UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, ~~2009~~2010

Commission file number 000-27419

AMERICAN SECURITY RESOURCES CORPORATION

(Exact name of small business issuer as specified in its charter)

192525 ~~Briar~~Robin ~~Hollow~~Hood ~~Lane~~Street, Suite ~~125~~1100

Houston, Texas ~~77027~~77005

(Address of principal executive offices)

Nevada		90-0179050
(State of incorporation)		(I.R.S. Employer Identification No.)

Registrant’s telephone number, including area code: (713) 465-1001

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

Securities registered pursuant to Section 12(g) of the Act: $.001 Par Value Common

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes  o No þ

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Securities Act. Yes  o No þ

Indicate by check mark whether the registrant (1) has 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 þ No  o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 229.405 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  o No þ

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. þ

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

(Do not check if a smaller reporting company)

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

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of December 31, ~~2009~~2010 is $1,~~518~~800,~~118.18~~151 (based on its reported last sale price by the OTC Pink Sheets).

The number of shares outstanding of the Registrant's common stock as of December 31, ~~2009~~2010 was 519,~~420~~414,~~381~~684,~~610~~920.

Documents Incorporated By Reference: None

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AMERICAN SECURITY RESOURCES CORPORATION

INDEX TO FORM 10-K

December 31, ~~2009~~2010

			Page No.
Part I	Item 1.	Description of Business	3
	Item 2.	Description of Property	4
	Item 3.	Legal Proceedings	4
	Item 4.	Submission of Matters to a Vote of Security Holders	45
Part II	Item 5.	Market for Common Equity and Related Stockholder Matters	5
	Item 6.	Selected Financial Data	76
	Item 7.	Management's Discussion and Analysis or Plan of Operation	87
	Item 8.	Financial Statements	1210
Part III	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	3328
	Item 9A.	Controls and Procedures	3328
	Item 10.	Directors, Executive Officers, Promoters and Control Persons Compliance with Section 16(a) of the Exchange Act Executive Compensation	3530
	Item 11	Executive Compensation	36
	Item 11.	Executive Compensation	31
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	3732
	Item 13.	Certain Relationships and Related Party Transactions	3732
	Item 14.	Principal Accountant Fees and Services	3732
Part IV	Item 15.	Exhibits and Reports on Form 8-K	3833
		Signatures	3833

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

Forward-Looking Statements

Certain statements concerning the Company's plans and intentions included herein may constitute forward-looking statements for purposes of the Securities Litigation Reform Act of 1995 for which the Company claims a safe harbor under that Act. There are a number of factors that may affect the future results of the Company, including, but not limited to, (a) the ability of the company to obtain additional funding for operations, (b) the continued availability of management to develop the business plan, (c) regulatory acceptance of our products in diverse localities and (d) successful development and market acceptance of the company’s products.

This periodic report may contain both historical facts and forward-looking statements. Any forward-looking statements involve risks and uncertainties, including, but not limited to, those mentioned above. Moreover, future revenue and margin trends cannot be reliably predicted.

Overview

AMERICAN SECURITY RESOURCES CORPORATION (the “Company” or ARSC) is a holding company with three wholly owned subsidiaries. Hydra Fuel Cell Corporation has completed several development stages of the HydraStax® unit and testing for certification is currently underway. We have two additional subsidiaries. We formed American Security Capital Corporation that is to provide financing options for the sales of products created by Hydra Fuel Cell and American Hydrogen. American Hydrogen Corporation is developing technologies to formulate hydrogen that we hope will change the economics of producing hydrogen sufficiently to enable the hydrogen economy.

Hydra Fuel Cell Corporation completed the initial development stage and several advanced stages of the HydraStax® unit and testing for certification is currently underway. We believe that the HydraStax® unit's cost per kWh will be significantly below that of its competitors, giving them a competitive edge as a replacement for residential grid power. Thus, upon certification Hydra intends to aggressively market these units and the Company is actively pursuing financing to begin manufacturing and distribution.

Hydra successfully defended itself from claims of patent infringement brought by a third party in 2006. Hydra’s fuel cell is original and Hydra categorically denied that it infringed on any patents. The Federal Court in Portland, Oregon dismissed the plaintiff’s suit against Hydra in 2008. We estimate that our Hydra Fuel Cell subsidiary will require approximately $1.5 million to produce and sell HydraStax® units to cash flow self-sufficiency. There is no guarantee that management will be successful in obtaining these funds.

On April 21, 2014, Hydrogen Future Corporation (OTCQB: HFCO) completed the acquisition of Hydra Fuel Cell Corporation (“Hydra”) from American Security Resources Corporation (Pink Sheets: ARSC). Hydra has developed advanced hydrogen fuel cell technology which it initially intends to deploy as residential and small commercial grid replacement for electric generation.

Under the agreement to acquire Hydra, HFCO acquired 100% of the common stock of Hydra in exchange for a convertible preferred share issued to ARSC. The preferred share is convertible into an amount equal to 100.2% of the then outstanding common stock of HFCO at the time of conversion, which is at the sole discretion of ARSC. This gives ARSC an effective 50.1% equity interest in HFCO.

American Hydrogen Corporation (AHC) was created to develop and commercialize technologies to formulate hydrogen that we believe will change the economics of producing hydrogen sufficiently to enable the hydrogen economy. The first hydrogen formulator that AHC will vend is expected to produce hydrogen from natural gas and propane and will be designed to provide hydrogen for Hydra’s fuel cells.

The Company continues to review acquisition opportunities that would enhance its fuel cell offerings and expand its offerings in alternative energy production.

The Company’s Internet address is http://www.americansecurityresources.com. Information contained on the Company’s web site is not a part of this report. The Company’s stock is traded on OTC Pink Sheets under the symbol “ARSC.PK.”

Organizational History

The Company, previously known as Computer Automation Systems, Inc., was reorganized and recapitalized in 2004 changing its name, first to Kahuna Network Security, Inc. and in July 2004, to American Security Resources Corporation with a business focus of acquiring companies in homeland security and national defense. In October 2005, the Company changed its focus to the development and commercialization of technologically advanced, high volume mass producible, hydrogen fuel cells and related clean energy technologies.

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The Company’s Products and Services

The Company is developing hydrogen fuel cells that it expects to begin delivering in ~~2009~~2011. Additionally, the Company is developing technologies to produce hydrogen at a reduced cost.

Employees

As of December 31, ~~2009~~2010, the Company had 2 two contract management members. None of the Company’s employees are covered by any collective bargaining agreements. Management believes that its relations with its employee contractors are good and the Company has not experienced any work stoppages attributable to employee disagreements.

The Company’s subsidiary, Hydra Fuel Cell Corporation, ~~has~~had ~~approximately~~ six contractors working on the development of the Company’s proprietary HydraStax™ hydrogen fuel cells and other hydrogen related technologies.

The Company’s subsidiary, American Hydrogen Corporation, ~~has~~had ~~approximately~~ three contractors working on the development of the Company’s hydrogen generators.

The Company’s subsidiary, American Security Capital, currently does not have any employees or contractors.

RISK FACTORS

Limited History

The Company is a startup with limited operating history and faces challenges typical of new businesses in highly competitive markets with many other providers of the same or essentially the same products and services.

No Revenue and Limited Resources

The Company is a start up business. There is no assurance that the Company will be able to finance its development, or that the Company will be able profitably to operate such business.

Limited Staff

The Company has two officers and five additional directors charged with the responsibility of executing the Company’s business strategy. Any death, injury or other incapacity of one or more of them could adversely affect the Company’s ability to complete its business strategy.

Volatility of Stock Market

There have been significant fluctuations in the market price for the Company's common stock. Factors such as variations in the Company's revenues, earnings, if any, and cash flow and announcements of innovations or acquisitions by the Company or its competitors could cause the market price of the common stock to fluctuate substantially. In addition, the stock market has experienced price and volume fluctuations that have particularly affected companies in the alternative energy business resulting in changes in the market price of the stocks of many companies which may not have been directly related to the operating performance of those companies. Such broad market fluctuations may adversely affect the market price of the Company’s common stock.

ITEM 2. DESCRIPTION OF PROPERTY

ASRC ~~has~~ leased approximately 1,600 square feet of office space at 19 Briar Hollow Lane, Ste 125, Houston, TX 77027, for approximately $2,650 per month through March 31, 2012. Additionally, the Company’s Hydra Fuel Cell subsidiary ~~leases~~leased approximately 5,000 square feet of office and light manufacturing space in Portland, Oregon, for approximately $4,930 per month. ~~The~~Currently the Company ~~believes~~leases ~~this~~executive ~~space~~offices ~~will~~at be2525 ~~sufficient~~Robin ~~for~~Hood ~~its~~Street, ~~needs~~Suite ~~for~~1100, Houston, Texas 77005 at a monthly rate of $500 per month. Hydra Fuel Cell Corporation was acquired by Hydrogen Future Corporation in April 2014 as discussed in the ~~term~~Note 15 - Subsequent Events on page 28 of the ~~lease~~Financial Statements in this 10-K Report.

ITEM 3. LEGAL PROCEEDINGS

From time to time, the Company may become involved in litigation arising in the ordinary course of its business. The Company isdoes ~~presently~~not ~~involved~~believe inthat any such litigation aswill ~~further~~have ~~described~~a inmaterial ~~Footnote~~effect 13on the Company’s financial position or results of operations.

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

NONE

PART II

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

Market Information.

The Company’s common stock trades on Pink Sheets under the symbol “ARSC.PK”, and was formerly listed on the NASDAQ OTC Bulletin Board under the symbol “ARSC”. The market for the Company’s common stock on Pink Sheets and on the OTC Bulletin Board is limited, sporadic and highly volatile.

The following quotations were provided by Pink Sheets and the OTC Bulletin Board for the Company’s common stock for the last two years. The quotations represent inter-dealer prices and do not necessarily represent actual transactions. These quotations do not reflect dealer markups, markdowns or commissions.

Quarter ended:	~~High~~	~~Low~~High		Low
March 31, 2009	$ 0.0034	$ 0.0005
March 31, 2010		$	0.0006	$	0.0002
June 30, 2009	$ 0.002	$ 0.0003
June 30, 2010		$	0.003	$	0.0001
September 30, 2009	$0.0011	$0.0003
September 30, 2010		$	0.0003	$	0.0001
December 31, 2009	$ 0.0007	$ 0.0003
December 31, 2010		$	0.0001	$	0.0001
March 31, 2008	$ 0.033	$ 0.025
March 31, 2009		$	0.034	$	0.0005
June 30, 2008	$ 0.074	$ 0.015
June 30, 2009		$	0.002	$	0.0003
September 30, 2008	$ 0.044	$ 0.01
September 30, 2009		$	0.0011	$	0.0003
December 31, 2008	$ 0.013	$ 0.0019
December 31, 2009		$	0.0007	$	0.0003

Holders

The number of record holders of the Company's securities as of the date of this Report is approximately 351.

Dividends

The Company has not declared any cash dividends with respect to its common stock, and does not intend to declare cash dividends in the foreseeable future. ~~On April 7, 2009, the Company announced the plan to spinoff Hydra to its shareholders through a special stock dividend. This will be accomplished through a Proxy and shareholder vote in 2010.~~ There are no material restrictions limiting, or that are likely to limit, the Company's ability to pay dividends on its securities.

Recent Sales of Unregistered Securities

During the year ended December 31, 2010, ASRC issued 5,171,075,185 common shares to external parties in exchange for consulting and legal services recorded a total expense of $904,776. The expense is equal to the fair value of the shares based upon the closing price at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

During the year ended December 31, 2010, ASRC issued 3,030,666,666 common shares in lieu of compensation to its Officers and Directors. The expense is equal to the fair value for services rendered. These shares were valued at $135,500 based on their market value at the time of issuance, as reflected in these financial statements.

During 2009, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2010, the Company issued 3,030,666,666 common shares in exchange for settlement of the accrued compensation of $135,500 to these executives.

During the year ended December 31, 2009, ASRC issued 2,116,514,414 common shares to external parties in exchange for consulting and legal services recorded a total expense of $1,488,450. The expense is equal to the fair value of the shares based upon the closing price at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

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During the year ended December 31, 2009, ASRC issued 189,336,735 common shares in lieu of compensation to its Officers and Directors. The expense is equal to the fair value for services rendered. These shares were valued at $87,550 based on their market value at the time of issuance, as reflected in these financial statements.

During 2009, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2009, the Company issued 935,079,111 common shares in exchange for settlement of the accrued compensation of $206,449 to these executives.

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The above transactions were completed pursuant to either Section 4(2) of the Securities Act or Rule 506 of Regulation D of the Securities Act or Rule 506 of Regulation D of the Securities Act. With respect to issuances made pursuant to Section 4(2) of the Securities Act, the transactions did not involve any public offering and were sold to a limited group of persons. Each investor either received adequate information about the Company or had access to such information. The Company determined that each investor had such knowledge and experience in financial and business matters that they were able to evaluate the merits and risks of an investment in the Company.

With respect to issuances made pursuant to Regulation D of the Securities Act, the Company determined that each purchaser was an “accredited investor” as defined in Rule 501(a) under the Securities Act, or if such investor was not an accredited investor, that such investor received the information required by Regulation D.

All sales of the Company’s securities were made by officers of the Company who have received no commission or other remuneration for the solicitation of any person in connection with the respective sales of the securities described above. The recipients of securities represented their intention to acquire the securities for investment only and not with a view to sale, or for sale in connection with any distribution thereof. Appropriate legends were affixed to the share certificates issued in these transactions.

Equity Compensation Plan Information

The Company has a 2009 stock ~~option~~incentive plan, as filed on Form S-8 on January 30, 2009, under which the Company is authorized to grant incentive ~~stock~~shares ~~options~~of stock, to a maximum of 200 million (200,000,000) shares, to key employees, officers, directors, and consultants of the Company. The plan provides both for the direct award or sale of shares and for the grant of options to purchase shares.

The following table provides information as of December 31, ~~2009~~2010 regarding compensation plans (including individual compensation arrangements) under which equity securities are authorized for issuance:

Plan Category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		~~Weighted-average exercise price of outstanding options, warrants and rights~~	~~Number~~Weighted-average ofexercise ~~securities~~price ~~available~~of ~~for~~outstanding ~~future~~options, ~~issuance~~warrants ~~under~~and ~~equity compensation plans (excluding securities shown in first column)~~rights		Number of securities available for future issuance under equity compensation plans (excluding securities shown in first column)
Equity compensation plans approved by shareholders (1)(2)	0	0	~~$0.00~~	~~200,000,000~~$	0.00		200,000,000
Total	0	0	~~$0.00~~	~~200,000,000~~$	0.00		200,000,000

(1) Consists of shares of our common stock issued or remaining available for issuance under our stock compensation plan.

(2) Approved by shareholders of American Security Resources Corporation.

Item 6. Selected Financial Data

~~The~~Not ~~following~~required ~~table~~for ~~contains~~smaller ~~certain~~reporting ~~financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto included elsewhere in this report~~issuers. The balance sheet and statement of operations data were derived from the consolidated financial statements and notes thereto that have been audited by our independent registered certified public accounting firms. The financial data shown below should be read in conjunction with the consolidated financial statements and the related notes thereto and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included elsewhere in this report.

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			Year Ended December 31,
			2005	2006	2007	2008	2009
Statement of Operations Data:
	Revenue		$ -	$ -	$ -	$ -	$ -
	Research and development costs		-	1,767,084	1,039,652	1,528,081	533,085
	General and administrative		5,381,900	6,579,160	4,176,295	1,604,224	1,698,829
	Loss from operations		( 5,384,548)	(8,368,581)	(5,277,798)	(3,132,305)	(2,261,712)
	Other income (expense), net		-	(231,189)	(208,337)	(653,808)	(417,565)
	Net loss		$( 5,384,548)	$ (8,599,770)	$ (5,486,135)	$(3,818,868)	$(2,679,277)
	Net loss per common share		$ (0.13)	$ (0.11)	$ (0.04)	$ (0.01)	$ (0.00)
	Weighted average common shares
		outstanding-basic and diluted	42,053,103	80,723,597	125,033,916	271,793,646	2,656,485,145
Balance Sheet Data:
	Current assets		$ 154,062	$ 13,022	$ 21,473	$ 183,683	$ 16,289
	Total assets		169,517	146,143	2,246,892	276,187	78,995
	Current liabilities		25,478	419,320	1,677,299	840,912	1,793,519
	Total liabilities		25,478	419,320	3,133,624	1,993,624	1,793,519
	Stockholders' Equity (Deficit)		144,039	(273,177)	(886,732)	(1,717,437)	(1,714,524)

Item 7. Management's Discussion and Analysis or Plan of Operation

Overview.

Forward-Looking Statements

This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other parts of this document contain forward-looking statements that involve risks and uncertainties, as well as current expectations and assumptions. From time to time, the Company may publish forward-looking statements, including those that are contained in this report, relating to such matters as anticipated financial performance, business prospects, technological developments, new products, research and development activities and similar matters. The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company’s actual results and experience to differ materially from the anticipated results or other expectations expressed in the Company’s forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company’s business include, but are not limited to, its ability to maintain sufficient liquidity to meet its obligations, maintaining compliance with the terms of its credit agreement, the ability to sell some or all of its business units and the amount of proceeds from any such sales, the impact of the significant reduction in research and development expenditures, limitations in its ability to fund capital expenditures to remain competitive, adverse changes in the global economy, sudden decreases in the demand for electronic products and semiconductors, the impact of competition, delays in product development schedules, delays due to technical difficulties related to developing and implementing technology, delays in delivery schedules, the ability to attract and maintain sufficient levels of people with specific technical talents, future results related to changes in demand for the Company’s products and services and the Company’s customers’ products and services, and other items discussed elsewhere in this report. The Company’s actual results could differ materially from those anticipated in these forward-looking statements, including those set forth elsewhere in this report. The Company assumes no obligation to update any such forward-looking statements.

