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, 2013
£ 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 400775 Las Vegas, NV 89140 | 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 £ 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 £
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 £ No R
The market value of the voting stock held by non-affiliates as of June 30, 2013 is $325,773 based on 325,772,878 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 11, 2014, the Registrant had 751,987,293 shares of common stock outstanding.
Documents incorporated by reference: None
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Table of Contents
PART I | 3 | |||
ITEM 1: | BUSINESS | 3 | ||
ITEM 1A: | RISK FACTORS | 6 | ||
ITEM 1B: | UNRESOLVED STAFF COMMENTS | 10 | ||
ITEM 2: | PROPERTIES | 10 | ||
ITEM 3: | LEGAL PROCEEDINGS | 11 | ||
ITEM 4: | MINE SAFETY DISCLOSURES | 11 | ||
PART II | 11 | |||
ITEM 5: | MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES | 11 | ||
ITEM 6: | SELECTED FINANCIAL DATA | 12 | ||
ITEM 7: | MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION | 12 | ||
ITEM 7A: | QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK | 17 | ||
ITEM 8: | FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA | 19 | ||
ITEM 9: | CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE | 35 | ||
ITEM 9A: | CONTROLS AND PROCEDURES | 36 | ||
ITEM 9B: | OTHER INFORMATION | 37 | ||
PART III | 38 | |||
ITEM 10: | DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE | 38 | ||
ITEM 11: | EXECUTIVE COMPENSATION | 39 | ||
ITEM 12: | SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS | 40 | ||
ITEM 13: | CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE | 41 | ||
ITEM 14: | PRINCIPAL ACCOUNTANT FEES AND SERVICES | 43 | ||
ITEM 15: | EXHIBITS AND FINANCIAL STATEMENT SCHEDULES | 43 | ||
SIGNATURES | 50 |
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PART I
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.
ITEM 1: BUSINESS
Business Development, History and Organization
Organizational History
On December 28, 2007, we incorporated as a Nevada corporation under the name National Automation Services, Inc. (referred to herein as “NAS” or the “Company”). 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
NAS is a public holding company that serves various market sectors. Currently our market concentration is in the Petro-chemical industry. Our business plan takes action with expansion through carefully selected acquisitions. We anticipate expansion by acquisition into several geographic regions over the next 12 to 18 months.
Our telephone number for our executive offices is (877) 871-6400.
Our common stock is currently quoted on the OTC Markets under the symbol “NASV.QB”.
Plan of Operation
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 have begun to be realized in the fourth quarter of 2013 and beyond.
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.
With the new focus as stated above, on February 28, 2014, the Company entered into a purchase and sale agreement with JD Field Services (“JD”). This is the first of several additional acquisitions that NAS has as a part of its growth strategy. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. They are licensed in all states west of the Mississippi River including Alaska to do trucking, but are focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.
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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.
We have begun evaluating other companies for acquisition in the fourth quarter of 2013 and beyond. 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. 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).
On February 24, 2014, the Company entered into a purchase and sale agreement with JD. The purchase of JD provides NAS a means to cure our cash shortage and eliminate our net losses. As such this purchase is the first step to continue as a going concern.
Improve Existing Operations
Our operating results have been unsatisfactory. We had a working capital deficit of $(2,875,372) at December 31, 2013. We also have experienced recurring losses. For the fiscal year end December 31, 2013, we had an operating loss of $(205,970), and a net loss of $(280,596), primarily due to interest expenses for outstanding liabilities owed. For the year ended December 31, 2012, we had an operating loss of $(266,255), and a net income of $(510,063), due primarily for our disposal of Trafalgar debt as noted in our settlement agreement dated March 25, 2011.
At April 11, 2014, our cash on hand, most of which was obtained from recent convertible note agreements and private placement offerings, was approximately $85,000.
We have begun our efforts to improve the existing operations by removing the burdens and obstacles that we believe are impeding our operations. With Trafalgar litigation settled and our first acquisition in the first quarter of 2014, the Company is moving forward.
Affect Strategic Acquisitions
We intend to expand our operations in the continental United States by acquiring select small to medium sized privately-held 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. |
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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 through several different financial methods; one such method is 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 determined by but not limited to senior executive position, professional experience, operational experience, and strategic and realized capital potential which would be required to successfully supervise, guide and operate a public holding company. Their fundamental role has been to guide the Company’s success in its current operations, strategic development, oversee the executive levels of the Company, while also ensuring Company compliance with the rules and regulations of a publicly traded company. Management, in the past, has traditionally had a broad discretion to adjust the allocation of our cash and other resources (what we pay and issue stock compensation for services rendered). The Company now and moving forward requires a majority of the Board of Directors (which now consists of independent Board members outside of management) consent to use cash resources as well as equity resources for such purposes.
We have begun to act on our primary goal to have our Corporate Governance rules and regulations implemented to continue our business strategy. The Board of Directors role in the next six to twelve months will continue to 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, was made dormant in January 2012.
Intecon, Inc.
Intecon Inc., a wholly owned subsidiary and an Arizona corporation headquartered in Tempe, Arizona, was made dormant in January 2012.
JD Field Services, Inc.
On February 24, 2014, the Company entered into a purchase and sale agreement with JD. This is the first of several additional acquisitions that NAS has as a part of its growth strategy. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. On March 21, 2014, the Company amended its purchase and sale agreement to JD as the original PSA left a 6 month “unwinding” provision should NAS not be able to achieve its benchmarks in uplifting and repayment of JD debt in the course of 270 days. We have amended this position to the following, (1) NAS shall pay or assume all outstanding debt of JD. Payment on debt held by JD where the Sellers have executed personal guarantees shall be given priority over other non-priority debts, and payments on such personally guaranteed debt will be accelerated if NAS or JD profits are sufficient to do so. (2) Each Seller of JD shall receive six percent (6%) of the outstanding common stock of NAS, constituting approximately six percent (6%) each of the total equity of NAS, but not requiring any fractional shares, or approximately fifty-nine million (59,000,000) shares each. (3) NAS shall provide to JD a Power of Attorney representing voting rights and control over approximately eighteen percent (18%) of the equity interests in NAS; holding in reserve, one hundred fifty eight million (158,000,000) shares of NAS Class A Common Stock to be representative of this Interest. (4) NAS shall pay any broker's commission associated with the purchase of JD interests, up to five hundred thousand dollars ($500,000). NAS shall pay any remaining broker's commissions.
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Our Business
Principal Services
General
By broadening our corporate focus to include new companies in services, product, distribution, manufacturing and production, NAS will create a diverse spectrum of revenue potential.
As acquisitions are concluded, NAS will be defining this spectrum of its services. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. They are licensed in all states west of the Mississippi River including Alaska to do trucking, but are focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.
Our Market
NAS intends to acquire businesses in the Petro-chemical, industrial, and related services at attractive prices with strong management teams, leaving these businesses intact, while providing the financial and human capital resources to grow revenue streams organically and through leveraging synergies of other acquired sister businesses.
We have begun to expand on our business strategy while adding diversification into additional new markets as defined by the targeted acquisitions.
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.
ITEM 1A: RISK FACTORS
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.
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Risks Relating To Our Business
Continuation as a Going Concern
Our auditors' report on our audited December 31, 2013 and 2012 financial statements, and Note 3 to such financial statements, reflect a substantial doubt about our ability to continue as a going concern. We have begun to expand our operations purely through acquisition in 2014 and will continue to acquire in the foreseeable future. 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.
On February 24, 2014, the Company entered into a purchase and sale agreement with JD. This is the first of several anticipated acquisitions that NAS has as a part of its growth strategy. The purchase of JD provides the Company a means to cure our cash shortage and eliminate our net losses. As such the purchase is the first step to continue as a going concern.
We Need Additional Capital
In the past we have experienced recurring net losses, including net losses of $(280,596) for the fiscal year ended December 31, 2013, and we had an accumulated deficit of $(16,094,605) at December 31, 2013. We have a cash shortage, with approximately $85,000 of cash on hand at April 11, 2014.
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.
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.
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Decreases in construction, industrial activities could adversely affect our revenues and operating results by decreasing the demand for our equipment and prices we can charge.
Our products and services provided by JD are used primarily in non-residential construction activity, industrial activity and the oil and gas industry. The economic downturn and the resulting decreases in construction and industrial activities in the United States has adversely affected our revenues and operating results and may further decrease the demand for our equipment and the prices we can charge.
Certain factors that may cause weakness, either temporary or long-term, in the construction industry included
· | weakness in the economy, the onset of a recession or a prolonged recession; |
· | an increase in interest rates; |
· | lack of available financing to fund development projects; |
· | reductions in corporate spending for plants and facilities or government spending for infrastructure projects; |
· | adverse weather conditions and natural disasters; |
· | terrorism or hostilities involving the United States; |
· | and an increase in the cost of construction materials. |
Our debt exposes us to risks
Our indebtedness has the potential to affect us adversely in many ways. For example, it will or could:
· | increase our vulnerability to adverse economic, industry or competitive developments; |
· | require us to devote a substantial portion of our cash flow to debt service, reducing funds available for other purposes or otherwise constrain our financial flexibility; |
· | affect our ability to obtain additional financing, particularly because substantially all of our assets are subject to security interests relating to existing indebtedness; or |
· | decrease our profitability or cash flow. |
Also, if we are unable to service our indebtedness and fund our operations, we will be forced to seek alternatives that may include:
· | reducing or delaying capital expenditures; |
· | limiting our growth; |
· | seeking additional capital; |
· | selling assets; or |
· | restructuring or refinancing our indebtedness. |
If we adopt an alternative strategy, it may not be successful and we may still be unable to service our indebtedness and fund our operations.
Control by Management and Directorship
Our company is effectively controlled by Management, specifically Messrs. Robert W. Chance, Jeremy Briggs, Jason Jensen, and David Gurr (“Management”), who collectively own approximately 26.55% (as of April 11, 2014) of our outstanding common stock, and Messrs. Sean Sego, Jim Gunn, Kevin Brown, and Tom Sego, who hold positions on our board of directors as independent directors which complies with NASDAQ Rule 5605(a)(2) and own 7.4% of the Company’s outstanding common stock for a total controlled ownership of 33.95%. 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.
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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, and (ii) with Mr. Briggs which expired on December 31, 2012, where he continued his services as a consultant. As of April 2013, he restarted his employment with the Company. 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 with operations performing at JD. The coverage is 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.
Demand for the majority of our services is substantially dependent on the levels of expenditures by the oil and gas industry. A substantial or an extended decline in oil and gas prices could result in lower expenditures by the oil and gas industry, which could have a material adverse effect on our financial condition, results of operations and cash flows.
Demand for the majority of our services depends substantially on the level of expenditures by the oil and gas industry for services. These expenditures are generally dependent on the industry’s view of future oil and natural gas prices and are sensitive to the industry’s view of future economic growth and the resulting impact on demand for oil and natural gas. Declines, as well as anticipated declines, in oil and gas prices could also result in project modifications, delays or cancellations, general business disruptions, and delays in payment of, or nonpayment of, amounts that are owed to us. These effects could have a material adverse effect on our financial condition, results of operations and cash flows. The prices for oil and natural gas have historically been volatile and can be affected by a variety of factors, including:
· | demand for hydrocarbons, which is affected by general economic and business conditions |
· | the ability of the Organization of Petroleum Exporting Countries (“OPEC”) to set and maintain production levels for oil |
· | oil and gas production levels by non-OPEC countries |
· | governmental policies and subsidies |
· | weather conditions |
The oil and gas industry has historically experienced periodic downturns, which have been characterized by diminished demand for oilfield services and downward pressure on the prices we charge. However, recent operational increases in the domestic oil and gas industry may offset the effects of the economic downturn in that industrial sector; it is currently unknown whether this will lead to a sustained increase in demand for our equipment and services.
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Failure to obtain and retain skilled technical personnel could impede our operations.
