Epoxy (EPXY) 10-Q 2010 Q4 Quarterly report

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-Q

x	QUARTERLY REPORT UNDER TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2010
OR
o	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission file number 000-53669

\

NEOHYDRO TECHNOLOGIES CORP.

(Exact name of registrant as specified in its charter)

NEVADA

(State or other jurisdiction of incorporation or organization)

84 Hawkhill Road NW

Calgary, Alberta

Canada   T3G 3H8

(Address of principal executive offices, including zip code)

(877) 241-0265

(Registrant’s telephone number, including area code)

Indicate by check mark whether the issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act 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 last 90 days.   YES x     NO o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, 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 o     NO 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,” “non-accelerated filer,” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	o	Accelerated Filer	o
Non-accelerated Filer	o	Smaller Reporting Company	x
(Do not check if smaller reporting company)

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES  x   NO  o

At November 17, 2010, the Registrant had 58,990,000 shares of common stock, outstanding.

TABLE OF CONTENTS

		Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statement.
	Unaudited Consolidated Balance Sheets - September 30, 2010 and December 31, 2009	3
	Unaudited Consolidated Statements of Operations - Three and Nine Months ended September 30, 2010 and 2009 and Period from November 13, 2007 (Date           of Inception to September 2010	4
	Unaudited Consolidated Statements of Stockholders’ Equity (Deficit) - For the Period from November 13, 2007 (Date of Inception) to September 30, 2010	5
	Unaudited Consolidated Statements of Cash Flows - Nine Months ended September 30, 2010 and 2009 and Period from November 13, 2007 (Date           of Inception to September 2010	6
	Notes to Audited Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations.	19
Item 3.	Quantitative and Qualitative Disclosures About Market Risk.	28
Item 4.	Controls and Procedures.	28
PART II – OTHER INFORMATION
Item 1A.	Risk Factors.	28
Item 6.	Exhibits.	28
Signatures		29
Exhibit Index		30

-2-

Neohydro Technologies Corp. and Subsidiary
(A Development Stage Company)
Consolidated Balance Sheets
(Expressed in US Dollars)
(Unaudited)
				September 30,		December 31,
				2010		2009
ASSETS
Current Assets
	Cash and cash equivalents		$	-	$	39,118
Total Assets			$	-	$	39,118
LIABILITIES AND STOCKHOLDERS' DEFICIT
Current Liabilities
	Accounts payable and accrued liabilities		$	64,482	$	66,074
	Due to related party (Note 4)			124,301		25,048
	Loans payable (Note 5)			-		35,000
	Convertible notes, less unamortized discount of $nil (December 31, 2009 - $31,893) (Note 6)			145,342		18,107
	Derivative liabilities (Note 6)			157,167		21,607
Total current liabilities				491,292		165,836
Commitments and Contingencies (Note 9)				-		-
Stockholders' Deficit
	Preferred Stock, $0.00001 par value;
		authorized 100,000,000 shares, none issued and outstanding		-		-
	Common Stock, $0.00001 par value;
		authorized 800,000,000 shares,
		58,990,000 shares issued and outstanding		590		590
	Additional paid-in capital			742,910		742,910
	Deficit accumulated during the development stage			(1,234,792)		(870,218)
Total stockholders' deficit				(491,292)		(126,718)
Total Liabilities and Stockholders' Deficit			$	-	$	39,118

The accompanying notes are an integral part of these consolidated financial statements.

-3-

Neohydro Technologies Corp. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Operations
(Expressed in US Dollars)
(Unaudited)
			Three months ended September 30, 2010		Three months ended September 30, 2009		Nine months ended September 30, 2010		Nine months ended September 30, 2009		Period from November 13, 2007 (Date of Inception) to September 30, 2010
Revenue		$	-	$	-	$	-	$	-	$	-
Costs and expenses
	General and administrative		60,640		103,986		187,101		116,032		365,973
Operating Loss			(60,640)		(103,986)		(187,101)		(116,032)		(365,973)
Other Income (Expense)
	Interest expense		(4,050)		-		(68,455)		-		(72,551)
	Loss on extinguishment of debt		-		-		(24,467)		-		(24,267)
	Loss on change in fair value of derivative liabilities		(57,750)		-		(84,551)		-		(70,169)
					-
Total other expense			(61,800)		-		(177,473)		-		(167,187)
Loss from continuing operations			(122,440)		(103,986)		(364,574)		(116,032)		(533,160)
Discontinued operations
	Gain on disposal of discontinued operations		-		18,177		-		18,177		18,177
	Operations		-		-		-		(55,510)		(719,809)
Total gain (loss) from discontinued operations			-		18,177		-		(37,333)		(701,632)
Net Income Loss		$	(122,440)	$	(85,809)	$	(364,574)	$	(153,365)	$	(1,234,792)
Net income (loss) per share - Basic and Diluted:
	Loss from continuing operations	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.00)
	Discontinued operations		-		0.00		-		(0.00)
	Net loss	$	(0.00)	$	(0.00)	$	(0.01)	$	(0.00)
Weighted Average Shares Outstanding
	Basic and Diluted		58,990,000		58,490,000		58,990,000		64,357,000

The accompanying notes are an integral part of these consolidated financial statements.

-4-

Neohydro Technologies Corp. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Stockholders' Equity (Deficit)
For the Period from November 13, 2007 (Inception) to September 30, 2010
(Expressed in US Dollars)
(Unaudited)
	Common Stock, $0.00001 par value				Additional Paid-in		Deficit Accumulated During the Development
	Shares		Amount		Capital		Stage		Total
Common shares sold for cash at $0.000125 per share	40,000,000	$	400	$	4,600	$	-	$	5,000
Common shares sold for cash at $0.00125 per share	32,800,000		328		40,672		-		41,000
Donated services	-		-		1,500		-		1,500
Net Loss	-		-		-		(26,792)		(26,792)
Balance - December 31, 2007	72,800,000		728		46,772		(26,792)		20,708
Common shares sold for cash at $0.40 per unit, less costs of $10,000	250,000		3		89,997		-		90,000
Donated services	-		-		6,000		-		6,000
Net Loss	-		-		-		(637,507)		(637,507)
Balance - December 31, 2008	73,050,000		731		142,769		(664,299)		(520,799)
Common shares returned and cancelled (Note 3)	(14,560,000)		(146)		146		-		-
Common shares issued for cash at $0.20 per unit	500,000		5		99,995		-		100,000
Donated capital - amount due licensor					500,000				500,000
Net Loss	-		-		-		(205,919)		(205,919)
Balance - December 31, 2009	58,990,000	$	590	$	742,910	$	(870,218)	$	(126,718)
Net Loss	-		-		-		(364,574)		(364,574)
Balance -September 30, 2010	58,990,000	$	590	$	742,910	$	(1,234,792)	$	(491,292)

The accompanying notes are an integral part of these consolidated financial statements.

