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

                                   FORM 10-QSB


     (Mark one)

|X|  ANNUAL REPORT  PURSUANT TO SECTION 13 OR 15(d) OF THE  SECURITIES  EXCHANGE
     ACT OF 1934 A

For the fiscal year ended: October 31, 2003

                or

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934
     For the transition period from ______________ to _____________


Commission file number: 000-50089


                     NATIONAL ENERGY SERVICES COMPANY, INC.
        ------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


             Nevada                                       52-2082372
-------------------------------------           --------------------------------
(State or other jurisdiction of                    (IRS Employer
 incorporation or organization)                            Identification No.)


3153 Fire Road, Suite 2C
Egg Harbor Township, NJ                                    08234
-------------------------------------           --------------------------------
(Address of principal executive offices)                  (Zip Code)

Issuer's telephone number: (800) 758-9288

                                      N/A
        ------------------------------------------------------------------
        (Former name, former address and former fiscal year,
                                          if changed since last report.)



Copies of Communications Sent to:

                        Kenneth S. Pollock, Esq.
                        Newman, Pollock & Klein, LLP
                        2424 N. Federal Highway, Suite 411
                        Boca Raton FL 33431
                        Tel: (561) 393-6168
                        Fax: (561) 391-8856



<PAGE>



Check  whether  the issuer  (1) has filed all  reports  required  to be filed by
section 13 or 15(d) of the  Exchange  Act during the past 12 months (or for such
shorter period that the  registrant was required to file such reports),  and (2)
has been subject to such filing  requirements  for the past 90 days.

Yes |_|   No |X|



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
or any amendment to this Form 10-KSB. |X|



Indicate  by check mark  whether  the  registrant  is an  accelerated  filer (as
defined in Rule 12b-2 of the Act). Yes |_| No |X|



State issuer's  revenues for its most recent fiscal year ended October 31, 2003.
$2,766,138.



Of  the  15,698,014  shares  of  voting  stock  of  the  registrant  issued  and
outstanding   as  of   February  11,  2005,   4,167,114   shares  were  held  by
non-affiliates.  Because of the absence of an established trading market for the
voting stock,  the registrant is unable to calculate the aggregate  market value
of the voting  stock held by  non-affiliates  as of a specified  date within the
past 60 days.



DOCUMENTS INCORPORATED BY REFERENCE:      None



Transitional Small Business Disclosure Format (check one):   Yes  |_|    No |X|




<PAGE>


                                     PART I

This Form  10-KSB  contains  "forward-looking  statements"  relating to National
Energy Services  Company,  Inc. ("NESC" or the "Company") which represent NESC's
current  expectations  or beliefs  including,  but not  limited  to,  statements
concerning NESC's operations,  performance,  financial condition and growth. For
this  purpose,  any  statements  contained  in this  Form  10-KSB  that  are not
statements of historical fact are forward-looking  statements.  Without limiting
the generality of the foregoing, words such as "may", "anticipation",  "intend",
"could",   "estimate",  or  "continue"  or  the  negative  or  other  comparable
terminology  are  intended  to  identify   forward-looking   statements.   These
statements by their nature involve substantial risks and uncertainties,  such as
credit  losses,  dependence  on management  and key  personnel,  variability  of
quarterly  results,  and the ability of NESC to continue its growth strategy and
competition,  certain of which are beyond NESC's control.  Should one or more of
these risks or  uncertainties  materialize or should the underlying  assumptions
prove incorrect,  actual outcomes and results could differ materially from those
indicated in the forward-looking statements.

Any forward-looking statement speaks only as of the date on which such statement
is made,  and NESC  undertakes  no  obligation  to  update  any  forward-looking
statement or statements  to reflect  events or  circumstances  after the date on
which such  statement  is made or to reflect  the  occurrence  of  unanticipated
events.  New  factors  emerge  from  time to  time  and it is not  possible  for
management to predict all of such factors,  nor can it assess the impact of each
such factor on the business or the extent to which any factor, or combination of
factors,  may cause actual results to differ  materially from those contained in
any forward-looking statements.


Item 1. Description of Business

(a)  Business Development

National Energy Services Company,  Inc. was incorporated on February 17, 1998 in
Nevada as Coastal  Enterprises,  Inc. to engage in an internet related business.
The Company and National Energy  Services  Company,  Inc., an  unaffiliated  New
Jersey Corporation formed in late 1995 ("NESNJ"),  entered into an Agreement And
Plan of Share Exchange,  dated October 19, 2001, (the "Share Exchange") pursuant
to which the  shareholders  of NESNJ on October 19, 2001 (the  "Exchange  Date")
were  issued  10,000,000  shares of common  stock of NESC,  par value  $0.001 in
exchange for one hundred percent (100%) of the issued and outstanding  shares of
NESNJ.  As part  of the  exchange,  John  A.  Grillo,  our  President,  received
3,333,300 shares of NESC's common stock.  Prior to the exchange,  the authorized
capital stock of NESC consisted of 20,000,000  shares of common stock, par value
$0.001,  of which  1,700,000  shares were issued and  outstanding  and 1,000,000
shares  of  preferred  stock,  par  value  $0.001,   of  which  no  shares  were
outstanding.  All outstanding shares were fully paid and non assessable, free of
liens,  encumbrances,  options,  restrictions  and legal or equitable  rights of
others  not a party to the Share  Exchange.  The Share  Exchange  called for the
resignation  of the  original  officers  and  directors,  who no longer have any
continued  involvement  in the Company,  and the  appointing  of a new board and
officers.  The new  board of  directors  consisted  of John A.  Grillo,  as sole
officer and  director.  As of the Exchange  Date,  NESNJ  became a  wholly-owned
subsidiary of the Company. For accounting purposes,  the transaction was treated
as a reverse  acquisition under the purchase method of accounting.  Accordingly,
NESNJ will be treated as the continuing entity with the Company as the acquiring
entity.

The Company currently operates as National Energy Services Company,  Inc. Unless
the context  indicates  otherwise,  references  hereinafter  to the "Company" or
"NESC" include both National Energy Services Company, Inc., a Nevada corporation
and it's wholly owned subsidiary,  National Energy Services Company, Inc., a New
Jersey corporation. The Company's principal place of business is 3153 Fire Road,
Suite 2C,  Egg  Harbor  Township,  NJ 08234,  and its  telephone  number at that
address is (800)  758-9288.  (b) Business of the Company At its  inception,  the
Company  intended to engage in an  internet  related  business.  The Company was
incorporated  in  February  1998 to conduct  any lawful  business,  but with the
express intent to enter into an internet  related  businesses.  In May 1998, the
Company  attempted to raise money to implement its business plan through the use
of a private  placement  memorandum to fund its operations.  It did not indicate
that its business plan or purpose was to engage in a merger or acquisition  with
an unidentified company or companies, or other entity or person. The Company was
only able to raise a total of $16,000, which was not sufficient to implement its
business plan.  For such  offering,  the Company relied upon Section 3(b) of the
Securities  Act of 1933,  as amended and Rule 504 of  Regulation  D  promulgated
hereunder.  At the time of the offering (May 1998) Rule 504 provided this Issuer
a limited offering  exemption to raise such seed capital.  Securities sold under
this exemption may be resold freely by non-affiliates of the Issuer.

It was not until October 2001,  through the acquisition of the Company's  wholly
owned  subsidiary,  NESNJ, that the Company changed its business plan to NESNJ's
business plan of marketing  aggregated  energy  management  services to the long
term care industry.  NESNJ was formed in late 1995 by John Grillo, the Company's
President.  Mr. Grillo capitalized on his experience as an electrical contractor
to  develop  a  comprehensive  energy  management  program  for long  term  care
facilities. The facilities are able to pay of this program directly from savings
generated  by energy  system  improvements.  The program  features an upgrade to
lighting  fixtures,  improved  heating,  venting and air  conditioning  ("HVAC")
equipment, ozone laundry systems ("OLS"), all of which serve to strengthen their
current   profitability,   maintain   contractually   competitive  power  during
deregulation uncertainty,  and fund these renovations through the monthly energy
savings with no out-of-pocket costs to the facility.

To provide  funding for the energy  conservation  projects,  the Company  formed
strategic  alliances  with various  lenders  including  Charter.  These  lenders
provide  financing to our  customers  so that the  customer may purchase  energy
conservation measures. This association creates a common structure that packages
an energy  upgrade and several  energy  management  services  within a long-term
energy supply contract assuring customers of continuing competitive pricing.

Energy Gatekeeper Program

The   Company   has   developed   a   proprietary   comprehensive,   cost-driven
energy-management  system called (the "Energy Gatekeeper  Program") which custom
tailors an energy  conservation plan to maximize energy efficiency in any energy
consuming building system for long-term health care facilities thereby improving
their bottom line. NESC has  aggressively  embraced new  technologies and formed
strategic alliances which enable it to offer state-of-the-art goods and services
for the purpose of  generating  revenue  for the  Company  and saving  long-term
health  care  facilities  operating  costs  on a  month-to-month  basis  with no
out-of-pocket cost.

The Energy  Gatekeeper  Program  bundles energy saving system upgrades within an
energy supply agreement. The health care facility signs a contract, typically 60
months or longer,  in which all  equipment  upgrades are paid for and all energy
bills are consolidated into one invoice. The complete service contract provides:

-    Monitoring of utility usage to spot inefficiencies
-    All energy bills consolidated into one easy to manage invoice; and
-    Competitive supply price guarantee for life of contract

The Energy  Gatekeeper  Program is a combined  service and  financing  agreement
whereby the facility has all its energy services  managed by the Company and its
energy solutions  partners.  The customer obtains new energy efficient lighting,
HVAC equipment and OLS systems.  All equipment is amortized over the term of the
energy supply agreement, with current standard contracts specifying a minimum of
36 to 60 months.  NESC controls the acquisition of power to all customers in two
ways,  contractually  and through a limited  power of attorney.  This ability to
exercise  complete  control is greater  than found in most other such  financing
agreements,  enhancing  the  level  of  security  for  the  funding  source  and
increasing the payment impetus for the installed equipment.

The Gatekeeper Contract and Documentation Package

NESC created a credit  review  process and  developed a contract  which  clearly
establishes  responsibilities of all parties. The following outlines the package
of materials the Company collects, evaluates and produces for each project:

     -    Two Years of  Financial  Statements  - Each  customer  is  required to
          supply the last two years of operating financial statements.
     -    Credit  Application  Form - A one page credit  application is required
          obtaining ownership and banking information.
     -    Contract  for Energy  Services
     -    The base contract is an agreement covering the responsibilities of all
          parties.  The contract  also contains a  termination  buyout  schedule
          identifying the cost of buying out the contract on a monthly basis and
          a complete upgrade equipment schedule.
     -    Limited Power of Attorney
     -    The limited  Power of  Attorney  is executed  giving NESC the power to
          completely  manage and control the  facility's  energy  sources and to
          receive and pay all utility bills.  However, the Company is not liable
          for any energy bills left unpaid by the customer.

Principal Products and Services

The products and services offered in the Energy Gatekeeper Program include:

     -    Ozone Laundry System (OLS)
     -    Lighting Upgrades
     -    Mechanical Systems (HVAC)
     -    Water/Sewer Conservation Methods

Ozone Laundry System (OLS)

OLS can cut laundering  costs by more than 50% primarily by eliminating the need
for hot water during the washing  process.  OLS uses activated oxygen (ozone) in
cold water washing to disinfect better than  traditional hot water methods.  The
savings are substantial since laundering  expense is considered to be one of the
most significant  line items in a facility  budget.  Most 120 bed facilities can
save over $1500 per month,  close to $20,000 per year in utility costs alone. By
injecting  ozone  (activated  oxygen) into the wash and rinse water,  laundry is
cleaner and  completely  disinfected.  With ozone  laundering,  fewer cycles are
required to clean,  thus chemical use is reduced.  Energy bills are also greatly
reduced because ozone works best in cold water.

Ozone is a powerful  oxidant that is 3,000 times faster and 130% more  effective
than chlorine,  but without chlorine's dangerous properties.  The ozone molecule
is  composed  of three atoms which are very  unstable.  An unstable  gas,  ozone
decomposes rapidly into oxygen, which causes its tremendous oxidation potential.
Test results from independent  laboratories confirm a 99.5% pathogenic bacterial
kill count with ozone  laundering,  as  compared to 97.3% with  traditional  hot
water temperature washing. An ozone disinfecting system is just as effective but
less  costly to  operate.  Using  ozone in the  laundry  process is less  costly
because  ozone is only active in cold water;  therefore  there is no need to buy
natural gas or other  energy  sources to heat the water.  Data also reveals that
using  ozone  gas  in  laundering  is  far  more  effective  than   conventional
disinfectants  against  microorganisms,   viruses  and  cysts.  Because  of  the
significant  energy savings,  the cost of the equipment and  installation can be
funded through the monthly savings,  resulting in no  out-of-pocket  cost to the
facility.  The OLS are easily  installed  and begin  generating  energy  savings
immediately upon operation.

By injecting ozone gas, one of the most powerful cleaning agents, into cold wash
and rinse water, the laundry becomes cleaner and completely  disinfected.  Ozone
oxidizes  the fatty  oils,  and breaks the bond  between the dirt and the cloth.
Insoluble soils are chemically altered by the ozone into soluble products, which
can be removed from the fabrics by the normal washing action.  Ozone  laundering
improves productivity because the process requires fewer wash cycles and reduces
drying time. The OLS reduces the drying time because the work, removing moisture
from the linen,  which the dryer has to do, is reduced.  While  utilizing  ozone
during  the wash  process,  a chemical  linen  softener  is no longer  required.
Without the "coating" of a softener, the weave of the fabric is more open. Since
the actual tubes of fabric are more open, water can be more effectively  removed
during the rinse cycle  resulting in less moisture for the dryer to remove.  The
more  open  weave of the  fabric  also  makes the  actual  drying  process  more
efficient  because  the  air  flow  is  increased  through  the  fabric,   which
significantly reduces dry time.

Using this  technology  lowers  water and sewer use, and reduces  energy  costs.
Because chemical use is reduced, softeners are not required, drying time is less
and fabrics  last  longer,  extending  linen life.  For  example,  an OLS system
installed in a typical 120 bed nursing facility can reduce the need to heat over
730,000 gallons of water per year. That reduction would save an average facility
approximately  $15,600 per year.  These average savings results are derived from
the  Company's  results  from over fifty (50)  installations  of the OLS system.
After comparing the costs and capabilities of the OLS with traditional hot water
temperature   washing,  the  benefits  to  the  average  120  bed  facility  are
substantial.

Lighting Upgrades

The  purpose  of a  lighting  upgrade  or  "Lighting  Retrofit"  is  to  install
energy-efficient lighting technologies wherever they are profitable and maintain
or  improve  lighting  quality.  The  energy-efficient   lighting   technologies
available today can dramatically reduce energy consumption and prevent pollution
while delivering  comparable or better lighting.  If  energy-efficient  lighting
were used everywhere it were profitable,  the electricity  required for lighting
could be cut by up to 50 percent,  and  aggregate  national  electricity  demand
would be reduced by more than 10 percent (EPA website).  For example, a lighting
upgrade in a typical 120 bead nursing home can reduce 226,666 kilowatt hours per
year,  resulting in an annual savings of  approximately  $20,400.  These average
savings  results are taken from our own  engineering  and actual results in more
than 100 installations.

Though an  energy-efficient  lighting product sometimes costs slightly more than
the inefficient product it replaces,  the energy savings are so significant that
any incremental cost is rapidly paid off,  producing highly  profitable rates of
return. Compact fluorescent light bulbs use 70 percent less energy than standard
incandescent light bulbs. By replacing just one 75-watt  incandescent light bulb
with a 20-watt CFL,  you could save an estimated  $14 a year on your energy bill
assuming the bulb is used for 5,000 hours.  Compact fluorescent light bulbs last
an  average  of  10,000  hours,  compared  to  only  850  hours  for a  standard
incandescent light bulb (Portland General Electric Company).

Mechanical Systems/HVAC

The installation of state-of-the-art, energy conserving boilers, heating and air
conditioning  units  and  other  mechanical   equipment  can  improve  operating
efficiency and increase  productivity.  Retrofitting  outdated  systems with new
equipment  not only saves energy  dollars,  but reduces  repair and  maintenance
expense.  The impact of environmental  improvements such as improved air quality
and increased  comfort levels can make a noticeable  positive impact on resident
and employee satisfaction.

Water and Sewer Conservation

The goal of an  effective  water  conservation  project  is to reduce  usage and
maintain or improve the water quality and fixture performance.  The installation
of low  use,  optimum  performance  fixtures  is the key to an  effective  water
conservation program. For example, the retrofit of a low-flush toilet can reduce
water usage by more than 750,000 gallons annually in the average 120 bed nursing
home.  This reduction in usage has a significant  impact on  water/sewer  costs.
Depending on the local  water/sewer  rates, the annual savings can be as much as
$5,000 per year with equipment life expectancy of 15 to 20 years.

MicroTurbines

The   MicroTurbine  was  developed  to  produce   electricity   efficiently  and
cost-effectively  by using natural gas. At the same time, the MicroTurbine emits
very low  levels  of  pollutants  and  remains  substantially  maintenance-free.
Additionally,  the MicroTurbine can virtually  eliminate down time costs related
to power outages.  Not only does the MicroTurbine  produce  electricity,  but it
also produces usable exhaust heat. This exhaust can be used directly without any
cleansing  needed,  therefore  displacing a large percentage of the existing hot
water boiler load. This  potentially  saves a facility  thousands of dollars per
month. An engineering  study performed in a 240 bed nursing home in North Jersey
showed that micro  turbines  would  generate  approximately  $15,000 per year in
savings.  This study was performed by PP&L Spectrum, an energy services division
of PPL, a Pennsylvania electric utility Company.

Energy Supply

NESC will provide competitively priced electricity and natural gas supply to its
customers.  Strategic alliances will be formed with regional and national energy
supply  sources.  The driving force in the selection of a supply partner will be
their commitment to competitive pricing and quality service.

Strategic Alliance with Charter Management, LLC.
In October 2002, the Company  received a term sheet from Charter  Management LLC
("Charter") relating to an alliance between the Company and Charter. It outlines
Charter's  willingness  to finance  Company  projects  to  long-term  healthcare
facilities, sub-acute units of hospitals, assisted living residences, retirement
communities  and the like up to $1,000,000  per year. In each case,  Charter has
the right to perform a credit analysis of the facility on which the project will
be performed  and to reject any unfit  candidate.  Credit  analysis will also be
utilized by Charter to determine  interest rate and term of  repayment.  Charter
will pay the Company as work is  performed  by the  Company.  The Company  shall
collect all payments in favor of Charter, and may charge a 1% administrative fee
in connection therewith.

On September 22, 2003, the Company  executed a master agreement with Charter for
the express  purpose of allowing  Charter to fund  energy  upgrade and  retrofit
opportunities in the long term care/ retirement  community  industry in a series
of funding  agreements for each job. Once each contractual  agreement is reached
between the Company and the customer  facility,  Charter provides  financing for
energy  upgrade and retrofit  projects  upon credit  approval to be paid back to
them over the term of the  agreement  including  monthly  principal and interest
payments,  which are  negotiated  at the time of contract  signing.  Each time a
project is funded,  NESC signs a separate  Project Loan  Agreement  with Charter
acknowledging  responsibility  for all loan  payments in the event of default by
the facility.  Charter may terminate the master  agreement  with 30 days written
notice to NESC. As of February 11, 2005, John O'Neill and Deborah  O'Neill,  the
sole owners of Charter, owned 100% of the Company's convertible preferred series
A stock and beneficially owned 3,433,300 of the Company's common stock.

