UNITED
        STATES SECURITIES AND EXCHANGE COMMISSION
 WASHINGTON,
        D.C. 20549
 
 **FORM
        10-KSB/A**
  x ANNUAL
        REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
        1934
  For
        the
        fiscal year ended December
        31, 2005
  o
 
  Commission
        file number 0-27419
 
 **AMERICAN
        SECURITY RESOURCES CORPORATION**
 (Exact
        name of small business issuer as specified in its charter)
 
 Nevada
              90-0179050(State
                  or other jurisdiction of incorporation or organization)
              (I.R.S.
                  Employer Identification No.)
 
 
 9601
                  Katy Freeway, Suite 220 Houston, Texas
              77024(Address
                  of principal executive offices)
              (Zip
                  Code)
 
 Registrant’s
        telephone number, including area code:   (713)
        465-1001
  Securities
        registered pursuant to Section 12(b) of the Act:  None
 
 Securities
        registered pursuant to Section 12(g) of the Act: $.001 Par Value Common
        Stock
 
 Check
        whether the Issuer (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. (1) Yes [X] No [ ] (2) Yes [X] No [ ]
 
 Check
        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 reference in Part III of this Form
        10-KSB/A or any amendment to this Form 10-KSB/A. [X]
 
 Issuer’s
        revenues for the fiscal year ended December 31, 2005, were $0.00.
 
 The
        aggregate market value of the voting and non-voting common equity held by
        non-affiliates of the Issuer as of December 31, 2005 based upon the average
        bid
        and asked price as of such date on the OTC Bulletin Board was $8,672,654.
 
 The
        Registrant’s common stock outstanding as of December 31, 2005 was 61,700,766
        shares.
 
 Transitional
        Small Business Disclosure Format (Check One): Yes [ ] No [X]
  
  **AMERICAN
        SECURITY RESOURCES CORPORATION**
 
 **INDEX
        TO FORM 10-KSB/A**
 **December
        31, 2005**
 
 **Page
                  No.****Part
                  I**
              Item
                  1.
              Description
                  of Business
              3Item
                  2.
              Description
                  of Property
              5Item
                  3.
              Legal
                  Proceedings
              5Item
                  4.
              Submission
                  of Matters to a Vote of Security Holders
              5**Part
                  II**
              Item
                  5.
              Market
                  for Common Equity and Related Stockholder Matters
              5Item
                  6.
              Management’s
                  Discussion and Analysis and Results of
                Operations
                  and Financial Condition
              7Item
                  7.
              Financial
                  Statements
              12Item
                  8.
              Changes
                  in and Disagreements with Accountants on
                Accounting
                  and Financial Disclosure
              23Item
                  8A.
              Controls
                  and Procedures
              23**Part
                  III**
              Item
                  9.
              Directors,
                  Executive Officers, Promoters and Control Persons,
                Compliance
                  with Section 16(a) of the Exchange Act
              24Item
                  10.
              Executive
                  Compensation
              26Item
                  11.
              Security
                  Ownership of Certain Beneficial Owners and
                Management
              26Item
                  12.
              Certain
                  Relationships and Related Party Transactions
              27Item
                  13.
              Principal
                  Accountant Fees and Services
              27**Part
                  IV**
              Item
                  14.
              Exhibits
                  and Reports on Form 8-K
              29
 
 Some
        of
        the statements contained in this report discuss future expectations,
        contain  projections
        of results of operations or financial condition, or state other
        "forward-looking" information. The words "believe," "intend," "plan," "expect,"
        "anticipate," "estimate," "project" and similar expressions identify such
        statement was made. These statements are subject to known and unknown risks,
        uncertainties, and other factors that could cause the actual results to differ
        materially from those contemplated by the statements. The forward-looking
        information is based on various factors and is derived using numerous
        assumptions:
  -
changes
        in general economic and business conditions affecting security technology;
 -  technical
        developments that make the Company's products or services obsolete;
 -  changes
        in the Company's business strategies;
 -  the
        level
        of demand for the Company's products or services;
 -  the
        Company's ability to develop or maintain strategic relationships;
        and
 -
        global economic conditions.
 
 The
        Company does not promise to update forward-looking information to reflect
        actual
        results or changes in assumptions or other factors that could affect those
        statements. Future events and actual results could materially differ from
        those
        expressed in, contemplated by, or underlying such forward-looking
        statements.
 
  
   **PART
        I**
 
 **ITEM
        1. DESCRIPTION OF BUSINESS**
 -----------------------------------------------------
 **Overview**
 
 AMERICAN
        SECURITY RESOURCES CORPORATION (the “Company” or ARSC) is a holding company with
        a wholly owned subsidiary, Hydra Fuel Cell Corporation, that is developing
        advanced hydrogen fuel cells based on its proprietary intellectual property.
        Hydra is in the development stage of its fuel cell, and is refining and fine
        tuning the design to maximize output, efficiency and minimize heat generated
        to
        provide maximum life of the unit. Hydra has designed two models of its fuel
        cell, the first to be used as either backup power or in some cases primary
        power
        for remote radio transmission facilities and cell phone towers. The second
        is a
        larger unit which can be used for backup power in critical commercial operations
        such as hospitals, computer centers and emergency operations centers.
 
 Hydra
        is
        concentrating on a “Proton Exchange Membrane” PEM fuel cell which utilizes a
        specialized flexible milar film which allows the electron which is split
        from
        the Hydrogen atom to pass through the membrane onto the “Cathode”. This stream
        of electrons develops a continuous flow which becomes the electrical power
        output of the fuel cell.
 
 The
        design of Hydra’s fuel cell is a unique design because it utilizes a Silicon
        board which has been laser drilled with thousands of tiny holes. The design
        also
        includes a proprietary gasket and manifold which supplies Hydrogen across
        the
        entire area of the PEM, thus significantly increasing the efficiency of the
        unit. Hydra’s target markets are stationery fuel cells between 500 watts and 40
        Kw and can be used as either backup power sources or primary power sources.
 
 The
        Company’s Internet address is http://www.americansecurityresources.com .
        Information contained on the Company’s web site is not a part of this report.
        The Company’s stock is traded on the OTC Bulletin Board under the symbol
“ARSC.”
 
  **Organizational
        History**
 ------------------------------
  The
        Company, previously known as Computer Automation Systems, Inc., was reorganized
        and recapitalized in 2004 changing its name, first to Kahuna Network Security,
        Inc. and in July, 2004, to American Security Resources Corporation with a
        business focus of acquiring companies in homeland security and national defense.
        With the acquisition of eGO Design Inc. in October, 2005, the Company changed
        its focus to the development and commercialization of technologically advanced,
        high volume mass producible, hydrogen fuel cells.
  
 **The
        Company’s Products and Services**
 --------------------------------------------------
 The
        Company is developing hydrogen fuel cells which it expects to begin delivering
        in the fourth quarter of 2006.
 
 **Employees**
 --------------
 As
        of
        December 31, 2005, the Company had two full-time employees. None of the
        Company’s employees is covered by any collective bargaining agreements.
        Management believes that its relations with its employees are good and the
        Company has not experienced any work stoppages attributable to employee
        disagreements.
 
 The
        Company’s subsidiary, Hydra Fuel Cell Corporation, has approximately twelve
        employees or contractors working on the development of the Company’s proprietary
        HydraStaxTM hydrogen fuel cells.
 
 
 **RISK
        FACTORS**
 
 **Limited
        History**
 ----------------------
 The
        Company is a startup with limited operating history and faces challenges
        typical
        of new businesses in highly competitive markets with many other providers
        of the
        same or essentially the same products and services.
 
 **Limited
        Revenue and Resources**
 -----------------------------------------
 The
        Company has acquired a start up business. There is no assurance that the
        Company
        will be able to finance its development, or that the Company will be able
        profitably to operate such business.
 
 **Limited
        Staff**
 -------------------
 The
        Company has two officers and two additional directors charged with the
        responsibility of executing the Company’s business strategy. Any death, injury
        or other incapacity of one or more of them could adversely affect the Company’s
        ability to complete its business strategy.
 