We require highly skilled personnel to operate and provide technical services and support for our business. Competition for the personnel required for our businesses intensifies as activity increases. In periods of high utilization it may become more difficult to find and retain qualified individuals to provide services to the site pads. This could increase our costs or have other adverse effects on our operations.
We must comply with numerous environmental and occupational health and safety regulations that may subject us to unanticipated liabilities.
Our facility and operations are subject to federal, state and local environmental and occupational safety and health requirements, including those relating to discharges of substances into the air, water and land, the handling, storage, use and disposal of hazardous materials and wastes and the cleanup of properties affected by pollutants. We do not anticipate any material adverse effect on our business, financial condition or competitive position as a result of our efforts to comply with these requirements. However, if we violate environmental laws or regulations, we may be held liable for damages and the costs of remedial actions, and could be subject to fees and penalties. We may violate or incur liability under environmental laws and regulations in the future as a result of human error, newly discovered noncompliance, contamination or other causes. These violations or liabilities could have a material adverse effect on our business, financial condition and results of operations.
Under some environmental laws and regulations, we may be liable for the costs of removal or remediation of hazardous substances located on or emanating from the site or facility. These laws and regulations often impose strict and, under certain circumstances, joint and several liability without regard to whether the owner or operator knew of, or was responsible for, the presence of hazardous substances.
We may incur liability in connection with the use, management and disposal of these substances. We use hazardous materials such as petroleum products for fueling our equipment and vehicles and solvents to clean and maintain equipment and vehicles. We incur expenses associated with using, storing and managing these materials in compliance with environmental requirements. We also generate and must manage in accordance with applicable environmental laws and regulations certain used or spent materials such as used motor oil, radiator fluid and solvents. We often seek to reuse, recycle or dispose of these spent materials at offsite disposal facilities in accordance with environmental laws and regulations. We could become liable under various federal, state and local laws and regulations for environmental contamination at off-site facilities where our waste has been disposed of, regardless of whether the waste was disposed of in compliance with environmental requirements.
Environmental and safety requirements may become stricter or be interpreted and applied more strictly in the future. In addition, we may be required to indemnify other parties for adverse environmental conditions that are now unknown to us. These future changes or interpretations, or the indemnification for such adverse environmental conditions, could result in environmental compliance or remediation costs not anticipated by us, which could have a material adverse effect on our business, financial condition or results of operations.
Fluctuations in fuel costs or reduced supplies of fuel could harm our business.
One of our competitive advantages is the mobility of our fleet. We could be adversely affected by limitations on fuel supplies or increases in fuel prices that result in higher costs of transporting equipment from location to location.
Severe weather conditions may affect our operations.
Our business may be materially affected by severe weather conditions in areas where we operate. This may entail the evacuation of personnel and stoppage of services. In addition, if particularly severe weather affects platforms or structures, this may result in a suspension of our service activities to these site pads. Any of these events could adversely affect our financial condition, results of operations and cash flows.
ITEM 1B: UNRESOLVED STAFF COMMENTS
None
ITEM 2: PROPERTIES
None
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ITEM 3: LEGAL PROCEEDINGS
On May 9, 2012, the Company entered into a note with Asher Enterprises in the amount of $47,500. Per the Note agreement, the Company is required to hold 5 “times” the amount of shares it would take to convert the note in reserve. On November 21, 2012, the Company has defaulted on its convertible note with Asher Enterprises which it entered into on May 9, 2012. Per the terms of the agreement, Asher Enterprises triggered the default, as the Company was not in compliance with its filing requirements per Securities and Exchange Commission 1934 Exchange Act. As such the Company, as of the date of the default, will accrue for the interest rate of 22% in relation to the terms set within the convertible note agreement, and repayment of 150% the amount of principal of $71,250. As of October 12, 2013, the Company has mediated the default on the note. The Company will still owe the balance of $71,250, which occurred during the period of default. As of December 31, 2013, the Company has fully converted the principle and interest of the note.
On September 4, 2013, the Company settled its obligation to Trafalgar Capital Group, SARL, in the amount of $234,537 in debt. The settlement will relieve all encumbrances of Trafalgar on the Company’s financials. The settlement in the amount of $40,800 has relieved all encumbrances of Trafalgar on the Company’s financials and noted a gain in the amount of $193,737.
ITEM 4: MINE SAFETY DISCLOSURES
None
PART II
ITEM 5: MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES
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, 2013: | High | Low | ||||
Fourth Quarter | $ | 0.008 | $ | 0.0017 | ||
Third Quarter | 0.0065 | 0.0008 | ||||
Second Quarter | 0.0016 | 0.0005 | ||||
First Quarter | 0.0008 | 0.0004 | ||||
Fiscal Year Ending December 31, 2012: | High | Low | ||||
Fourth Quarter | $ | 0.0011 | $ | 0.0004 | ||
Third Quarter | 0.0018 | 0.0005 | ||||
Second Quarter | 0.009 | 0.001 | ||||
First Quarter | 0.006 | 0.0014 |
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
On August 22, 2013, the Company granted 7,496,036 shares of restricted common stock in final consideration for the convertible note dated April 29, 2011. The original amount of the note was $15,000. The final conversion was valued at $0.00084 per share or $6,298 including principle and interest. These shares were issued on November 12, 2013.
On October 16, 2013, the Company issued 5,000,000 of restricted common stock in consideration for services provided to the Company for investor relations. The shares were valued at $25,000 or $0.005 per share.
On October 17, 2013, the Company issued 7,142,857 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $20,000. The shares were converted at a price per share of $0.0028 per share.
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On November 5, 2013, the Company provided a stock payable in the amount of 10,000,000 of restricted common stock in consideration for services provided to the Board of Directors of the Company. The shares were valued at $31,000 or $0.0031 per share. On March 20, 2014, the Company issued the stock payable.
On November 12, 2013, the Company issued 12,500,000 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $15,000. The shares were converted at a price per share of $0.0012 per share.
On November 19, 2013, the Company issued 27,272,727 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $30,000. The shares were converted at a price per share of $0.0011 per share.
On November 20, 2013, the Company issued 16,500,000 of restricted common stock in consideration for services agreement to the Company on July 5, 2013. The shares were valued at $18,150 or $0.0011 per share.
On November 25, 2013, the Company issued 10,956,522 shares of restricted common stock in final consideration for the convertible note dated May 9, 2012 in the amount of $10,080. The shares were converted at a price per share of $0.0009 per share.
On March 20, 2014, the Company issued 10,000,000 of a stock payable noted on November 5, 2013; the shares were valued at $31,000 or $0.0031 per share on the date of the stock payable.
On March 26, 2014, the Company issued 118,000,000 shares of restricted common stock in consideration for the amended purchase and sale agreement dated March 21, 2014.
On April 1, 2014, the Company issued 4,000,000 shares of restricted common stock for service agreements dated April 1, 2014.
On April 2, 2014, the Company issued 4,000,000 shares of restricted common stock for security on a note payable agreement dated April 2, 2014.
All transactions within the year involving our sales of our securities were disclosed under our reviewed financials Form 10-Q for fiscal year 2013 and our audited financial statement in this Form 10K for fiscal year 2013, 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.
Holders
As of April 11, 2014, we had 751,987,293 shares of common stock issued and outstanding and approximately 470 shareholders of record of our common stock.
ITEM 6: SELECTED FINANCIAL DATA
NAS under regulation S-K qualifies as a small reporting company and is not required to provide information required by this item.
ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATION
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.
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Executive Overview
Overview
Central to an understanding of our financial condition and results of operations is our current cash shortage. At April 11, 2014, our cash on hand was approximately $85,000, and at December 31, 2013, our operating revenues were insufficient to fund our operations. Consequently, our audited December 31, 2013 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 acquisitions in 2014 and beyond. 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.
On February 24, 2014, the Company entered into a purchase and sale agreement with JD. This is the first of several additional acquisitions that NAS has as a part of its growth strategy. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. On March 21, 2014, the Company amended its purchase and sale agreement to JD (See Item I: Acquisitions affected for additional information).
Critical Accounting Policies
The following policies are critical although they may not be active during periods our operations were dormant.
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.
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.
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.
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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.
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 criterion 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.
Results of Operations for the Fiscal Years Ended December 31, 2013 and 2012
Summary of Consolidated Results of Operations
Year Ended December 31, | ||||||||||||
2013 | 2012 | %Change | ||||||||||
Revenue | $ | -- | $ | -- | 0 | % | ||||||
Cost of revenue | -- | -- | 0 | % | ||||||||
Total gross loss | -- | -- | 0 | % | ||||||||
Operating expenses: | ||||||||||||
Selling, general and administrative expenses | 177,790 | 131,252 | 35 | % | ||||||||
Consulting fees | 2,200 | -- | 100 | % | ||||||||
Professional fees and related expenses | 461,426 | 186,276 | 148 | % | ||||||||
Forgiveness of accrued officer compensation | (435,446 | ) | -- | 100 | % | |||||||
Gain on extinguishment of accounts payable | -- | (51,273 | ) | (100 | ) % | |||||||
Operating loss | (205,970 | ) | (266,255 | ) | (23 | ) % | ||||||
Loss on disposal of fixed asset | -- | 12,429 | (100 | ) % | ||||||||
Interest expense, net | 281,461 | 320,655 | (12 | ) % | ||||||||
Fair value of derivative liability | -- | (113,026 | ) | (100 | ) % | |||||||
Gain on debt extinguishment | (206,835 | ) | -- | 100 | % | |||||||
Loss on default on debt | -- | 23,750 | (100 | ) % | ||||||||
Net income (loss) | $ | (280,596 | ) | $ | (510,063 | ) | (45 | ) % |
Operating loss; Net income (loss). For the year ended December 31, 2013, compared to the year ended December 31, 2012, our operating loss decreased by $60,285, or (23)%, to $(205,970). Out net loss decreased by $(229,467) or (45)% to $(280,596) due to the non-reoccurring gain on debt extinguishment, we attributed a gain on extinguishment of accounts payable to our write-off of accounts payable as of December 31, 2013, in the amount of $435,446, primarily salaries forgiven by our executive officers.
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Interest Expense, net. Interest expense, net decreased slightly by $(39,194), or (12)%, to $281,461, due to the settlement of Trafalgar debt and convertible note interest incurred for the year ending December 31, 2013.
Gain / loss on extinguishment of debt and accounts payable. This is a non-recurring, non-cash economic event, of our write-off of Trafalgar debt and additional gain on our debt extinguishments and extinguishment of accounts payable in the amount of $435,446 and debt extinguishment of $206,835.
Financial Condition
Summary of Consolidated Balance Sheets
December 31, | ||||||||||||
2013 | 2012 | % Change | ||||||||||
CASH | $ | 17,696 | $ | 652 | 2,614 | % | ||||||
TOTAL ASSETS | $ | 17,696 | $ | 652 | 2,614 | % | ||||||
TOTAL CURRENT LIABILITIES, OTHER | $ | 2,893,068 | $ | 3,539,638 | (18 | )% | ||||||
LONG TERM LIABILITIES | 169,500 | -- | 100 | % | ||||||||
TOTAL LIABILITIES | 3,062,568 | 3,539,638 | (14 | )% | ||||||||
STOCKHOLDER’S DEFICIT | (3,044,872 | ) | (3,538,986 | ) | (14 | )% | ||||||
TOTAL LIABILITIES & STOCKHOLDER’S DEFICIT | $ | 17,696 | $ | 652 | 2,614 | % |
Assets: At December 31, 2013, our consolidated total assets increased by $17,044, or 2,614%, to $17,696, which we acquired through our limited financing efforts (issuing both equity and debt agreements) for use in payments for our regulatory filing requirements, and settlement of some of our debt obligations compared to the previous year where we used limited funding, through both equity and debt agreements, for the same purposes.
