<PAGE>

                     U.S. SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                               AMENDMENT NO. 1 TO
                               ------------------

                                   FORM 10-KSB

(Mark One)

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

          FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004


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

          For the transition period from ________________ to __________________.


          Commission File Number 0-27689

                       AVIATION UPGRADE TECHNOLOGIES, INC.
--------------------------------------------------------------------------------
        (Exact name of small business issuer as specified in its charter)


           Nevada                                         33-0881303
---------------------------------------  ---------------------------------------
(State or other jurisdiction of               (IRS Employer Identification No.)
incorporation or organization)

            6550 South Pecos Road, Suite 142, Las Vegas, NV 89120 USA
--------------------------------------------------------------------------------
                    (Address of principal executive offices)

                                 (702) 450-0003
                                 --------------
                           (Issuer's telephone number)

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

         Title of each class           Name of each exchange on which registered

            Common stock                                 None
-------------------------------------  -----------------------------------------

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

                                  Common stock
--------------------------------------------------------------------------------
                                (Title of class)

Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
As been subject to such filing requirements for the past 90 days.

                                 Yes [X] No [ ]



<PAGE>

Check if there is no disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-KSB
or any amendment to this Form 10-KSB. [ ]

The issuer's revenue for the fiscal year ended December 31, 2004 was $77,994.

The aggregate market value of the voting stock held by non-affiliates of the
issuer as of March 28, 2005 was $0.

The number of shares of the common stock outstanding as of March 28, 2004 was
11,457,750

                      DOCUMENTS INCORPORATED BY REFERENCE:

                                  INAPPLICABLE



            TRADITIONAL SMALL BUSINESS DISCLOSURE FORMAT (CHECK ONE)

                                 YES [ ] NO [X]



                                       2


<PAGE>

PART 1

     Aviation Upgrade Technologies, Inc., a Nevada corporation ("Company," "we,"
or "AUT"), filed a Registration Statement on Form 10-SB on December 2, 1999. On
February 1, 2000, our Registration Statement on Form 10-SB was declared
effective and we became a reporting company pursuant to the Securities Exchange
Act of 1934. We did not file any periodic reports or other information with the
Securities and Exchange Commission until March 2001, at which time, we filed all
delinquent quarterly and annual reports for the year ended December 31, 2000
concurrently. We have filed all quarterly reports for the years ended December
31, 2001, 2002, 2003 and 2004 on a timely basis.

ITEM 1. DESCRIPTION OF BUSINESS

     BUSINESS DEVELOPMENT. We were incorporated in Nevada on January 8, 1999. We
had our first orders of our Air Alert Valve Cap product during the second half
of 2004 and earned $77,994 in revenue for the year. There has not been any
bankruptcy filing, receivership or any similar proceeding since our inception.
There has been no reclassification, merger or consolidation since our inception.
There has been no purchase or sale of a significant amount of assets that were
not in the ordinary course of our business.

     In April 2001, we signed a licensing agreement with Torbjorn Lundqvist our
founder and majority shareholder, for the worldwide marketing rights for an
electronic tire valve cap that may be used on airplanes but was designed
primarily for automobiles. The product provides early warning of low pressure in
tires, which we believe will lead to safer travel in these vehicles and better
fuel efficiency in automobiles. Once the tire is inflated to the appropriate
pressure, the initial tightening of the cap onto the valve stem makes the valve
cap memorize the tire pressure. If the pressure in the tire drops by more than
approximately four pounds per square inch, a red LED light will blink to
indicate the need to check the tire pressure. The licensing agreement calls for
the reimbursement of research and development costs incurred by its founder and
the payment of ongoing costs during the term of the agreement.

     PRODUCTS. AIR ALERT VALVE CAP. We currently license the marketing rights
for an electronic tire valve cap that may be used on both airplanes and
automobiles. The product provides early warning of low pressure in tires, which
we believe will lead to safer travel in these vehicles and better fuel
efficiency in automobiles. Once the tire is inflated to the appropriate
pressure, the initial tightening of the cap onto the valve stem makes the valve
cap memorize the tire pressure. If the pressure in the tire drops by more than
approximately four pounds per square inch, a red LED light will blink to
indicate the need to check the tire pressure. We shipped our first orders of the
Air Alert Valve Cap during the second half of 2004.

     AIR ALERT VALVE STEM. We are currently developing a new product called the
Air Alert Valve Stem. We are using the same technology as the Air Alert Valve
Cap but the components are baked into a valve stem designed for today's tubeless
tires. We have showed the product at a trade show in Las Vegas and we had good
response primarily from tire and automotive dealers. This product is anticipated
to be released in 2006.

     MANUFACTURING. After careful evaluation of several contract manufacturers
we have entered into a contract with Union Power Information Ind. Co., LTD in
the City of Shenzhen in China. Union Power has the capability of producing up to
several million Air Alert Valve Caps and Air Alert Valve Stems each month. Union
Power has manufactured all sales made during 2004.

     MARKETING. We believe that our initial primary target market will consist
of large fleet operators with a secondary focus on tire dealers. We believe that
the potential market for the tire valve cap is extremely large. The requirement
for a warning system to detect tire pressure is currently under consideration in
the automobile industry. On October 10, 2000, Congress passed the Transportation
Recall Enhancement, Accountability and Documentation Act, which specified that
legislation would be developed concerning a low tire pressure warning for motor
vehicles. We believe that the valve cap technology could become standard
equipment on all new low end vehicles sold in the United States and all over the
industrialized world in the years ahead, in addition to being added to existing
and replacement tires.

     GOVERNMENT REGULATION. The following does not purport to be a summary of
all present and proposed federal, state and local regulations and legislation
relating to the automobile industry. The following attempts to identify those
aspects that could affect our business. Other existing legislation and
regulation and, in many jurisdictions, state and local franchise requirements,
are currently the subject of a variety of judicial proceedings, legislative
hearings and administrative and legislative proposals which could also affect
our method of operation or the methods of industries in which we are involved.


                                       3


<PAGE>

     The Department of Transportation, the National Highway Traffic Safety
Administration and other regulatory and administrative agencies have established
standards for automotive and tire products and processes, which require the
maintenance of certain records and provide for unscheduled inspections of
facilities. Our products may be considered within the scope of such regulation
and in such event, we will have to comply with those agency standards. In
particular, the National Highway Traffic Safety Administration has established
standards regarding the shape, size, and performance requirements of warning
devices, as well as standards relating to tire manufacturing, maintenance and
repair.

     State, local and foreign governments have also adopted regulations relating
to the manufacture and marketing of automotive and tire products. We cannot
guarantee that our products will be in material compliance with all applicable
regulations, which could have a material adverse impact on our business,
financial conditions and results of operations. Any future violation of, and the
cost of compliance with, these laws and regulations could have a material
adverse effect on our business, financial condition and results of operations.

     PATENTS. We do not presently own any patents, trademarks, concessions or
royalties. Our founder has obtained a US patent (US PATENT NO. 6,629,454 B2) for
the Air Alert Valve Cap and filings for patent protection have been made in 29
other countries. Patent protection for the Air Alert Valve Stem has also been
filed in 29 countries.

     We cannot guarantee, however, that any patents will be issued for the Air
Alert Valve Stem or that, if issued, the breadth or degree of protection of
these patents will be adequate to protect our interests. In addition, we cannot
guarantee that others will not independently develop substantially equivalent
proprietary information or obtain access to our know-how. Further, we cannot
guarantee that others will not be issued patents which may prevent the sale of
our products or require licensing and the payment of significant fees or
royalties by us in order for us to be able to carry on our business. Finally, we
cannot guarantee that the products of others will not infringe any patents
issued to or licensed by us. Defense and prosecution of patent claims can be
expensive and time consuming, even in those instances in which the outcome is
favorable to us. If the outcome is adverse, it could subject us to significant
liabilities to third parties, require us to obtain licenses from third parties
or require us to cease our marketing activities.

     COMPETITION. Competition for the electronic tire valve cap is limited. To
our knowledge, there are only a few mechanical tire valve caps on the market,
which are sold by several companies under different brand names. Our review and
testing of these products has indicated to us that they are unreliable and
inefficient due to their mechanical nature. We have not seen any product like
the Air Alert Valve Stem. Other solutions to the tire pressure problem facing
the industry are currently directed toward interior warning signals, which are
significantly more expensive than our tire valve cap and valve stem, and
therefore, not considered direct competition. We anticipate that we will compete
on the basis of the technical features, quality of our products and price.

     RESEARCH AND DEVELOPMENT. We are not currently conducting any research and
development activities, other than those activities related to the licensing
agreement for the electronic tire valve cap and valve stem. During the license
period and any renewal periods, we will pay fees, expenses and costs related to
product development and any application fees for patents and trademarks. We have
also issued 50,000 shares of common stock to one individual for efforts in
co-designing the valve cap product with Mr. Lundqvist and another 1,000 shares
of common stock to another individual for the name "Air Alert Valve Cap."

