UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549  FORM 10-KSB  (Mark one) |X| ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: October 31, 2008 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: 0-50089   NATIONAL ENERGY SERVICES COMPANY, INC(Exact name of small business issuer in its charter)  Nevada52-2082372(State of Other Jurisdiction of
incorporation or organization)(I.R.S.  Employer
Identification No.)  3153 Fire Road, Suite 2C, Egg Harbor Township, NJ08234(Address of principal executive offices)(Zip Code)(800) 758-9288(Registrants telephone number including area code)  Issuer's telephone number: (800) 758-9288  Securities registered pursuant to Section 12(b) of the Exchange Act: None  Securities registered pursuant to Section 12(g) of the Exchange Act: Common Stock, $.001 par value  Check whether the issuer is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act.  Yes |  |   No |X|  Check whether the issuer (1) 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 |X|   No |  |   1  Check if there is no disclosure of delinquent filers in response to Item 405 of Regulation S-B 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.  |   |  Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).  Yes |  |   No |X|  The issuers revenues for its most recent fiscal year were $1,533,500.  The aggregate market value of the voting and non-voting common equity held by non-affiliates computed by reference to the price at which the common equity was sold, or the average bid and asked price of such common equity, as of a specified date within the past 60 days was $774,460.  The number of shares outstanding of the issuers common stock, as of January 19, 2009 was 30,260,846.  DOCUMENTS INCORPORATED BY REFERENCE:  None   Transitional Small Business Disclosure Format (check one): Yes |  | No |X|   2    PART I  CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS  This Report contains certain forward-looking statements regarding National Energy Services Company, Inc., (National Energy Services) its business and its financial prospects.  These statements represent Managements present intentions and its present belief regarding the Companys future.  Nevertheless, there are numerous risks and uncertainties that could cause actual results to differ from the results suggested in this Report.  Among the more significant factors are:  Ø The Company has not been profitable in recent years.  Although the Company implemented a number of programs to help us achieve profitability, it does not know yet whether they will be effective. Ø The Company lacks the capital necessary to significantly expand its business.  Unless the expansion of business is sufficient enough that the gross profit will exceed administrative costs, the Company will not achieve profitability. Ø Expansion of business will require that an expansion of accounting and other internal management systems.  Such an expansion may lead to inefficiencies that could prevent profitability.  Because these and other risks may cause National Energy Services actual results to differ from those anticipated by Management, the reader should not place undue reliance on any forward-looking statements that appear in this Report.  Readers should also take note that National Energy Services will not necessarily make any public announcement of changes affecting these forward-looking statements, which should be considered accurate on this date only.  ITEM 1. DESCRIPTION OF BUSINESS  Business of the Company  John Grillo, President, organized the predecessor to National Energy Services in 1995 to engage in the business of marketing aggregated energy management services to the long term care industry.  Mr. Grillo capitalized on his experience as an electrical contractor to develop a comprehensive energy management program (the Program) for the long term care industry.  In 2005 the Companys business model expanded to market the Program to hospitality facilities as well as long term care facilities ("Facilities").  The Program features an upgrade to lighting fixtures, improved heating, venting and air conditioning ("HVAC") equipment and ozone laundry systems ("OLS").  In February of 2007, the Company began to offer an additional service.  It provides telecommunications services to further assist in reducing its clients' operating expenses.  The Company is not affiliated with any one-service provider and is able to quote from various sources.  This allows the Company to obtain the best solution for improving service quality for its customer.  Recently, the Company added two new members to its sales team to begin to market these services to the existing and future client base.   3      Financing Arrangements  The Company has offered the Facilities several financing alternatives through various lending sources.  In the past Facilities purchased the upgrade equipment and obtained purchase financing from Charter Management, LLC ("Charter") under the Energy Gatekeeper Program (Gatekeeper).  Charter is owned by John O'Neill and Deborah ONeill, who have a controlling equity interest in National Energy Services as well.  Under the Gatekeeper Program, the Company provided the Facility with all of its energy services and assisted the Facility in obtaining financing from Charter for the energy services.  The Gatekeeper Program was terminated in 2006, although the Company still has receivables outstanding from the Gatekeeper Program, which will be fully paid in July of 2009.  In 2005 the Company developed an arrangement with US Energy Capital, under which that company offers our customers equipment lease financing for the capital equipment involved in the Program.  Under this arrangement, the Facility is directly indebted to US Energy Capital.  The Company also has customers who fund these projects through their own capital expenditure budgets and pay the Company directly.  Principal Products and Services  The principal products and services offered in the Program are the Ozone Laundry System (OLS), Lighting Upgrades, Mechanical Systems (HVAC), Water/Sewer Conservation Methods and Energy Management.  Ozone Laundry System (OLS).  OLS is a system that can reduce a Facilitys laundering costs by more than 50%, primarily by eliminating the need for hot water during the washing process. The OLS injects activated oxygen (ozone) into the wash and rinse water, with the result that the laundry is cleaned and completely disinfected.  Ozone is a powerful oxidant that is more effective than chlorine, but without chlorine's dangerous properties.  Various studies have shown that using ozone in laundering is far more effective than conventional disinfectants against microorganisms and viruses. With ozone laundering, fewer cycles are required to clean, thus chemical use is reduced.  Energy bills are also greatly reduced because ozone is only active in cold water, eliminating the need to buy natural gas or other energy sources to heat the water. The savings to the Facility are substantial since laundering expense is one of the most significant expense items in a Facilitys budget.  Lighting Upgrades.  The Company provides Facilities with energy-efficient lighting upgrades or retrofits (Lighting Upgrades).  The Lighting Upgrades can reduce the Facilitys energy consumption and prevent pollution while delivering comparable or better lighting. For example, a Lighting Upgrade in a typical 120 bed nursing home can reduce energy usage by 226,666 kilowatt hours per year, resulting in an annual savings of approximately $20,400.  This calculation of average savings is based on our own engineering studies and actual results in more than 100 installations.  4     Although a Lighting Upgrade product may cost slightly more than the standard lighting product it replaces, the energy savings are so significant that any incremental cost is rapidly recovered by the Facility.  For example, 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, a Facility saves approximately $14 a year, assuming the bulb is used for 5,000 hours in the year.  Further, compact fluorescent light bulbs last an average of 10,000 hours, compared to only 850 hours for a standard incandescent light bulb.  Mechanical Systems/HVAC.  The installation of state-of-the-art, energy conserving boilers, heating and air conditioning units and other mechanical equipment can improve a Facilitys operating efficiency and increase its 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 the Facilitys residents and employees.  The installation of ColdPlus Refrigerant Oil Additive in HVAC units provides highly charged molecules that bond themselves to the compressor bearings and the inner wall of the refrigerant tubing throughout the system. This one molecule thick barrier is 15 times slicker than compressor oil and prevents the compressor oil from baking onto the refrigerant tubing or becoming gel-like.  The inner wall of the tubing, now slicker and no longer constricted by the baked-on or gelled oil, returns to its original diameter, allowing the refrigerant to flow uninhibited throughout the system. The refrigerant, now in direct contact with the inner wall of the tubing, transfers the heat much quicker and more efficiently.  The free flowing mixture allows the compressor to run with less stress, reducing the amps required to operate the motor by 5% to 9%. It even begins to run quieter.  The refrigerant, now directly touching and cooling the inner wall of the tubing, allows the system to achieve colder temperatures with less energy usage.  The compressor operates 15% to 30% less, potentially extending its lifespan by 15% to 30%.  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.  Telecommunications.  The Company can provide a single turnkey program that increases operational profitability reduce operating expenses and improve overall quality.  The Company analyzes its clients current telecommunications structure and then works with various providers to find the best solution for improving service.  The Company works with various service providers to lower costs for local and long distance telephone service, internet service and wireless systems.  This service results in various one time commissions and recurring revenue paid to the Company by the providers for the life of the service contract.  5      Marketing, Sales and Distribution  The Companys primary market is the nursing home industry.  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. Nursing homes are a fertile area for our energy-saving Program for several reasons:  -    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 five highest line items in the 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.  In addition to capitalizing on the Companys track record in the skilled nursing facility industry, in 2007 the Company made its entry into the hospitality industry, with a successful test for Hilton Hotels.  As a result of that test, the Company is now in the process of gearing up its sales and marketing team in order to actively sell its Ozone Laundry System to Hilton.  The Company is also looking to sell its system to other hotel chains.   The addressable market of approximately 30,000 hotels/motels is much larger than the skilled nursing industry. The Company is proceeding carefully, looking to field test equipment in several locations with several chains, much in the way the nursing home market was initially approached.  To assist in this area, the Company recently engaged a new salesperson, who has existing relationships in the hotel industry.  