UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549



FORM 10-K/A

|     |                                                                                                                                        
|---- | ---------------------------------------------------------------------------------------------------------------------------------------
|[X]  | Annual Report under Section 13
or 15(d) of the Securities Exchange Act of 1934 for the fiscal year ended
June 30, 2008.                
|[  ] | Transition Report pursuant to
Section 13 or 15(d) of the Securities Exchange Act of 1934 for the
transition period from _____ to _____.



Commission File Number:
333-152052



[hdx10ka063008apg001.jpg]

Hydrodynex, Inc.

(Exact name of small business issuer as
specified in its charter)



|                                                                                                                                                                        |                                                   
|----------------------------------------------------------------------------------------------------------------------------------------------------------------------- | --------------------------------------------------
|Nevada
(State or other
jurisdiction of
incorporation or
organization)                                                                                                   | 20-4903071
(I.R.S.
employer
identification
number)
|230 Bethany Rd., Ste. 128,
Burbank, CA 91504
(Address of
principal executive offices and zip code)

(702) 884-2150
(Registrants
telephone number, including area code)



Securities registered pursuant to Section
12(b) of the Act: NONE



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

Common Stock, $.001 par value



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



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



Indicate by check mark whether the
registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Exchange Act during the past 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 [  ]



- 1 -

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



Indicate by check mark whether the
registrant is a large accelerated filer, an accelerated filer, a non-accelerated
filer, or a smaller reporting company.  See definition of accelerated
filer, larger accelerated filer and smaller reporting company in Rule 12b-2
of the Exchange Act.  (Check one):



Large accelerated
filer [  ]

Accelerated filer [  ]

Non- accelerated filer [  ]

Smaller reporting
company [X]



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



The aggregate market value of the voting
and non-voting common equity held by non-affiliates of the registrant, as of
June 30, 2008 is $77,500 based on the sale price of the shares in a private
placement that closed on September 30, 2007 of $0.10 per share.  The shares
of our company are not currently listed on an exchange.



Number of shares outstanding of the
issuers common stock as of September 28, 2008: 1,500,000 shares.













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TABLE OF CONTENTS



|           |  |          |  |                                                                                                              |  |   
|---------- |  | -------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|           |  |          |  | Page                                                                                                        
|PART
I     |  |          |  |                                                                                                             
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 1.  |  | Business                                                                                                     |  | 4 
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 1A. |  | Risk
Factors                                                                                                 |  | 10
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 2.  |  | Properties                                                                                                   |  | 20
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 3.  |  | Legal
Proceedings                                                                                            |  | 20
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 4.  |  | Submission of
Matters to a Vote of Security Holders                                                          |  | 20
|           |  |          |  |                                                                                                              |  |   
|PART
II    |  |          |  | 21                                                                                                          
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 5.  |  | Market for
Registrants Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities |  | 21
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 6.  |  | Selected
Financial Data                                                                                      |  | 21
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 7.  |  | Managements
Discussion and Analysis of Financial Condition and Results of
Operations                        |  | 21
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 7A. |  | Quantitative and
Qualitative Disclosures About Market Risk                                                   |  | 23
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 8.  |  | Financial
Statements and Supplementary Data                                                                  |  | 23
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 9.  |  | Changes in and Disagreements with Accountants on Accounting
and Financial Disclosure                         |  | 23
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 9A. |  | Controls and
Procedures                                                                                      |  | 24
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 9B. |  | Other
Information                                                                                            |  | 24
|           |  |          |  |                                                                                                              |  |   
|PART
III   |  |          |  | 25                                                                                                          
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 10. |  | Directors,
Executive Officers of the Registrant                                                              |  | 25
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 11. |  | Executive
Compensation                                                                                       |  | 26
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 12. |  | Security
Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters               |  | 26
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 13. |  | Certain
Relationships and Related Transactions, and Director Independence                                    |  | 28
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 14. |  | Principal
Accountant Fees and Services                                                                       |  | 28
|           |  |          |  |                                                                                                              |  |   
|           |  | Item 15. |  | Exhibits and
Financial Statement Schedules                                                                   |  | 29
|           |  |          |  |                                                                                                              |  |   
|SIGNATURES |  |          |  | 30                                                                                                          
|           |  |          |  |                                                                                                              |  |   
|FINANCIALS |  |          |  | 31                                                                                                          











- 3 -

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FORWARD LOOKING STATEMENTS



This Report on Form 10-K
and the documents incorporated by reference include forward-looking
statements. To the extent that the information presented in this Report on Form
10-K discusses financial projections, information or expectations about our
business plans, results of operations, products or markets, or otherwise makes
statements about future events, such statements are forward-looking. Such
forward-looking statements can be identified by the use of words such as
intends, anticipates, believes, estimates, projects, forecasts,
expects, plans and proposes. Although we believe that the expectations
reflected in these forward-looking statements are based on reasonable
assumptions, there are a number of risks and uncertainties that could cause
actual results to differ materially from such forward-looking statements. These
include, among others, the cautionary statements in the Risk Factors and
Managements Discussion and Analysis or Plan of Operation sections of this
Report on Form 10-K. These cautionary statements identify important factors that
could cause actual results to differ materially from those described in the
forward-looking statements. When considering forward-looking statements in this
prospectus, you should keep in mind the cautionary statements in the Risk
Factors and Managements Discussion and Analysis or Plan of Operation
sections below, and other sections of this Report on Form 10-K.



The statements contained
in this Report on Form 10-K that are not purely historical are forward-looking
statements within the meaning of Section 27A of the Securities Act of 1933 and
Section 21E of the Securities Exchange Act of 1934, including, without
limitation, statements regarding our expectations, objectives, anticipations,
plans, hopes, beliefs, intentions or strategies regarding the future. All
forward-looking statements included in this document are based on information
available to us on the date hereof, and we assume no obligation to update any
such forward-looking statements. It is important to note that our actual results
could differ materially from those included in such forward-looking statements.
There are many factors that could cause actual results to differ materially from
the forward looking statements. For a detailed explanation of such risks, please
see the section entitled Risk Factors beginning on page 10 of this Report on
Form 10-K. Such risks, as well as such other risks and uncertainties as are
detailed in our SEC reports and filings for a discussion of the factors that
could cause actual results to differ materially from the forward- looking
statements. Given these uncertainties, readers are cautioned not to place undue
reliance on the forward-looking statements.



The following discussion
should be read in conjunction with the audited consolidated financial statements
and the notes included in this Report on Form 10-K and the section entitled
Managements Discussion and Analysis or Plan of Operation included in this
Report on Form 10-K.



PART
I



Item 1.   Business.



TABLE OF CONTENTS



|                                                        |  |   
|------------------------------------------------------- |  | --
|A.
  Hydrodynex  Introduction and Business Strategy    |  | 4 
|B.
  Hydrodynex Products                                |  | 5 
|C.
  Description of Proprietary Technology              |  | 7 
|D.
  Hydrodynex Exclusive Technology License
Agreement |  | 8 
|E.
Market Analysis and Competition                      |  | 8 
|G.
  Marketing and Sales                                |  | 9 
|H.
  Patents, Trademarks, and Copyrights                |  | 10
|I.
   Employees                                         |  | 10



A.   Hydrodynex, Inc.  Introduction
and Business Strategy



Hydrodynex, Inc., a Nevada Corporation, was founded on May 12,
2006, for the purpose of acquiring an exclusive North American license for the
marketing and distribution rights of an anodic oxidation water disinfection
product commonly referred to as the AO-System® technology. The
primary objective of our company is to commercialize this technology in North
America initially through direct sales in order to gain a substantial market
penetration.  Hydrodynex has developed a strategic business plan to
introduce and market the AO-Systems® in North America.
 Hydrodynex believes that due to the innovative technology, the
AO-Systems® will fill an open market gap in the water disinfection
and treatment market.

As a result of the research and development work beginning in 1985
and conducted by Hydrosystemtechnik GmbH, from whom we have been granted an
exclusive license for the anodic oxidation water disinfection product,
substantial technological discoveries were made and a mechanized water
disinfection unit was developed and improved which is collectively referred to
as the AO-System®.  Hydrosystemtechnik GmbH has developed and
commercialized this innovative water purification and disinfection system and
has been selling these units in the European market for the last 16 years.
 Within the last few years, advancements to include warm water systems have
been developed by

- 4 -

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Hydrosystemtechnik GmbH.  Two U.S. patents have been granted
to Hydrosystemtechnik GmbH covering the apparatus design of a water
sterilization unit that uses the principals of anodic oxidation without adding
chlorine compounds.  Hydrosystemtechnik GmbH had, as of the end of 2007,
sold and installed over 160 AO-Systems® units of 11 different models
for projects in Europe and approximately 15 other countries worldwide.  No
system has yet been sold or is installed in the U.S., Canada or Mexico, and no
system can be sold in the U.S. without approval of the U.S. EPA.

B.   Hydrodynex Exclusive Technology License
Agreement

We entered into a Marketing, Distribution and License Agreement
with Hydrosystemtechnik GmbH September 3, 2007.  On August 30, 2008, we entered into an
Amended Marketing, Distribution and License Agreement, or amended license
agreement, with Hydrosystemtechnik, which has the same effective date as the
original license agreement, September 3, 2007, supersedes the original license
agreement.  Under the amended license agreement, we were granted the right
to sell water disinfection systems based on the AO-System® technology
in all markets (except the dental market) in Canada, the United States, and
Mexico on an exclusive basis for a period of three years after the effective
date of the license agreement.  The license remains exclusive subject to
Hydrodynex (a) leasing or purchasing an AO-System® prior to November
3, 2008, and (b) obtaining, within 30 months of the effective date of the
license agreement, verification and certification of the AO-System® technology by the U.S. EPA necessary for commercialization and
selling water disinfection systems in whole or in part within the United States.
 We plan to undertake to secure technology verification from NSF
International, an independent third party testing laboratory, accredited by the
EPA, to legally sell AO-Systems® in the United States, but the
process has not yet begun because of the non-completion of the construction of
the test reactor by the Licensor.  In addition, in order to maintain the
exclusivity of the license, we are obligated to (a) make application to six
states in the Western U.S. for certification of the AO-System®technology within 90 days after receiving the NSF and EPA verification,
(b) sell, deliver and install at least one AO-System® in the U.S. in
the two year exclusivity period following technology verification, and (c) we
are required to demonstrate financial responsibility in the form of a bank
credit line or equity funding of not less than $500,000 to accomplish the
objectives necessary to retain the exclusivity of the license.

We are also required, beginning year three after the effective
date, or September 3, 2009, to meet certain minimum annual sales targets, based
on net purchase value, for sales of AO-System®products in the North
American territory, which increase from 30,000 in year three to 500,000 in
year six and thereafter, in order to maintain the exclusivity of the license.
 If we fail to meet the minimum annual sales targets at the end of any
business year, the licensor, Hydrosystemtechnik GmbH, shall have the option to
revert the license agreement to a non-exclusive marketing agreement.  We
have paid a non-refundable license fee in the amount of 10,000, and we were
previously obligated to make a second non-refundable license fee in the amount
of 20,000 on June 1, 2008.  Under the terms of the amended license
agreement, Hydrosystemtechnik has agreed in writing to an extension of the due
date for the second license payment from June 1, 2008 to November 30, 2008.
 A third license fee in the amount of 20,000 will be due upon
certification and approval of the AO-Systems® by the US Environmental
Protection Agency for commercial sales in the United States.  We are also
required to attain and maintain minimum annual sales volume of 500,000 in order
to have the right to manufacture water disinfection systems based on the
AO-System®technology and sell them in the licensed territory.
 If after year five after the effective date we do not maintain minimum
annual sales volume of 500,000 in any two consecutive years, the right to
manufacture will expire automatically in the subsequent year.  We are
obligated to pay a royalty on the products actually assembled or manufactured
and sold to third parties in the amount of 10% of the net selling price on all
AO-Systems®.  We are not obligated to pay a royalty on finished
AO-Systems® purchased from Hydrosystemtechnik and resold.  We
are also obligated to pay fifty percent of the direct costs related to preparing
and prosecution of patents and patent applications in the U.S., Canada or
Mexico,, including legal fees, filing fees maintenance fees and transaction
costs, so long as the license agreement remains in effect.

The license agreement terminates after ten years, with an option
by us to extend the license for an additional ten years on an exclusive basis,
as long as the minimum annual sales volume of is maintained.  The licensor,
Hydrosystemtechnik GmbH, has the right to terminate the license agreement, after
a notice and cure period, if we are in default of any obligation in the
agreement, are adjudged bankrupt, become insolvent or similar events, or if we
do not maintain minimum annual sales volume of 100,000 in each business year
subsequent to the third year after the effective date (which means meeting the
100,000 minimum annual sales volume for each year beginning September 3,
2010).

We plan to market, sell, install, and maintain specialized
AO-Systems® on a retail basis pursuant to the license.
 Stationary-type systems will be sold and installed in facilities such as
hospitals, hotels, water cooling towers, swimming pools, etc.
 Transportable AO-Systems® and packaging units will be marketed
to the U.S. military and other associations involved in the use of portable
water treatment systems for emergency and non-emergency markets.
 Hydrodynex will purchase components on a wholesale basis from
Hydrosystemtechnik to make, use, and sell specific water disinfection systems on
a custom basis for it customers.  Hydrodynex has the option to engage in
future manufacturing of the AO-Systems® when it is deemed necessary
and financially justifiable.

- 5 -

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Activities to date have been limited primarily to organization,
initial capitalization, business and product research, producing marketing
materials and a website, securing a marketing agreement, preparing a
comprehensive business and operating plan, evaluating the regulatory
requirements to sell water treatment systems in the U.S., Canada and Mexico, and
undertaking a marketing feasibility study.   Extensive research has
been done on competing technologies and the water contaminants that most
adversely affect water systems at the present time.  Legionella bacteria
protection is the strongest market Hydrodynex has identified because of its wide
prevalence and the high percentage of death resulting from infection.

Our company is structured expressly as a marketing entity and
therefore we do not currently engage in the design, development or manufacturing
of products.  In phase one of our multiphase marketing plan. Subject to
receipt of approval from the EPA, of which there is no assurance, we intend to
market and sell the AO-System®, a device that disinfects potable
water systems and industrial water systems, under an OEM arrangement with our
Licensor Hydrosystemtechnik, GmbH.  To date, we have no revenues from
operations. Our expenses consist of marketing and management activities and
personnel costs.  We intend to accomplish the following:

| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | Establish
effective marketing channels for our products through a network of
distributors or dealers in selected markets.                                                                                                                                       
| |  | Support
revenue generation in these channels by effectively educating the end user
and promoting the use of AO-Systems® as a means of assuring the
delivery of safe, healthy water at low costs and eliminating the
Legionella bacteria from existing buildings.
| |  | We
intend to have Hydrosystemtechnik GmbH provide the AO-Systems®
under a brand label to be determined.                                                                                                                                                         
| |  | We
intend to register Hydrodynex as a company registered
trademark.                                                                                                                                                                                             



In addition to the risk factors set forth herein, additional
obstacles, which we may encounter in launching our business model, are as
follows:

1.  If we do launch planned marketing initiatives, our target
market may not be receptive to our business and may not purchase our
products.

2.  Potential customers may not be willing to pay the price
for our products.

3.  Distributors and dealers may not continue to carry our
products if we fail to meet their standards pursuant to our agreements with
them.

4.  We may be unable to establish new distributors or dealers
in the balance of our marketing territory if our performance with those channels
during our initial launch does not demonstrate a level of opportunity consistent
with their standards.

The water treatment industry is a rapidly growing sector and a
primary component of the worlds basic needs market.  With over 20 large
target industrial business areas benefiting from clean water and with an
ever-present threat of water-borne diseases, other biohazard and inorganic
aquatic health threats, including mechanical corrosion issues, the clean water
industry is paramount in importance to the U.S. and the rest of North America.
 Certain competing technologies are arising, but none that utilize the same
superior and patented technological properties as advanced Anodic Oxidation.
 Lawsuits filed against facilities such as hospitals, hotels, retirement
homes and cooling towers because of their substandard water system cleanliness
are very prevalent and on the rise in the U.S.  This system gives these
places a strong tool to protect themselves with and the ability to fight
accusations of negligence in lawsuits.  Too many human deaths arise from
unsanitary remote water sources and disaster induced contamination as well.