 **Volatility
        of Stock Market**
 ----------------------------------
 There
        have been significant fluctuations in the market price for the Company's
        common
        stock. Factors such as variations in the Company's revenues, earnings, if
        any,
        and cash flow and announcements of innovations or acquisitions by the Company
        or
        its competitors could cause the market price of the common stock to fluctuate
        substantially. In addition, the stock market has experienced price and volume
        fluctuations that have particularly affected companies in the network security
        services markets and homeland security services, resulting in changes in
        the
        market price of the stock of many companies which may not have been directly
        related to the operating performance of those companies. Such broad market
        fluctuations may adversely affect the market price of the Company’s common
        stock.
 
 **ITEM
        2. DESCRIPTION OF PROPERTY**
 --------------------------------------------------------
 ASRC
        has
        leased approximately 1,800 square feet of office space at 9601 Katy Freeway,
        Ste
        220, Houston, TX 77024, for approximately $2,300 per month until July 31,
        2007.
        The Company believes this space will be sufficient for its needs for the
        term of
        the lease.
 
 **ITEM
        3. LEGAL PROCEEDINGS**
 **----------------------------------------------**
 From
        time
        to time, the Company may become involved in litigation arising in the ordinary
        course of its business. The Company is not presently a party to any legal
        proceedings.
 
 **ITEM
        4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS**
 ----------------------------------------------------------------------------------------------------------
 On
        November 21, 2005, the Company held a shareholders meeting at which the
        Company’s Chairman Joe Grace announced his resignation. The Board selected Frank
        Neukomm, the Company’s CFO, as Chairman. The shareholders approved the Company’s
“Incentive Stock Plan”, approved the appointment of Malone & Bailey as the
        Company’s auditors and elected Mr. Neukomm as a Director for a two year term and
        Robert Wilson and Bob Farr as Directors for one year terms
 
 **PART
        II**
 
 **Item
        5. Market for Common Equity and Related Stockholder Matters** .
 ------------------------------------------------------------------------------------------
 
 **Market
        Information** .
 ---------------------------
 The
        Company’s common stock trades on the OTC Bulletin Board under the symbol “ARSC”.
        The market for the Company’s common stock on the OTC Bulletin Board is limited,
        sporadic and highly volatile.
 
 The
        following quotations were provided by the OTC Bulletin Board for the Company’s
        common stock for the last two years. The quotations represent inter-dealer
        prices and do not necessarily represent actual transactions. These quotations
        do
        not reflect dealer markups, markdowns or commissions.
 
 Quarter
                  ended:
              High
              Low--------------
              ----
              ---December
                  31, 2005
              $0.27
              $0.10September
                  30, 2005
              $0.24
              $0.04June
                  30, 2005
              $0.45
              $0.10March
                  31, 2005
              $0.55
              $0.30December
                  31, 2004
              $0.55
              $0.36September
                  30, 2004
              $0.69
              $0.30June
                  30, 2004
              $0.75
              $0.30March
                  31, 2004
              $1.10
              $0.45
 
 **Holders**
 -----------
 The
        number of record holders of the Company's securities as of the date of this
        Report is approximately 319.
 
 **Dividends**
 --------------
 The
        Company has not declared any cash dividends with respect to its common stock,
        and does not intend to declare dividends in the foreseeable future. The future
        dividend policy of the Company cannot be ascertained with any certainty,
        and if
        and until the Company completes any acquisition, reorganization or merger,
        no
        such policy will be formulated. There are no material restrictions limiting,
        or
        that are likely to limit, the Company's ability to pay dividends on its
        securities.
 
 **Recent
        Sales of Unregistered Securities**
 --------------------------------------------------
 
 Pursuant
        to a consulting agreement dated May 1, 2005, the Company issued 1,211,765
        shares
        to Timothy J. Connolly on May 10, 2005 and pursuant to a Warrant granted
        under
        the consulting agreement the Company issued an additional 1,000,000 shares
        on
        June 20, 2005. In addition to certain consulting services the Company received
        $77,000 as consideration for these shares.
 
 On
        June
        15, 2005 pursuant to an authorization of the Board of Directors the Company
        issued shares to certain officers and directors of the Company in lieu of
        unpaid
        salary and fees. The share and dollar amounts are as follows: Joe Grace 578,571
        shares $40,500; Frank Neukomm 342,857 shares $24,000; Robert Farr 321,429
        shares
        $22,500.
 
 On
        June
        20,2005, pursuant to a consulting agreement, the Company issued 300,000 shares
        to Princeton Consulting Group.
 
 On
        July
        26, 2005, pursuant to a consulting services contract, the Company issued
        500,000
        shares to the George Miller Company. Also on July 26, 75,000 shares were
        issued
        to Jonathan Gilchrist for legal services, and 100,000 shares were issued
        to
        Robert J. Wilson as a Directors fee.
 
 On
        August
        3, 2005, pursuant to an authorization of the Board shares were issued to
        certain
        officers and directors in lieu of certain salaries and fees. The share and
        dollar amounts are as follows: Joe Grace 216,617 shares $6,500; Frank Neukomm
        166,667 shares $5,000: and Robert Farr 53,333 shares $1,600.
 
 On
        August
        20, 2005, the Company issued 1,500,000 shares to Brewer & Pritchard, P.C.
        pursuant to a 3/a/9 transaction to pay legal fees. The fee amount was
        $81,094.
 
 On
        September 8 and 27, 2005 the Company issued 60,000 shares and 40,000 shares
        to
        B&B Marketing Communications, pursuant to a consulting services agreement.
        Also on September 27, the Company issued 1,000,000 shares to the Owners Group,
        Inc. pursuant to a Consulting Services Agreement.
 
 On
        October 12, 2005, pursuant to an authorization of the Board, the Company
        issued
        shares to certain officers and directors in lieu of certain salaries and
        fees.
        The share and dollar amounts are as follow: Joe Grace 37,500 shares $7,500;
        frank Neukomm 30,000 shares $6,000; Robert Farr 12,000 shares
        $2,400.
 
 Also
        on
        October 12, pursuant to an agreement with American Enterprise Development
        Corp.,
        the Company issued 500,000 shares to Jonathan Gilchrist.
 
 On
        October 26, 2005, pursuant to a consulting services agreement, the Company
        issued 100,000 shares to The George Miller Company, 100,000 shares to Ron
        Hargrove and 100,000 shares to Joe K. Smith.
 
 On
        October 27, the Company issued shares as directors fees to Joe Grace 200,000:
        Frank Neukomm 200,000 and to Robert Farr 100,000.
 
 On
        October 26 and November 1, to complete the acquisition of eGo Design Inc.,
        the
        Company issued 7,200,000 shares to Edward L. Davis: 3,600,000 shares to Benjamin
        F. Schafer; and 1,200,000 shares to James Twedt, in exchange for all the
        issued
        and outstanding stock of eGO Design, Inc.
 
 On
        November 29, 2005, the Company issued shares in lieu of salary to certain
        contractors of its Hydra Fuel Cell Corp. subsidiary. The recipients and amounts
        are as follows: Larry Burgess 80,000 shares, George Hull 80,000 shares, Richard
        Smith 100,000 shares, James Gates 100,000 shares, Corey Davis 50,000 shares,
        Mark Hunt 100,000 shares, and Brenda Burres 200,000 shares. The labor amount
        for
        these contractors was $142,000.
 
 On
        November 29,2005, the Company issued 1,500,000 shares to Wall Street Inside
        Reporter, Inc. in an equal exchange for 46,154 shares of Strategic Growth
        Ventures Inc. (SGWV.PK) as part of a consulting services agreement.
 
 On
        December 8 and 12, 2005, pursuant to a consulting services agreement with
        OTC
        Services, Inc., the Company issued 1,400,000 shares to OTC Services, Inc.
        and
        1,400,000 shares to Darrel T. Uselton.
 
