---

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 September 30,
2008

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

For the transition period from _________ to ________

Commission File No. 333-140595

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 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.
(Check one):

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

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 November 14, 2008, there were 112,120,000 shares of common
stock, par value $0.001, outstanding.

---

PART I - FINANCIAL INFORMATION

|Freshwater Technologies, Inc.
|-----------------------------
|(A Development Stage Company)
|                             
|September 30, 2008           

|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)  

|                                                                                       |  | September 30, |   |  | December 31, |  
|-------------------------------------------------------------------------------------- |  | ------------- | - |  | ------------ | -
|                                                                                       |  | 2008          |   |  | 2007         |  
|                                                                                       |  | $             |   |  | $            |  
|                                                                                       |  | (unaudited)   |   |  |              |  
|ASSETS                                                                                 |  |               |   |  |              |  
|Current Assets                                                                         |  |               |   |  |              |  
|Cash                                                                                   |  | 5,196         |   |  | 224          |  
|Accounts receivable                                                                    |  | 35            |   |  | 92           |  
|Other receivable                                                                       |  | 1,375         |   |  | 2,362        |  
|Inventory (Note 3)                                                                     |  |              |   |  |             |  
|Total Assets                                                                           |  | 6,606         |   |  | 2,678        |  
|                                                                                       |  |               |   |  |              |  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                  |  |               |   |  |              |  
|Current Liabilities                                                                    |  |               |   |  |              |  
|Accounts payable                                                                       |  | 21,447        |   |  | 30,308       |  
|Accrued liabilities (Note 4)                                                           |  | 11,760        |   |  | 10,030       |  
|Due to related parties (Note
      5)                                                  |  | 112,368       |   |  | 562,181      |  
|Deferred revenue                                                                       |  | 7,037         |   |  | 7,037        |  
|Total Liabilities                                                                      |  | 152,612       |   |  | 609,556      |  
|Nature of Operations and Continuance of Business and
      Commitments (Notes 1 and 7) |  |               |   |  |              |  
|Stockholders Deficit                                                                  |  |               |   |  |              |  
|Common Stock:                                                                          |  |               |   |  |              |  
|Class A common stock                                                                   |  |               |   |  |              |  
|Authorized: 300,000,000 common shares, with a par
      value of $0.001                |  |               |   |  |              |  
|112,120,000 shares issued and
      outstanding (Notes 5 and 6)                        |  | 112,120       |   |  | 100,800      |  
|Class B common stock                                                                   |  |               |   |  |              |  
|Authorized: 100,000,000 common
      shares, with a par value of $0.001; no shares     |  |               |   |  |              |  
|issued and outstanding                                                                 |  |              |   |  |             |  
|Additional Paid-in Capital (Notes 5 and 6)                                             |  | 684,367       |   |  | 99,890       |  
|Accumulated
      Deficit                                                              |  | (942,493      | ) |  | (807,568     | )
|Total Stockholders Deficit                                                            |  | (146,006      | ) |  | (606,878     | )
|Total Liabilities
      and Stockholders Deficit                                      |  | 6,606         |   |  | 2,678        |  

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

F-1

---

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

|                                             | Accumulated from    |   |                    |   |                   |   |             |   |             |  
|-------------------------------------------- | ------------------- | - | ------------------ | - | ----------------- | - | ----------- | - | ----------- | -
|                                             | January 21, 2005    |   |                    |   |                   |   |             |   |             |  
|                                             | (Date of Inception) |   | Three Months Ended |   | Nine Months Ended |  
|                                             | to September 30,    |   | September 30,      |   | September 30      |  
|                                             | 2008                |   | 2008               |   | 2007              |   | 2008        |   | 2007        |  
|                                             | $                   |   | $                  |   | $                 |   | $           |   | $           |  
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Revenue                                      | 461,799             |   | 200                |   | 979               |   | 1,626       |   | 979         |  
|Cost of Sales
      (Note 3)                 | 214,272             |   | 104                |   | 885               |   | 705         |   | 885         |  
|Gross Profit                                 | 247,527             |   | 96                 |   | 94                |   | 921         |   | 94          |  
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Expenses                                     |                     |   |                    |   |                   |   |             |   |             |  
|Consulting (Note 5(a))                       | 202,000             |   | 9,000              |   | 9,000             |   | 27,000      |   | 27,000      |  
|General and administrative                   | 61,219              |   | 3,130              |   | 7,944             |   | 7,220       |   | 10,906      |  
|Imputed interest (Note 5(b))                 | 95,836              |   | 1,475              |   | 7,084             |   | 17,641      |   | 20,501      |  
|Marketing and sales (Note
      5(a))        | 247,271             |   | 23,251             |   | 13,237            |   | 50,760      |   | 40,803      |  
|Professional fees (Note 5(c))                | 130,977             |   | 11,610             |   | 11,735            |   | 40,005      |   | 42,922      |  
|Provision for uncollectible
      sales, net |                     |   |                    |   |                   |   |             |   |             |  
|of
      recoveries                          | 409,416             |   | (5,900             | ) | (1,230            | ) | (6,780      | ) | (6,400      | )
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Total Expenses                               | 1,146,719           |   | 42,566             |   | 47,770            |   | 135,846     |   | 135,732     |  
|Net Loss From Operations                     | (899,192            | ) | (42,470            | ) | (47,676           | ) | (134,925    | ) | (135,638    | )
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Other Income                                 |                     |   |                    |   |                   |   |             |   |             |  
|Gain on
      settlement of debt             | 2,000               |   |                   |   |                  |   |            |   |            |  
|Net Loss                                     | (897,192            | ) | (42,470            | ) | (47,676           | ) | (134,925    | ) | (135,638    | )
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Net Loss Per Share  Basic and Diluted       |                     |   |                   |   |                  |   |            |   |            |  
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|                                             |                     |   |                    |   |                   |   |             |   |             |  
|Weighted Average
      Shares Outstanding    |                     |   | 102,700,000        |   | 100,800,000       |   | 102,700,000 |   | 100,800,000 |  

