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Hydroflo Corrects and Supplements Prior Releases and Reports

In certain prior press releases and analyst reports, the terms and conditions of an agreement between Hydroflo, Inc. (OTC BB: HYRF) portfolio company Metal & Arsenic Removal Technology, Inc. ("MARTI") and Essentially Yours Industries, Inc. ("EYI") were inaccurately or incompletely reported. Hydroflo issues this press release to provide accurate and more complete information about that agreement and certain other matters.

Effective May 11, 2005, MARTI entered into a reseller agreement with EYI. Pursuant to this agreement, MARTI is to manufacture and supply to EYI certain products, including specially marked Code Blue(TM) pitchers and specially formulated Code Blue(TM) filters. EYI is the exclusive distributor, and MARTI is the exclusive supplier, for these specially marked or formulated products.

EYI initially planned to sell the products in the United States and Canada, and EYI projected that it would order 72,000 pitchers and 468,000 filters during the period from July 2005 to June 2006. EYI has since indicated that on September 23, 2005, its affiliate Essentially Yours Industries (Hong Kong) Limited ("EYI HK") entered into an agreement with Guangzhou Zhongdian Enterprises (Group) Co. Ltd. ("GZE") and China Electronics Import and Export South China Corporation ("CEIEC"). According to EYI, this agreement projects that CEIEC will order $210 million of Code Blue(TM) product from EYI HK during the two-year period 2006-2007.

MARTI is not a party to that agreement, and the projections in that agreement are projections of revenue to EYI HK, not to MARTI.

Neither the EYI HK-GZE-CEIEC agreement nor MARTI's own agreement with EYI require the purchase of a particular quantity or dollar amount of Code Blue(TM) products. Furthermore, MARTI provides the Code Blue(TM) product to EYI on a consignment basis, meaning that MARTI is not entitled to payment for the product until EYI actually sells it to EYI's customers.

Under the terms of its agreement with EYI, MARTI is obligated only to maintain a minimum inventory of 1,000 units of each Code Blue(TM) item. To date, EYI has requested the production of 10,000 pitchers and 16,800 filters, MARTI has shipped 3,078 pitchers and 3,078 filters to EYI, and MARTI has been paid $15,000 for units sold by EYI.

More specific corrections follow:

July 18, 2005 Press Release

Hydroflo's July 18, 2005 press release indicated that Hydroflo portfolio company Advanced Water Recycle, Inc. ("AWRI") had received a request from a coastal region of North Carolina "to start treatment of 70 million gallons of water per day for the next 10 years." AWRI has discussed options for the treatment of such water volumes with various governmental officials and expressed interest in providing its goods and services for that purpose, but AWRI has not received any requests to provide those services.

August 3, 2005 Press Release

Hydroflo's August 3, 2005 press release indicated that MARTI had amended an agreement with EYI to include additional water filtration systems. This press release also discussed an "order" by EYI and stated that "[t]he total retail value of this order exceeds $7.5 million."

MARTI's agreement with EYI was not amended at that time. As noted above, MARTI's agreement with EYI was and remains a consignment agreement whereby EYI pays MARTI only for those items actually purchased by EYI's customers. EYI is not required to purchase a particular quantity or dollar volume of MARTI's products, and it has not purchased $7.5 million of MARTI's products.

August 4, 2005 Press Release

Hydroflo's August 4, 2005 press release discussed a "$1.2 million order received on May 18." As noted above, MARTI's agreement with EYI is a consignment agreement whereby EYI pays MARTI only for those items actually purchased by EYI's customers. EYI is not required to purchase a particular quantity or dollar volume of MARTI's products, and as of this date it has not purchased $1.2 million of MARTI's product.

