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

FORM 10-K

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

For the fiscal year ended: DECEMBER 31, 2011

£   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES AND EXCHANGE ACT OF 1934
 
National Automation Services, Inc.
(Name of Small Business Issuer in its Charter)

Nevada
000-53755
26-1639141
(State or jurisdiction of incorporation)
(Commission File No.)
(I.R.S. Employer Identification No.)
     
P.O. Box 531744 Henderson NV 89053
877-871-6400
(Address number principal executive offices)
(Issuer’s telephone number)

Securities registered pursuant to Section 12(b) of the Act:     None
Securities registered pursuant to Section 12(g) of the Act:                 Common, par value $0.001

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.  Yes £   No R

Check whether the Registrant is not required to file reports pursuant to Section 13 or 15 (d) of the Exchange Act.    Yes o   No R

Check whether the Registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports); and (2) has been subject to such filing requirements for the past 90 days.   Yes  R     No  o

Indicate by check mark whether the Registrant has submitted electronically and posted on its corporate web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).  Yes R   No £

Indicate by check mark if disclosure of delinquent filers pursuant to item 405 of Regulation S-K is not contained herein, and will not 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-K or any amendment to this Form 10-K      £

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company:
Large accelerated filer   £
Accelerated filed   £
   
Non-accelerated filer     £
Smaller reporting company  R

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes  o    No  R

The market value of the voting stock held by non-affiliates as of June 30, 2011 is $151,068 based on 151,067,823 shares held by non-affiliates. Due to the fact that there is no trading market for the Registrant’s common stock, these shares have been arbitrarily valued at par value of one thousandth ($0.001) per share.

As of April 16, 2012, the Registrant had 200,000,000 shares of common stock outstanding.

Documents incorporated by reference: None
 


 
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FORWARD LOOKING STATEMENTS
 
Forward-looking statements include the information concerning National Automation Services’ possible or assumed future results of operations, business strategies, financing plans, competitive position, industry environment, potential growth opportunities, and the effects of future regulation and the effects of competition. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “believe,” “expect,” “anticipate,” “intend,” “plan,” “believe,” “may,” “will,” or similar expressions. Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in the forward-looking statements. We do not have any intention or obligation to update forward-looking statements after we distribute this report. You should understand that many important factors, in addition to those discussed elsewhere in this report, and could cause our results to differ materially from those expressed in the forward-looking statements. These factors include, without limitation, increases in materials, labor, demand for services, our ability to implement our growth strategy, our fixed obligations, and our dependence on the market demand for automation and control services.


Business Development, History and Organization

Organizational History

On December 28, 2007, we incorporated as a Nevada corporation under the name National Automation Services, Inc. On August 6, 2009, National Automation Services, Inc. filed a Form 10, which under SEC rule, reinstates our public reporting obligations under federal securities laws. The Form 10 had an effective registration date 60 days after submission on October 6, 2009 and was cleared of SEC’s limited comments as of March 8, 2010.

Overview

National Automation Services, Inc. (referred to herein as “NAS” or the “Company”) is a public holding company that serves the Industrial Automation market place. Our offerings are needed by a wide variety of companies across varied market segments, from food processing, to nuclear power in private and public sectors.

Our business provides a full range of service from design, engineering, installation and maintenance of automation controlled systems and machinery.  We help companies to produce more efficiently, effectively and measurably through automation maximizing profitability, efficiency, and safety.

Our business plan takes action with expansion through carefully selected acquisitions. We anticipate expansion by acquisition into several geographic regions in 2012

Our telephone number for our executive offices is (877) 871-6400. Our corporate website is www.nasautomation.com; however, the information contained on, or that can be accessed through, that website is not a part of this annual report.

Our common stock is currently quoted on the OTC Markets under the symbol “NASV.QB”.
 
Plan of Operation

For the next 12-18 months we intend to focus our efforts on implementing the following business strategy:

The Company has evaluated the scope of its business plan and has modified it to reduce corporate overhead functions leaving all operating activities at the subsidiary level. The benefits of this new direction will begin to be realized in 2012.

Our goal is to acquire companies with track records of long term, stable, and profitable operations.  Each subsidiary operates as its own entity with current management retained. This allows the Company’s management to focus on maintaining quality while increasing current levels of revenues and profitability.  Each subsidiary provides their financials to NAS and the Company will make site visits to ensure companies are in compliance for reporting and monitoring purposes.

We feel this new and redirected focus will offer each subsidiary an opportunity for growth through synergies created by becoming a part of the Company.
 
 
Finalize Letters of Intent (“LOI”) to purchase companies
 
We currently have two signed LOI’s with profitable, high-profile companies in the automation business. These acquisitions will add to our Company’s overall annual earnings. We are expecting to have them close before the end of second quarter 2012.

We are presently evaluating other companies for acquisition in 2012. The evaluation process is conducted by our acquisition board and the companies are evaluated on the following attributes:

 
·
Geographic area
 
·
Synergies with our current core businesses
 
·
Niche marketing
 
·
Areas of expertise
 
·
Price/earnings ratio
 
·
Benefit: Customer base, proprietary products, technology, and talent base.
 
Raise Additional Capital
 
We currently have a cash shortage, and our operating revenues are insufficient to fund our operations, due to our past encumbered litigation with Trafalgar Capital which was settled on March 25, 2011. Even though we settled our debt with Trafalgar in March of 2011, the effects of the agreement prevented us from seeking additional sources of financing throughout the fiscal year of 2011. Consequently, our audited financial statements contain, in Note 3, an explanatory paragraph to the effect that our ability to continue as a going concern is dependent on our ability to increase our revenue, eliminate our recurring net losses, eliminate our working capital deficit, and realize additional capital; and we can give no assurance that our plans and efforts to do so will be successful (see Item 8, Financial Statements and Supplementary Data).

Therefore, we require additional funds to finance our business activities on an ongoing basis and to implement our acquisition strategy portraying our Company as one able to provide a target company with additional working capital to finance and grow its business.  Accordingly, we intend to seek additional financing.

Any additional funding sought would likely result in a material and substantial dilution of the equity interests of our current shareholders, and also likely will increase our debt servicing obligations for the future (See also Item 1A, Risk Factors).
 
Improve Existing Operations

Our operating results have been unsatisfactory.  We had a working capital deficit of $(3,151,939) at December 31, 2011. We also have experienced recurring losses.  Although in each of the following periods our revenues have increased over the corresponding period in the prior year, our revenues for 2011 decreased due to our past encumbrance with Trafalgar and the inability to service our customers. For the fiscal year end December 31, 2011, we had an operating loss of $(1,774,954), but a net income of $544,581. This is due primarily from our settlement agreement with Trafalgar Capital on March 25, 2011. For the year ended December 31, 2010, we had an operating loss of $(2,306,574), and a net loss of $(2,888,633).

At April 16, 2012 our cash on hand, most of which was obtained from recent convertible debt obligations, was $1,000.

We are working to improve the existing operations by removing the burdens and obstacles that we believe are impeding our operations. With Trafalgar litigation settled we intend to expand our operations purely through acquisition in 2012. We will be carefully managing our overhead to maximize the effects of profitable acquisitions. NAS maintains an operational office in Tucson, Arizona for the purpose of Corporate Acquisition and Engineering Consultant Services.
 
      Affect Strategic Acquisitions

We intend to expand our operations in the continental United States by acquiring select small to medium sized privately-held automation companies that primarily perform work for industrial applications.

We use the following criteria to evaluate acquisition opportunities:
 
 
·
Established businesses with a proven track record: We seek established businesses with a proven operating track record strong financial performance, positive operating results, established or growing contract backlogs, and/or the potential for positive operating cash flow.  We consider the experience and skill of management and whether other talented personnel exist within the company or the local market.
 
 
 
·
Opportunity for growth of our industrial business: We look for businesses with an established base of industrial end users, to provide us an opportunity to increase synergism of our portfolio as well as market diversification.
 
·
Opportunity to purchase and assimilate technologies and infrastructures to further aid our operational, technological and overhead objectives.

The criteria identified above are not intended to be exhaustive. Any evaluation relating to the merits of a particular business combination will be based, on the above factors as well as other considerations deemed relevant by our management. Accordingly, we may enter into a business combination that does not meet any or all of these criteria if we believe that it has the potential to create significant stockholder value.

We intend to affect our acquisitions by a stock purchase using the acquisitions cash flow to pay for the sale of our public stock. We currently have banks and access to cash for the funding of our acquisitions. The structure of the deal is an upfront cash payment with the owner carrying an interest bearing note payable for five years

Director Qualifications and Board of Directors Role

Our Company’s Board of Director qualifications, to date, have been members of the ownership of our Company. As owners of the Company their fundamental role has been to guide the Company’s success in its current operations, to oversee the management and executive levels of the Company, and to ensure that the Company complies with the rules and regulations of a public or traded company. Management has traditionally had a broad discretion to adjust the application and allocation of our cash and other resources as they are also a part of the management and Board of Directors.

In 2012, we will begin transition to an independent Board of Directors. We will also expand our Advisory Board to the company Directors. The Advisory Board is convened to give advice and support to the company. It does not have any legal or formal responsibilities.

Our primary goal is to have our Corporate Governance rules and regulations implemented to start these strategies. The Board of Directors role in the next six to twelve months will move from its existing blend of management and direct dependence on ownership to one of independence set forth in our Governance charter as noted on our website and other disclosed documentation. These principals also adhere to the Company’s code of conduct (ethics) which is also noted on the Company’s website and exhibited on this annual filing.

Acquisitions Affected

Intuitive System Solutions, Inc.

Intuitive Systems Solutions, Inc., a wholly owned subsidiary and a Nevada corporation headquartered in Henderson, Nevada, effectively moved operations to Intecon, Inc. in Arizona as an overhead reduction measure as of third quarter 2010.

Intecon, Inc.

During the fourth quarter 2011 we commenced plans to reorganize Intecon by reducing overall office space and employment to further mitigate overhead requirements.
 
Our Business

Principal Services

General

Our business is defined by our subsidiaries. The Company currently offers engineering and automation services. By broadening our corporate focus to include new companies in product distribution, manufacturing and production, NAS will create a diverse spectrum of services.

As acquisitions are concluded, NAS will be defining this spectrum of its services. At present time, our core services have not changed from design, production, and installation of mechanical and electronic automation systems.
 
 
Our Market

The automation/control industry in the United States has been approximated to exceed over $500 billion in revenues per year. The automation industry is segmented, consisting of automation control and system divisions in companies that expand over various markets (Aerospace, Robotics, Transportation, Process, Security, Automotive, etc.). We estimate, based on various external sources, the total automation/control market consists of over 21,000 publically and privately held companies operating both domestically and internationally.

Our focus in 2012 and beyond will be to expand our market penetration in Automation and Controls while adding diversification into additional new markets as defined by the targeted acquisitions concluded.

Business Conditions

Environmental Matters

We are subject to environmental regulation by federal, state and local authorities in the United States. Although we believe we are in substantial compliance with all applicable environmental laws, rules and regulations (“laws”), the field of environmental regulation can change rapidly with the enactment or enhancement of laws and stepped up enforcement of these laws, either of which could require us to change our manufacturing methods.  At present, we are not involved in any material environmental matters and are not aware of any material environmental matters threatened against us.

Proprietary Rights

We do not own or license any patents or trademarks, and we have no immediate plans to do so. We have not filed, and do not intend to file, any application with any government agency for protection or registration of these rights. We rely upon a combination of nondisclosure and other contractual arrangements to protect our proprietary rights.

Reports to Security Holders

You may read and copy any materials that we file with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  You may also find all of the reports that we have filed electronically with the SEC at their internet site www.sec.gov.

In any business venture, there are substantial risks specific to the particular enterprise which cannot be ascertained until a potential acquisition, reorganization or merger candidate has been specifically identified; however, at a minimum, our present and proposed business operations will be highly speculative, and will be subject to the same types of risks inherent in any new or unproven venture, and will include those types of risk factors outlined below, among others that cannot now be determined.

Risks Relating To Our Business

Continuation as a Going Concern

Our auditors' report on our audited December 31, 2011 financial statements, and Note 3 to such financial statements, reflect a substantial doubt about our ability to continue as a going concern..  We intend to expand our operations purely through acquisition in 2012. We will be carefully managing our overhead to maximize the effects of profitable acquisitions.  However, we can give no assurance that these plans and efforts will be successful.

We Need Additional Capital

Although, we show a net income as of December 31, 2011, in the amount of $544,581, it was due to our settlement of lawsuit agreement from Trafalgar Capital on March 25, 2011. In the past we have experienced recurring net losses, including net losses of $(2,888,633) for the fiscal year ended December 31, 2010, and we had an accumulated deficit of $(15,303,946) at December 31, 2011.  We have a severe cash shortage, with approximately $1,000 of cash on hand at April 16, 2012.
 
 
Therefore, we require additional funds to finance our business activities on an ongoing basis and to implement our acquisition strategy portraying our company as one able to provide a target subsidiary not only with cost savings results but also with additional working capital to finance and grow the business.  

