Form 10-SB/A

                                Amendment No. 6

      GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS

        Under Section 12(b) or (g) of the Securities Exchange Act of 1934


                       Hydro Environmental Resources, Inc.
                 (Name of Small Business Issuer in its charter)

             Oklahoma                                   73-1552304
(State or other jurisdiction of             (I.R.S. Employer Identification No.)
incorporation or organization)


                        8908 South Yale Avenue, Suite 409
                                 Tulsa, OK 74137
                                 (918) 492-4125
                    (Address of principal executive Offices)


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


                    Securities to be registered under Section
                               12(g) of the Act:
                         Common Stock, $0.001 par value



<PAGE>
                                     PART I


Item 1.  Description of Business

(a)  Business Development.  Hydro Environmental Resources, Inc. ("Company") is a
     development stage corporation organized on November 10, 1998 under the laws
     of the state of Oklahoma.  There has been no bankruptcy,  receivership,  or
     similar proceeding by or against the Company.  In addition,  there has been
     no material reclassification, merger, consolidation, or purchase or sale of
     a significant amount of assets not done in the ordinary course of business.

(b)  Business of Issuer.

1.   Principal  products or services  and their  markets.  The  objective of the
     Company is to  design,  build and manage  inexpensive  and  environmentally
     friendly  fuel and power  producing  systems for remote  areas of the world
     that are without  electricity,  cooking  fuel,  fresh water or power of any
     kind. On June 16,1999,  the rights to the ElectroChem Hydrogen Fuel Reactor
     (ECHFR), a prototype-stage  technology that produces clean burning hydrogen
     gas at low pressure from any water source,  were assigned to the Company in
     exchange for 15,000,000  shares of restricted common stock and a 5% royalty
     to the inventor,  Mr. James Pelto.  Mr. Pelto built the prototype ECHFR and
     will continue to be involved in its development and commercialization.

     The  ECHFR  is  designed  to be  used  where  there  is no  energy  readily
     available.  All that is  required  for the  ECHFR  to work is  water  and a
     proprietary  mixture of dry chemicals that are readily available,  light in
     weight, and easily  transported.  The Company is not aware of another power
     generation   system  that  is  similar  to  the  ECHFR.   The  ECHFR  is  a
     sophisticated  mechanical  reactor that creates an electrical  current that
     splits  the water  molecule,  separating  the two  hydrogen  atoms from the
     oxygen atom. The ECHFR activates a formula that removes hydrogen from water
     on a stand-by or as needed  basis using  equipment  that can be portable or
     stationery.  The result is clean burning  hydrogen gas that can be used for
     cooking, heating or refrigeration.

     The present  prototype ECHFR unit is a portable  3-gallon system capable of
     producing  enough  hydrogen gas to power a 2-kW  electric  generator for 16
     hours or to power a gas stove for 8-10 days. The next stage is to develop a
     larger system (50-100  gallons)  capable of producing enough hydrogen power
     to supply  electricity,  cooking fuel and purified water for a community of
     100 people.  Management  estimates R&D for the larger ECHFR unit to be from
     12-18  months.  Because  the  ECHFR  technology  is still  in  development,
     management  has  not  yet  determined  production  costs,  therefore,   the
     cost-effectiveness of the ECHFR technology has yet to be determined.

     Ultimately,  the Company intends to build,  market and operate a stationary
     power site using a 3,000 gallon ECHFR system capable of supplying power for
     a city of approximately 3,000 people. The Company plans to market the ECHFR
     technology in places that are  currently  underserved  by convention  power
     companies,  including Indonesia, China, Philippines,  Malaysia, Middle East
     and parts of Central and South  America.  In addition  to  providing  fuel,
     other potential  markets for the ECHFR are industrial mining and wastewater
     cleansing and property restoration.

2.   Distribution methods of the products or services. The Company plans to hire
     approximately  five  employees  during the next twelve months to market the
     ECHFR. To date the Company has received no orders for its product and there
     is no  assurance  that the  Company  will ever  receive  any orders for its
     product.

                                       2
<PAGE>

3.   Competitive business conditions and the small business issuer's competitive
     position in the industry and methods of competition.  The Company  believes
     that its ECHFR  technology is unique.  There is no ECHFR or its  equivalent
     used to produce energy anywhere else at this time. The ECHFR uses water and
     a  proprietary  mixture of chemicals  to produce  hydrogen gas for cooking,
     heating and refrigeration.

     A potential  competing  technology  to the ECHFR is the hydrogen fuel cell.
     Fuel cells are  electro-chemical  devices,  similar to a battery,  in which
     hydrogen  (either pure hydrogen gas or hydrogen  extracted from a fuel that
     contains  the  element)  and oxygen  from the air are  combined  to produce
     electricity,  water  and a modest  amount  of waste  heat.  The  conversion
     efficiency  can be as high as 80%,  but actual  values  vary with fuel cell
     types. Each cell produces on 0.5-0.9 volts, so a large number of cells must
     be stacked together and electrically  connected in a series and parallel to
     achieve the desired output. Like a battery, a fuel cell stack has no moving
     parts (except for small fans and pumps to remove or recover waste heat) has
     near-zero   emissions   except  for  water,   and  is  ultra-quiet.   These
     characteristics  make the fuel cell a highly  attractive  power  source for
     automobiles and other vehicles, and for stationary power plants.

     Fuel  cell  power  systems  can be  classified  in three  groups by type of
     application: 1) those intended to replace the internal combustion engine in
     automobiles,  trucks and buses,  2) those  intended to serve as distributed
     generation  power  plant  that  are at or close to  homes,  buildings,  and
     manufacturing  plants;  and 3) those that are intended to replace batteries
     in everything from cellular  telephones,  flashlights,  computers,  radios,
     golf carts, powered wheelchairs,  to portable outdoor signs.


     Hydrogen fuel cell technology is currently being commercialized.  According
     to a report documenting perspectives, insights and discussions presented by
     industry leaders at a recent conference on The Business Case for Fuel Cells
     (July 15-16, 1999), total worldwide R&D spending on fuel cell technology is
     nearly $1 billion per year with funding provided by vehicle  manufacturers,
     equipment  manufacturers,  utilities,  and government agencies in the U.S.,
     Europe  and  Japan.  About  80% of  the  funding  is  directed  toward  the
     development of fuel cell systems for electric vehicles such as automobiles,
     trucks,  buses  and  golf  carts.

