FORM 10-KSB



SECURITIES AND EXCHANGE COMMISSION



Washington, D.C. 20549



[  x  ]        ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES

EXCHANGE ACT 0F 1934



For the fiscal year ended  November 30, 2004



OR



[     ]          TRANSITION REPORT PURSUANT TO SECTION 13  OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the transition period from _____________________ to _____________________



Commission file number 0-26909



Budgethotels Network, Inc.

(Exact name of registrant as specified in its charter)



Nevada                                                                                                    91-0179013

______________________________________________________________________________

State or other jurisdiction of                                                                                (IRS Employer

incorporation or organization                                                                            Identification No.)





1260 Hornby Street

Vancouver, British Columbia Canada V6Z 1W2



(Address of principal executive offices, including zip code)



(604) 669-7827



Registrants telephone number, including area code





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

None



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

Common Stock



Name of Exchange on which registered:

OTC







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



YES  [  x  ]               NO  [     ]



Check if no disclosure of delinquent filers pursuant to Item 405 of Regulation S-B is contained herein, and no disclosure will be contained, to the best 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.  [     ]



Issuers revenues for the most recent fiscal year.



November 30, 2004 - $484,427



The aggregate market value of the Common Stock held by non-affiliates is as follows:  22,911,722 shares at $0.05 for a total of $1,145,586.



Issuers involved in Bankruptcy Proceedings during the past Five Years.

Not Applicable.



State the number of shares outstanding of each of the Issuers classes of common equity, as of the latest practicable date: November 30, 2004 28,911,722 shares of Common Stock.



Documents Incorporated by Reference:



1.        Form 10-QSB Registration Statement, and all amendments thereto, which was filed with the Securities and Exchange Commission and all exhibits thereto.



2.        All reports filed with the Securities and Exchange Commission after August 2, 1999.





---



ITEM 1.     BUSINESS.



History



Budgethotels Network, Inc. (formerly budgethotels.com, Inc.) (the Company), was incorporated under the laws of the State of Nevada on November 5, 1997, as Info Center International Inc. On November 30, 1997, the Company acquired all of the issued and outstanding shares of common stock of Info Center, Inc. (ICI), a corporation incorporated under the laws of the State of Washington on November 6, 1984. ICI thereafter became a wholly owned subsidiary corporation of the Company. On February 11, 1999, the Company changed its name to budgethotels.com, Inc. Info Center, Inc. (ICI) is  a wholly owned subsidiary of the Company. W.J. Marshall Management Inc. owned all of the shares of ICI and exchanged those shares for 8,000,000 shares of the Companys common stock in 1997. W.J. Marshal Management Inc. is a corporation owned and controlled by William J. Marshall, the Companys past President. W.J. Marshall Management Inc. is a corporation formed to hold title to certain investments of Mr. Marshall. W.J. Marshall Management Inc. is not a subsidiary corporation of the Company.



Operations



The Companys business operations consists of (1) display board advertising, and (2) an Internet online travel reservation system through its website, www.budgethotels.com. During the year ended November 30, 2003, the Company elected to discontinue its internet kiosks operations



Display Board Advertising



The Companys primary business is to install and maintain illuminated information boards in transportation terminals, primarily bus and rail stations. Each board is approximately 4 feet x 5 feet and is made up of approximately 16 to 25 individual windows, which are illuminated. These windows are available for advertisements.



Advertisements generally promote travel-related services located near the particular transportation terminal; such as hotels, rental cars and restaurants. Some advertisers, however, promote such services in destination cities. Each board is equipped with a free of charge direct telephone line to the particular advertiser.



Advertising



Advertising rates for the spaces vary, depending upon the location of the advertisement on the board. Assuming that each board is fully occupied by an advertiser for a twelve-month period, the board could generate revenues of up to approximately $60,000.  This revenue is not indicative of the average board. It represents the high end of what a board can be rented out for based on the location of the board.  Additionally, there is no assurance that a board will be fully occupied during any twelve-month period. Currently, the boards are approximately 25% utilized. Each board on average over the last four years has generated approximately $9,000 of revenue per year.



---



Costs of Display Board Adverting



The cost of constructing and installing each board is approximately $5,000. Over the life of the boards, the operating costs (which are included in general and administrative costs) can significantly add to the total cost of each board.



Marketing



The Company currently operates 78 boards throughout the United States and Canada. The boards range geographically from Vancouver, British Columbia, Canada to Miami, Florida. Due to the Companys financial condition and limited personnel, the Company has primarily marketed advertising space on its various boards by telephone contact with potential advertisers. The Company recognizes, however, that the most effective method of selling its products is through direct and personal contact with potential customers. Accordingly, the Company originally intended to establish a network of area representatives who would sell the Companys product on a commission basis. This plan, formulated at November 30, 2002, and held in abeyance for approximately one year, was to be revised and to concentrate on direct sales rather than telemarketing.  The plan has been discontinued.



The Company intends to concentrate its marketing efforts on filling the vacant spaces on existing boards, filling spaces on any additional boards installed and targeting strategic hotels to act as a wholesaler of rooms.



License Agreement with Greyhound Lines, Inc. (Greyhound)



On October 2, 1997, a License Agreement (the License Agreement) was executed between the Company and Greyhound Lines, Inc., a Delaware corporation. The License Agreement grants to the Company the sole right to install, operate and maintain wall-unit advertising displays with direct dial phones in Greyhounds leased bus terminal facilities. The License Agreement is effective beginning on February 15, 1998, and will continue in full force until February 15, 2003 (the Initial Term). After the Initial Term, the License agreement may be renewable for two additional five-year terms. The License Agreement has been renewed for an additional five years, expiring on February 15, 2008.



The License Agreement authorizes the Company to install at its sole cost approximately 20 square feet in area by 1 foot depth wall-unit with an illuminated advertising display board with map and direct dial phone in each of the Greyhound facilities designated in the License Agreement. The Company must also service, repair or replace any part of the display boards within 48 hours after receipt of notice.



Pursuant to the terms of the License Agreement, the Company must pay Greyhound a commission of $367.50 per month for display boards located in the following areas: (1) Chicago, Illinois; (2) Los Angeles, California; (3) Miami, Florida; (4) Orlando, Florida; and (5) Washington, D.C. For display boards located in: (1) Las Vegas, Nevada; (2) Nashville, Tennessee; (3) San Diego, California; and (4) Seattle, Washington, the Company is obligated to pay Greyhound a commission of $157.50 per month. The Company will pay Greyhound a commission of $50.00 per month for display boards located in thirty-six additional cities. The commission payments will increase 4% for each renewal term of the License Agreement.



---



Pursuant to the terms of the License Agreement, the Company is required to obtain and maintain the following insurance policies:



1.   Commercial General Liability Insurance with combined single limits of not less than

$1,000,000 (naming Greyhound as an additional insured):



2.    Contingent Liability Insurance underwriting the indemnification, hold harmless, and

insurance provisions of the License Agreement with combined  single limits of not less than

$1,000,000 (naming Greyhound as an additional insured);



3.    Comprehensive Automobile Liability Insurance providing coverage for owned, non-owned,

hired, contracted, and leased vehicles of Info Center with combined single limits for injury or damage in any one accident of $500,000 (naming Greyhound as an additional insured); and



4.    Workers Compensation Insurance in the amounts required by applicable state laws

governing the Companys operations or evidence that such insurance is not required.



