UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                   FORM 10-QSB

  [x] QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934

                  For the quarterly period ended June 30, 2004

  [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES ACT OF 1934
       For the transition period from _______________ to _________________

                                    000-29743
                            (Commission file number)

                        INTERNAL HYDRO INTERNATIONAL INC
                   ------------------------------------------
                   (Formerly Home Services International Inc)

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





                Nevada                                   88-0409143
--------------------------------------------------------------------------------
   (State or other jurisdiction               (IRS Employer Identification No.)
of incorporation or organization)


            607 W. MARTIN LUTHER KING Jr. Blvd., TAMPA, FLORIDA 33603
            ---------------------------------------------------------
               (Address of principal executive offices) (Zip Code)

                                  813-231-7122
                            -------------------------
                           (Issuer's telephone number)

Check  whether the issuer (1) 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. [X] Yes [ ] No

There is a limited trading market for the registrant's Common Stock. There were
1,575,763 shares of Common Stock, and 5,750,000 shares of preferred stock issued
and outstanding as of June 30, 2004.

Transitional Small Business Disclosure Format (Check one): [ ] Yes [X] No

None

Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]

                                       1
<PAGE>



            INTERNAL HYDRO INTERNATIONAL INC.INDEX TO THE FORM 10-QSB
                    FOR THE THREE-MONTHS ENDED JUNE 30, 2004






                                TABLE OF CONTENTS


PART I. FINANCIAL INFORMATION..................................................3

Item 1. Financial Statements...................................................3

Balance Sheet as of June 30, 2004 and 2003 (unaudited).......................3-4

Statements of Operations for the three and six months ended
   June 30, 2004 and 2003 (unaudited)..........................................5

Statements of Cash Flows for the six months ended
   June 30, 2004 and 2003 (unaudited)..........................................6

Notes to the Financial Statements...........................................7-12

Item 2. Management's Discussion and Analysis and Plan of Operation.........13-15

Item 3. Controls and Procedures...............................................15

PART II. OTHER INFORMATION....................................................17

Item 2. Changes in Securities.................................................17

SIGNATURES....................................................................17

CERTIFICATIONS.............................................................18-19


                                       2
<PAGE>

                          PART I. FINANCIAL INFORMATION

Item 1. Financial Statements


                        INTERNAL HYDRO INTERNATIONAL INC
                   (Formerly Home Services International Inc)

                                  BALANCE SHEET
                                  -------------
                               As of June 30, 2004
                                   (UNAUDITED)

                                     ASSETS
                                    -------             June 30
                                                  2003            2004
CURRENT ASSETS                              --------------- ---------------
Cash and equivalents                          $           -   $      11,652
Accounts/loan receivable                                  -          12,000
                                            --------------- ---------------
                                                          -          23,652
                                            --------------- ---------------
PROPERTY & EQUIPMENT
Computers & Equipment
    (net of accumulated depreciation)                 5,130           2,080
                                            --------------- ---------------

OTHER ASSETS

Investment in Patent - at cost                            -      18,732,000

Product Proto-type (Note 7)                               -         114,726
Other                                                     0               -
                                            --------------- ---------------
                                                          0      18,846,726
                                            --------------- ---------------

    Total Assets                              $       5,130   $  18,872,458
                                            =============== ===============

                       LIABILITIES & STOCKHOLDERS' EQUITY
                       ----------------------------------
CURRENT LIABILITIES
Accounts payable                              $     326,027   $       7,909
Interest Payable                                     38,336               -
Accrued Liabilities                                  82,621               -
Due to shareholder                                  105,463         463,963
Notes Payable                                       506,735          60,000
                                            --------------- ---------------
                                                  1,059,182         531,872
OTHER LIABILITIES

Debt under professional management (Note 4)               -         906,879
                                            --------------- ---------------
    Total Liabilities                             1,059,182       1,438,751
                                            --------------- ---------------

                                       3
<PAGE>

LIABILITIES & STOCKHOLDERS' EQUITY - continued

STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 75,000,000
  shares authorized 1,575,763 shares issued
  and outstanding (1,439,424 in 2003)                 1,439           1,576
Preferred stock, $.001 par value, 10,000,000
  shares authorized 5,750,000 shares issued
  and outstanding (250,000 in 2003)                     250           5,750
Additional paid-in capital                        1,538,058      21,148,168
Accumulated deficit                              -2,593,799      -3,721,787
                                            --------------- ---------------
    Total Stockholders' Equity                   -1,054,052      17,433,707
                                            --------------- ---------------

    Total Liabilities & Stockholders' Equity  $       5,130   $  18,872,458
                                            =============== ===============

See accompanying notes to unaudited financial statements


                                       4
<PAGE>



                        INTERNAL HYDRO INTERNATIONAL INC
                   (Formerly Home Services International Inc)

