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UNITED STATESSECURITIES AND EXCHANGE COMMISSIONWashington, D.C. 20549

FORM 10-K

[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: December 31, 2015

or

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

For the transition period
from                            
to

Commission File Number: 333-202030

NEW FUEL SYSTEMS INC.(Exact name of registrant as specified in its charter)

|British Columbia, Canada        | 26-3937768                          
|------------------------------- | ------------------------------------
|(State or other jurisdiction of | (I.R.S. Employer Identification No.)
|incorporation or organization)  |                                     

Unit 210, 5641 201 StreetLangley, British
ColumbiaCanada, V3A 8A4(Address of
principal executive offices)

(604) 532-2090(Registrants
telephone number, including area code)

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

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

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

Indicate by check mark if the registrant is not required to
file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes
[   ]        No [X]

Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Exchange Act during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.

(1) Yes [X]     No [  
]              
(2) Yes [X]     No [   ]

Indicate by check mark whether the registrant has submitted
electronically and posted on its corporate Website, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation
S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such
shorter period that the registrant was required to submit and post such files.
Yes [X]        No [   ]

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Indicate by check mark if disclosure of delinquent filers
pursuant to item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrants knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-K
or any amendment to this Form 10-K. [X]

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

Large accelerated filer [   ]
    Accelerated
      filed               
         [   ]Non-accelerated filer   [   ]
    Smaller reporting company  [X]


Indicate by check mark whether the registrant is a shell
company (as defined in Rule 12b-2 of the Exchange Act). Yes [ 
 ]        No [X]

State the aggregate market value of the voting and non-voting
common equity held by non-affiliates computed by reference to the price at which
the common equity was last sold, or the average bid and asked price of such
common equity, as of the last business day of the registrants most recently
completed second quarter.

The aggregate market value of the common equity held by
non-affiliates computed by reference to the average bid and asked price of such
common equity as of the last business day of the registrants most recently
completed second fiscal quarter is $0.00 since there was no bid or asked price
on that day being June 30, 2015.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY
PROCEEDINGS DURING THE PRECEDING FIVE YEARS

Not applicable.

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Indicate the number of shares outstanding of each of the
registrants classes of common stock, as of the latest practicable date.

As of April 9, 2016, the registrant had 42,474,814 shares of
common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE

See Part IV, Item 15.

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PART I

FORWARD LOOKING STATEMENTS

In this Annual Report, references to New Fuel Systems, NFS,
the Company, we, us, our and words of similar import) refer to New Fuel
Systems Inc., a British Columbia, Canada corporation, the registrant.

Statements made in this Form 10-K which are not purely
historical are forward-looking statements with respect to the goals, plan
objectives, intentions, expectations, financial condition, results of
operations, future performance and business of NFS. Such forward-looking
statements include those that are preceded by, followed by or that include the
words "may", "would", "could", "should", "expects", "projects", "anticipates",
"believes", "estimates", "plans", "intends", "targets" or similar expressions.

Forward-looking statements involve inherent risks and
uncertainties, and important factors (many of which are beyond our control) that
could cause actual results to differ materially from those set forth in the
forward-looking statements, including the following, in addition to those
contained in this Annual Report: general economic or industry conditions
nationally and/or in the communities in which we conduct business; fluctuations
in global oil and gas markets; legislation or regulatory requirements, including
environmental requirements; conditions of the securities markets; competition;
our ability to raise capital; changes in accounting principles, policies or
guidelines; financial or political instability; acts of war or terrorism; and
other economic, competitive, governmental, regulatory and technical factors
affecting our operations, products, services and prices.

Accordingly, results actually achieved may differ materially
from expected results in these statements. Forward-looking statements speak only
as of the date they are made. NFS does not undertake, and specifically
disclaims, any obligation to update any forward-looking statements to reflect
events or circumstances occurring after the date of such statements.

ITEM 1. BUSINESS

Company Background

New Fuel Systems Inc. (sometimes referred to as New Fuel
Systems, NFS or the Company) was incorporated under the Business
Corporation Act (BC) on March 2, 2005 under the name Lightning Ridge Resources
Inc., and changed its name to New Fuel Systems Inc. on February 21, 2007. The
Companys registered office and principal place of business is Unit 210, 5641
201 Street, Langley, British Columbia, Canada, V3A 8A4. The Companys principle
business activity is focusing on the identification, acquisition, development,
and commercialization of renewable, alternative energy technologies. The
Companys immediate business focus is the construction of a plant in the
Vancouver, British Columbia, Canada area for the purpose of converting plastics
into fuel. Given successful implementation in Vancouver, similar plants will be
constructed in other areas of the Canada and the U.S. The Company also has a
subsidiary formed for the purpose of developing long range electric-based power
generation in cars with battery extenders and a subsidiary formed for the
purpose of improving the quality and quantity of water for cities and
communities primarily through improved recycling technologies. The Company has
spent several years researching renewable, alternative energy technologies both
from a standpoint of what could help the earth and from what could be developed
into a commercially viable business. This research has led us to settle on
converting waste plastics into fuel as an initial business focus. Despite our
years of research and planning, when we raise additional capital and commence
construction of our initial plastics to fuel conversion plant, we will commence
our post research and post planning business operations. The Companys
subsidiaries formed to develop electric-based power generation for automobiles
and to improve city water sources have yet to commence business operations and
have been inactive since incorporation.

At the present time our common stock is not quoted for trading
on any exchange or listing service.

Business Strategy

New Fuel Systems is a diversified green energy development
company, which was formed to capitalize on markets in renewable and alternative
energy technologies. New Fuel Systems, together with its subsidiaries, Electric
City Motors Corp. and Water Evolution Systems Inc. is in the planning stage of focusing on the identification, acquisition, development, and commercialization of renewable, alternative energy technologies globally. Through members of our board of
directors, we are striving to identify technologies on the leading edge of innovation that would contribute to the ever increasing demands for energy producing fuels, clean air and pure water while protecting the environment for future generations.

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The first phase of the New Fuel Systems’ business plan is to set up the first commercial environmentally friendly ‘plastic to oil’ recycling plant in the Greater Vancouver area of British Columbia, Canada with existing technologies
utilizing a pyrolysis process whereby waste plastic is converted into useable oil or fuel. The patented technology being targeted by NFS allows for continuous processing in a modular design which allows for ease of portability to locations across
North America. This first plant will be set up to refine its manufacturing and operating systems and to be presented as the demo facility for future operations to be modeled after for installation of additional plants across Canada and the United
States that will be strategically located as close to existing waste management facilities as possible as part of a joint venture with commercial waste operators. We believe this model will add value to a joint venture because the Company will be
able to use existing waste plastic at the locations as feedstock with the fuel product produced being used as an energy source for machinery and vehicles within the fence of the same facility, greatly reducing resource costs and CO2 emissions. Once
in place, we believe our flagship plant will generate cash flow to help support the development of additional plants.

For the past sixty plus years, plastics production and its use has dramatically increased and close to 90% (per US EPA Statistics) (1) of this plastic ends up in the landfill. According to government statistics plastic production and thereby plastic
waste continues to grow at 7 % per annum. In Canada, the amount of waste plastic created annually is approximately 6,172,943,840 billion pounds (2). This waste plastic has become a huge problem for municipalities, waste management operators,
recyclers, and landfill operators. NFS’ solution to this problem is to divert as much of this disposed plastic from the landfill and municipal waste management system and convert this plastic into a high quality, mixed light crude and then
further refine it to gasoline, diesel, kerosene, oil or even jet fuel. The NFS’ ‘plastic to oil’ conversion process has up to a 90% materials recovery rate and ultra clean emissions therefore both primary and secondary carbon
footprints will be very small. This means that once our initial plant is up and running, NFS will be eligible for carbon credits estimated to be 2.5 for each ton of plastic recycled.

(1) http://www.epa.gov/epawaste/nonhaz/municipal/index.htm

(2) Kelleher Environmental Plastics Waste Denominator Study for Canada Submitted to: Canadian Plastics Industry Association (CPIA) 31 March 2012

The planned second phase of operations will be the production of royalties from this crude oil that is produced in the NFS’ plants yet to be constructed. Our initial plant will have plastics to oil conversion equipment necessary to meet the
production requirements of 8000 kg per day or 8000 liters of mixed oil per day. This unit will be capable of handling approximately 733 pounds of plastic per hour, operating 24 hours a day, and therefore producing approximately 90 US gallons of
mixed oil per hour or approximately 3 barrels of oil utilizing a semi continuous batch feed. For one unit this equates to a potential revenue for the oil (based on a market price of $50.00 per barrel) of approximately $150 per hour or
$3,600 per day. As the crude oil produced has little to no sulfite contamination, this recycled oil is equivalent to ‘sweet crude’ and therefore commands a higher price than the average crude oil on the market. (1)

Our plan is that the NFS’ conversion units will be capable of continuous operation making it possible to run safely 24 hours per day with minimal maintenance downtime to maximize production output and rate of return. The modular design will
allow the Company to install multiple units or add on additional units to accommodate future expansion plans or higher recycling volumes and/or enable the Company to handle increased processing demands. Additional revenues will be generated by
‘drop fees’ implemented to business, facilities or institutions requiring plastic waste pickup which will be implemented through the marketing division of NFS.

Overview

New Fuel Systems’ targeted areas for business will be primarily Canada and the United States. The agenda of NFS is focused on business stratagems that contribute to the universal efforts in protecting our natural environment. NFS has
identified issues that need to be addressed in our society that are contributing to the endangerment of our environment. The first issue is the massive amount of composting waste materials, especially plastic materials, in landfills which often produce dangerously concentrated levels of toxic gases. Presently 76% of municipal and industrial solid waste is
disposed of by landfilling processes, with only 24% disposed through recycling, resource recovery and incineration (2). In the United States, 32 million tons of plastic waste were generated in 2012 with only 2.8 million tons disposed through
recycling programs. (3).

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NFS’ first objective is to divert much of this abundant and problematic post-consumer, industrial and agricultural waste plastic from the landfill to strategically located commercial scale facilities to be implemented by NFS, whereby this
plastic can be converted back into its original state – oil. The benefits presented by the ‘plastic to oil’ technology that NFS intends to implement are three-fold: transforming non-recycled plastic into a valuable commodity,
creating a reliable source of alternative energy from an abundant feedstock, and reducing the amount of plastic waste either being incinerated or buried in the landfills.

NFS intends to implement modular equipment in their plants that utilize processes of de-polymerization and pyrolysis. NFS’ plan of business is to design and set up the initial commercial plant facility in the Greater Vancouver region of
British Columbia, Canada. The founders of NFS have spent years researching and identifying specific plastic to oil (“conversion”) systems which included meeting and conferring with professionals from around the world who are trying to
solve the waste plastic issue. NFS plastic to oil machines selected are among the newest generation of pyrolysis technology that has under testing for over three years, demonstrating the technological and economic feasibility for using pyrolytic
technology to recover more waste plastics. Other than a small proto type machine purchased by us for our testing and demonstration purposes, to date we have not entered into any agreements to purchase the plastic to oil machines and will not until
we have obtained the necessary funding to pay for the machines.

(1) The information in this paragraph is based upon the results of the plastics to oil technology we intend to purchase for the operation of our plants and was provided by Recycle Energy Company Ltd. who manufacturers that technology.

(2) Statistics Canada 2011, Kelleher Environmental Survey Report, 2012

(3) US EPA www.epa.gov/epawaste/conserv/materials/plastics.htm

Economics

Economic returns will come from the sale of the fuel product, and the offset fuel costs of what the New Fuel Systems plant will use internally.

Considering the technology is a zero polluting process that creates an alternative fuel from waste plastic, it creates a CO2 reduction value that could eventually be sold as “carbon credits”, generating additional revenues for the
Company.

In addition, given the disposal costs associated with commercial and industrial plastic waste, management expects to generate additional income from “tippage” fees. These fees will provide incentives to the waste plastic producers by way
of discounts to traditional tippage fees incurred at incinerator land fill sites.

New Fuel Systems team has also been approached by a local foam recycling plant that has expressed an interest in utilizing our technology to recover monomers from their foam product. A letter of intent is in place with this company for their
inventory of expanded polystyrene (foam) and other unusable materials. Depolymerization presents two advantages in recycling resin-based products such as foam, the ability to return a recovered resin to virgin resin-like quality, and the potential
to recover valuable feedstock from products that are economically challenging to recycle. When plastic is mechanically recycled, even small levels of contamination can compromise the performance of resin. However, because depolymerizaton breaks
scrap plastics back into the basic building blocks for resin, that contamination is removed. The resulting monomers, such as terephthalic acid, ethylene glycol, styrene and ethyl benzene, can be recovered and remade into what is essentially
comparable to virgin resins, free from impurities, and possessing virgin resin-like properties. This can provide NFS another source of potential revenue from another one of society’s problematic waste products – foam. The letter of
intent is not a legally binding agreement other than it binds each of the parties to a
good faith effort to enter into a legally binding agreement in the future when
the business relationship is ready to commence.

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New Fuel Systems is a development stage company, therefore has
not generated any revenues to date. To date some funds have been raised through
private investors.

New Fuel Systems Flagship Plant Development Budget

Continuous Feed Plastic to Oil System
    $              
      5,000,000Hydrocarbons Refiner System
    800,000Equipment Setup Costs
    700,000Heavy Duty Granulator (for larger plastics)
    250,000Heavy Duty Granulator (for smaller plastics)
    100,000Storage Tanks (x4) and Transfer Equipment
    120,000Scales
    35,000Hydro
    50,000Sewer and Water
    5,000Material Handling Equipment
    90,000Site Preparation Costs
    370,000Plant Mechanical Engineering Fees
    250,000Plant Electrical Engineering Fees
    250,000Freight and Shipping Costs
    250,000Building Lease Costs
    75,000Marketing
    300,000Operations Costs
    600,000Fuel Rated Holding Tanks (x3)
    100,000Conveyors ($125/foot)
    100,000Total:
    $              
      9,445,000


If we realize our projected production, one of our conversion
plants will be the equivalent of an oil field producing 200,000 barrels of
refined diesel oil per year, a field that requires no exploration, no wellhead
drilling & replenishes itself each year with more oil than it started with.
New Fuel Systems plan for the future is to locate plants alongside existing
waste management facilities as part of a joint venture with commercial waste
operators. Using this model will add value and with each integrated solution
these plants will be able to use existing waste plastic at these locations as
feedstock with the fuel product produced being used as an energy source for
machinery and vehicles within the fence of the same facility, reducing resource
costs and CO2 emissions.

After our first plant becomes fully operational, our plan is
for similar plants to be built in other areas of Canada and North America as
revenues and funding permit. The plants will use a technology involving low
temperature pyrolysis and distillation to liquefy plastics, ordinarily destined
for landfills, into ultra-low sulfur hydrocarbon fuels which are less harmful to
the environment than standard petroleum based diesel.

The concept of obtaining fuel from plastic in a commercially
viable manner is based upon the following principles:

- Plastic is made from crude. If you break down waste plastic using the
  right catalyst you get liquid hydrocarbons.
- There is a choice as to the end product to be produced  petrol, diesel,
  light petroleum gas/jet fuel, and monomer for resin.
- All plastics are polymers mostly containing carbon and hydrogen. Polymers
  are made up of small molecules called monomers.
- Degradation of polymers occur when this long chain of monomers break at
  certain points. If the division of bonds occur randomly, it is known as Random
  De-Polymerization.
- Plastic waste is converted in liquid hydrocarbons by Random
  De-Polymerizaton. The process is carried out in a specially designed reactor
  in the absence of oxygen and with a catalytic additive.

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- Maximum reaction temperature is 350 degrees Celsius and there is total
  conversion of waste plastic into value-added fuel products.

Features of the technology we will be using include:

- Converting plastic back to oil - conversion;
- Gas is converted to liquid form  distillation;
- Separation/refining/blending  final steps that determines the end product
  or fuel type, eg. diesel oil versus jet fuel;
- High efficiency pyrolysis process produces an alternate fuel with similar
  or better qualities to diesel fuel used in vehicles and equipment which is
  energy efficient with options of powering the facility either by generator,
  solar or electricity.