     Companies  such as Daimler  Chrysler  and Ford have  recognized  the future
     commercial potential of hydrogen fuel cells for the automotive industry and
     have developed strategic alliances with and have invested over $500 million
     in Ballard Power Systems, a leading company in the commercialization of the
     hydrogen  fuel cell.  Ballard,  together  with its  alliance  partners  and
     associated  companies,  plans to bring to market their first portable power
     products  in 2001;  their first  transit  bus engines in 2002;  their first
     stationary power products between 2002 and 2003; and their first automotive
     engines between 2003 and 2005.


     Manufacturers  and marketers of hydrogen  fuel cells include  Ballard Power
     Systems, DCH Technology,  Inc., ONSI, Ergenics, H Power Corp.,and Powerball
     Technologies.  These companies produce fuel cells on a made-to-order basis.
     Competitors may be able to develop  technologies  that are as effective as,
     or more  effective,  easier or  cheaper to use,  than those  offered by the
     Company.   The   Company's   existing  and   potential   competitors   have
     substantially   greater   financial,   marketing,   sales,   manufacturing,
     distribution  and  technological  resources  than the Company.  There is no
     assurance that the Company will be able to successfully compete.


                                       3
<PAGE>
4.   Patents, trademarks, licenses, franchises,  concessions, royalty agreements
     or labor  contracts.  The  ECHFR and the  chemical  formula  for  producing
     hydrogen  are both  covered by pending  patents.  The pending  patents were
     filed in Australia and cover 96 international jurisdictions,  including the
     United States.  There is no assurance that the patents will issue and there
     is no  assurance  that if the patents  issue that they will not infringe on
     other  patents.  Management  does not have an estimated  time frame for the
     patents to be issued. If the patents issue,  their duration will be from 17
     to 20 years from the date of issuance.

5.   Government  approval of principal product or service.  Although the Company
     is  not  aware  of  any  government  approvals  required  prior  to  or  in
     conjunction   with  its  marketing  of  the  ECHFR  in  Indonesia,   China,
     Philippines,  Malaysia, Middle East and parts of Central and South America,
     there is no assurance that such  government  approvals will not be required
     in the future.  In  addition,  compliance  with  government  or  regulatory
     requirements,  if  any,  could  have  a  material  adverse  affect  on  the
     operations of the Company.

6.   Employees.  The  Company  presently  has one officer  and  director  and no
     full-time employees.  The officer and director is engaged in other business
     activities  and devotes no more than 50% of his time to the business of the
     Company.  The Company has no other  full-time or part-time  employees.  The
     Company plans to hire  approximately  five employees during the next twelve
     months to market the ECHFR and plans to retain  consulting  engineers  on a
     project-by-project  basis. There is no assurance that any employees will be
     hired or any consultants will be retained.

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

         Plan of Operations. During the next twelve months, the Company plans to
raise  approximately  $2.5 million in  additional  capital to fund its operating
activities,  which include hiring  approximately  five  additional  employees to
market the product,  finding a third-party  manufacturer to build the ECHFR, and
building  three ECHFR units of varying sizes for  demonstration.  Management has
not yet determined  whether the  additional  capital will be raised through debt
financing,  the sale of common  stock in a  private  or  public  offering,  or a
combination  of both.  There is no assurance that the Company will be successful
in raising  additional  capital to fund its  operating  activities  or that such
capital, if raised, will be on favorable terms.

         The Company's  strategic business plan and business model is subject to
many risks, including, but not necessarily limited to, the following:

1.   No Operating  History.  The Company was  organized on November 10, 1998 and
     has no operating history. The Company has no products,  operating revenues,
     and minimal  assets at this time.  There is no  assurance  that the Company
     will be able to develop,  manufacture or market any products  successfully,
     generate net revenue from the sale of any products,  or achieve or maintain
     profitable operations.

                                       4
<PAGE>

2.   Product Not  Developed.  The Company has no products and limited  assets at
     this time. The business of the Company  depends upon the development of the
     ECHFR technology.  There is no assurance that the Company's activities will
     be successful or profitable.

3.   Patent Position. The ECHFR is protected by pending patents in Australia and
     96 international  jurisdictions.  There is no assurance that patents do not
     infringe the rights of others,  and there is no assurance  that the pending
     patent applications will be issued.

4.   Filing, Prosecution and Maintenance of Patents. The filing, prosecution and
     maintenance  of all patent  rights are  within the sole  discretion  of the
     Company.  The Company intends to seek,  obtain and maintain such patent and
     other  protections to the extent that it is lawfully  entitled to do so, at
     the  Company's  sole expense.  There is no assurance  that the Company will
     have sufficient working capital to fund its efforts in those activities.

5.   Need for Additional  Capital.  Additional  capital will be required to fund
     further  development,   file  and  process  applications  for  governmental
     approval, if required,  develop models, identify manufacturers to build the
     ECHFR,  and to advertise,  ship and collect for products sold and any other
     costs. The Company intends to pursue additional financing.  However,  there
     is no  assurance  that any  additional  capital  will be  available  to the
     Company on acceptable terms when needed, if at all.

6.   Acceptance of ECHFR by Market.  Inherent to the successful marketing of the
     Company's ECHFR is the acceptance of the product by the market. There is no
     assurance that the ECHFR will be accepted.

7.   Competition.  The alternative  fuels industry is intensely  competitive and
     composed of large and well financed firms that are constantly developing or
     acquiring  rights  to  new  products.  Some  competitors  have  established
     distribution networks and sufficient marketing resources to resist attempts
     to dislodge use of their products. In addition,  there is no assurance that
     one or more competitors  will not develop or manufacture  products that are
     more  effective  or better  accepted  than those that the Company  seeks to
     commercialize.  There  is no  assurance  that the  Company  will be able to
     compete successfully or profitably.

8.   Dependence  Upon Key Personnel.  The Company is dependent upon the services
     of Jack Wynn, sole officer and director,  and of Mr. James Pelto,  inventor
     of the ECHFR.  The loss of the  services of Mr.  Wynn or Mr.  Pelto and the
     inability to retain an acceptable  substitute will have a material  adverse
     effect  on the  Company.  There is no  assurance  that  replacement  of key
     personnel will be possible.  There is no written employment  agreement with
     Mr. Wynn. There is no written consulting services agreement with Mr. Pelto.
     Mr. Pelto owns 47.92% of the outstanding common stock of the Company.