                             STATEMENT OF OPERATIONS
                             -----------------------
                           Quarter ended June 30, 2004
                                   (UNAUDITED)
<table>
<caption>

                                      3 Months         6 Months         3 Months         6 Months
                                   ended June 30     ended June 30    ended June 30    ended June 30
                                       2003              2003             2004             2004
                                  ---------------- ---------------- ---------------- ----------------
<S>                                 <C>              <C>              <C>              <C>
NET SALES                           $            -   $            -   $            -   $            -

COST OF SALES                       $            -   $            -   $            -   $            -
                                  ---------------- ---------------- ---------------- ----------------
    GROSS PROFIT                    $            -   $            -   $            -   $            -

SELLING, GENERAL &
ADMINISTRATIVE EXPENSES             $       25,560   $      217,108   $      444,759   $      542,679

    LOSS FROM OPERATIONS                    25,560          217,108          444,759          542,679

    INTEREST EXPENSE                         7,791           12,231           25,713           25,713

NET LOSS                            $       33,351   $      229,339   $      470,472   $      568,392
                                  ---------------- ---------------- ---------------- ----------------
BASIC NET LOSS PER COMMON SHARE     $        -0.02   $         0.38   $         0.30   $         0.37

DILUTED NET LOSS PER COMMON SHARE   $        -0.02   $         0.38   $         0.30   $         0.37

WEIGHTED AVERAGE OF
COMMON SHARES OUTSTANDING                  596,740          596,740        1,575,763        1,552,702
                                  ---------------- ---------------- ---------------- ----------------
</table>

See accompanying notes to unaudited financial statements


                                       5
<PAGE>

                        INTERNAL HYDRO INTERNATIONAL INC.
                                   (UNAUDITED)

                            STATEMENTS OF CASH FLOWS
                            ------------------------
<table>
<caption>
                                                                 For the Period Ended June 30,
                                                                    2003               2004
                                                             ----------------- -----------------
<S>                                                                 <C>                 <C>
OPERATING ACTIVITIES:

  Net loss                                                     $      (229,339)  $     (568,392)
    Adjustments to reconcile net loss to cash used
       by operating activities:
        Depreciation & amortization of fixed assets                      2,745           -
        Amortization of debt discount                                                     25,713
        Issuance of common stock for services performed                287,500           278,148
         Changes in assets and liabilities:
           Increase in interest payable                                 12,231
           Decrease in lease deposits                                   14,111
           Increase (Decrease) in accounts payable                    (166,514)            7,909
           Increase in other assets                                                     (126,726)
                                                             ----------------- -----------------
           Cash (used) by operating activities                         (79,266)         (383,348)

                                                             ----------------- -----------------
                  Net cash (used) by operating activities              (79,266)         (383,348)
                                                             ----------------- -----------------
FINANCING ACTIVITIES:
    Note Payable                                                          -               60,000
    Proceeds from due to officers or shareholders                       78,000           335,000
                                                             ----------------- -----------------
                  Net cash provided by financing activities             78,000           395,000

                                                             ----------------- -----------------
CHANGE IN CASH AND EQUIVALENTS DURING PERIOD                            (1,266)           11,652
CASH AND EQUIVALENTS, BEGINNING OF PERIOD                                1,266            -
                                                             ----------------- -----------------
CASH AND EQUIVALENTS, END OF PERIOD                            $             -   $        11,652
                                                             =================  ================
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

    Interest paid                                              $             -   $             -

NONCASH INVESTING AND FINANCING ACTIVITIES:

    Issuance of common stock for services                      $        70,000   $       278,148
                                                            ==================  ================
    Issuance of common stock as payment on accrued liabilities $       200,000   $             -
                                                            ==================  ================
    Issuance of preferred stock for services                   $        17,500   $             -
                                                            ==================  ================
    Issuance of preferred stock for purchase of patent         $            -    $    18,732,000
                                                            ==================  ================

See accompanying notes to financial statements.
</table>

                                       6
<PAGE>

                        INTERNAL HYDRO INTERNATIONAL INC.

NOTES TO FINANCIAL STATEMENTS FOR THE THREE MONTHS ENDED JUNE 30, 2004.

NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIFICANT ACCOUNTING POLICIES

The  accompanying   unaudited  financial  statements  have  been  prepared,   by
management,  in accordance with accounting  principles generally accepted in the
United States for interim  financial  information and the  instructions for Form
10-QSB  and  Regulation  S-B.  Accordingly,  they  do  not  include  all  of the
information and footnotes required by accounting  principles  generally accepted
in the United States for complete financial statements. All adjustments that, in
the opinion of management are necessary for a fair  presentation  of the results
of  operations  for the  interim  periods  have been made and are of a recurring
nature unless  otherwise  disclosed  herein.  The results of operations  for the
three months ended June 30, 2004 are not  necessarily  indicative of the results
that will be realized for the entire  fiscal year.  These  financial  statements
should be read in  conjunction  with the Company's  Annual Report on Form 10-KSB
for the year ended December 31, 2003.