     INSURANCE. We are currently insured with an aggregate limit policy of
$2,000,000 of product liability insurance for the Air Alert Valve Cap.

     EMPLOYEES. We have one full time employee and two part time
directors/officers. Mr. Lundquist currently works for us on a full time basis.
Mr. Lindholm currently devotes approximately ten hours per week, but anticipates
that he will devote significantly more hours if the valve cap starts producing
significant revenues. Mr. Rhodes currently devotes approximately two hours per
week, but anticipates that he will devote significantly more hours if the valve
cap starts producing significant revenues. We anticipate that we will not hire
any employees in the next six months, unless we generate significant revenues.
We believe our future success depends in large part upon the continued service
of our key senior management personnel and our ability to attract and retain
managerial personnel.


                                       4


<PAGE>

ITEM 2. DESCRIPTION OF PROPERTY

     Our corporate headquarters are located in Las Vegas, Nevada. We have
renewed that lease for office space for which we pay $350 per month. The lease
has a term of six months and expires on June 30, 2005 . It includes certain
amenities such as receptionist services and conference rooms. We do not
anticipate any difficulty in extending the term of our lease on substantially
the same terms as currently exists.

ITEM 3. LEGAL PROCEEDINGS

     There are no legal actions pending against us nor are any legal actions
contemplated by us at this time:

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

     No matters were submitted for a vote of the stockholders at any time during
the fourth quarter of the year ended December 31, 2004.


PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

     Our securities are not listed for trading on any exchange or quotation
service. We are not required to comply with the timely disclosure policies of
any exchange or quotation service. The requirements to which we would be subject
if our securities were so listed typically include the timely disclosure of a
material change or fact with respect to our affairs and the making of required
filings. We have not yet delivered an annual report to security holders for the
year ended December 31, 2004, however, we intend to provide an annual report to
our security holders which will include audited financial statements. All our
filings and reports are available through our web site at:
http://www.AviationUpgrade.com with a direct link to the SEC web site.

     We are a reporting company with the Securities and Exchange Commission. The
public may read and copy any materials filed with the Securities and Exchange
Commission at the Security and Exchange Commission's Public Reference Room at
450 Fifth Street N.W., Washington, D.C. 20549. The public may also obtain
information on the operation of the Public Reference Room by calling the
Securities and Exchange Commission at 1-800-SEC-0330. The Securities and
Exchange Commission maintains an Internet site that contains reports, proxy and
information statements, and other information regarding issuers that file
electronically with the Securities and Exchange Commission. The address of that
site is http://www.sec.gov.

     As of March 28, 2005, there were 120 record holders of our common stock.

     As of March 28, 2005, there were 150,000 outstanding warrants to purchase
shares of our common stock. Each warrant entitles the holder the right to
purchase an additional share of common stock at $2.00 per share. These warrants
expire seven years from the date of issuance.

     Most of the shares of our common stock are subject to Rule 144 promulgated
pursuant to the Securities Act of 1933. Rule 144 provides, among other things,
that persons holding restricted securities for a period of one year may each
sell, assuming all of the conditions of Rule 144 are satisfied, in brokerage
transactions every three (3) months an amount of restricted securities equal to
one percent (1%) of our outstanding shares of common stock, or the average
weekly reported volume of trading during the four calendar weeks preceding the
filing of a notice of proposed sale, which ever is more. Rule 144 also provides
that, after holding such securities for a period of two (2) years, a
non-affiliate of the company may sell those securities without restriction,
other than the requirement that we are current with respect to our information
reporting requirements.

     There have been no cash dividends declared on our common stock. Dividends
are declared at the sole discretion of our Board of Directors.


                                       5


<PAGE>

     RECENT SALES OF UNREGISTERED SECURITIES. During the fiscal year ended
December 31, 2004, we issued unregistered shares of our Common Stock in the
following transactions:

     During the three month period ended March 2004, outstanding warrants to
purchase 30,466 shares of common stock were exercised by the holders. The
warrants were issued as part of a Rule 506 Regulation D offering, exempt under
Section 4(2) of the Securities Act of 1933. No underwriter was involved in the
exercise of the warrants.

     On March 1, 2004, we entered into a Securities Purchase Agreement with an
accredited investor for the sale of 55,000 shares of common stock for cash
consideration of $50,000. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities.

     On April 26, 2004, we entered into a Securities Purchase Agreement with an
accredited investor for the sale of 20,000 shares of common stock for cash
consideration of $20,000. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities.

     During the three month period ended September 30, 2004, AUT entered into
Securities Purchase Agreements with various accredited investors for the sale of
61,050 shares of common stock for cash consideration of $55,500. These
securities were issued under Section 4(2) of the Securities Act of 1933. No
underwriter was involved in the sale of these securities.

     During the three month period ended December 31, 2004, AUT entered into
Securities Purchase Agreements with various accredited investors for the sale of
28,875 shares of common stock for cash consideration of $26,250 and a stock
subscription of $750. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities.

     There are no compensation plans under which equity securities of the
Company are authorized for issuance.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

     GENERAL. As of December 31, 2004, we have generated $77,994 in revenue from
the sale of our Air Alert Valve Cap product.

     In April 2001, we acquired from Torbjorn B. Lundqvist, our chief executive
officer and one of our directors, the marketing rights to an electronic tire
valve cap for airplanes and automobiles that blinks if the tire pressure falls
below an initially calibrated level. The product provides early warning of low
pressure in tires which we believe will lead to safer travel in both these types
of vehicles and better fuel efficiency in automobiles. Once the tire is inflated
to the appropriate pressure, the initial tightening of the cap onto the valve
stem makes the valve cap memorize the tire pressure. If the pressure in the tire
drops by more than approximately four pounds per square inch, a red LED light
will blink to indicate the need to check the tire pressure. The licensing
agreement has a term of five years and requires the payment of a license fee
equal to 12% of the monthly gross profit from sales of the tire valve cap. It
also requires the reimbursement of research and development costs incurred by
its founder and the payment of ongoing development costs during the term of the
agreement. In addition, it stipulates the issuance of 50,000 shares of its
common stock to one individual for efforts in co-designing the product and 1,000
shares of common stock to another individual for naming the product

     We are currently developing a new product called the Air Alert Valve Stem.
We are using the same technology and a lot of the same parts as in the Air Alert
Valve Cap but the components are baked into a valve stem designed for today's
tubeless tires. We have showed a mock up of the product at a trade show in Las
Vegas, and we had a positive response primarily from tire and automobile
dealers. This product is anticipated to be released during the latter part of
2004 and will be primarily marketed to tire and automobile dealers.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2004, COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 2003.

     LIQUIDITY AND CAPITAL RESOURCES. The cash on hand as of December 31, 2004
was $8,212, as compared to $3,986 as of December 31, 2003. We continue to
operate without any source of liquidity to pay our liabilities, which are
increasing steadily as our vendors and others continue to support us. Total
current liabilities were $1,359,032 as of December 31, 2004, an increase of
$288,098 over the prior year balance of $1,070,934, represented primarily by
accrued payroll, advances, profit participation agreements and research and
development costs. We had negative working capital of $1,344,040 as of December


                                       6


<PAGE>


31, 2004, and we had an accumulated deficit of $2,310,465 as compared to an
accumulated deficit of $1,866,866 at December 31, 2003. Due to the lack of cash
to meet ongoing general operating expenses, payroll and related expenses, total
current liabilities increased $288,098 from $1,070,934 at December 31, 2003 to
$1,359,032 at December 31, 2004. During the year ended December 31, 2004, AUT
issued 30,466 shares of common stock upon the exercise of warrants for total
cash consideration of $3,047. During 2004, we also sold 164,925 shares of
additional common stock and subscribed 825 shares of common stock for total cash
consideration of $152,500. All proceeds for these issuances were used for
production set up costs and general operating purposes. The amount of
expenditures required to maintain operations and to continue business
development has been estimated at $31,500 per month. At March 28, 2005, we are
unable to satisfy our cash requirements for continuing operations. Our continued
ability to operate is dependent upon the raising of additional capital and the
sale of our product; however, we cannot guarantee that additional funds could be
raised on terms acceptable to us or that sales will occur. If we are unable to
satisfy our cash requirements through either product sales or additional capital
raising, we may have to cease operations, which could result in a loss to our
investors.


     RESULTS OF OPERATIONS. During 2004, we generated $77,994 in revenues. Total
operating expenses for the year ended December 31, 2004 were $415,934 compared
to total operating expenses for the prior year period of $371,222. The increase
of $44,712 resulted primarily from additional expenses associated with the
production of the tire valve cap. For the year ended December 31, 2004, our net
loss was $443,599, compared to a loss of $387,429 for the prior period.

