UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-KSB
ANNUAL REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004
000-29743
(Commission file number)
INTERNAL HYDRO INTERNATIONAL INC.
(Formerly Home Services International Inc)
Nevada 88-0409143
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
607 W. MARTIN LUTHER KING Jr. Blvd., TAMPA, FLORIDA 33603
---------------------------------------------------------
(Address of principal executive offices) (Zip Code)
813-231-7122
--------------------------
(Issuer's telephone number)
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, $.001 PAR VALUE
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if there is no disclosure of delinquent filers in
response to Item 405 of Regulation S-B is not contained in this form, and no
disclosure will be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by referenced in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]
Revenue for the year ended December 31, 2004: $0.00
There is a limited trading market for the registrant's Common Stock. There were
18,218,127 shares of Common Stock, and 28,530,750 shares of class "A" preferred
stock issued and outstanding as of December 31, 2004.
DOCUMENTS INCORPORATED BY REFERENCE
None
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
TABLE OF CONTENTS
Item Number and Caption
Page
PART I
Item 1. Description of Business
Item 2. Description of Property
Item 3. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
Item 6. Management's Discussion and Analysis or Plan of Operations
Item 7. Financial Statements
Item 8. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure
PART III
Item 9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act
Item 10. Executive Compensation.
Item 11. Security Ownership of Certain Beneficial Owners and Management
Item 12. Certain Relationships and Related Transactions
Item 13. Exhibits and Reports on Form 8-K.
Item 14. Controls and Procedures.
Item 15. Principal Accountant Fees and Services
PART I
Item 1. Description of Business
Background
Tel-Voice Communications, Inc. ("Tel-Voice") was incorporated under the laws of
the State of Nevada on December 31, 1996 to engage in any lawful corporate
activity, including, but not limited to, selected mergers and acquisitions.
Smartdotcom, Inc. was incorporated under the laws of the State of Nevada on
April 19, 1999. On June 30, 2000, Smartdotcom became a wholly owned subsidiary
of Tel-Voice through a reverse merger. Tel-Voice issued 4,376,895 shares of its
common stock all of the issued and outstanding common stock of Smartdotcom.
Prior to the merger, Tel-Voice had no business activity and therefore, pro forma
operating results as if the acquisition had taken place at the beginning of the
periods presented have not been presented. Smartdotcom has been treated as the
acquirer and accordingly, Smartdotcom is presented as the continuing entity, and
the historical financial statements are those of Smartdotcom.
Overview of Discontinued Business
In December 2002, the Company determined it would abandon its efforts of its
only operating business segment.
The Company was an all-inclusive telecom, video, Internet, entertainment and
security provider. It was in the business of enhancing the lives of our
subscribers, who benefit from the added value of high-quality services and a
fully integrated system made available by a single company. Subscribers were
afforded the luxury of accessing these services using state-of the-art
technology that included hardware, software and network connectivity.
The Company was also a content provider. Once logged off the community network,
subscribers could access the Internet and a host of special offerings, over
multi-speed connections. Subscribers could enjoy the benefit of exclusive
network content and global Internet service.
1-866-UNIONET
1-866-Unionet was a private network, customized for more than 17 million
potential labor union subscribers. Once deployed, this multipurpose and
interactive network would generate on-going revenue for our partners and us.
This network also incorporated sponsor participation with a potential of over 3
billion advertising dollars. This model is representative of all our solutions,
including our integrated communities, business networks, and all other
subscriber groups.
The Company intended to develop the subscriber base from within the union
membership. It would utilize the SmartFone and other interactive devices to
connect subscribers to a private and secure Intranet. Offering members both an
exclusive Intranet, and a gateway for Internet access, establishes a market for
our current and future technologies. The unique technical infrastructure allows
simple "plug & play" flexibility. 1-866-Unionet's network design offered cost
effective scalable services. Unions and labor organizations were to have a
financial stake in their own technology solution.
Overview of New Business
The Company determined that it would exit the telecommunications business. It
developed a new business plan to become a provider of services to homebuyers.
Home Services International Inc. (HSVI) intended to act as a holding company for
service businesses related to the home building and home buying that want to
expand into national markets. HSVI intended to acquire, joint venture and
develop such businesses. Businesses that were intended targets included mortgage
broking, mortgage originations and lending, construction lending and other
services that would benefit propsective home buyers.
HSVI expected to have 2 roles in the joint ventures or aquisitions:
1. To act as the financing intermediary between the business's that have
adpoted the HSVI program.
2. To distribute the interest earnings and profits to the shareholder who
have provided the financing.
The corporate offices of HSVI would not require a large infrastructure or
overhead to operate this business: o each business unit would be trained to
operate independently, except for the financing o the JV partners would have the
responsibility to manage and coordinate the business unit relationship
This feature of the business meant most of the revenues generated would result
in high profit margins and cash flow that can be distributed back the the
shareholders. The first phase of this would be to pay dividends directly on the
preferred shares we intend to issue in raising capital.