License Agreement with National Railroad Passenger Corporation (Amtrak)



Effective August 21, 2001, the Companys subsidiary, Info Center, Inc. negotiated a license to lease a portion of certain Amtrak owned and non owned railway properties for the purposes of providing an advertising display board with courtesy telephone.



The term of this agreement is five (5) years and is cancelable only for non compliance with the parameters of the contract, or non payment of license fees. The agreement concerns three (3) Amtrak owned and seven (7) non owned railroad stations in key United States cities. The agreement allows for additional locations for display advertising boards if agreed to by the parties.



Info Center, Inc. pays monthly a predetermined license fee ranging from $250 to $833 in year one, and increasing to $281 to $938 by year five. Additionally, Info Center, Inc. pays a royalty of five percent (5%) of all gross sales generated from each location.



All installation, maintenance and support costs are the responsibility of Info Center, Inc. Also, Info Center, Inc. is required to maintain a liability policy of $2,000,000 to protect Amtrak.



Installation of Additional Display Boards



The Company has also installed display boards for advertising by agreement with the New York Port Authority (2), New Jersey Transit Commission in Atlantic City, the Toronto Transit Commission, and Via Rail (Ottawa and Vancouver), and in the Amtrak rail station in Penn Station in New York, New York.



As at November 30, 2004, the Company operates 78 boards throughout the United States and 3 in Canada.



---



Internet Website  www.budgethotels.com



The Company owns the website www.budgethotels.com (budgethotels).



The Company takes hotel reservations on-line and obtains a commission from the respective hotel for each reservation. The Company receives a commission of 10% on each on-line reservation. As financial transaction security on the Internet improves, the Company anticipates that on-line reservations will increase. There is no assurance that the foregoing assumption will prove accurate.



On November 20, 2000, the Company entered into an Agreement with Pegasus Systems Inc. of Dallas, Texas under which approximately 37,000 hotels on the Pegasus system became accessible to visitors to the Companys website. The Company paid Pegasus Systems an initial $10,000 and paid an additional $2,500 per month unless 2,500 reservations for the month were booked through the Companys website. This agreement expired on November 30, 2003 and has not been replaced.



Competition



The Company competes with many other board providers and Internet travel services, most of whom have more financial resources than the company and there can be no assurance that, in the future, the Company will be able to compete successfully with other display board advertisers or Internet website advertisers. The Company is a small participant within the display board advertising arena and the Internet website arena. The Company competes with professional advertising agencies, television, radio and publications such as magazines and newspapers, all of which have more resources than the Company. The Company competes with other display board advertisers on the basis of price, availability of advertising space, size of space and the location of space. The Company competes with other Internet providers on the basis of price and the amount of space allocated to a particular client. The Company intends to market it services as discussed in Item 1. Description of Business  Marketing and does not believe that its methods of marketing will adversely affect its competitive position.



Government Regulation



The Company anticipates that its display board advertising will be subject to regulation by the representative local and state authorities, as well as federal authorities, with regard to the content of each display board. Further, the content of the display boards will also be regulated by the respective transportation (airport, bus, port or train) authorities. Advertisements subject to regulation may include socially objectionable advertisements relating to such matters as alcoholic beverages, tobacco products, drug or sex paraphernalia, striptease or topless establishments, adult book stores, nude modeling studios, escort services and massage parlors.



The Company believes that the lack of financial security on the Internet is hindering economic activity thereon. To ensure the security of transactions occurring over the Internet, U.S. federal regulations require that any computer software used within the United States contain a 128-bit encoding encryption, while any computer software exported to a foreign country contain a 40-bit encoding encryption. There is uncertainty as to whether the 128-bit encoding encryption required by the U.S. is sufficient security for transactions occurring over the Internet. Accordingly, there is a danger that any financial (credit card) transaction via the Internet will not be a secure transaction. Accordingly, risks such as the loss of data or loss of service on the Internet from technical failure or criminal acts are now being considered in the system specifications and in the security precautions in the development of the website www.budgethotels.com. There is no assurance that such security precautions will be successful.



Company Offices



The Companys headquarters are located at 1260 Hornby Street, Vancouver, British Columbia, Canada, V6Z 1W2 and its telephone number is (604) 669-7827.



Employees



The Company currently has no employees or consultants other than the President of Budgethotels Network Inc. and Info Center Inc.. Independent sales contractors are paid on a commission basis depending upon their duties. The Company intends to hire additional employees as working capital permits, and as required.



Risk Factors



1.           Going Concern. The Company has experienced operating losses and its ability to continue as a going concern in the future is dependent upon achieving profitability and/or securing sufficient additional capital at terms economically acceptable to the Company.



2.           Company with Limited History of Earnings. The Company has a limited operating history and is subject to all of the risks inherent in a developing business enterprise, including lack of cash flow and service acceptance.



3.           Development and Market Acceptance of Services. The Companys success and growth will depend in part upon the markets acceptance of, and the Companys ability to deliver and support, the Companys services.



4.           Dependence on Technology Suppliers. While the Company currently relies upon certain outside technology suppliers, the Company believes that there are numerous other outside technology suppliers that perform the same services. Accordingly, the Company believes that if current technology suppliers could not, or would not, furnish future services to the Company, the Company could obtain such services from other sources without interruption of its operations.



5.           Liquidity; Need for Additional Financing. The Company believes that it does not have the cash it needs for the next twelve months based upon its internally prepared budget and expansion plans. Further, the Companys cash requirements are not easily predictable and there is a possibility that its budget estimates will prove to be inaccurate. If the Company is unable to generate a positive cash flow, it will be required to curtail operations substantially and seek additional capital. There is no assurance that the Company will be able to obtain additional capital if required, or if capital is available, or can be obtained on terms favorable to the Company. The Company may suffer from a lack of liquidity in the future, which could impair its short-term marketing and sales efforts and adversely affect its results of operations.



6.           Competition. Most of the Companys competitors have substantially greater financial, technical and marketing resources than the Company. In addition, the Companys services compete indirectly with numerous other suppliers of web pages and search engines. As the market for the Companys services expands, the Company expects that additional competition will emerge and that existing competitors may commit more resources to those markets.



7.           Reliance upon Directors and Officer. The Company is primarily dependent, at the present, upon the personal efforts and abilities of its President and Director, William P. McLaws, who exercises complete control over the daily management of the Company.



8.           Issuance of Additional Shares:  21,088,278 shares of Common Stock, or 42.18% of the 50,000,000 authorized shares of common Stock of the Company, are not issued. The Board of Directors has the power to issue such shares, subject to shareholder approval, in some instances. Although the Company presently has no commitments, contracts or intentions to issue additional shares to other persons, other than is described in this registration statement, the Company may in the future attempt to issue shares to acquire products, equipment or properties, or for other corporate purposes. Any additional issuance by the Company from its authorized, but not issued shares, would have the effect of diluting the interest of existing shareholders.



