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


                                  FORM 10-KSB/A
                                  THIRD AMENDED

                     ANNUAL REPORT UNDER SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                   FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004

                                    000-29743
                            (Commission file number)

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

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

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

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

        SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT: NONE

           SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:

                               TITLE OF EACH CLASS
                          COMMON STOCK, $.001 PAR VALUE

Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the  preceding 12 months (or for such  shorter  period that the  registrant  was
required  to file  such  reports),  and  (2) has  been  subject  to such  filing
requirements for the past 90 days. Yes [X] No [ ]

Indicate  by check  mark if there  is no  disclosure  of  delinquent  filers  in
response to Item 405 of  Regulation  S-B is not  contained in this form,  and no
disclosure  will  be  contained,  to the  best  of  registrant's  knowledge,  in
definitive  proxy or information  statements  incorporated by referenced in Part
III of this Form 10-KSB or any amendment to this Form 10-KSB. [ ]

Revenue for the year ended December 31, 2004: $0.00

There is a limited trading market for the registrant's  Common Stock. There were
18,218,127  shares of Common Stock, and 28,530,750 shares of class "A" preferred
stock issued and outstanding as of December 31, 2004.

                       DOCUMENTS INCORPORATED BY REFERENCE
                                      None

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

                                       1
<PAGE>

                                TABLE OF CONTENTS




Item Number and Caption                                                   Page
                                                                         -----



Item 1. Description of Business..............................................3

Item 2. Description of Property.............................................10

Item 3. Legal Proceedings...................................................10

Item 4. Submission of Matters to a Vote of Security Holders.................11


                                     PART II


Item 5. Market for Registrant's  Common Equity and Related  Stockholder
        Matters And Small Business Issuer  Purchase of Equity  Securities...11

Item 6. Management's Discussion and Analysis of Financial Conditions
        and Results of Operations...........................................13


Item 7. Financial Statements................................................18

Item 8. Changes in and Disagreements With Accountants on
        Accounting and Financial Disclosure.................................33

Item 8A  Controls and Procedures ...........................................33

Item 8B  Reports on Form 8-K ...............................................33


                                    PART III

Item 9. Directors, Executive Officers, Promoters and Control
        Persons; Compliance with Section 16(a) of the Exchange Act..........34

Item 10. Executive Compensation.............................................38

Item 11. Security Ownership of Certain Beneficial Owners and Management.....40

Item 12. Certain Relationships and Related Transactions.....................40

Item 13. Exhibits...........................................................41

Item 14. Principal Accountant Fees and Services.............................42

SIGNATURES .................................................................43



                                       2
<PAGE>

                                     PART I


ITEM 1. DESCRIPTION OF BUSINESS



GENERAL INFORMATION ABOUT INTERNAL HYDRO

Internal  Hydro  International,  Inc.  ("IHDR" or  "Company")  was  organized on
December 31, 1996 as Tel-Voice Communications,  Inc. as a Nevada Corporation. On
January 6, 2003, we changed our name to Home Services International, Inc. and on
January 13, 2004, the name was changed to Internal Hydro International, Inc. The
Company  was  re-domiciled  to Florida on  February  4, 2004.  We are a publicly
traded  company  listed on the OTC  Electronic  Bulletin  Board under the symbol
"IHDR". Our offices are located at 607 W. Martin Luther King, Jr. Blvd.,  Tampa,
Florida 33603. Our website is www.internalhydro.com.


BUSINESS STRATEGY

IHDR is a development stage enterprise.  We intend to manufacture and distribute
alternative   energy   products  that  use  water   pressure  flow  to  generate
electricity.  IHDR  is  currently  finalizing  production  units  of the  Energy
Commander  version Four (EC IV) low impact hydro units.  We are also  finalizing
the development and prove out of the Energy Commander  version Five (EC V) super
efficient low impact hydro units.  The Energy Commander IV (EC IV) is a patented
technology,  utilizing wastewater,  fluid or gas flow from any source where flow
pressure  is  present  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 its
original destination,  without added waste. The system is noiseless and emission
free.

IHDR has now entered  into the  production  and  fielding  phase of its business
plan, with an overseas  strategic partner.  IHDR is now centering  activities on
the final  production  plans,  and  production  of a 10 unit fielding of its new
energy  units,  the EC V. These units will be deployed  to  strategic  locations
around  the  country,  and in Europe for  direct  industrial  use and for use in
natural flows such as water pipelines, rivers, aquaducts, and dams.

Initial  production  of the units will be done in Europe with  Internal  Hydro's
joint  venture  partner,  Cm2.  Cm2's  production  facility is located in Terni,
Italy, about one hour north of Rome. The facility encompasses a large 19,000 sq.
meter area with a 7,000 sq. meter production warehouse. With on staff engineers,
marketing and production,  Cm2 is well positioned to handle the Energy Commander
(EC)  systems.  Cm2  manufactures  and  produces  large  industrial   electrical
components for utilities and industries,  including such items as  transformers,
MV  and  LV   electrical   switchboards,   auxiliaries   and  conduits  for  big
transformers, cooling ducts, conduit bars, motors and generators. Cm2 also works
in the area of hydro  technologies for  implementation  of systems to unutilized
water flows,  where the EC units will fill a large role.  Cm2's clients  include
Siemens,  Colgate  Palmolive  Europe,  Alitalia and every large Italian utility,
among others.  Cm2 has already arranged and dedicated  through their engineering
department a proper space in their  800,000 sq. foot  warehouse  for hosting the
final  development and the starting of the production line for the EC generator.
Cm2 has also reached an agreement with Politecnico,  one of the foremost Italian
universities,  for their  endorsement  of the  technology  under a transfer plan


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ITEM 1. DESCRIPTION OF BUSINESS - continued

which we think will assist Cm2 in obtaining EU grants and the contribution  from
the Italian state and from the regional governments.  Cm2 is ISO 9001 certified,
and IQ NET certified for the  production,  maintenance  and  installation of all
electrical  systems,  as well as  maintaining  certifications  in the  same  for
quality control.  RINA (Italian Air and Shipping  Registry),  certifies that Cm2
works in  accordance  with ISO 9001  quality  regulations  in the  making of the
following products -- process -- services:  Planning,  production,  installation
and  assistance  of civil and  industrial  technological  systems for  electric,
electronic and mechanical sectors. We believe that additional manufacturing will
occur in the United States,  with other machining houses and manufacturers,  yet
to be selected and negotiated.

The patent for the base technology is held under a permanent assignment from the
inventor,  Rianey  Nelson.  Other  intellectual  property  patents  on  the  new
technology  will be generated into patent pending  status before  fielding.  All
parties to any  agreement  are bound by the  intellectual  and property  secrecy
agreements.  Additional patents will, in the opinion of management, be generated
from the improvements in the technology.

IHDR has several advantages over all other alternative energy sources available.
The patented Energy  Commander (EC) system  represents the first time in history
that a technology  has been created to use the  positive  displacement  of water
pressure to create mechanical force to create electricity. The advantages of the
EC are numerous.  Primarily,  the system will use 100% of the flow pressure into
the system,  unlike hydro units that are only 30% efficient at best. Second, the
EC units will not take up space;  an EC unit takes up 1/100 the space of a solar
array to gain the same  amount  of  electrical  output.  Third,  the price of EC
system  will be a fraction of the  competition.  Per Kw, the system cost will be
around $150.00 that is 1/10 the usual renewable energy goal. This means enormous
profit margins with the three  available  revenue  streams and more  competitive
market entry. The EC has no direct  competition.  Solar, wind, biomass and large
flow hydro-power  sources are much different than the IHI technology,  and these
alternative energy sources can co-exist.  The advantages that IHI has over these
sources are its cost,  its  flexibility  and its constant  availability.  In the
United States alone, IHDR estimates our technologies will surpass wind-generated
power within three years and exceed solar in four years.  Keep in mind that IHDR
is not  competing  with these  segments,  since our source of power is different
than solar, wind,  geothermal (although the system can use geothermal outlets as
power  sources),  or biomass.  The EC IV  technology  is related to  traditional
hydropower, only in the sense that it can use water flows; however, the flows of
water necessary for hydropower are enormous. Thousands of gallons per second are
required.  Our technology is low flow,  and much less  demanding than hydro.  EC
system optimizes and efficiently uses 100% of the flow.  Hydropower is much less
efficient.  IHDR will be a contributor  to the Renewable  Energy  segment of the
United States Economy. Our technology will help expand that portion of the pie.

The search and demand for  alternative  energy  sources is reaching  the highest
priority  possible,  with many  alternative  energy  initiatives  being proposed
domestically  and  internationally.  IHDR's EC  technology  saves  expenditures,
provides reliable electricity at a cheaper cost than current  alternatives,  and
does so with free flows of wasted water or gas flows.  The need for  alternative
energy is only as great as its reliability and value on a per  kilowatt-hour  of
electricity  basis. The common industry standard in the alternative energy field
is to attempt to beat the cost of  $1,500.00  per  kilowatt of energy  produced.
IHDR will set a new benchmark for that goal in the  alternative  energy industry
and we believe that the Energy Commander System beats that goal of $1,500.00 per
kilowatt of energy produced. The cost of units to provide electricity either for
direct  use or for  storage,  just as  solar  does in  battery  arrays,  will be


                                       4
<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS - continued

significantly less costly than solar,  biomass,  or wind, by as much as fifty to
ninety  percent per unit cost.  Per kilowatt  cost for the EC is in the $150 per
kilowatt range.

The unique aspect of IHDR's technology is that our energy conversion technology,
the EC System, has no direct competitor. No other technology uses low flow fluid
or gas pressure for the creation of vast amounts of  mechanical  force to create
electricity.  No other  technology has utilized  positive  displacement  of flow
pressure to create electricity.  Solar power depends upon a clear day; wind upon
the  strength of nature at a given  point,  and hydro upon vast amounts of water
flow. EC uses small flows to create  mechanical  force up to a hundred times the
incoming pressure of natural or manmade flows.  These flows are wasted potential
energy  and are  free.  We  harness  it and make it work to  create  electricity
wherever needed.

In today's energy and renewable energy market, the positions of the players have
stagnated.  The renewable  energy market has hinged around the six per cent mark
for a number of years. IHDR is targeting  industries as a whole. We are not tied
to the notion  that our  technology  somehow  has to be seen in the same vein as
solar,  biomass,  or wind. This technology will simply fit where the opportunity
is present in the flows available in a given area, building,  or industrial use.
IHDR is targeting industries with high electric utility costs and access to flow
pressures of gas or fluid, which will run the EC. Wasted flows will give rise to
the target areas.  IHDR will target those who have the need to cut utility costs
in the sectors  identified  with special  emphasis on the  textile,  oil and gas
refining  and  drilling,  home  development,  agricultural,  poultry,  and other
industries, which have communicated the greatest interest in placement of units.
All of the  industries are ones that will either have access to natural flow, be
near man-made flow, which is wasted, or have internal wasted flow after the flow
is used.

IHDR's Energy Commander System will be used in the industrial areas of steel and
metals  manufacturing,  oil and gas  drilling,  oil and gas  refining,  chemical
plants  and  processing,   wood  processing,   paper  and  wood  pulp,   battery
manufacturing, all areas of agriculture and food processing, cement and material
processing,   gas  pipelines,  and  numerous  other  industrial  and  commercial
applications.  The EC technology will have many  applications in rural and third
world areas. In the United States alone,  there are over 70,000 dams that do not
produce  electricity,  but many are  capable  of doing so with no  environmental
impact.  The  technology  has numerous  applications  in third world areas where
ready access to natural flow exists,  and yet is unused.  Such flows as in these
areas  would not  support  conventional  hydropower  systems,  but will  support
constant 24 hour a day power from the EC.

EC will mean huge savings, and potentially,  even payback to municipal,  county,
state and federal  government  facilities.  Lowering or  excluding  power costs,
while giving back potential revenue to governmental entities utilizing the EC to
produce electricity in buildings, compounds, and governmental facilities. IHDR's
technology will have far reaching military aspects,  able to be used by the U.S.
military to help build nations the third world areas where power  projection can
be accomplished by the supplying of power to areas of need. EC will be used as a
power  source for  direct  power  supply  and for  back-up  power  sourcing  for
hospitals,  nursing  homes,  and other uses where  back up power  generation  is
required.  The  potential  applications  for the EC will only be  limited by the
flows available where they are found.

