**UNITED
        STATES**
 
 **SECURITIES
        AND EXCHANGE COMMISSION**
 WASHINGTON,
        D.C. 20549
 
 **FORM
        10-KSB**
 
 x Annual report under Section 13 or 15(d) of the Securities Exchange Act of
 1934
 
 For
        the
        fiscal year ended June 30, 2006.
 
  ̈ Transition report under Section 13 or 15(d) of the Securities Exchange Act
 of
        1934
 
 For
        the
        transition period from _____ to ______
 
 *Commission
        File Number: 000-09283*
  
 **flexSCAN,
        INC.**
 (Name
        of
        Small Business Issuer in its Charter)
  **NEVADA**
              **88-0299716**(State
                  or other jurisdiction of
              (I.R.S.
                  Employerincorporation
                  or organization)
              Identification
                  No.)
 
 **27201
        Puerta Real, Suite 350, Mission Viejo, California 92691**
 (Address
        of principal executive offices)
 
 **(949)
        609-1966**
 (Issuer's
        telephone number)
 
 Securities
        registered under Section 12(b) of the Exchange Act
 None
  Securities
        registered under Section 12(g) of the Exchange Act: **Common
        Stock, $.001 par value**
  1
  Check
        whether the issuer (1) filed all reports required to be filed by Section
        13 or
        15(d) of the Exchange Act during the past 12 months (or for such shorter
        period
        that the registrant was required to file such reports), and (2) has been
        subject
        to such filing requirements for the past 90 days: Yes x No  ̈
 
 Check
        if
        there is no disclosure of delinquent filers in response to Item 405 of
        Regulation S-B contained in this form, and no disclosure will be contained,
        to
        the best of registrant's knowledge, in definitive proxy or information
        statements incorporated by reference in Part III of this Form 10-KSB or any
        amendment to this Form 10-KSB.  ̈
 
 Indicate
        by check mark whether the registrant is a shell company (as defined in Rule
        12b-2 of the Exchange Act). Yes  ̈ No x
 
 Issuer's
        revenues for the year
        ended June 30, 2006 were $134,708
 
 The
        aggregate market value for the Issuer's voting stock held by non-affiliates
        of
        the Issuer based upon the $0.90 per share closing sale price of the Common
        Stock
        on October 31, 2006 as reported on the Over-the-Counter Bulletin Board, was
        approximately $15,153,963. Shares of Common Stock held by each officer and
        director and by each person who owns 5% or more of the outstanding common
        stock
        have been excluded in that such persons may be deemed to be affiliates. This
        determination of affiliate status is not necessarily a conclusive determination
        for other purposes.
 
 As
        of
        October 31, 2006, Registrant had 51,873,112 shares of Common Stock issued
        and
        outstanding.
 
 Transitional
        Small Business Disclosure Format (check one): Yes  ̈ No x
  2
  **flexSCAN,
        INC.**
 
 **FORM
        10-KSBANNUALREPORT**
 
 **PART
                  I**
              **1****ITEM
                  1. DESCRIPTION OF
                  BUSINESS**
              **1****ITEM
                  2. DESCRIPTION OF
                  PROPERTIES**
              **6****ITEM
                  3. LEGAL PROCEEDINGS**
              **6****ITEM
                  4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY
                  HOLDERS**
              **6****PART
                  II**
              **6****ITEM
                  5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER
                  MATTERS**
              **6****ITEM
                  6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
                  OPERATIONS**
              **8****ITEM
                  7. CONSOLIDATED FINANCIAL
                  STATEMENTS**
              **20****ITEM
                  8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
                  ACCOUNTING AND FINANCIAL DISCLOSURE**
              **20****ITEM
                  8A. CONTROLS AND
                  PROCEDURES**
              **20****ITEM
                  8B. OTHER INFORMATION**
              **21****PART
                  III**
              **21****ITEM
                  9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND
                  CONTROL PERSONS: COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE
                  ACT**
              **21****ITEM
                  10. EXECUTIVE COMPENSATION AND OTHER
                  INFORMATION**
              **24****ITEM
                  11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
                  AND MANAGEMENT AND RELATED STOCKHOLDERS**
              **27****ITEM
                  12. CERTAIN RELATIONSHIPS AND RELATED
                  TRANSACTIONS**
              **28****ITEM
                  13. EXHIBITS**
              **30****ITEM
                  14. PRINCIPAL ACCOUNTANT FEES AND
                  SERVICES**
              **32**
  *Annual
            Report*
  **FORWARD
        LOOKING STATEMENTS**
 
 Statements
        contained in this Report that are not historical facts or that discuss our
        expectations or beliefs regarding our future operations or future financial
        performance, or financial or other trends in our business, constitute
        "forward-looking statements" within the meaning of Section 27A of the Securities
        Act of 1933, as amended (the 1933 Act) and Section 21E of the Securities
        Exchange Act of 1934, as amended (the 1934 Act). Forward-looking statements
        can
        be identified by the fact that they do not relate strictly to historical
        or
        current facts. Often, they include the words "believe," "expect," "anticipate,"
        "intend," "plan," "estimate," "project," or words of similar meaning, or
        future
        or conditional verbs such as "will," "would," "should," "could," or "may."
        The
        achievement or realization of the expectations or beliefs set forth in
        forward-looking statements are subject to a number of risks and uncertainties
        that could cause our financial condition or operating results in the future
        to
        differ significantly from those expected at the current time. Those risks
        and
        uncertainties are described in this Item 1 "Business," Item 6 "Management's
        Discussion and Analysis and Plan of Operation--Factors That May Affect Our
        Future Results" as well as those discussed in any documents incorporated
        by
        reference herein or therein. Due to these uncertainties and risks, readers
        are
        cautioned not to place undue reliance on forward-looking statements contained
        in
        the Report, which speak only as of the date of this Annual Report. We undertake
        no obligation to update or revise any forward-looking statements, whether
        as a
        result of new information, future events or otherwise.
 
 **PART
        I**
 
 **ITEM
                  1.**
              **DESCRIPTION
                  OF BUSINESS******
 
 **Introduction**
 
 flexSCAN,
        Inc. was originally incorporated under the laws of the State of Nevada on
        February 21, 1991, as Fuel Corporation of America (“Fuel Corporation”). On July
        15, 2005, Fuel Corporation entered into an Agreement and Plan of Merger (the
        “Merger Agreement”) by and among FCA Acquisition Corp., a Delaware corporation
        and wholly owned subsidiary of Fuel Corporation (“FCA”), and flexSCAN, Inc., a
        Delaware corporation. Pursuant to the Merger Agreement, FCA was merged with
        and
        into flexSCAN, with flexSCAN surviving as a wholly-owned subsidiary of Fuel
        Corporation. As a result of the merger, the operations of flexSCAN become
        the
        sole operations of Fuel Corporation. Upon completion of the merger flexSCAN
        changed its name to flexPLUS.
 
 On
        September 19, 2005, Fuel Corporation merged with and into flexSCAN, Inc.,
        a
        Nevada corporation and wholly owned subsidiary of the Company for the sole
        purpose of effecting a name changed of Fuel Corporation to flexSCAN, Inc.
        (“flexSCAN” or the “Company” or “our” or “we”). flexSCAN is currently
        headquartered in Orange County, California, with its principal executive
        offices
        located at 27201 Puerta Real, Suite 350, Mission Viejo, 92691.
 
 **General**
 
 flexSCAN
        is a healthcare information and services organization focusing on providing
        high
        technology medical information management to the healthcare consumer, along
        with
        a unique incentive program designed to abate the rising costs of healthcare
        to
        both employers and employees. We believe that our patent-pending and proprietary
        program wellness360TM is an industry-first for corporate health and wellness
        management. wellness360TM packages advertising and marketing research
        opportunities with 'no-cost' corporate health and wellness services, then
        rewards employers and employees for using the services. The program leverages
        innovative technology to provide participants with free comprehensive health
        and
        wellness services, an online personal health record system, online lifestyle
        guides for fitness and nutrition, and online progress tracking. Employers
        and
        employees receive economic rewards for using the free services and for
        participating in advertiser-sponsored activities.
  1
 *Annual
            Report*
  Another
        component of our wellness360TM program that differentiates us from the
        competition is the ability of our members’ healthcare professionals to quickly
        and easily upload copies of their “paper” records by simply using their office
        fax machine. In turn, wellness360’s software identifies the patient and provider
        though a simple and reliable character recognition strategy and automatically
        updates the individual’s medical record. flexSCAN’s online medical record not
        only provides a workable solution to the pressing need for access to a patient’s
        medical information, it does so at no cost to the participants. Our solution
        is
        provided free of charge to both healthcare providers and our wellness360
        members.
 
 All
        information provided to us by our members is aggregated into an electronic
        medical record system, which allows us to develop a Member Profile for each
        member based on every element of their life including diet, exercise, medical
        records, ethnicity, socioeconomic status, risky behaviors, medications, family
        history, diseases, and interests. In exchange for allowing wellness360 members
        to participate in our program free of charge, we allow marketers, advertisers
        and researchers to submit information in the form of advertisements, surveys,
        questionnaires, educational material and offers, collectively referred to
        as
        Messages, to a specified Member Profile. The Messages are submitted to us
        and
        upon review and acceptance by us are made available to members matching the
        specified Member Profile once the member logs into the wellness360 portal.
        All
        identifying member information is completely confidential and Health Insurance
        Portability and Accountability Act, referred to as HIPAA, compliant. The
        economic benefits of these activities are not exclusively received by flexSCAN.
        Fundamental to our business model is our mission to contribute to the reduction
        and overall control of healthcare costs. In this spirit, we used the revenues
        received from marketers, advertisers and researchers to fund our economic
        rewards programs for members and their employers in an attempt to offset
        burdensome healthcare costs, such as premiums, co-payments and deductibles.
        For
        a detailed description on how our wellness360TM program works please see the
        section below entitled “The Wellness360TM Process”.
  2
 *Annual
            Report*
  **The
        Wellness360TM Process**
 
 flexSCAN’s
        wellness360TM program incentivizes employees to manage their own on-line personal
        health record and motivates them to pursue a healthier lifestyle. The program
        enables flexSCAN to create a number of potentially lucrative revenue channels
        by
        leveraging opportunities in the multi-trillion dollar health care
        industry. The
        unique formula for our wellness360 tm model is
        illustrated in the following flowchart:
  
 
 
 1.
              The
                  employer (1) provides healthcare benefits to its employees (2)
                  either by
                  engaging an insurance company or self-insuring the
                  benefits.
 
 2.
              Employees
                  (2) enjoy the health benefits provided by the employer (1). Employees
                  interact with flexSCAN’s wellness360 web portal providing
                  critical health, wellnessand lifestyle information that is stored in a centralized
                  structured/secure HIPAA compliant database
                  (3).
 
 3.
              flexSCAN’s
                  Marketing Alliances (7) provide promotional messages, educational
                  content
                  and potential research and survey opportunities (4) to a selected
                  body of
                  wellness360 members. This information is routed to the members
                  via
                  flexSCAN’s HIPAA Compliant Firewall (6) and delivered to wellness360
                  members that meet the Marketing Alliances’ defined
                  profile.
 
 4.
              wellness360TMmembers may, at their election, communicate with the Marketing
                  Alliances
                  to divulge their identity.
 
 5.
              Marketing
                  Alliances (7) pay flexSCAN for marketing, advertising, sponsorship,
                  licensing or research (8).
 
 6.
              flexSCAN
                  routes a percentage of the marketing revenue to both participating
                  employees (2) and employers (1) based on the earned rewards of
                  each
                  participant (10).
  3
 *Annual
            Report*
  7.
              The
                  revenue sharing (9) enjoyed by the employees (2) is based on the
                  total
                  rewards points earned. Rewards points are earned for every banner
                  ad view
                  click-throughs, database additions, etc. Each reward point is worth
                  one
                  point five cents ($0.015) and is eligible for conversion into cash
                  or
                  non-cash rewards on a quarterly basis
                  (10).
 
 8.
              Employers
                  (1) receive an amount equal to twenty-five percent (25%) (11) of
                  the total
                  dollars (10) earned by the employees participating in wellness360.
                  Additionally, an amount equal to five percent (5%) of the participant’s
                  rebates (11) is paid to flexSCAN’s broker/agents (12) representing
                  wellness360.
 
 Our
        wellness360 model not only stimulates attention to lifestyle changes and
        disease
        management, it provides our members the ability to directly effect change
        and
        more importantly, lower both member and employer costs of
        healthcare.
 
 As
        illustrated in the accompanying figure, our wellness360TM service is an
        individual’s hub for every aspect of their medical and lifestyle activities. The
        fuel for our wellness360 proposition comes from marketers, including both
        commercial enterprises and pure research organizations such as universities
        and
        medical schools. Marketers provide flexSCAN both their messages and dollars.
        In
        turn, the messages are distributed to our members based on their unique
        demographic, lifestyle and medical database. Based on member activity, employers
        are provided incentive dollars to stimulate their employees’ activities and more
        importantly, provide additional working capital which may be used to directly
        offset out of control healthcare costs.
 
 As
        an
        added benefit, wellness360TM is each member’s safe, secure and private medical
        record kept online for easy access and, in the event of a medical emergency
        available to physicians and emergency medical personnel 24-hours a day year
        around.
  
 **Customers**
 
 To
        date,
        we have primarily focused on employer groups in the southern California area
        for
        purposes of our wellness360 program. We believe, however, that our electronic
        medical record system will not only allow us to expand our customer base
        from
        employers and employees to include marketers, advertisers, and researchers
        but
        will also allow us to penetrate markets outside of southern California.
 
 **Target
        Market**
 
 Our
        target is defined into three categories: 1) individuals desiring access to
        their
        medical records and personalized wellness solutions; 2) sponsors, such as
        employers, unions and associations, that shoulder the burden of providing
        healthcare benefits to their employees or members and seek lower costs; and
        3)
        marketers, such as advertisers, pharmaceutical manufactures, research
        institutions and fitness equipment manufactures, desiring access to a highly
        defined population selected via wellness360’s database-driven selection
        criteria.
 
 Based
        on
        the above definition of our target market, wellness360 is a solution for
        every
        form of business and organization (sectors including private, local, state
        and
        federal) seeking to reduce the cost of healthcare and create a healthier
        workforce. Since wellness360 is an information-based business model, our
        market
        spans state and national boundaries allowing us to define flexSCAN’s market as
        truly international.
  4
 *Annual
            Report*
  The
        wellness360 community provides our marketing alliances a powerful and cost
        effective conduit to a truly unique, motivated and highly defined
        population.
 
 **Competition**
 
 Management
        believes the principal competitive factors for companies seeking to succeed
        in
        the Company’s markets are: 1) available capital sources, 2) affordable capital
        sources, 3) awareness of the Company’s offerings, 4) supplemental business
        guidance and advice, and 5) continued economic growth. Some other companies
        that
        are primarily focused on offering competitive products are Blue Cross, Aetna,
        Beechstreet, WellPoint, WebMD and, in the future, new companies that may
        enter
        the Company’s marketplace.
 
 Many
        of
        our existing competitors, as well as potential new competitors, have longer
        operating histories, greater name recognition, substantial track records,
        and
        significantly greater financial, technical and marketing resources than us.
        This
        may allow our competitors to devote greater resources to the development
        and
        promotion of their services. Many of these competitors offer a wider range
        of
        services, and may attract business partners consequently resulting in a decrease
        of our business opportunities. These competitors may also engage in more
        extensive research and development, adopt more aggressive strategies and
        make
        more attractive offers to existing and potential employees, and partners.
        Furthermore, competitors may develop products and services that are equal
        or
        superior to that of the Company’s and achieve greater market acceptance. In
        addition, current and potential competitors have established or may establish
        cooperative relationships among themselves or with third parties to better
        address the needs of the Company’s target market. As a result, it is possible
        that new competitors may emerge and rapidly acquire significant market
        share.
 
 **Intellectual
        Property**
 
 flexSCAN
        has applied for a patent of the wellness360 economic model. The patent is
        currently pending approval. The Company has also submitted trademark
        applications for “It Pays to be Healthy”, “wellness360” and “mywellness360.”
 
 **Government
        Regulation**
 
 We
        are
        subject to federal, state and local regulations concerning the environment
        and
        occupational safety and health standards. We have not experienced significant
        difficulty in complying with such regulations and compliance has not had
        a
        material effect on our business or our financial results.
 
 **Research
        and Development**
 
 We
        have
        focused primarily on developing foundational and core technologies. We have
        successfully developed software such as flexBUILDER, a fully automated tool
        for
        radiologists that creates personalized multi-media medical interpretations
        for
        our disease screening services. We have also spent a substantial amount of
        time
        developing our core web-based technologies, advertising management and tracking
        system, member activity and rewards tracking and accounting system, integrated
        electronic health risk assessment system, and optical character recognition
        technology for processing health records, a multifaceted Client Management
        System, and systems for internal controls.
  5
 *Annual
            Report*
  **Employees**
 
 As
        of
        June 30, 2006, we had eight full-time employees and one part-time employee.
        Of
        these employees, three were engaged in providing services and five were engaged
        in general and administrative. None of our employees are represented by a
        labor
        union or a collective bargaining agreement. We have not experienced any work
        stoppages and have established positive employee relationships.
 
 **ITEM
                  2.**
              **DESCRIPTION
                  OF PROPERTIES******
 
 We
        currently lease approximately 7,297 square feet of office space in one building
        located in Mission Viejo, California. The lease terminates on June 30, 2009.
        The
        Company expects that the current leased premises will be satisfactory until
        the
        future growth of its business operations necessitates an increase in office
        space. There is an ample supply of office space in the Orange County, California
        area and we do not anticipate a problem in securing additional space if
        necessary.
 
 **ITEM
                  3.**
              **LEGAL
                  PROCEEDINGS******
 
 From
        time
        to time, we may become involved in litigation relating to claims arising
        from
        our ordinary course of business. We are aware of no claims or actions pending
        or
        threatened against us, the ultimate disposition of which would have a material
        adverse effect on us.
 
 **ITEM
                  4.**
              **SUBMISSION
                  OF MATTERS TO A VOTE OF SECURITY HOLDERS******
 
 No
        matters were submitted to a vote of the
        Company's security holders during the fourth quarter of its fiscal year ended
        June 30, 2006.
 
 **PART
        II**
 
 **ITEM
                  5.**
              **MARKET
                  FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS******
 
 The
        Company’s common stock currently trades on the Over-the-Counter Bulletin Board,
        under the trading symbol of “FXSC.OB”. Because we are listed on the
        Over-the-Counter Bulletin Board, our securities may be less liquid, receive
        less
        coverage by security analysts and news media, and generate lower prices than
        might otherwise be obtained if they were listed on a NASDAQ market or other
        exchange.
 
 The
        following table sets forth for each the high and low bid quotations for the
        common stock as reported by OTC Bulletin Board.
  Low
              
              High**Fiscal
                  2005***July
                  1, 2004—September 30, 2004
              n/a
              
              n/aOctober
                  1, 2004—December 31, 2004
              n/a
              
              n/aJanuary
                  1, 2005—March 31, 2005
              n/a
              
              n/aApril
                  1, 2005—June 30, 2005
              n/a
              
              n/a**Fiscal
                  2006**July
                  1, 2005—September 30, 2005
              $0.35
              
              $0.35October
                  1, 2005—December 31, 2005
              $0.35
              
              $0.35January
                  1, 2006—March 31, 2006
              $0.35
              
              $0.35April
                  1, 2006—June 30, 2006
              $0.35
              
              $1.92**Fiscal
                  2007**July
                  1, 2006—October 31, 2006
              $0.13
              
              $1.70
 *The
        Company’s predecessor entity, Fuel Corporation of America, was not actively
        trading during this time period.
  6
 *Annual
            Report*
  On
        October 31, 2006, the Company had approximately 849 stockholders of record.
        The
        Company has not paid any dividends on its Common Stock and does not expect
        to do
        so in the foreseeable future. The Company intends to apply its earnings,
        if any,
        in expanding its operations and related activities. The payment of cash
        dividends in the future will be at the discretion of the Board of Directors
        and
        will depend upon such factors as earnings levels, capital requirements, the
        Company's financial condition and other factors deemed relevant by the Board
        of
        Directors. In addition, the Company's ability to pay dividends may be limited
        under future loan agreements of the Company which restrict or prohibit the
        payment of dividends.
 
