U.S. SECURITIES AND EXCHANGE COMMISSION

Litigation Release No. 19755 / July 5, 2006

SEC v. HydroFlo, Inc. and Dennis Mast, U.S. District Court for the Eastern District of North Carolina, Western Division, Civil Action No. 5:06-CV-270, filed July 5, 2006

SEC Sues HydroFlo, Inc. and its Former CEO, Dennis Mast, for Issuing False Press Releases

The Commission announced that today it charged HydroFlo, Inc. ("HydroFlo") and its former CEO, Dennis Mast ("Mast"), with defrauding investors by making false and materially misleading statements about Hydroflo's water treatment business, contracts, and prospects in a series of press releases in 2005. Without admitting or denying the Commission's allegations, HydroFlo and Mast have consented to entry of injunctions against further violations of the antifraud provisions of the federal securities laws. Mast, of Apex, North Carolina, has also consented to entry of an order requiring him to pay a $100,000 civil penalty, barring him from serving as an officer or director of a public company, and barring him from participating in offerings of penny stock.

The Commission's complaint, filed in the United States District Court for the Eastern District of North Carolina, Western Division, alleges that HydroFlo and Mast misled investors by (i) mischaracterizing an agreement involving a subsidiary's consignment customer as a guaranteed contract worth $210 million to HydroFlo; (ii) touting a positive stock analyst report as "independent" and "unbiased" without disclosing that HydroFlo had paid $19,500 for the analyst coverage; and (iii) repeatedly publishing false statements claiming that HyrdroFlo subsidiaries were providing filtration equipment and water purifying consulting services to government agencies engaged in Hurricane Katrina relief efforts when in fact the company had not shipped any products, nor provided any such services. All of these false press releases had the effect of increasing trading volume in, and the price of, HydroFlo's common stock.

The complaint charges HydroFlo and Mast with engaging in transactions, acts, practices and courses of business in violation of Section 10(b) of Securities Exchange Act of 1934 (Exchange Act) and Rule 10b-5 thereunder. HydroFlo and Mast consented to the entry of permanent injunctions against future violations of Section 10(b) of the Exchange Act and Rule 10b-5 thereunder. Mast also consented to entry of an order requiring him to pay a $100,000 civil penalty under Section 21(d)(3) of the Exchange Act, permanently barring him from serving as an officer or director of a public company under Section 21(d)(2) of the Exchange Act, and barring him from participating in offerings of penny stock under Section 21(d)(6) of the Exchange Act.