9.           Indemnification of Officers and Directors for Securities Liabilities. The laws of the State of Nevada provide that the Company could indemnify any Director, Officer, agent and/or employee as to those liabilities, and on those terms and conditions, as are specified in the Corporation Act of the State of Nevada. Further, the Company may purchase and maintain insurance on behalf of such persons whether or not the corporation would have the power to indemnify such persons against the liability insured against. The foregoing could result in expenditures by the Company and prevent any recovery from such Officers, Directors, agents and employees for losses incurred by the Company as a result of their actions. Further, the Company has been advised that, in the opinion of the Securities and Exchange Commission, indemnification is against public policy as expressed in the Securities Act of 1933, as amended, and is, therefore, unenforceable.



10.         Cumulative Voting, Preemptive Rights and Control. There are no preemptive rights in connection with the Companys Common Stock. Shareholders may be further diluted in their percentage ownership of the Company in the event that additional shares are issued by the Company in the future. Cumulative voting in the election of Directors is not provided for. Accordingly, the holders of a majority of the shares of  Common Stock, present in person or by proxy, will be able to elect all of the Companys Board of Directors.



11.         No Dividends Anticipated. At the present time, the Company does not anticipate paying dividends, cash or otherwise, on its Common Stock in the foreseeable future. Future dividends will depend on earnings, if any, of the Company, its financial requirements and other factors.



ITEM 2.     DESCRIPTION OF PROPERTIES



The Company does not own any real or personal property.



The Companys registered office is located at 1260 Hornby Street, Vancouver, British Columbia, Canada, V6Z 1W3 and its telephone number is (604) 669-7827.



ITEM 3.     LEGAL PROCEEDINGS.



The Company is not a party to any pending or threatened litigation and to its knowledge, no action, suit or proceedings has bee threatened against it officers and directors.



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



The company has not held a shareholders meeting during the past year, therefore, no matters were submitted for a vote of shareholders.



ITEM 5.     MARKET FOR REGISTRANTS COMMON EQUITY AND RELATED

STOCLHOLDERS MATTERS



The Companys Common Stock is quoted on the Bulletin Board operated by the National Association of Securities Dealers, Inc. under the symbol BUDH. The Companys shares began trading in August 1998. The following table sets forth the high and low bid prices for the Common Stock for the quarters indicated, as reported by the Bloomberg Reporting Service. Such market quotations reflect inter-dealer prices, without retail mark-up, mark down or commissions and may not necessarily represent actual transactions.



|Fiscal Quarter | High Bid [1] | Low Bid [1]
|-------------- | ------------ | -----------
|2004           |              |            
|Fourth Quarter | $0.05        | $0.025     
|Third Quarter  | $0.05        | $0.025     
|Second Quarter | $0.10        | $0.04      
|First Quarter  | $0.12        | $0.06      
|               |              |            
|2003           |              |            
|Fourth Quarter | $0.08        | $0.03      
|Third Quarter  | $0.09        | $0.03      
|Second Quarter | $0.14        | $0.05      
|First Quarter  | $0.12        | $0.05      



[1]         These quotations reflect inter-dealer prices, without retail mark-up, mark-down or commissions and may not represent actual transactions.



As of November 30, 2004, the Company has identified 502 holders of record of its Common Stock.



The Company has not paid any dividends since its inception and does not anticipate paying dividends on its Common Stock in the foreseeable future.



ITEM 6.     MANAGEMENTS DISCUSSIONS AND ANAYSIS OF FINANCIAL

CONDITION AND RESULTS OF OPERATIONS



The following should be read in conjunction with the consolidated financial statements and the notes thereto:



OPERATIONS DURING THE FISCAL YEAR ENDED NOVEMBER 30, 2004.



The Company reports a net loss of $0.01 per share as compared to $0.02 per share in the prior year ended November 30, 2003. In dollar terms, the net loss decreased by $91,027, or 31.96% mainly due a decrease general and administrative expense, bad debts expense and a decrease in commission costs offset by a decrease in advertising revenues.



Sales for the year ended November 30, 2004 were $486,720, a decline of $126,482, or 20.63%, from the year ended November 30, 2003 due to a decrease of $77,403 in advertising revenues and a decrease of $49,079 in on-line bookings. The decrease is due to a reduction in commissioned sales personnel pending development of the Companys new electronic Info-Center boards, a marketing plan for the new boards and to a reduction in the number of current boards in day-to-day operations.



Commissions relating to the generation of advertising revenues decreased by $56,781 or 28.19%, mainly as a result of a reduction in the number of sales personnel.



The Companys general and administrative costs decreased by $20,140 or 3.85% as a result of a streamlining of the Companys operations, which included closing the operations and administrative office in Kelowna, British Columbia, Canada.



The Company recorded a gain of $19,475 as a result of the sale of the assets and liabilities of its discontinued internet kiosk operation and a gain of $2,176 as a result of the write-off of a lease payable.



Non-cash charges relating to the depreciation decreased by $33,156.



LIQUIDITY AND CAPITAL RESOURCES



The Company has a cash overdraft of $16,442 at November 30, 2004. Excluding items relating to the deferral of revenues and related commissions, the Company had a working capital deficiency of $59,754 as compared to a working capital deficiency of $100,028 at November 30, 2003.  The decrease in working capital deficiency compared to the previous year resulted primarily from a decrease of $28,929 in bank loans payable from bank loans of $47,630 to $18,701, a decrease in payroll taxes payable of $7,249, and a decrease in related party payables of $24,117. The Companys accumulative deficit at November 30, 2004 was $1,775,648 as compared to $1,581,938 at November 30, 2003.



---





ITEM 7.    AUDITIED CONSOLIDATED FINANCIAL STATEMENTS





BUDGETHOTELS NETWORK, INC.



CONSOLIDATED FINANCIAL STATEMENTS



November 30, 2004 and 2003



---



C O N T E N T S





Independent Auditors Report                                                                                                                       3



Consolidated Balance Sheet                                                                                                                          4



Consolidated Statements of Operations                                                                                                        6



Consolidated Statements of Stockholders Equity (Deficit)                                                                          7



Consolidated Statements of Cash Flows                                                                                                       8



Notes to the Consolidated Financial Statements                                                                                           9



---



HLB Cinnamon Jang Willoughby & Company



Chartered Accountants

A Partnership of Incorporated Professionals



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of Budgethotels Network, Inc.:



We have audited the consolidated balance sheet of Budgethotels Network, Inc. as at November 30, 2004 and the consolidated statements of operations, stockholders' deficiency and cash flows for the year ended November 30, 2004.  These consolidated financial statements are the responsibility of the companys management.  Our responsibility is to express an opinion on these consolidated financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States).  Those standards require that we plan and perform an audit to obtain reasonable assurance whether the financial statements are free of material misstatement.  An audit includes examining, on a test basis, evidence supporting the amounts and disclosure 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.

In our opinion, these consolidated financial statements present fairly, in all material respects, the financial position of the company as at November 30, 2004 and the results of its operations and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.

The accompanying financial statements have been prepared assuming that the company will continue as a going concern.  As discussed in Note 10 to the financial statements, the company has suffered recurring losses from operations and its total liabilities exceeds its total assets.  These items raise substantial doubt about the company's ability to continue as a going concern.  Management's plans in regard to these matters are also described in Note 10.  The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

The financial statements as at November 30, 2003 and for the year then ended were audited by another firm of chartered accountants who expressed an opinion without reservation on those statements in their report dated February 10, 2004.