Nursing Home Energy Market

There  are  approximately   17,000  nursing  homes  operating   nationally  with
approximately  10,000 of them in the high cost  energy  regions  of the East and
West coasts.

The following factors should be considered:

     -    Nursing homes are under intense fiscal and regulatory pressures.
     -    Nursing   homes  have  very  few  areas  to  conserve   cash   without
          compromising care.
     -    Utility  costs  are  among  the top  five  highest  line  items in the
          operating budget.
     -    Nursing homes desperately need to find cash savings in their operating
          budget.
     -    Most nursing homes are operating outdated HVAC and lighting systems.
     -    The customer is well-defined and easy to reach.
     -    Most long term care facilities are alike in  construction,  design and
          energy consumption.
     -    Data about nursing home energy  consumption is quickly and efficiently
          obtained.
     -    The Medicaid  utilities  reimbursement  structure assures a facility's
          ability to pay.

Marketing, Sales and Distribution

Marketing
Relationships  are the cornerstone of the Company's  marketing  philosophy.  The
process of building and maintaining  intimate working  relationships  requires a
commitment at all levels of the  organization.  The Company's  marketing program
includes:  Market Research,  Feasibility Studies, Public and Industry Relations,
Promotion,  Advertising,  Direct  Response,  Sales  Support,  Customer  Service,
Employee   Relations  and  Training  and   Education.   NESC  believes  that  to
successfully meet challenges,  marketing  relationships must be built at several
levels: NESC Team, Energy Market, Long Term Care Market and Customers.

NESC Team
It is paramount  that every NESC  employee,  associate,  and  strategic  partner
understands the Relationship Marketing philosophy.  Because of the complexity of
the  product  and the  market,  NESC also works  very hard to ensure  that every
person in the Company has a working  knowledge  of the product and the  process.
Building  solid  working  relationships  with our  employees is important to our
success.

Energy Market

If the energy supply prices are too low, NESC cannot offer  potential  customers
the most  effective  benefit;  No Out of Pocket  Cost.  Sales volume is directly
related to NESC's  ability to fund its  products  and  services  through  energy
savings.  Low energy supply prices also reduce the business  consumer's  need to
address their utility costs and energy usage patterns dramatically.  If the need
to  conserve  dollars  through  conserving  energy  does  not  exist,  the  NESC
Gatekeeper Program is not viable. Building a relationship with the Energy Market
means: (i) Researching  Energy  Suppliers,  (ii) Researching  Energy Rebates and
Special  Programs  Researching  ESCO's (Energy  Services  Companies),  and (iii)
Gaining an Understanding of the Energy Trends  Monitoring  Trends and Suppliers.
As energy supply prices increase, as they have in the past year, we believe that
additional markets will become available to us.

Long Term Care Market

The only way to stay on top of the constantly  changing health care  marketplace
is to  build  relationships  with  individuals  inside  the  industry.  This  is
particularly  true in Long Term Care.  The  feasibility of an area is determined
by:

     -    Number and Size of LTC Facilities
     -    Age of Facilities
     -    Cost of Energy
     -    Existing Energy Reimbursement Programs Profile of Ownership (Corporate
          or Individuals)
     -    Regulatory Controls Related to Hot Water Laundering

The Company begins the relationship  building process  immediately by contacting
the following:  Existing  Contacts,  Referrals,  Corporate Owners, LTC Trade and
Professional  Associations and State Regulators re:  Laundering  Regulations The
Company has spent years  developing  relationships in the Nursing Home industry.
In a relationship driven organization, these people are the key to success.

Customers

Building a good  relationship  with our  customers is an  important  part of the
Relationship  Marketing  program.  NESC begins building  relationships with long
term care owners and operators at the very beginning of the marketing process so
it can build off of good recommendations and referrals. By asking for their help
in  understanding   the  long  term  care  market,   NESC  opens  the  lines  of
communication that will continue  throughout the business  relationship.  Often,
our contacts  have made  personal  introductions  that  advances the process and
business  friendships are made quickly.  By the time NESC is positioned to begin
selling to these  individuals  and their  facilities,  solid  acquaintances  are
already in place  reducing  closing time and  building  sales volume in a timely
fashion.

The sales  process  is never  complete.  It is an  integral  part of our  growth
philosophy  to  provide  additional  products  and  services  to our  customers.
Ensuring customer  satisfaction and keeping our customers  informed is critical.
The Company currently uses a detailed  computerized  contact management software
program called Goldmine.  All NESC employees are trained in the use of Goldmine.
This networked  software  program allows all NESC employee's to view the history
of existing service records for all customers and provide  additional service as
needed.

Sales

The  customer  often  must be  educated  before a need is even  recognized.  The
education   occurs  on  several  levels:   Energy  Cost  and  Usage   Awareness,
Conservation Options, NESC Line of Products & Services and Benefits of Selecting
NESC.  The  complexity  and  length  of the  sales  process  presents  a special
challenge  to even  the  savviest  marketing/sales  professional.  However,  the
Company firmly believes that if it can prove to a potential  client that it will
save money with no  out-of-pocket  expense,  while  maintaining or improving its
current  level  of  care,  it can  sell  the  Company's  products  and  services
successfully. Inadequate reimbursement and challenging fiscal situations in many
nursing homes are driving  owner/operators  to seek creative ways to bring extra
cash to the bottom line.  Energy  Conservation  Measures that are financed are a
way to reduce current expenses and improve the bottom line.

A brief outline of the methodology used to accomplish the above sales goals is:

Identify the Decision Maker

Many  times  our  relationships  with   owner/operators  and  other  influential
individuals  in the industry help us to identify the  appropriate  person within
the organization.  Our contacts will often make an introductory call, saving the
Company valuable research  manpower.  If not, the  administrative  support staff
will  contact   facilities  and   organization  via  phone  to  get  the  needed
information.  During this phone call, NESC will also verify the names of the key
staff and the locations of sister facilities and/or the corporate offices.

Present the Financial Benefits of NESC Products and Services
NESC has developed a proven method of making the appropriate people aware of our
products and services  including the following:  (i) Introduction  Letter,  (ii)
Follow-up Phone Call, (iii) Set  Appointment,  (iv) Follow-up Letter and/or Fax,
(v) Make  Presentation to Decision Maker, and (vi) Identify Specific Savings for
the Facility.  During the  presentation,  information is gathered as part of the
qualifying  process.  It is critical to the success of the sale to  determine if
the  facility's  situation will generate the energy savings to create a positive
cash flow for the  customer.  Positive cash flow is the  difference  between the
monthly energy savings (dollars)  generated by the installed Energy Conservation
Measures and the monthly financing costs to fund the project. If the savings are
greater  than the  financing  cost  then the  project  is  considered  financial
positive.  The NESC marketing  representative will gather Monthly Utility Costs,
Usage   Patterns   and  Systems   Data  for;   Laundry   Operations,   Lighting,
HVAC/Mechanical and Water/Sewer. With this information, the sales representative
can quickly determine the project feasibility.

Identify Products to Achieve the Savings

The marketing  representative  can determine  which  products and services would
help the facility achieve their financial goals.  NESC gains approval to perform
surveys in the appropriate areas (lighting,  HVAC,  laundry,  water & sewer). We
believe that our years of experience in the energy services industry, electrical
contracting  business and our extensive  knowledge of long term care  operations
all  contribute  to  our  exceptional  survey  abilities.  The  qualitative  and
quantitative  information  gathered  during the survey  process  allows NESNJ to
accurately  project  the  savings  for each  facility  and  specify  the correct
products and services needed to actualize these savings. A follow-up appointment
is made to present the survey  results and the financial  arrangement  available
for the products needed.  At this time, the savings  analysis reports  detailing
exactly how and where dollars will be saved and how the project can be funded.

Close Customer

Contract is presented  and  negotiated.  Credit  application  is  completed  and
approximate  start  date  agreed  upon.  This  is  only  the  beginning  of  the
Relationship   Marketing  process.   As  NESC  moves  into  the  purchasing  and
installation  phase, the focus of the NESC  relationship with the client expands
to include the installation and project management teams.

Purchasing and Installation

Purchasing

The Company has developed solid relationships with major suppliers of industrial
lighting,  mechanical  equipment  and other  energy  conservation  products.  We
believe that our knowledge of the electrical  contracting  industry enables NESC
to offer state of the art  products and  services.  The needs of the health care
industry  are  unique.  Specifications  for HVAC,  lighting,  water  quality and
laundry  equipment are very specific.  It is the  responsibility of NESC to find
supplies and equipment  that meet and/or  surpass the Long Term Care  regulatory
guidelines.  Guidelines vary from state to state, from the laundry process,  the
lighting levels or air quality and temperature, each state has developed its own
set of standards  and  policies  regarding  these  issues.  Typically  the State
Department  governing  these  regulations is the  Department of Human  Services,
Department of Jobs and Family Services,  Department of Health Services,  etc. It
is  critical  for NESC to become  familiar  with each  state's  regulations  and
policies regarding each energy  conservation  measure ("ECM") it installs before
it starts to market and install the  particular  ECM in any given state.  NESC's
standard contract policy is to replace or improve the existing  conditions (i.e.
light levels,  air  temperature)  while reducing energy costs.) Many times it is
incumbent upon NESC to provide  education  regarding  these  restrictions to our
suppliers.

NESC has preferred  vendor or distributor  status with several  suppliers.  This
means that NESC enjoys the  following:  (i)  Preferred  Pricing,  (ii)  Quantity
Discounts,  (iii)  Timely  Delivery,  (iv)  Quality  Products,  (v)  Exceptional
Warranties,  (vi) Superior Customer Service,  (vii) Product Exclusivity,  (viii)
Manufacture  Sponsored  Training,  and (ix) Superior Customer  Service.  NESC is
dedicated to maintaining  quality  relationships  with our suppliers and makes a
concentrated  effort to expand our sphere of influence among the  manufacturers.
This allows NESC to  customize  our product line and select the  materials  that
best fill the needs of our customers.

Installation

The  installation  of NESC  products  is the most  delicate  part of the  entire
process and can place enormous strain on a customer relationship.  At this time,
NESC makes every  effort to expand our contact  with the facility to include all
of those staff members whose daily tasks will be affected by the installation of
new equipment. The nursing home presents exceptionally  complicated installation
problems. Unlike most commercial installations,  this is an environment in which
people are living,  sleeping,  eating and under  direct  medical  care.  NESC is
dedicated to making the  installation  as hassle free as possible.  This takes a
great deal of planning and communication with the customer. Contractor Selection
The  selection  of  the  right   contractor   is  critical  to  the   successful
installation. The Company has strict contractor criteria. The selected firm must
have a total  understanding  of  what is  required  to work in the  health  care
environment and be willing to complete the Contractor Compliance paperwork.

Customer Service

Building a solid  working  relationship  with our  customers is paramount to the
success of the Company.  The ability to create an  atmosphere  of trust in which
candid,  constructive  communication flows throughout the entire relationship is
critical.  The  quantity  and  quality  of  communication  in the NESC  customer
relationship  is imperative  because of the:  Complexity of the Energy  Services
Industry  Lack  of  Consumer  Understanding  Regarding  Energy  Issues  Consumer
Reluctance to Embrace Conservation Measures Lack of Consumer Knowledge Regarding
Energy Costs & Usage  Patterns  Complexity of the National  Energy  Products and
Services  Length of the Sales Cycle  Opportunity  to Sell  Additional  Goods and
Services Later in the  Relationship  Importance of Referrals to NESC's Marketing
Success. Customer service begins at the initial contact and continues throughout
the  relationship.  In addition,  our Customer  Service  policy calls for a site
visit once a year and monthly  phone calls to check on  operations  and customer
satisfaction.  These  visits  can be made by any of the  NESC  team.  Using  the
Goldmine Contact Management  System,  NESC carefully tracks the specifics of our
customer relations effort.  (i.e.: date, time of visit, who made the visit, note
of any comments, action taken, etc.)

Customer Service Training

The success of the Relationship  Marketing philosophy is directly related to the
ability of NESC to maintain  quality  relationships  and  provide  the  ultimate
service  to those  clients  and  potential  customers.  Every  NESC team  member
receives  extensive  training in the use of the Goldmine  tracking system.  This
ensures a communication  flow that allows anyone in the  organization  access to
the latest  information  about a project,  lead,  problem,  etc.  Inquiries  are
answered  quickly and  courteously.  From partner to  administrative  staff from
payroll  clerk to  receptionist  customer  service is everyone's  job.  Customer
Service  Training  extends  to  the  on-site  contractors.  NESC  believes  that
installers  and service  technicians  represent  NESC and must be  committed  to
delivering the highest quality of service.

Systems Design and Engineering

NESC has diligently  worked to develop systems and services that fill the unique
needs of the long term care industry.  The ability to assess  savings  potential
quickly,  project  usage,  design  a  system  and  purchase  to  meet  stringent
speculation is a very marketable asset.

Our Lighting  Analysis Software was designed using Microsoft Access to allow for
efficient and accurate  estimates of usage and to identify  equipment needs. For
example, at many nursing homes resident rooms are of the same floor plan or room
design.  In the  average  120 bed  nursing  home,  there are  between  50 and 65
resident rooms. Since many of these rooms have the same lighting layout, it is a
considerable   time  savings  for  us  to  not  survey  each  individual   room.
Additionally, we have developed software that allows us to set up a "model room"
and then  duplicate  that  room  simply by  keying  in the room  numbers  of the
remaining  rooms and  copying  the rest of the  information  such as the type of
light  fixtures,  amount of light fixtures and burn hours from the "model room,"
thus saving the data entry of each individual  room.  Upgrade pricing and design
is implemented  with the unique fixture key entry system which makes the program
flexible and easy to use.

NESC  understands  the  regulatory  and  financial  issues  of  long  term  care
facilities.  All Medicaid  facilities  receive some level of  reimbursement  for
their Medicaid  residents.  Each state varies its reimbursement  structure quite
differently. Because NESC receives a large part of the project costs through the
savings,  which is reflected on the energy bill,  it is important to  understand
how the reimbursement  works for billing purposes.  NESC has relationships  with
nursing home  owner/operators  who have enabled the Company to conduct  research
and  development  including  trial  installations  on  innovative  products  and
services.  In addition,  NESC has relationships with manufacturers and suppliers
which  expedite  the   development   of  a  unique   product  and/or   equipment
modifications necessary to fill the unique market needs.

Aggregated Services Potential

The financial impact of the Aggregated Services Potential is only now becoming a
reality for NESC and its energy  partners.  Many companies seek residual revenue
from the  initial  sale.  NESC  has  found a  market  niche  that not only has a
residual  value from the  initial  sale (long term energy  supply and  financing
contracts),  but has a potential for multiple sales to a single client.  NESC is
constantly  searching  for  innovative  equipment  and/or  services  that can be
integrated  into the  existing  product  line.  During  the length of the 5 year
Gatekeeper  contracts,  NESC is in constant contact with our customers  building
credibility.  This  ensures  NESC's  ability  to sell of  additional  goods  and
services to satisfied customers.

The Energy  Gatekeeper  Program is a combined  service and  equipment  financing
contract where a healthcare  facility has all of its energy services provided by
NES. The program  finances all  energy-efficient  equipment  over a  sixty-month
amortization schedule. The customer can obtain new energy-efficient lighting, an
ozone  laundry  system,   HVAC  systems  and  other  energy-  efficient  capital
improvements.  There  are no out of  pocket  costs to  NESC's  client  since the
capital costs for the project are provided by Charter.  The savings generated by
the  energy-efficient  measures  are  used  to pay for the  capital  costs.  All
equipment is amortized over a sixty-month period.

Because NESC controls the supply of power to all customers,  both  contractually
and through a limited  power of attorney in the  "Customer  Agreement for Energy
Services",  which is executed before work commences,  there is greater assurance
that the third party  lender  will be paid than is found in  standard  financing
arrangements.  The control of energy is provided to NESC  through the  following
material terms of the "Customer  Agreement for Energy  Services",  excerpts from
the "Customer Agreement for Energy Services" detailing this control, page 2: "

     b. Energy Gatekeeper. The services of an Energy Gatekeeper to provide for a
period of five (5) years,  energy,  utility and other  services to the  customer
("the "Energy Gatekeeper Program") including, but not necessarily limited to:

          i.  Auditing of the  Customer's  energy needs and the  negotiating  on
     behalf of the Customer  for the  transportation  and/or  supply of electric
     power and, if applicable,  natural gas, propane,  water, and other services
     (collectively  referred to as  "utilities")  at a  competitive  price (when
     compared to similarly situated users of utilities in customer's  geographic
     area, taking into account all variables  reasonably  necessary to determine
     pricing),  and with a level of  service  at or above the  level of  service
     received from the Customer's current supplier.  At the customer's  request,
     the  Contractors  will solicit  offers for utility supply on the Customer's
     behalf to demonstrate  that the Customer is receiving a competitive  price.
     The price shall be considered competitive if it is no more than the average
     of at least three offers;

          ii. Utility Bill Management,  Submission of consolidated utility bills
     to customer  and,  upon  receipt of payment from the  Customer,  processing
     payment to the various supplier."

Responsibilities of Customer.

Cooperation with Energy  Gatekeeper.  The Customer will fully cooperate with the
Energy  Manager  in the  implementation  of the  Energy  Gatekeeper  Program  by
providing all necessary information and records regarding utility services,  and
as  requested,  will  provide a  reasonable  access to the  facility for on site
auditing and  monitoring as well as for the  installation  of remote  monitoring
equipment.  The  Customer  will  provide  and  make  available  for  any  remote
monitoring  equipment,  a dedicated telephone line or access to a fax-modem line
at the expense of NESC.

Notice to Utilities.  Customer will cooperate with NESC in providing appropriate
documentation  to those Utilities as may from time to time be designated by NESC
to provide service to the facility,  including  changes of billing  addresses as
may be designated by NESC.

Payment.  The  Customer  will  reimburse  NESC for the total cost of all utility
expenses  and  service  charges,  which  includes  the cost of any and all ECM's
performed  pursuant to this  Agreement,  on a monthly basis within  fifteen (15)
days or less of the Customer's receipt of the Energy  Gatekeeper's  consolidated
utility  invoice in compliance  with the terms offered by the utility.  All late
fees or interest charges resulting from the Customer's failure to provide timely
payment to NESC will be the responsibility of the Customer.

Instead of the  traditional  collection  methods used for loan repayment such as
coupons or monthly  statements,  the  principle  and  interest  payments  of the
equipment  financing  is added into the monthly  utility  bill that the customer
receives. Facilities are preprogrammed to paying their energy bills to "keep the
lights on".  For  financing  providers  this  produces a greater  level of asset
repayment protection. Traditionally a facility would receive an energy bill from
the provider of that service and submit payment directly to that provider. Under
the Energy Gatekeeper Program,  NESC becomes the energy manager and receives the
facility's  energy bills  directly from the energy  suppliers and  transporters.
Upon  receiving the energy bills for a facility,  NESC  consolidates  all of the
facility's energy bills (combining the natural gas, electricity, water and sewer
bills into one invoice). Additionally, the monthly project financing costs (P&I)
are added into the consolidated  invoice.  This makes for a "seamless" bill that
includes the costs of  conventional  utilities,  as well as the amortized  costs
(P&I) of the energy-saving equipment.  After the different utility costs and the
financing costs have been combined into one  consolidated  energy invoice,  that
invoice is sent to the  facility  and payment  from the  facility is remitted to
NESC. Upon receipt of payment for the consolidated energy invoice, NESC forwards
payment to the  individual  energy  suppliers  for the actual cost of energy and
makes the  principal  and interest  payment to the  financing  institution  that
supplied the capital for the installation of the energy efficient upgrades.  For
example, the financing charges for an energy-efficient lighting upgrade would be
added into the electric  portion of a consolidated  invoice  because the upgrade
reduced the corresponding electricity usage.