Liabilities: At December 31, 2013, our current liabilities decreased by $(646,570), or (18)%, to $2,893,068, due to our gain on settlement of Trafalgar debt and other debt, our gain in forgiveness of accrued salaries and repayment of limited vendor payables. Along with an increase in long-term debt of $169,500 or 100% compared to last year of $0. 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 these obligations.
Stockholders’ Deficit: Our consolidated stockholders’ deficit increased by $(494,114), or (14)%, to $3,044,872 primarily due to the Company’s net loss, and conversion of debt and issuance of stock for services.
Commitment and Contingencies
On September 4, 2013, the Company settled its obligation to Trafalgar Capital Group, SARL, in the amount of $234,537 in debt. The settlement relieved all encumbrances of Trafalgar on the Company’s financials. The settlement in the amount of $40,800 has relieved all encumbrances of Trafalgar on the Company’s financials and noted a gain in the amount of $193,737.
Off-Balance Sheet Arrangements
At December 31, 2013, 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 had a severe effect on us. For the year ended December 31, 2013, our accounts receivable were $0 due to an entry of all of our subsidiaries into dormancy in 2012. As of April 11, 2014 our cash on hand was approximately $85,000.
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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 early 2014.
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.
On February 28, 2014, the Company entered into a purchase and sale agreement with JD. This is the first of several additional acquisitions that NAS has as a part of its growth strategy. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. They are licensed in all states west of the Mississippi River including Alaska to do trucking, but are focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers. JD is the first of many that will provide operational revenues and increase in fixed asset value for NAS. JD’s purchase has added additional long-term debt to NAS, which we intend to repay as a part of our recapitalization strategy, which has begun. We are also in the process of additional financing to provide to JD capital for their expansion plans. These capital financing requests are an added bonus to the growth strategy of NAS and will improve our recapitalization efforts.
Summary of Consolidated Cash Flow for the year ended December 31, 2013 and 2012 (rounded)
Our total cash increased approximately by $17,000, or 2,429%, to $17,700 for the year ended December 31, 2013, compared to $700 for the year ended December 31, 2012. Our consolidated cash flows for the years ended December 31, 2013 and 2012 were as follows:
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Net cash (used) by operating activities | $ | (260,200 | ) | $ | (135,000 | ) | ||
Net cash (used) by investing activities | $ | -- | $ | -- | ||||
Net cash provided by financing activities | $ | 277,200 | $ | 134,300 |
Operating Activities: Our total cash used by operating activities increased by $125,200, or 93%, to $(260,200) for the year ended December 31, 2013, compared to $(135,000) for the year ended December 31, 2012. The change is primarily due to accrual of liabilities in our operating activities, stock issued for services rendered, accretion of our beneficial conversion features on our convertible debt, and a decrease due to our gain in extinguishment of accounts payable.
Investing Activities: We had no investing activities for the year ended December 31, 2013, and the year ended December 31, 2012, respectively.
Financing Activities: Our total cash provided by financing activities increased by $142,900, or 106%, to $277,200 for the year ended December 31, 2013, compared to $134,300 for the year ended December 31, 2012. The increase is due in part to entering into new debt and convertible debt to pay for our regulatory filing requirements, and to settle out of additional debt obligations.
Current Commitments for Expenditures
Our current cash commitments, which include our subsidiary JD, are for expenditures that mainly provide for operations and regulatory compliance in nature. We seek to use current funding for debt services, operations and to remain current with any SEC filings that are required.
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ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
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 $0.0004 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.
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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.
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.
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ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Consolidated Financial Statements of
NATIONAL AUTOMATION SERVICES, INC.
Page | |
Report of Independent Registered Public Accounting Firm | 20 |
Consolidated Balance Sheets –December 31, 2013 and 2012, respectively | 21 |
Consolidated Statements of Operations –December 31, 2013 and 2012, respectively | 22 |
Consolidated Statements of Stockholders’ Deficit | 23 |
Consolidated Statements of Cash Flows –December 31, 2013 and 2012, respectively | 24 |
Notes to the Consolidated Financial Statements | 25-36 |
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Report of Independent Registered Public Accounting Firm
To the Board of Directors of
National Automation Services, Inc.:
We have audited the accompanying consolidated balance sheets of National Automation Services, Inc. as of December 31, 2013 and 2012, and the related consolidated statements of operations, stockholders’ deficit, and cash flows for the two years ended December 31, 2013 and 2012. National Automation Services, Inc.’s management is responsible for these financial statements. 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, 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 consolidated financial position of National Automation Services, Inc. as of December 31, 2013 and 2012, and its consolidated results of operations and cash flows for the two years ended December 31, 2013 and 2012, 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/ Keeton CPA
Keeton CPA
Henderson, NV
April 11, 2014
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NATIONAL AUTOMATION SERVICES, INC., CONSOLIDATED BALANCE SHEETS |
DEC 31, 2013 | DEC 31, 2012 | |||||||
ASSETS | ||||||||
CURRENT ASSETS | ||||||||
Cash | $ | 17,696 | $ | 652 | ||||
Total current assets | 17,696 | 652 | ||||||
TOTAL ASSETS | $ | 17,696 | $ | 652 | ||||
LIABILITIES AND STOCKHOLDERS’ DEFICIT | ||||||||
CURRENT LIABILITIES | ||||||||
Accounts payables and accrued liabilities | $ | 2,452,798 | $ | 2,873,687 | ||||
Current portion of loans, capital leases and line of credit | 94,517 | 259,517 | ||||||
Convertible debt, net of beneficial conversion feature net of $920 and $5,989, respectively | 173,580 | 234,261 | ||||||
Related party payable | 172,173 | 172,173 | ||||||
Total current liabilities | 2,893,068 | 3,539,638 | ||||||
Loans, capital leases and line of credit | 169,500 | -- | ||||||
Total liabilities | 3,062,568 | 3,539,638 | ||||||
STOCKHOLDERS’ DEFICIT | ||||||||
Common stock $0.001 par value, 1,000,000,000 authorized, 615,987,293 and 336,424,883 shares issued and outstanding, respectively | 615,987 | 336,425 | ||||||
Additional paid in capital | 12,058,574 | 11,903,613 | ||||||
Stock payable | 375,172 | 34,985 | ||||||
Accumulated deficit | (16,094,605 | ) | (15,814,009 | ) | ||||
Total stockholders’ deficit | (3,044,872 | ) | (3,538,986 | ) | ||||
TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT | $ | 17,696 | $ | 652 |
The accompanying notes are an integral part of these consolidated financial statements.
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NATIONAL AUTOMATION SERVICES, INC., CONSOLIDATED STATEMENTS OF OPERATIONS |
YEAR ENDED DECEMBER 31, 2013 | YEAR ENDED DECEMBER 31, 2012 | |||||||
REVENUE | $ | -- | $ | -- | ||||
COST OF REVENUE | -- | -- | ||||||
GROSS LOSS | -- | -- | ||||||
OPERATING EXPENSES | ||||||||
Selling, general and administrative expenses | 177,790 | 131,252 | ||||||
Consulting fees | 2,200 | -- | ||||||
Professional fees and related expenses | 461,426 | 186,276 | ||||||
Gain on settlement of accounts payable | -- | (51,273 | ) | |||||
Forgiveness of accrued officer compensation | (435,446 | ) | -- | |||||
TOTAL OPERATING EXPENSES | 205,970 | 266,255 | ||||||
OPERATING LOSS | (205,970 | ) | (266,255 | ) | ||||
OTHER INCOME – nonrecurring | ||||||||
Gain on extinguishment of debt | (206,835 | ) | -- | |||||
OTHER EXPENSE, non-operating | ||||||||
Loss on disposal of fixed asset | -- | 12,429 | ||||||
Fair value of derivative liability | -- | (113,026 | ) | |||||
Interest expense, net | 281,461 | 320,655 | ||||||
Loss on default of debt | -- | 23,750 | ||||||
TOTAL OTHER EXPENSE, non-operating | 281,461 | 243,808 | ||||||
LOSS BEFORE PROVISION FOR INCOME TAXES | (280,596 | ) | (510,063 | ) | ||||
PROVISION FOR INCOME TAXES | -- | -- | ||||||
NET LOSS | $ | (280,596 | ) | $ | (510,063 | ) | ||
BASIC & DILUTED LOSS PER SHARE | $ | (0.00 | ) | $ | (0.00 | ) | ||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC & DILUTED | 432,089,766 | 266,620,012 |
The accompanying notes are an integral part of these consolidated financial statements.
22
NATIONAL AUTOMATION SERVICES, INC.,
CONSOLIDATED STATEMENT OF STOCKHOLDERS’ DEFICIT
Common Stock | ||||||||||||||||||||||||
Shares | Amount | Additional Paid-in Capital | Stock Payable/ Receivable | Accumulated Deficit | Total | |||||||||||||||||||
0.001 par value | ||||||||||||||||||||||||
Balance at December 31, 2011 | 191,380,081 | $ | 191,380 | $ | 11,853,215 | $ | -- | $ | (15,303,946 | ) | $ | (3,259,351 | ) | |||||||||||
Stock for conversion of debt | 115,931,471 | $ | 115,932 | $ | (20,532 | ) | $ | -- | $ | -- | $ | 95,400 | ||||||||||||
Stock payable for cash, net of offering costs | 29,113,331 | 29,113 | 8,697 | 5,000 | -- | 42,810 | ||||||||||||||||||
Stock payable fair value equity instrument | -- | -- | (4,088 | ) | 29,985 | -- | 25,897 | |||||||||||||||||
Convertible note (BCF) | -- | -- | 66,321 | -- | -- | 66,321 | ||||||||||||||||||
Net loss | -- | -- | -- | -- | (510,063 | ) | (510,063 | ) | ||||||||||||||||
Balance at December 31, 2012 | 336,424,883 | $ | 336,425 | $ | 11,903,613 | $ | 34,985 | $ | (15,814,009 | ) | $ | (3,538,986 | ) | |||||||||||
Stock for cash, net of offering costs | 13,000,000 | $ | 13,000 | $ | 52,000 | $ | (5,000 | ) | $ | -- | $ | 60,000 | ||||||||||||
Stock for conversion of debt | 79,693,142 | 79,693 | 58,909 | -- | -- | 138,602 | ||||||||||||||||||
Stock for services | 186,869,268 | 186,869 | 39,552 | 1,015 | -- | 227,436 | ||||||||||||||||||
Stock for accrued salaries | -- | -- | -- | 344,172 | 344,172 | |||||||||||||||||||
Convertible note (BCF) | -- | -- | 4,500 | -- | -- | 4,500 | ||||||||||||||||||
Net loss | -- | -- | -- | -- | (280,596 | ) | (280,596 | ) | ||||||||||||||||
Balance at December 31, 2013 | 615,987,293 | $ | 615,987 | $ | 12,058,574 | $ | 375,172 | $ | (16,094,605 | ) | $ | (3,044,872 | ) |
The accompanying notes are an integral part of these consolidated financial statements.
