U.S. Securities and Exchange Commission
                             Washington, D.C. 20549

                                 Amendment 1 to
                                   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, 2002

[_]  TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES  EXCHANGE ACT
     OF 1934

For the transition period from _______________ to ________________

Commission File No.: 0-50089

                     National Energy Services Company, Inc.
                 ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)



         Nevada                                                52-2082372
------------------------------------                     ----------------------
(State or other jurisdiction of                              (I.R.S.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


Securities to be registered under Section 12(b) of the Act:

     Title of each class                           Name of each exchange
                                                    on which registered
         None                                              None
---------------------------                       -----------------------------


Securities to be registered under Section 12(g) of the Act:

                    Common Stock, $0.001 par value per share
                        -------------------------------
                                (Title of class)

Copies of Communications Sent to:

                                Mintmire & Associates
                                265 Sunrise Avenue, Suite 204
                                Palm Beach, FL 33480
                                Tel: (561) 832-5696 - Fax: (561) 659-5371






<PAGE>




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

                Yes [X]  No [_]


Check if there is no disclosure of delinquent  filers in response to Item 405 of
Regulation S-B contained in this form, and no disclosure  will be contained,  to
the  best  of  registrant's   knowledge,  in  definitive  proxy  or  information
statements  incorporated  by  reference  in Part III of this Form  10-KSB or any
amendment to this Form 10-KSB. [X]


State registrant's revenues for its most recent fiscal year. $2,285,026.


Of  the  12,594,260  shares  of  voting  stock  of  the  registrant  issued  and
outstanding   as  of  October   31,   2002,   3,904,760   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.



<PAGE>


                                     PART I

Item 1. Description of Business

Business Development

National Energy Services Company,  Inc. was incorporated on February 17, 1998 in
Nevada as Coastal  Enterprises,  Inc. to engage in an internet related business.
The Company and National Energy  Services  Company,  Inc., an  unaffiliated  New
Jersey corporation formed in late 1995 ("NESNJ"),  entered into an Agreement and
Plan of Share Exchange,  dated October 19, 2001, (the "Share Exchange") pursuant
to which the  shareholders  of NESNJ on October 19, 2001 (the  "Exchange  Date")
were  issued  10,000,000  shares of  common  stock of 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.  The new board of directors consisted of John A. Grillo,
as  sole  officer  and  director.  As of  the  Exchange  Date,  NESNJ  became  a
wholly-owned subsidiary of the Company. For accounting purposes, the transaction
was treated as a reverse acquisition, with the Company as the acquiring entity.

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

The Company is not  presently  trading on an  exchange,  but intends to apply to
have its common stock quoted on the Over the Counter  Bulletin Board.  There can
be no assurance that such application will be accepted.

The Company is filing this Form 10-KSB in compliance with the  effectiveness  of
its filing on Form 10-SB.

In October 2001, the Company  entered into the Share Exchange with NESNJ and its
shareholders. The exchange was made whereby the Company issued 10,000,000 shares
of its  common  stock to the  shareholders  of NESNJ for all of the  issued  and
outstanding  stock  of  NESNJ.  As part of the  exchange,  John A.  Grillo,  the
Company's current President,  Secretary and Chairman,  received 3,333,300 shares
of the Company's common stock.




                                       3
<PAGE>


Business of Registrant

General

At its  inception,  the  Company  intended  to  engage  in an  internet  related
business.  The Company was  incorporated  in February 1998 to conduct any lawful
business,  but  with  the  express  intent  to enter  into an  internet  related
businesses.  Its then current  management  had little or no  experience  in this
field.  In May 1998,  the  Company  attempted  to raise money to  implement  its
business  plan  through the use of a private  placement  memorandum  to fund its
operations.  It did not indicate that its business plan or purpose was to engage
in a merger or acquisition with an unidentified  company or companies,  or other
entity or person.  The  Company  was only able to raise a total of  $16,000,  to
implement  its business  plan,  but was unable to  successfully  launch  planned
operations.  For such  offering,  the Company  relied upon  Section  3(b) of the
Securities  Act of 1933,  as amended and Rule 504 of  Regulation  D  promulgated
thereunder. At the time of the offering (May 1998) Rule 504 provided this Issuer
a limited offering  exemption to raise such seed capital.  Securities sold under
this exemption may be resold freely by non-affiliates of the Issuer.

It was not until October 2001,  through the acquisition of the Company's  wholly
owned  subsidiary,  NESNJ, that the Company changed its business plan to NESNJ's
business plan of marketing  aggregated  energy  management  services to the long
term care industry.  NESNJ was formed in late 1995 by John Grillo, the Company's
current Chairman and President.  Mr. Grillo  capitalized on his experience as an
electrical  contractor to develop a comprehensive  energy management program for
long term care  facilities  which was 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 PPL. PPL 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.

During the course of the fiscal year ended October 31 2002, the Company expanded
its sales and  administrative  organization  in  anticipation of increased sales
volume.  By enlarging the staff last year additional  administrative  costs were
incurred such as salaries and related fringe benefits,  along with higher travel
expenses as the sales force  presented  its services and benefits to the nursing
home industry throughout the country.

During the  previous  completed  fiscal  year the  Company  incurred  additional
programming costs as it revised its software programs to better capture relevant
information to promote  internal  efficiencies  and have the ability to give its
customers salient  information for analytical and comparison  purposes regarding
energy costs.

Due to the additional  costs,  the recent  operating  losses ($633,897 in fiscal
year ended October 31, 2002) and accumulated deficit ($992,804) increased.



                                       4
<PAGE>


Energy Gatekeeper Program

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

Overview

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

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,  NES contracts carry a 24 month renewal period.  Earlier contracts
have a duration of up to ten years.

NES  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 Gatekeeper Contract and Documentation Package

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

Two Years of Financial Statements - Each customer is required to supply the last
two years of operating financial statements.

Credit  application form - A one page credit  application is required  obtaining
ownership and banking information.

Contract for Energy Services - The base contract is a 12 page agreement covering
the  responsibilities  of all parties.  The contract also contains a termination
buyout  schedule  identifying  the cost of buying out the  contract on a monthly
basis and a complete upgrade equipment schedule.



                                       5
<PAGE>


Limited  Power of  Attorney - The limited  Power of Attorney is executed  giving
NESC the power to completely  manage and control the  facility's  energy sources
and to receive and pay all utility bills.  However,  NESNJ is not liable for any
energy bills left unpaid by the customer.

PRINCIPAL PRODUCTS AND SERVICES

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

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

Ozone Laundry Support System (OLSS)

OLSS can cut laundering costs by more than 50% primarily by eliminating the need
for hot water during the washing process. Activated Air Laundry System, commonly
referred to as ozone  laundering,  uses  activated  oxygen (ozone) in cold water
washing to disinfect better than traditional hot water methods.

The savings are substantial since laundering  expense is considered to be one of
the most significant  line items in a facility  budget.  Most 120 bed facilities
can save over $1500 per month, close to $20,000 per year in utility costs alone.

By injecting ozone (activated oxygen) into the wash and rinse water,  laundry is
cleaner and  completely  disinfected.  With ozone  laundering,  fewer cycles are
required to clean,  thus chemical use is reduced.  Energy bills are also greatly
reduced because ozone works best in cold water.

Ozone is a powerful  oxidant that is 3,000 times faster and 130% more  effective
than chlorine,  but without chlorine's dangerous properties.  The ozone molecule
is  composed  of three atoms which are very  unstable.  An unstable  gas,  ozone
decomposes rapidly into oxygen, which causes its tremendous oxidation potential.

Test results from independent  laboratories confirm a 99.5% pathogenic bacterial
kill count with ozone  laundering,  as  compared to 97.3% with  traditional  hot
temperature washing.

An ozone  disinfecting  system is just as effective  but less costly to operate.
Using ozone in the laundry  process is less costly  because ozone is only active
in cold water;  therefore  there is no need to buy  natural gas or other  energy
sources to heat the water.

Data also reveals that using ozone gas in laundering is far more  effective than
conventional disinfectants against microorganisms, viruses and cysts.

Because  of the  significant  energy  savings  the  cost  of the  equipment  and
installation  can  be  funded  through  the  monthly  savings,  resulting  in no
out-of-pocket  cost to the  facility.  The OLSS are easily  installed  and begin
generating energy savings immediately upon operation.


                                       6
<PAGE>


By injecting ozone gas, one of the most powerful cleaning agents, into cold wash
and rinse water, the laundry becomes cleaner and completely  disinfected.  Ozone
oxidizes  the fatty  oils,  and breaks the bond  between the dirt and the cloth.
Insoluble soils are chemically altered by the ozone into soluble products, which
can be removed from the fabrics by the normal washing action.

Ozone laundering improves  productivity  because the process requires fewer wash
cycles and reduces  drying  time.  The OLSS  reduces the drying time because the
work,  removing moisture from the linen,  which the dryer has to do, is reduced.
While utilizing  ozone during the wash process,  a chemical linen softener is no
longer required. Without the "coating" of a softener, the weave of the fabric is
more  open.  Since the actual  tubes of fabric are more open,  water can be more
effectively  removed  during the rinse cycle  resulting in less moisture for the
dryer to remove.  The more open weave of the fabric also makes the actual drying
process more  efficient  because the air flow is  increased  through the fabric,
which significantly reduces dry time.

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

After  comparing the costs and  capabilities  of the  Activated  Air  Laundering
System with traditional hot temperature washing, the benefits to the average 120
bed facility are substantial.

Lighting Upgrades

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

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


                                       7
<PAGE>


Mechanical Systems/HVAC

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

Water and Sewer Conservation

The goal of an  effective  water  conservation  project  is to reduce  usage and
maintain or improve the water quality and fixture performance.  The installation
of low  use,  optimum  performance  fixtures  is the key to an  effective  water
conservation program.

For example,  the retrofit of a low-flush  toilet can reduce water usage by more
than  750,000  gallons  annually  in the  average  120 bed  nursing  home.  This
reduction in usage has a significant impact on water/sewer  costs.  Depending on
the local  water/sewer  rates,  the annual  savings can be as much as $5,000 per
year with equipment life expectancy of 15 to 20 years.

MicroTurbines

The   MicroTurbine  was  developed  to  produce   electricity   efficiently  and
cost-effectively  by using natural gas. At the same time, the MicroTurbine emits
very low levels of pollutants and remains substantially maintenance-free.

Additionally,  the MicroTurbine can virtually  eliminate down time costs related
to power outages.  Not only does the MicroTurbine  produce  electricity,  but it
also produces usable exhaust heat. This exhaust can be used directly without any
cleansing  needed,  therefore  displacing a large percentage of the existing hot
water boiler load. This  potentially  saves a facility  thousands of dollars per
month. An engineering  study performed in a 240 bed nursing home in North Jersey
showed  that  microturbines  would  generate  approximately  $15,000 per year in
savings.  This study was performed by PP&L Spectrum, an energy services division
of PPL, a Pennsylvania electric utility Company.