 **EQUITY
        COMPENSATION PLAN INFORMATION**
 
 The
        following table sets
        forth information concerning options to purchase shares of our common stock
        granted to our named executive officers in the fiscal year ended June 30,
        2006.
  **Executive
                  Officer**
              **Shares
                  of**
                **Common**
                **Stock**
                **Underlying**
                **Warrants
                  (1)**
              **Shares
                  of**
                **Common**
                **Stock**
                **Underlying**
                **Stock**
                **Options**
              **%
                  of Total**
                **Options
                  and**
                **Warrants**
                **Granted**
                **to
                  Company Employees**
              **Exercise
                  Price**
                **Per
                  Share (2)**
              **Expiration**
                **Date**
              **Grant
                  Date**
                **Present**
                **Value
                  (3)**Francis
                  X. Pisano
              884,437
                  (4)
              -
              60%
              $0.17
              4/1/2009
              $302,796Francis
                  X. Pisano
              600,000
                  (5)
              -
              40%
              $0.10
              4/1/2009
              $206,572
 
 (1)
              The
                  warrants have a term of no more than three years, subject to earlier
                  termination in certain events related to termination of employment.
                  The
                  warrants begin to vest on the first month subsequent to the grant
                  date. To
                  the extent not already exercisable, the warrants shall become exercisable
                  in full in connection with, and immediately prior to the consummation
                  of,
                  any liquidity event.
 
 (2)
              All
                  options were granted at a value determined and approved by the
                  Chief
                  Executive Officer and the Board of Directors.
 
 (3)
              As
                  suggested by the SEC’s rules on executive compensation disclosure, the
                  Company used the Black-Scholes model of option valuation to determine
                  grant date pre-tax present value. The calculation is based on a
                  three-year
                  term and upon the following assumptions: annual dividend growth
                  of zero
                  percent, volatility of approximately 245%, and an interest rate
                  of 4.625%.
                  There can be no assurance that the amounts reflected in this column
                  will
                  be achieved.
  7
 *Annual
            Report*
  (4)
              This
                  warrant was issued in connection with Mr. Pisano’s service as a director
                  of the Board of Directors.
 
 (5)
              This
                  warrant was issued to Mr. Pisano in lieu of salary for services
                  rendered
                  as the Company’s Chief Financial
                  Officer.
 
 **ITEM
                  6.**
              **MANAGEMENT'S
                  DISCUSSION AND ANALYSIS OR PLAN OF OPERATIONS******
 
 **FORWARD
        LOOKING STATEMENTS**
 
 This
        discussion contains statements regarding operating trends and our beliefs
        and
        expectations regarding our future financial performance and future financial
        condition (which are referred to as "forward looking statements"). The
        consequences of those operating trends on our business and the realization
        of
        our expected future financial results, which are discussed in those statements,
        are subject to the uncertainties and risks described below in this Section
        of
        this Report under the caption "Factors That May Affect Future Results." Due
        to
        those uncertainties and risks, the duration and effects of those operating
        trends on our business and our future financial performance may differ, possibly
        significantly, from those that are currently expected as set forth in the
        forward looking statements. As a result, you should not place undue reliance
        on
        those forward looking statements.
 
 **Introduction**
 
 The
        following discussion presents information about our consolidated results
        of
        operations, financial condition, liquidity and capital resources and should
        be
        read in conjunction with our consolidated financial statements and the notes
        thereto included elsewhere in this Report.
 
 **Overview**
 
 flexSCAN,
        Inc. was originally incorporated under the laws of the State of Nevada on
        February 21, 1991, as Fuel Corporation of America (“Fuel Corporation”). On July
        15, 2005, Fuel Corporation entered into an Agreement and Plan of Merger (the
        “Merger Agreement”) by and among FCA Acquisition Corp., a Delaware corporation
        and wholly owned subsidiary of Fuel Corporation (“FCA”), and flexSCAN, Inc., a
        Delaware corporation. Pursuant to the Merger Agreement, FCA was merged with
        and
        into flexSCAN, with flexSCAN surviving as a wholly-owned subsidiary of Fuel
        Corporation. As a result of the merger, the operations of flexSCAN become
        the
        sole operations of Fuel Corporation. Upon completion of the merger flexSCAN
        changed its name to flexPLUS.
 
 On
        September 19, 2005, Fuel Corporation merged with and into flexSCAN, Inc.,
        a
        Nevada corporation and wholly owned subsidiary of the Company for the sole
        purpose of effecting a name changed of Fuel Corporation to flexSCAN, Inc.
        (“flexSCAN” or the “Company” or “our” or “we”). flexSCAN is currently
        headquartered in Orange County, California, with its principal executive
        offices
        located at 27201 Puerta Real, Suite 350, Mission Viejo, 92691.
  8
 *Annual
            Report*
  flexSCAN
        is a healthcare information and services organization focusing on providing
        high
        technology medical information management to the healthcare consumer, along
        with
        a unique incentive program designed to abate the rising costs of healthcare
        to
        both employers and employees. We believe that our patent-pending and proprietary
        program wellness360TM is an industry-first for corporate health and wellness
        management. wellness360TM packages advertising and marketing research
        opportunities with 'no-cost' corporate health and wellness services, then
        rewards employers and employees for using the services. The program leverages
        innovative technology to provide participants with free comprehensive health
        and
        wellness services, an online personal health record system, online lifestyle
        guides for fitness and nutrition, and online progress tracking. Employers
        and
        employees receive economic rewards for using the free services and for
        participating in advertiser-sponsored activities.
 
 We
        have a
        limited operating history and as a start-up company in the early stage of
        development, there are substantial risks, uncertainties, expenses and
        difficulties that we are subject to. The market for wellness programs is
        generally highly competitive. Our ability to compete depends on many factors,
        many of which are outside of our control. These factors include: timing and
        market acceptance, introduction of competitive services, price and customer’s
        interest in incorporating mywellness360 into its suite of employee benefits.
        For
        additional uncertainties and risks that may affect our business please see
        the
        section entitled "Factors That May Affect Future Results."
 
 **Application
        of Critical Accounting Policies**
 
 The
        Company’s consolidated financial statements have been prepared in accordance
        with accounting principles generally accepted in the United States. The
        preparation of these consolidated financial statements requires the Company
        to
        make estimates and judgments that affect the reported amounts of assets,
        liabilities, revenues and expenses, and related disclosure of contingent
        assets
        and liabilities. The Company bases its estimates on historical experience
        and on
        various other assumptions that are believed to be reasonable under the
        circumstances, the results of which form the basis of making judgments about
        the
        carrying values of assets and liabilities that are not readily apparent from
        other sources. Actual results may differ from these estimates under different
        assumptions or conditions.
 
 The
        Company believes the following critical accounting policies, among others,
        affect more significant judgments and estimates used in the preparation of
        the
        consolidated financial statements:
 
 Allowance
        for Doubtful Accounts. The Company does not maintain allowances for doubtful
        accounts for estimated losses resulting from the inability of customers to
        make
        required payments as the company has not experienced any material losses
        through
        June 30, 2006. The allowance for doubtful accounts, when necessary, will
        be
        based on specific identification of customer accounts and a best estimate
        of the
        likelihood of potential loss, taking into account such factors as the financial
        condition and payment history of major customers. The Company evaluates the
        collectibility of receivables at least quarterly. If the financial condition
        of
        the customers were to deteriorate, resulting in an impairment of their ability
        to make payments, an allowance may be required. The differences could be
        material and could significantly impact cash flows from operating
        activities.
 
 Deferred
        Taxes. The Company records a valuation allowance to reduce the deferred tax
        assets to the amount that is more likely than not to be realized. The Company
        has considered estimated future taxable income and ongoing tax planning
        strategies in assessing the amount needed for the valuation allowance. Based
        on
        these estimates, all of the deferred tax assets have been reserved. If actual
        results differ favorably from those estimates used, the Company may be able
        to
        realize all or part of net deferred tax assets. Such realization could
        positively impact operating results and cash flows from operating
        activities.
  9
 *Annual
            Report*
  Revenue
        Recognition. The Company’s advertising revenue is generally recognized when the
        advertisements are displayed to flexSCAN’s online members. Revenue from the
        Company’s disease screening services is recognized upon delivery of the
        services. Monies collected in advance of the service being provided are recorded
        as deferred revenue. Unbilled receivables relate to revenues earned, but
        not
        billed prior to fiscal year end.
 
 In
        the
        past, the Company has acted in a manner similar to a medical equipment lease
        broker. As a broker, the Company earned a commission or fee for medical
        equipment leases referred to third parties on a non-recourse basis. The
        commission or fee was earned upon funding of the lease by the third party.
        The
        commission was recorded net of any related expenses and was included in
        equipment financing income, net.
 
 Derivative
        Instruments. From time to time, the Company issues debt securities that contain
        features, including registration rights that are considered embedded derivative
        instruments pursuant to Statement of Financial Accounting Standards No. 133,
        Accounting for Derivative Instruments and Hedging Activities, as amended.
        The
        accounting treatment of these derivative financial instruments requires that
        the
        Company record the derivatives and related warrants at their fair values
        as of
        the inception date of the debt agreements and at fair value as of each
        subsequent balance sheet date. In addition, under the provisions of Emerging
        Issues Task Force Issue No. 00-19, Accounting for Derivative Financial
        Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock, as a
        result of entering into the debt agreements, the Company may be required
        to
        classify all other non-employee warrants as derivative liabilities and record
        them at their fair values at each balance sheet date. Any change in fair
        value
        is recorded as non-operating, non-cash income or expense at each balance
        sheet
        date. If the fair value of the derivatives is higher at the subsequent balance
        sheet date, the Company records a non-operating, non-cash charge. If the
        fair
        value of the derivatives is lower at the subsequent balance sheet date, the
        Company records non-operating, non-cash income.
 
 **Results
        of Operations**
 
 **Year
        Ended June 30, 2006 Compared to the Year Ended June 30,
        2005**
 
 Sales
 
 Sales
        for
        the twelve months ended June 30, 2006 and 2005 were $134,708 and $507,830
        respectively. Initially, the decrease of $373,122 resulted from the slower
        sales
        of the Company’s myWellness360 wellness oriented pre-symptomatic disease
        screening services, however, in the third quarter of the fiscal year ended
        June
        30, 2006 management began implementation of a new business model which
        functionally eliminated the sales of disease screening services which
        represented a majority of the revenue for the year ended June 30, 2006.
        Management expects to significantly increase its customer base during fiscal
        year 2007, which it believes will provide an attractive venue for marketers,
        advertisers and researchers.
 
 Cost
        of Sales
 
 Cost
        of
        sales consists of radiologist reading fees, technology fees, CT scan and
        vitals
        related supplies, as well as salaries and expenses of field service personnel.
        Cost of sales decreased to $72,619 during the year ended June 30, 2006 from
        $155,036 for the same period in 2005. This decrease of $82,417 is primarily
        due
        to the significant decrease in sales of mywellness360 services for the same
        period.
  10
 *Annual
            Report*
  Selling,
        general and administrative expenses
 
 Selling,
        general and administrative expenses, which include personnel costs for
        administration, information systems, and general management, as well as facility
        expenses, professional fees, legal expenses, and other administrative costs,
        increased to $8,790,439 during the twelve months ended June 30, 2006 from
        $2,607,022 for the same period in 2005. This increase is primarily attributable
        to a significant increase in accounting, legal, and acquisition expenses
        related
        to going public and stock-based compensation to employees and consultants
        for
        services rendered. Additionally, on June 13, 2006, the Board of Directors
        granted Thomas Banks, Chief Executive Officer, the option to convert $260,000
        of
        deferred compensation into equity at an exercise price of $0.10 per share
        during
        a period in which the Company’s common stock was trading at $1.95 per share. The
        Company recorded $3,870,394 in salaries expense for the fair value of the
        conversion option in 2006.
 
 Interest
        Expense
 
 Interest
        expense for the year ended June 30, 2006 was $1,163,057, whereas interest
        expense during the year ended June 30, 2005 was $89,598. The increase of
        $1,073,459 was primarily due to amortization of the debt discount of $898,802
        related to notes issued during the year.
 
 Derivative
        Gain
 
 Derivative
        gain for the years ended June 30, 2006 and 2005 was $0 and $2,216,289,
        respectively. The decrease is related to the conversion of debt in the prior
        year, which resulted in the end of derivative accounting for the Company’s
        non-employee warrants.
 
 Equipment
        Financing
 
 Equipment
        financing income decreased to $0 during the twelve months ended June 30,
        2006
        from $43,605 for the same period in 2005. This decrease is attributable to
        the
        Company no longer providing equipment financing in the year ended June 30,
        2006.
 
 Net
        Loss
 
 Net
        loss
        for the years ended June 30, 2006 and 2005 were $9,878,471 and $759,732,
        respectively. The increase in net loss is primarily due to an increase in
        non-cash interest expense resulting from stock and warrant issuances, and
        an
        increase in selling, general, and administrative expenses and a decrease
        in
        derivative gains for the year ended June 30, 2006.
 
 Liquidity
        and Capital Resources
 
 On
        August
        3, 2005, the Company closed a private placement raising $1,000,000 in the
        form
        of a convertible debenture (“Debenture”) to a single investor (the "Investor").
        The terms of the Debenture was for three (3) years interest was earned at
        the
        rate of ten percent (10%) per annum. Under the terms of the Debenture, the
        Investor had the right to convert $1,000,000 in principal and accrued interest
        into fully paid and nonassessable shares of common stock at fifty cents ($0.50)
        per share. The Company had the right to prepay the Debenture at 125% of the
        principal and accrued interest after providing thirty (30) days written notice
        during which time the Investor had the right at its sole election to convert
        the
        principal and accrued interest into fully paid and nonassessable shares of
        common stock at fifty cents ($0.50) per share. In connection with the Merger,
        the Debenture and related accrued interest of $4,454 were converted into
        2,008,908 shares of common stock. Also, in connection with the conversion,
        the
        Investor received 500,000 shares of common stock and a warrant for Seven
        Hundred
        Thousand (700,000) shares (the “Warrant”) of the Company’s common stock. The
        Investor has the right to exercise the Warrant for a period of five (5) years
        from the date of conversion. If exercised within one hundred eighty (180)
        days
        from the conversion date the exercise price was be One Dollar ($1.00) per
        share
        then One Dollar Fifty Cents ($1.50) thereafter.
  11
 *Annual
            Report*
  During
        the year ended June 30, 2006, the Company issued an aggregate of $1,065,500
        in
        unsecured notes payable to officers, directors, and shareholders of the Company
        and $100,000 from third parties for working capital purposes.
 
 During
        the year ended June 30, 2006, the Company issued an aggregate of 810,000
        shares
        of common stock in exchange for $77,500 of legal services, and $174,500 for
        marketing and reproduction services.
 
 At
        June
        30, 2006, the Company had total assets of $338,525 compared to total assets
        of
        $361,530 at June 30, 2005. Cash was $152,298 as of June 30, 2006, an increase
        of
        $144,936 from the $7,362 cash on hand as of June 30, 2005.
 
 Accounts
        receivable was $9,588 at June 30, 2006 as compared to accounts receivable
        of
        $109,354 at June 30, 2005. The decrease in accounts receivable is due to
        collection of receivables from delivery of myWellness360 services and reduced
        myWelless360 member enrollments.
 
 Net
        fixed
        assets totaled $127,625 at June 30, 2006 compared to $156,121 at June 30,
        2005,
        a decrease of $28,496. The decrease in net fixed assets is primarily
        attributable to depreciation of the assets.
 
 Total
        liabilities at June 30, 2006 were $2,138,373, an increase of $1,453,039 (212%)
        from the $684,436 at June 30, 2005. Accounts payable and accrued expenses
        were
        $488,500 at June 30, 2006, an increase of $279,513 (134%) from the $208,987
        at
        June 30, 2005. The increase is primarily due to a delay in funding activities,
        which resulted in slower payment of expenses and an increase in accrued
        interest. Deferred Compensation totaled $429,709; an increase of $297,583
        compared to $132,126 at June 30, 2005 and is primarily related to the additional
        deferral of seven and one half (7.5) months of compensation for flexSCAN’s CEO
        and six (6) months of compensation for the COO.
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with accounting principles generally accepted in the United States of America,
        which contemplate continuation of the Company as a going concern. The Company
        has not generated significant revenues from operations and has no assurance
        of
        any future revenues. The Company incurred a net loss of $9,878,471 during
        the
        year ended June 30, 2006. Also, the Company has a working capital deficit
        of
        $1,883,898 and a stockholders’ deficit of $1,799,848 at June 30, 2006. These
        factors, among others, raise substantial doubt about the Company’s ability to
        continue as a going concern.
 
 The
        Company’s working capital requirements will depend upon numerous factors
        including but not limited to the nature, cost and timing of: product
        distribution and sales; technological advances and the Company’s ability to
        establish collaborative arrangements with potential distribution and service
        relationships to expand flexSCAN’s market reach. The Company’s capital resources
        will be focused primarily on the marketing of its wellness360 services and
        development of revenue relationships with advertisers, researchers and
        marketers. Currently the Company’s existing capital resources are insufficient
        to fund operations for the next 12 months. The Company is currently working
        to
        raise additional capital to subsidize operations until at such time that
        the
        Company achieves breakeven operations.
  12
 *Annual
            Report*
  To
        date,
        the Company’s sources of cash have been primarily limited to the sale of equity
        securities and the sale of myWellness360 services. The Company cannot guarantee
        that revenue from wellness360 activities will increase adequately to sustain
        operations in the near term, or can the Company be certain that additional
        funding will be available on acceptable terms, or at all. Any debt financing,
        if
        available, may involve restrictive covenants that impact the Company’s ability
        to conduct business. If the Company is unable to raise additional capital
        when
        required or on acceptable terms, the Company may have to significantly delay,
        scale back or discontinue the development and/or commercialization of one or more of the Company’s products
        and or services.
 
 **Contractual
        Obligations and Contingent Liabilities and Commitments**
 
 The
        Company leases its facility and certain equipment under non-cancelable operating
        lease arrangements that expire at various dates through 2010. The following
        table summarizes future minimum payments for these leases as of June 30,
        2006:
 
 **FY
                  2007**
              
              **FY
                  2008**
              
              **FY
                  2009**
              
              **FY
                  2010**
              
              **Total****Due
                  over****next
                  5****Years**Operating
                  Leases
              
              $
              237,552
              
              $
              233,785
              
              $
              36,743
              
              $
              2,537
              
              $
              710,617
  **FACTORS
        THAT MAY AFFECT FUTURE RESULTS**
 
 This
        Report, including the discussion and analysis of our financial condition
        and
        results of operations set forth above, contains certain forward-looking
        statements. Forward-looking statements set forth estimates of, or our
        expectations or beliefs regarding, our future financial performance. Those
        estimates, expectations and beliefs are based on current information and
        are
        subject to a number of risks and uncertainties that could cause our actual
        operating results and financial performance in the future to differ, possibly
        significantly, from those set forth in the forward-looking statements contained
        in this Report and, for that reason, you should not place undue reliance
        on
        those forward-looking statements. Those risks and uncertainties include,
        although they are not limited to, the following:
 
 **We
        are an early stage company and have a limited operating history.**
 
 We
        have a
        limited operating history upon which you can base an evaluation of our business
        and prospects. As a start-up company in the early stage of development, there
        are substantial risks, uncertainties, expenses and difficulties that we are
        subject to. You should consider an investment in the Company in light of
        these
        risks, uncertainties, expenses and difficulties. To address these risks and
        uncertainties, the Company must do the following:
 
 ·
              Successfully
                  execute its business strategy;
 
 ·
              Continue
                  to enhance its services to meet the needs of a changing
                  market;
  13
 *Annual
            Report*
  ·
              Respond
                  to competitive developments; and
 
 ·
              Attract,
                  integrate, retain and motivate qualified
                  personnel
 
 We
        may be
        unable to accomplish one or more of these objectives, which could cause the
        business to suffer. In addition, accomplishing one or more of these objectives
        might be very expensive, which could harm our financial results.
 
