- Annual Report (10-K)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

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

For the fiscal year ended December 31, 2009

Commission file number 000-27419

AMERICAN SECURITY RESOURCES CORPORATION

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

19 Briar Hollow Lane, Suite 125

Houston, Texas 77027

(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  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  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 

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  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 

Accelerated filer 

Non-accelerated filer 

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  No þ

The aggregate market value of the voting and non-voting common equity held by non-affiliates as of December 31, 2009 is $1,518,118.18 (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 was 5,420,381,610

Documents Incorporated By Reference: None

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AMERICAN SECURITY RESOURCES CORPORATION

INDEX TO FORM 10-K

December 31, 2009

			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	4

Part II	Item 5.	Market for Common Equity and Related Stockholder Matters	5
	Item 6.	Selected Financial Data	7
	Item 7.	Management's Discussion and Analysis or Plan of Operation	8
	Item 8.	Financial Statements	12

Part III	Item 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	33
	Item 9A.	Controls and Procedures	33
	Item 10.	Directors, Executive Officers, Promoters and Control Persons Compliance with Section 16(a) of the Exchange Act Executive Compensation	35
	Item 11	Executive Compensation	36
	Item 12.	Security Ownership of Certain Beneficial Owners and Management	37
	Item 13.	Certain Relationships and Related Party Transactions	37
	Item 14.	Principal Accountant Fees and Services	37
Part IV	Item 15.	Exhibits and Reports on Form 8-K	38
		Signatures	38

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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 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.

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 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. Additionally, the Company is developing technologies to produce hydrogen at a reduced cost.

Employees

As of December 31, 2009, the Company had 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 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 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 approximately 5,000 square feet of office and light manufacturing space in Portland, Oregon, for approximately $4,930 per month. The Company believes this space will be sufficient for its needs for the term of the lease.

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 is presently involved in litigation as further described in Footnote 13.

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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
March 31, 2009	$ 0.0034	$ 0.0005
June 30, 2009	$ 0.002	$ 0.0003
September 30, 2009	$0.0011	$0.0003
December 31, 2009	$ 0.0007	$ 0.0003

March 31, 2008	$ 0.033	$ 0.025
June 30, 2008	$ 0.074	$ 0.015
September 30, 2008	$ 0.044	$ 0.01
December 31, 2008	$ 0.013	$ 0.0019

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, 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.

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 plan, as filed on Form S-8 on January 30, 2009, under which the Company is authorized to grant incentive stock options, 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 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 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	$0.00	200,000,000

Total	0	$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 following table contains certain financial and operating data and is qualified by the more detailed consolidated financial statements and notes thereto included elsewhere in this report. 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, we do expect cash flows from distribution of the unit to become self-funding during 2010. We estimate that our Hydra Fuel Cell subsidiary will require approximately $1 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.

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

In April 2009, the FASB issued FASB Staff Position (“FSP”) No. 107-1 and 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 value disclosures required by SFAS No. 107 in their interim financial statements and is effective for interim and annual 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 FSP 107-1 and APB 28-1 to have any material impact on its financial statements and required disclosures.

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 and 2008.

The Company had no gross profit during fiscal years 2009 and 2008. General and administrative expenses were $1,698,829 and $1,604,224 for the years ended December 31, 2009 and 2008 respectively. Principal general and administrative expenses included contracted services ($834,362 and $222,245, respectively); legal expenses ($341,141 and $352,066, respectively); payroll and contractors ($354,132 and $760,530 respectively); and rent ($111,158 and $96,384, respectively).

Research and development expenses were $533,086 and $1,528,081 for the calendar years ended December 31, 2009 and 2008, 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 and 2008 were:

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

The Company had net operating losses of $2,679,277 and $3,818,868 for the years ended December 31, 2009 and 2008, respectively.

Liquidity and Capital Resources .

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

Our working capital deficit decreased by $13,711 to ($1,777,230) at December 31, 2009 compared to ($1,790,941) at December 31, 2008. 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 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 $165,056.

We consumed $177,778 in cash from operating activities for the year ended December 31, 2009 compared with $1,392,129 for the year ended December 31, 2008.

We had a net comprehensive loss of $2,679,277 and $3,818,868 or $0.00 and $0.01 per share for the year ended December 31, 2009 and 2008, respectively.

Our working capital deficit increased by $778,618 to ($1,790,941) at December 31, 2008 compared to ($1,012,323) at December 31, 2007. 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.

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.

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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.