This advantage adds one more level of control to the NESC process.  NESC already
controls the  operations  and  management  of the project  equipment  and energy
supply.

Operations and Management Control

NESC has the ability to control the operation and management of its products and
services.   The  integration  of  energy  supply,   equipment   procurement  and
installation, and equipment maintenance allows NESC to stay involved from design
and development through the life of the product and /or service.

The Power of Negotiated Pricing

NESC is able to  maintain a profit  margin of between 24 to 100%  because of the
nature of the energy services  contract.  For lighting  retrofit jobs, the gross
profit  percentage  has declined from 34.57% in 2001 to 25.67% in 2002 to 45.04%
in 2003. This decline is primarily  caused by increased  competition,  which has
resulted in the Company  having to lower its retail price,  while its costs have
remained  relatively  flat.  For Ozone jobs,  the gross  profit  percentage  has
declined  from 51.64% in 2001 to 48.47% in 2002 to 55.79% in 2003.  This decline
has been a result of slightly  higher  costs  without  concurrent  increases  in
retail  pricing.  The Company sold gas boosters in 2002 and the gross profit for
this product was 24.02% in 2002.  In 2003,  the Company  stopped  selling  these
boosters  because  it  was  not  able  to  obtain  preferred  pricing  from  the
manufacturer. The utility/energy  management/rebate income is essentially a 100%
gross margin, as the cost is purely personnel costs. The Company does not employ
anyone  specific to this income  stream,  as the  revenue  generated  is not yet
sufficient to require dedicated personnel.

Energy conservation services contracts are typically negotiated, not bid because
each facility has different needs and  requirements  which need to be determined
through an energy study prior to the preparation of a proposal. The fluid nature
of energy prices and the extended period of the agreement also contribute to the
need to work with a customer to determine the best energy conservation  strategy
for their  facility.  Customers  generally  do not shop  this  type of  proposal
because in most cases the energy savings funds the project,  so the owner has no
cash  outlay.  Because  we  provide  this  type of  special  project  financing,
specifically  tailored to the long-term care community,  the customer more often
than not finds little reason to look elsewhere.

The last factor, which leads to negotiation in place of shopping, is the lack of
competition. While it is true that there are many companies supplying energy and
numerous companies providing energy management services,  very few have combined
the entire package with the right financing to compete with the Company's Energy
Gatekeeper Program.

The Power of Data Collection

As energy deregulation becomes increasing widespread,  the value of an exclusive
5-year energy agreement increases. As we execute more contracts,  two things are
being developed;  a large  aggregated load profile and the  accompanying  energy
utilization  data.  Energy  prices are and always  will be a function of volume.
With each contract, the amount of energy units purchased through NESC increases.
As the volume increases, NESC will have greater purchasing power with generators
of  electricity  and producers of natural gas. As with any  commodity,  the more
units  purchased the better the pricing.  As NESC achieves  better  pricing,  it
allows  NESC to increase  its profit  margin  while  remaining  competitive  and
providing the client with better energy  pricing.  NESC can also profit from the
compilation of energy  utilization data because the more energy use history NESC
stores and  analyzes  for each client,  the better the  opportunity  NESC has of
understanding   which  particular   existing  or  emerging  energy  conservation
technologies will benefit the client and can be sold by NESC to the client.  The
better NESC  understands  the energy use profile of a client,  the better it can
market and profit from the various energy conservations available.

Dependence on New Products

The Company  believes its ability to grow in its  existing  markets is partially
dependent  upon its ability to introduce new and  innovative  products into such
markets.  Although the Company seeks to introduce  additional products each year
in its existing  markets,  the success of new products is subject to a number of
conditions,  including  discovering  products made by others that will appeal to
customers  and comply with  existing  regulations  at the time of  introduction.
There can be no assurance  that the  Company's  efforts to find  innovative  new
products will be successful,  that  customers will accept new products,  or that
the companies which manufacture these products will obtain regulatory  approvals
of such new products,  if required.  In addition, no assurance can be given that
new products  currently  experiencing  strong  popularity  and rapid growth will
maintain their sales over time.

Competition

The  principal  markets  in which  the  Company  competes  are  competitive  and
fragmented,  with competitors  supplying  energy,  providing  energy  management
services or  financing  but few  providing a total  package  deal with no out of
pocket cost to the facility. Increased competition could have a material adverse
effect on the Company,  as competition may have far greater  financial and other
resources available to them and possess extensive  capabilities far greater than
those of the Company.  Although all future employees are expected to be required
to sign  confidentiality  agreements,  there is no  guarantee  either that trade
secrets won't be shared with competitors or that the Company could enforce these
agreements.  Such  disclosures,  if made, could negatively  affect the Company's
competitiveness.  There are a few competitors  that NESC faces in several of the
different product lines that NESC offers. However, we have never faced a company
or group who has a program  that is  similar  or  competitive  with the  "Energy
Gatekeeper  Program".  The Energy Gatekeeper  Program offers the analysis design
and installation of energy conservation measures, energy management services and
a  unique  financing  package  tailored  for the  nursing  home  industry,  more
specifically the various State Medicaid reimbursement systems.

Competitors for the Ozone laundry system are:

Envirocleanse  Systems,  Inc., Ponte Vedra, FL and  Mooresville,  NC, 6 years in
Business  with  approximately  0.5% of nursing  home  market;  Laundrox  Laundry
Systems Concord,  NC Less than 1 year in business and it is believed that it has
no share of business currently and Daniels Equipment Company,  Inc., Auburn, NH,
20 plus years in business with approximately 0.5% of the nursing home market.

Competitors for the Lighting Upgrades and Mechanical Upgrades are:
Can-Am Energy Systems, Lake Park, FL, 6 - 7 years in business with approximately
1% of nursing home market and ES Performance  Lighting,  Tucson,  AZ, 5 years in
business  with  approximately  3% of nursing  home  market.  On a local level an
occasional small in-house electrician or HVAC contractor.

Sources and Availability of Raw Materials and Principal Suppliers

The Company obtains all its products from numerous sources. It uses little or no
raw materials.  The Company  generally does not have contracts with any entities
or persons  committing to buy/sell  certain  quantities  of product.  Therefore,
there can be no assurance that suppliers will provide the products needed by the
Company in the quantities requested or at a price the Company is willing to pay.
Because the Company does not control the actual production of these products, it
is also subject to delays  caused by  interruption  in  production  of materials
based on conditions not wholly within its control.  The inability of the Company
to obtain adequate  products at favorable  prices, or at all, as a result of any
of the foregoing  factors or otherwise,  could have a material adverse effect on
the Company.  The majority of the raw  materials  use by the major  manufactures
such as General  Electric,  Phillips and Sylvania Lighting for the manufacturing
of lamps and electronic ballasts are as follows:  sand, high boron borosilicate,
iron, mica,  aluminum,  soda lime, magnesia,  silica glass,  borosilicate glass,
lead-barium, petroleum, carbon, copper, lead, mercury, silicon, tungsten, nickel
rubber  and rare  earth  phosphorus.  These  products  are used to  produce  the
electronics,  wiring,  coils,  circuit  boards,  transformers  and casing of the
ballast.  Additionally, the manufacturing of the lamps includes the glass tubes,
filaments and end caps and bases.  The  manufacture  of the Ozone Laundry System
uses sand, iron, borosilicate glass, lead-barium,  aluminum,  petroleum, copper,
lead, silicon,  mica, soda lime,  magnesia,  silica glass,  carbon,  nickel, and
mercury.  These  products  are used to make the case,  controls,  wiring,  ozone
generator, tubing, circuit boards and hardware.

Intellectual Property

The Company  relies upon common law patent,  trademark and copyright  protection
for its proprietary Lighting Analysis Software.

Governmental Regulation

General

Most of the states in which we  currently  operate have adopted laws to regulate
expansion of skilled  nursing  facilities.  Certificate  of need laws  generally
require that a state  agency  approve  certain  acquisitions  or physical  plant
changes  and  determine  that a need  exists  prior to the  addition  of beds or
services,  the implementation of the physical plant changes or the incurrence of
capital  expenditures  exceeding a prescribed amount. Some states also prohibit,
restrict  or delay the  issuance  of  certificates  of need.  Many  states  have
established  similar  certificate of need processes to regulate the expansion of
assisted living facilities.

Many states in which we operate  have  implemented  moratoria on the granting of
licenses for any additional  skilled  nursing  facility beds. In these states we
may only expand our operations by targeting  existing  facilities,  which are by
definition  limited in number.  We cannot guarantee that we will be able to find
acceptable  targets  in these  states  and,  as a result,  we may not be able to
expand  operations  in  these  states,   possibly  resulting  in  areas  of  low
concentration  of business in certain areas and therefore  possibly higher costs
resulting from a lack of economy of scale.

The provision of  institutional  care through  nursing  facilities is subject to
regulation by various federal,  state and local governmental  authorities in the
United  States.  It is  possible,  that the  Company's  products and services to
institutional care facilities could be affected by this regulation. There can be
no assurance that such  authorities will not impose  additional  restrictions on
the Company's activities that might adversely affect the Company's business.

Nursing facilities,  assisted living facilities and other healthcare businesses,
including institutional pharmacy operations, are subject to annual licensure and
other regulatory  requirements of state and local authorities.  In addition,  in
order for a nursing  facility to be approved for payment  under the Medicare and
Medicaid reimbursement programs, it must meet the participation  requirements of
the  Social  Security  Act and  the  regulations  there  under.  The  regulatory
requirements  for nursing facility  licensure and  participation in Medicare and
Medicaid  generally  prescribe  standards  relating to  provision  of  services,
resident rights,  physical environment and administration.  Nursing and assisted
living  facilities are generally  subject to unannounced  annual  inspections by
state or local  authorities for purposes of relicensure  and nursing  facilities
for purposes of recertification under Medicare and Medicaid.

In 1987, the United States Congress passed the Omnibus Budget Reconciliation Act
which  included  extensive  revisions to the  Medicare  and  Medicaid  statutory
requirements   for   nursing   facilities.   These   provisions   prescribe   an
outcome-oriented  approach to the  provision  of services  and require that each
resident  receive the  necessary  care and  services  to attain or maintain  the
highest practicable physical,  mental and psychosocial  well-being in accordance
with the resident's  individualized  assessment and plan of care. The rules also
established  requirements for survey,  certification and enforcement procedures.
The Health Care Financing  Administration  of the Department of Health and Human
Services ("HCFA") promulgated regulations,  effective July 1, 1995, to implement
the survey,  certification  and  enforcement  procedures.  The survey process is
intended to review the actual  provision of care and services,  with an emphasis
on resident  outcomes to determine  whether the care provided meets the assessed
needs  of the  individual  residents.  Surveys  are  generally  conducted  on an
unannounced  annual  basis by state survey  agencies.  Remedies are assessed for
deficiencies  based upon the scope and severity of the cited  deficiencies.  The
regulations  specify that the remedies  are intended to motivate  facilities  to
return  to  compliance  and  to  facilitate  the  removal  of  chronically  poor
performing  facilities  from the program.  Remedies range from directed plans of
correction,   directed  in-service  training  and  state  monitoring  for  minor
deficiencies;   denial  of  Medicare  or  Medicaid  reimbursement  for  existing
residents or new admissions  and civil money  penalties up to $3,000 per day for
deficiencies  that do not constitute  immediate  jeopardy to resident health and
safety;  and appointment of temporary  management,  termination from the program
and civil money  penalties  of up to $10,000 for one or more  deficiencies  that
constitute  immediate  jeopardy to resident  health or safety.  The  regulations
allow  state  survey  agencies  to identify  alternative  remedies  that must be
approved  by HCFA prior to  implementation.  From time to time as a supplier  of
products and  services to nursing  facilities,  the Company may receive  notices
from facilities relating to alleged  deficiencies for failure to comply with all
components of the regulations.  While the Company does not always agree with the
positions  taken by the  facilities,  the Company reviews such notices and takes
corrective  action  when  appropriate.  Due to the fact that the new  regulatory
process  provides  the  facility  with  limited  appeal  rights,   many  alleged
deficiencies are not challenged even if the Company is not in agreement with the
allegation.

The July 1995 regulation  mandates that facilities  which are not in substantial
compliance and do not correct  deficiencies  within a certain time frame must be
terminated from the Medicare and/or Medicaid programs.  Generally,  the facility
has no more than six  months  from  deficiency  identification  to  correct  the
deficiency,  but shorter time frames apply when immediate jeopardy to the health
or safety of the  residents is alleged by the survey  agency.  While the Company
endeavors to comply with all applicable regulatory requirements,  certain of the
facilities  to which the Company  provides  its  products  and  services  may be
subject to various  sanctions and penalties as a result of deficiencies  alleged
by HCFA or state survey agencies.  There can be no assurance that the clients of
the Company will not be subject to such  sanctions  and  penalties in the future
and that this will not adversely affect the Company's business.

The Company is also subject to federal and state laws which govern financial and
other arrangements between healthcare  providers.  Such laws include the illegal
remuneration  provisions of the Social  Security Act,  which make it a felony to
solicit,  receive,  offer to pay or pay any kickback,  bribe or rebate in return
for  referring  a person for any item or  service  or in return for  purchasing,
leasing,  ordering or arranging for any good, facility,  service or item paid by
federal health care programs. The Office of the Inspector General ("OIG") of the
Department of Health and Human Services  ("HHS"),  the Department of Justice and
other federal agencies interpret these fraud and abuse provisions  liberally and
enforce  them  aggressively.  The  recently  enacted  Balanced  Budget  Act also
includes numerous health fraud provisions,  including:  new exclusion  authority
for the transfer of  ownership or control  interest in an entity to an immediate
family or household  member in  anticipation  of, or  following,  a  conviction,
assessment,  or exclusion;  increased  mandatory  exclusion periods for multiple
health fraud convictions, including permanent e exclusion for those convicted of
three health care-related crimes; authority for the Secretary to refuse to enter
into Medicare  agreements with convicted  felons;  new civil money penalties for
contracting  with an excluded  provider or violating  the federal  anti-kickback
statute;  new surety bond and information  disclosure  requirements  for certain
providers  and  suppliers;  and an expansion  of the  mandatory  and  permissive
exclusions added by the Health Insurance  Portability and  Accountability Act of
1996 to any federal health care program (other than the Federal Employees Health
Benefits Program).

Laundry

The laundry  process is  regulated  by state  guidelines.  Typically,  the State
Department  governing  these  regulations is the  Department of Human  Services,
Department  of Jobs and Family  Services,  Department of Health  Services,  etc.
Because these are state  guidelines,  the regulations  vary from state to state.
NESC endeavors to become  familiar with each state's  regulations  regarding the
laundry  process  before  it  starts  to  market  and  install  the  OLS in that
particular  state.  The  majority of states that NESC  operates,  site  specific
guidelines for laundry that is processed in an on-site laundry.

Typical regulations include guidelines covering issues such as: separate holding
areas for soiled and clean linen, linen cart storage,  having enough clean linen
on hand to  adequately  service the  facility,  adequate  soiled and clean linen
storage,  an area for  folding,  mending  and ironing  the clean  linen,  proper
storage for supplies,  a deep sink for soaking and a separate hand washing sink.
Polices,  procedures  and proper  protocol  to reduce  bacteria in linens and to
protect the staff and  residents  from  infection are required to be written and
implemented by the facility.

The procedures and policy section is what most effects the  installation  of the
OLS. Since these procedures and policies are left to the individual  facility to
develop it is common practice to follow the "manufactures  specifications"  when
it comes to disinfection.  Because standard  laundering  procedures use chlorine
bleach to disinfect the linen the  "manufactures  specifications"  is to use 160
degree water because that is the water  temperature in which chlorine  bleach is
most effective. While most states do not define a minimum water temperature, two
states have a minimum wash water  temperature in their  respective  regulations;
Maryland  and  Massachusetts.  To overcome  the minimum  wash water  temperature
requirements NESC has had to present Maryland and Massachusetts  with the merits
of using  ozone in the wash water to clean and  disinfect.  The Company has been
successful in this endeavor and has received waivers from both states to install
the OLS.

Research and Development

The Company has not spent any  considerable  amount on research and  development
efforts  during the last two fiscal  years,  as the  products  installed  by the
Company are manufactured by others.  However, there can be no guarantee that the
manufacturer does not pass the cost of its research and development efforts down
to the Company in the future.  This may result in higher  product  prices beyond
the Company's  control.  In turn,  this may lead to  unfavorable  negotiation of
contracts for installation by the Company.

Compliance with Environmental Laws

The Company  believes  that it is in  compliance  with all material and relevant
environmental  laws. NESC has adopted the practice of recycling and the disposal
of all lighting  ballast and fluorescent  lamps removed from a facility during a
lighting upgrade project. The waste generated during a lighting upgrade that can
be considered hazardous is the Polychlorinated Biphenyl's (PCBs) in the existing
ballasts and the mercury in the existing  fluorescent  lamps.  NESC uses federal
and state licensed and fully insured  recycling  facilities and hazardous  waste
disposers.  This  practice  in  some  instances  exceeds  the  minimum  disposal
requirements, but it is management's view that this practice will provide NESC's
clients,  shareholders and officers the greatest  protection from any Super Fund
or toxic waste liability issues.

The Company believes that its practices are in compliance with the federal Toxic
Substance  Control  Act  ("TSCA").  TSCA is an EPA  law  which  regulates  PCB's
disposal.  Under 40 CFR Section 761.65,  the TSCA sets extreme standards for the
disposal of PCB's.  Fully  complying with the TSCA removes the risk of liability
under the federal  Comprehensive  Environmental  Compliance and Liability Act of
1980  ("CERCLA"),  which is also known as the Superfund  law. Under this law any
release  or threat of a release  of a  hazardous  substance  requires  immediate
cleanup and notification of all responsible  parties.  The Company also believes
that its practices are compliant with the Resource Conservation and Recovery Act
("RCRA").  RCRA  requires  generators  of  lamps  to test a  sample  of  mercury
containing  lamps to  determine  if they should be treated as  hazardous  waste.
Lamps must be managed as hazardous  waste if the mercury  concentration  exceeds
0.2 mg per liter. In addition,  lamps must be managed as hazardous waste if they
are not tested and proven  non-hazardous.  NESC treats all fluorescent  lamps as
hazardous and properly disposes and recycles them. The Company believes that its
practices are in compliance with the Department of  Transportation  requirements
of classifying  all ballasts and lamps as hazardous  material and using a "class
9" label during transportation.

Employees

As of October 31, 2003, the Company employed ten (10) full time and no part time
employees. As of February 11, 2005, the Company employed eight (8) full time and
no part-time employees. None of the Company's employees are represented by labor
unions.  The Company believes its  relationship  with employees is excellent and
does not believe that unionization is likely to happen.