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NATIONAL AUTOMATION SERVICES, INC., CONSOLIDATED STATEMENTS OF CASH FLOWS |
YEAR ENDED DEC 31, 2013 | YEAR ENDED DEC 31, 2012 | |||||||
Operating Activities | ||||||||
Net (loss) income | $ | (280,596 | ) | $ | (510,063 | ) | ||
Cash used by operating activities | ||||||||
Depreciation and amortization | -- | 5,294 | ||||||
Stock for services | 227,436 | -- | ||||||
Gain on extinguishment of debt | (206,835 | ) | -- | |||||
Accretion of convertible notes beneficial conversion feature | 9,568 | 72,429 | ||||||
Loss on disposal of assets | -- | 12,429 | ||||||
Fair value of derivative | -- | (113,026 | ) | |||||
Expenses paid by related party | -- | 15,000 | ||||||
Fair value of equity instrument | -- | 25,897 | ||||||
Loss on default of note payable | -- | 23,750 | ||||||
Forgiveness of accrued officer compensation | (435,446 | ) | -- | |||||
Gain on extinguishment of accounts payable | -- | (51,273 | ) | |||||
Changes in assets | ||||||||
Decrease in receivables | -- | 3,251 | ||||||
Decrease in prepaid expenses | -- | 22,000 | ||||||
Changes in liabilities | ||||||||
Decrease in accounts payable and accrued liabilities | 425,716 | 359,283 | ||||||
Cash used by operating activities | (260,157 | ) | (135,029 | ) | ||||
Investing Activities | ||||||||
-- | -- | |||||||
Cash provided (used) by investing activities | -- | -- | ||||||
Financing activities | ||||||||
Proceeds from sale of stock, net of offering costs | 60,000 | 42,810 | ||||||
Proceeds from convertible notes | 38,500 | 87,500 | ||||||
Proceeds from loans | 219,500 | 15,000 | ||||||
Payments for loans and capital leases | (40,800 | ) | (11,000 | ) | ||||
Cash provided by financing activities | 277,200 | 134,310 | ||||||
Increase (decrease) in cash | 17,043 | (719 | ) | |||||
Cash at beginning of year | 652 | 1,371 | ||||||
Cash at end of year | $ | 17,696 | $ | 652 | ||||
SUPPLEMENTAL CASH FLOW | ||||||||
Cash paid for interest | $ | -- | $ | -- | ||||
Cash paid for income taxes | $ | -- | $ | -- | ||||
SUPPLEMENTAL DISCLOSURE OF NON CASH INVESTING AND FINANCING TRANSACTIONS | ||||||||
Disposal of fixed assets | $ | -- | $ | 29,697 | ||||
Stock for conversion of debt and interest | $ | 138,602 | $ | 91,500 | ||||
Beneficial conversion feature on convertible debt | $ | 4,500 | $ | (66,321 | ) | |||
Stock payable issued for repayment of services | $ | 29,985 | $ | -- | ||||
Convertible notes for expenses paid by related party | $ | -- | $ | 15,000 | ||||
Stock for conversion of accrued salaries | $ | 344,172 | $ | -- |
The accompanying notes are an integral part of these consolidated financial statements.
24
NATIONAL AUTOMATION SERVICES, INC.,
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1: Organization and basis of presentation
Basis of Financial Statement Presentation
The accompanying audited consolidated financial statements of National Automation Services, a Nevada corporation (“NAS”, or the “Company”), have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission (“SEC”). Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnished in the consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, in the opinion of management, are necessary for a fair presentation of such financial statements. 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, 2013, and December 31, 2012.
Business Overview
NAS is a public holding company that serves various market sectors. Currently our market concentration is in the Petro-chemical industry. Our business plan takes action with expansion through carefully selected acquisitions. 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 focus is to increase shareholder value through these carefully selected companies bringing oversight and resources to each which will allow them to maximize profitability and growth opportunities within their markets and existing and expanding customer base. This strategy will allow for rapid advancement in overall assets and revenue streams for the Company.
On February 24, 2014, the Company entered into a purchase and sale agreement with JD Field Services (“JD”). This is the first of several anticipated acquisitions that NAS has as a part of its growth strategy. JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. They are licensed in all states west of the Mississippi River including Alaska to do trucking, but are focused primarily in the Rocky Mountain Region. Oilfield services provided include heavy haul, water haul, and rig moving services as well as equipment, supplies, and specialty long hauling services. JD also provides oil and gas equipment rental services, hot shot, roustabout services and construction site development services. JD also operates a fabrication division that builds special-order oil and gas equipment and trucks for customers.
Reclassifications
Certain amounts in the financial statements of the prior years have been reclassified to conform to the current year presentation for comparative purposes. The Company reclassified the stock held in reserve to common stock. Common stock was presented as net of issued and outstanding and the reserve shares (as noted in our Asher agreements).
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 potentially subject the Company to concentrations of credit risk consist principally of cash. The Company places its cash with high credit quality financial institutions and generally limits the amount of credit exposure to the amount in excess of the Federal Deposit Insurance Corporation coverage limit of $250,000. As of December 31, 2013, the Company did not have cash in any one banking institution that exceeded this limit.
25
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.
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, 2013 and 2012, the Company incurred net losses, 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 7: 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;
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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 February 2013, the FASB issued ASU No. 2013-02, Reporting of Amounts Reclassified out of Accumulated Other Comprehensive Income, which is included in ASC 220, Comprehensive Income. This update improves the reporting of reclassification out of accumulated other comprehensive income. The adoption of this guidance did not have a material impact on the Company’s financial position, results of operations or cash flows.
In July 2013, FASB issued ASU No. 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This ASU is effective for interim and annual periods beginning after December 15, 2013. This update standardizes the presentation of an unrecognized tax benefit when a net operating loss carry forward, a similar tax loss, or a tax credit carry forward exists. The adoption of this accounting standard update became effective for the Company’s interim and annual reporting periods beginning January 1, 2013.
In May 2011, the FASB (“Financial Accounting Standards Board”) 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 did 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 did 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 did not have a material impact on the Company’s financial position, result of operations or cash flows.
27
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 did 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 did become effective for the reporting period beginning January 1, 2013.
Issued
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. The Company had no operating revenues for the year ended December 31, 2013. We had recurring net losses of $(280,596) for the year ended December 31, 2013, compared to the net losses of $(510,063) for the year ended December 31, 2012, and a working capital deficiency of $(2,875,372) at December 31, 2013.
Based on the above facts, management determined that there is substantial doubt about the Company’s ability to continue as a going concern.
We have begun to expand our operations through acquisition. We will be carefully managing our overhead to maximize the effects of profitable acquisitions. Our business plan 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 the Company for financial reporting purposes and other financial projections. However, we can give no assurance that our business plan will be successful. We have secured our first acquisition in early 2014 (see Note 10: Acquisitions), to begin this process.
NOTE 4: Loans, capital lease and lines of credit
The following tables represent the outstanding balance of loans, capital leases and lines of credit (“LOC”) for the Company as of December 31, 2013, and 2012.
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
South Bay Capital loan at an interest rate 12% (a) | $ | 10,926 | $ | 10,926 | ||||
Trafalgar promissory note (b) | -- | 200,000 | ||||||
Capital lease, line of credit (c) | 33,591 | 33,591 | ||||||
Kinney note (8/18/13) (d) | 149,500 | -- | ||||||
Goss note (e) | 20,000 | -- | ||||||
Kinney note (11/1/13) (f) | 50,000 | -- | ||||||
Krochak note (g) | -- | 15,000 | ||||||
Loans and capital lease & LOC sub total | 264,017 | 259,517 | ||||||
Less: current portion loans, capital leases, & LOC | (94,517 | ) | (259,517 | ) | ||||
Total | $ | 169,500 | $ | -- |
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(a) 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, 2013, $10,926 of the debt still remains outstanding with total interest of $45,606; the note is due on demand.
(b) 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. The note bears an interest of 12% for 6 months. As of September 4, 2013, we owed $200,000 plus accrued interest in the amount of $34,537. On September 4, 2013, the Company settled its obligation to Trafalgar Capital Group, SARL, of outstanding principle and interest in the amount of $234,537. The settlement in the amount of $40,800 has relieved all encumbrances of Trafalgar on the Company’s financials and noted a gain in the amount of $193,737.
(c) 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. As of December 31, 2013, the lease is in default as we have not made any payments on the lease since 2011. All of our fixed assets have been disposed of in 2012. We still owe the outstanding lease even though the fixed assets were disposed. The balance as of December 31, 2013 is $17,508. 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, 2013 was $16,083, which included $8,796 on a capital lease for computers even though the fixed assets were disposed of.
(d) On August 18, 2013, the Company entered into a six (6) year interest convertible note agreement. The note bears an interest of 12% annum, at a principle balance of the note $149,500. The terms of conversion are for interest accrued only; the principle balance of the note must be repaid in cash. As of December 31, 2013, the Company owed the principle balance plus accrued interest in the amount of $6,930.
(e) On September 19, 2013, the Company entered into a three (3) year interest convertible note agreement. The note bears an interest of 12% annum, at a principle balance of the note $20,000. The terms of conversion are for interest accrued only; the principle balance of the note must be repaid in cash. As of December 31, 2013, the Company owed the principle balance plus accrued interest in the amount of $564.
(f) On November 1, 2013, the Company entered into a one (1) year interest convertible note agreement. The note bears an interest of 12% annum, at a principle balance of the note $50,000. The terms of conversion are for interest accrued only; the principle balance of the note must be repaid in cash. As of December 31, 2013, the Company owed the principle balance plus accrued interest in the amount of $986.
(g) On January 4, 2012, the Company entered into a promissory note agreement. The note bears an interest of 7% annum, payable on demand. On July 25, 2013, the Company issued 3,325,000 shares of restricted common stock in consideration of the principle and interest in the amount of $16,625.
On April 16, 2013, the Company entered into a thirty (30) day promissory note agreement in the amount of $5,000. As of December 31, 2013, the Company has repaid the note.
As of December 31, 2013, the Company noted several vendor payables outstanding. As such we recognized cumulative interest accrued on their outstanding balances in the amount of $101,920 which is included in accrued liabilities.
NOTE 5: Related party transactions
On December 31, 2010, the Company entered into a promissory note with a former 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, 2013, we owed $2,000 plus accrued interest in the amount of $2,250.
On December 31, 2010, the Company entered into a promissory note with a former 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, 2013, we owed $9,760 plus accrued interest in the amount of $2,928.
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On December 31, 2010, the Company entered into a promissory note with a former 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, 2013, we owed $9,500 plus accrued interest in the amount of $2,850.
On April 1, 2009, we modified the verbal loan agreement entered into on June 30, 2008 with a former 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, 2013, we owed $71,000 plus accrued interest in the amount of $36,350. As of December 31, 2013, the note holder has called the note.
On November 5, 2008, the Company entered into agreement promissory note with a former 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, 2013, we owed $79,913 plus accrued interest in the amount of $66,815.
NOTE 6: Convertible notes
As of December 31, 2013, the following convertible notes payable are outstanding.