 On
        December 22, 2005, pursuant to its consulting agreement with AEDC, the Company
        issued 500,000 shares to Jonathan Gilchrist.
 
 The
        above
        transactions were completed pursuant to either Section 4(2) of the Securities
        Act or Rule 506 of Regulation D of the Securities Act or Rule 506 of Regulation
        D of the Securities Act. With respect to issuances made pursuant to Section
        4(2)
        of the Securities Act, the transactions did not involve any public offering
        and
        were sold to a limited group of persons. Each investor either received adequate
        information about the Company or had access to such information. The Company
        determined that each investor had such knowledge and experience in financial
        and
        business matters that they were able to evaluate the merits and risks of
        an
        investment in the Company.
 
 With
        respect to issuances made pursuant to Regulation D of the Securities Act,
        the
        Company determined that each purchaser was an “accredited investor” as defined
        in Rule 501(a) under the Securities Act, or if such investor was not an
        accredited investor, that such investor received the information required
        by
        Regulation D.
 
 All
        sales
        of the Company’s securities were made by officers of the Company who have
        received no commission or other remuneration for the solicitation of any
        person
        in connection with the respective sales of the securities described above.
        The
        recipients of securities represented their intention to acquire the securities
        for investment only and not with a view to sale, or for sale in connection
        with
        any distribution thereof. Appropriate legends were affixed to the share
        certificates issued in these transactions.
 
 **Item
        6. Management's Discussion and Analysis or Plan of
        Operation**
 -----------------------------------------------------------------------------------------
 
 **Overview** .
 -------------
 ASRC
        hired the three design engineers on October 28, 2005 through a purchase
        agreement described as the acquisition of eGO Design, Inc. which was the
        development-stage entity that the design engineers owed at the time. Up to
        that
        point, the engineers had spent time planning the development of a proto-type
        hydrogen fuel cell technology. ASRC hired these individuals to continue
        developing this technology. Although legally, the transaction was structured
        as
        a purchase agreement where ASRC exchanged shares for all the outstanding
        shares
        in EGO Design, the substance of the tranaction was a “hiring bonus” paid by ASRC
        to these design engineers in the form of ASRC stock. The accounting treatment
        of
        the transaction resulted in a recognition of compensation expense in the
        amount
        of $2,040,000, an amount equal to the market value of ASRC stock issued on
        the
        date of the transaction.
 
 Prior
        to
        completing the transaction on October 28, 2005, the Company completed extensive
        due diligence on the fuel cell market and PEM based hydrogen fuel cells in
        particular and determined that the engineers had developed unique technology
        ideas worthy of development.
 
  As
        of
        December 31, 2005 Hydra had designed, assembled and tested a successful
        prototype of the Company’s proprietary fuel cell concept.
 
 In
        2006,
        we intend to continue development of prototypes and conduct internal testing.
        We
        expect to submit the HydraStaxTM unit to CSA International for certification in
        September of 2006, after which we can begin production of the units for sale.
        We
        further expect to begin shipping certified units immediately after CSA
        certification. To accomplish this, we will need to raise approximately $5
        million to fund the research and development of the hydrogen fuel cell, and
        to
        produce and sell enough units to bring the endeavor to the point of
        self-sufficiency.
  The
        Company generated no substantive revenue in 2005, beyond the interest it
        earned
        on its bank deposits. As discussed in Note 2, the Company has incurred recurring
        losses from continuing operations. We are continuing to pursue the raising
        of
        capital, through private placements of Company common stock, to fund the
        Company’s current expenses and projected development and production costs.
        However, there is no certainty that management will be successful in these
        efforts. If we are unable to raise the capital required to fund these items
        it
        is likely that the Company will be unable to remain as a going
        concern.
 
 In
        February, 2005, the Company collected its note receivable from Superior
        Protection Inc. The principal amount due was $200,000 and was paid to the
        Company as $100,000 cash and the return of 500,000 shares of the Company’s
        common stock which were cancelled. The market value of the shares at the
        time
        was approximately $150,000.
 
 
 **Critical
        Accounting Policies**
 **------------------------------------**
 *Revenue
        Recognition*
 
 The
        Company recognizes revenue when products and services are
        delivered.
 
 *Accounting
        for Stock-Based Compensation*
 
 Prior
        to
        December 31, 2005, we accounted for stock-based compensation under Statement
        of
        Financial Accounting Standards No. 123 Accounting for Stock-Based Compensation
        (123). As permitted under this standard, compensation cost was recognized
        using
        the intrinsic value method described in Accounting Principles Board Opinion
        No.
        25, Accounting for Stock Issued to Employees (APB 25). Effective December
        15,
        2005, the Company has adopted Statement of Financial Accounting Standards
        No.
        123 (Revised 2004), Share-Based Payment (FAS 123R) and applied the provisions
        of
        the Securities and Exchange Commission Staff Accounting Bulletin No. 107
        using
        the modified-prospective transition method. The Company had not issued any
        options to employees in the prior periods thus, there was no impact of adopting
        the new standard.
 
 The
        Company follows the disclosure requirements of Financial Accounting Standards
        No. 123 as amended by FASB Statement No.148.
 
 *Recognition
        of Compensation Expense relating to the hiring of design engineers from eGo
        Design, Inc..*
 
 Although
        legally, the transaction was structured as a purchase agreement where ASRC
        exchanged shares for all the outstanding shares in EGO Design, the substance
        of
        the transaction was a “hiring bonus” paid by ASRC to these design engineers in
        the form of ASRC stock. The accounting treatment of the transaction resulted
        in
        a recognition of compensation expense in the amount of $2,040,000, an amount
        equal to the market value of ASRC stock issued on the date of the transaction.
        .
        In recording this transaction, we examined the principles of SFAS 141,
“Accounting for Business Combinations” and EITF 98-3, “Determining Whether
        Nonmonetary Transaction Involves Receipt of Productive Assets or of a Business”
and determined that in substance this was not an acquisition of a business
        and
        as such did not meet the accounting requirements for accounting for Business
        Combinations under SFAS 141. .
 
 We
        determined that the acquisition of eGO Design, Inc. did not meet the test
        of
        what is a business since it had no operations, employees, customer list or
        revenues.
 
 **Off
        Balance Sheet Arrangements**
 **-----------------------------------------------**
 The
        Company has no off balance sheet arrangements.
 
 **Accounting
        Pronouncements**
 ---------------------------------------
  In
        December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment.” SFAS No.
        123R is a revision of SFAS No. 123 and supersedes APB 25. SFAS No. 123R
        eliminates the use of the intrinsic value method of accounting, and requires
        companies to recognize the cost of employee services received in exchange
        for
        awards of equity instruments based on the grant-date fair value of those
        awards.
        The effective date of SFAS No. 123R is the first reporting period beginning
        after June 15, 2005, which is third quarter 2005 for calendar year companies,
        although early adoption is allowed. SFAS No. 123R permits companies to adopt
        its
        requirements using either a “modified prospective” method, or a “modified
        retrospective” method. Under the “modified prospective” method, compensation
        cost is recognized in the financial statements beginning with the effective
        date, based on the requirements of SFAS No. 123R for all share-based payments
        granted after that date, and based on the requirements of SFAS No. 123 for
        all
        unvested awards granted prior to the effective date of SFAS No. 123R. Under
        the
“modified retrospective” method, the requirements are the same as under the
“modified prospective” method, except that entities also are allowed to restate
        financial statements of previous periods based on pro forma disclosures made
        in
        accordance with SFAS No. 123.
 
 The
        Company currently utilizes Black-Scholes, a standard option pricing model,
        to
        measure the fair value of stock options granted to employees.
 
 The
        Company has adopted these standards which have had no material effect on
        the
        Company’s financial position.
 
 SFAS
        no.
        150 was issued in May 2003 and requires issuers to classify as liabilities
        three
        classes of freestanding financial instruments that represent obligations
        for the
        issuer. SFAS No. 150 is effective for financial instruments entered into
        or
        modified after May 31, 2003 and is otherwise effective at the beginning of
        the
        first interim period beginning after December 15, 2003. The adoption of this
        statement did not have a material effect on the Company’s financial, results of
        operations or cash flows.
 
