UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
FORM 10-QSB
QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For Quarter Ended: June 30, 2001 Commission File Number: 000-27825
------------- ---------
Hydro Environmental Resources, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Nevada 73-1552304
- --------------------------------- -------------------
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
5725 S. Valley View Blvd, Suite 3, Las Vegas, NV 89118
- ------------------------------------------------ ----------
(Address of principal executive offices) (Zip code)
(702) 597-9070
----------------------------------------------------
(Registrant's telephone number, including area code)
(Former name, former address and former fiscal year,
if changed since last report.)
Indicate by check 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.
[X] Yes [ ] No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date.
Common 34,645,078
------ ----------------------------
Class Number of shares outstanding
at August 17, 2001
This document is comprised of ___ pages.
INDEX
Page
----
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed balance sheet - June 30, 2001 (Unaudited).................... 3
Condensed statements of operations - Three and six months ended
June 30, 2001 (Unaudited) and 2000 (Unaudited), and
November 10, 1998 (inception) through June 30, 2001 (Unaudited)..... 4
Condensed statements of cash flows - Six months ended
June 30, 2001 (Unaudited) and 2000 (Unaudited), and
November 10, 1998 (inception) through June 30, 2001 (Unaudited)..... 5
Notes to condensed financial statements (Unaudited).................... 6
Item 2. Plan of Operation.............................................. 11
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.............................................. 12
Item 2. Changes In Securities.......................................... 12
Item 3. Defaults Upon Senior Securities................................ 12
Item 4. Submission of Matters to a Vote of Security Holders............ 12
Item 5. Other Information.............................................. 13
Item 6. Exhibits and Reports on Form 8-K............................... 13
Signatures............................................................. 14
-2-
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A Development Stage Company)
Condensed Balance Sheet
June 30, 2001
(Unaudited)
<Table> <c>
<s>
Assets
Cash............................................... $ 23,596
Computer equipment, net............................ 4,103
Intangible assets, net (Note 3).................... 9,000
---------
$ 36,699
=========
Liabilities and Shareholders' Deficit
Liabilities:
Accounts payable and accrued expenses........... $ 31,186
Due to officer (Note 2)......................... 193,446
Due to shareholder (Note 2)..................... 231,260
Notes payable, convertible into common
stock (Note 4)................................. 25,000
Accrued interest, notes payable (Note 4)........ 750
Loans payable, convertible into common
stock (Note 8)................................. 115,000
Accrued interest, notes payable (Note 8)........ 1,438
----------
Total liabilities 598,080
----------
Shareholders' deficit:
Preferred stock................................. -
Common stock.................................... 34,645
Additional paid-in capital...................... 542,088
Deficit accumulated during development stage.... (1,138,114)
-----------
Total shareholders' deficit (561,381)
-----------
$ 36,699
===========
</Table>
The accompanying notes are an integral part of the condensed
financial statements.
-3-
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A Developmental Stage Company)
Condensed Statements of Operations
(Unaudited)
<Table> <c> <c> <c> <c> <c>
<s>
November 10,
For the Three Months For the Six Months 1998
Ended Ended (Inception)
June 30, June 30, through
----------------------- ---------------------- June 30,
2001 2000 2001 2001 2001
---------- --------- ---------- --------- -----------
Operating expenses:
Research and development..................... $ - $ 2,930 $ - $ 32,194 $ 80,881
General and administrative:
Stock-based compensation (Note 5):
Consulting services................... 306,198 - 306,198 - 306,948
Legal services........................ - - 52,000 - 52,000
Debt issue costs (Note 4)............. 26,250 - 26,250 - 26,250
Other................................. 37,500 - 37,500 - 37,500
Related parties (Note 3)................. 3,000 3,000 6,000 6,000 31,000
Other.................................... 183,045 27,420 398,950 42,892 585,190
--------- --------- ---------- ---------- -----------
Total operating expenses 555,993 33,350 826,898 81,086 1,119,769
--------- --------- ---------- ---------- -----------
Operating loss (555,993) (33,350) (826,898) (81,086) (1,119,769)
Interest expense:
Related party (Note 2)....................... 2,573 - 5,362 - 15,457
Other........................................ 1,938 - 2,188 3,188 2,888
---------- ---------- ---------- ---------- -----------
Loss before income taxes (560,504) (35,586) (834,448) (84,274) (1,138,114)
Income taxes(Note 4).......................... - - - - -
---------- ---------- ---------- ---------- -----------
Net loss $(560,504) $ (35,586) $(834,448) $(84,274) $(1,138,114)
========== ========== ========== ========== ============
Basic and diluted loss per share.............. $ (0.02) $ * $ (0.03) $ *
========== ========== ========== ==========
Basic and diluted weighted average
number of common shares
outstanding.................................. 33,220,167 31,300,000 32,776,750 31,300,000
========== ========== ========== ==========
*Less than $.01 per share
</Table>
The accompanying notes are an integral part of the condensed
financial statements.