                                       5
<PAGE>

9.   Limited  Experience  of  Management.  Mr.  Wynn,  the sole  officer  of the
     Company,  has limited experience in the fuel and power producing  industry.
     Mr.  Wynn and Mr.  Pelto,  inventor  of the ECHFR  technology,  have  other
     business interests outside of their involvement with the Company.  however,
     they anticipate devoting 100% of their time to the Company's activities.

10.  No Trading Market for Common Stock.  There is no established  liquid market
     for the Company's Common Stock. The Company intends to pursue  developing a
     liquid market for the Common Stock as soon as practicable,  with the filing
     of its SEC Form 10 and its  application for approval for trading its shares
     on the OTC  Bulletin  Board.  Recent  changes  in NASD and SEC  rules  will
     require the Company to file with the SEC and comply with interim, quarterly
     and  annual  reporting  requirements  in order for the  Common  Stock to be
     quoted in the OTC Bulletin Board market. The Company intends to comply, but
     there is no assurance it will be able to do so. There is no assurance  that
     a liquid  market for the Common  Stock  will  develop  or, if such a market
     develops,  that it will be  maintained.  Holders of Shares of Common  Stock
     may, therefore,  have difficulty in selling their Shares should they desire
     to do so. Investors must be able to lose their entire  investment in Shares
     of Common Stock.

11.  No Dividends.  The Company has not paid any cash or other  dividends on its
     Common Stock and does not expect to declare or pay any such cash  dividends
     in the foreseeable future.

12.  International  Economic  Conditions.  Local,  national,  and  international
     economic conditions may have a substantial adverse affect on the efforts of
     the Company.  The Company cannot guarantee against the possible eventuality
     of any potential adverse economic conditions.

13.  Impact of Year 2000 on operations of the Company. The Year 2000 issue (Y2K)
     is the result of computer  programs  written  using two digits  rather than
     four to define the  applicable  year.  Any of the  Company's  computer  and
     telecommunications programs that have date sensitive software may recognize
     a date using "00" as the year 1900  instead of 2000.  This could  result in
     system  failure  or  miscalculations  causing  disruptions  in  operations,
     including the ability to process transactions,  send invoices, or engage in
     similar normal business activities.As of December 31, 1999, the Company did
     not own any software;  however,  the Company cannot determine the extent to
     which the Company is  vulnerable  to third  parties'  failure to  remediate
     their own Y2K  problems.  As a result,  there can be no guarantee  that the
     systems of other  companies on which the Company's  business relies will be
     timely  converted,  or that  failure to convert  by another  company,  or a
     conversion that is incompatible  with the Company's  systems,  would have a
     material adverse effect on the Company. In view of the foregoing, there can
     be no assurance that the Y2K issue will not have a material  adverse effect
     on the Company's business.

                                       6
<PAGE>

     To date the costs to the Company to address Y2K issues has been immaterial.
     The Company  believes the most likely worst case scenario related to Y2K is
     a significant delay in the development of its product. Such an interruption
     could occur due to a breakdown in the systems of third parties. The Company
     currently does not have a contingency plan in the event a particular system
     or vendor is not Y2K ready.  There can be no assurance that  unexpected Y2K
     readiness  problems of third parties will not materially  adversely  affect
     the Company's  business,  operating  results and financial  condition.  The
     foregoing assessment  represents  managements best estimates at the present
     time, which could change signficantly in the future.

     Results of Operations.  The Company has no revenues from sales and does not
expect to have  revenues  until it has  raised  sufficient  capital  to fund its
operations. There is no assurance that the Company will be successful in raising
additional capital.

     Liquidity and Capital  Resources.  As of December 31, 1999, the Company had
$9,665 in cash.  During  the next  twelve  months,  management  intends to raise
additional  capital to fund its business plan, as operating revenues will not be
generated until such time as sales of the ECHFR commence. Management has not yet
determined whether the additional capital will be raised through debt financing,
the sale of common stock in a private or public  offering,  or a combination  of
both.  There is no  assurance  that the Company  will be  successful  in raising
additional  capital to fund its operating  activities  or that such capital,  if
raised, will be on favorable terms.

     The Company faces considerable risks at each step in its strategic business
plan. Such things as technology, societal and economic changes, cost overruns, a
lack of interest in and/or  inability  to market the ECHFR,  and  shortfalls  in
funding due to the Company's  inability to raise additional capital through debt
or in the equity securities market all may have an impact on the Company.  If no
additional  funding is raised over the next twelve  months,  the Company's  sole
officer  and  director  may loan or  contribute  to the  Company  funds to cover
minimal  operating  expenses,  however,  he has no  legal  obligation  to do so.
Although the Company's sole officer and director has made loans or contributions
of funds to the Company in the past, there is no assurance that he will do so in
the future.  In such a  restricted  scenario,  the Company  would not be able to
complete all of the steps of its strategic business plan, and would therefore be
forced to delay all capital-intensive  activities.  It is possible that, without
necessary and sufficient  cash flow during the next twelve  months,  the Company
would have to severely restrict its plans and abilities to move forward with its
strategic business plan.

                                       7
<PAGE>

Item 3.  Description of Property

         The Company owns no property.  The  principal  executive  office of the
Company is provided free of charge by the Company's President.

Item 4.  Security Ownership of Certain Beneficial Owners and Management

         The table  below  details the  beneficial owners of more than 5% of the
Company's Common Stock as of December 31, 1999:

                                               Amount and Nature
                      Name and Address             of Beneficial         Percent
    Title of Class    of Beneficial Owner              Ownership        of Class
    ----------------------------------------------------------------------------

    Common Stock      Quantum Development Corp
                      34/30 St. Kevins
                      Benowa, Queensland 4217
                      Australia                       3,055,000            9.76%

    Common Stock      John Wheeler
                      14 Kel Nagle Crt
                      Parkwood, Queensland 4214
                      Australia                       2,500,000            7.99%


    Common Stock      James Pelto
                      17/30 St. Kevins Ave.
                      Benowa, Queensland 4217
                      Australia                      15,000,000           47.92%
                                               ---------------------------------

                      Total Ownership of
                         Beneficial Owners           20,555,000           65.67%
                                               ---------------------------------

         The table below details the ownership of the Company's  Common Stock by
its sole director and officer:
                                               Amount and Nature
                          Name and Address         of Beneficial         Percent
    Title of Class        of Beneficial Owner          Ownership        of Class
    ----------------------------------------------------------------------------
    Common Stock      Jack Wynn
                      2006 Oak Creek Place
                      Hayward, CA  94541                 650,000           2.08%
                                               ---------------------------------

Item 5.  Directors, Executive Officers, Promoters and Control Persons

         Jack Wynn is the sole  officer and  director of the  Company.  Prior to
founding  the  Company,  he was  Chairman  of the Board of  Scanner  Energy,  an
Oklahoma  Corporation.  While in Oklahoma,  he formed the Oklahoma  Transfer and
Registrar Corporation, which was later transferred to San Francisco,  California
as Securities  Transfer Pacifica Corp. Prior to Scanner Energy, he was a partner
with Scholen, Wynn & Associates,  a securities and insurance brokerage business.
Mr. Wynn has over twenty years in the life  insurance  industry,  including  ten
years with Occidental Life Insurance.