 **Results
        of Operations** .
 -----------------------------
 The
        Company had no revenue during the calendar years ended December 31, 2005
        and
        2004.
 
 The
        Company had no gross profit during the calendar years 2005 and 2004. General
        and
        administrative expenses were $5,384,548 and $28,805,594 for the calendar
        years
        ended December 31, 2005 and 2004 respectively. Principal general and
        administrative expenses included contracted services ($5,223,768 and
        $28,750,432, respectively); legal expenses ($20,845 and $29,153, respectively);
        payroll ($108,396 and $105,164 respectively); and rent ($26,558 and
        $13,382).
 
 Significant
        components contracted services for 2005 were:
 Warrant
                  expense
              $
                  1,105,897Stock
                  issued for hiring bonus for design engineers of eGo Design,
                  Inc.
              2,040,000Stock
                  issued for directors’ services
              248,567Stock
                  issued for outside consultants
              1,429,304Total
                  for 2005
              $
                  5,223,768
 
 Significant
        components of contracted services for 2004 were:
 Stock
                  issued to consultant for services
              $
                  16,980,069stock
                  issued for directors’ services
              10,820,000Warrant
                  expense
              769,834Other
              180,529Total
                  for 2004
              $
                  28,750,432
 
 The
        Company had a net operating loss for the years ended December 31, 2005 and
        2004.
 
 **Liquidity
        and Capital Resources** .
 -------------------------------------------
 In
        March
        of 2004 the Company completed a private placement of 2.5 million Units for
        gross
        proceeds of $500,000. Each Unit consists of one share of common stock and
        seven
        Warrants to purchase an additional share of stock at prices between $0.30
        and
        $0.90 inclusive. The cash remaining from the Units offering is sufficient
        to
        fund the Company’s operations for the next four quarters, but will not be
        sufficient to fund the development and production of the Hydra fuel cell.
        Therefore, we will need to raise approximately $5 million to adequately fund
        Hydra through its development stage and through production and marketing,
        to the
        point of self-sufficiency.
 
 We
        expect
        to incur costs of approximately $2 million through the end of the development
        phase of the unit, then to incur production and marketing costs of approximately
        $3 million subsequent to its CSA International certification in order to
        bring
        the project to self-sufficiency.
 
 The
        Company did not generate any cash flow from operating activities during 2005
        and
        2004. The Company had cash assets of $11,585 and $37,852 as of December 31,
        2005
        and 2004 respectively.
 
 The
        net
        change in cash position for 2005 is due primarily to operational costs of
        the
        parent company after funding $45,000 to Hydra in the 4 th Quarter.
 
 Management
        does not believe that SFAS No's 131 and 133 regarding segment reporting and
        derivatives, respectively, will have any impact on the Company's financial
        condition and operations.
 
 
  
   
 **ITEM
        7 - FINANCIAL STATEMENTS**
 
 **AMERICAN
        SECURITY RESOURCES CORPORATION AND SUBSIDIARIES**
  
 
 **INDEX
        TO FINANCIAL STATEMENTS**
 
 Page**Report
                  of Independent Certified Public Accountants**
              13**Financial
                  Statements**Consolidated
                  Balance Sheets at December 31, 2005 and 2004
              14Consolidated
                  Statements of Operations for the years ended December 31, 2005
                  and
                  2004
              15Consolidated
                  Statement of Shareholders’ Equity for the years ended December 31, 2005
                  and 2004
              16Consolidated
                  Statements of Cash Flows for the years ended December 31, 2005
                  and
                  2004
              17Notes
                  to Consolidated Financial Statements
              19
 
 
 
  
   
 ***REPORT
        OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS***
 
 
 
 To
        the
        Board of Directors and Shareholders of
 American
        Security Resources Corporation
 (formerly
        Kahuna Network Security, Inc. and Subsidiary)
 Houston,
        Texas
 
 We
        have
        audited the accompanying consolidated balance sheet of American Security
        Resources Corporation formerly, Kahuna Network Security, Inc., as of December
        31, 2004, and the related consolidated statements of expenses, shareholders'
        equity, and cash flows for each of the two years then ended. These financial
        statements are the responsibility of the Company's management. Our
        responsibility is to express an opinion on these financial statements based
        on
        our audits.
 
 We
        conducted our audits in accordance with standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audits to obtain reasonable assurance about whether the
        financial statements are free of material misstatement. An audit includes
        examining, on a test basis, evidence supporting the amounts and disclosures
        in
        the financial statements. An audit also includes assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audits provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the consolidated financial position of American Security
        Resources Corporation as of December 31, 2004, and the consolidated results
        of
        their operations and cash flows for each of the two years then ended, in
        conformity with accounting principles generally accepted in the United States
        of
        America.
 
 The
        accompanying consolidated financial statements have been prepared assuming
        that
        American Security Resources Corporation will continue as a going concern.
        As
        discussed in Note 2 to the consolidated financial statements, American Security
        Resources Corporation suffered losses from operations since inception, which
        raises substantial doubt about its ability to continue as a going concern.
        Management's plans regarding those matters also are described in Note 2.
        The
        consolidated financial statements do not include any adjustments that might
        result from the outcome of this uncertainty
 
 **MALONE
        & BAILEY, PC**
 www.malone-bailey.com
 Houston,
        Texas
 
 February
        29, 2005
 
 
 
 
 
  **AMERICAN
        SECURITY RESOURCES CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        BALANCE SHEET**
 **December
        31, 2005**
 2005ASSETSCash
                  in bank
              
              $
              11,585Prepaid
                  expenses
              
              
              4,015Investment,
                  available for sale
              
              
              138,462Total
                  current assets
              
              
              154,062Equipment,
                  net of depreciation of $4,129
              
              
              15,455Total
                  Assets
              
              $
              169,517LIABILITIES
                  AND SHAREHOLDERS' EQUITYCURRENT
                  LIABILITIESAccounts
                  payable
              
              $
              7,953Other
                  current liabilities
              
              
              17,525Total
                  current liabilities
              
              
              25,478Preferred
                  stock - 1,000,000 shares authorized; $.001 par value; no shares
                  issued or
                  outstanding
              
              
              -Common
                  stock - 200,000,000 shares authorized; $.001 par value; 61,675,766
                  shares
                  issued and outstanding at December 31, 2005
              
              
              61,676Additional
                  paid-in capital
              
              
              35,205,849Accumulated
                  deficit
              
              
              (35,036,948
              )Accumulated
                  other comprehensive loss
              
              
              (86,538
              )Total
                  shareholders' equity
              
              $
              144,039Total
                  Liabilities and shareholders' equity
              
              
              169,517
 
 
 
 
  *See
              summary of accounting policies and notes to consolidated financial
              statements.*
   **AMERICAN
        SECURITY RESOURCES CORPORATION AND SUBSIDIAR** **IES**
 **CONSOLIDATED
        STATEMENTS OF OPERATIONS**
 **For
        the years ended December 31,**
 
 2005
              
              2004General
                  and administrative expenses
              
              $
              5,384,548
              
              $
              28,805,594Impairment
                  of investment
              
              
              -
              
              
              60,000Forgiveness
                  of debt income
              
              
              -
              
              
              (8,167
              )Net
                  loss
              
              $
              5,384,548
              
              $
              28,857,427Other
                  Comprehensive Loss:Change
                  in unrealized loss on investment available for sale
              
              
              (86,538
              )
              
              -Comprehensive
                  Loss
              
              $
              5,471,086
              
              $
              28,857,427Loss
                  per common shares - basic and diluted
              
              $
              (0.13
              )
              $
              (0.92
              )Weighted
                  average shares outstanding
              
              
              42,053,103
              
              
              42,053,103
 
 
 
  *The
              accompanying notes are an integral part of these consolidated financial
              statements.*
   **AMERICAN
        SECURITY RESOURCES CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENT OF SHAREHOLDERS’ EQUITY**
 **For
        the years ended December 31, 2005 and 2004**
 