We have  prepared a business  model that will  market the EC V system  through a
distributor  network  around  the  world.  Numerous  municipalities,   counties,


                                       5
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ITEM 1. DESCRIPTION OF BUSINESS - continued

manufacturing, textile, petroleum, residential development, and other industries
have entered into  agreements  and intents with the Company for  application  of
these  units.  We also intend to further its  business  plan by  acquisition  of
similar  technologies  and by execution of contracts for future units and rights
to distribution of the technology.

However; since inception,  we have suffered recurring losses from operations and
have been  dependent on existing  stockholders  and new investors to provide the
cash  resources to sustain our  operations.  During the year ended  December 31,
2004,  we reported a loss of $3,630,41  while a loss of $80,426 was reported for
the date of inception through December 31, 2003.

Our long-term  viability as a going concern is dependent on certain key factors,
as follows:

     -    Our ability to continue to obtain sources of outside financing.

     -    Our  ability to increase  profitability  and sustain a cash flow level
          that will ensure support for continuing operations.

ACQUSITIONS OF SIMILAR TECHNOLOGIES

Cm2 Agreement:

In February  2005,  IHDR entered into a large scale joint venture  agreement for
production,  distribution and sale of its Energy Commander units to the European
Union.   Under  the  performance   based   contract,   Cm2,  an  Italian  Energy
Manufacturing   and  Supply  Company,   will  manufacture  units  in  Italy  for
distribution,  sale,  and  lease  into  Europe.  Cm2  will  supply  engineering,
production, marketing, distribution, and service for the Energy Commander units.
Cm2  believes  they will build and place a minimum of between 300 and 600 thirty
Kw units in Europe in 2006. Under the agreement IHDR pays no significant capital
expenditure, however, it receives revenues in various forms.

Cm2 is a producer and supplier of electrical  systems for European utilities and
industrial  users. Cm2 is positioned to supply Internal Hydro's units for all of
the European  Union for years to come.  Cm2 will be producing  the units under a
revenue sharing and payment license from IHDR. Cm2 believes they will be able to
produce 100 units per week in full production.

Cm2 will  distribute,  and service the units  throughout  Europe through a joint
venture entity.  IHDR shall receive an up front sum of $2,000 to $3,000 per unit
produced  for Europe plus a large  portion of the revenue  stream from all units
placed in Europe,  including  electricity,  renewable energy credits,  and other
readily available credits. Energy credits in Italy are expected to be about 3 to
10 times the  projection of revenue for IHDR units placed in the U.S.  Under the
agreement,  Cm2 will be a  strategic  partner  for  delivery  of the EC units to
IHDR's  domestic US use for less than IHDR could produce the units in the United
States. Due to their extensive  experience in the European energy market,  Cm2's
ability to  produce,  sell,  and  maintain  the  units,  will give IHDR a strong
partner for the EU.

KINETIC ENERGY

On July 8, 2004, we announced that we had entered into an agreement with Kinetic
Energy Systems,  Inc. ("Kinetic"),  a privately held Florida Corporation,  for a
strategic  partnership.  IHDR received 20% of the shares of the private  company
with access to license and assist in the  development of the technology  Kinetic


                                       6
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ITEM 1. DESCRIPTION OF BUSINESS - continued

held for  underwater  and over water power  generation.  IHDR  issued  1,250,000
shares of treasury  stock for this  interest.  IHDR  agreed to help  develop the
technology and market it within its resources. Kinetic has several new hydro and
wind based  technologies,  all  patented or patent  pending at this time.  These
include the  Hydrokinetic  Generator;  Offshore Energy  Platform;  KESC Bowsprit
Generator;  and,  KESC  Tidal  Generator.  These  technologies  create  generate
electrical  power or hydrogen  using kinetic  energy from moving water and wind,
utilizing  wind and tides.  The  Hydrokinetic  Generator is at the prototype and
engineering  stage.  The  Offshore  Energy  Platform  is at  the  prototype  and
engineering  stage. The KESC Bowsprit Generator at the prototype and engineering
stage.  The  Bowsprit  is being  designed  for  prototyping  in the dual role of
hydrogen  production.  The  KESC  Tidal  Generator  is at  the  engineering  and
prototype  stage.  KESC is preparing to display the Bowsprit  technology for the
first time at the NERL conference.

To date this  relationship  still exists,  and IHDR will help market and develop
the Kinetic line of production, in Europe and the United States. This support of
Kinetic is tied to IHDR's  capital  ability to do so.  IHDR will help  introduce
Kinetic's products to European entities for development and marketing.

TRITON TECHNOLOGIES:

In April 2005, IHDR entered into a future marketing and  distribution  agreement
with Triton Technologies of Reston Virginia. Through this agreement,  Triton has
the rights to market  the  Energy  Commander  technology.  Under the  agreement,
Triton took on certain  responsibilities  for the capital  support of the Energy
Commander build out and engineering.  Through the third quarter of 2005,  Triton
had directly taken on the contractual obligations for payment to the engineering
firm APTEC for unit plans and production of the EC IV. IHDR was relieved of such
payments during the period that Triton fulfills its obligations to APTEC, and to
date has paid APTEC  approximately  $40,000 as  reported  to IHDR.  The  primary
purpose of the agreement will be for Triton to develop and implement a strategic
marketing  plan for  industry  awareness  and for sales of the Energy  Commander
under IHDR's control, once units are fielded and able to be displayed. Under the
agreement,  Triton will  receive a portion of the revenue flow from units placed
under its marketing and distribution work. As part of the agreement,  IHDR would
also  receive an equity  position  in Triton  based upon the future  position of
Triton's public company. IHDR was informed by management of Triton in September,
2005, that they would be repositioning the assets of Triton,  and this agreement
for marketing and  licensing to a new private  entity in the near future,  which
IHDR did not object to. To date this contract has been fulfilled.

ETIG

On November 3, 2004, we entered into agreement with El Tigre Development (ETIG),
a Florida Corporation, for the purchase of one hundred units of Energy Commander
IV units.  The purchase price of the one hundred units was $2,250,000,  with the
first ten units to cost $50,000 each. The agreement itself had a three year term
and called for the Company and ETIG to share in revenue generated from each unit
beyond the  purchase  price.  For the first ten  units,  revenue is 20% from any
source on the units.  Additional units include 50% revenue.  In exchange for the
initial  ten-unit  purchase,  we are granted rights for placement to ETIG in the
states of Washington,  North  Carolina,  Oregon and Utah.  Upon execution of the
first ten-unit purchase, two lines of credit will become effective. Each line of
credit shall be for  $5,000,000  to our  benefit.  The first line of credit will
entitle  ETIG to place  units in Idaho and Asia.  The second line of credit will
entitle ETIG to place units in South America and Scotland. These lines of credit
were  represented by ETIG to be from financial  houses and resources,  which did


                                       7
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ITEM 1. DESCRIPTION OF BUSINESS - continued

not develop.  The lines of credit were stated to be available for the production
of units, at descending rates of pricing per Energy Commander Unit produced.

As of December  15,  2004,  we have not  received  the  initial  payment for the
ten-unit  order and ETIG,  which  had  renamed  itself  McGregor  Energy,  Inc.,
requested a thirty (30) day  extension for the payment of the initial ten units.
The extension was granted.  This contract was subsequently noticed by IHDR to be
in default,  with no answer being given by ETIG. We have  determined  that there
was no operable or available source of recourse due to the lack of any financial
resources or assets of ETIG, which became defunct in early 2005.

NEW IMPACT

On November 2, 2004, IHDR and New Impact,  LLC, a private Arizona based Company,
entered into a contract for the purchase of energy units from IHDR,  with follow
on rights for  distribution and use of IHDR's  technology.  The initial phase of
the contract  calls for supplying ten units at a purchase  price of $500,000 for
use in New Impact's water treatment facilities and other areas in the Southwest.
This contract has not been funded to date; however, in March 2005, this contract
was absorbed by the later agreement with Triton Technologies of Reston Virginia,
to be the  marketing  and sales  arm of IHDR  when IHDR is in a unit  production
ability.  Even without this contract with New Impact not being funded,  this did
not materially set back IHDR, since other users and application  finders for the
technology were available, namely the contract and strategic agreement with Cm2,
as explained herein. Due to the ability of units to be contracted for and placed
by any using entity, the funding of such contracts is not seen as central to the
business  plan,  since such plan is made around units being  implemented  at the
user level, not through distributors such as New Impact.

LETTERS OF INTENT

Throughout  the year, we have  released  news on a limited  number of letters of
intent from potential users of the production units when they are available.  To
date,  all such  potential  users and parties of interest  still want to acquire
units for use once production units of the new version of the unit is available.

HISTORY OF COMPANY

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. From
1996-2000  Tel-Voice was a development stage company with no business  activity.
On June 30, 2000, Tel-Voice acquired Smartdotcom,  Inc. ("SDC") in a transaction
accounted  for as a reverse  merger.  The Company  retained  the name  Tel-Voice
Communications,  Inc.  SDC had  developed a  technology  that  provides  private
electronic networks for labor unions and integrated  communities,  both of which
include  subscribers of the unions and communities.  SDC intended to provide the
hardware,  software  and  technical  support  required to setup and maintain the
networks;  however,  SDC was never  able to grow the  Company  due to  liquidity
issues.

In December  2002,  we addressed  its liquidity  problems and  discontinued  the
operations of SDC and  determined  that it would abandon this business  plan. On
December  16,  2002,  we closed a stock  for debt  exchange  with its  creditors
effective on December 11, 2002 whereby all of its outstanding debt was converted
to  unregistered  common stock at a  conversion  rate of one (1) share of common
stock for each $0.45 of debt.  In  addition,  on January 10, 2003, a majority of
the  shareholders  approved a reverse split of the 28.9 shares of the old common


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ITEM 1. DESCRIPTION OF BUSINESS - continued

stock  for 1  share  of  new  common  stock  effective  January  13,  2003,  the
acquisition of a private  entity name Home  Services,  Inc. and a name change to
Home Services International, Inc.

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.

However, HSVI was presented with a business plan for a unique alternative energy
technology by the management of Internal Command  International  (ICI) a Florida
based private  entity.  HSVI felt that the Energy  Commander  technology for low
impact hydro power  production  presented a unique  opportunity.  HSVI saw ICI's
technology as fulfilling a unique niche in the energy market.  Thus, HSVI sought
to acquire the  technology,  and related  expertise  through the reverse  merger
process.

On January 2, 2004,  Internal  Hydro entered into a merger  agreement  with Home
Services  International,  Inc.  ("HSVI").  HSVI issued  27,500,000 shares of its
Series A Preferred  stock to the  shareholders  of ICI. In connection  with this
acquisition,  the  company  was  re-named  Internal  Hydro  International,  Inc.
("IHDR").  On February 4, 2004, the company was redomiciled to Florida.  ICI was
not a related party.

As a result of the merger transaction with HSVI, the former Company stockholders
obtained control of HSVI's voting stock. For financial accounting purposes,  the
acquisition  was a reverse  acquisition  of HSVI,  under the purchase  method of
accounting,  and was  treated  as a  recapitalization  with the  Company  as the
acquirer.

GOING CONCERN RISK

We have had and could have losses, deficits and deficiencies in liquidity, which
could impair our ability to continue as a going concern.

In Note # 1to our consolidated  financial  statements,  our independent auditors
have indicated that certain factors raise substantial doubt about our ability to
continue as a going  concern.  Since its  inception,  the  Company has  suffered
recurring losses from operations and has been dependent on existing stockholders
and new  investors  to provide the cash  resources  to sustain  its  operations.
During the years ended  December  31, 2004 and 2003,  the Company  reported  net
losses and negative cash flows from operations as follows:



                                    2004                 Date of Inception
                                                             Through
                                                         December 31, 2003
                               ------------                 -----------
       Net Income (loss)          $3,630,41                     $80,426

The  Company's  continuing  negative  operating  results have produced a working
capital deficit  accumulated during Development Stage of $3,710,840 December 31,
2004.  The above factors  represent  continue to raise doubt about the Company's
ability to fully establish itself as a going concern.

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<PAGE>

ITEM 1. DESCRIPTION OF BUSINESS - continued

IMPLEMENTATION OF BUSINESS STRATEGY DEPENDENT ON ADDITIONAL FINANCING

Internal Hydro must obtain  financing to fund the expansion of operations.  Such
outside  financing  must be  provided  from the sale of  equity  or third  party
financing.  Further,  the sale of equity  securities  will  dilute our  existing
stockholders'  interests,  and borrowings from third parties could result in our
assets being pledged as collateral.  While the Company is currently able to fund
all basic operating  costs, it is possible our operations could be restricted if
loan terms increase our debt service requirements. There is no assurance that we
can obtain financing on favorable terms.