Background and Nature of Business

Home Services  International,  Inc. ("HSI") (formerly Tel-Voice  Communications,
Inc.) was  incorporated  under the laws of the State of Nevada on  December  31,
1996 to engage in any lawful corporate activity,  including, but not limited to,
selected mergers and  acquisitions.  Smartdotcom,  Inc. ("SDC") was incorporated
under the laws of the State of Nevada on April 19, 1999.

On June 30, 2000,  SDC was acquired by Tel-Voice in a transaction  accounted for
as a reverse merger.  Tel-Voice  issued 4,376,895 shares of its common stock for
all of the issued and  outstanding  common  stock of SDC.  Prior to the  merger,
Tel-Voice  had no  business  activity.  For  accounting  purposes,  SDC has been
treated as the acquirer  and  accordingly,  SDC is  presented as the  continuing
entity, and the historical  financial statements are those of SDC. Tel-Voice and
SDC are collectively referred to as the "Company."

The Company  determined in December 2002 to abandon its only operating  business
segment which involved a technology that provides  private  electronic  networks
for labor unions and integrated  communities,  both of which include subscribers
of the unions and  communities.  The Company also  abandoned  its  1-866-Unionet
network.   These  business   components  have  been  presented  as  discontinued
operations for the year ended December 31, 2002.

On January 2, 2004,  the Company  acquired  the net assets of  Internal  Command
International,  Inc.  ("ICI")  through the issuance of  5,500,000  shares of the
Company's Preferred stock. ICI is a development stage enterprise. ICI intends to
manufacture  and  distribute  its  alternative  energy  products  that use water
pressure flow to generate electricity. In connection with this acquisition,  the
company was re-named INTERNAL HYDRO INTERNATIONAL INC.

Basis of Presentation
---------------------

The  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting principles generally accepted in the United States of America and has
adopted a year-end of December 31.

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


                                       7
<PAGE>

Basis of Presentation - continued

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.

Management further acknowledges that it is solely responsible for adopting sound
accounting  practices,   establishing  and  maintaining  a  system  of  internal
accounting  control and preventing and detecting  fraud. The Company's system of
internal  accounting  control is designed to assure,  among other items, that 1)
recorded  transactions  are valid; 2) valid  transactions  are recorded;  and 3)
transactions  are  recorded in the proper  period in a timely  manner to produce
financial  statements which present fairly the financial  condition,  results of
operations  and cash  flows of the  Company  for the  respective  periods  being
presented

Going Concern Uncertainty
-------------------------

The  accompanying  financial  statements  have been prepared in conformity  with
accounting principles generally accepted in the United States of America,  which
contemplate  continuation of the Company as a going concern. As reflected in the
accompanying  consolidated  financial statements,  the Company has had recurring
losses and negative cash flows from  operations,  and negative  working capital.
The Company has abandoned it's only operating business segment and is attempting
to raise  capital  seek  acquisition  targets and commence  operations  in a new
business segment. There are no assurances that the Company will be successful in
any of  these  endeavors.  These  factors  raise  substantial  doubt  about  the
Company's  ability  to  continue  as a going  concern.  Without  realization  of
additional  capital, it would be unlikely for the Company to continue as a going
concern. The financial statements do not include any adjustments relating to the
recoverability  and  classification  of recorded asset  amounts,  or amounts and
classification  of  liabilities  that might be  necessary  should the Company be
unable to continue its existence.



NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation
---------------------------

The  accompanying   consolidated  financial  statements  currently  include  the
accounts of Internal Hydro  International  Inc. and its wholly owned subsidiary,
Internal Command  International,  Inc. All material  inter-company  balances and
transactions have been eliminated.

Use of 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 revenue and expenses during
the reporting period. Actual results could differ from those estimates.

                                       8
<PAGE>

Fair Value of Financial Instruments
-----------------------------------

The  carrying  amount of cash,  accounts  payable,  notes  payable  and  accrued
liabilities, as applicable, approximates fair value due to the short term nature
of these items.


Cash and Cash Equivalents
-------------------------

The Company  considers all highly  liquid  investments  purchased  with original
maturities of three months or less to be cash equivalents.


Concentration of Credit Risk
----------------------------

The Company  places its cash in what it believes to be  credit-worthy  financial
institutions.  However,  cash balances may exceed FDIC insured levels at various
times during the year. There were no bank balances  exceeding  insured limits at
June 30, 2004.

Revenue
-------

There was no revenue generated in the quarter ended June 30, 2004.