FOR THE FISCAL YEAR ENDED DECEMBER 31, 2003, COMPARED TO THE FISCAL YEAR ENDED
DECEMBER 31, 2002.

     RESULTS OF OPERATIONS. Since our inception, we have generated no revenues.
Total operating expenses for the year ended December 31, 2003 were $371,222
compared to total operating expenses for the prior year period of $699,565. The
decrease of $328,343 resulted primarily from a decrease of $330,000 in costs
associated with the Boeing Litigation and other legal fees. For the year ended
December 31, 2003, our net loss was $387,429, compared to a loss of $706,054 for
the prior period.

     PLAN OF OPERATION FOR NEXT 12 MONTHS. With regard to the tire valve cap, we
believe that our primary target market will consist of major retailers with a
secondary focus on automobile manufacturers and tire manufacturers. With regard
to the valve stem we believe our primary target is tire and automobile dealers
as well as auto and tire manufacturers. We believe that the potential market for
both the tire valve cap and the valve stem are large. The requirement for a
warning system to detect low tire pressure is currently under consideration in
the automobile industry. On October 10, 2000, Congress passed the Transportation
Recall Enhancement, Accountability and Documentation Act, which specified that
legislation would be developed concerning a low tire pressure warning for motor
vehicles. We believe that the valve cap technology could become standard
equipment on all new low end vehicles sold in the United States and all over the
industrialized world in the years ahead, in addition to being added to existing
and replacement tires.

     Competition for the electronic tire valve cap is limited. To our knowledge,
there are only a few mechanical tire valve caps on the market, which are sold by
several companies under different brand names. Our review and testing of these
products has indicated to us that they are unreliable and inefficient due to
their mechanical nature. We have not seen any product like the Air Alert Valve
Stem. Other solutions to the tire pressure problem facing the industry are
currently directed toward interior warning signals, which are significantly more
expensive than our tire valve cap and valve stem, and therefore, not considered
direct competition. We anticipate that we will compete on the basis of the
technical features, quality of our products and price.

     Our plan of operation is wholly dependent on our ability to generate
revenues from the sale of our tire pressure monitoring products. During the
first half of 2003, we visited several potential contract manufacturers in China
and Taiwan and after careful evaluation we have entered into a contract with
Union Power Information Ind. Co., LTD in the City of Shenzhen in China. Union
Power has the capability of producing up to several million Air Alert Valve Caps
each month. Union Power has indicated that it will help us meet any orders we
may receive by providing favorable terms of payment if those orders come from
qualified major U.S. retailers. Union Power has also indicated their interest in
manufacturing the Air Alert Valve Stem for us.


                                       7


<PAGE>

     Notwithstanding any assistance from Union Power, we will need to raise
additional capital to market, promote and sell the tire valve cap product. Such
additional capital may be raised through public or private financing as well as
borrowings and other sources. We cannot guarantee that additional funding will
be available on favorable terms, if at all.

     We are not currently conducting any research and development activities,
other than those activities related to the production of the electronic tire
valve cap and valve stem.

     Mr. Lundqvist is our only employee. The loss of Mr. Lundqvist could have a
material adverse effect upon our operations.

     OFF BALANCE SHEET ARRANGEMENTS. Inapplicable.

     FORWARD LOOKING STATEMENTS. This Form 10-KSB contains forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995. Our forward-looking statements involve known and unknown risks,
uncertainties and other factors which may cause our actual results, performance
or achievements to be materially different from any future results, performance
or achievements expressed or implied by such forward-looking statements. Factors
that could cause actual results to differ materially from the forward looking
statements include, but are not limited to, risks associated with lack of
significant operating history, international, national and local general
economic and market conditions; our ability to sustain, manage or forecast
growth; new business development, adverse publicity; competition; changes in
business strategy or development plans; business disruptions; the ability to
attract and retain talented personnel; the ability to protect technology; and
other factors referenced in this report. Given these uncertainties, readers are
cautioned not to place undue reliance on such forward-looking statements.
Management disclaims any obligation to forward-looking statements contained
herein to reflect any change in our expectation with regard thereto or any
change in events, conditions, circumstances or assumptions underlying such
statements.



                                       8


<PAGE>

ITEM 7.  FINANCIAL STATEMENTS

Report of Independent Registered Accounting Firm...............................9

Balance Sheets as of December 31, 2004 and 2003...............................10

Statements of Operations for the years ended December 31, 2004,
  2003 and 2002...............................................................11

Statements of Stockholders' Deficit for the years ended
  December 31, 2004, 2003 and 2002............................................12

Statements of Cash Flows for the years ended December 31, 2004,
  2003 and 2002...............................................................13

Notes to Financial Statements ...........................................14 - 20



                                       9


<PAGE>

             Report of Independent Registered Public Accounting Firm
             -------------------------------------------------------


To the Board of Directors and Stockholders of
AVIATION UPGRADE TECHNOLOGIES, Inc.


     We have audited the accompanying balance sheets of Aviation Upgrade
Technologies, Inc. (the "Company") as of December 31, 2004 and 2003, and the
related statements of operations, stockholders' deficit, and cash flows for each
of the years in the three-year period ended December 31, 2004. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

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

     In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Aviation Upgrade
Technologies, Inc. as of December 31, 2004 and 2003, and the results of its
operations and its cash flows for each of the years in the three-year period
ended December 31, 2004 in conformity with accounting principles generally
accepted in the United States of America.

     The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the accompanying financial
statements, the Company has experienced significant losses since inception.
These factors and other factors discussed in Note 1 to the financial statements
raise substantial doubt about the ability of the Company to continue as a going
concern. Management's plans in regard to these matters are described in Note 1.
The financial statements do not include any adjustments that might result from
the outcome of this uncertainty.



                                        Lesley, Thomas, Schwarz & Postma, Inc.
                                        A Professional Accountancy Corporation

Newport Beach, California
February 7, 2005


                                       10


<PAGE>

<TABLE>
                                 AVIATION UPGRADE TECHNOLOGIES, INC.

                                           BALANCE SHEETS


                                               ASSETS
                                               ------

                                                                                 DECEMBER 31,
                                                                         ---------------------------
                                                                             2004            2003
                                                                         -----------     -----------
<S>                                                                      <C>             <C>
CURRENT ASSETS
   Cash                                                                  $     8,212     $     3,986
   Stock subscription receivable                                                 750               0
   Inventory                                                                      39           8,619
   Prepaid expenses                                                            5,991           5,669
                                                                         -----------     -----------

      Total current assets                                                    14,992          18,274
                                                                         -----------     -----------

PROPERTY AND EQUIPMENT
   Tooling costs, net (Note 2)                                                42,083               0
   Equipment, net (Note 2)                                                     1,245               0
                                                                         -----------     -----------

      Total property and equipment                                            43,328               0
                                                                         -----------     -----------

DEPOSITS                                                                         350          40,350
                                                                         -----------     -----------

      Total assets                                                       $    58,670     $    58,624
                                                                         ===========     ===========

                                LIABILITIES AND STOCKHOLDERS' DEFICIT
                                -------------------------------------

CURRENT LIABILITIES
   Accounts payable                                                      $   651,632     $   509,563
   Profit participation payable (Note 4)                                       2,420               0
   Due to related party (Note 8)                                              15,594          38,313
   Accrued payroll and related expenses                                      455,590         313,560
   Loan payable, stockholder                                                 131,972         113,498
   Profit participation advances, net (Note 4)                               101,824          96,000
                                                                         -----------     -----------

      Total current liabilities                                            1,359,032       1,070,934
                                                                         -----------     -----------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' DEFICIT
   Common stock, $0.001 par value; 100,000,000 shares authorized;
      11,457,750 and 11,261,534 shares issued and outstanding at
      December 31, 2004 and 2003, respectively                                11,458          11,261
   Additional paid-in capital                                                998,645         843,295
   Accumulated deficit                                                    (2,310,465)     (1,866,866)
                                                                         -----------     -----------

      Total stockholders' deficit                                         (1,300,362)     (1,012,310)
                                                                         -----------     -----------

      Total liabilities and stockholders' deficit                        $    58,670     $    58,624
                                                                         ===========     ===========


                      See the accompanying notes to these financial statements


                                                 11
</TABLE>


<PAGE>

<TABLE>
                              AVIATION UPGRADE TECHNOLOGIES, INC.

