**Table
          of Contents**
 **Index
          to Financial
          Statements**







**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB**





(Mark
      One)





ý
            ANNUAL
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      fiscal year ended: **December
      31, 2006**





 ̈
            TRANSITION
                REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
                1934





For
      the
      transition period from ___________ to ___________





Commission
      file number: **33-33042-NY**





**CONTINENTAL
      FUELS, INC.**


(Name
      of
      small business issuer in its charter)





**Nevada**
              
              **22-3161629**(State
                  or other jurisdiction of
                incorporation
                  or organization)
              
              (I.R.S.
                  Employer Identification No.)







**9901
      IH 10 West, Suite 800, San Antonio, Texas 78230**


(Address
      of principal executive offices)





Issuer’s
      telephone
      number:  **(210) 558-2800**





Securities
      registered under Section 12(b) of the Exchange Act:  
**None**





Securities
      registered under Section 12(g) of the Exchange Act:  
**None**





Check
      whether the issuer is not required to file reports pursuant to Section 13 or
      15(d) of the Exchange Act.  ̈





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 ý
      No
 ̈





Check
      if
      there is no disclosure of delinquent filers in response to Item 405 of
      Regulation S-B contained in this form, and no disclosure will be contained,
      to
      the best of Registrant’s knowledge, in definitive proxy or information
      statements incorporated by reference in Part III of this Form 10-KSB or any
      amendment to this Form 10-KSB. ý





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





State
      issuer’s revenues for its most recent fiscal year.  
$90,076


**Table
          of Contents**
 **Index
          to Financial
          Statements**





State
      the
      aggregate market value of the voting and non-voting common equity held by
      non-affiliates computed by reference to the price at which the common equity
      was
      sold, or the average bid and asked price of such common equity, as of a
      specified date within the past 60 days. $9,964,965, assuming a price per share
      of $7.50 as of April 6, 2007.





State
      the
      number of shares outstanding of each of the issuer’s classes of common equity,
      as of the latest practicable date. 49,938,611 as of April 6, 2007.





Transitional
      Small Business Disclosure Format (Check one): Yes  ̈
      No
ý





2
 **Table
          of Contents**
 **Index
          to Financial
          Statements**


**CONTINENTAL
      FUELS, INC.**





**Form
      10-KSB**


**For
      the Fiscal Year Ended December 31, 2006**


PagePart
                      IItem
                      1.
                  Description
                      of Business
                  4Item
                      2.
                  Description
                        of Property
                  12Item
                      3.
                  Legal
                      Proceedings
                  12Item
                      4.
                  Submission
                      of Matters to a Vote of Security
                      Holders
                  12Part
                      IIItem
                      5.
                  Market
                      for Common Equity and Related Stockholder
                      Matters
                  13Item
                      6.
                  Management’s
                      Discussion
                      and Analysis or Plan of Operation
                  16Item
                      7.
                  Financial
                      Statements
                  17Item
                      8.
                  Changes
                      In and Disagreements with Accountants on
                      Accounting and Financial Disclosure
                  17Item
                      8A.
                  Controls
                      and Procedures
                  18Item
                      8B.
                  Other
                      Information
                  18Part
                      IIIItem
                      9.
                  Directors,
                      Executive Officers, Promoters and Control
                      Persons; Compliance with Section 16(a) of the Exchange
                      Act
                  19Item
                      10.
                  Executive
                      Compensation
                  22Item
                      11.
                  Security
                      Ownership of Certain Beneficial Owners and
                      Management and Related Stockholder Matters
                  24Item
                      12.
                  Certain
                      Relationships and Related
                      Transactions
                  25Item
                      13.
                  Exhibits
                  26Item
                      14.
                  Principal
                      Accountant Fees and
                      Services
                  27SIGNATURES
                  28SUPPLEMENTAL
                    INFORMATION AND EXHIBITS
                  29 
 3
 **Table
                  of Contents**
 **Index
                  to Financial Statements**