Employees
As of December 31, 2004, the company employed 3 full time employees.


Item 2. Description of Property


Internal Hydro's principal executive offices are located at 607 W. Martin Luther
King, Jr. Blvd., Tampa, Florida 33603 in approximately 200 square feet of shared
office  space which they receive  without  paying rent from Craig  Huffman,  the
President of Internal Hydro.

The Company  believes  that this  office  space is  adequate  for the  Company's
present and future needs.

In addition,  until March of 2005,  the Company also shared  approximately  1000
square  feet of  office  space  with a  company  owned  by the  inventor  of the
technology,  R. Budd Nelson.  The address was 4424 N. Manhattan  Avenue,  Tampa,
Florida  33614.  The space was  leased on a  month-to-month  contract  basis for
$981.00 per month.



Item 3. Legal Proceedings


A former  employee and director has  suggested he and several  shareholders  are
threatening  to sue  the  Company  over  breach  of  agreement  relating  to the
company's  refusal to forward certain share  certificates that are alleged to be
owed to them. We do not believe that losses are reasonably possible.  The former
shareholder has since indicated that no action will be forthcoming.

On October 14, 2004, the Clerk in the Circuit Court of the  Thirteenth  Judicial
Circuit of the State of Florida,  in and for  Hillsborough  County Circuit Civil
Division  (Case No.:  04-CA-009272)  sent a letter to the Company  notifying the
Company  that a  Foreign  Judgment  from the state of  Arizona  was  filed.  The
defendant in the case is  Tel-Voice  Communications,  Inc. and the  plaintiff is
Smartcom  Solutions,  Inc. The pending judgement if for non-payment of a debt of
approximately  $43,000.  This  judgment was  apparently  from a lawsuit filed in
Phoenix Arizona,  as a vendor law suit with the previous company HSVI.  Notably,
this suit was not disclosed to the management upon the reverse merger, or within
the  merger   documents   presented  to  the  management  of  Internal   Command
International upon the merger.

                                       10
<PAGE>

Item 3. Legal Proceedings - continued

Currently,  the Company has no additional  information  and is in the process of
obtaining  details on the date proceedings  began and a description of the facts
underlying the proceedings.  The financial  statement will be amended to reflect
the $43,000 once confirmation is made of the amount and underlying facts.

As of the  date  hereof,  Internal  Hydro is not a party  to any  further  legal
proceedings, and none are known to be contemplated against Internal Hydro.



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

No matter was  submitted  to a vote of  security  holders  during the year ended
December 31, 2004.


                                     PART II


Item 5. Market for Common Equity and Related Stockholder Matters

The  Company's  common  stock  under  the  registered  name  of  Internal  Hydro
International,  Inc.  was first  quoted in June of 2002,  and now  trades on the
Over-the-Counter ("OTC") Bulletin Board under the symbol "IHDR".


On July 27, 2004,  the Board of  Directors  approved a 5 to 1 stock split of the
Company's  common and preferred stock,  effective  September 10, 2004. The stock
split  increased  the number of  outstanding  common  shares from  2,875,279  to
14,376,395  and the number of  outstanding  preferred  shares from  5,750,000 to
28,750,000 as of September  10, 2004.  All  references  to the Company's  common
stock in the financial statements have been restated to reflect the stock split.

As of December 31, 2004,  Internal Hydro had  18,218,127  shares of common stock
outstanding and 28,530,750  shares of class "A" preferred stock  outstanding and
had approximately 276 certificate stockholders of record.


Set forth below are the high and low closing bid prices for the Company's common
stock  as  reported  on the OTC  Bulletin  Board  for  the  last  four  quarters
(accounting for share split).



        Quarter                      High            Low
        --------                     ----            ---
        2003
        First Quarter                .013            .005
        Second Quarter               .009            .002
        Third Quarter                .027            .008
        Fourth Quarter               .022            .012

        2004
        First Quarter                2.00            1.10
        Second Quarter               2.10             .90
        Third Quarter               $1.30           $0.15
        Fourth Quarter              $0.26           $0.12


                                       11
<PAGE>

Item 5. Market for Common Equity and Related Stockholder Matters - continued

The above quotations  represent  inter-dealer  quotations without retail markup,
markdown or commissions and may not represent actual transactions.


The bid price of our common stock was $0.016 per share on March 23, 2005.



Record Holders

As of December 31, 2004 the Company had 184 shareholders of record.


SECURITIES  AUTHORIZED FOR ISSUANCE UNDER EQUITY  COMPENSATION  PLANS FOR FISCAL
YEAR ENDED DECEMBER 31, 2004

<TABLE>
<CAPTION>

------------------------------- ---------------------------- ---------------------------- ----------------------------
                                Number of Securities to be   Weighted-average price of    Number of Securities
                                issued upon exercise of      outstanding options          remaining available for
                                outstanding options,         warrants and rights          future issuance under
                                warrants and rights                                       equity compensation
                                                                                          plans(excluding securities
                                                                                          reflected in column (a))
------------------------------- ---------------------------- ---------------------------- ----------------------------
<S>                                         <C>                         <C>                          <C>
                                            (a)                         (b)                          (c)
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans
approved by security holders                 0                            0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
Equity compensation plans not
approved by security holders                 0                            0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
TOTAL                                        0                            0
------------------------------- ---------------------------- ---------------------------- ----------------------------
</TABLE>




For information relating to the equity compensation plan, reference is made to
footnote 11 to our Financial Statements, Stock Holders Equity.

OUR TRANSFER AGENT IS:

Island Stock Transfer
100 2nd Avenue South #300 N.
St. Petersburg, Florida 33701



                                       12
<PAGE>

Item 5. Market for Common Equity and Related Stockholder Matters - continued

Dividends

The Company has never  declared or paid any cash  dividends on our common stock.
Any  future  determination  relating  to  dividend  policy  will  be made at the
discretion  of our Board of  Directors  and will  depend on a number of factors,
including the future earnings,  capital  requirements,  financial  condition and
future  prospects  and such  other  factors as the Board of  Directors  may deem
relevant.

RECENT  SALES OF  UNREGISTERED  SECURITIES;  USE OF PROCEEDS  FROM  UNREGISTERED
SECURITIES



During our year ended December 31, 2004, we completed the following transactions
in reliance upon exemptions from registration  under the Securities Act of 1933,
as amended (the "Act") as provided in Section  4(2)  thereof.  Each  certificate
issued  for  unregistered   securities  contained  a  legend  stating  that  the
securities  have  not  been  registered  under  the Act and  setting  forth  the
restrictions on the transferability and the sale of the securities.  None of the
transactions  involved  a public  offering.  We  believe  that each  person  had
knowledge and experience in financial and business matters which allowed them to
evaluate the merits and risks of our securities. We believe that each person was
knowledgeable about our operations and financial condition.


In 2004,  Internal Hydro received  $645,338.40  from private  placements  from a
total of 19 investors.


Item 6. Management's Discussions and Analysis or Plan of Operations

The following discussion and analysis should be read in conjunction with the our
consolidated  financial  statements  and  related  footnotes  for the year ended
December 31, 2004 included in this Annual Report


GENERAL

Internal  Hydro  International,  Inc.  ("IHDR" or  "Company")  was  organized on
December 31, 1996 as Tel-Voice Communications,  Inc. as a Nevada Corporation. On
January 6, 2003, we changed our name to Home Services International, Inc. and on
January 13, 2004, the name was changed to Internal Hydro International, Inc. The
Company  was  re-domiciled  to Florida on  February  4, 2004.  We are a publicly
traded  company  listed on the OTC  Electronic  Bulletin  Board under the symbol
"IHDR". Our offices are located at 607 W. Martin Luther King, Jr. Blvd.,  Tampa,
Florida 33603. Our website is www.internalhydro.com.


RESULTS OF OPERATIONS

Our first goal was the  perfection of the technology to prove the large scale of
the power potential of the Energy Commander (EC)  technology.  This entailed the
intricacy  of design  and  engineering  of a new style of unit on a much  larger
scale. It required the  acquisition of materials,  fabrication of machined parts
never before made; the  manufacture  and design of a valve system so unique that
it would qualify as a new intellectual  asset; the assembly of the unit; and the
testing of the unit under pressure  simulation.  This work resulted in the final


                                       13
<PAGE>

Item 6. Management's Discussions and Analysis or Plan of Operations - continued

production of a unit in late August,  2004 (the Energy  Commander IV - A Model).
The EC IV (A) was a four cylinder  unit,  designed for a four inch feed of water
at 65  p.s.i.  The EC IV (A) was shown to  produce  energy  via its 25  kilowatt
generator,  successfully  under  real  world  conditions.  With  the  successful
completion of the EC IV (A) the company proceeded to design a smaller sized unit
which would  produce  even more power.  The  planning  and design of the variant
model EC IV (B) has now begun.  The EC IV (B) will be an eight cylinder unit 50%
the size of the (A) model  producing  30  kilowatts  at 55  p.s.i.  In the third
Quarter 2005, IHDR chose to follow the new prototype  design for the EC V, which
is an  alternate  design  from the EC IV in line  system,  will be  smaller,  as
powerful, and easier to manufacture than the EC IV system. The new design of the
EC IV uses new parts,  a new  engineering  firm,  new plans and new equipment to
make it smaller and  standardized  for mass  production.  The EC V developmental
prototype,  is  showing  itself to be a fifth of the size of the EC IV,  for the
same power  output and is  projected  to be  displayed,  or fielded in the first
quarter 2005. The new EC V prototype is a twelve  cylinder radial system working
from the same 65 p.s.i.  flow.  From this system the cylinders  work on a common
cam or shaft which is a unique new  technology  in itself,  to then  produce the
mechanical  force or torque  to run a  generator.  The  inlet and  outlet of the
system works through a common shaft system around the device.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

The Company's  discussion and analysis of its financial condition and results of
operations are based upon its consolidated financial statements, which have been
prepared in accordance  with  generally  accepted  accounting  principles in the
United  States.  The  preparation  of these  financial  statements  requires the
Company to make  estimates  and  judgments  that affect the reported  amounts of
assets, liabilities,  revenue and expenses, and related disclosure of contingent
assets  and  liabilities.  On  an  ongoing  basis,  the  Company  evaluates  its
estimates.  The Company  bases its  estimates on  historical  experience  and on
various  other  assumptions  that  are  believed  to  be  reasonable  under  the
circumstances.  These  estimates  and  assumptions  provide a basis  for  making
judgments  about the  carrying  values of assets  and  liabilities  that are not
readily  apparent  from other  sources.  Actual  results  may differ  from these
estimates under different  assumptions or conditions,  and these differences may
be material.

The Company believes the following critical  accounting policies affect its more
significant  judgments and estimates used in the preparation of its consolidated
financial statements.

COMPARISON OF YEAR ENDED DECEMBER 31, 2004 TO YEAR ENDED DECEMBER 31, 2003.

LIQUIDITY AND CAPITAL RESOURCES

We intend to continue  development of the Energy Commander systems but will need
additional private  placements,  debt financing or equity investment in order to
participate fully and at the levels intended. There can be no assurance that any
of the plans  developed  will  produce  cash  flows  sufficient  to  ensure  its
long-term viability.

Prior to the merger of Internal  Command with Home Services,  the Company (HSVI)
had incurred  additional  deficits in cash flow from operating  activities.  The
Company  had  accrued   approximately   $343,000  in   obligations  to  vendors,
consultants and former employees. We are attempting to settle these obligations,
primarily  through the  issuance of common  stock.  Management  believes we will
ultimately settle these obligations for no more than amounts accrued at December


                                       14
<PAGE>

Item 6. Management's Discussions and Analysis or Plan of Operations - continued

31, 2004. As a part of the Merger Agreement with Internal Command International,
Inc.  (ICI),  the then Chief  Executive  Officer of HSVI,  Jay Budd, had and did
affirm that the  outstanding  debts of HSVI have been  properly  structured  for
management of the debt  post-merger;  namely,  that the debt was in the hands of
suitable professional debt management team, including Fletcher & Associates, and
Harry J.  Miller,  PLLC,  that  there has been set  aside as part of the  issued
common stock for obligation and  satisfaction of the debt, and that the incoming
principals of ICI will be held harmless for this debt. The company in the summer
of 2005, released Harry Miller, PLLC and Fletcher & Associates from their duties
as debt managers, taking control of such matters internally due to the amount of
legal  expertise  held.  To date,  the shares  issued to secure  these debts are
unissued,  and held by both Harry  Miller PLLC in trust,  and with the  company,
should the need arise for  settlement of any such debts,  if  communication  and
demand for the same is made.  To date no such  verified  debt  demands have been
made,  so the shares  are still held in  safekeeping.  Any  settlements  will be
valued at the fair value of the stock at the time the settlement is reached,  or
some other amount as negotiated.