Item 2. Description of Property

In May 2001,  NESNJ entered into a contract with Howard R. Bensel,  Jr. to lease
the  premises  located at 3153 Fire Road,  Suite 2C,  Egg Harbor  Township,  New
Jersey 08234 ("Lease"). The property consists of approximately 1,000 square feet
of finished  office  space.  The term of the  agreement  was for a period of two
years. Shortly after executing the Lease, NESNJ signed the first amendment added
Suite 2A to the Lease,  which increased the space leased to 1,800 square feet of
finished office space for the remaining term of the original lease. In May 2003,
the second  amendment was entered into  extending  the Lease an  additional  two
(2)years and increased the rent to $1,833 per month,  which rate will remain the
same throughout the remainder of the Lease.

In December 2001,  NESNJ entered into a contract with George E. Michael to lease
a portion of the premises  located at 328 South Main Street,  New Hope, PA 18938
beginning January 1, 2002. The property was used by the Company as office space.
The term of the agreement was for a period of one year.  In December  2002,  the
Company  exercised an option to extend the lease through and including  December
31, 2003 and agreed to an increase in rent in the amount of $1,050 per month. In
December 2003,  the Company  exercised an option to extend the lease through and
including  December 31, 2004 for the same rent of $1,050 per month.  Despite the
Company  closing its  Pennsylvania  office in September  2004, it was liable for
this rent until December 31, 2004.  Effective as of this filing,  the Company is
no longer responsible for this rent.


Item 3. Legal Proceedings

We are not a party  to any  legal  proceeding,  and  have  no  knowledge  of any
threatened or pending legal proceeding against us or our property.


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

No matter was  submitted to a vote of the  Company's  shareholders,  through the
solicitation of proxies or otherwise  during the fourth quarter of the Company's
fiscal year ended October 31, 2003, covered by this report.



                                     PART II


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

     (a) Market Information. There is no public trading market for the Company's
common stock. The Company's common stock has never traded in a public market.

     (b) Holders.  As of October 31, 2003, there were  approximately one hundred
four (104) holders of record of the Company's  common stock.  As of February 11,
2005, there were  approximately  one hundred five (105) holders of record of the
Company's common stock and one (1) holder of the Company's Convertible Preferred
Series A stock.

     (c) Dividend Policy. The Company has not declared or paid cash dividends or
made distributions in the past, and the Company does not anticipate that it will
pay cash dividends or make distributions in the foreseeable  future. The Company
currently intends to retain and reinvest future earnings, if any, to finance its
operations.

     (d)  Equity   Compensation  Plans.  The  Company  has  not  authorized  any
compensation plans (including individual compensation  arrangements) under which
its equity  securities  have been  authorized  for issuance as of the end of the
most recently  completed fiscal year ended October 31, 2003. The Company has not
authorized any such plan for the fiscal year ended October 31, 2004.

Recent Sales of Unregistered Securities

On April 4, 2003, the Company  executed a promissory note with Morris Harris for
$250,000.  On or about April 4, 2004,  the Company paid Mr. Harris the principal
amount of $250,000.  plus  interest of $4,806.43.  In addition,  pursuant to the
promissory  note,  the  Company  issued  to  Mr.  Harris  25,000  shares  of its
restricted common stock on October 29, 2003.

On September 3, 2003,  the Company  issued  2,978,754  shares of its  restricted
common stock to Charter in connection  with the  conversion  of the  shareholder
loan into equity.


Item 6. Management's Discussion and Analysis

Discussion and Analysis

The following  discussion and analysis  should be read in  conjunction  with the
financial  statements  of the  Company  and  the  accompanying  notes  appearing
subsequently under the caption "Financial Statements."

Overview

We market aggregated energy management  services to the long- term care industry
including  developing a comprehensive  energy management  program for long- term
care facilities  which is paid directly from savings  generated by energy system
improvements.  Our  program  consists f the  following  features:  an upgrade to
lighting  fixtures,  improved  heating,  venting and air  conditioning  ("HVAC")
equipment,  Ozone Laundry  Systems  ("OLS").  In addition,  the  long-term  care
facilities  are able to fund these  renovations  through  their  monthly  energy
savings with no  out-of-pocket  costs to the facility.  Specifically,  we formed
strategic alliances with various lenders, such as Charter, to provide funding to
the facilities for these energy conservation projects.  This association creates
a common structure that packages an energy upgrade and several energy management
services  within a long-term  energy  supply  contract,  assuring  customers  of
continuing competitive pricing. We expect our growth to come from our ability to
continue to assist long-term care facilities to finance our energy  conservation
projects and the growing need for the  operators  of existing  nursing  homes to
reduce their operating expenses.

On October 29, 2001, the Company  acquired  NESNJ.  Since acquiring  NESNJ,  the
Company has begun to make preparations for a period of growth, which may require
it to  significantly  increase the scale of its  operations.  This increase will
include the hiring of  additional  personnel  in all  functional  areas and will
result in  significantly  higher operating  expenses.  The increase in operating
expenses  is  expected  to be  matched by a  concurrent  increase  in  revenues.
However,  the  Company's  net loss may  continue  even if revenues  increase and
operating  expenses may still  continue to increase.  Expansion of the Company's
operations may cause a significant strain on the Company's management, financial
and other  resources.  The  Company's  ability to manage recent and any possible
future growth,  should it occur, will depend upon a significant expansion of its
accounting  and other internal  management  systems and the  implementation  and
subsequent improvement of a variety of systems,  procedures and controls.  There
can be no assurance that significant problems in these areas will not occur. Any
failure to expand these areas and implement and improve such systems, procedures
and  controls in an efficient  manner at a pace  consistent  with the  Company's
business  could  have a  material  adverse  effect  on the  Company's  business,
financial  condition  and results of  operations.  As a result of such  expected
expansion and the anticipated increase in its operating expenses, as well as the
difficulty in forecasting  revenue  levels,  the Company  expects to continue to
experience  significant  fluctuations in its revenues,  costs and gross margins,
and therefore its results of operations.

Results of  Operations

The Company generates sales by financing energy conservation  projects to reduce
gas and electric  costs to nursing homes and assisted  living  facilities in the
United  States.  The  estimated  pricing and gross profit that the Company earns
varies by each type of job completed,  with ozone projects having a higher gross
profit than lighting upgrade projects. During the period of comparison, lighting
projects completed exceeded ozone projects completed;  therefore,  the Company's
gross profit was reduced  accordingly.  Also, the Company added a field surveyor
to its staff,  which  increased the cost of sales via salary,  fringe  benefits,
travel and related expenses.

In  attempting  to obtain  business,  the Company  will send field  surveyors to
interested  facilities to determine the potential  energy savings so that a cost
proposal can be prepared and presented to the facility. During the course of the
year,  many  proposals are made, but there is no guarantee that the Company will
be able to perform  the job at the  facility  because of  several  reasons.  The
credit  rating of the facility  and  financial  statements  may not be minimally
sufficient  per the  funding  source  (PPL & Charter).  In this  situation,  the
Company has incurred  unrecoverable costs that won't be absorbed and then become
part of the  manufacturing  overhead,  which will reduce the gross profit of the
Company.

Revenues

Our total  revenues  for the twelve  months  ended  October 31,  2003  increased
$481,138 or  approximately  21% from the comparable  period in fiscal year ended
October 31, 2002.  Revenues  are higher due to an increased  sales force and the
generation of more contracts for both lighting and ozone. The Company recognizes
revenue when the  services are  rendered.  At that time,  the funding  source is
invoiced and the Company records revenue on its books. Revenues vary from period
to period  for NESC based upon the  success of the sales  force in closing  jobs
which then have to be  approved by the fund source  before  implementation.  The
primary  sources of  revenue  for NESC are ozone  jobs and  lighting  jobs which
account for approximately 93% of the Company's overall revenue.

Ozone  jobs are done to cut  laundering  costs by  approximately  50% at nursing
homes and  assisted  living  facilities.  The need for hot  water is  eliminated
during the washing process as activated oxygen (ozone) in cold water is used and
disinfects  better than traditional hot water methods.  The average facility has
120 beds  which can save up to $1,500  per month in  utility  costs  using  this
method.  By injecting  ozone  (activated  oxygen) into the wash and rinse water,
laundry is cleaner and  completely  disinfected.  Fewer  cycles are  required to
clean, thus chemical use is reduced along with the energy bills.  Because of the
significant  energy  savings the cost of the equipment and  installation  can be
funded  through the monthly  savings  resulting  in no out of pocket cost to the
facility.

The purpose of lighting jobs (lighting  retrofits) are to upgrade the facilities
by  installing  energy  efficient  lighting  technologies  where  it  is  deemed
profitable  and will  result in  significant  savings  for the  facilities.  The
energy-efficient   lighting   technologies  will   dramatically   reduce  energy
consumption  saving the average facility with 120 beds up to $1,500 per month in
utility costs. For example,  compact fluorescent light bulbs use 70% less energy
than standard incandescent light bulbs.

As with any product or service that is sold in the market  place,  NESC has seen
more competition in recent months,  and has been forced to reduce selling prices
to  capture  business.  NESC has also been  negotiating  with  larger  chains of
nursing  homes and assisted  living  facilities,  thereby  having to offer lower
selling prices which have also adversely affected gross margins.

The  remaining  revenues  for NESC are  composed  of  Management  Revenue  (4%),
$116,119 and $53,738 for the years ended October 31, 2003 and 2002, representing
4%  and  3%  of  Revenues   respectively.   This   Management   Revenue  is  the
administrative  handling  charges for  processing  the invoices from the utility
companies  for nursing  homes and assisted  living  facilities  In addition,  we
realized  energy  management  revenues of $78,610 and $3,240 for the years ended
October  31,  2003  and  2002,  representing  3% and  less  then 1% of  Revenues
respectively.  The energy  management  revenues  are for monthly  monitoring  of
facility  utility  invoices to ensure  proper  billing  via correct  charges and
appropriate tariffs.

Cost of Sales

The cost of goods  sold as a  percentage  of sales for the twelve  months  ended
October 31, 2003 was approximately 89% of sales as compared to approximately 64%
for the comparable  period in fiscal year ended October 31, 2002. The decline in
our  operating  margins  for  the  twelve  months  ended  October  31,  2003  is
attributable  to increased  competition,  primarily in lighting  retrofit  jobs,
resulting in the Company having to reduce the prices it charges, yet the cost of
goods pricing remaining  relatively stable. The gross profit for the years ended
October 31, 2003 and 2002 were  $305,644  (11% of Revenue) and $822,609  (34% of
Revenue) respectively.

Operating Expenses

Selling Expenses for the years ended October 31, 2003 and 2002 were $470,499 and
$501,136.  General and  Administrative  Expenses for the years ended October 31,
2003 and 2002 were $944,087 and $811,565.

Total operating  expenses for the twelve months ended October 31, 2003 increased
approximately  $103,755  or 8%. The reason for the  increase in expenses is that
based upon  anticipated  revenues,  the Company enlarged its sales and marketing
staff embarking upon programs to increase business, which are expected to affect
future  quarters.  Advertising  expenses also increased in connection  with this
expansion. The Company is also positioning itself in new markets and seeking new
project  financing which  contributed to additional  operating costs.  Legal and
accounting  fees  increased  in  connection  with  the  Company's   Registration
Statement with the Securities and Exchange Commission.

Interest Expense

Interest  expense for the years ended October 31, 2003 and 2002 were $50,079 and
$20,951.  Interest  Expense  increased  in year 2003 due to interest  charged on
short term borrowings.

Net Income/Loss

Net Loss for the years  ended  October  31,  2003 and 2002 were  $1,116,976  and
$496,256.

Assets and Liabilities

Assets were  $5,313,183  and  $4,536,950  as of October  31, 2003 and 2002.  Our
assets consisted  primarily of accounts  receivable with a value of $183,285 and
$513,115  and notes  receivable  in the  amount  of  $4,856,824  and  $3,976,434
respectively.

The majority of receivables represent pass through amounts. Utility invoices are
sent to NESC by the utility  company and NESC  invoices the facility for utility
charges and adds on the loan payment and handling charge,  and then subsequently
pays the utility company and loan provider monthly,  but only after the facility
payment is  received by NESC.  Receivables  have no  relation  to  revenues,  as
revenues  are  only  generated  when  the  loan  provider  approves  a  job  for
completion.  At that time an invoice is created, and payment is received by NESC
from the loan provider  within thirty days of invoicing.  There has not been any
change in credit terms, collection efforts, credit utilization or delinquency by
the facilities that NESC services.

Total Current  Liabilities as of October 31, 2003 and 2002 were $2,501,613 and $
2,127,700.  The majority of the payables represent pass through amounts. Utility
invoices  are booked as a liability  by NESC when the  invoices  are created and
offset when payments are received by the facilities;  therefore,  there have not
been any timing differences.

Long  Term  Debt,   less  current   portion  was  $3,539,626   and   $2,886,054,
respectively.  There are no other  obligations other than those disclosed in the
financial statements.

Financial  Condition,  Liquidity  and Capital  Resources At October 31, 2003 and
2002 the  Company had cash and cash  equivalents  of $45,656  and  $20,978.  The
Company's  working  capital is  presently  minimal and there can be no assurance
that the Company's financial condition will improve.  The Company is expected to
continue  to have  minimal  working  capital or a working  capital  deficit as a
result of current liabilities.

The Company  must  complete the job,  pay for all costs  incurred,  and obtain a
completion certificate before submitting an invoice for reimbursement to the two
main funding sources, (Charter), before it is able to collect its revenue. These
steps represent  approximately  a 30 day delay before receipt of the funds.  The
Company has minimal  liquidity and working  capital is severely  strained as the
company has fully utilized its credit lines.  There an not be any assurance that
the Company's financial condition will improve  significantly unless the Company
successfully  completes more jobs  consistently  on a monthly basis,  which will
enable the Company to generate  additional cash flow, thereby reducing currently
liabilities.  The  Company  will also  continue  to try and  attract  additional
capital through private sales of securities, but has no commitments for sales of
securities at this time.

During the course of the year with increased business,  accounts receivable have
increased and correspondingly accounts payable have increased. The Company plans
to finance its future operations  through the sale of its products and services.
In the event the Company is unable to fund operations  from revenues alone,  the
Company may raise  additional  capital  through  private  and/or public sales of
securities  in the  future  but  has no  commitments  at  this  time  which  are
contingent upon the occurrence of some future event.

No trends have been identified which would in a material increase or decrease in
the Company's results of operations or liquidity.

The Company has short term liquidity problems which are being addressed by
revising internal procedures for faster job approvals to hasten the process and
fund the projects faster. For long term liquidity, the Company will need
additional investors to remain an ongoing concern; however, as stated above no
commitments have been made as of this date.

The only  significant  cash  transaction  other than that  generated  an used in
operations has been that the Company raised  $250,000 and $500,000 in equity for
the period ended October 31, 2003 and 2002.

Accounts  receivable have grown at a rate faster than the sales increase because
the majority of receivables  represent pass through amounts only as stated above
and NESC has many more facilities  under contract.  Utility invoices are sent to
NESC by the utility  company and NESC invoices the facility for utility  charges
and adds on the loan payment and handling charge, and then subsequently pays the
utility company and loan provider  monthly,  but only after the facility payment
is received by NESC.  Receivables have no relation to revenues,  as revenues are
only generated  when the loan provider  approves a job for  completion.  At that
time an invoice  is  created,  and  payment  is  received  by NESC from the loan
provider  within  thirty  days of  invoicing.  There has not been any  change in
credit terms,  collection  efforts,  credit  utilization  or  delinquency by the
facilities that NESC services.

Accounts  payables  also have  grown at a faster  rate  than the sales  increase
because the majority of the  payables  represent  pass  through  amounts only as
stated above and NESC has many more facilities under contract.  Utility invoices
are booked as a liability  by NESC when the invoices are created and offset when
payments  are  received by the  facilities;  therefore,  there have not been any
timing differences.

Cash flow for NESC has become negative mainly due to the increase in the cost of
sales expenses discussed earlier.  All projects are approved by Charter,  who is
the loan  provider  of jobs for NESC.  Faster job  approval is needed by NESC to
generate  revenue more quickly,  but NESC must make sure that it follows through
on its own internal  procedures to make sure that all  documentation is gathered
and presented to the loan providers on a timely basis for credit  approval.  The
lenders  will not  reduce  their  standards  in  approving  jobs as they are not
willing to increase  their risk of default on accounts and notes  receivables by
the facilities.

NESC is taking steps to insure the continued operations of the company by trying
to  raise  additional  equity,  and is also  looking  into  the  possibility  of
incurring  additional  debt to improve  cash flow.  To insure  viability  of the
company,  NESC took steps in April 2003 to reduce  expenses by  eliminating  two
administrative  positions,  reduced  office  personnel  to a four day work  week
thereby lowering salaries and wages by 20%,  eliminated the company match to the
401k plan, reduced travel,  lodging, meals, and entertainment costs by 50% below
budget,  changed a salaried sales representative to commission only,  eliminated
advertising   expenses,   changed  telephone  plans  to  reduce  costs,  reduced
management fees by 50%, and eliminated all bonuses.

NESC management  believes that the above cost reduction and  elimination  steps,
even if additional  equity or additional  debt cannot be secured,  will give the
company a  reasonable  chance of being able to  continue  in  operation  for the
twelve months following the most recent balance sheet presented.

Critical Accounting Policies

National Energy Services Company,  Inc. ("NES") was incorporated on February 17,
1998 in Nevada as Coastal  Enterprises,  Inc. to engage in an  internet  related
business.   The  Company  and  National  Energy  Services   Company,   Inc.,  an
unaffiliated  New  Jersey  corporation  formed  in  late  1995  ("NESNJ"  or the
"Company"),  entered into an Agreement and Plan of Share Exchange, dated October
19, 2001, (the "Share Exchange")  pursuant to which the shareholders of NESNJ on
October 19, 2001 (the "Exchange Date") were issued  10,000,000  shares of common
stock of NES, par value $0.001 in exchange for one hundred percent (100%) of the
issued and outstanding  shares of NESNJ.  Prior to the exchange,  the authorized
capital stock of NESC consisted of 20,000,000  shares of common stock, par value
$0.001,  of which  1,700,000  shares were issued and  outstanding  and 1,000,000
shares  of  preferred  stock,  par  value  $0.001,   of  which  no  shares  were
outstanding.  All outstanding shares were fully paid and non assessable, free of
liens,  encumbrances,  options,  restrictions  and legal or equitable  rights of
others  not a party to the Share  Exchange.  The Share  Exchange  called for the
resignation  of the  original  officers  and  directors,  who no longer have any
continued  involvement  in the Company,  and the  appointing  of a new board and
officers. As of the Exchange Date, NESNJ became a wholly-owned subsidiary of the
Company.

For accounting  purposes,  the  transaction  has been accounted for as a reverse
acquisition under the purchase method of accounting.  Accordingly, NESNJ will be
treated as the  continuing  entity for  accounting  purposes,  and the financial
statements presented herein are those of NESNJ.

Principles of consolidation - The consolidated  financial statements include the
accounts of the Company and its entire wholly-owned subsidiary.  All significant
inter-company accounts and transactions have been eliminated in consolidation.

Use of estimates - The  financial  statements  have been  prepared in conformity
with accounting principles generally accepted in the United States. In preparing
the  financial  statements,   management  is  required  to  make  estimates  and
assumptions that affect the reported amounts of assets and liabilities as of the
date of the statements of financial  condition and revenues and expenses for the
period then ended. Actual results may differ significantly from those estimates.