 **We
        have incurred significant losses since inception and anticipate that we will
        continue to incur losses for the foreseeable future.**
 
 As
        of
        June 30, 2006, the Company had an accumulated deficit of $17,627,846. We
        plan to
        significantly increase our marketing expenses and general overhead. We believe
        that our business proposition will be appealing to both the healthcare and
        corporate benefits communities. There is no assurance, however, that we will
        be
        able to successfully market our services in a profitable manner. If the market
        acceptance for our services slows, its margins and profitability will suffer.
        The Company is unable to predict whether its operating results will be
        profitable.
 
 Management
        believes that long-term profitability and growth will
        depend on its ability to:
 
 ·
              Develop
                  brand name awareness;
 
 ·
              Successfully
                  identify viable market
                  opportunities;
 
 ·
              Provide
                  healthcare consumers with valuable and interesting
                  services;
 
 ·
              Develop
                  viable strategic alliances; and
 
 ·
              Maintain
                  sufficient transaction volume.
 
 **We
        will need to raise substantial additional capital to fund our operations,
        and
        failure to obtain funding when needed may force us to delay, reduce or eliminate
        its products and services.**
 
 Our
        operations have consumed substantial amounts of cash since inception. We
        anticipate having to make significant capital expenditures to:
 
 ·
              Increase
                  marketing and promotion of its products and
                  services;
 
 ·
              Increase
                  staffing;
 
 ·
              Increase
                  IT technology research and development;
                  and
 
 ·
              Explore
                  new markets for its products and services
 
 We
        expect
        that the amount of cash used in our operations will increase significantly
        over
        the next several years. If we are unable to fund these increased expenditures
        through increased revenues we will be required to raise additional capital.
        Our
        future funding requirements will depend on many factors, including, but not
        limited to:
 
 ·
              Market
                  acceptance of our products and
                  services;
 
 ·
              Research
                  and development costs;
 
 ·
              Costs
                  of increased staffing.
  14
 *Annual
            Report*
  To
        date,
        our sources of cash have been primarily limited to the sale of equity
        securities. We cannot be certain that additional funding will be available
        on
        acceptable terms, or at all. To the extent we raise additional funds by issuing
        equity securities, our stockholders may experience significant dilution.
        Any
        debt financing, if available, may involve restrictive covenants that impact
        our
        ability to conduct its business. If we are unable to raise additional capital,
        when required, or on acceptable terms, we may have to significantly delay,
        scale
        back or discontinue certain products and services.
 
 **We
        may be unable to renew or maintain our client contracts which could harm
        our
        business and financial results.**
 
 Our
        customers may elect not to renew their contracts with us or may elect to
        terminate their contracts with us. The loss of these customers may significantly
        impact our operations and may require us to obtain additional equity or debt
        financing to continue our operations. We cannot be certain that we will be
        able
        to obtain such additional financing on commercially reasonable terms, or
        at
        all.
 
 **We
        may be subject to professional liability risks which could be costly and
        negatively impact our business and financial results.**
 
 We
        may be
        subject to professional liability claims. To protect against possible
        professional liability, our vendors maintain professional liability insurance
        with coverage that is consistent and appropriate for industry risks. However,
        if
        the our vendors are unable to maintain insurance in the future at an acceptable
        cost or if our vendors’ insurance coverage does not fully cover a potential
        liability, and a successful claim was made against us and/or a vendor we
        could
        be exposed to liability. Any claim made against us that is not fully covered
        by
        insurance could be costly to defend against, and divert the attention from
        our
        operations.
 
 **Loss
        of key executives and failure to attract qualified managers, technologists
        and
        sales persons could limit our growth and negatively impact our operations.**
 
 We
        depend
        upon our management team to a substantial extent. In particular, we depend
        upon
        Mr. Thomas Banks, Chief Executive Officer and Chairman of the Board of
        Directors, for his skills, experience, and knowledge of the company and industry
        contacts. Currently, we do not have an employment agreement with Mr. Banks.
        The
        loss of Mr. Banks, or other members of our management team, could have a
        material adverse effect on our business, results of operations or financial
        condition.
 
 **Complying
        with federal and state regulations is an expensive and time-consuming process,
        and any failure to comply could result in substantial penalties.**
 
 We
        are
        directly or indirectly subject to extensive regulation by both the federal
        government and the states in which it conducts its business, including the
        federal Anti-Kickback Law and similar state anti-kickback laws, the Stark
        Law
        and similar state laws affecting physician referrals, the federal False Claims
        Act, the Health Insurance Portability and Accountability Act of 1996 and
        similar
        state laws addressing privacy and security, state unlawful practice of medicine
        and fee splitting laws, state certificate of need laws, the Medicare and
        Medicaid regulations, the Medicare Prescription Drug, Improvement and
        Modernization Act of 2003, and requirements for handling biohazardous and
        radioactive materials and wastes.
  15
 *Annual
            Report*
  If
        our
        operations are found to be in violation of any of the laws and regulations
        to
        which it or its clients are subject, it may be subject to the applicable
        penalty
        associated with the violation, including civil and criminal penalties, damages,
        fines and the curtailment of its operations. Any penalties, damages, fines
        or
        curtailment of the Company’s operations, individually or in the aggregate, could
        adversely affect its ability to operate its business and its financial results.
        The risk of us being found in violation of these laws and regulations is
        increased by the fact that many of these laws have not been fully interpreted
        by
        the regulatory authorities or the courts, and their provisions are open to
        a
        variety of interpretations. Any action against us for violation of these
        laws or
        regulations, even if we successfully defend against it, could cause us to
        incur
        significant legal expenses and divert management’s attention from the operation
        of its business.
 
 **Federal
        and state anti-kickback and anti-self-referral laws may adversely affect
        our
        operations   and income.**
 
 Various
        federal and state laws govern financial arrangements among health care
        providers. The federal Anti-Kickback Law prohibits the knowing and willful
        offer, payment, solicitation or receipt of any form of remuneration in return
        for, or to induce, the referral of Medicare, Medicaid or other federal
        healthcare program patients, or in return for, or to induce, the purchase,
        lease
        or order of items or services that are covered by Medicare, Medicaid, or
        other
        federal healthcare programs. Many state laws also prohibit the solicitation,
        payment or receipt of remuneration in return for, or to induce the referral
        of
        patients in private as well as government programs. Violation of these laws
        may
        result in substantial civil or criminal penalties and/or exclusion from
        participation in federal or state healthcare programs. We believe that we
        are
        operating in compliance with applicable law and believe that our arrangements
        with providers would not be found to violate the federal and state anti-kickback
        laws. However, these laws could be interpreted in a manner inconsistent with,
        and that could have an adverse effect on, our operations.
 
 The
        Stark
        Law prohibits a physician from referring Medicare or Medicaid patients to
        any
        entity for certain designated health services (including diagnostic imaging
        services) if the physician has a prohibited financial relationship with
        that entity, unless an exception applies. Although we believe that our
        operations do not violate the Stark Law, our activities may be challenged.
        If a
        chall e nge
        to
        our activities is successful, we could have an adverse effect on our operations.
        In addition, legislation may be enacted in the future that further addresses
        Medicare and Medicaid fraud and abuse or that imposes additional requirements
        or
        burdens on us.
 
 **We
        may experience competition from other medical imaging companies and this
        competition could adversely affect our revenues and business.**
 
 The
        market for wellness programs is generally highly competitive. Our ability
        to
        compete depends on many factors, many of which are outside of our control.
        These
        factors include: timing and market acceptance, introduction of competitive
        services, price and customer’s interest in incorporating mywellness360 into its
        suite of employee benefits.
 
 Many
        existing competitors, as well as potential new competitors, have longer
        operating histories, greater name recognition, substantial track records,
        and
        significantly greater financial, technical and marketing resources than us.
        This
        may allow them to devote greater resources to the development and promotion
        of
        their services. Many of these competitors offer a wider range of services,
        and
        may attract business partners consequently resulting in a decrease of our
        business opportunities. These competitors may also engage in more extensive
        research and development, adopt more aggressive strategies and make more
        attractive offers to existing and potential employees, and partners.
        Furthermore, competitors may develop products and services that are equal
        or
        superior to that of ours and achieve greater market acceptance. In addition,
        current and potential competitors have established or may establish cooperative
        relationships among themselves or with third parties to better address the
        needs
        of our target market. As a result, it is possible that new competitors may
        emerge and rapidly acquire significant market share.
  16
 *Annual
            Report*
  There
        can
        be no assurance that we will be able to compete successfully against our
        current
        or future competitors or that competition will not have a material adverse
        effect on our business, results of operations and financial condition.
 
 **If
        we are unable to protect our intellectual property effectively, we may be
        unable
        to prevent third parties from using our technologies, which would impair
        our
        competitive advantage.**
 
 We
        possess a broad range of propriety technologies and processes which may or
        may
        not be subject to protection under copyright, trademark and or patent law.
        We
        intend to make every effort to protect its proprietary technologies with
        all
        applicable copyright, trademark and patent law available at that time.
 
 We
        do not
        believe that our operations or products infringe on the intellectual property
        rights of others. However, there can be no assurance that others will not
        assert
        infringement or trade secret claims against us with respect to our current
        or
        future products or that any such assertion will not require us to enter into
        a
        license agreement or royalty arrangement with the party asserting the claim.
        Responding to and defending any such claims may distract the attention of
        our
        management and have an adverse effect on our business, financial condition
        and
        results of operations.
 
 Others
        may claim in the future that we have infringed their past, current or future
        technologies. We expect that participants in its markets increasingly will
        be
        subject to infringement claims as the number of services and competitors
        grow.
        Any claim like this, whether meritorious or not, could be time-consuming,
        and
        result in costly litigation and possibly result in royalty or licensing
        agreements. These royalty or licensing agreements might not be available
        on
        acceptable terms or at all. As a result, any claim like this could harm our
        business.
 
 We
        regard
        the protection of our copyrights, service marks, trademarks, and trade secrets
        as critical to our success. We rely on a combination of patent, copyright,
        trademark, service mark and trade secret laws and contractual restrictions
        to
        protect its proprietary rights in products and services. When applicable,
        we
        will enter into confidentiality and invention assignment agreements with
        employees and contractors, and nondisclosure agreements with parties we conducts
        business with in order to limit access to and disclosure of our proprietary
        information. These contractual arrangements and the other steps taken to
        protect
        our intellectual property may not prevent misappropriation of our technology
        or
        deter independent third-party development of similar technologies. We intend
        to
        pursue the registration of trademarks and service marks in the U.S. and
        internationally. Effective trademark, service mark, copyright and trade secret
        protection may not be available in every country in which its services are
        made
        available.
 
 **We
        will need to increase the size of its organization, and may experience
        difficulties in managing growth.**
 
 We
        are a
        small company with eight full-time employees and one part-time employee as
        of
        June 30, 2006. We expect to experience a period of significant expansion
        in
        headcount, facilities and infrastructure and anticipate that further expansion
        will be required to address potential growth in customers and market
        opportunities. Future growth will impose significant added responsibilities
        on
        members of management, including the need to identify, recruit, maintain
        and
        integrate additional employees. Our future financial performance and our
        ability
        to compete effectively will depend, in part, on our ability to manage any
        future
        growth effectively.
  17
 *Annual
            Report*
  **The
        ownership interests of our officers and directors could conflict with the
        interests of our other stockholders.**
 
 As
        of
        June 30, 2006, our officers and directors beneficially owned approximately
        69% of its common stock. As a result, these stockholders, acting together,
        will
        be able to significantly influence all matters requiring approval by our
        stockholders, including the election of directors and the approval of mergers
        or
        other business combination transactions. The interests of this group of
        stockholders may not always coincide with our interests or the interests
        of
        other stockholders.
 
 **It
        may be difficult for a third party to acquire us even if doing so would be
        beneficial to our shareholders.**
 
 Some
        provisions of our Articles of Incorporation, as amended, and Bylaws, as well
        as
        some provisions of Nevada or California law, may discourage, delay or prevent
        third parties from acquiring us, even if doing so would be beneficial to
        our
        shareholders.
 
 **There
        is no existing market for our common stock.**
 
 Our
        common stock is quoted on the Over the Counter Bulletin Board under the symbol
        "FXSC." The volume of trading of our common stock and the number of shares
        in
        the public float are small. Sales of a substantial number of shares of common
        stock into the public market in the future could materially adversely affect
        the
        prevailing market price of our common stock. In connection with Tryant, LLC’s
        execution of the warrant dated August 12, 2005, we issued Tyrant LLC 1,555,556
        shares of common stock. Also, in connection with a convertible debenture
        Rosfor
        International, Inc. was issued 2,508,908 shares of common stock and upon
        registration of its shares Trilogy Capital Partners, Inc. will be entitled
        to
        3,000,000 shares of common stock. Such a large “over-hang” of stock eligible for
        sale in the public market may have the effect of depressing the price of
        our
        common stock, and make it difficult or impossible for us to obtain additional
        debt or equity financing.
 
 **The
        market price of our common stock may be adversely affected by several factors.**
 
 The
        market price of our common stock could fluctuate significantly in response
        to
        various factors and events, including:
 
 ·
              Our
                  ability to execute our business
                  plan,
 
 ·
              Operating
                  results below expectations;
 
 ·
              Announcements
                  of technological innovations or new products by us or our
                  competitors;
 
 ·
              Loss
                  of any strategic relationship;
 
 ·
              Industry
                  developments;
 
 ·
              Economic
                  and other external factors; and
 
 ·
              Period-to-period
                  fluctuations in its financial
                  results.
  18
 *Annual
            Report*
  In
        addition, the securities markets have from time to time experienced significant
        price and volume fluctuations that are unrelated to the operating performance
        of
        particular companies. These market fluctuations may also materially and
        adversely affect the market price of our common stock.
 
 **Our
        common stock may be deemed penny stock with a limited trading market.**
 
 Our
        common stock is currently listed for trading on the OTC Bulletin Board which
        is
        generally considered to be a less efficient market than markets such as NASDAQ
        or other national exchanges, and which may cause difficulty in obtaining
        future
        financing. Further, our securities are subject to the "penny stock rules"
        adopted pursuant to Section 15(g) of the Securities Exchange Act of the 1934,
        as
        amended, or Exchange Act. The penny stock rules apply to Non-NASDAQ companies
        whose common stock trades at less than $5.00 per share or which have a tangible
        net worth less then $5,000,000 ($2,000,000 if the company has been operating
        for
        three or more years). Such rules require, among other things, that brokers
        who
        trade "penny stock" to persons other than "established customers" complete
        certain documentation, make suitable inquiries of investors and provide
        investors with certain information concerning trading in the security, including
        a risk disclosure document and quote information under certain circumstances.
        Many brokers have decided not to trade "penny stock" because of the requirements
        of the penny stock rules and, as a result, the number of broker-dealers willing
        to act as market makers in such securities is limited. In the event that
        we
        remain subject to the "penny stock rules" for any significant period of time,
        there may develop an adverse impact on the market, if any, for our securities.
        Because our securities are subject to the "penny stock rules", investors
        will
        find it more difficult to dispose of our securities. Further, for companies
        whose securities are traded on the OTC Bulletin Board, it is more difficult:
        (1)
        to obtain accurate quotations, (ii) to obtain coverage for significant new
        events because major wire services, such as the Dow Jones News Service,
        generally do not publish press releases about such companies, and (iii) to
        obtain needed capital.
 
 **We
        do not expect to pay dividends in the future. Any return on investment may
        be
        limited to the value of the Company’s stock.**
 
 We
        do not
        anticipate paying cash dividends on its stock in the foreseeable future.
        The
        payment of dividends on shares of common stock will depend on our earnings,
        financial condition and other business and economic factors affecting us
        at such
        time as the board of directors may consider relevant. If we do not pay
        dividends, our common stock may be less valuable because a return on your
        investment will only occur if our stock price appreciates.
 
 **A
        sale of a substantial number of shares of the Company’s common stock may cause
        the price of its common stock to decline.**
 
 If
        stockholders sell substantial amounts of our common stock in the public market,
        including shares issued upon the exercise of outstanding options or warrants,
        the market price of its common stock could fall. These sales also may make
        it
        more difficult for us to sell equity or equity-related securities in the
        future
        at a time and price that we deem reasonable or appropriate. Stockholders
        who
        have been issued shares in the Merger will be able to sell their shares pursuant
        to Rule 144 under the Securities Act of 1933, beginning one year after the
        stockholders acquired their shares.
  19
 *Annual
            Report*
  **ITEM
                  7.**
              **CONSOLIDATED
                  FINANCIAL STATEMENTS******
 
 See
        the
        consolidated financial statements attached to and made a part of this report.
 
 **ITEM
                  8.**
              **CHANGES
                  IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL
                  DISCLOSURE******
 
 On
        August
        30, 2006, the Company engaged a new auditing firm, Cacciamatta Accountancy
        Corporation, as its independent public accounting firm to audit its financial
        statements. The Company’s Board of Directors recommended and approved the change
        of accountants. Accordingly, Corbin and Company, LLP, was dismissed on August
        30, 2006. The decision to change accountants was determined by the Board
        of
        Directors to be in the Company’s best interests at the time.
 
 From
        August 12, 2005, the date of appointment, through the date of Corbin and
        Company, LLP’s dismissal, there were no disagreements between the Company and
        Corbin and Company, LLP on any matter of accounting principles or practices,
        financial statement disclosure or auditing scope or procedure which
        disagreements, if not resolved to the satisfaction of Corbin and Company,
        LLP
        would have caused them to make reference to the matter in its reports on
        the
        Company’s financial statements.
 
 From
        August 12, 2005, the date of appointment, to the present, Corbin and Company,
        LLP did not issue a report with respect to the Company’s financial statements
        that contained an adverse opinion or a disclaimer of opinion, or was qualified
        or modified as to uncertainty, audit scope or accounting principals. In
        addition, from the date of its appointment until the present, Corbin and
        Company, LLP did not advise the Company with respect to any of the matters
        described in paragraphs (a)(1)(iv)(B) of Item 304 of Regulation
        S-B.
 
 The
        Company has engaged the firm of Cacciamatta Accountancy Corporation, as of
        August 30, 2006. Cacciamatta Accountancy Corporation was not consulted on
        any
        matter relating to accounting principles to a specific transaction, either
        completed or proposed, or the type of audit opinion that might be rendered
        on
        the Company’s financial statements.
 
 A
        Form
        8-K was filed with the SEC on September 7, 2005, as amended October 3, 2006,
        regarding this matter.
 
 **ITEM
                  8A.**
              **CONTROLS
                  AND PROCEDURES******
 
 We
        maintain disclosure controls and procedures that are designed to ensure that
        information required to be disclosed in our Securities Exchange Act reports
        is
        recorded, processed, summarized and reported within the time periods specified
        in the SEC's rules and forms, and that such information is accumulated and
        communicated to our management, including our chief executive officer and
        chief
        financial officer, to allow timely decisions regarding required disclosure.
        In
        designing and evaluating the disclosure controls and procedures, management
        recognized that any controls and procedures, no matter how well designed
        and
        operated, can provide only reasonable assurance of achieving the desired
        control
        objectives, as ours are designed to do, and management necessarily was required
        to apply its judgment in evaluating the cost-benefit relationship of possible
        controls and procedures.
  20
 *Annual
            Report*
  As
        of
        June 30, 2006, the Company carried out an evaluation, under the supervision
        and
        with the participation of our management, including our chief executive officer
        and chief financial officer, of the effectiveness of the design and operation
        of
        our disclosure controls and procedures pursuant to Rule 13a-15b of the U.S.
        Securities Exchange Act of 1934 (the “Exchange Act”). Based on this evaluation,
        our chief executive officer and chief financial officer have concluded that,
        as
        of June 30, 2006, our disclosure controls and procedures, related to internal
        control over financial reporting and the recording of certain equity
        transactions, were not effective in light of the material weaknesses described
        below.
 
 We
        are
        committed to improving our financial organization. However, the Company does
        not
        possess the financial resources to address other than the most rudimentary
        of
        accounting and reporting requirements, and therefore relies heavily on outside
        advisors.
 
 The
        Company’s inability to independently prepare its financial reports to the
        standards of Generally Accepted Accounting Principals (“GAAP”) and the rules and
        Regulations of the Securities and Exchange Commission rise to the level of
        a
        material weakness in internal control.
 