                                    STATEMENTS OF OPERATIONS


                                                                  YEARS ENDED
                                                 ----------------------------------------------
                                                                  DECEMBER 31,
                                                 ----------------------------------------------
                                                     2004             2003             2002
                                                 ------------     ------------     ------------
<S>                                              <C>              <C>              <C>
REVENUES                                         $     77,994     $          0     $          0

COST OF SALES                                          83,732                0                0
                                                 ------------     ------------     ------------

GROSS PROFIT                                           (5,738)               0                0
                                                 ------------     ------------     ------------

OPERATING EXPENSES
   General and administrative                         335,767          363,140          666,429
   Research and development (Note 8)                   71,501            8,082           33,136
   Depreciation expense                                 8,666                0                0
                                                 ------------     ------------     ------------
                                                      415,934          371,222          699,565
                                                 ------------     ------------     ------------

LOSS FROM OPERATIONS                                 (421,672)        (371,222)        (699,565)

OTHER EXPENSE
   Profit participation expense                        (1,244)               0                0
   Interest expense                                   (20,683)         (16,207)          (6,489)
                                                 ------------     ------------     ------------

NET LOSS                                         $   (443,599)    $   (387,429)    $   (706,054)
                                                 ============     ============     ============

BASIC AND DILUTED LOSS PER COMMON SHARE          $      (0.04)    $      (0.03)    $      (0.06)
                                                 ============     ============     ============

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING         11,348,970       11,153,332       11,029,956
                                                 ============     ============     ============


                    See the accompanying notes to these financial statements


                                              12
</TABLE>


<PAGE>

<TABLE>
                                                 AVIATION UPGRADE TECHNOLOGIES, INC.

                                                 STATEMENTS OF STOCKHOLDERS' DEFICIT
                                            YEARS ENDED DECEMBER 31, 2004, 2003 AND 2002


                                         COMMON STOCK           COMMON STOCK SUBSCRIBED    ADDITIONAL
                                   -------------------------   -------------------------     PAID-IN     ACCUMULATED
                                      SHARES        AMOUNT        SHARES        AMOUNT       CAPITAL       DEFICIT         TOTAL
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------
<S>                                 <C>          <C>                   <C>   <C>           <C>           <C>            <C>
Balance, December 31, 2001          10,783,000   $    10,783             0   $         0   $   700,877   $  (773,383)   $   (61,723)

Common stock issued on warrant
  exercise for $0.10 per share         256,418           256             0             0        25,385             0         25,641
Common stock issued for $8.75
  per share
                                         3,000             3             0             0        26,247             0         26,250
Write off of deferred offering
  costs                                      0             0             0             0        12,090             0         12,090
Net loss                                     0             0             0             0             0      (706,054)      (706,054)
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------

Balance, December 31, 2002          11,042,418        11,042             0             0       764,599    (1,479,437)      (703,796)

Common stock issued on warrant
  exercise for $0.10 per share         119,116           119             0             0        11,796             0         11,915
Common stock issued under
  Securities Purchase Agreement        100,000           100             0             0        66,900             0         67,000
Net loss                                     0             0             0             0             0      (387,429)      (387,429)
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------

Balance, December 31, 2003          11,261,534        11,261             0             0       843,295    (1,866,866)    (1,012,310)

Common stock issued on warrant
  exercise for $0.10 per share          30,466            31             0             0         3,016             0          3,047
Common stock issued under
  Securities Purchase Agreements       164,925           165           825             1       152,334             0        152,500
Net loss                                     0             0             0             0             0      (443,599)      (443,599)
                                   -----------   -----------   -----------   -----------   -----------   -----------    -----------

Balance, December 31, 2004          11,456,925   $    11,457           825   $         1   $   998,645   $(2,310,465)   $(1,300,362)
                                   ===========   ===========   ===========   ===========   ===========   ===========    ===========


                                      See the accompanying notes to these financial statements


                                                                 13
</TABLE>


<PAGE>

<TABLE>
                                  AVIATION UPGRADE TECHNOLOGIES, INC.

                                        STATEMENTS OF CASH FLOWS


                                                                             YEARS ENDED
                                                               ----------------------------------------
                                                                             DECEMBER 31,
                                                               ----------------------------------------
                                                                  2004           2003           2002
                                                               ----------     ----------     ----------
<S>                                                            <C>            <C>            <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                    $ (443,599)    $ (387,429)    $ (706,054)
   Adjustments to reconcile net loss to net cash used in
   operating activities
      Write off of deferred offering costs                              0              0         43,877
      Depreciation and amortization                                 8,666              0              0
      Amortization of profit participation advances                (1,176)             0              0
      Changes in operating assets and liabilities
         Inventory                                                  8,581         (8,619)             0
         Prepaid expenses                                            (322)        (5,669)        10,000
         Other assets                                                   0        (40,000)             0
         Accounts payable                                         144,489        118,618        357,422
         Due to related party                                     (22,719)         1,681         13,406
         Accrued payroll and related expenses                     142,030        142,161        147,728
                                                               ----------     ----------     ----------

            Net cash used in operating activities                (164,050)      (179,257)      (133,621)
                                                               ----------     ----------     ----------

CASH FLOWS FROM INVESTING ACTIVITES
   Factory tooling costs                                          (11,995)             0              0
                                                               ----------     ----------     ----------

            Net cash used in investing activities                 (11,995)             0              0
                                                               ----------     ----------     ----------

CASH FLOWS FROM FINANCING ACTIVITIES
   Advances from stockholder                                       18,474          6,986        106,512
   Proceeds from issuance of common stock                         155,547         78,915         51,891
   Proceeds from profit participation investments                   7,000         96,000              0
   Common stock subscribed                                           (750)             0              0
   Stock offering costs                                                 0              0        (31,787)
                                                               ----------     ----------     ----------

            Net cash provided by financing activities             180,271        181,901        126,616
                                                               ----------     ----------     ----------

NET INCREASE (DECREASE) CASH                                        4,226          2,644         (7,005)

CASH, beginning of year                                             3,986          1,342          8,347
                                                               ----------     ----------     ----------

CASH, end of year                                              $    8,212     $    3,986     $    1,342
                                                               ==========     ==========     ==========


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the period for interest                    $   20,683     $   16,207     $        0
   Cash paid during the period for taxes                       $      195     $    1,627     $       17


                  SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

   During the year ended December 31, 2002, the Company wrote off deferred offering costs of $43,877.


                        See the accompanying notes to these financial statements


                                                  14
</TABLE>


<PAGE>

                       AVIATION UPGRADE TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

                        DECEMBER 31, 2004, 2003 AND 2002


NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     NATURE OF BUSINESS - Aviation Upgrade Technologies, Inc. ("AUT" or the
"Company") is a Nevada corporation, organized on January 8, 1999.

     In April 2001, we acquired from Torbjorn B. Lundqvist, our chief executive
officer and one of our directors, the marketing rights to an electronic tire
valve cap for airplanes and automobiles that blinks if the tire pressure falls
below an initially calibrated level. The product provides early warning of low
pressure in tires which we believe will lead to safer travel in both these types
of vehicles and better fuel efficiency in automobiles. Once the tire is inflated
to the appropriate pressure, the initial tightening of the cap onto the valve
stem makes the valve cap memorize the tire pressure. If the pressure in the tire
drops by more than approximately four pounds per square inch, a red LED light
will blink to indicate the need to check the tire pressure. The licensing
agreement has a term of five years and requires the payment of a license fee
equal to 12% of the monthly gross profit from sales of the tire valve cap. It
also requires the reimbursement of research and development costs incurred by
its founder and the payment of ongoing development costs during the term of the
agreement. In addition, it stipulates the issuance of 50,000 shares of its
common stock to one individual for efforts in co-designing the product and 1,000
shares of common stock to another individual for naming the product

     GOING CONCERN - The Company is attempting to obtain revenues from
additional product sales, but there is no commitment by any person for future
purchase of the Company's electronic tire valve cap. The Company has significant
working capital needs in order to produce sufficient products for sale.
Moreover, in the absence of significant sales and profits, the Company will
likely seek to raise additional funds to meet its working capital needs
principally through the additional sales of its securities. However, there is no
assurance that the Company will be able to obtain sufficient additional funds
when needed, or that such funds, if available, will be obtainable on terms
satisfactory to the Company.

     These circumstances raise substantial doubt about the Company's ability to
continue as a going concern. The accompanying financial statements do not
include any adjustments that might result from the outcome of this uncertainty.

     CASH AND CASH EQUIVALENTS - For the purposes of the balance sheets and
statements of cash flows, cash and cash equivalents consist of all cash balances
and highly liquid investments with an initial maturity of three (3) months or
less. At December 31, 2004 and 2003, there were no cash equivalents.

     INVENTORIES - Inventories are stated at the lower of cost or market with
cost determined using the first-in, first-out (FIFO) method.

     PROPERTY AND EQUIPMENT - Property and equipment are recorded at cost and
depreciated by the straight-line method over the expected useful lives of the
assets. Expenditures for normal maintenance and repairs are charged to
operations and significant improvements are capitalized. The estimated useful
life for the tooling and equipment costs is 3 years.

     PREPRODUCTION DESIGN AND DEVELOPMENT COSTS - All tooling, equipment and
molds of $ 51,994 used for production have been capitalized as of December 31,
2004.