Energy Supply

NES will provide  competitively priced electricity and natural gas supply to its
customers.  Strategic alliances will be formed with regional and national energy
supply  sources.  The driving force in the selection of a supply partner will be
their commitment to competitive  pricing and quality service.  In November 2002,
NES entered into a  Confidentiality  Agreement  with Tiger Natural Gas, Inc. for
the  purpose of  initiating  discussions  regarding  provision  of  natural  gas
directly to the Company's customers.

Strategic Alliance with PP&L Spectrum, Inc.

NESC has formed a strategic alliance with PPL to market energy-related  products
and services to commercial and industrial  customers.  It delivers  products and
services to customers through its subsidiaries.


                                       8
<PAGE>


In this alliance, PPL provides critical support to NES 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.

Engineering  -  PP&L  provides  system  analysis,  design  and  engineering  for
potential HVAC, Mechanical and Microturbine projects.

NESNJ  receives  5% of the  gross  project  cost  as a sales  commission  on all
projects  specified  and  managed by PPL which are  referred  by the  Company or
NESNJ.

Strategic Alliance with Charter Management Inc.

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

National Energy Services  Corporation  (NESC) has signed a master agreement with
Charter Management, LLC (Charter) for the express purpose of allowing Charter to
fund energy upgrade and retrofit opportunities in the long term care/ retirement
community industry in a series of funding agreements for each job.

Once  each  contractual  agreement  is  reached  between  NESC and the  customer
facility,  Charter provides  financing for energy upgrade and retrofit  projects
upon  credit  approval  to be paid back to them over a 5 year  period  including
monthly  principal and interest  payments,  which are  negotiated at the time of
contract signing.

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

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

NURSING HOME ENERGY MARKET

There are currently over 17,000 nursing homes  currently  operating  nationally.
Out of the 17,000  nursing  homes  currently  operating in the  continental  US,
approximately 10,000 of them are in the high cost energy regions of the East and
West coasts with especially large concentrations in Florida.




                                       9
<PAGE>


The following factors should be considered:

Nursing homes are under intense fiscal and regulatory  pressures.  Nursing homes
have very few areas to conserve cash without compromising care.

Utility costs are among the top five highest line items in the operating budget.

Nursing homes desperately need to find cash savings in their operating budget.

Most nursing homes are operating outdated HVAC and lighting systems.

The customer is well-defined and easy to reach.

Most long term care facilities are alike in construction, design and energy
consumption.

Data about nursing home energy consumption is quickly and efficiently obtained.

The Medicaid utilities reimbursement structure assures a facility's ability to
pay.

MARKETING, SALES AND DISTRIBUTION

MARKETING

Relationships  are the cornerstone of the Company's  marketing  philosophy.  The
process of building and maintaining  intimate working  relationships  requires a
commitment at all levels of the  organization.  The Company's  marketing program
includes:

Market Research
Feasibility Studies
Public and Industry Relations
Promotion
Advertising
Direct Response
Sales Support
Customer Service
Employee Relations
Training and Education

NES believes that to successfully meet challenges,  marketing relationships must
be built at several levels:

NESC Team
Energy Market
Long Term Care Market
Customers

NESC Team

It is paramount  that every NES  associate,  from  administrative  to installer,
business   development  to  CFO,  marketing  to  receptionist   understands  the
Relationship Marketing philosophy.  Because of the complexity of the product and
the market,  NES also works very hard to ensure that every person in the Company
has a working  knowledge of the product and the process.  Building solid working
relationships with our employees is important to our success.


                                       10
<PAGE>


Energy Market

If the energy  supply prices are too low, NES cannot offer  potential  customers
the most  effective  benefit;  No Out of Pocket  Cost.  Sales volume is directly
related to NES's  ability  to fund its  products  and  services  through  energy
savings.

Low energy  supply  prices also reduce the business  consumer's  need to address
their  utility  costs and energy  usage  patterns  dramatically.  If the need to
conserve  dollars through  conserving  energy does not exist, the NES Gatekeeper
Program is not viable. Building a relationship with the Energy Market means:

Researching Energy Suppliers

Researching  Energy  Rebates and Special  Programs  Researching  ESCO's  (Energy
Services  Companies)  Gaining an Understanding  of the Energy Trends  Monitoring
Trends and Suppliers

Long Term Care Market

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

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

NESNJ begins the  relationship  building  process  immediately by contacting the
following:

Existing Contacts
Referrals
Corporate Owners
LTC Trade and Professional Associations
State Regulators re: Laundering Regulations

NESNJ has spent years developing  relationships in the Nursing Home industry. In
a relationship driven organization, these people are the key to success.

Customers

Building a good  relationship  with our  customers is an  important  part of the
Relationship Marketing program. NES begins building relationships with long term
care owners and operators at the very  beginning of the marketing  process so it
can build off of good recommendations and referrals.



                                       11
<PAGE>


By asking for their help in understanding  the long term care market,  NES opens
the  lines  of  communication   that  will  continue   throughout  the  business
relationship. Often, our contacts have made personal introductions that advances
the  process  and  business  friendships  are made  quickly.  By the time NES is
positioned to begin selling to these  individuals  and their  facilities,  solid
acquaintances  are already in place  reducing  closing time and  building  sales
volume in a timely fashion.

The sales  process  is never  complete.  It is an  integral  part of our  growth
philosophy  to  provide  additional  products  and  services  to our  customers.
Ensuring customer satisfaction and keeping our customers informed is critical.

NES  has  invested  substantial  capital  in  a  detailed  computerized  contact
management  software program called  Goldmine.  All NES employees are trained in
the use of Goldmine.  This networked  software program allows all NES employee's
to view the history of existing  service  records for all customer's and provide
additional service as needed.

SALES

The  customer  often  must be  educated  before a need is even  recognized.  The
education occurs on several levels:

Energy Cost and Usage Awareness
Conservation Options
Benefits of Employing Conservation Methods Financial Quality of Life
Aesthetic
NES Line of Products & Services
Benefits of Selecting NES

The complexity and length of the sales process  presents a special  challenge to
even the most savvy  marketing/sales  professional.  However, the Company firmly
believes that if it can prove to a potential client that it will save money with
no out-of-pocket  expense,  while  maintaining or improving its current level of
care, it can sell the Company's products and services successfully.

Inadequate reimbursement and challenging fiscal situations in many nursing homes
are driving  owner/operators  to seek  creative  ways to bring extra cash to the
bottom line. Energy Conservation  Measures that are financed are a way to reduce
current expenses and improve the bottom line.

Sales Goals

Identify the Decision Maker
Present  Financial  Benefits of NES  Products  and  Services  Identify  Specific
Savings for Facility
Identity Products to Achieve those Savings Close Customer

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

Identify the Decision Maker

Many  times  our  relationships  with   owner/operators  and  other  influential
individuals  in the industry help us to identify the  appropriate  person within
the organization.  Our contacts will often make an introductory call, saving the
Company valuable research manpower.


                                       12
<PAGE>


If  not,  the   administrative   support  staff  will  contact   facilities  and
organization  via phone to get the needed  information.  During this phone call,
NES will also  verify  the names of the key  staff and the  locations  of sister
facilities and/or the corporate offices.

Present the Financial Benefits of NES Products and Services

NES has developed a proven method of making the appropriate  people aware of our
products and services.

Introduction Letter
Follow-up Phone Call
Set Appointment
Follow-up Letter and/or Fax
Make Presentation to Decision Maker
Identify Specific Savings for the Facility

During the  presentation,  information  is  gathered  as part of the  qualifying
process.  It is  critical  to  the  success  of the  sale  to  determine  if the
facility's  situation will generate the energy savings to create a positive cash
flow for the customer.  Positive cash flow is the difference between the monthly
energy savings (dollars) generated by the installed Energy Conservation Measures
and the monthly financing costs to fund the project.  If the savings are greater
than the financing cost then the project is considered  financial positive.  The
NES marketing representative will gather:

Monthly Utility Costs and Usage Patterns Systems Data Laundry
Lighting
HVAC/Mechanical
Water/Sewer

With this  information,  the sales  representative  can  quickly  determine  the
project feasibility.

Identify Products to Achieve the Savings

The marketing  representative  can determine  which  products and services would
help the facility  achieve their financial  goals. NES gains approval to perform
surveys in the appropriate areas (lighting, HVAC, laundry, water & sewer).

Years of  experience in the energy  services  industry,  electrical  contracting
business and our extensive knowledge of long term care operations all contribute
to  our  exceptional   survey   abilities.   The  qualitative  and  quantitative
information  gathered  during  the survey  process  allows  NESNJ to  accurately
project the  savings for each  facility  and  specify the correct  products  and
services needed to actualize these savings.

A follow-up  appointment is made to present the survey results and the financial
arrangement  available  for the  products  needed.  At this  time,  the  savings
analysis reports  detailing  exactly how and where dollars will be saved and how
the project can be funded.


                                       13
<PAGE>


Close Customer

Contract is presented  and  negotiated.  Credit  application  is  completed  and
approximate start date agreed upon.

This is only the beginning of the Relationship  Marketing process.  As NES moves
into the purchasing and  installation  phase,  the focus of the NES relationship
with the client  expands to include  the  installation  and  project  management
teams.

PURCHASING & INSTALLATION

PURCHASING

John  Grillo,  founder of NES,  has  developed  solid  relationships  with major
suppliers  of  industrial  lighting,   mechanical  equipment  and  other  energy
conservation  products.  His extensive  knowledge of the electrical  contracting
industry enables NES to offer state of the art products and services.

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

NES has preferred  vendor or  distributor  status with several  suppliers.  This
means that NES enjoys the following:

Preferred Pricing
Quantity Discounts
Timely Delivery
Quality Products
Exceptional Warranties
Superior Customer Service
Product Exclusivity
Manufacture Sponsored Training
Superior Customer Service

NES has  developed a system of checks and  balances to ensure that the  customer
has a complete and total  understanding of what is being ordered.  At this point
in the transaction every effort is made to clarify, down to the last detail, the
expectations  of the  customer  the  ability of NES to meet those  expectations.
Before the final order is placed the following procedure is followed:



                                       14
<PAGE>


Survey is Checked and Rechecked  with Customer  Final Walk Through with Customer
to Finalize Equipment  Purchasing List Final Review of Equipment to be Purchased
Confirmation of Purchasing  List with Customer  Customer Sign's Off on Equipment
Purchase

NES is dedicated to  maintaining  quality  relationships  with our suppliers and
makes a  concentrated  effort  to  expand  our  sphere  of  influence  among the
manufacturers.  This allows NES to  customize  our  product  line and select the
materials that best fill the needs of our customers.

INSTALLATION

The installation of NES products is the most delicate part of the entire process
and can place  enormous  strain on a customer  relationship.  At this time,  NES
makes  every  effort to expand our contact  with the  facility to include all of
those staff  members whose daily tasks will be effected by the  installation  of
new equipment.