Income Taxes
------------

Income  taxes are  provided  for  based on the  liability  method of  accounting
pursuant to  Statement  of  Financial  Accounting  Standards  ("SFAS")  No. 109,
"Accounting  for Income  Taxes."  Deferred  income taxes,  if any, are recorded,
using enacted tax rates expected to apply,  to reflect the tax  consequences  on
future years of differences  between the tax bases of assets and liabilities and
their financial reporting amounts at each year-end.

Equipment and Prototype
-----------------------

The Company has  capitalized  the costs  associated  with the manufacture of two
prototype  machines  that  will  be  used  for the  generation  of  electricity.
Depreciation  of this  equipment  will  commence when the machines are placed is
service and the useful life of the machines can be determined.


Earnings Per Share
------------------

The  Company  calculates  earnings  per share in  accordance  with SFAS No. 128,
"Earnings Per Share," which  requires  presentation  of basic earnings per share
("Basic EPS") and diluted earnings per share ("Diluted EPS"). The computation of
Basic EPS is computed by dividing loss available to common  stockholders  by the
weighted average number of outstanding common shares during the period.  Diluted
EPS gives effect to all dilutive  potential common shares outstanding during the
period. The computation of Diluted EPS does not assume  conversion,  exercise or
contingent  exercise of  securities  that would have an  antidilutive  effect on
earnings.  As of June 30, 2004,  there were no stock options and 7,497  warrants
outstanding.

                                       9
<PAGE>

Stock Based Compensation
------------------------

In  1996,  SFAS  No.  123  "Accounting  for  Stock-Based  Compensation,"  became
effective for the Company.  SFAS No. 123, which  prescribes  the  recognition of
compensation  expense  based on the fair  value of  options  on the grant  date,
allows  companies to continue  applying APB 25 if certain pro forma  disclosures
are made assuming hypothetical fair value method, for which the Company uses the
Black-Scholes option-pricing model.

The Company  accounts for employee stock options in accordance  with  Accounting
Principles  Board  Opinion No. 25 ("APB 25"),  "Accounting  for Stock  Issued to
Employees." Under APB 25, the Company recognizes no compensation expense related
to employee  stock  options,  as no options are granted at a price below  market
price on the date of grant.

For non-employee stock based compensation,  the Company recognizes an expense in
accordance with SFAS No. 123 and values the equity  securities based on the fair
value of the security on the date of grant. For stock-based  awards the value is
based on the  market  value  for the stock on the date of grant and if the stock
has  restrictions  as to  transferability  a discount  is  provided  for lack of
tradability.   Stock   option   awards  are  valued   using  the   Black-Scholes
option-pricing model.

Advertising
----------

The  Company  expenses  advertising  costs  as  incurred.  The  Company  had  no
advertising expense in the quarter ended June 30, 2004.

Recently Issued Accounting Pronouncements
-----------------------------------------

In June 2001, the FASB issued SFAS No. 141,  "Business  Combinations."  SFAS No.
141 requires  that the purchase  method of  accounting  be used for all business
combinations  initiated  after June 30, 2001.  Goodwill  and certain  intangible
assets  will  remain on the  balance  sheet and not be  amortized.  On an annual
basis,  and when  there is  reason  to  suspect  that  their  values  have  been
diminished or impaired,  these assets must be tested for  impairment,  and write
downs may be necessary.

The Company  adopted SFAS No. 141 as the basis for recording the  acquisition of
the assets  (including the patents) of Internal Command  International  Inc. The
Company issued 5,500,000 Preferred Shares for this acquisition. Accordingly, the
value placed upon the acquisition was $ 18,732,000. This value was determined by
an independent analysis conducted by IPA Advisory & Intermediary Services,  1275
Barclay Blvd, Buffalo Grove, Illinois. 60089

In January 2003, the Financial  Accounting  Standards Board ("FASB") issued FASB
Interpretation No. 46 ("FIN 46"),  "Consolidation of Variable Interest Entities,
an  Interpretation  of ARB No. 51." In December 2003, the FASB revised FIN 46 to
reflect decisions it made regarding a number of implementation  issues.  FIN 46,
as revised,  requires that the primary beneficiary of a variable interest entity
consolidate the entity even if the primary  beneficiary does not have a majority
voting interest. This interpretation applies to certain entities in which equity
investors do not have the characteristics of a controlling financial interest or
do not have  sufficient  equity at risk for the entity to finance its activities
without additional  subordinated  financial support.  This  interpretation  also
identifies  those  situations  where a  controlling  financial  interest  may be
achieved  through  arrangements  that  do  not  involve  voting  interests.  The


                                       10
<PAGE>

Recently Issued Accounting Pronouncements - continued

interpretation  also  establishes  additional  disclosures  which  are  required
regarding an enterprise's involvement with a variable interest entity when it is
not  the  primary  beneficiary.  The  requirements  of this  interpretation  are
required  to be  applied  for all new  variable  interest  entities  created  or
acquired  after  January 31, 2003.  For variable  interest  entities  created or
acquired prior to February 1, 2003, the provisions must be applied for the first
interim or annual  period ending after  December 15, 2003.  The Company does not
have any  controlling  interest,  contractual  relationships  or other  business
relationships with unconsolidated  variable interest entities, and therefore the
adoption of this  standard  did not have any effect on the  Company's  financial
position and results of operations.


