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Continental Fuels, Inc. – ‘10-12B’ on 5/1/08

On:  Thursday, 5/1/08, at 11:51am ET   ·   Accession #:  1297077-8-51   ·   File #:  1-34038

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 5/01/08  Continental Fuels, Inc.           10-12B                 2:651K                                   Integrity S… Transfer/FA

Document/Exhibit                   Description                      Pages   Size 

 1: 10-12B      Registration of Securities (General Form)           HTML    576K 
 2: EX-21       Exhibit 21.1                                        HTML      5K 

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

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

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting
company.

Special Note on Forward-Looking Statements

Except for historical information contained herein, this document contains forward-looking statements. In some cases, you can identify
forward-looking statements by terminology such as “may”, “should”, “expects”, “plans”, “anticipates”, “believes”, “estimates”, “predicts”,
“potential” or “continue” or the negative of these terms or other comparable terminology, although not all forward-looking statements contain
such identifying words. Forward-looking statements involve risks and uncertainties and include, but are not limited to, statements regarding
future events and the Registrant’s plans and expectations. The Registrant’s actual results may differ materially from such statements.
Although the Registrant believes that the assumptions underlying the forward-looking statements herein are reasonable, any of the
assumptions could prove inaccurate and, therefore, there can be no assurance that the results contemplated in such forward-looking
statements will be realized. In addition, the business and operations of the Registrant are subject to substantial risks which increase the
uncertainties inherent in the forward-looking statements included in this document. The inclusion of such forward-looking information
should not be regarded as a representation by the Registrant or any other person that the future events, plans or expectations contemplated by
the Registrant will be achieved.

Unless the context otherwise requires, references in this Annual Report to “Continental”, "registrant", "issuer", "we", "us", "our", "the
Company" or "ours" refer to Continental Fuels, Inc.

Historical Background

Continental Fuels, Inc. was incorporated under the name First Lloyd Funding, Inc. pursuant to the laws of the State of New York on
December 21, 1989. In January 1997, we closed a re-incorporation merger with our wholly-owned subsidiary and became a Nevada
corporation of the same name. On February 27, 2007, we changed our name to Continental Fuels, Inc. and our common stock currently
trades on the OTC Bulletin Board under the trading symbol “CFUL.OB”.

Change Of Control

On April 23, 2007, we closed a business combination transaction pursuant to a Stock Purchase Agreement (the “SPA”) dated April 20, 2007,
by and among the Company and Universal Property Development and Acquisition Corporation (“UPDA”), a publicly held Nevada
corporation. Pursuant to the SPA, we acquired one hundred percent (100%) of the capital stock of US Petroleum Depot, Inc. and Continental
Trading Enterprizes, Inc. (the “Subsidiaries”), two private Nevada corporations and wholly-owned subsidiaries of UPDA. The consideration
we paid for the Subsidiaries consisted of $2,500,000 in cash, payable within 30 days of the Effective Date, and shares of our Series A
Convertible Preferred Stock valued at $5,000,000 (the “Preferred Stock”). The Preferred Stock was convertible into 500,000,000 shares of
our common stock on the closing date and UPDA has the right to vote the shares of Preferred Stock on an “as converted” basis in any matters
for which the holders of our common stock are entitled to vote. On April 22, 2008, we had 101,479,897 shares of common stock issued and
outstanding. As of that date UPDA had the power to control the vote of approximately 83% of our common stock. The issuance of the
Preferred Stock to UPDA constituted a change of control transaction for the Company, as UPDA owns a majority of our outstanding voting
capital stock.

Subsequent to the closing of the SPA transaction, the Company and UPDA mutually agreed to extend the due date for the payment of the
$2,500,000 cash portion of the consideration described above. In connection with the agreement to extend the due date, we paid $150,000 in
cash to UPDA and executed a promissory note payable that was due to be paid on June 18, 2007 to UPDA for $2,350,000. The note is now
due and payable on demand and bears an interest rate of 5%. As of December 31, 2007, $1,800,000, plus interest, is due to be paid to UPDA.

Business of Issuer

Overview

Through January 26, 2007, the Company was a holding company and all business operations were conducted through our three wholly-
owned subsidiaries; Ophthalmic International, Inc., American Glaucoma, Inc., and OI, LLC. On January 26, 2007, each of these subsidiaries
and all of our assets related to these operations, except for certain European distribution agreements, were sold to G. Richard Smith, the
Company’s then Chairman, for $300,000 in cash and the assumption of certain trade debts. In February 2007, we began to execute an
acquisition strategy in the oil storage and transport segments.

Since the closing of the business combination transaction with UPDA on April 23, 2007, and the closing of subsequent transactions, our
business operations have principally been the purchase, transportation, storage and resale of petroleum products.

The Company conducts all of its operations through the following operating subsidiaries, which are referred to as the "Operating
Subsidiaries":

Business Developments

Beginning in the 2007 fiscal year, we substantially expanded our business operations through the following business and asset acquisitions:

2007 Acquisitions

On April 23, 2007, we closed the business combination transaction with UPDA under the terms of the SPA, pursuant to which, the Company
acquired one hundred percent (100%) of the capital stock of US Petroleum Depot, Inc. and Continental Trading Enterprizes, Inc.

On December 19, 2007, we completed our acquisition of Geer Tank Trucks, Inc. ("Geer"), a privately held Texas corporation, pursuant to the
terms and conditions of a Stock Purchase Agreement, dated as of December 11, 2007 (the "Geer SPA"). We acquired one hundred percent
(100%) of the outstanding capital stock of Geer, for an aggregate purchase price of $5,500,000. The purchase price was paid by the Company
in cash. We financed the acquisition of Geer with the proceeds of a Term Loan from Sheridan Asset Management LLC (“Sheridan”).

Business Activities

The following discussion describes the business activities of our operating segments. Detailed information regarding revenues, operating
income and total assets of each segment can be found in our consolidated financial statements.

Petroleum Products Resale and Blending Operations

US Petroleum Depot, Inc. and Continental Trading Enterprizes, Inc., two of our Operating Subsidiaries, conduct our petroleum products
storage, blending and purchase and sale operations. US Petroleum Depot, Inc. and Continental Trading Enterprizes, Inc. (hereinafter referred
to as the “Trading Subsidiaries”), were formed under the laws of the State of Nevada in 2006. The following is a description of these
operations.

General

Through the Trading Subsidiaries, the operations of the Company will primarily be the national and international wholesale distribution of
petroleum products. We intend to use the facilities of our Trading Subsidiaries to expand our petroleum products purchase and sales
operations and expand our distribution activities.

US Petroleum Depot, Inc., one of the Trading Subsidiaries, entered into an agreement to acquire the lease to an oil blending and distribution
facility located at 32 Espiritu, Brownsville, Texas in 2006. US Petroleum closed on the lease acquisition for the storage facility in the first
quarter of 2007. The property leased and operated by US Petroleum consists of, but is not limited to: (i) approximately 5.45 acres of real
property, (ii) six oil storage tanks with an aggregate capacity of 62,000 barrels, (iii) ship channel access via two 8 inch diameter oil pipelines
that measure 2,000 feet each, (iv) a railroad spur to receive or load oil via rail cars with a capacity of up to 800 barrels each and (v)
equipment to allow the loading and unloading of oil from tanker trucks (collectively, the “Brownsville facility”).

U.S. Petroleum intends to use the Brownsville facility in the operation of its business of receiving, storing and distributing petroleum
products. The Brownsville facility will allow U.S. Petroleum to receive and to load barges of diverse capacities, and to receive and load rail
cars. US Petroleum is currently receiving shipments of petroleum via truck transport. U.S. Petroleum has obtained all the operational permits
required for its business operations from regulators such as the United States Coast Guard, OSHA, and the EPA.

The Company utilizes the Brownsville facility to gather and store smaller shipments of petroleum products and to aggregate those shipments
into larger, more economically viable batches for wholesale shipment using its barge loading facilities. By doing so, the Registrant will be
able to take advantage of economies of scale and reduce the per barrel transportation costs for its products.

Product Offerings

During 2007, the Brownsville terminal facility received small batch shipments of petroleum products. These products were then resold into
the US market. The Company gathers and stores these small batches of petroleum products at its Brownsville facility until a large enough
quantity is available to ship via barge. As we continue to develop this supply source, refine the operation of the Brownsville facility and
acquire additional storage facilities, we expect to be able to ship approximately 20,000 barrels per week of petroleum products over the short
term.

During 2007, US Petroleum completed the delivery of approximately 39,410 barrels of light crude product per month.