Fluctuations in Operating Results by Acquisition

We expect quarterly and annual operating results to fluctuate, depending primarily on the following factors:

 
·
Our ability to obtain new business;
 
·
Our ability to generate significantly greater revenues than we have been able to generate to date, and to have revenues in such amount as to be able to satisfy our  operational overhead, which now is not being met;
 
·
Our ability to reduce selling, general and administrative cash expenses, particularly payroll compensation, by issuing stock to alleviate cash constraints, especially considering that our planned expansion by acquisition of other companies will result in increases in operating expenses, including, without limitation, as a result of the employment contracts we seek to enter into with the former owners of these companies;
 
 
·
The cost of attracting and hiring qualified employees.

Risks of Expansion by Acquisition

Our business strategy depends in large part on our ability to identify and acquire suitable companies, to expand our current expertise into the markets of our acquired companies, and to capitalize on the expertise of these companies to obtain new business in our current markets.  Delays or failures in acquiring new companies would materially and adversely affect our planned growth.

The success of this proposed strategy will depend on numerous factors, some of which are beyond our control, including the following:

 
·
securing any required approvals from our lender(s) and others;
 
·
our ability to effectively integrate an acquired company, including its information systems and personnel;
 
·
our ability to retain the services of the key employees of the acquired company;
 
·
availability of additional qualified operating personnel;
 
·
necessary or unavoidable increases in wages, or unanticipated operating costs;
 
·
the possibility of unforeseen events affecting the region particularly in which an acquired company operates;
 
·
adverse effects on existing business relationships resulting from the performance of an acquired company; and
 
·
diversion of management’s attention from operating our business.

The acquisition transactions may also result in the following:

 
·
issuance of additional stock that would further dilute our current stockholders’ percentage ownership;
 
·
incurring debt;
 
·
assumption of unknown or contingent liabilities; or
 
·
negative effects on reported operating results from acquisition-related charges and
 
·
amortization of acquired technology, goodwill and other intangibles.

Therefore, our business strategy may not have the desired result, and notwithstanding effecting numerous acquisitions we still may be unable to achieve profitability or, if profitability should be achieved, to sustain it.
 
 
Control by Management and Directorship

Our company is effectively controlled by Management, specifically Messrs. Robert W. Chance, David Marlow, and Jeremy Briggs (“Management”), also directors Robert O’Connor, Jody R. Hanley, and Manuel Ruiz, who collectively own approximately 20% (as of April 16, 2012) of our outstanding common stock.  While we intend to pursue our business strategy as set forth herein, Management has broad discretion to adjust the application and allocation of our cash and other resources, whether in order to address changed circumstances and opportunities or otherwise.  As a result of such discretion, our success is substantially dependent upon their judgment.  In addition, Management is able to elect our board of directors and to cause the directors to declare or refrain from declaring dividends, liquidation, conversion, voting or other rights which could adversely affect the voting power or other rights holders of our common stock, issue additional shares of capital stock and generally to direct our affairs and the use of all funds available to us.  Any such preferred stock also could be utilized, under certain circumstances, as a method of discouraging, delaying or preventing a change in control of the Company.  Any issuance of common or preferred stock could substantially dilute the percentage ownership of the company held by our current stockholders.  

Dependence on Management

Our success is dependent upon the active participation of our Management.  We have entered into employment agreements (i) with Mr. Chance, for an initial two-year term which expired February 14, 2009, and continues annually thereafter, (ii) with Mr. Marlow which expires on December 31, 2012, and (iii) with Mr. Briggs which expires on December 31, 2012. In addition, we do not maintain any "key man" insurance on any of their lives.  In the event we should lose the services of any of their people, our business would suffer materially.  There can be no assurance that we would be able to employ qualified person(s) on acceptable terms to replace them.

Dependence on Third-Party Suppliers

Our manufacturing processes require that we buy a high volume of components from third party suppliers. Our reliance on these suppliers involves certain risks, including:

 
·
The cost of these items might increase, for reasons such as inflation and increases in the price of the precious metals, if any, or other internal parts used to make such items, which could cause our costs to complete a job to exceed the estimate we used to create our bid;
 
·
Poor quality could adversely affect the reliability and reputation of our product; and
 
·
A shortage of components could adversely affect our manufacturing efficiencies and delivery capabilities, which could prevent us from obtaining, or hinder our ability to obtain, new business, which could jeopardize our ability to comply with the requirements of our contracts.

Any of these uncertainties also could adversely affect our business reputation and otherwise impair our profitability and ability to compete.

Risks Related to Our Industry in General

Exposure to Product and Professional Liability Claims

In the ordinary course of our business, we may be subject to product and professional liability claims alleging that products we sold or services that we provided failed or had adverse effects. We maintain liability insurance at a level which we believe to be adequate. A successful claim in excess of the policy limits of the liability insurance could materially adversely affect our business. As a user of products manufactured by others, we believe we may have recourse against the manufacturer in the event of a product liability claim. There can be no assurance, however, that recourse against a manufacturer would be successful, or that any manufacturer will maintain adequate insurance or otherwise be able to pay such liability.


None


We do not own any real property.  We lease our space on a month-to-month basis, pursuant to a written operating lease agreement.
 
 
On June 1, 2010, NAS has leased approximately 195 square feet of sales office space located in Tucson, Arizona, on a month-to-month basis from a non-related third party for $305 per month.


None
 
 

None


Market Information

Our common stock has been quoted on the OTC Markets under the symbol “NASV.QB” since October 12, 2007. The quarterly high and low close information on the OTC Markets of our common stock for each full quarterly period is as follows:

Fiscal Year Ending December 31, 2011:
 
High
   
Low
 
Fourth Quarter
  $ 0.07     $ 0.01  
Third Quarter
    0.08       0.04  
Second Quarter
    0.10       0.07  
First Quarter
    0.10       0.05  
                 
Fiscal Year Ending December 31, 2010:
 
High
   
Low
 
Fourth Quarter
  $ 0.07     $ 0.01  
Third Quarter
    0.08       0.04  
Second Quarter
    0.15       0.07  
First Quarter
    0.12       0.05  
 
These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not necessarily represent actual transactions.

Sales of Unregistered Securities

The following is a summary of all transactions within the year involving our sales of our securities not disclosed under our reviewed financials Form 10-Q for fiscal year 2011 or our audited financial statement Form 10K for fiscal year 2010, for the Securities Act.  Shares issued for cash consideration paid to us are valued at the purchase price per share; all other shares are valued as stated.  All shares issued were issued as “restricted” shares of our common stock except as otherwise expressly stated.

2011

On October 31, 2011, the Company issued to Asher Enterprises the sum of 3,529,412 shares valued at $6,000 or $0.0017 of its common stock from escrow as a part of the convertible note agreement on April 18, 2011.

On December 12, 2011, the Company issued to Asher Enterprises the sum of 9,090, 909 shares valued at $10,000 or $0.0011 of its common stock from escrow as a part of the convertible note agreement on April 18, 2011.

Except as stated above, the above issuances were deemed to be exempt under Rule 504 or 506 of Regulation D and/or Section 4(2) or 4(6) of the Securities Act of 1933, as amended, since, among other things, the transactions did not involve a public offering, the investors were accredited investors and/or qualified institutional buyers, the investors had access to information about our company and their investment, the investors took the securities for investment and not resale, and we took appropriate measures to restrict the transfer of the securities.

 
Holders

As of April 16, 2012, we had 200,000,000 shares of common stock issued and outstanding and approximately 455 shareholders of record of our common stock.


National Automation Services, Inc. under regulation S-K qualifies as a small reporting company and is not required to provide information required by this item.


Safe Harbor for Forward-Looking Statements

When used in this Annual Report, the words “may,” “will,” “expect,” “anticipate,”  “continue,” “estimate,” “project,” “intend,” and similar expressions are intended to identify forward-looking statements within the meaning of Section 27a of the Securities Act and Section 21e of the Exchange Act regarding events, conditions, and financial trends that may affect the Company’s future plans of operations, business strategy, operating results, and financial position.  Persons reviewing this Annual Report are cautioned that any forward-looking statements are not guarantees of future performance and are subject to risks and uncertainties and that actual result may differ materially from those included within the forward-looking statements as a result of various factors.  Such factors include, but are not limited to, general economic factors and conditions that may directly or indirectly impact our financial condition or results of operations.

Executive Overview

Overview:
 
Central to an understanding of our financial condition and results of operations is our current cash shortage.  At April 16, 2012, our cash on hand was approximately $1,000, and our operating revenues are insufficient to fund our operations.  Consequently, our audited December 31, 2011 financial statements contain, in Note 3, an explanatory paragraph to the effect that our ability to continue as a going concern is dependent on our ability to expand our operations through acquisition in 2012. We will be carefully managing our overhead to maximize the effects of profitable acquisitions.  Our goal is to acquire companies with track records of long term, stable, and profitable operations.  Each subsidiary will operate as its own entity with current management retained. This will allow the Company’s management to focus on maintaining or increasing current levels of revenues and profitability. The subsidiaries will use NAS for financial reporting purposes and other financial projections. However, we can give no assurance that these plans and efforts will be successful (See Item 8, Financial Statements and Supplementary Data).
 
Decision to “Go Public”

National Automation Services, Inc. (“NAS”), desire to become a publically traded Company was to provide to the industry in which we do business, an opportunity to enter into a market which has traditionally been (1) a privatized industry and (2) a segregated industry. By going public NAS has the potential to raise capital, more than would be readily available through bond financing (multiple restrictions) and the private financing markets. These private markets have higher rates and are a greater risk to the Company’s overall growth. In the “public arena”, financing can provide opportunities to “glue” together the privatized and segregated industry through acquisitions, joint partnerships, and other working relationships. Essentially, going public allowed NAS to “unlock” relatively illiquid value in our equity and more accessible debt financing (available to publicly traded companies), to turn it into a mechanism for purchasing power. Much of the money raised by going public allows NAS to pursue its business plan, financing business operations and ultimately achieving the growth by acquisition strategy and the overall improvement of the Company’s net worth.

Critical Accounting Policies

Use of Estimates

The methods, estimates and judgments we use in applying our accounting policies have a significant impact on the results we report in our financial statements and which we discussed below in Item 8. Some of our accounting policies require us to make difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. We believe our critical accounting policies are those described below.
 
 
Concentrations of Credit and Business Risk

Financial instruments that are potentially subject to a concentration of business risk consist of accounts receivable. The majority of accounts receivable and all contract work in progress are from clients in various industries and locations. Most contracts require milestone payments as the projects progress. We generally do not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs.

Allowance for Doubtful Accounts

As required by the Receivables Topic of FASB ASC, the Company is required to use a predetermined method in calculating the current value for its bad debt on overall accounts receivable.

We estimate our accounts receivable risks to provide allowances for doubtful accounts accordingly. We believe that our credit risk for accounts receivable is limited because of the way in which we conduct business largely in the areas of contracts. Accounts receivable includes the accrual of work in process for project contracts and field service revenue. We recognize that there is a potential of not being paid in a 12 month period. Our evaluation includes the length of time receivables are past due, adverse situations that may affect a contract’s scope to be paid, and prevailing economic conditions. We assess each and every customer to conclude whether or not remaining balances outstanding need to be placed into allowance and then re-evaluated for write-off. We review all accounts to ensure that all efforts have been exhausted before noting that a customer will not pay for services rendered. The evaluation is inherently subjective and estimates may be revised as more information becomes available.

Potential Derivative Instruments

We periodically assess our financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt and common stock equivalents in excess of available authorized common shares.

Revenue Recognition

As required by the Revenue Recognition Topic of FASB ASC, the Company is required to use predetermined contract methods in determining the current value for revenue.

Project Contracts Project revenue is recognized on a progress-basis - the Company invoices the client when it has completed the specified portion of the agreement, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On progress-basis contracts, revenue is not recognized until this criteria is met. The Company generally seeks progress-based agreements when a job project takes longer than 30 days to complete.

Service Contracts Service revenue is recognized on a completed project basis - the Company invoices the client when it has completed the services, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On service contracts, revenue is not recognized until the services have been performed. The Company generally seeks service based agreements when project based contracts have been completed.

In all cases, revenue is recognized as earned by the Company. Though contracts may vary between a progress-basis and completed project basis, as the client becomes liable to the Company for services provided, as defined in the agreement, the client is then invoiced and revenue is accordingly recognized and recorded.  The Company does not recognize or record any revenues for which it does not have a legal basis for invoicing or legally collecting.

Stock-Based Compensation

As required by the Stock-based Compensation Topic of FASB ASC, transactions in which the Company exchanges its equity instruments for goods or services is accounted for using authoritative guidance for stock based compensation. This guidance also addresses transactions in which the Company incurs liabilities in exchange for goods or services that are based on the fair value of the Company’s equity instruments or that may be settled by the issuance of those equity instruments.
 
 
If the Company issues stock for services which are performed over a period of time, the Company capitalizes the value paid in the equity section of the Company’s financial statements as it’s a non-cash equity transaction. The Company accretes the expense to stock based compensation expense on a monthly basis for services rendered within the period.

