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

                                   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, 2000


    [   ] 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)

           24040 Camino del Avion, #A303, Monarch Beach, CA 92629 USA
--------------------------------------------------------------------------------
                    (Address of principal executive offices)


                                 (949) 499-6665
                                 --------------
                           (Issuer's telephone number)

     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                    No    X
                                               ----------            ---------

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

The issuer's revenue for the fiscal year ended December 31, 2000 was $0.

     The market value of the voting stock held by  non-affiliates  of the issuer
as of March 23, 2001 was approximately $0.

     The number of shares of the common stock  outstanding  as of March 23, 2001
was 10,659,500.

Documents incorporated by reference:   None.



<PAGE>




PART 1

     Aviation Upgrade  Technologies,  Inc., a Nevada  corporation  ("Company" or
"AUT"),  filed a  Registration  Statement on Form 10-SB on December 2, 1999.  On
February  1,  2000,  the  Company's  Registration  Statement  on Form  10-SB was
declared  effective and the Company became a reporting  company  pursuant to the
Securities  Exchange Act of 1934. The Company has not filed any periodic reports
or other  information  with the  Securities  and Exchange  Commission  since the
Company  became  a  reporting  company.  The  Company  anticipates  that it will
concurrently file all of its delinquent annual and quarterly reports. Therefore,
investors should consider of the Company's filings cumulatively.


Item 1.  Description of Business

     Business  Development AUT is a start-up business founded in 1999 in Monarch
Beach,  California.  The  Company  has  had no  revenue  from  operations  since
inception  and has no  current  customers.  There  has not been  any  bankruptcy
filing,  receivership or any similar  proceeding since the Company's  inception.
There has been no reclassification,  merger or consolidation since the Company's
inception.  There has been no purchase or sale of a significant amount of assets
that were not in the ordinary course of the Company's business.

     Business of the Issuer- AUT is a Nevada  corporation,  organized on January
8, 1999. The primary purpose for the Company was to develop,  market and install
modifications  to  aircraft,  such as the Boeing  727,  which were  designed  to
improve and extend the  economic  life of these  aircraft by bringing  them into
compliance  with  strict  noise  and  emission  control  levels  as they  became
mandatory in the years ahead.  The  Company's  executive  offices are located at
24040 Camino Del Avion #A303,  Monarch Beach,  California  92629.  The Company's
telephone number is (949) 499-6665.  Although a substantial market exists in the
United  States,  the  Company  ultimately  aspires  to  compete  in  the  global
marketplace.

     With  expected   financing  of  $12.3  million  from  the  sale  of  stock,
contributions  by third party  suppliers and the use of two initial  aircraft by
one airline,  the Company expected to have sufficient capital resources to cover
establishment of its management and operational infrastructure and the launching
of its business plan.

     In  mid-1999,  however,  after  months  of  negotiations  with a number  of
aircraft  engine  manufacturers  for the purchase of new  engines,  each company
withdrew at the last minute from  executing a final  contract.  AUT believes the
withdrawals  were the  result of  pressure  from a major  aircraft  manufacturer
fearing  a  reduction  in the sale of new  aircraft  if the  lives  of  existing
aircraft were significantly  increased as proposed by AUT. On June 30, 2000, the
Company filed a lawsuit against The Boeing Company, a Delaware corporation,  CFM
International,  Inc.,  a  Delaware  corporation,  and Rolls  Royce PLC, a United
Kingdom  corporation,  in the  United  States  District  Court  for the  Central
District of California, Western Division (Case # 00-07157) for violations of the
Sherman Act ss.ss. 1 and 2, intentional  interference with prospective  economic
relationships  and breach of  contract  ("Boeing  Litigation").  The  Company is
seeking  actual  and  economic  damages  and  attorneys'  fees  and  costs.  The
defendants  filed a motion for  dismissal  of charges  but the court  denied the
defendants'  motion to  dismiss.  AUT  believes  that its claims  have merit and
intends to vigorously prosecute its claims against the defendants.

     The outcome of the Boeing Litigation is uncertain.  Antitrust litigation is
particularly   complex  and  can  extend  for  a  protracted   time,  which  can
substantially increase the cost of such litigation.  The Company does not expect
to incur  significant  legal fees and  expenses  in  connection  with the Boeing
Litigation  because the Company has retained its legal  counsel on a contingency
basis. However, the Boeing Litigation has diverted,  and is expected to continue
to divert,  the  efforts and  attention  of the  Company's  key  management  and
technical personnel. As a result, the Company's pursuit and potential defense of
the Boeing  Litigation,  regardless of its eventual outcome,  has been, and will
likely  continue  to be,  costly and time  consuming.  Should the outcome of the
Boeing Litigation be adverse to the Company,  the Company may be required to pay
significant  monetary damages to the defendants and the Company may be unable to
carry out its  business  plan.  If the Company is  required  to pay  significant
monetary  damages,  or is unable to carry out its business  plan,  the Company's
business will be harmed.




                                       -1-


<PAGE>



     In its efforts to continue  business  development,  AUT  evaluated  several
businesses  for  purchase  during the latter half of 1999 and  throughout  2000,
including  an  aircraft  maintenance  company and an  aircraft  leasing  company
specializing in cargo aircraft, none of which came to fruition. AUT is currently
negotiating  with its founder and majority  stockholder for the marketing rights
for an electronic tire valve cap for airplanes and/or automobiles that blinks if
the tire pressure falls below an initially calibrated level.

     Products  - AUT was  launched  as a  single  program  company,  namely  the
re-engining  and  upgrading  of the  Boeing  727.  The  Company's  only  product
consisted of installing  two Rolls Royce  RB211-535E4  or CFM56-5C4  powerplants
into the Boeing 727  aircraft,  with primary  emphasis  upon the Boeing  727-200
advanced  version of this  aircraft,  since this would be the most conducive for
these  modifications.  The  re-engining  of these  aircraft  was to  consist  of
removing the original three JT8D engines and replacing them with two Rolls Royce
RB211-535E4  or  CFM56-5C4  powerplants.  In  effect,  two  modern  high  bypass
powerplants would have worked in place of the original installation of three low
bypass ratio engines.  Due to the  unwillingness of the third party suppliers to
execute  their  contracts  with the Company,  AUT is currently in the process of
litigating the matter in antitrust court. See Item 3 "Legal Proceedings".