-5-

Neohydro Technologies Corp. and Subsidiary
(A Development Stage Company)
Consolidated Statements of Cash Flows
(Expressed in US Dollars)
(Unaudited)
				Nine months ended September 30, 2010		Nine months ended September 30, 2009		Period from November 13, 2007 (Date of Inception) to September 30, 2010
Cash Flows from Operating Activities
	Net loss		$	(364,574)	$	(153,365)	$	(1,234,792)
	Adjustments to reconcile net loss to net cash used
		for operating activities:
		Donated services		-		-		7,500
		Impairment of mineral property acquisition costs		-		-		6,500
		Amortization of terminated license agreement costs		-		-		1,096
		Impairment of terminated license agreement costs		-		-		498,904
		Gain on disposal of discontinued operations		-		(18,177)		(18,177)
		Loss on re-valuation of derivative liability		84,551		-		70,169
		Accretion of debt discount		68,455		-		72,551
		Loss on extinguishment of debt		24,467		-		24,467
	Change in operating assets and liabilities:
		Prepaid expenses		-		25,295		-
		Accounts payable and accrued liabilities		3,730		45,205		87,981
Net cash used for operating activities				(183,317)		(101,042)		(483,801)
Cash Flows from Investing Activities
	Mineral property acquisition costs			-		-		(6,500)
Net cash used for investing activities				-		-		(6,500)
Cash Flows from Financing Activities
	Proceeds from sales of common stock – net			-		-		236,000
	Increase in amount due to related party			99,253		63,831		124,301
	Increase in loan payable			-		35,000		-
	Proceeds from convertible note			45,000		-		130,000
Net cash provided by financing activities				144,253		98,831		490,301
Decrease in cash				(39,118)		(2,211)		-
Cash - beginning of period				39,118		2,268		-
Cash - end of period			$	-	$	57	$	-
Supplemental disclosures of cash flow information:
	Interest paid		$	-	$	-	$	-
	Income taxes paid		$	-	$	-	$	-
Non cash investing and financing activities:
	Acquisition of license agreement in exchange
		for liability due Licensor of license agreement	$	-	$	-	$	500,000
	Contribution of amount due Licensor of terminated license agreement		$	-	$	500,000	$	-

The accompanying notes are an integral part of these consolidated financial statements.

-6-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

1.   Nature of Operations

Neohydro Technologies Corp. (the “Company”) was incorporated in the State of Nevada on November 13, 2007 as Rioridge Resources Corp. On July 22, 2008, the Company changed its name to Neohydro Technologies Corp. From December 14, 2007 to September 20, 2008, the Company’s principal business was the acquisition and exploration of mineral resources. On September 22, 2008 (see Note 3), the Company entered into a licensing agreement and acquired the exclusive worldwide marketing, distribution and licensing rights to water sterilization technology. On March 31, 2009, this license agreement was terminated by the licensor. On June 8, 2009 (see Note 9), the Company entered into a licensing agreement to market and sell in Canada an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS ”). On September 1, 2009, the Company incorporated Green Interactive Hybrid Technologies Canada Inc. “GIH Canada” in the Province of Alberta, Canada as a wholly owned subsidiary to better attract Canadian investment.

These consolidated financial statements have been prepared on a going concern basis, which implies the Company will continue to realize its assets and discharge its liabilities in the normal course of business. The Company has not generated revenues since inception, has never paid dividends and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operations, and the attainment of profitable operations. As at September 30, 2010, the Company has a working capital deficit of $491,292 and has accumulated losses of $1,234,792 since inception. These factors raise substantial doubt regarding the Company’s ability to con tinue as a going concern. These consolidated 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)   Basis of Presentation

These consolidated financial statements and related notes are presented in accordance with accounting principles generally accepted in the United States, and are expressed in US dollars. The Company’s fiscal year-end is December 31.

-7-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

2. Summary of Significant Accounting Policies (continued)

b)   Interim Financial Information

The unaudited consolidated financial statements as of September 30, 2010 and for the three and nine months ended September 30, 2010 and 2009 and for the period November 13, 2007 (inception) to September 30, 2010 have been prepared in accordance with accounting principles generally accepted in the United States for interim financial information and with instructions to Form 10-Q. In the opinion of management, the unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements and reflect all adjustments, which include only normal recurring adjustments, necessary to present fairly the financial position as of September 30, 2010 and the results of operations and cash flows for the periods then ended. The financial data and other information disclosed in these notes to the i nterim consolidated financial statements related to these periods are unaudited. The results for the three and nine month periods ended September 30, 2010 is not necessarily indicative of the results to be expected for any subsequent quarters or the entire year ending December 31, 2010. The balance sheet at December 31, 2009 has been derived from the audited consolidated financial statements at that date.

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to the Securities and Exchange Commission's rules and regulations. These unaudited consolidated financial statements should be read in conjunction with our audited consolidated financial statements and notes thereto for the year ended December 31, 2009 as included in our Form 10-K filed with the Securities and Exchange Commission on April 15, 2010.

c)   Financial Instruments

Our financial instruments consist principally of cash, cash equivalents, due to related party, accounts payable, convertible notes, and derivative liabilities. ASC 820, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments establish a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and enhances disclosure requirements for fair value measurements. 

The Company generally does not use derivative financial instruments to hedge exposures to cash-flow risks or market-risks that may affect the fair values of its financial instruments. The Company utilizes various types of financing to fund its business needs, including convertible debt with conversion features not indexed to the Company’s stock. The Company is required to record its derivative instruments at their fair value. Changes in the fair value of derivatives are recognized in earnings in accordance with ASC 815.

Previously, the Company had assessed that the fair value of the derivative instruments were determined based on “Level 2” inputs. During the three months ended September 30, 2010, the Company re-assessed its derivative financial instruments and determined that the fair value of the derivative instruments are based on “Level 3” inputs, which consist of prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.

-8-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

2. Summary of Significant Accounting Policies (continued)

Financial Instruments (continued)

Fair Value Hierarchy

The Company has categorized its financial instruments, based on the priority of inputs to the valuation technique, into a three-level fair value hierarchy.  The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3).

Financial assets and liabilities recorded on the consolidated balance sheets are categorized based on the inputs to the valuation techniques as follows:

Level 1   Financial assets and liabilities for which values are based on unadjusted quoted prices for identical assets or liabilities in an active market that management has the ability to access.

Level 2   Financial assets and liabilities for which values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability (commodity derivatives and interest rate swaps).

Level 3   Financial assets and liabilities for which values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement.  These inputs reflect management’s own assumptions about the assumptions a market participant would use in pricing the asset or liability.

When the inputs used to measure fair value fall within different levels of the hierarchy, the level within which the fair value measurement is categorized is based on the lowest level input that is significant to the fair value measurement in its entirety.  The Company conducts a review of fair value hierarchy classifications on a quarterly basis.  Changes in the observability of valuation inputs may result in a reclassification for certain financial assets or liabilities. 

The following presents the Company’s fair value hierarchy for assets and liabilities measured at fair value on a recurring basis at September 30, 2010.  These items are included in “derivative liabilities” on the consolidated balance sheet.

