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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2009

or

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

For the transition period from _______________ to
_______________
Commission file number: 000-53871

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

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

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

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

Securities registered pursuant to Section 12(b) of the Exchange
  Act:

|Title of each class | Name of each exchange on which registered
|------------------- | -----------------------------------------
|None                | None                                     

Securities registered under Section 12(g) of the Exchange
Act:

Common stock, $0.001 par value(Title
of class)

Indicate by check mark if the registrant is a well-known
seasoned issuer, as defined in Rule 405 of the Securities Act. Yes
[   ]    No [X]

Indicate by check mark if the registrant is not required to file
reports pursuant to Section 13 or Section 15(d) of the Act. Yes [ 
 ]    No [X]

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 [   ]

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2

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Web site, if any, every
Interactive Data File required to be submitted and posted pursuant to Rule 405
of Regulation S-T (§232.405 of this chapter) during the preceding 12 months
(or for such shorter period that the registrant was required to submit 
and
post such files).Yes [   ]    No [  
]

Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not
contained herein, and will not be contained, to the best of registrants
knowledge, in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this Form 10-K.
[X]

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 the definitions of large accelerated filer,
accelerated filer and smaller reporting company in Rule 12b-2 of the
Exchange Act.

|Large accelerated filer [   ]                 | Accelerated
      filer                   [ 
       ]
|--------------------------------------------- | -----------------------------------------------------
|Non-accelerated filer   [   ]                 | 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 Act).Yes [   ]    No [X]

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at
which the common equity was last sold, or the average bid and asked price of
such common equity, as of the last business day of the registrants most
recently completed second fiscal quarter. $878,640.

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable date.

Common
Stock          180,120,000 shares
as of April 13, 2010

DOCUMENTS INCORPORATED BY REFERENCE

Not Applicable

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3

PART I

Item 1. Business.

Forward-Looking Statements

This annual report contains forward-looking statements. These
statements relate to future events or our future financial performance. In some
cases, you can identify forward-looking statements by terminology such as may,
should, expect, plan, anticipate, believe, estimate, predict,
potential or continue or the negative of these terms or other comparable
terminology. These statements are only predictions and involve known and unknown
risks, uncertainties and other factors, including the risks in the section
entitled Risk Factors, that may cause our companys or our industrys actual
results, levels of activity, performance or achievements to be materially
different from any future results, levels of activity, performance or
achievements expressed or implied by these forward-looking statements.

Although we believe that the expectations reflected in the
forward-looking statements are reasonable, we cannot guarantee future results,
levels of activity, performance or achievements. Except as required by
applicable law, including the securities laws of the United States, we do not
intend to update any of the forward-looking statements to conform these
statements to actual results.

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

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

Corporate History

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

Summary of Current Business

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

We currently offer three product lines consisting of drinking
water treatment products and water activation products. The drinking water
treatment products feature Sterilight branded ultra violet products that are
supplied to our company by VIQUA(formerly R-Can Environmental Inc.), a
manufacturer based out of Guelph, Ontario, Canada. Sterilight branded
ultraviolet water treatment systems incorporate ultraviolet light energy that
eradicates harmful microbiological contaminants in drinking water.Traditional
disinfectant methods, such as chlorination, react with natural organic matter to produce objectionable taste and odor
and also forms substances with known carcinogenic properties such as
trihalomethane.

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4

Genetic components in organisms carry hereditary characteristics
that are copied and transmitted from each cell of water borne contaminants such
as bacteria, viruses and parasites. The Sterilight ultraviolet lamp emits
powerful ultraviolet light energy which, when absorbed by these contaminants,
causes disruption of the DNA Structure of those contaminants preventing
reproduction. It is the prevention of reproduction by microbial contaminants
that renders ultraviolet treated water safe for human consumption. Sterilight
lamps provide consistent UV output over the 9,000 hour life of the lamp and
uniform temperature distribution calculated to achieve the desired levels of
decontamination.

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

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

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

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

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

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5

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

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

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

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

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

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

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

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6

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

Drinking Water Products

We represent a wide range of ultraviolet drinking water
products, all of which are provided to us by VIQUA(formerly R-Can Environmental
Inc.), pursuant to our non-exclusive distribution agreement. VIQUA manufactures
all products in Ontario, Canada. All of the drinking water products that we
distribute incorporate ultraviolet technology to sterilize and clean drinking
water. Ultraviolet disinfection is a well-established, economical and chemical
free process that offers a 99.9% reduction in bacteria, parasites and viruses in
drinking water. Ultraviolet technology imparts no chemical residues to the water
supply and management believes the technology represents the most simple and
cost-effective way to treat drinking water supplies. Water is treated as it
passes through a chamber where it is exposed to ultraviolet radiation. The VIQUA
Sterilight disinfection lamps emit a powerful light energy which, when absorbed
by contaminants such as bacteria, viruses and parasites, causes the disruption
of the DNA structure of the contaminants preventing reproduction of the fixed
genetic components or unique characteristics of each microbial contaminant. The
prevention of reproduction of contaminants is what renders ultra violet treated
water safe for human consumption.

VIQUAs ultraviolet products range from 1-2 gallons per minute
weighing 11 lbs. to larger units that can treat 1,000 gallons per minute
weighing 1,100 pounds. The company has one of the widest ranges of sizes and
types of ultraviolet water treatment systems, which make and assemble all of its
products in the Guelph, Ontario, Canada manufacturing facility.

Ultra violet technology is well established and NSF
International, a non profit agency based in Ann Arbor, Michigan established
standards for drinking water products. In October of 2002, NSF International and
the US Environmental Protection Agency (EPA) agreed to form a Drinking Water
technologies Agency to develop technical evaluation of drinking water
technologies. Standard 55A certification for ultra violet systems means that
products certified under Standard 55 A are able to disinfect or remove
microorganisms from contaminated drinking water, including bacteria and viruses.
VIQUAs ultra violet products sold by Freshwater Technologies are certified
under Standard 55A. Information on NSF International and its programs can be
found at www.nsf.org.

The technology utilized in our drinking water products exposes
water to an ultraviolet purification cycle which provides protection against
bacteria and other organic matter. Our water purification system operates as
follows: Sterilight ultraviolet water sterilizers incorporate natural
ultraviolet light energy to eradicate water borne contaminants such as bacteria,
viruses and parasites. Water enters through the bottom part of the ultraviolet
reactor chamber and swirls around a low pressure mercury vapor lamp protected by
a quartz sleeve. The UV lamp emits powerful ultraviolet light energy at a wave
length of 253.7 nm. Genetic components contained in the microorganisms absorb
the light energy which disrupts the DNA and prevents reproduction. Treated water
then exits through the top part of the chamber and is ready for human
consumption.

Water Activation Products

We currently can supply approximately 15 different sizes of FW
water activation devices, all of which are manufactured and supplied to the
Company by ELCE International Corp. pursuant to our non-exclusive Joint Venture
Agreement signed in January 2009. ELCE International Corp. manufactures all
products and ships such products to our company upon request or directly to our
distributors.

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7

Industrial and commercial boiler and refrigeration systems
typically rely on water as the medium through which the heat exchange process is
achieved. An energy source such as oil, electricity or natural gas is required
to operate the conversion to a heating or cooling function. Most water sources,
however, naturally contain minerals or salts that create rust and sediment
buildup in the water supply system. The result is the gradual accumulation of
these materials which reduces the efficiency of operating systems and increases
energy costs. Conventional treatment of these operating problems has been
through the use of chemicals to remove the deposits which result in increased
facility maintenance, labor and chemical costs.

Our water activation products process water physically without
removing or adding chemical impurities. The device is able to remove the mineral
and salt buildup by passing water over hardened ceramic balls inside a stainless
steel container. As the water passes through and around the ceramic balls,
several types of electrical energies are created. The activated water resulting
from these electrical energies causes a gradual erosion of the accumulations of
solid materials inside the water system. After a period of several months,
depending upon the amount of accumulation, the water system is cleansed and
future accumulation of minerals and salts is prevented. The accumulated material
is broken down into very tiny pieces which are purged from the systems, with
larger forms of residue captured by bag filters and, in the case of boilers,
there are scheduled shutdown periods when accumulated material is cleaned out
from the bottom of the boiler. Once existing deposits are removed, FW water
activation prevents the deposition of any new deposits in the equipment.

All FW Activators are similar in design. A stainless steel
cylinder contains a precisely defined number of highly hardened ceramic balls to
a certain height within the stainless steel chamber. Activators range from units
with a flow capacity of 13 liters per minute, weighing 5 kilograms to large
Activators with a flow capacity of over 2,100 liters per minute, weighing over
1,300 kilograms standing 2,200 millimeters high.

The water activation technology in our products offers the
following benefits:

| | 1. | Elimination of chemicals;                                         
| | -- | ------------------------------------------------------------------
| |    |                                                                   
| | 2. | A reduction in operating costs;                                   
| |    |                                                                   
| | 3. | Reduced maintenance costs and labor time;                         
| |    |                                                                   
| | 4. | A 10-year full replacement guarantee;                             
| |    |                                                                   
| | 5. | No environmental impacts;                                         
| |    |                                                                   
| | 6. | Energy savings;                                                   
| |    |                                                                   
| | 7. | Ease of installation and no maintenance; and                      
| |    |                                                                   
| | 8. | Prolonged equipment life as no corrosive chemicals are
      used.

To date, we have been unable to determine if there are other
manufacturers who utilize a similar ceramic based, water-flow technology.
Potential customers are able to observe the operation of the technology. Once
the operating benefits are demonstrated, including the potential cost savings
involved, customers have the option to either purchase or lease the equipment
from our distributors.

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Sales and Marketing

Drinking Water

Although ultra violet technology is a chemical free process,
that fact, in and of itself, may not be sufficient reason for a customer to
purchase an ultra violet system. There is some routine maintenance required to
keep the lamp free from particle accumulation and filters installed as part of
an ultra violet solution have to be changed periodically. Ultra violet lamps
have a defined period of use beyond which they may not function effectively.
These factors place significant responsibility on local distributors to fully
understand and be able to explain the benefits and features of our ultra violet
products.

We rely exclusively upon local distributors for the marketing
and sale of our products. We have distributors in 6 Countries in South and
Central America. We solicit local distributor candidates through our Director of
Latin American marketing and in direct contact with local mechanical, heating
and cooling firms. Distributor recruitment efforts will be supported by
appropriate sales literature highlighting our products and technologies as well
as our website and our suppliers websites. If we are able to secure financing,
we intend to provide a marketing program to support our local distributors. We
intend to develop the marketing program so that it consists of Spanish language
sales literature, regional advertising in health magazines, newspapers and news
magazines in the language of the country in question. The target market for our
drinking water products consists of both individual household and commercial
consumers since VIQUA has products that can provide safe drinking water from 1.5
gallons per minute to 1000 gallons per minute. The household market includes the
sale of water purification products, some of which are installed at the
point-of-entry to a residential water system, as well as point-of-use filtration
systems designed to improve the quality of drinking water. Household
point-of-entry and point-of-use water treatment systems are used to remove
bacteria, parasites and viruses in drinking water. Customer requirements for our
drinking water products vary by geographical region as a result of differing
water qualities and problems. We also offer a wide range of products for
commercial customers through Ozocan Corporation. Commercial users require water
treatment systems that remove health-related contaminants from the available
water supply and are capable of treating large quantities of water on a cost
effective basis.

Water Activation

We choose to market our water activation products to local
distributors who already supply boiler and refrigeration equipment to commercial
and industrial customers. In addition to selling original boiler and
refrigeration equipment, our local distributors also may have service contracts
to maintain equipment. Our local partners are now converting some of their
customers to water activation equipment replacing the ongoing cost of
purchasing, storing and handling of chemicals which also introduce potentially
hazardous materials into the environment. Customers may either purchase our
products outright or lease such products if they wish to remove accumulated
buildup in their water systems.

For manufacturing and agricultural customers, we are currently
marketing the water activator through our agents.

Training and Technical Information

We provide local distributors with a variety of services,
including initial training and product familiarization as well as ongoing
education and technical assistance in each country where we operate. We offer
regular bi monthly on site management, sales, installation and service support.
We realize the importance of working directly in person with our local
distributors. In addition, we maintain a system of weekly contact with each
distributor plus 4-5 country visits each year. We also update technical and
product information on our website as well as assist local distributors in the
preparation of sales proposals and often participate directly in making sales
calls and sales presentations with our local distributors. We do not charge the
local distributors for our training and technical information or related
services.

Our commercial products use technologies similar to our
household products, but afford greater capacity, durability and effectiveness
and allow customers increased flexibility for customization. For example,
commercial customers in the beverage industry may use our products as they
require consistent quality water to enable them to preserve uniformity of taste
and appearance in their products, to reduce health-related contaminants and
minimize equipment maintenance costs.

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9

Technology

All technologies utilized within our products have either been
developed or sourced and tested by our sole suppliers, ELCE International Corp.,
VIQUA(formerlyR-Can Environmental Inc.) and Ozocan Corporation. The principal
technologies utilized in our drinking water products are ultraviolet
sterilization techniques widely recognized as an effective and affordable
chemical free water treatment technology that meets NSF/EPA drinking water
standards for ultraviolet systems and exceeds U.S. Public Health Standards.
Standard 55 A for ultraviolet treatment systems certifies equipment that can
provide safe drinking water from water supplies containing microbial
contaminants harmful to human health. VIQUAs ultraviolet products sold by
Freshwater Technologies have received NSF certification under Standard 55A.

