================================================================================
--------------------------------------------------------------------------------

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

                                   FORM 10-KSB

|X|                ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                  FOR THE FISCAL YEAR ENDED: December 31, 2004

|_|           TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
                       THE SECURITIES EXCHANGE ACT OF 1934

                FROM THE TRANSITION PERIOD FROM ______ TO ______
                        COMMISSION FILE NUMBER: 000-26337

                             DONAR ENTERPRISES, INC.
            (Name of Small Business Issuer Specified in Its Charter)

                Delaware                                 23-3083371
        (State of incorporation)            (IRS Employer Identification Number)

   12890 Hilltop Road, Argyle, Texas                        76226
(Address of principal executive offices)                 (Zip Code)

                                 (972) 233-0300
                (Issuer's telephone number, including area code)

         Securities registered under Section 12(b) of the Exchange Act:
                                      None

         Securities registered under Section 12(g) of the Exchange Act:
                    Common Stock, par value $0.001 per share

         Check whether the issuer (1) filed all reports  required to be filed by
Section 13 or 15(d) of the  Exchange  Act during the past 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.
[X] Yes [ ] No


         Check if there is no  disclosure  of  delinquent  filers in response to
Item 405 of Regulation S-B is not contained in this form, and no disclosure will
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-KSB
or any amendment to this Form 10-KSB. |X|


         The Issuer's revenue for its most recent fiscal year was $3,607.


         As of March 18, 2005, 9,289,647 shares of the Issuer's $0.001 par value
common stock were  outstanding and the aggregate market value of the shares held
by non-affiliates  was approximately  $178,696 based upon a closing bid price on
March 18, 2005 of $0.28 per share of common stock on the OTC Bulletin Board.

--------------------------------------------------------------------------------
================================================================================





<PAGE>

PART I.........................................................................2
   ITEM 1. BUSINESS............................................................2
     History...................................................................2
     Description of Donar Enterprises, Inc.....................................2
   RISK FACTORS................................................................6
   ITEM 2. PROPERTIES.........................................................10
   ITEM 3. LEGAL PROCEEDINGS..................................................10
   ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS................10
PART II.......................................................................10
   ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
   MATTERS....................................................................10
   ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
   PLAN OF OPERATIONS.........................................................12
     General..................................................................12
     Results of Operations....................................................12
     Plan of Business.........................................................13
     Liquidity and Capital Resources..........................................14
   ITEM 7. FINANCIAL STATEMENTS...............................................14
   ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
   FINANCIAL DISCLOSURE.......................................................14
   ITEM 8A. CONTROLS AND PROCEDURES...........................................14
   ITEM 8B. OTHER INFORMATION.................................................15
PART III......................................................................15
   ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT; COMPLIANCE
   WITH SECTION 16(A) OF THE EXCHANGE ACT.....................................15
     Biographical Information.................................................15
     Indemnification of Officers and Directors................................15
     Conflicts of Interest....................................................16
     Involvement in Certain Legal Proceedings.................................16
     Compliance with Section 16(a) of the Securities Exchange Act of 1934.....16
     Audit Committee Financial Expert.........................................17
     Audit Committee..........................................................17
     Code of Ethics...........................................................17
   ITEM 10. EXECUTIVE COMPENSATION............................................17
     Compensation of Directors................................................18
     Conflict of Interest - Management's Fiduciary Duties.....................18
     Compensation Committee...................................................18
   ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT....18
   ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS....................19
   ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K..................................19
     Statements filed as part of this Report:.................................19
     Exhibits.................................................................19
     Reports on Form 8-K......................................................20
   ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES............................20
   SIGNATURES.................................................................21
INDEX TO FINANCIAL STATEMENTS................................................F-1











                                      -i-
<PAGE>

                                     PART I

ITEM 1. BUSINESS


     History

         Unless otherwise  indicated,  or unless the context otherwise requires,
all  references in this Annual  Report to the terms  "Company,"  "Donar,"  "we,"
"our," or "us" shall  mean  Donar  Enterprises,  Inc.,  a Delaware  corporation,
incorporated in 2001.


     Description of Donar Enterprises, Inc.

         Donar  Enterprises,  Inc.  ("Donar" or "the  Company")  was  originally
incorporated  on May 25,  2001under  the laws of the State of Delaware.  We were
organized  to convert and file  registration  statements,  periodic  reports and
other forms of small to mid-sized public companies with the U.S.  Securities and
Exchange Commission ("SEC")  electronically  through EDGAR, the SEC's Electronic
Data Gathering,  Analysis, and Retrieval system. We have been in the development
stage since our formation and have been unable to become  profitable  within any
segment of our core business. Our current principle business activity is to seek
a suitable reverse acquisition  candidate through  acquisition,  merger or other
suitable business combination method.

         On June 11,  2004,  we  experienced  a change in control  when the then
controlling  stockholder,  William Tay, sold 8,651,447  restricted shares of our
common stock to Edwin A. McGusty in a private  purchase  transaction for the sum
of $500,000. As a result of the transaction,  Mr. McGusty became the controlling
stockholder.  Simultaneously with this transaction,  (a) Mr. Tay resigned as our
sole  director,  effective as of the  effective  date of the election of the new
Board of Directors,  and (b) Mr. Tay, as our sole director,  elected Mr. McGusty
to serve as sole  director  effective as of the  expiration  of the ten (10) day
notice period  required  under Rule 14f-1 of the  Securities and Exchange Act of
1934. Mr. Tay also resigned as an officer,  effective immediately,  and, as sole
director,  named Mr.  McGusty to serve as our  President,  Vice  President,  and
Secretary, effective immediately.

         On December 15, 2004,  we  experienced  another  change in control when
Edwin A. McGusty sold 7,331,447 shares of restricted common stock, pursuant to a
private stock purchase  agreement,  to Halter Financial  Group,  Inc., an entity
owned  by  Timothy  P.  Halter,  for the sum of  $300,000.  As a  result  of the
transaction,   Halter  Financial  Group,  Inc.   currently  is  the  controlling
stockholder.  Immediately  subsequent  to and as a result of the  closing of the
stock  purchase  agreement,  Mr.  McGusty  resigned as an officer of the Company
effective  December 15, 2004. Timothy P. Halter was appointed as a member of our
Board of Directors,  and Mr. Halter was elected as our Chief Executive  Officer,
President,  Chief Financial  Officer,  Chairman of the Board and Secretary.  Mr.
McGusty  later  resigned  as a  director,  effective  January 4,  2005.  Also on
December 15, 2004, we issued to Mr. Halter warrants  convertible  into 1,000,000
shares of our common  stock at a price of $0.06 per share as  consideration  for
Mr.  Halter's  agreement  to serve as an officer and  director.  Mr.  Halter may
exercise the  warrants,  in whole or in part,  at any time after the issuance of
the warrants and prior to the expiration of the warrants on December 15, 2007.

         On  February  21,  2005,  by  written   consent  in  lieu  of  meeting,
stockholders  representing  78.9% of the  issued and  outstanding  shares of our
common stock approved a recommendation of our Board of Directors to effect a one
share for ten shares  reverse stock split of our common  stock,  par value $.001
per share,  with all fractional  shares rounded down to the nearest whole share.
The reverse split is to become effective on April 15, 2005,  unless the Board of
Directors  elects not to effect the split.  As a result of the reverse split, it
is  anticipated  that the total number of issued and  outstanding  shares of our
common stock will decrease from 9,289,647 shares to 928,964 shares.

         Our  address  is at  12890  Hilltop  Road,  Argyle,  Texas  76226.  The
telephone number of our principal executive office is (972) 233-0300.

         Our equity  securities are traded under the symbol "DNRE" on the NASDAQ
Over the Counter ("OTC")  Bulletin Board. We may be referred to as a trading and
reporting shell corporation.  Shell corporations have zero or nominal assets and
typically no stated or  contingent  liabilities.  Private  companies  wishing to
become  publicly  trading  may wish to merge  with a shell  (a  reverse  merger)
whereby the  stockholders  of the  private  company  become the  majority of the
stockholders of the combined company.  The private company may purchase for cash
all or a portion of the common  shares of the shell  corporation  from its major
stockholders.  Typically,  the board of  directors  and  officers of the private
company  become the new board of directors and officers of the combined  company
and often  the name of the  private  company  becomes  the name of the  combined
company.



                                       2
<PAGE>

         We have very limited  capital,  and it is unlikely that we will be able
to take advantage of more than one such business opportunity.  We intend to seek
opportunities  demonstrating  the  potential of  long-term  growth as opposed to
short-term  earnings.  However,  at the  present  time,  we have not reached any
agreement or definitive understanding with any person concerning an acquisition.

         No  assurance  can be given  that we will be  successful  in finding or
acquiring a desirable  business  opportunity,  given the limited  funds that are
expected to be available  for  acquisitions.  Furthermore,  no assurance  can be
given  that  any  acquisition,  which  does  occur,  will be on  terms  that are
favorable to us or our current stockholders.

         Our search will be directed toward small and  medium-sized  enterprises
that have a desire to become public corporations.  In addition these enterprises
may wish to satisfy,  either  currently or in the  reasonably  near future,  the
minimum  tangible  asset  requirement  in order to qualify shares for trading on
NASDAQ or on an exchange such as the American Stock Exchange. (See Investigation
and  Selection  of Business  Opportunities).  It is possible  that the  business
opportunities presented to us will (i) either be in the process of formation, or
be recently  organized  with  limited  operating  history or a history of losses
attributable  to   under-capitalization  or  other  factors;  (ii)  experiencing
financial  or operating  difficulties;  (iii) be in need of funds to develop new
products or  services  or to expand  into a new market,  or have plans for rapid
expansion  through  acquisition of competing  businesses;  (iv) or other similar
characteristics.  We intend to concentrate our acquisition efforts on properties
or businesses that we believe to be undervalued or that we believe may realize a
substantial  benefit  from  being  publicly  owned.  Given  the  above  factors,
investors  should  expect that any  acquisition  candidate may have little or no
operating history, or a history of losses or low profitability.

         We do not propose to restrict our search for  investment  opportunities
to any particular  geographical area or industry, and may, therefore,  engage in
essentially any business, to the extent of our limited resources.  This includes
industries such as service,  finance,  natural  resources,  manufacturing,  high
technology,  product  development,   medical,  communications  and  others.  Our
discretion in the selection of business  opportunities is unrestricted,  subject
to the  availability  of such  opportunities,  economic  conditions,  and  other
factors.

         Depending upon the nature of the transaction,  our current officers and
directors may resign their  management and board  positions in connection with a
change  of  control  or  acquisition  of a  business  opportunity  (See  Form of
Acquisition,  below,  and Risk  Factors,  The  Company,  Lack of  Continuity  of
Management).  In the event of such a resignation,  our current  management would
thereafter have no control over the conduct of our business.

         It  is  anticipated  that  business  opportunities  will  come  to  our
attention from various sources,  including our officers and directors, our other
stockholders,   professional   advisors  such  as  attorneys  and   accountants,
securities  broker-  dealers,  venture  capitalists,  members  of the  financial
community, and others who may present unsolicited proposals. At present, we have
no plan, understandings, agreements, or commitments with any individual for such
person to act as a finder of  opportunities  for us. We do not  foresee  that we
will enter into a merger or acquisition transaction with any business with which
our officers or directors are currently  affiliated.  Should we determine in the
future,  contrary  to the  forgoing  expectations,  that a  transaction  with an
affiliate  would  be in  our  best  interests  and  the  best  interests  of our
stockholders,  we are, in  general,  permitted  by Delaware  law to enter into a
transaction  if: the material  facts as to the  relationship  or interest of the
affiliate  and as to the contract or  transaction  are disclosed or are known to
the Board of Directors,  and the Board of Directors in good faith authorizes the
contract  or  transaction  by  the  affirmative   vote  of  a  majority  of  the
disinterested directors, even though the disinterested directors constitute less
than a quorum;  or the material facts as to the  relationship or interest of the
affiliate  and as to the contract or  transaction  are disclosed or are known to
the  stockholders  entitled to vote thereon,  and the contract or transaction is
specifically approved in good faith by vote of the stockholders; or the contract
or  transaction  is  fair as to the  Company  as of the  time it is  authorized,
approved or ratified, by our Board of Directors or our stockholders.

Investigation and Selection of Business Opportunities

         To a large extent,  a decision to  participate  in a specific  business
opportunity may be made upon  management's  analysis of the quality of the other
company's  management  and  personnel,  the  anticipated  acceptability  of  new
products  or  marketing  concepts,  the  merit  of  technological  changes,  the
perceived benefit the business  opportunity will derive from becoming a publicly
held entity, and numerous other factors which are difficult,  if not impossible,
to analyze through the application of any objective criteria. In many instances,
it  is  anticipated  that  the  historical  operations  of a  specific  business



                                       3
<PAGE>

opportunity  may not  necessarily  be indicative of the potential for the future
because of a variety of factors,  including,  but not  limited to, the  possible
need  to  expand  substantially,  shift  marketing  approaches,  change  product
emphasis,  change or  substantially  augment  management,  raise capital and the
like.