	Fair Value Measurements on a Recurring Basis
	September 30, 2010
	Level 1	Level 2	Level 3	Total
Liabilities:
Derivative liabilities	-	-	$157,167	$157,167
Total liabilities at fair value	-	-	$157,167	$157,167

-9-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

2.   Summary of Significant Accounting Policies (continued)

Financial Instruments (continued)

The following is a reconciliation of the beginning and ending balances for the derivative liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3) during the nine month period ended September 30, 2010:

	Derivatives		Total
Beginning balance	$	-	$	-
Total gains or losses (realized/unrealized):
Included in earnings (Loss on change in fair value of conversion feature)		84,551		84,551
Included in other comprehensive income		-		-
Purchases, issuances, and settlements		51,009		51,009
Transfers in and/or out of Level 3		21,607		21,607
Ending balance	$	157,167	$	157,167
The amount of total gains or losses for the period included in earnings (or changes in net assets) attributable to the change in unrealized gains or losses relating to liabilities still held at September 30, 2010	$	84,551	$	84,551

Gains and losses (realized and unrealized) included in earnings (or changes in net assets) for the nine month period ended September 30, 2010, are reported in other expenses as follows:

	Other Expenses
Total gains or losses included in earnings (or changes in net assets) for the period ended September 30, 2010	$	(84,551	)
Change in unrealized gains or losses relating to liabilities still held at September 30, 2010	$	84,551

-10-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

2.   Summary of Significant Accounting Policies (continued)

d.  Reclassification

Certain reclassifications have been made to the prior period’s financial statements to conform to the current period’s presentation.

e.         Recently Issued Accounting Pronouncements

In January 2010, the FASB issued the FASB Accounting Standards Update No. 2010-06 “Fair Value Measurements and Disclosures (Topic 820) Improving Disclosures about Fair Value Measurements,” which provides amendments to Subtopic 820-10 that require new disclosures as follows:

1.   Transfers in and out of Levels 1 and 2. A reporting entity should disclose separately the amounts of significant transfers in and out of Level 1 and Level 2 fair value measurements and describe the reasons for the transfers.

2.   Activity in Level 3 fair value measurements. In the reconciliation for fair value measurements using significant unobservable inputs (Level 3), a reporting entity should present separately information about purchases, sales, issuances, and settlements (that is, on a gross basis rather than as one net number).

This Update provides amendments to Subtopic 820-10 that clarify existing disclosures as follows:

1.   Level of disaggregation. A reporting entity should provide fair value measurement disclosures for each class of assets and liabilities. A class is often a subset of assets or liabilities within a line item in the statement of financial position. A reporting entity needs to use judgment in determining the appropriate classes of assets and liabilities.

2.   Disclosures about inputs and valuation techniques. A reporting entity should provide disclosures about the valuation techniques and inputs used to measure fair value for both recurring and nonrecurring fair value measurements. Those disclosures are required for fair value measurements that fall in either Level 2 or Level 3.

The new disclosures and clarifications of existing disclosures are effective for interim and annual reporting periods beginning after December 15, 2009, except for the disclosures about purchases, sales, issuances, and settlements in the roll forward of activity in Level 3 fair value measurements. Those disclosures are effective for fiscal years beginning after December 15, 2010, and for interim periods within those fiscal years (early adoption is permitted). The Company adopted FASB Accounting Standards Update No. 2010-06 for the three month period ended September 30, 2010 and updated its disclosures as a result.

In February 2010, the FASB issued the FASB Accounting Standards Update No. 2010-09 “Subsequent Events (Topic 855) Amendments to Certain Recognition and Disclosure Requirements,” which provides amendments to Subtopic 855-10 as follows:

1. An entity that either (a) is an SEC filer or (b) is a conduit bond obligor for conduit debt securities that are traded in a public market (a domestic or foreign stock exchange or an over-the-counter market, including local or regional markets) is required to evaluate subsequent events through the date that the financial statements are issued. If an entity meets neither of those criteria, then it should evaluate subsequent events through the date the financial statements are available to be issued.

2. An entity that is an SEC filer is not required to disclose the date through which subsequent events have been evaluated. This change alleviates potential conflicts between Subtopic 855-10 and the SEC's requirements.

3. The scope of the reissuance disclosure requirements is refined to include revised financial statements only. The term revised financial statements is added to the glossary of Topic 855. Revised financial statements include financial statements revised either as a result of correction of an error or retrospective application of U.S. generally accepted accounting principles.

-11-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

2.  Summary of Significant Accounting Policies (continued) 

Recently Issued Accounting Pronouncements (continued)

All of the amendments in this Update are effective upon issuance of the final Update, except for the use of the issued date for conduit debt obligors.  That amendment is effective for interim or annual periods after June 15, 2010. The Company adopted FASB Accounting Standards Update No. 2010-009 for the nine month period ended September 30, 2010 and updated its disclosures as a result. 

The Company’s management does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying financial statements.

f.Subsequent Events

In accordance with ASC 855, the Company evaluated subsequent events through the date these financial statements were issued. There were no material subsequent events that required recognition additional disclosure in these financial statements.

3.  Licence Agreement Costs, Net 

On September 22, 2008, the Company entered into an agreement with Neohydro Corp. ("Licensor") and Dean Themy ("Themy") and acquired the exclusive worldwide marketing, distribution and distribution rights, along with patent and intellectual rights, to the Licensor's water sterilization technology for the treatment of industrial waste water in industries such as the oil and gas industry. Licensor reserved the sole and exclusive right to manufacture the Licensed Products.

The price for the license was $500,000. No due date for payment or interest provisions were specified in the agreement. In addition, the Company's majority stockholder and president transferred 14,560,000 shares of Company Common Stock to Themy, president of the Licensor. On September 10, 2008, Themy was appointed director of the Company. On September 22, 2008, Themy was appointed president of the Company.

The agreement also provided for the payment of royalties to Licensor of 10% of sales of licensed products. The Company was also to use its best efforts to provide funding for business development and marketing.

The Company initially capitalized the $500,000 license agreement cost and recorded amortization expense of $1,096 for the period September 22, 2008 to September 30, 2008 (using the straight line method over the estimated 10 year economic life of the agreement). As at September 30, 2008, the Company reviewed the remaining $498,904 carrying value of the license agreement costs for potential impairment. Considering all facts and circumstances, the Company concluded that it was not more likely than not that any of the $498,904 carrying costs were recoverable. Accordingly, the Company expensed a $498,904 provision for impairment of license agreement costs at September 30, 2008 and reduced the license agreement costs, net , to $nil.

On March 31, 2009, the License Agreement was terminated by the Licensor due to the Company’s failure to comply with funding schedules set forth in the agreement.

On April 22, 2009, the Company executed an Agreement and Release with Licensor and Themy. Themy returned the 14,560,000 shares of Company common stock transferred to him pursuant to the License Agreement. Also, Licensor and Themy released the Company from any liabilities and claims due them and agreed to hold harmless the Company from any and all claims by third parties which Themy incurred while affiliated with the Company. The Company released Licensor and Themy from any claims due to the Company and agreed to hold harmless Licensor and Themy from any claims.