Ozocan Corporations products use ozone as a proven
disinfectant; ozone is one and 1⁄2 times more powerful than chlorine and, unlike
chlorine, it discharges no potentially harmful substances into the environment.
Used in a variety of water treatment applications, Ozocans products effectively
treat municipal and industrial drinking water and waste water and are used in
bottled water applications as well as treating air conditioning and cooling
water installations. The principal technologies utilized in our water activation
products are electrolytic fluidization with the use of special ceramic
materials. The friction caused by water flowing around the ceramic balls
generates several types of electrical energies. Nihon Jisui Co Ltd , the
Japanese inventor of water activation units, has provided the following summary
of some of the technologies used in their water activation units:

Electrical Energy Forms

Pyroelectricity:Energy
generated by electrons coming out of the ceramics and produced by the
temperature differences between the ceramics outer surface and water or between
the inner and outer areas of the unit.

Piezoelectricity:This form of
energy is created by changes in water pressure as water passes around the
ceramics or by a change in pressure between the ceramic balls themselves.

Frictional electricity:This
electrical charge is produced by the friction generated between the ceramic
balls themselves or caused by the combination of the collision between the
ceramic balls and the water passing through the stainless steel cylinder.

Intellectual Property

We do not currently own any intellectual property other than
our registered domain name of www.freshwatertechnologies.ca, which we have the
right to renew after two years.

Research and Development

We do not carry out any independent research and development of
our drinking water products. All research and development is carried out by
VIQUA(formerly R-Can Environmental Inc.) and Ozocan Corporation in regards to
our drinking water products.

Currently, we are testing our FW Activator on agicultural
applications in Cali, Colombia. All other research and development is carried
out by ELCE International Corp. in regards to our water activation products.

Warranty

ELCE International Corp. provides a 10 year replacement
guarantee on its water activation units provided the unit is installed according
to manufacturers specifications. VIQUAs Sterilight systems carry a 7 year
warranty on the stainless steel reactor chamber, a 1 year warranty on UV lamps
and monitor probes, and a 5 year pro rated warranty on all other components.

Government Approval

Neither our company nor our companys products or services are
regulated by governments in any of our markets and no permits specific to our
industry are required in order for our company to operate or to sell our
products and services. VIQUA has received NSF approval for meeting ultraviolet
drinking water standards which are generally higher than standards in the
countries where we sell ultraviolet products. Some jurisdictions, like the EPA
in the United States, have developed drinking water standards which
can be achieved with a variety of technologies but not with direct regulation of
such devices themselves.

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10

Environmental Issues

To our knowledge, neither the sale nor the distribution of our
products constitute activities or generate materials, in a material manner, that
require compliance with federal, state or local environmental laws in any
jurisdictions of our operation. Our ultraviolet water treatment systems must
meet drinking water standards in any jurisdictions where we maintain business
operations. NSF International, the Non Profit agency certifies, in conjunction
with the US Environmental Protection Agency (EPA), ultra violet products that
will meet NSF Standard 55A for effective treatment of water borne bacteria and
viruses. VIQUAs products sold by Freshwater Technologies have been certified as
meeting NSF Standard 55A which exceeds drinking water standards established in
other countries.

Employees

Our company is currently operated by Max Weissengruber as our
President, D. Brian Robertson as our Treasurer, Chief Financial Officer and
Vice-President of Sales and Douglas R. Robertson as our Secretary. We also have
a Senior Operations consultant, a Director of Marketing and Sales for Latin
America, two sales agents in Colombia, a marketing services consultant and a web
development consultant. As a development stage company, we are currently able to
manage our business with these consulting personnel. We rely extensively on our
local distributors supported by our Vice President of Sales and Director of
Latin America Sales to generate sales of our products. We also receive technical
support from our three product suppliers VIQUA, Ozocan Corp. and ELCE
International. We also retain the technical services of Graham Linttell for
shipping and installation assistance. Periodically, we may periodically hire
independent contractors to execute our marketing, sales, and business
development functions. Our company may hire employees when circumstances
warrant. If it does become necessary, we intend to carry out any such hiring on
a contract basis.

Item 1A. Risk Factors.

Risks Related to the Economy

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

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

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

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

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

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11

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

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

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

Risks Related to our Company

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

To date, we have not generated significant income from our
operations and we have been dependent on sales of our equity securities and
advances from directors to meet the majority of our cash requirements. From the
date of inception on January 21, 2005 to December 31, 2009, we have generated
$476,958 in revenue from the sale or rental of our products. As at December 31,
2009, we had cash of $226 and negative working capital of $88,697. We expect to
generate a moderate positive cash flow from operations in the next twelve month
period. We estimate that we will require between $1,000,000 and $1,400,000 to
carry out our business plan for the next twelve month period. We will, in all
likelihood, continue to incur operating expenses without significant revenues
until our products gain significant popularity. Since we are still in the early
stages of operating our company and because of the lack of operating history,
our independent auditors report and Note 1 to the financial statements for the
years ended December 31, 2009 and December 31, 2008 state that these factors
raise substantial doubt regarding the Companys ability to continue as a going
concern. Because we cannot anticipate when we will be able to generate
significant revenues from sales, we will need to raise additional funds to
develop our business plan, respond to competitive pressures, sign distribution
agreements with distributors and respond to unanticipated requirements or
expenses. If we are not able to generate significant revenues from the sale of
our products, we will not be able to maintain our operations or achieve a
profitable level of operations.

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

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

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

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12

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 December 31, 2009, 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 $30,000 per month. We will not be able to expand our operations
beyond current levels without generating significant revenues from our current
operations or obtaining further financing. Our primary source of funds has been
the sale of our common stock and advances from two of our directors and
officers. We cannot assure that we will be able to generate enough interest in
our products. If we cannot attract a successful distribution network, we will
not be able to generate any significant revenues or income. In addition, if we
are unable to establish and generate material revenues, or obtain adequate
future financing, our business will fail and you may lose some or all of your
investment in our common stock. These circumstances raise substantial doubt
about our ability to continue as a going concern as described in an explanatory
paragraph to our independent auditors report on the financial statements for
the years ended December 31, 2009 and December 31, 2008.

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

As of December 31, 2009, we had total liabilities of $212,925,
$107,303 of which was due to related parties. Our liabilities are substantial
relative to our current assets, which were $124,228 as of December 31, 2009, and
could adversely affect our financial condition and make it more difficult for us
to satisfy our obligations with respect to our creditors. If we are unable to
pay our debts as they come due, we will be insolvent and investors will lose all
of their investment in our company. Our substantial liabilities and lack of cash
could also have other negative effects, including:

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

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

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

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13

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

We depend almost exclusively on outside capital to pay for the
continued development of our business and the marketing of our products. Such
outside capital may include the sale of additional stock, shareholder and
director advances and/or commercial borrowing. There can be no assurance that
capital will continue to be available if necessary to meet these continuing
development costs or, if the capital is available, that it will be on terms
acceptable to us. The issuance of additional equity securities by us will result
in a significant dilution in the equity interests of our current stockholders.
Obtaining commercial loans, assuming those loans would be available, will
increase our liabilities and future cash commitments.

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

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

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

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

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

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14

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

All of our assets are located outside the United States and we
do not currently maintain a permanent place of business within the United
States. In addition, all of our directors and officers are nationals and/or
residents of countries other than the United States, and all or a substantial
portion of such persons assets are located outside the United States. As a
result, it may be difficult for investors to enforce within the United States
any judgments obtained against us or our officers or directors, including
judgments predicated upon the civil liability provisions of the securities laws
of the United States or any state thereof. Consequently, you may be effectively
prevented from pursuing remedies under United States federal securities laws
against them.

Risks Relating to our Business

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

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

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

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

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

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

Risks Related to our Securities

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

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15

Our directors and officers, in the aggregate, beneficially own
approximately 60% of the issued and outstanding shares of our common stock. As a
result, they have the ability to influence matters affecting our shareholders,
including the election of our directors, the acquisition or disposition of our
assets, and the future issuance of our shares. Because our officers and
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.

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

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

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

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

We are authorized to issue up to 400,000,000 common shares,
including 100,000,000 Series B common shares which have equal rights and
preferences as our common shares. As of April 13, 2010, there were 180,120,000
common shares issued and outstanding and no Series B common shares issued and
outstanding. Our board of directors has the authority to cause our company to
issue additional shares of common stock without the consent of any of our
shareholders. Consequently, our shareholders may experience more dilution in
their ownership of our company in the future.

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

Our stock is a penny stock. The Securities and Exchange
Commission has adopted Rule 15g-9 which generally defines penny stock to be
any equity security that has a market price (as defined) less than $5.00 per
share or an exercise price of less than $5.00 per share, subject to certain
exceptions. Our securities are covered by the penny stock rules, which impose
additional sales practice requirements on broker-dealers who sell to persons
other than established customers and accredited investors. The term
accredited investor refers generally to institutions with assets in excess of $5,000,000 or individuals with a net worth
in excess of $1,000,000 or annual income exceeding $200,000 or $300,000 jointly
with their spouse.

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16

The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document in a form prepared by the Securities and
Exchange Commission which provides information about penny stocks and the nature
and level of risks in the penny stock market. The broker-dealer also must
provide the customer with current bid and offer quotations for the penny stock,
the compensation of the broker-dealer and its salesperson in the transaction and
monthly account statements showing the market value of each penny stock held in
the customers account. The bid and offer quotations, and the broker-dealer and
salesperson compensation information, must be given to the customer orally or in
writing prior to effecting the transaction and must be given to the customer in
writing before or with the customers confirmation. In addition, the penny stock
rules require that prior to a transaction in a penny stock not otherwise exempt
from these rules; the broker-dealer must make a special written determination
that the penny stock is a suitable investment for the purchaser and receive the
purchasers written agreement to the transaction. These disclosure requirements
may have the effect of reducing the level of trading activity in the secondary
market for the stock that is subject to these penny stock rules. Consequently,
these penny stock rules may affect the ability of broker-dealers to trade our
securities. We believe that the penny stock rules discourage investor interest
in and limit the marketability of our common stock.

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

In addition to the penny stock rules promulgated by the
Securities and Exchange Commission (see above), FINRA rules require that in
recommending an investment to a customer, a broker-dealer must have reasonable
grounds for believing that the investment is suitable for that customer. Prior
to recommending speculative low priced securities to their non-institutional
customers, broker-dealers must make reasonable efforts to obtain information
about the customers financial status, tax status, investment objectives and
other information. Under interpretations of these rules, FINRA believes that
there is a high probability that speculative low priced securities will not be
suitable for at least some customers. FINRA requirements make it more difficult
for broker-dealers to recommend that their customers buy our common stock, which
may limit your ability to buy and sell our stock and have an adverse effect on
the market for our shares.

Item 1B. Unresolved Staff Comments.

Not applicable.

Item 2. Properties.

Our executive and head office is located at Suite 200, 30
Denver Crescent, Toronto, Ontario, Canada M2J 1G8. The 150 square foot office is
provided by Max Weissengruber at no cost to the company. This operating facility
functions as our main operating facility. Until May 31, 2008, we stored our
impaired inventory and related parts at 78 A Millwood Road, Toronto, Ontario,
Canada at a cost of $150 per month, under an informal lease arrangement with
Graham Linttell, who also provides technical support to our shipping and
installation activities. We believe our current premises are adequate for our
current operations and we do not anticipate that we will require any additional
premises in the foreseeable future.

Item 3. Legal Proceedings.

We know of no material pending legal proceedings to which we
are a party or of which any of our property is the subject. . There are no
material pending legal proceedings in which any of our directors, officers or
affiliates is an adverse party or has a material interest adverse to our
interest.

Item 4. (Removed and Reserved).

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17

PART II

Item 5. Market for Registrants Common Equity, Related
Stockholder Matters and Issuer Purchases of Equity Securities.

Market information

Our common stock is quoted on the OTC Bulletin Board under the
Symbol FWTC. Our stock was originally approved for trading on the OTC Bulletin
Board on September 2, 2008 under the symbol FWTC.

The following table reflects the high and low bid information
for our common stock obtained from the OTC Bulletin Board and reflects
inter-dealer prices, without retail mark-up, markdown or commission, and may not
necessarily represent actual transactions.

The high and low bid prices of our common stock for the periods
indicated below are as follows:

|Quarter    |   |          |  |   |         | 
|---------- | - | -------- |  | - | ------- | 
|Ended      |   | Bid High |  |   | Bid Low | 
|12/31/2009 | $ | 0.017    |  | $ | 0.015   | 
|09/30/2009 | $ | 0.025    |  | $ | 0.02    | 
|06/30/2009 | $ | 0.055    |  | $ | 0.04    | 
|03/31/2009 | $ | 0.08     |  | $ | 0.03    | 
|12/31/2008 | $ | 0.50     |  | $ | 0.05    | 
|09/30/2008 | $ | 0.55     |  | $ | 0.10    | 

On April13, 2010, the closing price for the common stock as
reported by the quotation service operated by the OTC Bulletin Board was $0.032

Transfer Agent

Our common shares are issued in registered form. Signature
Stock Transfer Inc. of 2301 Ohio Drive, Suite 100, Plano Texas, 75093, Phone:
(972)612-4120, Fax: (972)612-4122 is the registrar and transfer agent for our
common shares.