Fixed assets - All property and equipment  are recorded at cost and  depreciated
over their estimated useful lives,  generally three, five or seven years,  using
the  straight-line  method.  Upon sale or  retirement,  the  costs  and  related
accumulated  depreciation are eliminated from their respective accounts, and the
resulting  gain or loss is included in the  results of  operations.  Repairs and
maintenance  charges  which do not  increase  the useful lives of the assets are
charged to operations as incurred.  The Company's fixed assets  represent a very
small portion of the Company's  assets,  therefore the possibility of materially
different results from using different estimated lives or method of depreciation
are minimal.

Reserve for bad debt - The allowance for  uncollectible  accounts  receivable is
based on the historical experience of the Company and on management's evaluation
of the  collectibility  of the  individual  outstanding  balances.  A  potential
customer's  credit  rating  is  evaluated  prior to  entering  into any  revenue
agreements.  This evaluation is completed by PP&L and Charter,  as they are well
equipped to handle this as well as being the ultimate lender.

As the  Company is liable on all of its notes  payable,  which are offset by the
notes  receivable,  should the Company's  estimates of its potential bad debt be
incorrect,  the  impact on the  reported  results  and  balance  sheet  could be
substantially  negative.  At October  31,  2003 and 2002,  the  company's  notes
receivable were 91% and 88% of total assets.

Stock  compensation for services  rendered - The Company issues shares of common
stock in exchange  for services  rendered.  The costs of the services are valued
according to accounting  principles  generally accepted in the United States and
are charged to  operations.  There is no alternative to accounting for the stock
issued for services in any other manner;  therefore  there is no  possibility of
materially different results than that reported.

Revenue  recognition - The Company has four distinct revenue streams:  Equipment
sales,  management  revenue,  energy  management and energy sales. For equipment
sales revenue is recognized in accordance with signed agreements with customers,
typically 60 months,  and only upon the completion of  installation.  As part of
these agreements, the Company directly receives all utility company billings for
the customers to allow the Company to monitor savings the customer is realizing.
Management  revenue  is  recognized  and billed  monthly  as  earned.  This also
includes  fees  earned  for  processing  rebate  claims  for  customers.  Energy
management  revenue is a fee charged the customer to ensure that the customer is
being  charged  correct rates and tariffs by the  utilities.  Energy sales occur
when the Company  purchases  energy directly from a utility provider and resells
it to a user.  Cost of sales are  recognized  as  incurred  and  matched  to the
related revenues.  In addition,  the master agreements with PP&L and Charter for
the  provision of  financing  to the Company  which passes it through to the end
user under the same terms and  conditions.  Therefore,  the Company  records the
financing on both sides at gross amounts, as the Company is ultimately liable to
the lending sources.


The Company is obligated to the following cash outflows at October 31, 2003:

<TABLE>
<CAPTION>
                                           Less than                            After 5
Contractual Obligations      Total          1 Year      1-3 Years    4-5 Years   Years
-----------------------   ----------    -----------    ----------    ---------- --------
<S>                       <C>           <C>            <C>            <C>       <C>
Loans Payable
- Stockholder/employee    $ 182,037    $   182,037    $        0     $      0  $      0

Bank Loan - PPL           $    4,648    $     4,648    $        0     $      0  $      0

Charter/ Penn
Power & Light
  Term Loans              $4,771,061     $ ,231,435    $2,450,629     $785,122  $ 303,875

Short Term
Line of Credit            $  154,761     $  154,762    $        0     $      0  $      0

Operating Leases          $   57,619     $   45,127    $   12,491     $      0  $      0
</TABLE>

Critical Accounting Policies

The preparation of financial  statements in conformity  with generally  accepted
accounting   principles  (GAAP)  requires   management  to  make  estimates  and
assumptions  that  affect the  reported  amounts of assets and  liabilities  and
disclosure of  contingent  assets and  liabilities  at the date of the financial
statements  and the  reported  amounts  of  revenues  and  expenses  during  the
reporting period. Actual results may differ from those estimates.

Off-Balance Sheet Arrangements

The Company has not entered into any off-balance sheet  arrangements.  We do not
anticipate  entering into any off-balance sheet arrangements  during the next 12
months.

Forward-Looking Statements

This Form 10-KSB  includes  "forward-looking  statements"  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act of  1934,  as  amended.  All  statements,  other  than
statements of historical  facts,  included or  incorporated by reference in this
Form 10-KSB which address  activities,  events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital  expenditures  (including the amount and nature thereof),  demand
for the Company's  products and services,  expansion and growth of the Company's
business and operations, and other such matters are forward-looking  statements.
These  statements  are based on certain  assumptions  and  analyses  made by the
Company in light of its  experience  and its  perception of  historical  trends,
current conditions and expected future  developments as well as other factors it
believes are appropriate in the circumstances.  However,  whether actual results
or developments will conform with the Company's  expectations and predictions is
subject  to a number of risks and  uncertainties,  general  economic  market and
business  conditions;  the business  opportunities (or lack thereof) that may be
presented  to and pursued by the  Company;  changes in laws or  regulation;  and
other factors, most of which are beyond the control of the Company.

Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary  statements and there can be no assurance that the
actual results or  developments  anticipated by the Company will be realized or,
even if substantially  realized, that they will have the expected consequence to
or effects on the Company or its business or operations.


Item 7. Financial Statements

The Company's financial statements have been examined to the extent indicated in
their  reports  by  Bagell,  Josephs & Company,  LLC and have been  prepared  in
accordance  with  generally  accepted  accounting  principles  and  pursuant  to
Regulation S-B as promulgated by the Securities and Exchange  Commission and are
included herein, on Page F-1 hereof in response to Part F/S of this Form 10-KSB.


Item  8.  Changes  In and  Disagreements  with  Accountants  on  Accounting  and
          Financial Disclosure.

     (a) Previous Independent Auditors:

          (i) Maillie,  Falconiero & Company,  LLP  ("Maillie") was dismissed as
     the independent auditor for the Company on February 6, 2004.
          (ii) Maillie's reports on the financial  statements of the Company for
     the  fiscal  years  ended  October  31,  2002 and 2001,  contain no adverse
     opinion or  disclaimer  of opinion and were not qualified or modified as to
     uncertainty,  audit scope or accounting principles except that there was an
     explanatory  paragraph  relating  to our  ability  to  continue  as a going
     concern.
          (iii) The Company's Board of Directors unanimously approved the change
     in accountants.
          (iv) There has been no  disagreement  between the Company and Maillie,
     on any matter of accounting  principles or practices,  financial  statement
     disclosure,  or auditing  scope or procedure,  which  disagreement,  if not
     resolved  to the  satisfaction  of Maillie  would have  caused it to make a
     reference to the subject matter of the  disagreement in connection with its
     reports.
          (v) The  Company  has not been  advised of any  matters  described  in
     Regulation S-B, Item 304(a)(1)(B).

     (b) New Independent Accountants.

          (i) The Company engaged Bagell,  Josephs & Company, LLC located at 200
     Haddonfield Berlin Rd. High Ridge Commons Suite 400-403 Gibbsboro, NJ 08026
     ("Bagell"),  as its new  independent  accountants  as of  February 6, 2004.
     Prior to such date the Company did not consult  with Bagell  regarding  (i)
     the  application of accounting  principles,
          (ii) the type of audit opinion that might be rendered by Bagell, or
          (iii) any other matter that was subject of a disagreement  between the
     Company  and its  former  auditor as  described  in Item  304(a)(1)(iv)  of
     Regulation S-B.


Item 8A. CONTROLS AND PROCEDURES.

(a) Disclosure Controls and Procedures:

Within 90 days prior to the date of this Report,  we carried out an  evaluation,
under the supervision and with the  participation of our Chief Executive Officer
and Chief Financial  Officer (or persons  performing  similar  functions) of the
effectiveness  of the  design  and  operation  of our  disclosure  controls  and
procedures.  Based on this  evaluation,  our Chief  Executive  Officer and Chief
Financial Officer (or persons performing  similar functions)  concluded that our
disclosure  controls and  procedures  are  effective in timely  alerting them to
material  information  required to be included in our periodic  reports that are
filed with the Securities and Exchange  Commission.  It should be noted that the
design of any system of controls is based in part upon certain assumptions about
the likelihood of future  events,  and there can be no assurance that any design
will  succeed  in  achieving  its  stated  goals  under  all  potential   future
conditions,  regardless  of how remote.  In  addition,  we reviewed our internal
controls, and there have been no significant changes in our internal controls or
in other factors that could  significantly  affect those controls  subsequent to
the date of their last valuation.

(b) Internal Control Over Financial Reporting:

There have been no significant  changes in the Company's internal controls or in
other factors since the date of the Chief Executive  Officer and Chief Financial
Officer's  (or  persons  performing  similar  functions)  evaluation  that could
significantly  affect these internal  controls during the period covered by this
report or from the end of the reporting  period to the date of this Form 10-KSB,
including any corrective  actions with regards to significant  deficiencies  and
material weaknesses.


                                    PART III

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

     (a) Set forth below are the names,  ages,  positions,  with the Company and
business experiences of the executive officers and directors of the Company.

Name                  Age        Position(s) with Company
---------------      -----    ---------------------------------------
John A. Grillo        43      Chairman and President (1)
David W. Mason        40      Vice-President of Marketing and Director (2)
Rusty J. Gramiak      47      Vice-President of Operations and Director (3)
Edmond Ragazzi        61      Secretary (4)
Larry A. Shusman      61      Chief Financial Officer (5)
John O'Neill          47      Chairman(1)
Deborah O'Neill       46      Secretary, Treasurer and Director (4)
Patty Palmieri        38      Controller (5)

(1)  Mr.  Grillo  resigned as the  Company's  Chairman on February  20, 2004 but
     remains  the  President,  Chief  Executive  Officer  and a Director  of the
     Company and John O'Neil was appointed the Chairman.
(2)  Mr.  Mason  resigned as an officer and  director of the Company on February
     20, 2004.
(3)  Mr. Gramiak resigned as a director of the Company on February 20, 2004.
(4)  Mr. Ragazzi  resigned as an officer on February 20, 2004 and Deborah O'Neil
     was appointed the Secretary, Treasurer and a Director of the Company.
(5)  Mr. Shusman  resigned on February 20, 2004. Patty Palmieri was hired as the
     controller   on  March   15,   2004   and  has   assumed   the   accounting
     responsibilities for the Company.

All  directors  hold  office  until the next  annual  meeting  of the  Company's
shareholders and until their successors have been elected and qualify.  Officers
serve at the pleasure of the Board of Directors. The officers and directors will
devote such time and effort to the business and affairs of the Company as may be
necessary  to  perform  their  responsibilities  as  executive  officers  and/or
directors of the Company.

Business Experience

John A. Grillo

Mr. Grillo serves NESC as its president and chief executive  officer.  He is the
designer and  developer of the NESC Energy  Gatekeeper  Program.  He has managed
virtually  every aspect of the electrical  contracting  business.  Mr. Grillo is
also an electrical energy  conservation  expert. He has designed and implemented
energy  efficient  lighting and motor  systems for ten of his eighteen  years in
electrical  contracting.  His  concentration  in energy  efficiency has led to a
number  developments in the field. He has designed and programmed  comprehensive
lighting  upgrade analysis  software which NESC has been using  successfully for
the past two years.  He  designed  and  implemented  energy  efficient  lighting
programs for several local utility companies.  In 1996, Mr. Grillo conceived and
co-authored  the New Jersey  Division of Medical  Assistance and Health Services
Energy Efficient Lighting System Incentive, for the long -term care industry. He
is an Environmental  Protection Agency certified lighting  surveyor.  Throughout
his  career  Mr.  Grillo  has   participated   and  led  sales  and  contracting
initiatives.  He has set up NESC marketing campaigns and developed the company's
extensive contract and documentation  package. Mr. Grillo attended  Northeastern
University's School of Electrical Engineering Technology from 1979 to 1983.

David W. Mason

David W. Mason,  38, was the  company's  Vice-President  of Sales and  Marketing
since 2000. Mr. Mason  graduated from Boston  University in 1988 with a Bachelor
of Science  degree in Urban  Affairs.  Prior to joining the  company  Mr.  Mason
worked in the television industry for various networks including ABC, CBS, ESPN,
TNT and TBS. Mr. Mason is  responsible  for the marketing of the Company as well
as being the  direct  link  between  the home  office  and the sales team in the
field. Mr. Mason also is responsible for all convention,  training  seminars and
benefits.

Rusty J. Gramiak

Mr.  Gramiak is the current Vice  President of Operations of the Company and has
served in that capacity since 2000. His current duties  include:  overseeing all
Company projects,  developing new contacts with  manufacturers to ensure optimum
pricing on all energy  efficiency  upgrades and development of a training course
for new employees  specializing in field surveying and project management.  From
1999 to 2000, Mr. Gramiak was the Director of Sales for Mid Atlantic  states for
the Company. During that time, he expanded sales to include mass-market accounts
and expanded territorial sales by 100%. From 1998 to 1999, Mr. Gramiak served as
a Sales  Representative  for the  Company in New Jersey.  During  that time,  he
established over forty new accounts and attended  training seminars on Long Term
Care Federal and State  Reimbursements.  Prior to working for the Company,  from
1996-1998,  Mr.  Gramiak  was a lighting  surveyor  and an  installer  of energy
efficient lighting for GEC Lighting Company in Margate, New Jersey.  During that
time,  he surveyed  over fifty  facilities,  completed a  Green-Lights  training
course  given by the  Environmental  Protection  Agency and  installed  numerous
lighting projects located at nursing homes, hospitals, school districts, etc.

Edmond B. Ragazzi

Mr.  Ragazzi  has worked for the  Company  since 1997 and was  appointed  by the
Company's  Board of  Directors  to serve as  Secretary.  In that  capacity he is
responsible  for  maintaining  the corporate  books and records.  Mr.  Ragazzi's
primary  responsibilities include management of the Company's relationships with
different utility companies.

Larry A. Shusman

Mr.  Shusman worked for the Company on a regular  weekly  part-time  basis since
October 1, 2001 as the Chief Financial Officer. His responsibility was to handle
the books and records of the  Company  according  to GAAP,  along with being the
liaison  with  the  independent  accountants.  In  addition  to his work for the
Company, Mr. Shusman is currently employed part-time by Classic Hair, LLC as its
Chief Financial  Officer and has worked in that capacity since August 2001. From
April 2000 until August 2001, Mr.  Shusman was employed  full-time by Spring Air
Mattress Company as its East Coast Regional Controller and Office Manager. Prior
to April 2000, he worked for Waste Management, Inc. for a period of one month as
a staff accountant. From January 1996 to January 2000, Mr. Shusman served as the
Chief  Financial  Officer and Controller of Potts Welding and Boiler Repair Co.,
Inc. Mr. Shusman  originally  attended Penn State University  between  September
1960 and June 1961,  but  graduated  from Temple  University in June 1964 with a
Bachelor of Science degree in Accounting.

Deborah F. O' Neil

Deborah F. O'Neill is the  Secretary/Treasurer  for NESC and serves on its Board
of Directors.  She is a Certified Public Accountant with experience in auditing,
income tax preparation and real estate development.  During the years spent with
a public accounting firm, Deborah  specialized in long term care audits and cost
report preparation. Moving to the private sector, she was a founder and CFO of a
proprietary  software  company  that  offered  turnkey  accounting  and  medical
computer systems to long term care entities in Ohio,  Pennsylvania,  Connecticut
and  several  other  states.  Currently,  Mrs.  O'Neill  works in the  financial
management area of the family's healthcare conglomerate, O'Neill Management LLC.
Deborah  graduated from Kent State  University magna cumme laude with a Bachelor
of Business Administration degree in Accounting.

John T. O' Neil

John T.  O'Neill is the  Chairman of the Board of  Directors.  He brings to NESC
experience  in many  aspects  of the long term care  profession  coupled  with a
comprehensive   vision  of  energy  consumption  patterns  for  long  term  care
facilities.  Mr.  O'Neill began his career  working in the nursing home built by
his family more than forty years ago. His vision and leadership has  transformed
the business into a healthcare  conglomerate  that now offers  assisted  living,
Alzheimer  and  dementia  care,  rehabilitative  services,  skilled  nursing and
Facility  management.  As the  CEO  of  O'Neill  Management  LLC,  he  has  been
instrumental in the planning,  development,  construction and daily operation of
healthcare   facilities.   He  is  also  active  in  the  medical  reimbursement
initiatives  in the  state  of Ohio,  and has  long  been  proactive  in  energy
conservation  techniques  for his  facilities.  He attended  Bowling Green State
University  and The  Ohio  State  University  where  he  completed  the  Core of
Knowledge for certification as a Licensed Nursing Home Administrator.

Patricia Palmieri

Patricia  A.  Palmieri is the  Controller  of the Company and has served in this
capacity since March 2004. Ms.  Palmieri has 14 years  accounting  experience in
various  industries  such as home mortgages and auto financing.  Ms.  Palmieri's
current duties  include the  responsibility  for the financial  reporting of the
Company, coordination of reviews and audits, reconciliation and reporting to the
financing companies and various aspects of the Human Resource area. Ms. Palmieri
has a Bachelor of Arts in Accounting and a Masters in Business Administration.

Directors' Remuneration

Our  directors  are  presently  not  compensated  for  serving  on the  board of
directors.

Board Meetings and Committees

The Board of  Directors  of the  Company  did not hold any  meetings  during the
fiscal year ended October 31, 2003.  The Board does not currently have an Audit,
Executive or Compensation Committee.

Significant Employees

On March 15,  2004,  the Company  hired  Patricia A.  Palmieri as its  Corporate
Controller,  one of  whose  primary  functions  will  be  establishing  internal
controls and managing the current systems.

Family Relationships

John O'Neil and Deborah O'Neil are husband and wife. In addition, Rochelle Mason
is David Mason's mother and Barbara Leopold is David Mason's sister, whose trust
owns 547,000 shares.

Involvement in Certain Legal Proceedings

Except as indicated above, no event listed in Sub-paragraphs  (1) through (4) of
Subparagraph (d) of Item 401 of Regulation S-B, has occurred with respect to any
of our present  executive  officers  or  directors  or any nominee for  director
during the past five years which is material to an  evaluation of the ability or
integrity of such director or officer.

Audit Committee Financial Expert

During 2003, the Company did not maintain an Audit  Committee  because we had an
insufficient  number of qualified outside directors.  Moreover,  the Company had
not designated an Audit Committee Financial Expert. Until the Company is able to
obtain directors and officer liability insurance for its board of directors,  it
is unlikely that we will be able to attract the qualified  persons  necessary to
fulfill these functions.

Compliance with Section 16(a) of the Securities Exchange Act of 1934

The Company does not have a class of securities  registered  pursuant to section
12 of the Exchange Act and files this and other reports with the  Securities and
Exchange  Commission  pursuant to Section 15(d) of the Exchange Act.  Therefore,
Section 16(a) is not applicable to the Company or its control persons.

Code of Ethics

On  February  4, 2005,  we adopted a Code of Ethics and  Business  Conduct  that
applies  to  our  principal  executive  officer,  principal  financial  officer,
principal  accounting  officer  or  controller,  or persons  performing  similar
functions. We undertake to provide to any person without charge, upon request, a
copy of our Code of Ethics and Business Conduct.


Item 10. Executive Compensation

The following table shows all the cash compensation paid by the Company, as well
as certain  other  compensation  paid or accrued,  during the fiscal years ended
October 31,  2003,  2002 and 2001 to the  Company's  CEO and four  highest  paid
executive officers. No restricted stock awards, long-term incentive plan payouts
or other types of compensation,  other than the  compensation  identified in the
chart below, were paid to these executive officers during these fiscal years.