As of December 29, 2003 the above Business Plan was abandoned. An opportunity to
merge with INTERNAL COMMAND INTERNATIONAL INC. was negotiated with an effective
date of January 2, 2004. The merged companies became INTERNAL HYDRO
INTERNATIONAL INC.
Subject to the terms and conditions of the Merger Agreement (Plan of
Reorganization) and pursuant to Section 368(a)(1)(B) of the Internal Revenue
Code of 1986, as amended, the parties to the Agreement shall effect a Type B
reorganization (the "Reorganization") whereby all of the outstanding shares of
ICI common stock will be exchanged for 5,000,000 shares of the HSVI Class A
Preferred Stock.
INTERNAL HYDRO INTERNATIONAL INC. owns an alternative power system. The Energy
Commander IV (EC IV) is a patented technology, utilizing wastewater, fluid or
gas flow from any source where flow pressure is present, and yet wasted, to
create electricity. The system takes in the wasted pressure flow, where it goes
through the heart of the system, and into pistons that create massive mechanical
forces, all of which is transferred to a generator creating both electricity,
and optional air pressure, both being for direct use or storage. The water or
gas then moves out of the unit, to it's original destination, without added
waste. The system is noiseless and emission free
IHI has prepared a business model that will market the EC IV system through a
distributor's network around the world. Numerous municipalities, counties,
manufacturing, textile, petroleum, residential development, and other industries
have entered into agreements and intents with IHI for application of these
units.
The first goal of the new management of IHDR was the perfection of the
technology to prove the large scale of the power potential of the Energy
Commander technology. This entailed the intricacy of design and engineering of a
new style of unit on a much larger scale. It required the acquisition of
materials, fabrication of machined parts never before made; the manufacture and
design of a valve system so unique that it would qualify as a new intellectual
asset; the assembly of the unit; and the testing of the unit under pressure
simulation. This work resulted in the final production of a unit in late August,
2004 (the Energy Commander IV - A Model). The EC IV (A) was a four cylinder
unit, designed for a four inch feed of water at 65 p.s.i. The EC IV (A) was
shown to produce energy via its 25 kilowatt generator, successfully under real
world conditions. With the successful completion of the EC IV (A) the company
proceeded to design a smaller sized unit which would produce even more power.
The planning and design of the variant model EC IV (B) has now begun. The EC IV
(B) will be an eight cylinder unit 50% the size of the (A) model producing 30
kilowatts at 55 p.s.i. The new design will call for new parts, a new engineering
firm, new plans and new equipment to make it smaller and standardized for mass
production.
The Company's management sought to further its business plan by acquisition of
further similar technologies and by execution of contracts for future units and
rights to distribution of the technology.
KINETIC ENERGY:
On July 8, 2004, Internal Hydro International made an announcement that it had
entered into an agreement with KINETIC ENERGY SYSTEMS, INC. (KINETIC), a
privately held Florida Corporation, for a strategic partnership. Internal Hydro
received 20% of the shares of the private company, with access to license and
develop the technology Kinetic held for underwater and over water power
generation. Internal Hydro International issued 1,250,000 shares of treasury
stock for this interest. Internal Hydro agreed to help develop the technology
and market it within its resources.
ETIG
On November 3, 2004, the Company entered into agreement with El Tigre
Development (ETIG), a Nevada Corporation, for the purchase of one hundred units
of the Company's Energy Commander IV units. The purchase price of the one
hundred units was $2,250,000, with the first ten units to cost $50,000 each. The
agreement itself had a three year term and called for the Company and ETIG to
share in revenue generated from each unit beyond the purchase price. For the
first ten units, revenue is 20% for the Company from any source on the units.
Additional units include 50% revenue to the Company. In exchange for the initial
ten-unit purchase, the Company granted rights for placement to ETIG in the
states of Washington, North Carolina, Oregon and Utah. Upon execution of the
first ten-unit purchase, two lines of credit to the Company will become
effective. Each line of credit shall be for $5,000,000 to the Company's benefit.
The first line of credit will entitle ETIG to place units in Idaho and Asia. The
second line of credit will entitle ETIG to place units in South America and
Scotland.
On December 15, 2004, the Company had not received the initial payment for the
ten-unit order and ETIG, which had renamed itself McGregor Energy, Inc.,
requested a thirty (30) day extension for the payment of the initial ten units.
The extension was granted. As of December 31, 2004, the Company has not received
payment on the initial ten-units.
NEW IMPACT
On November 2, 2004 Internal Hydro International and New Impact, LLC, a private
Arizona based Company, entered into a contract for the purchase of energy units
from IHDR, with follow on rights for distribution and use of IHDR's technology.
The initial phase of the contract calls for IHDR to supply ten units at a
purchase price of $500,000 for use in New Impact's water treatment facilities
and other areas in the Southwest. This contract has not been funded to date.