Beginning in late November 2007, US Petroleum experienced an interruption of its supply of petroleum products from its supplier. As of the
date of the filing of this report, we are negotiating with this supplier to re-establish the supply of petroleum products that make up our resale
operations. We cannot be certain that this supply of products will be available to us in the future. In such event, we shall seek to replace our
prior suppliers with an alternative source of product.

During this period, US Petroleum took several of its tanks offline and eventually, in December 2007, took all tanks offline for maintenance
and upgrades, including the addition of storage tanks, work on the rail spur, and work on the pipes and pump manifolds. Work began in
December and continued as more work was determined to be required to ensure that the facility does not require significant maintenance or
repairs for several years to come.

The rail spur work was considered pivotal and an urgent need as it gives US Petroleum greater flexibility and significant cost savings when
transporting product to certain markets. Additionally, during hurricanes, bad weather, and other circumstance that prevent the shipment of
product by water, rail is rarely affected. In addition, US Petroleum can transport smaller net loads of product more cost effectively by rail.

This work continued through the first quarter of 2008 as more needed repairs and retrofits became apparent. The majority of this work was
planned from the inception of the US Petroleum acquisition; in major part to make the facility more flexible, efficient and safer.

Growth and Profitability Strategy

Through the Trading Subsidiaries, we intend to expand our current petroleum products purchase and sales operations, enter into new
distribution relationships and enter into the fuel blending and wholesale distribution markets. We intend to increase the volume of these
operations and we anticipate the acquisition by US Petroleum of additional storage and blending facilities to facilitate this business area.

Petroleum Products Transportation Operations

As a result of the closing of the Geer acquisition on December 11, 2007, Geer became a wholly-owned Operating Subsidiary of the
Company. Geer will, among other things, conduct our petroleum products transportation operations. Geer is a private Texas corporation that
was incorporated in 1965 and has been in operation since 1945. We acquired all of the capital stock of Geer through the closing of the Geer
SPA. The main business operations of Geer are the purchase, transport, and sale of crude oil in the State of Texas. The following is a brief
description of these operations.

General

Through Geer, the operations of the Company will be expanded into the purchase, ground transport and sale of crude oil in the State of
Texas. We also intend to use the Geer facilities to expand our petroleum products trading operations and distribution activities into the area of
purchasing petroleum products directly from the producers and re-selling those products to wholesalers, refiners and other end-users.

Geer operates out of five (5) locations in the State of Texas. Geer owns two salt water disposal wells and four pipeline terminals with yards
located in Jacksboro, Mineral Wells, Graham, Cisco and Bowie, Texas. Geer also owns and operates approximately twenty (20) tank trucks
for transporting oil with capacities of one hundred and eighty (180) bbl, and approximately fifty (50) frac tanks. In addition to oil shipping
and trading, Geer provides oil well services such as salt and fresh water removal services and frac tank rentals. On the Geer SPA closing date,
Geer had approximately twenty-five (25) employees.

Continental Fuels A.V.V.

On August 8, 2007, we established a 100% wholly owned foreign subsidiary, Agencia Fiduciaria Aequitas N.V. (“Continental Fuels
A.V.V.”), in Aruba for the purpose of developing a presence in Latin America.

On September 9, 2007, Continental Fuels A.V.V. established a joint venture company, Combustibles Continental De LatinoAmerica
(“Combustibles”), and invested $9,320 in the new entity. Continental Fuels A.V.V. owns 75% of the equity of Combustibles. Combustibles
was created for the purposes of investment in the general energy sector, the commercialization of hydrocarbon by-products, and the
investment and financing of industrial projects and energy infrastructure. On September 9, 2007, Combustibles appointed Timothy Brink as
president, Luis Bautista as vice-president, and Ernesto Haberer as director of its board.

Combustibles presently has no operations or operating assets other than a nominal local cash account totaling approximately $3,000.

Governmental Regulations

Regulation of Storage and Transportation of Oil

Sales of crude oil and other petroleum products are not currently regulated and are made at negotiated prices. Our sales of petroleum products
are affected by the availability, terms and cost of transportation. Insofar as effective interstate and intrastate rates are equally applicable to all
comparable shippers, we believe that the regulation of oil transportation rates will not affect our operations in any way that is of material
difference from those of our competitors. Further, interstate and intrastate common carrier oil pipelines must provide service on a non-
discriminatory basis. Under this open access standard, common carriers must offer service to all shippers requesting service on the same
terms and under the same rates. When oil pipelines operate at full capacity, access is governed by pro-rationing provisions set forth in the
pipelines’ published tariffs. Accordingly, we believe that access to oil pipeline transportation services generally will be available to us to the
same extent as to our competitors.

Environmental Regulations

Our operations are subject to various federal, state and local governmental regulations. The handling, storage, transportation and disposal of
oil, by-products thereof, and other substances and materials produced or used in connection with oil operations are subject to regulation under
federal, state and local laws and regulations relating primarily to the protection of human health and the environment. To date, we have not
incurred any extraordinary costs related to complying with these laws, for remediation of existing environmental contamination and for other
related matters. The requirements imposed by such laws and regulations are frequently changed and subject to interpretation, and we are
unable to predict the ultimate cost of compliance with these requirements or their effect on our operations.

At the federal level, among the more significant laws and regulations that may affect our business and the oil industry are: The
Comprehensive Environmental Response, Compensation and Liability Act of 1980, also known as “CERCLA” or Superfund; the Oil
Pollution Act of 1990; the Resource Conservation and Recovery Act, also known as “RCRA”; the Clean Air Act; Federal Water Pollution
Control Act of 1972, or the Clean Water Act; and the Safe Drinking Water Act of 1974.

Compliance with these regulations may constitute a significant cost and effort for us. No specific accounting for environmental compliance
has been maintained or projected by us at this time. We are not presently aware of any environmental demands, claims, or adverse actions,
litigation or administrative proceedings in which either us or our acquired properties are involved or subject to, or arising out of any
predecessor operations.

In the event of a breach of environmental regulations, these environmental regulatory agencies have a broad range of alternative or
cumulative remedies which include: ordering a clean-up of any spills and restoration of the soil or water to conditions existing prior to the
environmental violation, or fines. In certain egregious situations the agencies may also pursue criminal remedies against us or our principal
officers.

Competition

We operate in a highly competitive environment. The majority of our competitors possess and employ financial, technical and personnel
resources substantially greater than ours, which can be particularly important in the areas in which we operate. Also, there is substantial
competition for capital available for investment in the oil and natural gas industry.

Current competitive factors in the domestic oil and gas industry are unique. The actual price range of crude oil is largely established by major
international producers. Pricing for natural gas is more regional. Because the current domestic demand for oil and gas exceeds supply, we
believe there is little risk that all current production will not be sold at relatively fixed prices. The risk of domestic overproduction at current
prices is not deemed significant. However, more favorable prices can usually be negotiated for larger quantities of oil and/or gas product. In
this respect, while we believe we have a price disadvantage when compared to larger competitors, we view our primary pricing risk to be
related to a potential decline in international prices to a level which could render our current production uneconomical.

Major Customers

For the fiscal year 2007, two purchasers were responsible for purchasing 100% of our petroleum product sales. However, we believe that
the loss of either of these purchasers would not materially impact our business, because we could readily find other purchasers for our
products.

Employees

As of December 31, 2007, the Company had 36 full-time employees. As necessary for our operations, we or our subsidiaries select and
engage personnel on a contract or fee basis. 

Our business, operations and financial condition are subject to various risks. You should consider carefully the following risk factors, in
addition to the other information set forth in this report. The factors set forth below, however, are generally applicable to our operations and
securities.

We Have a Limited Operating History.

Because our business plan was only recently adopted we have a limited operating history. Such limited operating history makes it more
difficult to predict whether or not we will be successful in the future. Our future financial and operational success is subject to the risks,
uncertainties, expenses, delays and difficulties associated with managing a new business, many of which may be beyond our control. In
addition, we compete in a volatile and highly price sensitive industry and we may face many uncertainties. Our success will depend on many
factors, including those described in this Risk Factors section.

We Have a History of Losses and May Need Additional Financing.

We have experienced operating losses, as well as net losses, for each of the years during which we have operated. We anticipate future losses
and negative cash flow to continue for the foreseeable future.