         It is  anticipated  that we will  not be able to  diversify,  but  will
essentially be limited to the acquisition of one business opportunity because of
our limited financing. This lack of diversification will not permit us to offset
potential losses from one business opportunity against profits from another, and
should be  considered an adverse  factor  affecting any decision to purchase our
securities.

         Certain  types of business  acquisition  transactions  may be completed
without any requirement that we first submit the transaction to our stockholders
for their approval.  In the event the proposed transaction is structured in such
a fashion that stockholder  approval is not required,  holders of our securities
(other than principal  stockholders  holding a controlling  interest) should not
anticipate  that they will be provided  with  financial  statements or any other
documentation  prior  to the  completion  of the  transaction.  Other  types  of
transactions require prior approval of our stockholders.

         The analysis of business  opportunities  will be undertaken by or under
the  supervision  of our officers and directors,  none of whom are  professional
business analysts.  Although there are no current plans to do so, our management
might hire an outside consultant to assist in the investigation and selection of
business  opportunities,  and might pay a finder's fee. Since our management has
no current  plans to use any  outside  consultants  or advisors to assist in the
investigation  and  selection of business  opportunities,  no policies have been
adopted  regarding use of such consultants or advisors,  the criteria to be used
in selecting such consultants or advisors, the services to be provided, the term
of service,  or the total amount of fees that may be paid.  However,  because of
our limited  resources,  it is likely that any such fee we agree to pay would be
paid in stock and not in cash.

         Otherwise,   in  analyzing   potential  business   opportunities,   our
management anticipates that it will consider,  among other things, the following
factors:

         o        Potential  for  growth  and  profitability  indicated  by  new
                  technology, anticipated market expansion, or new products;

         o        Our perception of how any particular business opportunity will
                  be  received   by  the   investment   community   and  by  our
                  stockholders;

         o        Whether,  following  the business  combination,  the financial
                  condition of the business  opportunity would be, or would have
                  a significant  prospect in the foreseeable future of becoming,
                  sufficient to enable our  securities to qualify for listing on
                  an exchange or on a national  automated  securities  quotation
                  system,  such as NASDAQ,  so as to permit the  trading of such
                  securities  to be exempt from the  requirements  of Rule 15g-9
                  adopted by the  Securities and Exchange  Commission  (See Risk
                  Factors-Regulations of Penny Stocks).

         o        Capital requirements and anticipated  availability of required
                  funds,  to be provided by us or from  operations,  through the
                  sale of  additional  securities,  through  joint  ventures  or
                  similar arrangements, or from other sources;

         o        The extent to which the business opportunity can be advanced;

         o        Competitive position as compared to other companies of similar
                  size and  experience  within the  industry  segment as well as
                  within the industry as a whole;

         o        Strength and  diversity of existing  management  or management
                  prospects that are scheduled for recruitment;

         o        The cost of our  participation  as compared  to the  perceived
                  tangible and intangible values and potential; and

         o        The accessibility of required management expertise, personnel,
                  raw materials,  services,  professional assistance,  and other
                  required items.



                                       4
<PAGE>

         No one of the  factors  described  above  will  be  controlling  in the
selection of a business opportunity,  and management will attempt to analyze all
factors  appropriate to each  opportunity  and make a  determination  based upon
reasonable  investigative  measures and available  data.  Potentially  available
business  opportunities  may occur in many  different  industries and at various
stages  of  development,  all  of  which  will  make  the  task  of  comparative
investigation and analysis of such business  opportunities  extremely  difficult
and complex.  Because of our limited  capital  available for  investigation  and
management's  limited  experience in business  analysis,  we may not discover or
adequately evaluate adverse facts about the opportunity to be acquired.

         We are  unable  to  predict  when  we  may  participate  in a  business
opportunity. We expect, however, that the analysis of specific proposals and the
selection of a business opportunity may take several months or more.

         Prior to making a decision to participate in a business opportunity, we
will generally request that we be provided with written materials  regarding the
business  opportunity  containing  as much  relevant  information  as  possible,
including, but not limited to, such items as a description of products, services
and  company  history;  management  resumes;  financial  information;  available
projections,  with related assumptions upon which they are based; an explanation
of proprietary products and services; evidence of existing patents,  trademarks,
or service marks, or rights thereto;  present and proposed forms of compensation
to  management;  a  description  of  transactions  between  such company and its
affiliates  during the relevant  periods;  a description of present and required
facilities; an analysis of risks and competitive conditions; a financial plan of
operation and estimated capital requirements;  audited financial statements,  or
if  they  are not  available,  unaudited  financial  statements,  together  with
reasonable  assurance  that  audited  financial  statements  would be able to be
produced  within a  reasonable  period of time not to  exceed 60 days  following
completion of a merger or acquisition transaction; and the like.

         As part of our investigation,  our executive officers and directors may
meet  personally  with  management  and key  personnel,  may visit  and  inspect
material  facilities,  obtain  independent  analysis or  verification of certain
information provided, check references of management and key personnel, and take
other reasonable  investigative measures, to the extent of our limited financial
resources and management expertise.

         It is possible that the range of business  opportunities  that might be
available for our consideration could be limited by the impact of Securities and
Exchange Commission regulations regarding purchase and sale of penny stocks. The
regulations would affect,  and possibly impair, any market that might develop in
our  securities  until such time as they  qualify for listing on NASDAQ or on an
exchange  which  would make them exempt  from  applicability  of the penny stock
regulations. (See Risk Factors-Regulation of Penny Stocks).

         Our  management  believes  that various  types of  potential  merger or
acquisition  candidates  might  find  a  business  combination  with  us  to  be
attractive.  These include  acquisition  candidates  desiring to create a public
market for their shares in order to enhance liquidity for current  stockholders,
acquisition  candidates  which have long-term  plans for raising capital through
public sale of  securities  and believe that the possible  prior  existence of a
public  market  for  their  securities  would  be  beneficial,  and  acquisition
candidates  which  plan  to  acquire   additional  assets  through  issuance  of
securities rather than for cash, and believe that the possibility of development
of a public market for their  securities  will be of assistance in that process.
Acquisition  candidates,  which have a need for an immediate cash infusion,  are
not likely to find a potential business  combination with us to be an attractive
alternative.

Form of Acquisition

         It is impossible to predict the manner in which we may participate in a
business opportunity.  Specific business  opportunities will be reviewed as well
as our  respective  needs and desires those of the promoters of the  opportunity
and, upon the basis of the review and our relative negotiating strength and that
of the  promoters,  the legal  structure or method  deemed by  management  to be
suitable will be selected.  Such  structure  may include,  but is not limited to
leases,  purchase  and sale  agreements,  licenses,  joint  ventures  and  other
contractual arrangements.  We may act directly or indirectly through an interest
in a partnership,  corporation or other form of organization.  Implementing such
structure may require the merger, consolidation or reorganization of our Company
with other  corporations  or forms of business  organization.  In addition,  our
present  management  and  stockholders  most likely  will not have  control of a
majority of our voting stock following a merger or  reorganization  transaction.
As part  of such a  transaction,  our  existing  directors  may  resign  and new
directors may be appointed without any vote by stockholders.

         We  anticipate  that any new  securities  issued in any  reorganization
would be issued in reliance upon one or more exemptions from registration  under
applicable  federal and state securities laws to the extent that such exemptions
are available.  In some  circumstances,  however, as a negotiated element of the



                                       5
<PAGE>

transaction,  we may agree to register  such  securities  either at the time the
transaction  is  consummated  or under  certain  conditions  at specified  times
thereafter.   The  issuance  of  substantial  additional  securities  and  their
potential  sale into any trading market that might develop in our securities may
have a depressive effect upon such market.

         We  will   participate  in  a  business   opportunity  only  after  the
negotiation  and  execution of a written  agreement.  Although the terms of such
agreement  cannot  be  predicted,  generally  such an  agreement  would  require
specific  representations and warranties by all of the parties thereto,  specify
certain events of default,  detail the terms of closing and the conditions which
must be satisfied by each of the parties thereto prior to such closing,  outline
the manner of bearing costs if the transaction is not closed, set forth remedies
upon default, and include miscellaneous other terms.

         We will not be bound to  consummate an  acquisition  unless and until a
definitive agreement is executed. Even after a definitive agreement is executed,
it is possible that the  acquisition  would not be consummated  should any party
elect to  exercise  any right  provided  in the  agreement  to  terminate  it on
specific grounds.

         We anticipate that the investigation of specific business opportunities
and the negotiation,  drafting and execution of relevant agreements,  disclosure
documents and other  instruments  will require  substantial  management time and
attention and  substantial  costs for  accountants,  attorneys and others.  If a
decision is made not to  participate  in a specific  business  opportunity,  the
costs incurred in the related investigation would not be recoverable.

Investment Company Act and Other Regulation

         We may participate in a business opportunity by purchasing,  trading or
selling the securities of such business.  We do not,  however,  intend to engage
primarily in such activities.  Specifically, we intend to conduct our activities
so as to avoid being  classified as an investment  company under the  Investment
Company Act of 1940 (the Investment Act), and therefore to avoid  application of
the costly and restrictive  registration  and other provisions of the Investment
Act, and the regulations promulgated thereunder.

         Our plan of  business  may involve  changes in our  capital  structure,
management, control and business, especially if we consummate the reorganization
as discussed  above.  Each of these areas is regulated by the Investment Act, in
order to protect purchasers of investment company securities.  Since we will not
register as an  investment  company,  stockholders  will not be  afforded  these
protections.

Research and Development

         We have not undergone any research and development  activity during the
last two years ended December 31, 2003 and December 31, 2004.

Competition

         We expect to encounter substantial competition in our efforts to locate
attractive business combination opportunities.  The competition may in part come
from  business   development   companies,   venture  capital   partnerships  and
corporations, small investment companies, brokerage firms, and the like. Some of
these types of  organizations  are likely to be in a better  position than us to
obtain access to attractive business acquisition  candidates either because they
have greater experience,  resources and managerial capabilities than us, because
they are able to offer  immediate  access to limited  amounts of cash,  or for a
variety of other reasons. We also will experience  competition from other public
companies  with  similar  business  purposes,  some of which may also have funds
available for use by an acquisition candidate.

Employees

         We  currently  have  no  employees.   Our  management  expects  to  use
consultants,  attorneys and accountants as necessary,  and does not anticipate a
need to engage any full-time  employees so long as it is seeking and  evaluating
business  opportunities.  The need for employees and their  availability will be
addressed  in  connection  with  the  decision  whether  or  not to  acquire  or
participate in specific business opportunities.


RISK FACTORS

         An investment in our common stock  involves a high degree of risk.  You
should  consider  carefully the following  risks and other  information  in this
Annual Report,  including our financial statements and related notes, before you



                                       6
<PAGE>

decide to purchase  shares of our common stock.  If any of these risks  actually
occur,  our business,  financial  condition  and results of operations  could be
adversely  affected.  As a result,  the trading  price of our common stock could
decline,  perhaps  significantly,  and  you  could  lose  part  or all  of  your
investment.

         Conflicts of Interest.  Certain  conflicts of interest exist between us
and our officers and directors. They have other business interests to which they
currently devote attention,  and are expected to continue to do so. As a result,
conflicts of interest may arise that can be resolved only through their exercise
of judgment in a manner which is consistent with their  fiduciary  duties to our
Company.  (See  Executive  Compensation  - Conflict of  Interest -  Management's
Fiduciary Duties.)

         We anticipate that our principal stockholders may actively negotiate or
otherwise  consent  to the  purchase  of a portion  of their  common  stock as a
condition  to,  or  in  connection   with,  a  proposed  merger  or  acquisition
transaction.  In this process, our principal stockholders may consider their own
personal   pecuniary  benefit  rather  than  the  best  interest  of  our  other
stockholders.   Depending  upon  the  nature  of  a  proposed  transaction,  our
stockholders  other than the  principal  stockholders  may not be  afforded  the
opportunity to approve or consent to a particular transaction.

         Possible Need for Additional Financing. We have very limited funds, and
such funds may not be  adequate  to take  advantage  of any  available  business
opportunities.  Even if our currently  available funds prove to be sufficient to
pay for our operations  until we are able to acquire an interest in, or complete
a  transaction  with,  a business  opportunity,  such funds will  clearly not be
sufficient to enable it to exploit the  opportunity.  Thus, our ultimate success
will depend, in part, upon our availability to raise additional  capital. In the
event  that we  require  modest  amounts  of  additional  capital  to  fund  our
operations until we are able to complete a business  acquisition or transaction,
such funds, are expected to be provided by our principal stockholders.  However,
we have not investigated the  availability,  source,  or terms that might govern
the  acquisition of the  additional  capital which is expected to be required in
order  to  exploit  a  business  opportunity,  and  will not do so until we have
determined  the  level  of need  for  such  additional  financing.  There  is no
assurance  that  additional  capital  will be  available  from any source or, if
available,  that it can be obtained on terms acceptable to us. If not available,
our  operations  will be limited to those that can be  financed  with its modest
capital.