<TABLE>
<CAPTION>
                           ANNUAL COMPENSATION                        LONG-TERM COMPENSATION
                     --------------------------------             ------------------------------
                                                                         AWARDS          PAYOUTS
                                                                   -------------------- ---------
                                             OTHER     RESTRICTED
                                             ANNUAL      STOCK      OPTIONS/    LTIP        ALL OTHER
NAME AND                   SALARY    BONUS COMPENSATION  AWARD(S)    SARS      PAYOUTS        COMP.
POSITION              YEAR  ($)       ($)      ($)        ($)        (#)         ($)          ($)
------------------    ----  ---      ----     ---        ---        ---          ---          ---
<S>                   <C>  <C>      <C>      <C>        <C>    <C>       <C>         <C>
John Grillo,
CEO & President       2003 98,525
                      2002 57,517   42,000
                      2001 61,984   26,570

David W Mason
 VP of Marketing      2003 50,923           2,622
                      2002 53.539   25.726  2,622              7,500(a)
                      2001 45,000   50.168  2,622

Rusty Gramiak
VP of Operations      2003 52,500           2,892
                      2002 55,305   24,468  2,622              10,000(b)
                      2001 46,061   30,819  3,622

Ed Ragazzi.           2003 39,639        0  3,300
Secretary             2002 55,906        0      0                4000(c)
                      2001      0        0      0

Larry Shusman.        2003 23,400        0      0
CFO                   2002 30,600        0      0                5000(d)
                      2001      0        0      0

Deborah O'Neil
Secretary and
Treasurer             2003      0        0
                      2002      0        0
                      2001      0        0
John O'Neil
Chairman and
Director              2003      0        0
                      2002      0        0
                      2001      0        0
</TABLE>

(a)  Mr. Mason received 5000 shares of the Company's  restricted common stock on
     January 3, 2002 and 2500 shares of  restricted  common stock on January 16,
     2002.  Because of the  absence  of an  established  trading  market for the
     common  stock,  the Company is unable to determine the fair market value at
     the time the stock was awarded.

(b)  Mr. Gramiak received 5000 shares of the Company's  restricted  common stock
     on January 3, 2002 and 5000 shares of  restricted  common  stock on January
     16, 2002.  Because of the absence of an established  trading market for the
     common  stock,  the Company is unable to determine the fair market value at
     the time the stock was awarded.

(c)  Mr. Ragazzi received 4000 shares of the Company's  restricted  common stock
     on January 3, 2002. Because of the absence of an established trading market
     for the common  stock,  the Company is unable to determine  the fair market
     value at the time the stock was awarded.

(d)  Mr. Shusman received 5000 shares of the Company's  restricted  common stock
     on April 18, 2002. Because of the absence of an established  trading market
     for the common  stock,  the Company is unable to determine  the fair market
     value at the time the stock was awarded.

(1)  All other compensation  includes certain health and life insurance benefits
     paid by the Company on behalf of its employee.


Compensation of Directors

The Company has no standard  arrangements  for compensating the directors of the
Company for their attendance at meetings of the Board of Directors.

Bonuses and Deferred Compensation

The Company does not have any bonus,  deferred  compensation or retirement plan.
Such plans may be adopted by the  Company at such time as deemed  reasonable  by
the board of directors.  The Company does not have a compensation committee, all
decisions regarding compensation are determined by the board of directors.

Stock Option and Stock Appreciation Rights.

The Company does not currently have a Stock Option or Stock Appreciation  Rights
Plan.  No stock  options or stock  appreciation  rights were awarded  during the
fiscal year ended  October 31,  2004,  or the period  ending on the date of this
Report.

Termination of Employment and Change of Control Arrangement

There  are no  compensatory  plans or  arrangements,  including  payments  to be
received from the Company, with respect to any person named in cash compensation
set out above  which  would in any way  result in  payments  to any such  person
because of his resignation,  retirement,  or other  termination of such person's
employment with the Company or its subsidiaries, or any change in control of the
Company,  or a change in the person's  responsibilities  following a changing in
control of the Company.


Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth, as of October 31, 2003, information with respect
to the  beneficial  ownership of our common stock by (i) persons  known by us to
beneficially  own more than five percent of the  outstanding  shares,  (ii) each
director,  (iii) each  executive  officer and (iv) all  directors  and executive
officers as a group.

                                                        Common Stock
                                                    Beneficially Owned
                                    Title of
Name and Address                     Class         Number      Percent(1)
--------------------------------------------------------------------------
John A. Grillo                      Common       3,098,300        24.6%
101 Captains Walk
Egg Harbor Township, NJ 08234

David W. Mason                      Common         572,900         4.5%
195 Sandy Ridge / Mt. Airy Rd.
Stockton, NJ  08559

Rusty J. Gramiak                    Common          10,000            *
343 Cos Cob Dr.
Galloway, NJ  08205

Edmond Ragazzi                      Common           4,000            *
554 Fourth Str.
Absecon, NJ 08201

Larry Shusman                       Common           5,000            *
1502 Squire Lane
Cherry Hill, NJ 08003

All Executive Officers and
Directors as a Group                Common       3,690,200        29.3%
(Five (5) persons)

Barry Feldscher                     Common       3,333,300        26.5%

Rochelle Mason                      Common       1,666,000        13.2%

Charter Management, LLC(**)         Common       3,433,300        22.0%
--------------------------------------------------------------------------
*     Less than 1%.

(**) Charter  Management,  LLC, an Ohio limited liability  company,  is owned by
     John & Deborah  O'Neil.  These  shares of common  stock  were  acquired  on
     September  3, 2003.  Charter also owned 100% of the  Company's  convertible
     preferred series A stock.

(1)  Applicable  percentage of ownership is based on 15,598,014 shares of common
     stock outstanding as of October 31, 2003,  together with applicable options
     for each shareholder. Beneficial ownership is determined in accordance with
     the rules of the  Commission  and generally  includes  voting or investment
     power with respect to securities. Shares of common stock subject to options
     that are currently exercisable or exercisable within 60 days of October 31,
     2003 are deemed to be beneficially owned by the person holding such options
     for the purpose of computing  the  percentage  of ownership of such person,
     but are not  treated  as  outstanding  for the  purpose  of  computing  the
     percentage  ownership  of any other  person.  The common  stock is the only
     outstanding class of equity securities of the Company.

Securities Authorized for Issuance Under Equity Compensation Plans

The following table sets forth  information as of October 31, 2003, with respect
to compensation plans (including  individual  compensation  arrangements)  under
which our common stock is authorized  for issuance,  aggregated as follows:  (i)
all compensation  plans previously  approved by security  holders;  and (ii) all
compensation plans not previously approved by security Holders: None.


Item 12. Certain Relationships and Related Transactions

In October 2001, the Company  entered into the Share Exchange with NESNJ and its
shareholders. The exchange was made whereby the Company issued 10,000,000 shares
of its  common  stock to the  shareholders  of NESNJ for all of the  issued  and
outstanding  stock  of  NESNJ.  As part of the  exchange,  John A.  Grillo,  the
Company's  current  President and Secretary,  received  3,333,300  shares of the
Company's common stock. This offering was conducted  pursuant to Section 4(2) of
the Act,  Rule 506,  Section  49:3-50(b)(9)  of the New Jersey  Code and Section
211(b) of the Pennsylvania Code.

In January 2002,  the Company  issued a total of 39,000 shares of its restricted
common  stock to eleven  (11) of its  employees  for  services  rendered  to the
Company. For such offering,  the Company relied upon the 506 Exemption,  Section
49:3-50(b)(9) of the New Jersey Code,  Section 211(b) of the  Pennsylvania  Code
and Section 581-5(I)(c) of the Texas Code.

In June 2004, National Demand LLC., an Ohio limited liability company, agreed to
purchase from Powerweb  Inc., a web based  internet  energy  management  control
system.  National Demand LLC., is owned 95% by John T. O'Neill and 5% by John A.
Grillo. NESC is currently providing product testing for the Powerweb product and
when the  product  is ready for market  NESC will  offer the  energy  management
system to its clients through a licensing agreement with National Demand, LLC.

In April 2002, the Company  issued 15,000 shares of its restricted  common stock
to two (2) consultants for services rendered to the Company.  For such offering,
the Company  relied upon the 506  Exemption,  Section  49:3-50(b)(9)  of the New
Jersey Code and Section 7-11-402(10) of the Rhode Island Code.


Item 13. Exhibits and Reports on Form 8-K.

     (a) The exhibits  required to be filed  herewith by Item 601 of  Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:

Exhibit No.         Description
-----------         ------------------------------------------------------------

3.(i).1  [1]        Articles of Incorporation filed February 17, 1998.

3.(i).2  [1]        Certificate of Amendment of Articles of Incorporation  filed
                    October 29, 2001.

3.(ii).1 [1]        Bylaws.

4.1[1]              Form of  Private  Placement  Offering  of  1,600,000  common
                    shares at $0.01 per share.

4.2  *              Promissory  Note from the  Company  to Morris  Harris  dated
                    April 4, 2003

4.3  *              Convertible  Promissory  Note from the  Company  to  Charter
                    Management dated August 25, 2003

10.1 [1]            Master  Agreement  between  NESNJ and PPL dated  January 11,
                    1999.

10.2[1]             Lease for the premises  located at 3153 Fire Road, Suite 2C,
                    Egg Harbor Township, New Jersey 08234 dated April 13, 2001.

10.3 [1]            The Share Exchange dated October 19, 2001.

10.4 [1]            Lease for the premises located at 328 South Main Street, New
                    Hope, PA 18938 dated December 27, 2001.

10.5 [2]            Master Agreement with Charter Management.

10.6 [2]            Addendum Two to Egg Harbor Township lease.

10.7 [2]            New Hope lease extension.

10.8 [2]            Sample funding agreement with Charter Management.

14.1   *            Code of Ethics and Business Conduct

16.1                Letter  from  Maillie,  Falconiero  &  Company,  LLP  to the
                    Commission

17.1  *             Letter of Resignation of David W. Mason

17.2  *             Letter of Resignation of Rusty Gramiak

17.3  *             Letter of Resignation of Edward Ragazzi

17.4  *             Letter of Resignation of John Grillo

17.5  *             Letter of Resignation of Larry Shusman

31.1   *            Certification re: Section 302 (CEO)

31.2   *            Certification re: Section 302 (Controller)

32.1   *            Certification re: Section 906 (CEO)

32.2    *           Certification re: Section 906 (Controller)

-------------------------------------------------
[1]  Filed with the Company's Registration Statement on November 14, 2002.
[2]  Filed with the  Company's  Amended  Registration  Statement  on November 6,
     2003.
*    Filed herein.


     (b)  Reports on Form 8-K During the last  quarter of the fiscal  year ended
October 31, 2003, we did not file any reports on Form 8-K.


ITEM 14. PRINCIPLE ACCOUNTANT FEES AND SERVICES

Audit Fees. The aggregate  fees billed for  professional  services  rendered was
$25,730 and $20,751 for the audit of the Company's annual  financial  statements
for the fiscal  years ended  October 31,  2003 and 2002,  respectively,  and the
reviews of the financial  statements  included in the Company's Forms 10-QSB for
those fiscal years.

Audit-Related  Fees.  The  aggregate  fees billed in each of the last two fiscal
years for assurance and related  services by the principal  accountant  that are
reasonably  related to the  performance  of the audit or review of the Company's
financial statements and not reported under the caption "Audit Fee."

Tax  Fees.  No fees  were  billed  in each of the  last  two  fiscal  years  for
professional  services rendered by the principal  accountant for tax compliance,
tax advice and tax planning services.

All Other Fees.  Other than the services  described  above,  the aggregate  fees
billed  for  services  rendered  by the  principal  accountant  was  $0 and  $0,
respectively, for the fiscal years ended October 31, 2003 and 2002.

Audit  Committee  Policies and Procedures.  The Board of Directors  performs the
duties  of an audit  committee.  The Board of  Directors  must  pre-approve  all
auditing services and permitted non-audit services (including the fees and terms
thereof) to be performed for the Company by its independent auditors, subject to
the  de  minimus   exceptions  for  non-audit   services  described  in  Section
10A(i)(1)(B) of the Securities Exchange Act of 1934, which should be nonetheless
be approved by the Board of Directors prior to the completion of the audit. Each
year the  independent  auditor's  retention to audit our  financial  statements,
including the associated fee, is approved by the committee  before the filing of
the previous year's annual report on Form 10-KSB. At the beginning of the fiscal
year, the Board of Directors will evaluate other known potential  engagements of
the  independent  auditor,  including the scope of work proposed to be performed
and the proposed fees,  and approve or reject each service,  taking into account
whether the  services  are  permissible  under  applicable  law and the possible
impact of each non-audit service on the independent auditor's  independence from
management.  At each such  subsequent  meeting,  the auditor and  management may
present  subsequent  services for approval.  Typically,  these would be services
such as due diligence for an acquisition,  that would not have been known at the
beginning of the year.

Since May 6, 2003, the effective date of the Securities and Exchange  Commission
rules  stating  that an auditor  is not  independent  of an audit  client if the
services  it  provides to the client are not  appropriately  approved,  each new
engagement  of Bagell,  Josephs & Company,  LLC, has been approved in advance by
the Board of Directors, and none of those engagements made use of the de minimus
exception  to  the  pre-approval   contained  in  Section  10A(i)(1)(B)  of  the
Securities Exchange Act of 1934.




<PAGE>


                                   SIGNATURES


In  accordance  with the Exchange  Act, this report has been signed below by the
following  persons  on  our  behalf  and  in the  capacities  and  on the  dates
indicated.


Date: February 11, 2005          National Energy Services Company, Inc.
                                --------------------------------------
                                           (Registrant)


                        By: /s/ John A. Grillo
                        ----------------------------------------
                        John A. Grillo, CEO and President


Pursuant to the requirements of the Exchange Act, this Report has been signed
below by the following persons on behalf of the Registrant and in the capacities
and on the dates indicated.


Signature                                   Title                     Date

/s/ John A. Grillo                                             February 11, 2005
-----------------------------       CEO, President & Director
John A. Grillo

/s/ John O'Neil                                                February 11, 2005
-----------------------------           Chairman
John O'Neil

/s/ Deborah O'Neil                                             February 11, 2005
-----------------------------     Secretary, Treasurer and Director
Deborah O'Neil


<PAGE>


















                     NATIONAL ENERGY SERVICES COMPANY, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                      YEARS ENDED OCTOBER 31, 2004 AND 2003
























<PAGE>





                     NATIONAL ENERGY SERVICES COMPANY, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






Report of Independent Registered Public Accounting Firm .....................F-2

Consolidated Balance Sheets..................................................F-3

Consolidated Statements of Operation.........................................F-4

Consolidated Statements of Changes
in Stockholders' Equity (Deficit)............................................F-5

Consolidated Statements of Cash Flow.........................................F-6

Notes to Consolidated Financial Statements...................................F-8





















                                      F-1
<PAGE>



                        BAGELL, JOSEPHS & COMPANY, L.L.C.
                          Certified Public Accountants



High Ridge Commons
Suites 400-403
200 Haddonfield Berlin Road
Gibbsboro, New Jersey 08026
(856) 346-2828   Fax (856) 346-2882


               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'

The Board of Directors and Stockholders
National Energy Services Company, Inc.
Egg Harbor Township, New Jersey

We have audited the accompanying  consolidated balance sheets of National Energy
Services  Company,  Inc.,  as of  October  31,  2004 and  2003  and the  related
consolidated statements of operations, changes in stockholders' equity (deficit)
and cash flows for the years then ended. These consolidated financial statements
are the  responsibility of the Company's  management.  Our  responsibility is to
express an  opinion  on these  consolidated  financial  statements  based on our
audits.

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

In our opinion, the consolidated  financial statements referred to above present
fairly,  in all material  respects,  the financial  position of National  Energy
Services  Company,  Inc., as of October 31, 2004 and 2003 and the results of its
operations  and its cash  flows  for the years  then  ended in  conformity  with
accounting principles generally accepted in the United States.

The accompanying  consolidated  financial statements have been prepared assuming
that the Company will  continue as a going  concern.  As discussed in Note 14 to
the consolidated financial statements,  the Company has experienced  substantial
net losses for the years ended  October  31, 2004 and 2003 that has  resulted in
substantial accumulated deficits. The Company's financial position and operating
results  raise  substantial  doubt  about its  ability  to  continue  as a going
concern.  Management's  plans with regard to these matters are also described in
Note 14. The  consolidated  financial  statements do not include any adjustments
that might result from the outcome of this uncertainty.

Bagell Josephs & Company, LLC
Bagell Josephs & Company, LLC
Gibbsboro, New Jersey

January 15, 2005







MEMBER OF:
AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS  (AICPA) SEC PRACETIC SECTION
OF THE AICPA  (SECPSI)  NEW  JERSEY  SOCIETY  OF  CERTIFIED  PUBLIC  ACCOUNTANTS
PENNSYLVANIA  INSTITUTE OF CERTIFIED PUBLIC  ACCOUNTANTS  FLORIDA STATE BOARD OF
ACCOUNTANCY


                                      F-2
<PAGE>



<TABLE>
<CAPTION>
                     NATIONAL ENERGY SERVICES COMPANY, INC.
                           CONSOLIDATED BALANCE SHEETS
                      YEARS ENDED OCTOBER 31, 2004 AND 2003

                                                                                      2004               2003
                                                                                 ---------------    --------------
<S>                                                                                 <C>              <C>
ASSETS
Current Assets:
  Cash and cash equivalents                                                         $     73,223     $      45,656
  Accounts receivable, net                                                                43,116           183,285
  Notes receivable - related parties                                                     284,853           334,292
  Notes receivable - other, current portion                                            1,709,128           975,566
  Prepaid expenses and other current assets                                              203,132           132,500
    Total Current Assets                                                               2,313,452         1,671,299
                                                                                 ---------------    --------------

  Fixed assets, net of depreciation                                                       13,503            16,639
  Notes receivable - other, net of current portion                                     2,393,627         3,546,966
  Other assets                                                                            88,521            78,279
TOTAL ASSETS                                                                        $  4,809,103       $ 5,313,183
                                                                                 ===============    ==============

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
LIABILITIES
Current Liabilities:
  Note payable - bank                                                             $            -         $   4,648
  Line of credit                                                                         116,665           154,761
  Accounts payable and accrued expenses                                                  246,242           928,732
  Notes payable - related parties                                                         80,901           182,037
  Current portion of long-term debt                                                    2,115,382         1,231,435
      Total Current Liabilities                                                        2,559,190         2,501,613
                                                                                 ---------------    --------------
Long-term debt, net of current portion                                                 2,545,121         3,539,626
      Total Liabilities                                                                5,104,311         6,041,239
                                                                                 ---------------    --------------
STOCKHOLDERS' EQUITY (DEFICIT)
  Preferred stock, Series A, $.001 Par Value, 500,000 shares authorizeed,
     187,389 and 78,702 shares issued and outstanding at October 31, 2004
     and 2003, respectively.                                                                 187                79
  Common Stock, $.001 Par Value; 20,000,000 shares authorized 15,698,014 and
     15,598,014 shares issued and outstanding at
     October 31, 2004 and 2003, respectively                                              15,698            15,598
  Additional Paid-in Capital                                                           2,453,418         1,444,226
  Deficit                                                                             (2,764,511)       (2,187,959)
      Total Stockholders' Equity (Deficit)                                              (295,208)         (728,056)
                                                                                 ---------------    --------------

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)                                $  4,809,103      $  5,313,183
                                                                                 ===============    ==============
</TABLE>



                       The accompanying consolidated notes
                are an integral part of the financial statements.