Item 6.  Executive Compensation

         The Company's  sole officer and director does not receive  compensation
for his services. There are no written employment agreements.

                                       8
<PAGE>

Item 7.  Certain Relationships and Related Transactions

         The  Company  had no  transactions  with  related  parties in excess of
$60,000.

Item 8.  Description of Securities

     The Company is authorized to issue  50,000,000  Shares of Common Stock, par
value $0.001 per share, of which 31,300,000  shares were outstanding at December
31, 1999. The Company is also authorized to issue 5,000,000  Shares of Preferred
Stock,  par value  $0.001  per  share,  of which  there are no shares  presently
outstanding. There is no present intent to issue any Preferred Stock.

         Voting  Rights.  Holders of shares of Common  Stock are entitled to one
vote per share on all matters submitted to a vote of the shareholders. Shares of
Common Stock do not have cumulative voting rights,  which means that the holders
of a  majority  of the  shareholder  votes  eligible  to vote and voting for the
election  of the  Board of  Directors  can  elect  all  members  of the Board of
Directors.  Holders of a majority of the issued and outstanding shares of Common
Stock may take action by written consent without a meeting.

         Dividend  Rights.  Holders  of record  of  shares  of Common  Stock are
entitled to receive dividends when and if declared by the Board of Directors. To
date,  the Company has not paid cash  dividends on its Common Stock.  Holders of
Common Stock are entitled to receive such  dividends as may be declared and paid
from  time to time by the  Board of  Directors  out of funds  legally  available
therefor.  The Company  intends to retain any  earnings  for the  operation  and
expansion of its business and does not  anticipate  paying cash dividends in the
foreseeable future. Any future determination as to the payment of cash dividends
will depend upon future earnings,  results of operations,  capital requirements,
The  Company  's  financial  condition  and such  other  factors as the Board of
Directors may consider.

         Liquidation Rights. Upon any liquidation,  dissolution or winding up of
the Company,  holders of shares of Common Stock are entitled to receive pro rata
all of the assets of the Company  available  for  distribution  to  shareholders
after  liabilities  are paid and  distributions  are made to the  holders of The
Company 's Preferred Stock.


                                     PART II


Item 1. Market Price of and  Dividends  on the  Registrant's  Common  Equity and
          Other Shareholder Matters

     Market  Information.  There is no established  public trading  market.  The
Company  plans to apply for listing on the OTC  Bulletin  Board at the  earliest
practicable date.

     Outstanding  Options  or  Warrants.  There are no  outstanding  options  or
warrants.

     Shares that could be sold  pursuant to Rule 144.  Approximately  11,845,000
shares of the Company's  30,300,000  common shares  outstanding  at December 31,
1999 are eligibile for trading under Rule 144.


     Holders.  The Company has  approximately 77 holders of record of its Common
Stock.

                                       9
<PAGE>

     Dividends.  The Registrant intends to retain any earnings for the operation
and expansion of its business and does not  anticipate  paying cash dividends in
the foreseeable future.

     Transfer  Agent.  The  Company's  transfer  agent is Nevada  Agency & Trust
Company, 50 West Liberty Street, Suite 880, Reno, NV 89501.

     Penny Stock Rules. The Securities and Exchange  Commission has adopted Rule
15g-9 which established the definition of a "penny stock" as any equity security
that has a market price of less than $5.00 per share,  or with an exercise price
of less than $5.00 per  share,  subject to  certain  exceptions.  The  Company's
common  stock would be  considered  a penny stock under the  regulations,  which
makes it more  difficult  for  investors to resell their common  stock.  For any
transaction  involving a penny stock, unless exempt, the rules require: (i) that
broker or dealer approve a person's  account for  transactions  in penny stocks;
and, (ii) the broker or dealer receive from the investor a written  agreement to
the  transaction,  setting forth the identity and quantity of the penny stock to
be purchased.  In order to approve a person's  account for transactions in penny
stocks,  the  broker  or  dealer  must  (i)  obtain  financial  information  and
investment  experience  objectives  of the  person;  and (ii) make a  reasonable
determination  that the  transaction(s)  in penny  stocks are  suitable for that
person and the person has  sufficient  knowledge  and  experience  in  financial
matters to be capable of evaluating the risks of  transactions  in penny stocks.
The broker or dealer  must also  deliver,  prior to any  transaction  in a penny
stock, a disclosure  schedule  prepared by the Commission  relating to the penny
stock market,  which, in highlighted form, (i) sets forth the basis on which the
broker or dealer made the suitability determination; and (ii) that the broker or
dealer  received a signed,  written  agreement  from the investors  prior to the
transaction.  Disclosure  also has to be made  about the risks of  investing  in
penny stocks in both public  offerings  and in  secondary  trading and about the
commissions  payable to both the  broker-dealer  and registered  representative,
current  quotations for the securities and the rights and remedies  available to
an  investor  in case of fraud in penny  stock  transactions.  Finally,  monthly
statements  have to be sent  disclosing  recent price  information for the penny
stocks  held in the  account  and  information  on the  limited  market in penny
stocks.

Item 2.  Legal Proceedings

         None

Item 3.  Changes in and Disagreements with Accountants

         None

                                       10
<PAGE>

Item 4.  Recent Sales of Unregistered Securities


(a)  Securities Sold
     During  February,  1999, the Company offered for sale 11,300,000  shares of
its $.001 par value  common  stock for $.001 per share  pursuant to an exemption
from registration  under Rule 504 of Regulation D of the Securities Act of 1933,
as amended (the "Act"). An additional 4,250,000 shares of common stock were sold
to an officer and affiliates of the Company for $4,250 ($0.001 per share). These
shares are "restricted  securities" and may be sold only in compliance with Rule
144 of the  Act.The  Company  sold all  11,300,000  shares for net  proceeds  of
$9,375,   after  deducting  offering  costs  totaling  $1,925.   There  were  no
underwriters or commissions paid

     On June,  16, 1999,  the Company  issued  15,000,000  shares of  restricted
common stock to Mr. James Pelto,  inventor, to purchase the patent rights to the
ElectroChem  Hydrogen  Fuel Reactor.