Water treatment and purification systems with increasing
complexity and effectiveness have been put into operation worldwide for a number
of years.  However, conventional mechanical and chemical purification
processes have proven to be insufficient in preventing the distribution of
diseases through this essential nutritional element that water represents.
Recognizing that special disinfection methods had to be developed to eliminate
micro-organisms such as bacteria and viruses, heavy chlorination and other
chemical treatments, and more recently UV and Ozone treatments, have been
introduced. These processes, however, include significant disadvantages to the
AO-System®and among other things, are hazardous, or provide a bad
odor and/or taste, or only have a short-term residual cleaning effect on the
water.

We have seen several
outbreaks of water-borne illnesses in recent years in municipal, residential and
rural water systems, including outbreaks of Cryptosporidium, E. coli,
Pseudomonas, Norovirus, Echovirus, methicillin-resistant Staphylococcus aureus,
Giardia intestinalis, Shigella sonnei, etc.  An estimated 1400 people in
the U.S. die each year from Pseudomonas in hospital water systems.  An
estimated 18,000 people each year in the U.S. are infected with water-borne
Legionella bacteria, 25% of those estimated from Healthcare environments.



- 6 -

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Legionnaires disease, caused by Legionella bacteria, is
particularly dangerous and has already caused significant lawsuits against
hospitals where the disinfection processes used by them was insufficient in
preventing death to immuno-suppressed patients. The AO-System® is the
only existing system known to Hydrodynex which permanently eliminates
micro-organisms in water systems through its short and long-term oxidative
effects, including the biofilm inside pipe walls that harbors Legionella.
 The AO-System® has proven to be a solution to provide partial
or complete healing to existing and previously infected water systems in
closed circuits such as hot water systems in hospitals.  However, there
exists many other commercial applications in facilities such as cooling towers
and food processing plants that are in dire need of this process to provide
protection as well as prevention from expensive shut-down periods for cleaning.
 Being a new technical solution with more than 160 systems installed in 15
countries, the AO-System® are rapidly gaining a respect in the water
treatment industry on a global basis.

STRATEGY

Our
plan of operation for the next 12 months will be the execution of our strategic
business plan.   Hydrodynex intends to operate in three phases as
follows:

Phase 1: Finalization of the Strategic Marketing Plan,
complete current audit of Hydrodynex, initial start-up capital realization
through asecond private stock offering, securing EPA  and State
certification,  making application for Hydrodynex to be publicly traded on
the OTC-BB, and hiring/training sales and technical personnel.

Phase 2: Initiation of marketing and sales activities in
selected markets in North America (U.S., Canada, and Mexico).  Full scale
commercialization of the AO-System®, including industrialization and
after-sale service agreements, for the markets covered by Hydrodynex.  As
part of its effort to commercialize the AO-System®, Hydrodynex plans
to offer mobile systems which may use a film pouch packaging system.

Phase
3:  Set-up manufacturing in the U.S. when it becomes a viable,
profit-increasing option.

The
objectives are:

(a)
establish our product as the un-paralleled leader in water disinfection systems,

(b)
enter and cover all market segments in the U.S., Canada, and Mexico,0

(c)
get the AO-System® required and mandated by local, state, and
national insurance agencies and governments.

C.   Hydrodynex Products



The AO-System® units that Hydrodynex plans to
sell are fully developed and utilize a novel and patented advanced technology
broadly known as Anodic Oxidation.  The AO-System® delivers this
technology with 11 different reactor unit models to a wide range of applicable
markets and water volume parameters.  This particular generation of
AO-System®is advanced and does not use brine water and does not
contain technical characteristics similar to other older AO technology.
 Improved metal electrodes, design configurations, and process tuning make
this generation of AO-System®far superior to other out-dated AO
technologies.  We feel that research we have done on other current
competing technologies shows the AO-System®offers higher
disinfection standards and we have found various shortcomings for competing
technologies.  When treating water for Legionella bacteria, conventional
methods consisting of hyper-chlorination and super heat-flushing are inadequate.
 The AO-System® provides a viable technical solution related to
killing Legionella bacteria.

Initially, Hydrodynex will not produce any products or components;
it will act as an exclusive master distributor of AO-Systems® I in
Canada, the United States and Mexico.  When the volume of sales warrants
the setup of an assembly and manufacturing facility in North America, we will
enter Phase II of our business plan and take on the responsibility of assembling
and manufacturing the units by Hydrodynex or outsource the manufacturing to a
reliable subcontractor here in the U.S. or another foreign country.

D.   Description
of Proprietary Technology



The AO-System® is generally installed as a
point-of-entry device on warm and/or cold water systems.  Water passes
through a reactor chamber of the unit which contains specially engineered
electrodes that produce oxidizing effects in the water as an electrical current
is generated to pass from the cathodes to the anodes.  Instrument observed
water flow determines the amount of electrical current generated and

- 7 -

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the computer unit automatically controls the system.  The
system can bypass itself for regularly scheduled back-wash cleanings which
prevent build-up on the electrodes and thereby increase the longevity of the
system and its components.

Advanced AO is an electrochemical in-situ sterilization process
which produces deactivating (microbiocidal) oxidants directly from the water
being treated. No chemical additives are necessary for the treatment. The water
flows into the reactor from the bottom then up through the spaces between the
electrodes, serving directly as an electrolyte. The deactivation (killing) of
microorganisms such as bacteria, fungi, algae & viruses occurs predominantly
through oxidation in the anode boundary layer (due to short life absorbed
oxidants), ultimately being optimized for maximum effectiveness. In operation
with neutral pH, two dominant anode mechanisms can be verified:

E.   Market Analysis and Competition

Hydrodynex management believes that Hydrodynex main
competitiveness is expected to be based on technological superiority and
efficacy, rather than price.  Hydrodynex will be competing against
companies with products it believes are less efficient and less expensive than
the AO-System®, however, these companies have sufficiently more
financial resources than our company.  The main currently used disinfection
systems are based on chlorination (most common), and more recently, UV and Ozone
systems.

In the last few years, several companies have introduced a
Copper/Silver Ionization process which was installed for testing in at least 16
hospitals in 5 states.   This shows that there is indeed a viable
market for more efficient disinfection systems. Copper/Silver ionization has not
entered the retail market for drinking water systems and most likely will not be
allowed in this market due to its release of heavy metals into the treated
water.  It should be noted that while that system is simpler than
conventional systems, it has numerous deficiencies when compared to the
AO-System®.  Chlorine Dioxide is the other major competitor to
our technology, but also has several deficiencies when compared with advanced
Anodic Oxidation.  Examples would be such things as harmful carcinogenic
byproducts, large amounts of dangerous chemical dosing and inefficient
Legionella eradication.  .

In managements opinion, at this point in time, there is no
similar technology available in the United States.  However, the market
resistance against new products and new technical solutions has to be overcome
in order for the company to become successful and there is no assurance that
this will happen.  The need is immense, and so are the advantages.
 Electrolytic chlorinators have been seen entering the market recently, but
the statistical effects of it on Legionella have not shown perfect results, and
other negatives have been found with this process.  Very recently, two more
competing companies have marketed photo-oxidation and RECOR®, but
information on these systems is limited and the validity of these systems is yet
to be seen.

Other benefits of the AO-System® include lowered energy
consumption by the facility by not having to raise its warm water network above
55 degrees Celsius.  Many places raise their water temperature up to 70 or
even 80 degrees Celsius at night to combat problems they encounter.  This
results in danger of scorching to consumers, highly increased pipe corrosion,
and dramatically increased energy consumption.  The AO-System®
also partially softens water by increasing the solubility of common precipitates
and removing solutes within the reactor.  It also cleans existing pipe
corrosion and breaks down scaling deposits.  The cost of replacing a piping
system in a building is a very expensive, lengthy, and invasive process.

As far as the portable system is concerned, there are many
competing systems of different sizes on the market, but the long-term
disinfection effect of advanced AO-System® is a benefit that is not
matched by the majority of these systems.  Hydrodynex believes it may be
able to establish a niche market.

We have entered into a Memorandum of Understanding with IMF, under
which we will have access to the design parameter and manufacturing right which
integrates a unique water packaging system with the AO-System®.The packaging system utilized in the mobile unit uses a proprietary
tri-layer foil in the packaging.  This material keeps the water quality
unchanged over many years.

The competitive situation may adversely affect Hydrodynex sales or
capacity to retain or increase clientele or business.  There are no
assurances Hydrodynex will be able to successfully compete against these other
competitors based on these factors.  In order to compete with these other
companies, Hydrodynex plans to attempt competitive pricing, above average
customer service, high quality products and provide independent research and
testing that will provide conclusive evidence that the AO-System® is
the leading and best technology available.  In addition to the
technological advantages of the AO-System®, this system is very
competitive when it comes to operation and maintenance costs and treatment cost
per gallon of water.

- 8 -

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These facts lead to the belief that the Hydrodynex
AO-System® process has the potential to replace most of the competing
processes.  However, the replacement will be gradual due to the
fragmentation of the industry.  No company has a market penetration of more
than a couple of percent, but we believe that the AO-System®has the
potential to be the market leader.



G.   Marketing and
Sales

Once certification has been granted by the EPA, we intend to focus
its sales and marketing program directly toward certain targets of opportunity.
 The most important targets are those where water safety is paramount; in
facilities and industries where unhealthy people are exposed to additional
disease and lives are being lost, where expensive and reputation tarnishing
lawsuits are in abundance, and where other competing products are failing to
properly address these issues.  Four primary markets have been researched
and evaluated by the Companys management.  These four areas are hospitals,
hotels, military applications and applications for mobile disaster relief.
 Secondary marketing targets are water cooling towers, food processing
facilities, retirement homes, spas, schools, industrial plants, public
fountains, pools, water slide parks, cruise ships, etc.

The organism that is causing the greatest problems is the
Legionella bacteria, the most dangerous and most prevalent water bio-contaminant
in the market.  Hydrodynex has learned of hundreds of outbreaks in the U.S.
and subsequent litigation resulting from outbreaks.  It is estimated that
50-95% of building water systems are inhabited by this often fatal bacteria
which kills around 35% of the people that are infected.  As many as 18,000
are estimated to be infected by Legionella in the U.S. per year, about 5,000 of
them in hospitals, this is the number one focus of Hydrodynex at this time.
 The primary reason that hospitals have such a high degree of mortality is
because many of the individuals in the hospitals have their immune systems
compromised due to medication, surgery, chemotherapy, etc.  This phenomenon
is also seen in retirement homes.

We will attend trade shows and undertake a direct marketing
program to key hospitals in the southwestern section of the U.S. Marketing
efforts will initially be concentrated in the states of Nevada, Arizona, and
California.  Prospective customers and marketing targets include Good
Samaritan hospital in Los Angeles, which recently weathered a Legionnaires 
disease lawsuit involving two deaths.  The company is developing a
comprehensive marketing brochure to define the differences between the
AO-Systems® and other competing water treatment systems now available
on the market.  We have already created a website to begin educating the
market about the AO-System®- www.HydroDynex.com.

Hydrodynex will also deploy a multi-channel
Internet marketing strategy with the primary intention of building brand
recognition, educating the consumer of the Hydrodynex value propositions,
generating leads and increasing sales through the following
tactics:

Web Presence Development: the Hydrodynex
primary website and its supporting network websites will engage in a host of Web
marketing strategies. Such strategies will include but are not limited to:
Search Engine Optimization (SEO); consistent creation of unique, relevant
content that target specific key phrases Hydrodynex consumers are searching for;
optimized page TITLE and Meta tags, ALT tags, H1/2/3 headers, URLS, etc.; link
building through various web directory submissions and Web presence campaigns
such as article submissions, press releases, etc.

Monthly Email Newsletter and Lead
Cultivation: as prospects are added to the Hydrodynex sales pipelineand in
addition to traditional sales/marketing follow up and cultivation tacticsa
monthly newsletter will be sent to cultivate prospective clients through
value-added messaging, helpful information and sales/marketing
information,

Online Joint Venture Marketing Partnership:
Hydrodynex will identify complimentary businesses which support the Hydrodynex
model and seek out online marketing partnerships to expand Web presence and
sales/marketing objectives.



Subject to receiving the necessary regulatory approvals from the
EPA, we will develop all the appropriate technical brochures, presentations,
marketing materials, upgrade of our website, and develop a sales team, we will
initiate meeting with potential customers and attend key trade shows.  We
intend to use an integrated plan that includes a robust and informative web
site, target advertising, trade shows and personal contact to establishments
that have a reported history of problems related to Legionella.  The
identification of potential customer will be determined by a comprehensive
analysis of the existing market.  Hydrodynex plans to attend and/or
participate in trade shows and do direct mailings and call on to potential
clients as its marketing strategy.  Relationships with scientists,
organizations, associations, insurance companies, government agencies and media
will help in marketing the product.

Each target customer will receive comprehensive marketing
communications that address the benefits from the purchase and use of the
AO-System®.  The marketing mission will be focused on educating
the potential customer and providing information  that relates to how

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the system is a unique technical solution that will eliminate the
deadly virus of Legionella in hospitals, hotels, military applications, mobile
disaster relief units, water cooling towers, food processing facilities,
retirement homes, spas, schools, industrial plants, public fountains, pools,
water slide parks, cruise ships, carwashes, auto plants using water cooling
machinery, fountains, ice rinks, air-scrubbing plants, health-club showers,
public pools, mines, schools, industrial air-cleaners, prisons, stadiums, homes,
cruise ships, etc.

Hydrodynex will also look to present to building construction
companies such as Ellerbe Becket and McCarthy Builders and invite them to infuse
our systems into their new and old projects.  Builders want their projects
to be problem free and safe to the tenants, so an approach such as this should
prove profitable.

H.   Patents, Trademarks, and
Copyrights



We are substantially
dependent on the ability of Hydrosystemtechnik to obtain and maintain patents
and proprietary rights for our product, and to avoid infringing the proprietary
rights of others. We have interests in two patents issued by the United States
Patent and Trademark Office.  Additional patent applications may be
forthcoming from ongoing research and development.



On September 3, 2007, we
obtained an exclusive license in Canada, the United States and Mexico from
Meinolf Schoeberl and Hydrosystemtechnik to any proprietary technology being
developed by Hydrosystemtechnik involving advanced Anodic Oxidation water
disinfection units in any markets but the dental market.



Hydrosystemtechnik GmbH,
is the owner of two U.S. patents, numbers 5,395,492 granted on March 7, 1995,
and 5,439,576, granted August 8, 1995, both entitled Apparatus for the
Sterilization of Water.  Both patents describe innovative methods of
sterilization of water using anodic oxidation.  Anodic oxidation is a
process of using anodes and cathodes inside a reactor chamber for the purpose of
conducting high electrical current, which generates over-voltage with respect to
oxygen generation, and generates chlorine equivalent oxidants.  The reactor
creates a significant amount of oxidants to sterilize the water, but does so in
a way without adding chlorine.



We have not filed for
any copyright or trademark protection to date.



I.   Employees



Our President and Chief Executive Officer of Hydrodynex, Jerod
Edington, performs employee like services for our company on a part time basis.
 Mr. Edington works approximately 25 hours per week for the benefit of
Hydrodynex and is paid $2,500 per month.  Employee-like services provided
by the other officers and directors of Hydrodynex are compensated to them at the
rate of $50.00 per hour.  These individuals have other employment and
responsibilities outside of Hydrodynex.

Item 1A.  Risk Factors



Investing in our securities involves a high degree of risk. In
addition to other information contained in this registration statement,
prospective purchasers of the securities offered herby should consider carefully
the following factors in evaluating Hydrodynex and its business.

The securities we are offering through this registration statement
are speculative by nature and involve an extremely high degree of risk and
should be purchased only by persons who can afford to lose their entire
investment. We also caution prospective investors that the following risk
factors could cause our actual future operating results to differ materially
from those expressed in any forward looking statements, oral, written, made by
or on behalf of us. In assessing these risks, we suggest that you also refer to
other information contained in this registration statement, including our
financial statements and related notes.