We use the fair value method for equity instruments granted to non-employees and will use the Black-Scholes model for measuring the fair value of options, if issued. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the vesting periods.

If shares are issued for services to be performed over a period by a vendor, we capitalize the value paid and amortize the expense in association with services actually rendered.

Shares issued to employees are expensed upon issuance.

Results of Operations for the Fiscal Years Ended December 31, 2011 and 2010
 
Summary of Consolidated Results of Operations

   
Year Ended December 31,
     
   
2011
   
2010
   
%Change
                   
Revenue
  $ 385,242     $ 1,958,404     (80) %  
Cost of revenue
    626,595       1,993,746     (69) %  
Total gross loss
    (241,353 )     (35,342 )   583 %  
                       
Operating expenses:
                     
Selling, general and administrative expenses
    817,676       1,485,276     (45) %  
Consulting fees
    103,667       19,075     443 %  
Professional fees and related expenses
    612,258       766,881     (20) %  
                       
Operating loss
    (1,774,954 )     (2,306,574 )   (23) %  
                       
Loss on disposal of fixed asset
    15,020       --     100 %  
Allowance for stock receivable
    17,343       --     100 %  
Interest expense, net
    534,191       582,059     (8) %  
Fair value of derivative liability
    113,026       --     100 %  
Gain on debt extinguishment
    (2,999,115 )     --     100 %  
                       
Net income (loss)
  $ 544,581     $ (2,888,633 )   119 %  

Operating Loss; Net Income (loss)

Our decrease in revenue of $(1,573,162) or (80)%, over the prior year is a result of our inability to increase our contracts and services due to our inability to purchase parts for the Company. Our decrease in cost of revenue (goods sold) of $(1,367,151) or (69)% over the prior year due to the decrease in our production and labor costs. Our operating loss decreased by $(531,620), or (23)%, to $(1,774,954) and our net loss decreased by $(3,433,214), or (119)%, to $544,581.  We attribute the net income increase to one major event which was the write-off of our debt obligation to Trafalgar per our settlement on March 25, 2011 and one of our trade vendors Border States.

Revenue: Our consolidated 2011 revenue decreased by $(1,573,162), or (80)%, to $385,242 compared to $1,958,404 for the year ended December 31, 2010, due to loss of business, which is attributable to an decrease in (1) the number of new jobs we received and commenced, (2) inability to purchase parts for current customers.  We expect to increase revenue through our acquisition strategy, whereby we can increase our regional footprint and thus provide additional local service related contracts (for additional detail see Item 1: Plan of operations).

Cost of Revenues; Gross Profit:  Our cost of revenue is comprised of direct materials, direct labor, manufacturing overhead and other job related costs.  Our consolidated 2011 cost of revenue decreased by $(1,367,151) or (69) %, to $626,595, due to the decrease in our consolidated revenues and labor cutbacks since June 2009.  Our 2011 consolidated gross profit decreased by $(206,011), or 583%, to $(241,353), primarily due to our reduction in revenue on new jobs and the write off of our remaining inventory which was approximately $300,000.
 
 
Operating Expenses: Our consolidated operating expenses for 2011 decreased by $(737,631), or (32)%, to $1,533,601, which resulted in an operating loss of $(1,774,954), compared to 2010 operating expenses of $2,271,232, and an operating loss of $(2,306,574).  The decrease of $(531,620) or (23)% in our operating loss is due to the following factors:  the $(667,600) decrease in our selling, general and administrative expense with the reduction of staff (due to our layoffs of staff at Intecon); the $(154,623) or (20)% decrease in our professional fees (we reduced the amount of our legal and other professional fees).
 
Selling, General and Administrative Expenses:  Consolidated selling, general and administrative expenses decreased by $(667,600), or (45)%, to $817,676 for the year ended December 31, 2011, due to the reduction of staff (due to our layoffs of personnel in our Intecon subsidiary as of September 30, 2011).
 
Consulting fees:  Our consulting fees, which are attributable to investor relations services, increased by $84,592 or 443%, to $103,667 for the fiscal year ended December 31, 2011. We entered into several new service related agreements to promote ourselves within our industry and services for marketing our Company on a National level. With the settlement of Trafalgar we have been actively seeking additional sources of funding for the Company and its acquisition strategy along with operations.

Professional Fees and Related Expenses:  Professional fees, which principally represent costs for legal and accounting fees and expenses, and corporate, operations and acquisitions advisory services rendered decreased by $(154,623) or (20) % to $612,258, which is primarily due to reduction in our legal services.
 
Interest Expense, Net:  Interest expense, net decreased by $(47,868), or (8) %, to $534,191, and is primarily attributable to the interest expense on our convertible notes. The decrease over 2010 is primarily due to our settlement agreement with Trafalgar as of March 25, 2011.

Gain on extinguishment of debt and payables: The write-off of Trafalgar debt and a write-off of rent payable increased our net income to $606,014 for the year ending December 31, 2011. This is a non-recurring, non-cash economic event.

Fair value of derivative liability: Due to insufficient authorized but unissued shares of common stock to meet the required amount of shares under convertible instruments, the Company has accounted for the excess in common stock equivalents as a derivative liability in accordance with FASB ASC 815 Derivatives and Hedging.  Accordingly, the derivative is marketed to market through earnings at the end of each reporting period.  As of December 31, 2011, the Company has recorded an expense of $113,026.

Financial Condition

Summary of Consolidated Balance Sheets
   
December 31,
       
   
2011
   
2010
   
% Change
 
CASH
  $ 1,371     $ 11,404       (88)%  
ACCOUNTS RECEIVABLE, NET
    3,252       307,622       (99)%  
INVENTORY
    --       340,519       (100)%  
TOTAL CURRENT ASSETS, OTHER
    22,000       22,667       (3)%  
OTHER ASSETS
    12,723       177,467       (93)%  
TOTAL ASSETS
  $ 39,346     $ 859,679       (95)%  
                         
TOTAL CURRENT LIABILITIES, OTHER
  $
2,978,562
    $ 3,855,689      
(23)%
 
CURRENT MATURITIES OF TRAFALGAR DEBT
                       
Trafalgar Promissory note
    200,000       --       100%  
Current portion of secured redeemable debentures, net
    --       2,347,001       (100)%  
Revolving note, net
    --       758,398       (100)%  
LONG-TERM LIABILITIES
    120,135       12,654       849%  
TOTAL LIABILITIES
   
3,298,697
      6,973,742       (53)%  
                         
STOCKHOLDERS' DEFICIT
   
(3,259,351
)     (6,114,063 )     (47)%  
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT
  $ 39,346     $ 859,679       (95)%  
 
Assets:  At December 31, 2011, our consolidated total assets decreased by $(820,333), or (95)%, to $39,346, is due to the following; (1) less cash as of December 31, 2011  (2) write off of inventory due to our inability to remain in our warehouse in Arizona (3) reduction in our accounts receivable due to our loss of new customers and inability to service our current customers and (4) our write off of remaining fixed assets at our Arizona subsidiary due to an acceleration of depreciation expense and overall assessment of the fixed assets as of December 31, 2011.
 
 
Liabilities:  At December 31, 2011, our consolidated total liabilities decreased by $3,675,045, or 53%, to $3,298,697, due to our settlement of Trafalgar Capital debt. We did note an increase in our accrued liabilities attributable to our accrual of our payroll tax and outstanding payroll liability to our employees. As we have been unable to pay the payroll tax, we have accrued for both the penalties and interest to date. We are actively seeking additional funding to pay this obligation. Due to the insufficient authorized but unissued shares of common stock to meet the required amount of shares for convertible instruments, the Company has accounted for the excess in common stock equivalents as a derivative liability in accordance with FASB ASC 815 Derivatives and Hedging.  Accordingly, the derivative is marketed to market through earnings at the end of each reporting period.  As of December 31, 2011, the Company has recorded an expense of $113,026, as a part of the long-term liability.
 
Stockholders’ Deficit:  Our consolidated stockholders’ deficit decreased by $2,854,712, or (47)%, to $3,259,351 primarily due to the Company’s stock issuance in efforts to raise capital and our net income for our fiscal year ending December 31, 2011.

Revenue by Service Type
   
Year Ended December
 
   
2011
         
2010
       
Project revenue  (generally fixed price)
  $ 23,500       84%     $ 1,758,494       90%  
Service revenue (generally time and materials)
    61,742       16%       199,910       10%  
Total revenue
  $ 385,242       100%     $ 1,958,404       100%  
 
Project Contracts: Project revenue is recognized on a progress-basis - the Company invoices the client when it has completed the specified portion of the agreement, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On progress-basis contracts, revenue is not recognized until this criteria is met. The Company generally seeks progress-based agreements when a job project takes longer than 30 days to complete.

Service Contracts: Service revenue is recognized on a completed project basis - the Company invoices the client when it has completed the services, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On service contracts, revenue is not recognized until the services have been performed. The Company generally seeks service based agreements when project based contracts have been completed.

In all cases, revenue is recognized as earned by the Company. Though contracts may vary between a progress-basis and completed project basis, as the client becomes liable to the Company for services provided, as defined in the agreement, the client is then invoiced and revenue is accordingly recognized and recorded.  The Company does not recognize or record any revenues for which it does not have a legal basis for invoicing or legally collecting.

Commitment and Contingencies

On June 9, 2010, a writ of garnishment was filed against our subsidiary Intecon’s bank account for our outstanding balanced owed to one of our vendors, Summit Electric. Our current outstanding balance owed to Summit Electric is $61,000. This writ was established to collect funds from us by garnishing money in our subsidiaries bank accounts. At the time of the court ordered garnishment the accounts held a balance of $1,200 and have been sent to Summit Electric under the writ. To date we still have an outstanding balance with Summit Electric and are working towards payment to this vendor.

Off-Balance Sheet Arrangements

At December 31, 2011, we had no off-balance sheet arrangements that have, or are reasonably likely to have, a current or future material effect on our condensed consolidated financial condition, results of operations, liquidity, capital expenditures or capital resources.

Liquidity and Capital Resources/ Plan of Operation for the Next Twelve Months

The economic downturn has had a severe effect on us.  For the year ended December 31, 2011, our accounts receivable were $3,252, a decrease of $304,370, or 99%, due to a decrease in invoiced revenue, compared to December 31, 2010. April 16, 2012 our cash on hand was $1,000.
 
 
The Company has evaluated the scope of its business plan and has modified the plan to reduce corporate overhead functions leaving all operating activities at the subsidiary level. The benefits of this new direction will begin to be realized in 2012.

Our goal is to acquire companies with track records of long term, stable, and profitable operations.  Each subsidiary operates as its own entity with current management retained. This will allow the Company’s management to focus on maintaining or increasing current levels of revenues and profitability.  Each subsidiary provides their financials to NAS and the Company will make site visits to ensure companies are in compliance for reporting and monitoring purposes.
 
We feel this new focus will offer each subsidiary an opportunity for growth through synergies created by becoming a part of NAS.

Summary of Consolidated Cash Flow for the year ended December 31, 2011 and 2010 (rounded)

Our total cash decreased approximately by $10,000, or 88%, to $1,400 for the year ended December 31, 2011, compared to $11,400 for the year ended December 31, 2010. Our consolidated cash flows for the years ended December 31, 2011 and 2010 were as follows:

   
Year Ended December 31,
 
   
2011
   
2010
 
Net cash (used) by operating activities
  $ (239,500 )   $ (770,400 )
Net cash (used) by investing activities
  $ --     $ --  
Net cash  provided by financing activities
  $ 229,500     $ 739,500  

Operating Activities: Our total cash (used) by operating activities decreased by $(530,900), or (69) %, to $(239,500) for the year ended December 31, 2011, compared to $(770,400) for the year ended December 31, 2010.  The changes are due to the increase in our net income due to a write-off of the debt obligation owed to Trafalgar; we issued additional stock for services; we expensed the remaining deferred fees for the Ascendiant agreement which we cancelled in March, 2011. We have also made an allowance for our inventory for the year ended December 31, 2011. Due to the insufficient authorized but unissued shares of common stock to meet the required amount of shares for convertible instruments, the Company has accounted for the excess in common stock equivalents as a derivative liability in accordance with FASB ASC 815 Derivatives and Hedging.  Accordingly, the derivative is marketed to market through earnings at the end of each reporting period.  As of December 31, 2011, the Company has recorded an expense of $113,026.
 
Investing Activities: The Company has not had investing activities for the years of December 31, 2011 and December 31, 2010, respectively.
 
Financing Activities: Our total cash provided by financing activities decreased by $(510,000), or (69) %, to $229,500 for the year ended December 31, 2011, compared to $739,500 for the year ended December 31, 2010. The decrease is due in part to our limited funding through our sale of restricted stock. Our litigation lawsuit with Trafalgar had hampered our ability to seek additional funding in the form of equity, debt or mezzanine debt. We are currently seeking acquisitions through our business plan to increase our position to pay our existing obligations. We still require investment capital to run operations as well as our acquisition strategy.