The nursing  home  presents  exceptionally  complicated  installation  problems.
Unlike most commercial installations, this is an environment in which people are
living,  sleeping,  eating and under direct  medical  care.  NES is dedicated to
making the  installation as hassle free as possible.  This takes a great deal of
planning and communication. The traditional installation proceeds as follows:

Meet with Department Heads Re:  Installation  Schedule  Complete Action Plan for
Any Disruptions of Power, etc. Explain in Detail

Customer  Responsibilities Explain in Detail NES Responsibilities  Customer Sign
off on Installation Plan and Schedule

Send Follow-up Letter with Schedule to Dept. Heads Notify Wings, Floors,  Nurses
Stations of Schedule Make  Modifications in Schedule to Avoid Major  Disruptions
Installation Completed

First Walk Through with NES & Contractor Punch List Completed

Second Walk Through with NES & Contractor Punch List Completed

Walk Through with Customer, NES, & Contractor Punch List Completed

Final Walk Through with Customer,  NES, & Contractor Obtain Customer Sign Off of
Satisfactory Completion Obtain Certificate of Completion

Contractor Selection

The  selection  of  the  right   contractor   is  critical  to  the   successful
installation. The Company has strict contractor criteria. The selected firm must
have a total  understanding  of  what is  required  to work in the  health  care
environment and be willing to complete the Contractor Compliance paperwork.




                                       15
<PAGE>


CUSTOMER SERVICE

Building a solid  working  relationship  with our  customers is paramount to the
success of the Company.  The ability to create an  atmosphere  of trust in which
candid,  constructive  communication flows throughout the entire relationship is
critical.  The  quantity  and  quality  of  communication  in the  NES  customer
relationship is imperative because of the:

Complexity  of the  Energy  Services  Industry  Lack of  Consumer  Understanding
Regarding  Energy Issues Consumer  Reluctance to Embrace  Conservation  Measures
Lack of Consumer Knowledge Regarding Energy Costs & Usage Patterns Complexity of
the National Energy Products and Services Length of the Sales Cycle  Opportunity
to Sell Additional  Goods and Services Later in the  Relationship  Importance of
Referrals to NES's Marketing Success

Customer  service  begins at the initial  contact and continues  throughout  the
relationship. The following items are included in the Customer Service Program:

Correspondence:
Thank you for the appointment
It was a pleasure meeting with you
Thank you for the reference
Thank you for the referral
Thank you for your cooperation during installation

Questionnaires:
During Installation
Post Installation
90 Days Post Installation
Every 6 Months
Holiday Cards
Holiday Gifts

Also included in the Customer Service process are site visits.  The NES Customer
Service  policy  calls for a site visit once a year and  monthly  phone calls to
check on operations and customer  satisfaction.  These visits can be made by any
of the NES team. Using the Goldmine  Contact  Management  System,  NES carefully
tracks the specifics of our customer relations effort. (ie: date, time of visit,
who made the visit, note of any comments, action taken, etc.)

Customer Service Training

The success of the Relationship  Marketing philosophy is directly related to the
ability of NES to  maintain  quality  relationships  and  provide  the  ultimate
service to those clients and potential customers.

Every NES team member  receives  extensive  training in the use of the  Goldmine
tracking  system.  This ensures a  communication  flow that allows anyone in the
organization  access to the latest information about a project,  lead,  problem,
etc.   Inquiries  are  answered  quickly  and   courteously.   From  partner  to
administrative  staff from payroll  clerk to  receptionist  customer  service is
everyone's job.



                                       16
<PAGE>


Customer Service Training extends to the on-site contractors.  NES believes that
installers  and  service  technicians  represent  NES and must be  committed  to
delivering the highest quality of service.

Systems Design and Engineering

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

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

Upgrade  pricing  and design is  implemented  with the unique  fixture key entry
system which makes the program flexible and easy to use.

There are several factors that have  contributed to NES's design and engineering
abilities:

Most long  term care  facilities  were  constructed  about the same time and are
alike in design, size and materials,  hence the energy consumption and equipment
is often similar.

NES understands the nuances of the day to day operations of a nursing home.

NES  understands  the  regulatory  and  financial   issues  of  long  term  care
facilities.  All Medicaid  facilities  receive some level of  reimbursement  for
their Medicaid  residents.  Each state varies its reimbursement  structure quite
differently.  Because NES receives a large part of the project costs through the
savings,  which is reflected on the energy bill,  it is important to  understand
how the reimbursement works for billing purposes.

NES has relationships with nursing home  owner/operators  which have enabled the
Company to conduct  research and development  including trial  installations  on
innovative products and services.

NES has the ability to efficiently collect and analyze utility data.

NES has  relationships  with  manufacturers  and  suppliers  which  expedite the
development of a unique product and/or equipment modifications necessary to fill
the unique market needs.



                                       17
<PAGE>


Aggregated Services Potential

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

Financial Control

The financial  controls inherent in the NES programs are a significant  business
asset. The strong working relationship with the primary energy partners, PPL and
Charter Management, have secured NES's ability to control the income stream from
installation throughout the residual phase.

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

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

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

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



                                       18
<PAGE>


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

Responsibilities of Customer.

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

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

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

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


                                       19
<PAGE>


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

NESC also  receives  5% of the gross  project  cost as sales  commission  on all
projects specified and managed by PPL.

Operations and Management Control

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

This control over operations and management  ensures  consistency and quality of
service.

The Power of Negotiated Pricing

NES is able to  maintain a profit  margin of  between 30 to 100%  because of the
nature of the energy services contract.  Energy conservation  services contracts
are typically negotiated,  not bid because each facility has different needs and
requirements  which need to be  determined  through an energy study prior to the
preparation  of a proposal.  The fluid nature of energy  prices and the extended
period of the agreement  also  contribute to the need to work with a customer to
determine the best energy conservation strategy for their facility.

Customers  generally do not shop this type of proposal because in most cases the
energy  savings funds the project,  so the owner has no cash outlay.  Because we
provide this type of special  project  financing,  specifically  tailored to the
long-term care  community,  the customer more often than not finds little reason
to look elsewhere.

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

The Power of Data Collection

As energy deregulation becomes increasing widespread,  the value of an exclusive
5-year energy agreement increases. As we execute more contracts,  two things are
being developed;  a large  aggregated load profile and the  accompanying  energy
utilization  data.  Energy  prices are and always  will be a function of volume.
With each contract,  the amount of energy units purchased through NES increases.
As the volume increases,  NES will have greater purchasing power with generators
of  electricity  and producers of natural gas. As with any  commodity,  the more
units  purchased  the better the pricing.  As NES achieves  better  pricing,  it
allows NES to  increase  its  profit  margin  while  remaining  competitive  and
providing  the client with better energy  pricing.  NES can also profit from the


                                       20
<PAGE>



compilation of energy  utilization  data because the more energy use history NES
stores and  analyzes  for each  client,  the better the  opportunity  NES has of
understanding   which  particular   existing  or  emerging  energy  conservation
technologies  will benefit the client and can be sold by NES to the client.  The
better NES  understands  the energy use  profile of a client,  the better it can
market and profit from the various energy conservations available.

DEPENDENCE ON NEW PRODUCTS

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

COMPETITION

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

Although   all  future   employees   are   expected   to  be  required  to  sign
confidentiality  agreements,  there is no  guarantee  either that trade  secrets
won't be  shared  with  competitors  or that the  Company  could  enforce  these
agreements.  Such  disclosures,  if made, could negatively  affect the Company's
competitiveness.

There are a few competitors  that NES faces in several of the different  product
lines that NES offers. However, we have never faced a company or group who has a
program that is similar or competitive with the "Energy Gatekeeper Program". The
Energy Gatekeeper  Program offers the analysis design and installation of energy
conservation measures, energy management services and a unique financing package
tailored for the nursing home  industry,  more  specifically  the various  State
Medicaid reimbursement systems.

Competitors for the Ozone Laundry Support System are:

Envirocleanse Systems, Inc.
Ponte Vedra, FL
Mooresville, NC
6 years in Business
Less than 0.5% of nursing home market


                                       21
<PAGE>


Laundrox  Laundry Systems  Concord,  NC Less than 1 year in business No share of
business currently

Daniels Equipment Company, Inc.
Auburn, NH
20 plus years in business
less than 0.5% of the nursing home market

Competitors for the Lighting Upgrades and Mechanical Upgrades are:

Can-Am Energy Systems
Lake Park, FL
6 - 7 years in business
1 percent of nursing home market

ES Performance Lighting
Tuscan, AZ
5 years in business
3 percent of nursing home market

On a local level an occasional small in-house electrician or HVAC contractor.

SOURCES AND AVAILABILITY OF RAW MATERIALS AND PRINCIPAL SUPPLIERS

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

INTELLECTUAL PROPERTY

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



                                       22
<PAGE>


GOVERNMENTAL REGULATION

General

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

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

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

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

In 1987, the United States Congress passed the Omnibus Budget Reconciliation Act
which  included  extensive  revisions to the  Medicare  and  Medicaid  statutory
requirements   for   nursing   facilities.   These   provisions   prescribe   an
outcome-oriented  approach to the  provision  of services  and require that each
resident  receive the  necessary  care and  services  to attain or maintain  the
highest practicable physical,  mental and psychosocial  well-being in accordance
with the resident's  individualized  assessment and plan of care. The rules also
established  requirements for survey,  certification and enforcement procedures.
The Health Care Financing  Administration  of the Department of Health and Human
Services ("HCFA") promulgated regulations,  effective July 1, 1995, to implement
the survey,  certification  and  enforcement  procedures.  The survey process is


                                       23
<PAGE>


intended to review the actual  provision of care and services,  with an emphasis
on resident  outcomes to determine  whether the care provided meets the assessed
needs  of the  individual  residents.  Surveys  are  generally  conducted  on an
unannounced  annual  basis by state survey  agencies.  Remedies are assessed for
deficiencies  based upon the scope and severity of the cited  deficiencies.  The
regulations  specify that the remedies  are intended to motivate  facilities  to
return  to  compliance  and  to  facilitate  the  removal  of  chronically  poor
performing  facilities  from the program.  Remedies range from directed plans of
correction,   directed  in-service  training  and  state  monitoring  for  minor
deficiencies;   denial  of  Medicare  or  Medicaid  reimbursement  for  existing
residents or new admissions  and civil money  penalties up to $3,000 per day for
deficiencies  that do not constitute  immediate  jeopardy to resident health and
safety;  and appointment of temporary  management,  termination from the program
and civil money  penalties  of up to $10,000 for one or more  deficiencies  that
constitute  immediate  jeopardy to resident  health or safety.  The  regulations
allow  state  survey  agencies  to identify  alternative  remedies  that must be
approved  by HCFA prior to  implementation.  From time to time as a supplier  of
products and  services to nursing  facilities,  the Company may receive  notices
from facilities relating to alleged  deficiencies for failure to comply with all
components of the regulations.  While the Company does not always agree with the
positions  taken by the  facilities,  the Company reviews such notices and takes
corrective  action  when  appropriate.  Due to the fact that the new  regulatory
process  provides  the  facility  with  limited  appeal  rights,   many  alleged
deficiencies are not challenged even if the Company is not in agreement with the
allegation.