RISKS
RELATED TO OUR COMPANY AND OUR INDUSTRY

We must
raise additional capital to make required license payments under our license
agreement to our licensor.

Under our original
license agreement with our licensor Hydrosystemtechnik, we were required to make
a non-refundable license payment of 20,000 on June 1, 2008, but pursuant to the
amended license agreement dated August 30, 2008, our licensor agreed to extend
the due date for the second license payment to November 30, 2008.  We do
not currently have sufficient cash resources to make the second license payment
and we will need to raise additional capital by selling equity or incurring debt
in order to make this license payment.  Our licensor could find us in
default under the license agreement and terminate the agreement if we do not
make timely payment by the extended due date.  Under the license agreement
unpaid balances bear interest at a rate of 2% above the prime rate as quoted in
the U.S. edition of the Wall Street Journal.

- 10 -

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If we are unable to meet our milestone
and minimum annual sales obligations under the Marketing, Distribution and
License Agreement we will lose the exclusivity of the license and the licensor
could terminate the license agreement.



Under our license
agreement with our licensor Hydrosystemtechnik we are required to meet a number
of specific milestones by certain dates, which, if we fail to achieve the
required milestones, our license agreement will become non-exclusive, damaging
our competitive situation, or the licensor could decide to terminate the
agreement.  We have currently not met any of our milestone obligations.
 In addition, we are required to meet certain minimum annual sales volumes
based on net purchase value of sales for calendar years beginning in 2010.
 If we are unable to meet those minimum annual sales volumes our license
will become non-exclusive and in addition, our licensor could terminate the
agreement.



If we are unable to obtain approval from
the Environmental Protection Agency to commercially sell the anodic oxidation
water treatment/disinfection systems in the United States by March 3, 2010, our
license can revert to a non-exclusive license and our licensor could terminate
the license agreement.



Under the terms of our
license agreement with our licensor Hydrosystemtechnik we are required to gain
approval from the Environmental Protection Agency by March 3, 2010, thirty
months after the effective date of our license agreement.  The verification
and certification process leading to such approval involves extensive testing
and is an expensive process.  We will have to raise additional capital to
pay for the independent verification and certification process leading to
approval.  We have made contact with staff at NSF, gotten price quotes, and
met with NSF representatives in person.  We are currently awaiting
completion of the test reactor that we have ordered from our licensor so that we
can begin the testing process with NSF.  If we fail to meet the deadline
for approval from the EPA for the AO System water disinfection technology, we
will not be able to commercially sell it in the United States, our license will
become non-exclusive and our licensor could terminate the amended license
agreement.



[FOREIGN EXCHANGE RISK  fees to
licensor, minimum annual sales targets and purchases from Licensor are all in
Euros.  Further weakening of the dollar could significantly increase our
cost of goods, our fees payable under the license agreement as well as the
minimum annual sales targets we are required to meet.



If we are able to secure approval from
the Environmental Protection Agency, we may not be able to establish sufficient
sales and marketing capabilities in the U.S. or enter into agreements with third
parties to sell and market any products due to our lack of experience in these
areas, we may not be able to generate product revenue.



We do not currently have
an organization for the sales, marketing and distribution of our product. In
order to market any products, we must build our sales, marketing, managerial and
other non-technical capabilities or make arrangements with third parties to
perform these services.  In addition, we have no experience in developing,
training or managing a sales force and will incur substantial additional
expenses in doing so. The cost of establishing and maintaining a sales force may
exceed its cost effectiveness.  Furthermore, we will compete with many
companies that currently have extensive and well-funded marketing and sales
operations.  Our marketing and sales efforts may be unable to compete
successfully against these companies.  If we are unable to establish
adequate sales, marketing and distribution capabilities, whether independently
or with third parties, we may not be able to generate product revenue and may
not become profitable.

We are initially dependent on
third-party manufacturers, over whom we have limited control.

The manufacturing process of the AO-Systems®and
any other ancillary replacement components has initially been outsourced to the
Licensor, pursuant to the terms of the existing License Agreement between
Hydrodynex and Hydrosystemtechnik GmbH.  The Licensor is dependant upon
many third party vendors in Germany and other European countries to supply
essential components, which are assembled and tested in the Licensors
manufacturing facility in Germany.  We do not have any manufacturing
facilities and expect to rely upon Hydrosystemtechnik to properly manufacture
our products.  Our dependence upon a third party for the manufacture of our
proposed products may adversely affect our profit margins and our ability to
develop and deliver proposed products on a timely and competitive basis.
 Any delays in manufacturing and distribution will have an adverse impact
on the price of our Companys shares.

We may be subject to product liability
claims.



The sale of the
AO-Systems® may expose us to the risk of significant losses resulting
from product liability.  Although we intend to obtain and maintain product
liability insurance to offset some of this risk, we may be unable to secure such
insurance or it may not cover certain potential claims against us.



We may not be able to
afford to obtain insurance due to rising costs in insurance premiums in recent
years.  If we are able to secure insurance coverage, we may be faced with a
successful claim against us in excess of our product liability coverage that
could result in a material adverse impact on our business.  If insurance
coverage is too expensive or is unavailable to us, we may be forced to
self-insure against



- 11 -

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product-related
claims.  Without insurance coverage, a successful claim against us and any
defense costs incurred in defending ourselves may have a material adverse impact
on our operations.



As a result of our limited operating
history, we may not be able to correctly estimate our future operating expenses,
which could lead to cash shortfalls.



We have only a limited
operating history from which to evaluate our business.  We have not
generated revenue to date. Accordingly, our prospects must be considered in
light of the risks, expenses, and difficulties frequently encountered by
companies in an early stage of development.  We may not be successful in
addressing such risks, and the failure to do so could have a material adverse
effect on our business, operating results and financial condition.



Because of this limited
operating history and because of the emerging nature of the markets in which we
compete, our historical financial data is of limited value in estimating future
operating expenses.  Our budgeted expense levels are based in part on our
expectations concerning future revenues.  However, our ability to generate
revenues depends largely on purchase orders generated from hospitals, hotels, retirement homes, government
buildings, and cooling tower installations.



Moreover, if we generate
orders from hospitals, hotels, retirement homes, government buildings, and
cooling tower installations, the size of any future revenues depends on the
choices and demand of individual consumers, which are difficult to forecast
accurately.  We may be unable to adjust our operations in a timely manner
to compensate for any unexpected shortfall in revenues.  Accordingly, a
significant shortfall in demand for our products could have an immediate and
material adverse effect on our business, results of operations, and financial
condition.



Our operating results
may fluctuate as a result of a number of factors, many of which are outside of
our control.  For these reasons, comparing our operating results on a
period-to-period basis may not be meaningful, and you should not rely on our
past results as any indication of our future performance.  Our quarterly
and annual expenses are likely to increase substantially over the next several
years, and revenues from the sale of the AO-Systems® may not meet our
expectations. Our operating results in future quarters may fall below
expectations.  Any of these events could adversely impact our business
prospects and make it more difficult to raise additional equity capital at an
acceptable price per share.  Each of the risk factors listed in this Risk
Factors section may affect our operating results.



Our business, the
technology and the water treatment industry are constantly changing and evolving
over time.  Furthermore, we compete in an unpredictable industry and
regulatory environment.  Our ability to succeed depends on our ability to
receive approval from the Environmental Protection Agency and being able to
successfully compete in the water treatment market.  As such, our actual
operating results may differ substantially from our projections.

Hydrodynex has never earned a profit and is currently
operating under a net loss. There is no guarantee that we will ever earn a
profit.

From our inception on May 12, 2006 to the accounting period ended
on June 30, 2008, Hydrodynex has not generated any revenue.  Rather,
Hydrodynex operates under a net loss, and has an accumulated deficit of $72,123
as of the period ended June 30, 2008.  Hydrodynex does not currently have
any revenue producing operations. Hydrodynex is not currently operating
profitably, and it should be anticipated that it will operate at a loss at least
until such time when the production stage is achieved, if production is, in
fact, ever achieved.

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

We will need to obtain additional financing in order to complete
our business plan.  We currently do not have any operations and we have no
income.  We are an early stage company and we have not realized any
revenues to date. We do not have sufficient capital to enable us to commence,
implement and complete our business plan and based on our current operating
plan, we do not expect to generate revenue that is sufficient to cover our
expenses for at least the next twelve months.  We will require financing in
order to get regulatory approval and initiate operations described in the
section entitled, "Business of the Issuer. We need to raise a minimum of
$400,000 to implement and complete the first phase of our business plan.
 There will be an addition requirement of $2,000,000 to complete the second
phase of our business plan.,   There is no assurance that we will be
successful in raising these funds and in the event were are successful, there is
no assurance that the terms and conditions of these funds will be in the best
interest of our company or our shareholders.  We do not have any
arrangements for financing and we may not be able to find such financing if
required.  We will need to obtain additional financing to operate our
business for the next twelve months, and if we do not, our business will fail.
 We will raise the capital necessary to fund our business through a
Prospectus and private offering of our common stock or units consisting of
common stock and stock purchase warrants.  Obtaining additional financing
would be subject to a number of factors, including investor acceptance of
Companys business strategy, its technology and investor sentiment.
 These

- 12 -

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factors may adversely affect the timing, amount, terms, or
conditions of any financing that we may obtain or make any additional financing
unavailable to us.

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

Our company anticipates that the funds that were raised from
private placements by way of subscription agreements and funds advanced from
directors will not be sufficient to satisfy our cash requirements for the next
twelve month period.  Also, there is no assurance that actual cash
requirements will not exceed our estimates.  In particular, additional
capital may be required in the event that:

| |    |                                                                                                      
| | -- | -----------------------------------------------------------------------------------------------------
| | 1. | we incur unexpected costs in our independent
testing programs;                                       
| | 2. | we are unable to create a substantial market for
our products;                                       
| | 3. | we incur any significant unanticipated expenses;
and                                                 
| | 4. | we find that we need to spend additional funds to
educated the market and promote the new
technology.

The occurrence of any of the
aforementioned events could prevent us from pursuing our business plan,
expanding our business operations and ultimately achieving a profitable level of
operations.



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



If we are unable to obtain financing in the amounts and on terms
deemed acceptable to us, we may not be able to expand or continue sales of the
AO-Systems® for the treatment of water and so may be forced to
scale back or cease operations or discontinue business and you could lose your
entire investment

Our company was recently formed, and we have not proven that we
can generate a profit. If we fail to generate income and achieve profitability
investment in our securities may be worthless.

We have no operating history and have not proved we can operate
successfully.  We face all of the risks inherent in a new business.
 If we fail, your investment in our common stock will become worthless.
 From inception of May 12, 2006 to the audited period ended on December 31,
2007 and the audited period through June 30, 2008, we incurred a net loss of
$(17,588) and $(72,123) respectively and did not earn any revenue. Hydrodynex
does not currently have any revenue producing operations.

Arbitrary
offering price means we have no information to support the price of our
shares.

The shares being registered hereby will be sold at the prevailing
market price if and when the shares are traded in the open market.  Since
the selling price bears no relationship to assets, book value, net worth,
earnings, actual results of operations or any other established investment
criteria, the price set forth in the cover page of this prospectus should not,
therefore, be considered an indication of actual value of our securities.

We rely
on our senior management and will be harmed if any or all of them leave.

Our success is dependent on the efforts, experience and
relationships of Jerod Edington.  If this individual were unable to
continue in his role, the business would be adversely affected as to its
business prospects and earnings potential.  We do not currently carry any
insurance to compensate for any such loss.  Mr. Edingtons decisions and
choices may not take into account standard engineering or managerial

- 13 -

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approaches marketing companies in the water treatment industry
commonly use.  Consequently, our operations, earnings, and ultimate
financial success could suffer irreparable harm due to management's lack of
experience in this industry.

We may find it very difficult or impossible for Hydrodynex to
find suitable employees in the future or to find third party consultants to
assist Hydrodynex.

Hydrodynex currently
relies heavily upon the services and expertise of Jerod Edington and Blaine
Davidson.  In order to implement the business plan of Hydrodynex,
management recognizes that additional management will be required at some point
in the future.  However, on a near term basis, Hydrodynex will outsource
most services and utilize independent consultants as much as possible.  The
group of three directors, which includes the two officers, are the only
personnel at the outset of operations.  The three officers can manage the
office functions until Hydrodynex can generate enough revenues to hire
additional employees.



Because a small
number of existing shareholders own a large percentage of our voting stock, you
will have minimal influence over shareholder decisions.

Certain individuals have significant stock ownership in our
Company and will retain significant control of Hydrodynex in the future.
 Immediately following this offering, we anticipate that our founders,
executive officers, directors, employees and early-stage investors will together
own 100% of the voting power of our outstanding capital stock.  As a result
of such ownership concentration, this group will have significant influence over
the management and affairs of our business.  They will also exert
considerable, ongoing influence over matters subject to stockholder approval,
including the election of directors and significant corporate transactions, such
as a merger, sale of assets or other business combination or sale of our
business.  This concentration of ownership may have the effect of delaying,
deferring, or preventing a change in control, impeding a merger, consolidation,
takeover or other business combination involving us, or discouraging a potential
acquirer from making a tender offer or otherwise attempting to obtain control of
our business, even if such a transaction would benefit other shareholders.

There
are many competitors in our market and we may not be able to effectively compete
against them.

The business of marketing water disinfection systems is highly
competitive. This market segment includes numerous technologies, manufacturers,
distributors, marketers and retailers that actively compete for the business of
commercial water treatment in North America.  In addition, the market is
highly sensitive to the introduction of new products and technologies that may
rapidly capture a significant share of the market. As a result, our ability to
remain competitive depends in part upon its successful introduction and end user
acceptance of a new product.

We are a
development stage company, which means our operations may not be
successful.

We were incorporated on May 12, 2006 and although we have certain
assets, we have not executed our business model and are considered to be in the
development stage. Our ability to maintain and achieve profitability is
dependent on the execution of our business plan to generate cash flow to fund
future growth. There can be no assurance that our results of operations or
marketing strategy will prove successful.

RISKS
RELATED TO OUR FINANCIAL CONDITION AND BUSINESS MODEL

We have
no public trading market for our securities.

Although we intend to complete a public registration of our
securities, there is currently no public market for our securities. We have
never been nor are we currently subject to the periodic filing and reporting
requirements of the Securities Exchange Act of 1934. Accordingly, prospective
investors are cautioned that there is no available public information about our
financial status and operations.

If we
are unable to obtain additional capital, we may have to curtail or cease
operations.

We expect that we will need to raise funds by the end of the third
quarter of 2008 in order to meet our working capital requirements.  At
present, we believe that we can continue operations for a period of
approximately four months based upon our present monthly use of funds that were
raised from shareholders in a private placement or funds that could be provided
as loans by the officers, directors and shareholders.  We may not be able
to obtain additional financing on terms favorable to us, if at all. If adequate
funds are not available to us, we may have to curtail or cease operations after
the end of the third quarter, which would materially harm our business and
financial results. To the extent we raise additional funds through further
issuances of equity or convertible debt or equity securities, our existing
stockholders could suffer

- 14 -

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significant dilution, and any new equity securities we issue could
have rights, preferences and privileges superior to those of holders of our
common stock. Furthermore, any debt financing secured by us in the future could
involve restrictive covenants relating to our capital raising activities and
other financial and operational matters, which may make it more difficult for us
to obtain additional capital and to pursue business opportunities.

We have
no operating history that makes an evaluation of our business difficult.

Our lack of operating history makes it difficult to evaluate our
current business and prospects or to accurately predict our future revenues or
results of operations. Our business model, and accordingly our revenue and
income potential, is new and unproven. In addition, early-stage companies are
subject to risks and difficulties frequently encountered in new and rapidly
evolving markets.

We have
a new and unproven business model, a new technology and may not generate
sufficient revenues for our business to survive or be successful.

Our business model is based on the commercial viability of a new
patented technology and products not sold previously in North America.  In
order for our business to be successful, we must not only develop viable
marketing channels that directly generate revenues, but also provide educational
content to end users to create demand for our products and technology.  Our
business model assumes that end users in many markets will see the value of our
technology and products and we will be able to generate revenues through sales
to end users.  Each of these assumptions is unproven, and if any of the
assumptions are incorrect, we may be unable to generate sufficient revenues to
sustain our business or to obtain profitability.  At the present time, we
have no contracts, arrangements or agreements with either end users or
distributors.