Description | Note Value | BCF Value | Amortized BCF | Interest accrued | ||||||||||||
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 | 134,803 | ||||||||||||
Convertible note issued on September 16, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.005 per share | 2,500 | 500 | 293 | 145 | ||||||||||||
Convertible note issued on September 11, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.005 per share | 2,500 | 500 | 307 | 152 | ||||||||||||
Convertible note issued on November 20, 2013, at an annual 10% interest rate for the three months, convertible to shares of stock at $0.005 per share | 12,000 | -- | -- | 135 | ||||||||||||
Convertible note issued on July 10, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.001 per share | 25,000 | 2,500 | 2,364 | 2,384 | ||||||||||||
Convertible note issued on September 11, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.005 per share | 2,500 | 500 | 307 | 152 | ||||||||||||
Convertible note issued on September 10, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.005 per share | 5,000 | 500 | 309 | 307 | ||||||||||||
Convertible note issued on September 18, 2013, at a 10% interest rate for six months, convertible to shares of stock at $0.005 per share | 1,000 | -- | -- | 57 | ||||||||||||
Total | $ | 174,500 | $ | 128,500 | $ | 127,580 | $ | 138,135 |
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NOTE 7: 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, 2013 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Total | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||
Liabilities, and stockholder’s deficit: | ||||||||||||||||
Convertible debt, net of beneficial conversion feature | $ | 173,580 | $ | 173,580 | $ | -- | $ | -- | ||||||||
Total | $ | 173,580 | $ | 173,580 | $ | -- | $ | -- |
Fair value at December 31, 2012 | ||||||||||||||||
Total | Level 1 | Level 2 | Level 3 | |||||||||||||
Assets: | ||||||||||||||||
Total | $ | -- | $ | -- | $ | -- | $ | -- | ||||||||
Liabilities, and stockholders’ deficit: | ||||||||||||||||
Fair value of equity instrument | $ | 29,985 | $ | 29,985 | $ | -- | $ | -- | ||||||||
Convertible debt, net of beneficial conversion feature | 234,261 | 234,261 | $ | -- | $ | -- | ||||||||||
Total | $ | 264,246 | $ | 264,246 | $ | -- | $ | -- |
NOTE 8: Income taxes
At December 31, 2013 and 2012, the Company had federal and state net operating loss carry-forwards of approximately $7,313,000 and $6,914,000, respectively, which begin to expire in 2027. The components of net deferred tax assets, including a valuation allowance, are as follows (rounded):
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Deferred tax asset: | ||||||||
Net operating loss carry forward | $ | 2,559,600 | $ | 2,419,800 | ||||
Stock based compensation | -- | -- | ||||||
2,559,600 | 2,419,800 | |||||||
Total deferred tax assets | 2,559,600 | 2,419,800 | ||||||
Less: valuation allowance | (2,559,600 | ) | (2,419,800 | ) | ||||
Net Deferred Tax Assets | $ | -- | $ | -- |
The valuation allowance for deferred tax assets as of December 31, 2013 and 2012 was $2,559,600 and $2,419,800, 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 is as follows:
Year Ended December 31, | ||||||||
2013 | 2012 | |||||||
Federal statutory tax rate | 35 | % | 35 | % | ||||
State taxes, net of federal benefit | 7 | % | 7 | % | ||||
Valuation allowance | (42 | )% | (42 | )% | ||||
Effective tax rate | 0 | % | 0 | % |
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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 $155,600 and $153,100 for December 31, 2013 and 2012, respectively. This interest and penalties are in relation to payroll tax remittances that, due to cash constraints, were unable to be made for payroll paid prior to 2011, 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, 2013, 2012, 2011, 2010 and 2009. The federal (including payroll tax returns) and state filing payments have not been made for 2013, 2012, 2011 and 2010 respectively, as of the date of this filing. The U.S. federal returns are considered open tax years for years 2007 - 2013. There are currently no corporate tax filings under examination by IRS tax authorities.
NOTE 9: Stockholders’ deficit
Increased in authorized
On March 23, 2012, the Company filed a form DEF 14A whereby, the authorized common stock of the Company was increased to 1,000,000,000 shares with a par value of $0.001 per share. As of April 27, 2012, per our 8-K, form DEF 14A was approved by majority shareholder vote.
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 April 16, 2013, the Company entered into a promissory note agreement in the amount of $5,000. The Company was to repay this amount back in 30 days. The Company defaulted on this 30 day return of the promissory note and as such we had to issue a stock payable in the amount of 1,000,000 shares of stock. On July 23, 2013, the Company issued out the 1,000,000 shares of restricted common stock at a value of $600 or $0.006 per share to compensate for the interest and delay of repayment. As of December 31, 2013 the Company has repaid this debt in full.
On July 1, 2013, we amended our promissory note agreement in the amount of $15,000 dated January 4, 2012 to a convertible note, which included accrued interest of $1,625. On July 9, 2013, the Company converted the noted and on July 23, 2013 we issued stock in the amount of 3,325,000 or $0.005 per share in consideration for the amount of $16,625.
On July 23, 2013, the Company issued 10,000,000 shares of restricted common stock in consideration for the convertible note dated March 14, 2012 in the amount of $40,000. The shares were converted at a price per share of $0.004 per share.
On July 23, 2013, the Company issued 10,092,748 shares of restricted common stock in consideration for service agreement dated July 5, 2013. The services were valued at the closing value of stock on July 9, 2013, in the amount of $11,102 or $0.0011 per share.
On July 23, 2013, the Company issued 6,924,476 shares of restricted common stock in consideration for stock payable noted on December 31, 2012. The stock was valued at $5,540 or $0.0008 per share.
On July 23, 2013, the Company issued 102,000,000 shares of restricted common stock in consideration for services rendered by the Board of Directors of the Company. The services were valued at $81,600 or $0.0008 per share.
On July 23, 2013, the Company issued 9,000,000 shares of restricted common stock in consideration for cash valued at $0.005 or $45,000.
On July 25, 2013, the Company issued 4,000,000 shares of restricted common stock in consideration for cash valued at $0.005 or $20,000.
On August 15, 2013, the Company issued 12,000,000 shares of restricted common stock in consideration for services rendered by the Board of Directors of the Company. The services were valued at $14,400 or $0.0012 per share.
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On August 15, 2013, the Company issued 6,407,252 shares of restricted common stock in consideration for service agreement dated July 9, 2013. The services were valued at the closing value of stock on August 15, 2013, in the amount of $12,815 or $0.002 per share.
On August 15, 2013, the Company granted 3,441,720 shares of restricted common stock in consideration for services rendered by former employees of the Company. Based upon Board meeting minutes dated October 9, 2010, the Company issues stock in lieu of cash at a value of $0.10 per share or $344,172. As of December 31, 2013, the shares have not been issued.
On August 15, 2013, the Company issued 100,000 shares of restricted common stock in consideration for services rendered by a former employee of the Company. The Company issued stock in inconsideration of employee agreement dated May 5, 2011, in the amount of $0.05 per share or $5,000.
On August 15, 2013, the Company issued 5,000,000 shares of restricted common stock in consideration for consulting services rendered for the Company. The stock is valued at $0.0012 per share or $6,000.
On August 15, 2013, the Company issued 10,000 shares of restricted common stock in consideration for legal services rendered for the Company. The stock is valued at $0.002 per share or $20.
On August 15, 2013, the Company issued 20,334,792 shares of restricted common stock in consideration for stock payable noted on December 31, 2012. The stock was valued at $40,669 or $0.002 per share
On August 22, 2013, the Company granted 7,496,036 shares of restricted common stock in final consideration for the convertible note dated April 29, 2011. The original amount of the note was $15,000. The final conversion was valued at $0.00084 per share or $6,298 including principle and interest. These shares were issued on November 12, 2013.
On September 9, 2013, the Company issued 2,500,000 of restricted common stock in consideration for services provided to the Board of Directors of the Company. The shares were valued at $9,500 or $0.0038 per share.
On October 16, 2013, the Company issued 5,000,000 of restricted common stock in consideration for services provided to the Company for investor relations. The shares were valued at $25,000 or $0.005 per share.
On October 17, 2013, the Company issued 7,142,857 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $20,000. The shares were converted at a price per share of $0.0028 per share.
On November 5, 2013, the Company granted 10,000,000 shares in consideration for services provided to the Board of Directors of the Company. The shares were valued at $31,000 or $0.0031 per share. As of December 31, 2013, these shares were not issued. Subsequently on March 20, 2013, the Company issued the shares (see Note 11: other subsequent events).
On November 12, 2013, the Company issued 12,500,000 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $15,000. The shares were converted at a price per share of $0.0012 per share.
On November 19, 2013, the Company issued 27,272,727 shares of restricted common stock in consideration for the convertible note dated May 9, 2012 in the amount of $30,000. The shares were converted at a price per share of $0.0011 per share.
On November 20, 2013, the Company issued 16,500,000 of restricted common stock in consideration for services agreement to the Company on July 5, 2013. The shares were valued at $18,150 or $0.0011 per share.
On November 25, 2013, the Company issued 10,956,522 shares of restricted common stock in final consideration for the convertible note dated May 9, 2012 in the amount of $10,080. The shares were converted at a price per share of $0.0009 per share.
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NOTE 10: Acquisitions, subsequent events
Acquisition of JD Field Services
On February 24, 2014, the Company entered into a purchase and sale agreement with JD. This is the first of several anticipated acquisitions that NAS has as a part of its growth strategy. The JD provides oilfield services to the oil and gas industry primarily focused around those activities that are related to the drilling, operation(s) and maintenance of the well-site. On March 21, 2014, the Company amended its purchase and sale agreement to JD as the original PSA left a 6 month “unwinding” provision should NAS not be able to achieve its benchmarks in uplifting and repayment of JD debt in the course of 270 days. We have amended this position to the following, (1) NAS shall pay or assume all outstanding debt of JD. Payment on debt held by JD where the Sellers have executed personal guarantees shall be given priority over other non-priority debts, and payments on such personally guaranteed debt will be accelerated if NAS or JD profits are sufficient to do so. (2) Each Seller of JD shall receive six percent (6%) of the outstanding common stock of NAS, constituting approximately six percent (6%) each of the total equity of NAS, but not requiring any fractional shares, or approximately fifty-nine million (59,000,000) shares each. (3) NAS shall provide to JD a Power of Attorney representing voting rights and control over approximately eighteen percent (18%) of the equity interests in NAS; holding in reserve, one hundred fifty eight million (158,000,000) shares of NAS Class A Common Stock to be representative of this Interest. (4) NAS shall pay any broker's commission associated with the purchase of JD interests, up to five hundred thousand dollars ($500,000). NAS shall pay any remaining broker's commissions.
The following is the pro forma information that discloses the results of operations as though the business combination had been completed as of the beginning of the period being reported on.