Cinnamon Jang Willoughby & Company



Chartered Accountants

Burnaby, BC

February 23, 2005



MetroTower II - Suite 900 - 4720 Kingsway, Burnaby, BC Canada V5H 4N2.  Telephone: +1 604 435 4317  Fax: +1 604 435 4319.

HLB Cinnamon Jang Willoughby & Company is a member of HLB International.  A world-wide organization of accounting firms and business advisors.



---



BUDGETHOTELS NETWORK, INC.

Consolidated Balance Sheet

|ASSETS                                                                                            
|--------------------------------------------------------------------------------------------------
|                                                                                                  
|Current Assets                                                                                    
|Cash                                                                                              
|Accounts receivable                                                                               
|Prepaid commissions                                                                               
|Total Current Assets                                                                              
|                                                                                                  
|Property and Equipment (Net)                                                                      
|Total Assets                                                                                      
|                                                                                                  
|LIABILITIES AND STOCKHOLDERS DEFICIT                                                             
|                                                                                                  
|Current Liabilities                                                                               
|Accounts payable                                                                                  
|Bank overdraft                                                                                    
|Bank loans                                                                                        
|Payroll taxes payable                                                                             
|Lease payable  current portion                                                                   
|Related party payable                                                                             
|Unearned revenue                                                                                  
|Total Current Liabilities                                                                         
|Long Term Liabilities                                                                             
|Leases payable                                                                                    
|                                                                                                  
|Commitments and Contingencies  (Note 5)
Going Concern(Note 10)                                    
|Stockholders Deficiency                                                                          
|Preferred Stock; 1,000,000 shares authorized at
$0.01 par value                                   
|Issued and outstanding; Nil shares                                                                
|Common Stock; 50,000,000 shares authorized at
$0.001 par value                                    
|Issued and outstanding; 28,911,722 for November      30, 2004 and 21,486,722 for November 30, 2003
|Additional paid-in capital                                                                        
|Accumulated deficit                                                                               
|Total Stockholders Deficiency                                                                    
|Total Liabilities and Stockholders Deficiency                                                    
|                                                                                                  

Director:____________________                     Director:_________________________



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



---



BUDGETHOTELS NETWORK, INC.

Consolidated Statements of Operations







|                                              | For the Years Ended       
|--------------------------------------------- | --------------------------
|                                              | November 30, 2004         
|Revenue                                       |                           
|Sales                                         | $                  486,720
|Commission expense                            | 142,499                   
|Total Net Revenue                             | 344,221                   
|Expenses                                      |                           
|General and administrative expense            | 502,875                   
|Bad debts expense  net                       | 8,285                     
|Depreciation                                  | 48,422                    
|Impairment expense                            | --                        
|Total Expenses                                | 559,582                   
|Loss from Operations                          | (215,361)                 
|Other Expenses (Income)                       |                           
|Gain on sale of domain name                   | --                        
|Gain on write-off of lease payable            | (2,176)                   
|Gain on disposal of Internet 2U               | (19,475)                  
|Loss on disposition of debt                   | --                        
|Interest expense                              | --                        
|Total Other Expenses (Income)                 | (21,651)                  
|Loss before Discontinued Operations           | (193,710)                 
|Discontinued operations                       |                           
|Loss from discontinued operations             | --                        
|Total Loss from Discontinued Operations       | --                        
|Net Loss                                      | $              (193,710)  
|                                              |                           
|Basic Loss per Share                          |                           
|Continuing operations                         | $                   (0.01)
|Discontinued operations                       | -                         
|Total Loss per Share                          | $                   (0.01)
|                                              |                           
|Weighted Average Number of Shares Outstanding | 25,992,665                
|                                              |                           



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





---



BUDGETHOTELS NETWORK, INC.

Consolidated Statements of Stockholders Deficiency





|                                                                               |              | Additional    |              
|------------------------------------------------------------------------------ | ------------ | ------------- | -------------
|                                                                               | Common Stock | Paid in       | Accumulated  
|                                                                               | Shares       | Amount        | Capital      
|Balance, November 30, 2002                                                     | 15,895,281   | $      15,895 | $   1,089,365
|Common stock issued for fixed assets at $0.08 per share                        | 150,000      | 150           | 11,850       
|Common stock issued for             services at $0.10 per share                | 2,941,441    | 2,942         | 171,736      
|Common stock issued to              extinguish debt at $0.04 per         share | 2,500,000    | 2,500         | 97,500       
|Net loss for the year ended              November 30, 2003                     | --           | --            | --           
|Balance, November 30, 2003                                                     | 21,486,722   | 21,487        | 1,370,451    
|Common stock issued for             services at $0.075 per share               | 100,000      | 100           | 7,400        
|Common stock issued for             services at $0.02 per share                | 250,000      | 250           | 4,750        
|Common stock issued to              extinguish debt at $0.01 per         share | 1,000,000    | 1,000         | 9,000        
|Common stock issued for cash                                                   | 6,075,000    | 6,075         | 115,425      
|Net loss for the year ended            November 30, 2004                       | --           | --            | --           
|Balance, November 30, 2004                                                     | 28,911,722   | $     28,912  | $  1,507,026 
|                                                                               |              |               |              
|                                                                               |              |               |              



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



---



BUDGETHOTELS NETWORK, INC.

Consolidated Statements of Cash Flows



|                                                                                   | For the Years  ended        
|---------------------------------------------------------------------------------- | ----------------------------
|                                                                                   | November 30, 2004           
|Cash Flows from Operating Activities                                               |                             
|Net loss                                                                           | $                (193,710)  
|Adjustments to reconcile net loss to cash provided (used) by operating activities: |                             
|Depreciation                                                                       | 48,422                      
|Bad debts                                                                          | --                          
|Common stock issued for services                                                   | 12,500                      
|Common stock issued to extinguish debt                                             | 10,000                      
|Impairment loss on fixed assets                                                    | --                          
|Loss on disposition of debt                                                        | --                          
|Gain on sale of domain name                                                        | --                          
|Changed in assets and liabilities:                                                 |                             
|Decrease (increase) in accounts receivable                                         | (26,866)                    
|Decrease (increase) in assets held  for resale                                     | --                          
|Decrease (increase) in prepaid commissions                                         | 32,149                      
|Decrease (increase) in prepaids and other receivables                              | --                          
|Increase (decrease) in accounts receivable                                         | 22,258                      
|Increase (decrease) in accrued liabilities                                         | (7,250)                     
|Increase (decrease) in related party payables                                      | (24,118)                    
|Increase (decrease) in unearned revenue                                            | 4,320                       
|Net Cash Provided (Used) by Operating Activities                                   | (122,295)                   
|Cash Flows from Investing Activities                                               |                             
|Proceeds from sale of domain name                                                  | --                          
|Disposal of property and equipment                                                 | 5,799                       
|Net Cash Provided (Used) by Investing Activities                                   | 5,799                       
|Cash Flows from Financing Activities                                               |                             
|Proceeds from related parties                                                      | --                          
|Payment on note payable   related party                                           | --                          
|Payments on bank loan                                                              | (28,929)                    
|Payments on note payable                                                           | --                          
|Payments on leases payable                                                         | (8,373)                     
|Common stock issued for cash                                                       | 121,500                     
|Net Cash Provided (Used) by Financing Activities                                   | 84,198                      
|Net Increase (Decrease) in Cash                                                    | (32,298)                    
|Cash at Beginning of Year                                                          | 15,857                      
|Cash (Overdraft) at end of Year                                                    | $              (16,422)     
|                                                                                   |                             
|Supplemental Cash Flow Information                                                 |                             
|Cash Paid For:                                                                     |                             
|Interest                                                                           | $                         --
|Non-Cash Financing Activities:                                                     |                             
|Common stock issued for services                                                   | $                 12,500    
|Common stock issued for assets                                                     | --                          
|Common stock issued for extinguishment of debt                                     | 10,000                      