     AUT is currently  negotiating with its founder and majority  stockholder to
license the marketing  rights for a new invention.  The product is an electronic
tire valve cap that may be used on both airplanes and automobiles. The principal
of the  product is that early  warning of low  pressure  in tires leads 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 sets the pressure inside a control chamber in the valve cap equal
to the  pressure  in the tire.  If the  pressure  in the tire drops by more than
approximately two pounds per square inch ("psi"),  a red LED light will blink to
indicate the need to check the tire pressure.

     Marketing - 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. AUT believes this product could become
standard  equipment on all new 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. The cost of this product is expected to be less
than $1.00 each when mass produced, therefore, allowing for good profit margins.

     Government  Regulation  - AUT's  proposed  aviation  business is subject to
regulation by the FAA and the Department of  Transportation  ("DOT") pursuant to
the  provisions of the Federal  Aviation Act of 1958, as amended (the  "Aviation
Act").  The DOT is  responsible,  inter alia, for evaluating and determining the
fitness of  individuals  and  organizations  to  function  as air  carriers  and
maintains  jurisdiction  over  consolidations,  mergers or  acquisitions  of air
carriers.

     Compliance  with the regulatory  requirements  applicable to AUT's business
imposes material burdens on AUT,  including license  requirements,  maintenance,
training, record keeping and reporting obligations and limitations on the manner
in which AUT may operate its  aircraft.  Further,  the cost of  compliance  with
these  requirements  is  significant.  Management  believes,  however,  that the
regulatory  requirements  applicable to AUT generally are no more  burdensome to
AUT than to other businesses operating in the aviation services industry.

     In  addition,  AUT's  activities  will  be  subject  to  regulation  by the
regulatory  authorities of the  respective  foreign  jurisdictions  in which AUT
anticipates its will do business.

     Patents - AUT does not  presently  own any patents,  trademarks,  licenses,
concessions or royalties. The Company's success, however, depends in part on the
ability of its founder to obtain United States and foreign patent protection for
the tire valve cap,  which is currently in process,  preserve its trade secrets,
and operate without infringing upon the proprietary rights of third parties.






                                       -2-


<PAGE>



     There can be no assurance, however, that any patents will be issued for the
product or that, if issued, the breadth or degree of protection of these patents
will be adequate to protect the Company's interests.  In addition,  there can be
no assurance that others will not independently develop substantially equivalent
proprietary  information  or obtain access to the Company's  know-how.  Further,
there can be no  assurance  that  others  will not be issued  patents  which may
prevent the sale of the Company's  product or require  licensing and the payment
of  significant  fees or  royalties by the Company in order for it to be able to
carry on its  business.  Finally,  there can be no  guarantee  that any  patents
issued to or licensed by the Company  will not be  infringed  by the products of
others.  Defense and  prosecution  of patent  claims can be  expensive  and time
consuming,  even in those  instances  in which the outcome is  favorable  to the
Company.  If the outcome is adverse, it could subject the Company to significant
liabilities to third parties,  require the Company to obtain licenses from third
parties or require the Company to cease its marketing activities.

     Competition-  In the  re-engineering  project,  the  Company  had a  direct
competitor in terms of a re-engineering  company, the Aerospace Division of B.F.
Goodrich Co.  However,  AUT found many flaws in their design and  considered its
technology to be inferior.  Even though the competitor has the resources of B.F.
Goodrich  Aerospace behind it, their product "The Super 27" is considered a weak
solution to the  problem by AUT,  when  compared  to the program  which could be
performed by the Company. Further, once re-engined, AUT's planes would have soon
sold in competition against Boeing 757's and other newly manufactured planes.

     Competition  for the  electronic  tire valve cap is also limited.  To AUT's
knowledge,  there is one  mechanical  tire valve cap on the  market.  Review and
testing of this product has indicated that it is unreliable and  inefficient due
to its mechanical  nature.  Other solutions to the tire pressure  problem facing
the industry are currently  directed toward interior warning signals,  which are
significantly  more  expensive  than AUT's tire valve cap,  and  therefore,  not
considered direct competition.

     Research and Development - AUT is not currently conducting any research and
development  activities.  AUT does not anticipate  conducting such activities in
the near future.

     Insurance - The Company has not yet acquired any of the necessary insurance
coverage  typically  required  in  the  aviation  maintenance  industry.  Before
commencing full scale  operations,  the Company will have to secure insurance to
cover general aviation liability and, for clients who are maintaining  ownership
over their aircraft and simply paying for a retrofit,  hangar keeper  insurance.
Typical policy limits for such insurance  coverage are  $200,000,000 for general
aviation  liability and $200,000,000 of hangar keeper insurance,  plus customary
coverage  for other  business  insurance.  Because of the nature of the aviation
business,  even with these insurance limits in force,  there can be no assurance
that such  coverage  will fully  protect us  against  all losses  which we might
sustain. Moreover, typical policies carry a high deductible, which might require
the payment of as much as $20,000 for any loss or damage,  before this insurance
can be engaged.

     The Company is also  investigating  the  availability of product  liability
insurance for its products and intends to obtain product liability coverage,  if
available,  on  terms  acceptable  to  the  Company.  However,  there  can be no
assurance that product  liability  insurance will be available to the Company on
terms that it can afford,  or at all, or that the Company  will ever obtain such
insurance.

     Employees  - AUT  currently  has one  full-time  employee,  who is also the
founder and majority stockholder.  Additional employees are expected to be added
as the Company  sustains  growth.  The Company from time to time supplements its
permanent  staff  with  temporary   personnel.   The  current  employee  is  not
represented by a union nor is subject to a collective bargaining agreement,  and
the Company  considers  its  relation  with its  employee to be  favorable.  The
Company has entered into an agreement with its employee  regarding his services.
See Item 11, "Executive  Compensation and Other  Information." AUT also utilizes
the services of consultants for investor and public relations, accounting, legal
and other services.





                                       -3-


<PAGE>


Item 2.  Properties

     AUT  leases no  property  directly.  The  Company's  founder  and  majority
stockholder  provides  approximately 400 square feet of office space through his
privately  held  marketing  company  for which AUT pays  $1,500  per month  rent
reimbursement.