-12-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

4.   Related Party Balances/Transactions

Due to related parties, which are non-interest bearing, unsecured, and have no specific terms of repayment, consist of:

	September 30, 2010		December 31, 2009
Due to former chief executive officer (from November 13, 2007 to September 22 ,2008) for advances and expenses paid on behalf of the Company	$	20,998	$	20,998
Due to significant stockholders
Unpaid consulting fees		28,051		4,050
Due to current chief executive officer
Unpaid management fees		75,000		-
Expenses paid on behalf of the Company		252		-
Total	$	124,301	$	25,048

For the nine months ended September 30, 2010, the Company incurred $112,500, $12,500 per month,  (September 30, 2009 - $Nil) in management fees expense for services provided by its current chief executive officer (from June 8, 2009); $37,500 of the management fees incurred were paid as of September 30, 2010.

The Company’s office services and office space are provided without charge by the sole officer and director of the Company.

5.   Loans Payable

a)   On July 30, 2009, the Company entered into a loan agreement with a private company for $35,000 (“Lender”). The loan was non-interest bearing and due in full on March 1, 2010. The loan could be cancelled upon the conversion of the loan into shares by the Lender. The loan was not repaid by the due date of March 1, 2010 and on April 9, 2010 a new agreement was signed.  (see Note 6(b)).

b)   On March 31, 2010, a private company loaned the Company $28,000.   The loan was non-interest bearing and had no repayment terms.  On May 6, 2010, the private company loaned an additional $17,000 and entered into a convertible note agreement for the gross amount of $45,000 due in full on June 30, 2010.  The loan was not repaid by the due date and a new note was signed on July 31, 2010. (see Note 6(c)).

-13-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

6.   Convertible Notes

a)   On December 17, 2009, the Company entered into a convertible note agreement with a private company.  The Company received $50,000 which bears interest at 15% per annum and was due on March 31, 2010. On April 1, 2010, the due date of the loan was extended to June 1, 2010 and on June 1, 2010 the due date of the loan was extended to June 30, 2011. The Company evaluated the modifications and concluded that the modifications were not troubled debt restructurings or extinguishments of the original debt; as a result no gain or loss was recognized upon modification and no change to the carrying value of the debt was recognized. Interest is payable on the note when the principal amount becomes due. The loan and any unpaid interest are convertible into shares of common stock at a conversion price which is the lesser of (a) $0.15 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion. The Company initially recognized the fair value of the embedded conversion feature of $35,989 as a derivative liability and reduced the carrying value of the convertible loan to $14,011.  The discount on the convertible loan was accreted over the term of the convertible loan, and at March 31, 2010 the unamortized discount was $0, increasing the carrying value to the face value of $50,000. As at September 30, 2010, the discount was fully accreted and the carrying value of the convertible debt was $50,000.  At September 30, 2010 accrued interest of $5,152 was outstanding and included in the convertible note balance on the accompanying balance sheet. The fair value of the derivative liability at September 30, 2010 was $58,431 and a loss of $20,816 and $36,825 for the three and nine months ended September 30, 2010, respectively, was recorded on the change in the fair value of the derivative li ability.  The fair value of the derivative liability of $58,431 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 339%, no expected dividends, an expected term of nine months and a risk-free interest rate of 0.23%. As of September 30, 2010, the loan has not been repaid or converted into shares.

b)   On April 9, 2010, the Company entered into a convertible loan agreement which replaced the loan agreement for $35,000 referred to in Note 5(a). According to the terms of the agreement the loan is due March 1, 2011 and bears interest at 12% per annum. Interest is payable on the note when the principal amount becomes due. The loan and any unpaid interest are convertible into shares of common stock at a conversion price which is the lesser of (a) $0.015 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion. The Company evaluated the modification and concluded that the modification was an extinguishment of the original debt; as a result a loss of $24,467 for the three months ended June 30, 2010 and the nine months ended September 30, 2010 was recognized upon modification an d no change to the carrying value of the debt was recognized as the Company determined that the fair value of the new debt was $35,000. The fair value of the derivative liability at September 30, 2010 was $39,928 and a loss of $15,461 for the three and nine months ended September 30, 2010 was recorded for the change in the fair value of the derivative liability.  The fair value of the derivative liability of $39,928 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 428%, no expected dividends, an expected term of five months and a risk-free interest rate of 0.19%. As at September 30, 2010, the discount was $0 and the carrying value of the convertible debt was $35,000.  At September 30, 2010 accrued interest of $2,002 was also outstanding and included in the convertible note balance on the accompanying balance sheet.

-14-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

6.     Convertible Note (continued)

c)   On May 6, 2010, the Company entered into a convertible note agreement to secure $45,000 of advances referred to in Note 5(b).  According to the terms of the agreement the loan was due on June 30, 2010 and bore interest at 15% per annum.  Interest was payable on the note when the principal became due.  The loan and any unpaid interest were convertible into shares of common stock at a conversion price which of the lesser of (a) $0.02 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion.  The Company initially recognized the fair value of the embedded conversion feature of $26,543 as a derivative liability and reduced the carrying value of the convertible loan to $18,457. The initial fair value of the derivative liability at May 6, 2010 of $26,543 was determined using the Black Scholes option pricing model with a quoted market price of $0.02, a conversion price of $0.0165, expected volatility of 291%, no expected dividends, an expected term of one year and a risk-free interest rate of 0.32%. The discount on the convertible loan was accreted over the term of the convertible loan, increasing the carrying value to the face value of $45,000 on June 30, 2010. As at June 30, 2010, the discount was fully accreted and the carrying value of the convertible debt was $45,000 and the loan had not been repaid or converted into shares. On July 31, 2010 the loan was extended to June 30, 2011 and an additional $5,323 was loaned to the Company. The Company evaluated the modifications and concluded that the modifications were not troubled debt restructurings or extinguishments of the original debt; as a result no gain or loss was recognized upon modification. The fair value of the derivative liability at September 30, 2010 was $58,808 and a loss of $21,474 and fo r the three and nine months ended September 30, 2010, respectively, was recorded for the change in the fair value of the derivative liability.  The fair value of the derivative liability of $58,808 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 339%, no expected dividends, an expected term of nine months and a risk-free interest rate of 0.23%. As at September 30, 2010, the discount was $0 and the carrying value of the convertible debt was $50,323.  At September 30, 2010 accrued interest of $2,865 was also outstanding and included in the convertible note balance on the accompanying balance sheet.

7.     Share Purchase Warrants

A summary of the changes in the Company’s common share purchase warrants is presented below:

	Number of Warrants	Weighted Average Exercise Price
Balance – December 31, 2009 and September 30, 2010	1,250,000	$0.15

The warrants issued during 2009 were in conjunction with a share issuance. The Company determined the fair value of both the common stock and warrants as of the date the transactions were initially entered into. The fair value of the warrants was determined using the Black-Scholes method. The Company allocated the proceeds between the warrants and the stock based on the relative fair values as follows:

	2009
Relative fair value of warrants	$76,747
Relative fair value of stock	$23,253

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Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

7.     Share Purchase Warrants (continued)

As at September 30, 2010, the following common share purchase warrants were outstanding:

Description	Number of Warrants	Exercise Price	Expiry Date
Issued September 23, 2008	250,000	$0.40	September 23, 2011
Issued October 1, 2009	500,000	$0.10	October 1, 2012
Issued October 1, 2009	500,000	$0.08	October 1, 2013
Total	1,250,000

As at September 30, 2010, the aggregate intrinsic value of the common share purchase warrants was $0.