On July 10,  1999,  the  Company  issued  750,000  shares of its $.001 par value
common stock in accordance with the terms of a financial advisory agreement

b.  Underwriters and Other Purchasers

     There was no public offering of the shares.  There was no underwriter used
in connection with the offer or sale of the securities.

c.  Consideration

     There was no consideration paid by the Company in connection with the offer
or sale of the its securities.


d. Section under which exemption from registration was claimed.

     The offering of 15,550,000  shares of the Company's common stock was exempt
from  registration  pursuant  to  Regulation  D,  Rule 504.  Rule 504  permits a
non-reporting  issuer to offer and sell  securities  to an  unlimited  number of
persons  without  regard to their  sophistication  and  experience  and  without
delivery of any  specified  information.  The aggregate  offering  price of this
exemption is limited to $1 million in any  12-month  period;  and certain  other
offerings  must be  aggregated  with the Rule 504  offering in  determining  the
available  sales  amount.  Prior to  April  7,  1999,  general  advertising  and
solicitation were permitted for all Rule 504 offerings.  Prior to April 7, 1999,
securities sold under this exemption may be resold freely by  non-affiliates  of
the issuer who are not otherwise acting as an underwriter.

     For the issuance of  15,000,000  shares of  restricted  common stock to Mr.
Pelto, the Company relied upon exemptions from registration  pursuant to Section
4(2) of the  Securities  Act of 1933.  Appropriate  legends  were affixed to the
shares issued to Mr. Pelto.


Item 5.  Indemnification of Directors and Officers

         Article XI of the Company's Charter  specifically  provides that to the
full  extent  not  prohibited  by the law as in effect  from  time to time,  the
Corporation   shall   indemnify  any  person  (and  the  heirs,   executors  and
representatives of such person) who is or was a director,  officer,  employee or
agent of the Corporation,  or who, at the request of this Corporation, is or was
a director,  officer,  employee, agent, partner, or trustee, as the case may be,
of any other corporation,  partnership,  proprietorship,  trust,  association or
other entity in which this  Corporation  owns an  interest,  against any and all
liabilities and reasonable  expenses  incurred by such person in connection with
or resulting from any claim,  action, suit or proceeding,  whether brought by or
in the right of the  Corporation  or  otherwise  and  whether  civil,  criminal,
administrative  or  investigative  in nature,  and in connection  with an appeal
relating thereto,  in which such person is a party or is threatened to be made a
party by reason of serving or having served in any such capacity.

                                       11
<PAGE>


                                    PART F/S

                       HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                         Index to Financial Statements

                                                                       Page

Report of independent accountants..................................... F-2

Balance sheets, December 31, 1999 and December 31, 1998............... F-3

Statements of operations, for the year ended December 31, 1999,
   from November 10, 1998 (inception) through December 31, 1998,
   and from November 10, 1998 (inception through December 31, 1999.... F-4

Statement of shareholders' deficit, from November 10, 1998
   (inception) through December 31, 1999.............................. F-5

Statements of cash flows, for the year ended December 31, 1999,
   from November 10, 1998 (inception) through December 31, 1998,
   and from November 10, 1998 (inception) through
   December 31, 1999)................................................. F-7

Summary of significant accounting policies............................ F-9

Notes to financial statements......................................... F-12


                                      F-1
<PAGE>

To the Board of Directors and Shareholders
of Hydro Environmental Resources, Inc.

                        REPORT OF INDEPENDENT ACCOUNTANTS

We have audited the balance  sheets of Hydro  Environmental  Resources,  Inc. (a
development  stage  company) as of December 31, 1999 and December 31, 1998,  and
the related statements of operations,  shareholders' equity (deficit),  and cash
flows for the year ended December 31, 1999,  from November 10, 1998  (inception)
through  December  31,  1998 and from  November  10,  1998  (inception)  through
December 31, 1999.  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 audits.

We  conducted  our  audits  in  accordance  with  generally   accepted  auditing
standards.  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 audits provide a reasonable basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects, the financial position of Hydro Environmental  Resources,
Inc.  as of December  31, 1999 and  December  31,  1998,  and the results of its
operations  and its cash  flows  for the year  ended  December  31,  1999,  from
November 10, 1998  (inception)  through December 31, 1998, and from November 10,
1998  (inception)  through  December  31, 1999,  in  conformity  with  generally
accepted accounting principles.

As  explained  in  Note  B to  the  financial  statements,  Hydro  Environmental
Resources, Inc. conducted significant transactions with its president during the
periods presented.

The accompanying  financial  statements have been prepared  assuming the Company
will  continue as a going  concern.  As discussed in the Summary of  Significant
Accounting  Policies,  the  Company  has  no  revenues,  a  limited  history  of
operations  and  significant  operating  losses  since  inception,  which raises
substantial doubt about its ability to continue as a going concern. Management's
plans  in  regard  to  these  matters  are  also  described  in the  Summary  of
Significant  Accounting  Policies.  The financial  statements do not include any
adjustments that might result from the outcome of this uncertainty.


/s/ CORDOVANO AND HARVEY, P.C.

Cordovano and Harvey, P.C.
Denver, Colorado
February 19, 2000

                                      F-2
<PAGE>



                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                                 BALANCE SHEETS

                               December 31, 1999


                      ASSETS

CASH .............................................         $ 9,665

PATENT RIGHTS AND INTERESTS, less $1,500 of
  accumulated amortization (Note B)...............          13,500
                                                       ------------
                                                           $23,165
                                                       ============

  LIABILITIES AND SHAREHOLDERS' DEFICIT

LIABILITIES
     Accounts payable .................................    $ 3,937
     Due to officer (Note B) ..........................     49,470
     Other current liabilities.........................      2,000
                                                       ------------
                                      TOTAL LIABILITIES    $55,407
                                                       ------------

SHAREHOLDERS' DEFICIT (Note D)
     Preferred Stock, $.001 par value;
      5,000,000 shares authorized;
      -0- shares issued and outstanding, ...............   $     0
     Common Stock, $.001 par value;
      50,000,000 shares authorized;
      31,300,000 shares issued and outstanding, ........    31,300
Additional paid in capital .............................    15,985
Deficit accumulated during development stage............   (79,527)
                                                       ------------
                            TOTAL SHAREHOLDERS' DEFICIT    (32,242)
                                                       ------------