Item 3.  Legal Proceedings

     On June 30, 2000, the Company filed a lawsuit against The Boeing Company, a
Delaware corporation, CFM International, Inc., a Delaware corporation, and Rolls
Royce PLC, a United Kingdom corporation, in the United States District Court for
the Central  District of  California,  Western  Division  (Case # 00-07157)  for
violations  of the Sherman Act ss.ss.  1 and 2,  intentional  interference  with
prospective  economic  relationships  and  breach of  contract.  The  Company is
seeking  actual  and  economic  damages  and  attorneys'  fees  and  costs.  The
defendants  filed a motion for  dismissal  of charges  but the court  denied the
defendants'  motion to  dismiss.  AUT  believes  that its claims  have merit and
intends to vigorously prosecute its claims against the defendants.

     The outcome of the Boeing Litigation is uncertain.  Antitrust litigation is
particularly   complex  and  can  extend  for  a  protracted   time,  which  can
substantially increase the cost of such litigation.  The Company does not expect
to incur  significant  legal fees and  expenses  in  connection  with the Boeing
Litigation  because the Company has retained its legal  counsel on a contingency
basis. However, the Boeing Litigation has diverted,  and is expected to continue
to divert,  the  efforts and  attention  of the  Company's  key  management  and
technical personnel. As a result, the Company's pursuit and potential defense of
the Boeing  Litigation,  regardless of its eventual outcome,  has been, and will
likely  continue  to be,  costly and time  consuming.  Should the outcome of the
Boeing Litigation be adverse to the Company,  the Company may be required to pay
significant  monetary damages to the defendants and the Company may be unable to
carry out its  business  plan.  If the Company is  required  to pay  significant
monetary  damages,  or is unable to carry out its business  plan,  the Company's
business will be harmed.


     Robert  Meyer and  Joseph  Scarpello,  Esq.  Mr.  Joseph  Scarpello,  Esq.,
previously  represented  the  Company  in  certain  corporate  matters.  On  the
Company's behalf, funds were deposited into Mr. Scarpello's client trust account
by Spurlin and  Associates  for the purchase of stock.  On January 4, 2001,  and
again on January  10,  2001,  the law firm of Stepp Law Group,  on behalf of the
Company,  requested an accounting of such funds from Mr.  Scarpello.  On January
14, 2001,  Mr.  Scarpello  prepared  and  delivered to Stepp Law Group a partial
accounting  showing  that  funds  were  expended  by the  Company  for legal and
accounting fees.  However,  when asked to account for the other remaining funds,
Mr.  Scarpello  informed Stepp Law Group that the remaining funds were disbursed
at  the  direction  of  Mr.  Meyer.  At  that  time,  he  followed  Mr.  Meyer's
instructions  regarding  the  disposition  of the funds  because he believed the
funds were Mr.  Meyer's,  not the Company's.  As of the date of this Form 10KSB,
the Company has decided not to pursue this matter.  Spurlin and  Associates  has
entered into a release whereby  Spurlin and Associates have agreed,  among other
things,  to release  the  Company  from  liability  arising  from the actions or
inactions of Mr. Meyer.


Item 4.  Submission of Matters to a Vote of Security Holders

     On November 30, 2000, a stockholder  meeting was held,  however, no matters
were submitted for a vote of the stockholders.


PART II


Item 5.  Market for Common Equity and Related Stockholder Matters

     There is no trading  market for the AUT's  common  stock at present.  AUT's
securities  are not listed for  trading on any  exchange or  quotation  service.
Management has not undertaken any  discussions,  preliminary or otherwise,  with
any prospective  market maker concerning the  participation of such market maker
in the  market  of the  Company's  securities.  Management  does not  intend  to
initiate  any  discussion  until  such time as the  Company  has  become a fully
reporting company with the Securities and Exchange  Commission and has filed all
required financial  statements and disclosure  documents.  There is no assurance
that a trading market will ever develop or, if such market does in fact develop,
that it will continue.

     The  Company  is 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.


                                       -4-


<PAGE>



     As of March 8, 2001,  there were 44 record holders of the Company's  common
stock.

     As of March 8, 2001,  there are  456,000  outstanding  warrants to purchase
shares of our  common  stock.  Each  warrant  entitles  the  holder the right to
purchase of an additional share of common stock at $0.10.  These warrants expire
three years from the date of issuance.

     AUT has not  paid any  cash  dividends  since  its  inception  and does not
contemplate  paying dividends in the foreseeable  future. It is anticipated that
earnings, if any, will be retained for the operation of the Company's business.

     Recent  Sales of  Unregistered  Securities  - During the fiscal years ended
December  31,  2000,  AUT sold  unregistered  shares of its Common  Stock in the
following transactions:

     In June 2000,  AUT  commenced a private  placement  of shares of its common
stock at a price of $1.00 per share.  As of January  11,  2001,  the Company has
sold a total of  436,000  shares of common  stock to  various  investors  in the
United  States and Europe for gross  proceeds of $393,000.  Each of these shares
sold  included a warrant to purchase  an  additional  share of common  stock for
$0.10 per share. The shares issued to residents of the United States were issued
in a transaction  which the Company believes  satisfies the requirements of that
exemption from the  registration  and prospectus  delivery  requirements  of the
Securities  Act of 1933,  which  exemption  is specified  by the  provisions  of
Section 4(2) of that act and Rule 506 of  Regulation D  promulgated  pursuant to
that act by the  Securities  and  Exchange  Commission.  The  shares  issued  to
non-residents  of the  United  States  were  issued in a  transaction  which the
Company  believes   satisfies  the  requirements  of  that  exemption  from  the
registration and prospectus delivery requirements of the Securities Act of 1933,
which  exemption  is specified  by the  provisions  of Section 5 of that act and
Regulation  S  promulgated  pursuant  to that  Section 5 by the  Securities  and
Exchange Commission.


Item 6.  Management's Discussion and Analysis or Plan of Operation

     General - AUT is a start-up  company  and to date has had no  revenue  from
operations.  The primary  activities  during 1999 consisted of interviewing  and
making decisions on key personnel, locating possible facilities for the original
business  plan of upgrading  Boeing 727  aircraft,  and making  contact with and
engaging various persons with requisite  engineering,  financing,  accounting or
legal  expertise.  Since the untimely  halt of that plan,  AUT has continued its
business  development  efforts in 2000 by evaluating  several  businesses in the
airline  industry,  including  an aircraft  maintenance  company and an aircraft
leasing company specializing in cargo aircraft.  Ultimately, none of these deals
was economically  feasible for AUT. In addition,  in 2000, AUT pursued and filed
an antitrust lawsuit against the third party suppliers and aircraft manufacturer
involved in the original  business plan.  Efforts in the pursuit of this lawsuit
could  adversely  affect the amount of time available for business  development,
however, a positive outcome could provide a significant cash infusion for AUT.

