The following discussion should be read in conjunction with our audited financial statements for the years ended December 31, 2008 and December 31, 2007 and the related notes that appear elsewhere in this Form 10K. 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 registration statement and prospectus, particularly in the section entitled "Risk Factors" beginning on page 8 of this Form 10K.

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 household and commercial 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 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.

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, it discharges no potentially harmful substances into the environment. Used in a variety of water treatment

In January 2009, the Company 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. The most positive aspects of the joint venture agreement will be that ELCE International will not only supply its ELCE water activation units at manufacturer's cost to Freshwater but will actively participate with Freshwater to market and sell ELCE products to guarantee best performance in Argentina, Chile, Columbia, Costa Rica, Panama and Peru. ELCE International has compiled comprehensive technical information on ELCE equipment installed world-wide in a variety of commercial, industrial, agricultural and aquacultural applications. ELCE International will work closely with Freshwater in targeting industries and companies for whom ELCE has already provided effective solutions in terms of eliminating or reducing encrustations and corrosion, improving energy efficiency as well as significantly improved productivity and output. Our water activation products are designed to improve the operating efficiency of commercial and industrial boilers and refrigeration systems without the use of chemicals. Our water activation products are manufactured and supplied to our company by ELCE International Corp.

We have formalized our relationship with R-Can Environmental Inc., Ozocan Corporation and ELCE International Corp. pursuant to non-exclusive distribution agreements. We also offer a full line of accessories, replacement parts and services that complement our drinking 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.

Currently, we market our products to 11 local distributors and retailers 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. In addition, 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 products and commercial, heating and cooling business customers.

Results of Operations for the Period from January 21, 2005 (date of inception) to December 31, 2008

The financial statements have been restated to reflect the operations of Freshwater Technologies, Inc. from the date of its incorporation, January 21, 2005. During the period from January 21, 2005(date of inception) to December 31, 2008, we generated $461,799 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 Inc. water activation units in Peru, Panama and Costa Rica. The cost of sales on these orders was $214,272 resulting in a gross profit of 53.6% .

During the period from January 21, 2005 to December 31, 2008, our operating expenses totaled $1,252,908. Consulting costs were $211,000; general and administrative expenses were $113,235; marketing and sales expenses totaled $279,547; and professional fees were $142,452. Imputed interest, on Director's loans, totaled $98,058. A provision in the amount of $408,616 was made for sales that were deemed to be uncollectable net of recoveries to December 31, 2008 as these sales were in excess of one year old. We recorded a gain on settlement of debt in the amount of $2,000.

We reported a net loss of $1,003,381 for the period from date of inception to December 31, 2008.

During the year ended December 31, 2008, we signed a contract with our Director of Marketing and Sales-Latin America, increased our distributors from 4 to 11 with representation in six Countries in South and Central America, reconfirmed our supplier agreements, performed market research and testing and increased marketing activities.

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 Corporation.

During the year ended December 31, 2008, we generated $1,626 in sales revenue compared with $979 for the year ended December 31, 2007. Cost of sales for the year ended December 31, 2008 was $705 or 43% of sales compared with cost of sales of 885 ($521 represents freight costs for equipment shipped but not sold) or 90% of sales. For the year ended December 31, 2008 our gross profit was 57% of sales compared with gross profit of 10% of sales during the year ended December 31, 2007.

During the year ended December 31, 2008, our operating expenses totaled $196,734 as compared to $167,039 during the year ended December 31, 2007. Professional fees including costs of the Company's Prospectus amounted to $51,480 for the year ended December 31, 2008 as compared to $43,287 for the year ended December 31, 2007. Marketing and sales expenses and consultants' costs were $119,036 during the year ended December 31, 2008 as compared to $90,541 during the year ended December 31, 2007. This increase of $28,495 is mainly attributable to the consulting fees and travel expenses paid under our agreement with our Director of Marketing and Sales for Latin America. General and administrative expenses were $13,935 during the year ended December 31, 2008 as compared to $14,780 during the year ended December 31, 2007. Imputed interest on Directors' loans was $19,863 for the year ended December 31, 2008 as compared to $28,231 for the year ended December 31, 2007. This decrease is due to the payment of $560,000 owing to Directors by the issuance of common shares in July 2008 and the resultant decrease in imputed interest. During the year ended December 31, 2008, we recovered $7,580 of uncollectable sales previously written off as compared to $9,800 during the year ended December 31, 2007.