         Regulation of Penny Stocks.  Our  securities  are subject to a SEC rule
that imposes special sales practice  requirements upon  broker-dealers  who sell
such  securities  to persons  other than  established  customers  or  accredited
investors.  For purpose of the rule, the phrase  accredited  investor  means, in
general terms,  institutions with assets in excess of $5,000,000, or individuals
having a net worth in  excess of  $1,000,000  or  having an annual  income  that
exceeds  $200,000  (or that,  when  combined  with a  spouse's  income,  exceeds
$300,000).  For  transactions  covered by the rule,  the broker dealer must make
special  suitability  determination for the purchaser and receive the purchasers
written agreement to the transaction prior to the sale.  Consequently,  the rule
affects the ability of  broker-dealers  to sell our  securities  and affects the
ability of purchasers of our securities to sell such securities.

         In  addition,  the  Securities  and Exchange  Commission  has adopted a
number of rules to regulate  penny stocks.  Such rules include Rule 3a51-1 under
the Securities Act of 1933, an Rules 15g-1,  15g-2,  15g-3, 15g-4, 15g-5, 15g-6,
and 15g-7 under the  Securities  Exchange Act of 1934,  as amended.  Because our
securities  constitute  penny stocks within the meaning of the rules,  the rules
apply  to us and  to  our  securities.  The  rules  affect  the  ability  of our
stockholders to sell their shares in the public market.

         Shareholders should be aware that, according to Securities and Exchange
Commission  Release No.  34-29093,  the market for penny  stocks has suffered in
recent years from patterns of fraud and abuse. Such patterns include (i) control
of the market for the  security  by one or a few  broker-dealers  that are often
related  to  the  promoter  or  issuer;  (ii)  manipulation  of  prices  through
prearranged  matching  of  purchases  and sales and false and  misleading  press
releases;  (iii) boiler room practices involving high-pressure sales tactics and
unrealistic price projections by inexperienced sales persons; (iv) excessive and
undisclosed bid-ask differential and markups by selling broker-dealers;  and (v)
the wholesale  dumping of the same  securities  by promoters and broker  dealers
after prices have been manipulated to a desired level,  along with the resulting
inevitable  collapse of those prices and with consequent  investor  losses.  Our
management is aware of the abuses that have occurred  historically  in the penny
stock  market.  Although we are not in a position to dictate the behavior of the
market or of broker dealers who  participate in the market,  our management will
strive  within the confines of practical  limitations  to prevent the  described
patterns from being established with respect to our securities.



                                       7
<PAGE>

         No  Operating  History.  We have no  current  or  meaningful  operating
history,  revenues from operations or assets.  We face all of the risks of a new
business and the special risks inherent in the  investigation,  acquisition,  or
involvement  in a new  business  opportunity.  We must be  regarded  as a new or
start-up  venture with all of the  unforeseen  costs,  expenses,  problems,  and
difficulties to which such ventures are subject.

         No Assurance of Success or Profitability. There is no assurance that we
will acquire a favorable business opportunity. Even if we should become involved
in a business opportunity,  there is no assurance that it will generate revenues
or profits, or that the market price of our outstanding shares will be increased
thereby.

         Possible   Business  Not  Identified  and  Highly  Risky.  We  have  no
commitments  to enter  into or  acquire a specific  business  opportunity.  As a
result,  we are only able to make general  disclosures  concerning the risks and
hazards of acquiring a business  opportunity,  rather than providing  disclosure
with respect to specific  risks and hazards  relating to a  particular  business
opportunity. As a general matter, prospective investors can expect any potential
business opportunity to be quite risky.

         Type of Business  Acquired.  The type of business to be acquired may be
one that desires to avoid effecting its own public offering an the  accompanying
expense, delays, uncertainties, and federal and state requirements which purport
to protect investors. Because of our limited capital, it is more likely than not
that any acquisition by us will involve other parties whose primary  interest is
the acquisition of control of a publicly traded company.  Moreover, any business
opportunity  acquired may be currently  unprofitable  or present other  negative
factors.

         Impracticability  of  Exhaustive  Investigation.  Our limited funds and
lack of full-time  management will make it  impracticable  to conduct a complete
and exhaustive  investigation and analysis of a business  opportunity  before we
commit our capital or other resources thereto. Management decisions,  therefore,
will likely be made without detailed feasibility studies,  independent analysis,
market surveys and the like which,  if we had more funds  available to us, would
be  desirable.  We will be  particularly  dependent  in  making  decisions  upon
information provided by the promoter,  owner, sponsor, or others associated with
the business opportunity seeking our participation. A significant portion of our
available  funds may be expended for  investigative  expenses and other expenses
related to preliminary aspects of completing an acquisition transaction, whether
or not any business opportunity investigated is eventually acquired.

         Lack of  Diversification.  Because of the limited  financial  resources
that we have, it is unlikely that we will be able to diversify our  acquisitions
or operations. Our probable inability to diversify our activities into more than
one area will subject us to economic  fluctuations  within a particular business
or industry and therefore increase the risks associated with our operations.

         Need  for  Audited  Financial  Statements.   We  will  require  audited
financial statements from any business that we propose to acquire.  Since we are
subject to the reporting  provisions of the Securities  Exchange Act of 1934, as
amended  (the  Exchange  Act),  we are  required  to include  audited  financial
statements in our periodical  reports for any existing  business we may acquire.
In  addition,  the  lack of  audited  financial  statements  would  prevent  our
securities  from  remaining  eligible  for  listing on the OTC  Bulletin  Board.
Moreover,  the  lack  of such  financial  statements  is  likely  to  discourage
broker-dealers  from  becoming or  continuing  to serve as market  makers in our
securities.  Finally,  without  audited  financial  statements,  we would almost
certainly be unable to offer securities under a Registration  Statement pursuant
to the  Securities  Act of  1933,  and our  ability  to raise  capital  would be
significantly limited. Consequently, acquisitions prospects that do not have, or
are unable to provide  reasonable  assurances  that they will be able to obtain,
the required audited  statements would not be considered by us to be appropriate
for acquisition.

         Other  Regulation.  An acquisition made us may be of a business that is
subject to  regulation  or licensing by federal,  state,  or local  authorities.
Compliance  with  such  regulations  and  licensing  can  be  expected  to  be a
time-consuming, expensive process and may limit other investment opportunities.

         Dependence upon Management;  Limited  Participation  of Management.  We
will be entirely  dependant upon the experience of our officers and directors in
seeking,  investigating,  and  acquiring  a  business  and in  making  decisions
regarding our operations.  It is possible that, from time to time, the inability
of such persons to devote their full time  attention to such issues will prevent
the evaluation of the merits of possible future business acquisitions by us.

         Lack  of  Continuity  in  Management.  We do  not  have  an  employment
agreement  with any of our officers or directors,  and as a result,  there is no
assurance  that they will  continue  to manage  our  Company in the  future.  In
connection with acquisition of a business opportunity,  it is likely our current
officers and directors  may resign.  A decision to resign will be based upon the
identity of the business  opportunity and the nature of the transaction,  and is
likely to occur without the vote or consent of our stockholders.



                                       8
<PAGE>

         Indemnification   of  Officers  and  Directors.   Our   Certificate  of
Incorporation provides that we will indemnify any officer or director, or former
officer or director,  to the fullest extent permitted by law. Our bylaws provide
for the indemnification of our directors, officers, employees, and agents, under
certain  circumstances,  against expenses  incurred by them in any litigation to
which they become a party arising from their  association  with or activities on
behalf of our Company. We will also bear the expenses of such litigation for any
of our directors,  officers, employees, or agents, upon such person's promise to
repay us therefore if it is ultimately determined that any such person shall not
have been entitled to indemnification.  This indemnification policy could result
in substantial expenditures that we may be unable to recoup.

         Dependence upon Outside Advisors. To supplement the business experience
of our  officers  and  directors,  we may be  required  to  employ  accountants,
technical experts, appraisers,  attorneys, or other consultants or advisors. The
selection of any such advisors  will be made by our officers,  without any input
by stockholders.  Furthermore, we anticipate that such persons may be engaged on
an as needed basis without a continuing  fiduciary or other obligation to us. In
the event our officers consider it necessary to hire outside advisors,  they may
elect  to hire  persons  who are  affiliates,  if those  affiliates  are able to
provide the required services.

         Leveraged Transactions.  There is a possibility that any acquisition of
a  business  opportunity  by us may  be  leveraged  (i.e.  we  may  finance  the
acquisition of the business  opportunity by borrowing  against the assets of the
business opportunity to be acquired, or against the projected future revenues or
profits of the business opportunity). This could increase our exposure to larger
losses.  A business  opportunity  acquired  through a leveraged  transaction  is
profitable  only if it generates  enough  revenues to cover the related debt and
expenses. Failure to make payments on the debt incurred to purchase the business
opportunity could result in the loss of a portion or all of the assets acquired.
There is no assurance that any business opportunity acquired through a leveraged
transaction  will  generate  sufficient  revenues to cover the related  debt and
expenses.

         Competition.   The   search   for   potentially   profitable   business
opportunities is intensely  competitive.  We expect to be at a disadvantage when
competing  with  many  firms  that  have  substantially  greater  financial  and
management resources and capabilities than we have. These competitive conditions
will exist in any industry in which we may become interested.

         No  Foreseeable  Dividends.  We have not paid  dividends  on our common
stock and do not anticipate paying such dividends in the foreseeable future.

         Loss of Control by Present Management and Stockholders.  In conjunction
with completion of a business  acquisition,  we anticipate that we will issue an
amount of our authorized but unissued  common stock that  represents the greater
majority of our voting power and equity.

         In  conjunction  with  such  a  transaction,   our  current   officers,
directors,  and  principal  stockholders  could also sell all, or a portion,  of
their controlling block of stock to the acquired company's stockholders.  Such a
transaction  would result in a greatly  reduced  percentage  of ownership by our
current  stockholders.  As a result, the acquired  company's  stockholders would
control us, and it is likely that they would replace our management with persons
who are unknown at this time.

         No Public Market  Exists.  While our equity  securities  are listed for
trading on the NASDAQ OTC Bulletin  Board under the trading symbol "DNRE," there
is no  significant  or consistent  public  market for our common  stock,  and no
assurance  can be given that a market will  develop or that a  stockholder  will
ever be able to liquidate his investment without  considerable delay, if at all.
If a market should develop, the price may be highly volatile.

         Factors such as those discussed in this Risk Factors section may have a
significant  impact upon the market  price of our  securities.  Owing to the low
price of the  securities,  many  brokerage  firms may not be  willing  to effect
transactions  in the  securities.  Even if a purchaser finds a broker willing to
effect  a  transaction  in  theses  securities,  the  combination  of  brokerage
commissions,  state  transfer  taxes,  if any, and any other  selling  costs may
exceed the selling price. Further, many leading institutions will not permit the
use of such securities as collateral for any loans.



                                       9
<PAGE>

ITEM 2. PROPERTIES

         We have no  property,  either  owned or  leased,  and  maintain  only a
mailing address at 12890 Hilltop Road, Argyle, Texas 76226. Our telephone number
there is (972) 233-0300.  We do not anticipate the need for  maintaining  office
facilities at any time in the foreseeable  future.  We pay no rent or other fees
for the use of the mailing address as these offices are used virtually full-time
by other businesses of our President.

         It is  likely  that we will  not  establish  an  office  until  we have
completed a business acquisition transaction,  but it is not possible to predict
what   arrangements  will  actually  be  made  with  respect  to  future  office
facilities.


ITEM 3. LEGAL PROCEEDINGS

         We are  not a  party  to any  pending  legal  proceedings,  and no such
proceedings  are  known to be  contemplated.  None of our  directors,  executive
officers  or  affiliates  or owner of record or  beneficially  of more than five
percent of our common stock is a party adverse to us or has a material  interest
adverse to us in any proceeding.


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


         No matters were  submitted to a vote of the holders of our common stock
during the fourth quarter of the fiscal year ended December 31, 2004.

                                     PART II

ITEM 5.  MARKET  FOR THE  REGISTRANT'S  COMMON  EQUITY AND  RELATED  STOCKHOLDER
         MATTERS

         Shares of our common stock are traded on the OTC  Bulletin  Board under
the symbol  "DNRE." Our common stock has been traded on the OTC  Bulletin  Board
since  January 7, 2003.  There is  currently  no  broadly  followed  established
trading  market for our common stock.  An  established  trading market may never
develop or be maintained. Active trading markets generally result in lower price
volatility and more efficient execution of buy and sell orders.

         Holders.  As of March 18, 2005 we had  approximately 20 stockholders of
common  stock of record,  and our common  stock had a closing bid price of $0.20
per share and a closing ask price of $0.30 per share.