Plan for Future Operations

In 2005, we acquired certain intellectual property and contracted with engineers to begin our hydrogen fuel cell division. Seven patent applications have been filed covering some of the innovations incorporated in the HydraStax® and we intend to file additional patent applications. In November 2008 the first of the patents was issued.

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Our Hydra Fuel Cell subsidiary completed several development stages of the HydraStax® unit and testing for certification is currently underway. We believe that the HydraStax® unit's cost per kWh will be significantly below that of its competitors, giving it a competitive edge as a replacement for residential grid power. Thus, upon certification, Hydra intends to aggressively market these units. The Company is actively pursuing financing to begin manufacturing and distribution. Hydra installed two of its HydraStax® fuel cells in residences, one in Texas in October 2007 and one in Florida in December 2007, as “Beta Test demonstration units”. These were milestones for Hydra and for the fuel cell industry

American Hydrogen Corporation (AHC) was formed to develop and commercialize technologies to formulate hydrogen that we believe will change the economics of producing hydrogen sufficiently to enable the hydrogen economy.

The Company continues to review acquisition opportunities that would enhance its fuel cell offerings, expand its offerings in alternative energy production or represent opportunities in homeland security or national defense.

We have had no revenue since beginning our Hydra subsidiary. Although we expect revenues from our HydraStax™ unit during ~~2010~~2011, we do expect cash flows from distribution of the unit to become self-funding during ~~2010~~2011. We estimate that our Hydra Fuel Cell subsidiary will require approximately $1.5 million to produce and sell HydraStax® units to cash flow self-sufficiency. There is no guarantee that management will be successful in obtaining these funds.

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Critical Accounting Policies

The accompanying discussion and analysis of our financial condition and results of operations are based upon our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America (“US GAAP”). The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues, and expenses, and related disclosure of contingent assets and liabilities. These estimates form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. We base our estimates and judgments on historical experience and all available information. However, future events are subject to change, and the best estimates and judgments routinely require adjustment. US GAAP requires us to make estimates and judgments in several areas, including those related to recording various accruals, income taxes, the useful lives of long-lived assets, such as property and equipment and intangible assets, and potential losses from contingencies and litigation. We believe the policies discussed below are the most critical to our financial statements because they are affected significantly by management’s judgments, assumptions and estimates.

Accounting for Stock-Based Compensation

Effective December 15, 2005, we adopted the provisions of FASB Accounting Standards Codification 718, “Compensation — Stock Compensation” (ASC 718), previously referred to as Statement of Financial Accounting Standards No. 123R, “Share-Based Payment” and applied the provisions of the Securities and Exchange Commission Staff Accounting Bulletin No. 107 using the modified-prospective transition method. Under this transition method, compensation cost recognized includes (a) the compensation cost for all share-based awards granted prior to, but not yet vested, as of December 15, 2005, based on the grant-date fair value estimated in accordance with the original provisions of ASC 718 and (b) the compensation cost for all share-based awards granted subsequent to December 15, 2005, based on the grant-date fair value estimated in accordance with the provisions of ASC 718. The Company had not issued any options to employees in the prior periods thus; there was no impact of adopting the new standard.

Additionally, we accounted for restricted stock awards granted using the measurement and recognition provisions of ASC 718. We measure the fair value of the restricted stock awards on the grant date and recognize them in earnings over the requisite service period for each separately vesting portion of the award.

The Company determines the value of stock options utilizing the Black-Scholes option-pricing model. Compensation costs for share-based awards with pro rata vesting are allocated to periods on a straight-line basis.

Intangible Assets

Intangible assets with estimable useful lives are amortized over respective estimated useful lives to their estimated residual values, and reviewed for impairment in accordance with FASB Accounting Standards Codification 360, “Property, Plant and Equipment” (ASC 360), previously referred to as Statement of Financial Accounting Standards No. 144, Accounting for Impairment or Disposal of Long-Lived Assets .

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Off Balance Sheet Arrangements

The Company has no off balance sheet arrangements.

Recent Accounting Pronouncements

InThe ~~April~~Company ~~2009,~~has ~~the~~adopted ~~FASB~~all recently issued ~~FASB~~accounting ~~Staff Position (“FSP”) No~~pronouncements. ~~107-1~~The ~~and~~adoption ~~APB 28-1, Interim Disclosures about Fair Value~~ of ~~Financial Instruments (“FSP 107-1 and APB 28-1”). FSP 107-1 and APB 28-1 require that publicly traded companies include~~ the ~~fair~~accounting ~~value~~pronouncements, ~~disclosures~~including ~~required~~those bynot ~~SFAS~~yet ~~No. 107 in their interim financial statements and is~~ effective ~~for interim and annual periods ending after June 15~~, ~~2009,~~is ~~with early adoption permitted for periods ending after March 15, 2009, and must be applied prospectively. The Company does~~ not ~~expect~~anticipated ~~the adoption of FSP 107-1 and APB 28-1~~ to have ~~any~~a material ~~impact~~effect on ~~its~~the financial ~~statements~~position ~~and~~or ~~required~~results ~~disclosures~~of operations of the Company.

In April 2009, the FASB issued FSP FAS 157-4, Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157-4”). FSP 157-4 provides guidance regarding how to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability when compared with normal market activity for the asset or liability. In such situations, an entity may conclude that transactions or quoted prices may not be determinative of fair value, and may adjust the transactions or quoted prices to arrive at the fair value of the asset or liability. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, and must be applied prospectively. The Company does not expect the adoption of FAS 157-4 to have any material impact on its financial statements or required disclosures.

In May 2009, the FASB issued SFAS No. 165, Subsequent Events (“SFAS No. 165”). SFAS No. 165 establishes standards of accounting for and disclosure of events that occur after the balance sheet date but before financial statements are issued. Entities are required to disclose the date through which subsequent events have been evaluated and the basis for that date. SFAS No. 165 is effective on a prospective basis for interim and annual periods ending after June 15, 2009. The Company does not expect the adoption of SFAS No. 165 to have any material impact on its financial statements or required disclosures.

In June 2009, the FASB issued SFAS 168, “Codification”, which confirmed that the FASB Accounting Standards Codification will become the single official source of authoritative US GAAP (other than guidance issued by the SEC), superseding existing FASB, American Institute of Certified Public Accountants, Emerging Issues Task Force (“EITF”) and related literature. After that date, only one level of authoritative US GAAP will exist. All other literature will be considered non-authoritative. The Codification does not change US GAAP; instead, it introduces a new structure that is organized in an easily accessible, user-friendly online research system. The Codification becomes effective for interim and annual periods ending on or after September 15, 2009. The Company will apply the Codification beginning in the third quarter of fiscal 2009.

Financial Condition and Results of Operations

The Company had no revenue during the calendar years ended December 31, ~~2009~~2010 and ~~2008~~2009.

The Company had no gross profit during fiscal years ~~2009~~2010 and ~~2008~~2009. General and administrative expenses were $1,~~698~~414,~~829~~583 and $1,~~604~~698,~~224~~829 for the years ended December 31, ~~2009~~2010 and ~~2008~~2009 respectively. Principal general and administrative expenses included contracted services ($~~834~~714,~~362~~622 and $~~222~~834,~~245~~362, respectively); legal expenses ($~~341~~324,~~141~~386 and $~~352~~341,~~066~~141, respectively); payroll and contractors (of $354,132 ~~and~~in 2009; commission of $~~760~~136,~~530~~225 ~~respectively)~~in 2010; and rent ($112,286 and $111,158, respectively). Depreciation expense was $28,984 and $9629,~~384~~798 for the years ended December 31, 2010 and 2009, respectively).

Research and development expenses were $~~533~~499,~~086~~486 and $1533,~~528,081~~086 for the calendar years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively for costs incurred in its Hydra Fuel Cell and American Hydrogen subsidiaries relating to the development of its HydraStax® hydrogen fuel and hydrogen generator.

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Significant components of operating expenses for ~~2009~~2010 and ~~2008~~2009 were:

	2009		2008
		2010		2009
Fair value of warrants issued for services	$-	$	~~$72,546~~0	$	0
Stock issued for officers and directors' services	~~87,550~~		~~658~~8,~~780~~000		87,550
Stock issued to outside consultants	~~1,488,450~~		~~510~~904,~~746~~776		1,488,450
Totals	~~$1,576,000~~	$	$1912,~~242,072~~776	$	1,576,000

The Company had ~~net~~ operating losses of $2,~~679~~452,~~277~~150 and $32,~~818~~679,~~868~~277 for the years ended December 31, ~~2009~~2010 and ~~2008,~~2009 respectively.

Liquidity and Capital Resources.

We had no revenues for the years ended December 31, ~~2009~~2010 and ~~2008~~2009.

Our working capital deficit ~~decreased~~increased by $13576,~~711~~921 to ($12,~~777~~291,~~230~~445) at December 31, ~~2009~~2010 compared to ($1,~~790~~714,~~941~~524) at December 31, ~~2008~~2009. This deficit is primarily due to lack of revenues while we are in development stage and we continue to incur ordinary research and development and operating expenses as well as reflecting our outstanding debenture balances as current liabilities as a result of defaults under SEC filing provisions in those debenture agreements.

Our cash flows from operations were negative during the years ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively, due to our lack of revenues and the continuation of research and development and operating costs. Our primary funding source was the exercise of stock options for cash, issuance of stock for cash, and proceeds from new convertible debentures resulting in total cash provided by financing activities of $58,811 for the year ended December 31, 2010 and $165,056 for the year ended December 31, 2009.

We consumed $~~177~~69,~~778~~839 in cash from operating activities for the year ended December 31, ~~2009~~2010 compared with $1177,~~392,129~~778 for the year ended December 31, ~~2008~~2009.

We had a net comprehensive loss of $2,~~679~~452,~~277~~150 and $32,~~818~~679,~~868~~277 or $0.00 and $0.0100 per share for the year ended December 31, ~~2009~~2010 and ~~2008~~2009, respectively.

Our ~~working~~financial ~~capital~~statements ~~deficit~~are ~~increased~~prepared byusing ~~$778,618~~principles applicable to ~~($1~~a going concern,~~790~~ which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However,~~941)~~ atwe ~~December~~do 31not have significant cash or other material liquid assets, ~~2008~~nor ~~compared~~do we have an established source of revenue sufficient to ~~($1,012,323)~~cover atour ~~December~~operating ~~31,~~costs ~~2007~~and to allow us to continue as a going concern. ~~This~~We ~~deficit~~may, isin ~~primarily~~the ~~due~~future, toexperience ~~lack~~significant fluctuations in our results of ~~revenues~~operations. ~~while~~If we are inrequired ~~development~~to ~~stage~~obtain additional debt and weequity ~~continue~~financing toor ~~incur~~our ~~ordinary~~illiquidity ~~research~~could suppress the value and ~~development~~price of our shares if and ~~operating~~when ~~expenses~~trading asin ~~well~~those asshares ~~reflecting~~develops. However, our ~~outstanding~~future ~~debenture~~offerings ~~balances~~of assecurities may not be undertaken, and if undertaken, may not be successful or the proceeds derived from these offerings may be less than anticipated and/or may be insufficient to fund operations and meet the needs of our business plan. Our current ~~liabilities~~working ascapital is not sufficient to cover expected cash requirements for 2011 or to bring us to a ~~result~~positive ofcash ~~defaults~~flow ~~under~~position. ~~SEC~~If ~~filing~~we ~~provisions~~do innot ~~those~~raise ~~debenture~~sufficient ~~agreements~~capital to execute our business plan, it is possible that we will not be able to continue as a going concern.

Our cash flows from operations were negative during the years ended December 31, 2009 and 2008, respectively, due to our lack of revenues and the continuation of research and development and operating costs. Our primary funding source was the exercise of stock options for cash, issuance of stock for cash, and proceeds from new convertible debentures resulting in total cash provided by financing activities of $1,689,631.

We consumed $1,392,129 in cash from operating activities for the year ended December 31, 2008 compared with $1,651,405 for the year ended December 31, 2007.

Our financial statements are prepared using principles applicable to a going concern, which contemplates the realization of assets and liquidation of liabilities in the normal course of business. However, we do not have significant cash or other material liquid assets, nor do we have an established source of revenue sufficient to cover our operating costs and to allow us to continue as a going concern. We may, in the future, experience significant fluctuations in our results of operations. If we are required to obtain additional debt and equity financing or our illiquidity could suppress the value and price of our shares if and when trading in those shares develops. However, our future offerings of securities may not be undertaken, and if undertaken, may not be successful or the proceeds derived from these offerings may be less than anticipated and/or may be insufficient to fund operations and meet the needs of our business plan. Our current working capital is not sufficient to cover expected cash requirements for 2008 or to bring us to a positive cash flow position. If we do not raise sufficient capital to execute our business plan, it is possible that we will not be able to continue as a going concern.

- 10 -

We are attempting to raise additional capital through sales of common stock either through private placements or public offerings, as well as seeking other sources of funding. There are no assurances that ASRC will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain the additional financing through private placements or public offerings to support the investment in Hydra’s fuel cell technology. If these funds are not available ASRC may not continue its operations or execute its business plan.

- 119 -

ITEM 8 - FINANCIAL STATEMENTS

AMERICAN SECURITY RESOURCES CORPORATION

INDEX TO FINANCIAL STATEMENTS

	~~Page~~	Page
Report of Independent Registered Public Accounting Firm	13		13
Financial Statements
Consolidated Balance Sheets at December 31, 2009	14
Consolidated Balance Sheets at December 31, 2010 and 2009			14
Consolidated Statements of Operations for the years ended December 31, 2009 and 2008 and the period from October 1, 2005 (Re-entering of Development Stage) Through December 31, 2009	15
Consolidated Statements of Operations for the years ended December 31, 2010 and 2009			15
Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2009 and 2008 and the period from October 1, 2005 (Re-entering of Development Stage) through December 31, 2009	16
Consolidated Statement of Shareholders’ Equity for the years ended December 31, 2010 and 2009			16
Consolidated Statements of Cash Flows for the years ended December 31, 2009 and 2008 and the period from October 1, 2005 (Re-entering of Development Stage) Through December 31, 2009	20
Consolidated Statements of Cash Flows for the years ended December 31, 2010 and 2009			20
Notes to Consolidated Financial Statements	21		21

- 1210 -

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Management of

American Security Resources, Inc.

Houston, Texas

We have audited the accompanying consolidated balance ~~sheet~~sheets of American Security Resources Corporation as of December 31, 2010 and 2009, and the related consolidated statements of ~~income~~operations, cash flows and stockholders' equity for the ~~year~~years ended December 31, 2010 and 2009. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our ~~audit~~audits.

We conducted our audits of these financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the ~~audit~~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 audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit ~~also~~ includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements,. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits ~~provide~~provided a reasonable basis for our opinion.

InWe ~~our~~were ~~opinion,~~not ~~the~~engaged ~~financial statements referred~~ to ~~above~~examine ~~present~~management’s ~~fairly,~~assertion inabout ~~all material respects,~~ the ~~financial~~effectiveness ~~position~~ of American Security Resources Corporation’s internal control over financial reporting as of December 31, ~~2009,~~2010 and ~~the~~2009 ~~results of its operations~~ and, ~~its~~accordingly, ~~cash~~we ~~flows~~do ~~for~~not ~~the~~express ~~period~~an ~~then~~opinion ~~ended in conformity with accounting principles generally accepted in the United States of America~~thereon.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Security Resources Corporation as of December 31, 2010 and 2009, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 2 to the financial statements, the Company has suffered significant losses and will require additional capital to develop its business until the Company either (1) achieves a level of revenues adequate to generate sufficient cash flows from operations; or (2) obtains additional financing necessary to support its working capital requirements. These conditions raise substantial doubt about the Company's ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ PSThe ~~STEPHENSON~~Hall &Group ~~CO., PC~~CPA’s

~~Wharton~~Dallas, Texas

~~May~~October 1710, ~~2010~~2014

- 1311 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEET

December 31, 2010 and 2009

ASSETS
	2010			2009
Cash in bank	$12,399
ASSETS
Prepaid expenses	3,890
Cash in bank	$	1,371		$	12,399
Total Current Assets	16,289
Prepaid expenses		3,890			3,890
Equipment, net of accumulated depreciation of $119,413	43,744
Total Current Assets		5,261			16,289
Other assets	18,962
Equipment, net of accumulated depreciation of $119,413		14,758			43,744
TOTAL ASSETS	$78,995
Other assets		10,214			18,962
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
TOTAL ASSETS	$	30,233		$	78,995
CURRENT LIABILITIES
LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY
Accounts payable	$358,940
CURRENT LIABILITIES
Other current liabilities	424,393
Accounts payable	$	701,579		$	58,940
Convertible debentures (net of discounts of $781,004)	33,154
Note payable		18,350			0
Accrued interest on convertible debentures	5,762
Advances from shareholders		16,660			0
Derivative liability	971,270
Other current liabilities		596,711			424,393
	1,793,519
Convertible debentures (net of discounts of $322,574 and $781,004)		444,132			33,154
Total Current Liabilities
Accrued interest on convertible debentures		4,986			5,762
Long Term Liabilities	-
Derivative liability		539,260			971,270
Total Liabilities	1,793,519
Total Current Liabilities		2,321,678			1,793,519
SHAREHOLDERS' (DEFICIT)
Long Term Liabilities		0			0
Preferred stock Series A - 1,000,000 shares authorized; $.001 par value; 1,000 shares issued and outstanding	1,000
Total Liabilities		2,321,678			1,793,519
Preferred stock Series B - 1,000,000 shares authorized; $.001 par value; No shares issued and outstanding	-
SHAREHOLDERS' (DEFICIT)
Common stock - 200,000,000 shares authorized; $.001 par value; 5,420,381,610 shares issued and outstanding	5,420,381
Preferred stock Series A - 1,000,000 shares authorized; $.001 par value; 1,000 shares issued and outstanding		1,000			1,000
Additional paid-in capital	48,485,093
Preferred stock Series B - 1,000,000 shares authorized; $.001 par value; No shares issued and outstanding		0			0
Deficit accumulated during the development stage	(23,512,714)
Common stock - 200,000,000 shares authorized; $.001 par value; 5,420,381,610 shares issued and outstanding		19,414,684			5,420,381
Deficit accumulated from prior operations	(32,108,284)
Additional paid-in capital		36,366,019			48,485,093
Total Shareholders' (Deficit)	(1,714,524)
Deficit accumulated during the development stage		(25,964,864	)		(23,512,714	)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)	$78,995
Deficit accumulated from prior operations		(32,108,284	)		(32,108,284	)
Total Shareholders' (Deficit)		(2,291,445	)		(1,714,524	)
TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)	$	30,233		$	78,995

The accompanying notes are an integral part of these financial statements.