**PART
      I**





**Special
      Note on Forward-Looking Statements**




Except
      for historical information contained herein, this document contains
      forward-looking statements. Such forward-looking statements involve risks and
      uncertainties and include, but are not limited to, statements regarding future
      events and the Registrant’s plans and expectations. The Registrant’s actual
      results may differ materially from such statements. Although the Registrant
      believes that the assumptions underlying the forward-looking statements herein
      are reasonable, any of the assumptions could prove inaccurate and, therefore,
      there can be no assurance that the results contemplated in such forward-looking
      statements will be realized. In addition, the business and operations of the
      Registrant are subject to substantial risks which increase the uncertainties
      inherent in the forward-looking statements included in this document. The
      inclusion of such forward-looking information should not be regarded as a
      representation by the Registrant or any other person that the future events,
      plans or expectations contemplated by the Registrant will be
      achieved.





**Item
              1.**
            **Description
                of Business.**





**Initial
      Public Offering**




The
      Registrant was incorporated under the name First Lloyd Funding, Inc. pursuant
      to
      the laws of the State of New York on December 21, 1989. The effective date
      of
      the Registrant’s public offering was March 13, 1990. The Offering closed on May
      1, 1990. For further information concerning the Registration Statement, see
      File
      No. 33-33042-NY at the Securities and Exchange Commission’s Regional Office in
      New York City or at its principal office in Washington, D.C. In January 1997,
      the New York corporation at that time named Coronado Industries, Inc. merged
      into and became a Nevada corporation of the same name.





**Ophthalmic
      International, L.L.C. and American Glaucoma, Inc.**




After
      a
      series of immaterial acquisitions and spin-offs from May 1990 to September
      1996,
      on November 5, 1996 the Registrant entered into an Asset Purchase Agreement
      with
      Ophthalmic International, L.L.C. (“OI”),
      and American
      Glaucoma, a joint venture (“AG”), which provided for the purchase of the assets
      of OI and AG in exchange for 1,559,222 shares of the Registrant’s common stock
      (85%) to be issued to the Registrant’s three Directors at that time. An
      additional 85,500 shares were issued as finders fees to twelve entities and
      individuals. The assets of OI were a patent pending and other proprietary
      information concerning equipment and a process for the treatment of open angle
      glaucoma. The assets of AG were the concept and a business plan for forty
      glaucoma treatment centers in the United States.


**Recapitalizations
        and Reorganizations**
  On
        February 21, 2006, pursuant to Nevada statutes the number of Registrant’s
        authorized and outstanding common stock shares were reduced in a 10-for-1
        reverse stock split (the “2006 Reverse Split”).  (See “Item 4.
        Submission of Matters to a Vote of Security Holders,”
below.)
  On
        March
        17, 2006 and November 1, 2006, Registrant’s Articles of Incorporation were
        amended to increase the number of authorized common stock shares to 200,000,000
        and 400,000,000, respectively.  (See “Item 4.
        Submission of Matters to a Vote of Security Holders,”
below.)
 4
 **Table
                of Contents**
 **Index
                to Financial Statements**
 On
        January 26, 2007, all of Registrant’s subsidiaries
        and
        all assets of Registrant,
        except for the European distribution agreements, were sold to G. Richard
        Smith, Registrant’s Chairman, for $300,000 in cash and the assumption of certain
        trade debts (the “Sale of Assets”). (See “Item 1.  Description of Business
        - Subsequent Events” and “Item 4.
        Submission of Matters to a Vote of Security Holders,”
below.)
  On
          January 26, 2007, Mr. G. Richard Smith, Mr. Gary R. Smith and Mr. John LiVecchi
          sold to Mr. Marco Gutierrez a majority of Registrant’s pre-2007 Reverse Split outstanding
          common stock for a total of $100,000 cash. (See “Item 1.  Description of
          Business - Subsequent Events” and “Item 9.  Directors, Executive Officers, Promoters
          and Control Persons,” below.)
  On
        February 5, 2007, a 1-for-100 reverse stock split of Registrant’s outstanding
        common stock (the “2007 Reverse Split”) became effective.
        All common stock numbers set forth in this document have been adjusted for
        the
        2007 Reverse Split. (See “Item 1. Description of Business - Subsequent Events”
and “Item 4.
        Submission of Matters to a Vote of Security Holders,” below.)
 