         The following  table sets forth the quarterly  average high and low bid
prices per share for the common stock for the past two years:



                                    Common Stock
Fiscal Year Ended                ------------------
December 31, 2003                 High         Low
-----------------                -----        -----
First Quarter                    $0.09        $0.08
Second Quarter                   $0.05        $0.05
Third Quarter                    $0.08        $0.08
Fourth Quarter                   $0.08        $0.07


                                   Common Stock
Fiscal Year Ended                ------------------
December 31, 2004                 High         Low
-----------------                -----        -----
First Quarter                    $0.07        $0.07
Second Quarter                   $0.08        $0.08
Third Quarter                    $0.10        $0.10
Fourth Quarter                   $0.07        $0.07


         The  source  for  the  high  and  low  closing   bids   quotations   is
www.finance.yahoo.com  and does not reflect inter-dealer prices. Such quotations
are without retail  mark-ups,  mark-downs or commissions,  and may not represent
actual transactions and have not been adjusted for stock dividends or splits.



                                       10
<PAGE>
<TABLE>
<CAPTION>

         Outstanding Options, Conversions, and Planned Issuance of Common Stock.
Except as hereinafter set forth, there are no warrants or options outstanding to
acquire any additional  shares of common stock.  On December 15, 2004, we issued
to Timothy P. Halter warrants  convertible  into 1,000,000  shares of our common
stock at a price of $0.06 per share as consideration for Mr. Halter's  agreement
to serve as an officer and director of our Company.  Mr. Halter may exercise the
warrants,  in whole or in part,  at any time after the  issuance of the warrants
and prior to the expiration of the warrants on December 15, 2007.

         Preferred  Stock.  We may issue shares of preferred  stock from time to
time in one or more  series  with  such  designations,  voting  powers,  if any,
preferences and relative,  participating,  optional or other special rights, and
such  qualifications,   limitations  and  restrictions,  as  are  determined  by
resolution of our Board of Directors.  The issuance of preferred  stock may have
the  effect of  delaying,  deferring  or  preventing  a change in control of our
Company without further action by  stockholders  and could adversely  affect the
rights and powers,  including voting rights, of holders of common stock, with us
acting in  accordance  with our  corporate  charter,  articles and  by-laws.  In
certain circumstances,  the issuance of preferred stock could depress the market
price of the common stock. There are no shares of preferred stock outstanding.

         Dividends.  We have  never  declared  or paid  any  cash  dividends  or
distributions  on our common  stock.  We  currently  intend to retain our future
earnings to support  operations  and to finance future growth and expansion and,
therefore,  do not  anticipate  paying any cash dividends on our common stock in
the foreseeable future.

         Transfer Agent and Registrar. Our transfer agent is Securities Transfer
Corporation,  located at 2591 Dallas Parkway,  Suite 102,  Frisco,  Texas 75034.
Their telephone number is (469) 633-0100.

         Securities  Authorized for Issuance Under Equity Compensation Plans. As
of the fiscal  year ended  December  31,  2004,  we have no shares of our common
stock or preferred stock that are issuable under  compensation plans approved by
our security  holders.  As of the fiscal year ended December 31, 2004, shares of
our common stock are issuable under the following  compensation  plan, which was
not approved by our security holders:

                                                                  Number of securities
                                                                remaining available for
 Number of securities to                                     future issuance under equity
be issued upon exercise of      Weighted-average exercise         compensation plans
   outstanding options,       price of outstanding options,     (excluding securities
   warrants and rights            warrants and rights          reflected in column (a))
   -------------------            -------------------          ------------------------
   <S>                            <C>                          <C>
       1,000,000                         $0.06                           None
</TABLE>


         On  December  15,  2004,  we  issued  to  Timothy  P.  Halter  warrants
convertible  into  1,000,000  shares of our common stock at a price of $0.06 per
share as  consideration  for Mr.  Halter's  agreement to serve as an officer and
director. Mr. Halter may exercise the warrants, in whole or in part, at any time
after the issuance of the warrants and prior to the  expiration  of the warrants
on December 15, 2007.

         Recent Sales of Unregistered Securities.  Each issuance set forth below
was made in reliance upon the exemptions from  registration  requirements of the
Securities Act of 1933, as amended,  contained in Section 4(2) on the basis that
such  transactions  did not  involve a public  offering.  When  appropriate,  we
determined that the purchasers of securities  described below were sophisticated
investors who had the financial  ability to assume the risk of their  investment
in our  securities  and acquired such  securities  for their own account and not
with a view  to any  distribution  thereof  to the  public.  Where  required  by
applicable law, the certificates  evidencing the securities bear legends stating
that the  securities  are not to be  offered,  sold or  transferred  other  than
pursuant to an effective  registration  statement under the Securities Act or an
exemption from such registration requirements.

                      NAME                   SHARES                  DATE
                      ----                   ------                  ----
          U.S. Capital Partners, Inc.        200,000            January 3, 2003

                  William Tay              1,416,667             June 27, 2003

                  Michael Tay                320,800             March 10, 2004



                                       11
<PAGE>

                  William Tay              1,846,180             April 22, 2004

               Timothy P. Halter           1,000,000           December 15, 2004


         o        We issued the 200,000 restricted shares of our common stock to
                  U.S. Capital Partners, Inc., a financial services company that
                  provides  investment  banking  and  brokerage   services,   as
                  compensation  for financial  services that were to be provided
                  by U.S. Capital  Partners,  Inc. to us. We estimated the value
                  of these services at $10,000.

         o        We issued the 1,416,667  restricted shares of our common stock
                  to William Tay, our president at that time,  for past services
                  rendered aggregating $70,833.33 (or $0.05 per share).

         o        We issued the 320,800 restricted shares of our common stock to
                  Michael Tay, the father of William Tay, for a total of $16,040
                  in consulting services rendered (or $0.05 per share).

         o        We issued the 1,846,180  restricted shares of our common stock
                  to William Tay, our president at that time,  for past services
                  rendered aggregating $92,309 (or $0.05 per share).

         o        We issued to  Timothy  P.  Halter  warrants  convertible  into
                  1,000,000  shares of our common  stock at a price of $0.06 per
                  share as consideration for Mr. Halter's  agreement to serve as
                  an officer and director.


ITEM 6. MANAGEMENT'S  DISCUSSION AND ANALYSIS OF FINANCIAL  CONDITION OR PLAN OF
        OPERATIONS


     General

         Donar Enterprises,  Inc. was originally incorporated on May 25, 2001 in
accordance with the laws of Delaware.  Our company was originally formed for the
purpose of converting and filing registration  statements,  periodic reports and
other forms of small to  mid-sized  public  companies  with the SEC. In February
2002, we completed a public offering of 2,000,000  shares through a Registration
Statement  on Form  SB-2  (Registration  No.  333-68702).  We  have  been in the
development  stage since our formation and have been unable to become profitable
within any segment of our core business. Our current principle business activity
is to seek a suitable reverse acquisition candidate through acquisition,  merger
or other suitable business combination method.


     Results of Operations

         During the periods  ended  December 31, 2004 and December 31, 2003,  we
had a net loss of ($105,678) and ($134,848), respectively. We received $3,607 in
revenues in the period  ended  December  31, 2004 and $14,305 in revenues in the
period ended December 31, 2003.

         General and  administrative  expenses for the years ended  December 31,
2004 and 2003 were approximately $109,285 and $149,153,  respectively.  We had a
net loss per share for the respective  years ended December 31, 2004 and 2003 of
$0.01 and $0.02 based on the  weighted-average  shares issued and outstanding at
the end of each respective year.

         We do not expect to generate any meaningful  revenue or incur operating
expenses for  purposes  other than  fulfilling  the  obligations  of a reporting
company  under the  Securities  Exchange  Act of 1934 unless and until such time
that we complete a business acquisition or combination transaction.

         At December 31, 2004 and 2003, respectively,  we had working capital of
$0 and approximately $(17,900), respectively.

         It is the belief of our management and  significant  stockholders  that
sufficient  working  capital  necessary to support and preserve the integrity of
the corporate entity will be present.  However, there is no legal obligation for
either  management or  significant  stockholders  to provide  additional  future
funding. Consequently,  there is substantial doubt about our ability to continue
as a going concern.



                                       12
<PAGE>

         Our need for working capital may change dramatically as a result of any
business acquisition or combination transaction.  There can be no assurance that
we will identify any such business,  product, technology or company suitable for
acquisition in the future.  Further,  there can be no assurance that we would be
successful in consummating any acquisition on favorable terms or that it will be
able to  profitably  manage  the  business,  product,  technology  or company we
acquire.


     Plan of Business

         General.   We  intend  to  locate  and   combine   with  an   existing,
privately-held  company that is profitable or, in management's  view, has growth
potential,  irrespective of the industry in which it is engaged.  However, we do
not  intend  to  combine  with a  private  company  which may be deemed to be an
investment  company subject to the Investment Company Act of 1940. A combination
may be structured as a merger,  consolidation,  exchange of our common stock for
stock or assets or any other form which will result in the combined enterprise's
becoming a publicly-held corporation.

         Pending  negotiation and  consummation of a combination,  we anticipate
that we will have, aside from carrying on our search for a combination  partner,
no business  activities,  and, thus,  will have no source of revenue.  Should we
incur any significant liabilities prior to a combination with a private company,
we may not be able to satisfy such liabilities as are incurred.

         If our management pursues one or more combination  opportunities beyond
the  preliminary  negotiations  stage and those  negotiations  are  subsequently
terminated,  it is  foreseeable  that such  efforts  will exhaust our ability to
continue  to  seek  such   combination   opportunities   before  any  successful
combination  can be  consummated.  In that event,  our common  stock will become
worthless  and holders of our common stock will receive a nominal  distribution,
if any, upon our liquidation and dissolution.

         Combination  Suitability  Standards.  In its pursuit for a  combination
partner, our management intends to consider only combination candidates that are
profitable or, in management's view, have growth potential.  Our management does
not intend to pursue any combination proposal beyond the preliminary negotiation
stage with any  combination  candidate  that does not  furnish  us with  audited
financial  statements  for at least its most recent  fiscal  year and  unaudited
financial  statements for interim periods subsequent to the date of such audited
financial  statements,  or is in a position to provide such financial statements
in a timely manner. We will, if necessary funds are available,  engage attorneys
and/or accountants in our efforts to investigate a combination  candidate and to
consummate  a  business  combination.  We may  require  payment  of fees by such
combination candidate to fund the investigation of such candidate.

         In  the  event  such  a  combination  candidate  is  engaged  in a high
technology business,  we may also obtain reports from independent  organizations
of recognized  standing  covering the technology  being developed and/or used by
the candidate.  Our limited financial resources may make the acquisition of such
reports  difficult  or even  impossible  to obtain  and,  thus,  there can be no
assurance  that we will  have  sufficient  funds to  obtain  such  reports  when
considering combination proposals or candidates.  To the extent we are unable to
obtain  the  advice  or  reports  from  experts,   the  risks  of  any  combined
enterprise's being unsuccessful will be enhanced.  Furthermore, to the knowledge
of our officers and  directors,  neither the candidate nor any of its directors,
executive officers, principal shareholders or general partners:

         1)       will not have been convicted of securities  fraud, mail fraud,
                  tax  fraud,  embezzlement,  bribery,  or  a  similar  criminal
                  offense  involving  misappropriation  or theft of funds, or be
                  the subject of a pending investigation or indictment involving
                  any of those offenses;
         2)       will  not  have  been  subject  to a  temporary  or  permanent
                  injunction   or   restraining   order  arising  from  unlawful
                  transactions  in securities,  whether as issuer,  underwriter,
                  broker,  dealer, or investment advisor,  may be the subject of
                  any pending  investigation or a defendant in a pending lawsuit
                  arising   from  or  based   upon   allegations   of   unlawful
                  transactions in securities; or
         3)       will  not  have  been a  defendant  in a  civil  action  which
                  resulted  in a  final  judgment  against  it or  him  awarding
                  damages or rescission  based upon unlawful  practices or sales
                  of securities.

         Our officers and  directors  will make these  determinations  by asking
pertinent  questions of the  management of prospective  combination  candidates.
Such persons will also ask pertinent  questions of others who may be involved in
the  combination  proceedings.  However,  our  officers and  directors  will not
generally take other steps to verify independently  information obtained in this
manner which is favorable.  Unless something comes to their attention which puts



                                       13
<PAGE>

them on notice of a  possible  disqualification  which is being  concealed  from
them, such persons will rely on information  received from the management of the
prospective  combination  candidate  and from  others who may be involved in the
combination proceedings.


     Liquidity and Capital Resources

         It is the belief of our management and  significant  stockholders  that
sufficient  working  capital  necessary to support and preserve the integrity of
the corporate entity will be present.  However, there is no legal obligation for
either  management or  significant  stockholders  to provide  additional  future
funding. Consequently,  there is substantial doubt about our ability to continue
as a going concern.

         We have no current plans,  proposals,  arrangements  or  understandings
with  respect to the sale or  issuance  of  additional  securities  prior to the
location  of a merger or  acquisition  candidate.  Accordingly,  there can be no
assurance that sufficient funds will be available to us to allow us to cover the
expenses related to such activities.