Current Commitments for Expenditures

Our current cash commitments for expenditures are mainly operational and the Securities and Exchange Commission (“SEC”) compliance in nature. We seek to use current revenue to pay vendors for materials for contracts, for payroll, and related employment expenditures (i.e. benefits). The remaining cash is used for debt service and to remain current with any SEC filings that are required


Limitations upon Broker-Dealers Effecting Transactions in "Penny Stocks"

Trading in our common stock is subject to material limitations as a consequence of regulations which limits the activities of broker-dealers effecting transactions in "penny stocks."
 
 
Pursuant to Rule 3a51-1 under the Exchange Act, our common stock is a "penny stock" because it (i) is not listed on any national securities exchange or The NASDAQ Stock Market™, (ii) has a market price of less than $5.00 per share, and (iii) its issuer (the Company) has net tangible assets less than $2,000,000 (if the issuer has been in business for at least three (3) years) or $5,000,000 (if the issuer has been in business for less than three (3) years).

Rule 15g-9 promulgated under the Exchange Act imposes limitations upon trading activities on "penny stocks", which makes selling our common stock more difficult compared to selling securities which are not "penny stocks."  Rule 15a-9 restricts the solicitation of sales of "penny stocks" by broker-dealers unless the broker first (i) obtains from the purchaser information concerning his financial situation, investment experience and investment objectives, (ii) reasonably determines that the purchaser has sufficient knowledge and experience in financial matters that the person is capable of evaluating the risks of investing in "penny stocks", and (iii) delivers and receives back from the purchaser a manually signed written statement acknowledging the purchaser's investment experience and financial sophistication.

Rules 15g-2 through 15g-6 promulgated under the Exchange Act require broker-dealers who engage in transactions in "penny stocks" first to provide their customers with a series of disclosures and documents, including (i) a standardized risk disclosure document identifying the risks inherent in investing in "penny stocks", (ii) all compensation received by the broker-dealer in connection with the transaction, (iii) current quotation prices and other relevant market data, and (iv) monthly account statements reflecting the fair market value of the securities.

There can be no assurance that any broker-dealer which initiates quotations for the Common Stock will continue to do so, and the loss of any such broker-dealer likely would have a material adverse effect on the market price of our common stock.

Fluctuations in Stock Price

Our common stock has been quoted on the Pink Sheets since October 12, 2007. Since that date, our common shares have traded on the Pink Sheets between a low of $0.001 per share and a high of $0.56 per share. The market price of our common stock may change significantly in response to various factors and events beyond our control, including but not limited to the following: (i) the risk factors described herein; (ii) a shortfall in operating revenue or net income from that expected by securities analysts and investors; (iii) changes in securities analysts’ estimates of our financial performance or the financial performance of our competitors or companies in our industry generally; (iv) general conditions in the economy as a whole; (v) general conditions in the securities markets; (vi) our announcements of significant contracts, milestones, acquisitions; (vii) our relationship with other companies; (viii) our investors’ view of the sectors and markets in which we operate; or (ix) additions or departures of key personnel. Some companies that have volatile market prices for their securities have been subject to security class action suits filed against them. If a suit were to be filed against us, regardless of the outcome, it could result in substantial costs and a diversion of our management’s attention and resources. This could have a material adverse effect on our business, results of operations and financial condition.

Limited Public Trading Market

Our common stock is currently quoted for trading on the Over the Counter (“OTC”) QB markets. Trading in stocks quoted on the OTC is often thin and characterized by wide fluctuations in trading prices. With the registration of our Form 10, we seek to increase our trading volume in our current market, however, there can be no assurance that a more active trading market will commence in our securities on the Pink Sheets. Further, in the event that an active trading market commences on the Pink Sheets, there can be no assurance as to the level of any market price of our shares of common stock, whether any trading market will provide liquidity to investors, or whether any trading market will be sustained.

Companies quoted for trading on the Over-The-Counter Bulletin Board must be reporting issuers under Section 12 of the Exchange Act and must be current in their reports under Section 13 of the Exchange Act, in order to maintain price quotation privileges on the Over-The-Counter Bulletin Board. If our common stock is quoted on the Over-The-Counter Bulletin Board, and we fail to remain current on our reporting requirements, we could be removed from the Over-The-Counter Bulletin Board. As a result, the market liquidity for our securities could be severely adversely affected by limiting the ability of broker-dealers to sell our securities and the ability of stockholders to sell their securities in the secondary market. In addition, we may be unable to regain our quotation privileges on the Over-The-Counter Bulletin Board, which may have an adverse material effect on our business.
 
 
Accordingly, there can be no assurance as to the liquidity of any present or future markets that may develop for our common stock, the ability of holders of our common stock to sell our common stock, or the prices at which holders may be able to sell our common stock.

Shares Eligible for Future Sale

The sale of a substantial number of shares of our common stock, or the perception that such sales could occur, could adversely affect prevailing market prices for our common stock.  In addition, any such sale or perception could make it more difficult for us to sell equity, or equity related, securities in the future at a time and price that we deem appropriate.  With the effectiveness of our registration statement, we might elect to adopt a stock option plan and register the shares of common stock reserved for such a plan or register shares of stock for equity funding groups. The shares of common stock issued under such plan, other than shares held by affiliates, if any, would be immediately eligible for resale in the public market without restriction.  

The sales of shares of our common stock which are not registered under the Securities Act, known as “restricted” shares, typically are affected under Rule 144.  At April 16, 2012 we had outstanding an aggregate of 200,000,000 shares of restricted common stock.  In accordance with the recent amendments to Rule 144, since we formerly were a “shell” company our shares of restricted common stock are eligible for sale under Rule 144 as of October 6, 2009 at which time we became subject to the reporting requirements of the Exchange Act, i.e., our registration statement became effective, and thereafter, have complied with our reporting requirements under the Exchange Act. On March 23, 2012, the Company filed a form DEF 14A which will increase on shareholder approval our authorized common stock from 200,000,000 to 1,000,000,000, and increased our authorized preferred stock from zero to 10,000,000

No Dividends

We have never paid any dividends on our common stock and we do not intend to pay any dividends in the foreseeable future.  Furthermore, our financing agreements with Trafalgar prohibit us from declaring dividends while our indebtedness is outstanding.
 
 
 
 
 
 

Consolidated Financial Statements of
 NATIONAL AUTOMATION SERVICES, INC.


   
 
Page
   
Report of Independent Registered Public Auditing Firm (audit)
19
   
Consolidated Balance Sheets –December 31, 2011 and 2010, respectively
20
   
Consolidated Statements of Operations –December 31, 2011 and 2010, respectively
21
   
Statements of Stockholders’ Deficit
22
   
Consolidated Statements of Cash Flows –December 31, 2011 and 2010, respectively
23
   
Notes to the Consolidated Financial Statements
24-35
   
 

 
 
 
 
 
Report of Independent Registered Public Accounting Firm






To the Board of Directors of
National Automation Services, Inc.:

We have audited the accompanying balance sheets of National Automation Services as of December 31, 2011 and 2010, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the two years ended December 31, 2011 and 2010. These financial statements are the responsibility of the Company’s management.  Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement.  The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.  Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.  Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements.  An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation.  We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of National Automation Services as of December 31, 2011 and 2010, and the results of its operations and its cash flows for the two years ended December 31, 2011,  and December 31, 2010, in conformity with generally accepted accounting principles in the United States.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern.  As discussed in Note 3 to the financial statements, the Company has limited operations and continued net losses.  This raises substantial doubt about its ability to continue as a going concern.  Management’s plan in regard to these matters is also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.


/s/ Lynda R. Keeton CPA, LLC

Lynda R. Keeton CPA, LLC
Henderson, NV

April 16, 2012

 
NATIONAL AUTOMATION SERVICES, INC.,
CONSOLIDATED BALANCE SHEETS
 
           
   
DEC 31, 2011
   
DEC 31, 2010
 
             
ASSETS
           
CURRENT ASSETS
           
     Cash
  $ 1,371     $ 11,404  
     Accounts receivable, net of allowance of doubtful accounts of $0 and $12,378
    3,252       307,622  
     Inventory
    --       340,519  
     Prepaid fees
    22,000       22,667  
          Total current assets
    26,623       682,212  
PROPERTY, PLANT & EQUIPMENT, net of accumulated depreciation of $24,403 and $136,065
    12,723       46,932  
OTHER ASSETS, NON-CURRENT
               
     Security deposit
    --       5,535  
     Deferred financing fees
    --       125,000  
          Total other assets, non-current
    12,723       177,467  
TOTAL ASSETS
  $ 39,346     $ 859,679  
                 
LIABILITIES AND STOCKHOLDERS’ DEFICIT
               
CURRENT LIABILITIES
               
     Accounts payables
  $ 945,417     $ 1,216,635  
     Accrued liabilities
    1,624,157       2,192,726  
     Current portion of loans, capital leases and line of credit
    232,407       27,367  
     Current portion of secured redeemable debentures
    --       2,347,001  
     ABL line of credit
    --       758,398  
     Convertible debt, net of beneficial conversion feature of $12,092 and $34,212
    193,408       220,788  
     Related party payable
    183,173       198,173  
          Total current liabilities
    3,178,562       6,961,088  
Loans and capital leases
    7,109       12,654  
Derivative liability
    113,026       --  
     Total liabilities
    3,298,697       6,973,742  
STOCKHOLDERS’ DEFICIT
               
     Stock held in escrow
    (573,276 )     (70,000 )
     Common stock $0.001 par value, 200,000,000 authorized, 200,000,000  issued and
          outstanding and 112,376,315 shares issued and outstanding
    200,000       182,376  
     Additional paid in capital
    11,853,215       9,671,931  
     Stock payable (receivable)
    564,656       (49,843 )
     Accumulated deficit
    (15,303,946 )     (15,848,527 )
          Total stockholders’ deficit
    (3,259,351 )     (6,114,063 )
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT
  $ 39,346     $ 859,679  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
 
NATIONAL AUTOMATION SERVICES, INC. CONSOLIDATED STATEMENTS OF OPERATIONS
           
             
   
YEAR ENDED
DECEMBER 31,
2011
   
YEAR ENDED
DECEMBER 31,
2010
 
REVENUE
  $ 385,242     $ 1,958,404  
COST OF REVENUE
    626,595       1,993,746  
GROSS LOSS
    (241,353 )     (35,342 )
                 
OPERATING EXPENSES
               
     Selling, general and administrative expenses
    817,676       1,485,276  
     Consulting fees
    103,667       19,075  
     Professional fees and related expenses
    612,258       766,881  
     TOTAL OPERATING EXPENSES
    1,533,601       2,271,232  
                 
OPERATING LOSS
    (1,774,954 )     (2,306,574 )
                 
OTHER EXPENSE, non-operating
               
     Loss on disposal of fixed asset
    15,020       --  
     Allowance for stock receivable
    17,343       --  
     Fair value of derivative liability
    113,026       --  
     Interest expense, net
    534,191       582,059  
     TOTAL OTHER EXPENSE, non-operating
    679,580       582,059  
                 
OTHER INCOME - nonrecurring
               
     Gain on debt extinguishment and accounts payable
    (2,999,115 )     --  
                 
INCOME (LOSS) BEFORE PROVISION FOR INCOME TAXES
    544,581       (2,888,633 )
                 
PROVISION FOR INCOME TAXES
    --       --  
                 
NET INCOME (LOSS)
  $ 544,581     $ (2,888,633 )
                 
BASIC INCOME (LOSS) PER SHARE
  $ 0.00     $ (0.03 )
                 
DILUTED INCOME (LOSS) PER SHARE
  $ 0.00     $ (0.03 )
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  BASIC
    156,499,920       102,798,048  
                 
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING  DILUTED
    278,146,118       102,798,048  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
NATIONAL AUTOMATION SERVICES, INC.,
STATEMENT OF STOCKHOLDERS’ DEFICIT
 
   
Common Stock
                               
   
Shares
   
Amount
   
Additional
Paid-in
Capital
   
Stock
Payable/
 Receivable
   
Stock
Held in
Escrow
   
Accumulated
Deficit
   
Total
 
         
0.001 par value
                               
Balance at December 31, 2009
    90,081,416     $ 90,081     $ 8,251,062     $ (17,343 )   $ --     $ (12,959,894 )   $ (4,636,094 )
Stock for cash
    12,534,310     $ 12,534     $ 521,466     $ (32,500 )   $ --     $ --     $ 501,500  
Stock for services
    3,987,213       3,987       294,627       --       --       --       298,614  
Stock for conversion of debt
    2,640,000       2,640       123,360       --       --       --       126,000  
Stock payment for payable
    662,787       663       223,887       --       --       --       224,550  
Stock for deferred financing fees
    1,470,589       1,471       123,529       --       --       --       125,000  
Stock prepaid for services
    1,000,000       1,000       67,000       --       --       --       68,000  
Stock issued for equity draw down
   agreement (escrow)
    70,000,000       70,000       --       --       (70,000 )     --       --  
     Beneficial conversion feature
    --       --       67,000       --       --       --       67,000  
Net loss
    --       --       --       --       --       (2,888,633 )     (2,888,633 )
Balance at December 31, 2010
    182,376,315     $ 182,376     $ 9,671,931     $ (49,843 )   $ (70,000 )   $ (15,848,527 )   $ (6,114,063 )
                                                         
Stock for cash
    10,000,000     $ 10,000     $ 115,000     $ 7,500     $ --     $ --     $ 132,500  
Stock for services
    14,946,666       14,947       464,703       25,000       --       --       504,650  
Stock prepaid for services
    2,000,000       2,000       20,000       --       --       --       22,000  
Stock for accrued payroll
    4,151,279       4,151       400,726       --       --       --       404,877  
Stock for settlement
    21,895,821       21,896       783,624       --       --       --       805,520  
Stock for conversion of debt
    22,816,988       22,817       181,683       --       --       --       204,500  
Stock equity drawdown for TriPod
    3,193,012       3,193       11,807       --       --       --       15,000  
Convertible note (BCF)
    --       --       203,741       --       --       --       203,741  
Allowance for stock receivable
    --       --       --       17,343       --       --       17,343  
       Stock held in escrow for debt conversion
    8,619,919       8,620       --       564,656       (573,276 )     --       --  
       Return stock for equity draw down
   agreement (escrow)
    (70,000,000 )     (70,000 )     --       --       70,000       --       --  
Net income
    --       --       --       --       --      
544,581
     
544,581
 
Balance at December 31, 2011
    200,000,000     $ 200,000     $ 11,853,215     $ 564,656     $ (573,276 )   $
(15,303,946
)   $
(3,259,351
)

The accompanying notes are an integral part of these consolidated financial statements.
 