Technology Employed in the Conversion Unit

New Fuel Systems will be utilizing self-contained modules with
all the auxiliary components required to process waste plastic to oil or to
synthetic fuels (syn-fuels). The modules will be self-contained, computerized
and will require minimal operational skills. They will employ an electric heater
that controls temperature instead of flame. The conversion technology will be
quite safe. The units are capable of recycling high density polyethylene (HDPE),
low density polyethylene (LDPE), polypropylene (PP), and polystyrene (PS). One
kilogram of plastic using 1 kilowatt of electricity is capable of producing 1
liter of oil. At the current price of electricity, this process costs
approximately 20 cents.

Plastics Market Assessments

Plastics play an important role in almost every aspect of our
lives. Plastics are used to manufacture everyday products such as beverage
containers, toys, and furniture. The widespread use of plastics demands proper
end of life management. However, this category of end-of-life plastic material,
overall, still has a rather small amount being diverted to recycle centers
compared to the amount being disposed to the landfill. Canada for example has an
estimated 2.8 million tons of plastic waste being disposed by residential and
non-residential sources and only 9% of this plastic waste is being recycled. (1)
With regard to the United States, according to the 2013 Earth Engineering
Centers Report to the American Chemistry Council, plastics make up 11 percent
of the total US municipal solid waste stream. (2)

Plastic Waste Available in Canada and U.S.A.
      (Annually) (Data in columns 3 and 5 is rounded up.)Population
    Pounds Per Capita
      Plastic Waste Consumption
    Pounds of Plastic
      Waste Available
    Pounds to Tons
      Conversion
    Tons of Plastic Waste
      AvailableCanada
    35,675,834 (3)
    157
    5,600,000,000 (5)
    2,000
    2,800,000U.S.A.
    320,540,000 (4)
    257
    82,400,000,000 (6)
    2,000
    41,200,000


Based on these facts it is evident that the industry does have
room for the alternative solutions that New Fuel Systems plastic to oil
conversion technology has to offer to help deal with this overabundance of
plastic.

(1) Statistics Canada 2011, Kelleher Environmental Study 2012 
http://www.plastics.ca/_files/file.php?fileid=O&filename=file_Kell_Disposal_Report_31_MAR_2012_Revised.pdf

(2)
http://www.americanchemistry.com/Policy/Energy/Energy-Recovery/2014-Update-of-Potential-for-Energy-Recovery-from-Municipal-Solid-Waste-and
-Non-Recycled-Plastics.pdf

(3) Statistics Canada Oct 2014

(4) US Census.gov (19 March 2015)

(5) Kelleher Environmental, 2012 
http://www.plastics.ca/_files/file.php?fileid=O&filename=file_Kell_Disposal_Report_31_MAR_2012_Revised.pdf

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(6)
http://www.cleanair.org/program/waste_and_recycling/recyclenow_philadelphia/waste_and
_recycling_facts

Plastic comes in several forms, each of which is labeled
(coded) according to its production method and chemical content.(1) Plastics 3-7
are not easily recyclable if at all. The overwhelming majority of these plastics
ends up in a land fill or incinerated. Despite these facts and that type 1 and 2
are recycled, according to Environmental Protection Agency (EPA) statistics,
only 9% of total plastic waste is actually recycled.(2) Out of these difficult
to recycle plastics 2, 4, 5, 6 (and some other plastics in the 7 category) we
have learned through our testing using our prototype conversion machine that all
can be processed using the technology that will be used in our initial plastic
to oil plant once constructed. That is the greatest advantage with the NFS
technology once in use is it can be applied to a wider range of applications,
including post-consumer, agricultural, nursery and industrial waste plastics.

The US Environmental Protection Agency (EPA) states one ton of
plastic would take up 7.4 cubic yards (6.8 cubic meters) of landfill space.(3)
Plastic not only takes up this space in landfills, but at recyclers facilities
where they process other forms of material. It is our vision that New Fuel
Systems plants strategically placed close to these facilities will be able to
significantly reduce the space required to handle recyclable material as well as
saving significant landfill space.

Potential sources for plastics feedstock or potential locations
ideal for installation of the New Fuel Systems plastic to oil plants are as
follows:

| | Municipalities (especially areas
      where there is limited land space for landfills)                                                                                        
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| | Organizations wishing to reduce
      their tax burden/waste disposal fees/incineration fees                                                                                   
| | Organizations with a high volume
      of manufacturing plastic waste that cannot be disposed of in a landfill
      eg. Manufacturing plants/Agricultural industries/Retailers
| | Facilities that want to discharge
      large volumes of difficult to recycle plastics                                                                                         
| | Schools                                                                                                                                                                        
| | Foam recyclers                                                                                                                                                                 

Many of the existing municipal recycling programs restrict the
form and type of plastic that can be placed in their blue boxes, the remaining
plastic ends up in garbage. Given that New Fuel Systems conversion technology
will be able to handle a large number of the household waste plastics that go
into these blue boxes, it will allow these programs to expand and accept a
greater percentage of plastic, thus keeping it out of landfills and the
atmosphere through incineration programs and process it back into oil.

In the greater Vancouver, BC area where New Fuel Systems will
locate its first commercial plant, there is an equally large amount of plastic
waste being disposed of in landfills. According to Vancouver Regional
statistics, close to 150,000 tons (330 million pounds) of plastic was disposed
in 2009 (Statistics Canada, Waste Management Survey: Business and Government
Sectors 2010). (4) That represents an enormous amount of waste plastic feed
stock to convert into oil.

(1) Plastic types referred to in this paragraph by number are
as follows: Type 1 - "PET" - Polyethylene Terephthalate; Type 2 - "HDPE" - High
Density Polyethylene; Type 3 - "PVC" - Polyvinyl Chloride; Type 4 - "LDPE" - Low
Density Polyethylene; Type 5 - "PP" - Polypropylene; Type 6 - "PS" -
Polystyrene; Type 7-"OTHER" - other miscellaneous plastics.

(2) www.epa.gov/epawaste/conserve/materials/plastics.htm

(3) Ibid.

(4)
http://www.statcan.gc.ca.pub/16f0023x/16f0023x2013001-eng.pdf

In New Fuel Systems initial target market, we have identified a
number of waste handlers that would be significant sources of plastic for New
Fuel Systems flagship plant. However, to date we have not entered into any
contracts with such handlers to obtain access to their plastics. We believe NFS
will be a more economical choice because there will either be no charge or a
nominal tipping fee compared to having to dispose of the plastic in traditional
landfills where the tipping fees can run as high as $200 per ton.

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According to Metro Vancouvers solid waste management group,
their stated goal is to reduce waste to landfills by 80% by 2020. This goal will
have a positive impact on NFS ability to access waste plastic to feed its
flagship plant.

Electric City Motors Corporation

Electric City Motors Corporation is a wholly owned subsidiary
of NFS, incorporated pursuant to the laws of British Columbia, Canada. Electric
City Motors is currently planning the development of select technologies which
we believe can change the face of electric-based power generation in cars. We
have plans for vehicles that will be designed to make a major difference in
urban areas, especially where motor vehicles are the single largest contributor
to ground-level ozone, a major component of smog. Each year, the cars we drive
emit millions of tons of pollutants, contributing heavily to global warming and
acid rain. Only a clean technology that is affordable to the many can slow down
and eventually  when a critical mass is reached on a global basis  reverse
this lethal evolution. The development of select technologies will help to
address the important need to meet the worlds long-term energy and
environmental requirements. Even though this subsidiary has been formed, it has
been inactive since incorporation and has yet to commence meaningful business
operations of any kind.

Water Treatment and Purification

New Fuel Systems subsidiary, Water Evolutions Systems Inc.
(WES) is a Canadian company, incorporated pursuant to the laws of British
Columbia, Canada, that will focus on developing and introducing to market a
water processing technology with a wide range of applications that is more
efficient and cost effective than the conventional technologies already present
in this field. The system will not rely on chemicals and membrane filters as do
conventional systems and will therefore have minimal impact on the environment.

The agenda of WES is to help address the major concerns with
the quality and quantity of water currently available. The plan to develop water
purification methods and technologies having tailored applications across a wide
variety of sectors such as retail drinking water, industrial water treatment
facilities including the mining sector, municipal sewage management operations,
food processing facilities, hotels and resorts to drinking water reservoir's
and/or supplementary support of existing technologies and water treatment
infrastructures. Even though this subsidiary has been formed, it has been
inactive since incorporation and has yet to commence meaningful business
operations of any kind.

Competition

To our knowledge, there are no plastic to oil conversion plants
in demonstration or in commercial operation in Canada. In the U.S. we are aware
of three companies that have demonstration facilities, one of which has also
begun commercial operations. They are Plastic2Oil, Inc. in Niagara Falls, New
York, Gaily in Beaverton, Oregon, and RES Polyglot in Akron, Ohio. Because of
the newness of the industry and the size of the potential of the industry, we do
not believe any barriers exist in our entering into the industry from a
competition point of view. As the industry matures and as conversion plants
become numerous, our ability to compete will depend upon our efficiency in the
conversion process and in our ability to grow our Company. It is unknown at this
time the extent to which we will be successful in competing against other
companies in the future.

Methods of competition in our industry consist of promoting and
selling oil based products into the market of competing oil products that
already exist from traditional sources of supply. This is done primarily through
contractual arrangements with oil product distribution companies that have
established distribution networks. The oil product that New Fuel Systems plants
will be producing is different than normal in that it will not require the usual
amount of refining that standard crude oil requires and therefore will be
considered a more highly valued product. Secondly, we do not intend to promote
and sell our oil products to only the traditional oil product distribution
companies but will also be focusing on alternate industries that consume high
volumes of oil and/or diesel. However, our products supplied to alternate
industries that consume high volumes of oil and/or diesel will require
additional refining before it is ready for use. To date we have no contracts in
place with any distribution or other companies.

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Intellectual Property

The company does not own its own technology for converting plastics into fuel but is familiar with technological options for this purpose currently under use in Japan and Europe that are available for purchase. In connection with the preparation of
the flagship plant, the Company has identified an existing technology to be implemented and will determine, based on the results of the first plant's operations, as to whether this same technology or alternative technologies will be implemented in
the additional plants to be set up across Canada and the US.

Despite the fact that our research shows that the technology we will be using is commercially viable in Japan and Europe, we have determined that a flagship plant is necessary in order for us to determine whether the technology is commercially
viable in our market place. Even though we are confident we can turn plastic into oil, we need to know if we can make money given our local costs of labor, local costs of raw materials in the form of recyclable plastics and the potential for
revenues for selling our products into the local market.

We have studied the economic feasibility of our business to the best of our ability given the constant fluctuation of many variables including the price of crude oil, the retail price of fuel products and the costs of harvesting used plastics. We
have not obtained outside feasibility studies. We have purchased and have been using a small proto type plastics-to-oil machine that uses the technology we intend to purchase for our flagship plant. Through the use of this machine we have been able
to determine the types of plastic we will be able to convert to oil, how much used plastic it takes to produce a gallon of oil and the amount of additional refining that may be necessary to obtain high grade fuels for various industries.

We have concluded that our business operations will be profitable at some level. However, given the wide range of uncertainty in a number of variables that are subject to constant change, it is impossible to ascertain what that profit level will be.
A large component of any future profit picture is the cost of harvesting waste plastic. It is possible that the harvesting of waste plastic may be a profit center all of its own since municipalities are under pressure to dispose of plastics in a way
other that burying it in landfills. It is likely that some waste plastics will be delivered to our doors free of charge or that we may be in a position to charge a fee for taking the waste plastic. We have found that municipalities are unwilling to
discuss future arrangements with us until such time as our initial plant is operational. Accordingly, the cost of plastic acquisition remains an uncertainty for us. Given this uncertainty, the reason we believe the Company will be profitable at some
level is based upon fact that the raw material of our future operations, which is waste plastic, is obtainable at low or no cost since it is a byproduct of our society that needs to be disposed of. Thereafter, most other costs of production are not
fixed costs but rather costs which are a percentage of the amount of plastic being processed at any given time. Speaking generally, as long as the cost of electricity necessary to produce a gallon of oil is less than the market value of the gallon
of oil produced, a conversion plant will operate profitably.

Government Regulation

The Company is subject to federal, state, provincial and local laws generally with regard to business ownership and regulation. At such time as the Company commences its business operation of converting plastics into fuel, it will be subject to the
laws, including environmental laws, relating to the recycling of plastics and the production and sale of fuel and fuel related products.

Employees

We currently employ a Chief Executive Officer and a Chief Financial Officer and have no other employees. Karen Hartlin provides services to the Company through the Company’s management agreement with Hartlin Management Services.

ITEM 1A. RISK FACTORS

The success of the Company depends heavily on Karen Hartlin and our directors.

To date, the development of the Company has been a result of the dedication of our former CEO, Jack Stuart and also Karen Hartlin and our directors and the passion they have for the goals and objectives of the Company. Jack Stuart passed away
unexpectedly on March 25, 2016, leaving the immediate responsibility for the progress of the Company on the shoulders of Karen Hartlin and the members of the board of directors. Since the passing of Jack Stuart, Karen Hartlin has been appointed Interim CEO/President by the Board of Directors. In the event we lose the services of Karen
Hartlin or any of the members of the board and are unable to replace them with individuals having similar skills and passion for the ideals of the Company, it will limit our chances for success.

---

We have future capital needs and without adequate capital we will not be able to develop our business plan.

We are a development stage company and have yet to begin construction of our flagship plant for the purpose of converting plastic into fuel. The projected cost of construction for the flagship plant is $9,445,000. Without additional funding we
will not be able construct the plant. Our growth and continued operations could be impaired by limitations on our access to capital markets. Furthermore, the limited capital we have raised, and the capital we hope will be available to us from our
principals, if any, may not be adequate for our long-term growth. If financing is available, it may involve issuing securities senior to our common stock which would be dilutive to holders of our common stock. In addition, in the event we do not
raise additional capital from conventional sources, such as our existing investors or commercial banks, there is every likelihood that our growth will be restricted and we may be forced to scale back or curtail implementing our business plan in
which event investors in the Company may lose part or all of their investment.

The estate of our former CEO and our Secretary/Treasurer exercise voting control over 50% of the voting power of the Company.

The estate of Jack Stuart and our Secretary/Treasurer Karen Hartlin, exercise voting control over 50% of the issued and outstanding common shares of the Company. As a result, it is likely they can exert substantial control over all corporate actions
taken by the Company. These actions may include the election of directors, mergers, consolidations, the sale of all or substantially all of our assets, and also the power to prevent or cause a change in control. Any investor who purchases shares in
the Company will be a minority shareholder and as such will have little to no say in the direction of the Company and the election of directors. Additionally, it will be difficult if not impossible for investors to remove any person from our Board
of Directors without the consent of our executive officers.

There is uncertainty as to an investor’s ability to enforce civil liabilities both in and outside of the United States due to the fact that our officers, all directors but one, and our assets are not located in the United States.

Our office is not located in the United States. Our officers and all but one of our directors are located in Canada, and the operations and assets of the Company are located in Canada. As a result, it may be difficult for shareholders to effect
service of process within the United States on our officers and Directors. In addition, investors may have difficulty enforcing judgments based upon the civil liability provisions of the securities laws of the Unites States or any state thereof,
both in and outside of the United States.

Our future success depends on broad market acceptance of our products, which may not happen.

Our entire business is based on the assumption that the demand for our products will develop and grow. We cannot assure you that this assumption is or will be correct. The market for fuel converted from plastic is new and accordingly quite small. As
is typical of a new and rapidly evolving industry, the demand for, and market acceptance of, “green-based” products is highly uncertain. In order to be successful, we must be able to keep our understandings in place with the suppliers of
our products, convince retailers to stock our products and educate consumers that our products perform as well as the products they currently use. We plan to spend approximately 40% of our marketing budget educating consumers on the benefits
associated with using our products as well as proving that our products work as well as the existing products they are accustomed to using. We can provide no assurances that these efforts will be successful. Similarly, we cannot assure you that the
demand for our products will become widespread. If the market for our products fails to develop or develops more slowly than we anticipate, our business could be adversely affected.

As public awareness of the benefits of fuel converted from plastic grows, we expect competition to increase, which could make it more difficult for us to grow and achieve profitability.