         Regardless of whether the Company's  cash assets prove to be inadequate
to meet the Company's  operational  needs,  the Company might seek to compensate
providers of services by issuances of stock in lieu of cash.


ITEM 7. FINANCIAL STATEMENTS

         Reference  is made to page F-1  herein  for the Index to the  Financial
Statements.


ITEM  8.  CHANGES  IN AND  DISAGREEMENTS  WITH  ACCOUNTANTS  ON  ACCOUNTING  AND
          FINANCIAL DISCLOSURE

         Effective  February  17,  2005,  our Board of  Directors  approved  the
replacement of Mantyla  McReynolds,  LLC ("Mantyla") as our independent  auditor
for the fiscal year ending December 31, 2004, with S.W.  Hatfield,  CPA. Mantyla
was  terminated  effective  February  17,  2005.  The  reports of Mantyla on our
financial  statements for the year ended December 31, 2003, for which  Mantyla's
Independent  Auditors'  Report was dated March 20,  2004,  contained  no adverse
opinion or  disclaimer  of opinion  and were not  qualified  or  modified  as to
uncertainty,  other than the ability to continue  as a going  concern,  or audit
scope.  We filed a Current Report on Form 8-K with the SEC on February 22, 2005,
reporting the change in our certifying accountant.

         Effective  February  3,  2004,  our  Board of  Directors  approved  the
replacement of Stan J.H. Lee, C.P.A., ("Lee") as our independent auditor for the
fiscal year ending December 31, 2003, with Mantyla. Lee was terminated effective
February  3, 2004.  Lee did not give a report on our  financial  statements  for
either of the past two fiscal years.

         There  were no  disagreements  with  Mantyla  during  the period of its
appointment as independent  auditor  through the date of its  termination on any
matter of accounting principals or practices,  financial statement disclosure or
auditing  scope or  procedure.  Additionally,  there  were no  other  reportable
matters,  as defined in Item 304(a)(1)(iv) of Regulation S-B, during that period
of time.

         We did not  consult  with S.W.  Hatfield,  CPA at any time prior to the
December 15, 2004 change in control or  subsequent  thereto,  including  our two
most recent fiscal years ended  December 31, 2004 and December 31, 2003, and the
subsequent interim periods through the date of this Report, regarding any of the
matters or events set forth in Item 304(a)(2)(i) and (ii) of Regulation S-B.


ITEM 8A. CONTROLS AND PROCEDURES

         We maintain  disclosure  controls and  procedures  that are designed to
ensure that information  required to be disclosed in our Exchange Act reports is
recorded,  processed,  summarized and reported within the time periods specified
in the SEC's  rules and forms,  and that such  information  is  accumulated  and
communicated to our management,  including our Chief Executive Officer and Chief
Financial Officer, as appropriate,  to allow timely decisions regarding required
disclosure.  Such controls and  procedures,  by their  nature,  can provide only
reasonable assurance regarding management's control objectives.



                                       14
<PAGE>

         We  carried  out an  evaluation,  under  the  supervision  and with the
participation of our management, including our Chief Executive Officer and Chief
Financial  Officer,  on the  effectiveness  of the design and  operation  of our
disclosure  controls  and  procedures  pursuant to Exchange Act Rules 13a-15 and
15d-15 as of December 31, 2004. Based upon that evaluation,  our Chief Executive
Officer and Chief Financial Officer  concluded that our disclosure  controls and
procedures  are  effective  in  timely  alerting  them to  material  information
relating to us required to be included in our Exchange  Act reports.  There have
been no  significant  changes in our internal  controls or in other factors that
could  significantly  affect internal controls subsequent to the date we carried
out the evaluation.

         While we believe that our existing  disclosure  controls and procedures
have been  effective to accomplish  their  objectives,  we intend to continue to
examine,  refine and formulize our  disclosure  controls and  procedures  and to
monitor ongoing developments in this area.


ITEM 8B. OTHER INFORMATION

         None.

                                    PART III

ITEM 9.  DIRECTORS AND EXECUTIVE  OFFICERS OF THE  REGISTRANT;  COMPLIANCE  WITH
         SECTION 16(A) OF THE EXCHANGE ACT

         Our sole director and executive officer is as follows:

                Name              Age             Position Held and Tenure
                ----              ---             ------------------------
         Timothy P. Halter        38          Director, Chief Executive Officer,
                                             President, Chief Financial Officer,
                                             Chairman of the Board and Secretary


         The  director  named above will serve until the next annual  meeting of
our  stockholders  or until his  successor  is duly  elected and has  qualified.
Directors will be elected for one-year terms at the annual stockholders meeting.
Officers  will hold their  positions at the pleasure of the Board of  Directors,
absent  any  employment  agreement,   of  which  none  currently  exists  or  is
contemplated.  There  is no  arrangement  or  understanding  between  any of our
directors  or officers  and any other  person  pursuant to which any director or
officer  was or is to be  selected  as a director  or  officer,  and there is no
arrangement,  plan or  understanding as to whether  non-management  stockholders
will exercise their voting rights to continue to elect the current  directors to
our  Board  of  Directors.  There  are  also  no  arrangements,   agreements  or
understandings  between   non-management   stockholders  that  may  directly  or
indirectly participate in or influence the management of our affairs.

         Our sole director and officer will devote his time to our affairs on an
as needed  basis,  which,  depending  on the  circumstances,  could amount to as
little as two hours per month, or more than forty hours per month, but more than
likely  encompass  less than ten hours per  month.  There are no  agreements  or
understandings  for any  officer or director to resign at the request of another
person,  and none of the officers or directors  are acting on behalf of, or will
act at the direction of, any other person.


     Biographical Information

         Timothy  P.  Halter  has  served  as our sole  director  and our  Chief
Executive Officer, President, Chief Financial Officer, Chairman of the Board and
Secretary  since  December  15,  2004.  Mr.  Halter is the  President  of Halter
Financial Group, Inc., a position he has held since 1995. Halter Financial Group
is a Dallas, Texas based consulting firm. In addition,  Mr. Halter has served as
a Director of DXP Enterprises, Inc. since July 2001.


     Indemnification of Officers and Directors

         Our  Certificate of  Incorporation  provides that we will indemnify any
officer or  director,  or former  officer or  director,  to the  fullest  extent
permitted by law. Our bylaws provide for the  indemnification  of our directors,
officers,  employees, and agents, under certain circumstances,  against expenses



                                       15
<PAGE>

incurred by them in any  litigation  to which they become a party  arising  from
their association with or activities on behalf of our Company. We will also bear
the expenses of such litigation for any of our directors,  officers,  employees,
or agents,  upon such person's promise to repay us therefore if it is ultimately
determined that any such person shall not have been entitled to indemnification.


     Conflicts of Interest

         Our sole officer  will devote no more than a small  portion of his time
to  the  affairs  of  our  Company.  There  will  be  occasions  when  the  time
requirements  of our business  conflict with the demands of the officer's  other
business and investment  activities.  Such conflicts may require that we attempt
to employ additional personnel.  There is no assurance that the services of such
persons will be available or that they can be obtained  upon terms  favorable to
us.

         Our  officers,   directors  and  principal  stockholders  may  actively
negotiate for the purchase of a portion of their common stock as a condition to,
or in  connection  with, a proposed  merger or  acquisition  transaction.  It is
anticipated  that  a  substantial  premium  may be  paid  by  the  purchaser  in
conjunction  with any sale of shares by our  officers,  directors  and principal
stockholders made as a condition to, or in connection with, a proposed merger or
acquisition  transaction.  The fact that a  substantial  premium  may be paid to
members of our management to acquire their shares creates a conflict of interest
for them and may  compromise  their  state  law  fiduciary  duties  to our other
stockholders.  In making any such sale,  members of our  management may consider
their own personal pecuniary benefit rather than our best interests and the best
interests of our other stockholders, and the other stockholders are not expected
to be afforded the  opportunity to approve or consent to any particular  buy-out
transaction involving shares held by members of our management.

         Although our management has no current plans to cause the Company to do
so, it is  possible  that we may enter  into an  agreement  with an  acquisition
candidate requiring the sale of all or a portion of the common stock held by our
current  stockholders to the acquisition  candidate or principals thereof, or to
other individuals or business entities,  or requiring some other form of payment
to our current  stockholders,  or requiring  the future  employment of specified
officers  and payment of  salaries to them.  It is more likely than not that any
sale of securities by our current stockholders to an acquisition candidate would
be  at  a  price  substantially   higher  than  that  originally  paid  by  such
stockholders.  Any  payment  to  current  stockholders  in  the  context  of  an
acquisition  involving our Company  would be determined  entirely by the largely
unforeseeable terms of a future agreement with an unidentified business entity.


     Involvement in Certain Legal Proceedings

         During the past five years,  no present or former  director,  executive
officer or person nominated to become a director or an executive  officer of our
Company:

         1.       was a general  partner or  executive  officer of any  business
                  against which any bankruptcy petition was filed, either at the
                  time of the bankruptcy or two years prior to that time;

         2.       was  convicted in a criminal  proceeding or named subject to a
                  pending criminal proceeding  (excluding traffic violations and
                  other minor offenses);

         3.       was subject to any order, judgment or decree, not subsequently
                  reversed,  suspended  or  vacated,  of any court of  competent
                  jurisdiction,  permanently or temporarily enjoining,  barring,
                  suspending or otherwise  limiting his  involvement in any type
                  of business, securities or banking activities; or

         4.       was  found by a court of  competent  jurisdiction  (in a civil
                  action),  the  Commission  or the  Commodity  Futures  Trading
                  Commission to have  violated a federal or state  securities or
                  commodities  law,  and the  judgment  has not  been  reversed,
                  suspended or vacated.


     Compliance with Section 16(a) of the Securities Exchange Act of 1934

         Section 16(a) of the  Securities  and Exchange Act of 1934 requires our
executive  officers  and  directors  and  persons  who own  more  than  10% of a
registered  class of our  equity  securities,  to file with the  Securities  and
Exchange  Commission  initial  statements  of  beneficial  ownership  on Form 3,
reports of changes in ownership on Form 4 and annual  reports  concerning  their
ownership  on Form  5.  Executive  officers,  directors  and  greater  than  10%
stockholders are required by the Securities and Exchange Commission  regulations
to furnish us with copies of all Section 16(a) reports they file.



                                       16
<PAGE>
<TABLE>
<CAPTION>

         To the best of our knowledge, during the fiscal year ended December 31,
2004, all executive officers,  directors and greater than 10% stockholders filed
the required reports in a timely manner.


     Audit Committee Financial Expert

         As of December 31, 2004,  we had no audit  committee  financial  expert
serving on the Board of Directors or an audit committee.  We did not believe, at
that time, that the addition of such an expert would add anything  meaningful to
our  company.  It was also  unlikely we would be able to attract an  independent
financial  expert  to  serve  on our  Board of  Directors  at that  stage in our
development.  In order to entice such a director to join our Board of Directors,
we would  have  probably  needed  to  acquire  directors'  errors  and  omission
liability  insurance and provide some form of meaningful  compensation to such a
director; two things we were unable to afford at that time.


     Audit Committee

         At December 31, 2004,  we had not formed an audit  committee or adopted
an  audit  committee  charter.  In lieu of an  audit  committee,  our  Board  of
Directors assumes the responsibilities  that would normally be those of an audit
committee.


     Code of Ethics

         As of the date of this Annual Statement,  we have not adopted a Code of
Ethics that applies to our  principal  executive  officer,  principal  financial
officer,  principal accounting officer or controller, or any person performing a
similar  function with us. Our  management has been focused on  accomplishing  a
business  acquisition.  We determined that in order to have a meaningful Code of
Ethics,  tailored  to our new  business  operations,  it  would  be in our  best
interest to take the time to  carefully  consider  all of these  issues prior to
adopting a Code of Ethics.  We intend to prepare a Code of Ethics and present it
to our new, full Board of Directors after such business acquisition takes place.
Upon  adoption  of our Code of  Ethics,  we will  post the Code of Ethics on our
Internet website.  Assuming the consummation of a business acquisition,  we will
also file a copy of our Code of Ethics as an exhibit to our next  annual  report
and undertake in our next annual report to provide a copy of the Code of Ethics,
without charge, to any person who requests a copy.


ITEM 10. EXECUTIVE COMPENSATION

         There was no officer  whose  salary  and bonus for the period  exceeded
$100,000.