Holders of Common Stock

As of April 13, 2010, there were approximately 39 registered
holders of record of our common stock. As of such date 180,120,000 common shares
were issued and outstanding.

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18

Dividends

We have not paid any cash dividends on our common stock and
have no present intention of paying any dividends on the shares of our common
stock. Although there are no restrictions that limit our ability to pay
dividends on our common stock, our current policy is to retain earnings, if any,
for use in our operations and in the development of our business. Our future
dividend policy will be determined from time to time by our board of directors.

Securities authorized for Issuance Under Equity Compensation
Plans

The following table summarizes certain information regarding
our equity compensation plan as at December 31, 2009:

|Plan Category                                              | Number of Securities to be
      Issued Upon Exercise of Outstanding Options,
      Warrants and Rights | Weighted-Average Exercise
      Price of Outstanding Options, Warrants and
      Rights | Number of Securities Remaining
      Available for Future Issuance Under Equity
      Compensation Plan
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------- | --------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------------------
|Equity compensation plans approved by security holders     | Nil                                                                                                     | Nil                                                                                     | Nil                                                                                                    
|Equity compensation plans not approved by security holders | Nil                                                                                                     | Nil                                                                                     | Nil                                                                                                    
|Total                                                      | Nil                                                                                                     | Nil                                                                                     | Nil                                                                                                    

2010 Non-Qualified Stock Plan

On January 20, 2010, we adopted an equity incentive plan
entitled the 2010 Non-Qualified Stock Plan. The purpose of the 2010 stock plan
is to secure for our company and our stockholders the benefits arising from
capital stock ownership by employees, officers and directors of, and consultants
or advisors to, our company who are expected to contribute to our future growth
and success. Our board of directors administers the 2010 stock plan and may
grant up to 25,000,000 shares of our common stock pursuant to the 2010 stock
plan. On January 26, 2010, we filed a registration statement on Form S-8 to
register a total of 25,000,000 shares of our common stock which may be issued
under the 2010 stock plan.

In January 2010, we entered into a one year business consulting
services agreement whereby we issued 6,000,000 common shares, on January 25,
2010, for business consulting services to be rendered over a one year period.
The shares were issued under the 2010 stock plan and were registered on Form S-8
filed on January 26, 2010.

On February 22, 2010, we entered into a one year web
development consulting services agreement whereby we issued 3,000,000 common
shares for web development consulting services to be rendered over a one year
period. The shares were issued under the 2010 stock plan and were registered on
Form S-8 filed on January 26, 2010.

On February 22, 2010, we entered into a one year marketing
consulting services agreement whereby we issued 4,000,000 common shares for
marketing consulting services to be rendered over a one year period. The shares
were issued under the 2010 stock plan and were registered on Form S-8 filed on
January 26, 2010.

Recent Sales of Unregistered Securities; Use of Proceeds
from Registered Securities

Since the beginning of the fourth quarter of our fiscal year
ended December 31, 2009, we have not sold any equity securities that were not
registered under the Securities Act of 1933 that were not previously reported in
a quarterly report on Form 10-Q or in a current report on Form 8-K, with the
exception of the following:

On January 25, 2009 we entered into a joint venture agreement
with ELCE International Corp. to market and sell certain water activation
products owned by ELCE. Under the terms of the agreement we agreed to purchase
minimum quantities of products to fulfill customer orders and minimize shipping
costs, and maintain minimum inventory of ELCE products to complete customer
orders. As consideration for distributing ELCE products, we issued 10,000,000 restricted shares of common stock to Claudio
Sgarbi, the President of ELCE, on
January 25, 2009. We also agreed to issue an additional 5,000,000 shares
issuable bi-annually for two years from the closing of the joint venture
agreement. On August 20, 2009, we issued an additional 5,000,000 restricted
common shares under the agreement. On December 31, 2009 in consideration for ELCE eliminating the requirement for minimum inventory we agreed to issue the
15,000,000 restricted common shares owing to Claudio Sgarbi under the agreement.
We issued these 15,000,000 restricted common shares
on January 25, 2010. We issued these shares to one non-U.S. person (as that term
is defined in Regulation S of the Securities Act of 1933, as amended) in
offshore transactions in which we relied on the registration exemption provided
for in Regulation S and/or Section 4(2) of the Securities Act of 1933, as
amended.

---

19

Purchases of Equity Securities by the Issuer and Affiliated
Purchasers

None.

Item 6. Selected Financial Data.

Not applicable.

Item 7. Managements Discussion and Analysis of Financial
Condition and Results of Operations.

The following discussion should be read in conjunction with our
audited financial statements for the years ended December 31, 2009 and December
31, 2008 and the related notes that appear elsewhere in this Form 10-K. The
following discussion contains forward-looking statements that reflect our plans,
estimates and beliefs. Our actual results could differ materially from those
discussed in the forward looking statements. Factors that could cause or
contribute to such differences include, but are not limited to, those discussed
below and elsewhere in this Form 10-K, particularly in the section entitled
Risk Factors.

Our audited financial statements are stated in United States
dollars and are prepared in accordance with United States generally accepted
accounting principles.

Company Overview

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 May 20, 2006 effective 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
Treasurer, Chief Financial Officer and director.

Summary of Current Business

We are a distributor of water purification and activation
products to local distributors and retailers for industrial, manufacturing
productivity, agricultural, commercial and household applications. We currently
offer two product lines of drinking water treatment products and one water
activation product line. The first drinking water treatment products line is
Sterilight branded ultraviolet products that are supplied to our company by
VIQUA(formerly R-Can Environmental Inc.), a leading international 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 form 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 water borne contaminants absorb the light energy.
The energy of the ultra violet lamps disrupts the DNA structure of contaminants and
prevents their reproduction. It is the disruption of reproduction by ultra
violet 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.

---

20

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

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

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

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

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

Results of Operations for the Period from January 21, 2005
(date of inception) to December 31, 2009

The financial statements have been restated to reflect the
operations of Freshwater Technologies, Inc. from the date of its inception,
January 21, 2005. During the period from January 21, 2005(date of inception) to
December 31, 2009, we generated $476.958 in revenue. This revenue was generated
from sales of both our drinking water products and water activation products
with the majority or 98% of the sales consisting of ELCE International Corp.
water activation units in Peru, Panama and Costa Rica. The cost of
sales on these orders was $214,818 resulting in a gross profit of 55%.

---

21

During the period from January 21, 2005 to December 31, 2009,
our operating expenses totaled $1,857,899. Amotization of Intangible assets was
$322,190; consulting costs were $247,000; general and administrative expenses
were $135,812; marketing and sales expenses totaled $486,460; and professional
fees were $188,238. Imputed interest, on Directors loans, totaled $107,221 and
commission expense on water activation equipment rentals amounted to $5,900. A
provision in the amount of $365,078 was made for sales that were deemed to be
uncollectable net of recoveries to December 31, 2009 as these sales were in
excess of one year old. We recorded a gain on settlement of debt in the amount
of $99,709.

We reported a net loss of $1,496,050 for the period from date
of inception to December 31, 2009.

Results of Operations for the Years Ended December 31, 2009
and December 31, 2008

In February 2010, the Company entered into consulting
agreements with Nand Shankar to act as marketing services consultant and with
Marina Ricci to act as web development consultant to the Company

In January 2010, the Company entered into a consulting
agreement with Michael Borrelli to act as Senior Operations Consultant to the
Company.

In July 2009, the Company entered into an Agency Agreement with
Luis Alberto Buitrago Gonzalez to act as Agent for FW Activator sales in the
Valle de Cauca Region of Colombia, South America.

In February 2009, the Company entered into an Agency Agreement
with Ancizar Rendon Ramirez to act as Agent for ELCE sales in the Southern
Region of Colombia, South America.

In January 2009, we signed an agreement with a new supplier of
ozone water treatment equipment, Ozocan Corporation.

In January 2009, we signed a Joint Venture Agreement with our
supplier of water activation equipment, ELCE International Corp.

During the year ended December 31, 2008, we signed a contract
with our Director of Marketing and Sales-Latin America, increased our
distributors with representation in six Countries in South and Central America,
reconfirmed our supplier agreements, performed market research and testing and
increased marketing activities.

During the year ended December 31, 2009, we generated $15,159
in sales revenue compared with $1,626 for the year ended December 31, 2008. Cost
of sales for the year ended December 31, 2009 was $546 as compared with cost of
sales of $705 or 43% of sales. Cost of sales for the year ended December 31,
2009 represents costs for our drinking water equipment sales of $884 or 62% of
these sales.The balance of our sales for the 2009 fiscal year of $14,275
represents sales and rentals of water activation equipment previously written
off. For the year ended December 31, 2009 our gross profit was 38% of sales of
drinking water equipment compared with gross profit of 57% of sales during the
year ended December 31, 2008.

During the year ended December 31, 2009, our operating expenses
totaled $604,991 as compared to $196,734 during the year ended December 31,
2008. Amortization of intangible assets for the year ended December 31, 2009
were $322,190 compared to nil for the year ended December 31, 2008. Intangible
assets represent costs incurred to acquire product distribution rights under the
joint venture agreement with ELCE International Corp. The useful life of the
product distribution rights acquired has been estimated by management to be two
years. Amortization is provided on a straight-line basis over the estimated
useful life.

Professional fees amounted to $45,786 for the year ended
December 31, 2009 as compared to $51,480 for the year ended December 31, 2008.
Marketing and sales expenses and consultants costs were $242,913 during the
year ended December 31, 2009 as compared to $119,036 during the year ended
December 31, 2008. This increase of $123,877 is mainly attributable to an
increase in travel and fees relating to our Joint Venture Agreement with ELCE
International Corp. of $103,751, an increase in travel expenses and fees for our
Latin America sales director of $6,104, an increase in fees and expenses for our Agent in
Colombia of $16,016, and a business/marketing development fee paid of $3,750
offset by a decrease in Central/South American travel of $5,744.

---

22

General and
administrative expenses were $22,577 during the year ended December 31, 2009 as
compared to $13,935 during the year ended December 31, 2008. This increase of
$8,642 is mainly attributable to $3,450 in costs to set up bank accounts in
Peru, Argentina and Colombia, $4,100 paid for research and developement testing
in Colombia on our water activation equipment and an increase in transfer
company fees of $750. Imputed interest on Directors loans was $9,163 for the
year ended December 31, 2009 as compared to $19,863 for the year ended December
31, 2008. This decrease is due to lower loan balances owing to Directors
throughout the year 2009 as compared to 2008. During the year ended December 31,
2009, we recovered $43,538 of uncollectable sales previously written off as
compared to $7,580 during the year ended December 31, 2008. Commission expense
on water activation equipment rentals amounted to $5,900 for the year ended
December 31, 2009 compared to nil for the year ended December 31, 2008 as our
rental program started in July 2009. We recorded a gain on settlement of debt
for the year ended December 31,2009 as compared to nil for the year ended
December 31, 2008.

We reported a net loss of $492,669 for the year ended December
31, 2009 as compared to a net loss of $195,813 for the year ended December 31,
2008.

Liquidity and Capital Resources

Presently, our revenue is not sufficient to meet our operating
and capital expenses. Management projects that we will require additional
funding to expand our current operations. There is some doubt about our ability
to continue as a going concern as the continuation of our business is dependent
upon successful and sufficient market acceptance of our products and maintaining
a break even or profitable level of operations.

We have incurred operating losses since inception, and this is
likely to continue into the year ending December 31, 2010. Management projects
that we may require an additional $1,000,000 to $1,400,000 to fund our operating
expenditures for the next twelve month period. Projected working capital
requirements for the next twelve month period are broken down as follows:

Estimated Working Capital Expenditures During the Next Twelve
Month Period

|Operating expenditures                 |   |                         | 
|-------------------------------------- | - | ----------------------- | 
|Marketing                              | $ | 400,000-
      $500,000 | 
|General
      and Administrative       | $ | 50,000 - $ 75,000       | 
|Legal
      and Accounting             | $ | 50,000 - $
      75,000 | 
|Working
      capital                  | $ | 400,000 - $ 600,000     | 
|Repayment
      of Directors Advances | $ | 100,000 - $ 150,000     | 
|Total                                  | $ | 1,000,000 - $1,400,000  | 

Our cash on hand as at December 31, 2009 was $226. As at
December 31, 2009, we had negative working capital of $88,697. We require funds
to enable us to address our minimum current and ongoing expenses and to continue
with marketing and promotion activity connected with the development and
marketing of our products.

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. If we
require any additional monies during this time, we plan to raise any such
additional capital primarily through the private placement of our securities,
borrowing money from third parties or borrowing further amounts from our
Directors. We will 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.

---

23

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

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

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

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

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

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

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 years ended December 31, 2009 and December 31, 2008, our
independent auditors included an explanatory paragraph regarding concerns about
our ability to continue as a going concern. Our financial statements contain
additional note disclosures describing the circumstances that led to this
disclosure by our independent auditors. There is substantial doubt about our
ability to continue as a going concern as the continuation and expansion of our
business is dependent upon obtaining further financing, successful and
sufficient market acceptance of our products, and, finally, achieving a
profitable level of operations. The issuance of additional equity securities by
us could result in a significant dilution in the equity interests of our current
stockholders. Obtaining commercial loans, assuming those loans would be
available, will increase our liabilities and future cash commitments.
Fundraising continues to 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 to our
directors and shareholders or new shareholders. The issuance of additional
equity securities by us may result in a significant dilution in the equity
interests of our current shareholders. Even though our company has determined
that we may not have sufficient working capital for the next twelve month
period, our company has not yet pursued such financing options. There is no
assurance that we will be able to obtain further 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.