---

We expect competition to increase as awareness of the
environmental advantages of converting plastic into fuel increases. A rapid
increase in competition could negatively affect our ability to develop a
profitable client base. Many of our competitors and potential competitors may
have substantially greater financial resources, customer support, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships than we do. We cannot be
sure that we will have the resources or expertise to compete successfully.
Compared to us, our competitors may be able to:

| | develop and expand their products and services more
      quickly;                             
|- | -----------------------------------------------------------------------------------------------
| | adapt faster to new or emerging technologies and changing
      customer needs and preferences;
| | take advantage of acquisitions and other opportunities
      more readily;                     
| | negotiate more favorable agreements with vendors and
      customers; and                      
| | devote greater resources to marketing and selling their
      products or services.            

Some of our competitors may also be able to increase their
market share by providing customers with additional benefits or by reducing
their prices. We cannot be sure that we will be able to match price reductions
by our competitors. In addition, our competitors may form strategic
relationships to better compete with us. These relationships may take the form
of strategic investments, joint-marketing agreements, licenses or other
contractual arrangements that could increase our competitors ability to serve
customers. If our competitors are successful in entering our market, our ability
to grow or even sustain our current business could be adversely impacted.

We may not be able to manage our growth effectively, create
operating efficiencies or achieve or sustain profitability.

Our efforts to grow will place a significant strain on our
personnel, management systems, infrastructure and other resources. Our ability
to manage future growth effectively will also require us to continue to update
and improve our operational, financial and management controls and procedures.
If we do not manage our growth effectively, we could be faced with slower growth
and a failure to achieve or sustain profitability.

We face risks associated with obtaining raw materials.

Even though there seems to be an inexhaustible supply of used
plastic in our society, our success will depend upon our ability to collect or
pay someone else to collect plastic for commercially reasonable costs. In the
event there becomes increased competition for these plastic resources, it could
have an effect on our profitability that we do not foresee at this time.

We face risks associated with a reduction in demand for
carbon based fuels.

Our world is committing vast amounts of resources toward
research and development for the purpose of replacing carbon based fuels with
other sources of energy such as sunlight, ocean wave power, wind power and
various forms of electrical power, to name a few. Our primary business focus is
based upon a strategy for replacing the traditional source for carbon based
fuels, namely crude oil. If there is a major breakthrough in technology that
reduces the need for carbon based fuels, prospect for the success of our company
could suffer.

We will not be able to negotiate exclusive rights to the
technology we will need to acquire.

Our intent is to design and refine a plant that utilizes
existing technologies in plastics de-polymerization and to implement equipment
that is readily available in the industrial market place. We will not have
exclusive rights to this technology for Canada or the U.S. Accordingly, others
may license or otherwise obtain the use of the same technology and enter into
competition with us in our same locality. If this should be the case, it may be
difficult or impossible to obtain a competitive advantage over others that
desire to enter into this industry.

We have never paid cash dividends in connection with our
common stock and have no plans to pay dividends in the future.

We have paid no cash dividends on our common stock to date and
it is not anticipated that any cash dividends will be paid to holders of our
common stock in the foreseeable future. While our dividend policy will be based
on the operating results and capital needs of our business, it is anticipated
that any earnings will be retained to finance our future expansion.

---

Investors may face significant restrictions on the resale of
our common stock in the U.S. due to federal regulations of penny stocks.

Our common stock will be subject to the requirements of Rule
15g-9, promulgated under the Securities Exchange Act of 1934, as amended (the
Exchange Act) as long as the price of our common stock is below $5.00 per
share. Under such rule, broker-dealers who recommend low-priced securities to
persons other than established customers and accredited investors must satisfy
special sales practice requirements, including a requirement that they make an
individualized written suitability determination for the purchaser and receive
the purchaser's consent prior to the transaction. The Securities Enforcement
Remedies and Penny Stock Reform Act of 1990, also requires additional disclosure
in connection with any trades involving a stock defined as a penny stock.
Generally, the Commission defines a penny stock as any equity security not
traded on an exchange or quoted on NASDAQ that has a market price of less than
$5.00 per share. The required penny stock disclosures include the delivery,
prior to any transaction, of a disclosure schedule explaining the penny stock
market and the risks associated with it. Such requirements could severely limit
the market liquidity of the securities and the ability of purchasers to sell
their securities in the secondary market. In addition, various state securities
laws impose restrictions on transferring "penny stocks" and as a result,
investors in the common stock may have their ability to sell their shares of the
common stock impaired.

There is no market for our common shares.

While we intend to obtain a trading symbol and create a market
for our common stock, there can be no assurance that we will be successful in
doing so. Even if we are successful in creating a market for our common stock,
the market may be illiquid and subject to wide fluctuations in response to
several factors, including, but not limited to:

| | actual or anticipated variations
      in our results of operations;
|- | --------------------------------------------------------------------
| | our ability or inability to
      generate new revenues;            
| | the number of shares in our
      public float;                     
| | increased competition; and                                          
| | conditions and trends in the
      market for our products.         

Furthermore, our stock price may be impacted by factors that
are unrelated or disproportionate to our operating performance. These market
fluctuations, as well as general economic, political and market conditions, such
as recessions, interest rates or international currency fluctuations may
adversely affect the market price of our common stock.

Potential product, service or other related liability claims
could have a material adverse effect on the Companys liquidity, financial
position and results of operations.

The development, manufacture and sale of specialty fuel
products and other related services involve inherent exposure to potential
product liability claims, service level claims, product recalls and related
adverse publicity. Any of these potential product or service risks could also
result in substantial and unexpected expenditures and affect customer confidence
in our products and services, which could have a material adverse effect on the
Companys liquidity, financial position and results of operations. Although the
Company expects to maintain product and other general liability insurance, there
can be no assurance that this type or the level of coverage would be adequate to
cover these potential risks.

The Company must eventually emerge from its status as a
development stage company in order to be successful.

The audited financial statements which are a part of this
annual report state in part: The ability of the Company to carry out its
business objectives is dependent upon the Companys ability to receive continued
financial support from related parties or by obtaining public equity financing
and to develop its business plan resulting in the generation of profitable
operations in the future or by identifying, evaluating and negotiating an
acquisition of, a participation in, or an investment of an interest in a
technology or business that will generate profitable operations in the future.
Since the Company has yet to generate other than nominal revenues or to engage
in business operations that could generate business revenue in the near term, it is
necessary for the Company to continue to raise money through the sale of equity
capital to sustain its business existence. If the Company is not successful in
furthering its business development to where it can generate revenue from
business operations, in the long run it will not succeed as a business and it is
likely any investors in the Company will lose their investment. It should also
be noted and understood that even if the Company receives continued financial
support from related parties or obtains public equity financing to develop its
business plan or even if the Company negotiates an acquisition of, a
participation in, or an investment of an interest in a technology or business,
the Company may be unprofitable.

---

ITEM 1B. UNRESOLVED STAFF COMMENTS

None

ITEM 2: PROPERTIES

Our executive offices are located at Unit 210, 5641 201 Street,
Langley, British Columbia, Canada, V3A 8A4 and are rented from Hartlin
Management Services on a month to month basis. Hartlin Management Services is
owned by our Secretary/Treasurer Karen Hartlin. Hartlin Management Services is
paid $1,100 per month for the rent of the premises. A copy of the rental
agreement is attached as an exhibit to the registration statement. The Company
does not own or lease any other real property.

ITEM 3: LEGAL PROCEEDINGS

The Company is not engaged in any legal proceedings.

ITEM 4: MINE SAFETY DISCLOSURES

The Company does not own nor is it engaged in any mining
operations. According, Part I, Item 4 does not apply to the Company.

PART II

ITEM 5: MARKET FOR REGISTRANTS COMMON EQUITY, RELATED
STOCKHOLDERMATTERS AND ISSUER PURCHASES OF EQUITY
SECURITIES

Market Information

There is no established trading market for our shares of
common stock. Our common stock is not listed on any exchange or listing service.
The Company has no common equity that is subject to outstanding options or
warrants to purchase, or securities convertible into, common equity. The Company
has 42,474,814 common shares issued and outstanding, 42,472,564 of which could
be sold at this time pursuant to Rule 144 promulgated under the Securities Act.

Holders

As of April 9, 2016, the number of record holders of the
Companys common stock is approximately 118.

Dividends

Holders of shares of common stock are entitled to share pro
rata in dividends and distributions with respect to the common stock when, as
and if declared by the Board of Directors out of funds legally available
therefore. We have not paid any dividends on our common stock and intend to
retain earnings, if any, to finance the development and expansion of our
business. Future dividend policy is subject to the discretion of the Board of
Directors and will depend upon a number of factors, including future earnings,
capital requirements and the financial condition of the Company.

---

Securities Authorized for Issuance under Equity Compensation Plans

We have no equity compensation plans.

Recent Sales of Unregistered Securities

During the year 2015, the Company issued 353,575 common shares at the price from $0.50 to $1.00 per share for aggregate proceeds of $194,225. All shares issued in 2015 were issued pursuant to National Instrument 45-106 of the Prospectus
and Registration Exemptions of the Province of British of Columbia Securities Act.  Investors residing in the U.S. also invested in the Company pursuant to the rules and regulations of Regulation S promulgated under the United States Securities Act
of 1933.  Investors were all family, friends, business associates, and/or accredited investors. There was no general solicitation or public offering in connection with the issuance of any shares. Pursuant to the rules and regulations of Regulation
S, New Fuel Systems is a non-U.S. person.

Use of Proceeds of Registered Securities

During the years ended December 31, 2015 and 2014, we did not receive any proceeds from the sale of registered securities.

ITEM 6: SELECTED FINANCIAL DATA

Not required for smaller reporting companies.

ITEM 7: MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION ANDRESULTS OF OPERATION

The following discussion of our plan of operation, financial condition and results of operations should be read in conjunction with the Company’s financial statements, and notes thereto, included elsewhere herein. This discussion contains
forward-looking statements that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors including, but not limited to, those discussed in
this annual report.

Overview

The Company was incorporated in the Province of British Columbia on March 2, 2005, under the name Lightning Ridge Resources Inc. On February 21, 2007, we changed our name to New Fuel Systems Inc. to better reflect our emerging business plan of
constructing plants for the conversion of waste plastic to oil based fuels.

To date, the Company has not generated significant revenue. Its operating capital has come from sales of its common stock which has been sufficient to keep the Company funded for its low profile operations. However, the Company is now poised to
launch its business plan in a more aggressive manner which will require that additional working capital be raised in order to build out its first plant for the conversion of waste plastic into fuel.

Plan of Operation

Our goal is to be an industry leader in Canada and the U.S. in the emerging industry of converting waste plastics heretofore destined for the landfill into clean burning fuel. To achieve our goal, we plan to construct a flagship plant in the
Vancouver, British Columbia area that will accomplish the conversion process and allow us to market the resultant fuel. If successful, we will then build similar plants in other areas of Canada and the U.S. that appear conducive to having available
waste plastics and a market for the resultant fuel. We plan to expand our operations by building new plants as quickly as business revenues and capital availability allow and as new markets suggest commercial viability for our conversion plants. We
have spent significant time researching the conversion of waste plastics into fuel, researching the building and operating of a plastics-to-oil plant, experimentation with our prototype machine in actually converting plastic into oil, and the
development of our business plan and the development of our business strategy. The construction of our initial plant in Vancouver will be the beginning of our post research and post planning business operations.

---

Note 1 to the audited financial statements which are a part of
this annual report state in part: The ability of the Company to carry out its
business objectives is dependent upon the Companys ability to receive continued
financial support from related parties or by obtaining public equity financing
and to develop its business plan resulting in the generation of profitable
operations in the future or by identifying, evaluating and negotiating an
acquisition of, a participation in, or an investment of an interest in a
technology or business that will generate profitable operations in the future.
Since the Company has yet to generate other than nominal revenues or to engage
in business operations that could generate business revenue in the near term, it
is necessary for the Company to continue to raise money through the sale of
equity capital to sustain its business existence. In addition, if the Company is
not successful in furthering its business development to where it can generate
revenue from business operations, in the long run it will not succeed as a
business.

At the present time we have approximately $430,000 in cash on
hand. Our monthly fixed costs of operating our business including management
expenses, rent, utilities, office supplies and other miscellaneous payments
total around $10,000 per month. We estimate that the additional costs of
operating our business due to the fact we are going public and will have
transfer agent costs and also the costs of being a reporting company pursuant to
the United States Securities Exchange Act of 1934 and the attendant accounting
and legal costs will be approximately $4,000 per month. Pursuant to these
estimates, we have cash on hand to operate New Fuel Systems as a public company
for approximately 3 years. The expense of pursuing our business plan will be met
by raising working capital through the sale of equity capital.

Our plan of operations for the next 15 months is to first
complete the process of going public by obtaining a trading symbol for our
common stock on the OTC Markets System. Then we will attempt to raise working
capital through the sale of equity capital for the purpose of constructing our
first plant for converting plastics into oil. At this point our first order of
business will be to order machinery that needs to be built for the operation of
our plant that has a start to finish delivery date of six months. At the same
time we will begin the process of obtaining a suitable site for the plant. We
plan on obtaining an existing building that has enough warehouse type space for
the production equipment, office space, and outside space for storage tanks and
parking. We have several potential sites in mind and believe we can secure a
site in approximately 30 days. Once a site is obtained we will begin the process
of obtaining the necessary licenses to operate our business on the site. This is
expected to take 30 to 45 days to complete. We will then complete the purchasing
and installation of equipment and commence operations. From start to finish, the
activities described in this paragraph are expected to take 15 months. By the
end of the 15 months, we will have spent $210,000 of our current cash position
of $430,000 and will have needed to raise and then spend $9,445,000.

We will need to raise working capital through the sale of our
common stock sufficient to construct our initial plant and subsequent plants
until we can sustain business growth and operations through business
revenues.

We also plan to move forward as we can in developing long range
electric-based power generation for automobiles with battery extenders through
our subsidiary Electric City Motors Corp. and to develop technology for water
treatment and purification through our subsidiary Water Evolution Systems Inc.
Even though these subsidiaries have been formed, they have been inactive since
incorporation and have yet to commence meaningful business operations. We do not
plan on using any of our current cash to develop the businesses of these
subsidiaries but will seek outside investment or borrowings when we are ready to
proceed.

Results of Operations

Comparison of the fiscal year ended December 31, 2015 and
December 31, 2014.

Financial Information

2015
    2014Revenue
    $                        
       -
    $                        
       -Investor relations and business promotion
      expense
    8,652
    40,976Professional fees
    58,242
    62,230Management fees
    96,000
    96,000Travel and automobile expenses
    8,266
    10,384Net (loss)
    $         
       (244,834 )
    $         
       (324,104 )


---

In 2015, Company expenses decreased by $35,151 from 2014,
primarily as a result of the Company spending $32,324 less on Investor relations
and filing fees. The net loss for 2015 was also decreased from that for 2014 as
a result of the write of in 2014 of an available for sale security in the amount
of $46,246.

Liquidity and Capital Resources relative to year end
December 31, 2015

We had a cash balance of $439,461 on December 31, 2015, which
was down from a cash balance of $476,288 on December 31, 2014. Historically, our
principal source of funds has been cash generated from financing activities.
During 2015 we raised $194,225 as a result of the sale of 353,575 shares of
common stock.

Cash flow from operations. We have not as yet generated
cash flow from business operations. We anticipate that cash flows necessary to
fund our business operations will continue to come from financing activities for
the next twelve-month period.

Variables and Trends

We have no operating history with respect to our current
business plan. In the event we are able to obtain the necessary financing to
move forward with our business plan, we expect our expenses to increase
significantly as we grow our business. Accordingly, the comparison of the
financial data for the periods presented may not be a meaningful indicator of
our future performance and must be considered in light these circumstances.

Significant Accounting Policies

(a) Foreign currency

Transactions in foreign currencies are translated at the
exchange rate in effect at the date of the transaction. Foreign denominated
monetary assets and liabilities are translated to their Canadian dollar
equivalents using foreign exchange rates prevailing at the financial position
reporting date. Exchange gains or losses arising on foreign currency translation
are reflected in profit and loss for the period.