8.     Income Taxes

No provisions for income taxes have been recorded in the periods presented since the Company has incurred net losses since inception.

Based on management’s present assessment, the Company has not yet determined it to be more likely than not that a deferred tax asset of $190,808 at September 30, 2010 (December 31, 2009 - $127,194) attributable to the future utilization of the net operating loss carry-forward of $561,200 at September 30, 2010 (December 31, 2009 - $374,100) will be realized. Accordingly, the Company has provided a 100% allowance against the deferred tax asset in the financial statements. The Company will continue to review this valuation allowance and make adjustments as appropriate. The $561,200 net operating loss carry-forward expires $25,292 in year 2027, $132,603 in year 2028, $216,205 in year 2029, and $187,100 in year 2030.

Current tax laws limit the amount of loss available to be offset against future taxable income when a substantial change in ownership occurs. Therefore, the amount available to offset future taxable income may be limited.

The components of the net deferred income tax assets consist of:

	September 30, 2010			December 31, 2009
Net operating loss carry-forward	$	190,808		$	127,194
Valuation allowance		(190,808	)		(127,194	)
Net deferred income tax assets	$	–		$	–

-16-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

8. Income Taxes (continued)

Expected income tax benefit computed by applying the U.S. statutory income tax rate of 34% to pre-tax loss differs from the Company’s benefit from income taxes, as follows:

	For the Nine Months Ended
	September 30, 2010			September 30, 2009
Expected income tax expense (benefit) at 34%	$	(123,955	)	$	(52,144	)
Non-taxable portion of gain on disposal of Discontinued operations		–			6,180
Non-deductible accretion		23,275			–
Non-deductible loss on re-valuation of derivative liability and loss on extinguishment of debt		37,066			–
Change in valuation allowance		63,614			45,964
Provision for (benefit from) income taxes	$	–		$	–

9.Commitments and Contingencies

a)   On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (the “GIHS Licensor”) to be formed, wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”).  The term of the license is three years subject to the following:

1.	The Company must purchase and have operational a demonstration GIHS by December 31, 2009.
2.	The Company must sell at least 3 GIHS units by December 31, 2009.
3.	The Company must sell at least 25 GIHS units by December 31, 2010.
4.	The Company must sell at least 200 GIHS units by December 31, 2011.
5.	The Company must sell at least 500 GIHS units by December 31, 2012.

On November 23, 2009, the terms of the license agreement were amended as follows:

1.	The Company must purchase and have operational a demonstration GIHS by June 30, 2010.
2.	The Company must sell at least 3 GIHS units by December 31, 2010.
3.	The Company must sell at least 25 GIHS units by December 31, 2011.
4.	The Company must sell at least 200 GIHS units by December 31, 2012.
5.	The Company must sell at least 500 GIHS units by December 31, 2013.

-17-

Neohydro Technologies Corp. and Subsidiary

(A Development Stage Company)

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

September 30, 2010

(Expressed in US Dollars)

9. Commitments and Contingencies (continued)

On July 14, 2010, the terms of the license agreement were amended as follows:

1.	The Company must purchase and have operational a demonstration GIHS by September 30, 2010.
2.	The Company must sell at least 3 GIHS units by December 31, 2011.
3.	The Company must sell at least 25 GIHS units by December 31, 2012.
4.	The Company must sell at least 200 GIHS units by December 31, 2013.
5.	The Company must sell at least 500 GIHS units by December 31, 2014.

If the first and second milestones of the GIHS licensing agreement are not achieved the effect of this will result in the non issuance of the 15,000,000 shares to be issued to Kulcheski and Gelbard.

b)   On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock in consideration of Kulcheski and Gelbard using reasonable commercial efforts to sell, market, distribute, and manufacture the GIHS license granted to the Company by the GIHS Licensor and to manage the development of our technology.

If the first and second milestones of the GIHS licensing agreement described in the preceding paragraph are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company. The shares are not included in the number of issued and outstanding common shares at September 30, 2010 and December 31, 2009 since they are contingently returnable.

On June 8, 2009, Kulcheski was appointed chief executive officer, chief financial officer and director of the Company.

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

Cautionary Statement Regarding Forward-looking Statements

This section of the report includes a number of forward-looking statements that reflect our current views with respect to future events and financial performance. Forward-looking statements are often identified by words like: believe, expect, estimate, anticipate, intend, project and similar expressions, or words which, by their nature, refer to future events. You should not place undue certainty on these forward-looking statements, which apply only as of the date of this report. These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical results or our predictions.

Plan of Operation

We are a Development Stage Company, focused on  “Green” technologies in the automotive, transportation, and power generation industries, and, focused initially on the light -duty trucking industry, but we have not yet generated or realized any revenues from our business activities.  Neohydro has licensed a unique patented turbo hybrid system. This revolutionary Green Interactive Hybrid System™ is proven to assist an engine to operate more efficiently, with less effort, less fuel consumption, and enhanced horsepower. Thus increasing engine life as well as adding obvious economic benefits, and enhanced horsepower to many significantly underpowered vehicles, such as limousines and fleet vehicles where incremental cost for larger engines may not be an economically viable option. Advanced tuning methods also significantly decrease harmful emissions. In the case of most technological enhancements with vehicles, there are significant concerns about negating existing factory warranty protection. At present the Company’s technology is only engineered for one automobile manufacture where it does not void the manufacturer’s warranty.

Our auditors have issued a going concern opinion. This means that there is substantial doubt that we can continue as an on-going business for the next twelve months unless we obtain additional capital to pay our bills. This is because we have not generated any revenues and no revenues are anticipated in the near future.

On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (“Licensor”) to be formed wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other such territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”).  The term of the license is three years with automatic subsequent renewals subject to the following:

On September 1, 2009 we incorporated Green Interactive Hybrid Technologies Canada Inc. (GIH Technologies) in the Province of Alberta, Canada as a wholly owned subsidiary to better attract Canadian investment and as its primary location and focus.

The positive environmental and economic benefits of the company’s products open the opportunity for the company to apply for a variety of governmental grants, both provincial and federal.  These grants range from development capital at extremely favorable loan rates, to outright grant capital for development and subsequent production.  Grant capital focuses on the furthering of green concepts and applications that, now and in the future, will result in significant increase in fuel efficiency, while reducing the carbon footprint.  The high price of fossil fuel has brou ght to light the need for not only conservation, but also technologies that create efficiency of operation leading to direct fuel savings and decreased pollution.  We have yet to be successful in obtaining any government grants. 