Because of our limited resources and the speculative nature of
our business, there is substantial doubt as to our ability to operate as a going
concern.

The report of our independent auditors, on our audited financial
statements for the audited period ended June 30, 2008 indicates that there are a
number of factors that raise substantial doubt about our ability to continue as
a going concern.  Our continued operations are dependent on our ability to
obtain financing and upon our ability to achieve future profitable operations
from the development of our business model.  If we are not able to continue
as a going concern, it is likely investors will lose their investment.

We have
no operating history and expect to incur losses in the future.

We have no operating history and have generated no revenues. We
have not achieved profitability and expect to incur losses for the foreseeable
future. We expect those losses to increase as we continue to incur expenses to
develop our products and services. We believe that our business depends on our
ability to significantly increase revenues and to limit our operating expenses.
If our revenues fail to grow at anticipated rates or our operating expenses
increase without a commensurate increase in our revenues, or we fail to adjust
operating expense levels appropriately, we may never be able to achieve
profitability.

Our future operating results are likely to be volatile
and may cause our equity value to fluctuate.

Our future revenues and operating results, if any, are likely to
vary from quarter to quarter due to a number of factors, many of which are
outside of our control. Factors, which may cause our revenues and operating
results to fluctuate, include the following:

| |   |                                                                                                       | 
| | - | ----------------------------------------------------------------------------------------------------- | 
| |  | the
willingness of  distributors to market our products;                                              | 
| |  | market
acceptance of our technology and AO Systems;                                                   | 
| |  | the
timing and uncertainty of sales cycles;                                                           | 
| |  | new
products and services offered by current or future competitors; and                               | 
| |  | general
economic conditions, as well as economic conditions specific to the water
treatment industry. | 

We
are subject to all of the risks and uncertainties associated with the water
treatment industry, all of which may have an adverse impact on our business and
results of operations.

- 15 -

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Our future operating results will depend upon numerous factors
beyond our control, including the acceptability of our products and technology
by end users, national, regional and local economic conditions, changes in
demographics, the availability of alternative forms of water treatment, critical
reviews and existing competition, which change rapidly and cannot be predicted.
 If we are unable to successfully anticipate and respond to changes in
attitude by end users, our business and operating results will be adversely
affected.

Current
or future government regulations may add to our operating costs.

We may face unanticipated operating costs because of potential
changes in governmental regulations related to water treatment standards.
  We have no assurance that the independent testing to be undertaken
by NSF International will result in favorable data that will be accepted by the
Environmental Protection Agency.  Laws and regulations may be introduced
and court decisions reached that affect the water treatment standards or other
characteristics of water deemed to be disinfected.  Complying with new
regulations could increase our operating costs. Furthermore, we may be subject
to the laws of various jurisdictions where we actually conduct business. Our
failure to qualify to do business in a jurisdiction that requires us to do so
could subject us to fines or penalties and could have a material adverse impact
on our business and operations.

If we
fail to attract end users, distributors or professional sales personnel for our
products may have an adverse impact on our business.

Our success depends upon our ability to attract capable
distributors and as well as in-house sales representatives to enter into
arrangements with us to sell our products to end users.  If we do not
continually augment and improve our marketing channels, we will not be able to
sustain a sales level that will support our operations without the infusion of
additional capital.

If
we do not effectively educate end users on the benefits of the
AO-Systems®, we will not have sufficient demand for our
products.

Our business plan is predicated on our company attracting active
and loyal support from end users interested in the disinfection of water,
principally hospitals.  Our target market will be end users that have a
specific need in having the safest, purest and healthiest water possible for
consumption or utilization in their commercial business. There can be no
assurance that there will be significant support from our efforts to educate end
users on this new technology of disinfection of water.  Failure to achieve
recognition and acceptance of this new technology by hospital and other
commercial end-users in a timely fashion will have a material adverse effect on
the sales cycle and may require us to incur unexpected incremental marketing
expenses to educate and inform the market place.

Delivery
of our products may be interrupted due to international political situations,
natural disasters or other causes.

Our products are manufactured in Europe and delivery can be a
problem.  We are subject to the risk that delivery of our products may be
interrupted as a result of natural disasters such as earthquakes and fires or
capacity constraints with our vendors or suppliers hardware.  Any such
interruptions may lead to a loss of customers or distributors and, accordingly,
may adversely affect our business and results of operations.

RISKS
RELATED TO THIS OFFERING AND OUR STOCK

There is no market for our Common Stock and the stock is not
currently listed on any exchange, which limits our shareholders ability to
resell their shares or pledge them as collateral.

There is currently no public market for our shares, and we cannot
assure you that a market for our stock will develop.  Consequently,
investors may not be able to use their shares for collateral or loans and may
not be able to liquidate at a suitable price in the event of an emergency.
 In addition, investors may not be able to resell their shares at or above
the price they paid for them or may not be able to sell their shares at all.
 Our company is not currently listed on any stock exchange.  However,
if Hydrodynex should become listed, of which there is no assurance, we will be
subject to the "penny stock" rules, the level of trading activity in our
stock may be reduced which may make it difficult for investors to sell their
shares. Our common stock is penny stock as defined by the Exchange Act.
 Broker-dealer practices in connection with transactions in "penny
stocks" are regulated by certain penny stock rules adopted by the Securities
and Exchange Commission. Penny stocks, like shares of our common stock,
generally are equity securities with a price of less than $5.00, other than
securities registered on certain national securities exchanges or quoted on
NASDAQ.  The penny stock rules require a broker-dealer, prior to a
transaction in a penny stock not otherwise exempt from the rules, to deliver a
standardized risk disclosure document that provides information about penny
stocks and the nature and level of risks in the penny stock market.  The
broker-dealer also must provide the customer with current bid and offer
quotations for the penny stock, the compensation of the broker-dealer and its
salesperson in the transaction, and, if the broker-dealer is the sole market
maker,

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the broker-dealer must disclose this fact and the broker-dealer's
presumed control over the market, and monthly account statements showing the
market value of each penny stock held in the customer's account. In addition,
broker-dealers who sell these securities to persons other than established
customers and "accredited investors" must make a special written
determination that the penny stock is a suitable investment for the purchaser
and receive the purchaser's written agreement to the transaction.  The
reluctance of institutional investors to trade penny stocks and the additional
burdens imposed upon stockbrokers by these requirements discourages stockbrokers
from effecting transactions in our common stock, which may limit the market
liquidity and the ability of investors to trade our common stock.  The lack
of volume and transactions, if and when it becomes listed on an exchange, in our
stock may reduce the overall market value of the common stock.

Electing
reporting status under the 34 Act will result in a delay in the registration of
our common stock sold in the Offering.

There are no assurances
that the SEC will deem a registration statement effective or that any subsequent
planned registration statements to register for resale common stock or common
stock underlying warrants that maybe issued in the future, will be approved.

The Offering Price and other
terms of this Offering have been arbitrarily determined.



The Offering Price was
not established in a competitive market.  Rather, the Offering Price was
arbitrarily determined by us.  The Offering Price bears no relationship to
our assets, book value, historical results of operations, or any other
established criterion of value, and may not be indicative of the fair value of
the common stock.  The trading price, if any, of the common stock that will
prevail in any market that may develop in the future may be higher or lower than
the price you pay in this Offering.

The Offering Price may not be
indicative of future market prices.



The public market may not agree with or accept our determination
of the Offering Price, in which case investors may not be able to sell their
Shares at or above the Offering Price, thereby resulting in losses on sale.
 The market price of the common stock will likely fluctuate significantly
in response to factors, some of which are beyond our control, such as: the
announcement of new products or product enhancements by us or our competitors;
developments concerning intellectual property rights and regulatory approvals;
quarterly variations in results of operations; changes in earnings estimates or
recommendations by securities analysts; developments in our industry; and
general market conditions and other factors, including factors unrelated to our
own operating performance.

Further, the stock
market in general, and securities of small-cap companies in particular, has
recently experienced extreme price and volume fluctuations.  Continued
market fluctuations could result in extreme volatility in the price of our
common stock, which could cause a decline in the value of our common stock.
 You should also be aware that price volatility might be worse if the
trading volume of our common shares is low.

There is not now, and there
may not ever be, an active market for our common stock.

There currently is
no market for our common stock.  Further, although the common stock of
Hydrodynex may become quoted on the OTC Bulletin Board, trading of its common
stock may be extremely sporadic.  For example, several days may pass before
any shares are traded.  There can be no assurance that following the
listing on an exchange,  a more active market for such common stock would
develop.  Accordingly, investors must therefore bear the economic risk of
an investment in the Shares for an indefinite period of time.



There are restrictions on the transferability of the
securities comprising this Offering.



The securities being
offered have not been, nor will they be, registered pursuant to the Securities
Act except pursuant to the registration rights granted pursuant to the terms of
this Offering.  If we desire, we may permit the transfer of the securities
out of a purchasers name only when its request for transfer is accompanied by
an opinion of counsel reasonably satisfactory to us that neither the sale nor
the proposed transfer results in a violation of the Securities Act or any
applicable state securities or Blue Sky laws, and a written agreement by any
subsequent transferee that such party agrees to be bound by the terms of the
Subscription Agreement.



Following the approval of our
Registration Statement,  we will become subject to the reporting
requirements of federal securities laws, which can be expensive.

As a result of filing a registration statement to become a
reporting public company, Hydrodynex will be subject to the information and
reporting requirements of the Securities Exchange Act of 1934 and other federal
securities laws, including compliance with the Sarbanes-Oxley Act.  The
costs of preparing and filing annual and quarterly reports, proxy statements and
other information with the SEC and furnishing audited reports to stockholders
would cause our expenses to be higher than they would be if we remained a
privately-held Company.  In addition, we will incur substantial expenses in
connection with the preparation of the Registration Statement and related
documents with respect to the registration of the shares of common stock and the
reporting that is required once Hydrodynex becomes a reporting company.

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Compliance
with the Sarbanes-Oxley Act and SEC rules concerning internal controls may be
time consuming, difficult, and costly.



Hydrodynex has never operated as a publicly-traded company.
 It may be time consuming, difficult, and costly for us to develop and
implement the internal controls and reporting procedures required by the
Sarbanes-Oxley Act.  We may need to hire additional staff in order to
develop and implement appropriate internal controls and reporting procedures.
 If we are unable to comply with the internal controls requirements of the
Sarbanes-Oxley Act, we may not be able to obtain the independent accountant
certifications that the Sarbanes-Oxley Act requires publicly­-traded
companies to obtain.

Upon the
effective time of the Registration Statement, there will be a significant number
of shares of common stock eligible for sale, which could depress the market
price of such stock, assuming the Stock of Hydrodynex becomes listed on an
exchange, of which there is no assurance.

Following the effective date of the Registration Statement, a
large number of shares of common stock would become available for sale in the
public market, which could harm the market price of the stock.  Given the
relatively liquid market, it is likely that the sale of a significant amount of
our stock would have a substantial negative impact on the market price of our
stock due to supply and demand economic principles.  Further, shares may be
offered from time to time in the open market pursuant to Rule 144, and these
sales may have a depressive effect on the market for the common stock.  In
general, a person who has held restricted shares for a period of one year may,
upon filing with the SEC a notification on Form 144, sell into the market common
stock in an amount equal to the greater of 1% of the outstanding shares.

We cannot
assure you that, even following the approval of the registration statement by
the SEC and our election to be a reporting company under the 33 Act, the common
stock will become listed on the American Stock Exchange, NASDAQ, OTC-BB or any
other securities exchange.

Following the approval
of the registration statement and as soon as practical, we plan to apply for
listing our common stock on a recognized Stock Exchange.  However, we
cannot assure you that Hydrodynex will be able to meet the initial listing
standards of any stock exchange, or that it will be able to maintain a listing
of the common stock on any other stock exchange.  After the Registration
Statement is approved, we expect that the common stock would be eligible to
trade on the OTC Bulletin Board, another over-the-counter quotation system, or
on the pink sheets, where an investor may find it difficult to dispose of
shares or obtain accurate quotations as to the market value of the common stock.
 In addition, we would be subject to an SEC rule that, if we failed to meet
the criteria set forth in such rule, imposes various requirements on
broker-dealers who sell securities governed by the rule to persons other than
established customers and accredited investors.  Consequently, such rule
may deter broker-dealers from recommending or selling the common stock, which
may further affect its liquidity.



If you purchase shares you will
experience immediate and substantial dilution.



If you purchase shares,
you will incur immediate and substantial dilution in pro forma net tangible book
value.  If Hydrodynex sell additional shares of common stock or issues
warrants in the future and these holders of outstanding options and warrants
exercise those options and warrants, you will incur further dilution.  In
the event we obtain any additional funding, such financings are likely to have a
dilutive effect on the holders of our securities. In addition, we have adopted
an employee stock option plan under which officers, directors, consultants and
employees will be eligible to receive stock options exercisable for our
securities at exercise prices that may be lower than the Offering Price.
 Such stock option grants, if any, may dilute the value of the
securities.



If the selling shareholders all elect to
sell their shares of our common stock at the same time, the market price of our
shares may decrease.

It is possible that the selling shareholders will offer all of the
shares for sale. Further, because it is possible that a significant number of
shares could be sold at the same time, the sales, or the possibility thereof,
may have a depressive effect on the future market price of our common stock.

If our stock trades at a relatively small volume, shareholders
may not be able to sell their shares without depressing the market price of the
shares.

If a market for our common stock is established, it may be
possible that a relatively small volume of shares will trade on a daily basis. A
small volume is indicative of an illiquid market. In the event there is a
relatively small volume of shares being traded on a daily basis, shareholders
may be unable to sell their shares without causing a depressive effect on the
price of our common stock.

Our stock is a penny stock.  Trading of our stock may be
restricted by the SEC's penny stock regulations and the NASDs sales practice
requirements, which may limit a stockholder's ability to buy and sell our
stock.

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Hydrodynex common shares may be deemed to be penny stock as
that term is defined in Regulation Section 240.3a51-1 of the Securities and
Exchange Commission (the SEC).  Penny stocks are stocks: (a) with a price
of less than U.S. $5.00 per share; (b) that are not traded on a recognized
national exchange; (c) whose prices are not quoted on the NASDAQ automated
quotation system (NASDAQ - where listed stocks must still meet requirement (a)
above); or (d) in issuers with net tangible assets of less than U.S. $2,000,000
(if the issuer has been in continuous operation for at least three years) or
U.S. $5,000,000 (if in continuous operation for less than three years), or with
average revenues of less than U.S. $6,000,000 for the last three years.

Section 15(g) of the United States Securities Exchange Act of
1934, as amended, and Regulation Section 240.15g(c)2 of the SEC require broker
dealers dealing in penny stocks to provide potential investors with a document
disclosing the risks of penny stocks and to obtain a manually signed and dated
written receipt of the document before effecting any transaction in a penny
stock for the investors account.  Potential investors in Hydrodynex
common shares are urged to obtain and read such disclosure carefully before
purchasing any common shares that are deemed to be penny stock.

Moreover, Regulation Section 240.15g-9 of the SEC requires
broker dealers in penny stocks to approve the account of any investor for
transactions in such stocks before selling any penny stock to that investor.
 This procedure requires the broker dealer to: (a) obtain from the investor
information concerning his or her financial situation, investment experience and
investment objectives; (b) reasonably determine, based on that information, that
transactions in penny stocks are suitable for the investor and that the investor
has sufficient knowledge and experience as to be reasonably capable of
evaluating the risks of penny stock transactions; (c) provide the investor with
a written statement setting forth the basis on which the broker dealer made the
determination in (ii) above; and (d) receive a signed and dated copy of such
statement from the investor confirming that it accurately reflects the
investors financial situation, investment experience and investment objectives.
Compliance with these requirements may make it more difficult for investors in
Hydrodynex common shares to resell their common shares to third parties or to
otherwise dispose of them.  Stockholders should be aware that, according to
Securities and Exchange Commission Release No. 34-29093, dated April 17, 1991,
the market for penny stocks has suffered in recent years from patterns of fraud
and abuse. Such patterns include:

(i)

control of the market
for the security by one or a few broker-dealers that are often related to the
promoter or issuer



(ii)

manipulation of prices
through prearranged matching of purchases and sales and false and misleading
press releases



(iii)

boiler room practices
involving high-pressure sales tactics and unrealistic price projections by
inexperienced sales persons



(iv)

excessive and
undisclosed bid-ask differential and markups by selling broker-dealers



(v)

the wholesale dumping
of the same securities by promoters and broker-dealers after prices have been
manipulated to a desired level, along with the resulting inevitable collapse of
those prices and with consequent investor losses



Our management is aware of the abuses that have occurred
historically in the penny stock market. Although we do not expect to be in a
position to dictate the behavior of the market or of broker-dealers who
participate in the market, management will strive within the confines of
practical limitations to prevent the described patterns from being established
with respect to our securities.