     COMMON STOCK ISSUED FOR SERVICES RENDERED - AUT periodically issues common
stock for services rendered. Common stock issued is valued at the estimated fair
market value, as determined by management and the board of directors of the
Company. Management and the board of directors consider, recent stock offering
prices and other factors in determining fair market value for purposes of
valuing the common stock. No common stock was issued for services during the
years ended December 31, 2004, 2003 and 2002.


                                       15


<PAGE>

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

     REVENUE RECOGNITION - The Company recognizes revenue on product sales at
the time of shipment and customer acceptance.

     SHIPPING AND HANDLING COSTS - Freight billed to customers is considered
sales revenue and the related freight cost is considered cost of sales.

     BASIC AND DILUTED LOSS PER SHARE - Basic and diluted loss per share were
computed based on the weighted average number of shares outstanding for the
period. Basic and diluted loss per share are the same as the effect of warrants
on loss per share and are antidilutive and thus not included in the diluted loss
per share calculation.

     INCOME TAXES - The Company accounts for income taxes under Statement of
Financial Accounting Standards No. 109 ("SFAS 109"), "Accounting for Income
Taxes." Under SFAS 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. A valuation
allowance is provided for significant deferred tax assets when it is more likely
than not that such assets will not be recovered.

     USE OF ESTIMATES - The preparation of financial statements in conformity
with accounting principles generally accepted in the United States of America
requires management to make certain estimates and assumptions that affect the
reported amounts of assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

     DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES - The Company has adopted
Statement of Financial Accounting Standards No. 133 ("SFAS 133"), "Accounting
for Derivative Instruments and Hedging Activities." SFAS 133 establishes
accounting and reporting standards for derivative instruments, including certain
derivative instruments embedded in other contracts, and for hedging activities.
It requires that an entity recognize all derivatives as either assets or
liabilities on the balance sheet at their fair value. This statement, as amended
by SFAS 137, is effective for financial statements for all fiscal quarters of
all fiscal years beginning after June 15, 2000. The adoption of this SFAS 133
has not materially impacted the Company's results of operations, financial
position or cash flows as it currently does not engage in any derivative or
hedging activities.

     RESEARCH AND DEVELOPMENT - Research and development costs related to the
tire valve cap are charged to operations as incurred. The Company recognized
research and developments costs of $71,501, $8,082 and $33,136 for the years
ended December 31, 2004, 2003 and 2002, respectively.

     FAIR VALUE OF FINANCIAL INSTRUMENTS - The Company's financial instruments
consist primarily of cash, prepaid expenses and current liabilities. The Company
believes all the financial instruments recorded are valued at their approximate
fair value.

     WARRANTIES - The Company provides a one-year manufacturer's warranty
covering product defects. Accruals for product warranties are estimated based
upon current product performance trends and are recorded at the time revenue is
recognized.

     CONCENTRATIONS - As discussed in Note 9, the Company has a concentration of
risk in the form of one major customer and one major supplier.

The Company is attempting to mitigate its sales risk with the introduction of
new products and the expansion of its sales and business.

While primarily one source of supply is utilized, other sources are available
should the Company have to change suppliers. A change in suppliers, however,
could cause a delay in shipping and a possible loss of sales and could be at
less favorable terms. This would affect operating results adversely.


                                       16


<PAGE>

NOTE 2 - PROPERTY AND EQUIPMENT

     Property and equipment consists of the following at December 31, 2004:

     Tooling                                                    $   50,500
     Equipment                                                       1,494
                                                                ----------
                                                                    51,994

     Accumulated depreciation                                       (8,666)
                                                                ----------

     Property and equipment, net                                $   43,328
                                                                ==========


NOTE 3 - INCOME TAXES

     No provisions for income taxes for the years ended December 31, 2004, 2003
and 2002 is required since the Company incurred taxable losses during these
periods.

     The components of the net deferred tax asset are as follows:


       Depreciation                                             $   (6,335)
       Section 195 start-up costs                                  571,476
       Net operating losses                                         66,501
       Accruals                                                    155,173
                                                                ----------

                                                                   786,815

       Less: valuation allowance                                  (786,815)
                                                                ----------

                                                                $       --
                                                                ==========


     The provision for income taxes consists of the following:


     Current                                                    $       --
     Deferred (benefit)                                           (150,787)
     Change in valuation allowance                                 150,787
                                                                ----------

                                                                $       --
                                                                ==========



                                       17


<PAGE>

NOTE 4 - COMMITMENTS

     OPERATING LEASE - In December 2001, AUT entered into an operating lease for
the rental of its new executive offices in Las Vegas, Nevada. Monthly lease
payments are $350 for a term of six (6) months. The lease expires on June 30,
2005. Lease expense was $4,200, $4,200 and $4,550 for the years ended December
31, 2004, 2003 and 2002, respectively.

     EMPLOYMENT AGREEMENT - On May 31, 2000, AUT entered into an employment
agreement with Mr. Lundqvist to employ him as its Chief Executive Officer. The
agreement, which has an initial term of two years, provides for an annual base
salary of $140,000 effective June 1, 2000, adjustable annually at the discretion
of the board of directors. Among other provisions, the agreement also provides
for an annual cash salary incentive equal to 3% of adjusted net profits
beginning with the year ended December 31, 2001. The "adjusted net profit" shall
be the net profit of the Company before federal and state income taxes,
determined in accordance with accounting principles generally accepted in the
United States of America by the Company's independent accounting firm and
adjusted to exclude: (i) any incentive salary payments paid pursuant to this
employment agreement; (ii) any contributions to pension and/or profit sharing
plans; (iii) any extraordinary gains or losses; (iv) any refund or deficiency of
federal and state income taxes paid in a prior year; and (v) any provision for
federal or state income taxes made in prior years which is subsequently
determined to be unnecessary. The maximum incentive salary payable for any given
year may not exceed 400% of the then applicable base salary.

     LICENSING AGREEMENT - In April 2001, AUT acquired from Torbjorn B.
Lundqvist, our Chief Executive Officer and one of our directors, the marketing
rights to the electronic tire valve cap. The licensing agreement has a term of
five years and requires the payment of a license fee equal to 12% of the monthly
gross profit from sales of the tire valve cap. It also requires the
reimbursement of research and development costs incurred by its founder and the
payment of ongoing development costs during the term of the agreement, In
addition, it stipulates the issuance of 50,000 shares of its common stock to one
individual for efforts in co-designing the product and 1,000 shares of common
stock to another individual for naming the product, all shares of which were
issued in 2001.

     PROFIT PARTICIPATION ADVANCES - The Company has entered into several profit
participation agreements in order to raise capital for operations. In exchange
for the investment, the Company shares profits on the product by giving the
investor an agreed upon price for every package sold up to a specified amount as
defined in the agreement. The total estimated liability under these agreements
is $636,000. The Company has accrued $103,000 of profit sharing advances and
this amount is being amortized based on the terms of the related agreements.
Amortization expense was $1,176 and $0 as of December 31, 2004 and 2003,
respectively. The Company has accrued a liability of $2,420 and $0 as of
December 31, 2004 and 2003, respectively, for amounts payable under these
agreements. No amounts have been paid out under these agreements as of December
31, 2004 and 2003.


NOTE 5 - WARRANTS

     In July 2003, the Company entered into a stock purchase agreement which
included warrants to purchase 150,000 shares of common stock at $2.00 per share.
These warrants are exercisable at the option of the warrant holder and expire
seven years from the date of issuance.

     No warrants were issued during the year ended December 31, 2004.

     All warrants were issued in connection with the sale of stock, and
therefore, no expense was recorded for their issuance.


                                       18


<PAGE>

NOTE 5 - WARRANTS (CONTINUED)

     The following represents a summary of the warrants outstanding as of
December 31, 2004 and 2003:

<TABLE>
                                                             2004                      2003
                                                   -----------------------    -----------------------
                                                                  WTD AVG                    WTD AVG
                                                     SHARES       EX PRICE      SHARES       EX PRICE
                                                   ---------     ---------    ---------     ---------
<S>                                                  <C>         <C>            <C>         <C>
Outstanding, beginning of year                       180,466     $    1.68      270,582     $    0.10

Granted                                                    0             0      150,000          2.00
Exercised                                            (30,466)         0.10     (119,116)         0.10
Expired/forfeited                                          0             0     (121,000)            0
                                                   ---------     ---------    ---------     ---------

Outstanding, end of year                             150,000     $    2.00      180,466     $    1.68
                                                   =========     =========    =========     =========

Weighted average fair value of warrants granted                  $       0                  $    2.00
                                                                 =========                  =========
</TABLE>

     The outstanding warrants at December 31, 2004 and 2003 are all held by
stockholders.