 Retained
                Deficit
              
              Other
                Comprehensive
                Loss
              
              TotalCommon
                  stockShares
              
              AmountBalances
                  at December 31, 2003
              
              
              2,862,155
              
              $
              612,362
              
              $
              (794,973
              )
              
              
              
              
              
              
              
              
              
              $
              (182,611
              )Shares
                  issued for:--
                  cash
              
              
              2,755,625
              
              
              541,450
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              541,450--
                  debt
              
              
              752,168
              
              
              158,042
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              158,042--
                  director services
              
              
              12,600,000
              
              
              10,820,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              10,820,000--
                  services
              
              
              16,813,604
              
              
              16,980,069
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              16,980,069--
                  investment
              
              
              236,425
              
              
              -
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              ---
                  shares repurchased for note receivable and cancelled
              
              
              (500,000
              )
              
              (100,000
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (100,000
              )--
                  shares re-purchased
              
              
              (200,000
              )
              
              (40,000
              )
              
              
              
              
              
              
              
              
              
              
              
              
              
              (40,000
              )Fair
                  value of warrants issued for services
              
              
              
              
              
              769,834
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              769,834Net
                  loss
              
              
              
              
              
              
              
              
              (28,857,427
              )
              
              
              
              
              
              
              
              
              
              
              (28,857,427
              )Balances,
                  December 31, 2004
              
              
              35,319,977
              
              $
              29,741,757
              
              $
              (29,652,400
              )
              
              
              
              $
              -
              
              
              
              
              $
              89,357Shares
                  issued for:--
                  cash
              
              
              2,000,000
              
              
              77,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              77,000--
                  directors' services
              
              
              2,624,501
              
              
              248,567
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              248,567--
                  services
                --warrant
                  expense
              
              
              8,231,228
                -
              
              
              1,429,304
                1,505,897
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              1,429,304
                1,505,897--
                  compensation bonus
              
              
              12,000,000
              
              
              2,040,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              2,040,000--
                  equity swap investment
              
              
              1,500,000
              
              
              225,000
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              225,000Net
                  loss
              
              
              
              
              
              
              
              
              (5,384,548
              )
              
              
              
              
              
              
              
              
              
              
              (5,384,548
              )Other
                  comprehensive loss
              
              
              
              
              
              
              
              
              
              
              
              
              
              
              (86,538
              )
              
              
              
              
              (86,538
              )Balances,
                  December 31, 2005
              
              
              61,675,706
              
              $
              35,267,525
              
              $
              (35,036,948
              )
              
              
              
              $
              (86,538
              )
              
              
              
              $
              144,039
 
 Less:
        par      (61,676)
 Additional
        paid in capital     $35,205,849
 
  *The
              accompanying notes are an integral part of these consolidated financial
              statements.*
   **AMERICAN
        SECURITY RESOURCES CORPORATION AND SUBSIDIARIES**
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 **For
        the years ended December 31** ,
 
 2005
                
                2004Cash
                    flows from operating activities:Net
                    loss
                $
                    (5,384,548)
                
                $
                    (28,857,427)Adjustments
                    to reconcile net loss to net cash provided by / (used in) operating
                    activities:Depreciation
                2,648
                
                1,481Impairment
                    in investment in Simple Network Solutions
                -
                
                60,000Forgiveness
                    of debt income
                -
                
                (8,167)Common
                    stock for services
                5,223,768
                
                27,800,069Warrants
                    issued
                -
                
                769,834Changes
                    in operating assets and liabilities:Prepaid
                    expenses
                (4,015)
                
                -Accounts
                    payable
                4,553
                
                (13,233)Accrued
                    liabilities
                (37,404)
                
                54,929Net
                    cash used in operating activities
                (194,998)
                
                (192,514)Cash
                    flows from investing activities:Note
                    receivable
                100,000
                
                (200,000)Investment
                    in Simple Network Solutions
                -
                
                (60,000)Purchases
                    of property and equipment
                (8,269)
                
                (11,315)Net
                    cash provided by/(used in) investing activities
                91,731
                
                (271,315)Cash
                    flows from financing activities:Proceeds
                    from sale of common stock
                77,000
                
                541,450Repurchase
                    of common stock
                -
                
                (40,000)Net
                    cash provided by/(used in) financing activities
                77,000
                
                501,450Net
                    change in cash and cash equivalents
                (26,267)
                
                37,621Cash
                    and cash equivalents, beginning of year
                37,852
                
                231Cash
                    and cash equivalents, end of year
                $
                    11,585
                
                $
                    37,852
  *The
            accompanying notes are an integral part of these consolidated financial
            statements.*
  
 2005
              
              2004Supplemental
                  disclosures of cash flow information:Cash
                  paid for interest
              $
                  -
              
              $
                  549Schedule
                  of non-cash investing and financing transactions:Stock
                  issued for investment
              $
                  -
              
              $
                  225,000Stock
                  issued for debt
              
              
              158,042Note
                  receivable exchanged for return of common stock
              
              
              100,000
 
   *The
              accompanying notes are an integral part of these consolidated financial
              statements.*
   **NOTE
        1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
 
 **Organization**
 
 The
        Company was incorporated in Nevada in 1998. It began operations as Computer
        Automation Systems, Inc., a company that designed and manufactured custom
        rack
        mount and industrial computer applications for the telecom and other high
        tech
        industries. In January of 2004, the Company was recapitalized and its name
        was
        changed to Kahuna Network Security Inc.
 
 At
        that
        time the company’s shareholders voted to increase the total number of authorized
        shares of common stock from 15,000,000 to 200,000,000, to decrease the number
        of
        authorized shares of preferred stock from 5,000,000 to 1,000,000 and approved
        a
        1 for 4 reverse stock split. All share and per share amounts have been restated
        for the split.
 
 On
        July
        2, 2004, the Board of Directors voted to change the name of the Company to
        American Security Resources Corporation (ASRC), a change that was ratified
        by a
        majority of the Company’s shareholders in July of 2004.
 
 Basis
        of
        presentation -- The consolidated financial statements include the accounts
        of
        American Security Resources Corporation and its wholly-owned subsidiaries.
        Significant inter-company accounts and transactions have been eliminated.
 
 Use
        of
        Estimates. -- In preparing financial statements, management makes estimates
        and
        assumptions that affect the reported amounts of assets and liabilities in
        the
        balance sheet and revenue and expenses in the statement of expenses. Actual
        results could differ from those estimates.
 
 Cash
        and
        Cash Equivalents -- For purposes of the statement of cash flows, ASRC considers
        all highly liquid investments purchased with an original maturity of three
        months or less to be cash equivalents.
 
 Revenue
        Recognition -- ASRC recognizes revenue when persuasive evidence of an
        arrangement exists, services have been rendered, the sales price is fixed
        or
        determinable, and collectibility is reasonably assured. This typically occurs
        when the services are performed. There were no revenues for 2005 and
        2004.
 
 Property
        and equipment is valued at cost. Additions are capitalized and maintenance
        and
        repairs are charged to expense as incurred. Gains and losses on dispositions
        of
        equipment are reflected in operations. Depreciation is provided using the
        straight-line method over the estimated useful lives of the assets, which
        is
        estimated at five years.
 
 Impairment
        of Long-Lived Assets -- ASRC reviews the carrying value of its long-lived
        assets
        annually or whenever events or changes in circumstances indicate that the
        historical cost-carrying value of an asset may no longer be appropriate.
        ASRC
        assesses recoverability of the carrying value of the asset by estimating
        the
        future net cash flows expected to result from the asset, including eventual
        disposition. If the future net cash flows are less than the carrying value
        of
        the asset, an impairment loss is recorded equal to the difference between
        the
        asset’s carrying value and fair value.
 
 Income
        taxes -- ASRC recognizes deferred tax assets and liabilities based on
        differences between the financial reporting and tax bases of assets and
        liabilities using the enacted tax rates and laws that are expected to be
        in
        effect when the differences are expected to be recovered. ASRC provides a
        valuation allowance for deferred tax assets for which it does not consider
        realization of such assets to be more likely than not.
 