Additionally the Company is starting to penetrate the warehouse, freight distribution and manufacturing sectors, offering the T-5 lighting system.  This is a relatively new way to light traditional steel pre-fabricated buildings.  This lighting system, which consumes 50% less energy than conventional metal halide and high-pressure sodium HID fixtures, also provides better quality of light, increased productivity, and lower maintenance costs.  The Company believes that relationships are the cornerstone of its marketing philosophy.  The process of building and maintaining working relationships requires a commitment at all levels of the organization.  Our 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.  As a result of the complexity of the products offered and the market, the Company works very hard to ensure that its employees and representatives have a working knowledge of all products and processes.  6     Purchasing and Installation  The Company has developed solid relationships with major suppliers of industrial lighting, mechanical equipment and other energy conservation products.  The Company has preferred vendor or distributor status with several suppliers. This means that the Company 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) manufacturer sponsored training, and (ix) superior customer service.  The Company is dedicated to maintaining quality relationships with suppliers and makes a concentrated effort to expand its sphere of influence among manufacturers.  This allows the Company to customize product lines and select the materials that best fill the needs of its customers.  The installation of the products is the most delicate part of the entire process and can place enormous strain on a customer relationship.  The Companys selection of the right contractor to carry out the installation is critical to a successful installation.  The Company has strict contractor criteria. The selected firm must have a complete understanding of what is required to work in the health care or hospitality environment and be willing to complete the contractor compliance paperwork.  Competition  The principal markets in which the Company competes are competitive and fragmented.  No competitor known to us controls more than 3% of the nursing home market for any of the several services provided.  There are 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, as competitors may have far greater financial and other resources available to them.  Governmental Regulation  The government regulations applicable to the health care and hospitality industries are in many ways unique.  State regulations include specifications for HVAC, lighting, water quality and laundry equipment.  It is the Companys responsibility to find supplies and equipment that meet and/or surpass the regulatory guidelines.  Guidelines vary from state to state.  It is critical to become familiar with each states regulations and policies regarding each energy conservation measure (ECM) before we start to market and install the particular ECM in any given state.  The one portion of the Companys Program that is most intensely affected by government regulation is the laundry process.  The majority of states in which the Company markets have specific guidelines for laundry that is processed in an on-site laundry.  Typical regulations include guidelines mandating  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.  Policies, procedures and  7    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 affects 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 manufacturers specifications when it comes to disinfection.  Because standard laundering procedures use chlorine bleach to disinfect the linen, the manufacturers specifications often require 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, the Company presented Maryland and Massachusetts with the merits of using ozone in the wash water to clean and disinfect.  The Company was successful in this endeavor and has received waivers from both states to install the OLS.  Compliance with Environmental Laws  The Company is in compliance with all relevant environmental laws.  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. The Company 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 the Companys view that this practice will provide its clients and itself the greatest protection from any Super Fund or toxic waste liability issues.  The Companys practices are required to comply with the federal Toxic Substance Control Act ("TSCA"), which regulates the disposal of PCBs.  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s practices are also required to comply 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.  The Company treats all fluorescent lamps as hazardous and properly dispose and recycle them.  Employees  The Company employs seven full time and no part time employees.  None of the Company's employees is represented by a labor union.  The Company believes its relationship with employees is excellent and does not believe that unionization is likely to happen.  The Company anticipates hiring additional employees over the next twelve months if it is successful in implementing its plan of operations.   8    ITEM 2. DESCRIPTION OF PROPERTY  The Company currently leases its executive offices at 3153 Fire Road, Suite 2C, Egg Harbor Township, New Jersey from Knaak Family Real Estate Holdings, LLC on an annual basis. The property consists of approximately 1,800 square feet of finished office space, for which we pay $2,000 per month.  It is believed that the foregoing space is adequate to meet current and planned operations.  ITEM 3. LEGAL PROCEEDINGS  None.  ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS  None. PART II  ITEM 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND SMALL BUSINESS ISSUER PURCHASES OF EQUITY SECURITIES.  (a)  Market Information.  The Companys common stock has been quoted on the OTC Bulletin Board under the symbol NEGS.OB since September 26, 2006.  Set forth below are the high and low bid prices for each quarterly period from November 1,  2006 through October 31, 2008.  The reported bid quotations reflect inter-dealer prices without retail markup, markdown or commissions, and may not necessarily represent actual transactions.  BidHighLowNov. 1, 2006  Jan. 31, 2007$       .24$       .13Feb. 1, 2007  Apr. 30, 2007$       .51$       .20May 1, 2007  July 31, 2007$       .38$       .21Aug. 1, 2007  Oct. 31, 2007$       .33$       .17Nov. 1, 2007  Jan. 31, 2008$       .30$       .11Feb. 1, 2008  Apr. 30, 2008$       .23$       .08May 1, 2008  July 31, 2008$       .12$       .06Aug. 1, 2008  Oct. 31, 2008$       .15$       .03  (b)  Holders.  There are 137 holders of record of common stock.  (c)  Dividend Policy.  The Company has not declared or paid cash dividends or made distributions in the past, and does not anticipate paying cash dividends or making distributions in the foreseeable future. The Company currently intends to retain and reinvest future earnings, if any, to finance operations.  9     (e)  Recent Sales of Unregistered Securities.  None.  (f) Repurchase of Equity Securities.  The Company did not repurchase any of its equity securities that were registered under Section 12 of the Securities Act during the 4th quarter of fiscal year 2008  ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.  Results of Operations  The Companys revenue for the year ended October 31, 2008 was 36% lower then the revenues for the year ended October 31, 2007.  During the year ended October 31, 2008, the Company realized revenue from three distinct sources:  Equipment Sales.  Our revenue from sales of capital equipment was $1,450,947 for the year ended October 31, 2008, which is 36% lower then the level of equipment sales for the year ended October 31, 2007.   The 2008 sales represent 95% of our total revenue for the period.  Invoice Management Fees.  Some of the Facilities that we service pay us fees for aggregating invoices from the utility companies and processing their payments.  Our revenue from invoice management services represented 1% of total revenue for the year ended October 31, 2008.  It is expected that invoice management fees will continue to make only a minor contribution to revenue, as it is the intention of the Company to limit this relatively labor-intense business to situations in which the services can be performed profitably.  Energy Management Fees.  A number of the Facilities that the Company manages pay fees for monitoring their utility invoices to ensure correct charges and appropriate tariffs. Revenue from management services represented 4% of total revenue for the year ended October 31, 2008.  As with invoice management services, the portion of revenue attributable to energy management fees will remain modest, as the intention is to limit this relatively labor-intense business to situations in which the services can be performed profitably.  In the beginning of the 2007 fiscal year, the Company implemented a number of initiatives designed to increase revenues in the coming months.  The Company established a relationship with an equipment leasing company, so it could now offer prospective clients a choice of financing options.  In addition, the Company revised its internal procedures for evaluation of the credit worthiness of potential clients in order to substantially hasten the process, thus enabling the sales staff to close contracts more efficiently.  The expectation was that these initiatives, combined with increased demand for services due to the recent surge in energy prices, would enable the Company to expand its operations in the coming months.  Due to the current economic climate, sales for the current year were not what was expected.  The  10    Company has worked to establish relationships with new customer bases.  The Company expects these relationships to realize new contracts for the upcoming year.  National Energy has also begun to explore new markets.  To date the typical customer has been the long term care facility.  The Company is now quoting business to the warehouse, freight distribution, manufacturing and hospitality industries.  These new areas will take some time to develop.  Our gross margin during the year ended October 31, 2008 was 49%, compared to 50% gross margin for the year ended October 31, 2007.   In general, gross margin will depend on product mix and volume of business.  The Company realizes a higher gross profit from sales of ozone laundry systems than from upgrades to lighting and HVAC systems, although the profit is counterbalanced by the higher marketing costs attendant to sales of ozone laundry systems.  If the Company is successful in increasing its volume of business, gross profit should increase as well, for a number of reasons.  For one, each sale of equipment requires that field surveyors are sent to interested Facilities to determine the potential energy savings so that a cost proposal can be presented to the Facility. That expense is incurred whether the sale closes or not, and the expense of failed contracts burdens the gross profit that is realized from successful marketing efforts.  If the Company is able to close more contracts and at a higher success rate, the burden on gross profit of costs from failed contracts will be proportionately reduced.  Our operating expenses for the year ended October 31, 2008 totaled $1,446,439, an increase of $243,294 compared to the year ended October 31, 2007.  