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

The Company is also subject to federal and state laws which govern financial and
other arrangements between healthcare  providers.  Such laws include the illegal
remuneration  provisions of the Social  Security Act,  which make it a felony to
solicit,  receive,  offer to pay or pay any kickback,  bribe or rebate in return
for  referring  a person for any item or  service  or in return for  purchasing,
leasing,  ordering or arranging for any good, facility,  service or item paid by
federal health care programs. The Office of the Inspector General ("OIG") of the
Department of Health and Human Services  ("HHS"),  the Department of Justice and
other federal agencies interpret these fraud and abuse provisions  liberally and
enforce  them  aggressively.  The  recently  enacted  Balanced  Budget  Act also
includes numerous health fraud provisions,  including:  new exclusion  authority
for the transfer of  ownership or control  interest in an entity to an immediate
family or household  member in  anticipation  of, or  following,  a  conviction,
assessment,  or exclusion;  increased  mandatory  exclusion periods for multiple


                                       24
<PAGE>


health fraud convictions,  including  permanent exclusion for those convicted of
three health care-related crimes; authority for the Secretary to refuse to enter
into Medicare  agreements with convicted  felons;  new civil money penalties for
contracting  with an excluded  provider or violating  the federal  anti-kickback
statute;  new surety bond and information  disclosure  requirements  for certain
providers  and  suppliers;  and an expansion  of the  mandatory  and  permissive
exclusions added by the Health Insurance  Portability and  Accountability Act of
1996 to any federal health care program (other than the Federal Employees Health
Benefits Program).

Laundry

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

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

The procedures and policy section is what most effects the  installation  of the
OLSS. 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  NES has had to
present  Maryland and  Massachusetts  with the merits of using ozone in the wash
water to clean and disinfect.  The Company has been  successful in this endeavor
and has received waivers from both states to install the OLSS.

RESEARCH & DEVELOPMENT

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


                                       25
<PAGE>


COMPLIANCE WITH ENVIRONMENTAL LAWS

The  Company   believes  that  it  is  in  full  compliance  with  all  relevant
environmental  laws.  NES has adopted the  practice  of full  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. NES uses
federal and state licensed and fully insured recycling  facilities and hazardous
waste  disposers.  This practice in some instances  exceeds the minimum disposal
requirements,  but it is management's view that this practice will provide NES's
clients,  shareholders and officers the greatest  protection from any Super Fund
or toxic waste liability issues.

Our practices are in full compliance  with the federal Toxic  Substance  Control
Act ("TSCA").  TSCA is an EPA law which regulates  PCB's disposal.  Under 40 CFR
Section 761.65, the TSCA sets extreme standards for the disposal of PCB's. Fully
complying  with the  TSCA  removes  the  risk of  liability  under  the  federal
Comprehensive  Environmental  Compliance  and Liability Act of 1980  ("CERCLA"),
which is also known as the Superfund  law.  Under this law any release or threat
of  a  release  of  a  hazardous   substance   requires  immediate  cleanup  and
notification of all responsible parties.

NES is also in fully 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.  NES treats all lamps as hazardous and
properly  disposes  and  recycles  them  to  avoid  any  potential  toxic  waste
liabilities.

NES is fully  compliant with the Department of  Transportation  requirements  of
classifying  all ballasts and lamps as hazardous  material and using a "class 9"
label during transportation.

Employees and Consultants

As of October 31, 2002, the Company  employed  eleven (11) full time and one (1)
part-time  employees.  None of the Company's  employees are represented by labor
unions. The Company believes its relationship with employees is excellent.

The Company  believes that its success  depends to a  significant  extent on the
management and other skills of John Grillo, its Chairman and President,  as well
as its ability to attract other skilled personnel. The loss or unavailability of
the services of Mr. Grillo could have a material  adverse effect on the Company.
The Company is the primary  beneficiary of a $650,000 life  insurance  policy on
John Grillo.




                                       26
<PAGE>


Item 2. Description of Property

In May 2001,  NESNJ entered into a contract with Howard R. Bensel,  Jr. to lease
the  premises  located at 3153 Fire Road,  Suite 2C,  Egg Harbor  Township,  New
Jersey  08234.  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.
The lease has been twice  amended.  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. The second addendum extended
the lease an additional two (2) years and increased rent. The Company  currently
pays rent in the  amount of $1,833 per  month,  which rate will  remain the same
throughout the remainder of the lease.

In December 2001,  NESNJ entered into a contract with George E. Michael to lease
a portion of the premises  located at 328 South Main Street,  New Hope, PA 18938
beginning  January 1, 2002. The property is used by the Company as office space.
The term of the agreement was for a period of one year.  In December  2002,  the
Company  exercised an option to extend the lease through and including  December
31, 2003 and agreed to an  increase  in rent paid.  The Company now pays rent in
the amount of $1,050 per month.

Item 3. Legal Proceedings

No legal  proceedings  have been  initiated  either by or against the Company to
date.

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

No matter was  submitted to a vote of the  Company's  shareholders,  through the
solicitation  of proxies or otherwise from the Company's  inception to the close
of the 2002 fiscal year ended October 31, 2002, covered by this report.

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

No shares of the Company's common stock have previously been registered with the
Securities and Exchange  Commission (the  "Commission")  or any state securities
agency or authority. The Company intends to make application to the NASD for the
Company's  shares to be quoted on the OTC Bulletin Board. The application to the
NASD will be made  during the  Commission  comment  period for its Form 10-SB or
immediately  thereafter.  The Company's  application to the NASD will consist of
current  corporate  information,  financial  statements  and other  documents as
required  by Rule 15c211 of the  Securities  Exchange  Act of 1934,  as amended.
Inclusion on the OTC Bulletin  Board permits  price  quotation for the Company's
shares to be published by such service.

The Company is not aware of any existing  trading  market for its common  stock.
The  Company's  common stock has never traded in a public  market.  There are no
plans, proposals,  arrangements or understandings with any person(s) with regard
to the development of a trading market in any of the Company's securities.

If and when the Company's common stock is traded in the over-the-counter market,
most likely the shares will be subject to the  provisions  of Section  15(g) and
Rule 15g-9 of the Exchange Act,  commonly referred to as the "penny stock" rule.
Section 15(g) sets forth certain  requirements  for transactions in penny stocks
and Rule 15g9(d)(1)  incorporates  the definition of penny stock as that used in
Rule 3a51-1 of the Exchange Act.


                                       27
<PAGE>


The Commission  generally defines penny stock to be any equity security that has
a market price less than $5.00 per share,  subject to certain  exceptions.  Rule
3a51-1  provides  that any equity  security  is  considered  to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting  specified  criteria set by the Commission;  authorized for quotation on
The NASDAQ Stock Market;  issued by a registered  investment  company;  excluded
from the  definition  on the basis of price (at  least  $5.00 per  share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If the  Company's  shares are deemed to be a penny stock,  trading in the shares
will be subject to additional sales practice  requirements on broker-dealers who
sell penny stocks to persons other than  established  customers  and  accredited
investors,  generally  persons  with  assets in excess of  $1,000,000  or annual
income exceeding $200,000, or $300,000 together with their spouse.

For  transactions  covered by these  rules,  broker-dealers  must make a special
suitability  determination  for the  purchase of such  securities  and must have
received  the  purchaser's  written  consent  to the  transaction  prior  to the
purchase.  Additionally,  for any  transaction  involving a penny stock,  unless
exempt,  the rules require the delivery,  prior to the first  transaction,  of a
risk  disclosure  document  relating to the penny stock market.  A broker-dealer
also must disclose the  commissions  payable to both the  broker-dealer  and the
registered representative,  and current quotations for the securities.  Finally,
the monthly  statements must be sent disclosing recent price information for the
penny stocks held in the account and  information on the limited market in penny
stocks. Consequently,  these rules may restrict the ability of broker dealers to
trade and/or maintain a market in the Company's  common stock and may affect the
ability of shareholders to sell their shares.

As of October 31, 2002,  there were one hundred  (100)  holders of record of the
Company's common stock.

As of October 31, 2002,  the Company had  12,594,260  shares of its common stock
issued and outstanding.  Of this total,  10,994,260 were restricted  pursuant to
the terms of Rule 144 ("Rule 144") of the Act,  1,600,000 were  free-trading and
7,745,960  shares  which were  restricted  had been held for a period of one (1)
year or more.

Dividend Policy

The Company has never paid or declared  any  dividends  on its common  stock and
does not anticipate paying cash dividends in the foreseeable future.

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." The following discussion
and  analysis  contains  forward-looking  statements,  which  involve  risks and
uncertainties in the  forward-looking  statements.  The Company's actual results
may differ  significantly from the results,  expectations and plans discussed in
the forward-looking statements.



                                       28
<PAGE>


The Company's growth is expected to come from its ability to continue to finance
energy conservation  projects and the growing need for the operators of existing
nursing homes to reduce their operating expenses.  The ability to finance energy
conservation projects has been increased with the addition of Charter Management
and the continuing relationship with PPL as funding sources.

On October 29, 2001, the Company acquired NESNJ. By acquiring NESNJ, the Company
expanded NESNJ's existing comprehensive,  cost-driven  energy-management  system
and  further  exploited  the PPL  relationship.  Operations  (including  utility
income) produced revenues of $2,285,026 for the year ended October 31, 2002.

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

Results of  Operations  - For the Year Ended  October  31,  2002 and For the Ten
Months Ended October 31, 2001

The Company generates sales by financing energy conservation  projects to reduce
gas and electric  costs to nursing homes and assisted  living  facilities in the
United  States.  The  estimated  pricing and gross profit that the Company earns
varies by each type of job completed,  with ozone projects having a higher gross
profit than lighting upgrade projects.

During the period of  comparison,  lighting  projects  completed  exceeded ozone
projects   completed;   therefore,   the  Company's  gross  profit  was  reduced
accordingly.  Also,  the  Company  added a field  surveyor  to its staff,  which
increased  the cost of sales via  salary,  fringe  benefits,  travel and related
expenses.

In  attempting  to obtain  business,  the Company  will send field  surveyors to
interested  facilities to determine the potential  energy savings so that a cost
proposal can be prepared and presented to the facility. During the course of the
year,  many  proposals are made, but there is no guarantee that the Company will


                                       29
<PAGE>


be able to perform  the job at the  facility  because of  several  reasons.  The
credit  rating of the facility  and  financial  statements  may not be minimally
sufficient per the funding source (PPL & Charter Management). In this situation,
the Company has  incurred  unrecoverable  costs that won't be absorbed  and then
become part of the manufacturing overhead, which will reduce the gross profit of
the Company.

Revenues

Total  Revenue for the year and the ten months  ended  October 31, 2002 and 2001
was $2,228,000 and $2,071,500.  Revenues are only slightly higher as a result of
increased  competition,  primarily in lighting  retrofit jobs,  resulting in the
Company having to reduce the prices it charges.  The Company  recognizes revenue
when the services are rendered. At that time, the funding source is invoiced and
the Company records revenue on its books.