- 1412 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF OPERATIONS

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008 AND THE PERIOD FROM OCTOBER 1, 2005~~2009

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

	Year Ended December 31, 2010			Year Ended December 31, 2009

General and administrative expenses		1,414,583			1,698,829
Depreciation		28,984			29,798
Research and development expenses		499,486			533,085
Operating Loss		(1,943,053	)		(2,261,712	)

Other Income (Expense):
Interest income		0			0
Gain (loss) on derivative liability		432,010			(99,053	)
Permanent impairment of investment		0			0
Loss on license fee		0			0
Penalty on debenture default		0			(78,775	)
Interest expense		(941,107	)		(239,737	)
Net Loss		(2,452,150	)		(2,679,277	)

Other Comprehensive Loss:
Change in unrealized loss on investment available for sale		0			0

Comprehensive Loss	$	(2,452,150	)	$	(2,679,277	)

Loss per share - basic and fully diluted	$	(0.00	)	$	(0.00	)

Weighted average no. of shares outstanding		15,531,250,000			2,656,485,145

	Year Ended December 31, 2009	Year Ended December 31, 2008	Re-entering Development Stage to 12/31/09
General and administrative expenses	1,698,829	1,604,224	16,985,128
Depreciation	29,798	32,755	147,687
Research and development expenses	533,085	1,528,081	4,869,001
Operating Loss	(2,261,712)	(3,165,060)	(22,001,816)
Other Income (Expense):
Interest income	-	71,253	76,221
Gain (loss) on derivative liability	(99,053)	(73,652)	(172,705)
Permanent impairment of investment			(225,000)
Loss on license fee	-	(283,500)	(482,071)
Penalty on debenture default	(78,775)	(218,600)	(297,375)
Interest expense	(239,737)	(149,309)	(409,968)
Net Loss	(2,679,277)	(3,818,868)	(23,512,714)
Other Comprehensive Loss:
Change in unrealized loss on investment available for sale	-	-	( 86,538)
Comprehensive Loss	$(2,679,277)	$(3,818,868)	$(23,599,252)
Loss per share - basic and fully diluted	$ (0.00)	$ (0.01)
Weighted average no. of shares outstanding	2,656,485,145	271,793,646

The accompanying notes are an integral part of these financial statements.

- 1513 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008 AND THE PERIOD FROM OCTOBER 1, 2005~~2009

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

				Accumulated Deficit
	No. of Shares	Paid-in Capital and Par Value		Development Stage		Prior Operations		Comprehensive Loss	Total
Balance, 12/31/08	502,704,604	51,223,284		(20,833,437	)	(32,108,284	)	0	(1,718,437
Shares issued for
Cash	238,791,067	111,945							111,945
O&D fees	189,336,735	87,550							87,550
Consulting service	2,116,514,414	1,488,450							1,488,450
Cashless exercise of warrants	28,036,255	-							-
Bashful Warrants	55,000,000	28,111							28,111
Conversion of Series B preferred	75,000,000	25,000							25,000

Accrued officer compensation pursuant to wrap around agreement.	935,079,111	206,449							206,449
Beneficial conversion feature related to convertible note	1,224,919,424	734,685							734,685

Net loss				(2,679,277	)				(2,679,277



Balance, 12/31/09	5,420,381,610	53,905,474		(23,512,714	)	(32,108,284	)	0	(1,715,524

Less: par value of common stock ($0.01)		(5,420,381	)

Additional paid-in capital		48,485,093
Plus 1,000,000 shares of Preferred Stock at .001 par value									1,000
Total stockholders’ equity									(1,714,524

		No. of Shares	Paid-in Capital and Par Value	Accumulated Deficit		Comprehensive Loss	Total
				Development Stage	Prior Operations
Balance at 12/31/04		35,319,977	$ 29,741,757	$ (29,652,400)	$ -	$ -	$ 89,357
Shares issued for:
Cash		2,000,000	77,000				77,000
director services		2,624,501	248,567				248,567
Services		8,231,288	1,429,304				1,429,304
warrant expense		-	1,505,897				1,505,897
Compensation		12,000,000	2,040,000				2,040,000
equity swap investment		1,500,000	225,000				225,000
Net loss				(5,384,548)			(5,384,548)
Other comprehensive loss						(86,538)	(86,538)
Balance, 12/31/05		61,675,766	35,267,525	(35,036,948)	-	(86,538)	144,039
Reclassification of accumulated deficit				32,108,284	(32,108,284)
Shares issued for:
	Cash	23,744,250	1,905,990				1,905,990
	director fees	6,698,000	690,885				690,885
	consulting service	14,786,051	1,724,639				1,724,639
	accrued liabilities	633,292	132,539				132,539
	cashless exercise of warrants	1,129,935	-				-
	employee and contractor bonuses	937,500	42,188				42,188
Warrants issued for cash			150,000				150,000
Warrants issued for services			2,405,847				2,405,847
Modification of Warrants			1,127,998				1,127,998
Net loss				(8,599,770)			(8,599,770)
Other equity items			(84,070)			86,538	2,468
Balance, 12/31/06		109,604,794	43,363,541	(11,528,434)	(32,108,284)	-	(273,177)
Less: par value of common stock ($0.01)			109,604
Additional paid-in capital			$ 43,253,937

The accompanying notes are an integral part of these financial statements.

- 1614 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008 AND THE PERIOD FROM OCTOBER 1, 2005~~2009

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

						Accumulated Deficit
	No. of Shares		Paid-in Capital and Par Value			Development Stage			Prior Operations			Comprehensive Loss		Total
Balance, 12/31/09	5,420,381,610	$	53,905,474		$	(23,512,714	)	$	(32,108,284	)	$	0	$	(1,715,524	)
Shares issued for
Cash	506,311,459		71,253											71,253
O&D fees	100,000,000		8,000											8,000
Consulting service	5,171,075,185		904,776											904,776

Accrued officer compensation pursuant to wrap around agreement	2,030,666,666		127,500											127,500

Beneficial conversion feature related to convertible note	6,186,250,000		763,700											763,700

Net loss						(2,452,150	)							(2,452,150	)

Balance, 12/31/10	19,414,684,920		55,780,703		$	(25,964,864	)	$	(32,108,284	)	$	0	$	(2,292,445	)

Less: par value of common stock ($0.01)			(19,414,684	)

Additional paid-in capital		$	36,366,019
Plus 1,000,000 shares of Preferred Stock at .001 par value														1,000
Total stockholders’ equity													$	(2,291,445	)

		No. of Shares	Paid-in Capital and Par Value	Accumulated Deficit		Comprehensive Loss	Total
				Development Stage	Prior Operations
Balance, 12/31/06		109,604,794	43,363,541	(11,528,434)	(32,108,284)	-	(273,177)
	Shares issued for
	Cash	46,850,000	1,479,518				1,479,518
	O&D fees	2,931,818	126,435				126,435
	Consulting service	8,031,407	1,068,028				1,068,028
	accrued liabilities	11,289,917	510,151				510,151
	cashless exercise of warrants	76,873	-				-
	Technology License	2,000,000	82,000				82,000
Warrants issued for services			1,303,221				1,303,221
Technology License			70,150				70,150
Beneficial conversion feature related to convertible note			34,509				34,509
Net loss				(5,486,135)			(5,486,135)
Balance, 12/31/07		180,784,809	48,037,553	(17,014,569)	(32,108,284)	-	(1,085,300)
Less: par value of common stock ($0.01)			180,785
Additional paid-in capital			$47,015,484

The accompanying notes are an integral part of these financial statements.

- 1715 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND THE PERIOD FROM OCTOBER 1, 2005

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

		No. of Shares	Paid-in Capital and Par Value	Accumulated Deficit		Comprehensive Loss	Total
				Development Stage	Prior Operations
Balance, 12/31/07		180,784,809	48,037,553	(17,014,569)	(32,108,284)	-	(1,085,300)
	Shares issued for
	Cash	13,250,000	178,000				178,000
	O&D fees	66,311,128	658,780				658,780
	Consulting service	54,373,998	510,746				510,746
	Accrued liabilities	47,984,818	983,945				983,945
	Cashless exercise of warrants	18,584,615	-				-
	Cashful Warrants	27,011,375	173,290				173,290
Compensation expense			27,000				27,000
Warrants issued for services			196,170				196,170
Beneficial conversion feature related to convertible note		94,403,861	457,800				457,800
Net loss				(3,818,868)			(3,818,868)
Balance, 12/31/08		502,704,604	51,223,284	(20,833,437)	(32,108,284)	-	(1,718,437)
Less: par value of common stock ($0.01)			502,705
Additional paid-in capital			$50,720,579
Plus 1,000,000 shares of Preferred Stock at .001 par value							1,000
Total stockholders’ equity							(1,717,437)

The accompanying notes are an integral part of these financial statements.

- 18 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENT OF SHAREHOLDERS’ EQUITY

FOR THE YEARS ENDED DECEMBER 31, 2009 AND 2008 AND THE PERIOD FROM OCTOBER 1, 2005

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

		No. of Shares	Paid-in Capital and Par Value	Accumulated Deficit		Comprehensive Loss	Total
				Development Stage	Prior Operations
Balance, 12/31/08		502,704,604	51,223,284	(20,833,437)	(32,108,284)	-	(1,718,437)
	Shares issued for
	Cash	238,791,067	111,945				111,945
	O&D fees	189,336,735	87,550				87,550
	Consulting service	2,116,514,414	1,488,450				1,488,450
	Accrued liabilities	-	-				-
	Cashless exercise of warrants	28,036,255	-				-
	Cashful Warrants	55,000,000	28,111				28,111
	Conversion of Series B preferred	75,000,000	25,000				25,000
Accrued officer compensation pursuant to wrap around agmt.		935,079,111	206,449				206,449
Beneficial conversion feature related to convertible note		1,224,919,424	734,685				734,685
Net loss				(2,679,277)			(2,679,277)
Balance, 12/31/09		5,420,381,610	53,905,474	$(23,512,714)	$(32,108,284)	$ -	(1,715,524)
Less: par value of common stock ($0.01)			(5,420,381)
Additional paid-in capital			$48,485,093
Plus 1,000,000 shares of Preferred Stock at .001 par value							1,000
Total stockholders’ equity							$(1,714,524)

The accompanying notes are an integral part of these financial statements.

- 19 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, ~~2009~~2010 AND ~~2008 AND THE PERIOD FROM OCTOBER 1, 2005~~2009

(RE-ENTERING OF DEVELOPMENT STAGE) THROUGH DECEMBER 31, 2009

	Year Ended December 31, 2010			Year Ended December 31, 2009
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,452,150	)	$	(2,679,277	)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization		28,986			29,798
Contingent penalty		0			78,775
Common stock issued for services		1,040,276			1,750,200
Preferred stock issued for services		0			0
(Gain) loss on derivatives		(432,010	)		99,053
Amortization of discount on convertible debenture, net		467,178			102,131
Stock option and warrant expense		763,700			0
Change in operating assets and liabilities:
Prepaid expenses		0			135,672
Deferred finance costs		0			0
Accounts payable		342,639			(34,836	)
Accrued liabilities		172,318			367,376
Accrued interest		(776	)		(26,670	)
Net cash used in operating activities		(69,839	)		(177,778	)

CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment		0			0
Purchase of License Agreement		0			0
Net cash provided from (used in) investing activities		0			0

CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock		71,253			111,945
Proceeds from sale of preferred stock		0			25,000
Shareholders loans		16,660			0
Proceeds (pay down) - convertible note		(29,102	)		0
Net borrowings/(pay downs) on line of credit		0			0
Settlement of derivative liabilities		0			0
Proceeds from issuance of warrants		0			28,111
Net cash provided from financing activities		58,811			165,056

Net change in cash and cash equivalents		(11,028	)		(12,722	)
Cash and cash equivalents, beginning of period		12,399			25,121
Cash and cash equivalents, end of period	$	1,371		$	12,399

Supplemental disclosure of non-cash financing activities:
Stock issued for accrued expenses	$	0		$	686,748
Cashless exercise of warrants	$	0		$	19,000
Cash paid for interest and income taxes	$	0		$	162,246

	Year Ended December 31, 2009	Year Ended December 31, 2008	Re-entering Development Stage to 12/31/09
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$ (2,679,277)	$ (3,818,868)	$ (23,512,714)
Adjustments to reconcile net loss to net cash from operating activities:
Depreciation and amortization	29,798	51,743	166,677
Contingent penalty	78,775	218,600	297,375
Common stock issued for services	1,750,200	1,732,669	10,316,378
Preferred stock issued for services	-	28,000	28,000
(Gain) loss on derivatives	99,053	73,652	172,705
Amortization of discount on convertible debenture, net	102,131	-	102,965
Stock option and warrant expense	-	72,546	4,552,501
Permanent impairment of investment available for sale	-	-	225,000
Contingent liquidated damages expense	-	-	150,000
Change in operating assets and liabilities:
Prepaid expenses	135,672	(158,823)	(23,904)
Accrued interest receivable	-	4,968	4,968
Deferred finance costs	-	(26,252)	(26,252)
Accounts payable	(34,836)	(17,883)	301,452
Loss on license fee	-	283,500	482,071
Accrued liabilities	367,376	212,414	1,642,929
Accrued interest	(26,670)	53,539	26,869
Net cash used in operating activities	(177,778)	(1,290,195)	(5,092,980)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of property and equipment	-	(1,571)	(151,832)
Purchase of License Agreement	-	(283,500)	(308,501)
Net cash provided from (used in) investing activities	-	(285,071)	(460,333)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from the sale of common stock	111,945	303,000	2,236,865
Proceeds from sale of preferred stock	25,000	-	25,000
Shareholders loans	-	(26,659)	(1,659)
Paydown on note receivable	-	575,000	575,000
Proceeds from convertible note	-	665,000	865,000
Net borrowings/(paydowns) on line of credit	-	-	45,490
Settlement of derivative liabilities	-	(101,934)	(101,934)
Proceeds from issuance of warrants	28,111	173,290	1,802,809
Net cash provided from financing activities	165,056	1,587,697	5,474,682
Net change in cash and cash equivalents	(12,722)	12,431	(78,631)
Cash and cash equivalents, beginning of period	25,121	12,690	91,030
Cash and cash equivalents, end of period	$12,399	$ 25,121	$ 12,399
Supplemental disclosure of non-cash financing activities:
Stock issued for accrued expenses	$ 686,748	$ 132,539	$ 819,287
Cashless exercise of warrants	$19,000	$18,585	$ 38,715
Cash paid for interest and income taxes	$ 162,246	$ 113,005	$ 275,251

The accompanying notes are an integral part of these financial statements

- 2016 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

NOTES TO FINANCIAL STATEMENTS

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

The Company was incorporated in Nevada in 1998. It began operations as Computer Automation Systems, Inc. In January of 2004, the Company was recapitalized and its name was changed to Kahuna Network Security Inc. On July 2, 2004, the Board of Directors voted to change the name of the Company to American Security Resources Corporation (“ASRC” or “the Company”), a change that was ratified by a majority of the Company’s shareholders in July of 2004.

Significant Accounting Policies

Basis of presentation

The consolidated financial statements include the accounts of American Security Resources Corporation and its wholly-owned subsidiaries. Significant inter-company accounts and transactions have been eliminated. Management determined that ASRC, upon embarking on the new business plan of development and marketing of the HydraStax hydrogen fuel cell~~, has re-entered the development stage as defined in Statement of Financial Accounting Standards No~~. 7, “Accounting and Reporting by Development Stage Enterprises”. Consequently, ASRC has presented these financial statements in accordance with that Statement, including losses incurred from October 1, 2005 (re-entering of development stage) to December 31, 2009.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain 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.

Cash and Cash Equivalents

For purposes of the statement of cash flows, ASRC considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents.

Property and Equipment

Property and Equipment is valued at cost.

Additions are capitalized and maintenance and repairs are charged to expense as incurred. Gains and losses on dispositions of equipment are reflected in operations. Depreciation is provided using the straight-line method over the estimated useful lives of the assets.

Impairment of Long-Lived Assets

ASRC reviews the carrying value of its long-lived assets annually or whenever events or changes in circumstances indicate that the historical cost-carrying value of an asset may no longer be appropriate. ASRC assesses recoverability of the carrying value of the asset by estimating the future net cash flows expected to result from the asset, including eventual disposition. If the future net cash flows are less than the carrying value of the asset, an impairment loss is recorded equal to the difference between the asset’s carrying value and fair value.

Intangible Assets

Research and Development Costs

All research and development costs are expensed as incurred, including primarily contracting costs.