LETTERS OF INTENT
Throughout the year, the company released news on a limited number of letters of
intent from potential users of the production units when they are available. To
date, all such potential users and parties of interest still want to acquire
units for use once production units of the new version of the unit is available.
Employees
As of December 31, 2004, the company employed 3 full time employees.
Item 2. Description of Property
The Company leases its principal executive office, which is located in a shared
office facility in Tampa, Florida at a monthly rent of $ 981. This lease is
month to month.
Item 3. Legal Proceedings
A former employee and director has suggested he and several shareholders are
threatening to sue the Company over breach of agreement relating to the
company's refusal to forward certain share certificates that are alleged to be
owed to them.
The Company has been advised a judgment is pending from a creditor for
non-payment of a debt of approximately $43,000.
Item 4. Submission or Matters to a Vote of Security Holders
No matter was submitted to a vote of security holders during the year ended
December 31, 2004.
PART II
Item 5. Market for Common Equity and Related Stockholder Matters
The Company's common stock under the registered name of Internal Hydro
International, Inc. was first quoted in June of 2002, and now trades on the
Over-the-Counter ("OTC") Bulletin Board under the symbol "IHDR".
Set forth below are the high and low closing prices for the Company's common
stock as reported on the OTC Bulletin Board for the last four quarters
(accounting for share split):
Quarter Ended High Low
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December 31, 2004 $0.26 $0.12
September 30, 2004 $1.30 $0.15
June 30, 2004 $2.10 $0.90
March 31, 2004 $2.00 $1.10
The above quotations represent inter-dealer quotations without retail markup,
markdown or commissions and may not represent actual transactions.
Record Holders
As of December 31, 2004 the Company had 184 shareholders of record.
Dividends
The Company has never declared or paid any cash dividends on our common stock.
Any future determination relating to dividend policy will be made at the
discretion of our Board of Directors and will depend on a number of factors,
including the future earnings, capital requirements, financial condition and
future prospects and such other factors as the Board of Directors may deem
relevant.
RECENT SALES OF UNREGISTERED SECURITIES; USE OF PROCEEDS FROM UNREGISTERED
SECURITIES
Sale of Common Stock.
There were no underwriting discounts or commissions in connection with the
Private Placements.
The proceeds from Private Placements were used by the Company for funding of
general corporate purposes.
On July 27, 2004, the Board of Directors approved a 5 to 1 stock split of the
Company's common and preferred stock, effective September 10, 2004. The stock
split increased the number of outstanding common shares from 2,875,279 to
14,376,395 and the number of outstanding preferred shares from 5,750,000 to
28,750,000 as of September 10, 2004. All references to the Company's common
stock in the financial statements have been restated to reflect the stock split.
Item 6. Management's Discussions and Analysis or Plan of Operations
General
The following discussion and analysis should be read in conjunction with the our
consolidated financial statements and related footnotes for the year ended
December 31, 2004 included in this Annual Report on Form 10-KSB. The discussion
of results, causes and trends should not be construed to imply any conclusion
that such results or trends will necessarily continue in the future.
Background and Overview
Tel-Voice Communications, Inc. ("Tel-Voice") was incorporated under the laws of
the State of Nevada on December 31, 1996 to engage in any lawful corporate
activity, including, but not limited to, selected mergers and acquisitions.
Smartdotcom, Inc. ("Smartdotcom") was incorporated under the laws of the State
of Nevada on April 19, 1999. On June 30, 2000, Smartdotcom became a wholly owned
subsidiary of Tel-Voice through a reverse merger. Tel-Voice issued 4,376,895
shares of its common stock for all of the issued and outstanding common stock of
Smartdotcom. Prior to the merger, Tel-Voice had no business activity and
therefore, pro forma operating results as if the acquisition had taken place at
the beginning of the periods presented have not been presented. Smartdotcom has
been treated as the acquirer and accordingly, Smartdotcom is presented as the
continuing entity. The historical financial statements are those of Smartdotcom.
In December of 2002, the Company determined that its business plan of becoming
an all-inclusive telecom, messaging and communications provider would not be
successful. The Company therefore wound down those operations and began
searching for new business ventures. The Company has incurred net losses of
$2,364,460 since inception.
In December of 2002, TVCM reorganized, to become a "home services provider" to
attract investors and customers. The Company intended to become a provider of
services to homebuyers. The services would include design, construction
management and financing for individuals building their own custom homes. The
Company intended to raise capital in order to broker and originate residential
mortgage loans.
The Company issued "stock-for-debt" and rolled back the share issuance
outstanding 28.9 to 1.
Tel-Voice Communications, Inc., changed its name to Home Services International
Inc., and postured to grow and attract investment thus allowing the company to
meet its obligations and provide increased shareholder value.
Plan of Operation
Because the Company determined that it would exit the telecommunications
business, it developed a new business plan to become a provider of services to
homebuyers.