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ITEM 8 - FINANCIAL STATEMENTS

AMERICAN SECURITY RESOURCES CORPORATION

INDEX TO FINANCIAL STATEMENTS

	Page
Report of Independent Registered Public Accounting Firm	13

Financial Statements
Consolidated Balance Sheets at December 31, 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 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 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

Notes to Consolidated Financial Statements	21

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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 of American Security Resources Corporation as of December 31, 2009 and the related consolidated statements of income, cash flows and stockholders' equity for the year ended December 31, 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.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit 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, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of American Security Resources Corporation as of December 31, 2009, and the results of its operations and its cash flows for the period 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/ PS STEPHENSON & CO., PC

Wharton, Texas

May 17, 2010

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AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

CONSOLIDATED BALANCE SHEET

December 31, 2009


ASSETS
Cash in bank		$12,399
Prepaid expenses		3,890
Total Current Assets		16,289

Equipment, net of accumulated depreciation of $119,413		43,744

Other assets		18,962

TOTAL ASSETS		$78,995

LIABILITIES AND SHAREHOLDERS' (DEFICIT) EQUITY

CURRENT LIABILITIES
Accounts payable		$358,940
Other current liabilities		424,393
Convertible debentures (net of discounts of $781,004)		33,154
Accrued interest on convertible debentures		5,762
Derivative liability		971,270
		1,793,519
Total Current Liabilities

Long Term Liabilities		-

Total Liabilities		1,793,519

SHAREHOLDERS' (DEFICIT)
Preferred stock Series A - 1,000,000 shares authorized; $.001 par value; 1,000 shares issued and outstanding		1,000
Preferred stock Series B - 1,000,000 shares authorized; $.001 par value; No shares issued and outstanding		-
Common stock - 200,000,000 shares authorized; $.001 par value; 5,420,381,610 shares issued and outstanding		5,420,381

Additional paid-in capital		48,485,093
Deficit accumulated during the development stage		(23,512,714)
Deficit accumulated from prior operations		(32,108,284)

Total Shareholders' (Deficit)		(1,714,524)

TOTAL LIABILITIES AND SHAREHOLDERS' (DEFICIT)		$78,995

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

- 14 -

AMERICAN SECURITY RESOURCES CORPORATION

(A DEVELOPMENT STAGE ENTERPRISE)

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

	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.

- 15 -

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
		No. of Shares	Paid-in Capital and Par Value	Development Stage	Prior Operations	Comprehensive Loss	Total
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.

- 16 -

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
		No. of Shares	Paid-in Capital and Par Value	Development Stage	Prior Operations	Comprehensive Loss	Total

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.

- 17 -

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
		No. of Shares	Paid-in Capital and Par Value	Development Stage	Prior Operations	Comprehensive Loss	Total

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
		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)	-	(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 AND 2008 AND THE PERIOD FROM OCTOBER 1, 2005

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

	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

- 20 -

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.

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 and 2008, 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 12,411,127 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

NOTE 2 - GOING CONCERN

As shown in the accompanying consolidated financial statements, ASRC incurred recurring losses from continuing operations of $2,679,277and $3,818,868 in the years ended 2009 and 2008, 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, 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

NOTE 4- INTANGIBLE ASSETS

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.

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.

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, 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.

At March 31, 2008, the Company was in default of the agreement due to non payment. . On August 12, 2008, the Company paid Ohio University approximately $208,000 to bring current its liability on the license fees and sponsored research payments.

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

At December 31, 2009, the Company had convertible debentures outstanding as follows:

	Outstanding Balance of Convertible Debenture	Unamortized Discount

December 13, 2007 Debenture	$350,000	$(350,000)
February 28, 2008 Debenture	431,004	(397,850)
Total Convertible Debentures at December 31, 2009	$781,004	$747,850

- 24 -

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, 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 investor converted $148,665 of the outstanding principal into common shares of stock of the Company. The Company also received $19,000 in principal payments on the secured promissory note during 2009.

In the event that we default on the payment of the convertible debenture, the investor shall have the right to declare the outstanding principal and accrued interest immediately due and payable in cash at a price of 150% of the outstanding principal and accrued interest. The company became in default on this debenture when we were unable to timely file required periodic and annual reports required to be filed pursuant to Section 12 or 15(d) of the 1934 Securities and Exchange Act. One of the requirements in our convertible debenture agreement was that the Company timely file all reports required As a result, the convertible debenture was callable by the holder at 150% of the unpaid principal balance at December 31, 2009. The Company also asserts that the investor breached its agreement resulting in the acceleration of the remaining balance plus a penalty

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 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.