- 21 -

Income Taxes

The Company accounts for income taxes in accordance with FASB Accounting Standards Codification 740, “Income Taxes” (ASC 740), previously referred to as Statement of Financial Accounting Standards No. 109, “Accounting for Income Taxes,” and Financial Accounting Standard Board Interpretation No. 48, “Accounting for Uncertainty in Income Taxes.” Under ASC 740, we recognize deferred tax assets and liabilities for the future tax consequences attributable to temporary differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.statements

- 17 -

carrying amounts of existing assets and liabilities and their respective tax basis. We measure deferred tax assets and liabilities using enacted tax rates expected to apply to taxable income in the years in which we expect those temporary differences to be recovered or settled. We record valuation allowances to reduce our deferred tax assets to the amount expected to be realized by considering all available positive and negative evidence.

Pursuant to ASC 740, we must consider all positive and negative evidence regarding the realization of deferred tax assets, including past operating results and future sources of taxable income. Under the provisions of ASC 740-10, we determined that our net deferred tax asset needed to be fully reserved given recent results of operations.

In June 2006, the Financial Accounting Standards Board issued Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, also included in ASC 740. The Interpretation clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements and prescribes a recognition threshold and measurement attributes of income tax positions taken or expected to be taken on a tax return. Under FIN 48, the impact of an uncertain tax position taken or expected to be taken on an income tax return must be recognized in the financial statements at the largest amount that is more-likely-than-not to be sustained upon audit by the relevant taxing authority. An uncertain income tax position will not be recognized in the financial statements unless it is more likely than not of being sustained.

Basic and Diluted Net Loss Per Share

The basic net loss per common share is computed by dividing the net loss by the weighted average number of common shares outstanding. Diluted net loss per common share is computed by dividing the net loss adjusted on an "as if converted" basis, by the weighted average number of common shares outstanding plus potential dilutive securities. For the years ended December 31, ~~2009~~2010 and ~~2008~~2009, potential dilutive securities had an anti-dilutive effect and were not included in the calculation of diluted net loss per common share. The number of potentially dilutive securities that were not included in the computation of diluted EPS because to do so would have been antidilutive was 129,~~411~~838,~~127~~000 common stock potentially issuable under outstanding options/warrants.

Stock Based Compensation

Fair Value of Financial Instruments

The Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable and accounts payable. Management believes that the carrying values of these assets and liabilities are representative of their respective fair values based on their short-term nature.

- 22 -

Recently issued accounting pronouncements

In ~~April~~December ~~2009~~2010, the FASB issued ~~FASB~~amended ~~Staff~~guidance ~~Position~~related ~~(“FSP”)~~to NoBusiness Combinations. ~~107-1~~The ~~and~~amendments ~~APB~~affect ~~28-1~~any public entity that enters into business combinations that are material on an individual or aggregate basis. The amendments specify that if a public entity presents comparative financial statements, ~~Interim~~the ~~Disclosures~~entity ~~about~~should ~~Fair~~disclose ~~Value~~revenue and earnings of ~~Financial~~the ~~Instruments~~combined ~~(“FSP~~entity ~~107-1~~as ~~and~~though ~~APB~~the ~~28-1”~~business combination(s) that occurred during the current year had occurred as of the beginning of the comparable prior annual reporting period only. ~~FSP~~The ~~107-1~~amendments ~~and~~also ~~APB~~expand ~~28-1~~the ~~require~~supplemental ~~that~~pro ~~publicly~~forma ~~traded~~disclosures ~~companies~~to include a description of the ~~fair~~nature ~~value~~and ~~disclosures~~amount ~~required~~of bymaterial, ~~SFAS~~nonrecurring ~~No.~~pro ~~107~~forma adjustments directly attributable to the business combination included in ~~their~~the ~~interim~~reported ~~financial~~pro ~~statements~~forma revenue and isearnings. The amendments are effective prospectively for ~~interim~~business ~~and~~combinations ~~annual~~for ~~periods~~which ~~ending~~the acquisition date is on or after ~~June~~the ~~15,~~beginning ~~2009,~~of ~~with~~the ~~early~~first ~~adoption~~annual ~~permitted~~reporting ~~for~~period ~~periods~~beginning ~~ending~~on or after ~~March~~December 15, ~~2009,~~2010. ~~and~~Early ~~must~~adoption beis ~~applied prospectively~~permitted. The Company ~~does~~will ~~not~~assess ~~expect~~ the ~~adoption~~impact of ~~FSP~~these ~~107-1~~amendments ~~and~~on ~~APB~~its ~~28-1~~consolidated tofinancial ~~have~~position ~~any~~and ~~material~~results ~~impact~~of onoperations ~~its~~if ~~financial~~and ~~statements~~when ~~and~~an ~~required~~acquisition ~~disclosures~~occurs.

~~In April 2009, the FASB issued FSP FAS 157~~-4, ~~Determining~~18 ~~Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly (“FSP 157~~-4”). FSP 157-4 provides guidance regarding how to determine whether there has been a significant decrease in the volume and level of activity for the asset or liability when compared with normal market activity for the asset or liability. In such situations, an entity may conclude that transactions or quoted prices may not be determinative of fair value, and may adjust the transactions or quoted prices to arrive at the fair value of the asset or liability. FSP 157-4 is effective for interim and annual reporting periods ending after June 15, 2009, with early adoption permitted for periods ending after March 15, 2009, and must be applied prospectively. The Company does not expect the adoption of FAS 157-4 to have any material impact on its financial statements or required disclosures.

In ~~May~~December ~~2009~~2010, the FASB issued ~~SFAS~~amended ~~No.~~guidance ~~165,~~related ~~Subsequent~~to ~~Events~~Intangibles ~~(“SFAS~~- ~~No.~~Goodwill ~~165”)~~and Other. ~~SFAS~~The ~~No.~~amendments ~~165~~modify ~~establishes~~Step ~~standards~~1 of ~~accounting~~the goodwill impairment test for ~~and~~reporting ~~disclosure~~units with zero or negative carrying amounts. For those reporting units, an entity is required to perform Step 2 of ~~events~~the goodwill impairment test if it is more likely than not that ~~occur~~a ~~after~~goodwill ~~the~~impairment ~~balance~~exists. ~~sheet~~In ~~date~~determining ~~but~~whether ~~before~~it ~~financial~~is ~~statements~~more likely than not that a goodwill impairment exists, an entity should consider whether there are ~~issued~~any adverse qualitative factors indicating that an impairment may exist. ~~Entities~~The ~~are~~qualitative ~~required~~factors toare ~~disclose~~consistent with the ~~date~~existing ~~through~~guidance and examples, which ~~subsequent~~require ~~events~~that ~~have~~goodwill ~~been~~of ~~evaluated~~a ~~and~~reporting ~~the~~unit ~~basis~~be tested for impairment between annual tests if an event occurs or circumstances change that ~~date.~~would ~~SFAS~~more ~~No.~~likely ~~165~~than isnot ~~effective~~reduce onthe fair value of a ~~prospective~~reporting ~~basis~~unit below its carrying amount. For public entities, the amendments are effective for ~~interim~~fiscal years, and ~~annual~~interim periods ~~ending~~within those years, beginning after ~~June~~December 15, ~~2009~~2010. ~~The~~Early ~~Company~~adoption ~~does~~is not ~~expect~~permitted. ~~the~~The ~~adoption~~Company ofdoes ~~SFAS~~not ~~No.~~believe ~~165~~that tothis guidance will have ~~any~~a material impact on its consolidated financial ~~statements~~position orand ~~required~~results ~~disclosures~~of operations.

In ~~June~~July ~~2009~~2010, the FASB issued ~~SFAS~~ASU ~~168,~~No. ~~“Codification”~~2010-20, ~~which~~"Disclosures ~~confirmed~~about ~~that~~ the ~~FASB~~Credit ~~Accounting~~Quality ~~Standards~~of ~~Codification~~Financing ~~will~~Receivables ~~become~~and the ~~single~~Allowance ~~official~~for ~~source~~Credit ofLosses ~~authoritative US GAAP~~ (~~other~~Topic ~~than~~310)." ~~guidance~~ASU ~~issued~~No. by2010-20 ~~the~~requires ~~SEC),~~increased ~~superseding~~disclosures ~~existing~~about ~~FASB,~~the ~~American~~credit ~~Institute~~quality of ~~Certified~~financing ~~Public~~receivables ~~Accountants, Emerging Issues Task Force (“EITF”)~~ and ~~related~~allowances ~~literature.~~for ~~After~~credit ~~that date~~losses, ~~only~~including ~~one~~disclosure ~~level~~about ofcredit ~~authoritative~~quality USindicators, ~~GAAP~~past ~~will~~due ~~exist.~~information ~~All~~and ~~other~~modifications ~~literature~~of ~~will~~finance ~~be considered non-authoritative~~receivables. The ~~Codification~~guidance ~~does~~is ~~not~~generally ~~change~~effective USfor ~~GAAP;~~reporting ~~instead,~~periods itending ~~introduces~~after aDecember ~~new structure that is organized in an easily accessible~~15, ~~user-friendly online research system~~2010. The ~~Codification~~adoption ~~becomes~~of ~~effective~~ASU ~~for~~No. ~~interim~~2010-20 ~~and~~did ~~annual~~not ~~periods~~have ~~ending~~a onsignificant orimpact ~~after~~on ~~September~~the ~~15, 2009. The~~ Company's ~~will~~consolidated ~~apply~~financial ~~the~~position ~~Codification~~and ~~beginning~~results ~~in the third quarter~~ of ~~fiscal 2009~~operations.

In April 2010, the FASB issued ASU No. 2010-17, "Revenue Recognition- Milestone Method (Topic 605)," which provides guidance on the criteria that should be met for determining whether the milestone method of revenue recognition is appropriate. This ASU is effective in fiscal years, and interim periods within those years, beginning on or after June 15, 2010. We do not expect the adoption of ASU No. 2010-17 to have a significant impact on the Company's consolidated financial position and results of operations.

In April 2010, the FASB issued ASU No. 2010-13, "Compensation - Stock Compensation (Topic 718)," which provides guidance on the classification of a share-based payment award as either equity or a liability. A share-based payment award that contains a condition that is not a market, performance, or service condition is required to be classified as a liability. This ASU is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2010. The Company does not expect the adoption of ASU No. 2010-13 to have a significant impact on the Company's consolidated financial position and results of operations.

In February 2010, the FASB issued ASU No. 2010-09, "Subsequent Events (Topic 855) - Amendments to Certain Disclosure Requirements." The objective of this ASU was to remove the requirement for an SEC filer to disclose a date through which subsequent events have been evaluated in both issued and revised financial statements. This ASU is to be applied immediately upon issuance. The Company adopted this ASU in the first quarter of 2010 and the adoption of this ASU did not have an effect on the Company's consolidated financial position and results of operations.

In January 2010, the FASB issued ASU No. 2010-06, "Fair Value Measurements and Disclosures (Topic 820) - Improving Disclosures about Fair Value Measurements." This ASU requires new disclosures regarding significant transfers in and out of Levels 1 and 2, and information about activity in Level 3 fair value measurements. In addition, this ASU clarifies existing disclosures regarding input and valuation techniques, as well as the level of disaggregation for each class of assets and liabilities. This ASU was effective for interim and annual reporting periods beginning after December 15, 2009, except for certain Level 3 activity disclosure requirements, which are effective for reporting periods beginning after December 15, 2010. The Company adopted the new guidance in the first quarter of 2010, except for the disclosures related to purchases, sales, issuance and settlements, which will be effective for the Company beginning in the first quarter of 2011. Because these new standards are related primarily to disclosures, their adoption has not had and is not expected to have a significant impact on the Company's consolidated financial position and results of operations.

Management does not believe that any other recently issued, but not yet effective, accounting standards or pronouncements, if currently adopted, would have a material effect on the Company’s financial statements.

- 19 -

NOTE 2 - GOING CONCERN

As shown in the accompanying consolidated financial statements, ASRC incurred recurring losses from continuing operations of $2,~~679~~546,~~277and~~680 and $32,~~818~~679,~~868~~277 in the years ended ~~2009~~2010 and ~~2008~~2009, respectively. This condition creates an uncertainty as to ASRC’s ability to continue as a going concern. Management is trying to raise additional capital through sales of common stock either through private placements or public offerings, as well as seeking other sources of funding. There are no assurances that ASRC will be able to achieve a level of revenues adequate to generate sufficient cash flow from operations or obtain the additional financing through private placements or public offerings to support the investment in Hydra’s fuel cell technology. If these funds are not available ASRC may not continue its operations or execute its business plan. The conditions raise substantial doubt about ASRC’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might be necessary should ASRC be unable to continue as a going concern.

- 23 -

NOTE 3 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2010 and 2009:

Description	Life	Amount	Accumulated Depreciation	Net Book Value
Office furniture and equipment	Generally 5 years	$43,199	$ 30,104	$ 13,095
Equipment	From 3 to 7 years	119,958	89,309	30,649
Totals		$ 163,157	$ 119,413	$43,744

2010

NOTE 4- INTANGIBLE ASSETS

Description	Life	Amount		Accumulated Depreciation		Net Book Value
Office furniture and equipment	Generally 5 years	$	43,199	$	37,551	$	5,648
Equipment	From 3 to 7 years		119,958		110,848		9,110
Totals		$	163,157	$	148,399	$	14,758

Pursuant to the License Agreement dated August 2, 2007 between the Company and Ohio University (the “License Agreement”), the Company had a revocable, exclusive, royalty-bearing, worldwide license in and to technology relating to ammonia fuel cell electrolyzer.2009

The License Agreement has an initial term equal to the remaining life of Ohio University’s patent, which was approximately 17 years. At December 31, 2007, the Company has recorded $20,080 in amortization expense based on the straight line method over the 17 years left on the initial 20 year life of the patent.

Description	Life	Amount		Accumulated Depreciation		Net Book Value
Office furniture and equipment	Generally 5 years	$	43,199	$	30,104	$	13,095
Equipment	From 3 to 7 years		119,958		89,309		30,649
Totals		$	163,157	$	119,413	$	43,744

AsNOTE consideration for the license from Ohio University, the Company paid $100,000, issued 2,000,000 shares of restricted stock, issued 2,000,000 warrants exercisable for a three year period at $0.041 per share (the closing price on the transaction date) and agreed to provide the University with $600,000 in sponsored research on the patent, all which in the aggregate the Company valued at $819,300. The Company determined the fair value of the 2,000,000 shares of restricted stock by using the closing price ($.041 per share) of the stock on the Agreement. The warrants were valued at $37,300 using the Black Scholes model as described in Note 9. Additionally, the Agreement calls for the Company to pay a royalty of 4% of- annual sales of manufactured ammonia Electrolyzer units, 8% of net sales of Hydrogen fuel and other products and services based on the Licensed Technology, Company improvements or joint improvements. The Company shall also pay Ohio University 30% of the upfront fees, milestone fees, royalties and/or other compensation or consideration received by the Company in exchange for the grant of sublicense rights in any portion of the Licensed Technology, Company improvements or joint improvements to persons or entities not party to the License Agreement. The Company has agreed to pay Ohio University an annual development budget of $25,000 until the annual royalties due Ohio University exceed $25,000. A failure to comply with any of the above requirements could result in the termination of the License Agreement by Ohio University.INTANGIBLES

AtThe ~~March~~Company’s 31wholly-owned subsidiary, ~~2008~~Hydra Fuel Cell Corporation, ~~the~~has ~~Company~~received ~~was~~two inpatents ~~default~~– ofUS ~~the~~7,445,647 ~~agreement~~B1 ~~due~~for toa ~~non~~method ~~payment.~~for .making Onfuel ~~August~~cells ~~12,~~and ~~2008~~US 7,776,485 ~~the~~B1 ~~Company~~for ~~paid~~a ~~Ohio~~fuel ~~University~~cell ~~approximately~~stack ~~$208,000~~including toa ~~bring~~housing ~~current~~for ~~its~~holding ~~liability~~fuel oncells. It also has four patent pending applications that relate to the ~~license~~fuel ~~fees~~products and ~~sponsored~~a ~~research~~trademark ~~payments~~for HYDRASTAX.

During the fourth quarter 2008, the Company was again in default and opted to terminate its agreement with Ohio University and determined that the License Agreement did not have any future economic benefit or any substantial value; as a result, the Company wrote of the remaining balance of the intangible resulting in a loss of $283,500.

NOTE 5 – CONVERTIBLE DEBENTURE

AtConvertible ~~December~~debentures ~~31,~~outstanding ~~2009,~~as ~~the~~of ~~Company~~December ~~had~~31, ~~convertible~~2010 ~~debentures~~and ~~outstanding~~2009 were as follows:;

	Outstanding Balance of Convertible Debenture	Unamortized Discount
		2010				2009
December 13, 2007 Debenture	$350,000	$(350,000)
		Outstanding Balance of Convertible Debenture		Unamortized Discount		Outstanding Balance of Convertible Debenture		Unamortized Discount
February 28, 2008 Debenture	431,004	(397,850)
December 13, 2007 Debenture		$	284,300	$	284,300	$	350,000	$	350,000
Total Convertible Debentures at December 31, 2009	$781,004	$747,850
February 28, 2008 Debenture			482,406		38,274		431,004		397,850
Total Convertible Debentures at December 31, 2010		$	766,706	$	322,574	$	781,004	$	747,850

- 2420 -

Following is a description of each of the convertible debentures listed above:

December 13, 2007 Debenture

The Company entered into a Securities Purchase Agreement with an accredited investor on December 13, 2007for the sale of $1,500,000 in a convertible debenture bearing interest at 7.25% per annum, payable on or before December 12, 2010.

A prospectus relates to the resale of the common stock underlying the convertible debenture. The terms of the convertible debenture calls for the investor to provide the Company with an aggregate of $1,500,000 as follows;

· $200,000 was disbursed on December 13, 2007, with aggregate additional funding of $575,000 during the year ended December 31, 2008. $1,300,000 secured promissory note bearing interest at 7.75% per annum, due on demand at any time after February 1, 2011. The investor is obligated to make monthly periodic prepayments of $250,000 during each month that the promissory in outstanding. Interest is payable on a monthly basis, commencing January 15, 2008. The interest rate shall be increased by 0.25 percentage points per each Periodic Prepayment that is not paid by the investor, provided however that in no event shall the interest rate exceed an amount equal to 12.5%. During the year ended December 31, 2008, the Company received $575,000 under this promissory note.