     AUT is currently  negotiating with its founder and majority stockholder for
the  marketing  rights to an  electronic  tire  valve cap for  airplanes  and/or
automobiles that blinks if the tire pressure falls below an initially calibrated
level.












                                       -5-


<PAGE>



     Liquidity  and Capital  Resources  - AUT has  generated  no revenues  since
inception.  The cash on hand as of December 31, 2000 was $242,967,  up from zero
as of December 31, 1999. Stock  subscriptions  receivable amounted to $43,000 as
of December 31, 2000,  all of which was received in January 2001.  Total current
liabilities  were $59,131 as of December 31,  2000, a slight  increase  over the
prior year balance of $54,509,  due to accrued payroll taxes. As of December 31,
2000, AUT had an accumulated deficit of $391,164. In the absence of any sales or
profits,  AUT shall  continue to seek funding to meet its working  capital needs
through the sale of its securities. AUT has started a Rule 506 private placement
for the sale of its common  stock at $1.00 per share to  residents of the United
States and a Regulation S private  placement for the sale of its common stock at
$1.00 per share to non-residents  of the United States.  As of January 11, 2001,
$40,000  has been  received  in the  Rule 506  offering  and  $353,000  has been
received in the Regulation S offering.  The amount of  expenditures  required to
maintain  operations and to continue business  development has been estimated at
$31,500 per month.  AUT believes  the current  capital  resources  will fund the
Company  expenses  until such time as there is a final  outcome in the antitrust
lawsuit and/or sales of the electronic tire valve cap are generated.

     Results of  Operations-Year  Ended December 31, 2000 Compared to Year Ended
December 31, 1999 - Since its  inception,  AUT has generated no revenues.  Total
operating  expenses for the year ended December 31, 2000 were $253,148  compared
to total  operating  expenses  for the  period  from  January  8, 1999  (date of
inception)  to December 31, 1999 of $125,674.  The increase  resulted  primarily
from investor relations,  directors fees, and other consulting expenses recorded
for stock  issued for these  services in 2000.  In the year ended  December  31,
2000, AUT's net loss was $261,655,  compared to a loss of $129,509 for the prior
period.

     Total  liabilities  have increased $4,622 from $54,509 at December 31, 1999
to $59,131 at December 31, 2000  resulting  from accrued  payroll taxes owing at
December 31, 2000.

     Plan of Operation For Next 12 Months - On June 30, 2000,  the Company filed
a lawsuit against The Boeing Company, a Delaware corporation, CFM International,
Inc., a Delaware corporation, and Rolls Royce PLC, a United Kingdom corporation,
in the United  States  District  Court for the Central  District of  California,
Western  Division  (Case # 00-07157) for  violations of the Sherman Act ss.ss. 1
and 2, intentional  interference  with prospective  economic  relationships  and
breach of contract  ("Boeing  Litigation").  The  Company is seeking  actual and
economic  damages and attorneys'  fees and costs.  The  defendants  have not yet
responded to our complaint.

     The outcome of the Boeing Litigation is uncertain.  Antitrust litigation is
particularly   complex  and  can  extend  for  a  protracted   time,  which  can
substantially increase the cost of such litigation.  The Company does not expect
to incur  significant  legal fees and  expenses  in  connection  with the Boeing
Litigation  because the Company has retained its legal  counsel on a contingency
basis. However, the Boeing Litigation has diverted,  and is expected to continue
to divert,  the  efforts and  attention  of the  Company's  key  management  and
technical personnel. As a result, the Company's pursuit and potential defense of
the Boeing  Litigation,  regardless of its eventual outcome,  has been, and will
likely  continue  to be,  costly and time  consuming.  Should the outcome of the
Boeing Litigation be adverse to the Company,  the Company may be required to pay
significant  monetary damages to the defendants and the Company may be unable to
carry out its  business  plan.  If the Company is  required  to pay  significant
monetary  damages,  or is unable to carry out its business  plan,  the Company's
business will be harmed.

     AUT's plan of  operation  is  materially  dependent  on the  outcome of the
Boeing  Litigation  and its  ability  to  obtain  the  marketing  rights  to the
electronic  tire valve cap. The Company  anticipates  that it will acquire those
marketing  rights to the  electronic  tire valve cap. The Company  believes that
sales of the valve cap could potentially generate significant revenues. However,
AUT does not anticipate that it will be able to generate significant revenues in
the next twelve months.  AUT can make no prediction as to when, if ever, it will
be able to conduct its operations on a profitable basis.

     In the  event  that  the  Company  acquires  the  marketing  rights  to the
electronic tire valve cap, AUT may need to raise  additional  capital to market,
promote and sell the electronic tire valve caps. Such additional  capital may be
raised  through  public or private  financing  as well as  borrowings  and other
sources.  There can be no assurance that additional funding will be available on
favorable  terms,  if at all. If adequate funds are not available,  AUT believes
that the officers and directors of the Company will contribute  funds to pay for
its expenses.

                                       -6-


<PAGE>



     AUT is not currently  conducting any research and  development  activities.
AUT does not anticipate  conducting any other such activities in the next twelve
months.  We do not  anticipate  that we will  purchase  or sell any  significant
equipment  in the next six to twelve  months  unless  we are able to obtain  the
rights to the electronic tire valve cap.

     AUT does not anticipate any significant changes in the number of employees.
The  loss of key  employees  could  have a  material  adverse  effect  upon  the
operations of AUT.

     Forward  Looking  Statements  - This Form 10-KSB  contains  forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995.  Such  forward-looking  statements  made by AUT involve  known and unknown
risks,  uncertainties  and other  factors  which may cause the  actual  results,
performance or  achievements  of AUT 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; the ability of AUT to
sustain, manage or forecast its growth; the of 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.  AUT's management disclaims any obligation to
forward-looking  statements  contained  herein to  reflect  any  change in AUT's
expectation   with  regard   thereto  or  any  change  in  events,   conditions,
circumstances or assumptions underlying such statements.


