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

F-2

---

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

|                                                             |  | Nine Months   |   |  | Nine Months   |  
|------------------------------------------------------------ |  | ------------- | - |  | ------------- | -
|                                                             |  | Ended         |   |  | Ended         |  
|                                                             |  | September 30, |   |  | September 30, |  
|                                                             |  | 2008          |   |  | 2007          |  
|                                                             |  | $             |   |  | $             |  
|                                                             |  |               |   |  |               |  
|Operating Activities                                         |  |               |   |  |               |  
|Net loss for the period                                      |  | (134,925      | ) |  | (135,638      | )
|Adjustments to reconcile net loss to net
      cash provided |  |               |   |  |               |  
|by operating activities:                                     |  |               |   |  |               |  
|Donated costs                                                |  | 12,156        |   |  | 53,094        |  
|Imputed interest                                             |  | 17,641        |   |  | 20,501        |  
|Changes in operating assets and
      liabilities:           |  |               |   |  |               |  
|Accounts receivable                                          |  | 57            |   |  | 17,003        |  
|Other receivables                                            |  | 987           |   |  |              |  
|Inventory                                                    |  |              |   |  | (279          | )
|Prepaid expenses                                             |  |              |   |  | 5,470         |  
|Accounts payable and accrued liabilities                     |  | (1,131        | ) |  | (8,823        | )
|Due to related parties                                       |  | 54,000        |   |  | 54,000        |  
|Net Cash Provided
      by (Used in) Operating Activities    |  | (51,215       | ) |  | 5,328         |  
|Financing Activities                                         |  |               |   |  |               |  
|Advances from related parties                                |  | 60,187        |   |  | 16,417        |  
|Repayments to related parties                                |  | (4,000        | ) |  | (24,900       | )
|Net Cash Provided
      by (Used in) Financing Activities    |  | 56,187        |   |  | (8,483        | )
|Increase (Decrease) in Cash                                  |  | 4,972         |   |  | (3,155        | )
|Cash  Beginning
      of Period                             |  | 224           |   |  | 4,317         |  
|Cash  End of Period                                         |  | 5,196         |   |  | 1,162         |  
|                                                             |  |               |   |  |               |  
|Non-cash Investing and Financing
      Activities:           |  |               |   |  |               |  
|Issuance of 11,320,000 shares of common stock
      for      |  |               |   |  |               |  
|settlement of debt at a fair value of $0.05
      per share  |  | 566,000       |   |  |              |  
|Supplemental Disclosures                                     |  |               |   |  |               |  
|Interest paid                                                |  |              |   |  |              |  
|Income tax paid                                              |  |              |   |  |              |  

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

F-3

---

- 4 -

|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 Statement of Financial
      Accounting Standard (SFAS) No.7, Accounting and Reporting by
      Development Stage Enterprises. 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 SFAS 141, 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).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 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 September 30, 2008, the Company had an accumulated deficit of
      $942,493 and a working capital deficit of $146,006. The continuation of
      the Company as a going concern is dependent upon the continued financial
      support from its shareholders, 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.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | The Company received the Notice of Effectiveness for its
      S-1 Registration Statement from the United States Securities and Exchange
      Commission dated July 1, 2008. The S-1 Registration Statement registered
      20,400,000 shares of common stock for resale by existing shareholders of
      the Company at $0.50 per share until the shares are quoted on the OTC
      Bulletin Board, and thereafter at prevailing market prices. The Company
      will not receive any proceeds from the resale of shares of common stock by
      the selling stockholders.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | 2.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