To date, we have received only limited revenue from our operations. We have incurred significant costs in connection with the development
of our business and there is no assurance that we will achieve sufficient revenues to offset anticipated operating costs. Although we anticipate
deriving revenues from transportation and terminal related operations, no assurance can be given that these businesses will operate on a net
profit basis. We anticipate that our losses will continue until we are able to generate sufficient revenues to support our operations. If we
achieve profitability, we cannot give any assurance that we would be able to sustain or increase profitability on a quarterly or annual basis in
the future.

Similarly, in the future, we may not generate sufficient revenue from operations to pay our operating expenses. If we fail to generate
sufficient cash from operations to pay these expenses, our management will need to identify other sources of funds. We may not be able to
borrow money or issue more shares of common or preferred stock to meet our cash needs. Even if we can complete such transactions, they
may not be on terms that are favorable or reasonable from our perspective. 

The Profitability Of Our Operations Depends On The Availability To Us Of Supplies Of Petroleum Products. A Significant Decrease In
Available Supplies For Any Reason Could Adversely Affect Our Sales And Results Of Operations.

The availability of supplies of various petroleum products is essential to our operations. A material decline in such petroleum product
supplies could adversely affect our revenues from bulk, contract and rack product sales. Such a material decline in product supplies may be
caused by natural disasters, adverse weather conditions, terrorist attacks and other events beyond our control. Furthermore, we do not have
long-term supply contracts with refiners and our suppliers could cease selling product to us for any one of several reasons, including a lack of
crude oil supplies, price or volume competition and external economic or political events. Such a shortage could have a material adverse
effect on our supplies of product and hinder our ability to earn throughput fees or sales revenues.

A Substantial Or Extended Decline In Oil Prices May Adversely Affect Our Business, Financial Condition Or Results Of Operations And
Our Ability To Meet Our Financial Commitments.

The price we receive for our petroleum products heavily influences our revenue, profitability, access to capital and future rate of growth. Oil
is a commodity and, therefore, its price is subject to wide fluctuations in response to relatively minor changes in supply and demand.
Historically, the markets for oil have been volatile. These markets will likely continue to be volatile in the future. The prices we receive for
our products, and the levels of demand for our products, depend on numerous factors beyond our control. These factors include, but are not
limited to, the following:

• changes in global supply and demand for oil;
• the actions of the Organization of Petroleum Exporting Countries, or OPEC;
• the price and quantity of imports of foreign oil;
• political conditions, including embargoes, in or affecting other oil-producing activity;
• the level of global oil exploration and production activity;
• the level of global oil inventories;
• weather conditions;
• technological advances affecting energy consumption; and
• the price and availability of alternative fuels.

Lower oil prices may not only decrease the demand for our products but also may reduce the available supply of the petroleum product that is
our primary product. A substantial or extended decline in oil prices may materially and adversely affect our future business, financial
condition, results of operations, liquidity or ability to finance planned capital expenditures.

We Depend Upon A Relatively Small Number Of Customers For A Substantial Majority Of Our Revenue. A Substantial Reduction Of
Those Revenues Would Have A Material Adverse Effect On Our Financial Condition And Results Of Operations.

We expect to derive a substantial majority of our revenue from a small number of significant customers for the foreseeable future. Events that
adversely affect the business operations of any one or more of our significant customers may adversely affect our financial condition or
results of operations. Therefore, we are indirectly subject to the business risks of our significant customers, many of which are similar to the
business risks we face. For example, a material decline in refined petroleum product supplies available to our customers, or a significant
decrease in our customers’ ability to negotiate marketing contracts on favorable terms, could result in a material decline in the use of our tank
capacity or throughput of product at our terminal facilities, which would likely cause our revenue and results of operations to decline.

In addition, if any of our significant customers were unable to meet its contractual commitments to us for any reason, then our revenue and
cash flow would decline.

A Significant Decrease In Demand For Products In The Areas Served By Our Terminal And Trucking Operations Would Adversely
Affect Our Financial Condition And Results Of Operations.

A sustained decrease in demand for products in the areas served by our terminal and pipeline could significantly reduce our revenue. Factors
that could lead to a decrease in market demand include:

Because Of Our Lack Of Asset Diversification, Adverse Developments In Our Terminal Or Trucking Operations Could Adversely Affect
Our Revenue And Cash Flows.

We rely exclusively on the revenue generated from our terminal and trucking operations. Because of our lack of diversification in asset type,
an adverse development in these businesses would have a significantly greater impact on our financial condition and results of operations
than if we maintained more diverse assets.

Our Debt Levels May Limit Our Flexibility In Obtaining Additional Financing And In Pursuing Other Business Opportunities.
Our level of debt could have important consequences to us. For example our level of debt could:

If our operating results are not sufficient to service our current or future indebtedness, we will be forced to take actions such as reducing or
delaying our business activities, acquisitions, investments or capital expenditures, selling assets, restructuring or refinancing our debt, or
seeking additional equity capital. We may not be able to effect any of these actions on satisfactory terms, or at all.

Our senior secured credit facility also contains covenants limiting our ability to make distributions to shareholders in certain circumstances.
In addition, our senior secured credit facility contains various covenants that limit, among other things, our ability to incur indebtedness,
grant liens or enter into a merger, consolidation or sale of assets. Furthermore, our senior secured credit facility contains covenants requiring
us to maintain certain financial ratios and tests. Any future breach of any of these covenants or our failure to meet any of these ratios or
conditions could result in a default under the terms of our senior secured credit facility, which could result in acceleration of our debt and
other financial obligations. If we were unable to repay those amounts, the lenders could initiate a bankruptcy proceeding or liquidation
proceeding or proceed against the collateral.

We Face Intense Competition In Our Supply, Distribution And Marketing Activities, As Well As In Our Terminal And Trucking
Activities And Our Results Of Operations May Suffer If We Are Not Able To Compete Effectively.

We compete with other petroleum companies, national, regional and local pipeline and terminal companies, the major integrated oil
companies, their marketing affiliates, and independent brokers and marketers of widely varying sizes, financial resources and experience. In
particular, our ability to compete could be harmed by factors we cannot control, including:

If we are unable to compete with services offered by other petroleum enterprises, our results of operations may be adversely affected.

Our Operations And Sales Volumes Are Dependent Upon Demand For Petroleum Products By Distributors, Marketers, Wholesalers And
Commercial End Users. Any Decrease In This Demand Could Adversely Affect Our Business.

Our business depends in large part on the demand for refined petroleum products in the markets served by our transportation and storage
facilities. Our earnings and cash flow are dependent on high sales volumes. The volumes of our sales can be adversely affected by the prices
of refined products, which are subject to significant fluctuation depending upon numerous factors beyond our control, including the supply of
and demand for gasoline and other refined products. The supply of and demand for refined products can be affected by, among other things,
changes in domestic and foreign economies, political affairs, terrorism and the threat of terrorism, production levels, industry-wide inventory
levels, the availability of imports, the marketing of gasoline and other refined products by competitors, the marketing of competitive fuels,
the impact of energy conservation efforts and government regulation.

Sales volumes also are affected by regional factors, such as local market conditions, the availability of transportation systems with adequate
capacity, transportation costs, fluctuating and seasonal demands for products, changes in transportation and travel patterns, variations in
weather patterns from year to year and the operations of companies providing competing services.

We May Not Be Successful In Growing Through Acquisitions Or Integrating Effectively And Efficiently Any Businesses And Operations
We May Acquire. Any Future Acquisitions May Substantially Increase The Levels Of Our Indebtedness.

Part of our business strategy includes acquiring additional terminal and storage facilities that complement our existing asset base and
distribution capabilities. In order to expand our business through the selective acquisitions of new or expanded facilities, we must identify
those opportunities. We may not be able to identify appropriate opportunities for expansion which will satisfy our target rates of return,
obtain financing on acceptable terms, negotiate satisfactory terms of such acquisitions, or that any such acquisitions will improve our
operating results.

Acquisitions may require substantial capital or the incurrence of substantial indebtedness. As a result, our capitalization and results of
operations may change significantly as a result of future acquisitions. Any additional debt financing could significantly increase our interest
expense and involve restrictive covenants. Furthermore, you may not have the opportunity to evaluate the economic, financial and other
relevant information that we will consider in connection with any future acquisitions.

Unexpected costs or challenges may arise whenever businesses with different operations and management are combined. Inefficiencies and
difficulties may arise because of unfamiliarity with new assets and new geographic areas of any acquired businesses. We believe that
successful business combinations will require our management and other personnel to devote significant amounts of time to integrating the
acquired businesses with our existing operations. These efforts may temporarily distract their attention from day-to-day business and other
business opportunities. In addition, the management of the acquired business may not join our management team. Any change in
management may make it more difficult to integrate an acquired business with our existing operations. Following an acquisition, we may
discover previously unknown liabilities associated with the acquired business for which we may have no recourse under applicable
indemnification provisions.