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.


2005 OUTLOOK

During the next  twelve  months,  IHDR's  technology  is ready to enter the full
production phase of its business plan, and  implementation of the new management
structure  for roll  out in the  global  energy  market.  With  the  contractual
arrangement  with Cm2, IHDR has now partnered  with a ready and able partner for
production,  and implementation of the Energy Commander systems.  Given the vast
experience and ongoing  operations of Cm2 in the energy  market,  IHDR will have
significant  production  ability for the EC units. IHDR forecasts that the final
stage units will be made with Cm2, and other domestic  resources for final stage
production  hopefully by the first quarter of 2006.  IHDR will implement the new
radial system of low impact hydro with Cm2, for production in the latter part of
2005, and for production of the initial 10 units of the system for fielding IHDR
will also be  implementing  the portion of its business plan which will call for
new personnel to take over certain management positions, and the creation of new
positions  in  order  to  get  ready  for  direct  market  participation  in the
alternative energy sector, and for the expansion of the company beyond the start
up phase and into the global and domestic alternative energy market. Included in
this plan is the  implementation of new management with energy  experience,  and
new board membership of three outside directors,  and two inside directors.  The
addition of this new board will also allow us to create new boards  including an
audit  committee,  compensation  committee and corporate  governance  committee,
endeavoring  to  fulfill  the  duties  and   regulations  set  forth  under  the
Sarbanes-Oxley regulations.

We will enter into three  important  phases for the production mode and fielding
of its energy units, set to occur in the first quarter 2005. First, we will seek
new capital  contribution  for carryover of operations  and  production in Italy
with Cm2. This will be done in order to fulfill basic financial obligations such
as  audit  costs,  payroll,  travel  and  engineering  support  for the  Italian
operations,  and for final unit development for production with Cm2. Since we do


                                       15
<PAGE>

Item 6. Management's Discussions and Analysis or Plan of Operations - continued

not have  significant  production costs related to the energy unit production in
Italy of the ten units,  the need for  capital  has been kept to a minimum.  Cm2
under its agreement pays for all related costs of engineering  and production of
the unit,  as well as some on site costs for IHDR  personnel.  Next is the final
production  unit plan for the EC V, which the board of directors chose to be the
radial system twelve  cylinder unit.  This will be  accomplished  through Cm2 on
site in  Terni,  Italy at their  production  facility.  Our  personnel,  and the
prototype  unit of the EC V, will be  transported  on site for production of the
final unit. With the machining and parts assembly and plans being completed, the
final production value, first unit will be made.

We also hope to also identify and begin the selection  process for the new board
members to fill out the five member board of directors  as discussed  above.  We
hope  to  identify  new  CEO  candidates  with  the  appropriate  public  market
experience  and in the  energy or  alternative  energy  market.  We will also be
seeking a new CFO candidate with  experience in the energy  industry and take on
new advisory board members with direct  experience in the energy and alternative
energy area.

End of 2005/First Half of 2006
During this time frame the final production of the first unit and additional ten
units under the preliminary  production plan should be completed at Terni Italy.
These  units will then be deployed  for us in Italy  under Cm2 at  predetermined
sites,  and to the United  States,  to be deployed at five  locations by IHDR at
predetermined  sites. The units will go under  certification  process by Italian
agency  authorities and in the US by private entities so that they are qualified
for tax and energy  credits.  During  this time period  with the  deployment  of
units,  we hope to also be  expanding  its  management  and  board  for  full on
production  business plan  operations.  During this time, we anticipate  that we
will  hold our  annual  meeting  at which  time the board of  directors  will be
selected,  and the  committee  memberships  will be made.  IHDR  will,  with the
concurrent  deployment of units,  seek to raise a capital  amount related to its
operations for the next three quarters of the year, to include major  marketing,
certification,  governmental relations, and further unit production.  Production
capacity and unit production for the first quarter from Cm2 is expected to be 40
units by quarters  end. One half of these  should ship to the United  States for
use,  with the remaining  portion  being used in Europe.  At this point with the
first units being fielded,  revenues  should be realized from each fielded unit,
both in Italy and the United States.  Additionally,  IHDR will choose a suitable
production  partner during this phase,  as  additionally  needed will be pursued
using  traditional  equity  financing  tools  if  subsequent  revenues  are  not
achievable through the course of unit fielding and contracting.

In addition,  we hope that the production  phase of the EC units will be in full
force from Italy,  with  contracts  being  sought for unit  application  in both
Europe and the United States.  At this point, the major marketing effort of IHDR
and Triton  should  result in future  and  immediate  contracts  for units to be
supplied to industrial and natural flow users. The management team should be now
filled out to include separate offices of the CEO and President,  along with the
CFO, and a vice president of marketing.  The office in Rome should be staffed by
indigenous  personnel,  and should be able to now be a revenue producing section
with units being produced from Cm2, and placed into the European  energy market.
At this point,  IHDR will seek  development of other  complimentary  and related
products  through  its  own  research  and  development  arm,  and  through  the
acquisition  of new  technologies.  During this time the main portion for action
will be the conduction and  integration of revenue  streams through the value of
electricity,  the sale of he renewable  energy  credits and the value of the tax
credits.  Significantly,  the  accounting of these matters will vary by not only


                                       16
<PAGE>

Item 6. Management's Discussions and Analysis or Plan of Operations - continued

the national placement of the units, but by the very locality where it is placed
due to the value of electricity  rates which can vary vastly.  These  accounting
principles will be easier to bill and account for with the tracking system built
into the unit,  however,  the accreditation and certification  process will be a
major mergence into the accounting of IHDR.


Forward looking statements

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

Off balance sheet arrangements

The Company's  liquidity has not dependent upon off balance sheet  transactions.
For the year ended  December  31,  2004,  the  Company did not engage in any off
balance sheet transactions.


                                       17
<PAGE>


Item 7.  Financial Statements


                INTERNAL HYDRO INTERNATIONAL, INC. AND SUBSIDIARY

                        CONSOLIDATED FINANCIAL STATEMENTS

                 FOR THE YEARS ENDED DECEMBER 31, 2004 AND 2003

                                TABLE OF CONTENTS
                                                                        PAGE (S)



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM ...................   19

CONSOLIDATED BALANCE SHEETS ...............................................   20

CONSOLIDATED STATEMENTS OF OPERATIONS .....................................   21

CONSOLIDATED STATEMENTS OF CASH FLOWS .....................................   22

CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIENCY ........................   23

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS ................................   24







                                       18
<PAGE>


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM


To the  Stockholders  and Board of  Directors of Internal  Hydro  International,
Inc.:


We have audited the balance  sheet of Internal  Hydro  International,  Inc. (the
Company),  a development stage company, as of December 31, 2004, and the related
statements of operations, stockholders' deficit and cash flows for the year then
ended and January 21, 2003 (date of  inception) to December 31, 2003 and for the
period from January 21, 2003 (date of  inception)  to December  31, 2004.  These
financial  statements are the  responsibility of the Company's  management.  Our
responsibility  is  to  express  an  opinion  on  these  consolidated  financial
statements based on our audits.

We conducted  our audits in  accordance  with  standards  of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement.  An audit includes examining, on a
test basis,  evidence  supporting  the amounts and  disclosures in the financial
statements.  An audit also includes assessing the accounting principles used and
significant  estimates  made by  management,  as well as evaluating  the overall
financial  statement  presentation.  We believe our audits  provide a reasonable
basis for our opinion.

In our opinion,  the financial  statements  referred to above present fairly, in
all material respects,  the financial position of Internal Hydro  International,
Inc. as of December 31, 2004,  and the results of its  operations and cash flows
for year then ended and  January 21, 2003 (date of  inception)  to December  31,
2003,  and for the period from January 21, 2003 (date of  inception) to December
31, 2004 in  conformity  with  accounting  standards  generally  accepted in the
United States of America.

As disclosed in Note 1, the accompanying financial statements have been prepared
assuming  that the Company  will  continue as a going  concern.  The Company has
experienced  material  operating losses and had a net working capital deficiency
of $95,380 at December 31, 2004.  Management  is seeking  equity  capital and is
implementing  a  business  plan  that it  believes  will  result  in  profitable
operations.  There can be no assurances that the Company will obtain  sufficient
capital or that operations will become  profitable.  These and other  conditions
raise  substantial  doubt  about the  Company's  ability to  continue as a going
concern.  The accompanying  financial  statements do not include any adjustments
that might be  necessary  should the  Company be unable to  continue  as a going
concern.



/s/  EPSTEIN, WEBER & CONOVER, PLC
     Scottsdale, Arizona
     May 12, 2005




                                       19
<PAGE>

                        INTERNAL HYDRO INTERNATIONAL INC
                         (A Development Stage Company)

                                  BALANCE SHEET
                                  -------------
                             As of December 31, 2004

                                     ASSETS
                                     ------

CURRENT ASSETS
   Cash and equivalents                                         $    38,051
   Stock subscription receivable                                      2,500
                                                                -----------
                                                                     40,551
                                                                -----------
PROPERTY & EQUIPMENT
   Computers & Equipment
     (net of accumulated depreciation)                               14,152
                                                                -----------

OTHER ASSETS
   Accounts/loan receivable                                           7,000
   Investment - Langley Park                                        119,263
   Investment - Kinetic Energy                                      187,500
                                                                -----------
                                                                    313,763
                                                                -----------

                                                                $   368,466
                                                                ===========

                       LIABILITIES & STOCKHOLDERS' EQUITY
                       ----------------------------------
CURRENT LIABILITIES
   Accounts payable                                             $    32,001
   Interest Payable                                                   4,800
   Accrued Liabilities                                                4,130
   Due to shareholder                                                55,000
   Notes Payable                                                     40,000
                                                                -----------
                                                                    135,931
OTHER LIABILITIES
   Debt under professional management (Note 4)                      906,879
                                                                -----------
       Total Liabilities                                          1,042,810
                                                                -----------

STOCKHOLDERS' EQUITY
Common stock, $.001 par value, 75,000,000 shares authorized
18,218,127 shares issued and outstanding (7,647,025 in 2004)         18,218
Preferred stock, $.001 par value, 10,000,000 shares authorized
28,530,750 shares issued and outstanding (1,250,000 in 2004)         28,531
Additional paid-in capital                                        3,761,110
Unrealized loss on Investment                                      (771,362)
Deficit accumulated during Development Stage                     (3,710,841)
                                                                -----------
              Total Stockholders' Equity                           (674,344)
                                                                -----------

                                                                $   368,466
                                                                ===========
See accompanying notes to unaudited financial statements

                                       20
<PAGE>




                        INTERNAL HYDRO INTERNATIONAL INC
                         (A Development Stage Company)


                             STATEMENT OF OPERATIONS
                             -----------------------
                 For the years ended December 31, 2004 and 2003
<TABLE>
<CAPTION>

                                                                                        Accumulated from
                                               Date of Inception                       Date of Inception
                                                    through       For the year ended        through
                                              December 31, 2003    December 31, 2004   December 31, 2004
                                             -------------------- ------------------- ------------------
<S>                                              <C>                  <C>                 <C>
NET SALES                                        $             --     $            --     $           --


COST OF SALES                                                  --                  --                 --
                                             -------------------- ------------------- ------------------


              GROSS PROFIT                                     --                  --


SELLING, GENERAL & ADMINISTRATIVE EXPENSES                 47,726           2,672,401          2,720,127
RESEARCH & DEVELOPMENT                                     32,700             215,976            248,676
                                             -------------------- ------------------- ------------------

              LOSS FROM OPERATIONS                         80,426           2,888,377          2,968,803

              LOSS ON SALE OF SECURITIES                       --             697,237            697,237
              INTEREST EXPENSE                                 --              44,800             44,800
                                             -------------------- ------------------- ------------------

NET LOSS                                         $         80,426     $     3,630,414     $ 3,710,840.00
                                             ==================== =================== ==================

BASIC NET LOSS PER COMMON SHARE                  $          (0.01)    $         (0.40)
                                             ==================== ===================
DILUTED NET LOSS PER COMMON SHARE                $          (0.01)    $         (0.39)
                                             ==================== ===================