---

- 5 -

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

---

- 6 -

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

---

- 7 -

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

---

- 8 -

|3. | Inventory
|-- | ---------

| |                                      |  | September 30, |   |  | December 31, |  
| | ------------------------------------ |  | ------------- | - |  | ------------ | -
| |                                      |  | 2008          |   |  | 2007         |  
| |                                      |  | (unaudited)   |   |  |              |  
| |                                      |  | $             |   |  | $            |  
| | Finished Goods:                      |  |               |   |  |              |  
| | S-1 Units                            |  | 42,336        |   |  | 42,336       |  
| | S-2 Units                            |  | 13,230        |   |  | 13,230       |  
| | S-3 Units                            |  | 4,680         |   |  | 4,680        |  
| | Filters-Sediment                     |  | 279           |   |  | 279          |  
| |                                      |  | 60,525        |   |  | 60,525       |  
| | Provision for inventory obsolescence |  | (60,525       | ) |  | (60,525      | )
| |                                      |  |              |   |  |             |  

At December 31, 2007, inventory
consisted of water activation products and water filters held for sale and have
been fully impaired to reflect the fact that there has been no movement in water
activation products and water filters during the year ended December 31, 2007
and there is uncertainty as to whether the products can be resold in the future.
For the year ended December 31, 2007, the Company recorded a provision for
inventory obsolescence of $60,525 which was recorded as cost of sales.

|4. | Accrued Liabilities                                                                                  
|-- | -----------------------------------------------------------------------------------------------------
|   |                                                                                                      
|   | Accrued liabilities of $11,760 (December 31, 2007 -
      $10,030) is comprised of professional fees.
|   |                                                                                                      
|5. | Related Party Transactions                                                                           
|   |                                                                                                      
|   | a)                                                                                                   
|   |                                                                                                      
|   | b)                                                                                                   
|   |                                                                                                      
|   | c)                                                                                                   
|   |                                                                                                      
|   | d)                                                                                                   
|   |                                                                                                      
|   | e)                                                                                                   
|   |                                                                                                      
|   | f)                                                                                                   

---

- 9 -

|6. | Common Stock
|-- | ------------
|   |             
|   | a)          
|   |             
|   | b)          
|   |             
|   | c)          

|7. | Commitments
|-- | -----------
|   |            
|   | a)         
|   |            
|   | b)         

|8. | Economic Dependence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   | The Company relies solely upon R-Can Environmental Inc.
      (R-Can), as the sole supplier of their drinking water products, and ELCE
      International Inc. (ELCE), as the sole supplier of their water
      activation products. The Companys two suppliers supplied the Company with
      100% of the products that the Company offered and sold during the year
      ended December 31, 2007 and the period ended September 30, 2008. Both
      R-Can 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.

---

- 10 -

ITEM 2. MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.

Forward Looking Statements

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

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. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

Our financial statements are stated in United States dollars
(US$) and are prepared in accordance with United States Generally Accepted
Accounting Principles.

In this quarterly report, unless otherwise specified, all
dollar amounts are expressed in United States dollars and all references to
common stock refer to the common shares in our capital stock.

As used in this quarterly report, the terms we, us, our,
and Freshwater mean 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.

On October 9, 2008, we signed a Distribution Agreement with
Watergeeks Laboratories Inc. pursuant to which we have agreed to issue
30,000,000 of our common shares in order to obtain the exclusive, worldwide
rights to distribute and sell the Watergeeks products. The closing of this
agreement is conditional upon our satisfaction following a due diligence review
of Watergeeks and its corporate, legal and financial documents. The 30,000,000
shares were issued pursuant to the Distribution Agreement but will be held in
escrow pending the outcome of our Due Diligence review. Watergeeks products
include a variety of water bottles and water filters. Watergeeks has agreed to
continue to market and promote their products through the term of the agreement,
which is ten years. We have further agreed to purchase at least a certain number
of units from Watergeeks each year.

---

- 11 -

Current Business

We are a distributor of water purification products to local
distributors and retailers for household and commercial applications. We
currently offer two product lines consisting of drinking water products and
water activation products. The drinking water products are Sterilight branded
ultraviolet products that are supplied to our company by R-Can Environmental
Inc., a manufacturer based out of Guelph, Ontario, Canada. Sterilight branded
R-Can ultraviolet water treatment systems incorporate ultraviolet light energy
to eradicate microbiological contaminants in drinking water. Traditional
disinfection methods like chlorination react with natural organic matter
producing objectionable taste and odor and also forming substances with known
carcinogenic properties such as trihalomethane. Ultraviolet imparts no residual
chemicals into the water. This process makes the treated water safe for human
consumption. The Sterilight ultraviolet lamp emits powerful ultraviolet light
energy. Genetic or hereditary components contained in the waterborne
contaminants absorb the light energy. The energy of the ultraviolet lamps
disrupts the DNA structure of contaminants and prevents their reproduction. It
is the disruption of reproduction by ultraviolet treatment that renders the
drinking water safe for human consumption. Sterilight lamps provide consistent
ultraviolet output over the 9,000 hour life of the lamp and uniform temperature
distribution that can provide the desired levels of decontamination.