                                                           $23,165
                                                       ============


         See accompanying summary of significant accounting policies and
                       notes to the financial statements

                                      F-3

<PAGE>


                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                            STATEMENTS OF OPERATIONS


                                                     November 10,   November 10,
                                                         1998           1998
                                         For the     (Inception)    (Inception)
                                       Year Ended      through        through
                                      December 31,   December 31,   December 31,
                                           1999           1998           1999
                                      ------------   ------------   ------------
OPERATING EXPENSES
Research and development............  $     43,400   $        -     $    43,400
General and administrative..........        21,397           10          21,407
Rent (Note B) ......................         6,000        1,000           7,000
Office (Note B).....................         6,000            -           6,000
Stock-based compensation,
  financial advisory services.......           750            -             750
                                      ------------   ------------   ------------
                LOSS FROM OPERATIONS       (77,547)      (1,010)        (78,557)

INTEREST EXPENSE....................          (970)           -            (970)
                                      ------------   ------------   ------------
        NET LOSS BEFORE INCOME TAXES       (78,517)      (1,010)        (79,527)

INCOME TAXES (Note C) ..............             -            -               -
                                      ------------   ------------   ------------

                            NET LOSS   $   (78,517)  $    (1,010)   $   (79,527)
                                      ============   ============   ============

Basic loss per common share ........   $         *   $         *
                                      ============   ============

Basic weighted average common shares
outstanding ........................    22,075,000             -
                                      ============   ============

* Less than $.01 per share

           See accompanying summary of significant accounting policies
                     and notes to the financial statements

                                      F-4
<PAGE>


<TABLE>
                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                       STATEMENT OF SHAREHOLDERS' DEFICIT

          From November 10, 1998 (inception) through December 31, 1999

<CAPTION>
                                                                                                  Deficit
                                                                                              Accumulated             Total
                                                                                Additional     During the     Shareholders'
                                   Preferred Stock           Common Stock          Paid-In    Development           Equity
                                  Shares  Par Value       Shares    Par Value      Capital          Stage         (Deficit)
                                  ------  ----------      -------   ---------    ---------     ----------      ------------
<S>                                  <C>         <C>          <C>        <C>           <C>            <C>               <C>
Office space contributed by the
president (Note B) ................   -           -            -          -       $ 1,000         $     0         $  1,000

Net loss for the period ended
December 31, 1998 .................   -           -            -          -             0          (1,010)          (1,010)

                                   -----  ---------       -------   ---------     --------     ----------      -----------
        BALANCE, DECEMBER 31, 1998    -           -            -          -         1,000          (1,010)             (10)

February 25, 1999, sale of common
stock to officer and affiliates
for cash($.001/share)
(Note D) ..........................   -           -    4,250,000      4,250             -               -            4,250

February 25, 1999, sale of common
stock, net of $1,925 of offering
costs ($.001/share) (Note D).......   -           -   11,300,000     11,300        (1,925)              -            9,375

March 1, 1999 capital contribution
by the president (Note B) ........    -           -            -          -         3,210               -            3,210

May 31, 1999, expenses paid by
the president on behalf of the
Company (Note B)..................    -           -            -          -         1,700               -            1,700

June 16, 1999, shares issued in
exchange for patent interests and
rights ($.001/share) (Note B).....    -           -   15,000,000     15,000             -               -           15,000

July 10, 1999, shares issued in
exchange for financial advisory
agreement ($.001/share)(Note B)...    -           -      750,000        750             -               -              750

         See accompanying summary of significant accounting policies and
                       notes to the financial statements

                                      F-5

<PAGE>

                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                       STATEMENT OF SHAREHOLDERS' DEFICIT

          From November 10, 1998 (inception) through December 31, 1999

<CAPTION>
                                                                                                  Deficit
                                                                                              Accumulated             Total
                                                                                Additional     During the     Shareholders'
                                   Preferred Stock           Common Stock          Paid-In    Development           Equity
                                  Shares  Par Value       Shares    Par Value      Capital          Stage         (Deficit)
                                  ------  ----------      -------   ---------    ---------     ----------      ------------
<S>                                  <C>         <C>          <C>        <C>           <C>            <C>               <C>

Services and use of equipment
contributed by the president
(Note B)..........................    -           -            -          -         6,000               -            6,000

Office space contributed by
the president (Note B)............    -           -            -          -         6,000               -            6,000

Net loss for the year ended
December 31, 1999 .................   -           -            -          -             -         (78,517)         (78,517)

                                   -----  ---------   -----------  ---------     --------      ----------      -----------
BALANCE, December 31, 1999.........   -          $-   31,300,000   $ 31,300       $15,985        $(79,527)        $(32,242)
                                   =====  =========   ===========  =========     ========      ==========      ===========
</TABLE>
         See accompanying summary of significant accounting policies and
                       notes to the financial statements

                                      F-6

<PAGE>
                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF CASH FLOWS

                                                     November 10,   November 10,
                                                         1998           1998
                                         For The     (Inception)    (Inception)
                                       Year Ended      through        through
                                       December 31,  December 31,   December 31,
                                           1999          1998           1999
                                       -----------   ------------   ------------

OPERATING ACTIVITIES
     Net Loss............................$(78,517)     $(1,010)      $(79,527)

     Transactions not requiring cash:
       Amortization......................   1,500            -          1,500
       Office space contributed by
         the President (Note B) .........   6,000        1,000          7,000
       Services and use of equipment
         contributed by the President
         (Note B)........................   6,000            -          6,000
       Common stock issued in exchange
         for financial advisory
         agreement (Note E)..............     750            -            750

     Changes in operating assets and
     operating liabilities:
       Accounts payable and accrued
         expenses........................   6,807          100          6,907
                                       -----------  ------------    ------------

         NET CASH (USED IN) PROVIDED BY
                   OPERATING ACTIVITIES   (57,460)          90        (57,370)
                                       -----------  ------------    ------------

FINANCING ACTIVITIES
     Capital contributions by
        the president (Note B)...........   4,910            -          4,910
     Proceeds from loans and advances
        from the president (Note B)......  53,600            -         53,600
     Repayment of loans from the
        president (Note B)...............  (5,100)           -         (5,100)
     Proceeds from issuance of
        common stock ....................  15,550            -         15,550
     Payment of offering costs ..........  (1,925)           -         (1,925)
                                       -----------  ------------    ------------