                                      F-3
<PAGE>



<TABLE>
<CAPTION>
                     NATIONAL ENERGY SERVICES COMPANY, INC.
                      CONSOLIDATED STATEMENT OF OPERATIONS
                      YEARS ENDED OCTOBER 31, 2004 AND 2003


                                                                                       2004                      2003
                                                                                -------------------        ----------------
<S>                                                                             <C>                        <C>
OPERATING REVENUES
  Equipment sales                                                               $           831,615        $      2,571,409
  Management revenue                                                                          4,455                 116,119
  Energy management revenue                                                                  74,200                  76,800
  Energy sales                                                                                3,830                   1,810
                                                                                -------------------        ----------------

                                                                                            914,100               2,766,138
COST OF SALES                                                                               520,987               2,460,494
GROSS PROFIT                                                                                393,113                 305,644
                                                                                -------------------        ----------------

OPERATING EXPENSES
   Selling expenses                                                                         399,627                 470,499
   General and administrative expenses                                                      513,394                 944,087
   Depreciation and amortization                                                              7,344                   8,034
       Total Operating Expenses                                                             920,365               1,422,620
                                                                                -------------------        ----------------

LOSS BEFORE OTHER (EXPENSE)                                                                (527,252)             (1,116,976)

OTHER (EXPENSE)
   Interest expense                                                                         (49,300)                (50,079)
       Total Other (Expense)                                                                (49,300)                (50,079)
                                                                                -------------------        ----------------

NET LOSS BEFORE PROVISION FOR INCOME TAXES
                                                                                           (576,552)             (1,167,055)
Provision for Income Taxes                                                                        -                       -
                                                                                -------------------        ----------------

NET LOSS APPLICABLE TO COMMON SHARES                                            $          (576,552)       $     (1,167,055)
                                                                                ===================        ================

NET LOSS PER BASIC AND DILUTED SHARES                                           $             (0.04)       $          (0.09)
                                                                                ===================        ================

WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                                                                   15,638,293              13,341,032
                                                                                ===================        ================
</TABLE>


                       The accompanying consolidated notes
                are an integral part of the financial statements.

                                      F-4
<PAGE>



<TABLE>
<CAPTION>
                     NATIONAL ENERGY SERVICES COMPANY, INC.
      CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT)
                      YEARS ENDED OCTOBER 31, 2004 AND 2003


                                                                                          Additional
                                          Preferred Stock            Common Stock         Paid-in
Description                              Shares        Amount     Shares       Amount      Capital         Deficit        Total
------------------------------------- ----------- ------------ ------------ ------------  ------------- -------------  -----------

<S>                                   <C>         <C>          <C>          <C>           <C>           <C>            <C>
Balance, October 31, 2002                       - $         -    12,594,260 $      12,594 $     531,506 $  (1,020,904) $  (476,804)

Issuance of common stock in exchange
 for services                                   -           -        25,000            25         2,075             -        2,100
Issuance of common stock in exchange
 for cash                                       -           -     2,978,754         2,979       247,021             -      250,000
Conversion of loans payable - other
  to preferred stock, class A              78,702          79             -            -        663,624             -      663,703

Net loss for the year                           -           -             -   (1,167,055)    (1,167,055)
                                      ----------- ------------ ------------ ------------  ------------- -------------  -----------

Balance, October 31, 2003                  78,702          79    15,598,014       15,598      1,444,226    (2,187,959)    (728,056)
Issuance of common stock for cash                                   100,000          100          8,300             -        8,400
Issuance of preferred stock for cash      108,687         108                                 1,000,892             -    1,001,000

Net loss for the year                           -           -             -            -                     (576,552)    (576,552)

Balance, October 31, 2004                 187,389 $       187    15,698,014 $     15,698  $   2,453,418  $ (2,764,511) $  (295,208)
</TABLE>



                       The accompanying consolidated notes
                are an integral part of the financial statements.

                                      F-5
<PAGE>



<TABLE>
<CAPTION>
                     NATIONAL ENERGY SERVICES COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                      YEARS ENDED OCTOBER 31, 2004 AND 2003

                                                                                            2004            2003
                                                                                ----------------    ----------------
<S>                                                                             <C>                 <C>
CASH FLOW FROM OPERATING ACTIVITIES
   Net loss                                                                     $       (576,552)   $     (1,167,055)

   Adjustments to reconcile net loss to net cash
     used in operating activities

     Depreciation                                                                          7,344               8,034
     Common stock issued for services                                                          -               2,100

  Changes in assets and liabilities
     Decrease in accounts receivable                                                     140,169             329,830
     (Increase) in prepaid expenses and other assets                                     (70,632)           (130,750)
     (Increase) in deposits                                                              (10,242)            (78,279)
     (Decrease) in accounts payable and
       and accrued expenses                                                             (682,490)            (42,092)
                                                                                ----------------    ----------------
     Total adjustments                                                                  (615,851)             88,843
                                                                                ----------------    ----------------

     Net cash (used in) operating activities                                          (1,192,403)         (1,078,212)
                                                                                ----------------    ----------------

CASH FLOWS FROM INVESTING ACTIVITIES
   Net amounts received (paid) from loans receivable - related party                      49,439             (17,369)
   Net amounts received (paid) from loans receivable                                     419,777            (863,021)
   Acquisitions of fixed assets                                                           (4,208)                  -
                     -                                                          ----------------    ----------------

      Net cash provided by (used in) investing activities                       $        465,008    $       (880,390)
                                                                                ----------------    ----------------
</TABLE>


                       The accompanying consolidated notes
                are an integral part of the financial statements.

                                      F-6
<PAGE>



<TABLE>
<CAPTION>
                     NATIONAL ENERGY SERVICES COMPANY, INC.
                      CONSOLIDATED STATEMENTS OF CASH FLOW
                      YEARS ENDED OCTOBER 31, 2004 AND 2003
                                  (CONTINUED)

                                                                                            2004            2003
                                                                                ----------------    ----------------
<S>                                                                             <C>                 <C>
CASH FLOWS FROM FINANCING ACTIVITES
    Proceeds from common stock issuances                                        $          8,400    $        250,000
    Proceeds from preferred stock issuances                                            1,001,000                   -
    Repayment of line of credit                                                          (38,096)            (23,810)
    Repayment of note payable - bank                                                    (115,206)             (9,297)
    Net proceeds from long-term debt                                                           -           1,111,549
    Net proceeds (payments) from note payable - related party                           (101,136)            654,838
       Net cash provided by financing activities                                         754,962           1,983,280
                                                                                ----------------      --------------

NET INCREASE  IN CASH AND CASH EQUIVALENTS                                                27,567              24,678

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR                                             45,656              20,978
                                                                                ----------------      --------------

CASH AND CASH EQUIVALENTS - END OF YEAR                                         $         73,223      $       45,656
                                                                                ================      ==============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:

CASH PAID DURING THE YEAR FOR:
    Interest expense                                                            $         49,300      $       50,079
                                                                                ================      ==============

SUPPLEMENTAL DISCLOSURE OF NONCASH ACTIVITIES:
    Issuance of common stock for:

   Services                                                                     $          8,400      $        2,100
                                                                                ================      ==============

   Issuance of preferred stock to convert notes payable - related parties       $              -      $      663,703
                                                                                ================      ==============

   Disposal of fully depreciated fixed assets                                   $          5,167      $            -
                                                                                ================      ==============
</TABLE>


                       The accompanying consolidated notes
                are an integral part of the financial statements.

                                      F-7
<PAGE>


                     NATIONAL ENERGY SERVICES COMPANY, INC.
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                            OCTOBER 31, 2004 AND 2003



NOTE 1 - NATURE OF BUSINESS

National Energy Services Company,  Inc. ("NES") was incorporated on February 17,
1998 in Nevada as Coastal  Enterprises,  Inc.  to engage in an  internet-related
business.   The  Company  and  National  Energy  Services   Company,   Inc.,  an
unaffiliated  New  Jersey  corporation  formed  in  late  1995  ("NESNJ"  or the
"Company"),  entered into an Agreement and Plan of Share Exchange, dated October
19, 2001, (the "Share Exchange")  pursuant to which the shareholders of NESNJ on
October 19, 2001 (the "Exchange Date") were issued  10,000,000  shares of common
stock of NES, par value $0.001 in exchange for one hundred percent (100%) of the
issued and outstanding  shares of NESNJ.  Prior to the exchange,  the authorized
capital stock of NES consisted of 20,000,000  shares of common stock,  par value
$0.001,  of which  1,700,000  shares were issued and  outstanding  and 1,000,000
shares  of  preferred  stock,  par  value  $0.001,   of  which  no  shares  were
outstanding.  All outstanding shares were fully paid and non assessable, free of
liens,  encumbrances,  options,  restrictions  and legal or equitable  rights of
others  not a party to the Share  Exchange.  The Share  Exchange  called for the
resignation  of the  original  officers  and  directors,  who no longer have any
continued  involvement  in the Company,  and the  appointing  of a new board and
officers. As of the Exchange Date, NESNJ became a wholly owned subsidiary of the
Company.

For accounting  purposes,  the  transaction  was been accounted for as a reverse
acquisition under the purchase method of accounting.  Accordingly, NESNJ will be
treated as the  continuing  entity for  accounting  purposes,  and the financial
statements presented herein are those of NESNJ.

Upon this transaction, the Company changed its business plan to NESNJ's business
plan of marketing  aggregated energy management  services to the long- term care
industry.  The Company capitalized on their experience as electrical contractors
to  develop a  comprehensive  energy  management  program  for  long-  term care
facilities,  which is paid  directly  from savings  generated  by energy  system
improvements.  The program  features an upgrade to lighting  fixtures,  improved
heating, venting and air conditioning ("HVAC") equipment,  ozone laundry support
systems ("OLSS"),  all of which serve to strengthen their current profitability,
maintain contractually  competitive power during deregulation  uncertainty,  and
fund these renovations  through the monthly energy savings with no out-of-pocket
costs to the facility.

To provide funding for the energy  conservation  projects,  the Company formed a
strategic  alliance with PP&L. PP&L markets energy related products and services
to  commercial  and  industrial  customers.  This  association  creates a common
structure that packages an energy upgrade and several energy management services
within a long-term  energy  supply  contract,  assuring  customers of continuing
competitive pricing.




                                       F-8
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003



NOTE 2 -          SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated  financial  statements  include the accounts of the Company and
its  wholly  owned  subsidiary.   All  significant  inter-company  accounts  and
transactions have been eliminated in consolidation.

Use of Estimates

The preparation of financial statements in conformity with accounting principles
generally  accepted in the United States of America requires  management to make
estimates  and  assumptions  that  affect  the  reported  amounts  of assets and
liabilities and disclosures of contingent  assets and liabilities at the date of
the consolidated  financial  statements and the reported amounts of revenues and
expenses  during the reporting  period.  Actual  results could differ from those
estimates.

Revenue Recognition

The Company  recognizes  revenues as these revenues are earned under the various
contracts the Company enters into. Staff Accounting  Bulletin No. 101,  "Revenue
Recognition in Financial  Statements"  discusses  several  issues  regarding how
companies can  recognize  revenues.  Accordingly,  the Company has contracts for
each type of revenue  generating  activity,  however,  some  revenue  generating
activities are combined in the same agreement.

The   Company   has   developed   a   proprietary   comprehensive,   cost-driven
energy-management  system  called the Energy  Gatekeeper  Program  which  custom
tailors an energy  conservation plan to maximize energy efficiency in any energy
consuming building system for long-term health care facilities thereby improving
their bottom line. The Company has  aggressively  embraced new  technologies and
formed strategic  alliances that enable it to offer  state-of-the-art  goods and
services for the purpose of saving  long-term  health care facilities  operating
costs on a month-to-month basis with no out-of-pocket cost.

The Energy  Gatekeeper  Program  bundles energy saving system upgrades within an
energy supply agreement.  The health care facility signs a contract of 60 months
or longer in which all equipment  upgrades are paid for and all energy bills are
consolidated into one invoice. The complete service contract provides:

-    Monitoring of utility usage to spot inefficiencies;
-    All energy bills consolidated into one easy to manage invoice; and
-    Competitive supply price guarantee for life of contract.


                                       F-9
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

The Energy  Gatekeeper  Program is a combined  service and  financing  agreement
whereby the facility has all its energy services  managed by the Company and its
energy solutions  partner.  The customer obtains new energy efficient  lighting,
HVAC  equipment  and OLSS systems.  All equipment is amortized  over a 60- month
period, with current standard contracts specifying a minimum of 36 to 60 months.
Additionally, the Company contracts carry a 24-month renewal period.

The Company  controls  the  acquisition  of power to all  customers in two ways,
contractually and through a limited power of attorney.  This ability to exercise
complete  control is more than found in most  other such  financing  agreements,
enhancing  the level of  security  for the  funding  source and  increasing  the
payment impetus for the installed equipment.

The products and services offered in the Energy Gatekeeper Program include:

OLSS (Ozone Laundry Support System)
Lighting Upgrades
Mechanical Systems (HVAC)
Water/Sewer Conservation Methods
Acquiring On Generation & Asset Management Energy Supply Procurement Management

Strategic Alliance with PP&L Spectrum, Inc:

The Company has formed a strategic  alliance with Penn Power & Light ("PP&L") to
market  energy-related  products  and  services  to  commercial  and  industrial
customers.   It  delivers   products  and  services  to  customers  through  its
subsidiaries.

In this alliance, PP&L provides critical support to the Company in several ways;
Funding Source - PP&L Spectrum  serves as a funding source  providing  financing
for the equipment  upgrades  including  lighting,  HVAC,  OLSS systems and water
conservation  measures and Engineering - PP&L provides system  analysis,  design
and engineering for potential HVAC, Mechanical and Microturbine projects.

The Company  receives 5% of the gross project cost as a sales  commission on all
projects specified and managed by PP&L, which are referred by the Company. These
commissions received by the Company are recorded in its consolidated  statements
of operations under management revenues.  The Company recognizes the commissions
in accordance with the agreement with PP&L. The Company has not negotiated these
commission  agreements  with PP&L in over one year.  All  remaining  commissions
earned are part of the  original  contracts  the Company  had entered  into with
PP&L, and are not a material component of management revenues.


                                       F-10
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

Strategic  Alliance with Charter  Management  LLC: In October 2002,  the Company
received  a term  sheet  from  Charter  Management  LLC,  ("Charter")  a lending
institution,  relating to an  alliance  between  the  Company  and  Charter.  It
outlines  Charter's   willingness  to  finance  Company  projects  to  long-term
healthcare facilities, sub-acute units of hospitals, assisted living residences,
retirement  communities  and the like up to  $1,000,000  per year. In each case,
Charter has the right to perform a credit  analysis of the facility at which the
project will be performed  and to reject any unfit  candidate.  Credit  analysis
will  also be  utilized  by  Charter  to  determine  interest  rate  and term of
repayment.  Charter will pay the Company as work is performed. The Company shall
collect all payments in favor of Charter, and may charge a 1% administrative fee
in connection therewith.

The Company has signed a master  agreement with Charter for the express  purpose
of allowing  Charter to fund energy  upgrade and retrofit  opportunities  in the
long-term  care/retirement  community industry in a series of funding agreements
for each job.

Once a  contractual  agreement  is reached  between the Company and the customer
facility,  upon credit approval,  Charter provides  financing for energy upgrade
and retrofit projects to be paid back over a 5 year period, which are negotiated
at the time of contract  signing.  This term  represents the term of the service
contract.

Each time a project  is  funded,  the  Company  signs a  separate  Project  Loan
Agreement with Charter acknowledging responsibility for all loan payments in the
event of default by the facility.

Charter may terminate the master  agreement  with 30 days written  notice to the
Company.

In lieu of the  traditional  collection  methods used for loan repayment such as
coupons or monthly statements, the equipment financing payment is added into the
monthly utility bill that the customer  receives.  For financing  providers this
produces a greater level of asset repayment protection. Traditionally a facility
would  receive  an energy  bill from the  provider  of that  service  and submit
payment  directly to that provider.  Under the Energy  Gatekeeper  Program,  the
Company  becomes the energy  manager and  receives the  facility's  energy bills
directly from the energy suppliers and  transporters.  Upon receiving the energy
bills for a facility,  the Company  consolidates  all of the  facility's  energy
bills (combining the natural gas,  electricity,  water and sewer bills) into one
invoice.



                                       F-11
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

After the different  utility  costs and the  financing  costs have been combined
into one consolidated  energy invoice,  that invoice is sent to the facility and
payment from the  facility is remitted to the  Company.  Upon receipt of payment
for the  consolidated  energy  invoice,  the  Company  forwards  payment  to the
individual  energy suppliers for the actual cost of energy and makes the payment
to the financing  institution  that supplied the capital for the installation of
the energy efficient upgrades.

For example,  the financing  charges for an  energy-efficient  lighting  upgrade
would be added into the electric  portion of a consolidated  invoice because the
upgrade reduced the corresponding electricity usage.

This  advantage  adds one more level of control to the  Company's  process.  The
Company already controls the operations and management of the project  equipment
and energy supply.

The  Financial   Accounting   Standards   Board  issued  EITF  00-21,   "Revenue
Arrangements  with Multiple  Deliverables",  which focuses on the separation and
allocation  of the  arrangement  fee  for  revenue  arrangements  with  multiple
deliverables.  Specifically,  the Company does bundle  their  energy  management
service  package with the  installation  agreement in the gatekeeper  agreement.
However, the Company does bill separately for those services, and one service is
not contingent on the other.  Pursuant to Staff Accounting  Bulletin Topic 11:M,
which deals with the impact  recently issued  accounting  standards will have on
the financial  statements of registrants  when adopted in a future  period,  the
Company  does not believe that the  consolidated  financial  statements  will be
materially affected by EITF 00-21.

Certain  fees the Company  will  receive are not  necessarily  provided for in a
separate agreement,  such as management revenue,  rather they are bundled in the
same  agreement  entered  into for the  initial  equipment  sale.  However,  the
Company's  policy  for the  recognition  for each type of  revenue  varies.  The
Company will  recognize the revenue for the equipment  sales upon  installation,
and the  management  revenue is earned  systematically  over the duration of the
period in which those services will be provided. The Company values each element
in accordance with the provisions of the Statement of Financial  Concepts No. 5,
"Recognition and Measurement in Financial Statements of Business Enterprises".


                                       F-12
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

The Company  believes their earnings  process is completed upon  installation of
the  equipment  as it relates to  equipment  sales.  However,  the Company  will
continuously  manage and service its customers and bill for those  services over
time. This activity is not part of the installation  component,  however, it's a
separate revenue generating activity.

Under SFAC 5, the Company recognizes revenue for each of its components when the
revenue is realized or  realizable  and earned  when  persuasive  evidence of an
arrangement  exists;  delivery has occurred or services have been rendered;  the
price is fixed or determinable;  and collectibility is reasonably assured.  When
considering  the  types of  arrangement  the  Company  enters  into,  all of the
criteria  are  present,  and  therefore,  are  recorded in  accordance  with the
authoritative literature.