Our water activation products are designed to improve the
operating efficiency of commercial and industrial boilers and refrigeration
systems without the use of chemicals. Our water activation products are supplied
to our company by ELCE International Inc. of Switzerland and manufactured by
Nihon Jisui Co. Ltd., a Japanese company. We have formalized our relationship
with R-Can Environmental Inc. and ELCE International Inc. pursuant to
non-exclusive distribution agreements. We also offer a full line of accessories,
replacement parts and services that complement our drinking water systems. We
have local distributors in Columbia, Costa Rica, Panama and Peru.

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 two supplier-manufacturers in quantities
sufficient to satisfy product orders of our customers.

General

The following is a discussion and analysis of our results of
operation for the three and nine month periods ended September 30, 2008, 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

Three and nine Month Summary

|         |   | Three Months Ended |  |   | Nine Months Ended | 
|-------- | - | ------------------ |  | - | ----------------- | 
|         |   | September 30,      |  |   | September 30,     | 
|         |   | 2008               |  |   | 2007              | 
|Revenue  | $ | 200                |  | $ | 979               | 
|Expenses |   | 42,566             |  |   | 47,770            | 
|Net Loss | $ | 42,470             |  | $ | 47,676            | 

Revenue

We generated revenues of $200 for the three month period ended
September 30, 2008, compared to revenues of $979 for the three month period
ended September 30, 2007. The cost of sales on the orders for the three month
period ended September 30, 2008 was $104, compared to cost of sales on the
orders for the three month period ended September 30, 2007 of $885 ($521
represents freight costs for equipment shipped but not sold).

---

- 12 -

We generated $1,626 in revenues for the nine month period ended
September 30, 2008, compared to revenues of $979 for the nine month period ended
September 30, 2007. The cost of sales on the orders for the nine month period
ended September 30, 2008 was $705 compared to cost of sales on the orders for
the nine month period ended September 30, 2007 of $885 ($521 represents freight
costs for equipment shipped but not sold).

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

Operating Costs and Expenses

The major components of our expenses for the three and nine
month periods ended September 30, 2008 are outlined in the table below:

|                                   |   | Three Months Ended |   |   | Nine Months Ended |  
|---------------------------------- | - | ------------------ | - | - | ----------------- | -
|                                   |   | September 30       |   |   | September 30      |  
|                                   |   | 2008               |   |   | 2007              |  
|Consulting Fees                    | $ | 9,000              |   | $ | 9,000             |  
|General and Administrative         |   | 3,130              |   |   | 7,944             |  
|Imputed Interest                   |   | 1,475              |   |   | 7,084             |  
|Marketing and Sales                |   | 23,251             |   |   | 13,237            |  
|Professional Fees                  |   | 11,610             |   |   | 11,735            |  
|Provision for uncollectible sales, |   |                    |   |   |                   |  
|net of recoveries                  |   | (5,900             | ) |   | (1,230            | )
|Total Expenses                     | $ | 42,566             |   | $ | 47,770            |  

For the three months ended September 30, 2008, our operating
expenses totalled $42,566 as compared to $47,770 for the three months ended
September 30, 2007. Professional fees, including costs of our prospectus filed
with the Securities and Exchange Commission on July 8, 2008 amounted to $11,610
for the three months ended September 30, 2008 as compared to $11,735 for the
three months ended September 30, 2007. Marketing and sales expenses and
consultants costs were $23,251 for the three months ended September 30, 2008 as
compared to $13,237 for the three months ended September 30, 2007 with $6,700 of
this increase being directly attributable to costs of the Companys Director of
Marketing for Latin America who was hired in September 2008 and the balance of
the increase being due to increased travel expenses. General and administrative
expenses were $3,130 during the three months ended September 30, 2008 as
compared to $7,944 for the three months ended September 30, 2007. This decrease
is due to a write off of prepaid expenses of $5,808 in 2007 offset by increased
administrative expenses in 2008 of approximately $1,000. Imputed interest on
directors loans was $1,475 for the three months ended September 30, 2008 as
compared to $7,084 for the three months ended September 30, 2007. This decrease
is due to the completion of a debt settlement and subscription agreement in
August 2008 whereby $560,000 of debt to Directors was settled by the issuance of
11,200,000 common shares of the Company which reduced the imputed interest
charged on Directors loans for the September 2008 quarter. For the three months
ended September 30, 2008 we recovered $5,900 of sales previously written off as
compared to $1,230 for the three months ended September 30, 2007.

For the nine months ended September 30, 2008, our operating
expenses totalled $135,846 as compared to $135,732 for the nine months ended
September 30, 2007. Professional fees including costs of the prospectus amounted
to $40,005 for the nine months ended September 30, 2008 as compared to $42,922
for the nine months ended September 30, 2007. Marketing and sales expenses and
consultants costs were $50,760 for the nine months ended September 30, 2008 as
compared to $40,803 for the nine months ended September 30, 2007 with $6,700 of
this increase being directly attributable to costs of the Companys Director of
Marketing for Latin America who was hired in September 2008 and the balance of
the increase being due to increased travel expenses.. General and administrative
expenses were $7,220 during the nine months ended September 30, 2008 as compared
to $10,906 for the nine months ended September 30, 2007. This decrease is due to
a write off of prepaid expenses of $5,808 in 2007 offset by increased
administrative expenses in 2008 of approximately $3,000. Imputed interest on
directors loans was $17,641 for the nine months ended September 30, 2008 as
compared to $20,501 for the nine months ended September 30, 2007. This decrease
is due to the completion of a debt settlement and subscription agreement in
August 2008 whereby $560,000 of debt to Directors was settled by the issuance of
11,200,000 common shares of the Company which reduced the imputed interest
charged on Directors loans for the September 2008 quarter offset