NOTE 6 - STOCKHOLDERS' DEFICIT

     Holders of the common stock do not have preemptive rights to purchase
additional shares of common stock or other subscription rights. The common stock
carries no conversion rights and is not subject to redemption or to any sinking
fund provisions. All shares of common stock are entitled to share equally in
dividends from sources legally available therefor when, as and if declared by
the board of directors and, upon liquidation or dissolution of the company,
whether voluntary or involuntary, to share equally in the assets of the Company
available for distribution to stockholders. The board of directors is authorized
to issue additional shares of common stock on such terms and conditions and for
such consideration as the Board may deem appropriate without further stockholder
action.

     Each holder of common stock is entitled to one vote per share, either in
person or by proxy, on all matters that may be voted on by the owners thereof at
meetings of the stockholders. Since the shares of common stock do not have
cumulative voting rights, the holders of more than 50% of the shares voting for
the election of directors that can elect all the directors and, in such event,
the holders of the remaining shares will not be able to elect any person to the
board of directors.

     Most of the Company's common stock is held by insiders and persons who
acquired shares in private offerings. These are "restricted securities" as that
term is defined in Rule 144 promulgated under the Securities Act. The Company
has not declared or paid any dividends on its common stock to date, and there is
no assurance that the Company will ever be able to pay dividends in the future.

     On July 3, 2003, we entered into a securities purchase agreement with two
investors for the sale of $100,000 of units to purchase common stock, warrants
and a participation in the sale of the valve cap products for cash consideration
of $100,000. These securities were issued under Section 4(2) of the Securities
Act of 1933. No underwriter was involved in the sale of these securities.

     During the year ended December 31, 2003, outstanding warrants to purchase
119,116 shares of common stock were exercised by the holders for cash
consideration of $11,915. The warrants were issued as part of a Rule 506
Regulation D offering, exempt under Section 4(2) of the Securities Act of 1933.
No underwriter was involved in the exercise of the warrants.

     In February 2004, outstanding warrants to purchase 30,466 shares of common
stock were exercised by the holders. The warrants were issued as part of a Rule
506 Regulation D offering, exempt under Section 4(2) of the Securities Act of
1933. No underwriter was involved in the exercise of the warrants.


                                       19


<PAGE>

NOTE 6 - STOCKHOLDERS' DEFICIT (CONTINUED)

     On March 1, 2004, we entered into a Securities Purchase Agreement with an
accredited investor for the sale of 55,000 shares of common stock for cash
consideration of $50,000. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities.

     On April 26, 2004, we entered into a Securities Purchase Agreement with an
accredited investor for the sale of 20,000 shares of common stock for cash
consideration of $20,000. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities.

     During the three month period ended September 30, 2004, AUT entered into
Securities Purchase Agreements with various accredited investors for the sale of
61,050 shares of common stock for cash consideration of $55,500. These
securities were issued under Section 4(2) of the Securities Act of 1933. No
underwriter was involved in the sale of these securities.

     During the three month period ended December 31, 2004, AUT entered into
Securities Purchase Agreements with various accredited investors for the sale of
28,875 shares of common stock for cash consideration of $26,250 and a stock
subscription of $750. These securities were issued under Section 4(2) of the
Securities Act of 1933. No underwriter was involved in the sale of these
securities. The $750 stock subscription was collected on January 14, 2005.


NOTE 7 - LOSS PER SHARE

     The following is a reconciliation of the numerators and denominators of the
basic and diluted loss per share computations:

<TABLE>
                                                                       YEAR ENDED
                                                    -------------------------------------------------
                                                                       DECEMBER 31,
                                                    -------------------------------------------------
                                                         2004              2003              2002
                                                    -------------     -------------     -------------
<S>                                                 <C>               <C>               <C>
Numerator for basic and diluted loss per share
   Net loss                                         $    (443,599)    $    (387,429)    $    (706,054)
                                                    =============     =============     =============

Denominator for basic and diluted loss per share
   Weighted average shares                             11,348,970        11,153,332        11,029,956
                                                    =============     =============     =============

Basic and diluted loss per share
   Net loss                                         $       (0.04)    $       (0.03)    $       (0.06)
                                                    =============     =============     =============
</TABLE>

NOTE 8 - RELATED PARTY TRANSACTIONS

     Since its inception, AUT has not generated sufficient working capital to
cover the cost of its operations. Therefore, its founder and Chief Executive
Officer has provided working capital and substantially all its assets. All
amounts advanced to AUT have been recorded as expenses of the Company in the
period they were incurred, and the amount owing is reflected in due to related
party and totals $15,594 and $38,313 as of December 31, 2004 and 2003,
respectively. All the payroll and related expenses recorded as of December 31,
2004 were owing to the Chief Executive Officer and majority stockholder. In
addition, during the year ended December 31, 2004, AUT obtained advances from
Mr. Lundqvist's privately held marketing company in the amount of $18,474, which
are borrowed from third parties. Mr. Lundqvist's privately held marketing
company passes through the interest on these advances to the Company which
ranges from nine and one quarter percent (9.25%) to twenty-eight and ninety-nine
one hundredths percent (28.99%). Interest paid on all advances to date totaled
$20,683 for the year ended December 31, 2004.


                                       20


<PAGE>

NOTE 8 - RELATED PARTY TRANSACTIONS (CONTINUED)

     In accordance with the valve cap licensing agreement AUT has entered into
with its founder and Chief Executive Officer, the Company incurred $71,501,
$8,082 and $33,136 during the years ended December 31, 2004, 2003 and 2002,
respectively, for research and development costs in connection with the
development of the tire valve cap.


NOTE 9 - MAJOR CUSTOMERS/SUPPLIERS

     During the year ended December 31, 2004, the Company had sales of $66,076
or eight-five percent (85%) to one (1) customer. At December 31, 2004, there
were no amounts due from this customer.

     During the year ended December 31, 2004, the Company purchased all (100%)
of its cost of goods sold from one supplier in China. At December 31, 2004, the
amount due to the supplier included in accounts payable was $160,630.




                                       21


<PAGE>

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

     Inapplicable.


ITEM 8A. CONTROLS AND PROCEDURES

     Evaluation of Disclosure Controls and Procedures. An evaluation was
performed by the Company's Chief Executive Officer/Chief Financial Officer of
the effectiveness of the design and operation of the Company's disclosure
controls and procedures. Based upon that evaluation, the Company's Chief
Executive Officer/Chief Financial Officer concluded that as of December 31,
2004, the Company's disclosure controls and procedures were effective and
designed to ensure that material information relating to the Company would be
made known to him by others.

     There have been no significant changes in the Company's internal controls
or in other factors that could significantly affect the internal controls
subsequent to the last day they were evaluated.


PART III

ITEM 9. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.

     We are dependent on the efforts and abilities of certain of our senior
management. The interruption of the services of key management could have a
material adverse effect on our operations, profits and future development, if
suitable replacements are not promptly obtained. We anticipate that we will
enter into employment agreements with each of our key executives. We cannot
guarantee that each executive will remain with us during or after the term of
his or her employment agreement. In addition, our success depends, in part, upon
our ability to attract and retain other talented personnel. Although we believe
that our relations with our personnel are good and that we will continue to be
successful in attracting and retaining qualified personnel, we cannot guarantee
that we will be able to continue to do so. Our officers and directors will hold
office until their resignations or removal.

     Our directors and principal executive officers are as specified on the
following table:

================================================================================
  NAME                         AGE         POSITION
--------------------------------------------------------------------------------
  Torbjorn B. Lundqvist         52         Chairman, Chief Executive Officer /
                                           Chief Financial Officer
--------------------------------------------------------------------------------
  Dick G. Lindholm              55         Vice President, Director
--------------------------------------------------------------------------------
  William S. Rhodes             55         President, Director
================================================================================

     TORBJORN B. LUNDQVIST. Mr. Lundqvist has been our chief executive officer
and the chairman of our board of directors since our inception. Mr. Lundqvist
has been primarily responsible for the formation and development to date of
Aviation Upgrade Technologies, Inc. Mr. Lundqvist has had vast experience in
international business. His strength is managing and developing new ventures and
ideas. Mr. Lundqvist was born in Helsinki, Finland in 1952. After serving as a
transportation officer during his mandatory service in the Finnish army, he
owned and managed several companies in Finland, including companies involved in
remodeling and manufacturing. Since 1982, Mr. Lundqvist has been owner and
president of Minitec Marketing, Inc. which is an import and export firm. Among
other things, Minitec Marketing, Inc. invented, patented and manufactured a
Power Take Out for 4-wheel drive GM vehicles. This product allows the user to
divert some of the power from the vehicles engine and use it for other purposes
than powering the vehicle itself, e.g. external devices like snow blowers,
generators, and pumps. The product was developed to suit a niche market in
Finland. Since 1989 he has also been owner and president of Minitec Motors,
Inc., USA, a car dealership specializing in exporting cars to niche markets
where a slight modification of the vehicle would put it in a lower tax bracket
when imported to that particular niche market. Mr. Lundqvist is not an officer
or director of any other reporting company.