It is the Company’s intention to establish an R&D facility in Calgary to further the development of the company’s products and to benefit from government funding for R&D initiatives.  Due to a lack of funding we have yet to establish an R&D facility and to take advantage of any government funding for R&D initiatives.  The focus of the Company’s R&D will be to adapt the GIHS to other engine platforms, i.e. Light duty diesel trucks, stationary gas and diesel engines for the production of electricity and air compression, to aid the lu crative and demanding oil and gas arena, and marine engines, resulting in the same remarkable benefits in power, fuel economy with significant reduction in fossil fuel pollutants.

-19-

 To become profitable and competitive, we must sell a sufficient number of our GIHS systems to generate a profit.  We must sell 100 GIHS systems to break even.

 

1.	The Company must purchase and have operational one demonstration GIHS by December 31, 2009.
2.	The Company must sell at least three GIHS units by December 31, 2009.
3.	The Company must sell at least twenty-five GIHS units by December 31, 2010.
4.	The Company must sell at least two hundred GIHS units by December 31, 2011.
5.	The Company must sell at least five hundred GIHS units by December 31, 2012.

 On November 23, 2009 the licensor granted a six month extension to the terms of the License Agreement and added Europe and Scandinavia to the company’s territory by way of a duly executed Amendment to the License Agreement. The amended terms are as follows:

1.	The Company must purchase and have operational one demonstration GIHS by June 30, 2010.
2.	The Company must sell at least three GIHS units by December 31, 2010.
3.	The Company must sell at least twenty-five GIHS units by December 31, 2011.
4.	The Company must sell at least two hundred GIHS units by December 31, 2012.
5.	The Company must sell at least five hundred GIHS units by December 31, 2013.

All other provisions of the Agreement dated the 8th day of June 2009 remain in full force and effect.

On July 14, 2010, the terms of the license agreement were amended as follows:

1.	The Company must purchase and have operational a demonstration GIHS by September 30, 2010.
2.	The Company must sell at least 3 GIHS units by December 31, 2011.
3.	The Company must sell at least 25 GIHS units by December 31, 2012.
4.	The Company must sell at least 200 GIHS units by December 31, 2013.
5.	The Company must sell at least 500 GIHS units by December 31, 2014.

 We did not purchase and have operational a demonstration GIHS by September 30, 2010 and are currently in default under the licensing agreement.

 If the first and second milestones of the GIHS licensing agreement described in the preceding paragraph are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company. The shares are not included in the number of issued and outstanding common shares at September 30, 2010 and December 31, 2009 since they are c ontingently returnable.

 All other provisions of the Agreement dated the 8th day of June 2009 remain in full force and effect. This revolutionary Green Interactive Hybrid System™ is proven to cause an engine to operate with less effort, less fuel consumption, and enhanced power.  In addition, advanced tuning methods significantly decrease harmful emissions.

To meet our need for cash we seek additional capital.  If we obtain any purchase orders from our customers and if the purchase orders prove profitable, we will attempt to raise additional money through a subsequent private placement, public offering or through loans. If we do not have enough money to complete our sales and marketing initiatives, we will have to find alternative sources, like a second public offering, a private placement of securities, or loans from our officers or others.

-20-

Our officers and directors are willing to loan us money except to cover expenses relating to the purchase of inventory in supplies and materials required to assemble the units at this time. At the present time, we are looking at arrangements to raise additional cash to fulfill our obligations to the License Agreement. If we need additional cash and can't raise it, we will either have to suspend activities until we do raise the cash, or cease activities entirely. Other than as described in this paragraph, we have no other financing plans.

Our office services and office space are provided without charge by the sole officer and director of the Company.  We do not intend to hire additional employees at this time other than occasional temporary office staff as needed from time to time to assist in market research.

Results of Operations

Three and Nine Months Ended September 30, 2010 Compared to the Three and Nine Months Ended September 30, 2009.

We have had no revenues since inception from November 13, 2007 to the periods ended September 30, 2010. In the three and nine months ended September 30, 2010, we incurred net losses of $122,440 and $364,574, respectively. From November 13, 2007 (inception date) to September 30, 2010 we incurred a net loss of $1,234,792.

General and administrative expense relating to continuing operations for the three months ended September 30, 2010 was $60,640 compared to $103,986 for the three months ended September 30, 2009, representing a decrease of $43,346, or 41.7%.  General and administrative expense relating to continuing operations for the nine months ended September 30, 2010 was $187,101 compared to $116,032 for the nine months ended September 30, 2009, representing an increase of $71,069 or 61.2%.  The increase in general and administrative expenses is primarily due to increased management fees, consulting fees, legal and accounting.  In addition, for the three and nine months ended September 30, 2010 , accretion of discount on convertible notes in the amount of $4,050 and $68,455, respectively, contributed to the net losses of $122,440 and $364,574 for the three and nine months ending September 30, 2010, respectively.

-21-

Milestones

We have one milestone for the next twelve months. It is to sell a sufficient number of GIHS systems to generate revenues in order to operate profitably.

Other milestones are as follows:

1) Renegotiate our License Agreement by the end of November 2010.

 2) Raise additional capital by the end of December 31, 2010.

 3) We plan on changing our company name to better reflect our business.

4) Apply and obtain government grants and subsidies through the Canadian Subsidiary Company once the Company has been successful in raising additional capital.

5) To purchase and have operational a demonstration GIHS system as soon as possible. 

6) Establish a partnership or joint venture with a dealership in Alberta who will supply vehicles at fleet prices.

7) Once the Company has been successful in raising additional capital, begin R&D development through the Canadian Subsidiary Company on the GIHS, in order for the system to be compatible with other vehicle platforms.

We have nominal cash at the present time and cannot operate until we raise additional capital.

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. We have just completed our fifth quarter of our current operations as a company focused on “Green” technologies in the automotive, transportation, power generation, and, focused initially on the light-duty trucking industry and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the sales cycle and manufacturing, and possible cost overruns due to price and cost increases in raw materials.

To become profitable and competitive, we must sell a sufficient number of our GIHS systems to generate a profit.  We must sell 100 GIHS systems to break even.

We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.

-22-

From Inception on November 13, 2007

The Company acquired the Rio Lode Claim, which was located on November 24, 2007 and filed on December 7, 2007 in the Clark County recorder’s office in Las Vegas.  On August 31, 2009 the mining claims expired and we own no rights or interest in these claims and to any mining properties.

On September 22, 2008, we entered into a licensing agreement with Neohydro Corp., a Nevada corporation located in Houston, Texas (“Neohydro Corp”) to use all of Neohydro Corp.’s patent and intellectual rights for the purpose of the exclusive worldwide marketing, distribution and licensing rights of the Business for the treatment of industrial waste water for industries.  On March 31, 2009, Neohydro Corp. terminated its licensing agreement with us as a result of our failure to comply with the funding schedule set out in Section 3.2 of the Licensing Agreement.& #160; 

On September 23, 2008, we completed a private placement for 250,000 units at $0.40 per unit for gross proceeds of $100,000. Each unit consisted of one share of common stock and one Series A Warrant. Each Series A Warrant entitles the holder to purchase one share of common stock at $0.40 per share expiring three years from the closing date. The Company incurred finder’s fees of $10,000 in connection with the private placement.