RISKS RELATED TO OUR INTELLECTUAL
PROPERTY

Our intellectual property rights are
valuable, and our inability to protect them could reduce the value of our
products, services and brand.



We do not own any
patents or intellectual property.  We have an exclusive license agreement
with Hydrosystemtechnik GmbH, which initially grants us the right to market the
AO-Systems® in North America and in the future, we have an option to
manufacture and assemble the AO-Systems® here in the US or by
utilizing a subcontract manufacturer in other countries.  The patents
issued in the U.S. were granted in 1995.  U.S. trademarks, trade secrets,
copyrights and other intellectual property rights are owned by the licensor,
which we have access to by virtue of the terms and conditions of the exclusive
License Agreement.  This intellectual Property is currently outside of our
direct control and could jeopardize our ability to implement our business plan.
 In addition, the efforts made by Hydrosystemtechnik, GmbH, to protect the
intellectual property rights may not be sufficient or effective.  Any
significant impairment of the intellectual property rights could harm our
business indirectly or our ability to compete.  Protecting the intellectual
property rights is costly and time consuming, and the unauthorized use of the
intellectual property could cause these costs to rise significantly and
materially affect our operating results.  We are required to pay 50% of the
direct costs related to preparing and prosecution of patents and patent
applications, including legal fees, filing fees maintenance fees and transaction
costs within the licensed territory, so long as our license agreement with
Hydrosystemtechnik GmbH remains in effect.

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While the goal of
Hydrosystemtechnik GmbH is to obtain patent protection for their innovations,
they may not be patentable or they may choose not to protect certain innovations
that later turn out to be important for our business.  Even if
Hydrosystemtechnik GmbH does obtain protection for its innovations, the scope of
protection gained may be insufficient or a patent issued may be deemed invalid
or unenforceable, as the issuance of a patent is not conclusive as to its
validity or as to the enforceable scope of the claims of the patent.  The
patenting process, enforcement of issued patents, and defense against claims of
infringement are inherently costly and risky.   Hydrosystemtechnik
GmbH may not have the financial resources to defend its patents, thereby
reducing our competitive position and our business prospects.  Specific
risks associated with the patent process include the following:



·

The United States Patent and Trademark Office  may not grant
patents of meaningful scope based on the applications already filed and those
that may be filed in the future.  If the current patents do not adequately
protect the technology and the industrial applications, then we will not be able
to prevent imitation and the product may not be commercially viable.

·

Changes in or different interpretations of patent laws in the
United States may permit others to use our discoveries or to develop and
commercialize our technology and products without providing any compensation to
us.

·

Although we try to avoid infringement, there is the risk that we
will use a patented technology owned by another person or entity and/or be sued
for infringement.  For example, U.S. patent applications are confidential
while pending in the Patent and Trademark Office, and patent offices in foreign
countries often publish patent applications for the first time six months or
more after filing.  Further, we may not be aware of published or granted
conflicting patent rights.  Any conflicts resulting from patent
applications and patents of others could significantly reduce the coverage of
the patents and limit our ability to obtain meaningful patent protection.
 In addition, defending or indemnifying a third party against a claim of
infringement can involve lengthy and costly legal actions, and there can be no
guarantee of a successful outcome.

Item 2.
  Properties.



Our executive office is currently located at 230 Bethany Rd., Ste.
#128, Burbank, CA 91504. The 150 square foot office is provided by Jerod
Edington, the President of Hydrodynex at no cost to Hydrodynex.  We believe
our current premises are adequate for our current operations and we do not
anticipate that we will require any additional premises until such time as
Hydrodynex raises additional capital.

Item 3.   Legal
Proceedings.



We are not involved in
any legal proceedings, and there are no material pending legal proceedings of
which we are aware.



Item 4.   Submission of Matters to a
Vote of Security Holders



Hydrodynex did not submit any matters
to a vote of its stockholders in our fiscal year ending June 30, 2008.



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PART II



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



Our common stock is not
trading and has never traded on any stock exchanges.



The transfer agent of
Hydrodynex is Nevada Agency and Trust Company, 50 West Liberty Street, Suite
880, Reno, Nevada 89501.



As of June 30, 2008,
there were 41 holders of record of Hydrodynex common stock, of which 1,500,000
were issued and outstanding.



As of June 30, 2008,
there were no outstanding stock options or warrants.



We have never paid cash
dividends on our common stock. We presently intend to retain future earnings, if
any, to finance the expansion of our business and we do not anticipate that any
cash dividends will be paid in the foreseeable future. Our future dividend
policy will depend on our earnings, capital requirements, expansion plans,
financial condition and other relevant factors.



Item 6.   Selected Financial
Data



Not
applicable.



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



THE FOLLOWING PLAN OF OPERATIONS SECTION
SHOULD BE READ IN CONJUNCTION WITH OUR FINANCIAL STATEMENTS AND THE NOTES
THERETO INCLUDED ON PAGES 31 THROUGH 42 FOLLOWING THE SIGNATURE PAGES OF THIS
ANNUAL REPORT ON FORM 10-K. ALL STATEMENTS IN THIS ANNUAL REPORT RELATED TO
HYDRODYNEX CHANGING FINANCIAL OPERATIONS AND EXPECTED FUTURE OPERATIONAL PLANS
CONSTITUTE FORWARD-LOOKING STATEMENTS. THE ACTUAL RESULTS MAY DIFFER MATERIALLY
FROM THOSE ANTICIPATED OR EXPRESSED IN SUCH STATEMENTS.



A.   General.



Hydrodynex, Inc. was organized under the laws of the state of
Nevada on May 12, 2006 and is doing business as a marketer of the
AO-Systems® water treatment units.  We are structured expressly
as a marketing entity and therefore we do not engage in the design, development
or manufacturing of products.  We intend to operate only in North America
under the terms of our License agreement with Hydrosystemtechnik GmbH.
 Since commencement of operations in 2006, our efforts to date have been
principally devoted to and limited primarily to organization, initial
capitalization, business and product research, producing marketing materials and
a website, securing a marketing agreement, preparing a comprehensive business
and operating plan, evaluating the regulatory requirements to sell water
treatment systems in the U.S., Canada and Mexico, and undertaking a marketing
feasibility study.   Extensive research has been done on competing
technologies and the water contaminants that most adversely affect water systems
at the present time.  Legionella protection is the strongest market
 opportunity identified by Hydrodynex to date.  We will make
Legionella our primary target market because of its wide prevalence and the high
percentage of death resulting from infection.

Under our license
agreement with our licensor Hydrosystemtechnik, we paid a non-refundable license
fee creditable to royalty payments in the amount of 10,000 Euros in 2007.
 We were required, under the original license agreement with our licensor,
to make a non-refundable license payment of 20,000 Euros on June 1, 2008.
 Hydrosystemtechnik agreed in writing to an extension of the due date for
the second license payment from June 1, 2008 to August 31, 2008.  Under the
terms of the amended license agreement dated August 30, 2008, the due date for
the second license payment was extended to November 30, 2008.  We do not
currently have sufficient funds to make this license payment and we will have to
raise additional capital by selling equity or incurring debt in order to make
this license payment.  A third license fee in the amount of 20,000 Euros
will be due upon certification and approval of the AO-Systems®by the
US Environmental Protection Agency for commercial sales in the United States



We are currently organizing our distribution/dealer and direct
marketing programs, which consists of placing our product in commercial
buildings, retirement homes, cooling towers, and military installations. Our
primary focus will be on establishing the defined sales channels and supporting
them with meaningful marketing programs to the extent that funds are available.
 We have not sold any product to date and have generated no revenues from
operations.

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Since
we are a marketing company and not engaged in the manufacture of our products,
we have not been required to invest in assets dedicated to product design and
manufacturing activities.  Instead, we intend to purchase finished products
on an as sold basis from the manufacture based on receipt of an order from an
end user or a distributor/dealer.

We do not intend to conduct any other additional product research
and development nor do we intend to purchase any additional significant
equipment at this time.

Our
plan of operation for the next 12 months will be the execution of our strategic
business plan.   Hydrodynex intends to operate in three phases as
follows:

Phase 1: Finalization of the Strategic Marketing Plan,
complete the current audit of Hydrodynex, initial start-up capital realization
through asecond private stock offering, undertaking independent
testing, securing EPA and State certification, making application to have
Hydrodynex  be publicly traded on the OTC-BB  and hiring/training
sales and technical personnel.

Phase 2: Initiation of marketing and sales activities in
selected markets in North America (U.S., Canada, and Mexico).  Full scale
commercialization of the AO-System®, including industrialization and
after-sale service agreements, for the markets covered by Hydrodynex.  As
part of its effort to commercialize the AO-System®, Hydrodynex plans
to offer mobile systems which may use a film pouch packaging system.

Phase 3:  Set-up manufacturing in the U.S. when it
becomes a viable, profit-increasing option.

We need to raise a minimum of $400,000 to complete the first phase
of our plan of operations and $2,000,000 to complete the second phase, for a
total of $2,400,000 to implement both phases of our business plan.  In
August 2008, we raised $12,000 and issued a convertible promissory note in that
amount and 12,000 three year warrants exercisable at $1 per share to three
investors as part of a $50,000 bridge loan.  The convertible promissory
note earns interest at a rate of 8% per annum and matures one year from the
issue date.  It converts automatically into common shares at $0.50 per
share upon the closing of an equity financing of at least $400,000 (including
funds received under the bridge loan) prior to the maturity date.  If such
a financing does not close prior to the maturity date of the convertible
promissory note, the holders may convert their notes into common stock at $0.25
per share on the maturity date.  We anticipate completing the bridge loan
financing in the fourth quarter of 2008.

Subject to raising additional capital, our projected monthly rate
of expenditure is estimated at $6,000 for General and Administrative costs.
 We anticipate that supporting our operations and implementing Phase I of
our business plan for the next 12 months will require a minimum of $400,000.
 This includes approximately $30,000 for accounting, legal and auditing
fees.  The balance of the funds would be utilized for independent testing,
purchase of equipment for testing, marketing materials, advertising, insurance,
employee training, travel, office lease, licenses, shipping and import costs,
employee salary, and other budget costs.

B.
 Results of Operations

Since Hydrodynex was formed on May 12, 2006, it has not earned any
revenues and has incurred a net loss since its inception of $72,123 through June
30, 2008.

For the twelve months ended June 30, 2008, our total expenses were
$70,290 as compared to $1,296 for the twelve month period ending June 30, 2007.
 The increase in expenses was due to an increase in travel expenses,
professional (legal and accounting) fees and general and administrative
fees.

C.   Liquidity and
Capital Resources.



We are currently financing our operations from the proceeds from
sales of common stock offered pursuant to our private placement, which was
closed on September 30, 2007.  As of June 30, 2008, we had cash in the
amount of $518.  We will need to raise additional capital or generate
revenue by the third quarter of 2008 or curtail our operations.  As
mentioned above, in July and August 2008, we raised $12,000 and issued a
convertible promissory note in that amount and 12,000 three year warrants
exercisable at $1 per share to three investors as part of a $50,000 bridge loan.
 We intend to complete the $50,000 bridge loan and sell additional shares
of common stock or units consisting of common stock and stock purchase warrants
to secure additional capital to fund Phase I of our strategic plan.  The
amount we would like to raise is $750,000.  We raised a total of $100,000
pursuant to Rule 504 of Regulation D of the Securities Act of 1933 in December
2007.

- 22 -

---

As of June 30th, 2008, we had $518 in cash and cash equivalents.
We do not have any available lines of credit. Since inception we have financed
our operations from private placements of equity securities and loans from
shareholders.



Net cash used in
operating activities during the fiscal year ended June 30, 2008 was $98,210
resulting in a net loss of $70,290.



Net cash from financing
activities for the fiscal year ended June 30, 2008 was $100,000 from sale of
common stock at $.10 per share. This funding came from 40 investors in an
offering that ended on September 30, 2007.



We plan to finance our
needs principally from the following:

| |   |                                                                                                  
| | - | -------------------------------------------------------------------------------------------------
| |  | Issuance of additional
convertible promissory notes and warrants as part of a $50,000 bridge
loan
| |  | A private placement stock
offering for shares in the company.                                    



We do not have
sufficient capital to carry on operations past September 2008, but we plan to
complete our $50,000 bridge loan and raise additional capital in a private stock
offering to secure funds needed to finance our plan of operation for at least
the next twelve months. However, this is a forward-looking statement, and there
may be changes that could consume available resources before such time. Our long
term capital requirements and the adequacy of our available funds will depend on
many factors, including the eventual reporting company costs, public relations
fees, technology verification costs, among others.



We are pursuing
potential equity financing, sub-licensing and other collaborative arrangements
that may generate additional capital for us.  We cannot assure you that we
will generate sufficient additional capital or revenues, if any, to fund our
operations beyond September  2008, that any future equity financings will
be successful, or that other potential financings through bank borrowings, debt
or equity offerings, or otherwise, will be available on acceptable terms or at
all.



D.   Critical
Accounting Policies and Estimates.



This discussion and
analysis of our financial condition and results of operations are based on our
financial statements that have been prepared under accounting principles
generally accepted in the United States of America. The preparation of financial
statements in conformity with accounting principles generally accepted in the
United States of America requires our management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenue and expenses during the reporting
period. Actual results could materially differ from those estimates. We have
disclosed all significant accounting policies in Note 2 to the financial
statements included in this Form 10-K.  Our critical accounting policies
are:



Revenue
Recognition : Royalties will be recognized as revenue when the
amounts are contractually earned, fixed and determinable, and there is
substantial probability of collection.



Estimates. The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
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. Actual results could differ from those
estimates.



Intangible
Assets. Hydrodynex intangible asset is composed of a license from
Hydrosystemtechnik GmbH.

Item 7A.  Quantitative and Qualitative
Disclosures About Market Risk



Not applicable.



Item 8.   Financial Statements and
Supplementary Data



The Audited Financial Statements for
this Form 10-K appear on pages 31 through 42 following the signature pages
below.



Item 9.   Changes In and Disagreements With
Accountants on Accounting and Financial Disclosure.

| |      
| | -----
| | None.



- 23 -

---

ITEM
9A  Controls and Procedures



EVALUATION
OF DISCLOSURE CONTROLS AND PROCEDURES

In
connection with the preparation of this annual report on Form 10-K, an
evaluation was carried out by the Companys management, with the participation
of the Chief Executive Officer and the Chief Financial Officer, of the
effectiveness of the Companys disclosure controls and procedures (as defined in
Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934
(Exchange Act)) as of June 30, 2008.  Disclosure controls and procedures
are designed to ensure that information required to be disclosed in reports
filed or submitted under the Exchange Act is recorded, processed, summarized,
and reported within the time periods specified in the SEC rules and forms and
that such information is accumulated and communicated to management, including
the Chief Executive Officer and the Chief Financial Officer, to allow timely
decisions regarding required disclosures.

Based
on that evaluation, the Companys management concluded, as of the end of the
period covered by this report, that the Companys disclosure controls and
procedures were effective in recording, processing, summarizing, and reporting
information required to be disclosed, within the time periods specified in the
Securities and Exchange Commissions rules and forms.

MANAGEMENTS
REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING

This
annual report does not include a report of managements assessment regarding
internal control over financial reporting or an attestation report of the
Companys registered public accounting firm due to a transition period
established by rules of the Securities and Exchange Commission for newly public
companies.