-4-
HYDRO ENVIRONMENTAL RESOURCES, INC.
(A Development Stage Company)
Condensed Statements of Cash Flows
(Unaudited)
<Table>
<s> <c> <c> <c>
November 10,
1998
For the Six Months Ended (Inception)
June 30, through
---------------------------- June 30,
2001 2000 2001
------------ ----------- ------------
Net cash used in operating activities.......... $ (391,898) $ (87,600) $ (638,086)
------------ ----------- ------------
Cash flows from investing activities:
Equipment purchases.................................. (4,727) - (4,727)
------------ ----------- ------------
Net cash used in investing activities............. (4,727) - (4,727)
------------ ----------- ------------
Cash flows from financing activities:
Capital contributions................................ - - 4,910
Proceeds from officer loans (Note 2)................. 12,929 84,967 210,213
Retirement of officer loans (Note 2)................. - (6,900) (23,099)
Proceeds from notes payable (Note 4)................. 25,000 - 25,000
Proceeds from working capital advances (Note 2)..... 234,760 - 234,760
Retirement of working capital advances (Note 2)...... (3,500) - (3,500)
Proceeds from loans payable (Note 8)................. 115,000 - 115,000
Proceeds from the sale of common stock,
net of offering costs............................. 29,500 - 103,125
------------ ----------- ------------
Net cash provided by financing activities...... 413,689 78,067 666,409
------------ ----------- ------------
Net change in cash 17,064 (9,533) 23,596
Cash at beginning of period............................ 6,532 9,665 -
------------ ----------- ------------
Cash at end of period $ 23,596 $ 132 $ 23,596
============ =========== ============
Supplemental disclosure of cash flow information:
Cash paid for:
Interest.......................................... $ - $ - $ -
============ =========== ============
Income taxes...................................... $ - $ - $ -
============ =========== ============
Noncash investing and financing activities:
Common stock issued for patent rights............. $ - $ - $ 15,000
============ =========== ============
</Table>
The accompanying notes are an integral part of the condensed financial
statements.
-5-
HYDRO ENVIRONMENTAL RESOURCES, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 1: Basis of presentation
The financial statements presented herein have been prepared by
the Company in accordance with the accounting policies in its
annual 10-KSB report dated December 31, 2000 and should be read
in conjunction with the notes thereto.
In the opinion of management, all adjustments (consisting only of
normal recurring adjustments) which are necessary to provide a
fair presentation of operating results for the interim period
presented have been made. The results of operations for the
three and six months ended June 30, 2001 are not necessarily
indicative of the results to be expected for the year.
The accompanying financial statements have been prepared on a
going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of
business. The Company is in the development stage in accordance
with Statement of Financial Accounting Standard ("SFAS") No. 7.
As shown in the accompanying financial statements, the Company
has no revenues, a limited history of operations, and a loss of
$1,138,114 since inception. These factors, among others, may
indicate that the Company will be unable to continue as a going
concern for reasonable period of time.
The financial statements do not include any adjustments relating
to the recoverability and classification of liabilities that
might be necessary should the Company be unable to continue as a
going concern. The Company's continuation as a going concern is
dependent upon its ability to generate sufficient cash flow to
meet its obligations on a timely basis and ultimately to attain
profitability. The Company's management intends to seek
additional funding through future equity offerings and debt
financings to help fund the Company's operation.
Inherent in the Company's business are various risks and
uncertainties, including its limited operating history and
historical operating losses. The Company's future success will
be dependent upon its ability to create and provide effective and
competitive services on a timely and cost-effective basis.