                                       -7-


<PAGE>

<TABLE>
<CAPTION>

Item 7.  Financial Statements
<S>                                                                                                              <C>
Independent Auditors' Report......................................................................................8

Balance Sheets as of December 31, 2000 and 1999...................................................................9

Statements of Operations for the year ended December 31, 2000 and for the period
   January 8, 1999 (inception) through December 31, 1999.........................................................10

Statements of Stockholders' Equity (Deficit) for the year ended December 31, 2000 and
   for the period January 8, 1999 (inception) through December 31, 1999..........................................11

Statements of Cash Flows for the year ended December 31, 2000 and for the period
   January 8, 1999 ( inception) through December 31, 1999........................................................12

Notes to Financial Statements ..............................................................................13 - 17

</TABLE>



<PAGE>












                          Independent Auditors' Report
                          ----------------------------


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, 2000 and 1999,  and the
related statements of operations,  stockholders' equity (deficit) and cash flows
for the  year  ended  December  31,  2000 and for the  period  January  8,  1999
(inception)  through  December  31, 1999.  These  financial  statements  are the
responsibility of the Company's management.  Our responsibility is to express an
opinion on the financial statements based on our audits.

     We conducted  our audits in accordance  with  generally  accepted  auditing
standards. Those standards require that we plan and perform the audits to obtain
reasonable assurance about whether the financial statements are free of material
misstatement.  An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements.  An audit also includes
assessing the  accounting  principles  used and  significant  estimates  made by
management,  as well as evaluating the overall financial statement presentation.
We believe that our 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,  2000 and 1999,  and the results of its
operations  and its cash flows for the year ended  December 31, 2000 and for the
period January 8, 1999 (inception)  through December 31, 1999 in conformity with
generally accepted accounting principles.

     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 is a start up company which has experienced significant
losses  since  inception  with no  revenues.  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
January 11,  2001



                                       -8-


<PAGE>


                       AVIATION UPGRADE TECHNOLOGIES, INC.

                                 BALANCE SHEETS


                                     ASSETS
<TABLE>
<CAPTION>

                                                                                            December 31,
                                                                                       2000                1999
                                                                                 ----------------    ----------
<S>                                                                             <C>                  <C>
CURRENT ASSETS
   Cash                                                                          $       242,967     $             0
   Stock subscriptions receivable                                                         43,000                   0
   Prepaid expenses                                                                       10,000     $             0
                                                                                 ---------------     ---------------

     Total current assets                                                                295,967                   0

OTHER ASSETS                                                                                   0                   0
                                                                                 ---------------     ---------------

                                                                                 $       295,967     $             0
                                                                                 ===============     ===============

                 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

CURRENT LIABILITIES:
   Accounts payable                                                              $         3,739     $             0
   Due to related party                                                                    5,287              54,509
   Accrued payroll taxes                                                                  50,105                   0
                                                                                 ---------------     ---------------

     Total current liabilities                                                            59,131              54,509
                                                                                 ---------------     ---------------

COMMITMENTS AND CONTINGENCIES

STOCKHOLDERS' EQUITY (DEFICIT)
   Common stock, $0.001 par value; 100,000,000 shares authorized; 10,616,500 and
     10,000,000 shares issued and outstanding at
     December 31, 2000 and 1999, respectively                                             10,617              10,000
   Common stock subscribed, $.001 par value; 43,000 and 75,000
     shares at December 31, 2000 and, 1999, respectively                                      43                  75
   Additional paid-in capital                                                            617,340              64,925
   Accumulated deficit                                                                  (391,164)           (129,509)
                                                                                 ---------------     ---------------

     Total stockholders' equity (deficit)                                                236,836             (54,509)
                                                                                 ---------------     ---------------

                                                                                 $       295,967     $             0
                                                                                 ===============     ===============


</TABLE>










            See the accompanying notes to these financial statements
                                       -9-


<PAGE>


                       AVIATION UPGRADE TECHNOLOGIES, INC.

                            STATEMENTS OF OPERATIONS


<TABLE>
<CAPTION>


                                                                          January 8, 1999
                                                                             (Inception)
                                                         Year Ended            Through
                                                        December 31,        December 31,
                                                            2000                1999
                                                      ----------------    ----------------
<S>                                                   <C>                 <C>
REVENUES                                              $              0    $              0

COST OF SALES                                                        0                   0
                                                      ----------------    ----------------

GROSS PROFIT (LOSS)                                                  0                   0
                                                      ----------------    ----------------

OPERATING EXPENSES
   General and  administrative
   ($18,000  of rent was paid to a
   related  party  for 2000 and 1999)                          253,148             125,674
                                                      ----------------    ----------------

LOSS FROM OPERATIONS                                          (253,148)           (125,674)
                                                      ----------------    ----------------

OTHER INCOME (EXPENSE)
   Interest expense                                             (8,507)             (3,835)
                                                      ----------------    ----------------

NET LOSS                                              $       (261,655)   $       (129,509)
                                                      ================    ================

BASIC AND DILUTED LOSS PER COMMON SHARE               $         (0.03)    $          (0.01)
                                                      ===============     ================

WEIGHTED AVERAGE COMMON SHARES OUTSTANDING                  10,003,604           9,943,978
                                                      ================    ================

</TABLE>






















            See the accompanying notes to these financial statements
                                      -10-


<PAGE>


                       AVIATION UPGRADE TECHNOLOGIES, INC.

                  STATEMENTS OF STOCKHOLDERS' EQUITY (DEFICIT)
             FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD
              JANUARY 8, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999


<TABLE>
<CAPTION>


                                               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, January 8, 1999 (inception)              0     $       0            0    $     0     $       0     $      0       $      0

Common stock issued to founder           10,000,000        10,000            0          0       (10,000)           0              0
Common stock subscribed for $1.00 per
  share                                           0             0       75,000         75        74,925            0         75,000
Net loss                                          0             0            0          0             0     (129,509)      (129,509)
                                        -----------   -----------   -----------  ----------    ---------    ----------   -----------

Balance, December 31, 1999               10,000,000        10,000       75,000         75        64,925     (129,509)       (54,509)

Common stock issued for $1.00 per
  share                                     468,000           468      (75,000)       (75)      392,607            0        393,000
Common stock subscribed for $1.00 per
  share                                           0             0       43,000         43        42,957            0         43,000
Common stock issued for services            148,500           149            0          0       116,851            0        117,000
Net loss                                          0             0            0          0             0     (261,655)      (261,655)
                                        -----------   -----------   -----------  ---------    ---------    ----------     ----------

Balance, December 31, 2000               10,616,500   $    10,617       43,000    $    43     $ 617,340   $ (391,164)      $ 236,836
                                       ============   ===========   ===========  =========    =========   ===========     ==========


</TABLE>













            See the accompanying notes to these financial statements
                                      -11-


<PAGE>



                       AVIATION UPGRADE TECHNOLOGIES, INC.