Any Acquisitions We Make Are Subject To Substantial Risks, Which Could Adversely Affect Our Financial Condition And Results Of
Operations.

Any acquisition involves potential risks, including risks that we may:

If any acquisitions we ultimately consummate result in one or more of these outcomes, our financial condition and results of operations may
be adversely affected.

Managing Growth and Expansion.

We currently anticipate a period of growth as a result of the recent changes in our corporate structure and the sale of products by our
subsidiaries. The resulting strain on our managerial, operational, financial and other resources could be significant. Success in managing any
such expansion and growth will depend, in part, upon the ability of senior management to manage effectively. Any failure to manage the
anticipated growth and expansion could have a material adverse effect on our business.

Our Business Involves Many Hazards And Operational Risks, Including Adverse Weather Conditions, Which Could Cause Us To Incur
Substantial Liabilities And Increased Operating Costs.

Our operations are subject to the many hazards inherent in the storage and transportation of products, including:

If any of these events were to occur, we could suffer substantial losses because of personal injury or loss of life, severe damage to and
destruction of storage tanks, pipelines and related property and equipment, and pollution or other environmental damage resulting in
curtailment or suspension of our related operations and potentially substantial unanticipated costs for the repair or replacement of property
and environmental cleanup. In addition, if we suffer accidental releases or spills of products at our terminals or pipelines, we could be faced
with material third-party costs and liabilities, including those relating to claims for damages to property and persons. Furthermore, events like
hurricanes can affect large geographical areas which can cause us to suffer additional costs and delays in connection with subsequent repairs
and operations because contractors and other resources are not available, or are only available at substantially increased costs following
widespread catastrophes.

Our Operations Are Subject To Governmental Laws And Regulations Relating To The Protection Of The Environment That May Expose
Us To Significant Costs And Liabilities.

The risk of substantial environmental costs and liabilities is inherent in transport and terminal operations and we may incur substantial
environmental costs and liabilities. Our operations and activities are subject to significant federal, state and local laws and regulations relating
to the protection of the environment. These include, for example, the Federal Clean Air Act and analogous state laws, which impose
obligations related to air emissions and the Federal Water Pollution Control Act, commonly referred to as the Clean Water Act, and
analogous state laws, which regulate discharge of wastewaters from our facilities to state and federal waters. In addition, our operations are
also subject to the federal Comprehensive Environmental Response, Compensation, and Liability Act, also known as CERCLA or the
Superfund law, the Resource Conservation and Recovery Act, also known as RCRA, and analogous state laws in connection with the cleanup
of hazardous substances that may have been released at properties currently or previously owned or operated by us or locations to which we
have sent wastes for disposal. Various governmental authorities including the U.S. Environmental Protection Agency, or the EPA, have the
power to enforce compliance with these regulations and the permits issued under them, and violators are subject to administrative, civil and
criminal penalties, including civil fines, injunctions or both. Liability may be incurred without regard to fault under CERCLA, RCRA, and
analogous state laws for the remediation of contaminated areas. Private parties, including the owners of properties located near our terminal
facilities or through which our pipeline systems pass, also may have the right to pursue legal actions to enforce compliance, as well as to seek
damages for non-compliance with environmental laws and regulations or for personal injury or property damage.

In addition, the possibility exists that new, stricter laws, regulations or enforcement policies could significantly increase our compliance costs
and the cost of any remediation that may become necessary, some of which may be material. Our insurance may not cover all environmental
risks and costs or may not provide sufficient coverage in the event an environmental claim is made against us. Our business may be adversely
affected by increased costs because of stricter pollution control requirements or liabilities resulting from non-compliance with required
operating or other regulatory permits. New environmental regulations might adversely affect our products and activities, including
processing, storage and transportation, as well as waste management and air emissions. Federal and state agencies also could impose
additional safety requirements, any of which could affect our profitability.

We currently own or lease, and have owned or leased, many properties that have been used for many years to terminal or store refined
petroleum products or other chemicals. Owners, tenants or users of these properties have disposed of or released hydrocarbons or solid
wastes on or under them. Additionally, some sites we operate are located near current or former refining and terminal operations. There is a
risk that contamination has migrated from those sites to ours. Increasingly strict environmental laws, regulations and enforcement policies
and claims for damages and other similar developments could result in substantial costs and liabilities.

Federal Energy Regulatory Commission And Department Of Transportation Regulations May Change Important Aspects Of Our
Industry And Could Reduce Our Ability To Compete And Impose Significant Costs On Us Or Affect Our Ability To Ship Product In The
Quantities We Need, Which Could Adversely Affect Our Revenues.

The Federal Energy Regulatory Commission, or FERC, regulates the tariff rates for interstate common carrier operations. Tariff rates are
subject to periodic changes and the FERC may approve higher tariff rates for transport of product on the principal pipelines we utilize. The
FERC also may change the manner in which tariffs apply, such as changing from tariffs based on shipping history to tariffs based on
competitive bidding or some other methodology. Substantial increases or changes in the tariff rates on the principal pipelines we utilize could
adversely affect our ability to ship the quantities of product we need or to ship product at economical rates. As a result, we could lose sales or
suffer higher transportation expenses, which could adversely affect our results of operations.

In addition, refined petroleum product pipeline operations are subject to regulation by the Department of Transportation. These regulations
require, among other things, that pipeline operators engage in a regular program of pipeline integrity testing to assess, evaluate, repair and
validate the integrity of their pipelines, which could result in service interruptions or significant and unexpected expenditures either with
respect to pipelines we own or on pipelines owned by others that we use. We may have to bear those interruptions and expenses through the
prices we pay to transport product, and the prices we charge when selling product that we purchase and market. The resulting price increases
might not be entirely recoverable from our customers or could lower demand for product. We transport a large amount of product on
common carrier pipelines that we do not own, and spurs of those pipelines supply our terminals. If the Department of Transportation
determines that a spur of a common carrier pipeline that supplies our terminals requires repair to maintain its integrity, the owner of the
pipeline may decide to abandon the spur to our terminal instead of completing the repair work, or could require us to pay for the repair work,
either of which would adversely affect our operations at that terminal or force us to close the terminal.

We Are Subject To Strict Regulations At Many Of Our Facilities Regarding Employee Safety, And Failure To Comply With These
Regulations Could Adversely Affect Us.

The workplaces associated with the processing and storage facilities and the pipelines we operate are subject to the requirements of the
federal Occupational Safety and Health Act, or OSHA, and comparable state statutes that regulate the protection of the health and safety of
workers. In addition, the OSHA hazard communication standard requires that we maintain information about hazardous materials used or
produced in our operations and that we provide this information to our employees, state and local government authorities, and local residents.
Failure to comply with OSHA requirements, including general industry standards, record keeping requirements and monitoring of
occupational exposure to regulated substances, could adversely affect our results of operations if we are subjected to fines or significant
additional compliance costs.

The Loss Of Any Of Our Key Executive Officers Could Harm Our Business.

Our future success depends largely on the efforts of our executive management team. The loss of any members of our executive management
team could have a material adverse effect on our business. If we experience vacancies in any of these key roles, it could have a material
adverse impact on our ability to properly conduct our business operations and pursue our growth initiatives and, as a result, could have a
material adverse impact on our overall business, financial condition and results of operations. We do not carry key-man insurance on the life
of any of our executive officers.

Risks Relating to Our Common Stock

The Market Price Of Our Stock May Be Affected By The Issuance Of Additional Shares Of Our Common Stock Upon The Conversion Of
Shares Of Our Preferred Stock.

As of April 15, 2008, we had an aggregate of 48,000 shares of preferred stock outstanding, which are convertible into an aggregate of
480,000,000 restricted shares of our common stock. Substantial sales of our common stock, including shares issued upon the conversion of
our preferred shares and debts, in the public market, or the perception that these sales could occur, may have a depressive effect on the
market price of our common stock. Such sales or the perception of such sales could also impair our ability to raise capital or make
acquisitions through the issuance of our common stock.

We Have No Plans To Pay Dividends On Our Common Stock. You May Not Receive Funds Without Selling Your Stock.

We do not anticipate paying any cash dividends on our common stock in the foreseeable future. We currently intend to retain future earnings,
if any, to finance the expansion of our business. Our future dividend policy is within the discretion of our board of directors and will depend
upon various factors, including our business, financial condition, results of operations, capital requirements and investment opportunities.