  *.*
 
 **AMERICAN
              SECURITY RESOURCES CORPORATION AND SUBSIDIARIES,**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
              31, 2005 and 2004**
   Basic
        and
        diluted net loss per share -- The basic net loss per common share is computed
        by
        dividing the net loss by the weighted average number of common shares
        outstanding. Diluted net loss per common share is computed by dividing the
        net
        loss adjusted on an "as if converted" basis, by the weighted average number
        of
        common shares outstanding plus potential dilutive securities. For the years
        ended December 31, 2005 and 2004, potential dilutive securities had an
        anti-dilutive effect and were not included in the calculation of diluted
        net
        loss per common share. The number of potentially dilutive securities theat
        were
        not included in the computation of diluted EPS because to do so would have
        been
        antidilutive was 19,500,000 common stock potentially issuable under outstanding
        options/warrants.
 
 Stock
        Compensation -- ASRC adopted the disclosure requirements of Financial Accounting
        Standard No. 123, Accounting for Stock-Based Compensation (FAS No. 123) and
        FAS
        No. 148 with respect to pro forma disclosure of compensation expense for
        options
        issued. For purposes of the pro forma disclosures, the fair value of each
        option
        grant is estimated on the grant date using the Black-Scholes option-pricing
        model. ASRC applies APB No. 25 in accounting for its stock option plans and,
        accordingly, no compensation cost has been recognized in ASRC financial
        statements for stock options under any of the stock plans which on the date
        of
        grant the exercise price per share was equal to or exceeded the fair value
        per
        share. However, compensation cost has been recognized for warrants and options
        granted to non-employees for services provided. There were no options granted
        or
        outstanding during 2004 and 2003 to employees.
 
 Recently
        issued accounting pronouncements -- In December 2004, the FASB issued SFAS
        No.123R, “Accounting for Stock-Based Compensation” SFAS No.123R establishes
        standards for the accounting for transactions in which an entity exchanges
        its
        equity instruments for goods or services. This Statement focuses primarily
        on
        accounting for transactions in which an entity obtains employee services
        in
        share-based payment transactions. SFAS No.123R requires that the fair value
        of
        such equity instruments be recognized as expense in the historical financial
        statements as services are performed. Prior to SFAS No.123R, only certain
        pro
        forma disclosures of fair value were required. SFAS No.123R shall be effective
        for small business issuers as of the beginning of the first interim or annual
        reporting period that begins after December 15, 2005. While ASRC has not
        issued
        options to employees recently, it may do so in the future. The adoption of
        this
        new accounting pronouncement is not expected to have a material impact on
        the
        consolidated financial statements of ASRC during the calendar year
        2006.
 
 ASRC
        does
        not expect the adoption of any other recently issued accounting pronouncements
        to have a significant impact on their consolidated financial position, results
        of operations or cash flow.
 
 
 **NOTE
        2 - GOING CONCERN**
 
 As
        shown
        in the accompanying consolidated financial statements, ASRC incurred recurring
        losses from continuing operations of $5,471,086 and $28,857,427 in the year
        2005
        and 2004, respectively. This condition creates an uncertainty as to ASRC’s
        ability to continue as a going concern. Management is trying to raise additional
        capital through sales of common stock either through private placements or
        public offerings, as well as seeking other sources of funding. There are
        no
        assurances that ASRC will be able to achieve a level of revenues adequate
        to
        generate sufficient cash flow from operations or obtain the additional financing
        of $5 million through private placements or public offerings to support the
        investment in Hydra’s fuel cell technology. If these funds are not available
        ASRC may not continue its operations or execute its business plan. The
        conditions raise substantial doubt about ASRC’s ability to continue as a going
        concern. The consolidated financial statements do not include any adjustments
        relating to the recoverability and classification of asset carrying amounts
        or
        the amount and classification of liabilities that might be necessary should
        ASRC
        be unable to continue as a going concern.
 
  *.*
 
 **AMERICAN
              SECURITY RESOURCES CORPORATION AND SUBSIDIARIES,**
 **NOTES
              TO CONSOLIDATED FINANCIAL STATEMENTS**
 **December
              31, 2005 and 2004**
   
 **NOTE
        3 - PROPERTY AND EQUIPMENT**
 
 Property
        and equipment consisted of the following at December 31, 2005:
 
 Description
              
              Life
              
              AmountEquipment
              
              5
                  years
              
              $
                  4,988Office
                  furniture and equipment
              
              5
                  years
              
              14,59619,584Less:
                  accumulated depreciation
              
              
              
              (4,129)$
                  15,455
  Depreciation
        expense totaled $2,648 and $1,481 for the years December 31, 2005 and 2004,
        respectively.
 
 **NOTE
        4- INVESTMENT, AVAILABLE FOR SALE**
 
 ASRC
        exchanged 1,500,000 of its common stock for 46,154 shares of common stock
        f
        Strategic Growth Ventures, Inc., which trades under the symbol: SGWV.PK.
        At
        December 31, 2005, this amount is recorded at fair value and classified as
        available for sale
 
 **NOTE
        5 - COMMON STOCK**
 
 In
        2004,
        $100,000 of a note receivable due to ASRC was exchanged for the return of
        500,000 shares of ASRC
 
 
 In
        2004,
        ASRC repurchased 200,000 shares of its common stock for $40,000.
 
 In
        2005,
        ASRC issued 2,624,501 shares of common stock to directors for services valued
        at
        the then market price totaling $248,567 and issued 8,231,288 shares of common
        stock to outsiders for services valued at the then market price totaling
        $1,429,304.
 
 During
        the quarter ended June 30, 2005, we issued warrants to purchase 6,000,000
        common
        shares to an outside consultant. As such we recorded an expense of $1,505,897
        during the quarter that was estimated using the Black Scholes pricing model.
        Significant assumpations used were (1) 2 year term, (2) volatility of 149.80%,
        (3) risk-free rate of 3.5% and(4) dividends of zero.. Subsequently, the
        consultant exercised warrants to purchase 2,000,000 shares for $77,000 in
        cash.
        The market value at the time of the exercise was $780,000, but appropriately,
        there was no additional compensation expense recorded. The remaining warrants
        were then cancelled. The warrants contained no cashless provision.
 
 In
        2005,
        ASRC hired the original design engineers of eGo Designs, Inc. ("eGo") by
        issuing
        12,000,000 shares as a hiring bonus for the design engineers to work for
        ASRC
        and continue their development of the hyrdrogen fuel cell proto-type technology.
        Although legally, this transaction was structured as a purchase agreement
        of the
        outstanding shares of eGO Designs, ASRC examined the requirements under SFAS
        141, “Accounting for Business Combinations,” and EITF 98-3, “Determining Whether
        Nonmonetary Transactions Involve Receipt of Productive Assets or of a Business,”
to conclude that eGo Design, Inc was not a “business,” As such the transaction
        was accounted for as a “hiring bonus,” and recorded as compensation expense
        during 2005 in the amount of $2,040,000 which was equal to the market value
        of
        the shares issued by ASRC to the original design engineers.
 
 In
        2005,
        ASRC issued 1,500,000 shares as an equity swap for 46,154 shares of common
        stock
        of Strategic Growth Ventures, Inc. (the shares were issued to Wall Street
        Insider Report), valued at the then market price totaling $225,000.
 
 
 **NOTE
        6 - WARRANTS**
 
 In
        March
        of 2004, ASRC completed a private placement of 2.5 million Units consisting
        of
        one share of its common stock and seven warrants to purchase additional shares
        of common stock at a prices ranging from $0.30 to $0.90. The exercise period
        for
        these warrants expire on December 31, 2006.
 