Interim financial data presented herein are unaudited.
Note 2: Related party transactions
The President of the Company provided office space to the Company
at no charge for the six months ended June 30, 2001 and 2000.
The office space was valued at $500 per month and such charges
are recognized in the accompanying unaudited, condensed financial
statements as rent expense with a corresponding credit to
additional paid-in capital.
During the six months ended June 30, 2001 and 2000, the President
of the Company contributed services and the use of office
equipment to the Company. The services and use of equipment was
valued at $500 per month and such charges are recognized in the
accompanying unaudited, condensed financial statements as office
expense with a corresponding credit to additional paid-in
capital.
The president of the Company loaned the Company $12,929 for
working capital, during the six months ended June 30, 2001. The
loans owed to the president bear interest at six percent and are
due on demand. The $177,989 in outstanding loans and $15,457 in
related accrued interest is included in the accompanying
financial statements as due to officer.
-6-
HYDRO ENVIRONMENTAL RESOURCES, INC.
Notes to Condensed Financial Statements
(Unaudited)
During the six months ended June 30, 2001, a shareholder advanced
the Company $231,260 for working capital. The advances do not
carry an interest rate and are due on demand. The $231,260
balance owed at June 30, 2001 is included in the accompanying
unaudited, condensed financial statements as due to shareholder.
Note 3: Intangible assets
Intangible assets consist of patent rights acquired from a
related party. The rights are being amortized at the rate of $250
per month (60 months):
Patent rights............................................... $ 15,000
Accumulated amortization.................................... (6,000)
---------
$ 9,000
=========
Note 4: Notes payable
During the six months ended June 30, 2001, the Company received
$25,000 in exchange for promissory notes and 125,000shares of the
Company's $.001 par value common stock. The promissory notes
were as follows:
June 30,
2001
--------
Note payable to individual, dated February 12, 2001,
interest rate at 8.00 percent, maturing August 5, 2001..... $ 5,000
Note payable to individual, dated February 12, 2001,
interest rate at 8.00 percent, maturing August 5, 2001..... 5,000
Note payable to individual, dated February 12, 2001,
interest rate at 8.00 percent, maturing August 5, 2001..... 5,000
Note payable to individual, dated February 12, 2001,
interest rate at 8.00 percent, maturing August 5, 2001..... 5,000
Note payable to individual, dated February 12, 2001,
interest rate at 8.00 percent, maturing August 5, 2001..... 5,000
---------
$ 25,000
=========
Each $5,000 note is convertible into 125,000 shares of the Company's
$.001 par value common stock.
On May 17, 2001, the Company issued 125,000 shares of its restricted
common stock as debt issue costs related to the promissory notes
(see Note 5). Debt issue costs of $26,250 were recognized in the
accompanying financial statements for the six months ended June 30,
2001. Interest expense of $750 was recognized in the accompanying
financial statements for the six months ended June 30, 2001.
Note 5: Common stock
On March 12, 2001, the Company issued 200,000 shares of its
restricted common stock to its SEC attorney in exchange for legal
services. The market value of the common stock on the transaction
date was $.26 per share. Stock-based compensation expense of
$52,000 was recognized in the accompanying financial statements
for the six months ended June 30, 2001. These shares were issued
pursuant to the Company's Registration Statement on Form S-8.
On May 17, 2001, the Company issued 125,000 shares of its restricted
common stock to promissory note holders as debt issue costs for the
notes. The market value of the common stock on the transaction date
was $.21 per share. Interest expense of $26,250 was recognized in
the accompanying financial statements for the six months ended
June 30, 2001. These shares are "restricted securities" and may be
sold only in compliance with Rule 144 of the Securities Act of 1933,
as amended.
-7-
HYDRO ENVIRONMENTAL RESOURCES, INC.
Notes to Condensed Financial Statements
(Unaudited)
On May 17, 2001, the Company issued 345,526 shares of its
restricted common stock to unrelated third parties in exchange
for consulting services. The market value of the common stock on
the transaction date was $.21 per share. Stock-based
compensation expense of $72,560 was recognized in the
accompanying financial statements for the six months ended June
30, 2001. These issuances were deemed to be exempt from
registration pursuant to Regulation S under the Securities Act
and Section 4(2) of the Securities Act on the basis that the
transaction did not involve a public offering.