                           Summary Compensation Table




                                                                             Long-Term Compensation
                                       Annual Compensation                  Awards             Payouts
                                                        Other      Restricted   Securities
                                                       Annual        Stock       Underlying                 All Other
    Name and                     Salary     Bonus    Compensat-     Award(s)      Options/       LTIP       Compensat-
Principal Position      Year      ($)        ($)       ion ($)        ($)         SARs (#)    Payouts ($)    ion ($)
------------------      ----     ------     -----    ----------    ----------    ----------   -----------  -----------
<S>                     <C>      <C>        <C>      <C>           <C>           <C>          <C>          <C>
William Tay (1)         2004    $21,250      -0-         N/A          N/A            N/A          N/A          N/A
                        2003    $85,000      -0-         N/A          N/A            N/A          N/A          N/A
                        2002      -0-        -0-         N/A          N/A            N/A          N/A          N/A

Edwin A. McGusty (2)    2004      -0-        -0-         N/A          N/A            N/A          N/A          N/A
                        2003      N/A        N/A         N/A          N/A            N/A          N/A          N/A
                        2002      N/A        N/A         N/A          N/A            N/A          N/A          N/A

Timothy P. Halter (3)   2004      -0-        -0-         N/A          N/A            N/A          N/A        $60,000
                        2003      N/A        N/A         N/A          N/A            N/A          N/A          N/A
                        2002      N/A        N/A         N/A          N/A            N/A          N/A          N/A
</TABLE>



                                       17
<PAGE>

--------------------

(1) Mr. Tay served as our President, CEO, Secretary and Treasurer until June 11,
2004. A portion of the  compensation  Mr. Tay earned in 2003 was deferred  until
2004. In addition,  Mr. Tay received 1,275,000 shares valued at $0.05 per share,
as part of the referenced 2003 compensation.  Furthermore,  the compensation Mr.
Tay earned in 2004 was paid in 425,000 shares, valued at $0.05 per share.
(2) Mr. McGusty served as our President,  Vice President and Secretary from June
11, 2004 until December 15, 2004.
(3) Mr. Halter became our Chief Executive  Officer,  President,  Chief Financial
Officer,  Chairman of the Board and Secretary on December 15, 2004. Mr. Halter's
compensation  received in 2004  includes  warrants  convertible  into  1,000,000
shares  of our  common  stock at a price of $0.06  per  share,  issued  by us on
December 15, 2004 as  consideration  for Mr.  Halter's  agreement to serve as an
officer and director of the Company.  Mr. Halter may exercise the  warrants,  in
whole or in part,  at any time after the  issuance of the  warrants and prior to
the expiration of the warrants on December 15, 2007.

         We  have  no  stock  option,  retirement,  pension,  or  profit-sharing
programs  for the benefit of  directors,  officers or other  employees,  but our
Board of Directors  may  recommend  adoption of one or more such programs in the
future.


     Compensation of Directors

         Directors  were not  separately  compensated  for their services in the
year ended December 31, 2004.


     Conflict of Interest - Management's Fiduciary Duties

         Our director and officer is or may become, in his individual  capacity,
officer,  director,  controlling  stockholder  and/or  partner of other entities
engaged in a variety of businesses.  There exist potential conflicts of interest
including  allocation  of time  between  Donar  Enterprises,  Inc. and his other
business activities.


     Compensation Committee

         We do not  have a  formal  Compensation  Committee.  Due to the lack of
revenues,  our lack of payment of any executive compensation and our development
stage  status,  we deemed a  Compensation  Committee to not be necessary at this
time.


ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

         The following table sets forth certain information as of March 18, 2005
relating to the beneficial  ownership (as defined by the rules of the Securities
and  Exchange  Commission  (the  "SEC"))  of shares of common  stock by (i) each
person  who owns  beneficially  more  than 5% of the  outstanding  shares of our
common stock, (ii) each of our directors,  (iii) each of our executive  officers
for the year ended December 31, 2005, and (iv) all of our executive officers and
directors as a group.

                                                            Percentage of Common
            Name(1)                       Number of Shares     Stock Owned(2)
----------------------------------------  ----------------  --------------------

Timothy P. Halter(3)(4).................     8,331,447             81.0%
Officers and Directors as a group
(1 person)..............................
                                             8,331,447             81.0%
Edwin A. McGusty(5).....................     1,320,000             14.2%
--------------------



                                       18
<PAGE>

(1) Unless  otherwise  indicated,  the persons listed above have sole voting and
investment powers with respect to all such shares. Under applicable SEC rules, a
person is deemed to be the "beneficial owner" of a security with regard to which
the person,  directly or indirectly,  has or shares (a) the voting power,  which
includes  the power to vote or direct  the  voting of the  security,  or (b) the
investment power, which includes the power to dispose or direct the disposition,
of the security,  in each case irrespective of the person's economic interest in
the  security.  Under the SEC  rules,  a person is  deemed to  beneficially  own
securities  which the person has the right to acquire within 60 days (x) through
the exercise of any option or warrant or (y) through the  conversion  of another
security.
(2)  Calculations  are made in accordance  with Rule 13d-3 under the  Securities
Exchange Act, as amended.  In determining the percent of common stock owned by a
person (a) the  numerator is the number of shares of common  stock  beneficially
owned by the person,  including shares the beneficial  ownership of which may be
acquired  within 60 days upon the exercise of options or warrants or  conversion
of  convertible  securities,  and (b) the  denominator  is the  total of (i) the
9,289,647  shares in the aggregate of common stock  outstanding  as of March 18,
2005 and (ii) any  shares of common  stock  which  the  person  has the right to
acquire within 60 days upon the exercise of options or warrants or conversion of
convertible  securities.  Neither the  numerator  nor the  denominator  includes
shares  which may be issued upon the  exercise of any options or warrants or the
conversion of any other convertible securities.
(3) Mr. Halter is our sole director and executive  officer.  The mailing address
for Mr. Halter is 12890 Hilltop Road, Argyle, Texas 76226.
(4) Of these  shares,  7,331,447  shares are actually  held by Halter  Financial
Group, Inc., a Texas  corporation,  of which Mr. Halter is the sole stockholder,
sole  director  and  President.  Includes  1,000,000  shares  which are issuable
pursuant to a warrant that is  exercisable  within 60 days of March 18, 2005 and
held by Mr. Halter.
(5) The  mailing  address  for Mr.  McGusty is 23110 SR 54 #346,  Lutz,  Florida
33549.

         Securities  Authorized  for Issuance Under Equity  Compensation  Plans.
Please see Item 5 above.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

         During  the  period  ended  June  30,  2003,  our  Board  of  Directors
authorized  the issuance of 1,416,667  restricted  shares of our $.001 par value
common  stock  to  William  Tay  for  his  past  services  rendered  aggregating
$70,833.33 (or $0.05 per share). These securities were sold under the exemptions
from  registration  provided by Section 4(2) of the  Securities  Act of 1933, as
amended  (the  "Act"),  for  "transactions  by an issuer not  involving a public
offering."  Neither we nor any person  acting on our behalf  offered or sold the
securities by means of any form of general  solicitation or general advertising.
Mr. Tay  represented  in writing  that he acquired  the  securities  for his own
account.  A legend was placed on the  certificates  stating that the  securities
have  not  been  registered  under  the Act  and  cannot  be  sold or  otherwise
transferred without an effective registration or an applicable exemption.


ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K


         Statements filed as part of this Report:


         1. Financial Statements


         See "Index to Financial Statements" on page F-1 of this Report.


     Exhibits

         The  following  documents  are  filed  as  exhibits  herewith,   unless
otherwise specified, and are incorporated herein by this reference:

         Exhibit
         Number   Description of Exhibit
         -------  --------------------------------------------------------------
         3.1      Certificate of Incorporation of the Registrant,  as filed with
                  the Secretary of State of the State of Delaware. (1)

         3.2      Bylaws of the Registrant. (1)

         21.1     Subsidiaries of the Registrant. None.




                                       19
<PAGE>

         Exhibit
         Number   Description of Exhibit
         -------  --------------------------------------------------------------
         31.1     Statement of Chief  Executive  Officer  Furnished  Pursuant To
                  Section  302 Of The  Sarbanes-Oxley  Act Of  2002,  18  U.S.C.
                  Section 1350.*

         31.2     Statement of Chief  Financial  Officer  Furnished  Pursuant To
                  Section  302 Of The  Sarbanes-Oxley  Act Of  2002,  18  U.S.C.
                  Section 1350.*

         32.1     Statement  of Chief  Executive  Officer  and  Chief  Financial
                  Officer   Furnished   Pursuant   To   Section   906   Of   The
                  Sarbanes-Oxley Act Of 2002, 18 U.S.C. Section 1350.*
-----------------
*        Filed herewith.

(1) Previously  filed as an exhibit to the Company's  Registration  Statement on
Form SB-2 as filed on March 17, 1999 with the Commission,  which is incorporated
herein by reference.

(2) Previously  filed as an exhibit to the Company's  Current Report on Form 8-K
as filed on February 22, 2005 with the Commission,  which is incorporated herein
by reference.


     Reports on Form 8-K


         We filed a Current Report on Form 8-K with the SEC on December 21, 2004
reporting  a change in  control  of the  Company;  the  resignation  of Edwin A.
McGusty as an officer of the Company and the appointment of Timothy P. Halter as
a director and executive  officer of the Company;  and the issuance of a warrant
to Mr. Halter.


         There  were no other  reports on Form 8-K filed with the SEC during the
last quarter of fiscal year ended December 31, 2004.


ITEM 14. Principal Accountant Fees and Services

         Audit Fees.  The aggregate  fees billed by Mantyla  McReynolds  LLC for
professional  services  rendered  for (i) the  review  of  financial  statements
included in the Company's Forms 10-Q for the quarters ended March 31, 2004, June
30, 2004 and September  30, 2004 and (ii) the audit of the  Company's  financial
statements  for the  fiscal  year  ended  December  31,  2003 were  $3,864.  The
aggregate fees billed by Stan J.H. Lee, CPA for professional  services  rendered
for the review of financial  statements included in the Company's Forms 10-Q for
the quarters  ended March 31, 2003,  June 30, 2003 and  September  30, 2003 were
$1,000 in the aggregate.

         Audit-Related  Fees.  There  were no fees  for  assurance  and  related
services by Stan J.H.  Lee, CPA or Mantyla  McReynolds  LLC for the fiscal years
ended December 31, 2003 and December 31, 2004.

         Tax Fees.  There  were no fees for tax  compliance,  tax  advice or tax
planning services by Stan J.H. Lee, CPA or Mantyla McReynolds LLC for the fiscal
years ended December 31, 2003 and December 31, 2004.

         All Other Fees.  There were no other fees for either  audit-related  or
non-audit  services  billed by Stan J.H. Lee, CPA or Mantyla  McReynolds LLC for
the fiscal years ended December 31, 2003 and December 31, 2004.





                                       20
<PAGE>

SIGNATURES


         Pursuant to the  requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                           Donar Enterprises, Inc.

Dated: March 31, 2005                      By: /s/ Timothy P. Halter
                                              ----------------------------------
                                              Timothy P. Halter
                                              Director, Chief Executive Officer,
                                              President, Chief Financial
                                              Officer, Chairman of the Board and
                                              Secretary

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


Dated:   March 31, 2005                    By: /s/ Timothy P. Halter
                                              ----------------------------------
                                              Timothy P. Halter
                                              Director, Chief Executive Officer,
                                              President, Chief Financial
                                              Officer, Chairman of the Board and
                                              Secretary






















                                       21
<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                                    CONTENTS



                                                                            Page
                                                                            ----

Report of Independent Registered Public Accounting Firm
   S. W. Hatfield, CPA                                                       F-2
   Mantyla McReynolds                                                        F-3

Financial Statements
   Balance Sheets
     as of December 31, 2004 and 2003                                        F-4

   Statements of Operations and Comprehensive Income
     for the years ended December 31, 2004 and 2003 and f
     or the period from May 25, 2001 (date of inception)
     through December 31, 2004                                               F-5

   Statement of Changes in Shareholders' Equity (Deficit)
     for the period from May 25, 2001(date of inception)
     through December 31, 2004                                               F-6

   Statements of Cash Flows
     for the years ended December 31, 2004 and 2003 and
     for the period from May 25, 2001 (date of inception)
     through December 31, 2004                                               F-7

   Notes to Financial Statements                                             F-8














                                                                             F-1

<PAGE>

                        Letterhead of S. W. Hatfield, CPA
                        ---------------------------------


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------




Board of Directors and Stockholders
Donar Enterprises, Inc.

We have audited the  accompanying  balance sheet of Donar  Enterprises,  Inc. (a
Delaware  corporation  and a development  stage company) as of December 31, 2004
and the related  statements of operations  and  comprehensive  loss,  changes in
shareholders'  equity  (deficit) and cash flows for the year ended  December 31,
2004 and for the period from May 25,  2001(date of inception)  through  December
31, 2004, respectively. 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 audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  The  Company is not
required  to have,  nor were we engaged  to  perform,  an audit of its  internal
control over financial reporting.  Our 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 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 financial  statements  referred to above present fairly, in
all material respects,  the financial position of Donar Enterprises,  Inc. as of
December 31, 2004 and the results of its  operations and cash flows for the year
ended December 31, 2004 and for the period from May 25, 2001 (date of inception)
through  December 31, 2004 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 C to the
financial statements,  the Company was not successful in developing it's initial
business plan and has abandoned said plan. The Company's  existence is dependent
upon the support of key officers  and/or  shareholders  to support the corporate
entity. These circumstances create substantial doubt about the Company's ability
to continue as a going concern and Management's plans in regard to these matters
are also  described  in Note C. The  financial  statements  do not  contain  any
adjustments that might result from the outcome of these uncertainties.