CHANGES IN
INTERNAL CONTROL OVER FINANCIAL REPORTING

As
of the end of the period covered by this report, there have been no changes in
internal control over financial reporting (as defined in Rule 13a-15(f) of the
Exchange Act) during the quarter ended June 30, 2008, that materially affected,
or are reasonably likely to materially affect, the Companys internal control
over financial reporting.

Item 9B   Other Information

| |      
| | -----
| | None.



- 24 -

---



PART III



Item 10.
  Directors and Executive Officers of the Registrant



A. Directors, Executive Officers, Promoters and
Control Persons



The current executive
officers, directors and significant employees of Hydrodynex are as follows:



|                   |  |     |  |                                     
|------------------ |  | --- |  | ------------------------------------
|Name               |  | Age |  | Position                            
|                   |  |     |  |                                     
|Jerod C. Edington  |  | 30  |  | President & Chief Executive
Officer,
|                   |  |     |  | Director                            
|                   |  |     |  |                                     
|Blaine C. Davidson |  | 30  |  | Chief Financial Officer,
Secretary, 
|                   |  |     |  | Treasurer, Director                 
|                   |  |     |  |                                     
|Peter Schmid       |  | 52  |  | Vice President,
Director            
|                   |  |     |  |                                     



Each director is elected
to hold office for a one year term or until the next annual meeting of
stockholders and until his successor is elected and qualified. The officers of
Hydrodynex serve at the pleasure of Hydrodynex Board of Directors.



The following sets forth
certain biographical information with respect to the directors and executive
officers of Hydrodynex.



Jerod Edington, Founder, President and Director.Mr.
Edington attended the University of Washington in Seattle, Washington.  He
earned a B.S. in Zoology in 2000.  He did radiation cancer and tumor
research at the University of Washington Medical centers Radiation Oncology
Dept. for two years, receiving the coveted Mary Gates Endowment award for
undergraduate research and co-authored a front-cover research report for
Biotechniques magazine.  He has also been working in the TV/Film
Production business for the past 5 years as President of Naked Lumberjack
Productions where he oversaw production of commercials, feature films, music
videos, etc.  He is also a professional actor in the Screen Actors Guild
and American Federation of TV and Radio Artists Unions.

Peter Schmid, Vice President and Director.Mr. Schmid
was trained as a foreign sales businessman and received a marketing diploma from
the Volkshochshule in Munich, Germany, in 1975.  In 1993 he founded
Investment Management Financial Services, located in Aying, Germany, and acts as
President and an investment manager for the company through present day.

Blaine Davidson, Chief Financial Officer, Treasurer, Secretary
and Director.  Mr. Davidson attended the University of Washington in
Seattle, Washington.  He earned a B.A. in English in 2000.  He was
employed by HouseValues, Inc. from October 2001- September 2006-- a real estate
technology and marketing company--where he was Marketing Manager. In October
2006, Mr. Davidson started his own real estate sales business. He also consults
brokerages and trains brokers, setting up systems and processes to help agents
get streamlined with technology.

B. Section 16(a) Beneficial
Ownership Reporting Compliance.



Hydrodynex was not
subject to Section 16(a) during its fiscal year ended June 30, 2008 as it did
not have a class of equity securities registered pursuant to section 12 of the
Exchange Act.



Code of Ethics



As of June 30, 2008, we
had not adopted a code of ethics that applies to our President and CEO
(principal executive officer), or our Chief Financial Officer (principal
accounting officer). As we plan in the future to become a publicly traded
company under SEC rules, we have subsequently dealt with this issue and adopted
a Code of Business Conduct and Ethics for Directors, Officers and Employees and
a Code of Ethics for the Chief Executive Officer and Senior Financial Officers
on August 15, 2008.  Both are exhibits to this Report on Form 10-K.



- 25 -

---

Audit Committee and Audit Committee Financial
Expert



We are not a publicly
traded company under SEC rules and are therefore not required to have an audit
committee comprised of independent directors.  As we are a development
stage company with minimal revenues from operations, few employees, and
relatively simple financial statements, as of June 30, 2008 we had not
constituted any board committees, including an audit committee.  On August
15, 2008, we adopted charters for an Audit Committee, a Compensation Committee,
and a Corporate Governance and Directors Nominating Committee, but will not have
these committees until we have the resources to do so.  We do not have an
audit committee financial expert who is an outside director. As our business
grows and our financial statements become more complicated, we intend to seek an
outside director who can qualify as an audit committee financial expert.



Item 11.
  Executive Compensation.



A.   Summary
Compensation Table



The table below sets
forth the aggregate annual and long-term compensation paid by us during our last
two fiscal years ended June 30, 2007 and June 30, 2008 to our Chief Executive
Officer (the Named Executive Officer). Other than as set forth below, no
executive officers salary and bonus exceeded $100,000 for the fiscal year
2008.



|                                 |  |          |      |                |  |               |  |                      |   |                       |  |                                                |  |                                                      |       |                                |  |               |  |  |   |  |  |   |  |  |       
|-------------------------------- |  | -------- | ---- | -------------- |  | ------------- |  | -------------------- | - | --------------------- |  | ---------------------------------------------- |  | ---------------------------------------------------- | ----- | ------------------------------ |  | ------------- |  |  | - |  |  | - |  |  | ------
|Name and
Principal
Position
(a)  |  | Year
(b) |      | Salary
($)
(c) |  | Bonus
($)
(d) |  | Stock
Awards
($)
(e) |   | Option Awards
($)
(f) |  | Non-Equity
Incentive Plan Compensation ($)
(g) |  | Non-Qualified
Deferred Compensation Earnings ($)
(h) |       | All other
Compensation
($)
(i) |  | Total
($)
(j)
|Jerod Edington
Pres. & CEO, Dir. |  |          | 2008 |                |  | 22,500        |  |                      | 0 |                       |  | 0                                              |  |                                                      | 1,250 |                                |  | 0             |  |  | 0 |  |  | 0 |  |  | 23,750
|                                 |  |          | 2007 |                |  | 0             |  |                      | 0 |                       |  | 0                                              |  |                                                      | 0     |                                |  | 0             |  |  | 0 |  |  | 0 |  |  | 0     



B. Narrative Disclosure to Summary Compensation
Table



Jerod Edington has not entered into formal written employment
agreement with HydroDynex.  Jerod Edington has been employed on an at will
basis with a base salary of $2,500 per month beginning October 2007 but with any
bonus or option compensation at the discretion of the uninterested members of
the board of directors.  Jerod Edington was not paid his entire salary for
June 2008, and such wage shortfalls shall be accrued and paid later.  On
July 31, 2008, Jerod Edington was granted a non-statutory stock option to
purchase 25,000 shares of common stock at $0.25 per share with all of the
options vesting immediately for services performed during the fiscal year ended
June 30, 2008.  Those options were valued at $1,250.

C. Outstanding Equity Awards at Fiscal Year
End



Jerod Edington had not been granted
any equity compensation, including option grants as of June 30, 2008.



D. Compensation of Directors

| |                                                                                                               
| | --------------------------------------------------------------------------------------------------------------
| | No compensation was paid to
directors for their director services during the fiscal year ending June
30, 2008.



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

The following table sets forth, as of September 15, 2008 certain
information with respect to the beneficial ownership of our common stock by each
stockholder known by us to be the beneficial owner of more than 5% of our common
stock and by each of our current directors and executive officers.  The
percentage of shares beneficially owned is based on 1,500,000 shares of common
stock outstanding as of September 15, 2008.  Shares of common stock subject
to stock options and warrants that are currently exercisable or exercisable
within 60 days of April 4, 2008 are deemed to be outstanding for the purpose of
computing the percentage ownership of that person but are not treated as
outstanding for the purpose of computing the percentage ownership of any other
person.  Each person has sole voting and investment power with respect to
the shares of common stock, except as otherwise indicated. Beneficial ownership
consists of a direct interest in the shares of

- 26 -

---

common stock, except as otherwise indicated.  Except as otherwise listed below, the
address of each person is 230 Bethany Rd., Ste. 128, Burbank, CA 91504.

|                                                                  |                                          |                       
|----------------------------------------------------------------- | ---------------------------------------- | ----------------------
|Name and Address
ofBeneficial Owner                               | Amount and
Nature ofBeneficial Ownership | Percentageof
Class (1)
|Jerod Edington, Pres. &
CEO(1)                                    | 525,000
shares                           | 34.4%                 
|Peter Schmid, V.P., Dir.
(2)                                      | 140,000
shares                           | 9.24%                 
|Blaine Davidson, CFO, Treas,
Sec, Dir. (3)                        | 115,000
shares                           | 7.6%                  
|Steven Espey
358 E. 69th St.,
New York, NY 10021                  | 100,000
shares                           | 6.66%                 
|Thomas Keller
4533 Lower Thomas Ranch Rd.,
Miranda, CA 95553      | 100,000
shares                           | 6.66%                 
|Karsten Behrens
Rue de LUnion 16, 1800
Vevey, Switzerland        | 100,000
shares                           | 6.66%                 
|Frank Cholaj
707 Edenderry Ct.,
Spokane, WA 99223                 | 75,000
shares                            | 5.0%                  
|Alexander H. Gregg
177 Maine Street, Apt. 322,
Fort Lee, NJ 07024 | 75,000
shares                            | 5.0%                  
|Alex Gregg
758 Riverdale Rd.,
Riverdale, NJ 07675                 | 75,000
shares                            | 5.0%                  
|Executive officers and directors
as a group
3 persons (4)         | 780,000                                  | 50.16%                



| |     |                                                                                                                                                                                                                                                                                                         
| | --- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | (1) | Jerod Edington, President and Chief
Executive Officer, director.  The holdings of Jerod Edington include
500,000 shares of common stock and options to purchase 25,000 shares at
$0.25 per share that are exercisable currently or within 60 days of
September 15, 2008.                                
| | (2) | Peter Schmid, Vice President,
director. The holdings of Mr. Schmid include 100,000 shares of common
stock and options common stock and options to purchase 15,000 shares at
$0.25 per share that are exercisable currently or within 60 days of
September 15, 2008.                                     
| | (3) | Blaine Davidson, Chief Financial
Officer, Treasurer, Secretary, director.  The holdings of Mr.
Davidson include 100,000 shares of common stock and options common stock
and options to purchase 15,000 shares at $0.25 per share that are
exercisable currently or within 60 days of September 15, 2008.
| | (4) | The holdings of the executive
officers and directors as a group include an aggregate of 725,000 shares
of common stock, and 55,000 option shares exercisable currently or within
60 days of September 15, 2008.                                                                                         



- 27 -

---

Equity
Compensation Plan Information



The following table sets
forth information about the common stock available for issuance under
compensatory plans and arrangements as of June 30, 2008.



|                                                           |                                                                                                                                                                                                                                                                                                                                                                           |                                                                                              |   |                                                                              |   |                                                                                                                                            |  |  |           |  |  |  |  |  |  |  |  | 
|---------------------------------------------------------- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | -------------------------------------------------------------------------------------------- | - | ---------------------------------------------------------------------------- | - | ------------------------------------------------------------------------------------------------------------------------------------------ |  |  | --------- |  |  |  |  |  |  |  |  | 
|                                                           |                                                                                                                                                                                                                                                                                                                                                                           | (a)                                                                                          |   | (b)                                                                          |   | (c)                                                                                                                                        | 
|Plan Category                                              |                                                                                                                                                                                                                                                                                                                                                                           | Number of
securities to be issued upon exercise of outstanding options, warrants and
rights. |   | Weighted-average
exercise price of outstanding options, warrants, and rights |   | Number of
securities remaining available for future issuance under equity
compensation plans (excluding securities reflected in column (a) | 
|Equity
compensation plan approved by security holders (1)  |                                                                                                                                                                                                                                                                                                                                                                           |                                                                                              | 0 |                                                                              | $ | 0                                                                                                                                          |  |  | 1,000,000 | 
|Equity
compensation plans not approved by security holders |                                                                                                                                                                                                                                                                                                                                                                           |                                                                                              | 0 |                                                                              | $ | 0                                                                                                                                          |  |  |           | 
|Total                                                      |                                                                                                                                                                                                                                                                                                                                                                           |                                                                                              | 0 |                                                                              | $ | 0                                                                                                                                          |  |  | 1,000,000 | 
|(1)                                                        | On May 19, 2006
the shareholders of Hydrodynex adopted the 2006 Non-Qualified Stock Option
and Stock Appreciation Rights Plan with 1,000,000 shares of common stock
reserved for issuance under the Plan under which the board of directors
may grant incentive or non-statutory stock options to officers, directors,
employees, consultants and advisors of Hydrodynex.



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



None.

Director Independence



The Board of Directors
has determined that none of its three members are currently independent
directors as that term is defined in Rule 4200(a)(15 ) of the
Marketplace Rules of the National Association of Securities Dealers.



Item 14.   Principal Accounting Fees
and Services.



Audit Fees.
Aggregate fees billed for professional services rendered by Williams &
Webster, P.S. in connection with its audit of Hydrodynex financial statements
as of and for the years ended December 31, 2007, and June 30, 2008, which
included its reviews of Hydrodynex unaudited condensed consolidated interim
financial statements, and for SEC consultations and filings were $10,744.75 and
$5,383.75 thus far, respectively.



Audit-Related
Fees -  None.



Tax Fees  None



All Other Fees -
None



- 28 -

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Item 15.
  Exhibits



(a)   Exhibits specified by
item 601 of Regulation S-B.



HYDRODYNEX, INC.

INDEX TO EXHIBITS

|         |  |                                                                                           
|-------- |  | ------------------------------------------------------------------------------------------
|Exhibits |  | Description of
Document                                                                   
|         |  |                                                                                           
|3.1      |  | Articles of
Incorporation of Registrant(1)                                                
|         |  |                                                                                           
|3.2      |  | Bylaws of
Registrant(1)                                                                   
|         |  |                                                                                           
|10.1     |  | Exclusive North
American license between Hydrodynex, Inc. and Hydrosystemtechnik, GmbH
(1)
|         |  |                                                                                           
|10.2     |  | 2006
Non-Qualified Stock Option and Stock Appreciation Rights Plan Dated May
19, 2006 (1) 
|         |  |                                                                                           
|10.3     |  | Corporate
Governance Guidelines (4)                                                       
|         |  |                                                                                           
|10.4     |  | Corporate
Governance and Directors Nominating Committee Charter (4)                      
|         |  |                                                                                           
|10.5     |  | Compensation Committee Charter
(4)                                                        
|         |  |                                                                                           
|10.6     |  | Audit Committee Charter
(4)                                                               
|         |  |                                                                                           
|10.7     |  | Promissory Note between Jerod
Edington and HydroDynex dated June 12, 2008 (4)(3)          
|         |  |                                                                                           
|14.1     |  | Code of Business
Conduct and Ethics (4)                                                   
|         |  |                                                                                           
|14.2     |  | Code of Ethics
for the CEO and Senior Financial Officers (4)                              
|         |  |                                                                                           
|31.1     |  | Rule
13a-14(a)/15d-14(a) Certification of Chief Executive Officer (2)                     
|         |  |                                                                                           
|31.2     |  | Rule
13a-14(a)/15d-14(a) Certification of Chief Financial Officer (2)                     
|         |  |                                                                                           
|32.1     |  | Section 1350
Certifications (2)                                                           



|    |                                                                                                                                                                                                                                                
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|(1) | Filed with the
Securities and Exchange Commission on June 30, 2008 as an exhibit,
numbered as indicated above, to the Registrants registration statement on
Form S-1 (file no. 333-152052), which exhibit is incorporated herein by
reference.
|(2) | Filed
herewith.                                                                                                                                                                                                                                
|(3) | Promissory note
was paid in full on July 24, 2008                                                                                                                                                                                              
|(4) | Filed as an exhibit, numbered
as indicated above, to the Form 10-K Annual Report (file no. 333-152052)
filed on September 30, 2008,, which exhibit is incorporated herein by
reference.                                                        





- 29 -

---

SIGNATURES



In accordance with
Section 13 or 15(d) of the Exchange Act of 1934, as amended, the registrant
caused this Annual Report on Form 10-K to be signed on its behalf by the
undersigned, thereunto duly authorized, in Burbank, CA on this 11th day of
 March, 2009.

| |                                                  |                 
| | ------------------------------------------------ | ----------------
| |                                                  |                 
| | HYDRODYNEX, INC.                                
| |                                                  |                 
| | By:                                              | /s/ Ron Kunisaki
| | Ron Kunisaki
President & Chief Executive
Officer
| |                                                 

In accordance with
Section 13 or 15(d) of the Exchange Act of 1934, as amended, this Annual Report
on Form 10-K has been signed below by the following persons on behalf of the
registrant in the capacities indicated below on this 11th day of March,
2009.



|                      |  |                                                    
|--------------------- |  | ---------------------------------------------------
|Signature             |  | Title                                              
|                      |  |                                                    
|/s/ Ron Kunisaki      |  | Director, President & Chief
Executive Officer      
|Ron Kunisaki          |  | (Principal Executive
Officer)                      
|                      |  |                                                    
|                      |  |                                                    
|/s/ Richard Kunisaki  |  | Director, Treasurer, &
Chief Financial Officer     
|Richard Kunisaki      |  | (Principal Financial and
Accounting Officer)       
|                      |  |                                                    
|                      |  |                                                    
|/s/ Jerod C. Edington |  | Director, Vice President, &
Chief Operating Officer
|Jerod C. Edington     |  |                                                    
|                      |  |                                                    
|                      |  |                                                    
|/s/ Derek Grant       |  | Director & Secretary                               
|Derek Grant           |  |                                                    
|                      |  |                                                    
|                      |  |                                                    
|/s/ Peter Schmid      |  | Director                                           
|Peter Schmid          |  |                                                    



- 30 -

---



|                                                               |  |   
|-------------------------------------------------------------- |  | --
|TREVENEX,
INC.
INDEX TO
FINANCIAL STATEMENTS                  
|Report of Independent
Registered Public Accounting Firm        |  | 31
|Balance Sheets for June 30,
2007 and June 30, 2008             |  | 32
|Statements of Operations
for twelve months ended June 30, 2008 |  | 33
|Statement of Stockholders
Equity as of June 30, 2008          |  | 34
|Statements of Cash Flows
for twelve months ended June 30, 2008 |  | 35
|Notes to Financial
Statements for period ended June 30, 2008   |  | 36





- 31 -

---

To the Board of Directors and

Stockholders of HydroDyneX, Inc.

