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, 2004

                or

|_|  TRANSITION  REPORT  PURSUANT  TO  SECTION  13 OR  15(d)  OF THE  SECURITIES
     EXCHANGE ACT OF 1934

     For the transition period from ______________ to _____________


Commission file number: 000-50089


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


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


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

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

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

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered pursuant to Section 12(g) of the Exchange Act: None



Copies of Communications Sent to:

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



<PAGE>




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

Yes |_|   No |X|



     Check if there is no disclosure  of  delinquent  filers in response to Item
405 of Regulation S-B is not contained in this form,  and no disclosure  will be
contained,  to the  best of  registrant's  knowledge,  in  definitive  proxy  or
information statements incorporated by reference in Part III of this Form 10-KSB
or any  amendment  to this Form  10-KSB.  |X| Indicate by check mark whether the
registrant is an  accelerated  filer (as defined in Rule 12b-2 of the Act).

Yes |_|   No |X|



     State  issuer's  revenues for its most recent fiscal year ended October 31,
2004: $914,100.



     Of the  15,698,014  shares of voting  stock of the  registrant  issued  and
outstanding as of March 15, 2005,  4,157,114 shares were held by non-affiliates.
Because of the absence of an  established  trading  market for the voting stock,
the  registrant is unable to calculate the aggregate  market value of the voting
stock held by non-affiliates as of a specified date within the past 60 days.



                       DOCUMENTS INCORPORATED BY REFERENCE
     None



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





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<PAGE>



                                     PART I

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

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


ITEM 1. DESCRIPTION OF BUSINESS

(a)  Business Development

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




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<PAGE>



     Unless the  context  indicates  otherwise,  references  hereinafter  to the
"Company",  "we", "us" or "NESC" include both National Energy Services  Company,
Inc., a Nevada  corporation  and our wholly owned  subsidiary,  National  Energy
Services  Company,  Inc.,  a New  Jersey  corporation.  Our  principal  place of
business is 3153 Fire Road,  Suite 2C, Egg Harbor  Township,  NJ 08234,  and our
telephone number at that address is (800) 758-9288.


(b) Business of the Company

     As a result of the Share Exchange,  we changed our business plan to NESNJ's
business plan of marketing  aggregated  energy  management  services to the long
term care industry. NESNJ was formed in late 1995 by John Grillo, our President.
Mr. Grillo capitalized on his experience as an electrical  contractor to develop
a comprehensive  energy  management  program  ("Program") for the long term care
industry.  Recently,  we expanded  our  business  model 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").  The
Facilities  are able to pay for the  Program  directly  through  monthly  energy
savings generated by energy system improvements with minimal or no out-of-pocket
costs to the Facility. We offer the Facilities several financing alternatives to
finance  the  Program  through  various   lending  sources   including   Charter
Management,  LLC ("Charter"),  U.S. Energy Capital ("US Capital"),  and Facility
Capital Corporation ("Facility Capital").

Project Financing

     The Facilities  may purchase the equipment from Charter  through our Energy
Gatekeeper  Program  ("Gatekeeper")  or lease the equipment  from US Capital and
Facility Capital through an equipment lease agreement..

The Energy Gatekeeper Program

     The  Gatekeeper  is a combined  service and  equipment  financing  contract
whereby we provide the Facility  with all of its energy  services.  The Facility
may obtain new energy-efficient  lighting, an ozone laundry support system, HVAC
systems and other energy-efficient capital improvements. There are minimal or no
out-of-pocket  costs to the Facility  since the capital costs for the Gatekeeper
is provided by a third party lender such as Charter and typically amortized over
a sixty-month period.

     On September  22,  2003,  we executed a master  agreement  with Charter for
Charter to fund energy  upgrade and  retrofit  opportunities  to the  Facilities
through a series of funding  agreements for each job. In each case,  Charter has
the right to perform a credit analysis of the Facility on which the Project will
be  performed  and to reject any unfit  candidate.  Charter  will also utilize a
credit analysis to determine  interest rate and term of repayment.  Charter will
pay us as we  perform  the  work.  We shall  collect  all  payments  in favor of
Charter,  and may charge a 1% administrative fee in connection  therewith.  Each
time a project is funded, we sign a separate Project Loan Agreement with Charter




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acknowledging our responsibility for all loan payments in the event the Facility
defaults. Charter may terminate the master agreement with 30 days written notice
to us. As of March 15, 2005, John O'Neill and Deborah  O'Neill,  the sole owners
of  Charter,  owned  100%  of our  convertible  preferred  series  A  stock  and
beneficially  own  3,433,300 of our common  stock.  See Note 11 to our Financial
Statements.

Subsequent Events

     During  November 2004 and January 2005,  we reached an  understanding  with
Facility  Capital  and  US  Capital  respectively  to  provide  equipment  lease
financing for the Facilities.  Pursuant to this understanding,  we may introduce
the  Facilities to these  leasing  companies to arrange for the equipment to the
leased in connection with the Program. This leasing option is different than the
Gatekeeper,  which requires the Facility to finance the  equipment,  rather than
lease it.

Principal Products and Services

     The principal  products and services offered in the Program include:  Ozone
Laundry System (OLS), Lighting Upgrades,  Mechanical Systems (HVAC), Water/Sewer
Conservation Methods and Energy Management.

Ozone Laundry System (OLS)

     OLS can cut laundering  costs by more than 50% primarily by eliminating the
need for hot water during the washing process. OLS uses activated oxygen (ozone)
in cold water washing to disinfect  better than  traditional  hot water methods.
The savings are substantial since laundering  expense is considered to be one of
the most significant  expense items in a Facility's  budget.  By injecting ozone
into the wash and rinse water,  laundry is cleaner and  completely  disinfected.
With ozone laundering,  fewer cycles are required to clean, thus chemical use is
reduced.  Energy bills are also greatly reduced because ozone works best in cold
water.

     Ozone is a powerful  oxidant  that is more  effective  than  chlorine,  but
without chlorine's dangerous  properties.  Using ozone in the laundry process is
less costly  because ozone is only active in cold water;  therefore  there is no
need to buy  natural  gas or other  energy  sources to heat the  water.  Various
studies  also reveal that using ozone gas in  laundering  is far more  effective
than conventional  disinfectants against microorganisms and viruses. The OLS are
easily installed and begin generating energy savings immediately upon operation.

Lighting Upgrades

     We provide Facilities with energy-efficient  lighting upgrades or "Lighting
Retrofit"   ("Lighting   Upgrades").   The  Lighting  Upgrades  can  reduce  the
Facilities' 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 226,666 kilowatt hours per year,  resulting in an annual savings
of approximately  $20,400.  These average savings results are taken from our own
engineering and actual results in more than 100 installations.

     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  paid off by the  Facility.  For example,



                                       5
<PAGE>



compact  fluorescent  light  bulbs use 70  percent  less  energy  than  standard
incandescent light bulbs. By replacing just one 75-watt  incandescent light bulb
with a 20-watt CFL,  you could save an estimated  $14 a year on your energy bill
assuming the bulb is used for 5,000 hours.  Further,  compact  fluorescent light
bulbs last an average of 10,000 hours, compared to only 850 hours for a standard
incandescent light bulb (Portland General Electric Company).

Mechanical Systems/HVAC

     The installation of  state-of-the-art,  energy conserving boilers,  heating
and air  conditioning  units and other  mechanical  equipment  can  improve  the
Facilities'  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 Facilities' residents and employees.

     The  installation  of  ColdPlus  Regrigerant  Oil  Addictive  in HVAC units
provides  highly  negatively  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 will no longer allow the  compressor  oil to attach itself onto the bearings
and inner wall of the refrigerant tubing. The compressor oil will no longer turn
to gel in the cold section.  As the baked on compressor oil dissolves,  it mixes
with the refrigerant and begins to flow freely throughout the system.

     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.