In the year ended December 31, 2008 we provided $nil for impairment of inventory as compared to $60,525 during the year ended December 31, 2007. We reported a net loss of $195,813 for the year ended December 31, 2008 as compared to a net loss of $225,911 for the year ended December 31, 2007 because in 2007 inventory consisting of water activators and water filters held for sale has been fully impaired to reflect the fact that there has been no movement in water activation products and water filters for two years and there is uncertainty as to whether the products can be resold in the future. We recorded a gain on settlement of debt in the amount of $nil in 2008 versus $2,000 in 2007.

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, 2009. 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          $  50,000 -
     Administrative                                                       $ 75,000
                                                  Legal and Accounting $  50,000 -
                                                                          $ 75,000
                            Working capital                            $ 500,000 -
                                                                         $ 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, 2008 was $160. As at December 31, 2008, we had negative working capital of $204,672. We require funds to enable us to address our minimum current and ongoing expenses, 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.

The recent 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 recent 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 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 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.

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, 2008 and December 31, 2007, our independent auditors included an explanatory paragraph regarding concerns about our ability to continue as a going concern. Our financial statements contain additional note disclosures describing the circumstances that led to this disclosure by our independent auditors. There is substantial doubt about our ability to continue as a going concern as the continuation and expansion of our business is dependent upon obtaining further financing, successful and sufficient market acceptance of our products, and, finally, achieving a profitable level of operations. The issuance of additional equity securities by us could result 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 will be one of our primary objectives over the next twelve months. The financial requirements of our company for the next twelve months will depend on our ability to raise the money

Operating Activities

Operating activities used cash of $372,100 for the period between our date of inception(January 21,2005) to December 31,2008. Operating activities used cash of $93,840 for the year ended December 31, 2008 and provided $13,756 in cash for the year ended December 31, 2007.

Financing Activities

Net cash provided by financing activities was $372,260 for the period between our date of inception (January 21, 2005) to December 31, 2008. Net cash provided by financing activities was $93,776 for the year ended December 31, 2008 and net cash used in financing activities was $17,849 for the year ended December 31, 2007. These financing activities were provided by two Directors of the Company.

On May 20, 2006, we issued 80,000,000 shares to the directors of our company for the net assets, goodwill, name and business of Freshwater Technologies, a water treatment distribution company, in an offshore transaction relying on Rule 903 of Regulation S of the Securities Act of 1933. Max Weissengruber and D. Brian Robertson acquired 40,000,000 shares each. Mr. Weissengruber and Mr. Robertson are not U.S. persons as that term is defined in Regulation S.

Between December 1999, and February, 2000 we issued 5,100,000 common shares to 23 subscribers at an offering price of $0.0025 per share for gross offering proceeds of $12,750 in an offshore transaction relying on Rule 903 of Regulation S of the Securities Act of 1933. None of the subscribers were U.S. persons as that term is defined in Regulation S.

Between December 1999, and February, 2000 we issued 100,000 common shares to 1 subscribers at an offering price of $0.0025 per share for gross offering proceeds of $250. We issued the shares to the subscribers relying on an exemption from registration under Regulation D and/or Section 4(2) or 4(6) of the Securities Act of 1933.

Non-cash Investing and Financing Activities

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

Growth Strategy

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 from 4 to 11 with 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.

Future Operations

Marketing

Assuming that we will be able to obtain the financing that we need, we estimate that we will incur $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 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, Director of Marketing for Latin America and our Southern Colombian sales agent. We also receive the support and advice of our three product suppliers R-Can Environmental, 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 obtaining the financing we require, in the next twelve month period in order for us to become a going concern:

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 . . .