 “In
        October 2004, the we issued a warrant to purchase 2,000,000 shares of common
        stock at an initial exercise price of $0.30. The term of these warrants are
        three years from the issuance date with vesting to occur (1) one-half in
        October
        2004, and one-eighth after each of the first four six-month anniversary dates
        of
        the date of issuance. The exercise price initially was $0.30 per share. If
        the
        date of exercise is more than six months after the date of issuance, the
        exercise price shall be reset on each six month anniversary of the date of
        issuance to equal the lesser of (i) the then current exercise price, or (ii)
        105% of the lowest closing bid price during the ten trading days immediately
        preceding the six-month anniversary date. These warrants also contain a cashless
        exercise provision The Holder may elect a cashless provision and receive
        a
        number of shares of common stock computed using the following formula:
 
 X
        = Y ( A
        - B ) / A where,
 X
        = the
        number of shares of common stock to be issued to the holder
 A
        = the
        closing price 1 trading day before the date of exercise.
 B
        = the
        exercise price
 
 We
        estimated the fair market value of the warrants to be $769,834 using the
        Black
        Scholes pricing model and recorded the entire amount as expense. The significant
        assumptions used were (a) a computed volatility rate of 230.81%, computed
        using
        a 3-year look back period matching the term of the warrant, and (b) a discount
        risk free rate of 2.92% (c) zero dividend rate and (d) 3 year
        term.”
 
 Summary
        information regarding warrants is as follows:
 
 Warrants
              Weighted
                  Average Share PriceYear
                  ended December 31, 2004:Granted
              17,500,000
              0.60Granted
              2,000,000
              0.40Outstanding
                  atDecember
                  31, 2004
              19,500,000
              $
                  0.60Granted
              1,000,000
              $0.30Granted
              5,000,000
              $0.30Exercised
                  for Cash
              (2,000,000)
              $0.04Cancelled
              (4,000,000)
              $0.30Outstanding
                  at December 31, 2005
              19,500,000
              $0.60
 
 
 Warrants
        outstanding and exercisable as of December 31, 2004 and 2005:
 OutstandingExercise
                  Price
              Number
                  of Shares
              Remaining
                  life
              Exercisable
                  Number of Shares$0.30
              2,500,000
              1
                  year
              2,500,0000.30
              2,000,000
              2
                  years
              2,000,0000.40
              2,500,000
              1
                  year
              2,500,0000.50
              2,500,000
              1
                  year
              2,500,0000.60
              2,500,000
              1
                  year
              2,500,0000.70
              2,500,000
              1
                  year
              2,500,0000.80
              2,500,000
              1
                  year
              2,500,0000.90
              2,500,000
              1
                  year
              2,500,00019,500,000
              
              19,500,000
 
 
 **NOTE
        7 - INCOME TAXES**
 
 ASRC
        uses
        the liability method, where deferred tax assets and liabilities are determined
        based on the expected future tax consequences of temporary differences between
        the carrying amounts of assets and liabilities for financial and income tax
        reporting purposes. During fiscal 2005 and 2004, ASRC incurred net losses
        and,
        therefore, has no tax liability. The net deferred tax asset generated by
        the
        loss carry-forward has been fully reserved. The cumulative net operating
        loss
        carry-forward is approximately $4,200,000 at December 31, 2005 and will expire
        in the years 2018 through 2025.
 
 At
        December 31, 2005 deferred tax assets consisted of the following:
 
 2004Deferred
                  tax assets
              $1,428,000Less:
                  valuation allowance
              (1,428,000)Net
                  deferred tax asset
              $
                  -
 
 **NOTE
        8 - LEASES**
 
 ASRC
        leased office space under an operating lease during 2005. The lease agreement
        provided for monthly rent of $2,400 to be paid on a month-to-month basis.
        Total
        rent expense was $25,926 and $13,382 during 2005 and 2004,
        respectively.
 
 
 **ITEM
        8**
 
 **Changes
        In and Disagreements With Accountants on Accounting and Financial
        Disclosure.**
 -------------------------------------------------------------------------------------------------------------------------------
 None.
 
 **Item
        8A. Controls and Procedures.**
 ----------------------------------------------
 The
        Company's Chief Executive Officer and Chief Financial Officer ("Certifying
        Officers") are responsible for establishing and maintaining disclosure controls
        and procedures for the Company. The Certifying Officers have concluded (based
        on
        their evaluation of these controls and procedures as of December 31, 2004),
        that
        the design and operation of the Company's disclosure controls and procedures
        (as
        defined in Rule 13a-14(c) under the Securities Exchange Act of 1934) do not
        adequately meet intended objectives and are not effective due to the significant
        audit adjustments relating to the accounting treatment for the eGo Designs
        transaction and the shares received from Strategic Growth Ventures. However,
        we
        believe there are no material weaknesses. As of this date, given the small
        size
        of the Company and its limited operations and over the last year, the Company
        utilized a preliminary and basic standard of internal controls and procedures
        related to its financial reporting for the period covered by this report.
        Management is in the process of developing and adopting new and more stringent
        controls and procedures and anticipates such controls and procedures to be
        in
        place prior to the end of fiscal year 2006.
 
 Disclosure
        controls and procedures are controls and other procedures that are designed
        to
        ensure that information required to be disclosed in Company reports filed
        or
        submitted under the Exchange Act is recorded, processed, summarized and
        reported, within the time periods specified in the Securities and Exchange
        Commission's rules and forms. Disclosure controls and procedures include,
        without limitation, controls and procedures designed to ensure that information
        required to be disclosed in Company reports filed under the Exchange Act
        are
        accumulated and communicated to management, including our Chairman, to allow
        timely decisions regarding required disclosure.
 
 No
        significant changes were made in the Company's internal controls nor other
        facts
        that would significantly affect these controls subsequent to the date of
        this
        evaluation, including any corrective actions with regard to significant
        deficiencies and material weaknesses.
 
 
 **PART
        III**
 
 **ITEM
        9 - Directors, Executives Officers, Promoters and Control Persons, Compliance
        with Section 16(a) of the Exchange Act**
 **------------------------------------------------------------------------------------------------**
 The
        Company has adopted a Code of Ethics that applies to all of its Directors,
        Officers (including its CEO, CFO and chief accounting officer and any person
        performing similar functions) and all employees. The Code is attached as
        “Exhibit 14H”.
 
 **Directors
        and Executive Officers**
 --------------------------------------------------
 
 The
        following table sets forth the names of all current directors and executive
        officers of the Company. These persons will serve until the next annual meeting
        of the stockholders or until their successors are elected or appointed and
        qualified, or their prior resignation or termination.
 
 Name
              
              Positions
                  Held
              
              Date
                  of Election or DesignationRobert
                  C. Farr
              
              President/COO
              
              11/23/05Director
              
              10/27/04Frank
                  Neukomm
              
              CFO,
                  Director
              
              02/25/04Secretary
              
              11/08/04Chairman/CEO
              
              11/21/05Robert
                  J. Wilson
              
              Director
              
              07/21/05Edward
                  L. Davis
              
              Director
              
              11/21/05
 
 
 **Business
        Experience**
 ---------------------------
 Frank
        Neukomm (56), Chairman/ CEO, has an extensive background in finance, mergers
        and
        acquisitions, and sales and marketing. Mr. Neukomm has served as a senior
        executive of brokerage and M & A companies, software companies and telecom
        companies. Mr. Neukomm has been instrumental in purchasing or starting companies
        in industries as diverse as insurance, consumer retail goods, industrial
        services and wireless telecommunications. Since 1995, Mr. Neukomm has served
        as
        President of NeuHaus Advisors, Inc., a consulting firm to the telecommunications
        industry.
 
 Robert
        Farr (60), President/COO has extensive Fortune 500 management experience
        in a
        variety of industries. His experience extends to domestic and international
        finance, marketing, manufacturing and distribution. He is the Principal of
        Creative Equity Strategies.
 
 Robert
        J
        Wilson, Director, is a CPA and an independent Director who serves as Audit
        Committee Chairman.
 