August 15, 2005 and August 18, 2005 Press Releases

Hydroflo's August 15, 2005 press release indicated that MARTI had amended an agreement with EYI "to meet the demand received from recent transactions in China. The total value of the order is expected to exceed $210 million." Its August 18, 2005 press release also made reference to this "agreement amendment." While EYI did inform MARTI prior to this date that it expected to order substantially more of the Code Blue(TM) product than previously expected as a result of potential sales by EYI into the Chinese market and that such sales might have a value to EYI of as much as $210 million, EYI did not and has not placed an order with MARTI for any particular quantity or dollar volume of products, and neither GZE nor CEIEC is required to order any particular quantity or dollar volume of product from EYI HK. EYI has only requested that MARTI supply on consignment and per the parties' agreement the number of units described earlier in this press release. As explained previously, the figure cited in the press release is a projection of revenue to EYI HK arising out of its own agreement with Chinese companies GZE and CEIEC, not a projection by MARTI of its own expected revenues from the arrangement.

September 6, 2005 Press Release

Hydroflo's September 6, 2005 press release contains a quotation from MARTI's COO, George Moore, that makes reference to "a projection of over $210 million worth of product sales." As noted above, the projection in question is EYI's projection of the retail value to EYI HK of EYI HK's Code Blue(TM) sales into the Chinese market.

September 7, 2005 Press Release

In its September 7, 2005 press release, Hydroflo indicated that MARTI's initial daily goal for the production of pitchers and filters in China would be 8,000 pitchers and 25,000 filters and projected that the facility would produce over 2 million pitchers and 6 million filters per year. This facility will produce only those pitchers and filters reasonably necessary to satisfy the demands of MARTI's customers. At present, the only such demand has been EYI's request for the production of the quantities of pitchers and filters mentioned earlier in this press release.

September 12 and 16, 2005 Press Releases

Hydroflo's September 12, 2005 and September 16, 2005 press releases concerned Hydroflo's response to Hurricane Katrina. To the extent these releases state or imply that Hydroflo's portfolio companies had actually reached agreements with any entities to supply consulting services, they are inaccurate. Certain of those companies have simply offered such services.

September 20, 2005 Press Release (Corrected October 7, 2005)

Hydroflo's September 20, 2005 press release captioned "First Shipment of Filtering Systems leaves for Hurricane Katrina Survivors" (corrected October 7, 2005) incorrectly continues to indicate in its caption that the water pitcher and filtration units mentioned in the release had been shipped and that further shipments to FEMA and DOD would be made at a later time. In fact, as indicated in the text of the release, those goods had not yet been shipped. They were scheduled to ship on October 15, 2005, but the shipment has been delayed, and they have not been shipped as of the date of this release. In addition, the article incorrectly indicates that the pitchers and filters were to be shipped to DOD and FEMA, when in fact they were to be shipped to Judge Nicki Boland.

September 27, 2005 Press Release (Corrected October 6, 2005)

Hydroflo's September 27, 2005 press release (corrected October 6, 2005) refers to a "Guaranteed 2 Year $42 Million Agreement With Chinese Distribution Company" and states that MARTI would produce and supply this quantity of pitchers and filters to EYI. In fact, these revenue projections are projections of revenue to EYI HK arising out of the agreement, not projections of revenue to MARTI. CEIEC (the Chinese distribution company) is not required to purchase any particular quantity of product from EYI, and EYI is not required to purchase a particular quantity or dollar volume of MARTI's products.

September 28, 2005 Press Release (Corrected October 6, 2005)

Hydroflo's September 28, 2005 press release (corrected October 6, 2005) incorrectly indicates that Hydroflo values the EYI HK-GZE-CEIEC contract at $210,000,000 over the next two years. As noted above, MARTI's agreement with EYI is a consignment agreement whereby EYI pays MARTI only for those items actually purchased by EYI's customers. EYI is not required to purchase a particular quantity or dollar volume of MARTI's products. As explained previously, the figure cited in the press release is a projection of revenue to EYI HK arising out of its own agreement with Chinese companies GZE and CEIEC, not a projection by MARTI of its own expected revenues from the arrangement.

September 30, 2005 Press Release

Hydroflo's September 30, 2005 press release inaccurately states the reason for Hydroflo's decision to seek additional time to file its Form 10-K and inaccurately suggests, in a quotation from its CEO, Dennis Mast, that Hydroflo values a portion of the MARTI-EYI business at $42 million or at over $210 million over the next two years.