The Company intended to assemble a management team that would include
experienced managers in the fields of telecommunications, technology, home
building and construction, franchise sales and marketing, and finance. The
Company was seeking acquisition targets that would provide synergies within the
complete process of acquiring land, construction and financing of new homes.
The company intended to duplicate these in a franchise-type manner, so that HSVI
could create EBU's (Entrepreneurial Business Units) in several other cities or
communities. Any acquisition target was to have been in the "home service" field
and provide a product or service to a homeowner.
As of December 29, 2003 the above Business Plan was abandoned. An opportunity to
merge with INTERNAL COMMAND INTERNATIONAL INC. was negotiated with an effective
date of January 2, 2004. The merged companies became INTERNAL HYDRO
INTERNATIONAL INC.
Results of Operations
Year ended December 31, 2004 vs. December 31, 2003
Liquidity and capital resources
The Company has incurred additional deficits in cash flow from operating
activities. As a part of the Merger Agreement with INTERNAL COMMAND
INTERNATIONAL INC., the then Chief Executive Officer of HSVI, Jay Budd, has and
does affirm that the outstanding debts of HSVI have been properly structured for
management of the debt post-merger; namely, that the debt is in the hands of
suitable professional debt management team, including Fletcher & Associates, and
Harry J. Miller, PLLC, that there has been set aside as part of the issued
common stock for obligation and satisfaction of the debt, and that the incoming
principals of ICI will be held harmless for this debt.
Critical Accounting Estimates
The preparation of our financial statements in conformity with accounting
principles generally accepted in the United States of America requires our
management to make certain estimates and assumptions that affect the reported
amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. As such, in accordance with
the use of accounting principles generally accepted in the United States of
America, our actual realized results may differ from management's initial
estimates as reported. A summary of our significant accounting policies is
detailed in the notes to the financial statements, which are an integral
component of this filing.
Management evaluates the probability of the utilization of the deferred income
tax asset related to the net operating loss carry forwards. The Company has
estimated a $1,201,000 deferred income tax asset related to net operating loss
carry forwards at December 31, 2004. Management determined that because the
Company has yet to generate taxable income and that the generation of taxable
income in the short term is uncertain, it was appropriate to provide a valuation
allowance for the total deferred income tax asset.
Forward looking statements
This report contains certain forward-looking statements within the meaning of
Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. Stockholders are cautioned that all
forward-looking statements involve risks and uncertainty, including without
limitation, the ability of us develop our technology and execute our business
plan. Although we believe the assumptions underlying the forward-looking
statements contained herein are reasonable, any of the assumptions could be
inaccurate, and therefore, there can be no assurance that the forward-looking
statements contained in the report will prove to be accurate.
Off balance sheet arrangements
The Company's liquidity has not dependent upon off balance sheet transactions.
For the year ended December 31, 2004, the Company did not engage in any off
balance sheet transactions.
Item 7. Financial Statements
INTERNAL HYDRO INTERNATIONAL, INC. AND SUBSIDIARY
CONSOLIDATED FINANCIAL STATEMENTS
FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003
TABLE OF CONTENTS
PAGE (S)
INDEPENDENT AUDITORS' REPORT 11
CONSOLIDATED BALANCE SHEETS 12
CONSOLIDATED STATEMENTS OF OPERATIONS 13
CONSOLIDATED STATEMENTS OF CASH FLOWS 14
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY 15
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 16-22
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Stockholders and Board of Directors of Internal Hydro International,
Inc.:
We have audited the balance sheet of Internal Hydro International, Inc. (the
Company), a development stage company, as of December 31, 2004, and the related
statements of operations, stockholders' deficit and cash flows for the year then
ended and January 21, 2003 (date of inception) to December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States of America. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Internal Hydro International,
Inc. as of December 31, 2004, and the results of its operations and cash flows
for year then ended and January 21, 2003 (date of inception) to December 31,
2003, in conformity with accounting standards generally accepted in the United
States of America.
As disclosed in Note 1, the accompanying financial statements have been prepared
assuming that the Company will continue as a going concern. The Company has
experienced material operating losses and had a net working capital deficiency
of $1,035,842 at December 31, 2004. Management is seeking equity capital and is
implementing a business plan that it believes will result in profitable
operations. There can be no assurances that the Company will obtain sufficient
capital or that operations will become profitable. These and other conditions
raise substantial doubt about the Company's ability to continue as a going
concern. The accompanying financial statements do not include any adjustments
that might be necessary should the Company be unable to continue as a going
concern.
/s/ EPSTEIN, WEBER & CONOVER, PLC
Scottsdale, Arizona
May 12, 2005
PART III
ITEM 9. DIRECTORS EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
WITH SECTION 16(A) OF THE EXCHANGE ACT
EXECUTIVE OFFICERS AND DIRECTORS
The members of the Board of Directors of the Company serve until the next
annual meeting of stockholders, or until their successors have been elected. The
officers serve at the pleasure of the Board of Directors. On January 2, 2004
when then Home Services International Inc. acquired the shares of the Internal
Command International Inc. the Directors were Jay H. Budd and Robert E. Lee.