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



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 1 -    COMPANY BACKGROUND



The consolidated financial statements include those of Budgethotels Network, Inc. (BHI) (formerly known as budgethotels.com, inc.) and its wholly-owned subsidiaries, Info Center, Inc. (Info), R 403 Enterprises Ltd. (R 403) and, until November 30, 2003, Internet 2U.net, Inc. (Internet2U).  Collectively, they are referred to herein as the Company.



BHI was incorporated under the laws of the State of Nevada on November 5, 1997 as Info Center International, Inc.  BHI was incorporated for the purpose of acquiring Info.  In February 1999, the Company changed its name from Info Center International, Inc. to budgethotels.com, inc.  In August 2001, the Company changed its name from budgethotels.com, inc. to Budgethotels Network, Inc.  BHI maintains and operates an internet website for the purpose of making hotel reservations.



Info, a wholly-owned subsidiary, was formed under the laws of the State of Washington on November 6, 1984.  Info has been in the business of operating billboards, signboards and illuminated signs for the purpose of placing advertisements.



On November 30, 1997, the Company completed an Agreement and Plan of Share Exchange whereby BHI issued 8,000,000 shares of its common stock in exchange for all of the outstanding common stock of Info.   The share exchange was accounted for as a transfer under common control as WJ Marshall Management Inc. was the controlling shareholder of Info and BHI prior to the share exchange. Accordingly, there was no adjustment to the carrying value of the assets or liabilities of Info. BHI has been in the business of operating billboards for the purpose of placing advertisements.



R 403, a wholly-owned subsidiary, was incorporated under the laws of the Province of British Columbia, Canada on October 6, 1999.  R 403 was dormant until 2000.  R 403 was incorporated by the Company to manage and operate billboards, signboards and illuminated signs for the purpose of placing advertisements in Canada.



Internet2U, formerly a wholly-owned subsidiary, was incorporated under the State of Nevada on November 12, 1999.  Internet2U operates kiosk machines in bus terminals in which it provides the customer with internet access in the terminal.



The Company acquired Internet2U on April 26, 2001 and used the purchase method of accounting for the transaction. Since the purchase was from a related party (the President of the Company at the time), the assets acquired were recorded at the predecessors cost. The Company acquired fixed assets of $19,195 for a payment of $3,865 to the President, the assumption of the cash overdraft, and $10, for a total of $19,205. The excess purchase pricewas expensed.  The Company discontinued the operations of Internet 2 U in December 2003.



---





BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



A summary of the significant accounting policies consistently applied in the preparation of the accompanying consolidated financial statements follows:



a.  Basis of Presentation



The Companys consolidated financial statements are denominated in U.S. dollars.



b.  Property and Equipment



Property and equipment are recorded at cost.  Major additions and improvements are capitalized.  The cost and related accumulated depreciation of equipment retired or sold are removed from the accounts and any differences between the undepreciated amount and the proceeds from the sale are recorded as a gain or loss on sale of equipment.  Depreciation is computed using the straight-line method over the estimated useful lives as follows:



| | Description                                                                                                          | Useful Lives                                          | 
| | -------------------------------------------------------------------------------------------------------------------- | ----------------------------------------------------- | 
| | Advertising display boards
Office furniture and equipment
Computer software
Website
Computers
Leasehold Improvements | 7 years
7 years
3 years
3 years
3 years
Life of Lease | 



c.  Accounts Receivable



Accounts receivable are shown net of the allowance for doubtful accounts of $13,004 at November 30, 2004 (2003 - $Nil).



d.  Provision For Taxes



Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax assets are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



d.    Provision For Taxes (Continued)



Net deferred tax assets consist of the following components as of November 30, 2004 and 2003:

|                                                            | 2004                        | 2003                      
|----------------------------------------------------------- | --------------------------- | --------------------------
|Deferred tax assets:
NOL Carryover                          | $               357,580     | $              309,300    
|Deferred tax liabilities:
Depreciation

Valuation allowance | --

(357,580)               | (7,800)

(301,500)        
|Net deferred tax asset                                      | $                        -- | $                       --



The income tax provision differs from the amount of income tax determined by applying the U.S. federal income tax rate to pretax income from continuing operations for the years ended November 30, 2004 and 2003 due to the following:



|                                                                                | 2004                                | 2003                                   
|------------------------------------------------------------------------------- | ----------------------------------- | ---------------------------------------
|Book income
Stock for services/Options expense
Depreciation
Valuation allowance | $          (74,481)
8,483
--
65,998 | $         (107,506)
2,380
2,980
102,146
|                                                                                | $                    --             | $                     --               



At November 30, 2004, the Company had net operating loss carryforwards of approximately $940,578 that may be offset against future taxable income from the year 2004 through 2024.  No tax benefit has been reported in the November 30, 2004 consolidated financial statements since the potential tax benefit is offset by a valuation allowance of the same amount.



Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.  Should a change in ownership occur, net operating loss carryforwards may be limited as to use in future years.



e.  Principles of Consolidation



The consolidated financial statements include those of Budgethotels Network Inc. and its wholly-owned subsidiaries, Info Center, Inc and R403 Enterprises Ltd.



All material inter-company accounts and transactions have been eliminated.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



f.  Cash Equivalents



For the purposes of the Statement of Cash Flows, the Company considers all highly liquid investments with an original maturity of three months or less to be cash equivalents.



g.  Basic Loss Per Share



| | For the Year ended November 30, 2004
| | ------------------------------------
| | (Numerator)
Loss Amounts            
| | $             (193,710)             
| | For the Year ended November 30, 2003
| | (Numerator)
Loss Amounts            
| | $            (284,737)              





The basic loss per share of common stock is based on the weighted average number of shares issued and outstanding at the date of the consolidated financial statements.  Common stock equivalents are not presented, as they are antidilutive in nature.



h.  Estimates



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



i.  Accounting for the Impairment or Disposal of Long-lived Assets



The Company has implemented SFAS 144 Accounting for the Impairment or Disposal of Long-lived Assets  to account for the impairment and disposal of long-lived assets. As a result of the implementation, the Company recorded impairment expense of $15,282 during the year ended November 30, 2003. $11,476 of the impairment loss in 2003 was included in discontinued operations. No impairment expense was recorded during the year ended November 30, 2004.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 2 -    SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



j.     Web Site Development Costs



The costs of web site development during the planning stage, as defined under EITF No. 00-2 (Accounting for Web Site Development Costs) are expensed as incurred. Computer software and web site development costs incurred during the application and infrastructure development, including external direct costs of materials and services in developing software, creating graphics and web site content, payroll and interest costs are capitalized and amortized over the estimated useful life, beginning when the software is ready for use and after all substantial testing has been completed and the web site is operational.



k.  Revenue Recognition



The Companys revenues are derived principally from the sale of advertisements located in bus and train terminals.  The Company amortizes revenues over the life of the contract with the customer which range from three months to one year.  Deferred revenue primarily comprises billings in excess of recognized revenue and payments received in advance of revenue recognition



The Company pays commissions to its sales people in full from the initial sales proceeds. The commissions are capitalized as a prepaid expense and amortized over the estimated life of the contracts. Prepaid commissions at November 30, 2004 were $Nil.