---

24

Operating Activities

Operating activities used cash of $614,380 for the period
between our date of inception (January 21, 2005) to December 31,2009. Operating
activities used cash of $242,280 for the year ended December 31, 2009 and
$93,840 for the year ended December 31, 2008.

Financing Activities

Net cash provided by financing activities was $614,606 for the
period between our date of inception (January 21, 2005) to December 31, 2009.
Net cash provided by financing activities was $242,346 for the year ended
December 31, 2009 and 93,776 for the year ended December 31, 2008. These
financing activities were provided by two Directors of the Company.

Non-cash Investing and Financing Activities

On February 22, 2010, we entered into a one year web
developement consulting services agreement whereby the Company issued 3,000,000
common shares for web developement consulting services to be rendered over a one
year period. The shares were issued under the 2010 Stock Plan and were
registered on Form S-8 filed on January 26, 2010.

On February 22, 2010, we entered into a one year marketing consulting
  services agreement whereby the Company issued 4,000,000 common shares for marketing
  consulting services to be rendered over a one year period. The shares were issued
  under the 2010 Stock Plan and were registered on Form S-8 filed on January 26,
  2010.

In January 2010, we entered into a one year business consulting
services agreement whereby the Company issued 6,000,000 common shares, on
January 25, 2010, for business consulting services to be rendered over a one
year period. The shares were issued under the 2010 Stock Plan and were
registered on Form S-8 filed on January 26, 2010. In August 2009, we issued
25,000,000 shares of common stock for settlement of debt of $375,000 at a fair
value of $0.011 per share

On January 25, 2009, we issued 10,000,000 restricted shares of
common stock to Claudio Sgarbi, the President of ELCE International Corp. upon
closing of a joint venture agreement with ELCE International Corp. Under this
joint venture agreement an additional 5,000,000 restricted common shares were
issued August 20, 2009 and 15,000,000 restricted common shares were issued
January 25, 2010. Intangible assets calculated under this joint venture
agreement represent costs incurred to acquire product distribution rights under
the agreement amounting to $689,732.

In August 2008, we issued 11,320,000 shares of common stock for
settlement of debt of $566,000 at a fair value of $0.05 per share.

Growth Strategy

During 2009, we signed an agreement with two agents
representing us in Colombia. In 2009, arrangements were made for testing of our
FW Activators on agricultural applications at a University in Cali,
Colombia.

Effective September 2008, we signed an Agreement with our
Director of Marketing and Sales for Latin America. During the last quarter of
2008, we expanded our distributors to representation in 6 Countries in South and
Central America including Argentina, Chile, Colombia, Costa Rica, Panama and
Peru.

We plan to incrementally increase sale of water activation
products by using successful installation as local reference points for
approaching industries or commercial firms that utilize similar boiler and
refrigeration systems. Our success will be largely dependent upon the marketing
of our products to a manageable number and variety of markets. In the event that
we are able to secure sufficient financing, we will be able to consider
expanding the offering of additional products and/or technologies by our three
suppliers or future additional suppliers. If we have the appropriate resources,
we can also gradually explore establishing relationships with an increased
number of suppliers.

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25

Future Operations

Our primary objectives for the next twelve month period include
the pursuit of financing through private placement of our equity securities to
directors, shareholders and new shareholders which would allow us to further
develop and expand our present marketplace building on our local distributor and
customer base to secure more sales and product installations where we have
established commercial credibility. We believe that there is a strong market for
our innovative and cost effective product lines. We intend to seek to establish
relationships with heating and cooling service and equipment suppliers as well
as firms already supplying pumps, water tanks, and other water related
equipment.

Marketing

Assuming that we will be able to obtain the financing that we
need, we estimate that we will incur $400,000 to $500,000 in marketing costs
during the next twelve month period. Our proposed marketing activities for the
next twelve month period include:

| | 1. | Advertisements in local markets, in the language of the
      country and editorial coverage in water treatment journals and magazines
      demonstrating successful applications of ultraviolet and water activation
      technologies.                                                                                       
| | -- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                  
| | 2. | Participation in selected trade show directed at both
      distributors as well as consumer related events for people interested in
      drinking water treatment systems for their own homes.                                                                                                                                 
| |    |                                                                                                                                                                                                                                                                                                                                  
| | 3. | Building on local, word-of-mouth support from satisfied
      customers who have contacts within their own industry or community or, in
      the case of individual home owners, people who live in their communities
      who are concerned about drinking water quality and looking for affordable
      treatment solutions.
| |    |                                                                                                                                                                                                                                                                                                                                  
| | 4. | Pursuit of local distributors who will properly represent
      our products.                                                                                                                                                                                                                                                    

General and Administration

General and administration costs include personnel costs,
office, and miscellaneous expenses. We estimate that we will incur $50,000 to
$75,000 in general and administrative costs during the next twelve month period
based on previous costs and probable expansion of our business over the next
twelve month period.

Our company is currently operated by Max Weissengruber as our
President, D. Brian Robertson as our Treasurer, Chief Financial Officer and
Vice-President of Sales and Douglas R. Robertson as our Secretary. Given our
present status as a development stage company, these officers and directors are
capable of managing our current level of business much of which is conducted by
our local distributors and supported by our Vice President of Sales, Senior
Operations Consultant, Director of Marketing for Latin America and our Southern
Colombian sales agents. We also receive the support and advice of our three
product suppliers VIQUA, Ozocan Corporation and ELCE International. We may
periodically hire independent contractors to execute our marketing, sales, and
business development functions. In the next twelve month period, we plan to hire
independent contractors to assist in business development with an emphasis on
marketing, recruiting and management of distributors. We may choose to
compensate such persons with consideration other than cash, such as shares of
our common stock or options to purchase shares of our common stock.

Other Expenses

We expect our ongoing legal and accounting expenses to be
significantly reduced, averaging less than $5,000 per month.

In managements opinion, we need to achieve the following
events or milestones, which cannot and will not be achieved unless we first
obtain the financing we require, in the next twelve month period in order for us
to become a going concern:

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26

| | 1. | We must build on sales from our existing local
      distributors in whom we have now made a considerable investment. In
      addition to increasing sales through our local distributors, we plan, as
      resources become available, to incrementally develop a local distribution
      network which, in turn, must succeed in selling our products to end-users.
      Continuous technical and sales support and in person visits calling on
      customers and potential customers is the most effective way to increase
      the sales effectiveness of our distributors. New local distributors have
      been generated by cold-calls, email lists and most importantly, by
      referrals from current customers.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 2. | Our local distributors must increase the orders made by
      existing customers. This will be accomplished by ensuring customer
      satisfaction with the performance and pricing of the existing product
      lines and by establishing revenue streams from existing
  customers.                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | 3. | We must improve our gross profit margin by increasing our
      orders resulting in larger discounts and decreasing our shipping
    costs.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                        

Purchase or Sale of Equipment

We do not anticipate that we will expend any significant amount
on equipment for our present or future operations. We may purchase computer
hardware and software for our ongoing operations.

Off-Balance Sheet Arrangements

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

---

27

Item 8. Financial Statements and Supplementary Data.

---

Freshwater Technologies, Inc. 
  (A Development Stage Company)

December 31, 2009



|                                                              | Index
|------------------------------------------------------------- | -----
|                                                              |      
|Report of Independent
      Registered Public Accounting Firm | F-1  
|                                                              |      
|Balance Sheets                                                | F-2  
|                                                              |      
|Statements of
      Operations                                | F-3  
|                                                              |      
|Statements of Cash
      Flows                                | F-4  
|                                                              |      
|Statements of
      Stockholders Equity (Deficit)            | F-5  
|                                                              |      
|Notes to the Financial
      Statements                       | F-6  

---

melogo

Report of Independent Registered Public Accounting Firm

To the Directors and Stockholders 
  Freshwater Technologies,
  Inc.
  (A Development Stage Company)

We have audited the accompanying balance sheets of Freshwater
  Technologies, Inc. (A Development Stage Company) as of December 31, 2009 and
  2008, and the related statements of operations, cash flows and stockholders
  equity (deficit) for the years then ended and accumulated from January 21, 2005
  (Date of Inception) to December 31, 2009. These financial statements are the
  responsibility of the Company's management. Our responsibility is to express an
  opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the
  Public Company Accounting Oversight Board (United States). Those standards
  require that we plan and perform the audits to obtain reasonable assurance about
  whether the financial statements are free of material misstatement. An audit
  includes examining, on a test basis, evidence supporting the amounts and
  disclosures in the financial statements. The Company is not required to have,
  nor were we engaged to perform, an audit of its internal control over financial
  reporting. An audit includes consideration of internal control over financial
  reporting as a basis for designing audit procedures that are appropriate in the
  circumstances, but not for the purpose of expressing an opinion on the
  effectiveness of internal control over financial reporting. Accordingly, we
  express no such opinion. An audit also includes assessing the accounting
  principles used and significant estimates made by management, as well as
  evaluating the overall financial statement presentation. We believe that our
  audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above
  present fairly, in all material respects, the financial position of Freshwater
  Technologies, Inc. (A Development Stage Company) as of December 31, 2009 and
  2008, and the results of its operations and its cash flows for the years then
  ended and accumulated from January 21, 2005 (Date of Inception) to December 31,
  2009, in conformity with accounting principles generally accepted in the United
  States.

The accompanying financial statements have been prepared
  assuming the Company will continue as a going concern. As discussed in Note 1 to
  the financial statements, the Company has not generated any sustained revenues
  and has incurred operating losses from operations. The Company has a working
  capital deficiency and will need additional financing to sustain operations.
  These factors raise substantial doubt about the Companys ability to continue as
  a going concern. Managements plans in regard to these matters are also
  discussed in Note 1. The financial statements do not include any adjustments
  that might result from the outcome of this uncertainty.

/s/ Manning Elliott LLP

CHARTERED ACCOUNTANTS

Vancouver, Canada

April 13, 2010

F-1

---

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

|                                                                        |  | December 31, |   |  | December 31, |  
|----------------------------------------------------------------------- |  | ------------ | - |  | ------------ | -
|                                                                        |  | 2009         |   |  | 2008         |  
|                                                                        |  | $            |   |  | $            |  
|                                                                        |  |              |   |  |              |  
|ASSETS                                                                  |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Current Assets                                                          |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Cash                                                                    |  | 226          |   |  | 160          |  
|Amounts receivable                                                      |  | 1,791        |   |  | 1,716        |  
|Inventories                                                             |  | 122,211      |   |  |             |  
|                                                                        |  |              |   |  |              |  
|Total Current Assets                                                    |  | 124,228      |   |  | 1,876        |  
|                                                                        |  |              |   |  |              |  
|Intangible Assets (Notes 2(l) and 4(d))                                 |  | 367,542      |   |  |             |  
|                                                                        |  |              |   |  |              |  
|Total Assets                                                            |  | 491,770      |   |  | 1,876        |  
|                                                                        |  |              |   |  |              |  
|LIABILITIES AND STOCKHOLDERS
      EQUITY(DEFICIT)                     |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Current Liabilities                                                     |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Accounts payable                                                        |  | 98,585       |   |  | 21,054       |  
|Accrued liabilities                                                     |  | 7,037        |   |  | 17,537       |  
|Due to related parties (Note 3(b))                                      |  | 107,303      |   |  | 167,957      |  
|                                                                        |  |              |   |  |              |  
|Total Current Liabilities                                               |  | 212,925      |   |  | 206,548      |  
|                                                                        |  |              |   |  |              |  
|Commitments and Contingencies (Notes 1,
      3(a) and 6)               |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Stockholders Equity (Deficit)                                          |  |              |   |  |              |  
|                                                                        |  |              |   |  |              |  
|Class A Common Stock (Notes 4 and 5)                                    |  |              |   |  |              |  
|Authorized: 300,000,000 common shares, with a par
      value of $0.001 |  |              |   |  |              |  
|Issued and outstanding: 152,120,000
      shares (2008  112,120,000)   |  | 152,120      |   |  | 112,120      |  
|                                                                        |  |              |   |  |              |  
|Class B Common Stock                                                    |  |              |   |  |              |  
|Authorized: 100,000,000 common shares, with a par
      value of $0.001 |  |              |   |  |              |  
|Issued and outstanding: none                                            |  |             |   |  |             |  
|                                                                        |  |              |   |  |              |  
|Additional Paid-in Capital (Notes 4 and 5)                              |  | 1,371,436    |   |  | 686,589      |  
|                                                                        |  |              |   |  |              |  
|Class A Common Stock Issuable (Note 4(d))                               |  | 251,339      |   |  |             |  
|Deficit
      Accumulated During the Development Stage                  |  | (1,496,050   | ) |  | (1,003,381   | )
|                                                                        |  |              |   |  |              |  
|Total
      Stockholders Equity (Deficit)                              |  | 278,845      |   |  | (204,672     | )
|                                                                        |  |              |   |  |              |  
|Total Liabilities
      and Stockholders Equity (Deficit)              |  | 491,770      |   |  | 1,876        |  