Burbank, California



REPORT OF INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM



We have audited the accompanying balance sheet of HydroDyneX, Inc
as of June 30, 2008 and 2007, and the related statements of operations,
stockholders equity and cash flows for the years then ended.  These
financial statements are the responsibility of the Companys management.
 Our responsibility is to express an opinion on these financial statements
based on our audit.

We conducted our audit in accordance with the standards of the
Public Company Accounting Oversight Board (United States).  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 that our audit provides 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 HydroDyneX, Inc. as
of June 30, 2008 and 2007 and the results of its operations, stockholders equity
and its cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming
that the Company will continue as a going concern.  As discussed in Note 2
to the financial statements, the Companys significant and ongoing operating
losses raise substantial doubt about its ability to continue as a going concern.
 The financial statements do not include any adjustments that might result
from the outcome of this uncertainty.



Williams & Webster, P.S.Certified Public
AccountantsSpokane, WashingtonSeptember 26, 2008

- 32 -

---



|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|------------------------------------------------------------------------------------------------------------------------ | ---------------------------------- |  |  | - | -------- | ------- | ------ | -------- | ----- | ----- | --------
|Hydrodynex, Inc.                                                                                                        
|(A
Development Stage Company)                                                                                           
|Balance Sheet                                                                                                           
|                                                                                                                        
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|                                                                                                                         |                                    |  |  |   |          |         |        | June 30, |       |       | June 30,
|                                                                                                                         |                                    |  |  |   |          |         |        | 2008     |       |       | 2007    
|Assets                                                                                                                   |                                    |  |  |   |          |         |        |          |       |       |         
|Current Assets                                                                                                           |                                    |  |  |   |          |         |        |          |       |      
|                                                                                                                         | Cash                               |  |  |   |          |         | $      | 518      |       | $     | 16      
|                                                                                                                         | Pre-paid Expenses                  |  |  |   |          |         | 750    |          |       |      
|                                                                                                                         | Trade Deposits                     |  |  |   |          |         | 26,990 |          |       | 0    
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|                                                                                                                         | Total Current Assets               |  |  |   |          |         | 28,258 |          |       | 16   
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Property and Equipment                                                                                                   |                                    |  |  |   |          |         |        |          |      
|                                                                                                                         | Property Plant and Equipment (Net) |  |  |   | 1,288    |         |        | 0       
|                                                                                                                         | Less: Accumulated Depreciation     |  |  |   |          | (49)    |        |          | 0    
|                                                                                                                         | Total Property and Equipment       |  |  |   |          | 1,239   |        |          | 0    
|Other Assets                                                                                                             |                                    |  |  |   |          |         |        |          |       |      
|                                                                                                                         | Pre-paid Royalty                   |  |  |   |          |         | 21,889 |          |       | 6,997
|Total Other Assets                                                                                                       |                                    |  |  |   |          |         | 21,889 |          |       | 6,997
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Total Assets                                                                                                             |                                    |  |  |   |          |         | 51,386 |          |       | 7,013
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Liabilities and Stockholders Equity                                                                                      |                                    |  |  |   |          |         |        |         
|Current Liabilities:                                                                                                     |                                    |  |  |   |          |         |        |          |       |      
|                                                                                                                         | Accounts Payable                   |  |  |   |          | $       | 16,467 |          | $     | 0    
|                                                                                                                         | Accrued Expenses                   |  |  |   |          |         | 42     |          |       | 0    
|                                                                                                                         | Notes Payable-Related party        |  |  |   |          | 2,000   |        |          | 3,846
|                                                                                                                         | Total Current Liabilities          |  |  |   | $        | 18,509  |        | $        | 3,846
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Commitments and contingencies                                                                                            |                                    |  |  |   | $        | 0       |        | $        | 0    
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Stockholders Equity                                                                                                      |                                    |  |  |   |          |         |        |          |       |      
|Preferred stock, $.001 par value, 5,000,000 shares
authorized: no shares issued or outstanding                           |                                    |  |  |   | 0        |         |        | 0       
|Common stock, $.001 par value, 70,000,000 shares
authorized, 1,500,000, and 500,000 issued and outstanding,
respectively |                                    |  |  |   | 1,500    |         |        | 500     
|Additional Paid-In Capital                                                                                               |                                    |  |  |   |          | 107,750 |        |          | 4,500
|Deficit accumulated during development
stage                                                                             |                                    |  |  |   | (76,373) |         |        | (1,832) 
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Total Stockholder's Equity                                                                                               |                                    |  |  |   | $        | 32,877  |        | $        | 3,168
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         
|Total Liabilities and Stockholder's
Equity                                                                               |                                    |  |  | $ | 51,386   |         | $      | 7,013   
|                                                                                                                         |                                    |  |  |   |          |         |        |          |       |       |         

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



- 33 -

---



|                                                            |   |           |          |         |                     |           |                     |        |                                                
|----------------------------------------------------------- | - | --------- | -------- | ------- | ------------------- | --------- | ------------------- | ------ | -----------------------------------------------
|Hydrodynex, Inc.                                           
|(A
Development Stage Company)                              
|Statements of Operations                                   
|                                                            |   |           |         
|                                                            |   |           |          |         | Twelve Months Ended |           | Twelve Months Ended |        | Period from May 12, 2006 (Date of
Inception) to
|                                                            |   |           |          |         | June 30,            |           | June 30,            |        | June 30,                                       
|                                                            |   |           |          |         | 2008                |           | 2007                |        | 2008                                           
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Revenue                                                     |   |           |          | $       | 0                   | $         | 0                   | $      | 0                                              
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Expenses                                                    |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Consulting fees                                             |   |           |          | 23,500  |                     | 0         |                     | 23,500
|Board of directors fees                                     |   |           |          | 2,750   |                     |           |                     | 2,750 
|General and Administrative                                  |   |           | 10,685   |         | 1,241               |           | 12,463             
|Legal and accounting                                        |   |           |          | 27,012  |                     | 0         |                     | 27,012
|Travel                                                      |   |           |          |         | 10,513              |           | 0                   |        | 10,513                                         
|Interest expense                                            |   |           |          | 80      |                     | 55        |                     | 135   
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Total Expenses                                              |   |           | $        | 74,540  | $                   | 1,296     | $                   | 76,373
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Net Income(Loss) From Operations                            |   | $         | (74,540) | $       | (1,296)             | $         | (76,373)           
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Basic and fully diluted loss per share                      | $ | (0.05)    | $        | nil     | $                   | (0.05)   
|                                                            |   |           |          |         |                     |           |                     |        |                                                
|Basic and fully diluted weighted
average shares outstanding |   | 1,500,000 |          | 500,000 |                     | 1,500,000
|                                                            |   |           |          |         |                     |           |                     |        |                                                

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



- 34 -

---



|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|------------------------------------------ | - | ------- | --------- | ------------ | ----- | ----- | ------- | ---------- | -------- | ----------- | -------- | -------
|Hydrodynex, Inc.                          
|(A
Development Stage Company)             
|Statement of Stockholder's Equity         
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|                                           |   |         |           | Common Stock |       |       |         | Additional |          |             |          |        
|                                           |   |         |           |              |       | Par   |         | Paid       |          | Accumulated |          |        
|                                           |   |         |           | Shares       |       | Value |         | In Capital |          | Deficit     |          | Total  
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Balance - May 12, 2006 (Date of Inception) | 0 | $       | 0         | $            | 0     | $     | 0       | $          | 0       
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Shares issued to President (Note 5)        |   | 200,000 |           | 200          |       | 1,800 |         |            |          | 2,000      
|Net loss                                   |   |         |           |              |       |       |         |            |          | (536)       |          | (536)  
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Balance - June 30, 2006                    |   |         | 200,000   | $            | 200   | $     | 1,800   | $          | (536)    | $           | 1,464   
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Shares issued to President (Note 5)        |   | 300,000 |           | 300          |       | 2,700 |         |            |          | 3,000      
|Net loss                                   |   |         |           |              |       |       |         |            |          | (1,296)     |          | (1,296)
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Balance - June 30, 2007                    |   |         | 500,000   | $            | 500   | $     | 4,500   | $          | (1,832)  | $           | 3,168   
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Shares issued                              |   |         | 1,000,000 |              | 1,000 |       | 99,000  |            |          |             | 100,000 
|Options issued for director fees           |   |         |           |              |       | 2,750 |         |            |          |            
|Options issued for services                |   |         |           |              |       | 1,500 |         |            |          |            
|Net loss for period                        |   |         |           |              |       |       |         |            | (74,540) |             | (74,540)
|                                           |   |         |           |              |       |       |         |            |          |             |          |        
|Balance - June 30, 2008                    |   |         | 1,500,000 | $            | 1,500 | $     | 107,750 | $          | (76,372) | $           | 32,878  
|                                           |   |         |           |              |       |       |         |            |          |             |          |        

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



- 35 -

---



|                                      |                                                              |   |          |                     |         |                     |           |                                                
|------------------------------------- | ------------------------------------------------------------ | - | -------- | ------------------- | ------- | ------------------- | --------- | -----------------------------------------------
|Hydrodynex, Inc.                     
|(A
Development Stage Company)        
|Statements of Cash Flows             
|                                      |                                                              |  
|                                      |                                                              |  
|                                      |                                                              |   |          | Twelve Months Ended |         | Twelve Months Ended |           | Period from May 12, 2006 (Date of
Inception) to
|                                      |                                                              |   |          | June 30,            |         | June 30,            |           | June 30,                                       
|                                      |                                                              |   |          | 2008                |         | 2007                |           | 2008                                           
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|CASH FLOWS FROM OPERATING ACTIVITIES: |                                                              |   |          |                     |         |                    
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Net Loss                                                     |   | $        | (74,540)            | $       | (1,296)             | $         | (76,373)                                       
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Depreciation and Amortization
Expense                        |   |          | 49                  |         | 0                   |           | 0                                              
|                                      | Stock options issued for
director fees                       |   | 2,750    |                     | 0       |                     | 2,750    
|                                      | Stock options issued for
services                            |   | 1,500    |                     | 0       |                     | 1,500    
|                                      | Decrease (Increase) Trade
Deposits                           |   | (26,990) |                     | 0       |                     | (26,991) 
|                                      | Decrease (Increase) Prepaid
Expenses                         |   | (15,642) |                     | (6,997) |                     | (22,639) 
|                                      | Increase (Decrease) Accounts
Payable and Accrued Liabilities |   | 16,509   |                     | 0       |                     | 16,510   
|                                      | Increase (Decrease) Due to
related Party                     |   | (1,846)  |                     | 3,518   |                     | 2,000    
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Net Cash (Used) Provided by
Operating Activities             | $ | (98,210) | $                   | (4,775) | $                   | (103,243)
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|CASH FLOWS FROM INVESTING ACTIVITIES: |                                                              |   |          |                     |         |                    
|                                      | Investment in property, plant
and equipment                  |   | (1,288)  |                     | 0       |                     | (1,239)  
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Net Cash (Used) Provided by
Investing Activities             |   | (1,288)  |                     | 0       |                     | (1,239)  
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|CASH FLOWS FROM FINANCING ACTIVITIES: |                                                              |   |          |                     |         |                    
|                                      | Proceeds from sale of common
stock                           |   | 100,000  |                     | 0       |                     | 105,000  
|                                      | Increase (Decrease) stock
subscription receivable            |   | 0        |                     | 3,000   |                     | 0        
|                                      | Net Cash Provided by (Used in)
used in Financing Activities  | $ | 100,000  | $                   | 3,000   | $                   | 105,000  
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Net change in cash                                           |   | 502      |                     | (1,775) |                     | 518      
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Cash, Beginning of Period                                    |   | 16       |                     | 1,792   |                     | 0        
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      | Cash, End of Period                                          | $ | 519      | $                   | 17      | $                   | 518      
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|                                      |                                                              |   |          |                     |         |                     |           |                                                
|Supplement Cash Flow
Information      |                                                              |   |          |                     |         |                    
|                                      | Interest Expense Paid                                        | $ | 135      | $                   | 0       | $                   | 135      
|                                      |                                                              |   |          |                     |         |                     |           |                                                

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



- 36 -

---

NOTE 1  ORGANIZATION AND DESCRIPTION OF BUSINESS

Hydrodynex, Inc. (hereinafter the Company) was incorporated May
12, 2006 under the laws of the State of Nevada.  The primary business is to
market and sell, under an exclusive North-American license, AO-System (Anodic
Oxidation) water treatment units.  The water treatment systems are
developed and manufactured by Hydrosystemtechnik, GmbH based in Germany.

The Company is in the development stage.

The Companys fiscal year end is June 30.

NOTE 2  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

This summary of significant accounting policies is presented to
assist in understanding the financial statements.  The financial statements
and notes are representations of the Companys management, which is responsible
for their integrity and objectivity.  These accounting policies conform to
accounting principles generally accepted in the United States of America and
have been consistently applied in the preparation of the financial
statements.

Accounting Method

The Company uses the accrual basis of accounting in accordance
with accounting principles generally accepted in the United States of
America.

Use of Estimates

The process of preparing the financial statements in conformity
with accounting principles generally accepted in the United States of America
requires the use of estimates and assumptions regarding certain types of assets,
liabilities, revenues, and expenses.  Such estimates primarily relate to
unsettled transactions and events as of the date of the financial statements.
Accordingly, upon settlement, actual results may differ from estimated
amounts.

Cash and Cash Equivalents

Cash and cash equivalents consists of cash on deposit and term
deposits with a maturity of less than three months from the date of
purchase.

Organizational costs

Costs of startup activities, including organizational and
incorporation costs are expensed as incurred.

Fair Value of Financial Instruments

The carrying value of cash, and accounts payable and accrued
liabilities approximate their fair value because of there short maturity of
these instruments.