Revenues vary from period to period for NESC based upon the success of the sales
force in closing  jobs which then have to be approved by the fund source  before
implementation.  The  primary  sources  of  revenue  for NESC are ozone jobs and
lighting  jobs which  account for  approximately  85% of the  company's  overall
revenue.

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

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

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

The remaining revenues for NESC are composed of administrative  handling charges
(5%) for  processing  the invoices  from the utility  companies  for the nursing
homes and  assisted  living  facilities;  energy  management  revenues  (3%) for
monthly  monitoring of facility  utility  invoices to insure proper  billing via
correct   charges  and   appropriate   tariffs;   and  rebates  that   represent


                                       30
<PAGE>


approximately  7% of revenues,  which are the result when upgrades are performed
at facilities where  participating  utility companies offer rebates for reducing
energy  costs.  NESC  completes  all of the  paperwork and NESC keeps 30% of the
savings and the facility keeps the remaining 70% of the rebate.

Cost of Sales

Cost of sales for the year and the ten months  ended  October  31, 2002 and 2001
were  $1,462,400  and  $1,173,500.  Cost of sales is higher as a  percentage  of
revenues as a result of increased  competition,  primarily in lighting  retrofit
jobs,  resulting in the Company having to reduce the prices it charges,  yet the
cost of goods pricing remaining relatively stable.

Operating Expenses

Selling expenses for the year and the ten months ended October 31, 2002 and 2001
were $501,100 and $425,100. General and administrative expenses for the year and
the ten months ended October 31, 2002 and 2001 were $817,700 and $525,900. Total
operating  expenses for the year and the ten months  ended  October 31, 2002 and
2001 were $1,318,900 and $951,000.  The reason for the  significant  increase in
expenses  was that based upon  anticipated  revenues,  the Company  enlarged its
sales and marketing  staff embarking upon programs to increase  business,  which
are expected to affect future quarters.  Advertising  expenses also increased in
connection  with  this  expansion.   Legal  and  accounting  fees  increased  in
connection  with the Company's  Registration  Statement  with the Securities and
Exchange Commission.

Net Income/Loss

Net loss for the year and the ten months  ended  October  31,  2002 and 2001 was
$517,200 and $25,300.

Assets and Liabilities

Assets  were  $6,137,000  and  $4,248,800  as of  October  31,  2002  and  2001,
respectively.  As of October 31, 2002 and 2001,  assets  consisted  primarily of
accounts  receivable  with a  value  of  $2,113,100  and  $1,293,100  and  notes
receivable in the amount of $2,881,400 and $2,459,400, respectively.

Total current  liabilities as of October 31, 2002 and 2001,  were $3,727,000 and
$2,393,800,  respectively.  Long-term  debt, less current portion was $2,886,100
and $2,346,900, respectively.

There are no other  obligations  other than  those  disclosed  in the  financial
statements.

Financial Condition, Liquidity and Capital Resources

At October 31,  2002 and 2001,  the  Company  had cash and cash  equivalents  of
$21,000 and $3,700, respectively.



                                       31
<PAGE>


The Company's working capital is presently minimal and there can be no assurance
that the Company's financial condition will improve.  The Company is expected to
continue  to have  minimal  working  capital or a working  capital  deficit as a
result of current liabilities.

The Company  must  complete the job,  pay for all costs  incurred,  and obtain a
completion certificate before submitting an invoice for reimbursement to the two
main funding sources, (Penn Power & Light (PP&L) and Charter Management), before
it is able to collect its revenue. These steps represent  approximately a 30 day
delay before receipt of the funds.

At the present time,  the Company has minimal  liquidity and working  capital is
severely  strained as the company has fully utilized its credit lines.  There an
not be any  assurance  that  the  Company's  financial  condition  will  improve
significantly unless the Company  successfully  completes more jobs consistently
on a monthly basis,  which will enable the Company to generate  additional  cash
flow, thereby reducing currently liabilities.

The Company will also  continue to try and attract  additional  capital  through
private sales of securities,  but has no commitments  for sales of securities at
this time.

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

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

The Company  has short term  liquidity  problems  which are being  addressed  by
revising internal  procedures for faster job approvals to hasten the process and
fund the projects  faster.  The company is also contacting local banks to obtain
additional  short term financing via an extended credit line, but no commitments
have been made to date.

For long term liquidity, the Company will need additional investors to remain an
ongoing  concern;  however,  as stated above no commitments have been made as of
this date.

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

Accounts  receivable have grown at a rate faster than the sales increase because
the majority of receivables  represent pass through amounts only as stated above
and NESC has many more facilities  under contract.  Utility invoices are sent to
NESC by the utility  company and NESC invoices the facility for utility  charges
and adds on the loan payment and handling charge, and then subsequently pays the


                                       32
<PAGE>



utility company and loan provider  monthly,  but only after the facility payment
is received by NESC.  Receivables have no relation to revenues,  as revenues are
only generated  when the loan provider  approves a job for  completion.  At that
time an invoice  is  created,  and  payment  is  received  by NESC from the loan
provider  within  thirty  days of  invoicing.  There has not been any  change in
credit terms,  collection  efforts,  credit  utilization  or  delinquency by the
facilities that NESC services.

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

Cash flow for NESC has become negative mainly due to the increase in the cost of
sales expenses discussed earlier.

All projects are  approved by PP& L and Charter  Management  Company who are the
two loan  providers  of jobs for NESC.  Faster job approval is needed by NESC to
generate  revenue more quickly,  but NESC must make sure that it follows through
on its own internal  procedures to make sure that all  documentation is gathered
and presented to the loan providers on a timely basis for credit  approval.  The
lenders  will not  reduce  their  standards  in  approving  jobs as they are not
willing to increase  their risk of default on accounts and notes  receivables by
the facilities.

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

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

Critical Accounting  Policies

Significant  acquisition  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,  which was accounted for as a
reorganization of National Energy Services Company, Inc.-NJ. As a result of this
reverse merger,  the former  stockholders  of National Energy Services  Company,
Inc.-NJ now control  National Energy Services  Company,  Inc.-NV.  Prior to this
reverse merger, National Energy Services Company, Inc.-NV had nominal assets and
liabilities.  National Energy Services Company,  Inc.  accounted for the reverse


                                       33
<PAGE>



merger as an issuance of stock for the net  monetary  assets of National  Energy
Services  Company,  Inc.-NJ  or,  in  this  case,  as a  capitalization  of  the
accumulated deficit of National Energy Services Company,  Inc.-NJ to the date of
the merger.  There is no alternative  to accounting  for the  acquisition in any
other manner,  therefore there is no possibility of materially different results
than that reported.

Principles of consolidation The consolidated  financial  statements  include the
accounts of  National  Energy  Services  Company,  Inc.-NV and its wholly  owned
subsidiary.  Inter-company balances and transactions have been eliminated. There
is no  alternative  to  accounting  for the  consolidation  in any other manner,
therefore  there is no  possibility  of materially  different  results than that
reported.

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

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

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

As the  Company is liable on all of its notes  payable,  which are offset by the
notes  receivable,  should the Company's  estimates of its potential bad debt be
incorrect,  the  impact on the  reported  results  and  balance  sheet  could be
substantially  negative.  At July 31, 2003 and October 31, 2002,  the  Company's
notes receivable were 60.9% and 59.6% 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.




                                       34
<PAGE>


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

Revenues vary from period to period for NESC based upon the success of the sales
force in closing  jobs which then have to be approved by the fund source  before
implementation.  The  primary  sources  of  revenue  for NESC are ozone jobs and
lighting  jobs which  account for  approximately  85% of the  company's  overall
revenue.

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

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

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


                                       35
<PAGE>


The remaining revenues for NESC are composed of administrative  handling charges
(5%) for  processing  the invoices  from the utility  companies  for the nursing
homes and  assisted  living  facilities;  energy  management  revenues  (3%) for
monthly  monitoring of facility  utility  invoices to insure proper  billing via
correct   charges  and   appropriate   tariffs;   and  rebates  that   represent
approximately  7% of revenues,  which are the result when upgrades are performed
at facilities where  participating  utility companies offer rebates for reducing
energy  costs.  NESC  completes  all of the  paperwork and NESC keeps 30% of the
savings and the facility keeps the remaining 70% of the rebate.



The Company is obligated to the following cash outflows at October 31, 2002:

<TABLE>
<CAPTION>
                                                         Less than 1                               After 5
Contractual obligations:                      Total          year       1-3 years   4 - 5 years     years
-------------------------------------     -------------- ------------- ------------ ------------ -------------
<S>                                       <C>            <C>           <C>          <C>          <C>
Loans payable - stockholder/employee           $190,902      $190,902           $0            $0           $0
                                          ============== ============= ============ ============ =============
Bank term loan                                  $13,945        $9,300       $4,645            $0           $0
                                          ============== ============= ============ ============ =============
Penn Power & Light term loans                $3,659,512      $778,103     $894,410      $923,346   $1,063,653
                                          ============== ============= ============ ============ =============
Short-term line of credit                      $178,571      $178,571           $0            $0           $0
                                          ============== ============= ============ ============ =============
Operating leases                                $41,753       $28,957      $12,796            $0           $0
                                          ============== ============= ============ ============ =============
</TABLE>

Controls and Procedures

The  Company's  Chief  Executive   Officer  and  Chief  Financial  Officer  have
concluded,  based on an evaluation  conducted within 90 days prior to the filing
date of this  Annual  Report  on Form  10-KSB,  that  the  Company's  disclosure
controls and  procedures  have  functioned  effectively  so as to provide  those
officers the information necessary whether:

     (i) this Annual  Report on Form 10-KSB  contains any untrue  statement of a
material fact or omits to state a material fact necessary to make the statements
made, in light of the  circumstances  under which such statements were made, not
misleading  with  respect to the period  covered by this  Annual  Report on Form
10-KSB, and

     (ii) the financial statements,  and other financial information included in
this Annual Report on Form 10-KSB,  fairly present in all material  respects the
financial condition,  results of operations and cash flows of the Company as of,
and for, the periods presented in this Annual Report on Form 10-KSB.



                                       36
<PAGE>


There have been no significant  changes in the Company's internal controls or in
other  factors  since  the  date of the  Chief  Executive  Officer's  and  Chief
Financial Officer's  evaluation that could  significantly  affect these internal
controls,   including  any  corrective   actions  with  regards  to  significant
deficiencies and material weaknesses.