 On
        February 6, 2007, Registrant completed the sale of 47,000,000 restricted
        shares
        of its post-2007 Reverse Split common
        stock to Ms. Karen Sandhu for $200,000 cash. Registrant used the proceeds
        from this offering to pay outstanding debts and liabilities.  (See
        “Item 1. Description of Business - Subsequent Events” and “Item 5.Market
        for Common Equity and Related Stockholder Matters,” and
“Item
        11.  Security Ownership of
        Certain Beneficial Owners and Management and Related Stockholder Matters,” below.)
  On
        February 25, 2007, the Board of Directors of the Registrant approved the conversion
        of an aggregate of three hundred thousand dollars ($300,000) of an outstanding
        note of the Registrant (the “Note”) into shares of the Registrant’s common
        stock. The conversion price of the shares of common stock to be issued was valued
        at
        $0.001 per share by the Registrant’s Board of Directors.
  Upon
        the
        eventual full conversion of the Note to common shares, the approved conversion
        of the Note to common stock would result in the issuance by the Registrant
        of an aggregate of 300,000,000 restricted shares of its common stock .
        In
        addition, there would be a charge against earnings for the issuance of the
        option to convert the debt of approximately $90,000,000.  The
        holder of the
        shares of underlying common stock issued upon conversion of the Note may
        have
        been entitled to request the removal of any restrictive legends that would
        be
        attached to the common shares so issued in accordance with the provisions
        of Rule 144(k) under the Securities Act of 1933, as amended.
  On
        March
        26, 2007, the Registrant and the Noteholder mutually agreed to rescind the
        terms of
        the
        conversion of the Note to common stock as described above. It was mutually
        agreed between the Registrant
        and the Noteholder that, based solely on the current market price of the
        Registrant’ s
        common stock
        on
        its primary trading market, the conversion of the Note to common stock on
        the
        terms described no
        longer
        accurately reflected the value of the Note, would have an adverse effect
        on the
        financial statements
        of the Registrant, and therefore was not in the best interests of the
        Registrant. As of March 26, 2007,
        the
        Note had not been presented to the Registrant’s transfer agent for conversion to
        shares of common stock
        and
        no shares of common stock had been issued under the above described terms
        of
        conversion. As
        a
        result of the rescission of the conversion terms of the Note, all of the
        $300,000 Note shall remain
        outstanding as a valid and existing liability of the Registrant. The Registrant
        and the Noteholder have
        not
        reached any agreements as to the terms of a future conversion of the Note. 
(See “Item 1. Description of Business - Subsequent Events” and “Item 5. Market
        for Common Equity and Related Stockholder Matters,”and
“Item
        11.  Security Ownershipof
        Certain Beneficial Owners and Management and Related Stockholder Matters,”below.)
 
 On
        February 27, 2007, Registrant’s Articles of Incorporation were amended to
        change
        its name to Continental Fuels, Inc. and to increase its authorized capital
        to 900,000,000 common stock shares and 100,000,000 preferred stock shares.
        (See “Item 1. Description of Business - Subsequent Events” and “Item 4.
        Submission of Matters to a Vote of Security Holders,” below.)
  5
 **Table
                  of Contents**
 **Index
                  to Financial Statements**
  On
                  March
                  14, 2007 Registrant announced the appointment of Tim Brink as its President
                  and Ernesto Haberer as Vice President of Business Development.
                  (See “Item
                  1.
                  Description of Business - Subsequent Events” and “Item 9. Directors, Executive
                  Officer, Promoters and Control Persons,” below.)
  On
                    March
                    19, 2006 Registrant announced an agreement to acquire petroleum
                    trading and
                    storage companies
                    from Universal Property Development and Acquisition Corporation
                    (“UPDAC”) for
                    $2.5 Million
                    in cash and shares of Registrant’s convertible preferred stock valued at $5.0
                    Million (the “Preferred
                    Stock”). The Preferred Stock will be convertible into 500,000,000 shares
                    of
                    common stock and will also have voting rights which will equal
                    approximately 70% of
                    Registrant’s total votes at any shareholders meeting. Therefore, upon the
                    closing of this transaction UPDAC
                    will have control of the Registrant. (See “Item. Description of Business -
                    Subsequent Events,” “Item
                    5.
                    Market for Common Equity and Related Stockholder Matters” and “Item 9.
                    Directors, Executive Officer,
                    Promoters and Control Persons,” below.)