                                                        /s/ S. W. Hatfield, CPA
                                                       -------------------------
                                                       S. W. HATFIELD, CPA
Dallas, Texas
March 18, 2005





                                                                             F-2

<PAGE>

                        Letterhead of Mantyla McReynolds
                        --------------------------------


             REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
             -------------------------------------------------------



Board of Directors and Stockholders
Donar Enterprises, Inc.

We have audited the  accompanying  balance sheet of Donar  Enterprises,  Inc. (a
Delaware  corporation  and a development  stage company) as of December 31, 2003
and the related  statements of operations  and  comprehensive  loss,  changes in
shareholders'  equity  (deficit) and cash flows for the year ended  December 31,
2003 and for the period from May 25,  2001(date of inception)  through  December
31, 2003, respectively. 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 audit in accordance  with the standards of the Public  Company
Accounting Oversight Board (United States). Those standards require that we plan
and  perform  the  audits to  obtain  reasonable  assurance  about  whether  the
financial  statements  are free of  material  misstatement.  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 financial  statements  referred to above present fairly, in
all material respects,  the financial position of Donar Enterprises,  Inc. as of
December 31, 2003 and the results of its  operations and cash flows for the year
ended December 31, 2003 and for the period from May 25, 2001 (date of inception)
through  December 31, 2003 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 C to the
financial statements, the Company has accumulated losses and is still developing
its planned  operations.  These issues raise substantial doubt about its ability
to continue as a going  concern.  Management's  plans in regard to these matters
are also  described  in Note C. The  financial  statements  do not  include  any
adjustment that might result from the outcome of this uncertainty.


                                                          /s/ Mantyla McReynolds
                                                         -----------------------
                                                         Mantyla McReynolds
March 20, 2004
Salt Lake City, Utah






                                                                             F-3

<PAGE>
<TABLE>
<CAPTION>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)
                                 BALANCE SHEETS
                           December 31, 2004 and 2003


                                                        December 31,    December 31,
                                                            2004               2003
                                                        ------------    ------------
<S>                                                     <C>             <C>
                                     ASSETS
                                     ------
Current Assets
   Cash on hand and in bank                             $       --      $     54,194
   Accounts receivable - trade,
     net of allowance for doubtful accounts of $-0-             --               877
                                                        ------------    ------------
     Total current assets                                       --            55,071
                                                        ------------    ------------

Total Assets                                            $       --      $     55,071
                                                        ============    ============


                 LIABILITIES AND SHAREHOLDERS' EQUITY (DEFICIT)
                 ----------------------------------------------
Current Liabilities
   Accounts payable - trade                             $       --      $      1,350
   Advances from officer/shareholder                            --             7,012
   Accrued officer compensation                                 --            63,750
                                                        ------------    ------------
     Total current liabilities                                  --            72,112
                                                        ------------    ------------


Commitments and contingencies

Shareholders' Equity (Deficit)
   Preferred stock - $0.001 par value
     20,000,000 shares authorized
     None issued and outstanding                                --              --
   Common stock - $0.001 par value
     100,000,000 shares authorized
     9,289,647 and 7,122,667 shares
       issued and outstanding, respectively                    9,290           7,123
   Additional paid-in capital                                469,562         349,010
   Deficit accumulated during the development stage         (478,852)       (373,174)
                                                        ------------    ------------

     Total Shareholders' Equity (Deficit)                       --           (17,041)
                                                        ------------    ------------

Total Liabilities and Shareholders' Equity              $       --      $     55,071
                                                        ============    ============
</TABLE>







   The accompanying notes are an integral part of these financial statements.
                                                                             F-4

<PAGE>
<TABLE>
<CAPTION>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)
                 STATEMENT OF OPERATIONS AND COMPREHENSIVE LOSS
                   Years ended December 31, 2004 and 2003 and
     Period from May 25, 2001 (date of inception) through December 31, 2004


                                                                                Period from
                                                                                May 25, 2001
                                                                             (date of inception)
                                            Year ended         Year ended          through
                                           December 31,       December 31,       December 31,
                                               2004               2003               2004
                                         ---------------    ---------------    ---------------
<S>                                      <C>                <C>                <C>

Revenues                                 $         3,525    $        14,067    $        24,778
                                         ---------------    ---------------    ---------------

Operating expenses
   General and administrative costs              109,285            149,153            504,032
                                         ---------------    ---------------    ---------------

Loss from Operations                            (105,760)          (135,086)          (479,254)

Other Income (Expense)
   Interest income                                    82                238                402
                                         ---------------    ---------------    ---------------

Loss before provision for income taxes          (105,678)          (134,848)          (478,852)

Provision for Income Taxes                          --                 --                 --
                                         ---------------    ---------------    ---------------

Net Loss                                        (105,678)          (134,848)          (478,852)

Other comprehensive income                          --                 --                 --
                                         ---------------    ---------------    ---------------

Comprehensive Loss                       $      (105,678)   $      (134,848)   $      (478,852)
                                         ===============    ===============    ===============


Net loss per weighted-average share
   of common stock outstanding,
   computed on Net Loss
   - basic and fully diluted             $         (0.01)   $         (0.02)   $         (0.08)
                                         ===============    ===============    ===============

Weighted-average number of shares
   of common stock outstanding -
   basic and fully diluted                     8,864,217          6,361,202          6,192,296
                                         ===============    ===============    ===============
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                                                             F-5

<PAGE>
<TABLE>
<CAPTION>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)
             STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY (DEFICIT)
     Period from May 25, 2001 (date of inception) through December 31, 2004



                                                                                 Deficit
                                                                               accumulated
                                            Common Stock          Additional    during the
                                     -------------------------     paid-in     development
                                        Shares        Amount       capital        stage          Total
                                     -----------   -----------   -----------   -----------    -----------
<S>                                  <C>           <C>           <C>           <C>            <C>
Shares issued to founder
   at inception for
   organizational costs
   and services at $0.05
   per share                           4,750,000   $     4,750   $   232,750   $      --      $   237,500
Net loss for the period                     --            --            --        (145,316)      (145,316)
                                     -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2001                   4,750,000         4,750       232,750      (145,316)        92,184
Sale of common stock pursuant
   to Registration Statement on
   Form SB-2 at $0.05 per share          656,000           656        32,144          --           32,800
Net loss for the year                       --            --            --         (93,010)       (93,010)
                                     -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2002                   5,406,000         5,406       264,894      (238,326)        31,974
Common stock issued pursuant
   for services at $0.05 per share     1,616,667         1,617        79,216          --           80,833
Sale of common stock pursuant
   to Registration Statement on
   Form SB-2 at $0.05 per share          100,000           100         4,900          --            5,000
Net loss for the year                       --            --            --        (134,848)      (134,848)
                                     -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2003                   7,122,667         7,123       349,010      (373,174)       (17,041)
Common stock issued pursuant
   to private placements for:
     Services at $0.05 per share         320,800           321        15,719          --           16,040
     Settlement of accrued
     officers compensation
     and repayment of
     advances from officer
     at $0.05 per share                1,846,180         1,846        90,463          --           92,309
Capital contributed to
   support operations                       --            --          14,370          --           14,370
Net loss for the year                       --            --            --        (105,678)      (105,678)
                                     -----------   -----------   -----------   -----------    -----------

Balances at
   December 31, 2004                   9,289,647   $     9,290   $   469,562   $  (478,852)   $      --
                                     ===========   ===========   ===========   ===========    ===========
</TABLE>



   The accompanying notes are an integral part of these financial statements.
                                                                             F-6

<PAGE>
<TABLE>
<CAPTION>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)
                            STATEMENTS OF CASH FLOWS
                   Years ended December 31, 2004 and 2003 and
     Period from May 21, 2001 (date of inception) through December 31, 2004


                                                                                            Period from
                                                                                           May 21, 2001
                                                                                        (date of inception)
                                                       Year ended         Year ended          through
                                                      December 31,       December 31,       December 31,
                                                          2004               2003               2004
                                                    ---------------    ---------------    ---------------
<S>                                                 <C>                <C>                <C>
Cash Flows from Operating Activities
   Net loss for the period                          $      (105,678)   $      (134,848)   $      (478,852)
   Adjustments to reconcile net loss
     to net cash provided by operating activities
       Depreciation and amortization                           --                 --                 --
       Common stock issued for
         Operating expenses                                     297               --                  297
         Services                                            16,040             80,833            334,373
         Salaries, wages and bonuses                         21,250               --               86,350
       (Increase) Decrease in
         Accounts receivable                                    877               (526)              --
       Increase (Decrease) in
         Accounts payable and accrued liabilities              --                 (511)              --
         Accrued officers compensation                         --               63,750               --
                                                    ---------------    ---------------    ---------------

Net cash used in operating activities                       (67,214)             8,698            (57,832)
                                                    ---------------    ---------------    ---------------


Cash Flows from Investing Activities                           --                 --                 --
                                                    ---------------    ---------------    ---------------


Cash Flows from Financing Activities
   Proceeds from sale of common stock                          --                5,000             37,800
   Advances from officer/shareholder                           --                1,414              7,012
   Cash contributed to support operations                    13,020               --               13,020
                                                    ---------------    ---------------    ---------------
Net cash provided  by financing activities                   13,020              6,414             57,832
                                                    ---------------    ---------------    ---------------

Increase (Decrease) in Cash                                 (54,194)            15,112               --

Cash at beginning of period                                  54,194             39,082               --
                                                    ---------------    ---------------    ---------------

Cash at end of period                               $          --      $        54,194    $          --
                                                    ===============    ===============    ===============
</TABLE>


   The accompanying notes are an integral part of these financial statements.
                                                                             F-7

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                          NOTES TO FINANCIAL STATEMENTS


Note A - Organization and Description of Business

Donar Enterprises, Inc. (Company) was incorporated on May 21, 2001 in accordance
with the Laws of the State of Delaware.

The Company's  initial business plan was to provide the conversion and filing of
various documents prepared in accordance with either the Securities Act of 1933,
as amended,  or the  Securities  Exchange Act of 1934, as amended,  for small to
mid-sized  public  companies with the U.S.  Securities  and Exchange  Commission
(SEC) electronically through EDGAR, the Commission's  Electronic Data Gathering,
Analysis,  and Retrieval system.  The Company has never been affiliated with the
U.S. Securities and Exchange Commission in any manner.

On February 27, 2002,  the  Company's  Registration  Statement on Form SB-2 (SEC
File No. 333-68702), registering 2,000,000 shares to be sold at a price of $0.05
per share, was declared  effective.  Between July and December 2002, the Company
sold an aggregate 656,000 shares of stock under this Registration Statement.

The Company has been in the  development  stage since its formation and has been
unable to become profitable within any segment of its initial business plan.

In June 2004 and December 2004,  respectively,  the Company experienced separate
changes in  control  and  abandoned  its  business  plan  related  to  providing
electronic  filing services for small to mid-sized  public companies and began a
search to seek a suitable reverse  acquisition  candidate  through  acquisition,
merger or other suitable business combination method.


Note B - Preparation of Financial Statements

The  Company  follows  the  accrual  basis  of  accounting  in  accordance  with
accounting principles generally accepted in the United States of America and has
a year-end of December 31.

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  the  reported  amounts  of assets and
liabilities  and disclosure of contingent  assets and liabilities at the date of
the  financial  statements  and the  reported  amounts of revenues  and expenses
during the reporting period. Actual results could differ from those estimates.

Management further acknowledges that it is solely responsible for adopting sound
accounting practices, establishing and maintaining a system of internal
accounting control and preventing and detecting fraud. The Company's system of
internal accounting control is designed to assure, among other items, that 1)
recorded transactions are valid; 2) valid transactions are recorded; and 3)
transactions are recorded in the proper period in a timely manner to produce
financial statements which present fairly the financial condition, results of
operations and cash flows of the Company for the respective periods being
presented


Note C - Going Concern Uncertainty

Donar Enterprises,  Inc.  (Company) was originally  incorporated in 2001 for the
purpose of providing the conversion and filing of various documents  prepared in
accordance with either the Securities Act of 1933, as amended, or the Securities
Exchange Act of 1934, as amended,  for small to mid-sized  public companies with
the U.S. Securities and Exchange Commission (SEC) electronically  through EDGAR,
the Commission's Electronic Data Gathering,  Analysis, and Retrieval system. The
Company  has  never  been  affiliated  with the  U.S.  Securities  and  Exchange
Commission in any manner.

                                                                             F-8

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note C - Going Concern Uncertainty - Continued

Concurrent  with a July 2004 change in control,  all  business  operations  were
abandoned.  The  Company's  current  principal  business  activity  is to seek a
suitable reverse  acquisition  candidate  through  acquisition,  merger or other
suitable business combination method. The Company has had no operations,  assets
or liabilities since the July 2004 change in control transaction.