Because the Company experienced a decrease in sales volume in 2008, management implemented new initiatives to improve marketing material and market share.  As a result of the decrease in sales volume, those initiatives were discontinued. However, the expenses of the marketing initiatives contributed to the increase in operating expenses.   In addition, operating expenses increased due to (a) the $94,222 start up costs related to the new product line of telecommunications, (b) the $24,750 expense incurred as a result of issuing stock to employees and consultants, (c) the $212,473 expense incurred in hiring investor relations firms and marketing firms (d) and a bad debt expense in the amount of $81,951.  Interest expense for the year ended October 31, 2008 was $21,348, compared to interest expense of $34,125 incurred in the year ended October 31, 2007.  Interest expense should continue to decrease as debt is amortized unless the Company secures new debt financing.  As a result of the factors listed above, the Company reported a net loss of $713,316 for the year ended October 31, 2008, as compared to a net loss of $30,683 for the year ended October 31, 2007.  Liquidity and Capital Resources  During the years prior to fiscal 2008, the Companys only significant source of working capital financing was Charter Management, LLC, which is owned by two members of the Companys Board of Directors, John ONeill and Deborah ONeill.  11     The Companys working capital deficit increased by $555,227 during fiscal 2008, so that  at October 31, 2008 the deficit was $1,433,343.  The Company has minimal liquidity and working capital is severely strained, as credit lines have been fully utilized.  It is expected that there will continue to be a working capital deficit until revenues increase significantly.  Our working capital deficit is primarily a result of our poor operating results.  However, working capital has also been impaired, in part, by the nature of the Companys business contracts.  In most of the sales arrangements, the Company must complete the job, pay for all costs incurred, and obtain a completion certificate before an invoice can be submitted for reimbursement to the lender or lessor.  Only then will the Company collect the cash payment for the job.  This procedure creates a delay of approximately thirty days before funds are received.   Until a level of operations is reached in which the Company is completing jobs on a consistent basis, this delay in receiving payment for jobs will impair the ability to fund operations.  In 2004 PPL Spectrum, Inc. (PPL) terminated the arrangement under which it had previously provided equipment financing to the Companys customers.  Effective March 1, 2005 the Company assigned to PPL all of the notes receivable that arose from customer financing provided by PPL.  In turn, PPL released the Company from the corresponding notes payable to PPL.  In connection with the termination of the lending arrangement and assignment of the notes, the Company did assume certain obligations to PPL:  - The Company entered into a settlement agreement with PPL for aged payables.  In February 2004 the payables were consolidated into a three-year promissory note in the amount of $314,047, bearing interest at 18% per annum. Effective March 1, 2005, this note was renegotiated to bear interest rate at 8% per annum.  The balance at March 1, 2005 was $219,473 payable over seven years. The balance at October 31, 2008 outstanding under this note was $64,884 of which $37,203 is reflected as current liabilities. - The Company contracted to pay $1,400 per month toward a reserve for any bad debts among the notes it assigned to PPL.  The Company has recorded the present value of that obligation on its balance sheet as a debt.  As of October 31, 2008, the balance of the debt was $90,470, of which $12,107 is reflected as a current liability.  - The Company also contracted to assume a contingent liability to reimburse PPL for the bad debts of certain customers if they filed for protection in bankruptcy.  The contingency occurred in June 2005, and the Company became obligated to fund $140,709 over 10 years with an imputed interest rate of 6%.  As of October 31, 2008, the balance on this obligation was $100,417, of which $13,438 is reflected as current liabilities.  12     The table below sets forth our debt service obligations as of October 31, 2008. Less thanAfter 5Contractual ObligationsTotal1 Year1-3 Years4-5 YearsYearsLoans Payable Charter  Notes payable$    59,158$  59,158$          0$          0$           0PPL Promissory Note$    64,884$  37,203$ 27,681$          0$           0PPL Bad Debt Reserve$    90,470$  12,107$ 40,987$ 37,376$           0PPL Bankruptcy Reserve$  100,417$  13,438$ 45,494$ 41,485$           0Operating Leases$    30,761$  17,905$ 12,856$         0$           0TOTAL$  345,690$139,811$127,018$ 78,861$          0  Assets totaled $144,280 and $806,400 as of October 31, 2008 and 2007, respectively.  On both dates assets consisted primarily of notes receivable from our customers who financed through Charter Management  and accounts receivable from current installations.  The Company plans to finance our future operations through the sale of products and services.  In addition, the Company is taking steps to insure continued operations by trying to raise additional equity, and is also looking into incurring additional debt to improve cash flow.  The Company is also contacting local banks to obtain additional short term financing via an extended credit line.  To date, the Company has no commitments for financing from any source.  Off-Balance Sheet Arrangements  The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on our financial condition or results of operations.,  Application of Critical Accounting Policies  In preparing the financial statements the Company is required to formulate working policies regarding valuation of assets and liabilities and to develop estimates of those values.  In the preparation of the financial statements for fiscal year 2008, there was one estimate made which were (a) subject to a high degree of uncertainty and (b) material to our results.  The estimate was the determination, detailed in Note 10 to the Financial Statements, that the Company should record a valuation allowance for the full value of the deferred tax asset created by the net operating loss carryforward.  The primary reason for the determination was the lack of certainty as to whether the Company will carry on profitable operations in the future.  The Company made no material changes to critical accounting policies in connection with the preparation of financial statements for the year ended October 31, 2008.   13     Impact of Accounting Pronouncements  There were no recent accounting pronouncements that have had a material effect on the Companys financial position or results of operations.  There were two accounting pronouncements that may have a material effect on the Companys financial position or results of operations.  In December 2004, the FASB issued SFAS No. 123R Share-Based Payment. This Standard addresses the accounting for transactions in which a company receives employee services in exchange for (a) equity instruments of the company or (b) liabilities that are based on the fair value of the companys equity instruments or that may be settled by the issuance of such equity instruments. This Standard eliminates the ability to account for share-based compensation transactions using Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and requires that such transactions be accounted for using a fair-value-based method. The Standard is effective for periods beginning after June 15, 2005. To date, the adoption of this interpretation has not impacted the Companys financial condition, results of operations, or cash flows.  In July 2006, the FASB issued FASB Interpretation 48 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement 109 (FIN 48).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS 109, Accounting for Income Taxes.FIN 48 prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on a tax return.  This interpretation is effective for fiscal years beginning after December 15, 2006.  To date, the adoption of this interpretation has not impacted the Companys financial condition, results of operations, or cash flows.  ITEM 7. FINANCIAL STATEMENTS  The Companys financial statements, together with notes and the Report of the Independent Registered Public Accounting Firm, are set forth immediately following Item 14 of this Form 10-KSB.  ITEM 8. CHANGES IN AND DISAGREEMENTS WITH  ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.  Not applicable.  ITEM 8A. CONTROLS AND PROCEDURES.  (a) Evaluation of disclosure controls and procedures.  The term disclosure controls and procedures (defined in SEC Rule 13a-15(e)) refers to the controls and other procedures of a company that are designed to ensure that information required to be disclosed by a company in the reports that it files under the Securities Exchange  14    Act of 1934 (the Exchange Act) is recorded, processed, summarized and reported within required time periods. The Companys management, with the participation of the Chief Executive Officer and the Chief Financial Officer, has evaluated the effectiveness of the Companys disclosure controls and procedures as of the end of the period covered by this annual report (the Evaluation Date).In the course of that review, the Companys managementwere advised by Bagell, Josephs, Levine and Company, LLC, our independent registered public accounting firm, that during its performance of review procedures with respect to the financial statements for the period ended January 31, 2007,and subsequent reporting periods, it identified a material weakness (as defined in Public Company Accounting Oversight Board Standard No. 5) in our internal control over financial reporting.  The material weakness identified by Bagell, Josephs, Levine and Company, LLC consisted of inadequate staffing and supervision within the bookkeeping and accounting operations of our company.  The relatively small number of employees who have bookkeeping and accounting functions prevents us from segregating duties within our internal control system.  The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews.  In light of the advice from Bagell, Josephs, Levine and Company, LLC, management has considered adding personnel to the Companys bookkeeping and accounting operations.  However, as there has been no instance in which the company failed to identify or resolve a disclosure matter or failed to perform a timely and effective review, management determined that the addition of personnel to our bookkeeping and accounting operations is not an efficient use of our limited resources at this time.  Accordingly, based on their evaluation of our disclosure controls and procedures as of October 31 2008, the Companys Chief Executive Officer and Chief Financial Officer (or persons performing similar functions) have concluded that, as of the Evaluation Date, such controls and procedures were effective.  (b) Changes in internal controls.  The term internal control over financial reporting (defined in SEC Rule 13a-15(f)) refers to the process of a company that is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. The Companys management, with the participation of the Chief Executive Officer and Chief Financial Officer (or persons performing similar functions), has evaluated any changes in the Companys internal control over financial reporting that occurred during the fourth quarter of the year covered by this annual report, and they have concluded that there was no change to the Companys internal control over financial reporting that has materially affected, or is reasonably likely to materially affect, the Companys internal control over financial reporting.  (c) Managements Report on Internal Control over Financial Reporting Management of the Company is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rule 13a-15(f) under the Securities Exchange Act of 1934.  We have assessed the effectiveness of those internal controls as of  15    October 31, 2008, using the Committee of Sponsoring Organizations of the Treadway Commission (COSO) Internal Control  Intergrated Framework as a basis for our assessment. Because of inherent limitations, internal control over financial reporting may not prevent or detect misstatements.  Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies and procedures may deteriorate.  All internal control systems, no matter how well designed, have inherent limitations.  Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. A material weakness in internal controls is a deficiency in internal control, or combination of control deficiencies, that adversely affects the Companys ability to initiate, authorize, record, process, or report external financial data reliably in accordance with accounting principles generally accepted in the United States of America such that there is more than a remote likelihood that a material misstatement of the Companys annual or interim financial statements that is more than inconsequential will not be prevented or detected. In the course of making our assessment of the effectiveness of internal controls over financial reporting, we identified one material weakness in our internal control over financial reporting.  This material weaknesses consisted of: a. Inadequate staffing and supervision within the accounting operations of our company.  The relatively small number of employees who are responsible for accounting functions prevents us from segregating duties within our internal control system.  The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. Because of the above condition, managements assessment is that the Companys internal controls over financial reporting were not effective as of October 31, 2008. This annual report does not include an attestation report of the Companys registered public accounting firm regarding internal control over financial reporting.  Managements report was not subject to attestation by the Companys registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit the Company to provide only managements report in this annual report.  ITEM 8B. OTHER INFORMATION.  None.  16     PART III  ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT  The officers and directors of the Company are: Director Name Age Position with the Company Since John T. O'Neill 51 Chairman of the Board, Chief 2004 Executive Officer, Director  John A. Grillo 47 President, Chief Financial Officer, 2001 Director Deborah O'Neill 50 Secretary, Treasurer, Director 2004 Rusty J. Gramiak 52 Vice-President of Operations -- Patricia A. Palmieri 42 Controller --  All directors hold office until the next annual meeting of shareholders and until their successors have been elected and qualify.  Officers serve at the pleasure of the Board of Directors.  John T. O'Neill.   Mr. ONeill has been involved in the nursing home industry for over forty years.  For more than the past five years, Mr. ONeill has been employed as CEO of ONeill Management LLC., which is involved in the development, construction and operation of healthcare facilities.  Mr. ONeill is also the CEO of Charter Management, LLC, which provides financing programs for the development of long-term care facilities.  Mr. ONeill attended Bowling Green State University and Ohio State University, where he completed the Core of Knowledge for certification as a Licensed Nursing Home Administrator.  Mr. ONeill is married to Deborah F. ONeill, the Companys Secretary and Treasurer.  John A. Grillo.  Mr. Grillo organized National Energy Services in 1996, and has served as its Chief Executive Officer since that time.  Prior to organizing National Energy Services , Mr. Grillo was employed in a number of capacities in the field of electrical engineering.  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.  Mr. Grillo attended Northeastern Universitys School of Electrical Engineering Technology from 1979 to 1983.  Deborah F. O'Neill.  Ms. ONeill is a Certified Public Accountant with experience in auditing, income tax preparation and real estate development.  For more than the past five years, Ms. ONeill has been employed by ONeill Management LLC with responsibilities in financial management.  She is also employed in the financial management of Charter Management, LLC.  Previously, Ms. ONeill was a founder and CFO of a software development company that offered turnkey accounting and medical computer systems to long term care facilities in Ohio, Pennsylvania, Connecticut and several other states.  Ms. ONeill graduated from Kent State University magna cum laude with a Bachelor of Business Administration degree in Accounting.  Ms. ONeill is married to John T. ONeill, the Companys Chairman.  17     Rusty J. Gramiak.  Mr. Gramiak has been employed as the Vice President of Operations of National Energy Services since 2000. Prior to assuming that position, Mr. Gramiak was involved in the Companys sales operations.  From 1996 to 1998 Mr. Gramiak was employed as a lighting surveyor and an installer of energy efficient lighting for GEC Lighting Company in Margate, New Jersey.  Patricia A.  Palmieri.  Ms. Palmieri has been employed as the Companys Controller since March 2004.  Prior to joining the Company, Ms.  Palmieri had 14 years of accounting-related experience in industries such as home mortgages and auto financing.  Specifically, from January 2003 until March 2004 Ms. Palmieri was an accountant for a soil remediation company.  Prior to 2003, Ms. Palmieri was the Assistant Controller for a landscaping company. Ms. Palmieri has a Bachelor of Arts in Accounting and a Masters in Business Administration. Nominating and Audit Committee The Board of Directors has not appointed an Audit Committee or a Nominating Committee.  The Board of Directors does not have an audit committee financial expert.  The Board of Directors has not been able to recruit an audit committee financial expert to join the Board of Directors because of the Companys poor financial condition. Code of Ethics The Company has adopted a written code of ethics applicable to its executive officers.  A copy of the Code of Ethics was filed as an exhibit to the Companys Annual Report on Form 10-KSB for the year ended October 31, 2003.  Section 16(a) Beneficial Ownership Reporting Compliance  None of the officers, directors or beneficial owners of more than 10% of the Companys common stock failed to file on a timely basis the reports required by Section 16(a) of the Exchange Act during the year ended October 31, 2008.  ITEM 10. EXECUTIVE COMPENSATION  The following table sets forth all compensation awarded to, earned by, or paid by National Energy Services, Inc. to John ONeill, its Chief Executive Officer, and John Grillo, its Chief Financial Officer for services rendered in all capacities to the Company during the years ended October 31, 2008, 2007, 2006 and 2005.  There were no other executive officers whose total salary and bonus for the fiscal year ended October 31, 2008 exceeded $100,000.   18     Compensation Year Salary Other(1)  John T. ONeill 2008 $0 2007 $0 2006 $0  John A. Grillo 2008 $139,248 13,105 2007 $124,677 12,686 2006 $121,984 11,100 _______________________ (1)   Compensation: Other includes certain health and life insurance benefits paid by the Company on behalf of the employee.  Employment Agreements All  employment arrangements with  executives are on an at will basis.  Equity Grants The following tables set forth certain information regarding the stock options acquired by the Companys Chief Executive Officer during the year ended October 31, 2008 and those options held by him on October 31, 2008.  Option Grants in the Last Fiscal Year  Percent of total Potential realizable Number of options value at assumed securities granted to annual rates of underlying employees Exercise appreciation of option in fiscal Price Expiration for option term Name granted year ($/share) Date 5%  10% John ONeill             0 N.A. N.A. N.A. 0             0  Aggregated Fiscal Year-End Option Values  Number of securities underlying Value of unexercised in-the-money unexercised options at fiscal options at fiscal year-end ($) Name year-end (#) (All exercisable) (All exercisable) John ONeill                0 0  Remuneration of Directors  None of the members of the Board of Directors receives remuneration for service on the Board.   19    ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT  The following table sets forth information known with respect to the beneficial ownership of common stock as of the date of this prospectus by the following:  · each shareholder known by the Company to own beneficially more than 5% of common stock;  · John T. ONeill, Chief Executive Officer, and John A. Grillo,  Chief Financial Officer  · each director; and  · all directors and executive officers as a group.  There are 30,260,846 shares of common stock and no other equity securities outstanding on the date of this report.  Except as otherwise indicated, it is believed that the beneficial owners of the common stock listed below have sole voting power and investment power with respect to their shares,  subject to community property laws where applicable.  Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission.  Name and Address of Amount and Nature Aggregate Beneficial Owner(1) of Beneficial Ownership Percent of Class  John & Deborah ONeill 14,151,862(2) 47.6% John A. Grillo 2,941,320 9.9%    Current executive officers and directors as a group (4 persons) 17,353,182  58.4% _____________________________ (1)  The address of each shareholder, unless otherwise noted, is c/o National Energy Services Company, Inc., 3153 Fire Road, Suite 2C, Egg Harbor Township, NJ 08234. (2)  Includes 14,151,862 shares owned by Charter Management LLC, of which Mr. and Mrs. ONeill are the sole members and managers.  Equity Compensation Plan Information  The information set forth in the table below regarding equity compensation plans (which include individual compensation arrangements) was determined as of October 31, 2008.  20     Number of securities to be issued upon exercise of outstanding options, warrants and rightsWeighted average exercise price of outstanding options, warrants and rightsNumber of securities remaining available for future issuance under equity compensation plansEquity compensation plans approved by security holders.......0--0Equity compensation plans not approved by security holders......0--1,158,703Total..............0--1,158,703  (1)  The Board of Directors adopted the 2007 Equity Incentive Plan in 2007.  The Plan authorizes the Board to issue up to 1,500,000 common shares during the ten year period of the Plan.  The shares may be awarded to employees or directors of National Energy Services or its subsidiaries as well as to consultants to those entities.  The shares may be awarded as outright grants or in the form of options, restricted stock or performance shares.  