                            STATEMENTS OF CASH FLOWS

<TABLE>
<CAPTION>


                                                                                                     January 8, 1999
                                                                                                        (Inception)
                                                                                    Year Ended            Through
                                                                                   December 31,        December 31,
                                                                                       2000                1999
                                                                                 ----------------    ----------------
<S>                                                                           <C>                     <C>
CASH FLOWS FROM OPERATING ACTIVITIES
   Net loss                                                                      $       (261,655)   $       (129,509)
   Adjustments to reconcile net loss to net cash used in operating activities
     Common stock issued for services                                                     117,000                   0
     Changes in operating assets and liabilities
       Prepaid expenses                                                                   (10,000)                  0
       Accounts payable                                                                     3,739                   0
       Due to related party                                                               (49,222)             54,509
       Accrued payroll and related expenses                                                50,105                   0
                                                                                 ----------------    ----------------

         Net cash used in operating activities                                           (150,033)            (75,000)
                                                                                 ----------------    ----------------

CASH FLOWS FROM FINANCING ACTIVITIES
   Proceeds from issuance of common stock                                                 393,000                   0
   Common stock subscribed                                                                      0              75,000
                                                                                 ----------------    ----------------

         Net cash provided by financing activities                                        393,000              75,000
                                                                                 ----------------    ----------------

NET CHANGE IN CASH                                                                        242,967                   0

CASH, beginning of period                                                                       0                   0
                                                                                 ----------------    ----------------

CASH, end of period                                                              $        242,967    $              0
                                                                                 ================    ================


SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
   Cash paid during the period for interest                                      $          8,507    $          3,835
   Cash paid during the period for taxes                                         $              0    $              0

</TABLE>

SUPPLEMENTAL SCHEDULE OF NON-CASH INVESTING AND FINANCING ACTIVITIES

     During  the  year  ended  December  31,  2000,   the  Company   recorded  a
subscription receivable in the amount of $43,000 relating to the subscription of
43,000 shares of common stock.

     During the year ended  December 31,  2000,  the Company  recorded  costs of
$30,500 in equity relating to services for raising capital.







            See the accompanying notes to these financial statements
                                      -12-


<PAGE>



                       AVIATION UPGRADE TECHNOLOGIES, INC.

                          NOTES TO FINANCIAL STATEMENTS

             FOR THE YEAR ENDED DECEMBER 31, 2000 AND FOR THE PERIOD
              JANUARY 8, 1999 (INCEPTION) THROUGH DECEMBER 31, 1999





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.  The primary
purpose  for the Company was to  develop,  market and install  modifications  to
aircraft,  such as the Boeing 727, which were designed to improve and extend the
economic  life of these  aircraft by bringing them into  compliance  with strict
noise and emission control levels as they became mandatory in the years ahead.

     In  mid-1999,  however,  after  months  of  negotiations  with a number  of
aircraft  engine  manufacturers,  for the purchase of new engines,  each company
withdrew at the last minute from  executing a final  contract.  AUT believes the
withdrawals  were the  result of  pressure  from a major  aircraft  manufacturer
fearing  a  reduction  in the sale of new  aircraft  if the  lives  of  existing
aircraft  were  significantly  increased  as proposed by AUT. AUT has retained a
prominent  antitrust  law firm on a  contingency  basis and on June 30, 2000 AUT
filed an antitrust  lawsuit  against  these  companies,  including  the aircraft
manufacturer (see Note 7).

     In its efforts to continue  business  development,  AUT  evaluated  several
businesses  for  purchase  during the latter half of 1999 and  throughout  2000,
including  an  aircraft  maintenance  company and an  aircraft  leasing  company
specializing in cargo aircraft, none of which came to fruition. AUT is currently
negotiating  with its founder and majority  stockholder for the marketing rights
for an electronic tire valve cap for airplanes and/or automobiles that blinks if
the tire pressure falls below an initially calibrated level.

     Going Concern - AUT hopes to obtain revenues from future product sales, but
there is no  commitment  by any person for purchase of the  Company's  potential
product.  In the absence of significant sales and profits,  the Company may 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.

     Equipment - During the period from  inception  to December  31,  2000,  AUT
purchased an insignificant  amount of equipment.  The Company elected to expense
these purchases immediately.

     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.






                                      -13-


<PAGE>


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

     Basic and Diluted  Loss Per Share - The Company  has adopted  Statement  of
Financial  Accounting Standards No. 128 "Earnings Per Share" ("SFAS 128"). 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  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  generally  accepted  accounting  principles  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.

     Risks  and  Uncertainties  - AUT  is a  start  up  company  subject  to the
substantial  business  risks  and  uncertainties  inherent  to such  an  entity,
including the potential risk of business failure.

     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.

     Start Up  Activities  - The Company has adopted  Statement  of Position No.
98-5  ("SOP  98-5"),  "Reporting  the Costs of  Start-Up  Activities."  SOP 98-5
requires  that all  non-governmental  entities  expense  the  costs of  start-up
activities, including organization costs as those costs are incurred.


NOTE 2 - INCOME TAXES

     No provisions for income taxes for the year ended December 31, 2000 and for
the period January 8, 1999  (inception)  through  December 31, 1999 is required,
except for minimum state taxes, since the Company incurred taxable losses during
these periods.

     As of December 31, 2000 and 1999 the Company's  only deferred tax item were
capitalized  start-up costs of approximately  $262,000 and $130,000.  Due to the
Company's  lack of operations,  no deferred tax benefit has been  recognized for
this deferred tax asset.






                                      -14-


<PAGE>


NOTE 3 - COMMITMENTS

     Operating Lease - AUT has no operating  leases.  The Company's  founder and
majority stockholder provides  approximately 400 square feet of office space for
its use through his privately held marketing company.

     Rent  expense was $18,000 and $18,000 for the year ended  December 31, 2000
and the period from  January 8, 1999 (date of  inception)  to December 31, 1999,
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 generally  accepted  accounting  principles 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.


NOTE 4 - WARRANTS

     During 2000 and 1999,  the Company  issued  436,000 and 20,000  warrants in
connection  with the sale of its common stock to  investors,  respectively.  For
each share of stock sold at $1.00,  a warrant was issued for the  purchase of an
additional  share of common stock at $0.10.  These  warrants  expire three years
from the date of issuance.