Energy Supply

     We intend to provide  competitively  priced  electricity  and  natural  gas
supply to the  Facilities.  We intend to form strategic  alliances with regional
and national  energy  supply  sources.  The driving  force in the selection of a
supply  partner  will be their  commitment  to  competitive  pricing and quality
service.



                                       6
<PAGE>



Web-Based Energy Management

     We are currently  working with National  Demand,  LLC, a limited  liability
company owned by our directors,  Mr. Grillo and Mr. O'Neil,  to become the first
company  to  offer  the  Powerweb   internet-based  Wireless  Real  Time  Energy
Management  System to the retail  market.  We believe this system will allow our
customers  to measure,  monitor and manage  their  electric  energy  consumption
on-line and in real-time. We expect to generate revenue through a monthly access
fee to our web site  and  through  the  initial  sales  of  start  up  equipment
necessary for the operation of the system.  See Item 12.  Certain  Relationships
and Related Transactions.

Nursing Home Energy Market

     There are  approximately  17,000 nursing homes  operating  nationally  with
approximately  10,000 of them in the high cost  energy  regions  of the East and
West coasts. The following factors should be considered:

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

Marketing, Sales and Distribution

Marketing

     We  believe  that  relationships  are  the  cornerstone  of  our  marketing
philosophy.  The  process of  building  and  maintaining  working  relationships
requires a commitment at all levels of our  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
our products and the market,  we work very hard to ensure that our employees and
representatives have a working knowledge of our product and the process.


Energy Market

     If the  energy  supply  prices  are too  low,  we  cannot  offer  potential
customers the most  effective  benefit;  minimal or no  out-of-pocket  cost. Our
sales  volume is  directly  related  to our  ability  to fund our  products  and



                                       7
<PAGE>



services  through  energy  savings.  Low energy  supply  prices  also reduce the
Facilities' need to address its utility costs and energy usage patterns.  If the
need  to  conserve  dollars  through  conserving  energy  does  not  exist,  our
Gatekeeper or equiptment leasing options are not viable. Building a relationship
with the energy market means: (i) researching energy suppliers, (ii) researching
energy rebates and special  programs,  and (iii) gaining an understanding of the
energy trends monitoring trends and suppliers. As energy supply prices increase,
as they have in the past year,  we believe that  additional  markets will become
available to us.

Long Term Care and Hospitality Market
We believe the best way to stay on top of the constantly changing health care
and hospitality industry is to build relationships with individuals inside the
industry. The feasibility of an area is determined by:

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

Sales

     We begin the  relationship  building  process by contacting  the following:
existing  contacts,  referrals,  corporate  owners,  long  term  care  trade and
professional associations and state regulators regarding Laundering Regulations.
We have spent years  developing our  professional  relationships  in the Nursing
Home industry.  Often, our contacts have made personal introductions for us that
has advanced the sales process and business relationships are made quicker.

     We  believe  that the  sales  process  is an  integral  part of our  growth
philosophy  to provide  additional  products  and  services  to the  Facilities.
Ensuring customer  satisfaction and keeping our customers  informed is critical.
We currently use a detailed  computerized  contact  management  software program
called Goldmine. All of our employees are trained to use Goldmine,  which allows
our  employees to view the history of a Facility's  service  records and provide
additional service as needed.

     The  Facilities  often must be educated  before a need is even  recognized.
This  education  occurs on  several  levels:  energy  cost and usage  awareness,
conservation  options,  our line of products  and  services  and the benefits of
selecting  us. We believe  that if we can prove to a Facility  that it will save
money with minimal or no out-of-pocket  expense,  while maintaining or improving
its current level of care,  we can sell our products and services  successfully.
Inadequate reimbursement and challenging fiscal situations in many nursing homes
are driving  owner/operators  to seek  creative ways to secure extra cash to the
bottom line. Energy conservation  measures that are financed are a way to reduce
current expenses and improve the bottom line.

Purchasing and Installation

Purchasing

     We have developed  solid  relationships  with major suppliers of industrial
lighting,  mechanical  equipment  and other  energy  conservation  products.  We



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

     We have preferred vendor or distributor status with several suppliers. This
means  that we  enjoy  the  following:  (i)  preferred  pricing,  (ii)  quantity
discounts,  (iii)  timely  delivery,  (iv)  quality  products,  (v)  exceptional
warranties,  (vi) superior customer service,  (vii) product exclusivity,  (viii)
manufacture  sponsored  training,  and (ix) superior  customer  service.  We are
dedicated to  maintaining  quality  relationships  with our suppliers and make a
concentrated  effort to expand our sphere of influence among the  manufacturers.
This allows us to customize our product line and select the materials  that best
fill the needs of our customers.

Installation

     The  installation  of our products is the most  delicate part of the entire
process and can place enormous strain on a customer relationship.  At this time,
we make every  effort to expand our contact  with the Facility to include all of
those staff  members whose daily tasks will be affected by the  installation  of
new equipment.  The Facility  presents  exceptionally  complicated  installation
problems. Unlike most commercial installations,  this is an environment in which
people are living,  sleeping,  eating and under direct medical care (in the case
of a nursing home).  We are dedicated to making this  installation  as smooth as
possible,  which  takes a great  deal of  planning  and  communication  with the
Facility.

Contractor Selection

     The  selection  of the  right  contractor  is  critical  to the  successful
installation.  We have 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 our  contractor  compliance
paperwork.

Customer Service

     Customer service begins at the initial contact and continues throughout our
relationship  with the  Facility.  In  addition,  our  customer  service  policy
requires  a site  visit  once a year  and  monthly  phone  calls to check on the
Facilities'  operations and customer  satisfaction.  Using the Goldmine  Contact
Management  System,  we carefully track the specifics of our customer  relations
effort.  (i.e.:  date, time of visit, who made the visit,  note of any comments,
action taken, etc.).



                                       9
<PAGE>



Systems Design and Engineering

     We have  diligently  worked to develop  systems and services  that fill the
unique needs of the long term care and  hospitality  industries.  We believe our
ability to assess savings potential quickly,  project usage, and design a system
to meet stringent speculation is a very marketable asset.

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

     We have  relationships  with  various  Facilities  that have  enabled us to
conduct  research and development  including trial  installations  on innovative
products and services. In addition, we have relationships with manufacturers and
suppliers  which   expedites  the   development  of  product  and/or   equipment
modifications necessary to fill the unique market needs.

Operations and Management Control

     We have a gross profit  margin of between 24% to nearly 100%.  For example,
the gross profit percentage for lighting retrofit jobs has ranged from 34.57% in
2001 to  25.67% in 2002 to  45.04%  in 2003 to  40.14%  in 2004.  This  range is
primarily  caused by  increased  competition,  which has resulted in the Company
having to lower its retail price, while its costs have remained relatively flat.
For Ozone jobs,  the gross profit  percentage  has ranged from 51.64% in 2001 to
48.47% in 2002 to 55.79% in 2003 to an increase in 2004 to 83.58%. This range is
a direct result of NESC changing suppliers of the ozone machine.  These machines
are now less  expensive and we believe are better  quality.  Further,  these new
machines require less repair and maintenance  work. We sold gas boosters in 2002
and the gross  profit for this product was 24.02% in 2002.  In 2003,  we stopped
selling these boosters because we were not able to obtain preferred pricing from
the manufacturer.  The utility/energy  management/rebate income is close to 100%
gross margin, as the cost is purely personnel costs. The Company does not employ
anyone  specific to this income  stream,  as the  revenue  generated  is not yet
sufficient to require dedicated personnel.

     Energy conservation  services contracts are typically  negotiated,  not bid
because each  Facility has  different  needs and  requirements  which need to be
determined  through an energy study prior to the preparation of a proposal.  The
fluid nature of energy  prices and the  extended  period of the  agreement  also
contribute  to the need to work with the Facility to  determine  the best energy
conservation  strategy.  Facilities  generally do not shop this type of proposal
because in most cases the energy savings funds the project,  so the Facility has
no cash outlay.