                   NET CASH PROVIDED BY
                   FINANCING ACTIVITIES    67,035            -         67,035
                                       -----------  ------------    ------------

                   NET INCREASE IN CASH     9,575           90          9,665

Cash, beginning of period ...............      90            -              -
                                       -----------  ------------    ------------

                   CASH, END OF PERIOD $    9,665     $     90       $  9,665
                                       ===========  ============    ============

         See accompanying summary of significant accounting policies and
                       notes to the financial statements


                                      F-7



<PAGE>
                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                             STATEMENT OF CASH FLOWS

                                                     November 10,   November 10,
                                                         1998           1998
                                         For The     (Inception)    (Inception)
                                       Year Ended      through        through
                                       December 31,  December 31,   December 31,
                                           1999          1998           1999
                                       -----------   ------------   ------------

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for:

     Interest .........................$        -   $         -     $         -
                                       ===========  ============    ============
     Income Taxes......................$        -   $         -     $         -
                                       ===========  ============    ============
Non-cash investing and financing
transactions:
     Common stock issued in exchange for
        patent interests and rights
        (Note B).......................$   15,000   $         -     $    15,000
                                       ===========  ============    ============

         See accompanying summary of significant accounting policies and
                       notes to the financial statements


                                      F-8

<PAGE>

                        HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES




Development stage company

Hydro Environmental Resources, Inc. (the Company) is in the development stage in
accordance with Statements of Financial Accounting Standard (SFAS) No. 7.

Use of estimates

The  preparation  of the  financial  statements  in  conformity  with  generally
accepted  accounting  principles  requires  management  to  make  estimates  and
assumptions  that  affect  the  reported  amounts of  assets,  liabilities,  and
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.

Cash equivalents

For the  purposes of the  statement  of cash flows,  the Company  considers  all
highly  liquid debt  instruments  purchased  with an original  maturity of three
months or less to be cash equivalents.

Income taxes

Income taxes are provided  for the tax effects of  transactions  reported in the
financial  statements  and consist of taxes  currently due plus  deferred  taxes
related  primarily to  differences  between the recorded  book basis and the tax
basis of assets and  liabilities  for  financial and income tax  reporting.  The
deferred tax assets and liabilities represent the future tax return consequences
of those differences, which will either be taxable or deductible when the assets
and liabilities are recovered or settled. Deferred taxes are also recognized for
operating  losses that are  available to offset  future  taxable  income and tax
credits that are available to offset future federal income taxes.

Earnings /(loss) per share

The Company  reports  earnings per share using a dual  presentation of basic and
diluted  earnings per share.  Basic  earnings  per share  excludes the impact of
common stock equivalents. Diluted earnings per share utilizes the average market
price per share when applying the treasury  stock method in  determining  common
stock equivalents.  However,  the Company has a simple capital structure for the
period  presented  and,  therefore,  there is no variance  between the basic and
diluted earnings per share.

Fair value of financial instruments

The  Company  has  determined,   based  on  available  market   information  and
appropriate  valuation  methodologies,  that  the fair  value  of its  financial
instruments   approximates   carrying  value.  The  carrying  amounts  of  cash,
receivables,  payables, and other current liabilities approximate fair value due
to the short-term maturity of the instruments.

                                      F-9

<PAGE>

                      HYDRO ENVIRONMENTAL RESOURCES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES


Stock-based compensation

SFAS No. 123,  "Accounting for Stock-Based  Compensation" was issued in October,
1995.  This  accounting  standard  permits the use of either a "fair value based
method" or the "intrinsic  value method" defined in Accounting  Principles Board
Opinion 25,  "Accounting  for Stock Issued to Employees" (APB 25) to account for
stock-based compensation  arrangements with employees.  Stock-based compensation
arrangements with non-employees are accounted for under the fair value method.

The Company had no stock-based compensation  arrangements with employees and one
arrangement  with an unrelated  third party during the period from  November 10,
1998 (inception) through December 31, 1999.

New Accounting Pronouncement

The Company  adopted the  following  new  accounting  pronouncements  during the
period ended December 31, 1999. There was no effect on the financial  statements
presented from the adoption of the new pronouncements.  SFAS No. 130, "Reporting
Comprehensive  Income," requires the reporting and display of total comprehesive
income and its components in a full set of general purpose financial statements.
The  Company  did not  have  comprehensive  income  for the  periods  presented;
therefore,  comprehensive  income  and net  income  are  equal.  SFAS  No.  131,
"Disclosures about Segments of an Enterprise and Related  Information," is based
on the "management"  approach for reporting  segments.  The management  approach
designates  the  internal  organization  that is used by  management  for making
operating  decisions  and assessing  performance  as the source of the Company's
reportable  segments.  SFAS No. 131 also requires disclosure about the Company's
products,  the geographic  areas in which it earns revenue and holds  long-lived
assets, and its major customers.  SFAS 131 is not applicable, as the Company had
no segment  reporting  for the  periods  presented.  SFAS No.  132,  "Employers'
Disclosures about Pensions and Other  Post-retirement  Benefits," which requires
additional  disclosures about pension and other  post-retirement  benefit plans,
but does not change the measurement or recognition of those plans. SFAS No. 133,
"Accounting  for  Derivative  Instruments  and Hedging  Activities"  requires an
entity to recognize all derivatives on a balance sheet,  measured at fair value.
The Company had no  derivatives  at December  31,  1999.  Statement  of Position
("SOP")  98-1  "Accounting  for the  Costs of  Computer  Software  Developed  or
Obtained  for  Internal  Use"  requires   that   entities   capitalize   certain
internal-use  software costs once certain criteria are met. SOP 98-5, "Reporting
on the Costs of Start-Up Activities" provides,  among other things,  guidance on
the reporting of start-up  costs and  organization  costs.  It requires costs of
start-up  activities  and  organization  costs to be expensed as  incurred.  The
Company will continue to review these new accounting pronouncements over time to
determine  if  any  additional  disclosures  are  necessary  based  on  evolving
circumstances.


                                      F-10
<PAGE>
                      HYDRO ENVIRONMENTAL RESOURCES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

The  accompanying  financial  statements  have been  prepared on a going concern
basis,  which  contemplates  the  realization of assets and the  satisfaction of
liabilities  in the  normal  course of  business.  As shown in the  accompanying
financial  statements,  the  Company  is a  development  stage  company  with no
revenues, a limited history of operations,  and a loss of $79,527 for the period
from November 10, 1998 (inception) through December 31, 1999. This factor, among
others,  may  indicate  that the  Company  will be unable to continue as a going
concern for a reasonable period of time.