NATIONAL AUTOMATION SERVICES, INC., CONSOLIDATED PRO FORMA BALANCE SHEETS | ||||||||||||||||
JD | NAS | Pro-forma Adjustments | Pro forma | |||||||||||||
DEC 31, 2013 | DEC 31, 2013 | DEC 31, 2013 | DEC 31, 2013 | |||||||||||||
ASSETS | ||||||||||||||||
CURRENT ASSETS | ||||||||||||||||
Cash | $ | -- | $ | 17,696 | $ | -- | $ | 17,696 | ||||||||
Accounts receivable | 3,496,909 | -- | -- | 3,496,909 | ||||||||||||
Work in process | 178,333 | -- | -- | 178,333 | ||||||||||||
Prepaid expenses | 78,940 | -- | -- | 78,940 | ||||||||||||
Total current assets | $ | 3,754,182 | $ | 17,696 | $ | -- | $ | 3,771,878 | ||||||||
Property, plant & equipment, net | 15,806,214 | -- | -- | 15,806,214 | ||||||||||||
Intangible assets, net | 113,344 | -- | -- | 113,344 | ||||||||||||
Goodwill | -- | -- | 8,905,283 | 8,905,283 | ||||||||||||
Other assets | 76,740 | -- | -- | 76,740 | ||||||||||||
TOTAL ASSETS | $ | 19,750,480 | $ | 17,696 | $ | 8,905,283 | $ | 28,673,459 | ||||||||
LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
CURRENT LIABILITIES | ||||||||||||||||
Accounts payables and accrued liabilities | $ | 2,593,049 | $ | 2,452,798 | $ | -- | $ | 5,045,847 | ||||||||
Current portion of loans, capital leases and line of credit | 2,463,922 | 94,517 | -- | 2,558,439 | ||||||||||||
Convertible debt, net of beneficial conversion feature net of $920 and $5,989, respectively | -- | 173,580 | -- | 173,580 | ||||||||||||
Related party payable | 696,000 | 172,173 | -- | 868,173 | ||||||||||||
Total current liabilities | $ | 5,752,971 | $ | 2,893,068 | $ | -- | $ | 8,646,039 | ||||||||
Long-term loans, capital leases and line of credit | 8,449,436 | 169,500 | -- | 8,618,936 | ||||||||||||
Total liabilities | $ | 14,202,407 | $ | 3,062,568 | $ | -- | $ | 17,264,975 | ||||||||
STOCKHOLDERS’ EQUITY (DEFICIT) | ||||||||||||||||
Common stock $0.001 par value, 1,000,000,000 authorized, 615,986,053 issued and outstanding 2013 | 1,000 | 615,987 | (1,000 | ) | 615,987 | |||||||||||
Additional paid in capital | (710,500 | ) | 12,058,574 | 710,500 | 12,058,574 | |||||||||||
Stock payable | -- | 375,172 | 3,540,000 | 3,915,172 | ||||||||||||
Accumulated income (deficit) | 6,257,573 | (16,094,605 | ) | 4,655,783 | (5,181,249 | ) | ||||||||||
Total stockholders’ equity (deficit) | 5,548,073 | (3,044,872 | ) | 8,905,283 | 11,408,484 | |||||||||||
TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) | $ | 19,750,480 | $ | 17,696 | $ | 8,905,283 | $ | 28,673,459 |
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NATIONAL AUTOMATION SERVICES, INC., CONSOLIDATED PRO FORMA STATEMENT OF OPERATIONS (unaudited) | YEAR ENDED DECEMBER 31, 2013 | YEAR ENDED DECEMBER 31, 2013 | YEAR ENDED DECEMBER 31, 2013 | YEAR ENDED DECEMBER 31, 2013 | ||||||||||||
JD | NAS | Adjustments | Pro forma | |||||||||||||
REVENUE | $ | 21,079,945 | $ | -- | $ | -- | $ | 21,079,945 | ||||||||
COST OF REVENUE | 17,805,262 | -- | -- | 17,805,262 | ||||||||||||
GROSS PROFIT | 3,274,683 | -- | -- | 3,274,683 | ||||||||||||
OPERATING EXPENSES | ||||||||||||||||
Selling, general and administrative expenses | 2,100,066 | 177,790 | -- | 2,277,856 | ||||||||||||
Professional fees and related expenses | 93,843 | 463,626 | -- | 557,469 | ||||||||||||
Forgiveness of accrued officer compensation | -- | (435,446 | ) | -- | (435,446 | ) | ||||||||||
TOTAL OPERATING EXPENSES | 2,193,909 | 205,970 | -- | 2,399,879 | ||||||||||||
OPERATING INCOME (LOSS) | $ | 1,080,774 | $ | (205,970 | ) | $ | -- | $ | 874,804 | |||||||
OTHER EXPENSE (INCOME), non-operating | ||||||||||||||||
Other expenses | 220,512 | -- | -- | 220,512 | ||||||||||||
Gain on debt extinguishment | -- | (206,835 | ) | -- | (206,835 | ) | ||||||||||
Loss on disposal of fixed asset | 629,852 | -- | -- | 629,852 | ||||||||||||
Other income | (13,459 | ) | -- | -- | (13,459 | ) | ||||||||||
Interest expense, net | 647,936 | 281,461 | -- | 929,397 | ||||||||||||
TOTAL OTHER EXPENSE (INCOME), non-operating | 1,484,841 | 74,626 | -- | 1,559,467 | ||||||||||||
LOSS BEFORE PROVISION FOR INCOME TAXES | (404,067 | ) | (280,596 | ) | -- | (684,663 | ) | |||||||||
PROVISION FOR INCOME TAXES | -- | -- | -- | -- | ||||||||||||
NET (LOSS) INCOME | $ | (404,067 | ) | $ | (280,596 | ) | $ | -- | $ | (684,663 | ) | |||||
BASIC LOSS PER SHARE | $ | -- | $ | (0.00 | ) | $ | -- | $ | (0.00 | ) | ||||||
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING BASIC & DILUTED | -- | 432,089,766 | -- | 550,089,766 |
The Company is finalizing this transaction but did not identify any intangible items which qualify for separate disclosure or accounting apart from goodwill.
NOTE 11: Other subsequent events
On March 20, 2014, the Company issued 10,000,000 of a stock payable noted on November 5, 2013 (see Note 9).
On March 26, 2014, the Company issued 118,000,000 shares of restricted common stock in consideration for the amended purchase and sale agreement dated March 21, 2014.
On April 1, 2014, the Company issued 4,000,000 shares of restricted common stock for service agreements dated April 1, 2014.
On April 2, 2014, the Company issued 4,000,000 shares of restricted common stock for security on a note payable agreement dated April 2, 2014.
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ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING ANDFINANCIAL DISCLOSURE
None
ITEM 9A: CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
We conducted an evaluation, with the participation of our Chief Executive Officer and Chief Financial Officer, of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended, or the Exchange Act, as of December 31, 2013, to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the Securities Exchange Commission's rules and forms, including to ensure that information required to be disclosed by us in the reports filed or submitted by us under the Exchange Act is accumulated and communicated to our management, including our principal executive and principal financial officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Based on that evaluation, our Chief Executive Officer and Chief Financial Officer have concluded that as of December 31, 2013, our disclosure controls and procedures were not effective at the reasonable assurance level due to the material weaknesses identified and described in Item 9A(b).
Our principal executive officers do not expect that our disclosure controls or internal controls will prevent all error and all fraud. Although our disclosure controls and procedures were designed to provide reasonable assurance of achieving their objectives and our principal executive officers have determined that our disclosure controls and procedures are effective at doing so, a control system, no matter how well conceived and operated, can provide only reasonable, not absolute assurance that the objectives of the system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the Company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented if there exists in an individual a desire to do so. There can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) and 15d-15(f) promulgated under the Exchange Act, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officer and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles in the United States and includes those policies and procedures that:
· | Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and any disposition of our assets; |
· | Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; |
· | Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements |
Because of its inherent limitations, internal control over financial reporting may not prevent or detect all misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.
A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of our annual or interim financial statements will not be prevented or detected on a timely basis. Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2013. In making this assessment, our management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control-Integrated Framework. Based on this assessment, Management identified the following three material weaknesses that have caused management to conclude that, as of December 31, 2013, our disclosure controls and procedures, and our internal control over financial reporting, were not effective at the reasonable assurance level.
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We do not have sufficient control over our written agreements. Management evaluated the impact of our failure to have sufficient control over our written agreements and has concluded that the control deficiency that resulted represented a material weakness.
We do not have written documentation of our internal control policies and procedures. Written documentation of key internal controls over financial reporting is a requirement of Section 404 of the Sarbanes-Oxley Act for the period ending December 31, 2013. Management evaluated the impact of our failure to have written documentation of our internal controls and procedures on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
We do not have sufficient segregation of duties within accounting functions, which is a basic internal control. Due to our size and nature, segregation of all conflicting duties may not always be possible and may not be economically feasible. However, to the extent possible, the initiation of transactions, the custody of assets and the recording of transactions should be performed by separate individuals. Management evaluated the impact of our failure to have segregation of duties on our assessment of our disclosure controls and procedures and has concluded that the control deficiency that resulted represented a material weakness.
To address these material weaknesses, management performed additional analyses and other procedures to ensure that the financial statements included herein fairly present, in all material respects, our financial position, results of operations and cash flows for the periods presented. Accordingly, we believe that the financial statements included in this report fairly present, in all material respects, our financial condition, results of operations and cash flows for the periods presented.
Remediation of Material Weaknesses
To remediate the material weakness in our documentation, evaluation, and testing of internal controls we plan to engage a third-party firm to assist us in remedying this material weakness once resources become available.
We intend to remedy our material weakness in regard to control over written agreements by review of written agreements with our audit committee and subsequent working documentation to establish controls over accuracy in our disclosure and presentation of the written agreements.
We also intend to remedy our material weakness with regard to insufficient segregation of duties by hiring additional employees in order to segregate duties in a manner that establishes effective internal controls once resources become available.
We also intend to remedy our non-timely filing requirements by hiring additional employees in order to ensure that disclosure control is reviewed and monitored on a timely basis for the submission of our required flings to the SEC.
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 year ended December 31, 2013, that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B: OTHER INFORMATION
None
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PART III
ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE
Identification of Officers and Directors
Our directors and executive officers, and their respective ages, positions and offices, are as follows:
Name | Age | Position |
Robert W. Chance | 56 | Director, President and Chief Executive Officer of NAS |
Sean Sego | 44 | Independent Director, Secretary of Board of Directors |
Jeremy W. Briggs | 38 | Principle Financial Officer NAS |
Tom Sego | 47 | Independent Director of the Board of Directors |
Kevin Brown | 40 | Independent Director of the Board of Directors |
James Gunn | 49 | Independent Director of the Board of Directors |
Jason Jensen | 41 | General Manager of JD Field Services (subsidiary of NAS) |
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.
Sean Sego joined the board of directors for NAS on April 19, 2012 and replaces Manuel Ruiz as secretary. A graduate from Indiana State University, Mr. Sego brings many years of experience in the Financial Services Industry including Ameriprise Financial Services, Waddell and Reed and now over the past six years, serving as Senior Partner at Intrinsic Value Capital Management.
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.
Tom Sego is currently CEO of SouthInk, a fast growing international wine distributor. Previous to his current position he also worked at Apple for 9 years. Most notably he served as head of World Wide Sales and Sales Support, reporting directly to Tim Cook, the now current CEO and successor of Steve Jobs. He managed 6 different divisions while at Apple and was responsible for expanding an experimental program from 300 stores to 2600 stores in 24 months, accounting for a large amount of Apple's growth during that period. Before Apple, Tom worked at Alta Vista in business analysis and product management. Tom also performed merger and acquisition work in business development at Emerson Electric after getting his MBA from Harvard Business School. Before business school Tom held various engineering positions at Eli Lilly and Caterpillar.
Kevin Brown has over twelve years of experience with Big 4 and regional accounting firms assurance services with a focus on financial statement and SOX 404 internal control audits for SEC registrants in the upstream and midstream oil and gas, precious and industrial metal mining, financial services, computer technology, media and entertainment, construction, and manufacturing and distribution industries. He has knowledge and experience summarizing and preparing memos that present issues with US GAAP and IFRS based technical accounting research and interpretations using FASB, IASB, and SEC regulations. He graduated with a Masters of Business Administration, California State University Fullerton, in 2003.
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James Gunn is currently General Counsel for Cintron Brands, LLC, a beverage company located in Minnesota. He also serves as counsel to several development stage start-ups. He is a well-rounded attorney with experience focused on development stage businesses, workouts, and litigation. Jim previously worked for several years for Thompson Coe Cousins & Irons, LLP in their St. Paul, Minnesota office, representing two Fortune 100 companies in litigation. He graduated with honors from the University of Iowa, College of Law in 1997.
Jason Jensen is currently the General Manager of JD Field services, an oil field services company located in Vernal, UT since its inception in 1999. He has been in the oil field and roustabout services industry for over 20 years. He received a certificate of completion from Uinta Basin Area Tech College in 1991.
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
Currently our Board of Directors has two (2) independent directors which are related.
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.nasv.biz. 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, 2013, 2012 and 2011, 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 $60,000 during such fiscal year ends. We refer to all of these officers collectively as our “named executive officers”.
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Name & Principal Position | Year | Salary ($) | Bonus ($) | Stock Awards ($) (1) | Option Awards ($) | Non-Equity Incentive Plan Compensation ($) | All Other Compensation ($)(2) | Total ($) | ||||||||
Robert W. Chance, | 2013 | 0 | 0 | 0 | 0 | 0 | 32,000 | 32,000 | ||||||||
2012 | 48,000 | 0 | 0 | 0 | 0 | 0 | 48,000 | |||||||||
PEO Chief Executive Officer | 2011 | 78,000 | 0 | 0 | 0 | 0 | 0 | 78,000 | ||||||||
Jeremy W. Briggs, | 2013 | 0 | 0 | 0 | 0 | 0 | 32,000 | 32,000 | ||||||||
2012 | 58,300 | 0 | 0 | 0 | 0 | 0 | 58,300 | |||||||||
Principal Financial Officer | 2011 | 75,000 | 0 | 58,000 | 0 | 0 | 0 | 133,000 |
(1) | In 2011 we issued to these individual 1,750,000 shares of our common stock based upon their employment agreements, (see Item 13 Certain Relationships and Related Transactions, and Director Independence – Compensation). |
(2) | In 2013, the Company issued to these individuals 76,000,000 shares of restricted common stock in consideration for services provided to the Board of Directors (see Item 13 Certain Relationships and Related Transactions, and Director Independence – Compensation). |
Employment Contracts
Employment Agreements with Named Executive Officers
Robert Chance. Effective October 12, 2007, our ISS subsidiary entered into an employment agreement, as amended, with Robert Chance under which he agreed to devote his full working time to the discharge of his duties, such duties to be those which ISS may from time to time assign to him. Pursuant to the agreement, we agreed to pay Mr. Chance a salary at the rate of $104,000 per year and to provide him with such supplemental benefits as we may from time to time provide to our full-time employees in similar positions as Mr. Chance (see employment agreement as exhibited). As of December 31, 2012, due to the downturn of our operations we fixed Mr. Chance’s salary at $4,000 per month, since we have been unable to pay we have accrued for such salary, and as of December 31, 2013, the PEO has forgiven all accrued salary.