WEIGHTED AVERAGE OF COMMON SHARES OUTSTANDING           7,647,025           9,116,317
                                             ==================== ===================
</TABLE>

See accompanying notes to unaudited financial statements

                                       21
<PAGE>


                        INTERNAL HYDRO INTERNATIONAL INC
                         (A Development Stage Company)


                       STATEMENTS OF STOCKHOLDERS' DEFICIT
                       -----------------------------------

<TABLE>
<CAPTION>

                                                                                                Accumulated
                                              Common Stock        Preferred stock    Paid-in   Comprehensive Accumulated
                                         Shares           $     Shares          $    Capital        Loss       Deficit       Total
                                      ----------- ---------- ----------- --------- ----------- ------------- ----------- ----------
<S>                                      <C>        <C>        <C>         <C>       <C>          <C>          <C>         <C>
 BALANCE January 21, 2003               7,647,025  $   7,647  27,500,000  $ 27,500  $   45,664   $         -  $        -  $  80,811

   Net loss                                                                                                      (80,426)   (80,426)
                                      ----------- ---------- ----------- --------- ----------- ------------- ----------- ----------

BALANCE DECEMBER 31, 2003               7,647,025      7,647  27,500,000     27,500     45,664                  (80,426)  $     385

 Recapitalization for reverse merger          --         --    1,250,000     1,250  (1,035,012)                          (1,033,762)

 Shares issued for services             5,099,602      5,100                         2,238,470                            2,243,569

 Debt converted to common stock         1,627,250      1,627                           486,864                              488,491

 Conversion of preferred to common        219,250        219    (219,250)     (219)        --

 Value of warrants and
    conversion feature                                                                  60,000                               60,000

 Issued for investment in marketable
    securities                          2,375,000      2,375                         1,778,875                            1,781,250

 Issued for Kinetic agreeement          1,250,000      1,250                           186,250                              187,500

  Net loss                                                                                                    (3,630,414)(3,630,414)

 Unrealized loss on marketable securities                                                           (771,362)              (771,362)
                                                                                                                         ----------
  Total Comprehensive Loss                                                                                               (4,401,776)
                                      ----------- ---------- ----------- --------- ----------- ------------- ----------- ----------

 BALANCE DECEMBER 31, 2004             18,218,127  $  18,218  28,530,750  $ 28,531  $3,761,111  $   (771,362)$(3,710,840) $(674,343)
                                   ============== ========== =========== ========= =========== ============= =========== ===========
</TABLE>
See accompanying notes to unaudited financial statements

                                       22
<PAGE>


                        INTERNAL HYDRO INTERNATIONAL INC
                         (A Development Stage Company)

                             STATEMENT OF CASH FLOWS
                             -----------------------
                 For the years ended December 31, 2004 and 2003

<TABLE>
<CAPTION>

                                                                                                                 Accumulated from
                                                                             Date of Inception                   Date of Inception
                                                                                  through     For the year ended      through
                                                                             December 31, 2003 December 31, 2004 December 31, 2004
                                                                            ------------------ ----------------- -----------------
<S>                                                                                   <C>                <C>              <C>
OPERATING ACTIVITIES
   Net Loss                                                                   $        (80,426) $  (3,630,414.00)  $    (3,710,840)
     Adjustments to reconcile net loss to cash used by operating activities:
       Depreciation expense                                                                 -              3,931             3,931
       Amortization of Debt discount                                                        -             40,000            40,000
       Issuance of common and preferred stock for services performed                        -          2,243,569         2,243,569
        Loss on sale of securites                                                           -            697,237           697,237
       Changes in assets and liabilities
          Stock subscription receivable                                                     -             (2,500)           (2,500)
         (Decrease) Increase in accounts payable and accrued liabilities                    -             40,931            40,931
                                                                            ------------------ ----------------- -----------------

          Cash used by operating activities                                   $        (80,426) $       (607,246)       $ (687,672)

INVESTING ACTIVITIES
     Purchase of fixed assets                                                 $             -   $        (16,003)  $       (16,003)
     Cash on proceeds on sale of marketable securities                                      -            193,388           193,388
     Employee advances                                                                      -             (7,000)           (7,000)
                                                                            ------------------ ----------------- -----------------

          Cash provided by investing activities                               $             -   $        170,385  $        170,385

FINANCING ACTIVITIES
    Proceeds from notes payable                                               $             -   $         60,000  $         60,000
    Proceeds from shareholder advances                                                  80,811           414,527           495,338
                                                                            ------------------ ----------------- -----------------
Cash provided by financing activities                                         $         80,811  $        474,527  $        555,338

INCREASE IN CASH AND CASH EQUIVILENTS                                         $            385  $         37,666  $         38,051

CASH AND CASH EQUIVILENTS, beginning of year                                                -               385                 -
                                                                            ------------------ ----------------- -----------------

CASH AND CASH EQUIVILENTS, end of year                                        $            385   $        38,051  $         38,051
                                                                            ================== ================= =================
</TABLE>
See accompanying notes to unaudited financial statements

                                       23
<PAGE>

               INTERNAL HYDRO INTERNATIONAL, INC. AND SUBSIDIARY
                         (A Development Stage Company)
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIGICANT ACCOUNTING POLICIES

Background and Nature of Business

INTERNAL  HYDRO  INTERNATIONAL  INC.,(formerly  Internal  Command  International
("ICI")) was incorporated  under the laws of the State of Florida on January 21,
2003 (the "Company").

On  January  2,  2004 the  Company  entered  into a merger  agreement  with Home
Services International, Inc. ("HSI"). HSI issued 27,500,000 shares of its Series
A Preferred stock. The Company is a development stage enterprise.  . The Company
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.

As a result of the merger transaction with HSI, the former Company  stockholders
obtained control of HSI's voting stock. For financial accounting  purposes,  the
acquisition was a reverse acquisition of HSI by the Company,  under the purchase
method of accounting,  and was treated as a recapitalization with the Company as
the  acquirer.  Accordingly,  the  historical  financial  statements  have  been
restated after giving effect to the January 2, 2004, acquisition of the Company.
The  financial  statements  have been  prepared  to give  retroactive  effect to
January 21, 2003 (date of inception),  of the reverse  acquisition  completed on
January 2, 2004,  and represent the operations of the Company.  Consistent  with
reverse acquisition  accounting:  (i) all of the Company's assets,  liabilities,
and accumulated deficit, are reflected at their combined historical cost (as the
accounting acquirer) and (ii) the preexisting outstanding shares of the HSI (the
accounting  acquiree)  are  reflected  at their net asset  value as if issued on
Janaury 21, 2003.

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
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.

                                       24
<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIGICANT ACCOUNTING POLICIES - continued

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.

Principles of Consolidation

The accompanying  consolidated  financial statements include the accounts of HSI
and its wholly owned subsidiary, ICI. All intercompany accounts 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.

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
December 31, 2004.

Revenue

There was no revenue generated in the years ended December 31, 2004 and 2003.

                                       25
<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIGICANT ACCOUNTING POLICIES - continued

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.

Loss 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  anti-dilutive  effect on
earnings.  As of  December  31,  2004,  there were no stock  options and 107,497
warrants outstanding.

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 year ended December 31, 2004.

Recently Issued Accounting Pronouncements

In December  2002,  the FASB issued SFAS No.  148,  Accounting  for  Stock-Based
Compensation  - Transition  and  Disclosure - an amendment of FASB Statement No.
123. SFAS No. 148 amends SFAS No. 123, Accounting for Stock-Based  Compensation,
to provide  alternative methods of transition for a voluntary change to the fair
value-based  method of accounting  for  stock-based  employee  compensation.  In
addition,  SFAS No. 148 amends the  disclosure  requirements  of SFAS No. 123 to


                                       26
<PAGE>

NOTE 1 - DESCRIPTION OF BUSINESS AND SIGNIGICANT ACCOUNTING POLICIES - continued

require  prominent  disclosures in both interim and annual financial  statements
about the method of accounting for  stock-based  employee  compensation  and the
effect of the method used on reported  results.  SFAS No. 148 is  effective  for
financial statements issued for fiscal years ending after December 15, 2002. The
adoption  of SFAS  No.  148 did not  have a  material  effect  on its  financial
position or results of operations.

In January 2003, the FASB issued FIN No. 46,  Consolidation of Variable Interest
Entities,  and amended the  Interpretation  in December  2003. FIN No. 46 states
that companies  that have exposure to the economic  risks and potential  rewards
from  another  entity's  assets  and  activities  have a  controlling  financial
interest  in a  variable  interest  entity and should  consolidate  the  entity,
despite  the  absence  of  clear  control  through  a  voting  equity  interest.
Disclosure  of  significant  variable  interest  entities  is  required  in  all
financial  statements  issued  after  January 31, 2003,  regardless  of when the
variable  interest  was  created.  The  adoption  of FIN No.  46 will not have a
material effect on its financial position or results of operations.

In May 2003, the FASB issued SFAS No. 150,  Certain  Financial  Instruments with
Characteristics  of Both  Liabilities  and  Equity.  SFAS  No.  150  established
standards for how a company clarifies and measures certain financial instruments
with  characteristics  of both liabilities and equity.  It requires a company to
classify such instruments as liabilities,  whereas they previously may have been
classified as equity.  SFAS No. 150 is effective  for all financial  instruments
entered into or modified  after May 31, 2003. The Company  anticipates  that the
adoption  of SFAS  No.  150 will not have a  material  effect  on its  financial
position or results of operations.

In  December  2004  the  FASB  issued  a  revised  Statement  123  (SFAS  123R),
"Accounting for Stock-Based  Compensation"  requiring public entities to measure
the cost of  employee  services  received  in  exchange  for an award of  equity
instruments based on grant date fair value. The cost will be recognized over the
period  during which an employee is required to provide  service in exchange for
the award -- usually the vesting period. The Company is evaluating the impact of
this new  pronouncement  and does not expect the effect of  implementation  will
have a significant impact on the Company's financial statements.

NOTE 2 - RELATED PARTY TRANSACTIONS

The Company borrows funds from officers and  stockholders  from time to time. As
at December 31, 2004, the balance of these loans was $55,000.  Currently,  there
has been no repayment terms  specified for the  shareholder  loans, as such, the
Company has classified the loans as a Current Liability.

NOTE 3 - 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
lesser 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
$60,000.  This  amount was charged as a discount  to the note and  amortized  to
interest expense over a one year period.

                                       27
<PAGE>

NOTE 4 - STOCKHOLDERS' DEFICIENCY


COMMON STOCK
The  Company's  articles  of  incorporation  authorize  the  issuance  of  up to
75,000,000 shares of common stock, with a par value of $.001.

PREFERRED STOCK
The  Company's  articles  of  incorporation  authorize  the  issuance  of  up to
10,000,000  shares of serial A convertible  preferred stock, with a par value of
$.001.  Series  A  convertible  stock  can be  exchanged  at the  option  of the
stockholder  into  shares of  common  stock at the rate of one share of series A
convertible preferred stock for one shares of common stock at any time after the
first  anniversary  of the original  date of issuance.  The series A convertible
preferred  stock shall rank,  as to dividends  and upon  liquidation  senior and
prior to the  Company's  common stock and to all other classes or class of stock
issued by the Company,  except as otherwise  approved by the affirmative vote or
consent  of the  holders of a  majority  of the  shares of series A  convertible
preferred  stock.  In  addition,  so long as any share of  series A  convertible
preferred stock shall be outstanding,  the holders of such convertible preferred
stock shall be entitled to receive out of any funds legally available,  when, as
and if declared by the Board of Directors of the Company, preferential dividends
at the rate of ten percent (10%) per annum,  payable upon the first  anniversary
date of the  original  issue date,  then  quarterly  with  payment to be made in
either cash or in the  issuance  of  additional  shares of series A  convertible
preferred stock. Such dividends shall be cumulative and begin to accrue from the
original  issue date,  whether or not declared and whether or not there shall be
net profits or net assets of the Company  legally  available  for the payment of
those  dividends.  To date,  no  dividend  has  been  declared  by the  Board of
Directors.  The series A  stockholders  shall be entitled to vote on all matters
requiring a shareholder vote of the Company. Each Series A shareholder of record
shall have one vote for each Series A stock share outstanding


During the year ended December 31, 2003, HSI declared a 1 for 28.9 reverse stock
split.  The number of shares  presented in these  financial  statements has been
retroactively restated for all periods to reflect this reverse stock split.