**Business
      of Issuer**





**Overview**





Through
      January 26, 2007, the Registrant was a holding company and all business
      operations were conducted through its three wholly-owned subsidiaries. During
      2006, the Registrant, through its Ophthalmic International, Inc. subsidiary,
      manufactured and marketed a fixation device with a patented designed suction
      ring that treats Open Angle and Pigmentary glaucoma. American Glaucoma, Inc.
      (“AGI”), another Registrant subsidiary, operated a glaucoma treatment center in
      Scottsdale, Arizona from September 1997 to March 1999. OI, an Arizona limited
      liability company, held the Registrant’s patent.  Since February 2007, the
      Company has been pursuing an acquisition strategy in the oil and gas
      segment.




In
      the
      United States, glaucoma is the second leading cause of blindness affecting
      approximately 3,000,000 persons. Of those, about 60,000 are legally blind.
      If
      detected and treated early, glaucoma need not cause blindness or even severe
      vision loss. While there is no cure for glaucoma, the Registrant believes that
      its patented device and process provide an effective treatment for afflicted
      persons and that a significant global market for its patented process, equipment
      and rings currently exists. The Registrant has not yet received FDA approval
      for
      sale of its products in the United States and at this time it appears that
      Registrant’s sales in Europe will be negatively impacted until such FDA approval
      is obtained.





Glaucoma
      may have many forms which cause or present a feature of progressive damage
      to
      the optic nerve due to increased pressure within the eyeball. As the optic
      nerve
      deteriorates, blind spots and patterns develop. If left untreated, the result
      may be total blindness. The space between the lens and the cornea in the eye
      is
      filled with a fluid called the aqueous humor. This fluid circulates from behind
      the colored portion of the eye (the iris) through the opening at the center
      of
      the eye (pupil) and into the space between the iris and cornea. The aqueous
      humor is produced constantly, so it must be drained constantly. The drain is
      at
      the point where the iris and cornea meet, known as the drainage angle, which
      directs fluid into a channel (Schlemm’s canal) that then leads it to a system of
      small veins outside the eye. When the drainage angle does not function properly,
      the fluid cannot drain and pressure builds up within the eye. Pressure also
      is
      exerted on another fluid in the eye, the vitreous humor behind the lens, which
      in turn presses on the retina. This pressure affects the fibers of the optic
      nerve, slowly damaging them. The result over time is a loss of
      vision.