                                       10
<PAGE>



Dependence on New Products

     We believe our ability to grow our market share is partially dependent upon
our  ability to  introduce  new and  innovative  products.  Although  we seek to
introduce  additional products each year, the success of new products is subject
to a number of conditions,  including  discovering  products made by others that
will appeal to customers  and comply with  existing  regulations  at the time of
introduction.  There can be no assurance that our efforts to find innovative new
products will be successful,  that Facilities will accept these new products, or
that the  companies  that  manufacture  these  products  will obtain  regulatory
approvals of such new products,  if required.  In addition,  no assurance can be
given that new  products  currently  experiencing  strong  popularity  and rapid
growth will maintain their sales volume over time.

Competition

     The principal  markets in which we compete are  competitive and fragmented,
with  competitors  supplying  energy,  providing energy  management  services or
financing  but few  providing a total package deal with no out of pocket cost to
the facility.  Increased competition could have a material adverse effect on us,
as competition may have far greater  financial and other resources  available to
them and possess extensive capabilities far greater than those of us.

     Although  our future  employees  may be  required  to sign  confidentiality
agreements,  there is no guarantee  that our trade  secrets won't be shared with
competitors  or that we could enforce these  agreements.  Such  disclosures,  if
made, could negatively affect our  competitiveness.  There are a few competitors
that we face in several of the different  product lines that we offer.  However,
we don't believe our  competitors  have a program that is similar or competitive
with the Gatekeeper.  The Gatekeeper offers the analysis design and installation
of  energy  conservation  measures,  energy  management  services  and a  unique
financing package tailored for the nursing home and hospitality industries.

Competitors for the Ozone Laundry System are:

     Envirocleanse Systems,  Inc., Ponte Vedra, FL and Mooresville,  NC, 7 years
in Business with  approximately  0.5% of nursing home market;  Laundrox  Laundry
Systems Concord,  NC Less than 1 year in business and it is believed that it has
no share of business currently and Daniels Equipment Company,  Inc., Auburn, NH,
20 plus years in business with  approximately 0.5% of the nursing home market as
well as many local competitors.

Competitors for the Lighting Upgrades and Mechanical Upgrades are:

     Can-Am  Energy  Systems,  Lake  Park,  FL,  7 - 8 years  in  business  with
approximately 2% of nursing home market and ES Performance Lighting, Tucson, AZ,
5 years in business  with  approximately  3% of nursing home market.  On a local
level an occasional small in-house electrician or HVAC contractor.

Sources and Availability of Raw Materials and Principal Suppliers

     We obtain all our products from numerous  sources.  We use little or no raw
materials.  We  generally  do not have  contracts  with any  entities or persons
committing to buy/sell certain quantities of product. Therefore, there can be no



                                       11
<PAGE>



assurance  that suppliers will provide the products we need in the quantities we
request or at a price we are  willing  to pay.  Because  we do not  control  the
actual  production  of these  products,  we are also subject to delays caused by
interruption  in production of materials  based on conditions  not wholly within
our control.  Our inability to obtain adequate  products at favorable prices, or
at all, as a result of any of the foregoing  factors or otherwise,  could have a
material  adverse  effect on us. The  majority of the raw  materials  use by the
major manufactures such as General Electric,  Phillips and Sylvania Lighting for
the  manufacturing of lamps and electronic  ballasts are as follows:  sand, high
boron borosilicate,  iron, mica, aluminum,  soda lime,  magnesia,  silica glass,
borosilicate  glass,  lead-barium,  petroleum,  carbon,  copper,  lead, mercury,
silicon,  tungsten, nickel rubber and rare earth phosphorus.  These products are
used to produce the electronics, wiring, coils, circuit boards, transformers and
casing of the ballast. Additionally, the manufacturing of the lamps includes the
glass tubes,  filaments  and end caps and bases.  The  manufacture  of the Ozone
Laundry  System uses sand,  iron,  borosilicate  glass,  lead-barium,  aluminum,
petroleum,  copper,  lead,  silicon,  mica, soda lime,  magnesia,  silica glass,
carbon, nickel, and mercury. These products are used to make the case, controls,
wiring, ozone generator, tubing, circuit boards and hardware.

Intellectual Property

     We rely upon common law patent,  trademark and copyright protection for our
proprietary  Lighting Analysis Software.  There can be no assurance that we will
not violate the intellectual  proprietary rights of others or that our trademark
would be upheld and not prevented from using our trademark,  if challenged,  any
of which could have an adverse effect on us. It is possible that our competitors
will adopt  product or service  names  similar  to ours,  thereby  impeding  our
ability to build brand identity and possibly leading to customer confusion.  Our
inability to protect our trade names will have a material  adverse effect on our
business,  results of operations and financial condition.  We also rely on trade
secrets and  proprietary  know how, and employ various  methods,  to protect our
concepts.  However,  such methods may not afford complete protection,  and there
can be no assurance that others will not independently  develop similar know how
or obtain access to our know how and concepts. There can be no assurance that we
will be able to adequately  protect our trade secrets.  Third parties may assert
infringement  claims  against us or against third parties upon whom we rely and,
in the event of an unfavorable ruling on any claim, we may be unable to obtain a
license or similar  agreement to use technology that we rely upon to conduct our
business.

Governmental Regulation

General

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



                                       12
<PAGE>



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

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

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

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



                                       13
<PAGE>



Laundry

     The laundry process is regulated by state guidelines.  Typically, the State
Department  governing  these  regulations is the  Department of Human  Services,
Department  of Jobs and Family  Services,  Department of Health  Services,  etc.
Because these are state guidelines, the regulations vary from state to state. We
endeavor to become familiar with each state's regulations  regarding the laundry
process before we start to market and install the OLS in that particular  state.
The majority of states that we operate,  specify specific guidelines for laundry
that is processed in an on-site laundry.  Typical regulations include guidelines
covering  issues such as:  separate  holding  areas for soiled and clean  linen,
linen cart storage,  having enough clean linen on hand to adequately service the
facility,  adequate soiled and clean linen storage, an area for folding, mending
and ironing  the clean  linen,  proper  storage  for  supplies,  a deep sink for
soaking  and a  separate  hand  washing  sink.  Polices,  procedures  and proper
protocol to reduce  bacteria  in linens and to protect  the staff and  residents
from infection are required to be written and implemented by the facility.

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

Research and Development

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

Compliance with Environmental Laws

     We  believe  that we are in  compliance  with  all  material  and  relevant
environmental  laws.  We have adopted the practice of recycling and the disposal
of all lighting  ballast and fluorescent  lamps removed from a Facility during a
lighting upgrade project. The waste generated during a lighting upgrade that can
be considered hazardous is the Polychlorinated Biphenyl's (PCBs) in the existing
ballasts and the mercury in the existing  fluorescent  lamps. We use 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 our view that this practice will provide our clients and
us the greatest protection from any Super Fund or toxic waste liability issues.




                                       14
<PAGE>



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

Employees

     As of October 31, 2004, the Company  employed  eleven (11) full time and no
part time employees.  As of March 15, 2005, the Company  employed eight (8) full
time and no part-time employees. None of the Company's employees are represented
by labor  unions.  The Company  believes  its  relationship  with  employees  is
excellent  and does not  believe  that  unionization  is  likely to  happen.  We
anticipate  hiring  additional  employees  over the next twelve months if we are
successful in implementing our plan of operations.


ITEM 2. DESCRIPTION OF PROPERTY

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

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



                                       15
<PAGE>



ITEM 3. LEGAL PROCEEDINGS

     We are not a party to any legal  proceeding,  and have no  knowledge of any
threatened or pending legal procedding against us or our property. We are in the
process  of  negotiating  an  agreement  with  PPL  to  have  various   accounts
receivables and related accounts  payables  transferred to PPL in exchange for a
reserve account to be established in the amount of $300,000 over a ten (10) year
period. As of this filing date, this agreement has not finalized.


ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

     No  matter  was  submitted  to a vote  of  our  shareholders,  through  the
solicitation  of proxies or  otherwise  during the fourth  quarter of our fiscal
year ended October 31, 2004, covered by this report.



                                     PART II


ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

     (a) Market  Information.  There is no public  trading market for our common
stock. Our common stock has never traded in a public market.

     (b) Holders. As of March 3, 2005, there were approximately one hundred five
(105)  holders  of  record  of our  common  stock  and  one  (1)  holder  of our
convertible Preferred Series A stock.

     (c) Dividend  Policy.  We have not declared or paid cash  dividends or made
distributions  in the  past,  and we do not  anticipate  that we will  pay  cash
dividends or make  distributions in the foreseeable  future. We currently intend
to retain and reinvest future earnings, if any, to finance our operations.

     (d) Equity  Compensation  Plans.  We have not authorized  any  compensation
plans (including  individual  compensation  arrangements) under which our equity
securities  have been authorized for issuance as of the end of the most recently
completed  fiscal year ended October 31, 2004. We have not  authorized  any such
plan for the fiscal year ended October 31, 2005.

Recent Sales of Unregistered Securities.

     We did not sell any  securities  during the period  covered by this  report
that were not registered under the Securities Act which was not disclosed in our
10-QSB.


ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS

Discussion and Analysis

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




                                       16
<PAGE>



Overview

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

     We anticipate  that we will have to increase the scale of our operations as
our sales increase.  This will include the hiring of additional personnel in all
functional areas and will result in significantly higher operating expenses. The
increase  in  operating  expenses  is  expected  to be matched  by a  concurrent
increase  in  revenues.  However,  our net loss may  continue  even if  revenues
increase and operating expenses may still continue to increase. Expansion of our
operations may cause a significant strain on our management, financial and other
resources.  Our ability to manage possible future growth,  should it occur, will
depend  upon a  significant  expansion  of our  accounting  and  other  internal
management  systems  and the  implementation  and  subsequent  improvement  of a
variety of systems,  procedures  and  controls.  There can be no assurance  that
significant  problems in these areas will not occur. Any failure to expand these
areas and  implement  and improve such  systems,  procedures  and controls in an
efficient  manner at a pace  consistent  with our business could have a material
adverse effect on our business,  financial  condition and results of operations.
As a result of such  expected  expansion  and the  anticipated  increase  in our
operating expenses,  as well as the difficulty in forecasting revenue levels, we
expect to continue to experience significant fluctuations in our revenues, costs
and gross margins, and therefore our results of operations.

Results of  Operations

     We generate sales by financing energy  conservation  projects to reduce gas
and electric costs to the Facilities in the United States. The estimated pricing
and gross profit that we earn varies by each type of job  completed,  with ozone
projects having a higher gross profit than lighting upgrade projects. During the
period of  comparison,  lighting  projects  completed  exceeded  ozone  projects
completed; therefore, the Company's gross profit was reduced accordingly.

     In  attempting  to  obtain  business,  we  will  send  field  surveyors  to
interested  Facilities to determine the potential  energy savings so that a cost
proposal can be prepared and presented to the Facility. During the course of the



                                       17
<PAGE>



year, many proposals are made, but there is no guarantee that we will be able to
perform the job at the Facility  because of several  reasons.  For example,  the
Facility's credit rating or financial statements may not be minimally sufficient
per the  funding  or  leasing  source.  In  this  situation,  we  have  incurred
unrecoverable  costs  that  won't  be  absorbed  and  then  become  part  of the
manufacturing overhead, which will reduce our gross profit.

Revenues

     Our total  revenues for the twelve months ended October 31, 2004  decreased
from 2,766,138 to 914,100, a decrease of $1,852,038 or approximately 66.95% from
the comparable period in fiscal year ended October 31, 2003.  Revenues are lower
due to decrease in sales as a result of us not being able to provide  sufficient
funding  sources to the  Facilities and our sales force closing less jobs in the
lighting area. We are searching for additional  funding  sources to enable us to
obtain additional lighting contracts.  We have also established leasing programs
with two different leasing companies to provide  alternative funding sources for
the Facilities.  As a result,  our sales force can now market a lease option, in
additional to the Gatekeeper, to the Facilities.

     We recognize  revenue when the services  are  rendered.  At that time,  the
funding source is invoiced and we record revenue on our books. Our revenues vary
from period to period  based upon the success of our sales force in closing jobs
which then have to be approved by the funding source before implementation.  Our
primary  sources of revenue are ozone jobs and lighting  jobs which  account for
approximately 90.98% of our overall revenue.

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

     Our  remaining  revenues  consists  of  Management  Revenue  of $4,455  and
$116,119 for the years ended October 31, 2004 and 2003,  representing  less then
1/2 percent  and 4% of Revenues  respectively.  This  Management  Revenue is the
administrative  handling  charges for  processing  the invoices from the utility
companies  for nursing  homes and assisted  living  facilities  In addition,  we
realized energy  management  revenues of $78,030 and $78,610 for the years ended
October  31,  2004 and 2003,  representing  8.5% and less then 2.8% of  Revenues
respectively.  The energy  management  revenues  are for monthly  monitoring  of
facility  utility  invoices to ensure  proper  billing  via correct  charges and
appropriate tariffs.

Cost of Sales

     The cost of goods sold for the twelve  months  ended  October  31, 2004 was
$520,987  (approximately 57% of sales) as compared to $2,460,494  (approximately
89% of sales) for the  comparable  period in fiscal year ended October 31, 2003.
The increase in our  operating  margins for the twelve  months ended October 31,



                                       18
<PAGE>



2004 is attributable to our improvement in managing the costs related to various
lighting  and  ozone  jobs as well  as the  change  in  suppliers  of the  ozone
generators.. The gross profit for the years ended October 31, 2004 and 2003 were
$393,113 (43% of Revenue) and $305,644 (11% of Revenue) respectively.

Operating Expenses

     Selling  Expenses  for the  years  ended  October  31,  2004 and 2003  were
$399,627 and $470,499.  General and Administrative  Expenses for the years ended
October 31, 2004 and 2003 were $513,394 and $944,087.  Total operating  expenses
for the twelve months ended October 31, 2004 decreased approximately $502,255 or
35%.  The reason for this  decrease  in  operating  expenses  is that we began a
number of cost saving measures. For example, our payroll was reduced by employee
layoffs and we analyzed every area of our spending and instituted new procedures
to reduce expenses.

Interest Expense

     Interest expense for the years ended October 31, 2004 and 2003 were $49,300
and $50,079.

Net Income/Loss

     Net Loss for the years ended  October 31, 2004 and 2003 were  $576,552  and
$1,167,055.  As we  discussed,  our  sales  decreased  dramatically  due  to the
Facilities inability to obtain financing for the Project. This decrease in sales
and related cost of goods sold resulted in a lower net loss to us.

Assets and Liabilities

     Our total assets were  $4,809,103 and $5,313,183 as of October 31, 2004 and
2003.  Our assets  consisted  primarily of accounts  receivable  with a value of
$43,116  and  $183,285  and notes  receivable  in the amount of  $4,387,608  and
$4,856,824 respectively.

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

     Total Current  Liabilities as of October 31, 2004 and 2003 were  $2,559,190
and $ 2,501,613. The majority of our payables represent pass through amounts. We
record the utility  invoices as a liability  when the  invoices  are created and
offset when we receive the payments reform the Facilities; therefore, there have
not been any timing differences.



                                       19
<PAGE>



     Long Term  Debt,  less  current  portion  was  $2,545,121  and  $3,539,626,
respectively.  There are no other  obligations other than those disclosed in the
financial statements.

Financial Condition, Liquidity and Capital Resources

     At October 31, 2004 and 2003, we had cash and cash  equivalents  of $73,223
and $45,656 respectively. Our working capital is presently minimal and there can
be no assurance that our financial condition will improve. We expect to continue
to have minimal  working capital or a working capital deficit as a result of our
current liabilities.