The Company has been in the  development  stage since its formation and has been
unable to become profitable within any segment of its initial business plan.

The  Company's  continued  existence is  dependent  upon its ability to generate
sufficient cash flows from operations to support its daily operations as well as
provide sufficient resources to retire existing liabilities and obligations on a
timely basis.

The Company  anticipates  future sales of equity securities to facilitate either
the  consummation  of a business  combination  transaction  or to raise  working
capital to support and preserve the integrity of the corporate entity.  However,
there is no assurance that the Company will be able to obtain additional funding
through the sales of additional  equity  securities  or, that such  funding,  if
available, will be obtained on terms favorable to or affordable by the Company.

If no additional  operating  capital is received  during the next twelve months,
the  Company  will be  forced  to rely on  existing  cash in the  bank  and upon
additional  funds  loaned  by  management  and/or  significant  stockholders  to
preserve the integrity of the corporate  entity at this time. In the event,  the
Company  is  unable to  acquire  advances  from  management  and/or  significant
stockholders, the Company's ongoing operations would be negatively impacted.

It  is  the  intent  of  management  and  significant  stockholders  to  provide
sufficient  working  capital  necessary to support and preserve the integrity of
the corporate entity.  However, no formal commitments or arrangements to advance
or loan funds to the Company or repay any such advances or loans exist. There is
no legal obligation for either management or significant stockholders to provide
additional future funding.

While the Company is of the opinion that good faith estimates of the Company's
ability to secure additional capital in the future to reach our goals have been
made, there is no guarantee that the Company will receive sufficient funding to
sustain operations or implement any future business plan steps.


Note D - Summary of Significant Accounting Policies

1.   Cash and cash equivalents
     -------------------------

     For  Statement of Cash Flows  purposes,  the Company  considers all cash on
     hand  and  in  banks,  including  accounts  in  book  overdraft  positions,
     certificates of deposit and other highly-liquid investments with maturities
     of three months or less, when purchased, to be cash and cash equivalents.

2.   Income Taxes
     ------------

     The Company uses the asset and liability  method of  accounting  for income
     taxes. At December 31, 2004 and 2003, respectively,  the deferred tax asset
     and deferred  tax  liability  accounts,  as recorded  when  material to the
     financial  statements,  are entirely  the result of temporary  differences.
     Temporary  differences  represent  differences in the recognition of assets
     and  liabilities  for  tax  and  financial  reporting  purposes,  primarily
     accumulated depreciation and amortization,  allowance for doubtful accounts
     and vacation accruals.

                                                                             F-9

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note D - Summary of Significant Accounting Policies - Continued

2.   Income Taxes - continued
     ------------

     As of December 31, 2004 and 2003,  the  deferred  tax asset  related to the
     Company's net operating loss  carryforward  is fully  reserved.  Due to the
     provisions  of Internal  Revenue  Code Section 338, the Company may have no
     net operating loss carryforwards available to offset financial statement or
     tax  return  taxable  income in future  periods  as a result of a change in
     control   involving  50  percentage  points  or  more  of  the  issued  and
     outstanding securities of the Company.

3.   Earnings (loss) per share
     -------------------------

     Basic  earnings  (loss) per share is computed  by  dividing  the net income
     (loss) available to common shareholders by the  weighted-average  number of
     common shares  outstanding  during the respective  period  presented in our
     accompanying financial statements.  Fully diluted earnings (loss) per share
     is  computed  similar  to basic  income  (loss) per share  except  that the
     denominator is increased to include the number of common stock  equivalents
     (primarily outstanding options and warrants).

     Common  stock  equivalents  represent  the  dilutive  effect of the assumed
     exercise of the outstanding stock options and warrants,  using the treasury
     stock method, at either the beginning of the respective period presented or
     the date of  issuance,  whichever  is later,  and only if the common  stock
     equivalents  are  considered  dilutive  based upon the Company's net income
     (loss) position at the calculation date.

     At December 31, 2004 and 2003, and subsequent  thereto,  the Company had no
     outstanding common stock equivalents.


Note E - Fair Value of Financial Instruments

The carrying amount of cash,  accounts  receivable,  accounts  payable and notes
payable, as applicable,  approximates fair value due to the short term nature of
these items  and/or the current  interest  rates  payable in relation to current
market conditions.

Interest  rate risk is the risk  that the  Company's  earnings  are  subject  to
fluctuations  in interest  rates on either  investments  or on debt and is fully
dependent  upon  the  volatility  of  these  rates.  The  Company  does  not use
derivative instruments to moderate its exposure to interest rate risk, if any.

Financial  risk  is  the  risk  that  the  Company's  earnings  are  subject  to
fluctuations in interest rates or foreign exchange rates and are fully dependent
upon the  volatility  of  these  rates.  The  company  does  not use  derivative
instruments to moderate its exposure to financial risk, if any.


Note F - Loans from Shareholder/Officer

AS of December  31,  2003,  the Company and it's  then-controlling  shareholder,
William  Tay,  agreed that  additional  funds may be  necessary in the future to
support the corporate  entity.  As of December 31, 2004, Mr. Tay had advanced an
aggregate   approximate  $7,012.  This  amount  was  repaid  in  an  April  2004
transaction  with the issuance of an aggregate  1,846,180  shares of restricted,
unregistered common stock.

                                                                            F-10

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note G - Income Taxes

The  components  of income tax  (benefit)  expense  for each of the years  ended
December 31, 2004 and 2003, are as follows:

                                                      Year ended     Year ended
                                                     December 31,   December 31,
                                                         2004           2003
                                                     ------------   ------------
     Federal:
       Current                                       $       --     $       --
       Deferred                                              --             --
                                                     ------------   ------------
                                                             --             --
                                                     ------------   ------------
     State:
       Current                                               --             --
       Deferred                                              --             --
                                                     ------------   ------------
                                                             --             --
                                                     ------------   ------------
       Total                                         $       --     $       --
                                                     ============   ============

As a result of the July 2004 and  December  2004  changes in control the Company
has a nominal net  operating  loss  carryforward  for income tax  purposes.  The
amount and availability of any net operating loss  carryforwards  may be subject
to  limitations  set forth by the  Internal  Revenue  Code.  Factors such as the
number of shares ultimately issued within a three year look-back period; whether
there is a deemed  more  than 50  percent  change  in  control;  the  applicable
long-term  tax  exempt  bond  rate;  continuity  of  historical  business;   and
subsequent  income of the  Company  all enter  into the  annual  computation  of
allowable annual utilization of the carryforwards.

The Company's income tax expense  (benefit) for each of the years ended December
31, 2004 and 2003, respectively,  differed from the statutory federal rate of 34
percent as follows:
<TABLE>
<CAPTION>


                                                             Year ended      Year ended
                                                            December 31,    December 31,
                                                                2004            2003
                                                            ------------    ------------
<S>                                                         <C>             <C>
Statutory rate applied to income before income taxes        $    (35,900)   $    (45,800)
Increase (decrease) in income taxes resulting from:
     State income taxes                                             --              --
     Other, including reserve for deferred tax asset
       and application of net operating loss carryforward         35,900          45,800
                                                            ------------    ------------

         Income tax expense                                 $       --      $       --
                                                            ============    ============
</TABLE>

Temporary  differences,  consisting primarily of statutory deferrals of expenses
for organizational costs and statutory  differences in the depreciable lives for
property and equipment, between the financial statement carrying amounts and tax
basis of assets and liabilities give rise to deferred tax assets and liabilities
as of December 31, 2004 and 2003, respectively:

                                                    December 31,   December 31,
                                                        2004           2003
                                                    ------------   ------------
     Deferred tax assets
       Net operating loss carryforwards             $       --     $    126,900
       Less valuation allowance                             --         (126,900)
                                                    ------------   ------------

       Net Deferred Tax Asset                       $       --     $       --
                                                    ============   ============


                                                                            F-11

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note G - Income Taxes  - Continued

During the years ended  December 31, 2004 and 2003, the reserve for the deferred
current tax asset increased (decreased) by approximately $(126,900) and $46,300,
respectively.


Note H - Common Stock Transactions

On  February  21,  2005,  by written  consent in lieu of  meeting,  stockholders
representing  78.9% of the issued  and  outstanding  shares of our common  stock
approved a  recommendation  of our Board of  Directors to effect a one share for
ten shares  reverse stock split of our common stock,  par value $.001 per share,
with all fractional  shares rounded down to the nearest whole share. The reverse
split is anticipated to become effective on or about April 15, 2005,  unless the
Board of  Directors  elects not to effect the split.  As a result of the reverse
split, it is anticipated that the total number of issued and outstanding  shares
of our common stock will decrease from 9,289,647  shares to 928,964 shares.  The
effect of this action will be reflected in the Company's financial statements as
of the first day of the first period  presented  upon the effective  date of the
action.

On May 25, 2001, In connection  with the Company's  formation and  organization,
our  then-President,  William Tay, was issued  4,750,000  shares of  restricted,
unregistered common stock as consideration for various  organizational  expenses
and for his first year of executive services.

On February 27, 2002,  the  Company's  Registration  Statement on Form SB-2 (SEC
File No. 333-68702), registering 2,000,000 shares to be sold at a price of $0.05
per share, was declared  effective.  Between July and December 2002, the Company
sold an aggregate 656,000 shares of stock under this Registration Statement.

On January 3, 2003, the Company issued an aggregate of 200,000 restricted shares
of common stock to U.S.  Capital  Partners,  Inc., a financial  services company
that provides  investment  banking and brokerage  services,  as compensation for
financial services to be provided by U.S. Capital Partners, Inc. to the Company.
The Company  estimated the value of these services at $10,000.  The issuance was
accomplished  in reliance  upon Section 4(2) of the  Securities  Act of 1933, as
amended, and is subject to the resale provisions of Rule 144 and may not be sold
or  transferred  without  registration  except  in  accordance  with  Rule  144.
Certificates representing the shares bear such a legend.

On June 27, 2003,  the Company's  Board of Directors  authorized the issuance of
1,416,667 restricted, unregistered shares of common stock to William Tay for his
past  services  rendered  aggregating  $70,833.33  (or $0.05 per  share).  These
securities were sold under the exemptions from registration  provided by Section
4(2) of the Securities Act of 1933, as amended.

In February 2003, the Company sold an aggregate  100,000 shares of common stock,
pursuant  to the  Registration  Statement  on Form SB-2,  for cash  proceeds  of
approximately $5,000.

On March 10, 2004, the Company issued 320,800 shares of restricted, unregistered
common stock to Michael Tay, son of then-President and controlling  shareholder,
William Tay, as compensation for various services provided to the Company.  This
transaction  was  valued at  approximately  $16,040  (or $0.05 per  share).  The
Company  relied upon the  exemptions  provided by Section 4(2) of the Securities
Act of 1933, as amended, for this transaction.

On April 22, 2004,  the Company issued an aggregate  1,846,180  shares of common
stock to William Tay as consideration of approximately  $85,000 in accrued,  but
unpaid,  officer  compensation,  reimbursement of trade accounts payable paid by
Mr. Tay on behalf of the Company and in  repayment  of  approximately  $7,000 in
unsecured  advances made to the Company for working capital.  The Company relied
upon the  exemptions  provided by Section 4(2) of the Securities Act of 1933, as
amended, for this transaction.

                                                                            F-12

<PAGE>

                             DONAR ENTERPRISES, INC.
                          (a development stage company)

                    NOTES TO FINANCIAL STATEMENTS - CONTINUED


Note I - Stock Warrant

As a result of the December 15, 2004 change in control and in consideration  for
agreeing to serve as an officer and director of the  Company,  Timothy P. Halter
was granted a stock warrant to purchase up to 1,000,000 pre-reverse split shares
of the Company's restricted,  unregistered common stock at an effective price of
$0.06 per share, in reliance upon the exemption from  registration  set forth in
Section 4(2) of the Securities Act of 1933, as amended.  Mr. Halter may exercise
the  warrants,  in whole  or in part,  at any time  after  the  issuance  of the
warrants and prior to the  expiration of the warrants on December 15, 2007.  Due
to the uncertainty  related to the ultimate  exercise for purchase of any shares
covered by this  warrant,  the Company did not assign any  compensation  expense
upon the issuance of this warrant.

The following table presents warrant activity through December 31, 2004:

                                                                  Weighted
                                                                  Average
                                                   Number of     Exercise
                                                    Shares         Price
                                                  ---------      ---------
     Balance at December 31, 2003                      --             --
       Issued                                     1,000,000          $0.06
       Exercised                                      - -
                                                  ---------

     Balance at December 31, 2004                 1,000,000
                                                  =========


Note J - Commitment

In  March  2003,  the  Company   executed  an  employment   agreement  with  its
then-President  and majority  stockholder,  William Tay. This  agreement,  which
originally was scheduled to expire  January 1, 2006,  required the payment of an
annual base  compensation  of $85,000 and various fringe benefits (as defined in
the agreement).  Concurrent with the July 2004 change in control, this Agreement
was cancelled and the Company has no further performance requirements.


                                                                            F-13