 On June 8, 2009, the Company entered into a licensing agreement with Gene Peckover, a sole proprietor as president of Gene Vettes of Lynden, a Washington corporation (the “GIHS Licensor”) to be formed, wherein Licensor granted to the Company an exclusive license covering the territory of Canada and other su ch territories that shall be mutually agreed upon and the right to market and sell an environmental fuel efficient turbo technology called Green Interactive Hybrid System (“GIHS”).  The term of the license is three years subject to the following:

1.	The Company must purchase and have operational a demonstration GIHS by December 31, 2009.
2.	The Company must sell at least 3 GIHS units by December 31, 2009.
3.	The Company must sell at least 25 GIHS units by December 31, 2010.
4.	The Company must sell at least 200 GIHS units by December 31, 2011.
5.	The Company must sell at least 500 GIHS units by December 31, 2012.

On November 23, 2009 the licensor granted a six month extension to the terms of the License Agreement and added Europe and Scandinavia to the company’s territory by way of a duly executed Amendment to the License Agreement. The amended terms are as follows:

1.	The Company must purchase and have operational one demonstration GIHS by June 30, 2010.
2.	The Company must sell at least three GIHS units by December 31, 2010.
3.	The Company must sell at least twenty-five GIHS units by December 31, 2011.
4.	The Company must sell at least two hundred GIHS units by December 31, 2012.
5.	The Company must sell at least five hundred GIHS units by December 31, 2013.

All other provisions of the Agreement dated the 8th day of June 2009 shall  remain in full force and effect.

On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock in consideration of Kulcheski and Gelbard using reasonable commercial efforts to sell, market, distribute, and manufacture the GIHS license granted to the Company by the GIHS Licensor and to manage the development of our technology. On June 8, 2009, Kulcheski was appointed chief executive officer, chief financial officer and director of the Company.

-23-

If the first and second milestones of the GIHS licensing agreement described in the preceding paragraph are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company.

On October 1, 2009, we completed a private placement of our common stock pursuant to Regulation S of the Securities Act of 1933 (the “Act”). We sold 500,000 units to one corporation and raised $100,000. Each unit consisted of one share of common stock; one series A warrant; and, one series B warrant. Each series A warrant is convertible into one share of common stock at a conversion price of $0.10 per wa rrant and each series B warrant is convertible into one share of common stock at a conversion price of $0.08 per warrant. The series A warrants are exercisable for a period of 36 months from October 1, 2009 and the series B warrants are exercisable for a period of 48 months from October 1, 2009. The transaction took place outside the United States of America and the purchaser was a non-US corporation as defined in Regulation S of the Act.

On July 14, 2010, the terms of the license agreement were amended as follows:

1.	The Company must purchase and have operational a demonstration GIHS by September 30, 2010.
2.	The Company must sell at least 3 GIHS units by December 31, 2011.
3.	The Company must sell at least 25 GIHS units by December 31, 2012.
4.	The Company must sell at least 200 GIHS units by December 31, 2013.
5.	The Company must sell at least 500 GIHS units by December 31, 2014.

All other provisions of the Agreement dated the 8th day of June 2009 remain in full force and effect.

We did not purchase and have operational a demonstration GIHS by September 30, 2010 and are currently in default under the licensing agreement.

Liquidity and Capital Resources

We do not have sufficient funds to operate. Future operating activities are expected to be funded by loans from our officers and directors.

We owned a 100% interest in a Mineral Claim located in Clark County, Nevada, in consideration for $6,500. The claim was registered in the name of the company.  The claim has not been renewed and the claim expired on August 31, 2009.

In November 2007, we issued 40,000,000 shares of common stock to our sole officer and director, Venugopal Rao Balla, pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933.  The purchase price of the shares was $5,000.  This was accounted for as an acquisition of shares.  Venugopal Rao Balla covered some of our initial expenses by paying $125 for incorpo ration documents and $2,634 website support and operation costs.  The amount owed to Mr. Balla is non-interest bearing, unsecured and due on demand.  Further the agreement with Mr. Balla is oral and there is no written document evidencing the agreement.

-24-

 In December 2007, we issued 32,800,000 shares of common stock to 41 individuals in exchange for $41,000.  The shares were issued pursuant to the exemption from registration contained in Regulation S of the Securities Act of 1933.

On September 23, 2008, we completed a private placement for 250,000 units at $0.40 per unit for proceeds of $100,000. Each unit consists of one share of common stock and one Series A Warrant. Each Series A Warrant entitles the holder to purchase one share of common stock at $0.40 per share expiring three years from the closing date. The Company incurred finder’s fees of $10,000 in connection with the private placement.

In April 2009, Dean Themy returned 14,560,000 shares to the Company.

 On June 8, 2009, the Company entered into a fee agreement with Michael Kulcheski and Harry Gelbard wherein the Company agreed to issue Kulcheski 9,000,000 restricted shares of common stock and Gelbard 6,000,000 restricted shares of common stock in consideration of Kulcheski and Gelbard using reasonable commercial efforts to sell, market, distribute, and manufact ure the GIHS license granted to the Company by the GIHS Licensor and to manage the development of our technology.

 If the first and second milestones of the GIHS licensing agreement are not achieved, Kulcheski and Gelbard are to return the 15,000,000 shares of common stock held by them to the treasury of the Company. The shares are not included in the number of issued and outstanding common shares at September 30, 2010 and December 31, 2009 since they are contingently returnable.

 On December 17, 2009, the Company entered into a convertible note agreement with a private company.  The Company received $50,000 which bears interest at 15% per annum and was due on March 31, 2010. On April 1, 2010, the due date of the loan was extended to June 1, 2010 and on June 1, 2010 the due date of the loan was extended to June 30, 2011. The Company evaluated the modifications and concluded that t he modifications were not troubled debt restructurings or extinguishments of the original debt; as a result no gain or loss was recognized upon modification and no change to the carrying value of the debt was recognized. Interest is payable on the note when the principal amount becomes due. The loan and any unpaid interest are convertible into shares of common stock at a conversion price which is the lesser of (a) $0.15 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion. The

Company initially recognized the fair value of the embedded conversion feature of $35,989 as a derivative liability and reduced the carrying value of the convertible loan to $14,011.  The discount on the convertible loan was accreted over the term of the convertible loan, and at March 31, 2010 the unamortized discount was $0, increasing the carrying value to the face value of $50,000. As at September 30, 2010, the discount was fully accreted and the carrying value of the convert ible debt was $50,000.  At September 30, 2010 accrued interest of $5,152 was outstanding and included in the convertible note balance on the accompanying balance sheet. The fair value of the derivative liability at September 30, 2010 was $58,431 and a loss of $20,816 and $36,825 for the three and nine months ended September 30, 2010, respectively, was recorded on the change in the fair value of the derivative liability.  The fair value of the derivative liability of $58,431 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 339%, no expected dividends, an expected term of nine months and a risk-free interest rate of 0.23%. As of September 30, 2010, the loan has not been repaid or converted into shares.