     The  following  represents  a summary  of the  warrants  outstanding  as of
December 31, 2000 and 1999:

<TABLE>
<CAPTION>

                                                                 2000                               1999
                                                   -------------------------------    ------------------------------
                                                                         Wtd Avg                           Wtd Avg
                                                       Shares           Ex Price          Shares          Ex Price
         <S>                                           <C>           <C>                   <C>        <C>
         Outstanding, beginning of period                  20,000    $        0.10                 0   $           0

         Granted                                          436,000             0.10            20,000            0.10
         Expired/forfeited                                      0                0                 0               0
                                                   --------------    -------------    --------------   -------------

         Outstanding, end of period                       456,000    $        0.10            20,000   $        0.10
                                                   ==============    =============    ==============   =============

         Weighted average fair value of warrants granted             $        0.10
                                                                     =============
</TABLE>

     The  outstanding  warrants  at  December  31, 2000 and 1999 are all held by
stockholders.









                                      -15-


<PAGE>


NOTE 5 - STOCKHOLDERS' EQUITY (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.

     All 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.

     In April 1999,  the  Company  received  $75,000 for the  purchase of common
stock at $1.00 per share.  As of December  31,  2000,  none of these shares have
been issued and the stock is considered subscribed.

     During the year ended December 31, 2000, AUT conducted a Regulation D, Rule
506 Offering  ("Rule 506 Offering") of the common stock in the United States and
a  Regulation  S  offering  of common  stock  overseas.  As part of the Rule 506
Offering,  the Company  issued 40,000 shares of common stock for aggregate  cash
consideration  of  $40,000.  As part of the  Regulation  S offering , AUT issued
396,000 shares of common stock for aggregate cash consideration of $396,000.


NOTE 6 - LOSS PER SHARE

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

<TABLE>
<CAPTION>

                                                                                   December 31,        December 31,
                                                                                       2000                1999
                                                                                 ----------------    ----------------
         <S>                                                                    <C>                  <C>
         Numerator for basic and diluted loss per share
           Net loss                                                              $       (261,655)   $       (129,509)
                                                                                 ================    ================

         Denominator for basic and diluted loss per share
           Weighted average shares                                                     10,003,604           9,943,978
                                                                                 ================    ================

         Basic and diluted loss per share
           Net loss                                                              $         (0.03)    $          (0.01)
                                                                                 ================     ================

</TABLE>






                                      -16-


<PAGE>


NOTE 7 - LEGAL MATTERS

     On June 30, 2000, AUT filed a $2.5 billion  antitrust lawsuit against third
party  suppliers with whom it had negotiated  with for the upgrade of Boeing 727
aircraft  for  failure  to execute a final  contract  and  against  an  aircraft
manufacturer  who AUT believes  exerted pressure on the suppliers not to execute
the final contract. The defendants filed a motion for dismal of charges but were
denied on all counts.  At this time,  the lawsuit is in the discovery  phase and
any possible outcome cannot be predicted.


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, including
400 square feet of office space,  through his privately held marketing  company.
All amounts  advanced to AUT are reflected in due to related party and amount to
$5,287 and $54,509 as of December 31, 2000 and 1999, respectively.







































                                      -17-


<PAGE>


Item  8.  Changes  in and  Disagreements  with  Accountants  on  Accounting  and
Financial Disclosures

     On June 15, 2000,  AUT decided  that Barry L.  Friedman,  Certified  Public
Accountant would no longer be retained as the Company's  independent  accountant
for the  fiscal  years  ended  December  31,  2000 and  1999.  Accordingly,  the
client-independent  accountant  relationship was terminated as of that date. Mr.
Friedman's  report on the  Company's  financial  statements  for the period from
inception  to July 31, 1999 did not contain any adverse  opinion or a disclaimer
of opinion, or was not qualified,  but contained an explanatory  paragraph as to
the Company's ability to continue as a going concern.

     On December 30, 2000, a new independent  accounting firm,  Lesley,  Thomas,
Schwarz  &  Postma,  Inc.,  Newport  Beach,  California,  was  engaged  as AUT's
independent  accountants.  From the  Company's  inception  to July 31,  1999 and
subsequent interim periods, the Company did not consult Lesley,  Thomas, Schwarz
& Postma, Inc., regarding (i) either the application of accounting principles to
a specified  transaction  or the type of audit opinion that might be rendered on
the Company's financial statements, or (ii) any matter that was the subject of a
disagreement or was a reportable event.


PART III

Item 9.   Directors and Executive Officers of the Registrant

     The executive  officers and  directors of AUT, the positions  held by them,
and their ages as of January 11, 2001 are as follows:

       Name                     Age                       Position
--------------------------    --------      ------------------------------------
Torbjorn B. Lundqvist            48         Chairman and Chief Executive Officer
Dick G. Lindholm                 50         Director
William S. Rhodes                50         Director


     Torbjorn B. Lundqvist - Mr. Lundqvist has been the Chief Executive  Officer
and Chairman of the Company's Board of Directors since the Company's  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/President of Minitec  Marketing,  Inc. which is an import/export
firm  dedicated to finding  buyers/sellers  for a wide range of products.  Among
other things,  Minitec invented,  patented and manufactured a Power Take Out for
4-wheel  drive GM vehicles.  The product was developed to suit a niche market in
Finland.  Since 1989 he has also been  Owner/President of Minitec Motors,  Inc.,
USA, a car  dealership  specializing  in exporting  cars to niche  markets.  Mr.
Lundqvist is married with two children and resides in Orange County, California.

     Dick Lindholm - Mr.  Lindholm has been the Vice President and a director of
the Company since December 1999. Mr. Lindholm is known in the aircraft  industry
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  8000  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 either  Director  or  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,  the world's  leading
helicopter  company.  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,  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.

                                      -18-


<PAGE>



     William S. Rhodes - Mr. Rhodes has been the President and a director of the
Company  since August 2000.  Mr.  Rhodes is well known 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. Mr. Rhodes has
been involved in the day to day management in DOD 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, Dynair, and Avtel Services. 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.