 Management
        of the Company intends to promptly remediate this deficiency by:
 
 (i)
              acquiring
                  the appropriate level of internal financial
                  support
 
 (ii)
              access
                  current development training programs for financial employees
                  and
 
 (iii)
              provide
                  financial employees with adequate technical resources to research
                  financial accounting and reporting
                  requirements.
 
 (iiii)
              implementing
                  more structured financial controls and
                  reporting.
 
 We
        currently believe we will need to take additional steps to remediate the
        above
        referenced material weaknesses, and we will continue to evaluate the
        effectiveness of our design on an ongoing basis, and will take further action
        as
        appropriate. We are implementing a better system of controls and review process
        by our management to avoid similar problems in the future. This is being
        accomplished by a periodic review of our day to day financial entries by
        management to avoid any improper entries or issues that need to be resolved
        in
        accordance with proper GAAP accounting.
 
 Because
        of its inherent limitations, internal control over financial reporting may
        not
        prevent or detect misstatements. Also, projection of any evaluation of
        effectiveness to future periods is subject to the risk that controls may
        become
        inadequate because of changes in conditions, or that the degree of compliance
        with the policies or procedures may deteriorate.
 
 **ITEM
                  8B.**
              **OTHER
                  INFORMATION******
 
 All
        requisite reports on Form 8-K were filed in the fourth quarter ended June
        30,
        2006.
  21
 *Annual
            Report*
  **PART
        III**
 
 **ITEM
                  9.**
              **DIRECTORS,
                  EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS: COMPLIANCE WITH
                  SECTION
                  16(a) OF THE EXCHANGE ACT******
 
 The
        following sets forth the name, age and position of each of our directors
        and
        executive officers as of June 30, 2006:
  **Name**
              **Age**
              **Position
                  with the Company**Thomas
                  Banks
              53
              Chief
                  Executive Officer, Director and Chairman of the BoardFrancis
                  X. Pisano
              51
              Chief
                  Financial Officer, Director, Member of Compensation CommitteeGary
                  E. Geil, M.D.
              49
              Director,
                  Medical AdvisorMichael
                  Cranford
              43
              Chief
                  Technology OfficerHeidi
                  Patterson
              52
              Director,
                  Member of the Audit CommitteeTerry
                  Giles
              57
              DirectorDavid
                  Wilson
              57
              Director
 
 **Thomas
        Banks, 53.** Mr.
        Banks
        is flexSCAN’s founder and is in charge of the day-to-day operations of the
        Company. Prior to the founding of flexSCAN Mr. Banks founded guideSMART.com,
        a
        world class Internet portal and business-2-business Web community and
        Application Service Provider employing a franchise distribution model. Before
        guideSMART, Mr. Banks was the founder of Santiago Data Systems, Inc., which
        he
        ran from February 1980 until March 1997. While Santiago’s CEO, Mr. Banks
        specialized in the development, sales and marketing of health care practice
        management software. Before Santiago, Mr. Banks was with the Radio Shack
        division of Tandy Corporation where he was integral in the training and
        coordinating of the company’s Computer Center retail operations in Southern
        California, Nevada, and Arizona.
 
 **Francis
        X. Pisano, 51.** Francis
        X. Pisano is a founding partner and currently heads the Marketing and Financial
        and Business Services Departments of Hoffski Pisano.  Mr. Pisano earned a
        Bachelor of Science in both Accounting and Marketing at Fordham
        University.  He earned his Juris Doctor Degree at Western State
        University.  Mr. Pisano is a Certified Public Accountant, attorney, and a
        registered representative with the NASD with over 25 years of professional
        experience. Prior to co-founding the firm, Mr. Pisano held positions at national
        firms in Orange County and was an instructor in taxation at Orange Coast
        College.  He presently lectures on tax planning, financial planning and
        estate planning.
 
 **Gary
        Geil, M.D., 49.** Mr.
        Geil, MD is a board certified radiologist practicing in Orange County,
        California. Prior to entering private practice Dr. Geil was a faculty member
        of
        the Department of Radiological Sciences at UC Irvine and more recently Medical
        Director of Voxel, a high tech medical imaging start-up company. Dr. Geil
        received his undergraduate BA and BS degrees from UC Irvine and his Medical
        Degree from Loyola University of Chicago, Stritch School of Medicine. Dr.
        Geil
        is a member of the American College of Radiology and the Radiological Society
        of
        North America.
 
 **Michael
        Cranford., 43.** Mr.
        Cranford has over 20 years of application and internet development experience.
        Starting his career in Berkeley, California as a video game/interactive graphics
        programmer, Michael developed the international top-selling PC games The
        Bard's
        Tale I & II, as well as AtariSoft's Donkey Kong. He has in the years since
        developed proprietary client-server technologies for various vertical markets
        and has worked as an internet marketing consultant for such companies as
        Sanyo,
        Experian and Accor. Michael has an M.A. and Ph.D. (ABD) in Social Ethics
        from
        the University of Southern California, with a dissertation focus on ethics
        and
        technology
  22
 *Annual
            Report*
  **Heidi
        Patterson, 52** .
        Ms.
        Patterson, formerly the Chief Executive Officer of the Pacific Northwest
        Region
        of the American Red Cross from 1994 through 1999 and recently retired as
        the
        National Director of the Red Cross Umbilical Cord Blood Banking program.
        Ms.
        Patterson holds degrees in both Biology and Medical Technology. Ms. Patterson’s
        executive experience with the Red Cross makes Ms. Patterson a uniquely gifted
        member of flexSCAN’s board of directors and is committed to fulfilling
        flexSCAN’s charter to be a fundamentally sound and responsible member of the
        healthcare community.
 
 **Terry
        Giles, 57.** Terry
        Giles’ business career includes ownership of over 30 companies covering a
        spectrum of interests ranging from banking, automobile dealerships,
        manufacturing, entertainment, property development, restaurants and intellectual
        property. Mr. Giles is a member of the Horatio Alger Association of
        Distinguished Americans and serves on its Board of Directors. Additionally,
        Mr.
        Giles is a member of the Board of Regents of Pepperdine University, National
        Cabinet of Guidepost Magazine founded by Norman Vincent Peale and serves
        on the
        Council of Overseers of Jesse H. Jones Graduate School of Management Rice
        University.
 
 **David
        Wilson, 57.** A
        graduate of the University of Northern Iowa, David has been involved in the
        automobile business for over 30-years.  Mr. Wilson is the owner and
        president of twelve (12) automobile dealerships employing over 1,200 people
        with
        sales in excess of $1.2 billion annually making Wilson Automotive Group the
        sixth largest privately held auto group in the nation. Mr. Wilson is the
        first
        dealer to ever score a "triple double" achieving Toyota's three highest awards
        -- the President's Award, Parts and Service Advisory Council, and Board of
        Governors. Recently Mr. Wilson became a member of the prestigious Chapman
        University Board of Trustees.  Additionally, he serves on the Board of
        Directors of the Orange County Council of the Boy Scouts of America and as
        the
        Chairman of their annual golf tournament raising nearly $200,000 annually
        for
        Scouting.  Mr. Wilson also serves on the Board of Directors of Orangewood
        Children's Foundation and has raised over $500,000 to help worthy former
        residents obtain secondary education.
 
 **Code
        of Ethics**
 
 On
        September 12, 2005, the board of directors adopted a code of business conduct
        and ethics. The Company has posted the code of ethics on its internet
        website www.wellness360.com/codeofconduct.aspx .
 
 **Compliance
        with Section 16(a) of the Securities Exchange Act of 1934**
 
 Section
        16(a) of the Securities Exchange Act of 1934, as amended, requires the Company’s
        executive officers, directors and greater than 10% stockholders to file with
        the
        SEC certain reports of ownership and changes in ownership. Based on a review
        of
        the copies of such forms received and written representations from certain
        reporting persons, the Company believes that during the year ended June 30,
        2006
        all Section 16(a) reports applicable to its executive officers, directors
        and
        greater than 10% stockholders were filed on a timely basis, except for the
        following: a Form 4 to report warrant grants made between December 29, 2005
        and
        June 16, 2006 for HAP Investments, LLC and Thomas Banks, and a Form 3 to
        report
        warrant grants made on April 1, 2006 for Francis X. Pisano.
  23
 *Annual
            Report*
  ******ITEM
                  10.**
              **EXECUTIVE
                  COMPENSATION AND OTHER
                  INFORMATION**
 
 **Summary
        Executive Compensation Table**
 
 The
        following table discloses the annual and long-term compensation received
        in each
        of the last three fiscal years by (i) our Chief Executive Officer of the
        Company
        during the last fiscal year, (ii) the Company’s four most highly compensated
        executive officers, in addition to the Chief Executive Officer, serving at
        the
        end of the last fiscal year whose salary and incentive compensation exceeded
        $100,000 in the last fiscal year, and (iii)  any executive officer of the
        Company who resigned during the last fiscal year whose salary and incentive
        compensation exceeded $100,000 in the last fiscal year.
  **Annual
                    Compensation**
                
                **Long
                    Term******
                  **Compensation****Name
                    and Principal**
                  **Position**
                
                **Fiscal**
                  **Year**
                
                **Salary**
                
                **Bonus**
                
                **Shares
                    of Common**
                  **Stock
                    Underlying**
                  **Stock
                    Options and******
                  **Warrants**
                
                **All
                    Other**
                  **Compensation**Thomas
                    Banks (1)
                
                
                2006
                
                $
                240,000
                
                $
                -
                
                
                -
                
                
                -Chairman
                    and Chief
                
                
                2005
                
                $
                240,000
                
                $
                -
                
                
                -
                
                
                -Executive
                    Officer
                
                
                2004
                
                $
                240,000
                
                $
                -
                
                
                -
                
                
                -Michael
                    Reynolds (2)
                
                
                2006
                
                $
                -
                
                $
                -
                
                
                -
                
                
                -Chief
                    Operating
                
                
                2005
                
                $
                204,000
                
                $
                -
                
                
                -
                
                
                -Officer
                
                
                2004
                
                $
                204,000
                
                $
                -
                
                
                -
                
                
                -Francis
                    X. Pisano (3)
                
                
                2006
                
                $
                30,000
                
                $
                -
                
                
                1,484,437
                
                
                -Chief
                    Financial Officer
                
                
                2005
                
                $
                -
                
                $
                -
                
                
                -
                
                
                -2004
                
                $
                -
                
                $
                -
                
                
                -
                
                
                -Michael
                    Cranford (4)
                
                
                2006
                
                $
                171,840
                
                $
                -
                
                
                -
                
                
                -Chief
                    Technology
                
                
                2005
                
                $
                171,840
                
                $
                -
                
                
                -
                
                
                -Officer
                
                
                2004
                
                $
                171,840
                
                $
                -
                
                
                -
                
                
                -
 
 (1)
              Mr.
                  Banks founded the Company in February 2001 as Chief Executive Officer.
                  As
                  of June 30, 2006 he has accrued 7.5 months of deferred
                  compensation.
 
 (2)
              Mr.
                  Reynolds joined the Company in February 2001 as Chief Operating
                  Officer.
                  Mike Reynolds resigned from his position as Chief Operating Officer
                  and
                  Director in June 2006. As of June 30, 2006 he accrued 6 months
                  of deferred
                  compensation.
 
 (3)
              Mr.
                  Pisano joined the Company in January 2006 as part-time Chief Financial
                  Officer.
  (4)
              Mr.
                  Cranford joined the Company in September 2002 as Chief Technology
                  Officer.
 24
 *Annual
              Report*
  **Director
        Compensation**
 
 flexSCAN
        does not currently compensate its non-employee directors for their services
        on
        the Board of Directors with a standard option to purchase shares of common
        stock. Each outside director receives stock options for services on a
        case-by-case basis to be determined by the Company’s Chief Executive Officer and
        the board of directors.
 
 **Option
        Grants Table**
 
 There
        were 1,484,437 options to purchase shares of our common stock granted to
        our
        named executive officers in the fiscal year ended June 30, 2006.
  **Executive**
                **Officer**
              
              **Shares
                  of**
                **Common**
                **Stock**
                **Underlying**
                **Warrants**
              
              **Shares
                  of**
                **Common**
                **Stock**
                **Underlying**
                **Stock**
                **Options**
              
              **%
                  of Total**
                **Options**
                **and**
                **Warrants**
                **Granted**
                **to**
                **Company**
                **Employees**
              
              **Exercise**
                **Price**
                **Per
                  Share**
              
              **Expiration**
                **Date**
              
              **Grant**
                **Date**
                **Present**
                **Value**Thomas
                  Banks
              
              
              -
              
              
              -Michael
                  Reynolds
              
              
              -
              
              
              -Francis
                  X. Pisano
              
              
              -
              
              
              600,000
              
              
              40
              %
              $
              0.10
              
              
              4/1/2009
              
              $
              206,572Francis
                  X. Pisano
              
              
              -
              
              
              884,437
              
              
              60
              %
              $
              0.17
              
              
              4/1/2009
              
              $
              302,796
 
 (1)
              The
                  warrants have a term of no more than three years, subject to earlier
                  termination in certain events related to termination of employment.
                  The
                  warrants begin to vest on the first month subsequent to the grant
                  date. To
                  the extent not already exercisable, the warrants shall become exercisable
                  in full in connection with, and immediately prior to the consummation
                  of,
                  any liquidity event.
 
 (2)
              All
                  options were granted at a value determined and approved by the
                  Chief
                  Executive Officer and the Board of Directors.
 
 (3)
              As
                  suggested by the SEC’s rules on executive compensation disclosure, the
                  Company used the Black-Scholes model of option valuation to determine
                  grant date pre-tax present value. The calculation is based on a
                  three-year
                  term and upon the following assumptions: annual dividend growth
                  of zero
                  percent, volatility of approximately 245%, and an interest rate
                  of 4.625%.
                  There can be no assurance that the amounts reflected in this column
                  will
                  be achieved.
  25
 *Annual
            Report*
  **Aggregated
        Options and Warrants Exercised in Last Fiscal Year and Fiscal Year-End Option
        Values**
 
 The
        following table sets forth information regarding the exercisable and
        unexercisable options to acquire common stock granted to executive
        officers.
 
 **Number
                  of Unexercised Options and Warrants at**
              **Value
                    of Unexercised**
                **In-the-Money
                  Options and Warrants at (1)****June
                  30, 2006**
              **June
                  30, 2006****Name**
              **Shares**
                **Acquired
                  on**
                **Exercise**
              **Value**
                **Realized**
              **Exercisable**
              **Unexercisable**
              **Exercisable**
              **Unexercisable**Thomas
                  Banks
              2,911,761
              247,500
              3,045,000
              -
              4,872,000
              -Michael
                  Reynolds
              1,793,693
              152,464
              -
              -
              N/A
              N/AMichael
                  Cranford
              -
              -
              1,768,874
              -
              2,706,377
              -Francis
                  X. Pisano
              -
              -
              149,135
              1,335,302
              235,177
              2,078,012
 
 (1)
              Represents
                  the difference between the fair market value of the shares underlying
                  such
                  options at fiscal year-end and the exercise price of such options.
                  The
                  Company traded at $1.70 per share on June 30, 2006.
 
 **Employment
        and Separation Agreements and Change in Control
        Arrangements**
 
 On
        January 2, 2006, the Company entered into an employment agreement with Francis
        X. Pisano to serve as its Chief Financial Officer on a part-time basis,
        effective January 2, 2006. Mr. Pisano’s agreement does not provide for a base
        annual salary. In lieu of salary Mr. Pisano will receive a warrant for
        six-hundred thousand (600,000) shares of the Company’s Common Stock. The
        exercise price for the vested shares shall be $.10 per share. Mr. Pisano
        is
        eligible for cash bonuses to be determined by the CEO and Board of Directors.
        According to the employment agreement Mr. Pisano is not entitled to severance
        upon termination or voluntary resignation. In addition, Mr. Pisano’s unvested
        stock options and warrants will accelerate.
 
 On
        June
        29, 2006, the Company entered into an employment agreement with Kenneth K.
        Westbrook to serve as its President and Chief Operations Officer, effective
        July
        1, 2006. Mr. Westbrook’s agreement provides for a base annual salary of $200,000
        per year commencing on January 1, 2007. In lieu of salary Mr. Westbrook will
        receive a warrant for one million and two shares (1,000,002) of the Company’s
        Common Stock. In consideration for Mr. Westbrook’s services he shall receive a
        warrant for nine hundred thousand (900,000) shares of common stock. Mr.
        Westbrook is eligible for cash bonuses to be determined by the CEO and Board
        of
        Directors. According to the employment agreement Mr. Westbrook is not entitled
        to severance upon termination or voluntary resignation. In addition, Mr.
        Westbrook’s unvested stock options and warrants will
        accelerate.
  26
 *Annual
            Report*
  **ITEM
                  11.**
              **SECURITY
                  OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED
                  STOCKHOLDERS******
 
 The
        following table indicates beneficial ownership of Company common stock as
        of
        June 30, 2006 by:
 
 ·
              By
                  each person or entity known by the Company to beneficially own
                  more than
                  5% of the outstanding shares of the Company’s common
                  stock;
 
 ·
              By
                  each executive officer and director of the Company as a
                  group;
 
 ·
              By
                  all executive officers and directors of the Company as a
                  group.
 
 Unless
        otherwise indicated, the address of each beneficial owner listed below is
        c/o
        flexSCAN, Inc., 27201 Puerta Real, Suite 350, Mission Viejo, CA
        92691.
 
 Beneficial
        ownership is determined in accordance with the rules of the Securities and
        Exchange Commission and generally includes voting or investment power with
        respect to securities. Percentage of beneficial ownership is calculated on
        the
        basis of 48,366,126 shares of Company common stock issued and outstanding
        as of
        June 30, 2006, provided that any additional shares of common stock that a
        stockholder has the right to acquire within 60 days after June 30, 2006,
        are
        deemed to be outstanding for the purpose of calculating that stockholder’s
        percentage of beneficial ownership.
 
 **Shares****Beneficially
                  Owned****Name
                  of Beneficial Owner**
              **Number**
              **Percent**Thomas
                  Banks (1)
              19,342,653
              38.7%Michael
                  Reynolds (2)
              4,856,634
              9.7%Francis
                  X. Pisano (3)
              1,684,437
              *Michael
                  Cranford (4)
              1,768,874
              *Heidi
                  Patterson (5)
              1,637,847
              *Gary
                  E. Geil (6)
              128,688
              *Terry
                  Giles (7)
              1,112,532
              *David
                  Wilson (8)
              4,345,726
              8.9%All
                  directors and executive officers, as a group
              33,456,391
              69.2%**5%
                  or Greater Stockholders**Rosfor
                  International, Inc (9)
              3,208,908
              6.4%Trilogy
                  Capital Partners, Inc (10)
              3,000,000
              6.0%HAP
                  Investments, LLC (11)
              8,551,692
              17.1%
  *
        Less
        than 1% of the outstanding shares of common stock.
 
 (1)
              Thomas
                  Banks and J. Melinda Richards own 13,391,146 of such shares as
                  tenants in
                  common. Thomas Banks owns 2,972,314 shares of common stock. Amount
                  includes 3,045,000 shares of common stock issuable upon exercise
                  of
                  warrants.
 
 (2)
              Consists
                  of 4,856,634 shares of common stock owned by Michael
                  Reynolds.
  27
 *Annual
            Report*
  (3)
              Includes
                  1,484,437 shares of common stock issuable upon exercise of warrants
                  and
                  200,000 shares of common stock issuable upon exercise of warrants
                  issued
                  within 60 days after June 30, 2006.
 
 (4)
              Includes
                  1,768,874 shares of common stock issuable upon exercise of
                  warrants.
 
 (5)
              Includes
                  1,637,847 shares of common stock owned by Heidi Patterson, director
                  of the
                  Company and Glenn Patterson.
 
 (6)
              Consists
                  of 128,688 shares of common stock owned by Gary Geil, M.D, a director
                  of
                  the Company.
 
 (7)
              Consists
                  of 1,112,532 shares of common stock owned by Terry Giles, a director
                  of
                  the Company.
 
 (8)
              Consists
                  of shares of common stock owned by David Wilson, a director of
                  the
                  Company.
 
 (9)
              Includes
                  700,000 shares of common stock issuable upon exercise of
                  warrants.
 
 (10)
              Includes
                  3,000,000 shares of common stock issuable upon exercise of
                  warrants.
 