Jeremy Briggs. On July 28, 2008, we entered into an employment agreement with Jeremy Briggs, as amended January 1, 2009, under which he agreed to devote his full working time as a Vice President and our Chief Accounting Officer. Pursuant to the agreement, we agreed to pay Mr. Briggs a salary at the rate of $85,000 per year, to issue to him 250,000 shares of common stock which we valued at $32,500, and to provide him with such supplemental benefits as we may from time to time prove to our full-time employees in similar positions as Mr. Briggs. On January 17, 2011, we amended our employment agreement with Jeremy Briggs increasing his current salary of $85,000 to $100,000 and awarding him 750,000 shares of common stock as a retention bonus (see employment agreement as exhibited). From January 1, 2012 – March 31, 2013 we placed Mr. Briggs on a consulting basis for services rendered, and as of April 1, 2013, we started to accrue salary expenses for Mr. Briggs, as of December 31, 2013, the PFO has forgiven all accrued salary.
Termination of Employment or Change in Control Arrangements
Except as disclosed in this Form 10-K, there are no compensatory plans or arrangements with any named executive officer (including payments to be received from our parent company or any of our subsidiaries), which result or will result from the resignation, retirement or any other termination of employment of such named executive officer or from a change of control of our parent company or any of our subsidiaries or any change in such named executive officer’s responsibilities following a change in control.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Ownership of Management
The following table sets forth certain information as of April 11, 2014 as to each class of our equity securities beneficially owned by (i) each of our directors and named executive officers and (ii) our directors and executive officers as a group. Except as otherwise indicated, we have been advised that each of the persons listed below has sole voting and investment power over their listed shares.
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Title of Class | Name of Beneficial Owner (1) | Amount and Nature Of Beneficial Ownership (2) | Percent of Class (2) | |||
Common Stock | Robert W. Chance(3) | 42,124,872 | 5.60% | |||
Common Stock | Jeremy Briggs(4) | 39,513,654 | 5.25% | |||
Common Stock | Sean Sego | 42,900,000 | 5.70% | |||
Common Stock | Tom Sego | 2,600,000 | >1% | |||
Common Stock | Kevin Brown | 5,150,000 | >1% | |||
Common Stock | James Gunn | 5,010,000 | >1% | |||
Common Stock | Jason Jensen(5) | 59,000,000 | 7.85% | |||
Common Stock | David Gurr(5) | 59,000,000 | 7.85% | |||
Common Stock | All Executive Officers and | 255,298,526 | 33.95% | |||
Directors as a Group (8 persons) |
(1) | Each person named is an executive officer or a director. Except as otherwise indicated, the address of each beneficial owner is c/o National Automation Services, Inc., P.O. Box 400775 Las Vegas, NV 89140. |
(2) | Applicable percentage ownership is based on 751,987,293 shares of our common stock outstanding as of April 11, 2014, as provided by our Transfer Agent, which systematically makes the calculations to three decimal points, and we rounded up or down. Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. |
(3) | Individual formerly was a principal shareholder of ISS, and in connection with our October 2, 2007 reverse merger he executed a lockup agreement in which he agreed not to sell any of the 7,333,333 shares he received in that transaction for two years, other than in a private sales transaction approved in advance by Ronald Williams (the President of T-Beck Capital, Inc., who died in March 2009) or Joseph Pardo, each of whom we deemed to have been a “promoter” following such reverse merger. See Item 13 below, “Certain Relationships and Related Transactions, and Director Independence – Promoters and Control Persons.” |
(4) | Includes 26,154 shares held by immediate family members. |
(5) | Individuals were issued shares of restricted common stock as a part of the Purchase and Sale Agreement with JD Field Services dated February 24, 2014, the amount of 59,000,000 shares each. See Item 13 below, “Certain Relationships and Related Transactions, and Director Independence – Promoters and Control Persons.” |
Securities Authorized for Issuance under Equity Compensation Plans
We have no equity compensation plans.
Changes in Control
There are no arrangements, including any pledge by any person of our securities, known to us the operation of which may at a subsequent date result in a change in control of our company.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
The following information summarizes transactions we have either engaged in during the last three years, or propose to engage in, involving our executive officers, directors, more than 5% stockholders, promoters or founders, or immediate family members of these persons, or promoter or founder, or immediate family of such persons, which equals either $120,000 or an aggregate one percent of the average of our total assets at the year end of our last two fiscal years, whichever is less:
Transaction with related persons
Described below are certain transactions and currently proposed transactions, from January 1, 2009, the beginning of our last two fiscal years, between us and our named executive officers, our directors and the beneficial owners of 5% or more of our common stock (being the lesser of $120,000 or 1% of the average of our total assets as of year-end for the last three completed fiscal years), other than compensation arrangements that are otherwise described under “Executive Compensation.”
Borrowings:
On December 31, 2010, the Company entered into a promissory note with a former 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, 2013; we owed $2,000 plus accrued interest in the amount of $2,250.
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On December 31, 2010, the Company entered into a promissory note with a former 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, 2013; we owed $9,760 plus accrued interest in the amount of $2,928.
On December 31, 2010, the Company entered into a promissory note with a former 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, 2013; we owed $9,500 plus accrued interest in the amount of $2,850.
On April 1, 2009 we modified the verbal loan agreement entered into on June 30, 2008 with a former 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, 2013; we owed $71,000 plus accrued interest in the amount of $36,350. As of December 31, 2012, the note holder has called the note.
On November 5, 2008, the Company entered into agreement promissory note with a former 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, 2013, we owed $79,913 plus accrued interest in the amount of $66,815.
Compensation, Etc.
We also have issued to our named executive officers common stock for services rendered in both capacity of management and their respective roles on the Board of Directors, as follows:
To Robert Chance: On July 23, 2013, we issued 34,000,000 shares for Board services.
To Sean Sego: On July 23, 2013, we issued 34,000,000 shares for Board services.
To Jeremy Briggs: On July 23, 2013, we issued 34,000,000 shares for Board services.
To Sean Sego: On August 1, 2013, we issued 4,000,000 shares for Board services.
To Robert Chance: On August 1, 2013, we issued 4,000,000 shares for Board services.
To Jeremy Briggs: On July 23, 2013, we issued 4,000,000 shares for Board services.
To Kevin Brown: On November 5, 2013, we granted 5,000,000 shares for Board services and issued on March 20, 2014.
To James Gunn: On November 5, 2013, we granted 5,000,000 shares for Board services and issued on March 20, 2014.
To Jason Jensen: On March 26, 2014, we issued 59,000,000 in accordance with the JD acquisition agreement.
To David Gurr: On March 26, 2014, we issued 59,000,000 in accordance with the JD acquisition agreement.
To Sean Sego: On April 2, 2014, the Company issued 4,000,000 shares of restricted common stock for security on a note payable agreement dated April 2, 2014.
Promoters and certain control persons
We have no knowledge of any person who would be deemed a “promoter” of our company during the past five years within the meaning of Rule 405 under the Securities Act, except as noted in our registration statement Form 10/a filed on March 3, 2010.
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Director Independence
As of April 11, 2014, we currently have four (4), individuals serving on our board which we deem independent directors of the Company set forth in NASDAQ Rule 5605(a)(2).
ITEM 14: PRINCIPAL ACCOUNTANT FEES AND SERVICES
Audit Fees
The aggregate fees billed by the Company's auditors for the professional services rendered in connection with the audit of its annual financial statements and reviews of the financial statements included in the Company's Forms 10-Q’s and 10-K’s for fiscal year 2013 and 2012 were approximately $36,000 and $33,000, respectively.
Other Fees
For 2013 and 2012, we incurred no other fees to Keeton, CPA, Certified Public Accountants, for products and services other than the services reported above.