1,158,703 shares remain available for issuance under the plan.  ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS AND DIRECTOR INDEPENDENCE  Related Party Transactions John ONeill and Debbie ONeill who are directors of the Company are also officers of Charter Management, LLC.  To date, Charter Management has funded the Company an aggregate amount of $936,974.  Director Independence None of the members of our Board of Directors are independent, as independent is defined in the rules of the NASDAQ National Market System:  ITEM 13. EXHIBITS  3-a Articles of Incorporation filed February 17, 1998. (1)  3-a(1) Certificate of Amendment of Articles of Incorporation filed October 29, 2001. (1)  3-a(2) Certificate of Amendment of Articles of Incorporation, effective as of November 20, 2006  filed as an exhibit to the Current Report on Form 8-K dated November 20, 2006 and incorporated herein by reference.  3-b Bylaws. (1)  10-a Master Agreement with Charter Management LLC. (2)  21     14 Code of Ethics and Business Conduct - Filed as an exhibit to the Company's Annual Report on Form 10KSB for the year ended October 31, 2003 and incorporated herein by reference.  31.1 Rule 13a-14(a) Certification  CEO  31.2 Rule 13a-14(a) Certification  CFO  32 Rule 13a-14(b) Certifications  ------------------------------------------------- (1)  Filed as an exhibit to the Company's Registration Statement on Form 10-SB on November 14, 2002 and incorporated herein by reference. (2)  Filed as an exhibit to the Company's Amended Registration Statement on Form 10-SB on November 6, 2003 and incorporated herein by reference.  ITEM 14 PRINCIPAL ACCOUNTANT FEES AND SERVICES  Audit Fees  Bagell, Josephs, Levine & Company, LLC billed $27,200 to the Company for professional services rendered for the audit of fiscal 2008 financial statements and review of the financial statements included in fiscal 2008 10-QSB filings.  Bagell, Josephs, Levine & Company, LLC billed $29,813 to the Company for professional services rendered for the audit of fiscal 2007 financial statements and review of the financial statements included in fiscal 2007 10-QSB filings.  Audit-Related Fees  Bagell, Josephs, Levine & Company, LLC billed $0 to the Company during fiscal 2008 for assurance and related services that are reasonably related to the performance of the 2008 audit or review of the quarterly financial statements.  Bagell, Josephs, Levine & Company, LLC billed $0 to the Company during fiscal 2007 for assurance and related services that are reasonably related to the performance of the 2007 audit or review of the quarterly financial statements.  Tax Fees  Bagell, Josephs, Levine & Company, LLC billed $7,275 to the Company during fiscal 2008 for professional services rendered for tax compliance, tax advice and tax planning.  Bagell, Josephs, Levine & Company, LLC billed $10,387 to the Company during fiscal 2007 for professional services rendered for tax compliance, tax advice and tax planning.  22     All Other Fees  Bagell, Josephs, Levine & Company, LLC billed $0 to the Company in fiscal 2008 and $0 in fiscal 2007 for services not described above.  It is the policy of the Companys Board of Directors that all services, other than audit, review or attest services must be pre-approved by the Board of Directors, acting in lieu of an audit committee.  All of the services described above were approved by the Board of Directors.   23     NATIONAL ENERGY SERVICES COMPANY, INC.  INDEX TO CONSOLIDATED FINANCIAL STATEMENTS    Report of Independent Registered Public Accounting Firm F-1  Consolidated Balance Sheets at October 31, 2008 and 2007 F-2  Consolidated Statements of Operations for the years ended October 31, 2008 and 2007 F-3  Consolidated Statements of Changes in Stockholders Deficit for the years ended October 31, 2008 and 2007 F-4  Consolidated Statements of Cash Flows for the years ended October 31, 2008 and 2007 F-5  6  Notes to Consolidated Financial Statements F-7  25       BAGELL, JOSEPHS, LEVINE & COMPANY, L.L.C. Certified Public Accountants 406 Lippincott Drive Suites J Marlton, New Jersey 08053 (856) 346-2828   Fax (856) 396-0022  REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM  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, 2008 and 2007 and the related consolidated statements of operations, changes in stockholders deficit and cash flows for each of the years in the two-year period ended October 31, 2008.  National Energy Services Company, Incs management is responsible for these financial statements.  Our responsibility is to express an opinion on these consolidated financial statements based on our audits.  We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Companys internal control over financial reporting.  Accordingly, we express no such opinion.  An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.  In our opinion, the 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, 2008 and 2007 and the consolidated results of its operations and its cash flows for each of the years in the two-year period ended October 31, 2008 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 11 to the consolidated financial statements, the Company has experienced substantial net losses for the years ended October 31, 2008 and 2007 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 11.  The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.   Bagell Josephs, Levine & Company, LLC Bagell Josephs, Levine & Company, LLC Marlton, New Jersey  January 18, 2009   F-1      NATIONAL ENERGY SERVICES COMPANY, INC.CONSOLIDATED BALANCE SHEETSOCTOBER 31, 2008 AND 2007ASSETS20082007Current Assets:Cash and cash equivalents$               6,736$           282,567Accounts receivable, net47,716265,737Notes receivable - other, current portion59,158146,252Prepaid expenses and other current assets12,98318,363Total current assets126,593712,919Fixed assets, net of depreciation17,68727,050Notes receivable - other, net of current-66,431TOTAL ASSETS$           144,280$           806,400LIABILITIES AND STOCKHOLDERS' DEFICITLIABILITIESCurrent Liabilities:Long-term debt - current portion$             65,125$             86,984Notes payable - other, current portion59,158146,252Notes payable - related parties1,115,617954,808Accounts payable and accrued expenses320,036295,621Deferred Revenue-82,370Liability for stock to be issued-25,000Total current liabilities1,559,9361,591,035Long-term liabilities:Long-term debt, net of current portion193,023258,147Notes payable - other, net of current portion-66,431Total long-term liabilities193,023324,578Total liabilities1,752,9591,915,613COMMITMENTS AND CONTINGENCIESSTOCKHOLDERS' DEFICITPreferred stock, Series A, $.001 Par Value,500,000 shares authorized, 0 shares issued and--outstanding at October 31, 2008 and 2007, respectivelyCommon Stock, $.001 Par Value; 150,000,000 shares authorized;29,835,601 and 29,424,698 shares issued and outstandingat October 31, 2008 and 2007 respectively29,83529,424Additional Paid-in-Capital3,053,2202,989,781Additional Paid-in-Capital - Warrants133,483133,483Prepaid Consulting Fees-(150,000)Accumulated deficit(4,825,217)(4,111,901)Total Stockholders' Deficit(1,608,679)(1,109,213)TOTAL LIABILITIES AND STOCKHOLDERS'  DEFICIT$           144,280$           806,400  The accompanying notes are an integral part of these financial statements. F-2        NATIONAL ENERGY SERVICES COMPANY, INC.CONSOLIDATED STATEMENTS OF OPERATIONSFOR THE YEARS ENDED OCTOBER 31, 2008 AND 200720082007OPERATING REVENUESEquipment sales$        1,450,947$       2,277,028Management revenue23,40321,604Energy management revenue59,15086,752Total Operating Revenues1,533,5002,385,384COST OF SALES781,6681,193,134GROSS PROFIT751,8321,192,250OPERATING EXPENSESSelling expenses333,019258,937General and administrative expenses1,104,057939,892Depreciation and amortization9,3634,316Total Operating Expenses1,446,4391,203,145LOSS BEFORE OTHER INCOME (EXPENSE)(694,607)(10,895)OTHER INCOME (EXPENSE)Interest income2,63914,337Interest expense(21,348)(34,125)Total Other Income (Expense)(18,709)(19,788)LOSS BEFORE PROVISION FOR INCOME TAXES(713,316)(30,683)Provision for Income Taxes--NET LOSS APPLICABLE TO COMMON SHARES$         (713,316)$          (30,683)NET LOSS PER BASIC AND DILUTED SHARES$               (0.02)$                0.00WEIGHTED AVERAGE NUMBER OF BASIC AND DILUTEDCOMMON SHARES OUTSTANDING29,746,53626,839,400   The accompanying notes are an integral part of these financial statements. F-3     NATIONAL ENERGY SERVICES COMPANY, INC.CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' DEFICITFOR THE YEARS ENDED OCTOBER 31, 2008 AND 2007AdditionalAdditionalPaid-inPreferred StockCommon StockPaid-inCapitalPrepaidAccumulatedDescriptionSharesAmountSharesAmountCapitalWarrantsConsultingDeficitTotalBalance, November 1, 2006187,389$    18716,808,014$ 16,808$ 2,652,108$            -$             -$ (4,081,218)$ (1,412,115)Conversion of preferred stock(187,389)(187)10,868,56210,868(10,681)----Issuance of common stock for services--356,297356104,444---104,800Issuance of common stock for compensation--6,50072,033---2,040Issuance of common stock for subscription agreement--1,000,0001,000158,462---159,462Warrants issued for subscription agreement-----110,538--110,538Warrants issued for services to be performed-----22,945--22,945Issuance of common stock for services to be performed--385,32538599,615-(225,000)-(125,000)Amortization of prepaid consulting fees------75,000-75,000Issuance costs incurred in issuance of warrants----(16,200)---(16,200)Net loss for year ended October 31, 2007-------(30,683)(30,683)Balance October 31, 2007-$       -29,424,698$ 29,424$ 2,989,781$   133,483$ (150,000)$ (4,111,901)$ (1,109,213)Issuance of common stock for services--121,61812219,478--19,600Issuance of common stock for compensation--150,00015024,600--24,750Amortization of prepaid consulting fees------150,000150,000Issuance of stock for repayment of debt--139,28513919,361--19,500Net loss for the year ended October 31, 2008-------(713,316)(713,316)Balance October 31, 2008-$       -29,835,601$ 29,835$ 3,053,220$   133,483$             -$ (4,825,217)$ (1,608,679)  The accompanying notes are an integral part of these financial statements. F-4     NATIONAL ENERGY SERVICES COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED OCTOBER 31, 2008 AND 200720082007CASH FLOWS FROM OPERATING ACTIVITIESNet loss$           (713,316)$             (30,683)Adjustments to reconcile net loss to net cashprovided by (used in) operating activitiesDepreciation and amortization9,3634,316Common stock issued for services19,600229,800Common stock issued for compensation24,7502,040Amortization of prepaid consulting fees150,00075,000Common stock issued for debt repayment19,500-(Increase) in prepaid consulting fees-(225,000)Changes in assets and liabilities(Increase) Decrease  in accounts receivable218,021(172,426)(Increase) Decrease in prepaid expenses5,380(4,462)and other current assetsIncrease in accounts payable and accrued expenses24,415169,740Increase (Decrease) in deferred revenues(82,370)82,370Total adjustments388,659161,378Net cash provided by (used in) operating activities(324,657)130,695CASH FLOWS FROM INVESTING ACTIVITIESAcquisition of fixed assets-(25,629)Net proceeds from advances from employees-3,296Increase in notes payable - related party net160,80910,679Net cash provided by (used in)  investing activities160,809(11,654)CASH FLOWS FROM FINANCING ACTIVITESPrincipal payment on notes payable - bank(28,571)(28,324)Principal payment on long term debt(58,412)(101,416)Proceeds from notes receivable - other153,525376,786Reduction of notes payable - other(153,525)(376,786)Increase (Decrease) in liability of stock to be issued(25,000)25,000Issuance costs-(16,200)Proceeds from issuance of warrants-267,945Net cash provided by (used in) financing activities(111,983)147,005NET INCREASE  (DECREASE) IN CASHAND CASH EQUIVALENTS(275,831)266,046CASH AND CASH EQUIVALENTS -BEGINNING OF YEAR282,56716,521CASH AND CASH EQUIVALENTS - END OF YEAR$                 6,736$             282,567  The accompanying notes are an integral part of these financial statements. F-5     NATIONAL ENERGY SERVICES COMPANY, INC.CONSOLIDATED STATEMENTS OF CASH FLOWS (CONTINUED)FOR THE YEARS ENDED OCTOBER 31, 2008 AND 200720082007SUPPLEMENTAL DISCLOSURE OF CASH FLOWINFORMATION:CASH PAID DURING THE YEAR FOR:Interest expense$         21,348$         30,767Income taxes$                   -$                  -SUPPLEMENTAL DISCLOSURE OF NONCASHACTIVITIES:Preferred stock converted to common stock$                   -$         10,868Common stock issued for services$         19,600$       229,800Common stock issued for compensation$         24,750$           2,040Common stock issued for repayment of debt$         19,500$                  -Common stock issued for consulting fees$       150,000$                   -Warrants issued for services$                   -$         22,945Warrants issued for subscription agreement$                   -$       110,538  The accompanying notes are an integral part of these financial statements. F-6  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     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"), entered into an Agreement and Plan of Share Exchange, dated October 19, 2001, pursuant to which the shareholders of NESNJ on October 19, 2001 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, which became a wholly owned subsidiary of the Company. For accounting purposes, the transaction was accounted for as a reverse acquisition under the purchase method of accounting.  The Company is engaged in the business of marketing a comprehensive energy management program for long- term care and hospitality facilities.  The program features an upgrade to lighting fixtures, improved heating, venting and air conditioning ("HVAC") equipment, ozone laundry support systems ("OLSS).  The facilities generally recover the cost of these renovations through the monthly energy savings, resulting in no out-of-pocket costs to the facility.  In February of 2007, the Company began to offer an additional service.  It provides telecommunications services to further assist in reducing its clients' operating expenses.  The Company is not affiliated with any one-service provider and is able to quote from various sources.  This allows the Company to obtain the best solution for improving service quality for its customer.  The Company added two new members to its sales team to begin to market these services to the existing and future client base.  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.    F-7  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Revenue Recognition The Companys first program was an  Energy Gatekeeper Program which is a combined service and financing agreement whereby the facility has all of 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 previously was a party to a master agreement with Charter Management LLC for the purpose of obtaining financing from Charter for the Companys projects.  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 is negotiated at the time of contract signing. This term equals 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. The Company presently has notes receivables still outstanding from the Gatekeeper program, which will expire in July of 2009.  The Company discontinued this program as of January 2005.  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. The equipment financing payment due to Charter is added into the monthly utility bill that the customer receives.  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 Charter or any other financing institution that supplied the capital for the installation of the energy efficient upgrades.    F-8  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007    NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Revenue Recognition (Continued) In November 2002, 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.  The Companys Gatekeeper Program, in which the Company bundles its energy management service package with an installation agreement, is such an arrangement.  Accordingly, the Company adopted the principles set forth in EITF 00-21 on November 1, 2003 with respect to the fiscal year that commenced on that date.  The adoption of the principles of EITF 00-21 has not had a material effect on the Companys financial statements, since it was the Companys policy prior to implementation of EITF 00-21 that the Company bills separately for the energy management services and the installation, and that one service is not contingent on the other.  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 values each element in accordance with Staff Accounting Bulletin No. 104 (SAB), Revenue Recognition.  Under SAB104, 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.  Presently, the Company recognizes revenue from equipment sales upon installation. 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 Company has applied the principles set forth in EITF 99-19 and determined that all of its revenue should be recognized on a gross basis.   F-9  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007    NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  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 $250,000.  As of October 31, 2008 and 2007, the Company had $0 and $210,458   cash or cash equivalents in excess of the federally insured limits.  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 anti-dilutive for the periods presented.      F-10  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007    NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Loss Per Share of Common Stock (Continued) The following is a reconciliation of the computation for basic and diluted EPS:  October 31, 2008October 31, 2007Net Loss($713,316)($30,683)Weighted-average common sharesoutstanding (Basic)29,746,53626,839,400Weighted-average common stockEquivalents:Stock options and warrants--Weighted-average common sharesoutstanding (Diluted)29,746,53626,839,400
  Options and warrants outstanding to purchase stock were not included in the computation of diluted EPS in 2008 and 2007 because inclusion would have been anti-dilutive. There were 1,000,000 and 1,200,000 options and warrants available at October 31, 2008 and 2007 respectively.  On July 6, 2007, the Company entered into a subscription agreement and received $270,000 in cash for stock and warrants to purchase 1 million shares of the Companys common stock.  In 2006, the Company had 187,389 shares of preferred stock convertible into 10,868,562 shares of common.  These shares can be converted to 10,868,562 shares of common stock, based on a conversion ratio of 58:1.  As of November 27, 2006, Charter Management, LLC, the sole holder of the preferred stock, completed the process of conversion of 187,389 shares of preferred stock to 10,868,562 shares of common stock.  On August 8, 2007, the Company entered into a consulting services agreement and part of the compensation was the issuance of 200,000 options to purchase the Company stock.    F-11  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     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, notes 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 $15,371 and $15,916 for the years ended October 31, 2008 and 2007, respectively.  Share-Based Payments  In December 2004, the FASB issued Financial Accounting Standards No. 123 (revised 2004) (FAS 123R), Share-Based Payment.  FAS 123R replaces FAS No. 123, Accounting for Stock-Based Compensation, and supersedes APB Opinion No. 25, Accounting for Stock Issued to Employees.  FAS 123R requires compensation expense related to share-based payment transactions, measured as the fair value at the grant date, to be recognized in the financial statements over the period that an employee provides service in exchange for the award.  The Company adopted FAS 123R using the modified prospective transition method, as defined in FAS 123R.  Under the modified prospective method, companies are required to record compensation cost prospectively for the unvested portion, as of the date of adoption, of previously issued and outstanding awards over the remaining vesting period of such awards.  FAS 123R is effective January 1, 2006.  The implementation of this standard did not have a material impact on its financial position, results of operations, or cash flows.  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-12  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007    NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Provision for Bad Debt  The Company reports receivables at their outstanding principal balance, adjusted for any charge-offs, allowances for losses or doubtful accounts, any deferred fees or costs on originated loans, and any unamortized premium or discount on purchased loans. The Company provides for allowances for bad debts based on the past history of uncollectible accounts. All debts are written off when all measures have been exhausted for collection.  Recent Accounting Pronouncements  In May 2005, the FASB issued SFAS No. 154, Accounting Changes and Error Corrections. SFAS No. 154 replaces Accounting Principles Board (APB) Opinion No. 20, Accounting Changes and SFAS No. 3, Reporting Accounting Changes in Interim Financial Statements. SFAS No. 154 requires retrospective application to prior periods financial statements of a voluntary change in accounting principle unless it is impracticable. APB No. 20 previously required that most voluntary changes in accounting principle be recognized by including the cumulative effect of changing to the new accounting principle in net income in the period of the change. SFAS No. 154 is effective for accounting changes and corrections of errors made in fiscal years beginning after December 15, 2005. The adoption of SFAS No. 154 did not have a material impact on the Companys financial position, results of operations, or cash flows.  In February 2006, the FASB issued SFAS No. 155, Accounting for Certain Hybrid Financial Instruments, an amendment of FASB Statements No. 133 and 140. SFAS No. 155 resolves issues addressed in SFAS No. 133 Implementation Issue No. D1, Application of Statement 133 to Beneficial Interests in Securitized Financial Assets, and permits fair value re-measurement for any hybrid financial instrument that contains an embedded derivative that otherwise would require bifurcation, clarifies which interest-only strips and principal-only strips are not subject to the requirements of SFAS No. 133, establishes a requirement to evaluate interests in securitized financial assets to identify interests that are freestanding derivatives or that are hybrid financial instruments that contain an embedded derivative requiring bifurcation, clarifies that concentrations of credit risk in the form of subordination are not embedded derivatives and amends SFAS No. 140 to eliminate the prohibition on a qualifying special-purpose entity from holding a derivative financial instrument that pertains to a beneficial interest other than another derivative financial instrument. SFAS No. 155 is effective for all financial instruments acquired or issued after the beginning of the first fiscal year   F-13  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED )  Recent Accounting Pronouncements  that begins after September 15, 2006. The adoption of FAS 155 did not have a material impact on the Companys financial position, results of operations, or cash flows.  