·Accordingly, we have received a total of $1794,~~300,~~000 ~~secured~~pursuant ~~promissory~~to ~~note~~the ~~bearing~~Securities ~~interest~~Purchase Agreement through December 31, 2010. Pursuant to the convertible debenture the investor may convert the amount paid towards the Securities Purchase Agreement into common stock of the Company at 7a conversion price equal to the lesser of (i) $0.7525, or (ii) 80% ~~per~~of ~~annum,~~the average of the 5 lowest volume weighted average prices during the 20 trading days prior to investor’s election to convert (the percentage being a “Discount Multiplier”). If any portion of the principal or accrued interest on this convertible debenture is not paid within ten (10) days of when it is due, the Discount Multiplier shall decrease by one percentage point (1%) for all conversions of the convertible debenture. If the investor elects to convert a portion of the convertible debenture and, on ~~demand~~the atday that the election is made, the volume weighted average price is below $0.01, we shall have the right to prepay that portion of the convertible debenture that investor elected to convert, plus any ~~time~~accrued ~~after~~and unpaid interest, at 150% of such amount. In the event that we elect to prepay that portion of the convertible debenture, investor shall have the right to withdraw its conversion notice.

February 1, 2011. The investor is obligated to make monthly periodic prepayments of $250,000 during each month that the promissory in outstanding. Interest is payable on a monthly basis, commencing January 15, 2008. The interest rate shall be increased by 0.25 percentage points per each Periodic Prepayment that is not paid by the investor, provided however that in no event shall the interest rate exceed an amount equal to 12.5%. During the year ended December 31, 2009, the Company received $19,000 under this promissory note.

Accordingly, we have received a total of $307,535 and $575,000 pursuant to the Securities Purchase Agreement during the years 2009 and 2008, respectively. Pursuant to the convertible debenture the investor may convert the amount paid towards the Securities Purchase Agreement into common stock of the Company at a conversion price equal to the lesser of (i) $0.25, or (ii) 80% of the average of the 5 lowest volume weighted average prices during the 20 trading days prior to investor’s election to convert (the percentage being a “Discount Multiplier”). If any portion of the principal or accrued interest on this convertible debenture is not paid within ten (10) days of when it is due, the Discount Multiplier shall decrease by one percentage point (1%) for all conversions of the convertible debenture. If the investor elects to convert a portion of the convertible debenture and, on the day that the election is made, the volume weighted average price is below $0.01, we shall have the right to prepay that portion of the convertible debenture that investor elected to convert, plus any accrued and unpaid interest, at 150% of such amount. In the event that we elect to prepay that portion of the convertible debenture, investor shall have the right to withdraw its conversion notice.

We evaluated this agreement pursuant to FASB Statement No. 133 and due to the Company’s option to settle in cash if the weighted average price drops below a certain point and sufficient shares appear available, we determined no embedded derivatives existed and FASB No. 133 did not apply.

As required by Emerging Issues Task Force Issue 98-05 “Accounting for Convertible Securities with Beneficial Conversion Features”, we valued the beneficial conversion feature related to the outstanding debt which was treated as a loan discount and amortized to interest expense using the effective interest rate method over the life of the note.

During ~~2009~~the year ended December 31, 2010, the investor converted $~~148~~65,~~665~~700 of the outstanding principal into ~~common~~821,250,000 shares of common stock of the Company. ~~The Company also received $19,000 in principal payments on the secured promissory note during 2009.~~

In accordance with the ~~event~~option ~~that~~allowed wein ~~default~~SFAS on155, the ~~payment~~Company ofhas ~~the~~elected ~~convertible~~to ~~debenture,~~value the ~~investor~~derivative ~~shall~~separately ~~have~~at the ~~right~~fair tovalue ~~declare~~on the ~~outstanding~~issuance ~~principal~~date ~~and~~using ~~accrued~~the ~~interest~~Black-Scholes ~~immediately~~valuation ~~due~~model and ~~payable~~bifurcate inthe ~~cash~~instrument. atThe aresult ~~price~~ of ~~150% of~~ the ~~outstanding~~valuation ~~principal~~is ~~and~~a ~~accrued~~discount ~~interest. The~~on ~~company~~debt ~~became~~of in$284,300 ~~default~~as onof ~~this~~December ~~debenture~~31, ~~when~~2010. weWe ~~were~~estimated ~~unable~~the tofair ~~timely~~value ~~file~~of ~~required~~the ~~periodic~~derivative ~~and~~using ~~annual~~the ~~reports~~Black-Scholes ~~required~~valuation tomethod bewith ~~filed~~assumptions ~~pursuant~~including: to(1) ~~Section~~term 12of or4 15years; (d2) ofa ~~the~~computed ~~1934~~volatility ~~Securities~~rate ~~and~~from ~~Exchange~~132% ~~Act.~~to ~~One~~197%(3) ofa ~~the~~discount ~~requirements~~rate inof ~~our~~2.10% ~~convertible~~and ~~debenture~~(4) ~~agreement~~zero ~~was~~dividends. ~~that~~The ~~the~~discount ~~Company~~is ~~timely~~equal ~~file~~to ~~all~~the ~~reports~~value ~~required~~of Asthe anote ~~result~~issued, ~~the~~as ~~convertible~~it ~~debenture~~can ~~was~~only ~~callable~~be bydiscounted ~~the~~up ~~holder~~to atthe ~~150%~~value of the ~~unpaid~~note ~~principal~~and ~~balance~~is atbeing ~~December~~amortized ~~31,~~over ~~2009.~~the ~~The~~life ~~Company~~of ~~also~~the ~~asserts~~note ~~that~~using the ~~investor~~effective ~~breached~~interest ~~its~~method. ~~agreement~~For ~~resulting in~~ the ~~acceleration~~year ofended ~~the~~December ~~remaining~~31, ~~balance~~2010 ~~plus~~$0 awas ~~penalty~~amortized.

~~Subsequent~~In toaccordance ~~December~~with ~~31,~~the ~~2009~~option allowed in SFAS 155, the Company ~~and~~has ~~the~~elected ~~investor~~to ~~reached~~value athe ~~settlement~~derivative ~~agreement~~separately ~~whereby~~at ~~both~~the ~~parties~~fair ~~agreed~~value toon ~~dismiss~~the ~~their~~issuance ~~respective~~date ~~claims~~using ~~against~~ the ~~other,~~Black-Scholes ~~and~~valuation ~~mutually~~model ~~agreed~~and bifurcate the ~~outstanding~~instrument. ~~principal~~The ~~due~~result ~~under~~of the ~~original~~valuation ~~convertible~~is ~~debenture~~a toderivative liability in the ~~investor~~amount of $~~350~~355,~~000~~102 ~~would~~as beof ~~paid~~December ~~though~~31, a2010. We ~~stock~~estimated ~~conversion~~the ~~program,~~fair value of the derivative using the Black-Scholes valuation method with ~~interest~~assumptions including: (1) term of 74 ¼%years; (2) a computed volatility rate from ~~May~~132% 1to 197%(3) a discount rate of 45% and (4) zero dividends. The discount is equal to the value of the note issued, ~~2010~~as ~~until~~it can only be discounted up to the ~~outstanding~~value ~~principal~~of the note and is ~~fully~~being ~~converted~~amortized over the life of the note using the effective interest method. The ~~settlement~~gain/loss ~~agreement~~on ~~provides~~derivative ~~for~~is ~~daily~~equal ~~trading~~to ~~limits~~the ofdifference between the ~~Company’s~~discount ~~common~~on ~~stock~~debt byand the ~~investor~~derivative liability. The instrument was re-valued at period end, asand ~~well~~the asresulting ~~penalties~~change for ~~violations~~the year of $46,907 was included in the ~~trading~~statement ~~restrictions~~of operations as a net gain on the derivative liability.

- 2521 -

AsIn the ~~settlement~~event ~~agreement~~that ~~resulted~~we indefault aon ~~modification of~~ the ~~principal outstanding,~~ payment ~~terms~~of ~~and~~the ~~due~~convertible ~~dates~~debenture, wethe ~~evaluated~~investor ~~this~~shall ~~agreement~~have asthe ofright ~~December 31, 2009 pursuant~~ to ~~FASB~~declare ~~Statement~~the ~~No.~~outstanding ~~133~~principal and ~~due~~accrued tointerest ~~there~~immediately ~~being~~due ~~no minimum or fixed conversion price resulting in an indeterminate number of shares to be issued in the future, the Company determined an embedded derivative existed~~ and ~~FASB~~payable ~~No. 133 applied. In accordance with the option allowed~~ in ~~SFAS~~cash ~~155, the Company has elected to value the derivative separately~~ at ~~the~~a ~~fair~~price ~~value~~of on150% ~~the~~of ~~issuance date using~~ the ~~Black-Scholes~~outstanding ~~valuation~~principal ~~model~~ and ~~bifurcate~~accrued ~~the instrument~~interest. The ~~result~~company ofbecame ~~the valuation is a derivative liability~~ in ~~the~~default ~~amount of $433,199 and an offsetting loss~~ on ~~derivative~~this ofdebenture ~~$83,199~~when ~~and~~we ~~discount~~were onunable ~~debt~~to oftimely ~~$350,000.~~file Werequired ~~estimated~~periodic ~~the~~and ~~fair~~annual ~~value~~reports ofrequired ~~the~~to ~~derivative~~be ~~using~~filed ~~the~~pursuant ~~Black-Scholes~~to ~~valuation~~Section ~~method~~12 ~~with~~or ~~assumptions including:~~ 15(1d) ~~term~~ of 1the ~~year;~~1934 ~~(2)~~Securities aand ~~computed~~Exchange ~~volatility~~Act. ~~rate~~One ~~from 345 % (3) a discount rate~~ of ~~0.45%~~the ~~and~~requirements ~~(4)~~in ~~zero~~our ~~dividends.~~convertible ~~The~~debenture ~~discount~~agreement iswas ~~equal~~that to the ~~value~~Company oftimely ~~the~~file ~~note~~all ~~issued,~~reports asrequired itAs ~~can~~a ~~only~~result, bethe ~~discounted~~convertible updebenture towas ~~the~~callable ~~value~~by of the ~~note~~holder ~~and~~at is150% ~~being amortized over the life~~ of the ~~note~~unpaid ~~using~~principal ~~the~~balance ~~effective~~at ~~interest~~December ~~method~~31, 2009.

Subsequent to December 31, 2009, the Company and the investor reached a settlement agreement whereby both parties agreed to dismiss their respective claims against the other, and mutually agreed the outstanding principal due under the original convertible debenture to the investor of $350,000 would be paid though a stock conversion program, with interest of 7 ¼% from May 1, 2010 until the outstanding principal is fully converted. The note balance outstanding at December 31, 2010 was $284,300 and was offset by a discount of $284,300. The settlement agreement provides for daily trading limits of the Company’s common stock by the investor, as well as penalties for violations of the trading restrictions.

February 28, 2008 Debenture

On February 28, 2008, the Company entered into a Securities Purchase Agreement with an accredited investor for the sale of an aggregate of $515,000 in a convertible debenture bearing interest at 712.255% per annum, payable on or before February 28, 2012. The investor is guaranteed a 37.5% return on the investment and each advance is payable back to the investor at 150%. There ~~was~~were $35,000 in financing costs for this debt issuance. The financing costs were deferred and amortized using the effective interest method. This expense was $98,~~723~~748 ~~and $7,292~~ for the ~~years~~year ended December 31, ~~2009 and 2008~~2010.

Pursuant to the convertible debenture the investor may convert the debenture into common stock of the Company at a conversion price equal to 80% of the volume weighted average price for three regular trading days selected by the debenture holder from twenty trading days ending on the trading day immediately before the conversion date.

We evaluated this agreement pursuant to FASB Statement No. 133 and due to there being noa ~~minimum or~~ fixed ~~conversion~~maturity ~~price~~amount ~~resulting in an indeterminate number~~ of ~~shares~~$482,406 todue beon ~~issued~~December in31, ~~the future~~2011, the Company determined anno embedded derivative existed and FASB No. 133 ~~applied~~did not apply.

In accordance with the option allowed in SFAS 155, the Company has elected to ~~value the derivative separately at the fair value on the issuance date using the Black-Scholes valuation model and~~ bifurcate the instrument. The result of the valuation is a ~~derivative liability in the amount of $558,412 and an offsetting loss on derivative of $43,412 and~~ discount on debt of $~~515~~38,~~000.~~274 Weas ~~estimated the fair value~~ of ~~the~~December ~~derivative~~31, ~~using the Black-Scholes valuation method with assumptions including: (1) term of 4 years; (2) a computed volatility rate from 132% to 197 % (3) a discount rate of 2~~2010.~~10%~~ ~~and (4) zero dividends.~~ The discount is equal to the value of the note issued, as it can only be discounted up to the value of the note and is being amortized over the life of the note using the effective interest method. For the year ended December 31, ~~2009 and 2008,~~ $66195,~~180~~358 ~~and $93,183~~ was amortized and is included in interest expense. The gain/loss on derivative is equal to the difference between the discount on debt and the derivative liability. The instrument was re-valued at ~~the~~period ~~settlement agreement date (see below)~~end, and the resulting change for the year of $39348,~~731~~350 was included in the statement of operations as a net gain on the derivative liability.

During ~~fiscal~~the ~~2009~~year ended December 31, 2010, the investor converted $~~411~~496,~~020~~000 of the outstanding principal into 2,840,000,000 shares of common stock of the Company.

~~The~~Effective ~~company~~November ~~became~~17, in2009, ~~default~~the onCompany ~~this~~and ~~debenture~~the ~~when~~Investor weentered ~~were~~into ~~unable~~a settlement agreement whereby the Investor agreed to ~~timely~~a ~~file~~settlement ~~required~~amount ~~periodic~~of ~~and~~$431,004, ~~annual~~including ~~reports~~all ~~required~~unpaid toprincipal, beinterest ~~filed~~and ~~pursuant~~penalties, to ~~Section~~be 12paid in cash or ~~15(d)~~common stock of the ~~1934~~Company, ~~Securities~~subject to an ownership limitation, as defined in the settlement agreement. Interest on the settlement amount accrued at 8.75% beginning November 6, 2009, and ~~Exchange~~all ~~Act~~unpaid principal and accrued interest was due on or before December 31, 2010.The ~~One~~Company ofis ~~the~~subject to certain covenants and reporting requirements. The Company recorded a penalty charge in ~~our~~the ~~convertible~~fourth ~~debenture~~quarter ~~agreement~~of ~~was~~$78,775 ~~that~~in the ~~Company~~fourth ~~timely~~quarter ~~file~~of ~~all~~2009 ~~reports~~in ~~required~~connection with the settlement agreement.

Effective ~~November~~December 1731, ~~2009~~2010, the Company and the Investor entered into a settlement agreement whereby the Investor agreed to a settlement amount of $~~431~~482,~~004~~406, including all unpaid principal, interest and penalties, to be paid inby ~~cash or common stock of~~ the Company~~, subject to an ownership limitation, as defined in the settlement agreement~~. Interest on the settlement amount will accrue at 810.750% beginning ~~November~~December 631, ~~2009~~2010, and all unpaid principal and accrued interest is due on or before December 31, ~~2010~~2011. The Company is subject to certain covenants and reporting requirements. The Company recorded a penalty charge of $308,815 in the fourth quarter of ~~$78,775~~2010 in connection with the settlement agreement.

- 2622 -

As the settlement agreement resulted in a modification of the principal outstanding, payment terms and due dates, we evaluated this agreement pursuant to FASB Statement No. 133 and due to there being noa ~~minimum or~~ fixed ~~conversion~~maturity ~~price~~amount ~~resulting~~to inbe anpaid ~~indeterminate~~by ~~number~~the ofCompany ~~shares~~at toDecember be31, ~~issued in the future~~2011, the Company determined anno embedded derivative existed and FASB No. 133 ~~applied.~~did not apply. In accordance with the option allowed in SFAS 155, the Company has elected to ~~value the derivative separately at the fair value on the issuance date using the Black-Scholes valuation model and~~ bifurcate the instrument. The result of the valuation is a ~~derivative liability in the amount of $534,067 and an offsetting loss on derivative of $103,063 and~~ discount on debt of $~~431~~38,~~004~~274. We estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term of 1 year; (2) a computed volatility rate from 345% (3) a discount rate of 0.45% and (4) zero dividends. The discount is equal to the value of the note issued, as it can only be discounted up to the value of the note and is being amortized over the life of the note using the effective interest method. For the year ended December 31, 2009 $33,154 was amortized and is included in interest expense.

Derivative Liability

The Company evaluated all convertible debt and outstanding warrants to determine whether these instruments may be tainted from the aforementioned derivative. All warrants outstanding were considered tainted as a result of the derivative treatment. The Company valued these warrants using the Black-Scholes valuation model. The result of the valuation is a derivative liability in the amount of $41,~~004~~419. We estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term ranging from 1.71 to 2.75 years; (2) a computed volatility rate ranging from ~~229~~339% to ~~345~~675% (3) a discount rate ranging from 0.37% to 01.4579% and (4) zero dividends. The valuation of these warrants was treated the same way as the liability associated with the debt. There were no other instruments found to be tainted by the derivative treatment.