                                       22


<PAGE>

     DICK G. LINDHOLM. Mr. Lindholm has been our vice president and one of our
directors since December 1999. Mr. Lindholm is known in the Scandinavian
aviation circles as a problem solver and skillful negotiator, including
experience dealing with clients, suppliers and labor unions. He has over thirty
years aviation experience, primarily in rotorcraft. He has thirty years flying
experience with over 8,000 flying hours. From 1976 until 1985, he was president
of Helikopteripalvelu, the leading helicopter company in Finland. From 1985
until 1993, he held various duties as a pilot for Helikopter Service A/S. From
1993 until 1997, he was managing director of Helifyg AB, the leading helicopter
operator in Sweden. From 1997 to March 1999, he was area manager, Nordic
Countries, of Helicopter Service A/S, which at the time was the world's largest
helicopter company in terms of revenues. From March to November 1999, Mr.
Lindholm has been vice president of business development for Copter Action Oy,
Finland. Since December 1999, Mr. Lindholm has been vice president of flight
operations for SHT AB of Finland, a company responsible for development of the
helicopter emergency medical service in the country. Mr. Lindholm was born in
1950 and resides in Espoo, Finland. Mr. Lindholm is not an officer or director
of any other reporting company.

     WILLIAM S. RHODES. Mr. Rhodes has been our president and one of our
directors since August 2000. Mr. Rhodes has spent most of his career in
commercial aircraft, military aircraft and third party aircraft maintenance. Mr.
Rhodes has been intimately involved in the managing, planning and production of
commercial aircraft modification and maintenance of transport aircraft for
twenty-three years. His maintenance management experience has been with air
carriers including American, Continental, Hawaiian, United, and U.S. Air. During
the period 2000 through 2001, Mr. Rhodes has been working with AUT. From 1997 to
2000, Mr. Rhodes was the General Manager and Senior Vice President of
administration for Santa Barbara Aerospace, Inc., which repairs and maintains
aircraft, and Director of Programs for Avtel Services, Inc., which maintains and
repairs aircraft. His career includes the day-to-day management in Department of
Defense contracts with NAVAIR and ARL for a period of fifteen years including
mission specific requirements for the secretary of defense and chief of naval
operations. Mr. Rhodes has held positions with aircraft corporations including
Beech Aircraft, Garrett Aviation, Tracor Aviation, Rogerson Aircraft and Dynair.
These positions have ranged from program manager to senior vice president in
technical and administrative management fields. Mr. Rhodes is a currently
licensed A&P whose aviation work experience started in the U.S. Marines in 1968,
and education is in engineering and business administration. Mr. Rhodes
currently resides in San Bernardino County, California. Mr. Rhodes is not an
officer or director of any other reporting company.

     There is no family relationship between any of our officers or directors.
There are no orders, judgments, or decrees of any governmental agency or
administrator, or of any court of competent jurisdiction, revoking or suspending
for cause any license, permit or other authority to engage in the securities
business or in the sale of a particular security or temporarily or permanently
restraining any of our officers or directors from engaging in or continuing any
conduct, practice or employment in connection with the purchase or sale of
securities, or convicting such person of any felony or misdemeanor involving a
security, or any aspect of the securities business or of theft or of any felony.
Nor are any of the officers or directors of any corporation or entity affiliated
with us so enjoined.

     BOARD OF DIRECTOR MEETINGS AND COMMITTEES
     -----------------------------------------

     The Board of Directors regularly maintains communication among themselves
throughout the year regarding the operations and status of the Company. During
the fiscal year ended December 31, 2004, there was one formal telephonic meeting
of the board of directors on December 28, 2004. Due to the small size of our
Board of Directors, the whole board acts as the Audit Committee.

     CODE OF ETHICS
     --------------

     The Company has adopted a Code of Ethics for Financial Professionals [which
Code of Ethics will be provided to any person without charge, upon request to
Aviation Upgrade Technologies, Inc., 6550 South Pecos Road, Suite 142, Las
Vegas, Nevada 89120, Attention: Torbjorn Lundqvist, President.]


                                       23


<PAGE>

SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE

     Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
the officers and directors of the Company and those persons who beneficially own
more than 10% of the outstanding shares of common stock of the Company to file
reports of securities ownership and changes in such ownership with the
Securities and Exchange Commission ("the Commission"). Officers, directors and
greater than 10% beneficial owners are also required by rules promulgated by the
Commission to furnish the Company with copies of all Section 16(a) forms they
file.

     In August 2003, Mr. Lundqvist transferred 50,000 of his shares as an
accommodator to a financing transaction for the Company and a Form 4 was filed
by Mr. Lundqvist at that time. However, none of the Company's officers or
directors filed the required Form 5 to report their holdings by February 14,
2005.

ITEM 10. EXECUTIVE COMPENSATION

     CASH COMPENSATION OF EXECUTIVE OFFICERS - The following table sets forth
the total compensation earned by the Chief Executive Officer and Directors per
annum for the previous three years.

<TABLE>
                                         ANNUAL COMPENSATION                           LONG-TERM COMPENSATION
                         --------------------------------------------------- ------------------------------------------

                                                                              RESTRICTED  COMMON SHARES
                                                                  OTHER         STOCK      UNDERLYING
                                                   ANNUAL         AWARDS       GRANTED    OPTIONS GRANTED    ALL OTHER
   NAME AND POSITION       YEAR      SALARY         BONUS      COMPENSATION   (# SHARES)    (# SHARES)     COMPENSATION
   -----------------       ----      ------        ------      ------------   ----------  ---------------  ------------
<S>                        <C>      <C>               <C>           <C>           <C>            <C>             <C>
Torbjorn B. Lundqvist,     2004     $140,000         -0-           -0-           -0-            -0-             -0-
Chairman and CEO           2003     $140,000         -0-           -0-           -0-            -0-             -0-
                           2002     $140,000         -0-           -0-           -0-            -0-             -0-
</TABLE>


     OPTION/SAR GRANTS IN LAST FISCAL YEAR. Inapplicable.

     DIRECTOR COMPENSATION. Board members are currently serving without cash
compensation. Each director holds office until his successor is elected and
qualified or until his earlier resignation in the manner provided in the Bylaws
of the Company. The Company has not secured "key man" or liability insurance
coverage for its officers and directors.

     EMPLOYMENT CONTRACTS. On May 31, 2000, we entered into an employment
agreement with Mr. Lundqvist to employ him as our chief executive officer. The
agreement, which has an initial term of two years, provided for an annual base
salary of $140,000 effective June 1, 2000, adjustable annually at the discretion
of the board of directors. Among other provisions, the agreement also provides
for an annual cash salary incentive equal to 3% of adjusted net profits
beginning with the year ended December 31, 2001. The "adjusted net profit" shall
be our net profit before federal and state income taxes, determined in
accordance with generally accepted accounting principles by our independent
accounting firm and adjusted to exclude:

          o    any incentive salary payments paid pursuant to this employment
               agreement;
          o    any contributions to pension and/or profit sharing plans;
          o    any extraordinary gains or losses;
          o    any refund or deficiency of federal and state income taxes paid
               in a prior year; and
          o    any provision for federal or state income taxes made in prior
               years which is subsequently determined to be unnecessary.

     The maximum incentive salary payable for any given year may not exceed 400%
of the then applicable base salary. The salary to Mr. Lundqvist has been accrued
since November 2002 and is reflected in accrued payroll on the Company's Balance
Sheet.


                                       24


<PAGE>

     INDEMNIFICATION OF DIRECTORS. Section 6 of our Bylaws provide, among other
things, that our officers or directors shall not be personally liable to us or
our shareholders for monetary damages for breach of fiduciary duty as an officer
or director, except liability for:

          o    any breach of such officer's or director's duty of loyalty to us
               or our security holders;
          o    for acts or omissions not in good faith or which involve
               intentional misconduct or a knowing violation of law;
          o    unlawful payments of dividends or unlawful stock purchase or
               redemption by us; or
          o    any transaction from which such officer or director derived any
               improper personal benefit.

     Accordingly, our officers or directors may have no liability to our
shareholders for any mistakes or errors of judgment or for any act of omission,
unless such act or omission involves intentional misconduct, fraud, or a knowing
violation of law or results in unlawful distributions to our shareholders.

     Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to our directors, officers and controlling persons
pursuant to the foregoing provisions, or otherwise, we have been advised that in
the opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in the Act and is, therefore, unenforceable.

     REPORT OF THE COMPENSATION COMMITTEE ON EXECUTIVE COMPENSATION. No report
has been issued by the Compensation Committee.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT

     The following table sets forth certain information regarding the beneficial
ownership of our common stock as of March 28, 2005 by each person or entity
known by us to be the beneficial owner of more than 5% of the outstanding shares
of common stock, each of our directors and named executive officers, and all of
our directors and executive officers as a group.