During the year ended  December 31, 2004,  the Company  declared a 1 for 5 stock
split.  The number of shares  presented in these  financial  statements has been
retroactively restated for all periods to reflect this reverse stock split.

The Company  issues its common stock from time to time to  compensate  employees
and consultants as consideration for services rendered.  These shares are valued
at the trading  value on the date of grant.  During the year ended  December 31,
2004,  the  Company  issued  5,099,602  shares  of its  common  stock  valued at
$2,243,569

During the year ended December 31, 2002, the Company placed  2,813,180 shares of
its common stock in an escrow account. These shares are contingently issuable as
they  are to be  issued  to  creditors  as part of a plan to  negotiate  Company
obligations  through  an  intermediary.  The  Company  is  attempting  to settle
obligations  by  negotiating  with  creditors  to take  Company  common stock as
payment  for the  obligations.  During the year ended  December  31,  2002,  the
Company had not issued any of these shares to  creditors.  During the year ended
December 31, 2003,  the Company  negotiated a settlement in which 249,905 shares
of common stock were issued out of escrow to settle a creditor  obligation  that
had an original  balance of $65,000.  The settlement was recorded at the trading
value of the  shares on the date of  settlement.  That value was  $299,866.  The
result was an additional  expense of $234,866 charged to operations for the year


                                       28
<PAGE>

NOTE 4 - STOCKHOLDERS' DEFICIENCY - continued

ended  December 31, 2003.  During the year ended  December 31, 2004, the Company
did not issued any of these shares to creditors.

During the year ended  December 31, 2004,  the Company  converted debt and trade
accounts payable of $488,491 for 1,627,250 shares of its common stock.

On July 29, 2004(the Company entered into a Stock Purchase Agreement  ("Purchase
Agreement"),  effective  October 7, 2004,  with  Langley  Park  Investments  Plc
("Langley"),  a corporation  organized under the laws of England and Wales which
is  admitted  to trade on the London  Stock  Exchange  ("LSE") as an  investment
trust.  Pursuant to the Purchase  Agreement,  the Company sold 2,375,000  shares
(post-split)  of its common  stock  ("Company  Stock")  to  Langley  for a total
purchase price of approximately $1,780,000.

Langley paid the purchase price by delivering 882,778 Ordinary Shares of Langley
("Langley  Shares")  to the  Company  with a value of one (1.00)  British  Pound
Sterling  (approximately  U.S.$1.80)  per share.  The Company issued the Company
Stock to Langley.  Both the Company Stock and the Langley  Shares will initially
be placed into escrow, including fifty percent (50%) of the Langley Shares to be
deposited  into  escrow  as  Downside  Price  Protection  (the  "Langley  Escrow
Shares").

The Company  intends to  liquidate  the Langley  Shares  released to it within a
reasonable  period of time  following  their listing on the LSE in order to fund
operations.  Although the parties have agreed upon a value of one (1.00) British
Pound Sterling (approximately  U.S.$1.80 per share) per Langley Share, there can
be no  assurances  that the  Company  can  liquidate  some or all of the Langley
Shares at that price.

On November 3, 2004 the Company sold 441,389 shares of Langley Park  Investment,
(London Exchange:  LPI) for $193,388. This was the first liquidation pursuant to
the Agreement.  These gross  proceeds  represented a loss of $697,237 based upon
the  difference  between the selling price on November 3, 2004 and the Company's
trading price on July 29, 2004.

The  balance of the 441,389  shares  owned by the Company are valued at December
31, 2004 at the market price of the Langley Park  Investments  Plc. as listed on
the London  Stock  Exchange  ("LSE")  with the  difference  being  carried as an
unrealized loss in the equity section of the Company's financial statements.

On  the  two  (2)  year  anniversary  of  the  Purchase   Agreement  ("Two  Year
Anniversary"),  the market value of the Company's  common stock will be compared
to the purchase price of the Company Stock under the Purchase  Agreement" Market
Value" is defined as the average of the ten (10) closing bid prices per share of
the  Company's  common  stock  during  the ten  (10)  trading  days  immediately
preceding the Two Year Anniversary of the Agreement.  If the Market Value of the
Company's  common stock on the Two Year  Anniversary  is the same or higher than
purchase price per share, then at that time, the Company will receive all of the
Langley Escrow Shares.  If the Market Value on the Two Year  Anniversary is less
than purchase price per share,  then for each percentage point decline in value,
the Company must sell a  corresponding  percentage of the Langley  Escrow Shares
back to Langley for nominal  consideration,  up to the maximum number of Langley
Escrow  Shares,  and the balance of the Langley  Escrow  Shares is released from
escrow to the Company.

                                       29
<PAGE>

NOTE 4 - STOCKHOLDERS' DEFICIENCY - continued

Internal Hydro  International was approached with the investment by the Langley,
at a time  where the 2 year lock up of the  shares to be issued  was voted on by
the Board of Directors as being  acceptable for purposes of investment given the
stock price and discount  proposed by Langley.  Given that the  escrowed  shares
which  would be held by  Langley  of  IHDR's  shares  in the  fund,  these  were
accounted for in the analysis and date on December 31, 2004, as being  accounted
for as if they would  eventually be sold at the two year mark for the investment
holding period.  At the time of the investment and at the time of the accounting
determination,  it was  believed by the  Company's  management  that the Company
would meet the criteria as set forth in the Langley  agreement which would allow
the sale of the remaining shares in the fund.



NOTE 5 - FURNITURE AND EQUIPMENT

Furniture  and  equipment  is  stated  at cost  less  accumulated  depreciation.
Depreciation  is recorded on a  straight-line  basis over the  estimated  useful
lives of the assets of 3 years. Depreciation expense for the year ended December
31, 2004 and 2003 was $3,931 and $5,795, respectively.

Property and equipment consisted of the following at December 31, 2004:

         Office and computer equipment                $      33,388

         Less accumulated depreciation                      (19,236)
                                                       ------------

         Furniture and equipment, net                 $      14,152
                                                       ============



NOTE 6 - STOCK OPTIONS

There were no stock  options  granted nor was there any pro forma  effect of the
vesting of options  granted in previous  periods in the years ended December 31,
2004 and 2003.


NOTE 7 - INCOME TAXES

The Company  has no net income tax  provision  or benefit in the  periods  ended
December 31, 2004 and 2003. Prior to the merger transaction with HIS the Company
elected to be treated as an  S-Corporation  as prescribed  under Section 1362 of
the  Internal  Revenue  Code.  As  an  S-Corporation,  items  of  income,  loss,
deductions  and credits  generated by the Company  flow through  directly to the
stockholders and are included in the tax returns of the individual stockholders.

During the year ended  December  31, 2004,  the Company  generated a tax benefit
related to operating loss  carryforwards  of $1,456,000 which was equally offset
by a valuation allowance.

The Company  has  cumulative  net  operating  losses as of December  31, 2004 of
approximately $3,935,000 that expire in 2008 through 2023.

                                       30
<PAGE>

NOTE 7 - INCOME TAXES - continued

At December 31, 2004,  the Company had federal net operating loss carry forwards
of  approximately  $6,938,000  that  expire  from  2013 to 2024  and  state  net
operating loss carry forwards of approximately  $6,620,000 that expire from 2005
to 2008.  Substantially  all of the  deferred  income  tax  asset of  $2,756,000
relates to income tax benefits from net operating loss carry  forwards.  Because
of the change of control  issues under Section 382 of the Internal  Revenue Code
and the current  uncertainty of realizing the benefits of the tax  carryforward,
an equal valuation  allowance has been established.  The full realization of the
tax benefit  associated  with the carry forward depends  predominantly  upon the
Company's ability to generate taxable income during the carry forward period.


NOTE 8 - COMMITMENTS AND CONTINGENCIES


The Company is not delinquent and is not attempting to pay current creditors and
vendors with common stock.

However, prior to the merger of Internal Command with Home Services, the Company
(HSVI) had incurred additional deficits in cash flow from operating  activities.
The Company  had  accrued  approximately  $343,000  in  obligations  to vendors,
consultants and former employees. We are attempting to settle these obligations,
primarily  through the  issuance of common  stock.  Management  believes we will
ultimately settle these obligations for no more than amounts accrued at December
31, 2004. As a part of the Merger Agreement with Internal Command International,
Inc.  (ICI),  the then Chief  Executive  Officer of HSVI,  Jay Budd, had and did
affirm that the  outstanding  debts of HSVI have been  properly  structured  for
management of the debt  post-merger;  namely,  that the debt was in the hands of
suitable professional debt management team, including Fletcher & Associates, and
Harry J.  Miller,  PLLC,  that  there has been set  aside as part of the  issued
common stock for obligation and  satisfaction of the debt, and that the incoming
principals of ICI will be held harmless for this debt. The company in the summer
of 2005, released Harry Miller, PLLC and Fletcher & Associates from their duties
as debt managers, taking control of such matters internally due to the amount of
legal  expertise  held.  To date,  the shares  issued to secure  these debts are
unissued,  and held by both Harry  Miller PLLC in trust,  and with the  company,
should the need arise for  settlement of any such debts,  if  communication  and
demand for the same is made.  To date no such  verified  debt  demands have been
made,  so the shares  are still held in  safekeeping.  Any  settlements  will be
valued at the fair value of the stock at the time the settlement is reached,  or
some other amount as negotiated.


NOTE 9 - MERGER TRANSACTION

On January 2, 2004, the Company entered into a merger  transaction with HSI. The
Company  had net  assets  of  $385.  The net  deficit  of HSI was  approximately
$1,034,000 at January 2, 2004. As discussed in Note 1, the Company accounted for
this transaction under the purchase method of accounting,  and it was treated as
a recapitalization with the Company as the acquirer. HSI had office equipment of
approximately  $2,000,  accounts payable and accrued liabilities of $400,000 and
other liabilities of $636,000.


                                       31
<PAGE>

NOTE 10 - LOSS PER SHARE

Outstanding  options and warrants  were not  considered in the  calculation  for
diluted  earnings  per share  for the years  ended  December  31,  2004 and 2003
because the effect of their inclusion would be antidilutive.

<TABLE>
<CAPTION>

                                                  2003                             2004
                                     --------------------------  ----------------------------------
                                                            Per                                 Per
                                       Loss      Shares   share           Loss      Shares    share
                                  --------- ----------- ------- -------------- ----------- --------
<S>                                    <C>         <C>     <C>            <C>         <C>      <C>
    Net (Loss)                    $ (80,426)                       $(3,630,415)
    Discontinued operations               0                                  0
                                  ---------                     --------------
    Continuing operations           (80,426)                        (3.630,415)

    Basic Loss Per Share:

    Loss available to common
    stockholders                  $ (80,426)  7,647,025  $(0.01)   $(3,630,415)  9,116,317   $(0.40)
                                  =========             ======================              ========
    Effect of dilutive securities       N/A                                N/A

    Diluted Loss Per Share                               $(0.01)                              $(0.40)
                                                        =======                             ========
</TABLE>


Warrants and options to purchase  107,497 and 10,669 shares of common stock were
outstanding  and excluded  from the loss per share  calculation  at December 31,
2004 and 2003 respectively.


NOTE 11 - INVESTMENTS

During the year ended  December  31,  2004,  the  Company  entered  into a Stock
Purchase  Agreement to acquire  882,778 shares of Langley Park  Investments  Plc
("Langley"),  a corporation  organized under the laws of England and Wales which
is  admitted  to trade on the London  Stock  Exchange  ("LSE") as an  investment
trust.  Pursuant to the Purchase  Agreement,  the Company sold 2,375,000  shares
(post-split)  of its common  stock  ("Company  Stock")  to  Langley  for a total
purchase price of $1,781,250  based on the trading value of the Company's shares
delivered to Langley.  The Company sold one half of its Langley  holdings during
the year ended December 31, 2004.

The Company  currently  classifies  all investment  securities as  available-for
-sale. These securities are presented at their estimated fair value.  Unrealized
gains and losses on such securities,  net of the related income tax effect,  are
excluded  from  earnings and reported as a separate  component of  stockholders'
equity until  realized.  Realized  gains and losses are included in earnings and
are derived using the specific identification method for determining the cost of
securities sold.