 
NATIONAL AUTOMATION SERVICES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
           
   
YEAR ENDED
DEC 31, 2011
   
YEAR ENDED
DEC 31, 2010
 
Operating Activities
           
     Net income (loss)
  $
544,581
    $ (2,888,633 )
     Cash used by operating activities
               
          Allowance for doubtful accounts
    79,255       (14,778 )
          Depreciation and amortization
    19,189       129,258  
          Stock for services
    504,650       298,614  
          Gain on extinguishment of debt
    (2,999,115 )     --  
          Allowance for stock receivable
    17,343       --  
          Accretion of convertible notes beneficial conversion feature
    225,861       119,948  
          Loss on disposal of assets
    15,020       --  
          Expenses paid by related party
    --       32,260  
          Deferred financing fees
    125,000       --  
          Fair value of derivative
    113,026       --  
     Changes in assets
               
          Decrease in receivables
    88,780       74,253  
          Decrease in inventories
    340,519       109,574  
          Decrease in prepaid expenses
    22,667       45,331  
          Decrease in other assets
    5,535       --  
     Changes in liabilities
               
          Decrease in deferred revenue
    --       (50,777 )
          Increase in accounts payable and accrued liabilities
   
658,161
      1,374,503  
     Cash used by operating activities
    (239,528 )     (770,447 )
                 
Investing Activities
               
      --       --  
      Cash provided (used) by investing activities
    --       --  
                 
Financing activities
               
     Proceeds from sale of stock
    132,500       501,502  
     Proceeds from convertible notes
    97,500       255,000  
     Payment of line of credit
    --       (2,858 )
     Payments for loans and capital leases
    (505 )     (14,177 )
     Cash provided by financing activities
    229,495       739,467  
                 
Decrease in cash
    (10,033 )     (30,980 )
Cash at beginning of year
    11,404       42,384  
                 
Cash at end of year
  $ 1,371     $ 11,404  
                 
                 
SUPPLEMENTAL CASH FLOW
               
     Cash paid for interest
  $ --     $ 6,500  
     Cash paid for income taxes
  $ --     $ --  
                 
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND
FINANCING TRANSACTIONS
               
     Disposal of fixed assets
  $ 130,852     $ --  
     Stock issued in settlement of debt
  $ 805,820     $ --  
     Debt and interest converted to stock
  $ 204,500     $ 126,000  
     Deferred financing fees
  $ --     $ 125,000  
     Accounts payable paid with stock
  $ 404,877     $ 224,550  
     Common stock held in escrow
  $ 573,276     $ 70,000  
     Issuance of stock prepaid
  $ 22,000     $ 68,000  
     Beneficial conversion feature on convertible debt
  $ 203,741     $ 67,000  
     Stock receivable allocated to services prepaid
  $ 25,000     $ 32,500  
     Assignment of related party debt
  $ 15,000     $ --  
     Accrued interest added to note
  $ 24,000     $ --  
 
The accompanying notes are an integral part of these consolidated financial statements.
 
 
NATIONAL AUTOMATION SERVICES, INC.,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1: Organization and basis of presentation

Basis of Financial Statement Presentation
 
The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and accounts have been eliminated in consolidation. These financial statements have been presented in accordance with the Securities and Exchange Commission (“SEC”) rules governing a smaller reporting company for both periods of December 31, 2011 and December 31, 2010.

Business Overview

National Automation Services, Inc. (referred to herein as “NAS” or the “Company”) is a public holding company that serves the Industrial Automation market place. Our offerings are needed by a wide variety of companies across varied market segments, from food processing, to nuclear power both private and public sectors.

Our business provides a full range of service from design, engineering, installation and maintenance of automation controlled systems and machinery.  We help companies to produce product more efficiently, effectively and measurably through automation maximizing profitability and safety. The Company has strived to position itself as a leading system integrator and certified Underwriters Laboratories panel fabrication facility. The Company currently focuses on two distinct lines of business: (1) industrial automation and control and (2) automation manufacturing, which comprises the bulk of contracts that the Company currently maintains under its building contracts. The Company has subsidiaries which perform the services; one is located in Arizona named Intecon, Inc. and the other was located in Nevada named Intuitive System Solutions, Inc. Intuitive Systems Solutions, Inc., moved operations to Intecon, Inc. in Arizona as an overhead reduction measure as of third quarter 2010. During the fourth quarter 2011 we commenced plans to reorganize Intecon by reducing overall office space and employment to further mitigate overhead requirements. The Company has evaluated the scope of its business plan and has modified it to reduce corporate overhead functions leaving all operating activities at the subsidiary level.

Our goal is to acquire companies with track records of long term, stable, and profitable operations.  Each subsidiary operates as its own entity with current management retained. This allows the Company’s management to focus on maintaining quality while increasing current levels of revenues and profitability.  Each subsidiary provides their financials to NAS and the Company will make site visits to ensure companies are in compliance for reporting and monitoring purposes.

Use of Estimates

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

Concentrations of Credit and Business Risk

Financial instruments that are potentially subject to a concentration of business risk consist of accounts receivable. The majority of accounts receivable and all contract work in progress are from clients in various industries and locations. Most contracts require milestone payments as the projects progress. We generally do not require collateral, but in most cases can place liens against the property, plant or equipment constructed or terminate the contract if a material default occurs.

Potential Derivative Instruments

We periodically assess our financial and equity instruments to determine if they require derivative accounting. Instruments which may potentially require derivative accounting are conversion features of debt and common stock equivalents in excess of available authorized common shares.

We have determined that the conversion features of our debt instruments are not derivative instruments because they are conventional convertible debt.
 

Inventories
 
Inventory is stated at the lower cost or market, we use the weighted average cost method and consists of materials for contracted jobs, manufacturing supplies and equipment (small tools which are purchased for specific contracts and the related costs are associated with the contract). We constantly review inventory for obsolescence and write off obsolete items at the time of physical count. As of December 31, 2011, the Company has recognized the allowance of our inventory (see note 5, Inventory).

Property & Equipment
 
Property and equipment are stated at historical cost less accumulated depreciation.

Depreciation is computed using the straight-line method over the estimated useful lives of the assets, which is generally five years for vehicles, two to three years for computer software/hardware and office equipment and three to seven years for furniture, fixtures and office equipment. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives. Upon the sale or retirement of property or equipment, the cost and related accumulated depreciation or amortization is removed from the Company’s financial statements with the resulting gain or loss reflected in the Company’s results of operations. Repairs and maintenance costs are expensed as incurred.

Allowance for Doubtful Accounts

As required by the Receivables Topic of the Financial Accounting Standards Board Accounting Standards Codification (“FASB ASC”), the Company is required to use a predetermined method in calculating the current value for its bad debt on overall accounts receivable.

We estimate our accounts receivable risks to provide allowances for doubtful accounts accordingly. We believe that our credit risk for accounts receivable is limited because of the way in which we conduct business largely in the areas of contracts. Accounts receivable includes the accrual of work in process for project contracts and field service revenue. We recognize that there is a potential of not being paid in a 12 month period. Our evaluation includes the length of time receivables are past due, adverse situations that may affect a contract’s scope to be paid, and prevailing economic conditions. We assess each and every customer to conclude whether or not remaining balances outstanding need to be placed into allowance and then re-evaluated for write-off. We review all accounts to ensure that all efforts have been exhausted before noting that a customer will not pay for services rendered. The evaluation is inherently subjective and estimates may be revised as more information becomes available.

Revenue Recognition

As required by the Revenue Recognition Topic of FASB ASC, the Company is required to use predetermined contract methods in determining the current value for revenue.

Project Contracts Project revenue is recognized on a progress-basis - the Company invoices the client when it has completed the specified portion of the agreement, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On progress-basis contracts, revenue is not recognized until this criteria is met. The Company generally seeks progress-based agreements when a job project takes longer than 30 days to complete.
 
Service Contracts Service revenue is recognized on a completed project basis - the Company invoices the client when it has completed the services, thereby, ensuring the client is legally liable to the Company for payment of the invoice. On service contracts, revenue is not recognized until the services have been performed. The Company generally seeks service based agreements when project based contracts have been completed.

In all cases, revenue is recognized as earned by the Company. Though contracts may vary between a progress-basis and completed project basis, as the client becomes liable to the Company for services provided, as defined in the agreement, the client is then invoiced and revenue is accordingly recognized and recorded.  The Company does not recognize or record any revenues for which it does not have a legal basis for invoicing or legally collecting.

Income Taxes

As required by the Income Tax Topic of FASB ASC, income taxes are provided for using the liability method of accounting in accordance with the new codification standards. Deferred tax assets and liabilities are determined based on differences between the financial reporting and tax basis of assets and liabilities and are measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse. A valuation allowance is established when necessary to reduce deferred tax assets to the amount expected to be realized.
 

Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized. The computation of limitations relating to the amount of such tax assets, and the determination of appropriate valuation allowances relating to the realizing of such assets, are inherently complex and require the exercise of judgment. As additional information becomes available, we continually assess the carrying value of our net deferred tax assets.

Stock Based Compensation

Stock based compensation is accounted for using the Equity-Based Payments to Non-Employee Topic of the FASB ASC, which establishes standards for the accounting for transactions in which an entity exchanges its equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity's equity instruments or that may be settled by the issuance of those equity instruments. We determine the value of stock issued at the date of grant. We also determine at the date of grant the value of stock at fair market value or the value of services rendered (based on contract or otherwise) whichever is more readily determinable.

Earnings (loss) per share basic and diluted

Earnings per share is calculated in accordance with the Earnings per Share Topic of the FASB ASC. The weighted-average number of common shares outstanding during each period is used to compute basic earnings (loss) per share. Diluted earnings per share is computed using the weighted average number of shares plus dilutive potential common shares outstanding.

Potentially dilutive common shares consist of employee stock options, warrants, and other convertible securities, and are excluded from the diluted earnings per share computation in periods where the Company has incurred net loss. During the year ended December 31, 2011 the Company incurred a net income, resulting in potentially dilutive common shares, whereas, during the year ended December 31, 2010, the Company incurred a net loss, resulting in no potentially dilutive common shares.

Fair Value Accounting

As required by the Fair Value Measurements and Disclosures Topic of the FASB ASC, fair value is measured based on a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value as follows: (Level 1) observable inputs such as quoted prices in active markets; (Level 2) inputs, other than the quoted prices in active markets, that are observable either directly or indirectly; and (Level 3) unobservable inputs in which there is little or no market data, which require the reporting entity to develop its own assumptions (For additional information see Note 10: Fair value).
 
The three levels of the fair value hierarchy are described below:

Level 1         Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

Level 2         Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

Level 3         Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

NOTE 2: Recently adopted and recently issued accounting guidance

Adopted

In October 2009, the FASB issued changes to revenue recognition for multiple-deliverable arrangements. These changes require separation of consideration received in such arrangements by establishing a selling price hierarchy (not the same as fair value) for determining the selling price of a deliverable, which will be based on available information in the following order: vendor-specific objective evidence, third-party evidence, or estimated selling price; eliminate the residual method of allocation and require that the consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the arrangement to each deliverable on the basis of each deliverable's selling price; require that a vendor determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis; and expand the disclosures related to multiple-deliverable revenue arrangements. These changes became effective on January 1, 2011. The Company has determined that the adoption of these changes will not have an impact on financial position, results of operations or cash flows, as the Company does not currently have any such arrangements with its customers.
 