In March 2006, the FASB issued SFAS No. 156, Accounting for Servicing of Financial Assets, an amendment of FASB Statement No. 140. SFAS No. 156 requires an entity to recognize a servicing asset or liability each time it undertakes an obligation to service a financial asset by entering into a servicing contract under a transfer of the servicers financial assets that meets the requirements for sale accounting, a transfer of the servicers financial assets to a qualified special-purpose entity in a guaranteed mortgage securitization in which the transferor retains all of the resulting securities and classifies them as either available-for-sale or trading securities in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities and an acquisition or assumption of an obligation to service a financial asset that does not relate to financial assets of the servicer or its consolidated affiliates. Additionally, SFAS No. 156 requires all separately recognized servicing assets and servicing liabilities to be initially measured at fair value, permits an entity to choose either the use of an amortization or fair value method for subsequent measurements, permits at initial adoption a one-time reclassification of available-for-sale securities to trading securities by entities with recognized servicing rights and requires separate presentation of servicing assets and liabilities subsequently measured at fair value and additional disclosures for all separately recognized servicing assets and liabilities. SFAS No. 156 is effective for transactions entered into after the beginning of the first fiscal year that begins after September 15, 2006. The adoption of FAS 156 did not have a material impact on the Companys financial position or results of operations.  In September 2006, The Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 157, "Fair Value Measurement" ("SFAS No. 157"). This standard provides guidance for using fair value to measure assets and liabilities. SFAS No. 157 applies whenever other standards require (or permit) assets or liabilities to be measured at fair value but does not expand the use of fair value in any new circumstances. Prior to SFAS No. 157, the methods for measuring fair value were diverse and inconsistent, especially for items that are not actively traded. The standard clarifies that for items that are not actively traded, such as certain kinds of derivatives, fair value should reflect the price in a transaction with a market participant, including an  F-14  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Recent Accounting Pronouncements  adjustment for risk, not just the company's mark-to-model value. SFAS No. 157 also requires expanded disclosure of the effect on earnings for items measured using unobservable data. SFAS No. 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007, and interim periods within those fiscal years. The adoption of FAS 157 did not have a material impact on the Companys financial position or results of operations.  In July 2006, the FASB issued FASB Interpretation 48 Accounting for Uncertainty in Income Taxes  an interpretation of FASB Statement 109 (FIN 48).  FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an entitys financial statements in accordance with SFAS 109, Accounting for Income Taxes.FIN 48 prescribes a recognition threshold and measurement attribute for financial statement disclosure of tax positions taken, or expected to be taken, on a tax return.  This interpretation is effective for fiscal years beginning after December 15, 2006.  The adoption of this interpretation did not have a material impact the Companys financial position or results of operations. The FASB also issued in September 2006 Statement of Financial Accounting Standards No. 158, Employers Accounting for Defined Benefit Pension and Other Postretirement Plans  an amendment of FASB Statement No. 87, 88, 106 and 132(R), (FAS 158). This Standard requires recognition of the funded status of a benefit plan in the statement of financial position. The Standard also requires recognition in other comprehensive income certain gains and losses that arise during the period but are deferred under pension accounting rules, as well as modifies the timing of reporting and adds certain disclosures. FAS 158 provides recognition and disclosure elements to be effective as of the end of the fiscal year after December 15, 2006 and measurement elements to be effective for fiscal years ending after December 15, 2008. The Company has not yet analyzed the impact FAS 158 will have on its financial condition, results of operations, cash flows or disclosures. The Company adopted SFAS No. 159, "The Fair Value Option for Financial Assets and Financial Liabilities, Including an amendment of FASB Statement No. 115" ("SFAS No. 159"). SFAS No. 159 permits entities to choose to measure many financial instruments and certain other items at fair value, which are not otherwise currently required to be measured at fair value. Under SFAS No. 159, the decision to measure items at fair value is made at specified election dates on an instrument-by-instrument basis and is irrevocable. Entities electing the fair value option are   F-15  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Recent Accounting Pronouncements  required to recognize changes in fair value in earnings and to expense upfront costs and fees associated with the item for which the fair value option is elected. The new standard did not impact the Company's financial position or results of operations.  In December 2007, the FASB issued SFAS No. 160, Non-controlling Interests in Consolidated Financial Statementsan amendment of ARB No. 51.   The statement requires non-controlling interests (previously referred to as minority interests) to be treated as a separate component of equity, not as a liability or other item outside of permanent equity.  SFAS No. 160 is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008.  The Company is currently evaluating the impact of this statement on its financial statements.  In February 2008, FASB Staff Position ("FSP") FAS No. 157-2, "Effective Date of FASB Statement No. 157" ("FSP No. 157-2") was issued. FSP No. 157-2 defers the effective date of SFAS No. 157 to fiscal years beginning after December 15, 2008, and interim periods within those fiscal years, for all nonfinancial assets and liabilities, except those that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). Examples of items within the scope of FSP No. 157-2 are nonfinancial assets and nonfinancial liabilities initially measured at fair value in a business combination (but not measured at fair value in subsequent periods), and long-lived assets, such as property, plant and equipment and intangible assets measured at fair value for an impairment assessment under SFAS No. 144. The Company is currently evaluating the impact on its financial statements.  In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133.  The statement requires companies with derivative instruments to disclose information about how and why a company uses derivative instruments, how derivative instruments and related hedged items are accounted for under Statement No.133, and how derivative instruments and related hedged items affect a companys financial position, financial performance, and cash flows. SFAS No. 161 is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008.  The Company is currently evaluating the impact of this statement on its financial statements.   F-16  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007   In May 2008, the FASB issued SFAS No. 162, The Hierarchy of Generally Accepted Accounting Principles (SFAS No. 162). SFAS No. 162 identifies the sources of accounting principles and the framework for selecting principles used   NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)  Recent Accounting Pronouncements  in the preparation of financial statements.  SFAS No. 162 is effective 60 days following the SECs approval of the Public Company Accounting Oversight Board amendments to AU Section 411, The Meaning of Present Fairly in Conformity with Generally Accepted Accounting Principles. The implementation of this standard will not have a material impact on consolidated financial statements  NOTE 3- FIXED ASSETS  Fixed assets consist of the following at October 31, 2008 and 2007:  20082007Office equipment$56,922$56,922Furniture and fixtures2,1072,107Leasehold improvements2,9002,90061,92961,929Accumulated Depreciation(44,242)(34,879)Total$17,687$27,050
 Depreciation expense was $9,363 and $4,316 for the years ended October 31, 2008 and 2007.  NOTE 4- ACCOUNTS RECEIVABLE  Accounts receivable represent amounts due the Company for equipment sales.  At October 31, 2008 and 2007, the Company has receivables in the amount of $47,716 and $265,737, respectively.   F-17  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007    NOTE 5- FAIR VALUE MEASUREMENTS  On January 1, 2008, the Company adopted SFAS No. 157 "Fair Value Measurements" ("SFAS 157"). SFAS 157 defines fair value, provides a consistent framework for measuring fair value under Generally Accepted Accounting Principles and expands fair value financial statement disclosure requirements. SFAS 157's valuation techniques are based on observable and unobservable inputs. Observable inputs reflect readily obtainable data from independent sources,  while unobservable inputs reflect our market assumptions. SFAS 157 classifies these inputs into the following hierarchy: Level 1 Inputs- Quoted prices for identical instruments in active markets. Level 2 Inputs- Quoted prices for similar instruments in active markets; quoted prices for identical or similar instruments in markets that are not active; and model-derived valuations whose inputs are observable or whose significant value drivers are observable. Level 3 Inputs- Instruments with primarily unobservable value drivers.  The following table represents the fair value hierarchy for those financial assets and liabilities measured at fair value on a recurring basis as of October 31, 2008. .   AssetsLevel 1Level 2Level 3Notes Receivable$0$59,158$0Total Assets$0$59,158$0LiabilitiesNotes Payable$0$59,158$0Notes Payable Related Parties01,115,6170Long Term Debt0258,1480Total Liabilities$0$1,432,923$0  F-18  NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 6- LONG-TERM DEBT  The Company has a $200,000 note, which carries an interest rate of the issuing banks prime rate plus 1% (6.00% and 9.25% at October 31, 2008 and 2007, respectively). The loan was originally a line of credit when acquired in February 2004, but was subsequently refinanced November 2004, and converted into a 4-year loan.  As of October 31, 2008 and 2007, the balance was $2,377 and $30,949 of which $2,377 and $28,572 is classified as current, respectively.  The loan is secured by substantially all corporate assets and a shareholder/officer guarantee. Long-term debt also consists of residual liabilities arising from the Companys now-terminated financing arrangements with PPL Spectrum, Inc. (PPL).  