                                       32
<PAGE>

NOTE 11 - INVESTMENTS - continued

Investment  in Langley  securities  consisted  of the  following at December 31,
2004:

                                       Gross Unrealized              Fair
                            Cost      Gains         Losses           Value
                      ------------  --------  ---------------  -------------
Equity securities        $ 890,625   $     -       $ (771,362)     $ 119,263


During the year ended December 31, 2004, the Company  invested in Kinetic Energy
Systems,  Inc.  ("Kinetic") by issuing  1,250,000 shares of its common stock for
approximately  20% of Kinetic.  The value of the  investment  was  determined to
$187,500 based on the trading price of the Company's common stock at the time of
the agreement.  The Company intends to jointly develop and market  complimentary
technologies with Kinetic.  The Company  classifies its investment in Kinetic as
available for sale and has carried its investment at cost.  Kinetic is a private
company and there is quoted  market price for its  securities.  The Company does
not believe that its investment in Kinetic is impaired at December 31, 2004. The
Company owns 2,000,000 voting  preferred shares of Kinetic Energy Systems,  Inc.
Kinetic has 10,000,000  preferred  shares issued and  outstanding  and 1,000,000
common shares  outstanding.  The Company's  interest in Kinetic is approximately
18%. The Company exercises no management control and therefore,  the cost method
was used.



ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

          None.




ITEM 8A. CONTROLS AND PROCEDURES

Craig A. Huffman, our Chief Executive Officer, and Alberto Pastrana,  our acting
Chief  Financial  Officer,  have  evaluated  our controls and  procedures  as of
December  31,  2004.  Each  has  concluded  that  our  disclosure  controls  and
procedures are appropriate and effective.

During  the  quarter  ended  December  31,  2004,  there  were no changes in our
internal  controls or in other  factors  that could  significantly  affect these
controls  subsequent to the date of their  evaluation,  including any corrective
actions with regard to significant deficiencies and material weaknesses.


ITEM 8B.  REPORTS ON FORM 8K

None







                                       33
<PAGE>

                                    PART III

ITEM 9. DIRECTORS EXECUTIVE OFFICERS,  PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT


EXECUTIVE OFFICERS AND DIRECTORS

The members of the Board of Directors of the Company serve until the next annual
meeting of  stockholders,  or until  their  successors  have been  elected.  The
officers  serve at the  pleasure of the Board of  Directors.  On January 2, 2004
when then Home Services  International  Inc. acquired the shares of the Internal
Command  International  Inc. the  Directors  were Jay H. Budd and Robert E. Lee.
After this  transaction,  Robert E. Lee  resigned  and Mark Pena and Wade Kenyon
were appointed as Directors.

On January  2, 2004 when then Home  Services  International  Inc.  acquired  the
shares of the Internal Command International Inc. Jay H. Budd was the CEO of the
Company.  After this  transaction,  Jay H Budd resigned and was  re-appointed as
Executive Vice President and Craig Huffman was appointed as President and CEO.

Jay H. Budd  resigned  both his position on the Board of Directors and Executive
Vice President on August 23, 2004.

The  following  table sets forth the name,  age, and position of each  executive
officer and director of the Company:

DIRECTOR'S   NAME            AGE      OFFICE                TERM EXPIRES
--------------------------------------------------------------------------------

Mark Pena                    41      Chairman/Director      next annual meeting
Wade Kenyon                  65      Director               next annual meeting


EXECUTIVE OFFICER'S   NAME   AGE     OFFICE
--------------------------------------------------------------------------------

Craig Huffman                39      President/CEO

Alberto Pastrana             42      Chief Financial Officer



Set forth below is certain  biographical  information,  present  occupation  and
business  experience  for the past five  years of each  director  and  executive
officer of the  Company.  Officers  of the  Company  are elected by the Board of
Directors and hold office until their successors are chosen and qualified, until
their death or until they resign or have been removed from office. All corporate
officers serve at the discretion of the Board of Directors.


Mark Pena
Board of Directors

Member Board of Directors of Sun Rayz Beverages, Inc., Florida.
Corporate General Counsel/ Bevsystems International, Inc.,

                                       34
<PAGE>

EXECUTIVE OFFICERS AND DIRECTORS - continued

Mr. Pena was appointed Chairman of the Board of Directors on January 2, 2004.

From 1999 to the Present,  Mr. Pena has been a  Attorney/Solo  Practioner in the
Law Office of Mark E. Pena, P.A.,  Tampa Florida.  Mr. Pena was appointed acting
Chairman, Board of Directors of Internal Hydro International, Inc. on January 2,
2004. He is also Florida  Corporate General Counsel/  Bevsystems  International,
Inc., as well as a member of the Board of Directors of Sun Rayz Beverages, Inc.


Stetson  University  College of Law, Honor Roll, John O. Weihl Award Scholarship
Recipient  representing  top  student  of class in Trial  Advocacy/  Mann  Award
Scholarship Recipient  representing  Character and Leadership in the practice of
law, Student Bar Association President/ American Bar Association Young Lawyer as
Division Leutenant Governor.

Rutgers College, New Brunswick,  NJ, Union College,  Cranford, NJ, University of
South Florida, Tampa, Florida. Honors included: Dean's List, Member: Pi Gamma Mu
International Honor Society.

Teen Court  Judge,  Hillsborough  County  Bar  Association  Troubled  Teen Youth
Program.  Admitted to Practice:  July, 1994. Member, Florida Bar, Federal Middle
District of Florida,  11th  Federal  Circuit  Court of  Appeals.,  American  Bar
Assoc./ Member International Law and Business Law Divisions.

Primary areas of practice include general corporate transactions,  structure and
litigation,  commercial transactions, civil litigation,  international law. Past
practice  includes  insurance  defense,  first party contracts,  and employment.
Former  Senior  Partner/ Law Office of Pena & Thomas,  P.A.,  Tampa Florida from
1998-1999.

Former Special  Assistant Florida State Attorneys  Office,  Prosecution  Clinic,
Pinellas County, Florida.

Corporate  representation  included:  Armor Insurance Co., Progressive Insurance
Co.,  Bevsystems  International,  Inc., Staff Suppliers Inc.,  Corrosion Control
Specialists,  Inc.,  Nextrade Inc., Gulf South Income Properties Inc. d/b/a Best
Western,  Southeastern  Income Properties Inc., d/b/a Howard  Johnsons/Orlando.,
DTNet Technologies,  Inc. DTNet International,  Inc., St. Mary's Parish,  Polish
Catholic Church, St. Petersburg, Florida., Gulf West Property Development LLC, N
B Financial LLC. Counsel of record in over 400 civil litigation cases throughout
the State of Florida and Federal Districts.

Wade Kenyon
Board of Directors


Mr. Kenyon was appointed to the Board of Directors on January 2, 2004.

Mr. Kenyon is the Co-founder of Internal Command  Industries.  From July 1981 to
the present,  Mr.  Kenyon has been a Project  Executive  for Baring  Industries,
Inc.,  directing  the Health  Care  design  Build  efforts  and  overseeing  the
activities  of four  project  management  teams.  From  1997 to 2000 he was with
Johnson  Lancaster as a Project  Manager - where he  solicited  and managed high
profile Food Service projects some of which include Universal Studios,  Orlando,
and Disney World, Orlando, along with University of North Carolina,  Lenoir Hall
in Greensboro, NC. From 1991 to 1997 he was president of Kenyon and Kenyon, Inc.
- Food Facilities and Laundry Design and Consulting.  From 1991 to 1997 he was a
principal with Sherman Robinson  Associates,  Atlanta co venturing on the design


                                       35
<PAGE>

EXECUTIVE OFFICERS AND DIRECTORS - continued

of the Atlanta Olympic and Braves Stadium and a host of other projects including
Casino  and  Correctional  projects.  From  1990 to 1991 Judy  Ford  Stokes  and
Associates -Contracted  Consultant - responsibilities  included participation in
design and project  management  of several  major food  service  projects in the
Southeast,  Washington,  D.C., Philadelphia and San Benardino,  CA. From 1985 to
1986 Mr. Kenyon worked with Greitzer,  Inc., as Vice President - responsible for
revamping  the  manufacturing   processes,   participating  in  the  design  and
development of the product,  and expanding company sales. He became president of
the firm in 1986. He received his BA Degree from the University of South Florida
- Majoring in Chemistry with a Minor in Zoology.


Craig Huffman
Chief Executive Officer and President


Mr. Huffman was appointed President on January 2, 2004.


President  and  co-founder,  Internal  Command  International,   Tampa,  Florida
2001-2004.  Oversaw the  development  of the Energy  Commander  technology,  all
corporate operations,  patent protection, and all other aspects of the corporate
build up.

Author of the business plan for Internal Hydro, and the revenue stream plan.

BA, University of Tampa, 1989. President Student Political Organization,  member
Sigma Phi Epsilon

Juris Doctor, cum laude (2nd in class), Stetson University College of Law, 1997;
recipient West?s Corpus Juris Secundum Award for Torts and Civil Procedure.

Solo  Practitioner:  Craig A.  Huffman,  P.A.  primary  areas of practice  being
criminal  law,  civil tort  practice,  and  appellate  work.  Tried over 50 jury
trials, in both State and Federal Court; authored over 40 appeals.

Army ROTC four year scholarship  recipient.  Major,  United States Army Reserve,
1989-Present; commissioned as a Field Artillery Officer presently the JAG Corps.

United States Army Field  Artillery  Officer  Basic  Course;  United States Army
Judge Advocate Officers Basic Course, Judge Advocate Officers Advanced Course.

Deputy Sheriff in  Hillsborough  County  Florida as an  Enforcement  Deputy from
1990-1995.  Graduate Tampa Police Academy;  Hillsborough County Sheriff?s Office
Academy; Sex Crimes Investigations:  Hostage Negotiations;  Kinesic Interviewing
Techniques; Interviews and Interrogations.



Alberto Pastrana

Mr.  Pastrana has operated his tax  practice in Tampa,  Florida  since 1987.  He
assists businesses and individuals , and holds various licenses in the financial
sector (Real Estate,  Insurance). Mr. Pastrana was instrumental in the formation
and inception of Internal  Hydro  International.  He graduated  with Honors from
IONA College in New Rochelle New York with a Bachelor of Business Administration
in  Accounting  and Finance.  Mr.  Pastrana  served a tour of duty in The Unites
States Air Force.

                                       36
<PAGE>

EXECUTIVE OFFICERS AND DIRECTORS - continued

All  officers  and  directors  listed above will remain in office until the next
annual meeting of our  stockholders,  and until their  successors have been duly
elected and qualified.  There are no agreements  with respect to the election of
Directors.  We have not  compensated  our  Directors for service on our Board of
Directors,  any  committee  thereof,  or  reimbursed  for expenses  incurred for
attendance  at meetings of our Board of  Directors  and/or any  committee of our
Board of Directors.  Officers are  appointed  annually by our Board of Directors
and each  Executive  Officer serves at the discretion of our Board of Directors.
We do not have any standing committees. Our Board of Directors may in the future
determine to pay Directors' fees and reimburse Directors for expenses related to
their activities.


BOARD MEETINGS AND COMMITTEES

The Directors and Officers will not receive  remuneration from the Company until
a  subsequent  offering  has been  successfully  completed,  or cash  flow  from
operating  permits,  all in the discretion of the Board of Directors.  Directors
may be paid their  expenses,  if any, of attendance at such meeting of the Board
of Directors,  and may be paid a fixed sum for attendance at each meeting of the
Board of  Directors  or a stated  salary  as  Director.  No such  payment  shall
preclude any Director  from serving the  Corporation  in any other  capacity and
receiving compensation therefor. No compensation has been paid to the Directors.
The Board of  Directors  may  designate  from  among its  members  an  executive
committee  and one or  more  other  committees.  No such  committees  have  been
appointed.

COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT

Based  solely  upon a  review  of  forms  3, 4,  and 5 and  amendments  thereto,
furnished to the Company during or respecting its last fiscal year, no director,
officer,  beneficial owner of more than 10% of any class of equity securities of
the  Company  or any other  person  known to be  subject  to  Section  16 of the
Exchange  Act of 1934,  as  amended,  failed to file on a timely  basis  reports
required by Section 16(a) of the Exchange Act for the last fiscal year.


The Company has adopted a code of ethics for its Principal  Executive and Senior
Financial Officers.