On May 31, 2001, the Company gifted 150,000 shares of its
restricted common stock to a shareholder. The market value of
the common stock on the transaction date was $.25 per share.
Stock-based compensation expense of $37,500 was recognized
in the accompanying financial statements for the six months
ended June 30, 2001. These shares are "restricted securities"
and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended.
On May 31, 2001, the Company issued 934,552 shares of its
restricted common stock to unrelated third parties in exchange
for consulting services. The market value of the common stock on
the transaction date was $.25 per share. Stock-based
compensation expense of $233,638 was recognized in the
accompanying financial statements for the six months ended June
30, 2001. These shares are "restricted securities" and may be
sold only in compliance with Rule 144 of the Securities Act of
1933, as amended.
On June 19, 2001, the Company sold 590,000 shares of its
restricted common stock to unrelated third parties for $29,500
($.05/share). These shares are "restricted securities" and may
be sold only in compliance with Rule 144 of the Securities Act of
1933, as amended.
Following is a statements of changes in shareholders' deficit for
the six months ended June 30, 2001:
-8-
HYDRO ENVIRONMENTAL RESOURCES, INC.
Notes to Condensed Financial Statements
(Unaudited)
<Table>
<s> <c> <c> <c> <c> <c> <c> <c>
Deficit
Accumulated
Preferred Stock Common Stock Additional During the
----------------------- ---------------------- Paid-in Development
Shares Par Value Shares Par Value Capital Stage Total
--------- --------- ---------- --------- -------- ----------- -----------
Balance, January 1, 2001..... - $ - 32,300,000 $ 32,300 $ 86,985 $ (303,666) $ (184,381)
March 12, 2001, shares issued
to attorney in exchange for
services.................... - - 200,000 200 51,800 - 52,000
May 17, 2001, shares issued
as debt issue costs related
to promissory notes......... - - 125,000 125 26,125 - 26,250
May 17, 2001, shares issued
in exchange for consulting
services.................... - - 345,526 345 72,215 - 72,560
May 31, 2001, shares issued
gifted to shareholder....... - - 150,000 150 37,350 - 37,500
May 31, 2001, shares issued
in exchange for consulting
services.................... - - 934,552 935 232,703 - 233,638
June 17, 2001, sale of
common stock................ - - 590,000 590 28,910 - 29,500
Office space and equipment
contributed by officer...... - - - - 6,000 - 6,000
Net loss for the six months
ended June 30, 2001......... - - - - - (834,448) (834,448)
--------- --------- ---------- -------- --------- ------------ ----------
Balance, June 30, 2001 - $ - 34,645,078 $34,645 $542,088 $(1,138,114) $(561,381)
========= ========= ========== ======== ========= ============ ==========
</Table>
Note 6: Income taxes
The Company records its income taxes in accordance with SFAS No.
109, "Accounting for Income Taxes". The Company incurred net
operating losses during the six months ended June 30, 2001,
resulting in a deferred tax asset, which was fully allowed for;
therefore, the net benefit and expense result in $-0- income
taxes.
Note 7: Energy production agreement
During February of 2001, the Company signed a contract with Orini
Lumber Processors Limited ("Orini") of Orini, New Zealand. The
Company agreed to construct and develop an ElectroChem Hydrogen
Fuel Reactor ("ECHFR") system for the production of energy
suitable for the purposes required by Orini for $1,500,000.
Under the terms of the contract, the Company would (a) satisfy
Orini that the system is economical and financially viable and
satisfactory for long-term use for the purpose it is designed for
and (b) satisfy Orini that the system is safe and had no
hazardous or injurious side effects to the ecology or to the
environment and any by-products are capable of being disposed of
cheaply and efficiently and there is no unsatisfactory risk to
the staff operating the system. Once the Company satisfied Orini
of the above clauses, Orini would pay a deposit of 25 percent of
the purchase price and the balance of the purchase price upon the
successful installation and operation of the system. The
contract was subsequently terminated.
-9-
HYDRO ENVIRONMENTAL RESOURCES, INC.