In January 2010, the FASB issued guidance to amend the disclosure requirements related to recurring and nonrecurring fair value measurements. The guidance requires a roll forward of activities on purchases, sales, issuance, and settlements of the assets and liabilities measured using significant unobservable inputs (Level 3 fair value measurements). The guidance became effective for the Company with the reporting period beginning January 1, 2011. The adoption of this guidance did not have a material impact on the Company's financial position, results of operations or cash flows.

Issued

In May 2011, the FASB issued an accounting standard update that amends the accounting standard on fair value measurements. The accounting standard update provides for a consistent definition and measurement of fair value, as well as similar disclosure requirements between U.S. generally accepted accounting principles and International Financial Reporting Standards. The accounting standard update changes certain fair value measurement principles, clarifies the application of existing fair value measurement, and expands the fair value measurement disclosure requirements, particularly for Level 3 fair value measurements. The amendments in this accounting standard update are to be applied prospectively and are effective for interim and annual periods beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows

In June 2011, the FASB issued an accounting standard update which requires the presentation of components of other comprehensive income with the components of net income in either (1) a continuous statement of comprehensive income that contains two sections, net income and other comprehensive income, or (2) two separate but consecutive statements. This accounting standard update eliminates the option to present components of other comprehensive income as part of the statement of shareholders’ equity, and is effective for interim and annual periods beginning after December 15, 2011. In December 2011, the FASB issued ASU 2011-12, “Comprehensive Income - Deferral of the Effective Date for Amendments to the Presentation of Reclassifications of Items Out of Accumulated Other Comprehensive Income in ASU 2011-05,” to defer the effective date of the specific requirement to present items that are reclassified out of accumulated other comprehensive income to net income alongside their respective components of net income and other comprehensive income. All other provisions of this update, which are to be applied retrospectively, are effective for fiscal years, and interim periods within those years, beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations or cash flows.

In September 2011, the FASB issued an accounting standard update that amends the accounting guidance on goodwill impairment testing. The amendments in this accounting standard update are intended to reduce complexity and costs by allowing an entity the option to make a qualitative evaluation about the likelihood of goodwill impairment to determine whether it should calculate the fair value of a reporting unit. The amendments also improve previous guidance by expanding upon the examples of events and circumstances that an entity should consider between annual impairment tests in determining whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. The amendments in this accounting standard update are effective for interim and annual goodwill impairment tests performed for fiscal years beginning after December 15, 2011. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2012. The adoption of this guidance will not have a material impact on the Company’s financial position, result of operations or cash flows.

In December 2011, the FASB issued  Accounting Standard Update 2011-10, “Derecognition of in Substance Real Estate—a Scope Clarification” to clarify that when a parent (reporting entity) ceases to have a controlling financial interest (as described in ASC subtopic 810-10, Consolidation) in a subsidiary that is in substance real estate as a result of default on the subsidiary’s nonrecourse debt, the reporting entity should apply the guidance in subtopic 360-20, Property, Plant and Equipment, to determine whether it should derecognize the in substance real estate. Generally, a reporting entity would not satisfy the requirements to derecognize the in substance real estate before the legal transfer of the real estate to the lender and the extinguishment of the related nonrecourse indebtedness. Under this new guidance, even if the reporting entity ceases to have a controlling financial interest under subtopic 810-10, the reporting entity would continue to include the real estate, debt, and the results of the subsidiary’s operations in its consolidated financial statements until legal title to the real estate is transferred to legally satisfy the debt. This amendment is applicable to us prospectively for deconsolidation events occurring after June 15, 2012.  The adoption of this accounting standard update will become effective for the reporting period beginning July 1, 2012.  The adoption of this guidance will not have a material impact on the Company’s financial position, results of operations, or cash flows.
 

In December 2011, The FASB issued Accounting Standards Update 2011-11, "Disclosures about Offsetting Assets and Liabilities." This update requires entities to disclose both gross information and net information about instruments and transactions eligible for offset in the statement of financial position and instruments and transactions subject to an agreement similar to a master netting arrangement. The scope of this update includes derivatives, sale and repurchase agreements and reverse sale and repurchase agreements and securities borrowing and lending arrangements. The Company is required to adopt this update retrospectively for periods beginning after January 1, 2013. The adoption of this accounting standard update will become effective for the reporting period beginning January 1, 2013.  Management does not anticipate that adoption will have a material impact on the Company's consolidated financial position, results of operations or cash flows.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the American Institute of Certified Public Accountants, and the SEC did not, or are not believed by management to, have a material impact on the Company's present or future financial position, results of operations or cash flows.
 
NOTE 3: Going concern

The accompanying financial statements have been prepared in conformity with generally accepted accounting principles, which contemplate continuation of the Company as a going concern. Our operating revenues were insufficient to fund our operations and our assets pledged to Trafalgar as collateral for our outstanding $3,700,000 (including interest) of indebtedness (Additional information on Trafalgar See Note 11: Legal). As of March 25, 2011, the Company has settled its obligation with Trafalgar; however, we are still unable to fund our current liabilities. Although through the settlement of Trafalgar we recognized a net income of $544,581 for the year ended December 31, 2011, we had reoccurring net operating losses of $(1,774,954) compared to the net operating loss of $(2,306,574) for the year ended December 31, 2010, and a working capital deficiency of $(3,151,939) at December 31, 2011.

Based on the above facts, management determined that there was substantial doubt about the Company’s ability to continue as a going concern.

We intend to expand our operations through acquisition in 2012. We will be carefully managing our overhead to maximize the effects of profitable acquisitions.  Our goal is to acquire companies with track records of long term, stable, and profitable operations.  Each subsidiary will operate as its own entity with current management retained. This will allow the Company’s management to focus on maintaining or increasing current levels of revenues and profitability. The subsidiaries will use NAS for financial reporting purposes and other financial projections. However, we can give no assurance that these plans and efforts will be successful.

NOTE 4: Accounts receivable, net
 
Included in our accounts receivable account balance is our customer retention account which accounts for the remaining 10% of revenue on all building contracts that the Company enters into. For each invoice sent to the customer, 10% of the invoice total is held in retention until the job is completed. Once completed the Company issues a final invoice which accounts for the remaining balance unpaid and any and all retention in which the customer owes the Company. Retention revenue is recognized when earned.
   
Year Ended December 31,
 
   
2011
   
2010
 
Accounts receivable
  $ 3,252     $ 318,355  
Customer retentions receivables
    --       1,645  
Less: Allowance for doubtful accounts
    --       (12,378 )
Total accounts receivable
  $ 3,252     $ 307,622  

In 2011, the Company noted due to its encumbrance with Trafalgar, we had limited ability to service our customers. As a consequence we have been limited to produce further accounts receivables.

NOTE 5: Inventory
 
We have written off our inventory value in the amount of $317,771 and recognized the write off in our cost of goods sold (see note 11, Operating agreements).
 
 
NOTE 6: Property and equipment, net
 
Property and equipment consists of the following:
   
Year Ended December 31,
 
   
2011
   
2010
 
Vehicles
  $ --     $ 44,169  
Computer and office equipment
    30,829       114,122  
Furniture and fixtures
    6,297       6,296  
UL Machinery and equipment
    --       18,410  
Total property and equipment
    37,126       182,997  
Less: accumulated depreciation
    (24,403 )     (136,065 )
Property and equipment, net
  $ 12,723     $ 46,932  

The Company wrote off the remaining fixed assets from our Arizona subsidiary due to the downturn of our operations and inability to remain current on our warehouse lease (see note 11, Operating agreements). Depreciation expense for the year ended December 31, 2011 was $19,189 and for the year ended December 31, 2010 was $136,065.
 
NOTE 7: Loans, Capital lease

The following tables represent the outstanding balance of loans for the Company as of December 31, 2011, and December 31, 2010.
   
Year Ended December 31,
 
   
2011
   
2010
 
South Bay Capital loan at an interest rate 12%
  $ 10,926     $ 10,926  
Trafalgar promissory note
    200,000       --  
Capital lease, line of credit
    28,590       29,095  
Loans and capital lease sub total
    239,516       40,021  
Less: current portion loans and capital leases
    (232,407 )     (27,367 )
Total
  $ 7,109     $ 12,654  

On July 25, 2008, the Company entered into a loan agreement with South Bay Capital in the amount of $75,926. Per the terms of the verbal agreement no interest was to be accumulated. On December 19, 2008 the Company repaid South Bay in the amount of $65,000.  On September 15, 2009, the Company secured the remaining balance of the loan with a written promissory note. The note bears an interest rate of 12% for the remaining balance of $10,926, and was applied retrospectively to the note as of January 1, 2009.   As of December 31, 2011, $10,926 of the debt still remains outstanding with total interest of $42,666.

On March 25, 2011, the Company entered into a promissory note agreement which was a part of the Trafalgar Capital settlement agreement on the same date (see Note 11: Legal). The note bears an interest of 12% for 6 months. As of December 31, 2011; we owed $200,000 plus accrued interest in the amount of $10,932.

On January 15, 2009, the Company entered into a fair market value capital lease with Konika Copiers. The lease is over a 60 month period; with present lease payments exceeding 90% of fair market value of the property (see Note 11: Commitments).

On January 15, 2009, the Company entered into a capital lease for office equipment. The lease is over a 60 month period, with present lease payments exceeding 90% of fair market value of the property. The capital lease is a five (5) year lease at $481 per month (see Note 11: Commitments).

On April 1, 2009, the Company entered into a revolving line of credit with Dell Financial in the amount of $25,000. The Company’s current outstanding balance on the line of credit as of December 31, 2011 was $7,287.

NOTE 8: Related party transactions

On December 31, 2010, the Company entered into a promissory note with an officer of the Company, for $13,000. The terms of the loan were to repay of the loan in the amount of $13,000 with a 10% annual interest to start as of December 31, 2010. As of December 31, 2011; we owed $13,000 plus accrued interest in the amount of $1,300.
 

On December 31, 2010, the Company entered into a promissory note with an officer of the Company, for $9,760. The terms of the loan were to repay of the loan in the amount of $9,760 with a 10% annual interest to start as of December 31, 2010. As of December 31, 2011; we owed $9,760 plus accrued interest in the amount of $976.

On December 31, 2010, the Company entered into a promissory note with an employee of the Company, for $9,500. The terms of the loan were to repay of the loan in the amount of $9,500 with a 10% annual interest to start as of December 31, 2010. As of December 31, 2011; we owed $9,500 plus accrued interest in the amount of $950.

On April 1, 2009 we modified the verbal loan agreement entered into on June 30, 2008 with a director of the Company, which had a balance of $50,000 as of December 31, 2008, by making it a formal promissory note, capitalizing accrued interest into the principal ($36,000) and including an annual interest rate of 10%.  On August 15, 2011, we repaid a portion of the note obligation in the amount of $15,000 which reduced our principle obligation from $86,000 to $71,000. As of December 31, 2011; we owed $71,000 plus accrued interest in the amount of $21,961.

On November 5, 2008, the Company entered into agreement promissory note with a director of the Board, for $77,000. The terms of the loan were to repay of the loan in the amount of $72,000 with the addition of a $5,000 fee for interest or incur a $250 a day late fee if paid after December 5, 2008. On April 1, 2009 the loan agreement was modified to remove the $250 a day late fees and add an annual interest rate of 10%.  As of December 31, 2011, we owed $79,913 plus accrued interest in the amount of $50,833.

NOTE 9: Convertible notes

During the year ended December 31, 2010, we issued to three individuals convertible notes for $255,000. Two notes bared an interest at the rate of 20% per year and one note bears an interest rate of 40%, and all matured in six (6) months on varying dates starting with March 1, 2011. The notes were convertible into the Company’s common stock at a fixed values based upon the terms of the convertible note agreement. As of December 31, 2011, the Company has converted five and a half notes; noted above, totaling $170,000 in principle and $33,500 in interest of the convertible notes and issued to these three individuals collectively 13,389,679 shares of the Company’s common stock (see Note 13, Stockholders’ deficit). In conjunction with the half note that the Company converted, the remaining half of the note’s principle and interest was renewed and the interest was capitalized into the principle balance as of April 15, 2011, the Company entered into the renewed portion of the note in the amount of $124,000. During the year ended December 31, 2011, we issued to four individuals convertible notes for $112,500. The four notes bear interest at variable rates starting at 6% to 20%, and mature in six (6) months to a (1) year on varying dates starting with October 15, 2011. The notes are convertible into the Company’s common stock at various fixed values based upon the terms of the convertible note agreement. As of December 31, 2011, the Company converted the April 29, 2011, note in convertible draws per the terms of the agreement. The Company and the individual holders of the notes are working towards conversion of notes. Due to the insufficient authorized but unissued shares of common stock to meet the required amount of shares for convertible instruments, the Company has accounted for the excess in common stock equivalents as a derivative liability in accordance with FASB ASC 815 Derivatives and Hedging.  Accordingly, the derivative is marketed to market through earnings at the end of each reporting period.  As of December 31, 2011, the Company has recorded an expense of $113,026.