---

- 13 -

by higher imputed interest charges in the first two quarters of
2008 due to higher amounts owing to Directors as compared to amounts owing to
Directors in the first two quarters of 2007. For the nine months ended
September 30, 2008 we recovered $6,780 of uncollectable sales previously written
off as compared to $6,400 during the nine months ended September 30, 2007.

Liquidity and Capital Resources

Working Capital

|                           |   | September 30, 2008 |   |   | December 31, 2007 |  
|-------------------------- | - | ------------------ | - | - | ----------------- | -
|Current Assets             | $ | 6,606              |   | $ | 2,678             |  
|Current Liabilities        |   | 152,612            |   |   | 609,556           |  
|Working Capital Deficiency | $ | (146,006           | ) | $ | (606,878          | )

Cash Flows

|                                             |   | Nine
      Months Ended |   |   | Nine
      Months Ended |  
|-------------------------------------------- | - | ----------------------- | - | - | ----------------------- | -
|                                             |   | September 30, 2008      |   |   | September 30, 2007      |  
|Cash provided (used) in Operating Activities | $ | (51,215                 | ) | $ | 5,328                   |  
|Cash used by Investing Activities            |   | -                       |   |   | -                       |  
|Cash provided (used) by Financing Activities |   | 56,187                  |   |   | (8,483                  | )
|Net Increase (Decrease) in Cash              | $ | 4,972                   |   | $ | (3,155                  | )

We had cash on hand of $5,196 and negative working capital of
$146,006 as of September 30, 2008 compared to cash on hand of $224 and negative
working capital of $606,878 for the year ended December 31, 2007. 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 will need to obtain additional financing in order to complete
our full business plan.

Operating Activities

Operating activities used cash of $51,215 for the nine months
ended September 30, 2008 and provided $5,328 in cash for the nine months ended
September 30, 2007.

Financing Activities

Net cash provided by financing activities was $56,187 for the
nine months ended September 30, 2008 and net cash used in financing activities
was $8,483 for the nine months ended September 30, 2007. These financing
activities were provided by two directors of our company.

Non-cash Investing and Financing Activities

The Company issued, in August 2008, 11,320,000 shares of common
stock for settlement of debt of which $560,000 was Due to Directors and $6,000
was owing to a vendor.

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, 2007, 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

---

- 14 -

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.

We anticipate that our cash on hand and the revenue that we
anticipate generating going forward from our operations will not be sufficient
to satisfy all of 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.

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 3           | $ | 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

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

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. Our company regularly evaluates estimates and assumptions related to provision for uncollectible sales,
  provision for inventory obsolescence, donated expenses, stock-based compensation expense, and deferred income tax asset valuation allowances. Our 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

---

- 15 -

experienced by our company may differ materially and adversely from our 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

Our company considers all highly liquid instruments with maturity of three months or less at the time of issuance to be cash equivalents. As at September 30, 2008, we had no cash equivalents.

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. Our 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.

Revenue Recognition

Our company recognizes revenue from the sale of drinking water products and water activation products in accordance with Securities and Exchange Commission Staff Accounting Bulletin No. 104 (SAB 104), Revenue Recognition in
  Financial Statements.The majority of the sales consist of water activation units in Costa Rica, Panama and Peru.  Revenue consists of the sale 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 products, the customer pays all costs from arrival point in the country to which the ELCE products are shipped. Our company evaluates the collectibility of accounts receivable based on a combination of factors. In cases where
  our company is aware of circumstances that may impair a specific customers ability to meet its financial obligations subsequent to the original sale, our company will record an allowance against amounts due, and thereby reduce the net
  recognized receivable to the amount our company reasonably believes will be collected. For all other customers, our company recognizes allowances for doubtful accounts based on the length of time the receivables are past due, the current business
  environment and our companys historical experience.

Comprehensive Loss

SFAS No. 130, Reporting Comprehensive Income, establishes standards for the reporting and display of comprehensive loss and its components in the financial statements. As at September 30, 2008, our company has no items that
  represent comprehensive loss and, therefore, has not included a schedule of comprehensive loss in the financial statements.

Financial Instruments

The fair value of financial instruments which include cash, taxes recoverable, accounts receivable, inventory, accounts payable, accrued liabilities, deferred revenue, and due to related parties were estimated to approximate their carrying value due
  to the immediate or relatively short maturity of these instruments.

Foreign Currency Translation

Our companys functional and reporting currency is the United States dollar. Monetary assets and liabilities denominated in foreign currencies are translated in accordance with SFAS No. 52 Foreign Currency Translation 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. Our company has not, to the date of these financial statements, entered into derivative instruments to offset the impact of foreign currency fluctuations.