Notes to Condensed Financial Statements
(Unaudited)
Note 8: Stock purchase agreement
During June of 2001, the Company signed a stock purchase
agreement with PowerTek Holdings LTD ("PowerTek"), a Swiss
holding company. PowerTek agreed to purchase shares of the
Company's common stock equal to the number of shares issued and
outstanding, on a fully diluted basis, on the date of closing for
$500,000. Also, PowerTek agreed to expend not less than $2
million on research and development in the field of hydrogen
powered fuel cell technology. The resulting research and
development and related technology shall be licensed to the
Company on a non-exclusive, royalty-free basis for a seven-year
period subject to various terms listed in the agreement.
Prior to closing, providing the Company is not in default of the
agreement, PowerTek agreed to loan the Company funds for working
capital at an interest rate of ten percent. Upon closing, the
amounts owed under the loans will be credited against PowerTek's
$2,000,000 research and development expenditure obligation under
the agreement. If the closing does not occur, PowerTek has the
option to demand immediate payment in full, or to convert the
loans to the Company's common stock at a price of 75 percent of
the average quoted market price of the stock at the close of the
thirty business days immediately preceding the conversion demand
date. As of June 30, 2001, the Company owed PowerTek $115,000
for loans advanced during the three months ended June 30, 2001,
and $1,438 of accrued interest related to the loans.
Note 9: Contingencies
On August 1, 2001, the Company received a subpoena from the
Securities and Exchange Commission to appear, through its
custodian of records, for testimony and to produce documents (see
Item 1: Legal Proceedings). The subpoena requires the Company to
produce all documents supporting the contentions made in its 2001
press releases. The Company plans to produce the required
documents, thus relieving it of the need to appear for testimony.
On August 6, 2001, the Company received a subpoena from the
Securities and Exchange Commission to appear, through its
custodian of records, for testimony and to produce documents (see
Item 1: Legal Proceedings). The subpoena requires the Company to
produce the June 29, 2001 Stock Purchase Agreement between the
Company and PowerTek Holdings, Ltd. and all related agreements.
The Company plans to produce the required documents, thus
relieving it of the need to appear for testimony.
-10-
ITEM 2. PLAN OF OPERATION
Special note regarding forward-looking statements
This report contains forward-looking statements within the
meaning of federal securities laws. These statements plan for or
anticipate the future. Forward-looking statements include
statements about our future business plans and strategies,
statements about our need for working capital, future revenues,
results of operations and most other statements that are not
historical in nature. In this Report, forward-looking statements
are generally identified by the words "intend", "plan",
"believe", "expect", "estimate", "could", "may", "will" and the
like. Investors are cautioned not to put undue reliance on
forward-looking statements. Except as otherwise required by
applicable securities statues or regulations, the Company
disclaims any intent or obligation to update publicly these
forward-looking statements, whether as a result of new
information, future events or otherwise. Because forward-looking
statements involve future risks and uncertainties, these are
factors that could cause actual results to differ materially from
those expressed or implied.
We plan to satisfy our cash requirements, over the next twelve
months, through cash infusions from our principal shareholder, in
exchange for restricted stock. However, we will need to raise
additional capital in the next twelve months. Our management is
considering the following options:
(a) a private offering and sale of our common stock;
(b) a public offering and sale of our common stock;
(c) a combination of private and public sale of our common stock;
(d) debt financings from officers, shareholders and unrelated third
parties.
As of June 30, 2001, all cash infusions from the principal
shareholder have been classified as a liability and are disclosed
in the accompanying condensed balance sheet as due to officer.
On June 29, 2001, the Company entered into a Stock Purchase
Agreement with PowerTek Holdings, Ltd. Under the Agreement, the
Company plans to issue to PowerTek shares of its common stock in
exchange for $500,000. PowerTek also agrees to provide a minimum
of $2 million for research and development, and up to $200,000 in
working capital loans (see Note 8 and Item 6: Exhibits and
Reports on Form 8-K). This Agreement, when completed, will
provide the Company with the cash needed to meet all the
Company's requirements.