Our Common Stock Is Subject To "Penny Stock" Restrictions Under Federal Securities Laws, Which Could Reduce The Liquidity Of
Our Common Stock

The Securities and Exchange Commission has adopted regulations, which generally define penny stocks to be an equity security that has a
market price less than $5.00 per share or an exercise price of less than $5.00 per share, subject to certain exemptions. Our common stock is
designated a "Penny Stock." As a penny stock, our common stock may become subject to Rule 15g-9 under the Exchange Act or the Penny
Stock Rules. These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities
Exchange Act of 1934, as amended. These rules impose additional sales practice requirements on broker-dealers that sell such securities to
persons other than established customers and "accredited investors" (generally, individuals with a net worth in excess of $1,000,000 or
annual incomes exceeding $200,000, or $300,000 together with their spouses). For transactions covered by Rule 15g-9, a broker-dealer must
make a special suitability determination for the purchaser and have received the purchaser’s written consent to the transaction prior to sale. As
a result, this rule may affect the ability of broker-dealers to sell our securities and may affect the ability of purchasers to sell any of our
securities in the secondary market.

The rules may further affect the ability of owners of our shares to sell their securities in any market that may develop for them. There may be
a limited market for penny stocks, due to the regulatory burdens on broker-dealers. The market among dealers may not be active. Investors in
penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-
dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock
immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value.
Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all.

For any transaction involving a penny stock, unless exempt, the rules require delivery, prior to any transaction in a penny stock, of a
disclosure schedule prepared by the Securities and Exchange Commission relating to the penny stock market. Disclosure is also required to
be made about sales commissions payable to both the broker-dealer and the registered representative and current quotations for the securities.
Finally, monthly statements are required to be sent disclosing recent price information for the penny stock held in the account and
information on the limited market in penny stock.

The penny stock restrictions will no longer apply to our common stock if we become listed on a national exchange. In any event, even if our
common stock were exempt from the penny stock restrictions, we would remain subject to Section 15(b)(6) of the Exchange Act, which gives
the Securities and Exchange Commission the authority to restrict any person from participating in a distribution of penny stock, if the
Securities and Exchange Commission finds that such a restriction would be in the public interest.

The Ownership Of Our Voting Capital Stock Is Closely Held By Our Parent Company, UPDA, Making UPDA The Major Shareholder In
Our Company.

Approximately 83% of our outstanding voting capital stock is currently held by UPDA.  Consequently, UPDA currently controls the business
decisions of the Company, including, but not limited to, the election of the members of our Board of Directors.

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes appearing
elsewhere in this report.

Critical Accounting Policies

“Management’s Discussion and Analysis of Financial Condition and Results of Operations” discusses our consolidated financial statements
that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of
these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of
the financial statements, the 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. On an on-going basis, we evaluate our estimates and judgments, including those related to
revenue recognition, valuation allowances for inventory and accounts receivable, and impairment of long-lived assets. We base our estimates
and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The result of
these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily
apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The SEC suggests that
all registrants list their most “critical accounting policies” in Management’s Discussion and Analysis. A critical accounting policy is one
which is both important to the portrayal of the Company’s financial condition and results of operations and requires management’s most
difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently
uncertain. Management believes the following critical accounting policies affect its more significant judgments and estimates in the
preparation of its consolidated financial statements.

These policies include, but are not limited to, the carrying value of the inventory and fixed assets, the life of fixed assets, the expensing of the
costs relating to FDA and European licensing activities, and the valuation of common stock related to compensation and other services.
Complex judgments and estimates underlie these critical accounting policies, such as the estimated life of fixed assets for depreciation
purposes, the market valuation of inventory in reporting inventory at the lower of cost or market, dividing consultants’ compensation between
expense categories of FDA licensing activities and sales activities, dividing compensation and payments to third parties between cost of
goods sold category and general and administrative expense, and the determination of the market value of restricted stock when issued as
compensation or as repayment for loans.

For the Years Ended December 31, 2007 and 2006

Operations.

Pursuant to the Sale of Assets to G. Richard Smith on January 26, 2007, all of the Coronado’s subsidiaries and all assets of Coronado, except
for the European distribution agreements, were sold to Smith for $300,000 in cash and the assumption of certain trade debts. Therefore, the
Company had no operations in the first quarter of 2007.

For the years ended December 31, 2007 and 2006, total revenue was $26,975,568 and $90,076, respectively, with a cost of goods sold of
$24,351,151 and $58,614, respectively. Registrant continued delivery of its PNT products to its European distributors in 2006. Registrant’s
gross margin on its products sold was approximately 34.9% in 2006, but its marketing expenses for these European sales far exceeded the
gross sales. Registrant sold its operations to its former Chairman in January 2007. Registrant’s gross margin on its products sold was
approximately 9.7% in 2007.

For the year ended December 31, 2007, the Company experienced a net loss of $95,084,605 which comprised primarily of general and
administrative expenses of $1,041,278, stock option expense of $3,213,908, consulting fees and services of $612,822, interest expense of
$569,965, payroll expenses of $580,040, selling and marketing expenses of $531,000, $100,000 due to an escrow deposit lost on delay, and
debt conversion costs of $91,056,436, partially offset by a gain on sale incurred from the Sale of Assets of $114,963 as part of the proceeds
from the sale of restricted common stock sold in private placement to Karen Sandhu for $200,000.

For the year ended December 31, 2006, the Company experienced a net loss of $3,964,637 which comprised primarily general and
administrative expenses incurred at the corporate level of $699,127, consulting fees and services of $286,090, stock based compensation
expense of $1,398,350, selling and marketing expenses of $513,611, payroll expenses of $1,012,660, and interest expense of $83,968.

Liquidity and Capital Resources.

As shown in the consolidated financial statements, at December 31, 2007, the Company had cash on hand of $1,820,220, compared to none
at December 31, 2006. We had a net loss of $95,084,605. Net cash used in operating activities was $3,223,036 for the year ended
December 31, 2007. This was mainly due to a non-cash item of $114,963 due to a gain on sale of assets, $634,765 due to an increase in
accounts receivable, $128,343 due to an increase in inventory, $1,892,071 due to a decrease in accounts payable and accrued expenses
payable, offset by $91,056,436 due to loss on settlement of notes payable, $3,213,908 due to stock option expense, $47,384 of depreciation
expenses, $17,568 due to amortization of loan origination fees incurred to Sheridan, $48,876 due to amortization of the cost of warrants
issued to Sheridan to purchase the Company’s common stock, $164,453 due to an increase in state oil taxes payable and $143,430 due to an
increase in income taxes payable.

Net cash used in operating activities was $318,486 for the twelve months ended December 31, 2006. We had a net loss of $3,964,367. We
had non-cash charges of $229,756 in forgiveness of officer salaries, $1,714,938 due to stock and options issued for salaries, $1,967,940
related to stock and options issued for bonuses, and $2,023 related to depreciation, offset by net changes in operating assets and liabilities of
$301,124.

Cash flows provided by investing activities was $4,913,693 during the year ended December 31, 2007, consisting of $5,858,192 cash
acquired as part of the acquisitions of the subsidiaries offset by $48,400 related to the purchase of a surety bond, $250,000 due to an advance
made under a note receivable from UPDA-parent entity and $646,099 for the purchase of property and equipment.

There was no cash flow provided by or used in investing during the twelve months ended December 31, 2006.

The cash flows provided by financing activities of $129,563 during the year ended December 31, 2007, consisted of $200,000 of proceeds
from the sale of our common stock, $517,651 proceeds from notes payable to others, $66,625 proceeds from notes payable to other related
parties, $857,261 due to advances received under a former line of credit, offset by a note payable repayment of $700,000 to UPDA and
payment of deferred debt costs on the financing of the Geer acquisition of $811,859.

The cash flows provided by financing activities of $306,146 during the twelve months ended December 31, 2006, consisted of proceeds from
borrowings of $381,200, offset by a loan repayment of $50,000.

On April 1, 2007, the Company obtained financing in the form of a note from Kamal Abdallah for $110,000 at an interest rate of 10% per
year commencing on April 30, 2007. As of March, 31, 2007, the Company received $60,000 on this note. The remaining amount was
received in April 2007. On May 31, 2007 the Company obtained an additional note from Kamal Abdallah for $50,000 at an interest rate of
10% per year commencing on June 1, 2007. This note, along with all related interests, was settled on July 30, 2007. On July 31, 2007, the
Company also repaid the $110,000 note to Kamal Abdallah and all related interest.