 (11)
              Includes
                  3,201,692 shares of common stock owned by HAP Investments, LLC.
                  Amount
                  also includes 5,350,000 shares of common stock issuable upon exercise
                  of
                  warrants.
 
 **ITEM
                  12.**
              **CERTAIN
                  RELATIONSHIPS AND RELATED TRANSACTIONS******
 
 During
        the year ended June 30, 2006, the Company recorded sales of approximately
        $26,850 in connection with services performed on behalf of a company owned
        by a
        Director of flexSCAN.
 
 During
        the year ended June 30, 2006 the Company recorded a total of $81,616 in expenses
        connected with several related parties. Of these expenses, $65,259 was for
        Public and Investor Relations services performed by Michael Nason, a stockholder
        of the Company. Additionally, the Company engaged Bishop Design to perform
        graphic design work totaling $13,380. Harold Bishop, owner of Bishop Design
        is a
        stockholder.
 
 During
        the year ended June 30, 2006, the Company recorded a total of $62,407 in
        accounts payable in connection with certain related parties. $32,500 in accounts
        payable related to accounting services performed by a company owned by Francis
        Pisano the CFO and a Director of flexSCAN. An additional $15,178 remained
        in
        accounts payable for the Public and Investor Relations services performed
        by
        Michael Nason. The Company’s Board of Directors each paid the initial premium
        for Directors and Officers insurance. A payable in the amount of $1,200 is
        due
        to David Wilson, Francis Pisano, Gary Geil, Heidi Patterson, and Thomas Banks.
 
 During
        the years ended June 30, 2006 and 2005, the Company issued an aggregate of
        $2,035,500 in unsecured notes payable and 9,753,908 warrants and $80,000
        in
        notes payable and zero warrants to related parties respectively, as outlined
        in
        the table below. The notes bear interest at 10% per annum.
  28
 *Annual
            Report*
  **Name**
              **Relationship**
              **Origination
                  Date**
              **Maturity
                  Date**
              **Loan
                  Amount**
              **Warrants**
              **Exercise
                  Price**
              **Grant
                  Date**
              **Expiration
                  Date**
              **Notes****FISCAL
                  YEAR 2005**Thomas
                  Banks
              CEO
              5/12/2005
              9/30/2006
              $10,000
              -
              n/a
              n/a
              n/aThomas
                  Banks
              CEO
              6/29/2005
              9/30/2006
              $25,000
              -
              n/a
              n/a
              n/aMichael
                  Reynolds
              COO
              5/12/2005
              9/30/2006
              $10,000
              -
              n/a
              n/a
              n/aHAP
                  Investments
              Director
              6/29/2005
              7/15/2005
              $25,000
              -
              n/a
              n/a
              n/a
              (1)Thomas
                  Banks
              CEO
              11/05/2003
              11/05/2006
              $36,699
              -
              n/a
              n/a
              n/aGary
                  Geil
              Director
              3/7/2005
              3/7/2006
              $10,000
              -
              n/a
              n/a
              n/a
              (2)**FISCAL
                  YEAR 2006**Thomas
                  Banks
              CEO
              7/13/2005
              9/30/2006
              $20,000
              -
              n/a
              n/a
              n/aHAP
                  Investments
              Director
              7/28/2005
              9/30/2006
              $30,000
              -
              n/a
              n/a
              n/aRosfor
                  International
              Stockholder
              8/3/2005
              9/30/2006
              $1,000,000
              2,008,908
              $0.50
              9/30/2005
              9/30/2010
              (3)Tryant,
                  LLC.
              Stockholder
              8/12/2005
              9/30/2006
              $225,000
              2,000,000
              $0.01
              9/30/2005
              8/12/2008
              (4)Michael
                  Reynolds
              COO
              10/27/2005
              9/30/2006
              $15,000
              -
              n/a
              n/a
              n/aThomas
                  Banks
              CEO
              10/27/2005
              9/30/2006
              $15,000
              -
              n/a
              n/a
              n/aMichael
                  Reynolds
              COO
              12/28/2005
              9/30/2006
              $6,000
              -
              n/a
              n/a
              n/aHAP
                  Investments
              Director
              12/29/2005
              12/31/2006
              $40,000
              400,000
              $0.10
              12/29/2005
              12/29/2008HAP
                  Investments
              Director
              1/30/2006
              12/31/2006
              $50,000
              500,000
              $0.10
              1/30/2006
              1/30/2009HAP
                  Investments
              Director
              2/10/2006
              12/31/2006
              $60,000
              600,000
              $0.10
              2/10/2006
              2/10/2009HAP
                  Investments
              Director
              2/28/2006
              12/31/2006
              $60,000
              600,000
              $0.10
              2/28/2006
              2/28/2009HAP
                  Investments
              Director
              4/4/2006
              12/31/2006
              $35,000
              350,000
              $0.10
              4/4/2006
              4/4/2009HAP
                  Investments
              Director
              5/1/2006
              12/31/2006
              $40,000
              400,000
              $0.10
              5/1/2006
              5/1/2009HAP
                  Investments
              Director
              5/12/2006
              12/31/2006
              $150,000
              1,500,000
              $0.10
              5/12/2006
              5/12/2009HAP
                  Investments
              Director
              6/16/2006
              12/31/2006
              $70,000
              700,000
              $0.10
              6/16/2006
              6/16/2009Thomas
                  Banks
              CEO
              1/13/2006
              9/30/2006
              $28,000
              280,000
              $0.10
              1/13/2006
              1/13/2009Thomas
                  Banks
              CEO
              1/24/2006
              9/30/2006
              $12,000
              120,000
              $0.10
              1/24/2006
              1/24/2009Thomas
                  Banks
              CEO
              2/7/2006
              9/30/2006
              $4,500
              45,000
              $0.10
              2/27/2006
              2/27/2009David
                  Wilson
              Director
              11/9/2005
              9/30/2006
              $150,000
              -
              n/a
              n/a
              n/a
              (5)Allison
              Stockholder
              6/29/2006
              9/30/2006
              $25,000
              250,000
              $0.10
              6/29/06
              6/29/09TOTAL
              
              $2,035,500
              9,753,908
 
 (1)
              On
                  May 12, 2005 the company issued a promissory note to HAP Investments,
                  LLC
                  in principal amount of $25,000 at 10% per annum. The principal
                  and related
                  interest was paid in full on July 15, 2005.
 
 (2)
              On
                  March 7, 2005 the company issued a convertible promissory note
                  to Gary
                  Geil, M.D. in the principal amount of $10,000 bearing an interest
                  rate of
                  10% per annum. As stated in the promissory note, once the company
                  became
                  publicly traded, the principal and related interest of $1,000 were
                  automatically and simultaneously converted into common stock on
                  August 12,
                  2005, the date of the reverse merger with Fuel Corporation of America.
  29
 *Annual
            Report*
  (3)
              Effective
                  September 30, 2005, Rosfor International, Inc. converted $1,000,000
                  in
                  notes payable and accrued interest of $4,454 in shares of the Company's
                  common stock at an exercise price of $0.50 per share. In consideration
                  for
                  approving the above conversion, the Company issued Rosfor International,
                  Inc. an additional 500,000 shares of common
                  stock.
 
 (4)
              On
                  August 12, 2005, the Company issued a convertible promissory note
                  to
                  Tryant in the principal amount of $225,000. Pursuant to the terms
                  of the
                  Note Agreement, a principal payment of $175,000 was due on September
                  30,
                  2005 and the remaining balance was due on December 31, 2005. In
                  the event
                  of default, interest will accrue on the entire unpaid balance of
                  the note
                  thereafter at a rate of 10% per annum until paid. The terms of
                  the Note
                  Agreement also gave Tryant the right to convert the unpaid principal
                  and
                  interest of the note into shares of the Company’s common stock at a
                  conversion rate of $0.1125 per share. In addition, the Company
                  issued a
                  warrant to Tryant for the purchase of 2,000,000 shares of the Company’s
                  common stock at an exercise price of $0.01 per share. The warrant
                  vested
                  as to 1,555,556 shares of common stock because the Company did
                  not make
                  the timely payment of $175,000 due September 30, 2005. As a result,
                  Tryant
                  exercised its warrant as to the 1,555,556 shares of the Company’s common
                  stock at an exercise price of $0.01 per share for an aggregate
                  of $15,556.
 The
          remaining 444,444 shares have also vested because the Company failed to
          make a
          timely payment of $50,000 on December 31, 2005 pursuant to the Note Agreement.
          The warrant is exercisable until the earlier of (i) repayment of the note
          or
          (ii) August 12, 2008.
 (5)
              On
                  November 9, 2005 the Company issued a convertible promissory note
                  to David
                  W. Wilson, a Director, in the principal amount of $150,000 bearing
                  an
                  interest rate of 10% per annum. Per the note agreement if the Company
                  defaulted on the payment of principal and interest the holder could
                  elect
                  to convert the debenture and any accrued interest into fully paid
                  and
                  fully registered shares of the Company’s common stock at a $0.10 per
                  share. On February 6, 2006 the Company and Mr. Wilson modified
                  the terms
                  of the note from convertible to non-convertible
                  debt.
 
 **ITEM
                  13.**
              **EXHIBITS******
 
 2.1
              Agreement
                  and Plan of Merger by and among Fuel Corporation of America, flexSCAN,
                  Inc. and FCA Acquisition Corp., dated as of July 15, 2005 (incorporated
                  by
                  reference to Exhibit 2.1 to the Registrant’s Form 8-K, filed on July 19,
                  2005)
 
 3.1
              Articles
                  of Incorporation of flexSCAN, Inc. (incorporated by reference to
                  Exhibit 2
                  to the Registrant’s Form 8-K, filed on May 23,
                  2005.)
 
 3.2
              Bylaws
                  of the flexSCAN, Inc. (incorporated by reference to Exhibit 3 to
                  the
                  Registrant’s Form 8-K, filed on August 1, 2005)
  30
 *Annual
            Report*
  3.3
              Certificate
                  of Amendment to the Articles of Incorporation of flexSCAN, Inc.
                  (incorporated by reference to Exhibit A to the Registrant’s Form DEF 14-C,
                  filed on February 2, 2006)
 
 10.1
              flexSCAN,
                  Inc. 2005 Equity Compensation Incentive Plan (incorporated by reference
                  to
                  Exhibit 4.1 to the Registrant’s Form 8-K, filed on August 18,
                  2005)
 
 10.2
              Convertible
                  Promissory Note of Fuel Corporation of America dated August 12,
                  2005
                  (incorporated by reference to Exhibit 4.2 to the Registrant’s Form 8-K,
                  filed on August 18, 2005)
 
 10.3
              Common
                  Stock Warrant of Fuel Corporation of America dated August 12, 2005
                  (incorporated by reference to Exhibit 4.3 to the Registrant’s Form 8-K,
                  filed on August 18, 2005)
 
 10.4
              Lock-Up/Leak-Out
                  and Registration Rights Agreement between Fuel Corporation of America
                  and
                  Tryant, LLC., dated August 12, 2005 (incorporated by reference
                  to Exhibit
                  10.1 to the Registrant’s Form 8-K, filed on August 18,
                  2005)
 
 10.5
              Indemnity
                  Agreement among Fuel Corporation of America, Tryant, LLC., and
                  flexSCAN,
                  Inc., dated as of August 12, 2005 (incorporated by reference to
                  Exhibit
                  10.2 to the Registrant’s Form 8-K, filed on August 18,
                  2005)
 
 10.6
              Amendment
                  to the Convertible Promissory Note by and between flexSCAN, Inc.
                  and
                  Tryant, LLC., (incorporated by reference to Exhibit 4.1 to the
                  Registrant’s Form 8-K, filed on November 22,
                  2005)
 
 10.7
              Amendment
                  No. 2 to the Convertible Promissory Note by and between flexSCAN,
                  Inc. and
                  Tryant, LLC., dated November 15, 2005 (incorporated by reference
                  to
                  Exhibit 10.1 to the Registrant’s Form 8-K, filed on March 29,
                  2006)
 
 10.8
              Amendment
                  to Warrant dated March 23, 2006 (incorporated by reference to Exhibit
                  10.2
                  to the Registrant’s Form 8-K, filed on March 29,
                  2006)
 
 10.9
              Amendment
                  No. 3 to the Convertible Promissory Note by and between flexSCAN,
                  Inc. and
                  Tryant, LLC., dated April 30, 2006 (incorporated by reference to
                  Exhibit
                  10.1 to the Registrant’s Form 8-K, filed on May 4,
                  2006)
 
 31.1
              Certification
                  of Chief Executive Officer required under Rule 13a-14(a)/15d-14(a)
                  under
                  the Exchange Act.
 
 31.2
              Certification
                  of Principle Financial Officer required under Rule 13a-14(a)/15d-14(a)
                  under the Exchange Act.
 
 32.1
              Certification
                  of Chief Executive Officer and Chief Financial Officer pursuant to 18
                  U.S.C Section 1350, as adopted pursuant to Section 906 of the
                  Sarbanes-Oxely Act of 2002.
  31
 *Annual
            Report*
  **ITEM
                  14.**
              **PRINCIPAL
                  ACCOUNTANT FEES AND SERVICES******
 
 Following
        is a summary of the aggregate fees billed for professional service by the
        Company’s principal accountants.
 
 **2006**
              
              **2005**Audit
                  fees
              
              $
              96,495
              
              $
              10,100Audit
                  related fees
              
              
              -
              
              
              -Tax
                  fees
              
              
              -
              
              $
              1,350All
                  other fees
              
              
              -
              
              
              -**Total**
              
              **$**
              **96,495**
              
              **$**
              **11,450**
 
 The
        audit
        related fees listed above pertain to the costs associated with the preparation
        of the audits of the years specified.
 
 The
        Company did not have an audit committee as of June 30, 2006 and consequently
        the
        entire Board of Directors serves in that capacity. The Board’s pre-approval
        policy regarding professional services provided by the Company’s principal
        accountant is to pre-approve the engagement of the principal accountant for
        the
        performance of all professional services. The policy does provide a waiver
        of
        pre-approval in the event that such services, in the aggregate, will be less
        than 5% of the audit fee, such services are not recognized as non-audit fees
        at
        the time of the engagement, and pre-approval is obtained from a designated
        member of the Board prior to the engagement. Until such time as an audit
        committee is appointed, the designated individual is the Principal Executive
        Officer, currently the Chief Executive Officer of the Company.
  32
 *Annual
            Report*
  **SIGNATURES**
 
 In
        accordance with section 13 or 15(d) with the Securities Exchange Act of 1934,
        the Company has duly caused this report to be signed on its behalf by the
        undersigned, thereunto duly authorized, on the 13th day of November, 2006.
 
 **flexSCAN,
        Inc.**
 *By:*
                ***/s/
                    Thomas Banks**Thomas
                    Banks**Chief
                    Executive Officer**By:*
                ***/s/
                    Francis X. Pisano**Francis
                    X. Pisano**Chief
                    Financial Officer*
  
 In
        accordance with the Exchange Act, this report has been signed below by the
        following persons on behalf of the Company and in the capacities and on the
        dates indicated.
 
 *SIGNATURE*
              
              *TITLE*
              *DATE**/s/
                  Thomas Banks**Thomas
                  Banks*
              
              *Principle
                  Executive Officer and Director*
              *November
                  13, 2006**/s/
                  Francis X. Pisano**Francis
                  X. Pisano*
              
              *Principle
                  Financial Officer and Director*
              *November
                  13, 2006**/s/
                  Heidi A. Patterson**Heidi
                  A. Patterson*
              
              *Director*
              *November
                  13, 2006**/s/
                  Gary E. Geil**Gary
                  E.Geil, M.D.*
              
              *Director*
              *November
                  13, 2006*
  33
 *Annual
            Report*
  */s/David
                  Wilson**David
                  Wilson*
              
              *Director*
              *November
                  13, 2006**/s/
                  Maurice J. Dewald**Maurice
                  J. DeWald*
              
              *Director*
              *November
                  13, 2006**/s/
                  Jonathon Javitt**Jonathan
                  Javitt, M.D.*
              
              *Director*
              *November
                  13, 2006**/s/
                  Kenneth Westbrook**Kenneth
                  Westbrook*
              
              *Director*
              *November
                  13, 2006*
  34
 *Annual
            Report*
  **flexSCAN,
        INC.**
  **CONSOLIDATED
        FINANCIAL STATEMENTS**
  **YEARS
        ENDED JUNE 30, 2006 AND 2005**
  **WITH
        REPORTS OF INDEPENDENT REGISTERED**
  **PUBLIC
        ACCOUNTING FIRMS**
  **CONTENTS**
  PageReport
                  of Independent Registered Public Accounting Firm
              **F-1
                  - F-2****FINANCIAL
                  STATEMENTS**Consolidated
                  Balance Sheet
              **F-3**Consolidated
                  Statement of Operations
              **F-4**Consolidated
                  Statements of Stockholders’ Deficit
              **F-5**Consolidated
                  Statements of Cash Flows
              **F-6**Notes
                  to the Consolidated Financial Statements
              **F-7
                  to F-26**
  35
 *Annual
            Report*
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 The
        Board
        of Directors and Stockholders
 
 flexSCAN
        Inc.
 
 We
        have
        audited the accompanying balance sheet of FlexSCAN, Inc. (the “Company”) as of
        June 30, 2006, and the related statements of operations, stockholders’ deficit
        and cash flow for the year then ended. These financial statements are the
        responsibility of the Company’s management. Our responsibility is to express an
        opinion on these financial statements based on our audit.
 
 We
        conducted our audit in accordance with auditing standards of the Public Company
        Accounting Oversight Board (United States of America). Those standards require
        that we plan and perform the audit to obtain reasonable assurance about whether
        the financial statements are free of material misstatement. The Company has
        determined that it is not required to have, nor were we engaged to perform,
        an
        audit of its internal control over financial reporting. Our audit included
        consideration of internal control over financial reporting as a basis for
        designing audit procedures that are appropriate in the circumstances, but
        not
        for the purpose of expressing an opinion on the effectiveness of the Company’s
        internal control over financial reporting. Accordingly, we express no such
        opinion. An audit includes examining, on a test basis, evidence supporting
        the
        amounts and disclosures in the financial statements, assessing the accounting
        principles used and significant estimates made by management, as well as
        evaluating the overall financial statement presentation. We believe that
        our
        audit provide a reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the financial position of the Company as of June 30, 2006
        and
        the results of its operations and cash flows for the year then ended in
        conformity with generally accepted accounting principles in the United States
        of
        America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern. As discussed in Note 1 to the financial
        statements, the Company’s continued operating losses, limited capital and
        stockholders’ deficit raise substantial doubt about its ability to continue as a
        going concern. Management’s plans in regard to this matter are also described in
        Note 1. The accompanying financial statements do not include any adjustments
        that might result from the outcome of this uncertainty.
 
 
 
 /s/
        CACCIAMATTA ACCOUNTANCY CORPORATION
 
 Irvine,
        California
 October
        27, 2006
  F-1
 *Annual
            Report*
  **REPORT
        OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM**
 
 
 To
        the
        Board of Directors of
 
 flexSCAN,
        Inc.
 
 We
        have
        audited the accompanying statements of operations, stockholders’ deficit and
        cash flows of flexSCAN, Inc. (the “Company”) for the year ended June 30, 2005.
        These financial statements are the responsibility of the Company's management.
        Our responsibility is to express an opinion on these financial statements
        based
        on our audit.
 
 We
        conducted our audit in accordance with the standards of the Public Company
        Accounting Oversight Board (United States). Those standards require that
        we plan
        and perform the audit to obtain reasonable assurance about whether the financial
        statements are free of material misstatement. An audit includes examining,
        on a
        test basis, evidence supporting the amounts and disclosures in the financial
        statements. The Company is not required to have, nor were we engaged to perform,
        an audit of its internal control over financial reporting. Our audit included
        consideration of internal control over financial reporting as a basis for
        designing audit procedures that are appropriate in the circumstances, but
        not
        for the purpose of expressing an opinion on the effectiveness of the Company's
        internal control over financial reporting. Accordingly, we express no such
        opinion.  An audit also includes assessing the accounting principles used
        and significant estimates made by management, as well as evaluating the overall
        financial statement presentation. We believe that our audit provides a
        reasonable basis for our opinion.
 