The  financial  statements  do  not  include  any  adjustments  relating  to the
recoverability  and classification of liabilities that might be necessary should
the Company be unable to continue as a going concern. The Company's continuation
as a going  concern is dependent  upon its ability to generate  sufficient  cash
flow to meet  its  obligations  on a  timely  basis  and  ultimately  to  attain
profitability.  The  Company's  management  intends to seek  additional  funding
through  equity  offerings  and debt  financings  during  2000 to help  fund the
Company's operations as it expands

                                      F-11
<PAGE>


                      HYDRO ENVIRONMENTAL RESOURCES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENT


NOTE A:  BACKGROUND

The Company was  incorporated  under the laws of Oklahoma on November  10, 1998.
The principal  activities since inception have been  organizational  matters and
the sale and issuance of shares of its $.001 par value common stock. The Company
was formed to design, build and manage inexpensive and environmentally  friendly
fuel and power producing  systems for remote areas of the world that are without
electricity or other sources of power.

NOTE B:  RELATED PARTY TRANSACTIONS

The president  provided office space to the Company at no charge for all periods
presented.  The office space was valued at $500 per month and is included in the
accompanying financial statements as rent expense with a corresponding credit to
additional paid-in capital.

During the year ended December 31, 1999, the president  contributed services and
the use of office  equipment to the  Company.  The services and use of equipment
was  valued at $500 per  month and is  included  in the  accompanying  financial
statements as office expense with a corresponding  credit to additional  paid-in
capital.

During the year ended December 31, 1999, the president contributed $3,210 to the
Company for working  capital and paid a $1,700 expense on behalf of the Company.
These  amounts  are  included  in  the  accompanying   financial  statements  as
additional paid-in capital.

During the year ended  December  31,  1999,  the  president  loaned the  Company
$53,600 for working capital, of which $5,100 was repaid as of December 31, 1999.
The loans bear interest at eight  percent and are due on demand.  The $48,500 in
outstanding  advances and $970 in related  accrued  interest are included in the
accompanying financial statements as due to officer.

On June 16, 1999,  the Company  issued 15 million  shares of its $.001 par value
common  stock in exchange  for an  assignment  of the  interest  and rights in a
patent  pending in Australia for an  Electro-Chem  Hydrogen  Fuel  Reactor.  The
transaction has been valued at predecessor  cost in the  accompanying  financial
statements.

On November  17, 1998,  an affiliate  advanced the Company $100 to open its bank
account.  The Company repaid the $100 on February 24, 1999.


                                      F-12
<PAGE>
                      HYDRO ENVIRONMENTAL RESOURCES, INC.
                         (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENT


NOTE C:  INCOME TAXES

A reconciliation of the U.S.  statutory federal income tax rate to the effective
rate is as follows:
                                                           December 31,
                                                  ------------------------------

                                                       1999              1998
                                                  ----------          ----------

U.S. federal statutory graduated rate...........     18.23%               15.00%
State income tax rate,
    net of federal benefit......................      4.91%                5.10%
Net operating loss for which no tax
    benefit is currently available..............    -23.14%              -20.10%
                                                  ----------          ----------
                                                      0.00%                0.00%
                                                  ==========          ==========

At December 31, 1999,  deferred  taxes  consisted of a net tax asset of $18,366,
due to operating loss carryforwards of $79,527,  which was fully allowed for, in
the  valuation  allowance of $18,366.  The valuation  allowance  offsets the net
deferred tax asset for which there is no  assurance  of recovery.  The change in
the valuation  allowance  from  December 31, 1998 through  December 31, 1999 was
$18,163. Net operating loss carryforwards will expire through 2019.

The valuation  allowance will be evaluated at the end of each year,  considering
positive and negative evidence about whether the asset will be realized. At that
time, the allowance will either be increased or reduced;  reduction could result
in the complete elimination of the allowance if positive evidence indicates that
the value of the deferred tax asset is no longer  impaired and the  allowance is
no longer required.

NOTE D:  COMMON STOCK ISSUANCES

During  February,  1999, the Company offered for sale  11,300,000  shares of its
$.001 par value common stock for $.001 per share  pursuant to an exemption  from
registration  under Rule 504 of Regulation D of the  Securities  Act of 1933, as
amended (the "Act").  The Company sold all 11,300,000 shares for net proceeds of
$9,375, after deducting offering costs totaling $1,925.

An  additional  4,250,000  shares of common  stock were sold to an  officer  and
affiliates  of the Company  for $4,250  ($0.001  per  share).  These  shares are
"restricted  securities" and may be sold only in compliance with Rule 144 of the
Act.

On July 10,  1999,  the  Company  issued  750,000  shares of its $.001 par value
common stock in accordance with the terms of a financial advisory agreement (see
Note E).

                                      F-13

<PAGE>

                      HYDRO ENVIRONMENTAL RESOURCES, INC.
                          (A DEVELOPMENT STAGE COMPANY)

                          NOTES TO FINANCIAL STATEMENT

NOTE E:  STOCK-BASED COMPENSATION

On July 10,  1999,  the Company  entered  into a  consulting  agreement  with an
unrelated  third party to provide  financial  advisory  services to the Company.
Upon signing the agreement,  the Company agreed to issue the consultant  750,000
shares of its $.001 par value common stock.  The  transaction  was valued at the
estimated  fair value of the common stock on the date of issuance as  determined
by the Board of Directors based on contemporaneous equity transactions and other
analysis.  The Company  recorded stock- based  compensation in the  accompanying
financial statements totaling $750.

                                      F-14

<PAGE>

                                    PART III

Item 1.  Index to Exhibits and Description of Exhibits

2.1    Articles of Incorporation filed November 10, 1998
2.2    Bylaws
3.1    Form of Common Stock Certificate
6.1    Assignment of Patent and Intellectual Property Rights related to the
         ElectroChem Hydrogen Fuel Reactor
27.0   Financial Data Schedule at December 31, 1999 (for electronic filing only)


                                   SIGNATURES

In  accordance  with  Section 12 of the  Securities  Exchange  Act of 1934,  the
registrant caused this registration  statement to be signed on its behalf by the
undersigned, thereunto duly authorized.



                                             HYDRO ENVIRONMENTAL RESOURCES, INC.

                                             /s/  JACK WYNN
                                             -----------------------------------
                                             By:  Jack Wynn, President

                                             March 15, 2000

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