     We must  complete  the  job,  pay for all  costs  incurred,  and  obtain  a
completion  certificate  before we submit an invoice  for  reimbursement  to the
lender  or  leasor  before  we are able to  collect  our  revenue.  These  steps
represent  approximately  a 30 day delay  before we receive  the funds.  We have
minimal  liquidity  and working  capital is  severely  strained as we have fully
utilized our credit lines.  We cannot assure that our financial  condition  will
improve  significantly unless we successfully complete more jobs consistently on
a monthly basis, which will enable us to generate  additional cash flow, thereby
reducing our current liabilities.

     We plan to finance our future  operations  through the sale of our products
and services. In the event we are unable to fund operations from revenues alone,
we  may  raise  additional  capital  through  private  and/or  public  sales  of
securities  in the  future  but we have no  commitments  at this time  which are
contingent upon the occurrence of some future event.

     No trends have been identified  which would materialy  increase or decrease
our results of operations or liquidity.

     We have short term liquidity problems which are being addressed by revising
internal  procedures for faster job approvals to hasten the process and fund the
projects faster. For long term liquidity,  we believe that we will need to raise
additional  capital  or  experience  increased  revenues  to remain  an  ongoing
concern; however, as stated above no commitments have been made as of this date.

     The only significant cash transaction other than that generated and used in
operations  has been that we raised  $1,009,400  and  $250,000 in equity for the
period ended October 31, 2004 and 2003.

     For Gatekeeper  transaction,  our accounts  receivables have no relation to
our revenues,  as these revenues are only  generated when the lender  approves a
job for completion.  At that time, an invoice is created and payment is received
by us from the lender within  thirty days of  invoicing.  There has not been any
change in credit terms, collection efforts, credit utilization or delinquency by
the Facilities that we service. In addition,  we record an accounts payable when
the utility  invoices  are created and offset this  liability  when we receive a
payment  by  the  Facilities;   therefore,   there  have  not  been  any  timing
differences.




                                       20
<PAGE>



     Our cash flow has become negative mainly due to the increase in the cost of
sales expenses  discussed  earlier.  All projects are required to be approved by
Charter,  who is the  loan  provider  for  Gatekeeper  transactions  and with US
Capital and Facility  Capital for leasing  transactions.  Faster job approval is
needed by us to generate  revenue  more  quickly,  but we must make sure that we
follow   through  on  our  own  internal   procedures  to  make  sure  that  all
documentation  is gathered and presented to the loan providers on a timely basis
for credit  approval.  The lenders will not reduce their  standards in approving
jobs as they are not willing to increase  their risk of default on accounts  and
notes receivables by the facilities.

Going Concern

     The  accompanying  consolidated  financial  statements  have been  prepared
assuming  that  we will  continue  as a going  concern.  We have a  stockholders
deficit of $295,208 and a working capital  deficiency of $245,738 at October 31,
2004 and net losses from  operations of $576,552 and  $1,167,055,  respectively,
for  the  years  ended  October  31,  2004  and  2003.  These  conditions  raise
substantial  doubt  about  our  ability  to  continue  as a going  concern.  The
consolidated  financial  statements do not include any adjustments that might be
necessary if we are unable to continue as a going concern.

Critical Accounting Policies

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

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

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

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




                                       21
<PAGE>



     As we are liable on all of our notes payable, which are offset by the notes
receivable,  should our estimates of its  potential  bad debt be incorrect,  the
impact  on the  reported  results  and  balance  sheet  could  be  substantially
negative. At October 31, 2004 and 2003, our notes receivable were 91% and 91% of
total assets.

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

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

     We are obligated to the following cash outflows at October 31, 2004:

<TABLE>
<CAPTION>
                                          Less than                                After 5
Contractual Obligations       Total        1 Year       1-3 Years      4-5 Years    Years
-------------------------  -----------  ------------  --------------  -----------  -------
<S>                        <C>          <C>           <C>             <C>          <C>
Loans Payable -
Stockholder/employee           $80,901       $80,901              $0           $0       $0
                           ===========  ============  ==============  ===========  =======

Bank Term Loan                      $0            $0              $0           $0       $0
                           ===========  ============  ==============  ===========  =======

Penn Power & Light Term
Loans                       $4,660,503   $,2,115,382      $2,459,926      $85,195       $0
                           ===========  ============  ==============  ===========  =======

Short Term Line of Credit     $116,665       $28,572         $88,093           $0       $0
                           ===========  ============  ==============  ===========  =======

Operating Leases               $11,740       $11,740              $0           $0       $0
                           ===========  ============  ==============  ===========  =======
</TABLE>




                                       22
<PAGE>



Critical Accounting Policies

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

Off-Balance Sheet Arrangements

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

Forward-Looking Statements

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

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


ITEM 7. FINANCIAL STATEMENTS

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


ITEM 8. CHANGES  IN  AND  DISAGREEMENTS  WITH   ACCOUNTANTS  ON  ACCOUNTING  AND
        FINANCIAL DISCLOSURE.

     (a) Previous Independent Auditors:



                                       23
<PAGE>



          (i) Maillie,  Falconiero & Company,  LLP  ("Maillie") was dismissed as
     our independent auditor on February 6, 2004.

          (ii)  Maillie's  reports on our  financial  statements  for the fiscal
     years  ended  October  31,  2002 and 2001,  contain no  adverse  opinion or
     disclaimer of opinion and were not qualified or modified as to uncertainty,
     audit scope or accounting  principles  except that there was an explanatory
     paragraph relating to our ability to continue as a going concern.

          (iii)  Our  Board of  Directors  unanimously  approved  the  change in
     accountants.

          (iv) There has been no  disagreement  between us and  Maillie,  on any
     matter  of  accounting   principles  or  practices,   financial   statement
     disclosure,  or auditing  scope or procedure,  which  disagreement,  if not
     resolved  to the  satisfaction  of Maillie  would have  caused it to make a
     reference to the subject matter of the  disagreement in connection with its
     reports.

          (v) We have not been advised of any matters  described  in  Regulation
     S-B, Item 304(a)(1)(B).

     (b) New Independent Accountants.

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


Item 8A. CONTROLS AND PROCEDURES.

     (a) Disclosure Controls and Procedures:

     Within  90 days  prior  to the  date  of this  Report,  we  carried  out an
evaluation,  under  the  supervision  and with the  participation  of our  Chief
Executive  Officer and Chief Financial  Officer (or persons  performing  similar
functions) of the  effectiveness  of the design and operation of our  disclosure
controls and procedures.  Based on this evaluation,  our Chief Executive Officer
and Chief Financial Officer (or persons performing similar functions)  concluded
that our disclosure  controls and  procedures  are effective in timely  alerting
them to material  information  required to be included in our  periodic  reports
that are filed with the Securities and Exchange  Commission.  It should be noted
that the  design  of any  system  of  controls  is based  in part  upon  certain
assumptions about the likelihood of future events, and there can be no assurance




                                       24
<PAGE>



that any design will succeed in achieving  its stated goals under all  potential
future  conditions,  regardless  of how remote.  In  addition,  we reviewed  our
internal  controls,  and there have been no significant  changes in our internal
controls or in other  factors that could  significantly  affect  those  controls
subsequent to the date of their last valuation.

     (b) Internal Control Over Financial Reporting:

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



                                    PART III


ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS; COMPLIANCE
        WITH SECTION 16(A) OF THE EXCHANGE ACT

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

Name                  Age    Position(s) with Company
---------------      -----  ---------------------------------------

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


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




                                       25
<PAGE>



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

Business Experience

JOHN A. GRILLO

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

JOHN T. O' NEILL

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

DEBORAH F. O' NEILL

     Deborah F. O'Neill is our  Secretary  and Treasurer and serves on our Board
of Directors.  She is a Certified Public Accountant with experience in auditing,
income tax preparation and real estate development.  During the years spent with
a public accounting firm, Deborah  specialized in long term care audits and cost




                                       26
<PAGE>



report preparation. Moving to the private sector, she was a founder and CFO of a
proprietary  software  company  that  offered  turnkey  accounting  and  medical
computer systems to long term care entities in Ohio,  Pennsylvania,  Connecticut
and  several  other  states.  Currently,  Mrs.  O'Neill  works in the  financial
management area of the family's healthcare conglomerate, O'Neill Management LLC.
Deborah  graduated from Kent State  University magna cumme laude with a Bachelor
of Business Administration degree in Accounting.