Provision for Taxes

Income taxes are provided based upon the liability method of
accounting pursuant to SFAS No. 109 Accounting for Income Taxes.  Under
this approach, deferred income taxes are recorded to reflect the tax
consequences on future years of differences between the tax basis of assets and
liabilities and their financial reporting amounts at each year end.  A
valuation allowance is recorded against deferred tax assets if management does
not believe the Company has met the more likely than not standard imposed by
SFAS No. 109 to allow recognition of such an asset.

Basic and Diluted Loss Per Share

Loss per share was computed by dividing the net loss by the
weighted average number of shares outstanding during the period.  The
weighted average number of shares was calculated by taking the number of shares
outstanding and weighting them by the amount of time that they were outstanding.
 Basic and diluted loss per share was the same, as there were no common
stock equivalents outstanding.

- 37 -

---

Going Concern

As shown in the accompanying financial statements, the Company has
no revenues, has incurred a net loss of $ 70,290 for the period ended June 30,
2008 and has an accumulated deficit of $ 72,123.  These factors indicate
that the Company may be unable to continue in existence.  The financial
statements do not include any adjustments related to the recoverability and
classification of recorded assets, or the amounts and classification of
liabilities that might be necessary in the event the Company cannot continue in
existence.

The Companys management believes that the company will have
sufficient resources to execute the current plan of operations, and meet the
budget.  Although the company currently only has $518 in cash, a bridge
loan and a second private stock offering are planned to be implemented to raise
sufficient operating capital to continue operations.

Recent Accounting Pronouncements

In May 2008, the FASB issued SFAS No. 163, Accounting for
Financial Guarantee Insurance Contracts  an interpretation of FASB Statement
No. 60.  SFAS 163 requires that an insurance enterprise recognize a claim
liability prior to an event of default (insured event) when there is evidence
that credit deterioration has occurred in an insured financial obligation. 
This Statement also clarifies how Statement 60 applies to financial guarantee
insurance contracts, including the recognition and measurement to be used to
account for premium revenue and claim liabilities. Those clarifications will
increase comparability in financial reporting of financial guarantee insurance
contracts by insurance enterprises. This Statement requires expanded disclosures
about financial guarantee insurance contracts. The accounting and disclosure
requirements of the Statement will improve the quality of information provided
to users of financial statements.  SFAS 163 will be effective for financial
statements issued for fiscal years beginning after December 15, 2008.  The
Company does not expect the adoption of SFAS 163 will have a material impact on
its financial condition or results of operation.

In May 2008, the FASB issued SFAS No. 162, The Hierarchy of
Generally Accepted Accounting Principles.  SFAS 162 will provide framework
for selecting accounting principles to be used in preparing financial statements
that are presented in conformity with U.S. generally accepted accounting
principles (GAAP) for nongovernmental entities.  SFAS 162 will be effective
60 days following the Securities and Exchange Commissions approval of the
Public Company Accounting Oversight Board (PCAOB) amendments to AU Section
411.  The Company does not expect the adoption of SFAS 162 will have a
material impact on its financial condition or results of operation.

In March 2008, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 161, "Disclosures about
Derivative Instruments and Hedging Activities - an amendment of FASB Statement
No. 133" (FAS 161).  FAS 161 amends and expands disclosures about
derivative instruments and hedging activities. FAS 161 required qualitative
disclosures about the objectives and strategies of derivative instruments,
quantitative disclosures about the fair value amounts of and gains and losses on
derivative instruments, and disclosures of credit-risk-related contingent
features in hedging activities. FAS 161 is effective for fiscal years beginning
after November 15, 2008 and will be effective for the Company in fiscal year
2010. Early adoption is prohibited; however, presentation and disclosure
requirements must be retrospectively applied to comparative financial
statements. The Company has not yet determined the effect, if any, that the
adoption of this standard will have on its financial position or results of
operations.

In December 2007, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 160, Non-controlling Interests
in Consolidated Financial Statements (FAS 160) which amends ARB 51 to
establish accounting and reporting standards for the non-controlling interest in
a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a
non-controlling interest in a subsidiary is an ownership interest in the
consolidated entity that should be reported as equity in the consolidated
financial statements. In addition to the amendments to ARB 51, this Statement
amends FASB Statement No. 128, Earnings per Share; so that earnings-per-share
data will continue to be calculated the same way those data were calculated
before this Statement was issued. This Statement is effective for fiscal years,
and interim periods within those fiscal years, beginning on or after December
15, 2008. The Company is currently evaluating the impact, if any, of adopting
FAS 160 on its financial position and results of operations.

In
December 2007, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 141R, Business Combinations (FAS 141R)
which replaces FAS No. 141 and establishes principles and requirements for how
the acquirer of a business recognizes and measures in its financial statements
the identifiable assets acquired, the liabilities assumed, and any
non-controlling interest in the acquire. FAS 141R also provides guidance for
recognizing and measuring the goodwill acquired in the business combination and
determines what information to disclose to enable users of the financial
statements to evaluate the nature and financial effects of the business
combination. This Statement applies prospectively to business combinations for
which the acquisition date is on or after the beginning of the first annual
reporting period beginning on or after December 15, 2008. Early adoption of FAS
141R is prohibited. The Company is currently evaluating the impact, if any, of
adopting FAS 141R on its financial position and results of
operations.

- 38 -

---

NOTE 3  PROPERTY AND EQUIPMENT

The company records all purchases of property and equipment at
cost which is presumed to be fair value at the time.  Assets will be
depreciated over the straight-line method over the expected useful life of the
asset.  The Company has purchased a computer

The useful lives of property, plant and equipment for purposes of
computing depreciation are three to thirty-one and one half years.  The
following is a summary of equipment and accumulated depreciation at June 30,
2008 and 2007:

|                                 |  |               |  |              
|-------------------------------- |  | ------------- |  | -------------
|                                 |  | June 30, 2008 |  | June 30, 2007
|Equipment                        |  | $ 1,288       |  | -            
|Less: accumulated depreciation   |  | (49)          |  | -            
|Property, Plant & Equipment, net |  | $ 1,239       |  | -            

Depreciation expense was $ 49 for the year ended June 30, 2008
and $ 0 for the year ended June 30, 2007.

The Company evaluates the recoverability of property and equipment
when events and circumstances indicate that such assets might be impaired.
 The Company determines impairment by comparing the undiscounted cash flows
estimated to be generated by these assets as compared to the carrying
amounts.

The costs associated with maintenance will be expensed, and
replacements and betterments will be capitalized.   The cost and
related reserves of assets sold or retired are removed from the accounts, and
resulting gain or loss is reflected in results of operations.

NOTE 4  RELATED PARTY

The president of the Company loaned the company $ 2,500 with 6%
per annum interest on February 5, 2007, to be repaid before December 31, 2007.
  The note was fully satisfied on December 31, 2007.

The president of the Company loaned the company $ 2,000 without
interest on June 12, 2008,to be repaid before December 31, 2008.   The
note was fully satisfied on July 24, 2008.

NOTE 5  EXCLUSIVE TECHNOLOGY LICENSES

On September 3, 2007, the Company acquired an exclusive technology
license for North America to market the AO-System water treatment system (AO 
Anodic Oxidation) from Hydrosystemtechnik, GmbH, based in Germany.
  The Company has agreed to pay a licensing fee in the amount 50,000
Euros and has already paid one installment of three in the amount of 10,000
Euros.  A second installment in the amount of 20,000 Euros is due on
November 30th.  These license fee payments may be applied as
pre-paid royalties with Hydrosystemtechnik in the event the Company decides to
exercise its right to manufacture AO-Systems.  The Company does have the
opportunity under the license to manufacture and assemble the AO-System in the
United States for resell, after purchasing specified parts from
Hydrosystemtechnik as outlined in the license agreement..  In the event the
Company decides to enter into manufacturing of AO-Systems, the Company is to pay
royalties to Hydrosystemtechnik in the amount of 10% of the gross sale on each
AO-System that the Company manufactures and sells, and will be paid out of
pre-paid royalties first when the Company begins to sell the units within the
United States.  In the event the Company decides not to manufacture, the
license fees will no longer be considered pre-paid royalties.

- 39 -

---

NOTE 6 INCOME TAXES

Income taxes are
provided based upon the liability method of accounting pursuant to Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes
(hereinafter SFAS No. 109).  Under this approach, deferred income taxes
are recorded to reflect the tax consequences in future years of differences
between the tax basis of assets and liabilities and their financial reporting
amounts at each year-end.  A valuation allowance is recorded against
deferred tax assets if management does not believe the Company has met the more
likely than not standard imposed by SFAS No. 109 to allow recognition of such
an asset.

Effective December 1, 2007, the Company adopted the Financial
Accounting Standards Board (FASB) Interpretation No. 48, Accounting
for Uncertainty in Income Taxesan interpretation of FASB Statement
No. 109 (FIN 48). FIN 48 clarifies the accounting for uncertainty in
income taxes recognized in an enterprises financial statements in accordance
with FASB Statement No. 109, Accounting for Income Taxes. FIN 48
prescribes a recognition threshold and measurement attribute for the financial
statement recognition and measurement of a tax position taken or expected to be
taken in a tax return. Additionally, FIN 48 provides guidance on de-recognition,
classification, interest and penalties, accounting in interim periods,
disclosure, and transition. The adoption of FIN 48 did not have a material
impact on the Companys financial position, results of operation or liquidity.
The current Company policy classifies any interest recognized on an underpayment
of income taxes as interest expense and classifies any statutory penalties
recognized on a tax position taken as selling, general and administrative
expense.

The Company has not taken a tax position that, if challenged,
would have a material effect on the financial statements for the fiscal year
ended June 30, 2008, or during the prior three years applicable under FIN
48.

As a result of the adoption of FIN 48, we did not recognize
any adjustment to the liability for uncertain tax position and therefore did not
record any adjustment to the beginning balance of accumulated deficit on the
consolidated balance sheet.

At June 30, 2008, the Company had deferred tax assets of
approximately $ 2,310 principally arising from net operating loss carry forwards
for income tax purposes calculated at an expected rate of 34%.  As
management of the Company cannot determine that it is more likely than not that
the Company will realize the benefit of the deferred tax assets, a valuation
allowance equal to the deferred tax assets was present at June 30, 2008.

The Companys deferred tax assets are estimated as follows:

|                                       |  |               |  |              
|-------------------------------------- |  | ------------- |  | -------------
|                                       |  | June 30, 2008 |  | June 30, 2007
|Net operating loss carry forward       |  | $71,500       |  | $1,832       
|                                       |  |               |  |              
|Deferred tax asset                     |  | $24,310       |  | $623         
|Deferred tax asset valuation allowance |  | ($24,310)     |  | ($623)       
|                                       |  |               |  |              
|Net deferred tax asset                 |  | -             |  | -            

At June 30, 2008 the Company has net operating loss
carryforwards of approximately $ 71,500 which expires in the years 2026 through
2028.  The Company recognized $ 4,250 in stock options expense that cannot
be deducted for tax purposes, and are not included in the above calculation of
deferred tax assets.  The change in the allowance account from June 30,
2007 to June 30, 2008 was $ 23,687.

NOTE 7 
PREFERRED AND COMMON STOCK

The Company is authorized to issue 5,000,000 shares of $ 0.001 par
value preferred stock.  All shares have equal voting rights, are
non-assessable and have one vote per share.  Voting rights are not
cumulative and, therefore, the holders of more than 50% of the preferred stock
could, if they choose to do so, elect all of the directors of the Company.
 There are no preferred shares issued.

The Company is authorized to issue 70,000,000 shares of $ 0.001
par value common stock.  All shares have equal voting rights, are
non-assessable and have one vote per share.  Voting rights are not
cumulative and, therefore, the holders of more than 50% of the common stock
could, if they choose to do so, elect all of the directors of the Company.

The company sold 200,000 shares of common stock to the president
for $ 2,000 in May of 2006, and then another 300,000 shares were sold during
fiscal year 2006 for $ 3,000.

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During the fiscal year end June 30, 2008, the Company has sold
1,000,000 shares of common stock at a price of $ 0.10 per a share which raised
$100,000 in cash.

NOTE 8  STOCK OPTION PLAN

Statement of Financial Accounting Standards No. 123, Accounting
for Stock-Based Compensation (hereinafter SFAS No. 123), defines a fair
value-based method of accounting for stock options and other equity instruments.
The Company has adopted this method, which measures compensation costs based on
the estimated fair value of the award and recognizes that cost over the service
period.

The Companys board of directors approved the adoption of the
2006 Non-Qualified Stock Option and Stock Appreciation Rights Plan by
unanimous consent on May 19, 2006.  This plan was initiated to encourage
and enable officers, directors, consultants, advisors and other key employees of
the Company to acquire and retain a proprietary interest in the Company by
ownership of its common stock.  A total of 1,000,000 of the authorized
shares of the Companys common stock may be subject to, or issued pursuant to,
the terms of the plan.

For the year ended June 30, 2008, the Board of Directors approved
and granted the issuance of 85,000 non-statutory stock options granted from the
Companys 2006 Non-Qualified Stock Option Plan.  These options expire on
July 31, 2013 and vested entirely upon issue date.  The options are
exercisable at the price of $.25/share.  The purpose of granting the stock
options was to encourage and enable officers, directors, consultants, advisors,
other key employees and related parties of the Company to acquire and retain a
proprietary interest in the Company by ownership of its common stock.

The following is a summary of stock option activity:

|                                                       |                  |        |                                |   |    
|------------------------------------------------------ | ---------------- | ------ | ------------------------------ | - | ---
|                                                       | Number of Shares |        | Weighted AverageExercise
Price
|Outstanding at June 30, 2006                           |                  |       |                                | $ |   
|Granted                                                |                  |       |                                |   |   
|Exercised                                              |                  |       |                                |   |   
|Outstanding at June 30, 2007                           |                  |       |                                | $ |   
|Granted                                                |                  |       |                                |   |   
|Exercised                                              |                  |       |                                |   |   
|Outstanding at June 30, 2008                           |                  | 85,000 |                                | $ | .25
|Options exercisable at June 30,
2008                   |                  | 85,000 |                                | $ | .25
|Fair Market Value Per Share of
Options Granted in 2008 |                  |       |                                | $ | .25

The options were valued using the Black-Scholes option pricing
model using the following assumptions as required under SFAS No. 123): risk-free
interest rate of 3.3750%; volatility of 85%; no dividends; an expected life of
no more than 5 years; and an expected exercise price of $0.25. The Company
determined that the stock option compensation was $4,250 and was recognized
during the year ended June 30, 2008.



|                        |  |                 |        |  
|----------------------- |  | --------------- | ------ | -
|                        |  | Year Ended 2008 |       
|                        |  |                 |       
|Risk-free interest rate |  |                 | 3.3750 | %
|Expected option life    |  | 5 years         |       
|Dividend yield          |  |                 | 0      | %
|Volatility              |  |                 | 85     | %
|Exercise price          |  | $               | 0.25   |  

These assumptions were determined as follows:

| |   |                                                                                                                                                                                                                                                                 
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |  | The risk free interest rate for the
period within the contractual life of the option is based on the 5-year
U.S Treasury yield at the time of the grant                                                                                                         
| |  | The expected term of the options
granted represents the period of time that the options granted are
expected to be outstanding                                                                                                                                  
| |  | Historically, the Company has not
paid a dividend on its common shares and does not expect to do so in the
future                                                                                                                                               
| |  | The volatility assumption represents
an expectation of the volatility of the price of the underlying shares for
the expected term of the option, considering factors such as historical
stock price and stock volatility of other companies within the
industry.



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As of June 30, 2008 management wasnt aware of any contingencies
that needed to be included in the financial statements.

NOTE 10SUBSEQUENT EVENTS

The Company has amended its license agreement with
Hydrosystemtechnik, GmbH a German company.  A license payment of 20,000
Euros is due to Hydrosystemtechnik on November 30, 2008.

The Company is working on bridge financing of up to $50,000 from
individuals or entities.  $12,000 of bridge funding has been received since
the June 30 year end.  The promissory notes are convertible into common
stock, and also have warrants attached.   The notes are due within one
year, and include simple interest at 8%.

The Company has amended its Articles of Incorporation to increase
the number of authorized Common Shares to 75,000,000.







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