On April 1, 2007, the Company also obtained financing in the form of a note from Brainard Management Associates for $550,000 at an
interest rate of 10% per year commencing on April 30, 2007. As of March, 31, 2007, the Company received $150,000 on this note. The
remaining amount was received in April 2007.

On May 31, 2007, the Company obtained financing in the form of a note from Aztec Well Services, Inc., for $547,952 at an interest rate of
5% per annum payable on demand. On August 13, 2007, the Company repaid the full $547,952 note due to Aztec Wells Services, Inc, along
with all related interests.

On December 12, 2007, the Company obtained financing in the form of a term loan from Sheridan in the amount of $5,500,000 at an interest
rate of 15% per annum commencing on January 1, 2008 and payment-in-kind interest of 5% per annum for the purchase of Geer Tank
Trucks, Inc. On the same date, the Company also obtained financing in the form of a revolving loan in the amount of $3,000,000 at an
interest rate of 20% per annum on the amount used and 10% per annum on the unused portion commencing on January 1, 2008. As of
December 31, 2007, $2,207,261 of the revolving amount was used.

We have historically incurred recurring losses from operations. Our continuation is dependent upon a successful program of acquisitions and
achieving a profitable level of operations. We will need $3 million of additional financing for ongoing operations and acquisitions. The
issuance of additional equity securities by us would result in a significant dilution in the equity interests of our current stockholders.
Obtaining loans, assuming those loans would be available, would increase our liabilities and future cash commitments. We cannot assure that
we will be able to obtain further funds we desire for our continuing operations or, if available, that funds can be obtained on commercially
reasonable terms. If we are not able to obtain additional financing on a timely basis, we would cease our operations.

Because of the Registrant’s cash position at 2005 year-end and general and administrative expenses totaling approximately $3,900,000 per
year, the Registrant suffered from a liquidity shortage during 2006. From January 1, 2006 to December 31, 2006 Registrant borrowed a total
of $323,200 from its three Directors. After Registrant’s transactions on January 26, 2007, all loans to Registrant’s former Directors were
repaid except $15,775 owed to G. Richard Smith, $12,600 owed to Gary R. Smith, and $5,000 owed to Dr. LiVecchi, all of which are the
liability of Registrant’s former Chairman.

On August 22, 2006, US Petroleum Depot, Inc., a subsidiary, entered into a rental lease agreement with Brownsville Navigation District of
Cameron County, Texas for a term of five years payable semi-annually in installments of $9,801. The leased property is for the sole purpose
of shipping and receiving petroleum products.

In April 2007, the Registrant entered into a one-year lease for two office spaces at an aggregate monthly rent of $3,100.  The address for this
office is San Felipe Plaza, 5847 San Felipe, Houston, Texas 77057.

In July 2007, the Registrant entered into an agreement with Serafina De Los Santos and Rosi Chavez to lease a condominium at South Padre
Island, Texas from August 1, 2007 to March 1, 2008 for a monthly rent of $3,000.

In December 2007, the Registrant entered into a five year lease with Texas Tower Limited for 3,044 square feet of office space at varying
monthly rents ranging from $5,327 in the first year to $6,342 in the fifth year. The Registrant’s address is 600 Travis, Suite 6910, Houston,
Texas 77002.

Geer is headquartered in Jacksboro, TX where it owns a 12.7 acre industrial fee-simple property, supporting an office building and a
commercial yard for trucks and equipment, along with a licensed water disposal well. Geer’s address is P.O. Drawer J, 1136 S. Main Street,
Jacksboro, TX 76458.

As of March 31, 2008, there were 97,463,409 shares of the Company’s $0.001 par value per share common stock outstanding. The following
table sets forth the name, address, number of shares beneficially owned, and the percentage of the Registrant’s total outstanding common
stock shares owned by: (i) each of the Registrant’s Officers and Directors; (ii) the Registrant’s Officers and Directors as a group; and (iii)
other shareholders of 5% or more of the Registrant’s total outstanding common stock shares.

The directors and executive officers of the Registrant as of March 19, 2008 were as follows:

Timothy Brink, age 44, has over 15 years experience in petroleum retail operations. Mr. Brink has worked as an operational manager for
several large companies including Southland Corp., Circle K, and Amerada Hess, Inc. Mr. Brink has also been employed as an Operations
Manager by Garb-Ko, a 7-11 franchise chain in Michigan, Indiana, and Ohio. Mr. Brink specializes in developing marketing strategies to
promote sales and overall profitability to meet long-term financial goals. While employed at Amerada Hess Mr. Brink was promoted into
franchise operations (also called the Branded Retailer program). The Branded Retailer program helped Amerada Hess establish their desired
market share. In 2001, Mr. Brink started his own chain of petroleum retail outlets in Florida. Mr. Brink sold his interest in the company in
January of 2005. Since 2005, Mr. Brink has been actively involved in oil trading and consulting.  Mr. Brink was employed by Universal
Property Development and Acquisition Corporation from July 2006 to February 2007.
 
Prior to 1990, Mr. Brink served 6 years in the United States Air Force. He was an electrical avionics communications and navigation
specialist. While serving as a Non-Commission Officer in the United States Air Force, Mr. Brink was a full time student. He attended the
Community College of the Air Force, Florida State University, and Troy State University. Mr. Brink received a degree in Avionics System
Technology, Electrical Engineering Technology, and a Masters in Business Management.

Kamal Abdallah, age 43, has over fifteen years experience in commercial real estate investment and development. From 2000 to the present,
Mr. Abdallah has been self-employed as a real estate development entrepreneur and he has developed a very successful real estate investment
business, concentrated in the structuring and financing of a variety of real property transactions. Mr. Abdallah has been the Chief Executive
Officer, President and a Director of Universal Property Development and Acquisition Corporation (“UPDA”), a publicly traded Nevada
corporation, since March 2005. In February 2007, UPDA acquired a majority of the outstanding stock of Heartland Oil and Gas Corp. In
April 2007, UPDA acquired a majority of the outstanding stock of the Company. Mr. Abdallah is also a member of the Board of Directors of
Heartland Oil and Gas Corp., a publicly traded Nevada corporation. Mr. Abdallah attended Oakland Community College and Oakland
University in Michigan where he focused his studies in the area of accounting and finance.

Christopher J. McCauley, age 47, has over twenty years experience in the areas of real estate and commercial law and over 8 years
experience in oil and gas acquisitions and operations. From 1990 to July 2005, Mr. McCauley was in private practice in the state of Ohio as a
sole practitioner. Mr. McCauley now devotes all of his professional efforts to the growth and management of the Company. Mr. McCauley is
a member of the Board of directors of Universal Property Development and Acquisition Corporation, a publicly traded Nevada corporation.
Mr. McCauley is also a member of the Board of Directors of Heartland Oil and Gas Corp., a publicly traded Nevada corporation. In 1982,
Mr. McCauley graduated from The Ohio State University and in 1986 Mr. McCauley received his J.D. degree from Cleveland-Marshall
College of Law.

In August, 2007, Mr. McCauley was suspended indefinitely from the practice of law in the State of Ohio as a result of a disciplinary action
brought by Office of Disciplinary Counsel in the Ohio Supreme Court. The action was based upon allegations of commingling of client funds
and possible misuse of such funds. Mr. McCauley accepted full responsibility for the actions of his employees, voluntarily stipulated to the
suspension imposed in such action and fully reimbursed all claimants for any funds alleged to have been commingled or misused.

The Board of Directors of the Company currently consists of three members, Mr. Kamal Abdallah, Mr. Timothy Brink, and Mr. Christopher
McCauley. The full Board of Directors of the Registrant consists of five seats. Currently, two seats of the Registrant’s Board of Directors are
vacant.

On November 29, 2007, the Board of Directors of the Company approved and adopted the Continental Fuels, Inc. 2007 Stock Option/Stock
Issuance Plan (the "2007 Plan") and reserved 20,000,000 shares of the Company’s common stock for future issuance under the terms of the
2007 Plan. The purpose of the 2007 Plan is to provide a means through which the Company and its subsidiaries may attract, retain and
compensate the able and talented employees and consultants that the Company will need to execute its business plan and bring its products to
market. On November 30, 2007, the shareholders of the registrant approved the 2007 Plan.

On December 1, 2007, the Company entered into a three year Employment Agreement with Timothy Brink to continue serving as the
Company’s president and CEO for the annual base salary of $180,000 adjustable at any time, a discretionary bonus of up to $600,000 a year,
and the option to purchase 10 million shares of Continental’s common stock. On each successive anniversary of the Employment
Agreement, Mr. Brink shall be granted additional options as the Board determines.