Description
 
Note
Value
   
 
BCF
Value
   
Amortized
 BCF
value
   
Interest
accrued as
 of
12/31/2011
 
Convertible note issued on April 15, 2011, at a 20%
interest rate for six months, convertible to shares of
stock at $0.02 per share
    124,000       124,000       124,000       35,235  
Convertible note issued on April 29, 2011, at a 6%
interest rate for one year, convertible to shares of
stock at a variable rate upon date of conversion
    15,000       10,000       6,740       607  
Convertible note issued on April 18, 2011, at a 8%
interest rate for nine months, convertible to shares of
stock at a variable rate upon date of conversion
    34,000       36,207       32,963       2,784  
Convertible note issued on June 3, 2011, at a 8%
interest rate for nine months, convertible to shares of
stock at a variable rate upon date of conversion
    32,500       23,534       17,946       1,510  
Total
  $ 205,500     $ 193,741     $ 181,649     $ 40,136  
 
 
As of December 31, 2011, the Company has converted a portion of the convertible noted date April 18, 2011. We have converted $16,000 of the note for shares of the Company’s restricted stock held per the escrow agreement. We have issued stock in the amount of 12,620,321 shares towards the total note value of $50,000, and as of December 31, 2011 the note holds a value of $34,000 plus accrued interest.

NOTE 10: Fair Value

In accordance with authoritative guidance, the table below sets forth the Company's financial assets and liabilities measured at fair value by level within the fair value hierarchy. Assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.

   
Fair value at December 31, 2011
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                       
Total
  $ --     $ --     $ --     $ --  
                                 
Liabilities:
                               
Derivative liability
  $ 113,026     $ 113,026                  
Convertible debt, net of beneficial conversion feature
    193,408       193,408                  
Total
  $ 306,434     $ 306,434     $ --     $ --  

   
Fair value at December 31, 2010
 
   
Total
   
Level 1
   
Level 2
   
Level 3
 
Assets:
                       
Total
  $ --     $ --     $ --     $ --  
                                 
Liabilities:
                               
Convertible debt, net of beneficial conversion feature
  $ 220,788     $ 220,788                  
Total
  $ 220,788     $ 220,788     $ --     $ --  

NOTE 11: Commitments

Capital leases
 
On July 17, 2008, the Company entered into a Capital lease with Dell Computers. The lease is over a 48 month period, with a bargain purchase option at the end of the lease for $1.00, and an interest rate of 5% on any payments over five (5) days late. See table for future payments to the Capital lease:
 
From
   
Through
     
Annual rent
   
Monthly rent
 
1/1/2012
   
7/15/2012
   
$
3,934
 
$
562
 

On January 15, 2009, the Company entered into a capital lease for office equipment. The lease is over a 60 month period, with present lease payments exceeding 90% of fair market value of the property. The capital lease is a five (5) year lease at $481 per month.

From
   
Through
     
Annual rent
   
Monthly rent
 
1/1/2012
   
12/31/2012
   
$
5,772
 
$
481
 
1/1/2013
   
12/31/2013
   
$
5,772
 
$
481
 
1/1/2014
         
$
481
 
$
481
 

Operating leases
 
On May 25, 2011, the Company renegotiated the terms of its leasing agreement with the facility located in Tempe, Arizona. Per the terms of the agreement, the cost per square foot was reassessed which reduced our lease payments. Additionally, the landlord forgave our current outstanding balance owed to them for the past nine months totaling $90,000. As of September 30, 2011, the Company owed rent for the facility in the amount of $18,300.  Due to our inability to pay the rent for our warehouse, the lessor took procession of all fixed assets and inventory. The Company will not be able to retrieve these assets and inventory. Therefore we have disposed of the remaining fixed assets for Arizona as of December 31, 2011 and have written off the inventory value to be recognized in our cost of goods sold as of September 30, 2011.
 

On September 1, 2008, the Company leased office space for sales in Tuscon, Arizona on a month-to-month basis in the amount of $500 per month under operating lease agreements with original lease periods of up to five (5) years. On June 1, 2011, the Company moved office space under the existing agreement and reduced its rental fees to $305 per month on a month-to-month basis.

Total rental expense under the above operating leases for the year ended December 31, 2011 was $48,639 and for the year ended December 31, 2010 was $138,476.

Legal

On March 25, 2011, the Company signed a settlement agreement with Trafalgar whereby the pending litigation between both parties was settled out of court. The terms of the agreement dismissed all litigation against Trafalgar, and settled all debt owed to Trafalgar, the dismissal of all litigation against NAS and its subsidiaries and certain directors as well as the release of all liens and encumbrances on NAS assets in the UCC-1 filings held by Trafalgar. The following is the terms of settlement with Trafalgar: (i) a payment of $300,000 was paid on March 25, 2011 per the terms of the agreement; (ii) an executed promissory note in the principal amount of $200,000 payable within 6 months from the settlement date of March 25, 2011, and accruing interest at the rate of seven percent (7%) simple interest per annum;  (iii) a total of 7,645,821 shares of NAS common stock shares issued to the Trafalgar on April 6, 2011; (iv) NAS provided to Trafalgar a Rule 144 opinion letter in the form acceptable to the both parties, if necessary and/or applicable; and (v) exchanged of mutual unconditional and irrevocable general releases and dismissals of all claims, disputes, liens, encumbrances, defenses between the parties through the settlement agreement date of March 25, 2011. Per the terms of the agreement, the UCC-1 filings against the Company’s assets were lifted in ninety one (91) days after settlement as of June 27, 2011.

On June 9, 2010, a writ of garnishment was filed against our subsidiary Intecon’s bank account for our outstanding balanced owed to one of our vendors, Summit Electric. Our current outstanding balance owed to Summit Electric is $61,000. This writ was established to collect funds from us by garnishing money in our subsidiaries bank accounts. At the time of the court ordered garnishment the accounts held a balance of $1,200 and have been sent to Summit Electric under the writ. As of December 31, 2011, we still have an outstanding balance with Summit Electric and are working towards payment to this vendor.

On October 2, 2010, a writ of garnishment was filed against our subsidiary Intecon’s bank account for our outstanding balanced owed to one of our vendors, Border States. This writ was established to collect funds from us by garnishing money in our subsidiaries bank accounts. At the time of the court ordered garnishment the accounts held a balance of $90,000 which was sent to Border States under the writ on October 15, 2010. As of March 31, 2011, our outstanding balance owed to Border State was $100,000. Noting that our outstanding balance was $100,000, we negotiated a payment to Border States in the amount of $70,000 to pay off our outstanding balance. The Company recognized a gain in extinguishment of the debt in the amount of $30,000. As of April 4, 2011, the Company has repaid this vendor in full.

NOTE 12: Income taxes
 
At December 31, 2011 and 2010, the Company had federal and state net operating loss carry-forwards of approximately $6,390,000 and $7,777,600, respectively, which begin to expire in 2027. The components of net deferred tax assets, including a valuation allowance, are as follows at December 31 (rounded):

   
Year Ended December 31,
 
   
2011
   
2010
 
Deferred tax asset:
           
Net operating loss carry forward
  $ 2,236,500     $ 2,722,200  
Stock based compensation
    176,600       104,500  
                 
      2,413,100       2,826,700  
Deferred tax liabilities:
               
Depreciation and amortization
    --       --  
Total deferred tax assets
    2,413,100       2,826,700  
Less: valuation allowance
    (2,413,100 )     (2,826,700 )
Net Deferred Tax Assets
  $ --     $ --  
 
 
The valuation allowance for deferred tax assets as of December 31, 2011 and 2010 was $2,413,100 and $2,826,700, respectively. In assessing the recovery of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income in the periods in which those temporary differences become deductible.
 
Reconciliation between the statutory rate and the effective tax rate for the years ended December 31, is as follows:

   
Year Ended December 31,
   
2011
 
2010
     
Federal statutory tax rate
 
35%
 
35%
State taxes, net of federal benefit
 
7%
 
7%
Valuation allowance
 
(42)%
 
(42)%
Effective tax rate
 
0%
 
0%

The Company had no gross unrecognized tax benefits that, if recognized, would favorably affect the effective income tax rate in future periods. The Company has accrued for interest and penalties in the amount of approximately $103,300 and $73,200 for December 31, 2011 and 2010, respectively.

This interest and penalties are in relation to payroll tax remittances that, due to cash constraints, were unable to be made for our payroll accrued for 2011, and 2010 respectively, and past payroll tax IRS audit findings for our subsidiaries.

The Company files income tax returns in the United States federal jurisdiction and certain state jurisdictions.  With a few exceptions, the Company is no longer subject to U.S. federal or state income tax examination by tax authorities on tax returns filed before December 31, 2005. The Company will file its U.S. federal return for the year ended December 31, 2011, 2010 and 2009. The federal (including payroll tax returns) and state filing payments have not been made for 2011 and 2010 respectively.  The U.S. federal returns are considered open tax years for years 2006 - 2011. There are currently no corporate tax filings under examination by IRS tax authorities.

NOTE 13: Stockholders’ deficit
 
Preferred Stock
 
Our wholly owned subsidiary, ISS, has 125,000 shares of preferred stock authorized with a par value of $1.00; these shares have no voting rights and no dividend preferences.

Common Stock

                On February 20, 2011, the Company terminated its service agreement with X-Clearing Corporation, the Company’s stock transfer agent (services for X-Clearing were completed as of December 31, 2010), and entered into a service agreement with its new stock transfer agent Worldwide Stock.

On March 8, 2011, the Company issued to one individual the sum of 3,500,000 shares of common stock in consideration for services rendered and to be rendered at a value of $164,500 or $0.047 per share.

On March 18, 2011, the Company terminated its agreement with Ascendiant Capital. The Company has since removed the 70,000,000 shares from escrow and the shares back into treasury.
 
On March 25, 2011, the Company issued to one individual the sum of 10,000,000 shares of common stock in consideration for cash at a value of $300,000 or $0.03 per share; paid directly to Trafalgar as a part of the Trafalgar settlement agreement (see Note 11, Legal).

On March 25, 2011, the Company issued to one individual the sum of 7,500,000 shares of common stock in consideration for cash at a value of $75,000 or $0.01 per share.

On March 25, 2011, the Company settled negotiations with Trafalgar, the settlement and associated press release were filed in 8-K dated March 29, 2011.
 

On March 28, 2011, the Company issued to one individual the sum of 1,000,000 shares of common stock in consideration for employment retention at a value of $30,000 or $0.03 per share, based upon the agreement date.

On March 28, 2011, the Company issued to one individual the sum of 1,000,000 shares of common stock in consideration for employment retention at a value of $48,000 or $0.048 per share, based upon the agreement date.

On March 28, 2011, the Company issued to one individual the sum of 750,000 shares of common stock in consideration for employment retention at a value of $36,000 or $0.048 per share, based upon the agreement date.

On March 28, 2011, the Company issued to two individuals the sum of 696,666 shares of common stock in consideration for services rendered and finder’s fee agreement at a value of $20,900 or $0.03 per share.

On March 31, 2011, the Company issued to two individuals the sum of 4,250,000 shares of common stock in consideration for cash valued at $85,000 or $0.02 per share; the Company negotiated a settlement of all outstanding obligations with Border States in the amount of $70,000. Noted that our outstanding balance was $100,000, the Company recognized a gain in extinguishment of the debt in the amount of $30,000. Paid directly to Border States, the cash was used in repayment of Border States agreement and legal fees and settled on April 4, 2011 (see Note 11, Legal).

On March 31, 2011, the Company issued to 24 employees the sum of 4,256,279 shares of common stock in consideration for repayment of salary cuts made in May, 2009. The shares were issued at a value of $425,628 or $0.10 per share based upon the agreement stipulated for the salary reimbursement. The Company issued 310,000 shares valued at $31,000 in error the shares were returned on April 4, 2011.

On March 31, 2011, the Company issued to one employee the sum of 205,000 shares of common stock in consideration for repayment of salary cuts made in May, 2009. The shares were issued at a value of $10,250 or $0.05 per share based upon the agreement stipulated for the salary reimbursement.

On April 6, 2011, the Company issued to Trafalgar Capital the sum of 7,645,821 shares of common stock in consideration for settlement agreement dated March 25, 2011. The shares were issued at a value of $420,520 or $0.055 per share.

On April 30, 2011, the Company issued to one individual the sum of 2,000,000 shares of common stock in consideration for services rendered. The shares had a value of $0.049 per share for a total of $98,000.

On May 11, 2011, the Company issued to one individual the sum of 2,500,000 shares of common stock for cash consideration at a value of $0.02 per share for a total of $50,000.

On May 20, 2011, the Company issued to one individual the sum of 2,000,000 shares of its common stock as part of a collateral agreement. The shares were issued in an equity draw down agreement. The shares were issued in an equity draw down agreement. The shares had a value of $11,513

On May 23, 2011, the Company issued to one individual the sum of 6,200,000 shares of its common stock as part of a convertible note agreement. The agreement was partially converted into common stock at a value of $0.02 or $124,000.