NOTE 3 - RELATED PARTY TRANSACTIONS

The Company borrows funds from officers and  stockholders  from time to time. As
at June 30, 2004, there were no terms for the repayment of these loans.

During the three month period ended June 30, 2004, the Company received loans of
$155,000 from significant  shareholders to cover operating  expenses and certain
accounts payable. Currently, there has been no repayment terms specified for the
shareholder  loans,  as such,  the Company has  classified the loan as a Current
Liability.

NOTE 4 - DEBT UNDER PROFESSIONAL MANAGEMENT

As a part of the Merger Agreement with INTERNAL COMMAND  INTERNATIONAL INC., the
previous Chief Executive Officer of HSVI, Jay Budd, has and does affirm that the
outstanding  debts of HSVI have been properly  structured  for management of the
debt post-merger; namely, that the debt is in the hands of suitable professional
debt management team, Fletcher & Associates, and that there has been set aside a
pool of common  stock,  as part of the issued  common stock of the Company,  for
obligation  and  satisfaction  of the debt,  and that the ongoing  operations of
Internal Hydro International Inc. will be held harmless for this debt.

As a result of this obligation by the previous Chief Executive  Officer of HSVI,
Jay Budd,  and the  agreement,  with  Fletcher &  Associates,  the  Company  has
re-classified these debts from "Current Liabilities" to "Other Liabilities".

The  Company  is  currently  seeking a legal  opinion  regarding  the  timing of
converting this debt to equity.  Once this opinion is confirmed,  this debt will
be settled with a corresponding increase in Stockholders' Equity.


NOTE 5 - BUSINESS SEGMENTS

The Company operates in one business  segment,  the manufacture and marketing of
devices that produce  electrical energy from existing water,  steam, air and gas
flows.


NOTE 6 - COMMON STOCK

The Company  issued  46,358  shares of its Common  Stock  during the three month
period  ended June 30, 2004 for services  rendered to the Company.  The value of
these  services is recorded at $278,148,  which was based upon the closing price
of the Company's shares at April 1, 2004.

                                       11
<PAGE>

NOTE 7 - BUSINESS COMBINATION

On January 2, 2004, the Company entered into an agreement with Internal  Command
International, Inc. ("ICI") to acquire all of the outstanding shares of ICI. The
acquisition  was  effectuated  through the issuance of  5,000,000  shares of the
Company's Class A Preferred Stock in exchange for all of the outstanding  common
stock of ICI.  The  transaction  also  included  the  issuance of an  additional
500,000  shares of the  Company's  Class A  Preferred  Stock to  consultants  as
consideration for services rendered in connection with the merger.

ICI had no significant assets or liabilities other than its proprietary patented
technology for alternative energy generation. ICI is a development stage company
and has not yet commenced  revenue  generating  operations.  There was and is no
active  market for the  Company's  preferred  stock.  The  Company  obtained  an
independent valuation of the technology prior to the acquisition.  The valuation
report estimates the value of the technology to be $18,732,000.  The Company has
concluded  that this  valuation is the most readily  determinable  value for the
acquisition transaction. The Company intends to begin amortizing the capitalized
patent costs upon commencement of production of its machines for sale.

As a result of the  acquisition of ICI, the former  shareholders of ICI obtained
an approximately 45% voting interest in the Company. The former shareholders and
management of ICI took a 50% representation on the Company's board of directors.

In addition to the preferred  shares issued,  the former ICI  shareholders  will
also receive royalties based on sales of any of ICI products,  systems,  designs
or  patents,  generated  by the  successor  entity,  in an amount  not to exceed
$100,000,000.

NOTE 8 - NOTE PAYABLE

The Note  Payable  is a 1 year Term,  due April 30,  2005.  The Note  carries an
interest  rate  payable of 12% per annum.  The Note is  Convertible  into common
stock at the  discretion of the Lender,  including  all accrued  interest at the
lessor of $7.50 per share or at a 30% discount to the three  lowest  closing bid
prices for the five days prior to the conversion  date. The Note also includes a
warrant to purchase 100,000 shares of common stock at a price of $5.00 per share
for a period of 5 years.

The Company has valued the beneficial conversion feature of this Note Payable at
$25,713. This amount was charged to interest expense.

                                       12
<PAGE>

Item 2. Management's Discussion and Analysis and Plan of Operation.