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As the settlement agreement resulted in a modification of the principal outstanding, payment terms and due dates, we evaluated this agreement as of December 31, 2009 pursuant to FASB Statement No. 133 and due to there being 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 No. 133 applied. 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 $433,199 and an offsetting loss on derivative of $83,199 and discount on debt of $350,000. 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.

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 7.25% per annum, payable on or before February 28, 2012. There was $35,000 in financing costs for this debt issuance. The financing costs were deferred and amortized using the effective interest method. This expense was $9,723 and $7,292 for the years ended December 31, 2009 and 2008.

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 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 No. 133 applied.

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 $515,000. We estimated the fair value of the derivative 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 2.10% 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, $66,180 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 settlement agreement date (see below), and the resulting change for the year of $39,731 was included in the statement of operations as a net gain on the derivative liability.

During fiscal 2009, the investor converted $411,020 of the outstanding principal into shares of common stock of the Company.

The company became in default on this debenture when we were unable to timely file required periodic and annual reports required to be filed pursuant to Section 12 or 15(d) of the 1934 Securities and Exchange Act. One of the requirements in our convertible debenture agreement was that the Company timely file all reports required.

Effective November 17, 2009, the Company and the Investor entered into a settlement agreement whereby the Investor agreed to a settlement amount of $431,004, including all unpaid principal, interest and penalties, to be paid in 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 8.75% beginning November 6, 2009, and all unpaid principal and accrued interest is due on or before December 31, 2010.The Company is subject to certain covenants and reporting requirements. The Company recorded a penalty charge in the fourth quarter of $78,775 in connection with the settlement agreement.

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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 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 No. 133 applied. 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 $431,004. 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 $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 ranging from 229% to 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.

	Derivative Liability 12/31/2009	Gain (Loss) on Derivative Year Ended 12/31/09
December 13, 2007 Debenture	$433,199	$(83,199)
February 28, 2008 Debenture	$534,067	$(63,332)
Warrants Outstanding	4,004	47,478
Derivative Liability	$971,270	$(99,053)

NOTE 6 - PREFERRED 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.

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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.

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.

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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 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.

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.

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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.

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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.

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Summary of warrant and options information is as follows:

	Weighted Avg. Exercise Price	Outstanding 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, 2004			19,500,000	-	-	19,500,000

2005 Activity:
2005 Grants	$0.30		1,000,000	-	-	1,000,000
2005 Grants	$0.30		5,000,000	-	-	5,000,000
Exercised for cash	$0.04		-	-	2,000,000	(2,000,000)
Cancelled	$0.30		-	4,000,000	-	(4,000,000)

December 31, 2005	$ 0.60	19,500,000	6,000,000	4,000,000	2,000,000	19,500,000

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

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NOTE 10- 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 and 2008, 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 $18,400,000 at December 31, 2009 and will expire in the years 2019 and 2029. The resulting deferred tax asset arising from NOL carry forwards of $6,256,000 has been fully reserved.

NOTE 11 - 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.

NOTE 12 - 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:

Year Ending December 31,

	2010	$ 31,800
	2011	31,800
	2012	7,950
	2012	-
	Total	$71,550

Total rent expense was $100,314 and $96,384 during 2008 and 2007, respectively.

NOTE 13 – COMMITMENTS AND CONTINGENCIES

As previously mentioned in Note 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.

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Effective November 17, 2009, the Company and one investor entered into a settlement agreement whereby the Investor agreed to a settlement amount of $431,004, including all unpaid principal, interest and penalties, to be paid in 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 8.75% beginning November 6, 2009, and all unpaid principal and accrued interest is due on or before December 31, 2010.The Company is subject to certain covenants and reporting requirements. The Company recorded a penalty charge in the fourth quarter of $78,775 in connection with the settlement agreement.

Subsequent to December 31, 2009, the Company and second 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 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.

NOTE 14 – SUBSEQUENT EVENTS

As mentioned in Note 13, the Company settled its arrangement with an accredited investor due to default in the original debenture agreement.

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

None.

Item 9A(T). Controls and Procedures.

Evaluation of Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that material information required to be disclosed by us in Securities Exchange Act reports is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms, and that such information is accumulated and communicated to our management, including the Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure.