<TABLE>
TITLE OF CLASS        NAME AND ADDRESS OF BENEFICIAL OWNER      AMOUNT AND NATURE OF BENEFICIAL OWNER              PERCENT OF CLASS
------------------------------------------------------------------------------------------------------------------------------------
<S>                   <C>                                       <C>                                                      <C>
Common Stock          Torbjorn B. Lundqvist,                    9,572,300 shares, chief executive officer, chief         83.5%
                      6550 South Pecos Road, Suite 142          financial officer, chairman of board of directors
                      Las Vegas, Nevada   89120

Common Stock          Dick G. Lindholm                          235,000 shares, vice president, director                  2.1%
                      6550 South Pecos Road, Suite 142
                      Las Vegas, Nevada   89120

Common Stock          William S. Rhodes*                        10,000 shares, president, director                        0.1%
                      P.O. Box 10746
                      San Bernardino, California  92423


Common Stock          All directors and named executive         9,817,300 shares                                         85.7%
                      officers as a group
</TABLE>

* William S. Rhodes is the beneficial owner of 10,000 shares of common stock
through his spouse Lyn Rhodes.


                                       25


<PAGE>

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. In accordance with Securities and Exchange
Commission rules, shares of our common stock which may be acquired upon exercise
of stock options or warrants which are currently exercisable or which become
exercisable within 60 days of the date of the table are deemed beneficially
owned by the optionees. Subject to community property laws, where applicable,
the persons or entities named in the table above have sole voting and investment
power with respect to all shares of our common stock indicated as beneficially
owned by them.

CHANGES IN CONTROL. Our management is not aware of any arrangements which may
result in "changes in control" as that term is defined by the provisions of Item
403(c) of Regulation S-B.


ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

     CONFLICTS RELATED TO OTHER BUSINESS ACTIVITIES. The persons serving as our
officers and directors have existing responsibilities and, in the future, may
have additional responsibilities, to provide management and services to other
entities in addition to us. As a result, conflicts of interest between us and
the other entities may occur from time to time.

     In addition to serving as our chief executive officer and chairman of our
board of directors, Mr. Lundqvist is the president and a director of Minitec
Marketing, Inc., a California corporation and an importer and exporter of
products. Minitec Marketing, Inc. has not conducted any operations in the last
two years. Mr. Lundqvist currently devotes approximately 4% of his time to
Minitec Marketing, Inc. Mr. Lundqvist is the president and a director of Minitec
Motors, Inc., a California corporation. Mr. Lundqvist currently devotes
approximately 1% of his time to Minitec Motors, Inc. We do not believe that we
have any conflicts of interest with the business or industry of Minitec
Marketing, Inc., other than Mr. Lundqvist's duty to provide management and
services.

     In addition to serving as our officers and directors, Mr. Rhodes and Mr.
Lindholm currently devote a significant portion of their time to other
companies. Mr. Lindholm currently devotes approximately ten hours per week, but
anticipates that he will devote significantly more hours if the valve cap starts
producing significant revenues. Mr. Rhodes currently devotes approximately two
hours per week, but anticipates that he will devote significantly more hours if
the valve cap starts producing significant revenues. We do not believe that we
have any conflicts of interest with the business or industry of those companies,
other than their duties to provide management and services.

     We will attempt to resolve any such conflicts of interest in our favor. Our
officers and directors are accountable to us and our shareholders as
fiduciaries, which requires that such officers and directors exercise good faith
and integrity in handling our affairs. A shareholder may be able to institute
legal action on our behalf or on behalf of that shareholder and all other
similarly situated shareholders to recover damages or for other relief in cases
of the resolution of conflicts in any manner prejudicial to us.

     RELATED PARTY TRANSACTIONS. Mr. Lundqvist, our chief executive officer and
director and principal shareholder, provides substantially all the assets used
by us, through Minitec Marketing, Inc., his privately held marketing company. We
have reimbursed this entity for the cost of the services it has paid on behalf
of AUT.

     We entered into a license agreement with Torbjorn B. Lundqvist, to license
the marketing rights for the tire valve technology. During the years ended
December 31, 2004, 2003 and 2002, we incurred $71,501, $8,082 and $33,136 for
research and development costs in connection with the licensing agreement.
During the license period and any renewal period, we will pay fees, expenses and
costs related to product development and any application for patents and
trademarks. The license agreement also specifies that we will enter into a
manufacturing agreement with Torbjorn B. Lundqvist, our chief executive officer.
However, no terms of the manufacturing agreement have been negotiated.


                                       26


<PAGE>

     Mr. Lundqvist was issued 10,000,000 shares of our common stock in exchange
for services relating to founding and organizing the business, which were valued
at $10,000. In addition, during the period ended December 31, 1999, Mr.
Lundqvist, our chief executive officer and director and principal shareholder,
paid for various goods and performed services relating to our operations. Those
goods included office supplies of $2,000. Those services of $8,000 provided by
Mr. Lundqvist were for services as our promoter including founding and
organizing the business.

ITEM 13. EXHIBITS

3.1       Certificate of Incorporation of the Company(1)
3.2       Bylaws of the Company(1)
10.1      Employment Agreement (2)
21.1      Subdivision of small business issuer. Not applicable
31.1      Rule 13a-14(a)/15d-14(a) Certificate of Chief Executive Officer
31.2      Rule 13a-14(a)/15d-14(a) Certificate of Chief Financial Officer
32.1      Certification Pursuant to 18 U.S.C. ss.1350 of Chief Executive Officer
32.2      Certification Pursuant to 18 U.S.C. ss.1350 of Chief Financial Officer

(1)  Previously filed on December 2, 1999, as exhibit to the Registration
     Statement on Form 10-SB.
(2)  Previously filed in March 2002 as exhibit to the 2001 Annual Report on Form
     10-KSB.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES

     The Board of Directors has selected Lesley, Thomas, Schwarz & Postma, Inc.
as independent accountants to audit our books, records and accounts for the
fiscal year 2004. Lesley, Thomas, Schwarz & Postma, Inc. previously audited our
financial statements during the two fiscal years ended December 31, 2003 and
2002.

AUDIT AND NON-AUDIT FEES

     Aggregate fees for professional services rendered to the Company by Lesley,
Thomas, Schwarz & Postma, Inc. for the years ended December 31, 2004 and 2003,
were as follows:

      Services Provided                    2004                2003
      -----------------                    ----                ----

      Audit Fees                      $      23,925       $       21,700
      Audit Related Fees              $           0       $            0
      Tax Fees                        $         828       $          832
      All Other Fees                  $           0       $            0
                                      -------------       --------------

                  Total               $      24,753       $       22,532

     AUDIT FEES. The aggregate fees billed for the years ended December 31, 2004
and 2003 were for the audits of our financial statements and reviews of our
interim financial statements included in our annual and quarterly reports.

     AUDIT RELATED FEES. There were no fees billed for the years ended December
31, 2004 and 2003 for the audit or review of our financial statement that are
not reported under AUDIT FEES.

     TAX FEES. The aggregate fees billed for the years ended December 31, 2004
and 2003 were for professional services for tax compliance, tax advice and tax
planning.

     ALL OTHER FEES. There were no other fees billed for the years ended
December 31, 2004 and 2003.


                                       27


<PAGE>

AUDIT COMMITTEE PRE-APPROVAL POLICIES AND PROCEDURES

     Due to the small size of our Board of Directors, the whole board acts as
the Audit Committee.

     The Board of Directors has implemented pre-approval policies and procedures
related to the provision of audit and non-audit services. Under these
procedures, the Board of Directors pre-approves both the type of services to be
provided by Lesley, Thomas, Schwarz & Postma, Inc. and the estimated fees
related to these services.

     During the approval process, the Board of Directors considers the impact of
the types of services and the related fees on the independence of the auditor.
The services and fees must be deemed compatible with the maintenance of the
auditor's independence, including compliance with SEC rules and regulations.

     Throughout the year, the Board of Directors will review any revisions to
the estimates of audit and non-audit fees initially approved.



                                       28


<PAGE>

                                   SIGNATURES

In accordance with Section 13(a) or 15(d) of the Exchange Act, the registrant
has caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.

                                       Aviation Upgrade Technologies, Inc.



                                       By:  /s/  Torbjorn B. Lundqvist
                                          ------------------------------------
                                          Torbjorn B. Lundqvist
                                          Chairman and Chief Executive Officer



     In accordance with the Exchange Act, this report has been signed by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

       Signatures                        Title                        Date
-----------------------    ----------------------------------  -----------------


/s/ Torbjorn B. Lundqvist  Chairman, Chief Executive Officer    November 7, 2005
-----------------------    (principal executive officer) and
Torbjorn B. Lundqvist      Chief Financial Officer (principal
                           financial officer)

/s/ Dick G. Lindholm       Director                             November 7, 2005
-----------------------
Dick G. Lindholm

/s/ William S. Rhodes      Director                             November 7, 2005
-----------------------
William S. Rhodes



                                       29