ITEM 15: EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) | Financial Statements Filed |
INDEX TO FINANCIAL STATEMENTS | Page | |
Report of Independent Registered Public Auditing Firm | 20 | |
Consolidated Balance Sheets –December 31, 2013 and 2012, respectively | 21 | |
Consolidated Statements of Operations –December 31, 2013 and 2012, respectively | 22 | |
Statements of Stockholders’ Deficit | 23 | |
Consolidated Statements of Cash Flows –December 31, 2013 and 2012, respectively | 24 | |
Notes to the Consolidated Financial Statements | 25-36 |
(b) | Exhibits |
Exhibit No. | Description of Exhibit | |
2.1 | Stock Purchase Agreement dated October 2, 2007, by and among National Automation Services, Inc., Intuitive System Solutions, Inc., the stockholders of Intuitive System Solutions, Inc., TBeck Capital Inc. and 3 JP Inc. (1) | |
2.2 | Stock Purchase Agreement dated December 26, 2007, by and among National Automation Services, Inc., Intecon, Inc. and the stockholders of Intecon, Inc. (1) | |
2.3 | Stock Purchase Agreement dated June 30, 2009 by and among National Automation Services, Inc., Control Engineering, Inc., and the stockholders of Control Engineering, Inc. (1) | |
3.1 | Articles of Incorporation, as amended.(1) | |
3.2 | Bylaws.(1) | |
10.1 | Securities Purchase Agreement dated March 26, 2008 by and between National Automation Services, Inc. and Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.2 | Security Agreement dated March 26, 2008 by and between National Automation Services and Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) |
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10.3 | Secured Redeemable Debenture issued March 26, 2008 by National Automation Services, Inc. to Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.4 | Securities Purchase Agreement dated July 21, 2008 by and between National Automation Services, Inc. and Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.5 | Security Agreement dated July 21, 2008 by and between National Automation Services, Inc. and Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.6 | Personal Guaranty dated July 21, 2008 by and between Robert Chance and Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.7 | Secured Redeemable Debenture issued July 21, 2008 by National Automation Services, Inc. to Trafalgar Capital Specialized Investment Fund, Luxembourg.(1) | |
10.8 | Credit Agreement dated December 18, 2008 by and among National Automation Services, Inc., Intecon, Inc., Intuitive System Solutions, Inc., Robert Chance and Trafalgar Capital Specialized Investment Fund, FIS.(1) | |
10.9 | Security Agreement dated December 18, 2008 by and between National Automation Services, Inc., Intecon, Inc., Intuitive System Solutions, Inc. and Trafalgar Capital Specialized Investment Fund, FIS.(1) | |
10.10 | Revolving Note issued December 18, 2008 by National Automation Services, Inc., Intecon, Inc. and Intuitive System Solutions, Inc. to Trafalgar Capital Specialized Investment Fund, FIS.(1) | |
10.11 | Guaranty dated December 18, 2008 by and between National Automation Services, Inc., Intecon, Inc., Intuitive System Solutions, Inc. and Trafalgar Capital Specialized Investment Fund, FIS.(1) | |
10.12 | Personal Guaranty dated December 18, 2008 by and between Robert Chance and Trafalgar Capital Specialized Investment Fund, FIS.(1) | |
10.13 | Employment Agreement of Robert Chance.(1) | |
10.14 | Employment Agreement of Manuel Ruiz.(1) | |
10.15 | Employment Agreement of Jody Hanley.(1) | |
10.16 | Employment Agreement of Brandon Spiker.(1) | |
10.17 | Employment Agreement of David Marlow.(1) | |
10.18 | Operating Lease Agreement dated January 1, 2008 with Jody Hanley.(1) | |
10.19 | Nevada lease agreements.(1) | |
10.20 | Arizona lease agreements (1) | |
10.21 | Promissory note dated April 1, 2009 by and between National Automation Services, Inc. and Jody Hanley.(1) | |
10.22 | Promissory note dated April 1, 2009 by and between National Automation Services, Inc. and Robert O’Connor.(1) | |
10.23 | Lock Up Letter Agreement between T-Beck Capital, Inc. and Robert Chance, Jody Hanley and Manuel Ruiz, dated August 9, 2007.(3) | |
10.24 | Summary of February 2008 Oral Loan Agreement with Robert Chance.(2) | |
10.25 | Summary of July 25, 2008 Oral Loan Agreement with South Bay Capital, Inc. (2) |
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10.26 | Termination Agreement with Control Engineering, Inc., dated September 18, 2009.(2) | |
10.27 | Investment Banking Agreement with T-Beck Capital, dated October 2, 2007.(2) | |
10.28 | Consulting Agreement with Draco Financial LLC, dated April 18, 2008.(2) | |
10.29 | Consulting Agreement with Viard Consulting Services, dated July 16, 2008.(2) | |
10.30 | Consulting Agreement with Gianpiero Balestrieri, dated July 16, 2008.(2) | |
10.31 | Employment Agreement with Jeremy Briggs, dated July 28, 2008.(4) | |
10.32 | Addendum, dated January 1, 2009, to Jeremy Briggs Employment Agreement.(4) | |
10.33 | Amendment, dated March 1, 2010, to Addendum, dated January 1, 2009, to Jeremy Briggs Employment Agreement.(5) | |
10.34 | Consulting agreement dated May 29, 2009 by and between National Automation Services, Inc. and Keros Capital (7) | |
10.35 | Promissory note dated September 11, 2009 by and between National Automation Services, Inc. and Brandon Spiker (7) | |
10.36 | Consulting agreement dated October 16, 2009 by and between National Automation Services, Inc. and Selective Consulting (7) | |
10.37 | Convertible note dated November 9, 2009 by and between National Automation Services, Inc. and Joan Dougherty (7) | |
10.38 | Convertible note dated November 10, 2009 by and between National Automation Services, Inc. and Eugene Ingles III (7) | |
10.39 | Convertible note dated December 15, 2009 by and between National Automation Services, Inc. and Mark Ingles (7) | |
10.40 | Convertible note dated December 22, 2009 by and between National Automation Services, Inc. and Eugene Ingles IV (7) | |
10.41 | Consulting agreement dated January 27, 2010 by and between National Automation Services, Inc. and Quality Stocks (7) | |
10.42 | Consulting agreement dated February 1, 2010 by and between National Automation Services, Inc. and Harbour Capital (7) | |
10.43 | Securities Purchase Agreement dated April 7, 2010 with Ascendiant Capital Group, LLC (6) | |
10.44 | Registration Rights Agreement dated April 7, 2010 with Ascendiant Capital Group, LLC (6) | |
10.45 | Convertible note dated September 1, 2010 by and between National Automation Services, Inc. and Steven Seeley (9) | |
10.46 | Convertible note dated September 21, 2010 by and between National Automation Services, Inc. and Michael Hayak (9) | |
10.47a | Convertible note dated October 15, 2010 by and between National Automation Services, Inc. and George Donovan (9) | |
10.47b | Convertible note dated October 15, 2010 by and between National Automation Services, Inc. and George Donovan (9) |
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10.48 | Promissory note dated December 31, 2010 by and between National Automation Services, Inc. and David Marlow (9) | |
10.49 | Promissory note dated December 31, 2010 by and between National Automation Services, Inc. and James Jesse (9) | |
10.50 | Promissory note dated December 31, 2010 by and between National Automation Services, Inc. and Brandon Spiker (9) | |
10.51 | Consulting agreement dated September 21, 2010 by and between National Automation Services, Inc. and Quality Stocks.(9) | |
10.52 | Consulting agreement dated April 10, 2010 by and between National Automation Services, Inc. and Lord & Benoit.(9) | |
10.53 | Consulting agreement dated September 24, 2010 by and between National Automation Services, Inc. and Tribe Communication (Robert Sullivan).(9) | |
10.54 | Promissory note dated March 21, 2011 by and between National Automation Services, Inc. and Trafalgar Capital (disclosed as exhibit I in the settlement agreement filed in 8K on March 29, 2011).(9) | |
10.55 | Consulting agreement dated March 3, 2011 by and between National Automation Services, Inc. and Lighthouse Capital.(9) | |
10.56 | Addendum, dated January 17, 2011, to Jeremy Briggs Employment Agreement(9) | |
10.57 | Addendum, dated January 17, 2011, to Brandon Spiker Employment Agreement(9) | |
10.58 | Addendum, dated December 30, 2010, to David Marlow Employment Agreement(9) | |
10.59 | Settlement agreement dated March 25, 2011 by and between National Automation Services, Inc. and Trafalgar Capital in conjunction with litigation between both parties.(8) | |
10.60 | Finder’s Fee agreement dated March 15, 2011 by and between National Automation Services, Inc. and Newport Coast Securities.(9) | |
10.61 | Amended convertible note dated May 23, 2011 by and between National Automation Services, Inc. and George Donovan.(10) | |
10.62 | Amended convertible note dated May 23, 2011 by and between National Automation Services, Inc. and George Donovan.(10) | |
10.63 | Convertible note dated April 18, 2011 by and between National Automation Services, Inc. and Asher Enterprises.(10) | |
10.64 | Convertible note dated June 2, 2011 by and between National Automation Services, Inc. and Asher Enterprises.(10) | |
10.65 | Service agreement dated November 28, 2011 by and between National Automation Services, Inc. and Newport Coast Securities. (10) | |
10.66 | Service agreement dated April 14, 2011 by and between National Automation Services, Inc. and Versant Funding LLC. (10) | |
10.67 | Securities and collateral agreement dated April 29, 2011 by and between National Automation Services, Inc. and TriPod Group LLC. (10) | |
10.68 | Service agreement dated June 30, 2011 by and between National Automation Services, Inc. and Tribe Communications, Inc. (Robert Sullivan)(10) |
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10.69 | Service agreement dated September 1, 2011 by and between National Automation Services, Inc. and National Financial Communications Corporation. (10) | |
10.70 | Service agreement dated April 26, 2011 by and between National Automation Services, Inc. and Mass Media 77. (10) | |
10.71 | Convertible note dated May 8, 2012 by and between National Automation Services, Inc. and Asher Enterprises.(11) | |
10.72 | Service agreement dated June 26, 2012 by and between National Automation Services, Inc. and Mass Media 77. (11) | |
10.73 | Convertible note dated March 14, 2012 by and between National Automation Services, Inc. and Ronald Krochak.(11) | |
10.74 | Promissory note dated January 4, 2012 by and between National Automation Services, Inc. and Ronald Krochak (11) | |
10.75 | Service agreement dated March 23, 2012 by and between National Automation Services, Inc. and Newport Coast Securities.(11) | |
10.76 | Service agreement dated May 8, 2012 by and between National Automation Services, Inc. and Newport Coast Securities.(11) | |
10.77 | Convertible note dated January 6, 2012 by and between National Automation Services, Inc. and Asher Enterprises.(11) | |
10.78 | Convertible note dated July 1, 2013 by and between National Automation Services, Inc. and Ronald Krochak(*) | |
10.79 | Convertible note dated September 19, 2013 by and between National Automation Services, Inc. and Carolyn Goss(*) | |
10.80 | Convertible note dated July 10, 2013 by and between National Automation Services, Inc. and Ronald Krochak(*) | |
10.81 | Convertible note dated November 1, 2013 by and between National Automation Services, Inc. and Sharon Kinney(*) | |
10.82 | Service agreement dated July 15, 2013 by and between National Automation Services, Inc. and Wellington Shields(*) | |
10.83 | Service agreement dated July 15, 2013 by and between National Automation Services, Inc. and Wellington Shields(*) | |
10.84 | Convertible note dated September 11, 2013 by and between National Automation Services, Inc. and Michael Hayek(*) | |
10.85 | Convertible note dated September 16, 2013 by and between National Automation Services, Inc. and Dennis Clarke(*) | |
10.86 | Convertible note dated September 11, 2013 by and between National Automation Services, Inc. and Lisa DeFily(*) | |
10.87 | Convertible note dated September 18, 2013 by and between National Automation Services, Inc. and Eric Haggard(*) | |
10.88 | Convertible note dated September 10, 2013 by and between National Automation Services, Inc. and Debra Stangle(*) |
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10.89 | Promissory note dated April 15, 2013 by and between National Automation Services, Inc. and Jody Dougherty(*) | |
10.90 | Convertible note dated August 12, 2013 by and between National Automation Services, Inc. and Sharon Kinney(*) | |
10.91 | Service agreement dated July 5, 2013 by and between National Automation Services, Inc. and Mass Media 77, LTD(*) | |
10.92 | Convertible note dated November 20, 2013 by and between National Automation Services, Inc. and Ronald Krochak(*) | |
10.93 | Purchase and Sale agreement with JD Field Services executed on February 24, 2014 with National Automation Services, Inc.(12) | |
10.94 | Amended Purchase and Sale agreement with JD Field Services executed on March 25, 2014 with National Automation Services, Inc.(13) | |
14.1 | Code of Ethics (NAS Company code of conduct) (9) | |
21.1 | Subsidiaries(*) | |
31.1 | Certification of Principal Executive Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*) | |
31.2 | Certification of Principal Financial Officer pursuant to Rule 13a-14(a) of the Securities Exchange Act of 1934, as amended, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002(*) | |
32.1 | Certification of Principal Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*) | |
32.2 | Certification of Principal Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.(*) | |
101.INS | XBRL Instance Document(*) | |
101.SCH | XBRL Taxonomy Extension Schema Document(*) | |
101.CAL | XBRL Taxonomy Extension Calculation Link base Document(*) | |
101.LAB | XBRL Taxonomy Extension Label Link base Document(*) | |
101.PRE | XBRL Taxonomy Extension Presentation Link base Document(*) | |
101.DEF | XBRL Taxonomy Extension Definition Link base Document(*) | |
99.1 | Disclosure Policy(1) |
Filed herewith (*)
Filed with registration statement Form 10 on August 7, 2009 (1)
Filed with amended registration statement Form 10/A on September 9, 2009 (2)
Filed with amended registration statement Form 10/A on October 29, 2009 (3)
Filed with amended registration statement Form 10/A on February 1, 2010 (4)
Filed with amended registration statement Form 10/A on March 3, 2010 (5)
Filed as exhibits 10.1 and 10.2, respectively on Form 8K on April 8, 2010 (6)
Filed with amended registration statement Form 10 on March 8, 2010 (7)
Filed as exhibits 10.1 on Form 8K on March 29, 2011 (8)
Filed as exhibits on audited form 10-K on April 14, 2011(9)
Filed as exhibits on audited form 10-K on April 14, 2012(10)
Filed as exhibits on audited form 10-K on April 14, 2012(11)
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Filed as exhibits 1.1 on Form 8K on February 24, 2014(12)
Filed as exhibits 1.1 on Form 8K on March 26, 2014(13)
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SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this annual report to be signed on its behalf by the undersigned, thereunto duly authorized.
NATIONAL AUTOMATION SERVICES INC.
(Registrant)
Date: April 11, 2014
By: | /s/ | Robert W. Chance | ||
Name: Robert W. Chance | ||||
Title: President and Chief Executive Officer | ||||
(Principal Executive Officer) |
By: | /s/ | Jeremy W. Briggs | ||
Name: Jeremy W. Briggs | ||||
Title: Principal Financial Officer |
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