---

- 16 -

Stock-based Compensation

Effective January 1, 2006, our company adopted the fair value recognition provisions of SFAS No. 123R Share Based Payments, using the modified retrospective transition method. Our company has not issued any stock options or share
  based payments since its inception. Accordingly, there was no effect on our companys reported loss from operations, cash flows or loss per share as a result of adopting SFAS No 123R.

Recent Accounting Pronouncements

In May 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 163, Accounting for Financial Guarantee Insurance Contracts  An interpretation of FASB Statement No. 60. SFAS No. 163 requires that an
  insurance enterprise recognize a claim liability prior to an event of default when there is evidence that credit deterioration has occurred in an insured financial obligation. It also clarifies how Statement 60 applies to financial guarantee
  insurance contracts, including the recognition and measurement to be used to account for premium revenue and claim liabilities, and requires expanded disclosures about financial guarantee insurance contracts. It is effective for financial statements
  issued for fiscal years beginning after December 15, 2008, except for some disclosures about the insurance enterprises risk-management activities. SFAS No. 163 requires that disclosures about the risk-management activities of the insurance
  enterprise be effective for the first period beginning after issuance. Except for those disclosures, earlier application is not permitted. The adoption of this statement is not expected to have a material effect on our companys financial
  statements.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles. SFAS No. 162 identifies the sources of accounting principles and the framework for selecting the principles to be used in the
  preparation of financial statements of nongovernmental entities that are presented in conformity with generally accepted accounting principles in the United States. It is effective 60 days following the SECs approval of the Public Company
  Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity With Generally Accepted Accounting Principles. The adoption of this statement is not expected to have a material effect on the
  Companys financial statements.

In March 2008, the Financial Accounting Standards Board (FASB) issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment to FASB Statement No. 133. SFAS No. 161 is
  intended to improve financial standards for derivative instruments and hedging activities by requiring enhanced disclosures to enable investors to better understand their effects on an entity's financial position, financial performance, and cash
  flows. Entities are required to provide enhanced disclosures about: (a) how and why an entity uses derivative instruments; (b) how derivative instruments and related hedged items are accounted for under Statement 133 and its related interpretations;
  and (c) how derivative instruments and related hedged items affect an entitys financial position, financial performance, and cash flows. It is effective for financial statements issued for fiscal years beginning after November 15, 2008, with
  early adoption encouraged. Our company is currently evaluating the impact of SFAS No. 161 on its financial statements.

In December 2007, the FASB issued SFAS No. 160 Noncontrolling Interests in Consolidated Financial Statements-an amendment of ARB No.51SFAS No. 160 requires consolidated net income to be reported at amounts that include the
  amounts attributable to both the parent and the noncontrolling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non
  controlling interest. SFAS No. 160 also requires that a parent recognize a gain or loss in net income when a subsidiary is deconsolidated. SAFAS No. 160 also requires expanded disclosures in the consolidated financial statements that clearly
  identify and distinguish between the interests of the parents owners and the interests of the noncontrolling owners of a subsidiary. SFAS No. 160 is effective for financial statements issued for fiscal years beginning after December 15, 2008.
  Our company is currently evaluating the impact of SFAS No. 160 on its financial statements, and the adoption of this statement is not expected to have a material effect on our companys financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial LiabilitiesIncluding an Amendment of FASB Statement No. 115.This pronouncement permits entities to use the fair value
  method to measure certain financial assets and liabilities by electing an irrevocable option to use the fair value method at specified election dates. After election of the option, subsequent changes in fair value would result

---

- 17 -

in the recognition of unrealized gains or losses as period costs during the period the change occurred. SFAS No. 159 becomes effective as of the beginning of the first fiscal year that begins after November 15, 2007, with early adoption permitted.
  However, entities may not retroactively apply the provisions of SFAS No. 159 to fiscal years preceding the date of adoption. The adoption of this statement is not expected to have a material effect on our company's future reported financial position
  or results of operations.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements. The objective of SFAS No. 157 is to increase consistency and comparability in fair value measurements and to expand disclosures about fair value
  measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS No. 157 applies under other accounting
  pronouncements that require or permit fair value measurements and does not require any new fair value measurements. The provisions of SFAS No. 157 are effective for fair value measurements made in fiscal years beginning after November 15, 2007. The
  adoption of this statement is not expected to have a material effect on our company's future reported 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.

Risks Related to Our Business

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 September 30, 2008, we have generated
$461,799 in revenue from the sale of our products. As at September 30, 2008, we
had cash of $5,196 and negative working capital of $146,006. We expect to
generate a moderate positive cash flow from operations in the next twelve month
period. We estimate that we will

---

- 18 -

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 year
ended December 31, 2007 state that these factors raise substantial doubt
regarding our 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.

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, Central America and the Caribbean. 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 September 30, 2008, 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 operating expenses to be
approximately $24,000 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 year ended December 31, 2007.