General

The following discussion and analysis should be read in conjunction with the our
consolidated  financial  statements  and  related  footnotes  for the year ended
December 31, 2003 included in this Annual Report on Form 10-KSB.  The discussion
of results,  causes and trends  should not be construed to imply any  conclusion
that such results or trends will necessarily continue in the future.

Background and Overview

Tel-Voice Communications,  Inc. ("Tel-Voice") was incorporated under the laws of
the State of Nevada  on  December  31,  1996 to engage in any  lawful  corporate
activity,  including,  but not limited to,  selected  mergers and  acquisitions.
Smartdotcom,  Inc.  ("Smartdotcom") was incorporated under the laws of the State
of Nevada on April 19, 1999. On June 30, 2000, Smartdotcom became a wholly owned
subsidiary of Tel-Voice  through a reverse merger.  Tel-Voice  issued  4,376,895
shares of its common stock for all of the issued and outstanding common stock of
Smartdotcom.  Prior  to the  merger,  Tel-Voice  had no  business  activity  and
therefore,  pro forma operating results as if the acquisition had taken place at
the beginning of the periods presented have not been presented.  Smartdotcom has
been treated as the acquirer and  accordingly,  Smartdotcom  is presented as the
continuing entity. The historical financial statements are those of Smartdotcom.

In December of 2002, the Company  determined  that its business plan of becoming
an all-inclusive  telecom,  messaging and  communications  provider would not be
successful.  We therefore have wound down those operations and are now searching
for new  business  ventures.  We have  incurred net losses of  $2,560,448  since
inception.

Because  the Company had  determined  that it would exit the  telecommunications
business,  it developed a new business  plan to become a provider of services to
homebuyers.

Home Services International Inc. (HSVI) intended to act as a holding company for
service  businesses  related to the home  building  and home buying that want to
expand into  national  markets.  HSVI  intended to  acquire,  joint  venture and
develop such businesses. Businesses that were intended targets included mortgage
broking,  mortgage  originations  and  lending,  construction  lending and other
services that would benefit propsective home buyers.

HSVI expected to have 2 roles in the joint ventures or aquisitions:

     1.   To act as the financing  intermediary between the business's that have
          adpoted the HSVI program.

     2.   To distribute the interest earnings and profits to the shareholder who
          have provided the financing.

The corporate offices of HSVI would not require a large infrastructure or
overhead to operate this business:

          o    each  business  unit would be  trained to operate  independently,
               except for the financing

          o    the JV  partners  would  have the  responsibility  to manage  and
               coordinate the business unit relationship

                                       13
<PAGE>

Management's Discussion and Analysis and Plan of Operation - continued

This feature of the business meant most of the revenues  generated  would result
in high  profit  margins  and cash  flow  that can be  distributed  back the the
shareholders.  The first phase of this would be to pay dividends directly on the
preferred shares we intend to issue in raising capital.

As of December 29, 2003 the above Business Plan was abandoned. An opportunity to
merge with INTERNAL COMMAND  INTERNATIONAL INC. was negotiated with an effective
date  of  January  2,  2004.  The  merged   companies   became   INTERNAL  HYDRO
INTERNATIONAL INC.

Subject  to  the  terms  and  conditions  of  the  Merger   Agreement  (Plan  of
Reorganization)  and pursuant to Section  368(a)(1)(B)  of the Internal  Revenue
Code of 1986,  as amended,  the parties to the  Agreement  shall effect a Type B
reorganization (the  "Reorganization")  whereby all of the outstanding shares of
ICI  common  stock  were  exchanged  for  5,500,000  shares of the HSVI  Class A
Preferred Stock.

The Company has valued the  acquisitions  of these assets at  $18,732,000  based
upon an indication  of value  estimate  provided by IPA Advisory &  Intermediary
Services, 1275 Barclay Blvd, Buffalo Grove, Illinois. 60089.


INTERNAL HYDRO  INTERNATIONAL  INC. owns an alternative power system. The Energy
Commander IV (EC IV) is a patented technology,  utilizing  wastewater,  fluid or
gas flow from any source  where flow  pressure  is present,  and yet wasted,  to
create electricity.  The system takes in the wasted pressure flow, where it goes
through the heart of the system, and into pistons that create massive mechanical
forces,  all of which is transferred to a generator  creating both  electricity,
and optional air  pressure,  both being for direct use or storage.  The water or
gas then moves out of the unit,  to it's  original  destination,  without  added
waste. The system is noiseless and emission free

IHI has  prepared a business  model that will market the EC IV system  through a
distributors  network  around  the  world.  Numerous  municipalities,  counties,
manufacturing, textile, petroleum, residential development, and other industries
have  entered into  agreements  and intents  with IHI for  application  of these
units.

Results of Operations
---------------------

Quarter ended June 30, 2004 vs. June 30, 2003

Revenue for the three months ended June 30, 2004 and 2003 was $-0-.