Non-monetary assets and liabilities that are measured at
historical cost are translated into Canadian dollars by using the exchange rate
in effect at the date of the initial transaction and are not subsequently
restated. Non-monetary assets and liabilities that are measured at fair value or
a revalue amount are translated into Canadian dollars by using the exchange rate
in effect at the date the value is determined and the related translation
differences are recognized in net income (loss) or other comprehensive net
(loss) consistent with where the gain or loss on the underlying non-monetary
asset or liability has been recognized.

(b) Cash

Cash consist of deposits in banks.

(c) Financial instruments

(i) Financial assets

Fair value through profit or
loss  This category comprises derivatives, or assets acquired or incurred
principally for the purpose of selling or repurchasing it in the near term. They
are carried in the statement of financial position at fair value with changes in
fair value recognized in the statement of operations and comprehensive loss.

Loans and receivables  These
assets are non-derivative financial assets with fixed or determinable payment
that are not quoted in an active market. They are carried at cost less any
provision for impairment. Individually significant receivables are considered
for impairment when they are past due or when other objective evidence is
received that a specific counterparty will default.

---

Held-to-maturity investments 
These assets are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Companys management has the positive
intention and ability to hold to maturity. These assets are measured at
amortized cost using the effective interest method. If there is objective
evidence that the investment is impaired, determined by reference to external
credit ratings and other relevant indicators, the financial asset is measured at
the present value of estimated future cash flows. Any changes to the carrying
amount of the investment, including impairment losses, are recognized in the
statements of operations and comprehensive loss.

Available-for-sale 
Non-derivative financial assets not included in the above categories are
classified as available-for-sale. They are carried at fair value with changes in
fair value recognized directly in equity. Where a decline in the fair value of
an available-for-sale financial asset constitutes objective evidence of
impairment, the amount of the loss is removed from equity and recognized in the
statement of operations and comprehensive loss.

All financial assets, except those at
fair value through profit or loss, are subject to review for impairment at least
at each reporting date. Financial assets are impaired when there is objective
evidence that a financial asset or a group of financial assets is impaired.
Different criteria are applied for each category of financial assets described
above to determine impairment.

(ii) Financial liabilities

The Company classifies its financial
liabilities into one of two categories, depending on the purpose for which the
asset was acquired. The Companys accounting policy for each category is as
follows:

Fair value through profit or
loss  This category comprises derivatives or liabilities acquired or
incurred principally for the purpose of selling or repurchasing it in the near
term. They are carried in the statement of financial position at fair value with
changes in fair value recognized in the statement of operations and
comprehensive loss.

Other financial liabilities 
This category includes due to related party and trade and other payables, all of
which are recognized at amortized cost.

(d) Share capital

Common shares

Common shares are classified as equity.
Incremental costs directly attributable to the issue of common shares and share
options are recognized as a deduction from equity, net of any tax effects.

(e) Equipment

Equipment is recorded at cost, net of
accumulated amortization. Depreciation is calculated on a straight line basis
over the estimated useful lives.

The estimated useful lives are as
follows:

Computer equipment
    3 yearsOffice equipment
    5 yearsMachinery equipment
    5 years


Depreciation methods, useful lives and
residual values are reviewed at each financial year end and adjusted if
appropriate.

(f) Impairment

(i) Financial assets

---

A financial asset not carried at fair
value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has occurred after
the initial recognition of the asset, and that the loss event had a negative
effect on the estimated future cash flows of that asset that can be estimated
reliably.

Objective evidence that financial
assets (including equity securities) are impaired can include default or
delinquency by a debtor, restructuring of an amount due to the Company on terms
that the Company would not consider otherwise, indications that a debtor or
issuer will enter bankruptcy, or the disappearance of an active market for a
security. In addition, for an investment in an equity security, a significant or
prolonged decline in its fair value below its cost is objective evidence of
impairment.

The Company considers evidence of
impairment for receivables at both a specific asset and collective level. All
individually significant receivables are assessed for specific impairment. All
individually significant receivables found not to be specifically impaired are
then collectively assessed for any impairment that has been incurred but not yet
identified. Receivables that are not individually significant are collectively
assessed for impairment by grouping together receivables with similar risk
characteristics.

In assessing collective impairment, the
Company uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for managements judgement
as to whether current economic and credit conditions are such that the actual
losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a
financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash
flows discounted at the assets original effective interest rate. Losses are
recognized in profit or loss and reflected in an allowance account against
receivables. Interest on the impaired asset continues to be recognized through
the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through
profit or loss.

Impairment losses on available-for-sale
investment securities are recognized by transferring the cumulative loss that
has been recognized in other comprehensive income, and presented in unrealized
gains/losses on available-for-sale financial assets in equity, to profit or
loss. The cumulative loss that is removed from other comprehensive income and
recognized in profit or loss is the difference between the acquisition cost, net
of any principal repayment and amortization, and the current fair value, less
any impairment loss previously recognized in profit or loss. Changes in
impairment provisions attributable to time value are reflected as a component of
interest income.

If, in a subsequent period, the fair
value of an impaired available-for-sale equity security increases and the
increase can be related objectively to an event occurring after the impairment
loss was recognized in profit or loss, then the impairment loss is reversed,
with the amount of the reversal recognized in profit or loss. However, any
subsequent recovery in the fair value of an impaired available-for-sale equity
security is recognized in other comprehensive income.

(ii) Non-financial assets

The Company reviews and evaluates its
property and equipment for indications of impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable
or at least at the end of each reporting period. The assets recoverable amount
is estimated if an indication of impairment exists.

Impairment loss is recognized when the
carrying amount of an asset exceeds its recoverable amount. For an asset that
does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. The
cash-generating unit is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows of other assets or
groups of assets. Future cash flows are estimated based on expected future
production, commodity prices, operating costs and capital costs.

---

The recoverable amount is the greater
of the assets fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects the current market assessment
of the time value of money and the risks specific to the asset.

Impairment losses reducing the carrying
value to the recoverable amount are recognized in profit and loss.

An impairment loss is reversed if there
is an indication that there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that
the assets carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation, if no impairment loss had been recognized.

(g) Income tax

Income tax expense comprises current and deferred tax. Current
tax and deferred tax are recognized in profit or loss except to the extent that
it relates to a business combination, or items recognized directly in equity or
in other comprehensive income.

Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.

Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss, and differences
relating to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future.
In addition, deferred tax is not recognized for taxable temporary differences
arising on the initial recognition of goodwill. Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which they can be
utilized. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realized.

(h) Earnings per share

The Company presents basic and diluted earnings per share
(EPS) data for its common shares. Basic EPS is calculated by dividing the
profit or loss attributable to common shareholders of the Company by the
weighted average number of common shares outstanding during the period, adjusted
for own shares held. Diluted EPS is determined by adjusting the profit or loss
attributable to common shareholders and the weighted average number of common
shares outstanding, adjusted for own shares held, for the effects of all
dilutive potential common shares, which comprise share options granted to
employees.

(i) Comprehensive Income (Loss)

Comprehensive income (loss) is the overall change in the net
assets of the Company for a period, other than changes attributable to
transactions with shareholders. It is made up of net income (loss) and other
comprehensive income (loss). The historical make up of net income (loss) has not
changed. Other comprehensive income (loss) includes gains or losses, which
generally accepted accounting principles requires be recognizing in a period,
but excluding from net income for that period.

---

(j) Related Party Transactions

Parties are considered to be related if one party has the ability, directly or indirectly, to control the other party or exercise significant influence over the other party in making financial and operating decisions. Parties are also considered to
be related if they are subject to common control, related parties may be individuals or corporate entities. A transaction is considered to be a related party transaction when there is a transfer of resources or obligations between related parties.

(k) Deferred charge

Costs directly identifiable with the raising of capital will be charged against the related capital stock. Costs related to shares not yet issued are recorded as deferred charge. These costs will be deferred until the issuance of the shares to which
the costs relate, at which time the costs will be charged against the related capital stock or charged to operations if the shares are not issued.

(l) Adoption of new accounting standards and amendments

The standards that were adopted for the period beginning on January 1, 2015 or earlier had no effect on the Company’s financial statements for the periods presented, as a result, none of the standards are disclosed.

(m) New and Revised IFRS Issued but Not Effective

Standards issued but not yet effective up to the date of issuance of the Company’s consolidated financial statements are listed below. This listing is of standards and interpretations issued, which the Company reasonably expects to be
applicable at a future date. The Company intends to adopt those standards when they become effective. The Company does not expect the impact of such changes on the consolidated financial statements to be material.

IFRS 9 Financial instruments (“IFRS 9”)

IFRS 9 was issued in November 2009 and subsequently amended as part of an ongoing project to replace IAS 39 Financial instruments: Recognition and measurement. The standard requires the classification of financial assets into two measurement
categories based on the entity’s business model for managing its financial instruments and the contractual cash flow characteristics of the instrument. The two categories are those measured at fair value and those measured at amortized cost.
The classification and measurement of financial liabilities is primarily unchanged from IAS 39. However, for financial liabilities measured at fair value, changes in the fair value attributable to changes in an entity’s “own credit
risk” is now recognized in other comprehensive income instead of in profit or loss. This new standard will also impact disclosures provided under IFRS 7 Financial instruments: disclosures.

In November 2013, the IASB amended IFRS 9 for the significant changes to hedge accounting. In addition, an entity can now apply the “own credit requirement” in isolation without the need to change any other accounting for financial
instruments. IFRS 9 applies to financial statements for annual periods beginning on or after January 1, 2018, with early adoption permitted.

IFRS 15 Revenue from Contracts with Customers (“IFRS 15”)

IFRS 15 deals with revenue recognition and establishes principles for reporting useful information to users of financial statements about the nature, timing and uncertainty of revenue and cash flows arising from an entity’s contracts with
customers. Under IFRS 15, revenue is recognized when a customer obtains control of a good or service and thus has the ability to direct the use and obtain the benefits from the good or service. The standard replaces IAS 18, Revenue, and IAS 11,
Construction Contracts, and related interpretations. The standard is effective for annual periods beginning on or after January 1, 2017, with early adoption permitted. The IASB has issued an exposure draft that would, if approved defer the effective
date to January 1, 2018.

---

Off Balance Sheet Arrangements

We have no off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition,
changes in financial condition, revenues or expenses, results of operations,
liquidity, capital expenditures or capital resources that are material to
investors.2015.

ITEM 7A: QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK

Not required for smaller reporting companies.

ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA







New Fuel Systems Inc.

Consolidated Financial Statements(Expressed in Canadian Dollars)

Years Ended December 31, 2015 and 2014







---

Managements Responsibility for Financial Reporting

Management is responsible for the preparation and presentation
of the accompanying consolidated financial statements, including responsibility
for significant accounting judgments and estimates in accordance with
International Financial Reporting Standards and ensuring that all information in
the annual report is consistent with the statements. This responsibility
includes selecting appropriate accounting principles and methods, and making
decisions affecting the measurement of transactions in which objective judgment
is required.

In discharging its responsibilities for the integrity and
fairness of the consolidated financial statements, management designs and
maintains the necessary accounting systems and related internal controls to
provide reasonable assurance that transactions are authorized, assets are
safeguarded and financial records are properly maintained to provide reliable
information for the preparation of consolidated financial statements.

The Board of Directors and Audit Committee are composed
primarily of Directors who are neither management nor employees of the Company.
The Board is responsible for overseeing management in the performance of its
financial reporting responsibilities, and for approving the financial
information included in the annual report. The Board fulfils these
responsibilities by reviewing the financial information prepared by management
and discussing relevant matters with management and external auditors. The Audit
Committee has the responsibility of meeting with management and external
auditors to discuss the internal controls over the financial reporting process,
auditing matters and financial reporting issues. The Board of Directors is also
responsible for recommending the appointment of the Company's external auditors.

MNP LLP is appointed by the shareholders to audit the
consolidated financial statements and report directly to them; their report
follows. The external auditors have full and free access to, and meet
periodically and separately with, both the Audit Committee and management to
discuss their audit findings.



April 14, 2016



|Karen Hartlin         | Douglas Myrdal       
|----------------------- | -----------------------
|Chief Executive Officer | Chief Financial Officer

---



INDEPENDENT AUDITORS REPORT



To the Directors of New Fuel Systems Inc.:

We have audited the consolidated financial statements of New
Fuel Systems Inc. (the Company), which comprise the consolidated statements of
financial position as at December 31, 2015 and 2014, and the consolidated
statements of operations and comprehensive loss, changes in equity, and cash
flows for the years then ended and a summary of significant accounting policies
and other explanatory information.

Managements Responsibility for the Consolidated
Financial Statements

Management is responsible for the preparation and fair
presentation of these consolidated financial statements in accordance with
International Financial Reporting Standards (IFRS) as issued by the
International Accounting Standards Board, and for such internal control as
management determines is necessary to enable the preparation of consolidated
financial statements that are free from material misstatement, whether due to
fraud or error.

Auditors Responsibility

Our responsibility is to express an opinion on these
consolidated financial statements based on our audits. We conducted our audits
in accordance with Canadian generally accepted auditing standards and the
standards of the Public Company Accounting Oversight Board (United States).
Those standards require that we comply with ethical requirements and plan and
perform an audit to obtain reasonable assurance about whether the consolidated
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit
evidence about the amounts and disclosures in the financial statements. The
procedures selected depend on our judgment, including the assessment of the
risks of material misstatement of the consolidated financial statements, whether
due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the Companys preparation and fair presentation of
the consolidated financial statements in order to design 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. An audit also
includes evaluating the appropriateness of accounting policies used and the
reasonableness of accounting estimates made by management, as well as evaluating
the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained in our
audits is sufficient and appropriate to provide a basis for our audit
opinion.

Opinion

In our opinion, the consolidated financial statements present
fairly, in all material respects, the financial position of the Company as at
December 31, 2015 and 2014, and its financial performance and its cash flows for
the years then ended in accordance with International Financial Reporting
Standards as issued by the International Accounting Standards Board.



|Vancouver, BC, Canada |                                         
|--------------------- | ----------------------------------------
|April 14, 2016        | Chartered Professional
      Accountants



---

NEW FUEL SYSTEMS INC.Consolidated Statements of
Financial PositionDecember 31, 2015 and 2014

|Stated in
      Canadian dollars                                  |  | Notes |  |   | 2015       |   |   | 2014       |  
|----------------------------------------------------------------- |  | ----- |  | - | ---------- | - | - | ---------- | -
|                                                                  |  |       |  |   |            |   |   |            |  
|                                                                  |  |       |  |   |            |   |   |            |  
|ASSETS                                                            |  |       |  |   |            |   |   |            |  
|Current assets                                                    |  |       |  |   |            |   |   |            |  
|Cash                                                              |  |       |  | $ | 439,461    |   | $ | 476,288    |  
|Available-for-sale securities                                     |  | 5     |  |   | 331,606    |   |   | 271,009    |  
|Prepaid expenses                                                  |  | 6     |  |   | 47,416     |   |   | 920        |  
|Total current
      assets                                        |  |       |  |   | 818,483    |   |   | 748,217    |  
|                                                                  |  |       |  |   |            |   |   |            |  
|Deferred charge                                                   |  | 9     |  |   | -          |   |   | 4,000,000  |  
|Equipment                                                         |  | 4     |  |   | 6,819      |   |   | 8,069      |  
|Total
      assets                                                |  |       |  | $ | 825,302    |   | $ | 4,756,286  |  
|                                                                  |  |       |  |   |            |   |   |            |  
|LIABILITIES AND SHAREHOLDERS' EQUITY                              |  |       |  |   |            |   |   |            |  
|                                                                  |  |       |  |   |            |   |   |            |  
|LIABILITIES                                                       |  |       |  |   |            |   |   |            |  
|Current liabilities                                               |  |       |  |   |            |   |   |            |  
|Trade and other payables                                          |  | 7     |  | $ | 27,319     |   | $ | 27,338     |  
|Due to related party                                              |  | 12    |  | $ | 58,258     |   |   | 71,211     |  
|Total current
      liabilities                                   |  |       |  |   | 85,577     |   |   | 98,549     |  
|                                                                  |  |       |  |   |            |   |   |            |  
|Shareholders' Equity                                              |  |       |  |   |            |   |   |            |  
|Share capital                                                     |  | 8     |  |   | 1,899,300  |   |   | 5,705,075  |  
|Contributed surplus                                               |  |       |  |   | 69,970     |   |   | -          |  
|Accumulated other comprehensive
      income                      |  |       |  |   | 273,224    |   |   | 212,627    |  
|Deficit                                                           |  |       |  |   | (1,503,670 | ) |   | (1,259,965 | )
|Total deficit attributable to equity
      holders of the Company |  |       |  |   | 738,824    |   |   | 4,657,737  |  
|Non-controlling
      interest                                    |  |       |  |   | 901        |   |   | -          |  
|Total shareholders' equity                                        |  |       |  |   | 739,725    |   |   | 4,657,737  |  
|                                                                  |  |       |  |   |            |   |   |            |  
|Total liabilities and shareholders' equity                        |  |       |  | $ | 825,302    |   | $ | 4,756,286  |  
|                                                                  |  |       |  |   |            |   |   |            |  
|Going concern (note 1)                                            |  |       |  |   |            |   |   |            |  