 In
        our
        opinion, the financial statements referred to above present fairly, in all
        material respects, the results of operations and cash flows of flexSCAN,
        Inc.
        for the year ended June 30, 2005 in conformity with accounting principles
        generally accepted in the United States of America.
 
 The
        accompanying financial statements have been prepared assuming that the Company
        will continue as a going concern.  As discussed in Note 1 to the financial
        statements, the Company has incurred recurring losses, and has a working
        capital
        deficit of $402,131 and a stockholders' deficit of $322,906 at June 30,
        2005.  These factors, among others, raise substantial doubt about the
        Company's ability to continue as a going concern.  Management's plans in
        regard to these matters are also described in Note 1.  The financial
        statements do not include any adjustments relating to the recoverability
        and
        classification of asset carrying amounts or the amount and classification
        of
        liabilities that might result should the Company be unable to continue as
        a
        going concern.
 
 
 
 CORBIN
        & COMPANY, LLP
 
 Irvine,
        California
 December
        21, 2005
  F-2
 *Annual
            Report*
  **flexSCAN,
        Inc.**
 **CONSOLIDATED
            BALANCE SHEET**
 
 **June
                      30, 2006****Assets**Current
                      AssetsCash
                  
                  $
                  152,298Accounts
                      receivableBilled
                  
                  
                  6,321Unbilled
                  
                  
                  3,2679,588Prepaid
                      expenses and other current assets
                  
                  
                  4,187Total
                      current assets
                  
                  
                  166,073Fixed
                      assets, net
                  
                  
                  127,625Deposits
                  
                  
                  42,016Intangibles,
                      net
                  
                  
                  2,811$
                  338,525**Liabilities
                      and Stockholders' Deficit**Current
                      liabilitiesAccounts
                      payable
                  
                  $
                  375,833Accrued
                      expenses
                  
                  
                  112,667Deferred
                      compensation
                  
                  
                  429,709Deferred
                      revenue
                  
                  
                  26,377Registration
                      rights obligation
                  
                  
                  188,958Related
                      party notes payable, net of $81,122 debt discount
                  
                  
                  864,105Short
                      term notes payable, net of $93,299 debt discount
                  
                  
                  6,701Current
                      portion of deferred rent
                  
                  
                  18,621Current
                      portion of capital lease obligations
                  
                  
                  27,000Total
                      current liabilities
                  
                  
                  2,049,971Deferred
                      rent, net of current portion
                  
                  
                  56,067Capital
                      lease obligations, net of current portion
                  
                  
                  32,3352,138,373Commitments
                      and contingencies
                  
                  
                  -Stockholders'
                      DeficitPreferred
                      stock, $0.001 par value, 10,000,000 shares authorized, none
                      issued
                  
                  
                  -Common
                      stock, $0.001 par value, 150,000,000 shares authorized, 47,641,284
                      shares
                      issued and outstanding
                  
                  
                  47,642Additional
                      paid in capital
                  
                  
                  15,780,356Accumulated
                      deficit
                  
                  
                  (17,627,846
                  )Total
                      Stockholders' Deficit
                  
                  
                  (1,799,848
                  )$
                  338,525
  **** The
            accompanying notes are an integral part of these consolidated financial
            statements.
  F-3
 *Annual
                Report*


**flexSCAN,
      Inc.**





**CONSOLIDATED
      STATEMENTS OF OPERATIONS**





**For
      the years ended June 30,**




**2006**
              
              **2005**Sales
              
              $
              134,708
              
              $
              507,830Cost
                  of sales
              
              
              72,619
              
              
              155,036Gross
                  profit
              
              
              62,089
              
              
              352,794Selling,
                  general and administrative
              
              
              8,790,439
              
              
              2,607,022Loss
                  from operations
              
              
              (8,728,350
              )
              
              (2,254,228
              )Other
                  income (expense)Interest
                  expense
              
              
              (1,163,057
              )
              
              (89,598
              )Equipment
                  financial income, net
              
              
              
              
              
              43,605Derivative
                  valuation gain
              
              
              -
              
              
              2,216,289Other
              
              
              13,736
              
              
              -Total
                  other income (expense)
              
              
              (1,149,321
              )
              
              2,170,296Loss
                  before income taxes
              
              
              (9,877,671
              )
              
              (83,932
              )Income
                  tax expense
              
              
              800
              
              
              800Net
                  loss before deemed preferred dividends
              
              
              (9,878,471
              )
              
              (84,732
              )Deemed
                  preferred dividends
              
              
              -
              
              
              (675,000
              )Net
                  loss
              
              $
              (9,878,471
              )
              $
              (759,732
              )Basic
                  and diluted:(Loss)
                  per share
              
              $
              (0.30
              )
              $
              (0.03
              )Weighted
                  average shares outstanding
              
              
              32,848,793
              
              
              22,971,217




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


F-4
 *Annual
          Report*


**flexSCAN,
      INC.**





**CONSOLIDATED
      STATEMENTS OF STOCKHOLDERS' DEFICIT**





**For
      the years ended June 30, 2006 and 2005**





Additional
            
            
            
            TotalPreferred
                Series A
            
            Preferred
                Series B
            
            Common
                Stock
            
            Paid
                in
            
            Accumulated
            
            Stockholders'Shares
            
            Amount
            
            Shares
            
            Amount
            
            Shares
            
            Amount
            
            Capital
            
            Deficit
            
            DeficitBalance,
                June 30, 2004
            
            
            194,899
            
            $
            195
            
            
            363,873
            
            $
            364
            
            
            18,401,412
            
            $
            18,401
            
            $
            4,880,977
            
            $
            (6,989,643
            )
            $
            (2,089,706
            )Preferred/common
                shares issued for:Warrants
                exercised
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            7,194,827
            
            
            7,195
            
            
            407,805
            
            
            -
            
            
            415,000Cash
            
            
            -
            
            
            -
            
            
            225,000
            
            
            225
            
            
            -
            
            
            -
            
            
            899,775
            
            
            -
            
            
            900,000Estimated
                fair value of warrants:Granted
                to employees
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            151,200
            
            
            -
            
            
            151,200Issued
                with debt
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            1,060,332
            
            
            -
            
            
            1,060,332Deemed
                dividend related to warrants issued in connection with preferred
                stock
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (675,000
            )
            
            (675,000
            )Issuance
                of preferred stock per anti-dilution agreements
            
            
            -
            
            
            -
            
            
            57,461
            
            
            57
            
            
            -
            
            
            -
            
            
            (57
            )
            
            -
            
            
            0Net
                loss
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            -
            
            
            (84,732
            )
            
            (84,732
            )Balance,
                June 30, 2005
            
            
            194,899
            
            
            195
            
            
            646,334
            
            
            646
            
            
            25,596,239
            
            
            25,596
            
            
            7,400,032
            
            
            (7,749,375
            )
            
            (322,906
            )Common
                shares issued for:Preferred
                stock conversions
            
            
            (194,899
            )
            
            (195
            )
            
            (646,334
            )
            
            (646
            )
            
            4,920,753
            
            
            4,921
            
            
            (4,080
            )
            
            -
            
            
            -Merger
                with Fuel Corporation of America
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            2,435,848
            
            
            2,436
            
            
            (2,436
            )
            
            -
            
            
            -Cash
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            314,286
            
            
            314
            
            
            109,686
            
            
            
            
            
            110,000Debt
                and interest conversions
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            4,078,690
            
            
            4,079
            
            
            1,349,709
            
            
            
            
            
            1,353,788Warrants
                exercised
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            9,485,468
            
            
            9,486
            
            
            121,670
            
            
            
            
            
            131,156Services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            810,000
            
            
            810
            
            
            251,190
            
            
            
            
            
            252,000Estimated
                fair value of beneficial conversion:To
                settle officer deferred compensation
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            3,870,394
            
            
            
            
            
            3,870,394Estimated
                fair value of warrantsGranted
                to employees
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            227,421
            
            
            
            
            
            227,421Issued
                for consulting services
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            1,644,303
            
            
            
            
            
            1,644,303Issued
                with debt
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            812,467
            
            
            
            
            
            812,467Net
                loss
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            
            (9,878,471
            )
            
            (9,878,471
            )Balance,
                June 30, 2006
            
            
            -
            
            $
            -
            
            
            -
            
            $
            -
            
            
            47,641,284
            
            $
            47,642
            
            $
            15,780,356
            
            $
            (17,627,846
            )
            $
            (1,799,848
            )




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




F-5
 *Annual
          Report*


**flexSCAN,
        Inc.**
 
 **CONSOLIDATED
        STATEMENTS OF CASH FLOWS**
 
 **For
        the years ended June 30,**
  **2006**
              
              **2005****Cash
                  from operating activities**Net
                  loss
              
              
              (9,878,471
              )
              
              (84,732
              )Adjustments
                  to reconcile net loss to net cash from operating
                  activitiesDepreciation
                  and amortization
              
              
              48,312
              
              
              41,902Gain
                  on disposal of fixed assets to settle accounts
                  payable
              
              
              (3,736
              )
              
              -Amortization
                  of debt discount
              
              
              898,802
              
              
              21,512Acquisition
                  costs expensed - financed with note payable
              
              
              225,000
              
              
              -Estimated
                  fair value of common stock issued for services
              
              
              252,000
              
              
              -Estimated
                  fair value of warrants issued for services
              
              
              1,644,303
              
              
              441,461Estimated
                  fair value of warrants issued to employees
              
              
              227,421
              
              
              151,200Estimated
                  fair value of deferred compensation conversion
                  option
              
              
              3,870,394
              
              
              -Estimated
                  gain on derivatives
              
              
              -
              
              
              (2,216,289
              )Changes
                  in operating assets and liabilitiesAccounts
                  receivable, net
              
              
              (99,766
              )
              
              (33,724
              )Prepaid
                  expenses and other assets
              
              
              (36,868
              )
              
              5,999Accounts
                  payable
              
              
              188,885
              
              
              87,815Accrued
                  expenses and deferred
              
              
              473,011
              
              
              84,386Registration
                  rights obligation
              
              
              188,958
              
              
              -Net
                  cash flows from operating activities
              
              
              (2,001,754
              )
              
              (1,500,470
              )**Cash
                  from investing activities**Purchases
                  of fixed assets
              
              
              (17,119
              )
              
              -Net
                  cash flows from investing activities
              
              
              (17,119
              )
              
              -**Cash
                  from financing activities**Proceeds
                  for issuing common stock
              
              
              241,156
              
              
              415,000Proceeds
                  for issuing preferred stock
              
              
              -
              
              
              900,000Proceeds
                  from borrowings
              
              
              2,165,500
              
              
              230,000Repayment
                  of notes
              
              
              (241,317
              )
              
              (171,877
              )Repayment
                  of captial lease obligations
              
              
              (1,530
              )
              
              (5,869
              )Net
                  cash flows from financing activities
              
              
              2,163,809
              
              
              1,367,254Net
                  change in cash for the year
              
              
              144,936
              
              
              (133,216
              )Cash,
                  beginning of year
              
              
              7,362
              
              
              140,578Cash,
                  end of year
              
              
              152,298
              
              
              7,362Supplemental
                  disclosures:Cash
                  paid for interest
              
              
              17,711
              
              
              65,470Cash
                  paid for income taxes
              
              
              800
              
              
              800Non-cash
                  investing and financing activitiesPurchase
                  of fixed assets under capital leases
              
              
              -
              
              
              66,735Value
                  of warrants issued with Preferred B shares
              
              
              -
              
              
              675,000Par
                  value of of Preferred B shares issued for antidilution
                  provisions
              
              
              -
              
              
              57Debt
                  related derivative liabilities reclassified from liabilities to
                  equity
              
              
              -
              
              
              1,060,332Debt
                  discount recorded for warrants and beneficial
                  conversions
              
              
              812,467
              
              
              100,000Debt
                  and accrued interest converted to common shares
              
              
              1,353,788
              
              
              -


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


F-6
 *Annual
          Report*


**flexSCAN,
      Inc.**




**Notes
      to the Consolidated Financial Statements**




**For
      the Years Ended June 30, 2006 and 2005**




**NOTE
        1 - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING
        POLICIES**
 
 Organization
 
 Since
        its
        original incorporation on February 13, 2001, flexSCAN, Inc.’s efforts have been
        principally devoted to research and development, software development, securing
        and protecting its intellectual property, and raising capital. From inception
        through June 30, 2006, flexSCAN has established its marketing strategy,
        developed its foundation technology, established a scalable infrastructure,
        defined its products and services, established its brand identity, and assembled
        its executive team. flexSCAN’s model is to increase the availability of
        leading-edge imaging diagnostic technology through a blending of teleradiology
        and remote/mobile services resulting in greater access, increased affordability
        and improvement of the human condition, while not incurring the economic
        burden
        of operating physical facilities.
 
 On
        July
        15, 2005, the former flexSCAN entered into an Agreement and Plan of Merger
        (the
“Agreement”) with Fuel Corporation of America, and its wholly owned subsidiary
        (“FCA Sub”). On August 12, 2005, the Merger closed and pursuant to the
        Agreement, FCA Sub merged with and into the former flexSCAN and the combined
        entity became a wholly owned subsidiary of Fuel Corporation of America (the
        “Merger”). Per the Agreement, Fuel Corporation of America issued 30,671,207
        shares of its common stock to holders of the former flexSCAN common stock
        (collectively, the “flexSCAN Shareholders”) so that upon consummation of the
        Merger, 33,107,055 shares of common stock of the Company were issued and
        outstanding. Approximately 92.61% of the Company’s issued and outstanding common
        stock is owned by the former flexSCAN’s Shareholders and the remainder is held
        by the Fuel Corporation of America’s stockholders. Subsequent to the Merger,
        Fuel Corporation of America executed a short-form merger into a Nevada
        corporation in order to become a Nevada corporation and effect a name change
        to
        flexSCAN, Inc. The Merger was accounted for as a reverse acquisition as the
        former flexSCAN shareholders controlled the combined entity after the Merger.
        As
        a result, the accompanying consolidated financial statements have been
        retroactively restated for all periods presented to present the historical
        results of the former flexSCAN and all share information have been adjusted
        to
        reflect the merger conversion factor of 5.8494525.
 
 In
        connection with the Merger, the Company entered into an Indemnity Agreement
        with
        Tryant, LLC, a principal stockholder of Fuel Corp. (“Tryant”), whereby, among
        other things, Tryant agreed to pay and indemnify the Company with respect
        to any
        and all past liabilities of any type or nature of the Company existing at
        or
        arising out of any act or occurrence prior to the closing of the Merger
        Agreement and all other related agreements. As consideration for Tryant entering
        into the Indemnity Agreement, the Company agreed to pay Tryant $550,000,
        which
        was expensed during the six months ended December 31, 2005, and is included
        in
        selling, general and administrative expenses. Pursuant to the terms of the
        Indemnity Agreement, the Company paid $325,000 on the closing of the Merger
        Agreement. The Company issued a convertible promissory note for the remaining
        $225,000 (see Note 5).
  F-7
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Basis
        of Presentation
 
 The
        accompanying consolidated financial statements include the results of flexSCAN,
        Inc. and its subsidiary. All significant intercompany balances and transactions
        have been eliminated in consolidation.
 
 Liquidity
        and Management’s Plans
 
 The
        accompanying consolidated financial statements have been prepared in conformity
        with accounting principles generally accepted in the United States of America,
        which contemplate continuation of the Company as a going concern. The Company
        has not generated significant revenues from operations and has no assurance
        of
        any future revenues. The Company incurred a net loss of $9,878,471 during
        the
        year ended June 30, 2006. Also, the Company has a cash balance of $152,298,
        a
        working capital deficit of $1,883,898 and a stockholders’ deficit of $1,799,848
        at June 30, 2006. These factors, among others, raise substantial doubt about
        the
        Company’s ability to continue as a going concern.
 
 The
        Company’s success is dependent upon numerous items, certain of which are the
        successful growth of revenues from its services, its ability to obtain new
        customers in order to achieve levels of revenue adequate to support the
        Company’s current and future cost structure, and its success in obtaining
        financing for operations, for which there is no assurance. Unanticipated
        problems, expenses, and delays are frequently encountered in establishing
        and
        maintaining profitable operations. These include, but are not limited to,
        technical difficulties, market acceptance, and sales and marketing. The failure
        of the Company to meet any of these conditions could have a materially adverse
        effect on the Company and may force the Company to reduce or curtail operations.
        No assurance can be given that the Company can achieve or maintain profitable
        operations. The Company’s management recognizes that the Company must obtain
        additional capital for the eventual achievement of sustained profitable
        operations. Management’s plans include obtaining additional capital through
        equity financing sources. However, no assurance can be given that additional
        capital, if needed, will be available when required or upon terms acceptable
        to
        the Company or that the Company will be successful in its efforts to negotiate
        the extension of its existing debt. The accompanying consolidated financial
        statements do not include any adjustments that might result from the outcome
        of
        this uncertainty.
 
 Use
        of
        Estimates
 
 The
        preparation of consolidated financial statements in conformity with accounting
        principles generally accepted in the United States of America requires
        management to make estimates and assumptions that affect the reported amounts
        of
        assets and liabilities and disclosure of contingent assets and liabilities
        at
        the date of the financial statements and the reported amounts of revenues
        and
        expenses during the reporting periods. Significant estimates made by management
        include, among others, realization of accounts receivable, recoverability
        of
        long-lived assets, deferred tax asset valuations and valuation of derivative
        instruments. Actual results could differ from those estimates.
  F-8
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Cash
 
 The
        Company maintains its cash accounts in financial institutions. Accounts at
        these
        financial institutions are insured by the Federal Deposit Insurance Corporation
        (“FDIC”) up to $100,000. At June 30, 2006, the Company had no deposits which
        were in excess of the FDIC insurance limit. The Company performs ongoing
        evaluations of these institutions to limit its concentration risk
        exposure.
 
 Customers
 
 The
        Company performs ongoing credit evaluations of its customers and generally
        does
        not require collateral. The Company regularly monitors its customer collections
        and payments and will record a provision for estimated credit losses based
        upon
        the Company’s historical experience and any specific customer collection issues
        that have been identified. At June 30, 2006, no reserve against accounts
        receivable was required.
 
 Fair
        Value of Financial Instruments
 
 The
        Company’s consolidated financial instruments consist of cash, accounts
        receivable, accounts payable and accrued expenses, and related party notes
        payable. The carrying values for all such instruments, except the related
        party
        notes payable, approximate fair value at June 30, 2006 due to the short
        maturities of such financial instruments. The fair value of related party
        notes
        payable approximates their carrying value and was determined based on the
        current rates at which similar loans would be made to borrowers with similar
        credit ratings and for the same remaining maturities.
 
 Fixed
        Assets
 
 Fixed
        assets are stated at cost, net of accumulated depreciation and amortization.
        Depreciation and amortization of fixed assets are provided using the
        straight-line method over estimated useful lives ranging from three to five
        years. Betterments, renewals and extraordinary repairs that extend the lives
        of
        the assets are capitalized; other repairs and maintenance charges are expensed
        as incurred. The cost and related accumulated depreciation and amortization
        applicable to assets retired are removed from the accounts, and the gain
        or loss
        on disposition is recognized in current operations.
 
 Intangible
        Asset
 
 The
        intangible asset is a domain name which is amortized using the straight-line
        method over its estimated useful life of five years.
 
 Long-Lived
        Assets
 
 The
        Company’s management assesses the recoverability of its long-lived assets upon
        the occurrence of a triggering event by determining whether the depreciation
        and
        amortization of long-lived assets over their remaining useful lives can be
        recovered through projected undiscounted future cash flows. The amount of
        long-lived asset impairment, if any, is measured based on fair value and
        is
        charged to operations in the period in which long-lived asset impairment
        is
        determined by management. At June 30, 2006, the Company’s management believes
        there is no impairment of its long-lived assets.
  F-9
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  There
        can
        be no assurance however, that market conditions will not change or demand
        for
        the Company’s services will continue, which could result in impairment of its
        long-lived assets in the future.
 