General and  administrative  expenses  for the three  months ended June 30, 2004
increased  by  $411,408.  The increase is  principally  due to  increased  costs
related to the  Company's  expanded  effort to finalize an equity  financing  to
commence marketing of the EC IV machines. All of the expenses were paid for from
loans provided by significant  shareholders,  services provided for shares and a
note payable from an investment broker.

Interest  expense for the three months ended June 30, 2004  decreased by $7,791.
The  decrease is the result of the debt being  placed with a  professional  debt
management service.

                                       14
<PAGE>

Management's Discussion and Analysis and Plan of Operation - continued

Liquidity and capital resources

The  Company  has  incurred  additional  deficits  in cash flow  from  operating
activities.  These  deficits  have  been  funded  from  loans  from  significant
shareholders.  The Company is in discussions with several capital  organizations
with a view to selling more common and preferred  shares as a means of financing
future  capital  needs.  The company  anticipates it will be successful in these
discussions,  however  there  can be no  assurances  that  the  Company  will be
successful in doing so.

As a part of the Merger Agreement with INTERNAL COMMAND  INTERNATIONAL INC., the
previous Chief Executive Officer of HSVI, Jay Budd, has and does affirm that the
outstanding  debts of HSVI have been properly  structured  for management of the
debt post-merger; namely, that the debt is in the hands of suitable professional
debt management team, Fletcher & Associates, and that there has been set aside a
pool of common  stock,  as part of the issued  common stock of the Company,  for
obligation  and  satisfaction  of the debt,  and that the ongoing  operations of
Internal Hydro International Inc. will be held harmless for this debt.


As a result of this obligation by the previous Chief Executive  Officer of HSVI,
Jay Budd,  and the  agreement,  with  Fletcher &  Associates,  the  Company  has
re-classified these debts from "Current Liabilities" to "Other Liabilities".

The  Company  is  currently  seeking a legal  opinion  regarding  the  timing of
converting this debt to equity.  Once this opinion is confirmed,  this debt will
be written of with a corresponding increase in Stockholders' Equity.

Forward-looking statements

This report contains certain  forward-looking  statements  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities Exchange Act of 1934, as amended. Stockholders are cautioned that all
forward-looking  statements  involve risks and  uncertainty,  including  without
limitation,  the ability of us develop our  technology  and execute our business
plan.  Although  we  believe  the  assumptions  underlying  the  forward-looking
statements  contained  herein are reasonable,  any of the  assumptions  could be
inaccurate,  and therefore,  there can be no assurance that the  forward-looking
statements contained in the report will prove to be accurate.

Off balance sheet arrangements

The Company's  liquidity has not dependent upon off balance sheet  transactions.
For the  period  ended  June 30,  2004,  the  Company  did not engage in any off
balance sheet transactions.

Item 3. Controls and Procedures

The Company  maintains  disclosure  controls and procedures that are designed to
ensure that  information  required to be  disclosed  in our annual and  periodic
reports  filed with the SEC is  recorded,  processed,  summarized  and  reported
within the time periods specified in the SEC's rules and forms. These disclosure
controls and procedures are further  designed to ensure that such information is
accumulated and  communicated  to our management,  including our Chief Executive
Officer and Principal  Accounting  Officer,  to allow timely decisions regarding
required disclosure.

                                       15
<PAGE>

Controls and Procedures - continued

Based on the most recent  evaluation,  which was completed within 90 days of the
filing of this report,  our Chief  Executive  Officer and  Principal  Accounting
Officer  believes  that the Company's  disclosure  controls and  procedures  are
effective and there have been no significant  changes in the Company's  internal
controls  or in other  factors  that could  significantly  affect  the  internal
controls subsequent to the date of the most recent evaluation.

                                       16
<PAGE>

PART II. OTHER INFORMATION

Item 1. Legal Proceedings

There are no active legal claims.

This  statement is based upon the obligation and agreement by the previous Chief
Executive  Officer  of HSVI,  Jay  Budd,  and the  agreement,  with  Fletcher  &
Associates, to manage and hold the ongoing entity of Internal Hydro harmless for
previous  debts of the  company.  The  Company  will  continue  to monitor  this
agreement  and  disclose  the  results  of this  agreement  in future  financial
statements.

Item 2 - Changes in Securities

During the three month  period  ended June 30, 2004 the Company  granted  46,358
shares of its common stock as  consideration  for  services  provided by certain
staff and Board members.  These shares were issued in April 2004.  There were no
underwriters  involved in the issuance of these shares and the  securities  were
not publicly offered for sale.


Item 6. Exhibits and Reports on Form 8-K

(a) Exhibits

31.1 Certifications  pursuant to Rule 13a-4 of the  Securities  Exchange  Act of
     1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
32.1 Certification  of Chief  Executive  Officer  pursuant to 18 U.S.C.  section
     1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley act of 2002.