PATRICIA A. PALMIERI

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

RUSTY J. GRAMIAK

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

DAVID W. MASON

     David W. Mason, 38, was the company's Vice-President of Sales and Marketing
from 2000 until February 20, 2004. Mr. Mason graduated from Boston University in
1988 with a Bachelor of Science  degree in Urban  Affairs.  Prior to joining us,
Mr. Mason worked in the television  industry for various networks including ABC,
CBS, ESPN, TNT and TBS. Mr. Mason was  responsible  for our marketing as well as
being the direct  link  between our home office and the sales team in the field.
Mr.  Mason  also was  responsible  for all  convention,  training  seminars  and
benefits.

EDMOND B. RAGAZZI

     Mr.  Ragazzi has worked for the Company since 1997 and was appointed by our
Board of  Directors  to serve as Secretary  until  February  20,  2004.  In that
capacity he was responsible for maintaining the corporate books and records. Mr.
Ragazzi's primary responsibilities  included management of the our relationships
with different utility companies.



                                       27
<PAGE>



LARRY A. SHUSMAN

     Mr. Shusman worked for the Company on a regular weekly part-time basis from
October 1, 2001 until  February  20, 2004 as the Chief  Financial  Officer.  His
responsibility was to handle our books and records according to GAAP, along with
being the liaison with the independent accountants.  In addition to his work for
us,  Mr.  Shusman  was  employed  part-time  by Classic  Hair,  LLC as its Chief
Financial  Officer and has worked in that capacity since August 2001. From April
2000 until  August  2001,  Mr.  Shusman  was  employed  full-time  by Spring Air
Mattress Company as its East Coast Regional Controller and Office Manager. Prior
to April 2000, he worked for Waste Management, Inc. for a period of one month as
a staff accountant. From January 1996 to January 2000, Mr. Shusman served as the
Chief  Financial  Officer and Controller of Potts Welding and Boiler Repair Co.,
Inc. Mr. Shusman  originally  attended Penn State University  between  September
1960 and June 1961,  but  graduated  from Temple  University in June 1964 with a
Bachelor of Science degree in Accounting.

Directors' Remuneration

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

Board Meetings and Committees

     The Board of Directors of the Company did not hold any meetings  during the
fiscal year ended October 31, 2004.  The Board does not currently have an Audit,
Executive or Compensation Committee.

Significant Employees

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

Family Relationships

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

Involvement in Certain Legal Proceedings

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

Audit Committee

     During 2004, the Company did not maintain an Audit Committee because we had
an insufficient number of qualified outside directors. Moreover, the Company had
not designated an Audit Committee Financial Expert. Until the Company is able to



                                       28
<PAGE>



obtain directors and officer liability insurance for its board of directors,  it
is unlikely that we will be able to attract the qualified  persons  necessary to
fulfill these functions. However, our entire Board of Directors has reviewed the
audited  financial  statements for the year ended October 31, 2004 and the Board
has taken such steps as deemed  needed  necessary to insure that the Company has
discussed with its independent auditors the matters required by SAS 61.

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

     For  companies  registered  pursuant to section  12(g) of the Exchange Act,
Section 16(a) of the Exchange Act requires our executive officers and directors,
and persons who beneficially own more than ten percent of our equity securities,
to file reports of ownership and changes in ownership  with the  Securities  and
Exchange   Commission.   Officers,   directors  and  greater  than  ten  percent
shareholders  are  required by SEC  regulation  to furnish us with copies of all
Section 16(a) forms they file. We are not  registered  pursuant to Section 12(g)
of the Act and no reports have been filed.

Code of Ethics

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


ITEM 10. EXECUTIVE COMPENSATION

     The following table shows all the cash compensation paid by the Company, as
well as certain  other  compensation  paid or accrued,  during the fiscal  years
ended  October 31, 2004,  2003,  2002 and 2001 to the  Company's  President  and
highest paid executive officers. No restricted stock awards, long-term incentive
plan  payouts  or  other  types of  compensation,  other  than the  compensation
identified  in the chart below,  were paid to these  executive  officers  during
these fiscal years.

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
                                                           Long Term Compensation
                         Annual Compensation                       Awards            Payouts
                                                 Other        Restricted  Securities   LTIP     All
Name and                                        Annual         Stock     Underlying   Pay-     Other
Principal            Year    Salary    Bonus    Compen-      Award(s)    Options/     outs     Compen-
Position (1)                   ($)       ($)      sation ($)   ($)         SARs  (f)             sation ($)
-----------------    ------  --------  -------- ------------ ----------  ------------ -------- ----------
<S>                   <C>     <C>      <C>      <C>          <C>         <C>          <C>      <C>
John Grillo,          2004    121,984           11,100
CEO & President       2003     98,525
                      2002     57,517   42,000

David W Mason         2004     47,692           14,522
 VP of Marketing      2003     50,923            2,622
                      2002     53,539   25,726   2,622        7,500(a)

Rusty Gramiak         2004     65,000            9,491
VP of Operations      2003     52,500            2,892
                      2002     55,305   24,468   2,622       10,000(b)




                                       29
<PAGE>



Ed Ragazzi.           2004     41,730            5,916
                      2003     39,639         0  3,300
Secretary             2002     55,906         0      0        4,000(c)

                      2004          0         0      0
Larry Shusman.        2003     23,400         0      0
CFO                   2002     30,600         0      0        5,000(d)

Deborah O'Neil
Secretary and         2004          0        0
Treasurer             2003          0        0
                      2002          0        0

John O'Neil
Chairman and          2004          0        0
Director              2003          0        0
                      2002          0        0

Particia A. Palmieri
Controller            2004     39,346        0   1,526
                      2003          0        0
                      2002          0        0
</TABLE>

(a)  Mr. Mason received 5000 shares of the Company's  restricted common stock on
     January 3, 2002 and 2500 shares of  restricted  common stock on January 16,
     2002.  Because of the  absence  of an  established  trading  market for the
     common  stock,  the Company is unable to determine the fair market value at
     the time the stock was awarded.
(b)  Mr. Gramiak received 5000 shares of the Company's  restricted  common stock
     on January 3, 2002 and 5000 shares of  restricted  common  stock on January
     16, 2002.  Because of the absence of an established  trading market for the
     common  stock,  the Company is unable to determine the fair market value at
     the time the stock was awarded.
(c)  Mr. Ragazzi received 4000 shares of the Company's  restricted  common stock
     on January 3, 2002. Because of the absence of an established trading market
     for the common  stock,  the Company is unable to determine  the fair market
     value at the time the stock was awarded.
(d)  Mr. Shusman received 5000 shares of the Company's  restricted  common stock
     on April 18, 2002. Because of the absence of an established  trading market
     for the common  stock,  the Company is unable to determine  the fair market
     value at the time the stock was awarded.

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


Compensation of Directors

     We have no standard  arrangements  for  compensating our board of directors
for their attendance at meetings of the Board of Directors.

Bonuses and Deferred Compensation

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



                                       30
<PAGE>



Stock Option and Stock Appreciation Rights.