F-2

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

---

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

|                                             |  | Accumulated from       |   |  | Year         |   |  | Year         |  
|-------------------------------------------- |  | ---------------------- | - |  | ------------ | - |  | ------------ | -
|                                             |  | January 21, 2005       |   |  | Ended        |   |  | Ended        |  
|                                             |  | (Date of Inception) to |   |  | December 31, |   |  | December 31, |  
|                                             |  | December 31, 2009      |   |  | 2009         |   |  | 2008         |  
|                                             |  | $                      |   |  | $            |   |  | $            |  
|                                             |  |                        |   |  |              |   |  |              |  
|                                             |  |                        |   |  |              |   |  |              |  
|Revenue                                      |  | 476,958                |   |  | 15,159       |   |  | 1,626        |  
|Cost of Sales                                |  | 214,818                |   |  | 546          |   |  | 705          |  
|Gross Profit                                 |  | 262,140                |   |  | 14,613       |   |  | 921          |  
|                                             |  |                        |   |  |              |   |  |              |  
|Expenses                                     |  |                        |   |  |              |   |  |              |  
|Amortization of intangible assets            |  | 322,190                |   |  | 322,190      |   |  |             |  
|Consulting (Note 3(a))                       |  | 247,000                |   |  | 36,000       |   |  | 36,000       |  
|General and administrative                   |  | 135,812                |   |  | 22,577       |   |  | 13,935       |  
|Imputed interest (Note 3(b))                 |  | 107,221                |   |  | 9,163        |   |  | 19,863       |  
|Marketing and sales (Note 3(a))              |  | 486,460                |   |  | 206,913      |   |  | 83,036       |  
|Professional fees (Note 3(c))                |  | 188,238                |   |  | 45,786       |   |  | 51,480       |  
|Bad debts expense (recovery)                 |  | 365,078                |   |  | (43,538      | ) |  | (7,580       | )
|Commission expense                           |  | 5,900                  |   |  | 5,900        |   |  |             |  
|Total Expenses                               |  | 1,857,899              |   |  | 604,991      |   |  | 196,734      |  
|Net Loss From Operations                     |  | (1,595,759             | ) |  | (590,378     | ) |  | (195,813     | )
|Other Income                                 |  |                        |   |  |              |   |  |              |  
|Gain on settlement of debt (Note 4(e))       |  | 99,709                 |   |  | 97,709       |   |  |             |  
|Net Loss                                     |  | (1,496,050             | ) |  | (492,669     | ) |  | (195,813     | )
|                                             |  |                        |   |  |              |   |  |              |  
|Net Loss Per Share
       Basic and Diluted |  |                        |   |  |             |   |  |             |  
|                                             |  |                        |   |  |              |   |  |              |  
|Weighted Average
      Shares Outstanding    |  |                        |   |  | 132,723,000  |   |  | 105,080,000  |  

F-3

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

---

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

|                                                                                              |  | Accumulated from |   |  |              |   |  |             |  
|--------------------------------------------------------------------------------------------- |  | ---------------- | - |  | ------------ | - |  | ----------- | -
|                                                                                              |  | January 21,      |   |  |              |   |  |             |  
|                                                                                              |  | 2005 (Date of    |   |  | Year         |   |  | Year        |  
|                                                                                              |  | Inception) to    |   |  | Ended        |   |  | Ended       |  
|                                                                                              |  | December 31,     |   |  | December 31, |   |  | December 31 |  
|                                                                                              |  | 2009             |   |  | 2009         |   |  | 2008        |  
|                                                                                              |  |                  |   |  |              |   |  |             |  
|Operating Activities                                                                          |  |                  |   |  |              |   |  |             |  
|Net loss                                                                                      |  | (1,496,050       | ) |  | (492,669     | ) |  | (195,813    | )
|                                                                                              |  |                  |   |  |              |   |  |             |  
|Adjustments to reconcile net loss to net cash provided 
             by operating activities: |  |                  |   |  |              |   |  |             |  
|Amortization of Intangible
      Assets                                                       |  | 322,190          |   |  | 322,190      |   |  |            |  
|Donated costs                                                                                 |  | 89,350           |   |  |             |   |  | 12,156      |  
|Imputed interest                                                                              |  | 107,221          |   |  | 9,163        |   |  | 19,863      |  
|Gain on forgiveness of debt                                                                   |  | (52,408          | ) |  | (97,709      | ) |  |            |  
|Provision for inventory
      obsolescence                                                    |  | 60,525           |   |  |             |   |  |            |  
|Changes in operating assets and liabilities:                                                  |  |                  |   |  |              |   |  |             |  
|Accounts receivable                                                                           |  |                 |   |  |             |   |  | 92          |  
|Amounts receivable                                                                            |  | (1,791           | ) |  | (75          | ) |  | 646         |  
|Inventory                                                                                     |  | (182,736         | ) |  | (122,211     | ) |  |            |  
|Prepaid expenses                                                                              |  |                 |   |  |             |   |  |            |  
|Accounts payable and accrued
      liabilities                                                |  | 105,622          |   |  | 67,031       |   |  | (8,784      | )
|Due
      to related parties                                                                  |  | 433,697          |   |  | 72,000       |   |  | 78,000      |  
|Net Cash Used By Operating Activities                                                         |  | (614,380         | ) |  | (242,280     | ) |  | (93,840     | )
|Financing Activities                                                                          |  |                  |   |  |              |   |  |             |  
|Advances from related parties                                                                 |  | 776,382          |   |  | 264,338      |   |  | 102,176     |  
|Repayments to related parties                                                                 |  | (161,776         | ) |  | (21,992      | ) |  | (8,400      | )
|Net Cash Provided By Financing Activities                                                     |  | 614,606          |   |  | 242,346      |   |  | 93,776      |  
|Increase (Decrease) in Cash                                                                   |  | 226              |   |  | 66           |   |  | (64         | )
|Cash  Beginning of Period                                                                    |  |                 |   |  | 160          |   |  | 224         |  
|Cash  End of
      Period                                                                    |  | 226              |   |  | 226          |   |  | 160         |  
|                                                                                              |  |                  |   |  |              |   |  |             |  
|Non-cash Investing and Financing Activities:                                                  |  |                  |   |  |              |   |  |             |  
|Issuance of shares of common
      stock for intangible assets                                |  | 689,732          |   |  | 689,732      |   |  |            |  
|Issuance of shares of common stock to settle debt                                             |  | 843,291          |   |  | 277,291      |   |  | 566,000     |  
|                                                                                              |  |                  |   |  |              |   |  |             |  
|Supplemental Disclosures                                                                      |  |                  |   |  |              |   |  |             |  
|                                                                                              |  |                  |   |  |              |   |  |             |  
|Interest paid                                                                                 |  |                 |   |  |             |   |  |            |  
|Income tax paid                                                                               |  |                 |   |  |             |   |  |            |  

F-4

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

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Statement of Stockholders Equity (Deficit) 
  From January 21, 2005 (Date
  of Inception) to December 31, 2009 
  (expressed in U.S. dollars)

|                                                           |  | Class A      |  |  |           |  |  | Additional |   |  | Class A  |  |  |             |   |  |          |  
|---------------------------------------------------------- |  | ------------ |  |  | --------- |  |  | ---------- | - |  | -------- |  |  | ----------- | - |  | -------- | -
|                                                           |  | Common Stock |  |  |           |  |  | Paid-In    |   |  | Common   |  |  | Accumulated |   |  |          |  
|                                                           |  | Shares       |  |  | Par Value |  |  | Capital    |   |  | Stock    |  |  | Deficit     |   |  | Total    |  
|                                                           |  | #            |  |  | $         |  |  | $          |   |  | Issuable |  |  | $           |   |  | $        |  
|Balance  January 21, 2005 (Date of
      Inception)       |  |             |  |  |          |  |  |           |   |  |         |  |  |            |   |  |         |  
|                                                           |  |              |  |  |           |  |  |            |   |  |          |  |  |             |   |  |          |  
|Shares issued to owners of Freshwater (Note
      5)       |  | 80,000,000   |  |  | 80,000    |  |  | (80,000    | ) |  |         |  |  |            |   |  |         |  
|Donated interest on related party loans                    |  |             |  |  |          |  |  | 17,302     |   |  |         |  |  |             |   |  | 17,302   |  
|                                                           |  |              |  |  |           |  |  |            |   |  |          |  |  |             |   |  |          |  
|Net loss for the
      period                              |  |             |  |  |          |  |  |           |   |  |         |  |  | (335,337    | ) |  | (335,337 | )
|Balance  December 31, 2005                                |  | 80,000,000   |  |  | 80,000    |  |  | (62,698    | ) |  |         |  |  | (335,337    | ) |  | (318,035 | )
|Recapitalization Transactions (Note 5)                     |  |              |  |  |           |  |  |            |   |  |          |  |  |             |   |  |          |  
|Shares of HMI
      Technologies, Inc.                     |  | 20,800,000   |  |  | 20,800    |  |  | (20,800    | ) |  |         |  |  |            |   |  |         |  
|Net liabilities assumed in
      recapitalization (Note 5) |  |             |  |  |          |  |  |           |   |  |         |  |  | (45,301     | ) |  | (45,301  | )
|Donated interest on shareholders loans                    |  |             |  |  |          |  |  | 32,662     |   |  |         |  |  |            |   |  | 32,662   |  
|Prospectus costs donated by shareholder                    |  |             |  |  |          |  |  | 29,685     |   |  |         |  |  |            |   |  | 29,685   |  
|Net loss for the year                                      |  |             |  |  |          |  |  |           |   |  |         |  |  | (200,939    | ) |  | (200,939 | )
|Balance  December 31, 2006                                |  | 100,800,000  |  |  | 100,800   |  |  | (21,151    | ) |  |         |  |  | (581,577    | ) |  | (501,928 | )
|Donated interest on shareholders loans
      (Note 3(b))  |  |             |  |  |          |  |  | 28,231     |   |  |         |  |  |            |   |  | 28,231   |  
|Forgiveness of debt                                        |  |             |  |  |          |  |  | 45,301     |   |  |         |  |  |            |   |  | 45,301   |  
|Prospectus costs donated by shareholder
      (Note 3(c))  |  |             |  |  |          |  |  | 47,509     |   |  |         |  |  |            |   |  | 47,509   |  
|Net loss for the
      year                                |  |             |  |  |          |  |  |           |   |  |         |  |  | (225,991    | ) |  | (225,991 | )
|Balance  December 31, 2007                                |  | 100,800,000  |  |  | 100,800   |  |  | 99,890     |   |  |         |  |  | (807,568    | ) |  | (606,878 | )
|Donated interest on shareholders loans (Note 3(b))        |  |             |  |  |          |  |  | 19,863     |   |  |         |  |  |            |   |  | 19,863   |  
|Settlement of debt by share issuance (Note
      4)        |  | 11,320,000   |  |  | 11,320    |  |  | 554,680    |   |  |         |  |  |            |   |  | 566,000  |  
|Prospectus costs donated by shareholder (Note 3(c))        |  |             |  |  |          |  |  | 12,156     |   |  |         |  |  |            |   |  | 12,156   |  
|Net loss for the year                                      |  |             |  |  |          |  |  |           |   |  |         |  |  | (195,813    | ) |  | (195,813 | )
|                                                           |  |              |  |  |           |  |  |            |   |  |          |  |  |             |   |  |          |  
|Balance  December 31, 2008                                |  | 112,120,000  |  |  | 112,120   |  |  | 686,589    |   |  |         |  |  | (1,003,381  | ) |  | (204,672 | )
|Donated interest on shareholders loans (Note 3(b))        |  |             |  |  |          |  |  | 9,163      |   |  |         |  |  |            |   |  | 9,163    |  
|Settlement of debt by share issuance (Note
      4)        |  | 25,000,000   |  |  | 25,000    |  |  | 252,291    |   |  |         |  |  |            |   |  | 277,291  |  
|Shares to be issued for intangible assets (Note 4(d))      |  |             |  |  |          |  |  |           |   |  | 251,339  |  |  |            |   |  | 251,339  |  
|Issuance of shares for intangible assets
      (Note 4(d)) |  | 15,000,000   |  |  | 15,000    |  |  | 423,393    |   |  |         |  |  |            |   |  | 438,393  |  
|Net loss for the
      year                                |  |             |  |  |          |  |  |           |   |  |         |  |  | (492,669    | ) |  | (492,669 | )
|Balance  December 31, 2009                                |  | 152,120,000  |  |  | 152,120   |  |  | 1,371,436  |   |  | 251,339  |  |  | (1,496,050  | ) |  | 278,845  |  