(b) Reports on Form 8-K

    None
                                   SIGNATURES

Pursuant to the  requirements of Section 13 or 15(d) of the Securities  Exchange
Action of 1934,  as amended,  the  registrant  has duly caused this Report to be
signed on its behalf by the undersigned, thereunto duly authorized.

                        INTERNAL HYDRO INTERNATIONAL INC.


By:   /s/ CRAIG A. HUFFMAN
 ---------------------------
          Craig A. Huffman
          CHIEF EXECUTIVE OFFICER


Pursuant to the requirements of the Securities Exchange Act of 1934, as amended,
this  Report has been  signed  below by the  following  persons on behalf of the
registrant and in the capacities and on the dates indicated.


       Signature                   Title              Date

    /s/ CRAIG A. HUFFMAN
--------------------------
        Craig A. Huffman, Chief Executive Officer     August 16, 2004

                                       17
<PAGE>

Exhibit 31.1 CERTIFICATIONS

I, Craig A. Huffman,  certify, pursuant to Rule 13a-4 of the Securities Exchange
Act of 1934,  as adopted  pursuant to Section 302 of the  Sarbanes-Oxley  Act of
2002, with respect to the Quarterly Report of Internal Hydro International, Inc.
("IHDR") on Form 10-QSB for the quarterly  period ended June 30, 2004 ("Report")
that:

(1)  I have reviewed this Report;

(2)  based on my knowledge, this Report does not contain any untrue statement of
     a material  fact or omit to state a  material  fact  necessary  to make the
     statements made, in light of the circumstances  under which such statements
     were made,  not  misleading  with  respect  to the  period  covered by this
     Report;

(3)  based  on my  knowledge,  the  financial  statements  and  other  financial
     information  included  in  this  Report,  fairly  present  in all  material
     respects the financial  condition,  results of operations and cash flows of
     IHDR as of, and for the periods presented in this Report;

(4)  I am responsible for establishing and maintaining  disclosure  controls and
     procedures  (as defined in Exchange  Act Rules  13a-14 and 15d-14) for IHDR
     and I have:

     (a)  designed  such  disclosure  controls  and  procedures  to ensure  that
          material  information  relating to IHDR is made known to me by others,
          particularly during the period in which this Report is being prepared;

     (b)  evaluated  the  effectiveness  of  IHDR's   disclosure   controls  and
          procedures  as of a date  within 90 days prior to the  filing  date of
          this Report (the "Evaluation Date"); and

     (c)  presented in this Report my conclusions about the effectiveness of the
          disclosure  controls and  procedures  based on my evaluation as of the
          Evaluation Date;

(5)  I have disclosed,  based on my most recent evaluation,  to our auditors and
     the audit  committee of our board of directors (or persons  performing  the
     equivalent  function):

     (a)  all  significant  deficiencies  in the design or operation of internal
          controls which could adversely affect our ability to record,  process,
          summarize  and  report  financial  data  and have  identified  for our
          auditors any material weaknesses in internal controls; and

     (b)  any fraud, whether or not material,  that involves management or other
          employees who have a significant role in our internal controls; and

(6)  I have  indicated  in this  Report  whether or not there  were  significant
     changes in internal  controls or in other factors that could  significantly
     affect  internal  controls  subsequent  to  the  date  of  my  most  recent
     evaluation,  including any  corrective  actions with regard to  significant
     deficiencies and material weaknesses.


By:      /s/ Craig A. Huffman
      ---------------------------
            Craig A. Huffman
            Chief Executive Officer

                                       18
<PAGE>

Exhibit 32.1

                        INTERNAL HYDRO INTERNATIONAL INC.
                                CERTIFICATION OF
                             CHIEF EXECUTIVE OFFICER
                       PURSUANT TO18 U.S.C. SECTION 1350,
                       AS ADOPTED PURSUANT TO SECTION 906
                        OF THE SARBANES-OXLEY ACT OF 2002

I, Craig  Huffman,  solely for the purpose of complying  with 18 U.S.C.  Section
1350,  as adopted  pursuant  to Section 906 of the  Sarbanes-Oxley  Act of 2002,
hereby  certify  that to my knowledge  the  Quarterly  Report of INTERNAL  HYDRO
INTERNATIONAL  INC. on Form 10-QSB for the quarterly  period ended June 30, 2004
fully complies with the requirements of Section 13(a) or 15(d) of the Securities
Exchange Act of 1934 and that  information  contained in such Form 10-QSB fairly
presents  in all  material  respects  the  financial  condition  and  results of
operations of Internal Hydro International, Inc.


/s/ Craig A. Huffman
------------------------
    Craig A. Huffman
    Chief Executive Officer



                                       19
<PAGE>