6
 **Table
            of Contents**
 **Index
            to Financial Statements**
  **The
          Fixation Device**
  After
          four years of ongoing studies involving Dr. John T. LiVecchi, M.D., F.A.C.S.,
          Assistant Clinical Professor of Ophthalmology, Allegheny University and
          Dr.
          Guillermo Avolos, Professor of Ophthalmology, University of Guadalajara,
          Mexico,
          it was determined that a 2 minute treatment with Ophthalmic International’s
“vacuum fixation device and patented design suction ring” temporarily reduced
          inter-ocular pressure (“I.O.P.”) in the treatment of Open Angle Glaucoma by
          approximately 6 Hg for an average of three months at which time the treatment
          can be repeated with no serious side effects. This I.O.P. lowering is achieved
          when the external suction device is applied over the perilimbal area for
          a
          specified time. With this treatment the Registrant believes that there
          are no
          harmful side effects, like those associated with eye drop treatments.
          In addition, the patent entitled “Open Angle Glaucoma Treatment Apparatus and
          Method” has been approved.
  The
          first
          clinical study of the Registrant’s product (the “PNT device”) was conducted on
          86 patients over an 8 month period in 1992 by Dr. Avolos in Guadalajara,
          Mexico.
          The second clinical study of the Registrant’s product was conducted on 250
          patients over a two-year period ending in 1996 by Dr. Avolos and Dr. LiVecchi.
          The Registrant initiated a third study in September 1997 conducted by Dr.
          Leo
          Bores, the Medical Director of the Registrant’s Scottsdale treatment center.
          This third study involved approximately 150 patients.
  Dr.
          John
          LiVecchi, a former Registrant Director, and Dr. Leo Bores, a consultant,
          have
          been asked to address different medical conventions of ophthalmologists
          concerning the results of the studies of Registrant’s procedure and equipment. A
          report on Registrant’s clinical studies was accepted for publication by Annals
          of Ophthalmology in June 2004. The European Journal of Ophthalmology accepted
          a
          report for publication in January 2005.  These publications for the
          ultimate end-users of Registrant’s products serve to educate the industry about
          the Registrant’s products and their efficacy. They also aid in building
          credibility with potential product distributors.
  Registrant
          executed a distribution agreement dated September 9, 2003, with EuPharmed
          s.r.l.
          of Rome, Italy (“EuP”) which grants the exclusive distribution rights for
          Registrant’s PNT products for the country of Italy to EuP for a period of five
          years (the “Italian Contract”). EuP may extend the agreement for an additional
          two years by agreeing to additional minimum purchases. EuP will conduct
          a one
          year randomized clinical trial of PNT involving 80 patients and four different
          clinics in Italy. EuP will bear all costs of this trial, except for the
          PNT
          equipment and rings which Registrant will provide free of charge. The clinical
          trial was to commence in September 2003, but was postponed until the Fall
          of
          2004. The patient enrollment for this study has taken longer than originally
          estimated.  This agreement provides for monthly minimum purchase quantities
          commencing in March 2004. That date was postponed until after the Type
          2a
          product classification was received by Registrant. Registrant received
          its Type
          2a product classification in July 2004.
  Registrant
          executed another agreement dated September 29, 2003, with EuP which grants
          to
          EuP the exclusive distribution rights to EuP for the countries of Algeria,
          Libya, Morocco and Tunisia on the same terms as the Italian Contract, except
          for
          the monthly minimum purchase quantities for these North African
          countries.
  Registrant
          executed a distribution agreement dated November 10, 2003 with Izasa, S.A.
          of
          Madrid, Spain (“Izasa”) which grants the exclusive distribution rights for
          Registrant’s PNT products for the country of Spain to Izasa for a period of five
          years (the
          “Spanish Contract”). Izasa may extend the agreement for an additional two
          years by agreeing to additional minimum purchases. This agreement provides
          for
          annual minimum purchase quantities commencing in January 2004. That date
          was
          postponed until after the Type 2a product classification was received by
          Registrant.
  Registrant
          executed another agreement dated December 5, 2003 with Izasa which grants
          to
          Izasa the exclusive
          distribution rights to Izasa for the country of Portugal on the same terms
          as
          the Spanish Contract,
          except for the monthly minimum purchase quantities for Portugal (the “Portuguese Contract”).


7
 **Table
              of Contents**
 **Index
              to Financial Statements**
  Izasa
            was
            in violation of the Spanish Contract and the Portuguese Contract during
            2005
            with respect to
            the
            number of units ordered by Izasa. Registrant is considering terminating
            these
            contracts with Izasa
            and
            negotiating a distribution contract with another company.
  On
            April
            21, 2006 Registrant entered into an agreement with Laboratoires DOLIAGE SAS (“LDS”)
            which appointed LDS as Registrant’s exclusive partner in France to market and
            distribute the PNT
            equipment and rings under an arrangement whereby costs paid for the products
            and
            certain LDS marketing
            and administrative expenses are charged against sales proceeds, with
            Registrant
            and LDS sharing
            equally in the net proceeds. LDS will arrange clinical trials in France
            at 2 to
            4 clinics on approximately
            100 patients. The cost of these clinical trials will be shared equally
            by the
            parties, but Registrant’s
            financial liability for the clinical trials is limited to its share of
            the net product revenues under the agreement. Registrant’s agreement
            with LDS has an initial term of 8 years, provided an annual budget for
            each
            subsequent year is
            agreed
            upon by the parties by December 31. Registrant and LDS did not agree
            to an
            annual budget for 2007
            by
            December 31, 2006. Therefore, either party may now terminate this agreement.
  During
            the 2006 fiscal year, Registrant sold and delivered 44 PNT units and
            3,500
            patented rings to its European distributors.
  The
            Registrant’s vacuum equipment is composed of special order parts, such as the
            molded case, display board, circuit boards, and motors, all for which
            Registrant
            has established manufacturing relationships with manufacturers. Registrant’s
            subsidiary, Ophthalmic International, Inc., assembled the vacuum fixation
            device
            at its offices in Fountain Hills, Arizona. The Registrant purchased the
            patented
            rings on a purchase-order basis from a medical device manufacturer, which
            manufactured the rings from the specially designed mold owned by the
            Registrant.