 Derivative
        Financial Instruments
 
 From
        time
        to time, the Company issues debt securities that contain features, that are
        considered embedded derivative instruments pursuant to Statement of Financial
        Accounting Standards (“SFAS”) No. 133, *Accounting
        for Derivative Instruments and Hedging Activities* ,
        as
        amended. The accounting treatment of these derivative financial instruments
        requires that the Company record the derivatives and related warrants at
        their
        fair values as of the inception date of the debt agreements and at fair value
        as
        of each subsequent balance sheet date. In addition, under the provisions
        of
        Emerging Issues Task Force (“EITF”) Issue No. 00-19, *Accounting
        for Derivative Financial Instruments Indexed to, and Potentially Settled
        in, a
        Company’s Own Stock,* if
        the
        Company enters into certain non-conventional convertible debt agreements,
        the
        Company may be required to classify all other non-employee warrants as
        derivative liabilities and record them at their fair values at each balance
        sheet date. At June 30, 2006, no such classification requirement existed.
        During
        the twelve month period ended June 30, 2005, the Company recognized other
        income
        of $2,216,289, related to the change in the fair value of derivative
        instruments.
 
 Convertible
        Debentures
 
 The
        convertible feature of certain of the Company’s notes payable provides for a
        rate of conversion that is below market value (see Note 5). This feature
        is
        characterized as a beneficial conversion feature (“BCF”), which is recorded by
        the Company pursuant to EITF Issue No. 98-5, Accounting *for
        Convertible Securities with Beneficial Conversion Features or Contingently
        Adjustable Conversion Ratios,* and EITF
        Issue No. 00-27, *Application
        of EITF Issue No. 98-5 to Certain Convertible Instruments.*
 
 The
        Company’s conventional convertible debt is recorded net of the debt discount
        related to the BCF. The Company amortizes the discount to interest expense
        over
        the life of the debt on a straight-line basis, which approximates the effective
        interest method.
 
 Revenue
        Recognition
 
 The
        Company’s pre-symptomatic disease screening services (“mywellness360 plan”)
        revenue is recognized when the service is provided. Monies collected in advance
        of the service being provided are recorded as deferred revenue. Unbilled
        receivables relate to revenues earned, but not billed prior to period end.
 
 From
        time
        to time, the Company has acted in a manner similar to a medical equipment
        lease
        broker. As a broker, the Company earns a commission or fee for medical equipment
        leases referred to third parties on a non-recourse basis. The commission
        or fee
        is earned upon funding of the lease by the third party. The commission is
        recorded net of any related expenses and is included in equipment financing
        income, net.
  F-10
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Advertising
        Costs
 
 The
        Company expenses advertising costs when incurred. Advertising costs for the
        years ended June 30, 2006 and 2005 were $45,748 and $8,766,
        respectively.
 
 Share-Based
        Payments
 
 Our
        share-based employee compensation arrangements are described in Note 7. Prior
        to
        April 1, 2006, we accounted for these share-based employee compensation
        arrangements under the measurement and recognition provisions of Accounting
        Principles Board (APB) Opinion No. 25, *“Accounting
        for Stock Issued to Employees,”* and
        related Interpretations, as permitted by SFAS 123, *“Accounting
        for Stock-Based Compensation.”* Accordingly,
        we only recorded share-based employee compensation expense for warrants granted
        with an exercise price less than the market price on the date of grant during
        the twelve months ended June 30, 2005, and for the period from July 1, 2005
        through March 31, 2006. In accordance with SFAS 123 and SFAS 148, *“Accounting
        for Stock-Based Compensation - Transition and Disclosure,”* we
        provided pro forma net income or loss and net income or loss per share
        disclosures for each period prior to the adoption of SFAS 123(R) as if we
        had
        applied the fair value-based method in measuring compensation expense for
        our
        share-based compensation plans.
 
 Effective
        April 1, 2006, we adopted the fair value recognition provisions of SFAS
        123(R), *“Share-Based
        Payment,”* using
        the
        modified prospective transition method. Under that transition method,
        compensation expense that we recognized for the twelve months ended June
        30,
        2006 included: (a) period compensation expense for all share-based payments
        granted prior to, but not yet vested as of, April 1, 2006, based on the
        grant date fair value estimated in accordance with the original provisions
        of
        SFAS 123, adjusted for forfeitures, and (b) period compensation expense for
        all share-based payments granted on or after April 1, 2006, based on the
        grant
        date fair value estimated in accordance with the provisions of SFAS 123(R).
        For
        warrants granted before April 1, 2006, we amortize the fair value on a
        straight-line basis. This is the same basis on which we amortized warrants
        granted before April 1, 2006 for our pro forma disclosures under SFAS 123.
        For
        warrants granted on or after April 1, 2006, we amortize the fair value on
        a
        straight-line basis. All warrants are amortized over the requisite service
        periods of the awards, which are generally the vesting periods. Because we
        used
        the modified prospective transition method, results for prior periods have
        not
        been restated. In March 2005 the Securities and Exchange Commission issued
        Staff Accounting Bulletin (SAB) No. 107, which provides supplemental
        implementation guidance for SFAS 123(R). We have applied the provisions of
        SAB
        107 in our adoption of SFAS 123(R).
 
 Income
        Taxes
 
 The
        Company accounts for income taxes in accordance with SFAS No. 109, *Accounting
        for Income Taxes* .
        Under
        the asset and liability method of SFAS No. 109, deferred tax assets and
        liabilities are recognized for the future tax consequences attributable to
        differences between the financial statement carrying amounts of existing
        assets
        and liabilities and their respective tax bases. Deferred tax assets and
        liabilities are measured using enacted tax rates expected to apply to taxable
        income in the years in which those temporary differences are expected to
        be
        recovered or settled. Under SFAS No. 109, the effect on deferred tax assets
        and
        liabilities of a change in tax rates is recognized in income in the period
        that
        includes the enactment date. A valuation allowance is provided for certain
        deferred tax assets if it is more likely than not that the Company will not
        realize tax assets through future operations.
  F-11
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Basic
        and Diluted Loss Per Share
 
 Basic
        loss per common share is computed based on the weighted average number of
        shares
        outstanding for the period. Diluted loss per share is computed by dividing
        net
        loss by the weighted average shares outstanding assuming all potential dilutive
        common shares were issued. Basic and diluted loss per share are the same
        as the
        effect of convertible notes, stock options and warrants on loss per share
        are
        anti-dilutive and thus not included in the diluted loss per share calculation.
        The following antidilutive common stock equivalents were excluded from the
        computation of diluted earnings as of June 30:
 
 2006
              
              2005Warrants
                  outstanding
              
              
              16,798,114
              
              
              18,367,620Conversion
                  option on notes payable
              
              
              844,444
              
              
              -Conversion
                  option on deferred compensation
              
              
              2,600,000
              
              
              -
 
 Recent
        Accounting Pronouncements
 
 In
        September 2006, the Financial Accounting Standards Board, ("FASB") issued
        FAS
        157 (SFAS 157), Fair Value Measurements. This standard defines fair value,
        establishes a framework for measuring fair value in generally accepted
        accounting principles, and expands disclosures about fair value measurements.
        This statement is effective for financial statements issued for fiscal years
        beginning after November 15, 2007. Earlier application is encouraged. The
        adoption of this accounting pronouncement is not expected to have a material
        effect on the consolidated financial statements.
 
 In
        July
        2006, the FASB issued Interpretation No. 48 (FIN No. 48), Accounting for
        Uncertainty in Income Taxes. This interpretation requires recognition and
        measurement of uncertain income tax positions using a "more-likely-than-not"
        approach. The provisions of FIN 48 are effective for fiscal years beginning
        after December 15, 2006. The adoption of this accounting pronouncement is
        not
        expected to have a material effect on the consolidated financial
        statements.
 
 In
        February 2006, the FASB issued FAS 155 (SFAS No. 155), Accounting for Certain
        Hybrid Financial Instruments - an amendment of FASB Statements No. 133 and
        140.
        This statement permits fair value remeasurement for any hybrid financial
        instrument that contains an embedded derivative that would otherwise have
        to be
        accounted for separately. The new Statement also requires companies to identify
        interests in securitized financial assets that are freestanding derivatives
        or
        contain embedded derivatives that would have to be accounted for separately,
        clarifies which interest- and principal-only strips are subject to Statement
        133, and amends Statement 140 to revise the conditions of a qualifying special
        purpose entity due to the new requirement to identify whether interests in
        securitized financial assets are freestanding derivatives or contain embedded
        derivatives. This statement is effective for all financial instruments acquired
        or issued after the beginning of an entity's first fiscal year that begins
        after
        September 15, 2006, but can be adopted early as long as financial statements
        for
        the fiscal year in which early adoption is elected, including interim
        statements, have not yet been issued. The adoption of this accounting
        pronouncement is not expected to have a material effect on the consolidated
        financial statements.
  F-12
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  In
        May
        2005, the FASB issued FAS 154 (SFAS no. 154), Accounting Changes and Error
        Corrections, a replacement of APB Opinion No. 20 and FASB Statement No. 3.
        This
        Statement provides guidance on the accounting for and reporting of accounting
        changes and error corrections. It establishes, unless impracticable,
        retrospective application as the required method for reporting a change in
        accounting principle in the absence of explicit transition requirements specific
        to the newly adopted accounting principle. This Statement also provides guidance
        for determining whether retrospective application of a change in accounting
        principle is impracticable and for reporting a change when retrospective
        application is impracticable. The correction of an error in previously issued
        financial statements is not an accounting change. However, the reporting
        of an
        error correction involves adjustments to previously issued financial statements
        similar to those generally applicable to reporting an accounting change
        retrospectively. Therefore, the reporting of a correction of an error by
        restating previously issued financial statements is also addressed by this
        Statement. This statement is effective for accounting changes and corrections
        of
        errors made in fiscal years beginning after December 15, 2005. The adoption
        of
        this accounting pronouncement is not expected to have a material effect on
        the
        consolidated financial statements.
 
 **NOTE
        3 - FIXED ASSETS**
 
 Property
        and equipment consist of the following:
  Furniture
                  and fixtures
              
              $
              59,317Computer
                  hardware
              
              
              93,104Telephone
                  system
              
              
              11,549Computer
                  software
              
              
              5,574Equipment
                  under capital lease
              
              
              66,735236,279Less
                  accumulated depreciation and amortization
              
              
              (108,655
              )$
              127,625
  Depreciation
        of fixed assets was $43,431 and $39,091 for
        the years ended June 30, 2006 and 2005, respectively.
  F-13
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  **NOTE
        4 - INTANGIBLE ASSET**
 
 The
        intangible asset consists of the following at June 30, 2006:
  Domain
                  name
              
              $
              14,055Less
                  accumulated amortization
              
              
              (11,244
              )$
              2,811
  Amortization
        expense for the intangible asset for the years ended June 30, 2006 and 2005
        was
        $2,811 in both years. Estimated future annual amortization expense related
        to
        the intangible continues through 2007 at $2,811 per year.
 
 **NOTE
        5 - NOTES PAYABLE**
 
 On
        August
        12, 2005, the Company issued a convertible promissory note (the “Note
        Agreement”) to Tryant in the principal amount of $225,000. Pursuant to the terms
        of the Note Agreement, a principal payment of $175,000 was due on September
        30,
        2005 and the remaining balance was due on December 31, 2005. The note is
        non-interest bearing. In the event of default, interest will accrue on the
        entire unpaid balance of the note thereafter at a rate of 10% per annum until
        paid. The terms of the Note Agreement also give Tryant the right to convert
        the
        unpaid principal and interest of the note into shares of the Company’s common
        stock at a conversion rate of $0.1125 per share. In addition, the Company
        issued
        a warrant to Tryant for the purchase of 2,000,000 shares of the Company’s common
        stock at an exercise price of $0.01 per share. The warrant will vest as to
        1,555,556 shares of common stock in the event the Company does not make a
        timely
        payment of $175,000 by September 30, 2005 pursuant to the terms of the Note
        Agreement. The remaining 444,444 shares will vest in the event the Company
        does
        not make a timely payment of $50,000 by December 31, 2005 pursuant to the
        Note
        Agreement. The warrant is exercisable until the earlier of (i) repayment
        of the
        note or (ii) August 12, 2008. On September 30, 2005, the Company defaulted
        on
        the Note Agreement by failing to make the scheduled principal payment of
        $175,000 required under the Note Agreement. As a result, the 1,555,556 warrant
        shares became fully vested and on October 24, 2005, Tryant exercised its
        warrant
        as to the 1,555,556 shares of the Company’s common stock at an exercise price of
        $0.01 per share for an aggregate of $15,556.
 
 On
        November 15, 2005, the Company entered into an Amendment to the Convertible
        Promissory Note (the “Amended Note”). The Amended Note provided for a waiver of
        the default until December 31, 2005. In consideration of the waiver, the
        Company
        agreed to pay to Tryant the sum of $1,000 per day commencing October 15,
        2005,
        up to a cap of $30,000, in addition to the principal amount due under the
        Note
        Agreement plus accrued interest, on the earlier of (i) the Company’s receipt of
        funding, or (ii) December 31, 2005. During the three month period ended December
        31, 2005, the Company recorded the $30,000 as interest expense and has included
        such amount in accrued interest in the accompanying consolidated balance
        sheet
        as of March 31, 2006. On December 31, 2005, the Company further defaulted
        on the
        Note Agreement by failing to make the scheduled principal payment of $50,000
        required under the Note Agreement. As a result, the remaining 444,444 warrant
        shares became vested and immediately exercisable. As of June 30, 2006, Tryant
        has not exercised its warrant as to the 444,444 shares of the Company’s common
        stock.
  F-14
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  In
        connection with the issuance of the convertible promissory note, the Company
        recorded a debt discount of $225,000 related to the fair value of the warrant
        and the beneficial conversion feature of the note. As a result of the defaults
        noted above, the Company amortized the entire debt discount immediately and
        recorded such amount as interest expense in the accompanying consolidated
        statement of operations. In addition, the Company recorded interest expense
        of
        $5,625 related to the default provisions of the Note Agreement, which is
        included in interest expense for the year ended June 30, 2006.
 
 Effective
        March 23, 2006, the Company entered into Amendment No. 2 to the Note. Pursuant
        to the amendment, the Company is required to file a registration statement
        within 60 days from the earlier of (i) the closing of the next financing
        by the
        Company, or (ii) April 30, 2006. Such registration statement shall include
        the
        shares of common stock held by Tryant, including the 1,555,556 shares issued
        to
        Tryant upon its exercise of the warrant dated August 12, 2005 and any other
        shares which are issuable to Tryant. If the Company fails to meet the
        registration requirements specified in the Amended Note, the Company is required
        to pay to Tryant 1.5% of the value of the registerable securities based on
        a
        conversion rate of $0.50 per share for every 30 days, on a pro rata daily
        basis.
        The Company has not yet met the registration requirements as of June 30,
        2006
        and recorded $188,958 in interest expense and registration rights obligation
        related to the value of the registerable securities.
 
 In
        addition, the Amended Note provided that if the Company fails to deliver
        certificates evidencing shares of common stock which Tryant converts pursuant
        to
        the Note Agreement or evidencing shares issuable upon exercise of the warrant,
        for each day that such delivery is not made, the Company shall pay to Tryant
        $100 for every $1,000 in value of the converted or exercised shares, as
        applicable, based on the conversion rate of $0.50 per share.
 
 On
        April
        30, 2006, the Company entered into Amendment No. 3 to the Convertible Promissory
        Note (the “Third Amended Note’). The Third Amended Note requires, among other
        things, for the Company to make a payment of $120,000 not later than May
        16,
        2006, with additional minimum monthly payments of $10,000, thereafter, on
        the
        15th day of each month until the outstanding amount owed pursuant to the
        Note
        Agreement are paid in full. The Company paid $120,000 on May 12, 2006 and
        $10,000 on June 28, 2006 to Tryant in accordance with the terms of the Third
        Amended Note. The Third Amended Note also provides that in the event the
        Company
        receives capital in excess of $750,000 in one transaction, the Company shall
        pay
        the entire outstanding balance of the Note within five days of its receipt
        of
        funding.
  F-15
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Unsecured
        Promissory Notes
 
 During
        the year ended June 30, 2006, the Company issued an aggregate of $1,065,500
        in
        unsecured notes payables to related parties and $100,000 in unsecured notes
        to
        third parties. In connection with certain of these note issuances, the Company
        issued a total of 7,404,500 warrants to purchase common shares at an exercise
        price of $0.10. The warrants vest immediately and were valued using the
        Black-Scholes valuation model using the assumptions listed in Note 7 below.
        In
        connection with these warrants, the Company recorded a debt discount of
        $587,467, of which $413,046 was amortized to interest expense during the
        year
        ended June 30, 2006.
 
 Related
                party notes
                payable consist of the following at June 30, 2006:10%
                  unsecured notes outstanding to chief executive officer, issued
                  from May
                  12, 2005 through February 7, 2006; matured September 30, 2006
              
              $
              114,50014%
                  secured note outstanding to chief executive officer, issued November
                  5,
                  2003; matures November 5, 2006; secured by various office furniture
                  and
                  equipment
              
              
              24,72710%
                  unsecured convertible note payable to shareholder, issued August
                  12, 2005,
                  matured December 31, 2005; shares underlying the note have registration
                  rights that accrue penalties as defined, currently accruing approximately
                  $9,200 per month, until underlying shares are registered or note
                  is paid
                  off.
              
              
              95,00010%
                  unsecured notes payable to prior officer, issued from May 12, 2005
                  through
                  December 28, 2005; matured September 30, 2006
              
              
              31,00010%
                  unsecured notes payable to a company director; issued on November
                  9, 2005;
                  matures December 31, 2006
              
              
              150,00010%
                  unsecured notes payable to company controlled by company director;
                  issued
                  from December 29, 2005 through June 16, 2006; matures December
                  31,
                  2006
              
              
              505,00010%
                  unsecured note payable to shareholder; issued June 29, 2006; matured
                  September 30, 2006
              
              
              25,000945,227Less
                  unamortized discount
              
              
              (81,122
              )Related
                  party notes payable, net
              
              $
              864,105Notes
                payable to
                third parties consist of the following at June 30, 2006:10%
                  unsecured notes payable; issued June 28, 2006 through June 30,
                  2006;
                  matured September 30, 2006
              
              $
              100,00Less
                  unamortized discount
              
              
              (93,299
              )Notes
                  payable, net
              
              $
              6,701
  F-16
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Total
        interest expense on related party notes payable was $968,133 and $19,558
        and for
        the years ended June 30, 2006 and 2005, respectively.
 
 **NOTE
        6 - COMMITMENTS AND CONTINGENCIES**
 
 Capital
        Leases
 
 The
        Company has various capital lease agreements for equipment which expire through
        January 2009 with imputed interest rates of 10%. The following is an analysis
        of
        the equipment under capital leases, which is included in fixed assets at
        June
        30, 2006:
 
 Equipment
                  Under Capital Leases
              
              $
              66,735Less
                  accumulated depreciation
              
              
              (16,684
              )Equipment
                  Under Capital Leases, net
              
              $
              50,051
 
 
 During
        fiscal year ended June 30, 2006, the Company did not make payments as required
        under its capital lease agreements. A complaint was filed by the lessor on
        August 29, 2006 for total amounts owed on all leases. A stipulation was filed
        on
        September 8, 2006, which changed the terms of the lease agreements. According
        to
        the stipulation the company must pay the lessor $2,000 per month from July
        1,
        2006 to December 31, 2006 and $2,500 per month thereafter until the balance
        is
        paid in full. Additionally, the lender consolidated the three leases into
        one
        liability.
 
 Minimum
        lease payments for capital lease obligations are as follows:
 
 **Years
                  Ending**
                **June
                  30,**2007
              
              $
              27,0002008
              
              
              30,0002009
              
              
              2,335Present
                  value of minimum lease payments
              
              
              59,335Less
                  current installments
              
              
              (27,000
              )Capital
                  Lease Obligations, net of current portion
              
              $
              32,335
  Operating
        Leases
 
 The
        Company leases its office facilities under a non-cancelable operating lease
        which requires initial base monthly rent of $16,345 and provides for fixed
        based
        rent escalations over the term of the lease which expires in March 2009.
        The
        Company also leases certain equipment under operating lease arrangements
        which
        require monthly payments aggregating $2,252 and expire at various dates through
        April 2010.
  F-17
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Future
        annual minimum rents under non-cancelable operating leases at June 30, 2006
        are
        as follows:
 
 **FY
                  2007**
              
              **FY
                  2008**
              
              **FY
                  2009**
              
              **FY
                  2010**
              
              **Total
                  Due over**
                **next
                  5 Years**Office
                  Facilities
              
              $
              213,768
              
              $
              219,898
              
              $
              226,903
              
              $
              -
              
              $
              660,568Equipment
              
              
              23,784
              
              
              13,887
              
              
              9,840
              
              
              2,537
              
              
              50,049Totals
              
              $
              237,552
              
              $
              233,785
              
              $
              36,743
              
              $
              2,537
              
              $
              710,617
  Rent
        expense was $231,089 and $238,202 for the years ended June 30, 2006 and 2005,
        respectively.
 