	Derivative Liability 12/31/2009		Gain (Loss) on Derivative Year Ended 12/31/09
		2010				2009
December 13, 2007 Debenture	$433,199		$(83,199)
		Derivative Liability		Gain (Loss) on Derivative year		Derivative Liability		Gain (Loss) on Derivative year ended
February 28, 2008 Debenture	$534,067		$(63,332)
December 2007 Debenture		$	335,688	$	66,321	$	433,199	$	(83,199	)
Warrants Outstanding	4,004		47,478
February 2008 Debenture			202,153		363,218		534,067	$	(63,332	)
Derivative Liability	$971,270		$(99,053)
Warrants Outstanding			1,419		2,471		4,004		47,478
Derivative Liability		$	539,260	$	432,010	$	971,270	$	(99,053	)

NOTE 6 - ~~PREFERRED~~COMMON STOCK

On February 15, 2008, the board of directors and shareholders representing a majority of the voting rights voted to amend its articles of incorporation to designate its existing authorized 1,000,000 preferred shares, par value $0.001 as Series A Preferred Stock, par value $0.001 and establish a Series B Preferred Stock, 1,000,000 shares authorized, par value $0.001.

On February 15, 2008, the Company’s directors and shareholders representing a majority of the voting rights, voted to amended its articles of incorporation to designate the existing 1,000,000 shares of preferred stock, par value $0.001 to Preferred Series A Super Voting Convertible Preferred with voting rights equal to five hundred (500) to one (1) on matters requiring a vote of the common stock shareholders and further authorized the creation of 1,000,000 shares of Series B Preferred Stock, par value $0.001.

On February 15, 2008, the board of directors and shareholders representing a majority of the voting rights voted to issue Frank Neukomm, CEO, 666,667 shares of Series A Preferred Stock and Robert Farr, President, 333,333 shares of Series A Preferred Stock in return for their encumbering their personal share holdings of approximately 12 million shares and for them personally guaranteeing a $400,000 convertible debenture agreement with an accredited investor that the Company closed on February 29, 2008, that could possibly reach $2,000,000 if further advances are made to the Company. These Series A Preferred shares are convertible into common stock on a 1 to 1 basis and entitled to 500 to 1 Super Voting Rights on any issue requiring a shareholder vote. These Super Voting Rights shall expire with the expiry of the obligations under the convertible debenture or at such time as holder of the Series A Preferred Shares convert to common stock. The shares were valued at market price at the date of issuance and expensed as compensation to executives. The valuation of these shares was $28,000.

On March 12, 2009, the Company issued 25,000 shares of its Series B Preferred Stock for a total of $25,000. During the fourth quarter of fiscal 2009, the shareholder converted the Series B preferred stock into 75,000,000 shares of common stock of the Company.

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NOTE 7 - COMMON STOCK

In 2005, ASRC issued 2,624,501 shares of common stock to directors for services valued at the then market price totaling $248,567 and issued 8,231,288 shares of common stock to outsiders for services valued at the then market price totaling $1,429,304.

On June 30, 2005, we issued warrants to purchase 6,000,000 common shares to an outside consultant. As such we recorded an expense of $1,505,897 during the quarter that was estimated using the Black Scholes pricing model. Significant assumptions used were (1) 2 year term, (2) volatility of 149.80%, (3) risk-free rate of 3.5% and (4) dividends of zero. Subsequently, the consultant exercised warrants to purchase 2,000,000 shares for $77,000 in cash. The market value at the time of the exercise was $780,000, but appropriately, there was no additional compensation expense recorded. The remaining warrants were then cancelled. The warrants contained no cashless provision.

In 2005, ASRC hired the original design engineers of eGo Designs, Inc. ("eGo") by issuing 12,000,000 shares as a hiring bonus for the design engineers to work for ASRC and continue their development of the hydrogen fuel cell proto-type technology. Although legally, this transaction was structured as a purchase agreement of the outstanding shares of eGO Designs, ASRC examined the requirements under SFAS 141, “Accounting for Business Combinations,” and EITF 98-3, “Determining Whether Nonmonetary Transactions Involve Receipt of Productive Assets or of a Business,” to conclude that eGo Design, Inc was not a “business,” As such the transaction was accounted for as a “hiring bonus,” and recorded as compensation expense during 2005 in the amount of $2,040,000 which was equal to the market value of the shares issued by ASRC to the original design engineers.

In 2005, ASRC issued 1,500,000 shares as an equity swap for 46,154 shares of common stock of Strategic Growth Ventures, Inc. (the shares were issued to Wall Street Insider Report), valued at the then market price totaling $225,000.

In 2006, ASRC issued 6,698,000 shares of common stock to officers and directors for services valued at the closing price on the day before the issuance. As a result of these issuances, we recognized a total expense of $690,885.

In 2006, ASRC issued 14,786,051 shares of common stock to outsiders for services. These shares were valued at the closing price on the day before the issuance and, as a result of these issuances, we recognized expenses totaling $1,724,639.

In 2006, ASRC issued 1,570,792 common shares to contractors for incentives and bonuses. We recognized expense of $174,727 related to these shares.

In 2006, ASRC issued 1,129,935 shares of common stock upon the cashless exercise of warrants held by Goldbridge Capital.

In 2006, ASRC issued 23,744,250 shares of common stock for cash totaling $1,905,990. $84,070 of this amount was not received until subsequent to December 31, 2006 and was deducted from additional paid in capital at December 31, 2006. Out of the total shares issued for cash, 15,750,000 shares were related to his exercise of warrants for cash proceeds of $1,324,675.

In June 2007, there was a cashless exercise of warrants resulting in 76,873 shares of common stock being issued.

In 2007, ASRC granted options to purchase 46,850,000 shares of its common stock pursuant to a consulting contract with an exercise price equal to 70% of the average closing price of the lowest 8 days of the prior twenty trading days and were exercisable for 90 days. The value of the options was computed using the Black-Scholes pricing model using the following input values and assumption: (1) Stock price: the closing price on the day previous to the grant date; (2) warrant exercise price equal to 70% of the weighted average price of the lowest eight days of the prior twenty trading days; (3) volatility ranging from 95.62% to 195.42%; (4) discount rate of 4.72% to 4.91%; (5) term of 90 days and (6) a zero dividend rate. The amount of expense recognized during 2007 in connection with these warrants was $1,240,307 and is included in general and administrative expenses for the year ended December 31, 2007. All of these options were exercised, resulting in cash receipts of $1,479,518.

On January 30, 2007 ASRC issued 500,000 shares of our common stock to our Board of Directors as compensation for their service. These shares were valued at $42,000 based on their market value in these financial statements. The amount is equal to the fair value of the shares at the time the Board authorized their issuance.

- 28 -

During the year ended December 31, 2007, ASRC issued 2,181,818 shares of our common stock to our Chairman and Chief Executive Officer, Frank Neukomm and our President and Chief Operating Officer in lieu of salaries which were due to them as of December 31, 2006. These shares were valued at $74,182 based on their market value at the date of grant. ASRC also issued 250,000 shares of stock to Frank Neukomm as compensation for a sales bonus. These shares were valued at $10,000. The amount is equal to the fair value of the shares at the time the Board authorized their issuance.

During the year ended December 31, 2007, ASRC issued 8,031,407 common shares to external parties in exchange for consulting and legal services and recorded a total expense of $349,006. The expense is equal to the fair value of the shares based upon the closing price at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

During the year ended December 31, 2007, ASRC issued 11,289,917 shares of stock in lieu of compensation to consultants for services rendered at Hydra Fuel Cell. These shares were valued at $510,151 based on their market value at the time of issuance, as reflected in these financial statements.

As consideration for the license from Ohio University, the Company paid $100,000, issued 2,000,000 shares of restricted stock, issued 2,000,000 warrants exercisable for a three year period at $0.041 per share (the closing price on the transaction date) and agreed to provide the University with $600,000 in sponsored research on the patent,.

During the year ended ending December 31, 2008, ASRC issued 13,250,000 common shares for cash proceeds from private placements of $178,000.

During the year ended ending December 31, 2008, ASRC issued 19,611,375 common shares for cash proceeds from warrant exercises of $86,290.

During the year ended December 31, 2008, ASRC granted options to purchase 7,400,000 shares of its common stock pursuant to a consulting contract with an exercise price equal to 70% of the average closing price of the lowest 8 days of the prior twenty trading days and were exercisable for 90 days. The value of the options was computed using the Black-Scholes pricing model using the following input values and assumption: (1) Stock price: the closing price on the day previous to the grant date; (2) warrant exercise price equal to 70% of the weighted average price of the lowest eight days of the prior twenty trading days; (3) volatility of 92% - 190%; (4) discount rate of 0.37 to 3.02%; (5) term of .2 to 3.4 years and (6) a zero dividend rate. The amount of expense recognized during the year ended 2008 with these warrants was $72,546 and is included in general and administrative expenses. All of these options were exercised, resulting in cash receipts of $87,000.

During the year ended ending December 31, 2008, ASRC issued 28,113,618 common shares to external parties in exchange for consulting and legal services and recorded a total expense of $593,993. The expense is equal to the fair value of the shares based upon the closing price at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

During the year ended December 31, 2008 ASRC issued 74,245,198 shares of stock in lieu of compensation to consultants for services rendered at Hydra Fuel Cell and American Hydrogen. These shares were valued at $900,698 based on their market value at the time of issuance, as reflected in these financial statements.

During the year ended December 31, 2008, there was a cashless exercise of 45,584,425 warrants resulting in the issuance of 18,584,615 shares of common stock.

During the year ended ending December 31, 2008, ASRC issued 54,221,260 common shares for officers and directors fees. These shares were valued at $320,264 based on their market value at the time of issuance, as reflected in these financial statements.

During the year ended December 31, 2008, ASRC issued 8,054,253 shares to our Chairman and Chief Executive Officer, Frank Neukomm as indemnification for his pledging an equal number of shares on the St. George Investments, LLC convertible debenture transaction in February 2008 and also guaranteeing the convertible debenture liability. These shares were valued at $225,519 based on their market value at the time of issuance.

- 29 -

During the year ended December 31, 2008, ASRC issued 4,035,615 shares to our President and Director, Robert Farr as indemnification for his pledging an equal number of shares on the St. George Investments, LLC convertible debenture transaction in February 2008 and also guaranteeing the convertible debenture liability. These shares were valued at $112,997 based on their market value at the time of issuance.

During 2009, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2009, the Company issued 935,079,111 common shares in exchange for settlement of the accrued compensation of $206,449 to these executives.

During the year ended December 31, 2009, ASRC issued 238,791,067 common shares for cash totaling $92,945.

During the year ended December 31, 2009, ASRC issued 28,036,255 common shares under cashless warrant exercise.

During the year ended December 31, 2009, ASRC issued 55,000,000 common shares from the exercise of warrant agreements resulting in total cash proceeds of $28,111.

During the year ended December 31, 2009, ASRC received conversion notices under convertible debenture agreements to issue an aggregate of 1,224,919,424 common shares for total debt reductions of $734,685.

- 23 -

During the year ended December 31, 2010 ASRC issued 5,171,075,185 common shares to external parties in exchange for consulting and legal services recorded a total expense of $904,776. The expense is equal to the fair value of the shares based upon the closing price at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

During the year ended December 31, 2010, ASRC issued 100,000,000 common shares in lieu of compensation to its Officers and Directors. The expense is equal to the fair value for services rendered. These shares were valued at $8,000 based on their market value at the time of issuance, as reflected in these financial statements.

During the year ended December 31, 2010, ASRC issued 2,030,666,666 of common shares pursuant to a wraparound agreement with an accredited investment firm. This agreement is a wrap-around agreement issued in exchange for accrued compensation due to the officers of ASRC in the amount of $127,500.

During the year ended December 31, 2010, ASRC issued 6,186,250,000 of common shares pursuant to a beneficial conversion feature related to convertible notes and such shares were valued at $763,700 based on their market value at the time of issuance, as reflected in these financial statements.

During the year ended December 31, 2010, ASRC issued 506,311,459 common shares for cash totaling $71,253.

NOTE 7 – PREFERRED STOCK

On March 12, 2009, the Company issued 25,000 shares of its Series B Preferred Stock for a total of $25,000. Subsequently, during the fourth quarter of fiscal 2009, the shareholder converted the Series B preferred stock into 75,000,000 shares of common stock of the Company.

NOTE 8 - STOCK-BASED COMPENSATION

During the year ended December 31, 2008, ASRC issued a total of 64,510,448 shares of our common stock to our Chairman and Chief Executive Officer, Frank Neukomm, our President and Chief Operating Officer, Robert Farr, and the President of our subsidiary Hydra Fuel Cell, in lieu of compensation which were due to them. These shares were valued at $619,780 based on their market value at the date of grant.

During the year ended December 31, 2008, ASRC issued 500,000 shares of our common stock to our Board of Directors as compensation for their service. These shares were valued at $39,000 based on their market value in these financial statements. The amount is equal to the fair value of the shares at the time the Board authorized their issuance.

During the year ended December 31, 2008, ASRC issued 74,245,198shares of stock in lieu of compensation to consultants for services rendered at Hydra Fuel Cell. These shares were valued at $900,698 based on their market value at the time of issuance, as reflected in these financial statements.

During the year ended December 31, 2008, ASRC issued 28,113,618 common shares to external parties in exchange for consulting and legal services and recorded a total expense of $593,993. The expense is equal to the fair value of the shares at the date that either a definitive agreement to issue the shares was reached with external parties or the date the Board authorized their issuance.

- 30 -

During 2009, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2009, the Company issued 935,079,111 common shares in exchange for settlement of the accrued compensation of $206,449 to these executives.

During 2010, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2009, the Company issued 2,030,666,666 common shares in exchange for settlement of the accrued compensation of $127,500 to these executives.

- 24 -

NOTE 9 –WARRANTS AND OPTIONS

In 2007, ASRC granted options to purchase 46,850,000shares of its common stock pursuant to a consulting contract with an exercise price equal to 70% of the average closing price of the lowest 8 days of the prior twenty trading days and were exercisable for 90 days. The value of the options was computed using the Black Scholes pricing model using the following input values and assumption: (1) Stock price: the closing price on the day previous to the grant date; (2) warrant exercise price equal to 70% of the weighted average price of the lowest eight days of the prior twenty trading days; (3) volatility ranging from 95.62% to 195.42%; (4) discount rate of 4.72% to 4.91%; (5) term of 90 days and (6) a zero dividend rate. The amount of expense recognized during 2007 in connection with these warrants was $1,240,307 and is included in general and administrative expenses for the year ended December 31, 2007. All of these options were exercised, resulting in cash receipts of $1,471,049.

On August 2, 2007, the Company issued Ohio University 2,000,000 warrants exercisable over a three year period at the closing price of the Company’s common stock on the closing date, which was $0.041 on August 2, 2007. The Company valued the warrants at $37,500 by using the Black Scholes model with assumptions including: (1) three years: (2) a computed volatility rate of 117.24%: (3) a discount rate of 4.57% and (4) zero dividends. This amount was written off in conjunction with the Company’s termination of the Ohio Agreement (Note 4)

In 2007, ASRC issued 650,000 shares and granted warrants to purchase 650,000 shares of our common stock pursuant to a Private Placement Memorandum with two accredited investors whereby the investors purchased 650,000 Investment Units consisting of (a) 1 share of common stock, (b) ½ of one option to purchase a share of our common stock at $0.10 and (c) ½ of one option to purchase a share of our common stock at $0.20. These warrants vested immediately and had a term of three years. We allocated the proceeds of $32,500 to the warrants and common stock based on the relative fair value of each. We estimated the fair value of these warrants using the Black Scholes method with assumptions including: (1) term of 3 years; (2) a computed volatility rate of 194.65% (3) a discount rate of 4.78 % and (4) zero dividends. The relative fair value of these options was estimated to be $18,931 and was included in general and administration expenses for the year ended December 31, 2007.

In 2007, ASRC granted options to purchase 500,000 shares to each member of our Board of Directors, to the Chief Technology Officer of our Hydra Fuel Cell subsidiary, and our Chief Financial Officer with an exercise price equal to $0.071. The options vested immediately and expire on December 31, 2011. We estimated the fair value of these options using the Black Scholes method with assumptions including: (1) term of 5 years; (2) a computed volatility 217% (3) a discount rate of 4.78% and (4) zero dividends. The fair value of these options was estimated to be $332,123 and is included in general and administrative expenses for the year ended December 31, 2007.

In 2007, ASRC granted a distributor for 40,000,000 warrants, that are exercisable at the lower of $0.03 or the lowest closing price at any time prior to the exercise of any or all of the warrants that have an expiration date of December 18, 2008. We estimated the fair value of these options using the Black Scholes method with assumptions including: (1) term of 1 year; (2) a computed volatility 117% (3) a discount rate of 4.5% and (4) zero dividends. Based on the warrant agreement, consulting expense of $719,022 was recorded as general and administrative expense for the valuation of the warrants as of December 31, 2007. During the year ended December 31, 2008, 19,611,489 warrants were exercised for cash proceeds of $86,290, and the remaining outstanding warrants expired.

- 31 -

In 2008, the Company granted warrants to purchase 15,000,000 shares of our common stock pursuant to a Securities Purchase Agreement for cash proceeds of $15,000. The warrants are exercisable over a seven year period at a closing price equal to $0.0297 per share, which was calculated based on 110% of the VWAP on the trading day immediately before the closing date, as defined in the agreement. We estimated the fair value of these options using the Black Scholes method with assumptions including: (1) term of 7 years; (2) a computed volatility 190% (3) a discount rate of 1.2% and (4) zero dividends. The warrant agreement provided for a cashless exercise, and during the year ended December 31, 2008, the holder of the warrants received 8,584,615 shares of common stock of the Company.

In 2008, the Company granted warrants to purchase an aggregate 10,000,000 shares of common stock pursuant to a consulting agreement. The warrants are exercisable over a one year period at an exercise price of $0.005 per share. We estimated the fair value of these options using the Black Scholes method with assumptions including: (1) term of 1 year; (2) a computed volatility 285% (3) a discount rate of 4.3% and (4) zero dividends. The fair value of these options was estimated to be $11,826 and is included in general and administrative expenses for the year ended December 31, 2008. These warrants expired in the fourth quarter of fiscal 2009.