A summary of our product research and development for the term of
the plan is as follows:
We have performed research on the recovery and reconstruction of
compounds used by the ECHFR to produce hydrogen. It is estimated
that over 40 percent of these patented-formula compounds can be
reused, possibly lowering the cost of production by as much as 25
percent. In addition, there are several potentially profitable
by-products created by the ECHFR that we could market worldwide,
such as:
(a) An on-site power plant could possibly be designed for particular
needs where electricity and/or gas are necessary to process cooking
oil; and
(b) In the treatment of wastewater at abandoned mine sites and other
wastewater dumps or quarries, the ECHFR could possibly operate the
process by creating power from the actual wastewater to be treated
We expect to lease larger laboratory facilities and to purchase
lab equipment over the next twelve months.
Subject to the implementation and success of one or more of the
financing options discussed in the first paragraph, or the
closing of the PowerTek agreement, we plan to hire four
employees; an engineer; a laboratory technician, a computer
specialist, and a chief operating officer. Once in place and
subject to the implementation and success of one or more of the
financing options discussed in the first paragraph, we plan to
hire two to three additional technical personnel.
-11-
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On August 1, 2001, the Company received a subpoena from the
Securities and Exchange Commission to appear, through its
custodian of records, for testimony and to produce
documents. The subpoena requires the Company to produce all
documents supporting the contentions made in press releases
during 2001, and to produce all documents related to:
- Patents
- Hydrogen-powered experimental vehicle testing
- The Assignment Agreement between the Company and James Pelto
- The Agreement and payments between the Company and Orini Lumber
- Draft press releases and other documents provided to Blue Bison
Communications for the drafting and issuance of press releases
on behalf of the Company
On August 6, 2001, the Company received a subpoena from the
Securities and Exchange Commission to appear, through its
custodian of records, for testimony and to produce documents.
The subpoena requires the Company to produce the June 29, 2001
Stock Purchase Agreement between the Company and PowerTek
Holdings, Ltd. and all related agreements.
ITEM 2. CHANGES IN SECURITIES
On May 17, 2001, the Company issued 125,000 shares of its restricted
common stock to five promissory note holders as debt issue costs for
the notes. The market value of the common stock on the transaction
date was $.21 per share totaling $26,250. These shares were issued in
reliance on Section 4(2) of the Securities Act, are "restricted
securities" and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended.
On May 17, 2001, the Company issued 345,526 shares of its restricted
common stock to four unrelated third parties in exchange for
consulting services. The market value of the common stock on the
transaction date was $.21 per share totaling $72,560. These issuances
were deemed to be exempt from registration pursuant to Regulation S
under the Securities Act and Section 4(2) of the Securities Act on the
basis that the transaction did not involve a public offering.
On May 31, 2001, the Company gifted 150,000 shares of its restricted
common stock to a shareholder. The market value of the common stock
on the transaction date was $.25 per share totalling $37,500. These
shares were issued in reliance on Section 4(2) of the Securities Act,
are "restricted securities" and may be sold only in compliance with
Rule 144 of the Securities Act of 1933, as amended.
On May 31, 2001, the Company issued 934,552 shares of its restricted
common stock to 16 unrelated third parties in exchange for consulting
services. The market value of the common stock on the transaction
date was $.25 per share totaling $233,638. These shares were issued
in reliance on Section 4(2) of the Securities Act, are "restricted
securities" and may be sold only in compliance with Rule 144 of the
Securities Act of 1933, as amended.
On June 19, 2001, the Company sold 590,000 shares of its restricted
common stock to unrelated third parties for $29,500 ($.05/share).
These shares were sold in reliance on Rule 506 of the Securities Act
and Regulation D promulgated thereunder, are "restricted securities"
and may be sold only in compliance with Rule 144 of the Securities
Act of 1933, as amended.
ITEM 3 - No response required.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Company's Annual Meeting of Stockholders was held on August 15,
2001. A total of 24,415,104 shares of common stock, par value $.001
per share, were present at the Annual Meeting, either in person or by
proxy, constituting a quorum. The matters voted upon at the annual
Meeting by the stockholders consisted of four proposals specifically
set forth in the Company's definitive Proxy Statement, dated July 17,
2001.