On June 2, 2011, the Company entered into a convertible note agreement whereby we authorized to reserve a specific number of shares for collateral to cover the convertible notes. The total shares issued into escrow for holding is approximately 19,876,000. As of August 15, 2011 the shares have not been issued only held in escrow with the Company’s transfer agent.

On July 6, 2011, the Company issued to one individual the sum of 130,000 shares of its common stock as a part of a convertible note agreement. The shares were converted at $0.05 per share for a total value of $6,500.

On July 6, 2011, the Company issued to one individual the sum of 3,866,667 shares of its common stock as a part of a convertible note agreement. The shares were converted at $0.015 per share for a total value of $58,000.

On July 7, 2011, the Company issued to one individual the sum of 2,000,000 shares of its common stock as a part of a service agreement. The shares were valued at $0.02 per share or $40,000.

On August 24, 2011, the Company issued to one individual the sum 1,193,012 shares of its common stock as part of the May 20, 2011 collateral agreement. The shares were valued at $3,486. The shares were issued in an equity draw down agreement. As of September 30, 2011 the collateral agreement has been fully converted, no additional shares will be issued.
 

On September 2, 2011, the Company issued to one individual the sum of 6,000,000 shares of its common stock as a part of a service agreement. The shares were valued at fair market on September 2, 2011 at $0.011 or $66,000.

On October 31, 2011, the Company issued to Asher Enterprises the sum of 3,529,412 shares valued at $6,000 or $0.0017 of its common stock from escrow as a part of the convertible note agreement on April 18, 2011.

On December 12, 2011, the Company issued to Asher Enterprises the sum of 9,090, 909 shares valued at $10,000 or $0.0011 of its common stock from escrow as a part of the convertible note agreement on April 18, 2011.
 
As noted on the balance sheet for the year ended December 31, 2011, the Company must keep in escrow an amount of shares equal to five times the amount held in convertible notes, based on our convertible note agreements entered in on April 29, 2011 and June 3, 2011 respectively. The stock payable noted on the balance sheet are shares of stock which have yet to be placed into escrow due to our lack of shares as of December 31, 2011. As of December 31, 2011, the Company is required to have 573,275,862 shares of its common stock held in escrow, of which 564,655,943 shares have been recognized as a stock payable.
 
The Company’s common stock equivalents exceed the common shares available for issuance of approximately 113,026,000.  Therefore, the Company has recognized a derivative liability of $113,026 as of December 31, 2011. In March 2012, the Company has filed a Form DEF 14A to increase the number of authorized shares, however, at the time of this filing, no shareholder approval has been granted.

As noted, the above purchase shares of the Company’s restricted common stock were purchased under a private offering.

Warrants

As of December 31, 2010 the Company granted 150,000 warrants to twenty individuals for 1:1 ratio of common stock at $0.05 per share in connection with the sale of common stock under the Company’s private offering.  Since these warrants were issued in connection with a cash sale of common stock and were not compensatory in any way, the value of the warrants have been accounted for as part of the proceeds received from the sale of the common stock.  Nineteen warrants vested over a period of six months and expired in November 2010; one warrant vested over a period of two years and expires in 2012.

Warrants
 
Shares
   
Weighted-
Average
Exercise
Price
   
Weighted-
Average
Remaining
Contractual
Term
   
Aggregate
Intrinsic
Value
 
Outstanding at December 31, 2009
    --                    
Outstanding at December 31, 2010
    150,000     $ 0.05       1.0     $ --  
Exercised, Granted, Forfeited or expired
    --                          
Outstanding at  December 31, 2011
    150,000     $ 0.05       1.0     $ --  
Exercisable at December 31, 2011
    150,000     $ 0.05       1.0     $ --  

NOTE 14: Subsequent events

On January 4, 2012, the Company entered into a promissory note in the amount of $15,000. The note bears an interest rate of 10% and is for 6 months.

On March 23, 2012, the Company filed a form DEF 14A to increase our authorized common stock from 200,000,000 to 1,000,000,000, and increased our authorized preferred stock from zero to 10,000,000. The Company noted no shareholder approval of the form DEF 14A as of April 16, 2012.
 


None


Evaluation of Disclosure Controls and Procedures

Disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) are designed to ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is recorded, processed, summarized, and reported within the time periods specified in rules and forms adopted by the Securities and Exchange Commission, and that such information is accumulated and communicated to management, including the President/Secretary, to allow timely decisions regarding required disclosures.

Under the supervision and with the participation of our management, including our Chief Executive Officer and Principal Financial Officer, we evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act).  Based upon that evaluation, our officers concluded that, as of the end of the period covered by this report, the Company has been improving control procedures to mitigate our internal control issues which could have a material impact on our financial reporting procedures. As of the end of the period covered by this report, the Company has limited controls over financial reporting. Our disclosure controls and procedures were ineffective to ensure that information required to be disclosed by us in our periodic reports is recorded, processed, summarized and reported appropriately. The Company has been working towards clearing ineffective financial reporting controls and disclosures to implement proper internal controls over financial reporting.
 
Management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a- 15(f) and 15d-15(f) under the Exchange Act. Our internal control over financial reporting is intended to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. GAAP. Our internal control over financial reporting includes those policies and procedures that:

 
·
pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions of our financial statements;
 
·
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with applicable GAAP, and that receipts and expenditures are being made only in accordance with authorizations of management and the Board of Directors; and
 
·
provide reasonable assurance that transactions pertaining to stock issuances are recorded as necessary to permit preparation of financial statements in accordance with applicable GAAP, and that the stock issuances are being made only in accordance with authorizations of management and the Board of Directors.

Under the supervision and with the participation of our management, our Chief Executive Officer, and Principal Financial Officer, we have evaluated the effectiveness of our internal control over financial reporting and as of the end of the fiscal year ended December 31, 2011, the Company feels that it is working towards clear disclosures and implementing proper internal controls over financial reporting. Our controls have since been updated in order to prevent the issues surrounding our material weakness and management feels that, moving forward, our controls over financial reporting will reduce the potential impact of material misstatements.

This annual report does not include an attestation report of the Company's registered public accounting firm regarding internal control over financial reporting.

Change in internal control over financial reporting

No change in our internal control over financial reporting (as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act) occurred during the fiscal year ended December 31, 2011, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
 
 

Our Form 10 General Registration Statement filed with the Securities and Exchange Commission on August 7, 2009 went effective 60 days following that date, on October 6, 2009, and cleared all comments, in their limited review on March 8, 2010.

Our Form DEF 14A filed with the Securities and Exchange Commission on March 23, 2012 will be effective upon shareholder approval.



Identification of Officers and Directors

Our directors and executive officers, and their respective ages, positions and offices, are as follows:

Name
Age
Position
Robert H. O’Connor
67
Director of National Automation Services, Inc. (“NAS”)
     
Robert W. Chance
55
Director, President and Chief Executive Officer of NAS
     
Manuel Ruiz
47
Director and Secretary of NAS
     
Jody R. Hanley
50
Director of NAS
     
David Marlow
48
Vice President of NAS
     
Jeremy W. Briggs
36
Vice President, Principal Financial Officer NAS

Robert H. O’Connor has served as a director since October 2, 2007, when we acquired Intuitive Systems Solutions, Inc. (“ISS”) in a reverse merger.  Mr. O’Connor is the President and the owner of O’Connor Mortgage and Investment Company, which he established in 1981.  Mr. O’Connor has developed, built and acquired both commercial and residential properties, and he also is an investor in diverse early stage companies.

Robert W. Chance has served as a director and our President and Chief Executive Officer since October 2, 2007, when we completed our reverse merger with ISS; and he served as our acting Principal Financial Officer from September 2008 through December 2008 (Jeremy Briggs filled that position on January 1, 2009). From July 2005 to June 2007, Mr. Chance was Chief Operations Officer of Nytrox Systems, which engaged in the business of manufacturing ozone generating equipment; and from October 2004 until October 2, 2007 he served as Vice President of ISS. Prior to that time, he held management positions in Siemens and Johnson Controls, and worked for representatives of Honeywell and Fisher Controls International, over the course of his 30 year career in the automation and controls industry.

Manuel Ruiz has served as a director and our Secretary since October 2, 2007, when we reverse merged with ISS.  He has been Director of Engineering and the Controls Engineer of ISS since he co-founded it in April 2001. Mr. Ruiz has over 21 years of experience and expertise in PLC system programming and design, including process control and electrical engineering, including working for Honeywell from 1996 to 2001, designing and building automation systems and industrial related control projects.

Jody R. Hanley has served as a director since October 2, 2007, when we reverse merged with ISS.  He has been the President of ISS since he co-founded it in April 2001. Mr. Hanley has over 21 years of supervisory and managerial experience, including five years as a project manager and facility maintenance manager for Merck Medco, a Fortune 50 company.

David Marlow has served as our Vice President since December 31, 2007, when we acquired Intecon, Inc. Mr. Marlow’s background is in sales and marketing of industrial process equipment and controls.
 
Jeremy Briggs has served as our Principal Financial Officer since January 1, 2009.  He also has served as our Vice President and Chief Accounting Officer since January 2009 (he has worked for us since July 2008, originally as Senior Accountant, and from October through December 2008 as Controller) and he is responsible for directing our overall accounting policies and functions.
 

Involvement in Certain Legal Proceedings

Our directors, executive officers and control persons have not been involved in any of the following events during the past five years:
 
                        
·      any bankruptcy petition filed by or against any business of which such person was a general partner or executive officer either at the time of the bankruptcy or within two years prior to that time;
 
·      any conviction in a criminal proceeding or being subject to a pending criminal proceeding (excluding traffic violations and other minor offenses);
 
·      being subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his involvement in any type of business, securities or banking activities; or
 
·      being found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended, or vacated.
 
Family Relationships

There are no family relationships, or other arrangements or understandings between or among any of the directors, executive officers or other person pursuant to which such person was selected to serve as a director or officer.

Section 16(a) Beneficial Ownership Reporting Compliance

Section 16(a) of the Exchange Act requires our executive officers and directors, and persons who own more than ten percent of a registered class of our equity securities, to file reports of ownership and changes in ownership of our common stock on Forms 3, 4 and 5 with the SEC. Based on our review of the copies of such forms that we have received and written representations from certain reporting persons we believe that all our executive officers, directors and greater than ten percent beneficial owners complied with applicable SEC filing requirements.
 
Code of Ethics and Corporate Governance

We have adopted a Code of Conduct (ethics) and Corporate Governance that applies to our executive officers, including the principal executive officer, principal financial officer and principal accounting officer; our management team and all employees. A copy of our Code of Conduct (ethics) and Corporate Governance is posted on our Internet site at http://www.nasautomation.com. In the event that we amend or grant any waiver from, a provision of the Code of Conduct (ethics) and Corporate Governance that applies to the principal executive officer, principal financial officer or principal accounting officer and that requires disclosure under applicable SEC rules, we intend to disclose such amendment or waiver and the reasons therefore on our Internet site.
 
 
ITEM 11:                      EXECUTIVE COMPENSATION

The following table sets forth all compensation earned during the fiscal years ended December 31, 2011, 2010 and 2009, by (i) our Chief Executive Officer (principal executive officer), (ii) our Principal Financial Officer, (iii) our Vice President, and (iv) up to two additional individuals for whom disclosure would have been provided but for the fact that the individuals were not serving as an executive officer at the end of our last completed fiscal year, whose total compensation exceeded $60,000 during such fiscal year ends. We refer to all of these officers collectively as our “named executive officers”.

Name &
Principal
Position  
 
Year
 
Salary
 ($) (2)
 
Bonus
($)
 
Stock
Awards
($) (1)
 
Option
Awards
($)
 
Non-Equity
Incentive Plan
Compensation
($)
 
All
Other
Compensation
($)
 
Total
($)
                                 
Robert W. Chance,
 
2011
 
78,000
 
0
 
0
 
0
 
0
 
0
 
78,000
   
2010
 
76,000
 
0
 
0
 
0
 
0
 
0
 
76,000
PEO Chief Executive Officer
 
2009
 
76,000
 
0
 
8,000
 
0
 
0
 
0
 
84,000
David Marlow,
 
2011
 
78,000
 
0
 
40,000
 
0
 
0
 
0
 
118,000
   
2010
 
76,000
 
0
 
0
 
0
 
0
 
0
 
76,000
Vice President
 
2009
 
76,000
 
0
 
8,000
 
0
 
0
 
0
 
84,000
Jeremy W. Briggs,
 
2011
 
75,000
 
0
 
58,000
 
0
 
0
 
0
 
133,000
   
2010
 
61,600
 
0
 
0
 
0
 
0
 
0
 
61,600
Principal Financial Officer
 
2009
 
61,600
 
0
 
51,600
 
0
 
0
 
0
 
113,200
Jody R. Hanley,
 
2011
 
0
 
0
 
0
 
0
 
0
 
0
 
0
   
2010
 
76,000
 
0
 
0
 
0
 
0
 
0
 
84,000
Director of NAS
 
2009
 
76,000
 
0
 
8,000
 
0
 
0
 
0
 
84,000
Manual Ruiz,
 
2011
 
0
 
0