Hydroflo's 10-K filing was delayed because Hydroflo's accountants requested that its Board of Directors seek an independent valuation, the Board of Directors did so, and the valuation was not completed in time for the 10-K to incorporate it and still be filed by the original deadline.

As noted above, the $42 million and $210 million figures reflect EYI's estimate of the retail value to EYI of orders of the Code Blue(TM) pitcher in the Chinese market. MARTI's agreement with EYI is a consignment agreement whereby EYI pays MARTI only for those items actually purchased by EYI's customers. EYI is not required to purchase a particular quantity or dollar volume of MARTI's products. The projections in the article relate to EYI's expectations for its own sales, not MARTI's expected revenues from the arrangement.

10/3/2005 Wasserman Morris Report

The October 3, 2005 report on Hydroflo, Inc. issued by Wasserman Morris contained a number of inaccurate or incomplete statements about the company. In particular:

The report refers to a "recently signed agreement with ... China Electronics Import and South China Export Corporation." To the extent the report could be read to suggest that Hydroflo has a recently signed agreement with this company, it is in error. Neither Hydroflo nor any of its portfolio companies have an agreement with China Electronics Import and South China Export Corporation. MARTI reseller EYI has reported such an agreement with a similarly named company.

The report also indicates that the reported agreement "is likely to provide [Hydroflo] with roughly $210 million in revenues for the next two years from the sale of water filters and pitchers in the Chinese Market." While MARTI's agreement with EYI could provide MARTI with significant revenue ultimately derived from EYI's sale of water filters and pitchers to the Chinese company, neither MARTI's agreement with EYI nor EYI's agreement with CEIEC guarantees the purchase of particular quantities or dollar volumes. The $210 million projection in the Wasserman Morris report is the amount that EYI reports as CEIEC's projected purchase from EYI during the stated period.

The report indicates that MARTI's collaboration with EYI "could also bring [Hydroflo] up to $7.5 million in revenues from the sale of water filters, pitchers and FATS units in the U.S. and Canada markets during the next twelve months." While MARTI's agreement with EYI could provide MARTI with significant revenue ultimately derived from EYI's sale of water pitchers and filters in the United States and Canadian markets, EYI is not currently selling the FATS unit, and the 12-month, $7.5 million revenue projection contained in the Wasserman Morris report is EYI's projection of its own revenues for a stated period (not the next twelve months), not a projection of MARTI's likely revenues.

The report also states that Hydroflo is "actively involved in the restoration of basic sanitary living conditions in the hurricane-ravaged regions of Mississippi, Alabama, and Louisiana." To date, Hydroflo's involvement in such activities has been limited to MARTI's donation of 5,000 water pitcher and filter units for use in affected areas, for which Hydroflo's chairman has informally agreed to reimburse the company, and to offers to provide consulting services to governmental organizations.

The report also states that Hydroflo's management "expects to secure a portion of the $100 billion that are being made available for disaster relief." Hydroflo has no present basis to expect to secure a portion of this money, although Hydroflo's portfolio companies are seeking contracts to provide their products and services for that purpose.

Finally, the report states that the company "moved its corporate offices to North Carolina." The offices simply moved within the state to a larger space.

Hydroflo's 10-K Filing

Hydroflo's 10-K reported that the company's board members receive no compensation. In fact, board member Shane Traveller receives $1,500/month and board member Ross Smith receives $500/month.

Hydroflo's 10-K has a typographical error in the section describing the company's ethics policy. The company's ethics policy can be found at http://www.hydroflo.us/Content%20Pages/OFFICIAL%20CODE%20OF%20ETHICS.pdf.

Hydroflo's 10-K reported that the company had received a second subpoena from the SEC regarding a nonpublic fact-finding inquiry into the activities of other entities not managed by Hydroflo, Inc. In fact, Hydroflo, its CEO Dennis Mast, and MARTI COO George Moore have received and complied with subpoenas in connection with a formal investigation that includes inquiries into the accuracy of Hydroflo's press releases and public filings.

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