 Edward
        L.
        Davis, Director, serves as Chairman of the Company’s Hydra Fuel Cell Corporation
        subsidiary. He is Chief Architect at Intel Corporation and is the principle
        inventor of the Company’s proprietary fuel cell technology.
  **Compliance
        with Section 16(a) of the Exchange Act**
 ------------------------------------------------------------------
 
 Each
        of
        the Company's directors and executive officers filed a Form 3 Initial Statement
        of Beneficial Ownership of Securities with the Securities and Exchange
        Commission on or after December 5, 2003, February 25, and November 2004.
        To the
        best knowledge of management, all reports required to be filed by members
        of
        management under Section 16(a) of the 1934 Act have been filed.
 
 **Item
        10. Executive Compensation** .
 --------------------------------------------
 
 **Cash
        Compensation** .
 ---------------------------
 
 
 Name
              Year
              Other
                  CompPosition
              Period
              SalaryJoe
                  Grace
              12/31/04
              $28,500CEO
              12/31/05
              $34,500Frank
                  Neukomm
              12/31/04
              $24,000CFO,
                  Secretary
              12/31/05
              $35,000Robert
                  Farr
              10/27/04
              $0Director
              12/31/05
              $10,200
 
 Except
        as
        set forth above, no cash compensation, deferred compensation or long-term
        incentive plan awards were issued or granted to the Company's management
        during
        the calendar years ended December 31, 2005 and 2004.
 
 **Compensation
        of Directors**
 ------------------------------------
 Certain
        Directors were compensated with restricted stock during 2005 for attending
        meetings and for work performed. Total stock awarded was 2,624,501
        shares.
 
 **Employment
        Contracts and Termination of Employment and Change-in-Control
        Arrangements** .
 ----------------------------------------------------------------------------------------------------------------------------
  There
        are
        no employment contracts, compensatory plans or arrangements, including payments
        to be received from the Company, with respect to any director or executive
        officer of the Company which would in any way result in payments to any such
        person because of his or her resignation, retirement or other termination
        of
        employment with the Company, any change in control of the Company, or a change
        in the person's responsibilities following a change in control of the
        Company.
  **Item
        11. Security Ownership of Certain Beneficial Owners and
        Management** .
 ----------------------------------------------------------------------------------------------------
 
 **Security
        Ownership of Certain Beneficial Owners** .
 ----------------------------------------------------------------
  The
        following table sets forth the share holdings of those persons who own more
        than
        five percent of the Company's common stock, including stock options, outstanding
        as of the date of this Report, assuming 82,497,992 shares are outstanding
        (the
        number outstanding at the date of this report):
 
 Name
                  & Address
              Type
                  of Ownership
              No.
                  of Shares Beneficially Owned*
              
              Percentage
                  of ClassMr.
                  Frank Neukomm
              Personal
              3,977,270
              
              4.82%9601
                  Katy Freeway, Suite 220Houston,
                  TX 77024Robert
                  Farr
              Corporate
              629,706
              
              0.76%9601
                  Katy Freeway, Suite 220Houston,
                  TX 77024Robert
                  J Wilson
              Personal
              200,000
              
              0.24%9601
                  Katy freeway, Suite 220Houston,
                  TX 77024Edward
                  L. Davis
              Personal
              7,623,312
              
              9.24%9601
                  Katy freeway, suite 220Houston,
                  TX 77024
 
 *Mr.
        Neukomm’s share number includes 162,500 shares held by The Neukomm Children’s
        Trust for which he is the trustee.
 
 **Item
        12. Certain Relationships and Related Transactions** .
 -----------------------------------------------
 
 There
        have been no material transactions, series of similar transactions, currently
        proposed transactions, or series of similar transactions, to which the Company
        and any director, executive officer, five percent stockholder or associate
        of
        any of these persons is or was a party.
 
 **Item
        13. Principal Accountant Fees and Services**
 **--------------------------------------------------------------**
 
 AUDIT
        FEES
 
 Malone
        & Bailey were the Company’s auditors for the fiscal years ended December 31,
        2005 and 2004.
 
 AUDIT
        FEES
 
 For
        their
        audit of our annual financial statements and for their review of our Quarterly
        Reports on Form 10-Q, Malone & Bailey billed us a total of $9,985 for the
        fiscal year ended December 31, 2005 and $7,610 for the fiscal year ended
        December 31, 2004.
 
 TAX
        FEES
 
 For
        their
        review of tax matters, John A. Wilkinson, P.C. billed us a total of $1,500
        in
        2005 and $1,850 in 2004.
 
 ALL
        OTHER
        FEES
 
 John
        A.
        Wilkinson, P.C. billed us $ 2,075 related to general accounting services
        and
        quarterly filings of Form 10-QSB.
 
 The
        Board
        of Directors Pre-approval Policy and Procedures
 
 We
        do not
        have a separate Audit Committee. Our full Board of Directors performs the
        functions of an Audit Committee. During fiscal year 2003, the Board of Directors
        adopted policies and procedures for the pre-approval of audit and non-audit
        services for the purpose of maintaining the independence of our independent
        auditors. We may not engage our independent auditors to render any audit
        or
        non-audit service unless either the service is approved in advance by the
        Board
        of Directors or the engagement to render the service is entered into pursuant
        to
        the Board of Director's pre-approval policies and procedures. On an annual
        basis, the Board of Directors may pre-approve services that are expected
        to be
        provided to us by the independent auditors during the following 12 months.
        At
        the time such pre-approval is granted, the Board of Directors must (1) identify
        the particular pre-approved services in a sufficient level of detail so that
        management will not be called upon to make judgment as to whether a proposed
        service fits within the pre-approved services and (2) establish a monetary
        limit
        with respect to each particular pre-approved service, which limit may not
        be
        exceeded without obtaining further pre-approval under the policy.
 
 The
        Board
        has considered whether the provision of the services described above under
        the
        caption "All Other Fees" is compatible with maintaining
        independence.
    *.*
  
 **PART
        IV**
 
 **Item
        14. Exhibits and Reports on Form 8-K.**
 ---------------------------------------------------------
 Reports
        on Form 8-K.
 --------------------------------------
 
 Form
        8-K  Election
        of Directors July and November, 2005
 Departure
        of or Change of Corporate Officers or Directors November 2005
 
 Index
        of
        Exhibits:
 
 No.
              Name
                  of Exhibit
              Filed
                  Herewith
              Incorporated
                  by referenceForm
              Period
                  Ending
              Exhibit
              Filing
                  Date3.1
              Initial
                  Articles of Incorporation filed in the State of Utah.
              
              10-SB
              
              3.1
              09/22/993.2
              Initial
                  Articles of Incorporation filed in the State of Nevada.
              
              10-SB
              
              3.1
              09/22/993.3
              Articles
                  of Merger to change the Company's domicile filed in the State of
                  Utah and
                  Nevada and effecting a one for four reverse split of the outstanding
                  securities of The Company.
              
              10/SB/12GA
              
              3.3
              09/02/993.5
              By-Laws
              
              10/SB/12GA
              
              3.5
              02/02/0010.1
              Purchase
                  agreement - eGO Design
              X10.2
              2.0
                  Million Warrants issued
              X10.3
              2.5
                  Million-Unit Warrants
              X10.4
              Employment
                  Agreement - Joe Grace
              
              10-KSB
              12/31/04
              14B
              03/31/0510.5
              Form
                  of Warrant Agreement
              X21
              Subsidiaries
                  of Registrant
              X31.1
              Certification
                  of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002
              X31.2
              Certification
                  of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                  Act of 2002
              X32.1
              Certification
                  of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002
              X32.2
              Certification
                  of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                  Act of 2002
              X99.1
              Code
                  of Business Conduct and Ethics
              X
 
  *.*
  
 
 **SIGNATURE**
 
 Pursuant
        to the requirements of the Securities Exchange Act of 1934, the registrant
        has
        duly caused this report to be signed on its behalf by the undersigned thereunto
        duly authorized.
 
 October
        31, 2006
 
 /s/
                  Frank NeukommFrank
                  Neukomm
                President,
                  Chief Executive Officer
 
 
 /s/
                  Randall NewtonRandall
                  Newton
                Chief
                  Financial Officer