Forward-Looking Statements

This Form 10-KSB  includes  "forward-looking  statements"  within the meaning of
Section 27A of the  Securities  Act of 1933, as amended,  and Section 21E of the
Securities  Exchange  Act of  1934,  as  amended.  All  statements,  other  than
statements of historical  facts,  included or  incorporated by reference in this
Form 10-KSB which address  activities,  events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital  expenditures  (including the amount and nature thereof),  demand
for the Company's  products and services,  expansion and growth of the Company's
business and operations, and other such matters are forward-looking  statements.
These  statements  are based on certain  assumptions  and  analyses  made by the
Company in light of its  experience  and its  perception of  historical  trends,
current conditions and expected future  developments as well as other factors it
believes are appropriate in the circumstances.  However,  whether actual results
or developments will conform with the Company's  expectations and predictions is
subject  to a number of risks and  uncertainties,  general  economic  market and
business  conditions;  the business  opportunities (or lack thereof) that may be
presented  to and pursued by the  Company;  changes in laws or  regulation;  and
other   factors,   most  of  which  are  beyond  the  control  of  the  Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary  statements and there can be no assurance that the
actual results or  developments  anticipated by the Company will be realized or,
even if substantially  realized, that they will have the expected consequence to
or effects on the Company or its business or operations.

Item 7. Financial Statements

The Company's financial statements have been examined to the extent indicated in
their  reports by Maillie,  Falconiero & Company,  LLP 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.

None.



                                       37
<PAGE>







                          INDEX TO FINANCIAL STATEMENTS


Independent Auditors' Report.................................................F-2

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

Statements of Operations.....................................................F-4

Statements of Stockholders' Equity...........................................F-5

Statements of Cash Flows.....................................................F-6

Notes to Financial Statements................................................F-7














                                       F-1

<PAGE>



                          INDEPENDENT AUDITORS' REPORT



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,  2002 and  2001  and the  related
consolidated  statements of operations,  stockholders' equity (deficit) and cash
flows for the year and ten  months  then  ended.  These  consolidated  financial
statements   are  the   responsibility   of  the   Company's   management.   Our
responsibility  is to express an opinion on these financial  statements based on
our audits.

We conducted our audits in accordance with auditing standards generally accepted
in the United  States.  Those  standards  require  that we plan and  perform the
audits to obtain reasonable  assurance about whether the consolidated  financial
statements are free of material misstatement.  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 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, 2002 and 2001 and the results of its
operations  and its  cash  flows  for the  year  and ten  months  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 10 to
the consolidated  financial  statements,  the Company has experienced net losses
since inception.  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  10.  The
consolidated  financial  statements  do not include any  adjustments  that might
result from the outcome of this uncertainty.

/s/Maillie, Falconiero & Company, LLP
Maillie, Falconiero & Company, LLP
West Chester, Pennsylvania
December 16, 2002




                                       F-2

<PAGE>


<TABLE>
<CAPTION>
                     National Energy Services Company, Inc.
                           Consolidated Balance Sheets
                                   October 31,

                                                                                2002                    2001
                                                                       ---------------------  ----------------------
<S>                                                                    <C>                    <C>
                                         ASSETS
CURRENT ASSETS

   Cash                                                                $              20,978  $                3,710
   Accounts receivable                                                             2,113,115               1,293,075
   Notes and accrued interest receivable                                             778,102                 490,255
   Prepaid expenses                                                                    1,750                   1,000
                                                                       ---------------------  ----------------------
     Total current assets                                                          2,913,945               1,788,040
                                                                       ---------------------  ----------------------

PROPERTY AND EQUIPMENT, NET                                                           24,673                   1,350

OTHER ASSETS
   Notes and accrued interest receivable -related parties                            316,923                       0
   Notes and accrued interest receivable                                           2,881,409               2,459,362
                                                                       ---------------------  ----------------------
      Total other assets                                                           3,198,332               2,459,362
                                                                       ---------------------  ----------------------

Total Assets                                                           $           6,136,950  $            4,248,752
                                                                       =====================  ======================

                          LIABILITIES AND STOCKHOLDERS' EQUITY

CURRENT LIABILITIES
   Bank overdraft                                                      $                   0  $               44,547
   Short-term line of credit                                                         178,571                 200,000
   Current portion of long term debt and accrued interest                            978,305                 610,451
   Accounts payable                                                                2,445,800               1,484,300
   Accrued expenses                                                                  125,024                  54,527
                                                                       ---------------------  ----------------------

     Total current liabilities                                                     3,727,700               2,393,825
                                                                       ---------------------  ----------------------

LONG-TERM DEBT, LESS CURRENT PORTION                                               2,886,054               2,346,924
                                                                       ---------------------  ----------------------

Total Liabilities                                                                  6,613,754               4,740,749
                                                                       ---------------------  ----------------------

STOCKHOLDERS' EQUITY
   Common stock, $0.001 par value, authorized 20,000,000 shares:
      12,594,260 and 11,700,000 issued and outstanding                                12,594                  11,700
   Additional paid-in capital                                                         27,809                (503,697)
   Retained earnings (deficit)                                                      (517,207)                      0
                                                                       ---------------------  ----------------------

     Total Stockholders' Equity                                                     (476,804)               (491,997)
                                                                       ---------------------  ----------------------

Total Liabilities and Stockholders' Equity                             $           6,136,950  $            4,248,752
                                                                       =====================  ======================
</TABLE>










     The accompanying notes are an integral part of the financial statements


                                       F-3

<PAGE>



<TABLE>
<CAPTION>
                     National Energy Services Company, Inc.
                      Consolidated Statements of Operations
                      Year and Ten Months Ended October 31,



                                                                    2002              2001
                                                              ----------------- -----------------
<S>                                                           <C>               <C>
REVENUES
    Equipment sales                                           $       2,228,048 $       2,071,506
   Management revenue                                                    53,738            49,020
   Energy management revenue                                                  0                 0
   Energy sales                                                            3240                 0
                                                              ----------------- -----------------
         Total Revenue                                                2,285,026         2,120,526

COST OF SALES                                                         1,462,417         1,173,508
                                                              ----------------- -----------------
       Gross Margin                                                     822,609           947,018
OPERATING EXPENSES
   Selling                                                              501,136           425,101
   General and administrative expenses                                  817,729           525,876
                                                              ----------------- -----------------

         Total expenses                                               1,318,865           950,977
                                                              ----------------- -----------------

Income (loss) from operations                                          (496,256)           (3,959)
                                                              ----------------- -----------------

Other income (expense)
   Interest income                                                            0                 0
   Interest expense                                                     (20,951)          (21,380)
                                                              ----------------- -----------------

          Total other income (expense)                                  (20,951)          (21,380)
                                                              ----------------- -----------------

Net income (loss) before income tax                                    (517,207)          (25,339)
   Income tax expense                                                         0                 0
                                                              ----------------- -----------------

Net income (loss)                                             $        (517,207)$         (25,339)
                                                              ================= =================
Net income (loss) per weighted average share, basic           $           (0.04)$           (0.01)
                                                              ================= =================
Weighted average number of shares - basic                            12,145,905        11,700,000
                                                              ================= =================
</TABLE>









     The accompanying notes are an integral part of the financial statements


                                       F-4

<PAGE>



<TABLE>
<CAPTION>
                     National Energy Services Company, Inc.
                 Consolidated Statements of Stockholders' Equity




                                                                   Additional       Retained          Total
                                       Number of       Common        Paid-in        Earnings      Stockholders'
                                         Shares         Stock        Capital       (Deficit)         Equity
                                    --------------- ----------- --------------- -------------- -----------------

<S>                                 <C>             <C>         <C>             <C>            <C>
BEGINNING BALANCE, January 1, 2001            1,000 $       100 $        15,900 $     (482,658)$        (466,658)

Reverse merger                           11,699,000      11,600        (519,597)       507,997                 0
Net income                                        0           0               0        (25,339)          (25,339)
                                    --------------- ----------- --------------- -------------- -----------------

BALANCE, October 30, 2001                11,700,000      11,700        (503,697)             0          (491,997)

Shares issued for cash                      840,260         840         499,160              0           500,000
Shares issued for services                   54,000          54          32,346              0            32,400
Net loss                                          0           0               0       (517,207)         (517,207)
                                    --------------- ----------- --------------- -------------- -----------------

BALANCE, October 30, 2002                12,594,260 $    12,594 $        27,809 $     (517,207)$        (476,804)

                                    =============== =========== =============== ============== =================
</TABLE>














     The accompanying notes are an integral part of the financial statements


                                       F-5

<PAGE>


<TABLE>
<CAPTION>
                     National Energy Services Company, Inc.
                            Statements of Cash Flows
                      Year and Ten Months Ended October 31,



                                                                                       2002             2001
                                                                                ------------------ --------------
<S>                                                                             <C>                <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income (loss)                                                               $         (517,207)$      (25,339)
Adjustments to reconcile net loss to net cash used for operating activities:
   Depreciation                                                                              6,164          4,955
   Shares issued for services                                                               32,400              0
Changes in operating assets and liabilities:
   (Increase) decrease accounts receivable                                                (820,040)      (991,388)
   Increase (decrease) prepaid expenses                                                     (1,750)             0
   Increase (decrease) accounts payable and accrued
       expenses                                                                          1,031,996      1,065,983
                                                                                ------------------ --------------

Net cash used by operating activities                                                     (268,437)        54,211
                                                                                ------------------ --------------

CASH FLOW FROM INVESTING ACTIVITIES:
   Purchase of fixed assets                                                                (28,486)        (4,516)
                                                                                ------------------ --------------

Net cash (used) provided by investing activities                                           (28,486)        (4,516)
                                                                                ------------------ --------------

CASH FLOW FROM FINANCING ACTIVITIES:
   Proceeds from bank overdraft                                                                  0         44,547
   Repayment of bank overdraft                                                             (44,547)             0
   Proceeds from line of credit                                                                  0          2,843
   Repayments on line of credit                                                            (21,429)             0
   Proceeds from notes payable                                                           1,482,819      2,474,840
   Repayments on notes payable                                                            (643,056)      (476,616)
   Repayments of bank term loan                                                             (9,296)        (6,973)
   Extension of notes receivable                                                        (1,482,819)    (2,474,840)
   Repayments of notes receivable                                                          642,670        476,919
   Extension of notes receivable - related party                                          (186,669)       (82,645)
   Repayments of notes receivable - related party                                                0              0
   Proceeds from notes payable - related party                                              76,518              0
   Payments on notes payable - related party                                                     0        (42,862)
   Proceeds from issuance of common stock                                                  500,000              0
                                                                                ------------------ --------------

Net cash provided by financing activities                                                  314,191        (84,787)
                                                                                ------------------ --------------

Net increase (decrease) in cash                                                             17,268        (35,092)

CASH, beginning of period                                                                    3,710         38,802
                                                                                ------------------ --------------

CASH, end of period                                                             $           20,978 $        3,710
                                                                                ================== ==============

Supplemental Disclosure of Cash Flow Information:
Interest paid in cash                                                           $           20,737 $       22,001
                                                                                ================== ==============
</TABLE>







     The accompanying notes are an integral part of the financial statements


                                       F-6

<PAGE>



                     National Energy Services Company, Inc.
                          Notes to Financial Statements

(1)  Summary of Significant Accounting Principles
     The Company  National Energy Services  Company,  Inc. is a Nevada chartered
     corporation  which conducts  business from its  headquarters  in Egg Harbor
     Township, New Jersey. The Company was incorporated on February 17, 1998 and
     changed its name to National Energy Services  Company,  Inc. on October 29,
     2001.