Management  revenues and  management  energy  revenues are recognized and billed
monthly as earned,  or as commissions  when the equipment sales are final at the
time of  installation,  which is the time the  earnings  process  is  completed.
Management  revenue  includes  fees  earned  for  processing  rebate  claims for
customers.  Energy  management  revenue is a fee charged the  customer to ensure
that the customer is being billed  correct  rates and tariffs by the  utilities.
Energy sales occur when the Company  purchases  energy  directly  from a utility
provider and resells it to a user.

On March 16, 2000, the Emerging  Issues Task Force issued EITF 99-19  "Recording
Revenue as a Principal  versus Net as an Agent" which addresses the issue of how
and when  revenues  should be  recognized  on a Gross or Net method as the title
implies.  The Emerging  Issues Task Force has not reached a consensus  but sites
SEC Staff  Accounting  Bulletin  101.  EITF 99-19 does not affect the  Company's
consolidated financial statements.

Cash and Cash Equivalents

The Company  considers all highly liquid debt  instruments and other  short-term
investments  with  an  initial  maturity  of  three  months  or  less to be cash
equivalents.  The Company maintains cash and cash equivalent balances at several
financial  institutions  that  are  insured  by the  Federal  Deposit  Insurance
Corporation up to $100,000.



                                       F-13
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

All  property and  equipment  are  recorded at cost and  depreciated  over their
estimated  useful  lives,  generally  three,  five or  seven  years,  using  the
straight-line method. Upon sale or retirement, the costs and related accumulated
depreciation  are eliminated from their respective  accounts,  and the resulting
gain or loss is included in the results of operations.  Repairs and  maintenance
charges,  which do not increase  the useful lives of the assets,  are charged to
operations as incurred.

Income Taxes

The income tax  benefit is  computed on the pretax loss based on the current tax
law.  Deferred  income taxes are recognized for the tax  consequences  in future
years of differences  between the tax basis of assets and  liabilities and their
financial  reporting  amounts at each  year-end  based on  enacted  tax laws and
statutory tax rates.

(Loss) Per Share of Common Stock

Historical  net (loss) per common share is computed  using the weighted  average
number of common shares  outstanding.  Diluted  earnings per share (EPS) include
additional  dilution  from  common  stock  equivalents,  such as stock  issuable
pursuant to the exercise of stock options and warrants. Common stock equivalents
are not  included  in the  computation  of diluted  earnings  per share when the
Company  reports a loss because to do so would be  antidilutive  for the periods
presented.

                  The following is a reconciliation of the computation for basic
and diluted EPS:

                                                October 31,        October 31,
                                                   2004               2003
                                               ------------        ------------
Net Loss                                        ($576,552)         ($1,167,055)

Weighted-average common shares
   outstanding (Basic)                         15,638,293           13,341,032

Weighted-average common stock equivalents:
   Stock options and warrants                           -                    -

Weighted-average common shares
   outstanding (Diluted)                       15,638,293           13,341,032

Options and  warrants  outstanding  to purchase  stock were not  included in the
computation of diluted EPS because inclusion would have been antidilutive.


                                       F-14
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003



NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

The carrying  amount  reported in the  consolidated  balance sheets for cash and
cash equivalents,  accounts receivable,  accounts payable,  accrued expenses and
notes  payable  approximate  fair value  because of the  immediate or short-term
maturity of these financial instruments.

Advertising

Costs of  advertising  and marketing are expensed as incurred.  Advertising  and
marketing  costs were $6,105 and $8,112 for the years ended October 31, 2004 and
2003, respectively.

Stock-Based Compensation

The Company has elected to follow  Accounting  Principles  Board Opinion No. 25,
"Accounting   for  Stock  Issued  to  Employees"   (APB  No.  25),  and  related
interpretations,  in accounting for their employee stock options rather than the
alternative  fair value  accounting  allowed by SFAS No.  123,  "Accounting  for
Stock-Based Compensation", and has adopted the enhanced disclosure provisions of
SFAS No.  148,  "Accounting  for  Stock  Based  Compensation  -  Transition  and
Disclosures",  an  amendment  of SFAS No.  123.  APB No.  25  provides  that the
compensation  expense  relative  to the  Company's  employee  stock  options  is
measured based on the intrinsic value of the stock option. SFAS No. 123 requires
companies  that continue to follow APB No. 25 to provide a pro-forma  disclosure
of the impact of applying the fair value method of SFAS No. 123.

The  Company  measures   compensation   expense  for  its  employee  stock-based
compensation using the intrinsic-value  method. Under the intrinsic-value method
of accounting for stock-based  compensation,  when the exercise price of options
granted to employees  is less than the  estimated  fair value of the  underlying
stock on the date of the  grant,  deferred  compensation  is  recognized  and is
amortized to compensation expense over the applicable vesting period. In each of
the periods  presented,  the vesting  period was the period in which the options
were granted.  All options were expensed to  compensation  in the period granted
rather than the exercise date.

The  Company  measures  compensation  expense for its  non-employee  stock-based
compensation  under the Financial  Accounting  Standards  Board (FASB)  Emerging
Issues Task Force (EITF) Issue No.  96-18,  "Accounting  for Equity  Instruments
that are Issued to Other Than  Employees for Acquiring,  or in Conjunction  with
Selling  Goods or  Services".  The fair  value of the  option  issued is used to
measure the  transaction,  as this is more  reliable  than the fair value of the
services  received.  The fair value is  measured  at the value of the  Company's
common stock on the date that the  commitment for  performance is complete.  The
fair value of the equity instrument is charged directly to compensation  expense
and additional paid-in capital.

                                       F-15
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Provision for Bad Debt

The allowance for  uncollectible  accounts and notes receivable are based on the
historical  experience  of the Company  and on  management's  evaluation  of the
collectibility of the individual outstanding balances. Customer's credit ratings
are evaluated prior to entering into any revenue agreements.

Under SOP 01-6 "Accounting for Certain Entities  (including  Entities with Trade
Receivables),  the Company reports receivables at the fair value less nay charge
offs  and  allowances  for  uncollectible   amounts.  In  addition,   any  loans
originating  from  receivables  are reported net of any  unamortized  premium or
discount.

Bad debt  expense for the years ended  October 31, 2004 and 2003 was $62,327 and
$289,245, respectively.

Recent Accounting Pronouncements

In June 2001, the FASB issued  Statement No. 142 "Goodwill and Other  Intangible
Assets".  This  Statement  addresses  financial  accounting  and  reporting  for
acquired goodwill and other intangible assets and supersedes APB Opinion No. 17,
Intangible  Assets.  It  addresses  how  intangible  assets  that  are  acquired
individually  or with a group  of other  assets  (but not  those  acquired  in a
business combination) should be accounted for in financial statements upon their
acquisition.  This Statement  also  addresses how goodwill and other  intangible
assets should be accounted for after they have been initially  recognized in the
financial statements.  This statement does not currently impact the consolidated
financial statements.

In December  2002,  the FASB issued  Statement No. 148,  "Accounting  for Stock-
Based  Compensation-Transition  and Disclosure",  an amendment of FASB Statement
No. 123"("SFAS  148").  SFAS 148 amends FASB Statement No. 123,  "Accounting for
Stock-Based  Compensation," to provide  alternative methods of transition for an
entity that voluntarily changes to the fair value based method of accounting for
stock-based employee  compensation.  It also amends the disclosure provisions of
that Statement to require prominent disclosure about the effects on reported net
income of an entity's  accounting  policy  decisions with respect to stock-based
employee  compensation.  Finally,  this Statement amends  Accounting  Principles
Board  ("APB")  Opinion  No.  28,  "Interim  Financial  Reporting",  to  require
disclosure  about those effects in interim  financial  information.  SFAS 148 is
effective for financial  statements  for fiscal years ending after  December 15,
2002. The Company will continue to account for stock-based employee compensation
using the intrinsic  value method of APB Opinion No. 25,  "Accounting  for Stock
Issued to Employees",  but has adopted the enhanced  disclosure  requirements of
SFAS 148.



                                       F-16
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003



NOTE 3- FIXED ASSETS

Fixed assets consist of the following at October 31, 2004 and 2003:

                                       2004         2003
                                   ----------    ---------
Office equipment                   $   29,793    $  30,465
Furniture and fixtures                  2,107        2,107
Leasehold improvements                  2,900        3,187
                                   ----------    ---------
                                       34,800       35,759
Accumulated Depreciation              (21,297)     (19,120)
                                   ----------    ---------
                Total              $   13,503    $  16,639

Depreciation  expense was $7,344 and $8,034 for the years ended October 31, 2004
and 2003. During the year, fully depreciated assets in the amount of $5,167 were
disposed of and subsequently written off.

NOTE 4- NOTES RECEIVABLE - OTHER

The Company has outstanding notes receivable  representing  customer notes under
their Energy Gatekeeper Program.

Under the Energy Gatekeeper Program,  the Company becomes the energy manager and
receives the  facility's  energy bills  directly  from the energy  suppliers and
transporters.  Upon  receiving  the energy  bills for a  facility,  the  Company
consolidates  all of the  facility's  energy bills  (combining  the natural gas,
electricity, water and sewer bills into one invoice).

Additionally,   the  monthly   project   financing  costs  are  added  into  the
consolidated  invoice.  This makes for a "seamless" bill that includes the costs
of conventional  utilities,  as well as the amortized costs of the energy-saving
equipment.  After the different  utility costs and the financing costs have been
combined  into one  consolidated  energy  invoice,  that  invoice is sent to the
facility and payment from the facility is remitted to the Company.  Upon receipt
of payment for the consolidated energy invoice,  the Company forwards payment to
the  individual  energy  suppliers  for the actual  cost of energy and makes the
payment  to  the  financing  institution  that  supplied  the  capital  for  the
installation of the energy efficient upgrades.

The notes  correspond to long-term  debt with PP&L and Charter  Management  (see
Note 8). The notes  receivable  are shown net of an allowance for  uncollectible
amounts of $307,201 at October 31, 2004.




                                       F-17
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003



NOTE 4- NOTES RECEIVABLE - OTHER (CONTINUED)

The  maturity  of these  notes  receivable  in the next  four  years  and in the
aggregate are:

Year Ending October 31,:

2005 $ 1,709,128 2006 1,543,216 2007 765,217 2008 85,194

     4,102,755 Less: current portion (1,709,128)

     Notes receivable - other, net of current portion $2,393,627


NOTE 5- NOTES RECEIVABLE - RELATED PARTIES

The Company has entered  into certain  notes  receivable  from  related  parties
during the course of the past few years.  The notes do not stipulate a repayment
date and  therefore  management of the Company has treated them as due on demand
and has classified  them as current assets on the  consolidated  balance sheets.
These notes receivable carry no stated interest rate.  Related party balances in
the form of notes  receivable  are  amounts  due from  employees,  officers  and
directors. The notes receivable - related parties due the Company at October 31,
2004 and 2003 are $284,853 and 334,292, respectively.

NOTE 6- ACCOUNTS RECEIVABLE

Accounts  receivable  represent  amounts  due the  Company  for the sales of the
equipment.  Also included in accounts  receivable are amounts due from the long-
term care  facility  for their  utility  payment  net of amounts due the utility
company by the  Company.  At October 31, 2004 and 2003,  the Company has $43,116
and $183,285, respectively.

NOTE 7- LINE OF CREDIT

The Company has a $200,000 demand line of credit, which carries an interest rate
of the issuing  bank's  prime rate plus 1%.  During the years ended  October 31,
2004 and 2003, the Company had reached the maximum of the line at various times.
At the end of the fiscal  years the  balance  owed was  $116,665  and  $154,761,
respectively.  The line of credit is  secured  by  substantially  all  corporate
assets and a shareholder/officer guarantee.


                                       F-18
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 8- LONG-TERM DEBT

As noted in Note 4, the Company, under the Gatekeeper contract is a party to the
loans  that are  provided  for the  equipment  purchase.  The  Company  receives
payments by the facilities  and in turn remits those over to the provider,  PP&L
and Charter.

In  accordance  with  FASB  Interpretation  45,  the  Company  accounts  for the
recognition  of the long-term  debt with the lending  source at the inception of
the loan  agreement.  The Company  records the liability at the inception of the
guarantee  and only will reflect a reduction of the payable,  i.e.  release from
guarantee upon the  expiration or settlement of the  guarantee,  by a systematic
and rational amortization method or as the fair value of the guarantee changes.

Statement of Financial Accounting  Standards Number 5 discusses  disclosures and
recognition  of  liabilities  relating to loss  contingencies.  A prime  example
discussed is the guarantees of indebtedness of others. Under this pronouncement,
the Company has disclosed the guarantee and has recorded the liability,  because
the amounts currently due are probable and reasonably estimated.

At October 31 long-term debt consists of:

                                                    2004               2003
                                               -------------       ------------
PP&L and Charter Management term loans,
five year terms, corresponding with
notes receivable (see Note 4)                  $   4,660,503       $  4,771,061
                                               -------------       ------------
Net long term loans payable                    $   4,660,503       $  4,771,061

At October 31, 2004 maturities on these notes are:

                       2005                     $  2,115,382
                       2006                        1,661,643
                       2007                          798,283
                       2008                           85,195
                                                   4,660,503
                      Less: current portion       (2,115,382)
                                                $  2,545,121



                                       F-19
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003



NOTE 9- NOTE PAYABLE - BANK

The Company has a bank note,  payable  $775 per month,  principal  and  variable
interest  at prime plus 2% through  April  2004,  secured by  substantially  all
corporate  assets.  At October 31, 2004 and 2003, there remains $ -0- and $4,648
outstanding, respectively.

NOTE 10- NOTES PAYABLE - RELATED PARTIES

The  Company  has notes  payable  with a  stockholder/employees/officers  in the
amount of $80,901 and $182,037 at October 31, 2004 and 2003, respectively. These
notes have no stated interest rates or repayment terms.  Therefore,  the Company
has classified them as current liabilities.

NOTE 11- STOCKHOLDERS' EQUITY (DEFICIT)

The Company has authorized  20,000,000  shares of $0.001 par value common stock.
At October 31, 2004 and 2003, the Company had  15,698,014 and 15,598,014  shares
of common stock issued and outstanding, respectively.

The Company has authorized  500,000 shares of $0.001 par value preferred  stock,
Series A. At October  31,  2004 and 2003,  the  Company  had  187,389 and 78,702
shares of preferred stock issued and outstanding, respectively. In October 2003,
the Company converted $663,703 in related party note payables from a shareholder
into the 78,702  shares.  In January 2004,  the Company issued 108,687 shares of
preferred stock for $1,001,000.  Out of the $1,001,000 there remains $952,500 as
a subscription  receivable.  This amount was  subsequently  received in February
2004.  The Series A preferred  shares  convert at a ratio of 58:1 into shares of
common  stock.  As of October 31, 2004 and 2003,  no preferred  shares have been
converted.

In October 2001,  National Energy Services  Company,  Inc.-NV issued  10,000,000
shares of common stock to acquire all the issued and  outstanding  shares of the
common stock of National Energy Services Company, Inc., a New Jersey company, in
a reverse  merger.  Upon the reverse merger,  the Company had 11,700,000  shares
issued and outstanding.

In fiscal 2002, the Company issued 840,260 shares of common stock restricted for
$500,000, or $0.60 per share.  Additionally,  in fiscal 2002, the Company issued
54,000  shares of common stock  restricted  in exchange  for services  valued at
$32,400,  or $0.60 per share.  The stock of the Company is not trading,  and for
fiscal 2002, the value was determined to be $.60 per share.



                                       F-20
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003


NOTE 11- STOCKHOLDERS' EQUITY (DEFICIT) (CONTINUED)

In fiscal 2003, the Company issued  2,978,754  shares of common stock restricted
for  $250,000,  or $0.084 per share.  The Company also issued  25,000  shares of
common stock as consideration for a note that the Company received in the amount
of $250,000.  The Company  valued these shares at $.084 the value they  received
for the 2,978,754 shares or $2,100.

In the first quarter of fiscal 2004, the Company issued 100,000 shares of common
stock for  services  rendered.  The value of the  issuance  of these  shares was
$8,400 (.084 per share).

There were no options or warrants  granted,  exercised or expired by the Company
for the years ended October 31, 2004 and 2003. In addition, the Company does not
have any options or warrants outstanding.

NOTE 12- COMMITMENTS

Leases

The  Company  currently  leases its New Jersey  office  space under a lease that
expired in May 2003, and was renewed on a month-to-month  basis.  Payments under
this lease were  $21,996 and  $22,282  for the years ended  October 31, 2004 and
2003 respectively.

The Company  also has an office in  Pennsylvania  that had been under a one-year
lease with a one-year  extension that expires December 31, 2004.  Payments under
this lease were  $12,600 and  $13,750  for the years ended  October 31, 2004 and
2003,  respectively.  Effective  August  1,  2004,  the  Company  abandoned  the
Pennsylvania office and requested the landlord to locate a replacement tenant as
soon as possible. The Company will continue honor the existing lease through the
end of the term or until a replacement is located.

The Company also has a three-year lease for certain office  equipment,  expiring
in 2005.  Payments under this lease were $10,531 and $12,754 for the years ended
October 31, 2004 and 2003, respectively.

Future lease commitments at October 31, 2004:

                  2004                       $  8,169
                  2005                       $  4,627
                  2005                       $ 11,740

Management Fees

The Company had entered into a Management Agreement with a related party through
common ownership that was terminated in fiscal 2003.


                                       F-21
<PAGE>



                     NATIONAL ENERGY SERVICES COMPANY, INC.
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
                            OCTOBER 31, 2004 AND 2003




NOTE 13- PROVISION FOR INCOME TAXES

Deferred  income taxes will be  determined  using the  liability  method for the
temporary differences between the financial reporting basis and income tax basis
of the Company's assets and liabilities.  Deferred income taxes will be measured
based on the tax rates  expected to be in effect when the temporary  differences
are included in the Company's  consolidated tax return.  Deferred tax assets and
liabilities  are  recognized  based  on  anticipated   future  tax  consequences
attributable to differences  between  financial  statement  carrying  amounts of
assets and liabilities and their respective tax bases.

At October 31, 2004 and 2003, deferred tax assets consist of the following:

                                                  2004          2003
                                            -------------   -----------
Net operating loss carryforwards            $     912,288   $   722,026
 Less:  valuation allowance                      (912,288)     (722,026)

                                            $         -0-   $       -0-

At October 31, 2004 and 2003,  the  Company  had a federal  net  operating  loss
carryforward   in  the   approximate   amounts  of  $2,764,511  and  $2,187,959,
respectively, available to offset future taxable income. The Company established
valuation  allowances equal to the full amount of the deferred tax assets due to
the uncertainty of the utilization of the operating losses in future periods.


NOTE 14- GOING CONCERN

As shown in the  accompanying  consolidated  financial  statements,  the Company
incurred  substantial  net losses for the years ended October 31, 2004 and 2003.
There is no  guarantee  whether  the  Company  will be able to  generate  enough
revenue  and/or  raise  capital  to  support  those   operations.   This  raises
substantial doubt about the Company's ability to continue as a going concern.

Management also states that they are confident that they can improve  operations
and raise the  appropriate  funds  needed  through  the  advancements  in energy
conservation over the past year.

The consolidated  financial statements do not include any adjustments that might
result from the outcome of these uncertainties.


NOTE 15- SUBSEQUENT EVENTS

The Company is in the process of arranging a settlement with PPL to have various
assets and liabilities  transferred to the ownership of said company in exchange
for a reserve  account to be  established  in the amount of $300,000  over a ten
(10) year period.




                                      F-22