     The Company's success is principally  dependent upon its current management
personnel  for  the  operation  of its  business.  In  particular,  Torbjorn  B.
Lundqvist, its founder and Chief Executive Officer, has played a crucial role in
the  development  and management of AUT.  There is no assurance that  additional
managerial assistance will not be required. If the Company loses the services of
its  executive  officer or one or more  directors  or its ability to attract and
retain such personnel, the business,  financial condition, results of operations
and cash flows will be materially and adversely affected.

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.

     AUT  believes  that  during  1999 and 2000 no Section  16(a)  filings  were
required.


























                                      -19-


<PAGE>


Item 10.  Executive Compensation And Other Information

     Cash  Compensation  of Executive  Officers - The following table sets forth
the total  compensation  earned by the Chief Executive Officer and Directors per
annum since inception.

<TABLE>
<CAPTION>

                                        Annual Compensation                           Long-Term Compensation
                      ------------------------------------------------------   -------------------------------------

                                                                                                 Common Shares
                                                                 Other           Restricted    Underlying Options
                                                 Annual          Awards         Stock Granted       Granted             All Other
  Name and Position     Year       Salary         Bonus       Compensation       (# Shares)        (# Shares)         Compensation
-------------------- ---------- --------------- ---------- -----------------   ---------------- ------------------ -----------------

<S>                     <C>        <C>              <C>            <C>               <C>               <C>                 <C>
Torbjorn B.             2000       $81,667         -0-            -0-               -0-               -0-                 -0-
Lundqvist, Chairman     1999        $-0-           -0-            -0-            10,000,000           -0-                 -0-
and CEO

Dick G. Lindholm,       2000         -0-           -0-            -0-              35,000             -0-                 -0-
Director                1999         -0-           -0-            -0-               -0-               -0-                 -0-

William S. Rhodes,      2000         -0-           -0-            -0-              10,000             -0-                 -0-
Director (2)            1999         -0-           -0-            -0-               -0-               -0-                 -0-

Darle K. Ford,          2000         -0-           -0-            -0-              3,000              -0-                 -0-
Former Director (1)     1999         -0-           -0-            -0-               -0-               -0-                 -0-

</TABLE>



      1.       Mr. Ford resigned as Director in July, 2000.
      2.       Shares were issued in the name of his spouse, Lyn Rhodes.


     Director   Compensation   -  Board   members  are  serving   without   cash
compensation.  During 2000,  directors received shares of AUT's common stock for
their services to the Company. 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  Agreements  - 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 generally  accepted  accounting  principles 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.











                                      -20-


<PAGE>



     Indemnification of Directors - Insofar as  indemnification  for liabilities
arising under the  Securities  Act may be permitted to  directors,  officers and
controlling persons of the Company pursuant to the provisions in its Articles of
Incorporation,  78 et seq.  of the Nevada  Code,  the  Bylaws of the  Company or
otherwise,  AUT has been  advised  that in the  opinion  of the  Securities  and
Exchange  Commission (the "Commission")  such  indemnification is against public
policy as expressed in the Act, and is, therefore,  unenforceable.  In the event
that a claim  for  indemnification  against  such  liabilities  (other  than the
payment by the  Company of expenses  incurred or paid by a director,  officer or
controlling person of the Company in the successful defense of any action,  suit
or proceeding) is asserted by such  director,  officer or controlling  person in
connection with the securities being registered, the Company will, unless in the
opinion of counsel the matter has been settled by controlling precedent,  submit
to a court of appropriate jurisdiction the question whether such indemnification
by it is against  public policy as expressed in the  Securities  Act and will be
governed by the final adjudication of such issue.


Item 11.  Security Ownership of Certain Beneficial Owners and Management

     The following table sets forth certain information regarding the beneficial
ownership  of the  shares of common  stock as of  January  11,  2001 by (i) each
person who is known by the Company to be the beneficial  owner of more than five
percent (5%) of the issued and outstanding  shares of common stock, (ii) each of
the  Company's  directors  and  executive  officers and (iii) all  directors and
executive officers as a group. Except as otherwise  indicated,  each stockholder
listed  below has sole voting  power and  investment  power with  respect to the
shares beneficially owned by such person.

                                            Number                Percentage
  Name and Address *                       Of Shares                 Owned
---------------------------              -----------              ----------
Torbjorn B. Lundqvist                     10,000,000                 93.8%
Dick G. Lindholm                              35,000                  0.3%
William S. Rhodes                             10,000                  0.1%
All Directors and Officers                10,045,000                 94.2%
as a group (3 persons)

*  Address is 24040 Camino del Avion, #A303, Monarch Beach, CA  92629


Item 12.  Certain Relationships and Related Transactions

     AUT's founder and majority shareholder provides substantially all the
assets used by the Company, including its 400 square feet of office space,
through his privately held marketing company. AUT has reimbursed this entity
$1,500 per month for the use of this space.

     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.

     AUT is currently  negotiating with its founder and majority  stockholder to
license the marketing rights for a new invention.








                                      -21-


<PAGE>



Item 13.  Exhibits, Financial Statement Schedules and Reports on Form 8-K



(A) The following financial statements are included in Part II, Item 7.

<TABLE>

                                                                                                               PAGE
<S>                                                                                                              <C>
Independent Auditors' Report......................................................................................8

Balance Sheets as of December 31, 2000 and 1999...................................................................9

Statements of Operations for the year ended December 31, 2000 and for the period
   January 8, 1999 (inception) through December 31, 1999.........................................................10

Statements of Stockholders' Equity (Deficit) for the year ended December 31, 2000 and
   for the period January 8, 1999 (inception) through December 31, 1999..........................................11

Statements of Cash Flows for the year ended December 31, 2000 and for the period
   January 8, 1999 ( inception) through December 31, 1999........................................................12

Notes to Financial Statements ..............................................................................13 - 17

</TABLE>


(A3).....List of Exhibits Filed as Part of the Report

Exhibit No.
3.1            Certificate of Incorporation of the Company*
3.2            Bylaws of the Company*
10.1           Employment Agreement

     *  Previously  filed on  December 2, 1999,  as exhibit to the  Registration
Statement on Form 10-SB.






















                                      -22-


<PAGE>



                                   SIGNATURES

     In accordance  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. Lunqvist
                                   ---------------------------------------------
                                         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 and Chief Executive       March 23, 2001
Torbjorn B. Lundqvist          Officer (principal executive
                               officer)

/s/  Dick G. Lindholm          Vice President, Director           March 23, 2001
Dick G. Lindholm

/s/    William S. Rhodes       President, Director                March 23, 2001
William S. Rhodes

















                                       -23