     The Company provides comprehensive energy management programs for long-term
     care facilities,  which are paid directly from savings  generated by energy
     system  improvements.  The program includes upgrades to lighting  fixtures,
     improved  heating,  venting  and air  conditioning  equipment  and an ozone
     laundry support system. Sales are made to facilities  throughout the United
     States.

     The  following  summarize  the more  significant  accounting  and reporting
policies and practices of the Company:

     a)  Significant  acquisition  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,  which
     was accounted for as a reorganization  of National Energy Services Company,
     Inc.-NJ.  As a result of this reverse  merger,  the former  stockholders of
     National  Energy  Services  Company,  Inc.-NJ now control  National  Energy
     Services Company,  Inc.-NV.  Prior to this reverse merger,  National Energy
     Services  Company,  Inc.-NV had nominal  assets and  liabilities.  National
     Energy  Services  Company,  Inc.  accounted  for the  reverse  merger as an
     issuance of stock for the net monetary  assets of National  Energy Services
     Company,  Inc.-NJ or, in this case, as a capitalization  of the accumulated
     deficit of National  Energy  Services  Company,  Inc.-NJ to the date of the
     merger.

     b)  Principles  of  consolidation  The  consolidated  financial  statements
     include the accounts of National Energy Services  Company,  Inc.-NV and its
     wholly owned subsidiary.  Inter-company balances and transactions have been
     eliminated.

     c) Net income (loss) per share Basic is computed by dividing the net income
     (loss) by the weighted average number of common shares  outstanding  during
     the period.  Fully  diluted is  computed by dividing  the net income by the
     weighted  average number of common shares that would be outstanding  during
     the period if all dilutive securities were converted.  Fully diluted is not
     presented for periods where such presentation would be anti- dilutive.  The
     Company has no dilutive or anti-dilutive securities outstanding.

     d)  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.



                                       F-7

<PAGE>



                     National Energy Services Company, Inc.
                          Notes to Financial Statements

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

     f) 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 accelerated methods. 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.
     Depreciation  expense  was  $6,164  and  $4,955 for the year and ten months
     ended October 31, 2002 and 2001, respectively.

     g) Cash and equivalents The company  considers  investments with an initial
     maturity of three months or less as cash equivalents.

     h) 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.

     i) Reserve for bad debt The allowance for uncollectible accounts receivable
     is based on the  historical  experience of the Company and on  management's
     evaluation of the  collectibility of the individual  outstanding  balances.
     Customer's  credit  rating is evaluated  prior to entering into any revenue
     agreements.




                                       F-8

<PAGE>



                     National Energy Services Company, Inc.
                          Notes to Financial Statements

(2)  Stockholders' Equity The Company has authorized 20,000,000 shares of $0.001
     par value  common  stock At October 31,  2002,  the Company had  12,594,260
     shares of common stock issued and outstanding.

     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.  In fiscal 2002, the Company issued
     840,260 shares of common stock  restricted  under Rule 144, in exchange for
     $500,000,  or $0.60 per share.  In fiscal 2002,  the Company  issued 54,000
     shares of common stock  restricted under Rule 144, in exchange for services
     valued at $32,400, or $0.60 per share.

(3)  Income  Taxes  Deferred  income taxes  (benefits)  are provided for certain
     income and expenses which are  recognized in different  periods for tax and
     financial   reporting   purposes.   The  Company  has  net  operating  loss
     carry-forwards  for income tax purposes of  approximately  $517,200,  which
     expire on October 31,  2022.  The net  operating  loss prior to October 31,
     2001,  of $508,000,  was  capitalized  upon the  completion  of the reverse
     merger and termination of Subchapter S election  status,  and treated as an
     constructive distribution to the former stockholders of the subsidiary.

     The  amount  recorded  as  deferred  tax asset as of  October  31,  2002 is
     approximately  $155,000 which  represents the amount of tax benefits of the
     loss  carry-forward.  The Company has established a valuation allowance for
     this deferred tax asset of $155,000 as the Company has no sustained history
     of profitable  operations.  Had the Company not reported under Subchapter S
     of the Internal  Revenue  Code,  it would not have reported any tax accrual
     for the ten months ended October 31, 2001, as it recorded a loss of $25,300
     and would have had approximately $508,000 of loss carryforwards.

(4)  Property and equipment At October 31 property and equipment consists of:

                                               2002              2001
                                          -----------------   ----------------
Equipment                                 $          30,465   $          4,879
Furniture and fixtures                                2,107              2,107
Leasehold improvements                                3,187                287
Less: accumulated depreciation                      (11,086)            (5,923)
                                          -----------------   ----------------
Property and equipment, net               $          24,673   $          1,350
                                          =================   ================

(5)  Related  parties The Company pays a related party  corporation a management
     fee for certain general and administrative  expenses.  For the year and ten
     months ended  October 31, 2002 and 2001 these fees  amounted to $89,997 and
     $24,000,  respectively.  The  Company  has certain  notes  receivable  from
     related  parties as well as notes  payable to related  parties  outstanding
     during  the  periods  presented.  Both the notes  receivable  and the notes
     payable  carry no stated  interest rate or repayment  terms.  Therefore the
     Company  accounts  for  them as  short-term  demand  notes.  Related  party
     balances and amounts at October 31 are as follows:

                                                   2002            2001
                                                 -------------   ------------
Loan receivable - stockholder                    $      48,012   $     60,500
                                                 =============   ============
Loan receivable - employees                      $     165,694   $     32,098
                                                 =============   ============
Loan receivable - commission sales personnel     $     103,217   $     37,656
                                                 =============   ============
Loan payable - affiliated company                $           0   $     38,851
                                                 =============   ============
Loan payable  - stockholder/employee             $     190,902   $     75,804
                                                 =============   ============



                                       F-9

<PAGE>



                     National Energy Services Company, Inc.
                          Notes to Financial Statements


(6)  Notes receivable At October 31notes receivable balances are:

<TABLE>
<CAPTION>
                                                                  2002               2001
                                                             ---------------   --------------
<S>                                                          <C>               <C>
Customer term loans, five year term with 15% interest rate   $     3,659,511   $    2,819,363
Less: current portion                                               (778,102)        (490,255)
                                                             ---------------   --------------
Net long term notes receivable                               $     2,881,409   $    2,329,108
                                                             ===============   ==============
</TABLE>

     Maturities on these notes at October 31, 2002 are:

2003                                                 $      778,102
                                                     ==============
2004                                                 $      894,410
                                                     ==============
2005                                                 $      923,346
                                                     ==============
2006                                                 $      834,869
                                                     ==============
2007 and thereafter                                  $      545,707
                                                     ==============

(7)  Long term debt At October 31 long term debt consists of:

<TABLE>
<CAPTION>
                                                                 2002                 2001
                                                              -----------------   ---------------
<S>                                                           <C>                 <C>
Bank term loan, April 2004 maturity, prime plus 2%            $          13,945   $        23,241
Penn Power & Light term loans, five year term, 12.5% to 15%           3,659,512         2,819,749
Less; current portion                                                  (978,305)         (610,451)
                                                              -----------------   ---------------
Net long term loans payable                                   $       2,695,152   $     2,232,539
                                                              =================   ===============
</TABLE>

     At October 31, 2002 maturities on these notes are:


2003                              $            978,305
                                  ====================
2004                              $            899,055
                                  ====================
2005                              $            923,346
                                  ====================
2006                              $            834,869
                                  ====================
2007 and thereafter               $            228,784
                                  ====================


                                      F-10


<PAGE>


                     National Energy Services Company, Inc.
                          Notes to Financial Statements


(8)  Short-Term  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%,
     which is  secured  by  substantially  all the  assets  of the  Company  and
     stockholder  personal  guarantees.  During  the year and ten  months  ended
     October 31, 2002 and 2001,  the Company had reached the maximum of the line
     at various  times.  At the end of the  fiscal  years the  balance  owed was
     $178,571 and $200,000, respectively.  During the nine months ended July 31,
     2003, the maximum drawn on this line was $178,571,  and the balance at July
     31, 2003 was $154,761.

(9)  Lease  commitments The Company currently leases its new Jersey office space
     under a lease that  expired in May 2003,  and the Company is now on a month
     to month lease.  Payments under this lease were $22,282 and $12,541 for the
     year and ten months ended October 31, 2002 and 2001 respectively.

     The  Company  also has an office  in  Pennsylvania  which had been  under a
     one-year lease with a one year  extension  that expires  December 31, 2003.
     Payments under this lease were $10,000 for the year ended October 31, 2002.

     The  Company  also has a three year  lease for  certain  office  equipment,
     expiring in 2005.  Payments under this lease were $1,623 for the year ended
     October 31, 2002.

     Future lease commitments at October 31, 2002 are:


2003                               $           28,957
                                   ==================
2004                               $            8,169
                                   ==================
2005                               $            4,627
                                   ==================
2006                               $                0
                                   ==================
2007 and thereafter                $                0
                                   ==================

(10) Going  Concern  As  shown  in  the  accompanying   consolidated   financial
     statements, the Company has incurred net losses totaling $517,200, reflects
     a  stockholders'  deficit of  approximately  $476,800 and negative  working
     capital of $813,800 at October 31, 2002. These conditions raise substantial
     doubt as to the ability of the Company to continue as a going concern.  The
     ability of the  Company to continue as a going  concern is  dependent  upon
     increasing  sales and  obtaining  additional  capital  and  financing.  The
     Company  has  embarked on a plan to raise  additional  equity via a private
     placement.  The  Company  has also  taken  steps to  reduce  its  operating
     expenses.  The Company is also  exploring  the option of issuing its common
     stock to certain  creditors as payment,  thereby  reducing its cash outlay.
     The  financial  statements  do not  include any  adjustments  that might be
     necessary if the Company is unable to continue as a going concern.

(11) Subsequent events
     a) Stockholders' equity In fiscal 2003, the Company issued 2,978,754 shares
     of common stock  restricted  under Rule 144, in exchange for  $200,000,  or
     $0.07 per share.

                                      F-11

<PAGE>



                                    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        42      Chairman and President
David W. Mason        39      Vice-President of Marketing and Director
Rusty J. Gramiak      46      Vice-President of Operations and Director
Edmond Ragazzi        60      Secretary
Larry A. Shusman      60      Chief Financial Officer


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

Family Relationships

There are no family  relationships  between or among the executive  officers and
directors of the Company.

Business Experience

John A. Grillo

Mr. Grillo serves NES as its president and chief  executive  officer.  He is the
designer and  developer  of the NES Energy  Gatekeeper  Program.  He has managed
virtually  every aspect of the electrical  contracting  business.  Mr. Grillo is
also an electrical energy  conservation  expert. He has designed and implemented
energy  efficient  lighting and motor  systems for ten of his eighteen  years in
electrical contracting.

His concentration in energy  efficiency has led to a number  developments in the
field. He has designed and programmed  comprehensive  lighting  upgrade analysis
software  which NESC has been using  successfully  for the past three 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.