After this transaction, Robert E. Lee resigned and Mark Pena and Wade Kenyon
were appointed as Directors. On January 2, 2004 when then Home Services
International Inc. acquired the shares of the Internal Command International
Inc. Jay H. Budd was the CEO of the Company. After this transaction, Jay H Budd
resigned and was re-appointed as Executive Vice President and Craig Huffman was
appointed as President and CEO. Jay H. Budd resigned both his position on the
Board of Directors and Executive Vice President on August 23, 2004.
The following table sets forth the name, age, and position of each executive
officer and director of the Company:
DIRECTOR'S NAME AGE OFFICE TERM EXPIRES
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Mark Pena 41 Chairman/Director next annual meeting
Wade Kenyon 65 Director next annual meeting
EXECUTIVE OFFICER'S NAME AGE OFFICE
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Craig Huffman 39 President/CEO
Set forth below is certain biographical information, present occupation and
business experience for the past five years of each director and executive
officer of the Company. Officers of the Company are elected by the Board of
Directors and hold office until their successors are chosen and qualified, until
their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors.
Mark Pena
Board of Directors
Member Board of Directors of Sun Rayz Beverages, Inc., Florida.
Corporate General Counsel/ Bevsystems International, Inc.,
Stetson University College of Law, Honor Roll, John O. Weihl Award Scholarship
Recipient representing top student of class in Trial Advocacy/ Mann Award
Scholarship Recipient representing Character and Leadership in the practice of
law, Student Bar Association President/ American Bar Association Young Lawyer as
Division Leutenant Governor.
Rutgers College, New Brunswick, NJ, Union College, Cranford, NJ, University of
South Florida, Tampa, Florida. Honors included: Dean's List, Member: Pi Gamma Mu
International Honor Society.
Teen Court Judge, Hillsborough County Bar Association Troubled Teen Youth
Program.
Attorney/Solo Practioner, Law Office of Mark E. Pena, P.A., Tampa, Florida
Admitted to Practice: July, 1994. Member, Florida Bar, Federal Middle District
of Florida, 11th Federal Circuit Court of Appeals., American Bar Assoc./ Member
International Law and Business Law Divisions. Primary areas of practice include
general corporate transactions, structure and litigation, commercial
transactions, civil litigation, international law. Past practice includes
insurance defense, first party contracts, and employment. Former Senior Partner/
Law Office of Pena & Thomas, P.A., Tampa Florida Former Special Assistant
Florida State Attorneys Office, Prosecution Clinic, Pinellas County, Florida.
Corporate representation included: Armor Insurance Co., Progressive Insurance
Co., Bevsystems International, Inc., Staff Suppliers Inc., Corrosion Control
Specialists, Inc., Nextrade Inc., Gulf South Income Properties Inc. d/b/a Best
Western, Southeastern Income Properties Inc., d/b/a Howard Johnsons/Orlando.,
DTNet Technologies, Inc. DTNet International, Inc., St. Mary's Parish, Polish
Catholic Church, St. Petersburg, Florida., Gulf West Property Development LLC, N
B Financial LLC. Counsel of record in over 400 civil litigation cases throughout
the State of Florida and Federal Districts.
Wade Kenyon
Board of Directors
BA Degree University of South Florida - Major Chemistry, Minor Zoology.
Co-founder of Internal Command Industries,
2000 to Current - Baring Industries, Inc. a division of Electrolux Professional
Sales Manager - Manages the Orlando branch office of Baring Industries. Oversee
the activities of two other project management teams, participate in the daily
sales activities, negotiate pricing for the projects and project manage selected
projects and coordinate branch office operation with the rest of the Baring
management team.
1997 to 2000 Johnson Lancaster Project Manager - Solicited and managed high
profile Food Service projects some of which include Universal Studios, Orlando,
and Disney World, Orlando, along with University of North Carolina, Lenoir Hall
in Greensboro, NC. 1991 to 1997 Kenyon and Kenyon, Inc. - Food Facilities and
Laundry Design and Consulting - major projects and customers included the
Georgia Department of Corrections, and other major contracts.
1991 to 1997 Sherman Robinson Associates, Atlanta - Partner with Kenyon and
Kenyon, Inc. - Food Facilities Design and Consulting - designed numerous food
service facilities including the Olympic Stadium concessions for the 1996
Olympic games and the food service facilities for the Atlanta Braves Turner
Stadium.
1990 to 1991 Judy Ford Stokes and Associates -Contracted Consultant -
responsibilities included participation in design and project management of
several major food services in the southeast and Washington, D.C.