APPROVED BY THE DIRECTORS

|/s/ Douglas
      Myrdal |  | /s/
      Robert Intile
|------------------------ |  | -----------------------
|Director                 |  | Director               

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

---

NEW FUEL SYSTEMS INC.Consolidated Statements of
Operations and Comprehensive LossFor the years ended December 31,
2015 and 2014

|Stated in
      Canadian dollars, except for share amounts |  | Notes |  |   | 2015       |   |   | 2014       |  
|---------------------------------------------------------- |  | ----- |  | - | ---------- | - | - | ---------- | -
|                                                           |  |       |  |   |            |   |   |            |  
|Expenses                                                   |  |       |  |   |            |   |   |            |  
|Amortization - equipment                                   |  |       |  | $ | 2,618      |   | $ | 2,095      |  
|Bank charge                                                |  |       |  |   | 580        |   |   | 223        |  
|Investor relations and filing fee                          |  |       |  |   | 8,652      |   |   | 40,976     |  
|Advertising and promotion                                  |  |       |  |   | 6,441      |   |   | -          |  
|Professional fees                                          |  |       |  |   | 58,242     |   |   | 62,230     |  
|Office and miscellaneous                                   |  |       |  |   | 9,506      |   |   | 8,548      |  
|Management fees                                            |  | 12    |  |   | 96,000     |   |   | 96,000     |  
|Rent                                                       |  | 12    |  |   | 13,200     |   |   | 13,200     |  
|Travel and automobile expenses                             |  |       |  |   | 8,266      |   |   | 10,384     |  
|Stock based
      compensation                             |  | 12    |  |   | 40,000     |   |   | 45,000     |  
|                                                           |  |       |  |   | 243,505    |   |   | 278,656    |  
|                                                           |  |       |  |   |            |   |   |            |  
|Other items                                                |  |       |  |   |            |   |   |            |  
|Foreign exchange gain (loss)                               |  |       |  |   | (1,329     | ) |   | 798        |  
|Available-for-sale security written off                    |  |       |  |   | -          |   |   | (46,246    | )
|Net loss for
      the year                                |  |       |  |   | (244,834   | ) |   | (324,104   | )
|Unrealized gain on available-for-sale securities           |  |       |  |   | 60,597     |   |   | 256,930    |  
|Comprehensive
      loss for the year                      |  |       |  | $ | (184,237   | ) | $ | (67,174    | )
|                                                           |  |       |  |   |            |   |   |            |  
|Loss attributable to:                                      |  |       |  |   |            |   |   |            |  
|Owners of the company                                      |  |       |  | $ | (243,705   | ) | $ | (324,104   | )
|Non-controlling interest                                   |  |       |  |   | (1,129     | ) |   | -          |  
|Net loss for the year                                      |  |       |  | $ | (244,834   | ) | $ | (324,104   | )
|                                                           |  |       |  |   |            |   |   |            |  
|Comprehensive loss attributable to:                        |  |       |  |   |            |   |   |            |  
|Owners of the company                                      |  |       |  | $ | (183,108   | ) | $ | (67,174    | )
|Non-controlling interest                                   |  |       |  |   | (1,129     | ) |   | -          |  
|Comprehensive
      loss for the year                      |  |       |  | $ | (184,237   | ) | $ | (67,174    | )
|                                                           |  |       |  |   |            |   |   |            |  
|Basic and
      diluted loss per share                     |  |       |  | $ | (0.01      | ) | $ | (0.01      | )
|                                                           |  |       |  |   |            |   |   |            |  
|Weighted average number of common shares                   |  |       |  |   |            |   |   |            |  
|Basic and diluted                                          |  |       |  |   | 46,395,404 |   |   | 47,221,174 |  

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

---

NEW FUEL SYSTEMS INC.Consolidated Statements of
Cash FlowsFor the years ended December 31, 2015 and 2014

|Stated in
      Canadian dollars                           |   | 2015     |   |   | 2014     |  
|---------------------------------------------------------- | - | -------- | - | - | -------- | -
|                                                           |   |          |   |   |          |  
|Cash flows used in operating
      activities              |   |          |   |   |          |  
|Loss for the year                                          | $ | (244,834 | ) | $ | (324,104 | )
|Adjustments for non-cash items:                            |   |          |   |   |          |  
|Amortization - equipment                                   |   | 2,618    |   |   | 2,095    |  
|Available-for-sale
      security written off              |   | -        |   |   | 46,246   |  
|Stock based compensation                                   |   | 40,000   |   |   | 45,000   |  
|                                                           |   |          |   |   |          |  
|Changes in non-cash working capital items:                 |   |          |   |   |          |  
|Changes in prepaid expenses                                |   | (46,496  | ) |   | 41,408   |  
|Changes in trade and other payable                         |   | (19      | ) |   | 23,273   |  
|Net cash used in operating activities                      |   | (248,731 | ) |   | (166,082 | )
|                                                           |   |          |   |   |          |  
|Cash flows used in investing
      activities              |   |          |   |   |          |  
|Additions to
      equipment                               |   | (1,368   | ) |   | (7,500   | )
|Net cash used in investing activities                      |   | (1,368   | ) |   | (7,500   | )
|                                                           |   |          |   |   |          |  
|Cash flows from financing activities                       |   |          |   |   |          |  
|Due to related party                                       |   | (12,953  | ) |   | (7,799   | )
|Proceeds from shares issued                                |   | 194,225  |   |   | 199,980  |  
|Proceeds
      from shares issued to minority shareholders |   | 32,000   |   |   | -        |  
|Net cash from financing activities                         |   | 213,272  |   |   | 192,181  |  
|                                                           |   |          |   |   |          |  
|Increase(decrease) in cash                                 |   | (36,827  | ) |   | 18,599   |  
|                                                           |   |          |   |   |          |  
|Cash at beginning of the year                              |   | 476,288  |   |   | 457,689  |  
|                                                           |   |          |   |   |          |  
|Cash at end of the year                                    | $ | 439,461  |   | $ | 476,288  |  

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

---

NEW FUELSYSTEMSINC.ConsolidatedStatementsof Changes inShareholders'EquityFor the years endedDecember31, 2015 and 2014

|                                                          |  | Attributable to equity holders of the Company |   |   |            |   |   |             | 
|--------------------------------------------------------- |  | --------------------------------------------- | - | - | ---------- | - | - | ----------- | 
|                                                          |  |                                               |   |   |            |   |   |             | 
|                                                          |  |                                               |   |   |            |   |   |             | 
|                                                          |  | Number of                                     |   |   | Share      |   |   | Contributed | 
|Stated in Canadian dollars, except for share amoun        |  | shares                                        |   |   | capital    |   |   | surplus     | 
|                                                          |  |                                               |   |   |            |   |   |             | 
|Balance, January 1, 2014                                  |  | 46,981,509                                    |   | $ | 5,463,035  |   | $ | -           | 
|                                                          |  |                                               |   |   |            |   |   |             | 
|Share capital received for
      cash                     |  | 477,480                                       |   |   | 197,040    |   |   | -           | 
|Stock based compensation                                  |  | -                                             |   |   | 45,000     |   |   | -           | 
|Available-for-sale security
      written off             |  | -                                             |   |   | -          |   |   | -           | 
|Net loss for the year ended December 31, 2014             |  | -                                             |   |   | -          |   |   | -           | 
|Unrealized gain on available-for-sale securities          |  | -                                             |   |   | -          |   |   | -           | 
|Balance, December 31, 2014                                |  | 47,458,989                                    |   | $ | 5,705,075  |   | $ | -           | 
|                                                          |  |                                               |   |   |            |   |   |             | 
|Share capital received for cash                           |  | 353,575                                       |   |   | 194,225    |   |   | -           | 
|Reversal of the shares issued
      in 2013 as commission |  |                                               |   |   |            |   |   |             | 
|for equity financing                                      |  | (5,340,000                                    | ) |   | (4,000,000 | ) |   | -           | 
|Shares issued to minority
      shareholders              |  | -                                             |   |   | -          |   |   | 69,970      | 
|Net loss for the year ended December 31, 2015             |  | -                                             |   |   | -          |   |   | -           | 
|Unrealized gain on available-for-sale securities          |  | -                                             |   |   | -          |   |   | -           | 
|Balance, December 31, 2015                                |  | 42,472,564                                    |   | $ | 1,899,300  |   | $ | 69,970      | 

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

---

1. Nature of Operations and Going Concern

New Fuel Systems Inc. (the Company) was incorporated under
the British Columbia Business Corporations Act on March 2, 2005 under the name
Lighting Ridge Resources Inc, and changed its name to New Fuel Systems Inc. on
February 21, 2007. The Companys registered office and principal place of
business is Unit 210, 5641 201 Street, Langley, British Columbia, Canada, V3A
8A4. The Companys principle business activity is focusing on the
identification, acquisition, development, and commercialization of renewable,
alternative energy technologies globally.

These consolidated financial statements were authorized for
issue by the Audit Committee and Board of Directors on April 14, 2016.

These consolidated financial statements are prepared on a going
concern basis, which presumes that the Company and its wholly owned subsidiaries
(collectively, the Company) will continue in operation for the foreseeable
future and will be able to realize its assets and discharge its liabilities in
the normal course of business for the foreseeable future.

These consolidated financial statements have been prepared
using accounting principles applicable to a going concern which assumes the
Company will continue in operation for the foreseeable future and will be able
to realize its assets and discharge its liabilities in the normal course of
business rather than through a process of forced liquidation. The ability of the
Company to carry out its business objectives is dependent on the Companys
ability to receive continued financial support from related parties, to obtain
public equity financing, to identify, evaluate and negotiate an acquisition of,
a participation in, or an investment in an interest, and to generate profitable
operations in the future. Such an acquisition will be subject to regulatory
approval and may be subject to shareholder approval. In order to continue as a
going concern and meet its corporate objectives, the Company will require
additional financing through debt or equity issuances or other available means.
There is no assurance that the Company will be able to obtain adequate financing
in the future or that such financing will be on terms advantageous to the
Company. These financial statements do not reflect the adjustments to the
carrying value of assets and liabilities, or the impact on the statement of
operations and comprehensive loss and financial position classifications that
would be necessary were the going concern assumption not appropriate.

As at December 31, 2015, the Company has not generated any
revenue and has incurred an accumulated deficit of $1,503,670 (December 31,
2014: $1,259,965).

2. Basis of Preparation

(a) Statement of compliance

These consolidated financial statements have been prepared in
accordance with International Financial Reporting Standards (IFRS) issued by
the International Accounting Standards Board (IASB) and Interpretations of the
International Financial Reporting Interpretations Committee (IFRIC).

8

---

2. Basis of Preparation - Continued

(b) Basis of measurement

These consolidated financial statements have been prepared on a
historical cost basis except for financial instruments classified as at fair
value through profit or loss and available-for-sale that have been measured at
fair value. In addition, these consolidated financial statements have been
prepared using the accrual basis of accounting, except for cash flow
information.

(c) Principles of consolidation

These consolidated financial statements include the accounts of
the Company and its wholly owned subsidiaries.

Subsidiaries are fully consolidated from the date of
incorporation, being the date on which the Company obtains control and continue
to be consolidated until the date when such control ceases. A summary of the
Companys subsidiaries are as follows:

|                                       |               | Ownership interest
|-------------------------------------- | ------------- | ------------------
|                                       | Country of    | December 31,      
|Name of subsidiaries                   | incorporation | 2015              
|                                       |               |                   
|Electric City Motors
      Corporation | Canada        | 97%               
|Water Evolution Systems Inc.           | Canada        | 100%              

Electric City Motors Corporation (ECM) and Water Evolution
Systems Inc. were incorporated on December 5, 2012 and October 10, 2013
respectively under the Business Corporation Act of British Columbia. Both of
them have been inactive since incorporation.

During the year ended December 31, 2015, ECM issued 144,000
shares for $32,000, representing approximately 3% of the total outstanding
issued shares of ECM as at December 31, 2015.

Inter-company balances and transactions and any unrealized
gains or losses arising from inter-company transactions, are eliminated in
preparing the consolidated financial statements.

(d) Functional and presentation currency

These consolidated financial statements are presented in
Canadian dollars, which is the Companys reporting currency and functional
currency.

(e) Use of estimates and judgements

The preparation of the consolidated financial statements in
conformity with IFRSs requires management to make judgements, estimates and
assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ
from these estimates.

9

---

2. Basis of Preparation - Continued

(e) Use of estimates and judgements - Continued

Estimates and underlying assumptions are reviewed on an ongoing
basis. Revisions to accounting estimates are recognized in the period in which
the estimates are revised and in any future periods affected.

Significant areas requiring the use of management estimates and
assumptions include:

Deferred tax liabilities and assets

Deferred tax liabilities and assets are measured at tax rates
expected in the period during which the asset is realized or the liability is
settled, based on tax rates (and tax laws) that are enacted or substantively
enacted at the end of the reporting period of the financial information. The
measurement of liabilities and deferred tax assets reflects the tax consequences
that result from the manner in which the Company expects, at the end of the
reporting period of the financial information, to recover or settle the carrying
amount of its assets and liabilities.

Measurement of financial instruments at fair value

The Company measures certain of its financial instruments at
fair value. The determination of such fair value is based on the most readily
available market data. When no readily available data is available, management
is required to estimate the fair value of the instrument using various inputs
that are either, directly or indirectly observable, or not based on observable
market data.

Critical accounting judgments are accounting policies that have
been identified as being complex or involving subjective judgments or
assessments. The Company made the following critical accounting judgments:

Going concern

Management has applied judgments in the assessment of the
Companys ability to continue as a going concern when preparing its consolidated
financial statements for the years ended December 31, 2015 and 2014. Management
routinely plans future activities including forecasting future cash flows.
Management has reviewed their plan with the directors and has collectively
formed a judgment that the Company has adequate resources to continue as going
concern for the foreseeable future, which management and the directors have
defined as being at least the next 12 months. In arriving at this judgment,
management has prepared the cash flow projections of the Company, which
incorporates a detailed cash flow modelling from the current financial year
information. Directors have reviewed the cash flow projections provided by
management and have considered the information in relation to the financing
uncertainties in the current economic climate and the financial resources
available to the Company. As a result of the assessment, management concluded
there are no doubts as to the ability of the Company to meet its obligations as
they fall due and, accordingly, the use of accounting principles applicable to a
going concern is appropriate.

10

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3. Significant Accounting Policies

The accounting policies set out below have been applied
consistently to all periods presented in these consolidated financial
statements.

(a) Foreign currency

Transactions in foreign currencies are translated at the
exchange rate in effect at the date of the transaction. Foreign denominated
monetary assets and liabilities are translated to their Canadian dollar
equivalents using foreign exchange rates prevailing at the financial position
reporting date. Exchange gains or losses arising on foreign currency translation
are reflected in profit and loss for the period.

Non-monetary assets and liabilities that are measured at
historical cost are translated into Canadian dollars by using the exchange rate
in effect at the date of the initial transaction and are not subsequently
restated. Non-monetary assets and liabilities that are measured at fair value or
a revalue amount are translated into Canadian dollars by using the exchange rate
in effect at the date the value is determined and the related translation
differences are recognized in net income (loss) or other comprehensive net
(loss) consistent with where the gain or loss on the underlying non-monetary
asset or liability has been recognized.

(b) Cash

Cash consist of deposits in banks.