 Indemnities
        and Guarantees
 
 The
        Company has made certain indemnities and guarantees, under which it may be
        required to make payments to a guaranteed or indemnified party, in relation
        to
        certain transactions. The Company indemnifies its directors, officers, employees
        and agents to the maximum extent permitted under the laws of the State of
        Delaware. In connection with its office facility lease, the Company has
        indemnified its lessor for certain claims arising from the use of the
        facilities. The duration of the guarantees and indemnities varies, and in
        many
        cases is indefinite. These guarantees and indemnities do not provide for
        any
        limitation of the maximum potential future payments the Company could be
        obligated to make. Historically, the Company has not been obligated to make
        any
        payments for these obligations and no liabilities have been recorded for
        these
        indemnities and guarantees in the accompanying consolidated balance
        sheet.
 
 **NOTE
        7 - STOCKHOLDERS' DEFIC** **IT**
 
 PreferredStock
 
 On
        August
        12, 2005, Series B and Series A Preferred shares, totaling 1,140,053 and
        3,780,700 (adjusted for merger conversion factor of 5.8494), respectively,
        were
        converted into 4,920,753 shares of common stock.
 
 On
        January 24, 2006, the Company’s Board of Directors approved an increase in the
        authorized capital stock of the Company to 160,000,000 shares, of which
        150,000,000 will be common stock, par value $0.001, and 10,000,000 will be
        preferred stock, par value $0.001.
 
 The
        Preferred Stock will be “blank check” preferred stock, giving the board of
        directors the authorization, without further stockholder approval, to issue
        up
        to 10,000,000 shares of preferred stock from time to time in one or more
        series
        and to fix the number of shares and the relative dividend rights, conversion
        rights, voting rights and other rights and qualifications of any such series.
        The authorized shares of Preferred Stock issued will be available for issuance
        for those purposes as the board of directors may deem advisable without further
        action by the stockholders, except as may be required by the Company’s Articles
        of Incorporation and applicable laws and regulations.
  F-18
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Common
        Stock
 
 The
        Company is authorized to issue 150,000,000 shares of common stock, $0.001
        par
        value per share, of which 47,641,284 shares are issued and outstanding.
 
 On
        August
        12, 2005 all preferred stock was converted to common stock in connection
        with
        the Fuel Corporation of America merger. Per the merger agreement, Fuel
        Corporation of America issued 30,671,207 shares of its common stock to holders
        of the former flexSCAN common. Approximately 92.61% of the Company’s issued and
        outstanding common stock is owned by the former flexSCAN’s Shareholders and the
        remainder is held by the Fuel Corporation of America’s stockholders.
 
 In
        August
        2005, four related party note holders converted notes totaling $160,000 and
        the
        related accrued interest of $14,334 into 1,569,782 shares of the Company’s
        common stock. Two of these note holders whose converted shares totaled 154,214
        converted their notes prior to the Merger. In connection with the conversion,
        the associated debt discount of $83,333 was recorded as interest expense
        during
        the twelve month period ended June 30, 2006.
 
 On
        November 9, 2005, the Company issued a $150,000 unsecured note payable to
        a
        Director of the Company. The note bears interest at the greater of 10% per
        annum
        or $7,500 with interest payable monthly. The note was due and payable on
        or
        before June 30, 2006.
 
 On
        June
        13, 2006, the Director of the Company converted the $150,000 unsecured note
        payable and related $7,898 accrued interest into 1,578,984 shares of common
        stock at $0.10 per share. The Company recorded $2,850,070 in additional interest
        expense related to the difference between the market value of the stock on
        June
        13, 2006 and the conversion price per share.
 
 On
        August
        3, 2005, the Company issued a convertible debenture (the “Debenture”) to Rosfor
        International, Inc. (“Rosfor”) in the principal amount of $1,000,000. The
        Debenture bore interest at 10% per annum and was payable quarterly or was
        accrued at the holder’s option. All outstanding principal and accrued interest
        was due and payable on August 3, 2008. Rosfor, at its election, could choose
        to
        convert the Debenture and any accrued interest into shares of the Company’s
        common stock at $0.50 per share. The Debenture was mandatorily convertible
        upon
        the occurrence of a (i) qualified financing, as defined, (ii) public offering,
        as defined, or (iii) consolidation or merger of the Company, as defined,
        into
        shares of the Company’s common stock at a conversion rate of $0.50 per share. In
        connection with the Merger, the Debenture and related accrued interest of
        $4,454
        were converted into 2,008,908 shares of the Company’s common stock.
 
 Upon
        conversion of the Debenture, Rosfor received a warrant for the purchase of
        700,000 shares of the Company’s common stock. Beginning on the conversion date,
        Rosfor will have the right to exercise the warrant for a period of five years.
        If the warrant is exercised within 180 days of the conversion date, the exercise
        price of the warrants will be $1.00 per share and $1.50 per share thereafter.
        At
        the conversion date, there was no value associated with the
        warrant.
  F-19
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  In
        addition to the warrant, in February 2006, the Company issued to Rosfor an
        additional 500,000 shares of common stock valued at $0.35 per share based
        on the
        trading price in effect on that date, resulting in additional interest expense
        of $175,000.
 
 During
        the year ended June 30, 2006, the Company issued an aggregate of 9,485,472
        shares of common stock related to the exercise of warrants for total proceeds
        of
        $131,155.
 
 During
        the year ended June 30, 2006, the Company issued an aggregate of 810,000
        shares
        of common stock for services rendered with a fair value of
        $252,000.
 
 During
        the year ended June 30, 2006, the Company issued an aggregate of 314,286
        shares
        of common stock for $110,000 in cash.
 
 Warrants
 
 Share-based
        compensation expense recognized during the period is based on the value of
        the
        portion of share-based payment awards that is ultimately expected to vest
        during
        the period. Share-based compensation expense recognized in our consolidated
        statement of operations beginning April 1, 2006 included compensation expense
        for share-based payment awards granted prior to, but not yet vested as of,
        March 31, 2006 based on the grant date fair value estimated in accordance
        with the pro forma provisions of SFAS 123 and share-based payment awards
        granted
        subsequent to March 31, 2006 based on the grant date fair value estimated
        in
        accordance with SFAS 123(R). For share awards granted during the quarter
        ended
        June 30, 2006, expenses are amortized under the straight-line method. For
        share
        awards granted prior to 2006, expenses are amortized under the straight-line
        method prescribed by SFAS 123. As share-based compensation expense recognized
        in
        the consolidated statement of operations for the year ended June 30, 2006
        is
        based on awards ultimately expected to vest, it has been reduced for estimated
        forfeitures. SFAS 123(R) requires forfeitures to be estimated at the time
        of
        grant and revised, if necessary, in subsequent periods if actual forfeitures
        differ from those estimates.
 
 In
        our
        pro forma information required under SFAS 123 for the periods prior to April
        1,
        2006, we accounted for forfeitures as they occurred.
 
 Total
        estimated share-based compensation expense, related to all of our share-based
        awards, recognized under SFAS 123(R) for the year ended June 30, 2006 was
        comprised of the following:
  F-20
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  **Year
                    Ended**
                **June
                  30, 2006**Selling,
                  general and administrative
              
              $
              221,421Share-based
                  compensation expense before taxes
              
              
              221,421Related
                  income tax benefits
              
              
              —Share-based
                  compensation expense
              
              $
              221,421Net
                  share-based compensation expense per basic and diluted common
                  share
              
              $
              0.01
  Share-based
        compensation expense recognized under SFAS 123(R) for the year ended June
        30,
        2006 included $221,421 from the issuance of stock warrants. Since the Company
        had a net operating loss carryforward as of June 30. 2006, it did not recognize
        excess tax benefits for the tax deductions related to share-based awards
        in the
        consolidated statement of operations. Additionally, no incremental tax benefits
        were recognized from stock warrants exercised in the year ended June 30,
        2006
        which would have resulted in a reclassification to reduce net cash provided
        by
        operating activities with an offsetting increase in net cash provided by
        financing activities. Share-based compensation expense was not recognized
        during
        the year ended June 30, 2005. As of June 30, 2006, there is no unrecognized
        compensation costs related to non-vested awards.
 
 The
        Company grants employee warrants from authorized and un-issued shares of
        common
        stock. Employee warrants are granted by the Company subject to terms and
        conditions established by the Chief Executive Officer. Warrants generally
        have
        term of five years and vest over three years. At the present time, we intend
        to
        issue new common shares upon the exercise of stock warrants.
 
 The
        fair
        value of each warrant award is estimated on the date of grant using a
        Black-Scholes-Merton option pricing model (“Black-Scholes model”) that uses the
        assumptions noted in the following table. Expected volatilities are based
        on
        historical volatility of our common stock and other factors. The expected
        term
        of warrants granted is based on analyses of historical employee termination
        rates and warrant exercises. The risk-free interest rates are based on the
        U.S.
        Treasury yield for a period consistent with the expected term of the option
        in
        effect at the time of the grant. Assumptions used in the Black-Scholes model
        for
        the year ended June 30, 2006 and 2005, were as follows:
  F-21
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  **2006**
              
              **2005**Expected
                  volatility
              
              
              245
              %
              
              50
              %Average
                  expected term in years
              
              
              3.0
              
              
              3.0Risk-free
                  interest rate
              
              
              4.625
              %
              
              3.0%
                  - 4.10
              %Expected
                  dividend yield
              
              
              0
              %
              
              0
              %
  A
        summary
        of warrant activity as of June 30, 2006 and changes during the year then
        ended
        is presented below.
 
 **Warrants
                  Outstanding**
              
              **Weighted
                  Average Exercise Price Per Share**Warrants
                  outstanding, June 30, 2004
              
              
              21,516,263
              
              $
              0.24Granted
              
              
              7,615,401
              
              
              0.11Cancelled
              
              
              (3,569,219
              )
              
              0.38Exercised
              
              
              (7,194,827
              )
              
              0.06Warrants
                  outstanding, June 30, 2005
              
              
              18,367,619
              
              
              0.23Granted
              
              
              17,221,372
              
              
              0.28Cancelled
              
              
              (6,890,350
              )
              
              0.72Exercised
              
              
              (11,900,528
              )
              
              0.09Warrants
                  outstanding, June 30, 2006
              
              
              16,798,113
              
              $
              0.18Warrants
                  exercisable, June 30, 2005
              
              
              16,000,715
              
              $
              0.22Warrants
                  exercisable, June 30, 2006
              
              
              15,143,152
              
              $
              0.28
 
 
 The
        following table summarizes information about warrants outstanding at June
        30,
        2006:
 
 **Exercise
                  Price**
              
              **Number
                  of**
                **Warrants
                  O/S**
              
              **Number
                  of Warrants**
                **Exercisable**
              
              **Wtd
                  Avg**
                **Remaining**
                **Contractual**
                **Life
                  (Years)**$0.01-$0.10
              
              8,089,444
              
              7,589,444
              
              2.749$0.17-$0.35
              
              6,696,901
              
              5,828,257
              
              1.498$0.43-$0.60
              
              623,288
              
              544,755
              
              0.871$1.20-$1.50
              
              1,388,481
              
              1,180,695
              
              3.293TOTALS
              
              16,798,114
              
              15,143,152
  At
        June
        30, 2006, the aggregate intrinsic value was $28,728,743 on outstanding options
        and $21,529,267 on exercisable options. The weighted average grant-date fair
        values of warrants granted during the years ended June 30, 2006 and 2005
        were
        $0.27 per share. The intrinsic value of options exercised during the year
        ended
        June 30, 2006 and 2005 was $20,644,061 and $11,816,205, respectively.
  F-22
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  Through
        March 31, 2006, we accounted for share-based awards to employees using the
        intrinsic value method in accordance with APB 25 and related interpretations
        and
        provided the required pro forma disclosures of SFAS 123. Under the intrinsic
        value method, share-based compensation expense was recognized in our
        consolidated statement of operations for share-based awards to employees
        only
        when the exercise price of stock warrants granted to employees was less than
        the
        fair market value of the underlying stock at the date of grant. The following
        table summarizes the pro forma effect on our net loss and per share data
        if we
        had applied the fair value recognition provisions of SFAS 123 to share-based
        employee compensation for the year ended June 30, 2006.
 
 **For
                  the Years Ended June, 30****2006**
              
              **2005**Net
                  loss before deemed preferred dividends, as reported
              
              $
              (9,878,471
              )
              $
              (84,732
              )Add:
                  Total stock-based employee compensation expense determined under
                  the
                  intrinsic value method for all awards
              
              
              9,450
              
              
              151,200Deduct:
                  Total share-based employee compensation expense determined under
                  fair
                  value based method for all awards
              
              
              (21,474
              )
              
              (191,110
              )Pro
                  forma net loss
              
              $
              (9,890,495
              )
              $
              (124,642
              )Net
                  loss per share, basic and diluted, as reported
              
              $
              (0.30
              )
              $
              (0.03
              )Pro
                  forma net loss per share, basic and diluted
              
              $
              (0.30
              )
              $
              (0.03
              )
  We
        account for stock options granted to non-employees in accordance with Emerging
        Issues Task Force No. 96-18, “Accounting for Equity Instruments That Are
        Issued to Other Than Employees for Acquiring, or in Conjunction with Selling,
        Goods or Services,” (“EITF 96-18”). Under EITF 96-18, we determine the fair
        value of the stock options granted as either the fair value of the consideration
        received or the fair value of the equity instruments issued, whichever is
        more
        reliably measurable.
  F-23
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  **NOTE
        8 - INCOME TAXES**
 
 The
        tax
        effects of temporary differences that give rise to deferred taxes at June
        30,
        2006 are as follows:
  Deferred
                  tax asset:Net
                  operating loss carryforward
              
              $
              3,040,000Accrued
                  expenses reserves
              
              
              172,000Expenses
                  recognized for granting of options
              
              
              1,300,000Total
                  gross deferred tax asset
              
              
              4,512,000Less
                  valuation allowance
              
              
              (4,512,000
              )$
              -
  As
        of
        June 30, 2006, the Company had net operating loss carryforwards of approximately
        $7,600,000 for federal and state income tax reporting purposes, which expire
        at
        various dates through 2026 and 2016, respectively.
 
 The
        utilization of the net operating loss carry forwards might be limited due
        to
        restrictions imposed under federal and state laws upon a change in ownership.
        The amount of the limitation, if any, has not been determined at this time.
        A
        valuation allowance is provided when it is more likely than not that some
        portion or all of the deferred tax assets will not be realized. As a result
        of
        the Company’s continued losses and uncertainties surrounding the realization of
        the net operating loss carry forwards, the Company has recorded a valuation
        allowance equal to the net deferred tax asset amount as of June 30,
        2006.
 
 The
        valuation allowance increased by approximately $2,056,000 and $857,000 during
        the years ended June 30, 2006 and 2005, respectively.
 
 No
        current provision for income taxes for the year ended June 30, 2006 is required,
        except for minimum state taxes, since the Company incurred taxable losses
        during
        such year. The provision for income taxes for fiscal 2006 and 2005 was $800
        and
        differs from the amount computed by applying the U.S. federal income tax
        rate of
        34% to loss before income taxes as a result of the following:
  F-24
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  **2006**
              
              **2005**Computed
                  tax benefit at federal statutory tax rate
              
              $
              (1,297,000
              )
              $
              (29,000
              )State
                  income tax benefit, net of federal effect
              
              
              -
              
              
              (4,000
              )Increase
                  in valuation allowance
              
              
              2,393,000
              
              
              857,000Beneficial
                  conversion and derivative charges
              
              
              (98,000
              )
              
              (750,000
              )Other
              
              
              (997,200
              )
              
              (73,200
              )$
              800
              
              $
              800
  **NOTE
        9 - RELATED PARTY TRANSACTIONS**
 
 During
        the year ended June 30, 2006, the Company recorded a total of $26,850 in
        sales
        to a company owned by one of our director. At June 30, 2006, the Company
        had
        billed and unbilled receivables from this related party amounting to
        $2,255.
 
 During
        the year ended June 30, 2006, the Company incurred a total of $81,616 in
        expenses, primarily for consulting services, that were provided by certain
        of
        the Company’s shareholders and a director.
 
 At
        June
        30, 2006, the Company had $62,407 in accounts payables to officers, directors,
        and shareholders.
 
 **NOTE****10
        - SUBSEQUENT EVENTS**
 
 From
        July
        1, 2006 through October 31, 2006 the Company issued an aggregate of $131,000
        in
        unsecured notes payable to related parties. The notes bear interest at 10%
        per
        annum. All unpaid principal and accrued interest are due on three months
        from
        the origination date.
 
 In
        consideration for the loans made by the above lenders, the Company issued
        warrants for an aggregate of 910,000 shares of common stock with an exercise
        price of $0.10 per share with expiration dates 3 years from the grant date.
 
 On
        July
        1, 2006, the President was issued 1,000,002 warrants to purchase common stock
        that shall vest at the rate of 166,667 shares per month up to and until December
        31, 2006. Upon vesting, the President will have the right to exercise his
        right
        under the warrant for a period of three years at $0.10 per share.
 
 On
        July
        1, 2006, the President was issued 900,000 warrants to purchase common stock
        that
        shall vest at the rate of 25,000 shares per month commencing August 1, 2006.
        The
        exercise price for each vested share shall be $1.445 per share. The right
        to
        exercise the rights granted under this warrant shall expire three years from
        the
        vesting date for each vested unit.
 
 On
        July
        6, the Company issued a $50,000 unsecured note payable bearing an interest
        rate
        of 10% per annum. All unpaid principal and interest became due as of September
        30, 2006. In consideration for the above note, the Company issued 500,000
        shares
        of common stock with an exercise price of $0.10 per share with expiration
        dates
        3 years from the grant date.
  F-25
 *Annual
            Report*
  **flexSCAN,
        Inc.**
  **Notes
        to the Consolidated Financial Statements**
  **For
        the Years Ended June 30, 2006 and 2005**
  On
        July
        10, 2006, the Vice President of Sales and Marketing was issued 360,000 warrants
        to purchase common stock at $0.34 per share. The warrants vest at a rate
        of
        10,000 shares per month commencing September 1, 2006 and expire three years
        from
        the vesting date.
 
 On
        August
        3, 2006, a director of the Company was issued a board warrant to purchase
        884,000 shares of common stock at $0.10 per share.
 
 From
        July
        20, 2006 to August 23, 2006 the Company issued an aggregate of 725,000 shares
        of
        common stock at $0.40 per share resulting in proceeds of $290,000 to the
        Company. In consideration for investing, the Company issued an additional
        412,500 warrants to purchase common stock at an exercise price of $0.40 per
        share.
 
 From
        September 15, 2006 to August 10, 2006, the Company issued an aggregate of
        80,000
        shares of common stock for in consideration for legal and investment services
        rendered.
 
 On
        September 20, 2006, the Company issued a $57,000 secured promissory note
        for
        accounting services. The note bears interest at 5% per annum. The note is
        secured by 133,333 registered shares of common stock.
 
 On
        September 29, 2006, the Company acquired ten gross acres of undeveloped real
        property located in Apple Valley in exchange for a $155,000 first trust deed
        and
        300,000 shares of restricted common stock valued at $95,000 or $0.32 per
        share.
 
 On
        October 10, 2006, the Corporate Account Executive was issued 360,000 warrants
        to
        purchase common stock at $0.40 per share. The warrants vest at a rate of
        10,000
        shares per month commencing November 1, 2006 and shall expire four years
        from
        November 1, 2006.
 
 On
        October 10, 2006, the Chief Science Advisor was issued 180,000 warrants to
        purchase common stock at $0.40 per share. The warrants vest and become
        exercisable with respect to one-sixth of all of the shares on November 10,
        2006
        with the remaining shares vesting over three years.
  F-26