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

Termination of Employment and Change of Control Arrangement

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


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

The following table sets forth, as of October 31, 2004, information with respect
to the beneficial ownership of our common stock by (i) persons known by us to
beneficially own more than five percent of the outstanding shares, (ii) each
director, (iii) each executive officer and (iv) all directors and executive
officers as a group.
26,566,576

                                                         Common Stock
                               Title of                 Beneficially Owned
Name and Address               Class                 Number         Percent (1)
--------------------------------------------------------------------------------
John A. Grillo                 Common             3,098,300           11.7%
101 Captains Walk
Egg Harbor Township, NJ 08234

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

John and Deborah O'Neill**     Common            14,301,862           53.8%
34100 Center Ridge Road
Suite 10
North Ridgeville, OH 44039

All Executive Officers and
Directors as a Group           Common            17,410,162           65.5%
(Four (4) persons)

Barry Feldscher                Common             3,333,300           12.5%
1904 Champlain Drive
Voorhees, NJ 08042

Rochelle Mason                 Common             1,666,000            6.3%
6615 Greenhill Road
Lumberville, PA 18933

--------------------------------------------------------------------------------




                                       31
<PAGE>



*    Less than 1%.
**   John and Deborah O'Neill hold 454,546 shares jointly and hold an additional
     2,978,754 shares through Charter Management, LLC, an Ohio limited liability
     company, that is owned by John & Deborah O'Neil. Charter also owned 187,389
     shares of our convertible  preferred stock, which stock converts at a ratio
     of 58:1  into  shares  of our  common  stock.  If the  preferred  stock was
     converted,  the O'Neills' would an additional  10,868,562  shares of common
     stock for a total of 14,301,862  shares of common stock. See Note 11 to our
     Financial Statements.

(1)  Under Rule 13d-3, a beneficial owner of a security includes any person who,
     directly or indirectly, through any contract,  arrangement,  understanding,
     relationship,  or otherwise has or shares: (i) voting power, which includes
     the power to vote, or to direct the voting of shares;  and (ii)  investment
     power,  which  includes the power to dispose or direct the  disposition  of
     shares.  Certain shares may be deemed to be beneficially owned by more than
     one person (if, for example,  persons  share the power to vote or the power
     to  dispose  of  the  shares).  In  addition,   shares  are  deemed  to  be
     beneficially  owned by a person if the person has the right to acquire  the
     shares (for example, upon exercise of an option) within 60 days of the date
     as of which the  information  is  provided.  In  computing  the  percentage
     ownership  of any  person,  the amount of shares  outstanding  is deemed to
     include  the amount of shares  beneficially  owned by such person (and only
     such  person)  by  reason of these  acquisition  rights.  As a result,  the
     percentage of outstanding  shares of any person as shown in this table does
     not necessarily  reflect the person's actual ownership or voting power with
     respect to the number of shares of common  stock  actually  outstanding  on
     March 15, 2005. As of March 15, 2005,  there were 15,698,014  shares of our
     common stock issued and outstanding.

Securities Authorized for Issuance Under Equity Compensation Plans

     The following  table sets forth  information  as of October 31, 2004,  with
respect to compensation plans (including individual  compensation  arrangements)
under which our common stock is authorized for issuance,  aggregated as follows:
(i) all compensation plans previously approved by security holders; and (ii) all
compensation plans not previously approved by security Holders: None.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     Except as described below,  none of the following persons has any direct or
indirect material interest in any transaction to which we are a party during the
past two years, or in any proposed  transaction to which the Company is proposed
to be a party:

     (A)  any director or officer;
     (B)  any proposed nominee for election as a director;
     (C)  any person who  beneficially  owns,  directly  or  indirectly,  shares
          carrying  more than 5% of the  voting  rights  attached  to our common
          stock; or
     (D)  any  relative  or  spouse  of  any of the  foregoing  persons,  or any
          relative of such spouse,  who has the same house as such person or who
          is a director or officer of any parent or subsidiary.



                                       32
<PAGE>



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

     In June 2004,  National  Demand LLC.,  an Ohio limited  liability  company,
agreed to purchase from Powerweb  Inc., a web based internet  energy  management
control  system.  National  Demand LLC.,  ownership  is as follows;  95% John T.
O'Neill and 5% John A. Grillo.  We are currently  providing  product testing for
the Powerweb product and when the product is ready for market, we will offer the
energy  management  system to our  clients  through a licensing  agreement  with
National Demand, LLC. We believe that the terms and conditions of this licensing
agreement  will be  similar  to  those  negotiated  pursuant  to an  arms-length
transaction.

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


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.

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

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

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

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

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

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

4.2 [3]             Promissory  Note from the  Company  to Morris  Harris  dated
                    April 4, 2003

4.3 [3]             Convertible  Promissory  Note from the  Company  to  Charter
                    Management dated August 25, 2003

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

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




                                       33
<PAGE>



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

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

10.5 [2]            Master Agreement with Charter Management.

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

10.7 [2]            New Hope lease extension.

10.8 [2]            Sample funding agreement with Charter Management.

14.1 [3]            Code of Ethics and Business Conduct

16.1 [3]            Letter  from  Maillie,  Falconiero  &  Company,  LLP  to the
                    Commission

17.1  [3]           Letter of Resignation of David W. Mason

17.2  [3]           Letter of Resignation of Rusty Gramiak

17.3  [3]           Letter of Resignation of Edward Ragazzi

17.4  [3]           Letter of Resignation of John Grillo

17.5  [3]           Letter of Resignation of Larry Shusman

31.1   *            Certification re: Section 302 (CEO)

31.2   *            Certification re: Section 302 (Controller)

32.1   *            Certification re: Section 906 (CEO)

32.2   *            Certification re: Section 906 (Controller)

-------------------------------------------------

[1]  Filed with the Company's Registration Statement on November 14, 2002.
[2]  Filed with the  Company's  Amended  Registration  Statement  on November 6,
     2003.
[3]  Filed with the Company's Form 10KSB for October 31, 2003.
*    Filed herewith


     (b) Reports on Form 8-K

     During the last quarter of the fiscal year ended  October 31, 2004,  we did
not file any reports on Form 8-K.


ITEM 14. PRINCIPLE ACCOUNTANT FEES AND SERVICES

     Audit Fees. The aggregate fees billed for  professional  services  rendered
was $38,835and $25,730 for the audit of our annual financial  statements for the
fiscal years ended October 31, 2004 and 2003,  respectively,  and the reviews of
the financial statements included in our Forms 10-QSB for those fiscal years.



                                       34
<PAGE>



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

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

     All Other Fees. Other than the services described above, the aggregate fees
billed  for  services  rendered  by the  principal  accountant  was  $0 and  $0,
respectively, for the fiscal years ended October 31, 2004 and 2003.

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

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





                                       35
<PAGE>



                                   SIGNATURES

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


                     National Energy Services Company, Inc.
                    ----------------------------------------
                                  (Registrant)

Date: March 16, 2005

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


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


Signature                           Title                          Date

/s/ John A. Grillo         CEO, President & Director            March 16, 2005
---------------------
John A. Grillo

/s/ John O'Neil           Chairman                              March 16, 2005
---------------------
John O'Neil

/s/ Deborah O'Neil        Secretary, Treasurer and Director     March 16, 2005
---------------------
Deborah O'Neil










                                       36
<PAGE>









                     NATIONAL ENERGY SERVICES COMPANY, INC.

                        CONSOLIDATED FINANCIAL STATEMENTS

                      YEARS ENDED OCTOBER 31, 2004 AND 2003























<PAGE>




                     NATIONAL ENERGY SERVICES COMPANY, INC.