In prior fiscal years, PPL provided financing to the Companys clients in connection with the Companys Energy Gatekeeper Program.  Under its arrangement with PPL, the Company executed notes payable to PPL for the amount of the financing, and   took notes receivable from the client in like amount. Effective March 1, 2005, the Company entered into an agreement with PPL in which the Company assigned the client notes to PPL, and PPL released the Company from liability under its notes to PPL.  That transaction reduced the Companys assets by $3,062,257, the amount of the notes assigned to PPL, and reduced the Companys liabilities by the same amount, representing the Companys obligation on the note released by PPL.  At the same time, however, the Company contracted to pay $1,400 per month toward a reserve for any bad debts among the notes it assigned to PPL.  The Company has recorded the present value of that obligation on its balance sheet as a debt.  As of October 31, 2008 and 2007, the balance of the debt was $90,470 and $101,873, of which $12,107 and $11,403 is reflected as a current liability, respectively. Additionally, the Company has also contracted to fund a contingent liability to reimburse PPL for bad debts of certain customers should the customer file for protection in bankruptcy.  The agreement was consummated in June 2005, and the Company became obligated to fund $140,709 over a ten (10) year period.  This obligation carries an imputed interest rate of 6%.  As of October 31, 2008 and 2007, the balance was $100,417 and $113,074 of which $13,438 and $12,657 is classified as a current obligation, respectively.     F-19   NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007     NOTE 6- LONG-TERM DEBT (CONTINUED)  During its 2004 fiscal year, the Company entered into a settlement agreement with PPL with respect to certain aged obligations from the Company to PPL.  The payables were consolidated into a three-year promissory note in the amount of $314,047 bearing interest at 18% per annum.   Effective March 1, 2005, this note was renegotiated to lower the interest rate to 8%.  The balance due on the note at March 1, 2005 was $219,473 payable over seven years. The balances at October 31, 2008 and 2007 outstanding under this note were $64,884 and 99,235 respectively of which $37,203 and $34,352 are classified as current.  The Company made a principal payment of $50,000 in August 2007.  During the years ended October 31, 2008 and 2007, the cumulative effect of the Companys obligations to PPL on the Companys consolidated statement of operations was represented by an interest expense of $18,940 and $26,185 respectively.  Current maturities of all long-term debt consisted of the following as of October 31, 2008: 2008$65,125200954,800201028,793201130,569201229,041Thereafter49,820$258,148   NOTE 7- RELATED PARTY TRANSACTIONS  Advances Charter Management, LLC has funded the operations of the Company. Charter is related to the Company through common ownership. The balance of the payable to Charter is $1,115,617 and $935,308 as of October 31, 2008 and 2007, respectively.  These are non interest bearing advances with no specific repayment terms.  .  F-20   NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007


NOTE 7- RELATED PARTY TRANSACTIONS (Continued)  In addition, Charter Management, LLC has provided financing for the Companys various customers.  The Company records the various receivables from the customers and a corresponding payable to the related party and acted as an agent for collection and payment for/to the related party.  Initially, the Company had consulted FIN 45 for clarification as to the proper recording and inclusion of these amounts in the financial statements.  However, the Company had signed separate financing agreements with the related party, thereby negating the exception for exclusion of the amounts.  These notes receivable/payable range from between 4 and 5 years with an interest rate between 8% and 9%.  The outstanding balance at October 31, 2008 and 2007 is $59,158 and $212,683.  Principle maturity of these loans for the next three years is as follows:  2009 $   59,158  Total $  59,158  In addition, the Company has a note payable with a stockholder of the Company in the amount of $0 and $19,500 at October 31, 2008 and 2007. This note had no stated interest rate or repayment terms.  Therefore, the Company had classified it as a current liability.  On January 17, 2008, the Company issued 139,285 shares of common stock, with a fair market value of $.14 per share to repay the related party debt.   NOTE 8- STOCKHOLDERS DEFICIT  As of October 31, 2008, the Company had 500,000 authorized shares of $0.001 par value Series A preferred stock and zero shares outstanding. The Series A preferred shares convert at a ratio of 58:1 into shares of common stock.  In addition, the Company had 150,000,000 shares authorized of $0.001 par value common stock and 29,835,601 shares issued and outstanding.  During the year ending October 31, 2008, the following transactions occurred: On November 2, 2007 and January 17, 2008 the Company issued 75,000 and 75,000 shares, with a market value of $.19 and $.14 respectively per share, to an employee as part of an employment agreement.  The total fair market value is $24,750.    F-21


NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007


NOTE 8- STOCKHOLDERS DEFICIT (Continued)  On January 17, 2008, the Company issued 15,000 shares, with a fair market value of $2,100, to an investor relation agent for services to be performed over one year.  On January 17, 2008, the Company issued 139,285 shares of common stock, with a fair market value of $.14 per share to repay the related part debt of $19,500.  On February 4, 2008 the Company issued 44,118 shares, with a fair market value of $7,500, to an investor relation agent for services performed in January 2008.  On April 10, 2008 the Company issued 62,500 shares, with a fair market value of $10,000, to an investor relation agent for services performed in February  During the year ending October 31, 2007, the following transactions occurred: On November 27, 2006, Charter Management, LLC, the sole holder of the preferred stock, converted all 187,389 outstanding shares of preferred stock into 10,868,562 of common shares.  On February 23, 2007, the Company issued 15,000 shares, with a fair market value of $4,800, to an investor relation agent for services to be performed over one year.  On March 28, 2007, the Company issued 1,500 shares, with a fair market value of $540, to a former employee as previous compensation earned, but not recorded.  The expense was charged to current operations.  On May 29, 2007,the Company entered into a one year contract with a public relations firm by issuing 300,000 shares of stock at $0.25 per share for a total of $75,000.  On July 6, 2007, the Company received $270,000 for 1,000,000 shares of common stock and warrants to purchase an additional 1,000,000 shares of common stock for exercise prices ranging from $.50 per share to $1.50 per share.  The bifurcated value of the warrants was $110,538 and was charged to Additional paid-in capital  Warrants. The Company paid an issuance cost of $16,200, which was applied against additional paid-in capital.  The common stock was not issued until August 2007.       F-22


NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007


NOTE 8- STOCKHOLDERS DEFICIT (Continued)   On July 19, 2007, the Company issued 5,000 shares, with a fair market value of $1,500, to an employee as compensation.  On August 8, 2007, the Company executed an agreement to obtain the services of an investment banking/public relations firm.  In exchange for the firms one year commitment, the Company issued to it 85,325 shares, with a fair market value of $50,000 and options to purchase 200,000 shares at prices ranging from $.50 to $1.50.  On August 8, 2007, the Company executed an agreement to obtain the services of a Consultant.  In exchange for the consultants one year commitment, the Company issued 341,297 shares, with a fair market value of $100,000.  NOTE 9- COMMITMENTS Leases - Office  The Company currently leases its New Jersey office space under a lease that expired in April 2008, and was renewed on a one-year basis. Payments under this lease were $23,342 and $22,692 for the years ended October 2008 and 2007, respectively.  The Company also has various lease agreements for certain office equipment, expiring in 2012. Payments under this lease were $7,948 and $7,269 for the years ended October 31, 2008 and 2007, respectively.  The Company is leasing an upgrade to its sales management software.  The lease was signed on July 22, 2007 and expires in 2012.  Payments under this lease were $4,851 and $1,949 for the years ended October 31, 2008 and 2007, respectively.  Future lease commitments at October 31, 2008:  2009 $17,905 2010 4,675 2011 4,675 2012 3,506 2013 0   Total lease costs                     $  30,761    F-23


NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007


NOTE 10 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, 2008 and 2007, deferred tax assets consisted of the following:   2008 2007  Deferred tax assets $1,592,000 $  1,356,000 Less:  valuation allowance (1,592,000) (1,356,000)  Net deferred tax assets $          -0- $           -0-  At October 31, 2008 and 2007, the Company had a federal net operating loss carry forward in the approximate amounts of $4,825,000 and $4,111,000, 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 11- GOING CONCERN  As shown in the accompanying consolidated financial statements, the Company incurred substantial net losses for the years ended October 31, 2008 and 2007 and has sustained large accumulated deficits as well as negative cash flows from operations that raise substantial doubt about the Companys ability to continue as a going concern.  The Companys future success is dependent upon its ability to achieve profitable operations and management 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. There is no guarantee whether the Company will be able to generate enough revenue and/or raise capital to support those operations.  The consolidated financial statements do not include any adjustments that might result from the outcome of these uncertainties.  F-24


NATIONAL ENERGY SERVICES COMPANY, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS OCTOBER 31, 2008 AND 2007


NOTE 12- LEGAL  The Company was named as a defendant in a lawsuit with a vendor.  The lawsuit has been settled as of 1/12/09.  NOTE 13- SUBSEQUENT EVENTS  The Company was named as a defendant in a lawsuit with a vendor.  The lawsuit has been settled as of 1/12/09. On January 9, 2009 the Company issued 425,245 shares, with a fair market value of $30,510.84 to an investor relation agent for services performed.             F-25     SIGNATURES  In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant has caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.  National Energy Services Company, Inc.   By: /s/ John T. ONeill John T. ONeill, Chief Executive Officer  In accordance with the Exchange Act, this Report has been signed below on January 29, 2009 by the following persons, on behalf of the Registrant and in the capacities and on the dates indicated.   /s/ John T. ONeill John T. ONeill, Director, Chief Executive Officer,   /s/ John A. Grillo John A. Grillo, Director, Chief Financial Officer,   /s/ Deborah ONeill Deborah ONeill, Director