F-5

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

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

|1. | Nature of Operations and Continuance of
      Business                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
|-- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | On January 1, 2006 Freshwater Technologies Inc. (formerly
      HMI Technologies Inc.) (HMI) entered into an Asset Acquisition Agreement
      to acquire the business of Freshwater Technologies (Freshwater). HMI was
      incorporated in the State of Nevada, U.S.A. on December 10, 1999. Its
      principal business now involves the distribution and marketing of drinking
      water products and water activation products. HMI is a Development Stage
      Company, as defined by Financial Accounting Standards Board (FASB)
      Accounting Standards Codification (ASC) 915, Development Stage
      Entities. Effective January 1, 2006, the acquisition of the Freshwater
      business was completed through the issuance of 80,000,000 split-adjusted
      restricted shares of common stock, and as a result, the former owners of
      the Freshwater business owned approximately 79% of the outstanding common
      stock of HMI.                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | Prior to the acquisition of Freshwater, HMI was a
      non-operating shell company with nominal net assets. The acquisition was a
      capital transaction in substance and therefore has been accounted for as a
      recapitalization, which is outside the scope of ASC 805 Business
        Combinations. Under recapitalization accounting, Freshwater is
      considered the acquirer for accounting and financial reporting purposes,
      and acquired the assets and assumed the liabilities of HMI. Assets
      acquired and liabilities assumed are reported at their historical amounts.
      These financial statements include the accounts of HMI since the effective
      date of the recapitalization (January 1, 2006) and the historical accounts
      of the business of Freshwater since inception (collectively, the
      Company). Refer to Note 5.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | These financial statements have been prepared on a going
      concern basis, which implies that the Company will continue to realize its
      assets and discharge its liabilities in the normal course of business. The
      Company has generated limited revenues to date and has never paid any
      dividends and is unlikely to pay dividends or generate significant
      earnings in the immediate or foreseeable future. In order to fund the
      proposed plan of operation, the Company will require an additional
      $1,000,000 to $1,400,000 in funding through the next twelve month period.
      As at December 31, 2009, the Company had an accumulated deficit of
      $1,496,050 and a working capital deficit of $88,697. The continuation of
      the Company as a going concern is dependent upon the continued financial
      support from its directors and officers, the ability to raise equity or
      debt financing, and the attainment of profitable operations from the
      business. These factors raise substantial doubt regarding the Companys
      ability to continue as a going concern. These financial statements do not
      include any adjustments to the recoverability and classification of
      recorded asset amounts and classification of liabilities that might be
      necessary should the Company be unable to continue as a going
      concern.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|2. | Summary of Significant Accounting Policies                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                  
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | a)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   | b)                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             

F-6

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

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

Level 1

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

Level 2

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

Level 3

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

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

F-7

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

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

F-8

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

|2. | Summary of Significant Accounting Policies
      (continued)
|-- | ------------------------------------------------------------
|   |                                                             
|   | n)                                                          
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|   |                                                             
|3. | Related Party Transactions                                  
|   |                                                             
|   | a)                                                          
|   |                                                             
|   | b)                                                          
|   |                                                             
|   | c)                                                          
|   |                                                             
|   | d)                                                          
|   |                                                             
|   | e)                                                          
|   |                                                             
|   | f)                                                          
|   |                                                             
|4. | Common Stock                                                
|   |                                                             
|   | a)                                                          
|   |                                                             
|   | b)                                                          

F-9

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

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

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

F-10

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

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

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

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

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

| |    | Under the agreement, the Company has agreed to pay to
      ELCE 50% of the net profits relating to sales of ELCE water products and
      was to maintain minimum inventories of ELCE water products, estimated to
      be $881,000 in total, for each country specified in the agreement in due
      course.                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| |    | Under an amendment to this agreement dated December 31,
      2009, in return for ELCE eliminating the requirement for a minimum
      inventory in each country, the Company agreed to issue the remaining
      15,000,000 shares owing to Claudio Sgarbi under this agreement on January
      25, 2010.                                                                                                                                                                                                                                                                                                                                                                                                         
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | c) | In February 2009, the Company entered into an Agency
      Agreement with Ancizar Rendon Ramirez to act as Agent for ELCE sales in
      the Southern Region of Colombia, South America. The Company will pay
      $1,000 monthly for these consulting services including related sales
      expenses and a commission of 10% for all collected ELCE sales initiated by
      the Agent in the Southern Region of Colombia. The agreement is for a one
      year term which expires January 31, 2010, is renewable annually and can be
      terminated by the Company with three months notice. In January 2010, the
      Company agreed to extend the term of this agreement on a month to month
      basis.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
| | d) | In July 2009, the Company entered into an Agency
      Agreement with Luis Alberto Buitrago Gonzalez to act as Agent for FW
      Activator sales in the Valle de Cauca Region of Colombia, South America.
      The Company will pay $400 monthly increasing to $600 per month after three
      months for these consulting services including related sales expenses and
      a commission of 5% for all collected FW Activator sales initiated by the
      agent in the Valle de Cauca Region of Colombia. The agreement is for a one
      year term which expires July 15, 2010, is renewable annually and can be
      terminated by the Company with three months
      notice.                          

F-11

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

|7. | Economic Dependence                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|-- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company relies solely upon VIQUA- a Trojan
      Technologies Company (formerly R-Can Environmental Inc.) (VIQUA), as the
      sole supplier of their drinking water products, ELCE International Corp.
      (ELCE), as the sole supplier of their water activation products and
      Ozocan Corporation as sole supplier of ozone water treatment systems.
      VIQUA and ELCE supplied the Company with 100% of the products that the
      Company offered and sold during the years ended December 31, 2009 and
      2008. VIQUA, Ozocan and ELCE are the sole manufacturers and primary
      developers of the respective technologies in such products. As a result,
      the Company could be adversely affected by changes in the cost of the
      suppliers products, the financial condition of the suppliers or by the
      deterioration or termination of its relationship with the
      suppliers.
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | During the year ended December 31, 2009, 78% of revenues
      were earned through one major agent.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|8. | Income Taxes                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company has net operating loss carryforwards of
      approximately $1,067,000 available to offset taxable income in future
      years which expire commencing in the year ended December 31,
      2027.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                     
|   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|   | The Company is subject to United States income taxes at a
      rate of 35%. The reconciliation of the provision for income taxes at the
      United States statutory rate compared to the Companys income tax expense
      as reported is as follows:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

| |                                       |  | Year Ended   |   |  | Year Ended   |  
| | ------------------------------------- |  | ------------ | - |  | ------------ | -
| |                                       |  | December 31, |   |  | December 31, |  
| |                                       |  | 2009         |   |  | 2008         |  
| |                                       |  | $            |   |  | $            |  
| | Income tax recovery at statutory rate |  | (172,434     | ) |  | (68,535      | )
| | Permanent differences                 |  | 3,207        |   |  | 6,952        |  
| | Change in valuation allowance         |  | 169,227      |   |  | 61,583       |  
| | Provision for
      income taxes      |  |             |   |  |             |  

The significant components of deferred
  income tax assets as at December 31, 2009 and 2008 are as follows:

| |                                      |  | December 31, |   |  | December 31, |  
| | ------------------------------------ |  | ------------ | - |  | ------------ | -
| |                                      |  | 2009         |   |  | 2008         |  
| |                                      |  | $            |   |  | $            |  
| | Net operating losses carried forward |  | 373,562      |   |  | 301,008      |  
| | Intangible assets                    |  | 96,673       |   |  |             |  
| |                                      |  | 470,235      |   |  | 301,008      |  
| | Valuation
      allowance            |  | (470,235     | ) |  | (301,008     | )
| | Net deferred income tax asset        |  |             |   |  |             |  

F-12

---

Freshwater Technologies Inc. 
  (A Development Stage Company) 
  Notes to the Financial Statements 
  (expressed in U.S. dollars)

|9. | Subsequent Events
|-- | -----------------
|   |                  
|   | a)               
|   |                  
|   |                  
|   |                  
|   | b)               
|   |                  
|   |                  
|   |                  
|   | c)               
|   |                  
|   | d)               
|   |                  
|   | e)               

F-13

---

28

Item 9. Changes in and Disagreements with Accountants on
Accounting and Financial Disclosure.

None.

Item 9A(T). Controls and Procedures.

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

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

Managements Annual Report on Internal Control over
Financial Reporting. Our management is responsible for establishing and
maintaining adequate internal control over financial reporting (as defined in
Rule 13a-15(f) under the Securities Exchange Act of 1934, as amended). Our
internal control over financial reporting is a process designed to provide
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
accounting principles generally accepted in the United States.

Because of its inherent limitations, internal control over
financial reporting may not prevent or detect misstatements. Therefore, even
those systems determined to be effective can provide only reasonable assurance
of achieving their control objectives.

In making this assessment, our management used the criteria set
forth by the Committee of Sponsoring Organizations of the Treadway Commission
(COSO) in Internal Control  Integrated Framework. Based on this evaluation, our
management, including our chief executive officer and chief financial officer,
concluded that, as of December 31, 2009, our internal control over financial
reporting was not effective.

In making this assessment, our management determined that we
have the following weaknesses in our disclosure controls and procedures and
internal control over financial reporting:

- We do not have an audit committee;
- We do not have independent directors who meet the
  independence requirementsfor members of an audit committee;
- We do not have an audit committee charter outlining duties and
  responsibilities;
- We do not have a board of directors charter outlining duties and
  responsibilities;
- We do not have an adequate mechanisms in place for identifying business
  risks, including changes in the business, economic, and regulatory
  environment;
- We do not have an internal audit function with competent and experienced
  staff to assist in monitoring activities, adhering to professional standards;
- We do not have training seminars, planning sessions, and other meetings to
  provide feedback to management on whether controls operate effectively;
- Signatures are not required to evidence performance of critical control
  functions, such as reconciliations; and,
- We do not have separate evaluations of our internal control system.

---

29

We have not taken measures to address these weaknesses but
intend to evaluate how and when to do so in the coming year. Currently, our
entire board acts as our audit committee. Given our limited financial resources
and operations at present the board does not believe that it is necessary at
this time to establish a separate audit committee or appoint an independent
director or an audit committee financial expert to the board.
Similarly, with our other weaknesses, while we intend to address them in the
future, we do not currently have the funds or level of operations to justify the
expense of fixing these material weaknesses at the present time.

This annual report does not include an attestation report of
our registered public accounting firm regarding internal control over financial
reporting. Management's report was not subject to attestation by our registered
public accounting firm pursuant to temporary rules of the Securities and
Exchange Commission that permit our company to provide only management's report
in this annual report.

Changes in Internal Control over Financial Reporting.
There has been no change in our internal control over financial reporting, that
occurred during the quarter ended December 31, 2009, that has materially
affected, or is reasonably likely to materially affect, our internal control
over financial reporting.

Item 9B. Other Information.

On January 25, 2009 we entered into a joint venture agreement
with ELCE International Corp. to market and sell certain water activation
products owned by ELCE. Under the terms of the agreement we agreed to purchase
minimum quantities of products to fulfill customer orders and minimize shipping
costs, and maintain minimum inventory of ELCE products to complete customer
orders. As consideration for distributing ELCE products, we issued 10,000,000
restricted shares of common stock to Claudio Sgarbi, the President of ELCE,
on January 25, 2009. We also agreed
to issue an additional 5,000,000 shares issuable bi-annually for two years from
the closing of the joint venture agreement. On August 20, 2009, we issued an
additional 5,000,000 restricted common shares under the agreement. On December
31, 2009 in consideration for ELCE eliminating the requirement for minimum
inventory we agreed to issue the 15,000,000 restricted common shares owing to
Claudio Sgarbi under the agreement. We issued these 15,000,000 restricted common
shares on January 25, 2010. We issued these shares
to one non-U.S. person (as that term is defined in Regulation S of the
Securities Act of 1933, as amended) in offshore transactions in which we
relied on the registration exemption provided for in Regulation S and/or Section
4(2) of the Securities Act of 1933, as amended.

PART III

Item 10. Directors, Executive Officers and Corporate
Governance.

All directors of our company hold office until the next annual
meeting of the stockholders or until their successors have been elected and
qualified. The officers of our company are appointed by our board of directors
and hold office until their death, resignation or removal from office. Our
directors and executive officers, their ages, positions held, and duration as
such, are as follows:

|Name                 | Position Held with the Company                                                 | Age | Date First Elected or Appointed
|-------------------- | ------------------------------------------------------------------------------ | --- | -------------------------------
|Max Weissengruber    | President and Director                                                         | 71  | January 1, 2006                
|D. Brian Robertson   | Treasurer, Chief Financial
      Officer, Vice-President of Sales and Director | 67  | January 1, 2006                
|Douglas R. Robertson | Secretary and Director                                                         | 71  | January 1, 2006                

---

30

Business Experience

The following is a brief account of the education and business
experience of each director and executive officer during at least the past five
years, indicating each persons business experience, principal occupation during
the period, and the name and principal business of the organization by which
they were employed.

Max Weissengruber

Max Weissengruber has served our company as President and
director since January 1, 2006. Mr. Weissengruber served as Director and
President of Ozolutions Inc., an OTCBB listed company from April 2000 through
January 2005 until his appointment as Director and President of International
Development Corp., the renamed successor company to Ozolutions Inc. In April
2006, International Development Inc. changed its name to Global Wataire Corp.
and Mr. Weissengruber became Director and Secretary, a position from which Mr.
Weissengruber resigned in June 2006. In June, 2006, Mr. Weissengruber was
appointed Director and President of Wataire Industries Inc., a publicly traded
company, a position from which he resigned in March 2009. Prior to that, Mr.
Weissengruber was a Manager of Consulting Services with KPMG, a worldwide
professional firm. He also was Marketing Manager for Wilson Learning Corporation
and a consultant in the sales and service area for General Motors and IBM.
Before joining Ozolutions in 2000, he was Managing Partner of Acris Partners, a
marketing and consulting firm specializing in employee surveys and marketing
communications. Mr. Weissengruber has also lectured on business subjects at the
University of Toronto and on Entrepreneurship in the Masters in Business
Administration Program at the Canadian School of Management. Mr. Weissengruber
currently spends approximately 30 hours per week providing services to our
company, which represents approximately 75% of his weekly working hours. He
spends the remainder of his working hours working on various other business
endeavors.