ITEM 401(e)
AUDIT COMMITTEE FINANCIAL EXPERT


The Company's  board of directors  does not have an "audit  committee  financial
expert," within the meaning of such phrase under  applicable  regulations of the
Securities and Exchange Commission, serving on its audit committee. The board of
directors  believes  that all  members of its audit  committee  are  financially
literate and  experienced in business  matters,  and that one or more members of
the  audit  committee  are  capable  of  (i)  understanding  generally  accepted
accounting  principles  ("GAAP") and financial  statements,  (ii)  assessing the
general  application  of GAAP  principles in connection  with our accounting for
estimates,  accruals and reserves,  (iii) analyzing and evaluating our financial
statements,   (iv)  understanding  our  internal  controls  and  procedures  for
financial  reporting;  and (v) understanding audit committee  functions,  all of
which are attributes of an audit committee financial expert.  However, the board
of  directors  believes  that  there is not any audit  committee  member who has
obtained  these  attributes  through  the  experience  specified  in  the  SEC's


                                       37
<PAGE>

AUDIT COMMITTEE FINANCIAL EXPERT - continued

definition  of "audit  committee  financial  expert."  Further,  like many small
companies,  it is difficult  for the Company to attract and retain board members
who qualify as "audit  committee  financial  experts," and competition for these
individuals is significant.  The board believes that its current audit committee
is able to  fulfill  its  role  under  SEC  regulations  despite  not  having  a
designated "audit committee financial expert."


ITEM 401(g)
There have been no material  changes to the procedures by which security holders
may recommend nominees to the board of directors.


ITEM 10. EXECUTIVE COMPENSATION



ITEM 10. EXECUTIVE COMPENSATION
<TABLE>
<CAPTION>

    SUMMARY COMPENSATION TABLE
                         Annual Compensation          Long Term Compensation
                          ------------------------------ ----------------------------------
                                                                   Awards          Payouts
                                                          ------------------------ --------
Name and             Year     Salary  Bonus  Other Annual  Restricted  Securities    LTIP    All Other
Principal Position              ($)    ($)   Compensation     Stock    Underlying  Payouts  Compensation
                                                  ($)         award(s) Options /      ($)
                                                             (shares)     SARs
                                                                           (#)
------------------- ---- ----------- ------ ------------- ------------ ---------- -------- -------------
<S>                 <C>        <C>     <C>       <C>           <C>         <C>      <C>         <C>
Craig A. Huffman
President and       2002       -0-     -0-        0            -0-          0        -0-        -0-
Director            2003       -0-     -0-        0            -0-          0        -0-        -0-
                    2004     $51,850   -0-        0           145,000       0        -0-        -0-
------------------- ---- ----------- ------ ------------- ------------ ---------- -------- -------------
Alberto Pastrana
Chief Financial     2002       -0-     -0-        0            -0-          0        -0-        -0-
Officer             2003       -0-     -0-        0            -0-          0        -0-        -0-
                    2004      $1,000   -0-        0            20,000       0        -0-        -0-

</TABLE>










                                       38
<PAGE>

ITEM 10. EXECUTIVE COMPENSATION - continued


OPTIONS/SAR GRANTS IN LAST FISCAL YEAR


                  Individual Grants
------------------------------------------------------------ ------------------
Name        Number of  Percent of   Exercise  Expiration Grant Date Present
           Securities     Total     of Base      Date         Value ($)
           Underlying   Options /    Price
            Options/      SARs       ($/sh)
              SARs     Granted to
             Granted    Employees
               (#)      in Fiscal
                           Year
---------- ----------- ----------- ---------- ---------- ---------------
Craig A.
Huffman         0           0          0        N/A           N/A
---------- ----------- ----------- ---------- ---------- ---------------
Alberto
Pastrana        0           0          0        N/A           N/A
---------- ----------- ----------- ---------- ---------- ---------------


-------------- ------------ ---------------- ---------------- ---------
Name           Shares        Value Realized  Number of        Value of
               Acquired on   ($)             Securities       Unexercised In-
               Exercise (#)                  Underlying       The-Money
                                             Unexercised      Options/SARs
                                             Options / SARs   At Fiscal Year-
                                             At Fiscal Year-  End ($)
                                             End (#)          Exercisable /
                                             Exercisable /    Unexercisable
                                             Unexercisable
-------------- ------------ ---------------- ---------------- -----------
Craig A.
Huffman            -0-              -0-           -0-             -0-
-------------- ------------ ---------------- ---------------- -----------
Alberto
Pastrana          -0-              -0-            -0-            -0-
-------------- ------------ ---------------- ---------------- ------


EMPLOYMENT AGREEMENTS

On December 1, 2004, we entered into an employment  agreement with Craig Huffman
that ends on  December  1, 2006,  to act as our  President  and Chief  Executive
Officer. Mr. Huffman is paid a salary of $96,000 per year, with enumerated other
incentives.  The base  salary is subject to a ten percent  incremental  increase
annually





                                       39
<PAGE>

ITEM 11. SECURITY OWNERSHIP OF BENEFICIAL OWNERS AND MANAGEMENT

PRINCIPAL SHAREHOLDERS; MANAGEMENT SHARE HOLDINGS

     Beneficial  Ownership is  determined  in  accordance  with the rules of the
Securities and Exchange  Commission and generally  includes voting or investment
power with respect to  securities.  The following  table sets forth Common Stock
ownership  information  as of the Record  Date with  respect to (i) each  person
known  to us to be the  beneficial  owner  of  more  than 5% of our  issued  and
outstanding  Common Stock and  Preferred  Stock;  (ii) each of our directors and
executive  officers;  and (iii) all of our directors and executive officers as a
group. Unless otherwise indicated, the business address of each person listed is
Internal Hydro International,  Inc., 607 W. MARTIN LUTHER KING Jr. Blvd., TAMPA,
FLORIDA 33603

   Name and Address of       Title of   Amount and Nature of  Percent of
   Beneficial Owner            Class      Beneficial Owner       Class
-  ---------------------------------------------------------------------
-  Craig Huffman            Preferred       6,509,020           22.8%
-  Rianey Nelson            Preferred       7,739,760           27.1%
-  Mark Pena                Preferred       1,213,280            4.3%
-  James A. Thomas          Preferred       6,051,140           21.2%
-  Alberto Pastrana         Preferred       0                      0%



-  Mark Pena                Common            362,154            2.0%
-  Craig Huffman            Common          1,129,630            6.2%
-  Wade Kenyon              Common            136,135             .7%

-  Alberto Pastrana         Preferred       0                      0%
- ----------------------------------------------------------------------
All officers and directors
     as a group (4 person)  Preferred       7,722,300            27.1%
                            Common          1,411,412             8.9%



ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS


Two  individuals  named in Item 403 of Regulation  S-B have advanced the company
money for general and administrative expenses:  Craig Huffman,  President of the
Company and James Thomas, who was a founding partner of the predecessor company,
Internal  Command  International  in  2001  and  who  owns  more  than 5% of the
outstanding  shares of stock of the Company.  In 2004,  Mr.  Huffman  loaned the
Company $4,000 on 7/16/04 and Mr. Thomas loaned the company  $15,000 on 6/29/04,
and $10,000 on 7/1/04 for a total of $29,000 loaned in 2004.

In 2005, Mr.  Huffman  loaned the Company $1,000 on 3/11/05,  $8,000 on 3/16/05,
$18,000 on 3/18/05 and $15,000 on 8/4/05.  Mr. Thomas loaned the Company  $5,200
on 6/23/05,  and $10,000 on 8/4/05.  Mr. Thomas was repaid $1,000 on 3/21/05 and
$2,000 on 11/18/05.

Mr.  Huffman  is owed a total  of  $46,000  and Mr.  Thomas  is owed a total  of
$37,200.

Currently,  there has been no  repayment  terms  specified  for the  shareholder
loans, as such, the Company has classified the loans as a Current Liability.


                                       40
<PAGE>

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS - continued

ADDITIONAL INFORMATION CONCERNING THE BOARD OF DIRECTORS OF THE COMPANY

During the year ended  December 31, 2004, the Board of Directors met 2 times and
held 1 meeting via unanimous consent in lieu of a special meeting. A majority of
the  directors  was  present at each  meeting,  all  constituting  a quorum.  In
addition to regularly scheduled meetings, a number of Directors were involved in
numerous informal  discussions with management,  offering advice and suggestions
on a broad range of corporate matters.



Item 13.  Exhibits and Reports on Form 8-K

                                  EXHIBIT INDEX

The following exhibits are filed as part of this Annual Report on Form 10-KSB or
are incorporated herein by reference:

Exhibit         Description
3.1.1           Articles of Incorporation (1)
3.1.2           Amended Articles of Incorporation (1)
3.2             Bylaws (1)
10.1            Lock-up agreement with Hagit Bernstein (1)
10.2            Lock-up agreement with Raphi Shram (1)
10.3            Lock-up agreement with Naomi Shram (1)
10.4            Stock Purchase Agreement and Plan of Reorganization (2)
21.1            Subsidiaries of Registrant (F)


(1)  Incorporated  by reference to the  Exhibits to the  Registration  Statement
     filed by the Registrant on Form 10SB dated March 1, 2000.

(2)  Incorporated  by reference  to the Exhibits to the Current  Report filed by
     the Registrant on Form 8-K/A dated December 11, 2000.

F    Filed herewith



(a) The following documents are filed as part of this report

Exhibit 31.1 --     Certification  of Chief Executive  Officer of Internal Hydro
                    International, Inc. required by Rule 13a - 14(1) or Rule 15d
                    - 14(a) of the  Securities  Exchange Act of 1934, as adopted
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 31.2 --     Certification  of Chief Financial  Officer of Internal Hydro
                    International, Inc. required by Rule 13a - 14(1) or Rule 15d
                    - 14(a) of the  Securities  Exchange Act of 1934, as adopted
                    pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

Exhibit 32.1 --     Certification  of Chief Executive  Officer of Internal Hydro
                    International,   Inc.   pursuant   to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

Exhibit 32.2 --     Certification  of Chief Financial  Officer of Internal Hydro
                    International,   Inc.   pursuant   to  Section  906  of  the
                    Sarbanes-Oxley Act of 2002 and Section 1350 of 18 U.S.C. 63.

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ITEM 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

AUDIT FEES

Epstein,  Weber & Conover,  PLC billed us in the aggregate amount of $18,103 and
$14,565  for  professional  services  rendered  for  their  audit of our  annual
financial  statements and their reviews of the financial  statements included in
our Forms  10-KSB for the year ended  December  31, 2004 and  December 31, 2003,
respectively.

AUDIT-RELATED FEES

Epstein,  Weber & Conover,  PLC. did not bill us for,  nor perform  professional
services  rendered  for  assurance  and related  services  that were  reasonably
related  to the  performance  of  audit or  review  of the  Company's  financial
statements for the fiscal years ended December 31, 2004 and December 31, 2003.

FINANCIAL INFORMATION SYSTEMS DESIGN AND IMPLEMENTATION FEES

For the fiscal years ended  December  31, 2004 and  December 31, 2003,  Epstein,
Weber & Conover, PLC did not bill us for, nor perform, any financial information
systems design or  implementation.  For the fiscal years ended December 31, 2004
and December 31, 2003,  we were not billed for  professional  services  from any
other accounting firm for information systems design or implementation.

TAX FEES

Epstein,  Weber & Conover,  PLC,  L.L.P.  did not bill us for, nor perform,  any
professional  services  rendered  for tax related  services for the fiscal years
ended December 31, 2004 and December 31, 2003, respectively.

ALL OTHER FEES

We were not billed for any other professional services for the fiscal year ended
December 31, 2004.

AUDITOR INDEPENDENCE

Our Board of  Directors  considers  that the work done for us in the year  ended
December  31,  2004  by  Epstein,  Weber  &  Conover,  PLC  is  compatible  with
maintaining Epstein, Weber & Conover, PLC.'s independence.

AUDITOR'S TIME ON TASK

All of the work  expended by Epstein,  Weber & Conover,  PLC on our December 31,
2004 audit was attributed to work performed by Epstein,  Weber & Conover,  PLC's
full-time, permanent employees.






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                                  CERTIFICATION
                                  -------------


                                   SIGNATURES

Pursuant to the  requirements of section 13 or 15(d) of the Securities  Exchange
Act of 1934,  the  undersigned  has duly caused this Form 10-KSB to be signed on
its behalf by the undersigned, there unto duly authorized, in the City of Tampa,
Florida, on January 30, 2006.


INTERNAL HYDRO INTERNATIONAL, INC.


         By: /s/ Craig A. Huffman                         Date: January 30, 2006
             -------------------------------------
             Craig A. Huffman
             President and Director


Pursuant to the requirements of the Securities Exchange Act of 1933, this report
has been signed below by the following  persons on behalf of the  registrant and
in the capacities and on the date indicated.

Date: January 30, 2006


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


Date:  January 30, 2006


By: /s/ Alberto Pastrana
----------------------------------
Alberto Pastrana, Chief Financial Officer



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