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. You could lose your entire investment.

---

- 19 -

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. In particular, additional capital may be required
in the event that:

| | 1. | we incur unexpected costs in expanding our distribution
      network;                          
| | -- | ------------------------------------------------------------------------------------------------
| |    |                                                                                                 
| | 2. | we are unable to create a substantial market for our
      products;                            
| |    |                                                                                                 
| | 3. | we incur any significant unanticipated
expenses;                                                
| |    |                                                                                                 
| | 4. | we find that we need to acquire additional water
      treatment products based on market needs.

The occurrence of any of the aforementioned events could
prevent us from pursuing our business plan, expanding our business operations
and ultimately achieving a profitable level of operations.

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 financing in the amounts and on
terms deemed acceptable to us, we may not be able to expand or continue our
sales of our drinking water and water activation products and so may be forced
to scale back or cease operations or discontinue our business and you could lose
your entire investment.

Our company relies on two 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 products and water activation products.
Our sole supplier of drinking water products, R-Can Environmental Inc. of
Guelph, Ontario, Canada, supplied our company with all of our drinking water
products that our company sold during the three month period ended September 30,
2008. Similarly, our sole supplier of water activation products, ELCE
International of Switzerland, is the distributor of our water activation units
manufactured by Nihon Jisui of Japan. We order units from ELCE International
which are then shipped from Japan to our warehouse facility for reshipment or
directly to countries where our distributors are located. ELCE International of
Switzerland supplied our company with all of our water activation products. Our
two suppliers manufacture their respective products and develop the technologies
within such products. In addition, both suppliers also supply similar products
from other manufacturers. As of May 2005, R-Can Environmental Inc. supplied our
company with products from some components from outside suppliers but all R-Can
products are assembled and shipped from their Guelph, Ontario, Canada
manufacturing facility. All ELCE International, Inc. water activation units are
manufactured, assembled and shipped from Japan. 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 R-Can
Environmental Inc. or ELCE International Inc. deteriorates or is terminated in
the future, and we are not successful in establishing a relationship

---

- 20 -

with an alternative supplier at prices and products currently
offered by such suppliers, our results of operations could be adversely
affected.

Our future operating results are subject to a number of
uncertainties. If these factors negatively affect our business, you could lose
your entire investment.

Our future operating results are subject to a number of
uncertainties, including our ability to market our portable water beverage and
water activation products and to develop and introduce new products, our ability
to penetrate new markets, the marketing efforts of distributors and retailers of
our products, most of which also distribute or sell products that are
competitive with our products, the number, quantity and marketing forces behind
products introduced by competitors and laws and regulations and any changes
thereto, especially those that may affect the way in which our products are
marketed and produced, as well as laws or regulations that are enforceable by
such regulatory authorities as the Food and Drug Administration, public health
and environmental agencies such as the World Health Organization.

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.

Most of our products are manufactured in Canada 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.

Our industry is very competitive and we may not be able to
achieve long term success.

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.

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 three local distributors and the technical assistance of our two product
suppliers, R-Can Environmental and ELCE International as well as local
accounting and technical support services. At present, Max Weissengruber, our
President and director, spends approximately 30 hours per week, or 75%, of his
business time on the management of

---

- 21 -

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.

In the event that Freshwater Technologies, Inc. were to lose
its domain name, it would be difficult to maintain effective relationships with
our existing customers as well as prospective customers who had originally been
approached by Freshwater Technologies, Inc. The establishment and maintenance of
a distribution network for the sale of our drinking water and water activation
products will be essential to the success of our business.

We offer drinking water and water activation products to
distributors through our marketing efforts. Since we expect that in the future,
substantially all of our revenues will be generated from product sales through
local distributors, it is vital that we have a flexible relationship with
potential distributors.

We realize that our local distribution partners represent
the lifeline with existing customers as well as prospective customers for our
products.

We believe that establishing and maintaining professional
working relationships that are flexible for both parties will help increase the
awareness of our products. Promotion of our products will depend largely on our
success in managing samples and systems that best support our future
distributors. In order to attract and retain distributors of our products and to
promote and maintain our relationships in response to competitive pressures, we
may increase our financial commitment to expanding and developing our business
systems. If we are unable to provide proven high quality, competitively priced
products, or otherwise fail to establish and maintain our industry
relationships, incur excessive expenses in an attempt to improve, or promote and
maintain our systems, we will not achieve profitable operations and you may lose
some or all of your investment in our common stock.

We rely upon our website in both English and Spanish to
maintain effective marketing and technical contact with our customers as well as
distribution partners.

We design and manage our own website
(www.freshwatertechnologies.ca) which contains product, technical,
marketing and sales information as well as an investor relation section. There
is a special Spanish language section for our Latin American distribution
partners. In the event that there is a technical problem or temporary loss of
the website, we may not have the internal resources that will allow us to
quickly re establish an up-to-date website.

Because our directors and officers control a large
percentage of our common stock, such insiders have the ability to influence
matters affecting our shareholders.