We believe Mr. Weissengruber is qualified to serve on our board
of directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experiences as described above.

D. Brian Robertson

D. Brian Robertson has served our company as Treasurer, Chief
Financial Officer, Vice-President of Sales and director since January 1, 2006.
Mr. B. Robertson is a chartered accountant registered with the institute of
Chartered Accountants in Ontario and responsible for all finance related aspects
of our company. He joined Touche Ross & Co., Chartered Accountants, and
obtained his Chartered Accountant Degree in 1964 and supervised a number of
audits including several major Canadian companies. During 1978 and 1979 he was
General Manager of F.G, Bradley Co. Ltd. a large Canadian meat purveyor with
approximately 500 employees. In 1982 he became an investment advisor for a
Canadian investment dealer Osler, Wills, Bickle Ltd. and in 1988 a director of
Continental Securities Limited. During the 1990s, Mr. B. Robertson was
self-employed as a business consultant to a number of different business
enterprises. In 2000, he was instrumental in founding Ozolutions Inc., where he
continued to act as a financial consultant and business advisor before becoming
Chief Financial Officer of International Development Corp.,the renamed successor
company to Ozolutions Inc., in September 2004 until January 2006. International
Development Corp. is an OTCBB listed company. Mr. Brian Robertson currently
spends approximately 35 hours per week providing services to our company, which
represents approximately 90% of his working hours. He spends the remainder of
his working hours working on various other business endeavors.

We believe Mr. Robertson is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experiences as described above.

Douglas R. Robertson

Douglas Robertson has served our company as Secretary and
director since January 1, 2006. Mr. D. Robertson served as Chief Financial
Officer of Ozolutions Inc. from July 2003 until September 2004. He was also a
director of International Development Corp. from 2001 to 2006. He has been
General Manager of MTL Trading of Toronto since May 2001. MTL Trading is engaged
in the business of buying and selling meat and poultry products. From June 1997
to April 2001, Mr. D. Robertson was the President and sole shareholder of
Robertson Foods of Toronto, a company engaged in exporting pork, beef and
poultry products. Mr. Douglas Robertson currently spends approximately 4 hours per week providing services to our
company, which represents approximately 10% of his weekly working hours. He
spends the remainder of his working hours working on various other business
endeavors.

---

31

We believe Mr. Robertson is qualified to serve on our board of
directors because of his knowledge of our companys history and current
operations, which he gained from working for our company as described above, in
addition to his education and business experiences as described above.

Committees of the Board

Currently, our entire board acts as our audit committee. Our
board presently does not include any member who qualifies as an "audit committee
financial expert" (as defined in Item 407(d)(5)(ii) of Regulation S-K). Given
our limited financial resources and operations at present the board does not
believe that it is necessary at this time to establish a separate audit
committee or appoint an "audit committee financial expert" to the board.

Code of Ethics

We have not adopted a code of ethics because our board of directors
  believes that our small size does not merit the expense of preparing, adopting
  and administering a code of ethics. Our board of directors intends to adopt
  a code of ethics when circumstances warrant.

Family Relationships

There are no family relationships among our directors or
officers.

Involvement in Certain Legal Proceedings

Our directors and executive officers have not been involved in
any of the following events during the past ten years:

| | 1. | any bankruptcy petition filed by or against any business
      of which such person was a general partner or executive officer either at
      the time of the bankruptcy or within two years prior to that
  time;                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
| | -- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 2. | any conviction in a criminal proceeding or being subject
      to a pending criminal proceeding (excluding traffic violations and other
      minor offenses);                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 3. | being subject to any order, judgment, or decree, not
      subsequently reversed, suspended or vacated, of any court of competent
      jurisdiction, permanently or temporarily enjoining, barring, suspending or
      otherwise limiting his involvement in any type of business, securities or
      banking activities;                                                                                                                                                                                                                                                                                                                                                                                                                                              
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 4. | being found by a court of competent jurisdiction (in a
      civil action), the Securities and Exchange Commission or the Commodity
      Futures Trading Commission to have violated a federal or state securities
      or commodities law, and the judgment has not been reversed, suspended, or
      vacated;                                                                                                                                                                                                                                                                                                                                                                                                                                                        
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
| | 5. | being the subject of, or a party to, any federal or state
      judicial or administrative order, judgment, decree, or finding, not
      subsequently reversed, suspended or vacated, relating to an alleged
      violation of: (i) any federal or state securities or commodities law or
      regulation; or (ii) any law or regulation respecting financial
      institutions or insurance companies including, but not limited to, a
      temporary or permanent injunction, order of disgorgement or restitution,
      civil money penalty or temporary or permanent cease- and-desist order, or
      removal or prohibition order; or (iii) any law or regulation prohibiting
      mail or wire fraud or fraud in connection with any business entity;
    or

---

32

| | 6. | being the subject of, or a party to, any sanction or
      order, not subsequently reversed, suspended or vacated, of any
      self-regulatory organization (as defined in Section 3(a)(26) of the
      Securities Exchange Act of 1934), any registered entity (as defined in
      Section 1(a)(29) of the Commodity Exchange Act), or any equivalent
      exchange, association, entity or organization that has disciplinary
      authority over its members or persons associated with a
  member.
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Section 16(a) Beneficial Ownership Compliance

During the fiscal year ended December 31, 2009, we were not
subject to Section 16(a) of the Securities Exchange Act of 1934 because our
common stock was not registered under the Securities Exchange Act of 1934.
Section 16(a) requires our executive officers and directors, and persons who own
more than 10% of our common stock, to file reports regarding ownership of, and
transactions in, our securities with the Securities and Exchange Commission.

Item 11. Executive Compensation.

No executive officer of our company has received an annual
salary and bonus that exceeded $100,000 during our two most recently completed
fiscal years. The following table shows the compensation received by our
executive officers for the period indicated:

SUMMARY COMPENSATION

|Name and Principal
      Position (a)                                   | Year (b)  | Salary($)
      (c) | **Bonus** ($) (d) | Stock Awards($)
      (e) | Option **Awards**
      ($) (f) | Non- Equity
      Incentive Plan Compensa- tion
      ($) (g) | Nonqualified Deferred
      CompensationEarnings ($) (h) | All Other
      **Compensa-** tion ($)
      (i) | Total ($)
      (j)
|----------------------------------------------------------------------- | --------- | ------------------- | ----------------- | ------------------------- | ------------------------------- | ------------------------------------------------------------- | -------------------------------------------------------- | ------------------------------------------------ | -------------------
|Max Weissengruber
      President(1)                                    | 2008 2009 | Nil Nil             | Nil Nil           | Nil Nil                   | Nil Nil                         | Nil Nil                                                       | Nil Nil                                                  | $36,000(4)$36,000(4)                             | $36,000 $36,000    
|D.Brian Robertson       Treasurer and
      Chief Financial Officer (2) | 2008 2009 | Nil Nil             | Nil Nil           | Nil Nil                   | Nil Nil                         | Nil Nil                                                       | Nil Nil                                                  | $36,000(5)$36,000(5)                             | $36,000 $36,000    
|Douglas R. Robertson Secretary
      (3)                                | 2008 2009 | Nil Nil             | Nil Nil           | Nil Nil                   | Nil Nil                         | Nil Nil                                                       | Nil Nil                                                  | Nil Nil                                          | Nil Nil            

| | (1) | Max Weissengruber was appointed President on January 1,
      2006.                                       
| | --- | ----------------------------------------------------------------------------------------------------------
| |     |                                                                                                           
| | (2) | D. Brian Robertson was appointed Treasurer and Chief
      Financial Officer on January 1, 2006.          
| |     |                                                                                                           
| | (3) | Douglas R. Robertson was appointed Secretary on January
      1, 2006.                                    
| |     |                                                                                                           
| | (4) | This amount represents consulting fees paid to Max
      Weissengruber pursuant to a consulting
agreement.

---

33

| | (5) | This amount represents consulting fees paid to D. Brian
      Robertson pursuant to a consulting agreement.
| | --- | -----------------------------------------------------------------------------------------------------------

Stock Options and Stock Appreciation Rights

During our years ended December 31, 2009 and December 31, 2008,
we did not grant any stock options or stock appreciation rights to any of our
directors or officers.

The following table sets forth for each executive officer and
director certain information concerning the outstanding equity awards as of
December 31, 2009.

OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END

|                                                                                                   | Options Awards                                               | Stock Awards                                                              
|-------------------------------------------------------------------------------------------------- | ------------------------------------------------------------ | --------------------------------------------------------------------------
|Name                                                                                               | NumberofSecuritiesUnderlyingUnexercisedOptions(#)Exercisable | NumberofSecurities**Underlying****Unexercised**Options(#)**Unexercisable**
|(a)                                                                                                | (b)                                                          | (c)                                                                       
|Max
        
        Weissengruber 
      President(1)                                             | Nil                                                          | Nil                                                                       
|D.Brian
        Robertson 
        Treasurer and
        Chief
        Financial
      Officer (2) | Nil                                                          | Nil                                                                       
|Douglas R.
        Robertson 
      Secretary (3)                                                  | Nil                                                          | Nil                                                                       

|(1) | Max Weissengruber was appointed President on January 1,
      2006.                             
|--- | ------------------------------------------------------------------------------------------------
|    |                                                                                                 
|(2) | D. Brian Robertson was appointed Treasurer and Chief
      Financial Officer on January 1, 2006.
|    |                                                                                                 
|(3) | Douglas R. Robertson was appointed Secretary on January
      1, 2006.                          

---

34

Compensation of Directors

We reimburse our directors for expenses incurred in connection
with attending board meetings. We did not pay any other directors fees or other
cash compensation for services rendered as a director for the fiscal years ended
December 31, 2009 or December 31, 2008.

We have no formal plan for compensating our directors for their
service in their capacity as directors, although such directors are expected in
the future to receive stock options to purchase common shares as awarded by our
board of directors or (as to future stock options) a compensation committee
which may be established. Directors are entitled to reimbursement for reasonable
travel and other out-of-pocket expenses incurred in connection with attendance
at meetings of our board of directors. Our board of directors may award special
remuneration to any director undertaking any special services on our behalf
other than services ordinarily required of a director. No director received
and/or accrued any compensation for their services as a director, including
committee participation and/or special assignments.

The following table sets forth the compensation of our
directors for services rendered as director for the fiscal year ended December
31, 2009.

DIRECTOR COMPENSATION

|Name                               | FeesEarnedor Paid
      inCash($) | StockAwards($) | OptionAwards($) | Non-EquityIncentivePlanCompensation($) | Non-QualifiedDeferredCompensationEarnings | AllOther**Compensation**($) | Total($)
|---------------------------------- | --------------------------------- | -------------- | --------------- | -------------------------------------- | ----------------------------------------- | --------------------------- | --------
|(a)                                | (b)                               | (c)            | (d)             | (e)                                    | (f)                                       | (g)                         | (h)     
|Max Weissengruber (1)              | Nil                               | Nil            | Nil             | Nil                                    | Nil                                       | Nil                         | Nil     
|D.Brian Robertson (2)              | Nil                               | Nil            | Nil             | Nil                                    | Nil                                       | Nil                         | Nil     
|Douglas R. Robertson Secretary (3) | Nil                               | Nil            | Nil             | Nil                                    | Nil                                       | Nil                         | Nil     

|(1) | Max Weissengruber became a director on January 1,
      2006.   
|--- | ----------------------------------------------------------------
|    |                                                                 
|(2) | D.Brian Robertson became a director on January 1,
      2006.   
|    |                                                                 
|(3) | Douglas R. Robertson became a director on January 1,
      2006.

Employment Contracts and Termination of Employment and
Change in Control Arrangements

Other than our contracts with Mr. Weissengruber and Mr. B.
Robertson set out below, we have not entered into any employment agreement or
consulting agreements with our directors and executive officers. There are no
arrangements or plans in which we provide pension, retirement or similar
benefits for directors or executive officers. Our directors and executive
officers may receive stock options at the discretion of our board of directors
in the future. We do not have any material bonus or profit sharing
plans pursuant to which cash or non-cash compensation is or may be paid to our
directors or executive officers, except that stock options may be granted at the
discretion of our board of directors.

---

35

On January 1, 2006, we entered into a consulting contract with
Max Weissengruber, whereby Mr. Weissengruber agreed to provide services as
President of our company for a twelve month term expiring January 1, 2007 in
consideration for the payment by our company of $5,000 per month from January 1,
2006 to May 31, 2006 and $3,000 per month from June 1, 2006 to December 31,
2006. The agreement will be reviewed annually by our board of directors and has
been extended by the Company to January 1, 2011 at $3,000 per month. Our company
has the right to terminate Mr. Weissengrubers consulting contract at any time
with payment, in either cash or stock, of the remaining amount for the year plus
any accrued expenses owing at the termination date. Mr. Weissengruber is
required to provide us with two months notice prior to termination.

On January 1, 2006, we also entered into a consulting contract
with D. Brian Robertson, whereby Mr. Robertson agreed to provide services as
Treasurer and Chief Financial Officer of our company for a twelve month term
expiring upon January 1, 2007 in consideration for the payment by our company of
$5,000 per month from January 1, 2006 to May 31, 2006 and $3,000 per month from
June 1, 2006 to December 31, 2006. The agreement will be reviewed annually by
our board of directors and has been extended by the Company to January 1, 2011
at $3,000 per month. Our company has the right to terminate Mr. Robertsons
consulting contract at any time with payment, in either cash or stock, of the
remaining amount for the year plus any accrued expenses owing at the termination
date. Mr. Robertson is required to provide us with two months notice prior to
termination.