The Company also earns revenue through the sale of hotel reservations.  This is a commission the Company receives as it facilitates the booking of hotel rooms at various places through the Companys website.  Deferred revenues reflect the amounts that are associated with reservations that have been made, through the Companys website, for dates after the fiscal year end of November 30, 2004.



In accordance with EITF 99-17, barter transactions have been valued based on similar cash transactions which have occurred within six months prior to the date of the barter transaction.



l. Translation of Foreign Currencies



Amounts in foreign currencies are translated into U.S. dollars as follows:



i) Current assets and current liabilities at the exchange rate prevailing at the end of the year;



ii) Inventory, capital assets and investments in shares and joint ventures at the exchange rate prevailing on the date of acquisition;



iii) Income and expenses at the average annual rate.



---





BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 2 -   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)



m. Accounting for Stock-Based Compensation



The Company accounts for common stock issuances for services based on the more readily determinable value of the services received or the fair value of the common stock given up. In most cases, the Company values the services at the closing value of the common stock on the date of authorization of the issuance. The Companys policy is to issue the common stock after the services have been provided.



n. Newly Issued Accounting Pronouncements



In April 2002, the FASB issued Statement No. 145 Rescission of FASB Statements No. 4, 44, and 62, Amendment of FASB Statement No. 13, and Technical Corrections (SFAS 145). SFAS 145 will require gains and losses on extinguishments of debt to be classified as income or loss from continuing operations rather than as extraordinary items as previously required under Statement of Financial Accounting Standards No. 4 (SFAS 4).  Extraordinary treatment will be required for certain extinguishments as provided in APB Opinion No. 30. SFAS 145 also amends Statement of Financial Accounting Standards No. 13 to require certain modifications to capital leases be treated as a sale-leaseback and modifies the accounting for sub-leases when the original lessee remains a secondary obligor (or guarantor).  SFAS 145 is effective for financial statements issued after May 15, 2002, and with respect to the impact of the reporting requirements of changes made to SFAS 4 for fiscal years beginning after May 15, 2002. The adoption of the applicable provisions of SFAS 145 did not have an effect on our consolidated financial statements.



In June 2002, the FASB issued Statement No. 146, Accounting for Costs Associated with Exit or Disposal Activities. SFAS 146 nullifies Emerging Issues Task Force Issue No. 94-3 Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring).  SFAS 146 applies to costs associated with an exit activity that does not involve an entity newly acquired in a business combination or with a disposal activity covered by SFAS 144.  SFAS 146 is effective for exit or disposal activities that are initiated after December 31, 2002, with earlier application encouraged. We are currently reviewing SFAS 146 and intend to implement it no later than January 1, 2003.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003





NOTE 3 -    BANK LOANS



The Company has three credit facilities, bearing interest at rates from prime plus 2% to 6.25%.  The loans are unsecured and are due on demand.



NOTE 4 -    PROPERTY AND EQUIPMENT



Property and equipment, at cost, consists of the following:



|                                                                                                   | 2004                                  | 2003                                    
|-------------------------------------------------------------------------------------------------- | ------------------------------------- | ----------------------------------------
|Advertising display boards
Office furniture  and equipment
Computer software
Website
Sales manuals | $          138,646
28,401
-
125,203
- | $         138,646
32,706
5,222
125,203
-
|                                                                                                   | 292,250                               | 314,491                                 
|Accumulated depreciation                                                                           | (292,250)                             | (260,270)                               
|Net property and equipment                                                                         | $                    -                | $           54,221                      



Depreciation expense for the years ended November 30, 2004 and 2003 was $48,422 and $81,578, respectively. Impairment expense for the years ended November 30, 2004  and 2003 was $Nil and $15,282, respectively.



NOTE 5 -    COMMITMENTS AND CONTINGENCIES



The Company leased certain office equipment used in their operations under non-cancelable operating leases.  The lease terms expired beginning in January 2003 and ending in November 2003.  The monthly rental payment for the leases was $790. The leases have expired



NOTE 6 -    LICENSING AGREEMENTS



In October 1997, the Company entered into a licensing agreement with Greyhound Lines, Inc. (Greyhound), whereby the Company is granted the right to install, operate and maintain its advertising boards in all of Greyhounds owned and leased bus terminal facilities.  The agreement is for a period of 15 years (three 5 year terms) beginning in February 1998.  The cost to the Company ranges from $50 to $367 per month for each location where an advertising board is placed.



In August 2001, the Company negotiated a license with National Railroad Passenger Corporation (Amtrak), whereby the Company is granted the right to lease a portion of Amtrak owned and non owned railroad properties for the purposes of installing, operating and maintaining its advertising display boards. The license is for a period of 5 years. The cost to the Company ranges from $250 to $833 per month in year one, increasing to $281 to $933 in year five.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003





NOTE 7 -    COMMON STOCK



During the year ended November 30, 2004, the Company issued 100,000 and 250,000 S-8 registered shares for services rendered at a price of $0.075 and $0.02 per share, respectively, for a total of $12,500.



During the year ended November 30, 2004, the Company issued 1,000,000 shares of common stock at $0.01 per share in payment of advances totaling $10,000 from a related party.



During the year ended November 30, 2004, the Company issued 6,075,000 shares of common stock at $0.02 per for cash totaling $121,500.



During the year ended November 30, 2003, the Company issued 2,941,441 S-8 registered shares for services rendered at prices ranging between $0.04 and $0.10 per share for a total of $174,678 and 150,000 S-8 registered shares for fixed assets at $0.08 per share for a total of $12,000.



During the year ended November 30, 2003, the Company issued 2,500,000 shares of common stock at $0.04 per share in payment of advances totaling $50,000 from a related party.  The Company incurred a loss on disposition of this debt in the amount of $50,000.





NOTE 8 -    DILUTIVE INSTRUMENTS



a.  Stock Options



The Company applied Accounting Principles board (APB) Option 25, Accounting for Stock Issued to Employees, and related interpretations in accounting for all stock option plans.  Under APB Option 25, compensation cost is recognized for stock options granted to employees when the option price is less than the market price of the underlying common stock on the date of grant.