1985 to 1990 Greitzer, Inc., Vice President - responsible for revamping the
manufacturing processes, participating in the design and development of the
product lines, reorganizing the sales and marketing efforts and personally
closing sales. 1986 to 1990 Greitzer, Inc., President - as president was
responsible for overseeing and guiding each company department, reporting to the
Board of Directors, negotiating labor contracts, reviewing manufacturing costs
and continuing personal contact with the company key clients. Increased the
sales of the firm fivefold from 1985 to 1990. 1981 to 1984 Internal Command
Industries, Tampa, FL - co founder and vice president.
Craig Huffman
Chief Executive Officer and President
President and co-founder, Internal Command International, Tampa, Florida
2001-2004. Oversaw the development of the Energy Commander technology, all
corporate operations, patent protection, and all other aspects of the corporate
build up. Author of the business plan for Internal Hydro, and the revenue stream
plan.
BA, University of Tampa, 1989. President Student Political Organization, member
Sigma Phi Epsilon Juris Doctor, cum laude (2nd in class), Stetson University
College of Law, 1997; recipient West?s Corpus Juris Secundum Award for Torts and
Civil Procedure.
Solo Practitioner: Craig A. Huffman, P.A. primary areas of practice being
criminal law, civil tort practice, and appellate work. Tried over 50 jury
trials, in both State and Federal Court; authored over 40 appeals. Army ROTC
four year scholarship recipient. Major, United States Army Reserve,
1989-Present; commissioned as a Field Artillery Officer presently the JAG Corps.
United States Army Field Artillery Officer Basic Course; United States Army
Judge Advocate Officers Basic Course, Judge Advocate Officers Advanced Course.
Deputy Sheriff in Hillsborough County Florida as an Enforcement Deputy from
1990-1995. Graduate Tampa Police Academy; Hillsborough County Sheriff?s Office
Academy; Sex Crimes Investigations: Hostage Negotiations; Kinesic Interviewing
Techniques; Interviews and Interrogations.
CONFLICTS OF INTEREST
Certain conflicts of interest existed at December 31, 2004 and may continue
to exist between the Company and its officers and directors due to the fact that
each has other business interests to which they devote their primary attention.
Each officer and director may continue to do so notwithstanding the fact that
management time should be devoted to the business of the Company.
Certain conflicts of interest may exist between the Company and its
management, and conflicts may develop in the future. The Company has not
established policies or procedures for the resolution of current or potential
conflicts of interests between the Company, its officers and directors or
affiliated entities. There can be no assurance that management will resolve all
conflicts of interest in favor of the Company, and failure by management to
conduct the Company's business in the Company's best interest may result in
liability to the management. The officers and directors are accountable to the
Company as fiduciaries which mean that they are required to exercise good faith
and integrity in handling the Company's affairs. Shareholders who believe that
the Company has been harmed by failure of an officer or director to
appropriately resolve any conflict of interest may, subject to applicable rule
of civil procedure, be able to bring a class action or derivative suit to
enforce their rights and the Company's rights.
BOARD MEETINGS AND COMMITTEES
The Directors and Officers will not receive remuneration from the Company
until a subsequent offering has been successfully completed, or cash flow from
operating permits, all in the discretion of the Board of Directors. Directors
may be paid their expenses, if any, of attendance at such meeting of the Board
of Directors, and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefor. No compensation has been paid to the Directors.
The Board of Directors may designate from among its members an executive
committee and one or more other committees. No such committees have been
appointed.
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer, beneficial owner of more than 10% of any class of equity securities of
the Company or any other person known to be subject to Section 16 of the
Exchange Act of 1934, as amended, failed to file on a timely basis reports
required by Section 16(a) of the Exchange Act for the last fiscal year.
AUDIT COMMITTEE FINANCIAL EXPERT
The Company's board of directors does not have an "audit committee
financial expert," within the meaning of such phrase under applicable
regulations of the Securities and Exchange Commission, serving on its audit
committee. The board of directors believes that all members of its audit
committee are financially literate and experienced in business matters, and that
one or more members of the audit committee are capable of (i) understanding
generally accepted accounting principles ("GAAP") and financial statements, (ii)
assessing the general application of GAAP principles in connection with our
accounting for estimates, accruals and reserves, (iii) analyzing and evaluating
our financial statements, (iv) understanding our internal controls and
procedures for financial reporting; and (v) understanding audit committee
functions, all of which are attributes of an audit committee financial expert.
However, the board of directors believes that there is not any audit committee
member who has obtained these attributes through the experience specified in the
SEC's definition of "audit committee financial expert." Further, like many small
companies, it is difficult for the Company to attract and retain board members
who qualify as "audit committee financial experts," and competition for these
individuals is significant. The board believes that its current audit committee
is able to fulfill its role under SEC regulations despite not having a
designated "audit committee financial expert."
ITEM 10. EXECUTIVE COMPENSATION
None of the executive officer's salary and bonus exceeded $100,000 during
any of the Company's last two fiscal years.
ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT
PRINCIPAL SHAREHOLDERS; MANAGEMENT SHARE HOLDINGS
Beneficial Ownership is determined in accordance with the rules of the
Securities and Exchange Commission and generally includes voting or investment
power with respect to securities. The following table sets forth Common Stock
ownership information as of the Record Date with respect to (i) each person
known to us to be the beneficial owner of more than 5% of our issued and
outstanding Common Stock and Preferred Stock; (ii) each of our directors and
executive officers; and (iii) all of our directors and executive officers as a
group. Unless otherwise indicated, the business address of each person listed is
Internal Hydro International, Inc., 607 W. MARTIN LUTHER KING Jr. Blvd., TAMPA,
FLORIDA 33603
Name and Address of Title of Amount and Nature of Percent of
Beneficial Owner Class Beneficial Owner Class
- - ---------------------------------------------------------------------
- - Craig Huffman Preferred 6,509,020 22.8%
- - Rianey Nelson Preferred 7,739,760 27.1%
- - Mark Pena Preferred 1,213,280 4.3%
- - James A. Thomas Preferred 6,051,140 21.2%
- - Mark Pena Common 362,154 2.0%
- - Craig Huffman Common 1,129,630 6.2%
- - Wade Kenyon Common 136,135 .7%
- - ---------------------------------------------------------------------
All officers and directors
as a group (1 person) Preferred 7,722,300 27.1%
Common 1,411,412 8.9%
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Shareholders of the Company have advanced the Company money in order to pay
general and administrative expenses. As of December 31, 2004 and 2003, the
Company owed $55,000 and $128,963, respectively, relating to these loans.
None of our directors, executive officers or key employees is related to
any other of our directors, executive officers or key employees.
ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS OF THE COMPANY
During the year ended December 31, 2004, the Board of Directors met 2 times and
held 1 meeting via unanimous consent in lieu of a special meeting. A majority of
the directors was present at each meeting, all constituting a quorum. In
addition to regularly scheduled meetings, a number of Directors were involved in
numerous informal discussions with management, offering advice and suggestions
on a broad range of corporate matters.
Item 13. Exhibits and Reports on Form 8-K
EXHIBIT INDEX
The following exhibits are filed as part of this Annual Report on Form
10-KSB or are incorporated herein by reference:
Exhibit Description
3.1.1 Articles of Incorporation (1)
3.1.2 Amended Articles of Incorporation (1)
3.2 Bylaws (1)
10.1 Lock-up agreement with Hagit Bernstein (1)
10.2 Lock-up agreement with Raphi Shram (1)
10.3 Lock-up agreement with Naomi Shram (1)
10.4 Stock Purchase Agreement and Plan of Reorganization (2)
21.1 Subsidiaries of Registrant (F)
(1) Incorporated by reference to the Exhibits to the Registration Statement
filed by the Registrant on Form 10SB dated March 1, 2000.
(2) Incorporated by reference to the Exhibits to the Current Report filed by
the Registrant on Form 8-K/A dated December 11, 2000.
F Filed herewith
Reports filed on Form 8-K
Item 14 - Controls and Procedures
- --------------------------------------
As required by Rule 13a-14 under the Exchange Act, within 90 days prior to
the filing date of this report, the Company carried out an evaluation of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures. This evaluation was carried out under the supervision and with
the participation of the Company's management, including the Company's Chief
Executive Officer. Based upon that evaluation, the Company's Chief Executive
Officer concluded that the Company's controls and procedures are effective.
There have been no significant changes in the Company's internal controls or in
other factors that could significantly affect internal controls subsequent to
the date the Company carried out this evaluation.
Disclosure controls and procedures are controls and other procedures that
are designed to ensure that information required to be disclosed in the
Company's reports filed or submitted under the Exchange Act is recorded,
processed, summarized and reported within the time periods specified in the
Securities and Exchange Commission's rules and forms. Disclosure controls and
procedures include controls and procedures designed to ensure that information
required to be disclosed in Company reports filed under the Exchange Act is
accumulated and communicated to management, including the Company's Chief
Executive Officer as appropriate, to allow timely decisions regarding
disclosures.
The Company has confidence in its internal controls and procedures and has
expanded its efforts to develop and improve its controls. Nevertheless, the
Company's management, including the Chief Executive Officer, does not expect
that the Company's disclosure procedures and controls, or its internal controls,
will necessarily prevent all error or intentional fraud. An internal control
system, no matter how well conceived and operated, can provide only reasonable,
but not absolute, assurance that the objectives of such internal controls are
met. Further, the design of an internal control system must reflect the fact
that the Company is subject to resource constraints, and the benefits of
controls must be considered relative to their costs. Because of the inherent
limitations in all internal control systems, no evaluation of controls can
provide absolute assurance that all internal control issues or instances of
fraud, if any, within the Company be detected.