(c) Financial instruments

(i) Financial assets

Fair value through profit or
loss  This category comprises derivatives, or assets acquired or incurred
principally for the purpose of selling or repurchasing it in the near term. They
are carried in the statement of financial position at fair value with changes in
fair value recognized in the statement of operations and comprehensive loss.

Loans and receivables  These
assets are non-derivative financial assets with fixed or determinable payment
that are not quoted in an active market. They are carried at cost less any
provision for impairment. Individually significant receivables are considered
for impairment when they are past due or when other objective evidence is
received that a specific counterparty will default.

Held-to-maturity investments 
These assets are non-derivative financial assets with fixed or determinable
payments and fixed maturities that the Companys management has the positive
intention and ability to hold to maturity. These assets are measured at
amortized cost using the effective interest method. If there is objective
evidence that the investment is impaired, determined by reference to external
credit ratings and other relevant indicators, the financial asset is measured at
the present value of estimated future cash flows. Any changes to the carrying
amount of the investment, including impairment losses, are recognized in the
statements of operations and comprehensive loss.

11

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3. Significant Accounting Policies - Continued (c) Financial
instruments - Continued

(i) Financial assets - Continued

Available-for-sale 
Non-derivative financial assets not included in the above categories are
classified as available-for-sale. They are carried at fair value with changes in
fair value recognized directly in equity. Where a decline in the fair value of
an available-for-sale financial asset constitutes objective evidence of
impairment, the amount of the loss is removed from equity and recognized in the
statement of operations and comprehensive loss.

All financial assets, except those at
fair value through profit or loss, are subject to review for impairment at least
at each reporting date. Financial assets are impaired when there is objective
evidence that a financial asset or a group of financial assets is impaired.
Different criteria are applied for each category of financial assets described
above to determine impairment.

(ii)Financial liabilities

The Company classifies its financial
liabilities into one of two categories, depending on the purpose for which the
asset was acquired. The Companys accounting policy for each category is as
follows:

Fair value through profit or
loss  This category comprises derivatives or liabilities acquired or
incurred principally for the purpose of selling or repurchasing it in the near
term. They are carried in the statement of financial position at fair value with
changes in fair value recognized in the statement of operations and
comprehensive loss.

Other financial liabilities 
This category includes due to related party and trade and other payables, all of
which are recognized at amortized cost.

(d) Share capital

Common shares

Common shares are classified as equity.
Incremental costs directly attributable to the issue of common shares and share
options are recognized as a deduction from equity, net of any tax effects.

(e) Equipment

Equipment is recorded at cost, net of
accumulated amortization. Depreciation is calculated on a straight line basis
over the estimated useful lives.

The estimated useful lives are as
follows:

Computer equipment
    3 yearsOffice equipment
    5 yearsMachinery equipment
    5 years


12

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3. Significant Accounting Policies  Continued

(e) Equipment- Continued

Depreciation methods, useful lives and
residual values are reviewed at each financial year end and adjusted if
appropriate.

(f) Impairment

(i) Financial assets

A financial asset not carried at fair
value through profit or loss is assessed at each reporting date to determine
whether there is objective evidence that it is impaired. A financial asset is
impaired if objective evidence indicates that a loss event has occurred after
the initial recognition of the asset, and that the loss event had a negative
effect on the estimated future cash flows of that asset that can be estimated
reliably.

Objective evidence that financial
assets (including equity securities) are impaired can include default or
delinquency by a debtor, restructuring of an amount due to the Company on terms
that the Company would not consider otherwise, indications that a debtor or
issuer will enter bankruptcy, or the disappearance of an active market for a
security. In addition, for an investment in an equity security, a significant or
prolonged decline in its fair value below its cost is objective evidence of
impairment.

The Company considers evidence of
impairment for receivables at both a specific asset and collective level. All
individually significant receivables are assessed for specific impairment. All
individually significant receivables found not to be specifically impaired are
then collectively assessed for any impairment that has been incurred but not yet
identified. Receivables that are not individually significant are collectively
assessed for impairment by grouping together receivables with similar risk
characteristics.

In assessing collective impairment, the
Company uses historical trends of the probability of default, timing of
recoveries and the amount of loss incurred, adjusted for managements judgement
as to whether current economic and credit conditions are such that the actual
losses are likely to be greater or less than suggested by historical trends.

An impairment loss in respect of a
financial asset measured at amortized cost is calculated as the difference
between its carrying amount and the present value of the estimated future cash
flows discounted at the assets original effective interest rate. Losses are
recognized in profit or loss and reflected in an allowance account against
receivables. Interest on the impaired asset continues to be recognized through
the unwinding of the discount. When a subsequent event causes the amount of
impairment loss to decrease, the decrease in impairment loss is reversed through
profit or loss.

13

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3. Significant Accounting Policies - Continued

(f) Impairment - Continued

Impairment losses on available-for-sale
investment securities are recognized by transferring the cumulative loss that
has been recognized in other comprehensive income, and presented in unrealized
gains/losses on available-for-sale financial assets in equity, to profit or
loss. The cumulative loss that is removed from other comprehensive income and
recognized in profit or loss is the difference between the acquisition cost, net
of any principal repayment and amortization, and the current fair value, less
any impairment loss previously recognized in profit or loss. Changes in
impairment provisions attributable to time value are reflected as a component of
interest income.

If, in a subsequent period, the fair
value of an impaired available-for-sale equity security increases and the
increase can be related objectively to an event occurring after the impairment
loss was recognized in profit or loss, then the impairment loss is reversed,
with the amount of the reversal recognized in profit or loss. However, any
subsequent recovery in the fair value of an impaired available-for-sale equity
security is recognized in other comprehensive income.

(ii) Non-financial assets

The Company reviews and evaluates its
property and equipment for indications of impairment when events or changes in
circumstances indicate that the related carrying amount may not be recoverable
or at least at the end of each reporting period. The assets recoverable amount
is estimated if an indication of impairment exists.

Impairment loss is recognized when the
carrying amount of an asset exceeds its recoverable amount. For an asset that
does not generate largely independent cash inflows, the recoverable amount is
determined for the cash-generating unit to which the asset belongs. The
cash-generating unit is the smallest identifiable group of assets that generates
cash inflows that are largely independent of the cash inflows of other assets or
groups of assets. Future cash flows are estimated based on expected future
production, commodity prices, operating costs and capital costs.

The recoverable amount is the greater
of the assets fair value less costs to sell and value in use. In assessing
value in use, the estimated future cash flows are discounted to their present
value using a pre-tax discount rate that reflects the current market assessment
of the time value of money and the risks specific to the asset.

Impairment losses reducing the carrying
value to the recoverable amount are recognized in profit and loss.

An impairment loss is reversed if there
is an indication that there has been a change in the estimates used to determine
the recoverable amount. An impairment loss is reversed only to the extent that
the assets carrying amount does not exceed the carrying amount that would have
been determined, net of depreciation, if no impairment loss had been recognized.

14

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3. Significant Accounting Policies - Continued

(g) Income tax

Income tax expense comprises current and deferred tax. Current
tax and deferred tax are recognized in profit or loss except to the extent that
it relates to a business combination, or items recognized directly in equity or
in other comprehensive income.

Current tax is the expected tax payable or receivable on the
taxable income or loss for the year, using tax rates enacted or substantively
enacted at the reporting date, and any adjustment to tax payable in respect of
previous years.

Deferred tax is recognized in respect of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for the following temporary differences: the initial recognition of
assets or liabilities in a transaction that is not a business combination and
that affects neither accounting nor taxable profit or loss, and differences
relating to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future.
In addition, deferred tax is not recognized for taxable temporary differences
arising on the initial recognition of goodwill. Deferred tax is measured at the
tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by
the reporting date. Deferred tax assets and liabilities are offset if there is a
legally enforceable right to offset current tax liabilities and assets, and they
relate to income taxes levied by the same tax authority on the same taxable
entity, or on different tax entities, but they intend to settle current tax
liabilities and assets on a net basis or their tax assets and liabilities will
be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax
credits and deductible temporary differences, to the extent that it is probable
that future taxable profits will be available against which they can be
utilized. Deferred tax assets are reviewed at each reporting date and are
reduced to the extent that it is no longer probable that the related tax benefit
will be realized.

(h) Earnings per share

The Company presents basic and diluted earnings per share
(EPS) data for its common shares. Basic EPS is calculated by dividing the
profit or loss attributable to common shareholders of the Company by the
weighted average number of common shares outstanding during the period, adjusted
for own shares held. Diluted EPS is determined by adjusting the profit or loss
attributable to common shareholders and the weighted average number of common
shares outstanding, adjusted for own shares held, for the effects of all
dilutive potential common shares, which comprise share options granted to
employees.

(i)Comprehensive Income (Loss)

Comprehensive income (loss) is the overall change in the net
assets of the Company for a period, other than changes attributable to
transactions with shareholders. It is made up of net income (loss) and other
comprehensive income (loss). The historical make up of net income (loss) has not
changed. Other comprehensive income (loss) includes gains or losses, which
generally accepted accounting principles requires be recognizing in a period,
but excluding from net income for that period.

15

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3. Significant Accounting Policies - Continued

(j)Related Party Transactions

Parties are considered to be related if one party has the
ability, directly or indirectly, to control the other party or exercise
significant influence over the other party in making financial and operating
decisions. Parties are also considered to be related if they are subject to
common control, related parties may be individuals or corporate entities. A
transaction is considered to be a related party transaction when there is a
transfer of resources or obligations between related parties.

(k)Deferred charge

Costs directly identifiable with the raising of capital will be
charged against the related capital stock. Costs related to shares not yet
issued are recorded as deferred charge. These costs will be deferred until the
issuance of the shares to which the costs relate, at which time the costs will
be charged against the related capital stock or charged to operations if the
shares are not issued.

(l)Adoption of new accounting
standards and amendments

The standards that were adopted for the period beginning on
January 1, 2015 or earlier had no effect on the Companys financial statements
for the periods presented, as a result, none of the standards are disclosed.

(m)New and Revised IFRS Issued
but Not Effective

Standards issued but not yet effective up to the date of
issuance of the Companys consolidated financial statements are listed below.
This listing is of standards and interpretations issued, which the Company
reasonably expects to be applicable at a future date. The Company intends to
adopt those standards when they become effective. The Company does not expect
the impact of such changes on the consolidated financial statements to be
material.

IFRS 9 Financial instruments (IFRS 9)

IFRS 9 was issued in November 2009 and subsequently amended as
part of an ongoing project to replace IAS 39 Financial instruments: Recognition
and measurement. The standard requires the classification of financial assets
into two measurement categories based on the entitys business model for
managing its financial instruments and the contractual cash flow characteristics
of the instrument. The two categories are those measured at fair value and those
measured at amortized cost. The classification and measurement of financial
liabilities is primarily unchanged from IAS 39. However, for financial
liabilities measured at fair value, changes in the fair value attributable to
changes in an entitys own credit risk is now recognized in other
comprehensive income instead of in profit or loss. This new standard will also
impact disclosures provided under IFRS 7 Financial instruments: disclosures.

In November 2013, the IASB amended IFRS 9 for the significant
changes to hedge accounting. In addition, an entity can now apply the own
credit requirement in isolation without the need to change any other accounting
for financial instruments. IFRS 9 applies to financial statements for annual
periods beginning on or after January 1, 2018, with early adoption
permitted.

16

---

3. Significant Accounting Policies - Continued

(m)   New standards and interpretations not yet
adopted - Continued

IFRS 15 Revenue from Contracts with Customers (IFRS 15)

IFRS 15 deals with revenue recognition and establishes
principles for reporting useful information to users of financial statements
about the nature, timing and uncertainty of revenue and cash flows arising from
an entitys contracts with customers. Under IFRS 15, revenue is recognized when
a customer obtains control of a good or service and thus has the ability to
direct the use and obtain the benefits from the good or service. The standard
replaces IAS 18, Revenue, and IAS 11, Construction Contracts, and related
interpretations. The standard is effective for annual periods beginning on or
after January 1, 2017, with early adoption permitted. The IASB has issued an
exposure draft that would, if approved defer the effective date to January 1,
2018.

4. Equipment

|                              |   | Computer  |  |   | Office    |  |   | Machinery |  |   |        | 
|----------------------------- | - | --------- |  | - | --------- |  | - | --------- |  | - | ------ | 
|                              |   | equipment |  |   | equipment |  |   | Equipment |  |   | Total  | 
|                              |   |           |  |   |           |  |   |           |  |   |        | 
|Cost                          |   |           |  |   |           |  |   |           |  |   |        | 
|Balance, at December 31, 2013 | $ | 2,507     |  | $ | 673       |  | $ | -         |  | $ | 3,180  | 
|Additions                     |   | -         |  |   | -         |  |   | 7,500     |  |   | 7,500  | 
|Balance, at December 31, 2014 |   | 2,507     |  |   | 673       |  |   | 7,500     |  |   | 10,680 | 
|Additions                     |   | -         |  |   | 1,368     |  |   | -         |  |   | 1,368  | 
|Balance, December 31, 2015    | $ | 2,507     |  | $ | 2,041     |  | $ | 7,500     |  | $ | 12,048 | 

|Depreciation                  |   |       |  |   |     |  |   |       |  |   |       | 
|----------------------------- | - | ----- |  | - | --- |  | - | ----- |  | - | ----- | 
|Balance, at December 31, 2013 | $ | 471   |  | $ | 45  |  | $ | -     |  | $ | 516   | 
|Depreciation for the year     |   | 836   |  |   | 134 |  |   | 1,125 |  |   | 2,095 | 
|Balance, at December 31, 2014 |   | 1,307 |  |   | 179 |  |   | 1,125 |  |   | 2,611 | 
|Depreciation for the year     |   | 836   |  |   | 282 |  |   | 1,500 |  |   | 2,618 | 
|Balance, at December 31, 2015 | $ | 2,143 |  | $ | 461 |  | $ | 2,625 |  | $ | 5,229 | 

|Carrying amounts     |   |       |  |   |       |  |   |       |  |   |       | 
|-------------------- | - | ----- |  | - | ----- |  | - | ----- |  | - | ----- | 
|At December 31, 2015 | $ | 364   |  | $ | 1,579 |  | $ | 4,875 |  | $ | 6,818 | 
|At December 31, 2014 | $ | 1,200 |  | $ | 494   |  | $ | 6,375 |  | $ | 8,069 | 

17

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5. Available-for-Sale Securities

Available-for-sale securities consist of marketable securities
and are summarized as follows:

Public traded
    
    No. of
    
    
    December 31, 2015
    
    
    December 31, 2014securities
    
    shares
    
    
    Cost
    
    
    Fair Market Value
    
    
    Cost
    
    
    Fair Market ValueFirst Choice
    
    253,000
    
    $
    -
    
    $
    -
    
    $
    -
    
    $
    -Superbox Inc. *
    
    599,000
    
    
    58,382
    
    
    331,606
    
    
    58,382
    
    
    271,009$
    58,382
    
    $
    331,606
    
    $
    58,382
    
    $
    271,009


*traded in US dollar.

The fair market value of publicly traded securities is measured
using quoted prices in active market for the identical assets; The total fair
market value is the published market price per share multiplied by the number of
shares held without consideration of transaction costs.

The cost of First Choice of $46,246 was written off due to
permanent impairment during the year ended December 31, 2014.

The unrealized gain of $60,597 was recorded as accumulated
other comprehensive income or loss during the year ended December 31, 2015
(2014: $256,930).

6. Prepaid expenses

December 31,
    
    
    December 31,2015
    
    
    2014Prepaid expenses
    $
    47,416
    
    $
    920


In November 2015, the Board of the Company approved a
Sponsorship Agreement entered with Ambleside Broadcasting Group Inc. (ABG),
where ABG grants the Company a non-exclusive sponsorship right for 14 months to
Karaoke World Championships 2016 world Finals in Vancouver. The purpose of this
sponsorship is to gain awareness of the Company with not only potential
investors for its crowd funding efforts but also to promote stewardship and/or
related business engagements, and at the same time promote awareness of the
plastics pollution issues. In consideration, the Company shall pay Euro 30,000
to ABG. The president of ABG is related to CEO of the Company. As at December
31, 2015, $38,646 has been included in the prepaid balance.