On December 1, 2007, the Company granted Timothy Brink, CEO, options to purchase 10,000,000 shares of the Company’s common stock
under the terms and conditions of the Company’s 2007 Stock Option/Stock Issuance Plan (the “Brink Options”). The Brink Options have a
term of 10 years and an exercise price of $0.33 per share, the closing per share market price for the Registrant’s common stock on the date of
grant. The shares of common stock underlying the Brink Options shall be restricted shares on issuance.

The following table sets forth the salaries of the Company’s executive officer for the fiscal year ending December 31, 2007.

The following table sets forth certain information concerning the stock options granted during the 2007 fiscal year to the Company’s chief
executive officer and each other executive officer.

The Company currently has no pension, retirement, annuity, savings or similar benefit plan which provides compensation to its executive
officers or directors.

The Company currently does not have a Compensation Committee to the board of directors. All of the current members of the board of
directors are responsible for setting the compensation amounts and terms for the executives, employees and directors of the Company. If a
director is also an employee of the Company, such person shall not be involved in negotiating the compensation amounts to be paid by the
Company to that person, or any other terms of such employment, and such person shall not participate in the vote of the board of directors on
the approval of such compensation. The members of the Company’s board of directors are not currently independently compensated for
holding seats on the board of directors or for their attendance and participation at board meetings.

On January 26, 2007, the Registrant and G. Richard Smith, the then Chairman and a member of the Registrant’s board of directors, entered
into an Asset Sales Agreement (the “ASA”) dated as of January 24, 2007, pursuant to which the Registrant agreed to sell and Mr. Smith
agreed to purchase substantially all of the Registrant’s assets, except for certain European distribution agreements (collectively the “Assets”).
The purchase price for the Assets pursuant to the ASA was $300,000 in cash (the “Purchase Price”). Under the terms of the ASA, Mr. Smith
assumed certain of the existing debts and liabilities of the Registrant and its subsidiaries that existed on the date of execution of the ASA,
which remained unpaid after the Purchase Price. An additional $200,000 was paid out by the Registrant to satisfy such outstanding debts and
liabilities. The Board of Directors of the Registrant determined that the Purchase Price for the Assets was fair to the shareholders of the
Registrant based on the recent market prices of Registrant’s common stock and Registrant’s past performance.

On November 11, 2007, Kamal Abdallah, the Registrant’s Chairman and member of the board of directors, loaned the Registrant $100,000 at
an interest rate of 5% per annum from December 11, 2007, with all principal and accrued interest payable on demand after February 1, 2008.

No legal proceedings are currently pending against or by the Registrant.

Market Information

The principal U.S. market in which the Registrant’s common shares (all of which are one class, $.001 par value) are traded is the over-the-
counter bulletin board. The Company’s common stock trades under the symbol “CFUL.OB” The over-the-counter market quotations shown
below reflect inter-dealer prices without retail markup, markdown or commission and may not necessarily represent actual transactions. The
following table shows the low and the high closing trading prices during the 2007 and 2006 fiscal years, and for the interim period ended
March 31, 2008. The share prices shown below have been adjusted for the 1-for-10 reverse stock split on February 21, 2006, the 1-for-100
reverse stock split on February 5, 2007, and the 3-for-1 forward stock split on April 20, 2007.

After the reverse split on February 5, 2007, Registrant’s shares traded under the symbol “CFUL.OB”

Registrant’s common stock is also traded on the Frankfurt and Hamburg, Germany exchanges.

Stockholders

The Registrant has approximately 1,000 stockholders of record, including nominee firms for securities dealers, at December 31, 2007.

Dividends

The Registrant has not paid or declared any dividends upon its common shares since its inception and, by reason of its present financial status
and its contemplated financial requirements, does not intend to pay or declare any dividends upon its common shares within the foreseeable
future.

Preferred Stock

The Registrant is authorized to issue 100,000,000 shares of preferred stock, par value $.001 per share, of which 48,000 shares were issued
and outstanding at the date of this report. The preferred stock shares shall have the rights, limitations and obligations which the Board of
Directors shall determine at the time the preferred stock is issued.

On April 23, 2007, the Board of Directors of the Company adopted a resolution providing for the designation, rights, powers and preferences
and the qualifications, limitation and restrictions of 500,000 shares of Series A Convertible Preferred Stock (the “Series A Preferred”). Each
share of the Series A Preferred is convertible into 10,000 shares of the Company’s common stock. In the event of a stock dividend, stock
split, reclassification, reorganization, consolidation or merger, adjustments in the conversion ratio will be made in a manner which will
provide the preferred holders, upon full conversion into common stock, the same percentage ownership of the Company that existed
immediately prior to such action. The Series A Preferred has the same voting rights as the common stock, on an as converted basis, with the
preferred holders having one vote for each share of common stock into which their Series A Preferred is convertible. The Series A Preferred
has a liquidation preference over the Company’s common stock up to the one-hundred dollar ($100) per share.

On April 23, 2007, the Company issued 50,000 shares of the Company’s Series A Preferred stock to UPDA in connection with the closing of
the SPA transaction. On August 1, 2007, UPDA converted 2,000 shares of its Series A Preferred stock into 20,000,000 shares of the
Company’s common stock, of which 18,177,918 shares were distributed to the common shareholders of UPDA as a special distribution of
assets. The 48,000 outstanding shares of Series A Preferred Stock are currently convertible into 480,000,000 shares of our common stock and
UPDA has the right to vote the shares of Series A Preferred Stock on an “as converted” basis in any matters for which the holders of our
common stock are entitled to vote. Therefore, UPDA has the power to control the vote of approximately 81% of our voting capital stock.

Shares Authorized for Issuance Under the Company’s Equity Compensation Plans

Please refer to the information contained herein in “Note 8 - Shareholder’s Equity” of the Company’s audited financial statements for
information related to the number of shares of the Company’s common stock reserved for issuance under the Company’s equity
compensation plans, and the number of options outstanding under those plans.

On February 25, 2007, our Board of Directors approved the conversion of outstanding promissory notes of the Registrant with an aggregate
face value of three hundred thousand dollars (the “Notes”) payable to Mathews Investment, LLC (“Mathews”) into shares of our common
stock. The Registrant is in the process of issuing an aggregate of 32,042,928 shares of our common stock to Mathews as a result of the
ongoing conversion of the Notes. Through March 31, 2008, the Company had issued a total of 28,026,440 shares of common stock, out of the
32,042,928 total, to Mathews as a result of theses conversions.

On February 6, 2007, Registrant completed the sale of 47,000,000 restricted shares of its common stock to Ms. Karen Sandhu in a private
transaction with gross proceeds to the Registrant from the sale equaling $200,000. Ms. Sandhu is an accredited investor (as defined in Rule
501 of Regulation D). The purchase price of the shares was paid in cash.

On August 1, 2007, UPDA converted 2,000 shares of its Series A Preferred stock into 20,000,000 shares of the Registrant’s common stock,
of which 18,169,545 shares were distributed to the common shareholders of UPDA as a special distribution of assets.

The shares of common stock issued as described above were restricted shares and cannot be resold unless they are subsequently registered
pursuant to the Securities Act of 1933, as amended, or such sale is pursuant to a valid exemption from such registration. The transactions
referred to above did not involve an underwriter or placement agent and there were no underwriter’s discounts or commissions, or placement
agent fees or commissions, paid in connection with the transaction. The transactions referred to above were exempt transactions in
accordance with the provisions of Section 4(2) of the Securities Act of 1933, as amended, as transactions by an issuer not involving any
public offering. We did not engage in any public solicitations in connection with the above transactions.

Common Stock

The Registrant’s Articles of Incorporation, as amended, authorize the issuance of 900,000,000 shares of par value $.001 per share common
stock.

As of April 22, 2008, there were 101,479,897 shares of common stock issued and outstanding.

Holders of common stock are entitled to one vote for each share held on each matter to be acted upon by stockholders of the Registrant.
Stockholders do not have preemptive rights or the right to cumulate votes for the election of directors. Shares are not subject to redemption
nor to any liability for further calls. All shares of common stock issued and outstanding are entitled to receive such dividends, if any, as may
be declared by the Board of Directors in its discretion out of funds legally available for that purpose, and to participate pro rata in any
distribution of the Registrant’s assets upon liquidation or dissolution.