In 2008, the Company granted options to purchase 7,400,000 shares of its common stock pursuant to a consulting contract with an exercise price equal to 70% of the average closing price of the lowest 8 days of the prior twenty trading days and were exercisable for 90 days. The value of the options was computed using the Black Scholes pricing model using the following input values and assumption: (1) Stock price: the closing price on the day previous to the grant date; (2) warrant exercise price equal to 70% of the weighted average price of the lowest eight days of the prior twenty trading days; (3) volatility ranging from 92% to 190%; (4) discount rate of 1.26% to 3.02%; (5) term of 90 days and (6) a zero dividend rate. The amount of expense recognized during 2008 in connection with these warrants was $72,546 and is included in general and administrative expenses for the year ended December 31, 2008. All of these options were exercised, resulting in cash receipts of $87,000.

The Company evaluated all outstanding warrants to determine whether these instruments may be tainted from the aforementioned derivative. All warrants outstanding were considered tainted as a result of the derivative treatment. The Company valued these warrants using the Black-Scholes valuation model. The result of the valuation is a derivative liability in the amount of $4,004. We estimated the fair value of the derivative using the Black-Scholes valuation method with assumptions including: (1) term ranging from 1 to 2 years; (2) a computed volatility rate of 229-345% (3) a discount rate ranging from 0.37% to 0.45% and (4) zero dividends. The valuation of these warrants was treated the same way as the liability associated with the debt. There were no other instruments found to be tainted by the derivative treatment.

- 32 -

Summary of warrant and options information is as follows:

	~~Weighted Avg. Exercise Price~~	~~Outstanding~~Weighted ~~Beginning~~Avg. ofExercise ~~Period~~Price	~~New Grants~~	~~Forfeitures and Cancellations~~	~~Exercises~~	Outstanding ~~End~~Beginning of Period		New Grants		Forfeitures and Cancellations			Exercises			Outstanding End of Period
Year ended December 31, 2004	$0.58	-	19,500,000	-	-	19,500,000
December 31, 2008							102,769,250		32,400,000		(20,669,761	)		(72,595,914	)		41,903,575
December 31, 2004			19,500,000	-	-	19,500,000
2009 Activity:
2005 Activity:
Forfeitures and cashless exercise		$	0.0039								29,415,575						(29,415,575	)
2005 Grants	$0.30		1,000,000	-	-	1,000,000
Consultant grants and exercises		$	0.0005						83,036,255					(83,036,255	)		-
2005 Grants	$0.30		5,000,000	-	-	5,000,000
December 31, 2009							41,903,575		83,036,255		(29,415,575	)		(83,036,255	)		12,488,000
Exercised for cash	$0.04		-	-	2,000,000	(2,000,000)
Forfeitures and cashless exercise		$	0.04				-		-		2,650,000			-			(2,650,000	)
Cancelled	$0.30		-	4,000,000	-	(4,000,000)
Consultant grants and exercises							-		-		-			-			-
December 31, 2005	$ 0.60	19,500,000	6,000,000	4,000,000	2,000,000	19,500,000
December 31, 2010							12,488,000		-		(2,650,000	)		-			9,838,000
2006 Activity:
Granted pursuant to consulting arrangements	$ 0.08		15,250,000	-	15,250,000	-
Forfeitures and cashless exercise	$ 0.13		-	500,000	1,500,000	(2,000,000)
Options granted to directors	$ 0.19		5,500,000	-	-	5,500,000
Granted pursuant to private placements	$ 0.41		1,119,250	-	-	1,119,250
Granted pursuant to warrant agreement	$ 0.01		50,000,000	-	-	50,000,000
December 31, 2006	$ 0.13	19,500,000	71,869,250	500,000	16,750,000	74,119,250
2007 Activity:
Options granted to directors	$0.07		3,500,000			3,500,000
Grants pursuant to consulting agreements	$.003		87,500,000		46,850,000	40,650,000
Cash less exercise					76,873	(76,873)
Forfeits	$0.03			17,500,000		(17,500,000)
New grant	$0.04		2,000,000			2,000,000
December 31, 2007		74,119,250	93,000,000	17,500,000	46,926,873	102,692,377
2008 Activity:
Forfeitures and cashless exercise	$0.0021			20,669,761	30,584,425	(51,254,186)
Grant to accredited investor	$0.0017		15,000,000		15,000,000
Grants for legal services	$0.012		7,400,000		7,400,000
Grants to consultants	$0.005		10,000,000			10,000,000
Exercised by consultants	$0.044				19,611,489
December 31, 2008		102,692,377	32,400,000	(20,669,761)	(72,595,914)	41,826,702
2009 Activity:
Forfeitures and cashless exercise	$0.0039			29,415,575		(29,415,575)
Consultant grants and exercises	$0.0005		83,036,255		(83,036,255)	-
December 31, 2009		41,826,702	83,036,255	(29,415,575)	(83,036,255)	12,411,129

- 3325 -

NOTE 1011- INCOME TAXES

ASRC uses the liability method, where deferred tax assets and liabilities are determined based on the expected future tax consequences of temporary differences between the carrying amounts of assets and liabilities for financial and income tax reporting purposes. During fiscal ~~2009~~2010 and ~~2008~~2009, ASRC incurred net losses and, therefore, has no tax liability. The net deferred tax asset generated by the loss carry-forward and temporary differences has been fully reserved. The cumulative net operating loss carry-forward is approximately $1820,~~400~~900,000 at December 31, ~~2009~~2010 and will expire in the years 2019 and 2029. The resulting deferred tax asset arising from NOL carry forwards of $67,~~256~~100,000 has been fully reserved.

NOTE 1112 - RELATED PARTY TRANSACTIONS

As described in Note 7 above, during the year ended December 31, 2008, ASRC issued a total of 64,510,448 shares of our common stock to our Chairman and Chief Executive Officer, Frank Neukomm, our President and Chief Operating Officer, Robert Farr, and the President of our subsidiary Hydra Fuel Cell, in lieu of compensation which were due to them. These shares were valued at $619,780 based on their market value at the date of grant.

During 2009, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2009, the Company issued 935,079,111 common shares in exchange for settlement of the accrued compensation of $206,449 to these executives.

~~NOTE~~During 12the -year ~~LEASES~~ended December 31, 2010, ASRC issued 100,000,000 common shares in lieu of compensation to its Officers and Directors. The expense is equal to the fair value for services rendered. These shares were valued at $8,000 based on their market value at the time of issuance, as reflected in these financial statements.

During 2010, ASRC entered into a series of wrap around agreements with two accredited investment firms in which ASRC and the Chief Executive Officer and Chief Operating Office guaranteed the liability in exchange for settlement of accrued compensation to these individuals. The wrap around agreement allowed the investor to exchange the outstanding debt in exchange for common stock of the Company. During 2010, the Company issued 2,030,666,666 common shares in exchange for settlement of the accrued compensation of $127,500 to these executives.

NOTE 13 - LEASES

ASRC leased office space under an operating lease during 2009 and 2008. The lease agreement provided for monthly rent of $2,650 to be paid through March 31, 2012. Additionally, ASRC’s subsidiary, Hydra Fuel Cell Corporation leases approximately 5,000 square feet in Portland, Oregon for monthly rent of $4,930.

Minimum lease payments due under non-cancelable leases over the next five years and thereafter are as follows as of December 31, ~~2009~~2010:

Year Ending December 31,

	2010	$ 31,800
2011			31,800
	2011	31,800
2012			7,950
	2012	7,950
2013			-
	2012	-
2014			-
	Total	$71,550
2015			-
Total		$	39,750

Total rent expense was $~~100~~112,~~314~~286 and $96100,~~384~~314 during ~~2008~~2010 and ~~2007~~2009, respectively.

~~NOTE~~- 1326 ~~– COMMITMENTS AND CONTINGENCIES~~-

AsNOTE ~~previously~~14 ~~mentioned~~– inCOMMITMENTS ~~Note~~AND ~~5, ASRC was in default with two Securities Purchase Agreements with two accredited investment firms at December 31, 2008 and during the year ended December 31, 2009.~~CONTINGENCIES

-As 34previously -mentioned in Note 4, ASRC was in default with two Securities Purchase Agreements with two accredited investment firms during the year ended December 31, 2009.

~~Effective~~On ~~November~~April 177, ~~2009~~2010, the Company and one investor ~~entered~~reached ~~into~~ a settlement agreement whereby ~~the~~both ~~Investor~~parties agreed to adismiss ~~settlement~~their ~~amount~~respective ofclaims ~~$431,004,~~against ~~including~~the ~~all unpaid principal~~other, ~~interest~~ and ~~penalties,~~mutually toagreed bethe ~~paid~~outstanding inprincipal ~~cash~~due orunder ~~common stock of~~ the ~~Company,~~original ~~subject~~convertible debenture to anthe ~~ownership~~investor ~~limitation~~of $350,000 aswould ~~defined~~be inpaid ~~the~~through ~~settlement~~a ~~agreement. Interest~~stock onconversion ~~the~~program, ~~settlement~~with ~~amount~~interest ~~will~~of ~~accrue~~7 ~~at 8.75~~¼% ~~beginning~~from ~~November~~May 61, ~~2009,~~2010 ~~and~~until ~~all~~the ~~unpaid~~outstanding principal ~~and accrued interest~~ is ~~due~~fully ~~on or before December 31, 2010~~converted. The ~~Company~~settlement isagreement ~~subject~~provides tofor ~~certain~~daily ~~covenants~~trading ~~and~~limits ~~reporting~~of ~~requirements. The~~the Company’s ~~recorded~~common astock ~~penalty~~by ~~charge in~~ the ~~fourth~~investor, ~~quarter~~as ofwell ~~$78,775~~as inpenalties ~~connection~~for ~~with~~violations of the ~~settlement~~trading ~~agreement~~restrictions.

~~Subsequent~~Effective to December 31, ~~2009~~2010, the Company and ~~second~~one investor ~~reached~~entered into a settlement agreement whereby ~~both~~the ~~parties~~Investor agreed to ~~dismiss~~a ~~their~~settlement ~~respective~~amount ~~claims~~of ~~against~~$482,406, ~~the~~including ~~other~~all unpaid principal, interest and ~~mutually~~penalties, ~~agreed~~to ~~the~~be ~~outstanding~~paid ~~principal~~in ~~due~~cash ~~under~~or ~~the~~common ~~original~~stock ~~convertible~~of ~~debenture~~the toCompany, ~~the~~subject ~~investor~~to ofan ~~$350~~ownership limitation,~~000~~ ~~would~~as bedefined ~~paid~~in ~~though~~the asettlement ~~stock~~agreement. Interest ~~conversion~~on ~~program,~~the ~~with~~settlement ~~interest~~amount ofwill 7accrue ¼at 10.0% ~~from~~beginning ~~May~~December 131, 2010, ~~until~~and ~~the~~all ~~outstanding~~unpaid principal and accrued interest is ~~fully~~due ~~converted~~on or before December 31, 2010. The ~~settlement~~Company ~~agreement~~is ~~provides~~subject ~~for~~to ~~daily~~certain ~~trading~~covenants ~~limits~~and ofreporting ~~the~~requirements. The Company’s ~~common~~recorded ~~stock~~a bypenalty ~~the~~charge ~~investor,~~in asthe ~~well~~fourth asquarter ~~penalties~~of ~~for~~$308,815 ~~violations~~in ofconnection with the ~~trading~~settlement ~~restrictions~~agreement.

NOTE 1415 – SUBSEQUENT EVENTS

As mentioned in Note 1314, the Company settled its arrangement with an accredited investor due to default in the original debenture agreement.

- 27 -

ITEM 9. Changes In and Disagreements with Accountants on Accounting and Financial Disclosure.

~~None~~On May 31, 2011, P. S. Stephenson Co. was dismissed as the independent auditor for American Security Resources Corporation.

From the date on which P S Stephenson Co. was engaged until the date they were dismissed, there were no disagreements with P S Stephenson Co. on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedure, which disagreements, if not resolved to the satisfaction of P S Stephenson Co., would have caused P S Stephenson Co. to make reference to the subject matter of the disagreements in connection with any reports it would have issued, and there were no “reportable events” as that term is defined in Item 304(a) (1) (iv) of Regulation S-B.

P S Stephenson Co’s reports on the Company’s financial statements for years ended December 31, 2008, through December 31, 2009 did not contain adverse opinions or disclaimers of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles.

On June 1, 2011, Registrant executed an engagement letter with Hall Group CPA’s to assume the role of its new certifying accountant. Hall Group CPA’s has been asked to perform the quarterly review of Registrant for the quarter and year ended December 31, 2010.

The engagement of the new principal auditor was recommended and approved by the Board of Directors of Registrant.

Item 9A(T). Controls and Procedures.

~~Evaluation of~~ Disclosure Controls and Procedures

The Company's ~~maintains~~management ~~disclosure~~evaluated, ~~controls~~with ~~and~~the ~~procedures~~participation ~~that~~of ~~are~~its ~~designed~~Chief toExecutive ~~ensure~~Officer ~~that~~("CEO") ~~material~~and ~~information~~Chief ~~required~~Financial toOfficer ~~be disclosed by us in Securities Exchange Act reports is recorded~~("CFO"), ~~processed, summarized and reported within~~ the ~~time~~effectiveness ~~periods~~of ~~specified in~~ the ~~Securities~~design/operation ~~and~~of ~~Exchange~~its ~~Commission’s~~disclosure ~~rules~~controls and ~~forms,~~procedures ~~and~~(as ~~that~~defined ~~such~~in ~~information~~Rules is13a-15(e) ~~accumulated~~ and ~~communicated~~15d-15(e) tounder ~~our management, including~~ the ~~Chief~~Securities ~~Executive~~Exchange ~~Officer~~Act ~~and~~of ~~Chief Financial Officer~~1934, as ~~appropriate,~~amended to("Exchange ~~allow~~Act")) ~~timely~~as ~~decisions~~of ~~regarding~~December ~~required~~31, ~~disclosure~~2010.

~~Our~~Disclosure ~~Chief~~controls ~~Executive Officer~~ and ~~Chief~~procedures ~~Financial~~refer ~~Officer~~to ~~have~~controls ~~evaluated~~and ~~the~~other ~~effectiveness~~procedures ofdesigned ~~the~~to ~~design~~ensure ~~and~~that ~~operation~~information ofrequired ~~our~~to ~~disclosure~~be ~~controls~~disclosed ~~and~~in ~~procedures~~the ~~(as~~reports ~~defined~~we infile ~~Rules 13a-15(e)~~or ~~and~~submit ~~15d-15(e)~~ under the ~~Securities~~ Exchange Act, ofis ~~1934) as~~recorded, ofprocessed, ~~the~~summarized ~~end~~and ofreported within the ~~period~~time ~~covered~~periods byspecified ~~this~~in ~~report. Based~~the onrules ~~that evaluation, our Principal Executive Officer~~ and ~~Principal~~forms ~~Financial Officer concluded that, as~~ of the ~~end~~SEC ofand ~~the~~that ~~period~~such ~~covered~~information byis ~~this~~accumulated ~~Annual Report, our disclosure controls~~ and ~~procedures~~communicated ~~were ineffective. The failure~~ to ~~timely~~our ~~file~~management, ~~this~~including ~~annual~~our ~~report~~chief ~~for~~executive ~~2009~~officer ~~leads to the conclusion that the disclosure controls~~ and ~~procedures~~chief ~~were~~financial ~~not~~officer, ~~effective. As~~as ~~of the date of this report~~appropriate, ~~the~~to ~~Company~~allow ~~has~~timely ~~added~~decisions ~~the~~regarding ~~further~~required ~~step~~disclosure. ofIn ~~fully~~designing ~~discussing with its outside advisors whether they are aware of any new SEC rules~~ and ~~regulations~~evaluating ~~affecting~~ our disclosure ~~requirements~~controls and ~~whether~~procedures, ~~each~~management ~~report~~recognizes ~~being~~that ~~filed~~any iscontrols ~~compliant with current rules~~ and ~~regulations.~~procedures, ~~Our~~no ~~management~~matter ~~has~~how ~~concluded~~well ~~that~~designed ~~the~~and ~~financial~~operated, ~~statements~~can ~~included~~provide inonly ~~this~~reasonable ~~Form~~assurance ~~10-K~~of ~~present~~achieving ~~fairly,~~the indesired ~~all~~control ~~material respects our financial position~~objectives, ~~results of operations~~ and ~~cash~~management ~~flows~~is ~~for~~required ~~the~~to ~~periods~~apply ~~presented~~its judgment in ~~conformity~~evaluating ~~with~~and ~~generally~~implementing ~~accepted~~possible ~~accounting~~controls ~~principles~~and procedures.

~~Changes~~Management inconducted ~~Internal~~its ~~Controls~~evaluation of disclosure controls and procedures under the supervision of our principal executive officer and our principal financial officer. Based on that evaluation, management concluded that, considering the existence of material weaknesses identified, our internal control over financial reporting disclosure controls and procedures were not effective as of December 31, 2010.

~~During~~Material ~~the~~Weaknesses quarter ended December 31, 2009, there were no changes in our internal controls over financial reporting that materially affected, or were reasonably likely to materially affect, our internal control over financial reporting.Identified

~~Limitations~~We onidentified the ~~Effectiveness~~following deficiencies which together constitute a material weakness in our assessment of ~~Controls~~the effectiveness of internal control over financial reporting as of December 31, 2010:

~~Our~~o ~~management,~~The ~~including~~Company ~~our~~has ~~CEO~~inadequate ~~and~~segregation CFO, does not expect that our disclosure controls and internal controls will prevent all errors and all fraud. A control system, no matter how well conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of ~~the~~duties ~~control~~within ~~system~~its ~~are~~cash ~~met.~~disbursement ~~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~~design. 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.