18

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7. Trade and Other Payables

December 31,
    
    
    December 31,2015
    
    
    2014Trade payables
    $
    20,519
    
    $
    8,278Accrued expenses
    
    6,800
    
    
    19,060$
    27,319
    
    $
    27,338


8. Non-controlling interest

Below is summarized financial information for ECM, the
Companys 97% owned subsidiary. The amounts disclosed are based on those
included in the consolidated financial statement before inter-company
eliminations.

Summarized statement for financial position

|                                     |  | December 31, |   |  | December 31, | 
|------------------------------------ |  | ------------ | - |  | ------------ | 
|As at                                |  | 2015         |   |  | 2014         | 
|                                     |  | $            |   |  | $            | 
|Non-controlling interest percentage  |  | 3%           |   |  | 0%           | 
|                                     |  |              |   |  |              | 
|Current assets                       |  | 32,301       |   |  | -            | 
|Current liabilities                  |  | (127         | ) |  | -            | 
|Net assets                           |  | 32,174       |   |  | -            | 
|Accumulated non-controlling interest |  | 901          |   |  | -            | 
|                                     |  |              |   |  |              | 
|Summarized income statement          |  |              |   |  |              | 

|                                              |  | December 31, |   |  | December 31, | 
|--------------------------------------------- |  | ------------ | - |  | ------------ | 
|For the year ended                            |  | 2015         |   |  | 2014         | 
|                                              |  | $            |   |  | $            | 
|Net loss                                      |  | (40,326      | ) |  | -            | 
|Total comprehensive loss                      |  | (40,326      | ) |  | -            | 
|                                              |  |              |   |  |              | 
|Loss allocated to to non-controlling interest |  | (1,129       | ) |  | -            | 

Summarized cash flows

|                                  |  | December 31, |   |  | December 31, | 
|--------------------------------- |  | ------------ | - |  | ------------ | 
|For the year ended                |  | 2015         |   |  | 2014         | 
|                                  |  |              |   |  |              | 
|Cash used in operating activities |  | (326         | ) |  | -            | 
|Cash used in investing activities |  | -            |   |  | -            | 
|Cash from financing activities    |  | 32,127       |   |  | -            | 

19

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9. Share Capital, Share Purchase Options and Warrants

(a) Share Capital

Common shares

| | a. | Authorized:                                             
| | -- | --------------------------------------------------------
| |    |                                                         
| |    | Unlimited number of common shares with no par
    value.
| |    |                                                         

| | b. | Issued and outstanding:                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
| | -- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | As at December 31, 2015 the total issued and outstanding
      common shares are 42,472,564 (December 31, 2014: 47,458,989).                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                               
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | During the year 2013, the Company entered a Special
      Private Placement Agreement (the Agreement) with a third party. The
      third party was to invest up to $100 million (Commitment Amount) to the
      Company once the Company was listed on an acceptable public market or
      exchange. As consideration, the third party required a commitment fee of
      4% of the Commitment Amount. In settlement of this fee, the Company issued
      5,340,000 common shares at the price of $0.75 per share as payment for the
      commitment fee of $4,000,000, and deposited the shares in an escrow
      custodial account pursuant to the Agreement. The commitment fee was
      initially recorded as deferred charge. In August 2015, these shares were
      cancelled as the services could not be provided according to schedule and
      the related commitment fee of $4,000,000 previously recorded was also
      reversed.
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | During the year 2014, the Company issued 477,480 common
      shares at the prices ranging from $0.25 to $0.75 per share for aggregate
      proceeds of $197,040. The Company re-valued the 180,000 common shares
      issued to the founders at $0.25 per share to $0.50 per share and
      recognized a stock based compensation of $45,000.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| |    |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                            
| |    | During the year ended December 31, 2015, the Company
      issued 353,575 common shares at prices ranging from $0.50 to $1.00 per
      share for aggregate proceeds of $194,225.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          

(b) Share Purchase Options

During the year ended December 31, 2015, there were no share
purchase options granted, exercised or cancelled. At December 31, 2015 and
December 31, 2014, there was no share purchase option outstanding.

(c) Share Purchase Warrants

During the year ended December 31, 2015, there were no share
purchase warrants granted, exercised or cancelled. At December 31, 2105 and
December 31, 2014, there was no share purchase warrant outstanding.

20

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10. Financial instruments and risk management

Fair values

The Companys financial instruments consist of cash,
available-for-sale securities, trade and other payables and due to related
party. Cash is classified as loans and receivables and recorded at cost.
Available-for-sale securities is classified as available for sale and recorded
at fair value. Trade and other payables and due to related party are classified
as other financial liabilities, which are measured at amortized cost.

The carrying and fair value amounts of the Companys financial
instruments related to cash, available-for-sale securities and trade and other
payables are the same due to their short terms to maturity. It is not practical
to determine the fair value of the amounts due from related parties and due to
related parties with sufficient reliability due to the nature of the financial
instruments.

Fair value hierarchy

Financial instruments recorded at fair value on the statements
of financial position are classified using a fair value hierarchy that reflects
the significance of the inputs used in making the measurements. The fair value
hierarchy has the following levels:

- Level 1: quoted prices (unadjusted) in active markets for identical assets
  or liabilities
- Level 2: inputs other than quoted prices included within Level 1 that are
  observable for the asset or liability, either directly (i.e. as prices) or
  indirectly (i.e. derived from prices)
- Level 3: inputs for the asset or liability that are not based on
  observable market data (unobservable inputs)

As at December 31, 2015 and 2014, cash and available-for-sale
securities are assessed to be Level 1 instruments.

11. Risk management framework

The Board of Directors has overall responsibility for the
establishment and oversight of the Companys risk management framework.

The Company's risk management activities include the
preservation of its capital by minimizing risk related to its cash. The Company
does not have a risk management committee or written risk management policies.
The Companys financial instruments are exposed to the risks described below:

Credit risk

Credit risk is the risk of an unexpected loss if a party to a
financial instrument fails to meet its contractual obligations. The Company's
credit risk is primarily attributable to cash. The Company has no significant
concentration of credit risk arising from operations. Management believes that
the maximum credit exposure at December 31, 2015 is cash in the bank of $439,461
(December 31, 2014: $476,288) and the credit risk concentration with respect to
cash is remote.

21

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11. Risk management framework- Continued

Liquidity risk

Liquidity risk is the risk that the Company will not be able to
meet its financial obligations as they come due. The Company has in place a
planning and budgeting process to help determine the funds required to support
the Companys normal operating requirements on an ongoing basis. The Company
tries to ensure that there is sufficient working capital to fund its ongoing
operating expenditures. At December 31, 2015, the Company had a working capital
of $732,906. (December 31, 2014: $649,668).

Market risk

Market risk is the risk of loss that may arise from changes in
market factors such as interest rates and foreign exchange rates.

(i) Interest rate risk

Interest rate risk is the risk that the fair value or future
cash flows of a financial instrument will fluctuate because of changes in market
interest rates. The Company is not exposed to significant interest rate risk due
to the short term nature of its money assets and liabilities.

(ii) Foreign currency exchange rate risk

Foreign currency exchange rate risk is the risk that the fair
value of financial instruments or future cash flows will fluctuate as a result
of changes in foreign exchange rates.

The Company's functional currency is the Canadian dollar and
major transactions are transacted in Canadian dollars. Management believes the
foreign exchange risk derived from currency conversions is minimal and therefore
does not hedge its foreign exchange risk.

Capital management

The Companys objective when managing capital is to safeguard
the entitys ability to continue as a going concern.

In the management of capital, the Company monitors its adjusted
capital which comprises all components of equity (i.e. share capital,
accumulated other comprehensive income (loss) and deficit).

The Company manages its capital structure and makes adjustments
to it, based on the funds available to the Company, in order to meet its daily
operating expenses. The Company may sell some of its available-for-sale
investments for additional cash required. The Board of Directors does not
establish quantitative return on capital criteria for management, but rather
relies on the expertise of the Company's management to sustain future
development of the business.

There were no changes in the Company's approach to capital
management during the years ended December 31, 2015 and 2014. The Company is not
subject to externally imposed capital requirements.

22

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12. Related Parties Transactions

The aggregate value of transactions and outstanding balances
relating to key management personnel and entities over which they have control
or significant influence were as follows:

|                                                |   | Transaction value       |  |   | Balance outstanding | 
|----------------------------------------------- | - | ----------------------- |  | - | ------------------- | 
|                                                |   | Year ended December 31, |  |   | December 31,        | 
|Officer Transaction                             |   | 2015                    |  |   | 2014                | 
|                                                |   |                         |  |   |                     | 
|Karen Hartlin 
      Management fee & rent      | $ | 109,200                 |  | $ | 109,200             | 
|Jack Stuart     
      Stock based compensation | $ | 40,000                  |  |   |                     | 
|                                                | $ | 149,200                 |  | $ | 109,200             | 

During the years ended December 31, 2015 and 2014, Hartlin
Management Services, a private company controlled by former CFO and Secretary of
the Company, Karen Hartlin, charged management fees of $8,000 per month and
$1,100 per month for rent to the Company.

The amounts due to related parties do not bear interest, are
unsecured, and have no fixed payment term; accordingly, the fair value cannot be
readily determined.

On December 31, 2015, the Companys subsidiary Electric City
Motors Corporation issued 100,000 common stock at a price of $0.10 per share to
a director of the Company. The Company recorded stock based compensation of
$40,000 in the consolidated statements of operations and comprehensive loss.

Also see note 6.

13. Income Tax

The following table reconciles the expected income tax expense
(recovery) at the Canadian statutory income tax rates to the amounts recognized
in the consolidated statements of operations for the years ended December 31,
2015 and 2014:

Corporate tax rate
    
    13.50%
    
    
    13.50%Expected tax expense
      (recovery) at statutory rates
    $
    (33,053
    )
    $
    (43,754
    )Increase (decrease) resulting from:Non-deductible
      items
    
    5,436
    
    
    107Change in estimates
    
    -
    
    
    2,902Change in
      enacted rates
    
    (17,430
    )
    
    (28,629
    )Marketable securities
    
    8,791
    
    
    12,727Change in Deferred tax asset not recognized
    
    36,256
    
    
    56,647Income tax expense (recovery)
    $
    -
    
    $
    -


23

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13. Income Tax  Continued

Deferred taxes reflect the tax effects of temporary differences
between the carrying amounts of assets and liabilities for financial reporting
purposes and their tax values. Deferred tax assets (liabilities) at December 31,
2015 and 2014 are comprised of the following:

2015
    
    
    2014Deferred income tax assetsNon capital loss carryforwards
    $
    375,951
    
    $
    323,445Capital loss
      carryforwards
    
    635
    
    
    635Fixed assets
    
    533
    
    
    (148
    )Marketable securities
    
    (29,867
    )
    
    (12,936
    )Total deferred income tax assets
    
    347,252
    
    
    310,996Unrecognized deferred income tax assets
    
    (347,252
    )
    
    (310,996
    )Net
      deferred income tax assets
    $
    -
    
    $
    -


The Company has non capital loss carryforwards of approximately
$1,445,966 (2014: $1,244,018) which may be carried forward to apply against
future income for Canadian income tax purposes, subject to the final
determination by taxation authorities, expiring in the following years:

2027
    $
    128,2692028
    
    107,9432029
    
    204,8942030
    
    179,0502031
    
    113,6322032
    
    18,9672033
    
    170,0462034
    
    321,2172035
    
    201,948$
    1,445,966


In addition, the Company has capital losses of $4,883 (2014:
$4,883), which may be carried forward indefinitely and applied to reduce future
capital gains.

The deferred tax assets have not been recognized because at
this stage of the Companys development, it is not probable that future taxable
profit will be available against which the Company can utilize such deferred tax
assets.

24

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14. Subsequent Events

On October 30, 2015, the Company signed a share purchase
agreement with a private company and an executive director of the private
company to acquire a control block of 20,900,000 shares of the common stock of
Superbox Inc. for a total purchase price of US$15,000. As at December 31, 2015,
the Company has paid US$5,000 towards this agreement. Subsequent to year end,
the Company remitted the balance of US$10,000 and is in the process of
completing the transaction. All of the 20,900,000 shares of Superbox Inc. are
restricted. Upon completion of the transaction, the accumulative share position
in Superbox Inc. held by the Company will be approximately 72% of all the issued
and outstanding shares of Superbox Inc. As a result, Superbox Inc. will be
consolidated as part of the Company from the completion date.

On March 15, 2016, the Company issued 2,250 shares of the
Common Stock of the Company at $1.27 (USD 1.00 per share) per share to a third
party for a total proceed of USD $2,250.

25

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ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING ANDFINANCIAL DISCLOSURE

None

ITEM 9A: CONTROLS AND PROCEDURES

The company's management evaluated, with the participation of
the Chief Executive Officer and Chief Financial Officer, the effectiveness of
the company's disclosure controls and procedures as of the end of the period
covered by this report. Based on that evaluation, the Chief Executive Officer
and Chief Financial Officer have concluded that the company's disclosure
controls and procedures were effective as of the end of the period covered by
this report.

Managements Annual Report on Internal Control Over
Financial Reporting

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

Our management, with the participation of Chief Executive
Officer and Chief Financial Officer, evaluated the effectiveness of our internal
controls over financial reporting as of December 31, 2015. In making this
assessment, management used the criteria set forth by the Committee of
Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control
 Integrated Framework. Based on this evaluation, our management concluded that
as of December 31, 2015, our internal controls over financial reporting were
effective.

Internal control over financial reporting is defined as a
process designed by, or under the supervision of, our principal executive and
principal financial officers and effected by our board of directors, management
and other personnel to provide reasonable assurance regarding the reliability of
financial reporting and the preparation of financial statements for external
purposes in accordance with generally accepted accounting principles, and
includes those policies and procedures that:

|- | pertain to the maintenance of records that, in reasonable
      detail, accurately and fairly reflect the transactions and dispositions of
      our assets;                                                                                                                                                                                         
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|- | provide reasonable assurance that transactions are
      recorded as necessary to permit the preparation of financial statements in
      accordance with U.S. generally accepted accounting principles and that our
      receipts and expenditures are being made only in accordance with
      authorization of our management and directors; and,
|- | provide reasonable assurance regarding prevention or
      timely detection of unauthorized acquisition, use or disposition of our
      assets that could have a material effect on the financial statements.                                                                                                                                       

A control system, no matter how well conceived and operated, can provide only
reasonable, not absolute, assurance that the objectives of the internal control
system are met. Because of the inherent limitations of any internal control
system, no evaluation of controls can provide absolute assurance that all
control issues, if any, within a company have been detected.

This Annual Report on Form 10-K does not include an attestation report of the
Companys independent registered public accounting firm regarding internal
control over financial reporting. Managements report was not subject to
attestation by the Companys independent registered public accounting firm
pursuant to rules of the Securities and Exchange Commission that permit the
Company to provide only managements report in this Annual Report on Form 10-K.

Changes in Internal Control Over Financial Reporting

During the fourth quarter of our 2015 fiscal year, there were
no changes in our internal control over financial reporting.

26

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ITEM 9B: OTHER INFORMATION

None

PART III

ITEM 10: DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE
GOVERNANCE

Identification of Directors and Executive Officers

The names of our executive officers and directors and the
positions currently held by each are as follows:

Name
    Age
    PositionKaren Hartlin
    55
    Chief Executive Officer and
      PresidentRobert Intile
    54
    DirectorSatyendra Tripathi
    62
    DirectorHarvey Lawson
    68
    DirectorDouglas R. Myrdal
    52
    Chief Financial Officer and
      DirectorDr. David Wang
    54
    Director


Karen Hartlin  CEO/President/Sec/Treas

Ms. Hartlin has been president of Hartlin Management Services
for over 30 years. She is a veteran management consultant providing management
and administrative services to several private/public corporations including
investor relations, maintenance of company financial records and corporate
minutes book, preparation and filing of due-diligence reports, disclosure
documentation and annual corporate filings required by the various corporate
regulatory agencies. She has been serving as our Sec/Treas since inception.

Robert Intile  Director

Mr. Intile has a background in mechanics and developed one of
the leading environmental contracting companies in British Columbia. This
company had strategic focus on underground utilities which prevent contamination
of ground water, soil and property damage due to erosion. He has marketing
experience on the federal, provincial and municipal level. He has been involved
in the environmental movement through businesses he owns or has worked for the
last 20 years. Since 2005, Mr. Intile has been working for RCO Ventures Corp, a
company which he owns, as an independent business entrepreneur.