The first proposal related to the election of five persons to serve on
the Company's Board of Directors. The Board's nominees were each
elected and received, respectively, the following votes:
Nominee For Withheld
------------------ ---------- --------
Jack H. Wynn 24,414,104 1,000
Julio P. Focaracci 24,414,104 1,000
Drew Sakson 24,414,104 1,000
Lane J. Austin 24,414,104 1,000
David A. Youngblood 24,414,104 1,000
The second proposal related to the reincorporation of the Company in
the State of Nevada. The second proposal was adopted by a vote of
18,054,493 in favor, with 504,000 votes against, 501,150 abstentions
and 5,355,461 broker non-votes.
The third proposal related to the approval of the Stock Purchase
Agreement between the Company and PowerTek Holdings Ltd. The third
proposal was adopted by a vote of 19,022,193 in favor, with 37,300
votes against, 150 abstentions and 5,355,461 broker non-votes.
The fourth proposal related to the ratification the selection of
Cordovano and Harvey, P.C. as the Company's independent public
accountants for the fiscal year ending December 31, 2001. The fourth
proposal was adopted by a vote of 24,304,476 in favor with 1,100 votes
against, 109,528 abstentions and no broker non-votes.
-12-
ITEM 5. OTHER INFORMATION
On July 4, 2001, the Agreement between the Company and Orini Lumber
Processors Limited of Orini Rd Orini New Zealand was terminated by
mutual agreement of the parties.
On August 15, 2001, the Company entered into an Amendment to Stock
Purchase Agreement with PowerTek Holdings Ltd., a Swiss holding
company, whereby the parties agreed to extend the closing date from
August 15, 2001 to a date not later than November 15, 2001.
On August 20, 2001, subsequent to shareholder approval at the
Annual Meeting of Shareholders, the Company completed its
redomiciling merger with Hydro Environmental Resources, Inc., a Nevada
corporation, and, pursuant to the Plan of Merger, each five (5) shares
of common stock of the Oklahoma corporation was exchanged for one (1)
share of the Nevada corporation.
Effective August 20, 2001, to reflect the reincorporation in the State
of Nevada and the 1 for 5share exchange, the National Association of
Securities Dealers assigned the Company a new trading symbol: HYVR.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit No. Description
----------- -----------
3.1* Articles of Incorporation (Nevada)
3.2* By-laws (Nevada)
3.3* Articles of Merger (Nevada)
3.4* Certificate of Merger (Oklahoma)
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 3.1 to the Registration
Statement on Form 10-SB filed with the Commission
on March 22, 2000).
10.1 Assignment of Patent and Intellectual Property
Rights related to the ElectroChem Hydrogen Fuel
Reactor (incorporated by reference to Exhibit 6.1
the Registration Statement on Form 10-SB filed
with the Commission on March 22, 2000).
* Filed herewith.
(b) Reports on Form 8-K:
June 19, 2001: The Company postponed its annual stockholders'
meeting from June 29, 2001 to August 2001.
July 6, 2001: On June 29, 2001, the Company entered into a
Stock Purchase Agreement with PowerTek Holdings,
Ltd. Under the Agreement, the Company plans to
issue to PowerTek shares of its common stock in
exchange for $500,000. PowerTek also agrees to
provide a minimum of $2 million for research and
development, and up to $200,000 in working capital
loans (see Note 8).
-13-
SIGNATURES
The financial information furnished herein has not been audited by an
independent accountant; however, in the opinion of management, all
adjustments (only consisting of normal recurring accruals) necessary
for a fair presentation of the results of operations for the three and
six months ended June 30, 2001 have been included.
Pursuant to the requirements of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
Hydro Environmental Resources, Inc.
(Registrant)
DATE: August 17, 2001 BY:/s/ Jack Wynn
Jack Wynn, President
-14-
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1* Articles of Incorporation (Nevada)
3.2* By-laws (Nevada)
3.3* Articles of Merger (Nevada)
3.4* Certificate of Merger (Oklahoma)
4.1 Form of Common Stock Certificate (incorporated by
reference to Exhibit 3.1 to the Registration
Statement on Form 10-SB filed with the Commission
on March 22, 2000).
10.1 Assignment of Patent and Intellectual Property
Rights related to the ElectroChem Hydrogen Fuel
Reactor (incorporated by reference to Exhibit 6.1
the Registration Statement on Form 10-SB filed
with the Commission on March 22, 2000).
* Filed herewith.