FASB Statement 123, Accounting for Stock-Based Compensation (SFAS No. 123"), requires the Company to provide pro-forma information regarding net income and net income per share as if compensation costs for the Companys stock option plans and other stock awards had been determined in accordance with the fair value based method prescribed in SFAS No. 123. The company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model with the following weighted average assumptions used for grants, respectively; dividend  yield of zero percent for all years; expected volatility of 5.82 and 77.00 percent for 2003 and 2004 respectively; risk-free interest rates of 5.45 and 4.00 percent and expected lives of 1 year for 2003 and 2004 respectively.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 8 -   DILUTIVE INSTRUMENTS (Continued)



a.  Stock Options (Continued)

|                                          | For the Years ended
November 30                  
|----------------------------------------- | -------------------------------------------------
|                                          | 2004                                             
|Net loss:
As reported
Pro-forma           | $           (193,710)
$           (331,585)      
|Net loss per share:
As reported
Pro-forma | $                 (0.01)
$                 (0.01)



A summary of the status of stock options outstanding as of November 30:



|                                                                          | 2004                                  | 2003                           
|------------------------------------------------------------------------- | ------------------------------------- | -------------------------------
|                                                                          | Shares                                | Weighted
Average
Exercise
Price
|Outstanding at beginning of year
Granted
Exercised
Forfeighted            | 200,000
2,850,000
(350,000)
(200,000) | $       0.50
0.036
0.036
0.50  
|Outstanding at end of year
Exercisable at year end                        | 2,500,000
2,500,000                   | Nil                            
|Weighted average fair value per option of options granted during the year | $       0.036                         | $           0.50               





---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 8 -   DILUTIVE INSTRUMENTS (Continued)



a.    Stock Options (Continued)



On November 1, 2000, the Company issued options to employees to purchase 1,200,000 shares of common stock at $0.25 per share, which exceeded the trading price of the shares at the date of issuance.  400,000 options vest immediately, 400,000 vest on November 1, 2001 and 400,000 vest on November 1, 2002. The options have expired, unexercised.



During the year ended November 30, 2004, the Company issued options to employees to purchase 350,000 shares of common stock at an exercise price range from $0.02 to $0.075 per share. All options granted were exercised as payment for services rendered.



During the year ended November 30, 2004 the Company has granted Michael R. Jones the options to purchase 2,500,000 shares at $0.065 per share expiring the earlier of three years from the date of grant or ninety days after the termination of employment as president of the Companys subsidiary, Info Center Inc.



During the year ended November 30, 2003, the Company issued options to employees to purchase 2,941,401 shares of common stock at an exercise price range from $0.035 to $0.10 per share. All options granted were exercised as payment for services rendered.



During the year ended November 30, 2003, the Company issued options to employees to purchase 150,000 shares of common stock at an exercise price of $0.08 per share. All options were exercised as payment for fixed assets.



b.    Stock Purchase Warrants



There are 10,075,000 warrants outstanding as of November 30, 2004 to acquire additional shares of common stock of the Company at $0.04 per share. 3,700,000 warrants have a life of one year and the balance have a life of two years.





---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 9 -    LEASES PAYABLE



There were no leases payable at November 30, 2004.  Leases payable at November 30, 2003 consisted of the following:

2004     2003



Lease payable to Qualica Financial Group, bearing 16.49%

interest, due April 1, 2004, monthly payments of $296, secured

by fixed assets.                                                                                    $          -   $  1,419



Lease payable to Qualica Financial Group, bearing 12.80%

interest, due August 1, 2004, monthly payments of $276, secured

by fixed assets.                                                                                                -       2,359



Lease payable to Qualica Financial Group, bearing 15.50% interest,

due February 1, 2005, monthly payments of $361, secured by

fixed assets.                                                                                         -   4,594



Total                                                                                                               -        8,372



Less current maturities                                                             -   7,667





Long-term debt                                                                         $          -   $     705



NOTE 10 -  GOING CONCERN



The Companys consolidated financial statements are prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business.  The Company has incurred losses from operations which have resulted in an accumulated deficit of $1,775,648 at November 30, 2004 and has failed to produce positive cash flows from operations for the years ended November 30, 2004 and 2003, which together raises substantial doubt about the Companys ability to continue as a going concern.  The accompanying consolidated financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result from the outcome of this uncertainty.  Management believes that the Company will generate sufficient advertising revenue and commissions through its licensing agreements and hotel reservation internet website to cover all operating expenses in the future, although no assurance of this can be given.







---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003



NOTE 11 - RELATED PARTY PAYABLE



During the year ended November 30, 2004, a shareholder of the Company who had advanced $10,000 to the Company was issued 1,000,000 of common stock as repayment.



Accounts payable includes a balance of $60,699 (2003 - $Nil) due to an officer of the Company.



NOTE 12 - SEGMENT INFORMATION



The Company generates revenues from two segments, as listed below. The Company has no customers who comprise over 5% of revenues or receivables and derives approximately 8% of its revenues from Canada, with the balance being derived from the United States.



November 30, 2004:

|                  | Display Boards    | Reservation System  | Total               
|----------------- | ----------------- | ------------------- | --------------------
|Total Assets      | $          73,531 | $             7,187 | $             80,718
|Total Revenues    | $        446,283  | $           40,437  | $           486,720 
|Net Income (Loss) | $       (177,752) | $         (15,958)  | $         (190,710) 



November 30, 2003:

|                  | Display Boards    | Reservation System | Total              
|----------------- | ----------------- | ------------------ | -------------------
|Total Assets      | $          68,307 | $           87,771 | $           156,078
|Total Revenues    | $        523,686  | $           89,516 | $           613,202
|Net Income (Loss) | $       (325,633) | $           70,958 | $         (254,675)



NOTE 13  FINANCIAL INSTRUMENTS



Fair Value Disclosures 



The carrying value of cash, accounts receivable, accounts payable, bank overdraft and bank loans approximate their fair values due to the relatively short periods to maturity of the instruments.



Foreign Currency Risk 



The Company operates in the United States of America and Canada, which gives rise to the risk that cash flows may be adversely affected by exchange rate fluctuation.  The Company does not participate in future contracts for foreign exchange hedges.



---



BUDGETHOTELS NETWORK, INC.

Notes to the Consolidated Financial Statements

November 30, 2004 and 2003





NOTE 14  DISPOSAL OF SUBSIDIARY AND DISCONTINUED OPERATIONS



In December 2003, the Company discontinued the Internet 2U Division. The following is a summary of the discontinued operations for the years ended November 2004 and 2003. No income tax benefit has been attributed to the discontinued operations.

|                                                                                | For the Years Ended
November 30
|------------------------------------------------------------------------------- | -------------------------------
|                                                                                | 2004                           
|Revenues
Cost of Sales                                                          | $                     --
--    
|Gross Margin                                                                    | --                             
|Expenses
Interest expense
Impairment expense
General and administrative expense | --
--
--                       
|Total Expenses                                                                  | --                             
|                                                                                |                                
|Loss from  Operations                                                           | --                             
|Net Operations Loss from Discontinued                                           | $                    --        



During the year ended November 30, 2004 the Company sold its 100% interest in Internet 2 U for proceeds of $1.  The carrying value of the liabilities of Internet 2 U at the date of sale was as follows:



Bank indebtedness                                           $           14,881

Lease payable                                                    4,594

$           19,475

NOTE 15 SUBSEQUENT EVENT



On February 24, 2005 the Company signed a letter of intent to sell 88.2% of the common shares of the Company to Edentify, Inc. (the Purchaser). Pursuant to the letter of intent dated February 24, 2005 the Purchaser will deposit $75,000 into an escrow account for the benefit of the Company, and will pay an additional $75,000 to the Company within 45 days of execution of definitive agreements for the transaction.