Pension, Retirement or Similar Benefit Plans

There are no arrangements or plans in which we provide pension,
retirement or similar benefits for directors or executive officers. We have no
material bonus or profit sharing plans pursuant to which cash or non-cash
compensation is or may be paid to our directors or executive officers, except
that stock options may be granted at the discretion of the board of directors or
a committee thereof.

Item 12. Security Ownership of Certain Beneficial Owners and
Management and Related Stockholder Matters.

The following table sets forth, as of April 13, 2010 certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers. Each person
has sole voting and investment power with respect to the shares of common stock,
except as otherwise indicated. Beneficial ownership consists of a direct
interest in the shares of common stock, except as otherwise indicated.

|Name and Address of Beneficial
      Owner                                            | Amount and Nature of Beneficial
      Ownership | Percentage of
      Class(1)
|------------------------------------------------------------------------------------- | ----------------------------------------------- | ----------------------------
|Max Weissengruber 30 Denver Crescent
      Toronto, Ontario, Canada M2J 1G8           | 45,600,000                                      | 25.4%                       
|D. Brian Robertson 49 South Street
      Orillia, Ontario, Canada L3V 3T2             | 45,500,000                                      | 25.2%                       
|Douglas R. Robertson 2189 Castlestone
      Court Mississauga Ontario, Canada L5B 1X9 | Nil                                             | Nil%                        
|Directors and Officers (3  as a group)                                               | 91,100,000                                      | 50.6%                       

---

36

|Name and Address of
      Beneficial Owner             | Amount and Nature of
      Beneficial Ownership | Percentage of
      Class(1)
|------------------------------------------------------ | ----------------------------------------------- | ----------------------------
|Claudio Sgarbi Via G.Leopardi NR50
      Cesina, Italy | 30,000,000                                      | 16.7%                       

| | (1) | Based on 180,120,000 shares outstanding as of April 13,
      2010.
| | --- | -------------------------------------------------------------------

Changes in Control

We are unaware of any contract, or other arrangement or
provision of our Articles or By-laws, the operation of which may at a subsequent
date result in a change of control of our company.

Item 13. Certain Relationships and Related Transactions, and
Director Independence.

Other than as disclosed below, there has been no transaction,
since January 1, 2008, or currently proposed transaction, in which our company
was or is to be a participant and the amount involved exceeds the lesser of
$120,000 or one percent of the average of our total assets at year end for the
last two completed fiscal years, and in which any of the following persons had
or will have a direct or indirect material interest:

| | (i)   | any director or executive officer of our
  company;                                                                                          
| | ----- | ---------------------------------------------------------------------------------------------------------------------------------------------
| |       |                                                                                                                                              
| | (ii)  | any beneficial owner of shares carrying more than 5% of
      the voting rights attached to our outstanding shares of common stock;
      and
| |       |                                                                                                                                              
| | (iii) | any immediate family member (including spouse, parents,
      children, siblings and in-laws) of any of the foregoing
  persons.             

Max Weissengruber and D. Brian Robertson, although not
obligated to do so, have expressed willingness to advance the Company funds on a
short-term basis to the extent necessary and, at December 31, 2009 had advanced
funds totaling $107,303 to our company. These amounts are unsecured, and have no
specific terms for repayment. For the year ended December 31, 2009, the Company
recorded $9,163 (2008 - $19,683) of imputed interest at 5.25% relating to these
amounts owing.

Given that we are a start-up, development stage company, we
believe that the terms of the foregoing transactions, and the funds provided
thereby, was the only manner by which we could generate the funds required to
implement the initial stages of our business plan and the Company would have
offered similar terms of transactions to unaffiliated third parties.

The Company entered into consulting agreements with the
President and CFO of the Company. Under these agreements, both the President and
CFO receive $3,000 per month commencing June 1, 2006 and expiring December 31,
2009. For the year ended December 31, 2009, the Company recorded $36,000
(December 31, 2008 - $36,000) of consulting expense and $36,000 (December 31,
2008 - $36,000) as marketing and sales expense. In December 2009, the Company
agreed to extend the term of these agreements to December 31, 2010 at $3,000 per
month.

On August 15, 2008, the Company entered into a debt settlement
and subscription agreement with the President of the Company, whereby the
Company agreed to issued 5,700,000 Class A common shares at a fair value of
$0.05 per share in consideration of the settlement of $285,000 owing.

On August 15, 2008, the Company entered into a debt settlement
and subscription agreement with the CFO of the Company, whereby the Company
agreed to issued 5,500,000 Class A common shares at a fair value of $0.05 per
share in consideration of the settlement of $275,000 owing.

On January 25, 2009 the Company entered into a joint venture
agreement with ELCE International Corp. to market and sell certain water
activation products owned by ELCE.

---

37

Under the terms of the agreement the Company agreed to purchase
minimum quantities of products to fulfill customer orders and minimize shipping
costs, and maintain minimum inventory of ELCE products to complete customer
orders.

On January 25, 2009 we entered into a joint venture agreement
with ELCE International Corp. to market and sell certain water activation
products owned by ELCE. Under the terms of the agreement we agreed to purchase
minimum quantities of products to fulfill customer orders and minimize shipping
costs, and maintain minimum inventory of ELCE products to complete customer
orders. As consideration for distributing ELCE products, we issued 10,000,000
restricted shares of common stock to Claudio Sgarbi, the President of ELCE,

on January 25, 2009. We also agreed
to issue an additional 5,000,000 shares issuable bi-annually for two years from
the closing of the joint venture agreement. On August 20, 2009, we issued an
additional 5,000,000 restricted common shares under the agreement. On December
31, 2009 in consideration for ELCE eliminating the requirement for minimum
inventory we agreed to issue the 15,000,000 restricted common shares owing to
Claudio Sgarbi under the agreement. We issued these 15,000,000 restricted common
shares on January 25, 2010.

The Company will pay Claudio Sgarbi any out of pocket expenses
plus a monthly consulting fee as follows:

| | $4,500 | for the period
      ending May 2009                     
| | ------ | ---------------------------------------------------------
| |        |                                                          
| | $6,000 | for the period
      ending August 2009                  
| |        |                                                          
| | $7,500 | for the period
      ending November 2009                
| |        |                                                          
| | $9,000 | December 1, 2009
      until the agreement is terminated.

The Company will also pay to ELCE International Corp. 50% of
the net profits relating to sales under the agreement.

Director Independence

Under NASDAQ Rule 5605(a)(2), a director is not considered to
be independent if he or she is also an executive officer or employee of the
company or accepted any compensation from the company in excess of $120,000
during any period of twelve consecutive months within the three years preceding
the determination of independence.

We determined that none of our directors are independent as
that term is defined by NASDAQ Rule 5605(a)(2).

Item 14. Principal Accounting Fees and Services.

Audit Fees

The following table sets forth the fees billed or expected to
be billed to the Company for professional services rendered by the Company's
independent registered public accounting firm, for the years ended December 31,
2009 and 2008:

|Fees                       |   | 2009   |  |   | 2008   | 
|-------------------------- | - | ------ |  | - | ------ | 
|Manning Elliot             |   |        |  |   |        | 
|Audit &
      Related Fees | $ | 30,750 |  | $ | 22,000 | 
|Tax Fees                   | $ | 5,000  |  | $ | Nil    | 
|All other Fees             | $ | Nil    |  | $ | Nil    | 

Audit & Related Fees. Consist of fees billed for
professional services rendered for the audits of our financial statements,
reviews of our interim consolidated financial statements included in quarterly
reports, services performed in connection with filings with the Securities and
Exchange Commission and related comfort letters and other services that are
normally provided by Manning Elliot LLP, Chartered Accountants for the fiscal
years ended December 31, 2009 and December 31, 2008.

---

38

Tax Fees. Consist of fees billed for professional
services for tax compliance, tax advice and tax planning. These services include
assistance regarding federal, state and local tax compliance and consultation in
connection with various transactions and acquisitions.

Policy on Pre-Approval by Audit Committee of Services
Performed by Independent Auditors

We do not use Manning Elliot, for financial information system
design and implementation. These services, which include designing or
implementing a system that aggregates source data underlying the financial
statements or generates information that is significant to our financial
statements, are provided internally or by other service providers. We do not
engage Manning Elliot to provide compliance outsourcing services.

Effective May 6, 2003, the Securities and Exchange Commission
adopted rules that require that before Manning Elliot is engaged by us to render
any auditing or permitted non-audit related service, the engagement be:

- approved by our audit committee (the functions of which are performed by
  our entire board of directors); or
- entered into pursuant to pre-approval policies and procedures established
  by the board of directors, provided the policies and procedures are detailed
  as to the particular service, the board of directors is informed of each
  service, and such policies and procedures do not include delegation of the
  board of directors' responsibilities to management.

Our entire board of directors pre-approves all services
provided by our independent auditors. All of the above services and fees were
reviewed and approved by our directors before the respective services were
rendered.

Our board of directors have considered the nature and amount of
fees billed by Manning Elliot and believe that the provision of services for
activities unrelated to the audit is compatible with maintaining Manning
Elliots independence.

PART IV

Item 15. Exhibits, Financial Statement Schedules.

Financial Statements

The Consolidated Financial Statements, together with the report
thereon of Manning Elliot Chartered Accountants, dated April 13, 2010, are
included as part of Item 8, Financial Statements and Supplementary Data.

Exhibit Table

|Exhibit Number | Description                                                                                                                                                           
|-------------- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------
|3.1            | Articles of Incorporation, filed as an exhibit to our
      Form SB-2 registration statement on February 12, 2007                                                     
|3.2            | By-laws, filed as an exhibit to our Form SB-2
      registration statement on February 12, 2007                                                                       
|10.1           | Supplier Agreement with ELCE International dated August
      18, 2001, filed as an exhibit to our Form SB- 2 registration statement on
      February 12, 2007       
|10.2           | Distribution Agreement with Avila S.T.E.M., SA dated
      February 1, 2005, filed as an exhibit to our Form SB-2 registration
      statement on February 12, 2007   
|10.3           | Supplier Agreement with R-Can Environmental Inc. dated
      May 20, 2005, filed as an exhibit to our Form SB-2 registration statement
      on February 12, 2007     
|10.4           | Distribution Agreement with JEUFI International, SA dated
      June 22, 2005, filed as an exhibit to our Form SB-2 registration statement
      on February 12, 2007 
|10.5           | Distribution Agreement with Freshwater Latin, S.A. dated
      September 1, 2005, filed as an exhibit to our
Form SB-2 registration statement
    on February 12, 2007

---

39

|10.6  | Asset Sale Agreement dated
          January 1, 2006, among our company, Max Weissengruber and D. Brian Robertson,
          filed as an exhibit to our Form SB-2 registration statement on February
          12, 2007
|----- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7  | Consulting Agreement dated
          January 1, 2006, between our company and D. Brian Robertson, filed as
          an exhibit to our Form SB-2 registration statement on February 12, 2007                           
|10.8  | Agreement with Max Weissengruber,
          dated January 1, 2006, filed as an exhibit to our Form SB-2 registration
          statement on February 12, 2007                                                          
|10.9  | Distribution Agreement dated
          October 9, 2008 with Watergeeks Laboratories Inc., dated October 9,
          2008 and filed as an exhibit to our Form 8-K on October 16, 2008.                                 
|10.10 | Extension Agreement dated
          December 31, 2008 to Distribution Agreement with Watergeeks Laboratories
          Inc., dated October 9, 2008 and filed as an exhibit to our Form 8-K
          on January 6, 2009
|10.11 | Joint Venture Agreement with
          ELCE International Corp., dated January 25, 2009 and filed as an exhibit
          to our Form 8-K on February 10, 2009                                                         
|23.1* | Consent
          of Manning Elliott                                                                                                                                                                                   
|31.1* | Certification
          of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley
          Act of 2002 of Max Weissengruber                                                                        
|31.2* | Certification
          of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley
          Act of 2002 of D. Brian Robertson                                                                       
|32.1* | Certification
          of Principal Executive Officer pursuant Section 906 Certifications under
          Sarbanes-Oxley Act of 2002                                                                                  
|32.2* | Certification
          of Principal Financial Officer pursuant Section 906 Certifications under
          Sarbanes-Oxley Act of 2002                                                                                  

---

40

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) 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.

|Date: April 15, 2010 | FRESHWATER TECHNOLOGIES, INC.
|-------------------- | -----------------------------
|                     |                              
|                     | By:                          
|                     |                              
|                     |                              
|                     |                              

Pursuant
to the requirements of the Securities Exchange Act of 1934, this report has been
signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.

|/s/ Max Weissengruber    |  | Director, President and Chief Executive      | April 15, 2010
|------------------------ |  | -------------------------------------------- | --------------
|Max Weissengruber        |  | Officer (Principal Executive Officer)        |               
|                         |  |                                              |               
|/s/ D. Brian Robertson   |  | Director, Treasurer, Chief Financial Officer | April 15, 2010
|D. Brian Robertson       |  | (Principal Financial Officer and Principal   |               
|                         |  | Accounting Officer)                          |               
|                         |  |                                              |               
|/s/ Douglas R. Robertson |  | Secretary and Director                       | April 15, 2010
|Douglas R. Robertson     |  |                                              |               

---