Our Chief Executive Officer and Chief Financial Officer have evaluated the effectiveness of the design and operation of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934) as of the end of the period covered by this report. Based on that evaluation, our Principal Executive Officer and Principal Financial Officer concluded that, as of the end of the period covered by this Annual Report, our disclosure controls and procedures were ineffective. The failure to timely file this annual report for 2009 leads to the conclusion that the disclosure controls and procedures were not effective. As of the date of this report, the Company has added the further step of fully discussing with its outside advisors whether they are aware of any new SEC rules and regulations affecting our disclosure requirements and whether each report being filed is compliant with current rules and regulations. Our management has concluded that the financial statements included in this Form 10-K present fairly, in all material respects our financial position, results of operations and cash flows for the periods presented in conformity with generally accepted accounting principles.

Changes in Internal Controls

During the 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.

Limitations on the Effectiveness of Controls

Our management, including our CEO and 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 control system are met. Further, the design of a control system must reflect the fact that there are resource constraints, and the benefits of controls must be considered relative to their costs. Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within the company have been detected. These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

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Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people, or by management override of the control. The design of any system of controls also is based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that any design will succeed in achieving its stated goals under all potential future conditions; over time, a control may become inadequate because of changes in conditions, or the degree of compliance with the policies or procedures may deteriorate. Because of the inherent limitations in a cost-effective control system, misstatements due to error or fraud may occur and not be detected.

CEO and CFO Certifications

Exhibits 31.1 and 32.1 are the Certifications of the CEO and the CFO, respectively. The Certifications are required in accordance with Section 302 of the Sarbanes-Oxley Act of 2002 (the Section 302 Certifications). This Item of this report, which you are currently reading is the information concerning the Evaluation referred to in the Section 302 Certifications and this information should be read in conjunction with the Section 302 Certifications for a more complete understanding of the topics presented.

Management’s Report on Internal Control Over Financial Reporting

Management is responsible for establishing and maintaining adequate internal control over our financial reporting (as defined in Rule 13a-15(f) and 15d-15(f) of the Exchange Act). Internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America.

Our internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and 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 statements.

Because 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, or 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.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management's report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management's report in this Annual Report.

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. 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	Date of Election or Designation

Robert C. Farr	President/COO	11/23/05
	Director	10/27/04

Frank Neukomm	Director	02/25/04
	Secretary	11/08/04
	Chairman/CEO	11/21/05

Robert J. Wilson	Director	07/21/05

Marlin Williford	CFO (1)	07/05/07

Sam Lindsey	CFO (1)	11/1/08
John A. Wilkinson	CFO (1)	04/08/09
John A. Wilkinson	CFO (1)	04/1/09
Alvie T. Merrill	Director	10/11/06

James R. Twedt	Director	10/11/06

R. Brian Klock	Director	01/10/09

(1)	Mr. Williford 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.

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 $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, Frank Neukomm was paid $14,000 in cash during 2009. Mr. Wilkinson, Chief Financial Officer, provides CFO services as an independent CPA and received 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, 2008 and 2007 were as follows:

Name	Position or Title	Year	Salary	Bonus	Stock Awards	All Other
Robert Farr	Chief Operating Officer	2009	$ 144,000	$ -	$ -	$ -
		2008	144,000
		2007	$144,000	-	-	-

Frank Neukomm	Chief Executive Officer	2009	144,000	-	-	-
		2008	144,000	-	-	-
		2007	144,000	-	-	-

John Wilkinson	Chief Financial Officer	2009	-	-	-	-

Randall Newton	Chief Financial Officer	2008	-
		2007	-	-	-	-

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 and 2006.

Compensation of Directors

Certain Directors were compensated with restricted stock during 2008 and 2007 for attending meetings and for work performed.

Total stock 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 7,349,975,068 shares are outstanding (the number outstanding at the date of this report):

Name and Address	Type of Ownership	No. of Shares Beneficially Owned	Percent of Class

Frank Neukomm 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	162,879,116	2.2%
Robert Farr 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	189,352.948	2.58%
James Twedt 19 Briar Hollow Lane, Suite 125 Houston, TX 77027	Personal	25,718,636	.0035%

*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 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 and 2008 were: $27,500 and $22,000 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 and 2008 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 and 2008 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 and 2008.

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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
		Chief Executive Officer and Chairman (Principal Executive Officer)

Date: May 18, 2010	By:	/s/ Robert Farr
		President, Chief Operating Officer and Director

Date: May 18, 2010	By:	/s/ John A. Wilkinson
		Chief Financial Officer

Date: May 18, 2010	By:	/s/Robert J. Wilson
		Director

Date: May 18, 2010	By:	/s/Alvie T. Merrill
		Director

Date: May 18, 2010	By:	/s/James R. Twedt
		Director

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