Our directors and officers, in the aggregate, beneficially own
81.3% 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

---

- 22 -

our officers and directors 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.

Risks Associated with our Common Stock

There is no active trading market for our common stock and
if a market for our common stock does not develop, our investors will be unable
to sell their shares.

We currently have our common stock quoted on the OTC Bulletin
Board. However, we cannot provide our investors with any assurance that public
market will materialize. Further, the OTC Bulletin Board is not a listing
service or exchange, but is instead a dealer quotation service for subscribing
members. If a public market for our common stock does not develop, then
investors may not be able to resell the shares of our common stock that they
have purchased and may lose all of their investment. If we establish a trading
market for our common stock, the market price of our common stock may be
significantly affected by factors such as actual or anticipated fluctuations in
our operation results, general market conditions and other factors. In addition,
the stock market has from time to time experienced significant price and volume
fluctuations that have particularly affected the market prices for the shares of
developmental stage companies, which may affect the market price of our common
stock in a material adverse manner.

We do not intend to pay dividends and there will be less
ways in which you can make a gain on any investment in our company.

We have never paid any cash dividends and currently do not
intend to pay any dividends for the foreseeable future. To the extent that we
require additional funding currently not provided for in our financing plan, our
funding sources may likely prohibit the payment of a dividend. Because we do not
intend to declare dividends, any gain on an investment in our company will need
to come through appreciation of the stocks price.

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,
consisting of 300,000,000 class A common shares and 100,000,000 class B common
shares which have equal rights and preferences as our common shares. As of
November 14, 2008, there were 112,120,000 class A common shares issued and
outstanding and no class 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

---

- 23 -

$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 and the Market for Common Equity
and Related Stockholder Matters section at page 43 for discussions of penny
stock rules), 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.

Item 4T. Controls and Procedures.

We maintain disclosure controls and procedures that are
designed to ensure that information required to be disclosed in our reports
filed under the Securities Exchange Act of 1934, as amended, is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commissions rules and forms, and that such information
is accumulated and communicated to our management, including our president (who
is our principal executive officer) and our treasurer, chief financial officer,
vice-president of sales (who is our principal financial and accounting officer)
to allow for timely decisions regarding required disclosure. In designing and
evaluating our disclosure controls and procedures, our management recognizes
that any controls and procedures, no matter how well designed and operated, can
provide only reasonable assurance of achieving the desired control objectives,
and our management is required to apply its judgment in evaluating the
cost-benefit relationship of possible controls and procedures.

As of September 30, 2008, the end of the three month period
covered by this report, we carried out an evaluation, under the supervision and
with the participation of our management, including our president (who is our
principal executive officer) and our treasurer, chief financial officer,
vice-president of sales (who is our principal financial and accounting officer),
of the effectiveness of the design and operation of our disclosure controls and
procedures. Based on the foregoing, our president (who is our principal
executive officer) and our treasurer, chief financial officer, vice-president of
sales (who is our principal financial and accounting officer) concluded that our
disclosure controls and procedures were effective as of the end of the period
covered by this quarterly report.

---

- 24 -

There have been no significant changes in our internal controls
over financial reporting that occurred during the quarter ended September 30,
2008 that have materially affected, or are reasonably likely to materially
affect, our internal controls 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. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
HOLDERS.

None.

ITEM 5. OTHER INFORMATION.

None.

ITEM 6. EXHIBITS

Exhibit 
        Number
      Description3.1(1)
      Articles of Incorporation3.2 (1)
      By-laws10.1 (1)
      Supplier Agreement with ELCE International dated August 18,
        200110.2 (1)
      Distribution Agreement with Avila S.T.E.M., SA dated February
        1, 200510.3 (1)
      Supplier Agreement with R-Can Environmental Inc. dated May 20,
        200510.4 (1)
      Distribution Agreement with JEUFI International, SA dated June
        22, 200510.5 (1)
      Distribution Agreement with Freshwater Latin, S.A. dated September
        1, 200510.6 (1)
      Asset Sale Agreement dated January 1, 2006, among
        our company, Max Weissengruber and D. Brian Robertson10.7 (1)
      Consulting Agreement dated January 1, 2006, between our company
        and D. Brian Robertson10.8 (1)
      Agreement with Max Weissengruber, dated January 1, 2006.31.1*
      Certification of Principal
        Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act
        of 2002 of Max Weissengruber31.2*
      Certification of Principal Financial
        Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
        of D. Brian Robertson32.1*
      Certification of Principal
        Executive Officer pursuant Section 906 Certifications under Sarbanes-Oxley
        Act of 200232.2*
      Certification
          of Principal
          Financial Officer pursuant Section 906 Certifications under Sarbanes-Oxley
          Act of 2002


(1) Filed as an exhibit to our Form SB-2 registration statement
filed on February 12, 2007. * Filed herewith

---

- 25 -

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: | November 14, 2008                          | 
|      |                                            | 
|      |                                            | 
|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: | November 14, 2008                          | 

---