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 On April 9, 2010, the Company entered into a convertible loan agreement which replaced the loan agreement for $35,000 referred to in Note 5(a). According to the terms of the agreement, the loan is due March 1, 2011 and bears interest at 12% per annum. Interest is payable on the note when the principal amount becomes due. The loan and any unpaid interest are convertible into shares of common stock at a conversion p rice which is the lesser of (a) $0.015 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion. The Company evaluated the modification and concluded that the modification was an extinguishment of the original debt; as a result a loss of $24,467 for the three months ended June 30, 2010 and nine months ended September 30, 2010 was recognized upon modification and no change to the carrying value of the debt was recognized as the Company determined that the fair value of the new debt was $35,000. The fair value of the derivative liability at September 30, 2010 was $39,928 and a loss of $15,461 for the three and nine months ended September 30, 2010 was recorded for the change in the fair value of the derivative liability.  The fair value of the derivative liability of $39,928 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 428%, no expec ted dividends, an expected term of five months and a risk-free interest rate of 0.19%. As at September 30, 2010, the discount was $0 and the carrying value of the convertible debt was $35,000.  At September 30, 2010 accrued interest of $2,002 was also outstanding and included in the convertible note balance on the accompanying balance sheet.

 On May 6, 2010, the Company entered into a convertible note agreement to secure $45,000 of advances referred to in Note 5(b).  According to the terms of the agreement the loan was due on June 30, 2010 and bore interest at 15% per annum.  Interest was payable on the note when the principal became due.  The loan and any unpaid interest were convertible into shares of common stock at a conversion price which of the lesser of (a) $0.02 or (b) a 25% discount to the five day value weighted average stock price of the common stock as of the date of conversion.  The Company initially recognized the fair value of the embedded conversion feature of $26,543 as a derivative liability and reduced the carrying value of the convertible loan to $18,457. The initial fair value of the derivative liability at May 6, 2010 of $26,543 was determined using the Black Scholes option pricing model with a quoted market price of $0.02, a conversion price of $0.0165, expected volatility of 291%, no expected dividends, an expected term of one year and a risk-free interest rate of 0.32%. The discount on the convertible loan was accreted over the term of the convertible loan, increasing the carrying value to the face value of $45,000 on June 30, 2010. As at June 30, 2010, the discount was fully accreted and the carrying value of the convertible debt was $45,000 and the loan had not been repaid or converted into shares. On July 31, 2010 the loan was extended to June 30, 2011 and an additional $5,323 was loaned to the Company. The Company evaluated the modifications and concluded that the modifications were not troubled debt restructurings or extinguishments of the original debt; as a result no gain or loss was recognized upon modification. The fair value of the derivative liability at September 30, 2010 was $58,808 and a loss of $21,474 and $32,265 for the three and nine months ended September 30, 2010, respectively, was recorded for the change in the fair value of the derivative liability.  The fair value of the derivative liability of $58,808 was determined using the Black Scholes option pricing model with a quoted market price of $0.01, a conversion price of $0.0075, expected volatility of 339%, no expected dividends, an expected term of nine months and a risk-free interest rate of 0.23%. As at September 30, 2010, the discount was $0 and the carrying value of the convertible debt was $50,323.  At Sept ember 30, 2010 accrued interest of $2,865 was also outstanding and included in the convertible note balance on the accompanying balance sheet.

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 On October 1, 2009, we completed a private placement of our common stock pursuant to Regulation S of the Securities Act of 1933 (the “Act”). We sold 500,000 units to one corporation and raised $100,000. Each unit consisted of one share of common stock; one series A warrant; and, one series B warrant. Each series A warrant is convertible into one share of common stock at a conversion price of $0.10 per warrant and each series B warrant is convertible into one share of common stock at a conversion price of $0.08 per warrant. The series A warrants are exercisable for a period of 36 months from October 1, 2009 and the series B warrants are exercisable for a period of 48 months from October 1, 2009. The transaction took place outside the United States of America and the purchaser was a non-US corporation as defined in Regulation S of the Act.

 As of September 30, 2010, our total assets were $0 and our total liabilities were $491,292.

 We have no assurance that future financing will be available to us in the future on satisfactory terms. If financing is not available on satisfactory terms, we may be unable to continue, develop or expand our activities. Equity financing could result in additional dilution to existing shareholders.

 Our executive office is located at 84 Hawkhill Rd. NW Calgary, Alberta, T3G 3H8.  This office is approximately 200 square feet in size and is provided to us free of charge by our sole director and officer. We had not entered into any lease agreement for the office. We do not plan to recognize any rent expenses for this office.

Limited Operating History; Need for Additional Capital

There is no historical financial information about us upon which to base an evaluation of our performance. We have just started our current operations and have not generated any revenues from activities. We cannot guarantee we will be successful in our business activ ities. Our business is subject to risks inherent in the establishment of a new business enterprise, including limited capital resources, possible delays in the sales cycle and manufacturing, and possible cost overruns due to price and cost increases in metals.

 The Company has not generated revenues since inception, has never paid dividends and is unlikely to generate earnings in the immediate or foreseeable future. The continuation of the Company as a going concern is dependent upon the continued financial support from its shareholders, the ability of the Company to obtain necessary equity financing to continue operat ions, and the attainment of profitable operations. As at September 30, 2010, the Company has a working capital deficit of $491,292 and has accumulated losses of $1,234,792 since inception. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. These consolidated 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.

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ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT

 MARKET RISK.

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 4.            CONTROLS AND PROCEDURES.

Evaluation of disclosure controls and procedures

 Under the supervision and with the participation of our management, including the Principal Executive Officer and Principal Financial Officer, we have evaluated the effectiveness of our disclosure controls and procedures as required by Exchange Act Rule 13a-15(b) as of the end of the period covered by this report. Based on that evaluation, the Principal Executive Officer and Principal Financial Officer have concluded that these disclosure controls and procedures were not effective as a result of our failure to file our Form 10-Q ending June 30, 2010 in a timely manner.  

 To prevent a recurrence of the deficiency in its disclosure controls and procedures, our Principal Executive Officer and Principal Financial Officer will make arrangements to keep the filings of the Company current for the next twelve months or until additional capital is raised.  We believe the foregoing will not occur in the future.  As a result, we have not made any changes to our disclosure controls and procedures.

Changes in internal controls

There were no changes in our internal control over financial reporting during the quarter ended September 30, 2010 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

ITEM 1A.                      RISK FACTORS

We are a smaller reporting company as defined by Rule 12b-2 of the Securities Exchange Act of 1934 and are not required to provide the information under this item.

ITEM 6.                      EXHIBITS.

The following documents are included herein:

Exhibit No.	Document Description
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following person on behalf of the Registrant and in the capacities on this 19th day of November, 2010.

NEOHYDRO TECHNOLOGIES CORP.
BY:	MICHAEL R. KULCHESKI
	Michael R. Kulcheski
	President, Principal Executive Officer, Secretary, Treasurer, Principal Financial Officer, Principal Accounting Officer and sole member of the Board of Directors

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EXHIBIT INDEX

Exhibit No.	Document Description
31.1	Certification of Principal Executive Officer and Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1	Certification of Chief Executive Officer and Chief Financial Officer pursuant to section 906 of the Sarbanes-Oxley Act of 2002.

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