In the event of liquidation or dissolution of the Registrant, all assets available for distribution after satisfaction of all debts and other
liabilities and after payment or provision for any liquidation preference on any issued Preferred Stock are distributable among the holders of
the common stock on a pro-rata basis.
 
The transfer agent for the Registrant’s common stock is Integrity Stock Transfer, 2920 N. Green Valley Parkway, Building 5 - Suite 527,
Henderson, Nevada 89014.

The Registrant’s Articles of Incorporation contain provisions for the indemnification of its officers and directors to the fullest extent
permitted by the laws of the State of Nevada; in addition, Sections 78.7502 and 78.751 of the Nevada General Corporation Laws provides as
follows:

NRS 78.7502 Discretionary and mandatory indemnification of officers, directors, employees and agents: General provisions.

1. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or investigative, except an action by or in the right of the
corporation, by reason of the fact that he is or was a director, officer, employee or agent of the corporation, or is or was serving at the request
of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against
expenses, including attorneys’ fees, judgments, fines and amounts paid in settlement actually and reasonably incurred by him in connection
with the action, suit or proceeding if he:

         a. Is not liable pursuant to NRS 78.138; or

         b. Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his conduct was unlawful.

The termination of any action, suit or proceeding by judgment, order, settlement, conviction or upon a plea of nolo contendere or its
equivalent, does not, of itself, create a presumption that the person is liable pursuant to NRS 78.138 or did not act in good faith and in a
manner which he reasonably believed to be in or not opposed to the best interests of the corporation, or that, with respect to any criminal
action or proceeding, he had reasonable cause to believe that his conduct was unlawful.

2. A corporation may indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that he is or was a
director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other enterprise against expenses, including amounts paid in settlement and
attorneys’ fees actually and reasonably incurred by him in connection with the defense or settlement of the action or suit if he:

         a. Is not liable pursuant to NRS 78.138; or

         b. Acted in good faith and in a manner which he reasonably believed to be in or not opposed to the best interests
of the corporation.

Indemnification may not be made for any claim, issue or matter as to which such a person has been adjudged by a court of competent
jurisdiction, after exhaustion of all appeals therefrom, to be liable to the corporation or for amounts paid in settlement to the corporation,
unless and only to the extent that the court in which the action or suit was brought or other court of competent jurisdiction determines upon
application that in view of all the circumstances of the case, the person is fairly and reasonably entitled to indemnity for such expenses as the
court deems proper.

3. To the extent that a director, officer, employee or agent of a corporation has been successful on the merits or otherwise in defense
of any action, suit or proceeding referred to in subsections 1 and 2, or in defense of any claim, issue or matter therein, the corporation shall
indemnify him against expenses, including attorneys’ fees, actually and reasonably incurred by him in connection with the defense.

NRS 78.751 Authorization required for discretionary indemnification; advancement of expenses; limitation on indemnification and
advancement of expenses.

1. Any discretionary indemnification pursuant to NRS 78.7502, unless ordered by a court or advanced pursuant to subsection 2, may
be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer,
employee or agent is proper in the circumstances. The determination must be made:

         a. By the stockholders;

         b. By the board of directors by majority vote of a quorum consisting of directors who were not parties to the
action, suit or proceeding;

         c. If a majority vote of a quorum consisting of directors who were not parties to the action, suit or proceeding so
orders, by independent legal counsel in a written opinion; or

         d. If a quorum consisting of directors who were not parties to the action, suit or proceeding cannot be obtained, by
independent legal counsel in a written opinion.

2. The articles of incorporation, the bylaws or an agreement made by the corporation may provide that the expenses of officers and
directors incurred in defending a civil or criminal action, suit or proceeding must be paid by the corporation as they are incurred and in
advance of the final disposition of the action, suit or proceeding, upon receipt of an undertaking by or on behalf of the director or officer to
repay the amount if it is ultimately determined by a court of competent jurisdiction that he is not entitled to be indemnified by the
corporation. The provisions of this subsection do not affect any rights to advancement of expenses to which corporate personnel other than
directors or officers may be entitled under any contract or otherwise by law.

3. The indemnification pursuant to NRS 78.7502 and advancement of expenses authorized in or ordered by a court pursuant to this
section:

         a. Does not exclude any other rights to which a person seeking indemnification or advancement of expenses may
be entitled under the articles of incorporation or any bylaw, agreement, vote of stockholders or disinterested directors or otherwise, for either
an action in his official capacity or an action in another capacity while holding his office, except that indemnification, unless ordered by a
court pursuant to NRS 78.7502 or for the advancement of expenses made pursuant to subsection 2, may not be made to or on behalf of any
director or officer if a final adjudication establishes that his acts or omissions involved intentional misconduct, fraud or a knowing violation
of the law and was material to the cause of action.

         b. Continues for a person who has ceased to be a director, officer, employee or agent and inures to the benefit of
the heirs, executors and administrators of such a person.

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers or persons controlling the
Registrant pursuant to the foregoing provisions, the Registrant has been informed that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the Securities Act and is therefore unenforceable.

See Financial Statements starting on page F-1 for this information.

On April 17, 2007, the board of directors of the Registrant appointed KBL, LLP (“KBL”) as the Registrant’s independent auditors for the
fiscal year ended December 31, 2007, and dismissed Semple, Marchal & Cooper, LLP (“Semple, Marchal & Cooper”), which had audited the
Registrant’s financial statements for the fiscal years ended December 31, 2006, and December 31, 2005.

The Registrant’s board of directors believes that the appointment of KBL to audit the Registrant’s financial statements for the fiscal year
ended December 31, 2007, and thereafter, is in the best interest of the Registrant and its shareholders. During the last two fiscal years, the
Registrant did not consult KBL on any matters requiring disclosure.

The reports of Semple, Marchal & Cooper, LLP on the financial statements of the Registrant for the fiscal years ended December 31, 2006
and December 31, 2005, did not contain an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty,
audit scope or accounting principles, except for the going concern emphasis paragraphs previously reported in the Registrant’s Annual
Reports on Form 10-KSB filed with the Securities and Exchange Commission on April 17, 2007, and April 17, 2006. Through the date of
this filing, the Registrant has had no disagreements with Semple, Marchal & Cooper on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not resolved to Semple, Marchal & Cooper’s satisfaction, would
have caused them to make reference to the subject matter of the disagreement in connection with its report.

Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf on April 28, 2008 by the undersigned, thereunto duly authorized.

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the
Registrant and in the capacities on the date(s) indicated.

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIES PURSUANT
TO SECTION 12 OF THE ACT.

The Registrant’s fiscal year ended December 31, 2007. The Registrant currently has not held its Annual Meeting of Stockholders.

Four copies of all material to be mailed to stockholders with respect to such meeting will be furnished to the Securities and Exchange
Commission but such documents, when furnished, will not be deemed to be filed with the Securities and Exchange Commission or otherwise
subject to liabilities of Section 18 of the Act (except to the extent that the Registrant specifically incorporates such material by reference in
any subsequent Form 10-KSB); it is expected that such documents will consist of a Form of Proxy, Notice of Annual Meeting, Information
Statement with Schedules and/or Exhibits annexed thereto.

INDEX TO FINANCIAL STATEMENTS

To the Board of Directors and Stockholders of
Continental Fuels, Inc. 

We have audited the accompanying consolidated balance sheet of Continental Fuels, Inc. as of December 31, 2007 and the related
consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the year then ended. These financial
statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements
based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those
standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Continental Fuels, Inc. at December 31, 2007, and the results of its operations, changes in stockholders’ equity (deficit) and its cash flows for
the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the Company’s significant operating losses raise substantial doubt about its
ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the
outcome of this uncertainty.


/s/ KBL, LLP

New York, NY
April 10, 2008

To the Board of Directors and Stockholders of
Continental Fuels, Inc. (formerly Coronado Industries, Inc.)


We have audited the accompanying consolidated balance sheet of Continental Fuels, Inc. (formerly Coronado Industries, Inc.) as of
December 31, 2006 and the related consolidated statements of operations, changes in stockholders’ equity (deficit), and cash flows for the
year then ended. 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 audit 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. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of
Continental Fuels, Inc. (formerly Coronado Industries, Inc.) at December 31, 2006, and the results of its operations, changes in stockholders’
equity (deficit) and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of
America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As
discussed in Note 1 to the consolidated financial statements, the Company’s significant operating losses and negative working capital raise
substantial doubt about its ability to continue as a going concern. The consolidated financial statements do not include any adjustments that
might result from the outcome of this uncertainty.


/s/ Semple, Marchal & Cooper, LLP

Phoenix, Arizona
March 22, 2007