                   INDEX TO CONSOLIDATED FINANCIAL STATEMENTS






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

Consolidated Balance Sheets at October 31, 2004 and 2003.....................F-3

Consolidated Statements of Operation for the years ende
   October 31, 2004 and 2003.................................................F-4

Consolidated Statements of Changes in Stockholders' Equity (Deficit)
   for the years ended October 31, 2004 and 2003.............................F-5

Consolidated Statements of Cash Flow for the years ended
   October 31, 2004 and 2003.................................................F-6

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















                                      F-1
<PAGE>



               REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS'

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


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

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

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

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



/s/Bagell Josephs & Company, LLC

Bagell Josephs & Company, LLC
Gibbsboro, New Jersey


January 15, 2005

                                       F-2
<PAGE>



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


     ASSETS

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

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

     LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

LIABILITIES
Current Liabilities:
  Note payable - bank                                                            $                -     $            4,648
  Line of credit                                                                            116,665                154,761
  Accounts payable and accrued expenses                                                     246,242                928,732
  Notes payable - related parties                                                            80,901                182,037
  Current portion of long-term debt                                                       2,115,382              1,231,435
                                                                                -------------------     ------------------
      Total Current Liabilities                                                           2,559,190              2,501,613
                                                                                -------------------     ------------------

Long-term debt, net of current portion                                                    2,545,121              3,539,626
                                                                                -------------------     ------------------

      Total Liabilities                                                                   5,104,311              6,041,239
                                                                                -------------------     ------------------

STOCKHOLDERS' EQUITY (DEFICIT)
  Preferred stock, Series A, $.001 Par Value, 500,000 shares authorizeed,
     187,389 and 78,702 shares issued and outstanding at October 31, 2004
     and 2003, respectively.                                                                    187                    79
  Common Stock, $.001 Par Value; 20,000,000 shares authorized 15,698,014 and
     15,598,014 shares issued and outstanding at
     October 31, 2004 and 2003, respectively                                                 15,698                 15,598
  Additional Paid-in Capital                                                              2,453,418              1,444,226
  Deficit                                                                                (2,764,511)            (2,187,959)
                                                                                -------------------     ------------------
      Total Stockholders' Equity (Deficit)                                                 (295,208)              (728,056)
                                                                                -------------------     ------------------

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

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

                                       F-3
<PAGE>



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


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

                                                                                              914,100           2,766,138

COST OF SALES                                                                                 520,987           2,460,494
                                                                                ---------------------   -----------------

GROSS PROFIT                                                                                  393,113             305,644
                                                                                ---------------------   -----------------

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

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

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

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

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

NET LOSS PER BASIC AND DILUTED SHARES                                           $               (0.04)  $           (0.09)
                                                                                =====================   =================
WEIGHTED AVERAGE NUMBER OF COMMON
    SHARES OUTSTANDING                                                                     15,638,293          13,341,032
                                                                                =====================   =================
</TABLE>


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

                                       F-4
<PAGE>



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

                                                                                         Additional
                                              Preferred Stock           Common Stock     Paid-in
Description                                 Shares      Amount       Shares    Amount    Capital       Deficit            Total
-------------------------------------------------------------------------------------------------------------------------------
<S>              <C> <C>                                          <C>          <C>          <C>        <C>             <C>
Balance, October 31, 2002                        -           -    12,594,260   12,594       531,506    (1,020,904)     (476,804)

Issuance of common stock in exchange for
     services                                    -           -        25,000       25         2,075             -         2,100

Issuance of common stock in exchange for
     cash                                        -           -     2,978,754    2,979       247,021             -       250,000

Conversion of loans payable - other to
     preferred stock, class A               78,702          79             -        -       663,624             -       663,703

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

Balance, October 31, 2003                   78,702          79    15,598,014   15,598     1,444,226    (2,187,959)     (728,056)

Issuance of common stock for cash                                    100,000      100         8,300             -         8,400

Issuance of preferred stock for cash       108,687         108                            1,000,892             -     1,001,000

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

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


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

                                       F-5
<PAGE>



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


                                                                                        2004                 2003
                                                                                ------------------     ----------------
<S>                                                                             <C>                    <C>
CASH FLOW FROM OPERATING ACTIVITIES
   Net loss                                                                     $         (576,552)    $     (1,167,055)
                                                                                ------------------     ----------------
   Adjustments to reconcile net loss to net cash
     used in operating activities

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

  Changes in assets and liabilities
     Decrease in accounts receivable                                                       140,169              329,830
     (Increase) in prepaid expenses and other assets                                       (70,632)            (130,750)
     (Increase) in deposits                                                                (10,242)             (78,279)
     (Decrease) in accounts payable and
       and accrued expenses                                                               (682,490)             (42,092)
                       )                                                        ------------------     ----------------
     Total adjustments                                                                    (615,851)              88,843
                       3                                                        ------------------     ----------------

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

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

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



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

                                       F-6
<PAGE>



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


                                                                                        2004                 2003
                                                                                ------------------     ----------------
<S>                                                                             <C>                    <C>

CASH FLOWS FROM FINANCING ACTIVITES
    Proceeds from common stock issuances                                        $            8,400     $        250,000
    Proceeds from preferred stock issuances                                              1,001,000                    -
    Repayment of line of credit                                                            (38,096)             (23,810)
    Repayment of note payable - bank                                                      (115,206)              (9,297)
    Net proceeds from long-term debt                                                             -            1,111,549

    Net proceeds (payments) from note payable - related party                             (101,136)             654,838
       Net cash provided by financing activities                                           754,962            1,983,280
                                                                                ------------------     ----------------

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

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

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


SUPPLEMENTAL DISCLOSURE OF CASH FLOW
   INFORMATION:

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

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

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

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

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




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

                                       F-7
<PAGE>



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


NOTE 1-  NATURE OF BUSINESS

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

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

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

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





                                       F-8
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

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

Use of Estimates

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

Revenue Recognition

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

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

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

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




                                       F-9
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

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

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

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

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

Strategic Alliance with PP&L Spectrum, Inc:

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

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

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




                                       F-10
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

Strategic Alliance with Charter Management LLC:

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

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

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

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

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

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



                                       F-11
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

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

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

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

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

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



                                       F-12
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Revenue Recognition (Continued)

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

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

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

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

Cash and Cash Equivalents

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



                                       F-13
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Property and Equipment

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

Income Taxes

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

(Loss) Per Share of Common Stock

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

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

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

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

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

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

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



                                       F-14
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Fair Value of Financial Instruments

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

Advertising

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

Stock-Based Compensation

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

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

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



                                       F-15
<PAGE>



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


NOTE 2- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Provision for Bad Debt

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

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

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

Recent Accounting Pronouncements

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

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



                                       F-16
<PAGE>



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


NOTE 3-  FIXED ASSETS

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

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

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


NOTE 4-  NOTES RECEIVABLE - OTHER

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

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

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

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







                                       F-17
<PAGE>



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


NOTE 4-  NOTES RECEIVABLE - OTHER (CONTINUED)

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

             Year Ending October 31,:

             2005                                  $ 1,709,128
             2006                                    1,543,216
             2007                                      765,217
             2008                                       85,194
                                                     4,102,755
                                                   ------------
             Less: current portion                  (1,709,128)
                                                   ------------
             Notes receivable - other, net of
                current portion                    $ 2,393,627


NOTE 5-  NOTES RECEIVABLE - RELATED PARTIES

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


NOTE 6-  ACCOUNTS RECEIVABLE

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


NOTE 7-  LINE OF CREDIT

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



                                       F-18
<PAGE>



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


NOTE 8-  LONG-TERM DEBT

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

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

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

     At October 31 long-term debt consists of:

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

     At October 31, 2004 maturities on these notes are:

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




                                       F-19
<PAGE>



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


NOTE 9-  NOTE PAYABLE - BANK

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


NOTE 10- NOTES PAYABLE - RELATED PARTIES

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


NOTE 11- STOCKHOLDERS' EQUITY (DEFICIT)

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

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

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

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




                                       F-20
<PAGE>



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


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

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

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

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


NOTE 12- COMMITMENTS

Leases

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

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

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

     Future lease commitments at October 31, 2004:

                     2005                       $ 11,740

Management Fees

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




                                       F-21
<PAGE>



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


NOTE 13- PROVISION FOR INCOME TAXES

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

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

                                                    2004            2003
                                                 ---------       ---------
          Net operating loss carryforwards       $ 912,288       $ 722,026
          Less:  valuation allowance              (912,288)       (722,026)
                                                 ---------       ---------
                                                 $     -0-       $     -0-

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


NOTE 14- GOING CONCERN

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

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

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


NOTE 15- SUBSEQUENT EVENTS

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



                                      F-22