-o 35During -the year ended December 31, 2010, the company internally performed all aspects of our financial reporting process, including, but not limited to the underlying accounting records and record journal entries and responsibility for the preparation of the financial statement due to the fact these duties were performed often times by the same people, a lack of review was created over the financial reporting process that might result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statement and related disclosures as filed with the SEC. These control deficiencies could result in a material misstatement to our interim or annual financial statements that would not be prevented or detected.

~~Additionally,~~o ~~controls~~The ~~can~~Company bedoes ~~circumvented~~not byhave ~~the~~a ~~individual~~sufficient ~~acts~~number of ~~some~~independent ~~persons,~~directors byfor ~~collusion~~our ofboard ~~two~~and oraudit ~~more~~committee. ~~people,~~We orcurrently byhave ~~management~~no ~~override~~independent ofdirector ~~the~~on ~~control.~~our ~~The~~board, ~~design~~which ~~of any system of controls also~~ is ~~based~~comprised ~~in part upon certain assumptions about the likelihood~~ of ~~future~~two ~~events~~directors, and ~~there~~we ~~can~~do benot nohave ~~assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time,~~ a ~~control~~functioning ~~may~~audit ~~become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate~~committee. ~~Because~~As ~~of the inherent limitations in~~ a ~~cost-effective~~publicly ~~control~~traded ~~system~~company, ~~misstatements~~we ~~due~~should strive to ~~error~~have ora ~~fraud~~majority ~~may~~of ~~occur~~our ~~and~~board ~~not~~of directors be ~~detected~~independent.

~~CEO~~- ~~and~~28 ~~CFO Certifications~~-

~~Exhibits 31.1~~The ~~and~~Company ~~32.1~~is ~~are~~continuing the ~~Certifications~~process of remediating its control deficiencies. However, the ~~CEO~~material weakness in internal control over financial reporting that has been identified will not be remediated until numerous internal controls are implemented and ~~the~~operate ~~CFO~~for a period of time, ~~respectively~~are tested, and the Company is able to conclude that such internal controls are operating effectively. The ~~Certifications~~Company ~~are~~cannot ~~required~~provide inassurance ~~accordance~~that ~~with~~these ~~Section 302~~procedures ofwill ~~the~~be ~~Sarbanes-Oxley~~successful ~~Act~~in ofidentifying ~~2002~~material (errors that may exist in the ~~Section 302~~financial ~~Certifications)~~statements. ~~This~~The ~~Item~~Company ofcannot ~~this~~make ~~report,~~assurances ~~which~~that ~~you~~it ~~are~~will ~~currently~~not ~~reading~~identify isadditional ~~the~~material ~~information~~weaknesses ~~concerning~~in ~~the~~its ~~Evaluation~~internal ~~referred~~control toover financial reporting in the ~~Section 302~~future. ~~Certifications~~Management plans, as capital becomes available to the Company, to increase the accounting and ~~this~~financial ~~information~~reporting ~~should~~staff beand ~~read~~provide infuture ~~conjunction~~investments ~~with~~in the ~~Section 302~~continuing ~~Certifications~~education ~~for~~and apublic ~~more~~company ~~complete~~accounting ~~understanding~~training of ~~the~~our ~~topics~~accounting ~~presented~~and financial professionals.

Management’'s Report on Internal Control ~~Over~~over Financial Reporting

~~Management~~Our management is responsible for establishing and maintaining adequate internal control over ~~our~~ financial reporting (as defined in ~~Rule~~Rules 13a-15(f) and 15d-15(f) ofunder the Exchange Act). ~~Internal~~Our management is also required to assess and report on the effectiveness of our internal control over financial reporting isin aaccordance ~~process~~with ~~designed~~Section to404 ~~provide~~of ~~reasonable~~the ~~assurance~~Sarbanes-Oxley ~~regarding~~Act ~~the~~of ~~reliability~~2002 of("Section ~~financial~~404"). ~~reporting~~Management ~~and~~assessed the ~~preparation~~effectiveness of our internal control over financial ~~statements~~reporting ~~for~~as ~~external~~of ~~purposes~~December in31, ~~accordance~~2010. ~~with~~In ~~accounting~~making ~~principles~~this ~~generally~~assessment, ~~accepted~~we inused the ~~United~~criteria ~~States~~set forth by the Committee of ~~America.~~Sponsoring Organizations of the Treadway Commission (COSO)

~~Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that,~~ in ~~reasonable~~Internal ~~detail,~~Control ~~accurately~~- ~~and~~Integrated fairly reflect the transactions and dispositions of our assets, (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with accounting principles generally accepted in the United States of America, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors, and (iii) 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 statementsFramework.

~~Because~~Changes of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in ~~conditions,~~Internal orControls that the degree of compliance with the policies or procedures may deteriorate. Our management, with the participation of our Principal Executive Officer and Principal Financial Officer, conducted an evaluation of the effectiveness of our internal control over financial reporting based on the framework in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, our Principal Executive Officer and Principal Financial ~~Officer concluded that, as of the end of the period covered by this Annual Report, our internal control over financial reporting was effective.~~Reporting

~~This~~Other ~~Annual~~than ~~Report~~the ~~does~~matters ~~not~~discussed ~~include~~above, anduring ~~attestation~~the ~~report~~period ofcovered ~~our~~by ~~independent~~this ~~registered~~report, ~~public~~there ~~accounting~~were ~~firm~~no ~~regarding~~significant ~~internal~~changes ~~control~~in ~~over~~the ~~financial reporting. Management~~Company's ~~report~~internal ~~was~~controls ~~not~~over ~~subject~~financial toreporting ~~attestation~~that byhave ~~our~~materially ~~independent~~affected ~~registered~~or ~~public~~are ~~accounting~~reasonably ~~firm~~likely ~~pursuant~~ to ~~temporary~~materially ~~rules~~affect of the ~~Securities and Exchange Commission that permit us to provide only management~~Company's ~~report~~internal incontrols ~~this~~over ~~Annual~~financial ~~Report~~reporting.

It should be noted that any system of controls, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system are met. In addition, the design of any control system is based in part upon certain assumptions about the likelihood of future events. Because of these and other inherent limitations of control system, there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions, regardless of how remote.

Auditor Attestation

This annual report does not include an attestation report of the company's registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by the company's registered public accounting firm pursuant to rules of the Securities and Exchange Commission that permit the company to provide only management's report.

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PART III

ITEM 10 - Directors, Executives Officers, Promoters and Control Persons

The Company has adopted a Code of Ethics that applies to all of its Directors, Officers (including its CEO, CFO and chief accounting officer and any person performing similar functions) and all employees. The Code is attached hereto by reference.

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Directors and Executive Officers

The following table sets forth the names of all current directors and executive officers of the Company as of December 31, ~~2009~~2010. These persons will serve until the next annual meeting of the stockholders or until their successors are elected or appointed and qualified, or their prior resignation or termination.

Name	Positions Held	~~Positions~~Date ~~Held~~of Election or Designation	~~Date of Election or Designation~~
Robert C. Farr	President/COO	~~President~~11/~~COO~~23/05	~~11/23/05~~
	Director	~~Director~~10/27/04	~~10/27/04~~
Frank Neukomm	Director	~~Director~~02/25/04	~~02/25/04~~
	Secretary	~~Secretary~~11/08/04	~~11/08/04~~
	Chairman/CEO	~~Chairman~~11/~~CEO~~23/05	~~11/21/05~~
Robert J. Wilson	Director	~~Director~~07/21/05	~~07/21/05~~
Marlin Williford		CFO (1)	07/05/07
Sam Lindsey	CFO (1)	11/1/08
Sam Lindsey		CFO (1)	11/1/08
John A. Wilkinson	CFO (1)	04/1/09
John A. Wilkinson		CFO (1)	04/08/09
Alvie T. Merrill	Director	10/11/06
John A. Wilkinson		CFO (1)	04/1/09
James R. Twedt	Director	10/11/06
Alvie T. Merrill		Director	10/11/06
R. Brian Klock	Director	01/10/09
James R. Twedt		Director	10/11/06
R. Brian Klock		Director	01/10/09

(1) Mr. ~~Williford~~Lindsey performed the Chief Financial Officer duties for the Company on a contract basis until he was replaced by ~~Mr. Lindsey. Mr. Lindsey was replaced by~~ John A. Wilkinson CPA in April 2009.

Business Experience

Frank Neukomm (58), Chairman/ CEO, has an extensive background in finance, mergers and acquisitions, and sales and marketing. Mr. Neukomm has served as a senior executive of brokerage and M & A companies, software companies and telecom companies. Mr. Neukomm has been instrumental in purchasing or starting companies in industries as diverse as insurance, consumer retail goods, industrial services and wireless telecommunications. Since 1995, Mr. Neukomm has served as President of NeuHaus Advisors, Inc., a consulting firm to the telecommunications industry.

Robert Farr (62), President/COO has extensive Fortune 500 management experience in a variety of industries. His experience extends to domestic and international finance, marketing, manufacturing and distribution. He is the Principal of Creative Equity Strategies.

John A. Wilkinson, CPA, CFO, has over twenty years public accounting experience and CFO experience. He previously served as chief accounting officer of Computer Automation Systems Inc., a predecessor enterprise to ARSC.

Robert J Wilson , Director, is a CPA and an independent Director who serves as Audit Committee Chairman.

Alvie T. Merrill, Director, is Chairman of Merrill-Zurich Inc., a diversified real estate management and consulting firm. Mr. Merrill is also President of A. T. Merrill Business Consulting that has advised over 200 public and private companies since 1980. Mr. Merrill has extensive public company experience from his consulting activities and is active in numerous civic and charitable organizations in hometown of Lake Jackson, Texas.

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James R. Twedt, Director, has over forty years of public and private company accounting and management experience. He has been the President and CEO of Hydra Fuel Cell Corp. since inception and has led the subsidiary from startup to production in less than twelve months. He previously served as CFO of Computer Automation Systems, Inc., a predecessor enterprise to American Security Resources Corp.

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R. Brian Klock, Director, is a retired Naval officer with significant experience in intelligence and financial matters.

Compliance with Section 16(a) of the Exchange Act

Each of the Company's directors and executive officers filed a Form 3 Initial Statement of Beneficial Ownership of Securities with the Securities and Exchange Commission. To the best knowledge of management, all reports required to be filed by members of management under Section 16(a) of the 1934 Act have been filed.

Item 11. Executive Compensation.

Messrs. Robert Farr, Director and Chief Operating Officer, and Frank Neukomm, Chairman and Chief Executive Officer, each had $15,000 per month compensation, accrued as independent consulting services, during 2010 for a total annual amount of $180,000, respectively and $12,000 per month compensation, accrued as independent consulting services, during 2009 and 2008 for a total annual amount of $144,000, respectively. Of that amount, Robert Farr was paid $128,850 and $144,000 in cash in2010and 2009. Of that amount, Frank Neukomm was paid $111,144and $14,000 in cash during 2010and 2009. Mr. Wilkinson, Chief Financial Officer, provides CFO services as an independent CPA and received $24,835 cash compensation in 2010 plus an accrued $6,700 and no cash compensation during 2009.

Additionally, Messrs. Farr and Neukomm received 4 million and 1 million warrants, respectively, to purchase common shares of the Company. The option strike price is $0.19, expire on January 23, 2011 and contain a cashless provision. ~~These warrants make up the value in the “All Other” column in the table below.~~

Executive compensation for ~~2009~~2010, ~~2008~~2009 and ~~2007~~2008 were as follows:

Name	Position or Title	Year	~~Salary~~	~~Bonus~~Salary	~~Stock Awards~~	~~All Other~~	Bonus		Stock Awards		All Other
Robert Farr	Chief Operating Officer	~~2009~~2010	~~$ 144,000~~	$ -	~~$ -~~180,000	~~$ -~~	$	0	$	0	$	0
		2008	144,000
		2009		$	144,000			0		0		0
		2007	$144,000	-	-	-
		2008		$	144,000			0		0		0
Frank Neukomm	Chief Executive Officer	~~2009~~2010	~~144,000~~	-$	-180,000	-		0		0		0
		2008	144,000	-	-	-
		2009		$	144,000			0		0		0
		2007	144,000	-	-	-
		2008		$	144,000			0		0		0
John Wilkinson	Chief Financial Officer	~~2009~~2010	-	-$	-31,535	-		0		0		0
Randall Newton	Chief Financial Officer	2008	-
		2009			0			0		0		0
		2007	-	-	-	-
Randall Newton	Chief Financial Officer	2008			0			0		0		0
Marlin Williford	Chief Financial Officer	2007	-	-	25,000	4,500

Except as set forth above, no cash compensation, deferred compensation or long-term incentive plan awards were issued or granted to the Company's management during the calendar years ended December 31, ~~2007~~2010, 2009 and ~~2006~~2008.

Compensation of Directors

Certain Directors were compensated with restricted stock during ~~2008~~2010 ~~and 2007~~ for attending meetings and for work performed. Total stock awarded was 100,000,000 shares in 2010 which were valued at $8,000. Additionally directors were awarded 5,500,000 warrants to purchase common shares of the Company. The option strike price is $0.19, expire on January 23, 2011 and contain a cashless provision.

~~Total~~- ~~stock~~31 awarded was 500,000 shares in 2008 and 2007, respectively. Additionally, one director was awarded warrants to purchase common shares of the Company. The option strike price is $0.19, expire on January 23, 2011 and contain a cashless provision.-

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Item 12. Security Ownership of Certain Beneficial Owners and Management.

Security Ownership of Certain Beneficial Owners.

The following table sets forth the share holdings of officer, directors and those persons who own more than five percent of the company's common stock, including stock options, outstanding as of the date of this Report, assuming 7 19,~~349~~414,~~975~~684,~~068~~ 920 shares are outstanding (the number outstanding at the date of this report):

Name and Address	Type of Ownership	~~No. of Shares Beneficially Owned~~	~~Percent~~No. of ~~Class~~Shares Beneficially Owned		Percent of Class
Frank Neukomm 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	~~162,879,116~~	~~2.2%~~	556,879,116		2.87	%
Robert Farr 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	~~189,352.948~~	~~2.58%~~	589,352,948		3.04	%
James Twedt 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	~~25,718,636~~	~~.0035%~~	266,946,939		1.37	%

*Mr. Neukomm’s share number includes 162,500 shares held by The Neukomm Children’s Trust for which he is the trustee.

Item 13. Certain Relationships and Related Transactions.

There have been no material transactions, series of similar transactions, currently proposed transactions, or series of similar transactions, to which the Company and any director, executive officer, five percent stockholder or associate of any of these persons is or was a party.

Mr. Robert Farr, President and COO is in a social relationship with MS Diane Lundell, P & L Solutions, which provides Peachtree advisory services and consults on ~~bookeeping~~bookkeeping matters with the Company. Ms Lundell has no control or involvement with the Company’s cash or financial decision making.

Item 14. Principal Accountant Fees and Services

(1) Audit Fees

The aggregate fees billed for each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal years ending December 31, ~~2009~~2010 and ~~2008~~2009 were: $2760,500 and $2227,~~000~~500 respectively.

(2) Audit-Related Fees

The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal accountant that are reasonably related to the performance of the audit or review of the registrant's financial statements and are not reported under item (1) for the fiscal years ending December 31, ~~2009~~2010 and ~~2008~~2009 were: $0 and $0, respectively.

The nature of the services comprising the fees herein disclosed are: none provided.

(3) Tax Fees

The aggregate fees billed for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning for the fiscal years ending December 31, ~~2009~~2010 and ~~2008~~2009 were: $0 and $0, respectively.

The nature of the services comprising the fees herein disclosed are: none provided

(4) All Other Fees

No aggregate fees were billed for professional services provided by the principal accountant, other than the services reported in items (1) through (3) for the fiscal years ending December 31, ~~2009~~2010 and ~~2008~~2009.

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(5) Audit Committee

The registrant's Audit Committee, or officers performing such functions of the Audit Committee, have approved the principal accountant's performance of services for the audit of the registrant's annual financial statements and review of financial statements included in the registrant's Form 10-Q or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for the fiscal year ending December 31, 2009. Audit-related fees, tax fees, and all other fees, if any, were approved by the Audit Committee or officers performing such functions of the Audit Committee.

(6) Work Performance by others

None

PART IV

Item 15. Exhibits and Reports on Form 8-K.

Reports on Form 8-K. -- None

31.1	Certifications of the Chief Executive Officer and Chief Financial Officer required by Rule 13A-14 or Rule 15D-14 under the Securities Exchange Act of 1934, As Amended
32.1	Certification of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350, As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

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Signatures

Pursuant to the requirements of the Securities Exchange Act of 1934, as amended, this report has been signed below by the following persons in the capacities and on the dates indicated.

	American Security Resources Corporation
Date: May 18, 2010	By:	/s/Frank Neukomm
Date: November 5, 2014	By:	/s/Frank Neukomm
		Chief Executive Officer and Chairman (Principal Executive Officer)
Date: May 18, 2010	By:	/s/ Robert Farr
Date: November 5, 2014	By:	/s/ Robert Farr
		President, Chief Operating Officer and Director
Date: May 18, 2010	By:	/s/ John A. Wilkinson
		Principal Financial Officer
Date: November 5, 2014	By:	/s/ Randy Moseley
		Chief Financial Officer
Date: May 18, 2010	By:	/s/Robert J. Wilson
Date: November 5, 2014	By:	/s/Robert J. Wilson
		Director
Date: May 18, 2010	By:	/s/Alvie T. Merrill
Date: November 5, 2014	By:	/s/Alvie T. Merrill
		Director
Date: May 18, 2010	By:	/s/James R. Twedt
Date: November 5, 2014	By:	/s/James R. Twedt
		Director
Date: November 5, 2014	By:	/s/R. Brian Klock
		Director

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