Satyendra Tripathi  Director

Mr. Tripathi is the president of Electric City Motors North
America and has 41 years experience in the automobile industry. From 1976-2002
he managed 22 dealerships and in 2005 changed his focus to highway speed
electric car development. His work distributing electric cars within the USA has
led to partnerships with Korean and Pakistan automobile manufacturers for eight
new model electric cars. He is presently testing a new Korean battery which
would extend driving ranges to 350-400 miles per charge. From April 2010 through
October 2012, Mr. Tripathi was not employed in the traditional sense by an
outside party but was engaged full time in personal research regarding the
electric propulsion of automobiles. From October 2012 to the present he has also
been employed by Ross Direct Media as its marketing director. Ross Direct Media
markets products for auto manufacturers and dealerships.

27

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Harvey Lawson  Director

Mr. Lawson has been an officer and director of several junior
public companies in the resource and oil and gas exploration and mining sectors,
most recently as CFO and director of Trade Winds Ventures, which was acquired
for $84 million. He provides administrative, accounting and financial consulting
services to these companies. He is familiar with the compliance and regulatory
requirements as set by the SEC and CSA. At the present time and since 2004, he
has been the owner and sole employee of Aruba Capital Inc. Aruba Capital
provides accounting, funding and financial services to public & private
companies.

Douglas R. Myrdal  Director, CFO

Mr. Myrdal began his career with Price Waterhouse in 1986 and
is designated as a Chartered Accountant. From 1998 to 2005 he acquired an
accounting firm and converted it into a full service chartered accounting
company. He has experience as an officer of companies involved in food
manufacturing, renewable energy, construction and cleaning services, acquisition
development and most recently Broco Glass Group, and negotiated a multi-million
dollar sale of the company to the largest auto glass conglomerate in the world.
For the past 17 years he has been working in these areas as an independent
business consultant. Mr. Myrdal was appointed chief financial officer of the
Company on April 13, 2015.

Dr. David Wang  Director

For 25 years Dr. Wang was in the Canadian natural foods
industry and naturopathic medicine. He specializes in preventative medicine,
ozone and chelation therapy and is certified in anti-aging medicine. He is
founder of Boucher Institute of Naturopathic Medicine. He is a formulator,
lecturer and author. For the past 33 years he has been working as an independent
consultant with the following companies each of which he owned:

Dr. David Wang Investments Inc. - 16 years 360 Well-being
Integrative Health Inc. - 10 years Pranin Organic Inc. - 7 years

Director Qualifications

Robert Intile

Mr. Intile has been involved in his familys construction
businesses all of his life and is a self-employed entrepreneur. We believe this
experience is important to the company since it is our plan to construct
plastics to oil plants throughout Canada and the United States.

Satyendra Tripathi

Mr. Tripathi has 40 years of experience in the automotive
industry and over 15 years of experience in the research, development, design
and manufacturing of highway speed electric vehicles. It is this expertise the
Company needs with respect to the business development of its subsidiary
Electric City Motors Corp.

Harvey Lawson

Mr. Lawson is presently involved with Vantech (Vancouver Angel
Technology Network) and Keiretsu (a global investment community of accredited
private equity angel investors, venture capitalists and corporate/institutional
investors). Through his relationship with these groups he provides mentorship to
startup technology companies such as New Fuel Systems. He also has experience in
the filing requirements of and financial reporting requirements of publicly
traded companies.

28

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Douglas R. Myrdal

As New Fuel Systems is a start-up business in the renewable
energy industry, it requires a director that can contribute to the selection of
candidates for the management team, to analyze and approve budgets, business
plans, compensation packages, corporate policies and financial statements.
Douglas has experience in all of these key areas, including capital fund raising
for both private and public enterprise, as well as taking private companies
public. He is key to providing executive expertise and creative thinking in
areas of taxation, corporate structure, strategic business planning, and
accounting.

Dr. David Wang

Dr. Wang has been practicing as a licensed naturopathic
physician in Vancouver for 25 years. He understands the negative impact that
environmental toxins have on human health. He is especially concerned about
plastic waste, the xenobiotic effects on the glandular system and its connection
with hormonal imbalances. He has been involved in organizations throughout his
career that offer innovative and environmentally friendly technologies that help
deal with key issues that have a direct impact on our food chain such as waste
plastic and contaminated water, key elements of business goals.

During the past ten years none of our directors, executive
officers, promoters or control persons was:

1)           
 the subject of any bankruptcy petition filed by or against any business of
which such person was a general partner or executive officer either at the time
of the bankruptcy or within two years prior to that time;

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

3)             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)             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.

Significant Employees

Hartlin Management Services, a private company controlled by
our Secretary/Treasurer Karen Hartlin, is paid a management fee of $8,000 per
month by the Company for services rendered to the Company. Through this
relationship, Karen Hartlin would be considered the same as an employee who is
not an executive officer, but who is expected to make a significant contribution
to the Company.

Family Relationships

None of our executive officers and directors are related.

Involvement in Other Public Companies Registered Under the
Exchange Act

None

Section 16(a) Beneficial Ownership Reporting Compliance

Since we have no stock registered under Section 12(b) or
Section 12(g) of the Exchange Act, there are no persons who need to file reports
under Section 16(a) of the Exchange Act.

29

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Code of Ethics

To form strategic alliances and partnerships with reputable and
innovative companies that provide high quality products, innovative technology
and reliable services.

To value our customers, partners and shareholders and excel in
our business by honouring our commitments, delivering sustainable growth and
continuing to strive for excellence in a professional and responsible manner.

To treat our employees and shareholders as assets and as the
key to our success. We shall maintain an active role in helping our team achieve
their full potential and to provide them with a conducive work environment where
integrity, creativity and mutual respect is valued and rewarded.

Corporate Governance

**Nominating
Committee**

We have not established a Nominating Committee because we
believe that our Board of Directors is able to effectively manage the issues
normally considered by a Nominating Committee.

**Audit
Committee**

We have not adopted an audit committee separate from our Board
of Directors.

ITEM 11: EXECUTIVE COMPENSATION

The following table sets forth the aggregate compensation paid
by the Company for services rendered by the referenced officers during the
periods indicated:

SUMMARY COMPENSATION TABLE

Name and Position
    Year
    Salary($)
    All Other Compensation
    Total($)Jack Stuart, CEO and President (3)
    2015
    0
    0
    02014
    0
    0
    02013
    0
    0
    0Karen Hartlin, Secretary and Treasurer, former CFO and
      current Interim CEO (2)
    2015
    0 (1)
    0
    0 (1)2014
    0 (1)
    0
    0 (1)2013
    0 (1)
    0
    0 (1)Douglas R. Myrdal, CFO (4)
    2015
    0
    0
    0


(1) The Company pays Hartlin Management Services $8,000 per
month for management services and $1,100 per month for rent of the Companys
headquarters. Our Administration Manager, Secretary/Treasurer and former CFO,
Karen Hartlin, is the owner of Hartlin Management Services. (2) Ms. Hartlin
resigned her position as CFO on April 13, 2015. (3) Mr. Stuart passed away
on March 27, 2016. (4) Mr. Myrdal was elected CFO on April 13, 2015. (5)
On December 31, 2015, the Companys subsidiary Electric City Motors Corporation
issued 100,000 common stock at a price of $0.10 per share to Mr. Stuart. The
Company recorded stock based compensation of $40,000 in the consolidated
statements of operations and comprehensive loss.

30

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Employment Agreements

The Company does not have any employment agreements with any
officer or director.

Directors Compensation

Directors are not currently compensated, although each is
entitled to be reimbursed for reasonable and necessary expenses incurred on our
behalf. All directors hold office until the next annual meeting of stockholders
and until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. Officers are appointed
annually by the Board of Directors and each executive officer serves at the
discretion of the Board of Directors.

Outstanding Equity Awards at Fiscal Year End

None

Compensation of Directors

Our directors are not compensated for their service on the
board of directors.

ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT AND RELATED STOCKHOLDER MATTERS

The following table presents information known to us, as of
April 9, 2016, relating to the beneficial ownership of common stock by:

- each person who is known by us to be the beneficial holder of more than 5%
  of our outstanding common stock;
- each of our named executive officers and directors; and
- our directors and executive officers as a group.

We believe that all persons named in the table have sole voting
and investment power with respect to all shares beneficially owned by them,
except as noted.

Percentage ownership in the following table is based on
42,474,814 shares of common stock outstanding as of April 9, 2016. Each
beneficial owners percentage ownership is determined by dividing the number of
shares beneficially owned by that person by the base number of outstanding
shares.

Beneficial Owner
    Amount and Nature
      of Beneficial Ownership
    PercentageEstate of Jack Stuart
    19,500,000 Indirect (1)
    45.9Karen Hartlin
    4,500,000 Indirect (2)
    10.6Robert Intile
    1,000,000 Indirect (3)
    2.4Satyendra Tripathi
    1,000,000 Direct
    2.4Harvey Lawson
    40,000 Direct
    0.1Douglas R. Myrdal
    180,000 Direct
    0.4Dr. David Wang
    500,000 (5)
    1.2Hartlin Management Services
    2,500,000 Direct
    5.9TMK World Investment Group, Inc.
    4,500,000 Direct
    10.6Cooljet Air Inc.
    3,000,000 Direct
    7.1Lightning Ridge Resources Inc.
    3,550,000 Direct
    8.4


31

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New Quest Capital Corp.
    4,000,000 Direct
    9.4Evolution Venture Group Inc.
    4,000,000 Direct
    9.4Que Capital Corp.
    4,000,000 Direct
    9.4All directors and executive officers as a group (6 persons)
    2,720,000 (4)
    6.4


(1) The 19,500,000 shares held indirectly by the estate of Jack
Stuart are comprised of the shares held by TMK World Investment Group, Inc., New
Quest Capital Corp., Evolution Venture Group Inc., Cooljet Air Inc. and Que
Capital Corp. Each of these companies is controlled by the estate of Mr. Stuart.

(2) The 4,500,000 shares held indirectly by Karen Hartlin are
comprised of the shares held by Hartlin Management Services and Cintanis Capital
Corporation, both of which are controlled by Ms. Hartlin.

(3) The 1,000,000 shares held indirectly by Robert Intile are
comprised of shares held by WC Investments S.A. and RCO Ventures Corp, both of
which are controlled by Mr. Intile.

(4) 1,220,000 of this total is held directly by three directors
while the balance is held indirectly by certain officers and directors pursuant
to notes (3), (5) and (6).

(5) The 500,000 shares held indirectly by Dr. David Wang are
comprised of shares held by Pranin Organic Inc. which is controlled by Dr. Wang.

Securities Authorized for Issuance under Equity Compensation
Plans

None

ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS,
AND DIRECTORSINDEPENDENCE

Transactions with Related Persons

Hartlin Management Services, a private company controlled by
our Secretary/Treasurer Karen Hartlin, is paid a management fee of $8,000 per
month by the Company for services rendered to the Company. As part of its
management services, Hartlin Management does all corporate bookkeeping, manages
all corporate documents and records, maintains all banking records, manages
accounts payable, assists with and consults on corporate financial strategies,
keeps the company in good standing with applicable government agencies and
carries out other applicable responsibilities assigned by the board of directors
from time to time. Karen Hartlin owns indirectly 10.6 percent of the issued and
outstanding common shares of the Company.

Approval of Related Party Transactions

Related party transactions are reviewed and approved or denied
by the board of directors of the Company. If the related party to a transaction
is a member of the board of directors, the transaction must be approved by a
majority of the board that does not include the related party.

Parents of the Smaller Reporting Company

NFS has no parent company.

Director Independence

Two of our five directors serving on our Board of Directors are
independent directors. Our independent directors are Harvey Lawson and Dr. David
Wang. The definition the Company uses to determine whether a director is
independent is NASDAQ Rule 4200(a)(15).The text of this rule is attached to our
Registration Statement on Form F-1 as Exhibit 99, filed with the U.S. Securities
and Exchange Commission on February 11, 2015.

32

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ITEM 14: PRINCIPAL ACCOUNTING FEES AND SERVICES

The following is a summary of the fees billed to us by our
principal accountants during the fiscal years ended December 31, 2015, and
2014:

Fee Category
    
    
    2015
    
    
    2014Audit Fees
    
    $
    22,000
    
    $
    13,000Audit-related Fees
    
    $
    12,000
    
    $
    6,000Tax Fees
    
    $
    -
    
    $
    -All Other Fees
    
    $
    -
    
    $
    -Total Fees
    
    $
    34,000
    
    $
    19,000


Audit Fees -Consists of fees for professional services
rendered by our principal accountants for the audit of our annual financial
statements and review of the financial statements included in our Forms 10-Q or
services that are normally provided by our principal accountants in connection
with statutory and regulatory filings or engagements.

Audit-related Fees - Consists of fees for assurance and
related services by our principal accountants that are reasonably related to the
performance of the audit or review of our financial statements and are not
reported under Audit fees.

Tax Fees - Consists of fees for professional services
rendered by our principal accountants for tax compliance, tax advice and tax
planning.

All Other Fees - Consists of fees for products and
services provided by our principal accountants, other than the services reported
under Audit fees, Audit-related fees, and Tax fees above.

Policy on Audit Committee Pre-Approval of Audit and
Permissible Non-Audit Services of Independent Auditors

We have not adopted an Audit Committee; therefore, there is no
Audit Committee policy in this regard. However, we do require approval in
advance of the performance of professional services to be provided to us by our
principal accountant. Additionally, all services rendered by our principal
accountant are performed pursuant to a written engagement letter between us and
the principal accountant.

PART IV

ITEM 15: EXHIBITS AND FINANCIAL STATEMENT
SCHEDULES

(a)(1)(2) Financial Statements. See the audited financial
statements for the year ended December 31, 2015 contained in Item 8 above which
are incorporated herein by this reference.

(a)(3) Exhibits. The following exhibits are filed as part of
this Annual Report:

Exhibits

Exhibit Number
    Description (1)3.1
    Certificate of Incorporation (2)3.2
    By-laws (2)31.1
    302 Certification of Chief
      Executive Officer31.2
    302 Certification of Chief
      Financial Officer32.1
    906 Certification of Chief
      Executive Officer32.2
    906 Certification of Chief
      Financial Officer


33

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DOCUMENTS INCORPORATED BY REFERENCE

(1) Summaries of all exhibits contained within this Report are
modified in their entirety by reference to these exhibits.

(2) Incorporated by reference to our Registration Statement on
F-1, filed with the SEC on February 11, 2015.

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.

NEW FUEL SYSTEMS INC.

|Date: | April 14, 2016 |  | By: | /s/ Douglas R. Myrdal                               
|----- | -------------- |  | --- | ----------------------------------------------------
|      |                |  |     | Douglas R. Myrdal, Chief
      Financial Officer and
|      |                |  |     | Director                                            

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:

NEW FUEL SYSTEMS INC.

|Date: | April 14, 2016 |  | By: | /s/ Karen Hartlin                                                 
|----- | -------------- |  | --- | ------------------------------------------------------------------
|      |                |  |     | Karen Hartlin, Chief Executive
      Officer                      
|      |                |  |     |                                                                   
|Date: | April 14, 2016 |  | By: | /s/Douglas R. Myrdal                                              
|      |                |  |     | Douglas R. Myrdal, Chief
      Financial Officer, Chief Accounting
|      |                |  |     | Officer and Director                                              
|Date: | April 14, 2016 |  | By: | /s/ Robert Intile                                                 
|      |                |  |     | Robert Intile, Director                                           
|      |                |  |     |                                                                   
|Date: | April 14, 2016 |  | By: | /s/ Satyendra Tripathi                                            
|      |                |  |     | Satyendra Tripathi,
      Director                                
|      |                |  |     |                                                                   
|Date: | April 14, 2016 |  | By: | /s/ Harvey Lawson                                                 
|      |                |  |     | Harvey Lawson, Director                                           
|      |                |  |     |                                                                   
|Date: | April 14, 2016 |  | By: | /s/ Dr. David Wang                                                
|      |                |  |     | Dr. David Wang, Director                                          

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