ITEM 15. PRINCIPAL ACCOUNTANT FEES AND SERVICES
The following is a summary of the fees billed to us by EPSTEIN, WEBER & CONOVER,
PLC for professional services rendered for the years ended December 31, 2004 and
2003:
Service 2004 2003
- ------------------------------------------------------------------------------
Audit Fees $18,103 $14,565
All Other Fees - -
- ------------------------------------------------------------------------------
Total $18,103 $14,565
================================================
AUDIT FEES - Consists of fees billed for professional services rendered for the
audits of our financial statements, reviews of our interim financial statements
included in quarterly reports, services performed in connection with filings
with the Securities & Exchange Commission and related comfort letters and other
services that are normally provided by EPSTEIN, WEBER & CONOVER, PLC in
connection with statutory and regulatory filings or engagements.
TAX FEES - Consists of fees billed for professional services for tax compliance,
tax advice and tax planning. These services include assistance regarding
federal, state and local tax compliance and consultation in connection with
various transactions and acquisitions.
AUDIT COMMITTEE PRE-APPROVAL OF AUDIT AND PERMISSIBLE NON-AUDIT SERVICES OF
INDEPENDENT AUDITORS
The Audit Committee is to pre-approve all audit and non-audit services
provided by the independent auditors. These services may include audit services,
audit related services, tax services and other services as allowed by law or
regulation. Pre-approval is generally provided for up to one year and any
pre-approval is detailed as to the particular service or category of services
and is generally subject to a specifically approved amount. The independent
auditors and management are required to periodically report to the Audit
Committee regarding the extent of services provided by the independent auditors
in accordance with this pre-approval and the fees incurred to date. The Audit
Committee may also pre-approve particular services on a case-by-case basis.
CERTIFICATION
-------------
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange
Action of 1934, as amended, the registrant has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.
INTERNAL HYDRO INTERNATIONAL INC.
By: /s/ CRAIG A. HUFFMAN
---------------------------
Craig A. Huffman
CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this Report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
/s/ CRAIG A. HUFFMAN
- --------------------------
Craig A. Huffman, Chief Executive Officer May 12, 2005
Exhibit 99.1 CERTIFICATIONS
I, Craig A. Huffman, certify, pursuant to Rule 13a-4 of the Securities Exchange
Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of
2002, with respect to the Annual Report of Internal Hydro International, Inc.
("IHDR") on Form 10-KSB for the year ended December 31, 2004 ("Report") that:
(1) I have reviewed this Report;
(2) based on my knowledge, this Report does not contain any untrue statement of
a material fact or omit to state a material fact necessary to make the
statements made, in light of the circumstances under which such statements were
made, not misleading with respect to the period covered by this Report;
(3) based on my knowledge, the financial statements and other financial
information included in this Report, fairly present in all material respects the
financial condition, results of operations and cash flows of IHDR as of, and for
the periods presented in this Report;
(4) I am responsible for establishing and maintaining disclosure controls and
procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for IHDR and I
have: (a) designed such disclosure controls and procedures to ensure that
material information relating to IHDR is made known to me by others,
particularly during the period in which this Report is being prepared; (b)
evaluated the effectiveness of IHDR's disclosure controls and procedures as of a
date within 90 days prior to the filing date of this Report (the "Evaluation
Date"); and (c) presented in this Report my conclusions about the effectiveness
of the disclosure controls and procedures based on my evaluation as of the
Evaluation Date;
(5) I have disclosed, based on my most recent evaluation, to our auditors and
the audit committee of our board of directors (or persons performing the
equivalent function): (a) all significant deficiencies in the design or
operation of internal controls which could adversely affect our ability to
record, process, summarize and report financial data and have identified for our
auditors any material weaknesses in internal controls; and (b) any fraud,
whether or not material, that involves management or other employees who have a
significant role in our internal controls; and
(6) I have indicated in this Report whether or not there were significant
changes in internal controls or in other factors that could significantly affect
internal controls subsequent to the date of my most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
By: /s/ Craig A. Huffman
---------------------------
Craig A. Huffman
Chief Executive Officer
INTERNAL HYDRO INTERNATIONAL INC.
CERTIFICATION OF
CHIEF EXECUTIVE OFFICER
PURSUANT TO18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO SECTION 906
OF THE SARBANES-OXLEY ACT OF 2002
I, Craig Huffman, solely for the purpose of complying with 18 U.S.C. Section
1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002,
hereby certify that to my knowledge Annual Report of Internal Hydro
International, Inc. ("IHDR") on Form 10-KSB for the year ended December 31, 2004
("Report") fully complies with the requirements of Section 13(a) or 15(d) of the
Securities Exchange Act of 1934 and that information contained in such Form
10-QSB fairly presents in all material respects the financial condition and
results of operations of Internal Hydro International, Inc.
/s/ Craig A. Huffman
- ------------------------
Craig A. Huffman
Chief Executive Officer