                                       49
<PAGE>


Throughout his career Mr. Grillo has  participated and led sales and contracting
initiatives.  He has set up NESC marketing campaigns and developed the company's
extensive contract and documentation  package. Mr. Grillo attended  Northeastern
University's School of Electrical Engineering Technology from 1979 to 1983.

David W. Mason

David W. Mason, 39, has been the company's Vice-President of Sales and Marketing
since 2000. Mr. Mason  graduated from Boston  University in 1988 with a Bachelor
of Science  degree in Urban  Affairs.  Prior to joining the  company  Mr.  Mason
worked in the television industry for various networks including ABC, CBS, ESPN,
TNT and TBS.

Mr. Mason is  responsible  for the marketing of the Company as well as being the
direct link  between the home office and the sales team in the field.  Mr. Mason
also is responsible for all convention, training seminars and benefits.

Rusty J. Gramiak

Mr.  Gramiak is the current Vice  President of Operations of the Company and has
served in that capacity since 2000. His current duties  include:  overseeing all
Company projects,  developing new contacts with  manufacturers to ensure optimum
pricing on all energy  efficiency  upgrades and development of a training course
for new employees specializing in field surveying and project management.

From 1999 to 2000, Mr. Gramiak was the Director of Sales for Mid Atlantic states
for the  Company.  During that time,  he expanded  sales to include  mass-market
accounts and expanded territorial sales by 100%.

From 1998 to 1999, Mr. Gramiak served as a Sales  Representative for the Company
in New Jersey.  During that time,  he  established  over forty new  accounts and
attended training seminars on Long Term Care Federal and State Reimbursements.

Prior to working for the Company,  from  1996-1998,  Mr.  Gramiak was a lighting
surveyor and an installer of energy efficient  lighting for GEC Lighting Company
in Margate,  New Jersey.  During that time, he surveyed  over fifty  facilities,
completed a Green-Lights  training course given by the Environmental  Protection
Agency and  installed  numerous  lighting  projects  located  at nursing  homes,
hospitals, school districts, etc.

Edmond B. Ragazzi

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

Larry A. Shusman

Mr.  Shusman has worked for the Company on a  part-time  basis since  October 1,
2001. He is the Chief  Financial  Officer and works for the Company on a regular
weekly part time basis. His responsibility is to handle the books and records of
the Company according to GAAP, along with being the liaison with the independent
accountants.


                                       50
<PAGE>


In addition  to his work for the  Company,  Mr.  Shusman is  currently  employed
part-time by Classic Hair, LLC as its Chief Financial  Officer and has worked in
that capacity since August 2001.  From April 2000 until August 2001, Mr. Shusman
was employed full-time by Spring Air Mattress Company as its East Coast Regional
Controller  and  Office  Manager.  Prior to April  2000,  he  worked  for  Waste
Management,  Inc. for a period of one month as a staff accountant.  From January
1996 to January 2000,  Mr.  Shusman  served as the Chief  Financial  Officer and
Controller of Potts Welding and Boiler Repair Co., Inc.

Mr. Shusman originally attended Penn State University between September 1960 and
June 1961, but graduated from Temple  University in June 1964 with a Bachelor of
Science degree in Accounting.

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

No Director,  Officer,  Beneficial  Owner of more than ten percent  (10%) of any
class of equity  securities  of the  Company  failed  to file on a timely  basis
reports  required by Section  16(a) of the  Exchange  Act during the most recent
fiscal year or prior fiscal years.



                [Balance of this page intentionally left blank]



                                       51
<PAGE>

Item 10. Executive Compensation

<TABLE>
<CAPTION>
                                         Annual             LT
                               Annual    Comp      Annual   Comp       LT
Name                           Comp      Bonus     Comp     Rest       Comp     LTIP      All
and Post              Year     Salary    ($)       Other    Stock      Options  Payouts  Other
-----------------------------------------------------------------------------------------------
<S>                   <C>      <C>       <C>               <C>                           <C>
John A.               1999     $65,788   $     0                                         $ 5,546
Grillo,
President             2000     $61,986   $     0                                         $ 6,655
and
Chairman              2001     $61,984   $26,570                                         $ 6,732

                      2002     $57,517   $42,000                                         $ 9,213

                      2003     $98,525   $     0                                         $10,079
-------------------------------------------------------------------------------------------------
David W.              1999     $36,154   $ 1,890                                         $ 2,016
Mason,
Vice-                 2000     $40,000   $35,180                                         $ 2,016
President of
Marketing             2001     $45,000   $50,168                                         $ 2,622
and Director
                      2002     $53,539   $25,726            10,000                       $ 2,622

                      2003     $50,923   $ 3,846                                         $ 2,622
-------------------------------------------------------------------------------------------------
Rusty J.              1999     $24,000   $ 6,716                                         $ 6,408
Gramiak,
Vice-                 2000     $28,300   $10,230                                         $ 6,408
President of
Operations            2001     $46,061   $30,819                                         $ 3,622

                      2002     $55,305   $24,468            10,000                       $ 2,622

                      2003     $52,500   $ 3,846                                         $ 2,892
-------------------------------------------------------------------------------------------------
Edmond                1999     $     0        $0                                         $     0
Ragazzi,
Secretary             2000     $     0        $0                                         $     0

                      2001     $10,026   $ 6,000                                         $     0

                      2002     $45,310   $     0              4,000                      $ 2,622

                      2003     $38,076   $     0                                         $ 2,871
-------------------------------------------------------------------------------------------------
Larry A.              1999     $     0   $     0                                         $     0
Shusman,
Chief                 2000     $     0   $     0                                         $     0
Financial
Officer               2001     $ 2,250   $     0                                         $     0

                      2002     $27,900   $     0                                         $     0

                      2003     $18,000   $     0                                         $     0
</TABLE>

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


                                       52
<PAGE>


Compensation of Directors

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

Item 11. Security Ownership of Certain Beneficial Owners and Management

The following table sets forth information as of October 31, 2002, regarding the
ownership of the Company's Common Stock by each shareholder known by the Company
to be the  beneficial  owner of more than five percent  (5%) of its  outstanding
shares of Common Stock,  each director and all executive  officers and directors
as a group.  Except as otherwise  indicated,  each of the  shareholders has sole
voting  and  investment  power  with  respect  to  the  share  of  Common  Stock
beneficially owned.


Name and Address of              Title of   Amount and Nature of     Percent of
Beneficial Owner                    Class       Beneficial Owner       Class
-------------------------------------------------------------------------------
John A. Grillo                    Common         3,098,300             24.6%
101 Captains Walk
Egg Harbor Township, NJ 08234

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

Rusty J. Gramiak                  Common            10,000              0.1%
343 Cos Cob Dr.
Galloway, NJ  08205

Edmond Ragazzi                    Common             4,000              0.1%
554 Fourth Str.
Absecon, NJ 08201

Larry Shusman                     Common             5,000              0.1%
1502 Squire Lane
Cherry Hill, NJ 08003

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

Barry Feldscher                   Common         3,333,300             26.5%

Rochelle Mason                    Common         1,666,000             13.2%
-------------------------------------------------------------------------------

Item 12. Certain Relationships and Related Transactions

In February 1999,  the Company  issued  100,000 shares of its restricted  common
stock to two (2)  persons  for their  services  valued at  $1,000,  or $0.01 per
share, to the Company in connection with the Share Exchange.  For such offering,
the  Company  relied  upon  Section  4(2)  of the  Act,  Rule  506  and  Section
517.061(11) of the Florida Code.

In October 2001, the Company  entered into the Share Exchange with NESNJ and its
shareholders. The exchange was made whereby the Company issued 10,000,000 shares
of its  common  stock to the  shareholders  of NESNJ for all of the  issued  and
outstanding  stock  of  NESNJ.  As part of the  exchange,  John A.  Grillo,  the


                                       53
<PAGE>


Company's current President,  Secretary and Chairman,  received 3,333,300 shares
of the Company's common stock.  This offering was conducted  pursuant to Section
4(2) of the Act,  Rule 506,  Section  49:3-50(b)(9)  of the New Jersey  Code and
Section 211(b) of the Pennsylvania Code.

In January 2002,  the Company  issued a total of 39,000 shares of its restricted
common  stock  valued at $0.60 per share to  eleven  (11) of its  employees  for
various services rendered to the Company. The shares were issued to employees of
the Company to make up for below  market  wages.  The  Company  has  recorded an
expense at $0.60 per share,  the same as if the shares  were sold for cash.  For
such offering, the Company relied upon the 506 Exemption.

In April 2002,  the Company  issued a total of 15,000  shares of its  restricted
common stock  valued at $0.60 per share to Ted Francis Di Stefano for  financial
consulting  services  and to Larry  A.  Shusman,  the  Company's  current  Chief
Financial  Officer for  accounting  services  rendered to the Company.  For such
offering, the Company relied upon the 506 Exemption.

In August 2003, the Company  issued  2,978,754  shares of its restricted  common
stock to Charter Management,  LLC for $200,000.00,  or $0.07 per share. For such
offering,  the Company relied upon the 506 Exemption and Section  1707.03 of the
Ohio Securities Act.

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.

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

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

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

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

10.5     [2]        Master Agreement with Charter Management.



                                       54
<PAGE>


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.

31.1      *         Section 302 Certification by Chief Executive Officer.

31.2      *         Section 302 Certification by Chief Financial Officer.

32.1      *         Sarbanes-Oxley Certification by Chief Executive Officer.

32.2      *         Sarbanes-Oxley Certification by Chief Financial Officer.
-------------------------------------------------

* Filed herewith.

[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.


     (b) No reports on Form 8-K have been filed.



                                       55
<PAGE>

                                   SIGNATURES

In  accordance  with  Section 13 and 15(d) of the Exchange  Act, the  Registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.

                     National Energy Services Company, Inc.
                                  (Registrant)

Date: October 31, 2003

By: /s/ John A. Grillo
----------------------------------------
John A. Grillo,  Chairman & President

By: /s/ David W. Mason
-----------------------------------------
David W. Mason, Vice-President of Marketing and Director

By: /s/ Rusty J. Gramiak
-----------------------------------------
Rusty J. Gramiak, Vice-President of  Operations and Director

By: /s/ Edmond Ragazzi
-----------------------------------------
Edmond Ragazzi, Secretary

By: /s/ Larry A. Shusman
-----------------------------------------
Larry A. Shusman, Chief Financial Officer


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

Signature                           Title                      Date

/s/ John A. Grillo                  Chairman and President    October 31, 2003
-----------------------------
John A. Grillo

/s/ David W. Mason                  Vice-President of         October 31, 2003
-----------------------------       Marketing and Director
David W. Mason

/s/ Rusty J. Gramiak                Vice-President of         October 31, 2003
-----------------------------       Operations and Director
Rusty J. Gramiak

/s/ Edmond Ragazzi                  Secretary                 October 31, 2003
-----------------------------
Edmond Ragazzi

/s/ Larry A. Shusman                Chief Financial           October 31, 2003
-----------------------------       Officer
Larry A. Shusman


                                       56