In accordance with the terms of the letter of intent, the Company must execute a reverse 10-for-1 split of the Companys common stock, such that after the split the Companys common stock will consist of 2,841,172 common shares.  Additionally, prior to the date of closing the Company must execute a distribution agreement with its subsidiary InfoCenter, Inc., to the effect that all of the issued and outstanding shares of InfoCenter, Inc. owned by Budgethotels Network Inc. will be distributed to the shareholders of the Budgethotels Network Inc. as of a record date immediately prior to closing on the reverse acquisition Budgethotels Network Inc. through a registration statement on Form SB-2 or otherwise by November 30, 2005.



ITEM 8.     CHANGES IN, AND DISAGREEMENTS WITH, ACCOUNTANTS ON

ACCOUNTING AND FINANCIAL DISCLOSURE



During the year ended November 30, 2004, the Company changed accountants from HJ & Associates LLP, Certified Public Accountants, of Salt Lake City, Utah to HLB Cinnamon Jang & Willoughby, Chartered Accountants, of Burnaby, British Columbia. This change was a result of managements decision to appoint a local auditor to reduce costs and audit travel.





ITEM 9.     DIRECTORS, OFFICERS PROMOTERS AND CONTROLL PERSONS;

COMPLIANCE WITH SECTION 16 (a) OF THE EXCHANGE ACT



The following persons were directors and/or officers of the Company during the year ended November 30, 2004:



William P. McLaws, Chief Executive Officer, President, Chief Financial Officer and Director



Mr. McLaws is a businessman who initially served as a temporary Director between August 2002 and September 15, 2002. He again became a Director on January 6, 2004, at which time he became Chief Executive Officer, President and Chief Financial Officer.



Robert L. Chalmers, Director



Mr. Chalmers is a self-employed, independent businessman. He became a direcrtor in January, 2004.



ITEM 10.    EXECUTIVE COMPENSATION



SUMMARY COMPENSATION TABLE



|                                                  |                                                                     |                                      |                    |                             | Long Term
Compensation
----------------------------- |                                                    |                          
|------------------------------------------------- | ------------------------------------------------------------------- | ------------------------------------ | ------------------ | --------------------------- | ---------------------------------------------------- | -------------------------------------------------- | -------------------------
|                                                  | Annual Compensation
----------------------------------------------- | Awards
----------------------------- | Payouts
---------- |                            
|Name and
Principal Position
--------------------- | Year
---------                                                      | Salary
---------                     | Bonus
---------    | Ot      Other
-   --------- | Restricted
Stock Awards
--------------               | Secuirites
Underlying Options/ SaRs
-------------- | LTIP
Payouts
------------
|Wm. P McLaws
President,CEO                        | 2004                                                                | Nil                                  | Nil                | $47,750                     | N/A                                                  | N/A                                                | N/A                      
|Robert L. Chalmers
Director                       | 2004                                                                | Nil                                  | Nil                | $      Nil                  | N/A                                                  | N/A                                                | N/A                      





ITEM 11.    SECURITY OWNERSHIP AND CERTAIN BENEFICIAL OWNERS AND

MANAGEMENT AND RELATED STOCKHOLDER MATTERS



As at November 30, 2004, the Company had 502 holders of record holding a total of 28,911,722 common shares. 4,000,000 shares (13.83%) are beneficially held by Wm. P. Mclaws, the CEO of the Company, and 2,000,000 shares are beneficially held by M. Jones, the President of Info Center.



ITEM 12.    CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.



In addition to the transactions noted in Item 11 above, the  Company repaid advances of $25,000 by issuinq 1,000,000 share of common stock at $0.01 per share and making a cash payment of  $15,000



ITEM 13.    EXHIBITS AND REPORTS FILED ON FORM-8K



Not applicable.



ITEM 14.    CONTROLS AND PROCEDURES



The Company maintains very basic controls. Management decisions are made by the Companys President and Board of Directors. All deposits are in the form of checks, which are deposited by the Companys bookkeeper.  Checks are issued under the direction of the Companys president. The Companys bookkeeper is responsible for recording the day-to-day sales and accounts receivable transactions of the Companys wholly owned subsidiaries. An independent accounting office records all other transactions and provides a preliminary consolidated trial balance. The Company employs an accounting consultant to review these records on a quarterly basis and and to prepare Form 10-QSB and Form 10-KSB. The Form 10-QSB is reviewed by the Companys auditors, who also audit the Form 10-KSB. The accounting consultant is responsible for filing the Form 10-QSB and the Form 10-KSB.



ITEM 15 .    PRINCIPAL ACCOUNTING FEES AND SERVICES.



As noted in Item 14, above, the Company employs the services of a bookkeeper  to record day-to-day sales and receivable transactions, an independent accounting office to record all other transactions and an accounting consultant to review the records and prepare, and file, the quarterly Form 10-QSB and annual Form 10-KSB. These documents are review by the Companys independent auditors.





---





SIGNATURES



Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.



|                        | BUDGETHOTELS NETWORK, INC.                                                                                            
|----------------------- | ----------------------------------------------------------------------------------------------------------------------
|                        | -     (registrant)                                                                                                    
|Date: February 28, 2005 | By: /s/ William P. McLaws                                                                                             
|                        | William P. McLaws, Chief Executive Officer, President, Chief Financial Officer and a member of the Board of Directors.





---



CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002







In connection with the Quarterly Report of Budgethotels Network, Inc. (the Company) on Form 10-KSB for the year ending November 30, 2004 as filed with the Securities and Exchange Commission on the date hereof (the Report), I William P. McLaws, Chief executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002, that, to the best of my knowledge and belief:





|(1) | The Report fully complies with the requirements of section 13(a) or 15(d)
of  the Securities Exchange Act of 1934: and                              
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------
|(2) | The information contained in the Report fairly presents, in all material
respects, the financial condition and results of operations of the Company.





By:  /s/ William P. Macaws

William P. McLaws, Chief Executive Officer, and

Principal Accounting Officer



Date: February 28, 2005







---





CERTIFICATION

18 U.S.C SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002



I, William P. McLaws, certify that:



1.     I have reviewed the quarterly report on Form 10-KSB of Budgethotels Network. Inc.;



2.     Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report.



3.     Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report.



4.     The registrants other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:



a)     designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;



b)     evaluated the effectiveness of of the registrants disclosure controls and procedures as of a date within 90 days prior to the filing date of the quarterly report (the Evaluation Date); and



c)     presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date.



5.   The registrants other certifying officers and I have disclosed, based on our most recent evaluation, to the registrants auditors, and the audit committee of the registrants board of directors (or persons performing the equivalent function):



a)       all significant deficiencies in the design or operation of interrnal controls which could adversely affect the registrants ability to record, process, summarize and report financial data and have identified for the registrants auditors any material weaknesses in internal controls: and



b)      any fraud, whether or not material, that involves management or other employees who have a significant role in the registrants internal controls; and



6.   The registrants other certifying officers and I have indicated in this quarterly report whether or not there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.



Dated this 28th day of February, 2005.

/s/ William P. McLaws  Chief Executive Officer and Principal Financial Officer