**Governmental
      Regulation**




No
      medical device may be sold or distributed in the United States without FDA
      approval or an exemption from such approval. The FDA has the authority to enjoin
      the manufacture and sale of a medical device, to seize such device and to levy
      fines against a manufacturer or seller of a medical device which has not been
      registered or approved for sale in the United States. A device which needs
      FDA
      approval is considered a Class III device, unless a similar product with a
      similar intended use has previously been granted FDA approval (a “Class II
      Device”) or the FDA has listed the product as generally safe and not needing FDA
      approval (a “Class I Device”). The process for having the FDA remove a device
      from the Class III category to a Class II category is called a 510(k)
      application.




The
      Registrant submitted a 510(k) premarket notification to the FDA on its PNT
      product in August 1998. The FDA rejected this notification in October 1998,
      on
      the basis that the Registrant’s PNT product was not substantially equivalent to
      other products currently on the market and intended to lower intraocular
      pressure. The Registrant met with the FDA in February 1999 to discuss the
      concerns expressed by the agency with respect to the substantial equivalence
      and
      safety of the PNT product. The Registrant made a submission to the FDA in April
      1999 that was intended to provide the agency with detailed information
      addressing many of the concerns expressed by the FDA at the February 1999
      meeting. This submission did not satisfy the FDA with respect to the patient
      risk associated with the clinical use of the PNT product.




In
      February 1999, the FDA requested more information be submitted on patients
      treated to date with the PNT product. In September 1999, the FDA demanded
      Registrant submit a new clinical protocol for additional patient studies.
      Throughout 2006, Registrant continued negotiation with the FDA concerning
      various features of the protocol and the study, such as the length of the study
      and the number of patients, in hopes of expediting FDA approval.




8
 **Table
            of Contents**
 **Index
            to Financial Statements**
  A
          Class
          III device may be approved for sale and distribution in the United States
          by the
          FDA pursuant to a Premarket Approval Application (“PMA”). The FDA approves PMAs
          after a review of the clinical trials information contained therein
          demonstrating that the device is safe and effective for its labeled indications.
          In addition, the FDA will inspect the facilities where the device is
          manufactured prior to approving a PMA.
  Clinical
          data to support either a 510(k) premarket notification or a PMA must be
          collected pursuant to the FDA’s Investigational Device Exemption (“IDE”)
          regulation. The IDE regulation describes two types of device studies: 1)
          significant risk and 2) nonsignificant risk studies. The principal difference
          from a regulatory point of view between the two types of studies is that
          significant risk studies must be reviewed and approved by both the FDA
          and an
          Institutional Review Board (“IRB”) before they may be initiated, while
          nonsignificant risk studies require only IRB review and approval prior
          to study
          initiation. The Registrant believes that its studies of its PNT product
          are
          nonsignificant risk in nature. The Registrant therefore has conducted several
          clinical studies of the PNT product after receiving IRB approval in 1994,
          1996,
          and 1998 from three different IRBs. The approximately 170 patients treated
          at
          the Registrant’s Scottsdale treatment center since 1997 were treated in
          accordance with the clinical protocols that received IRB approval in 1994
          and
          1998. To date, no negative adverse reactions have been reported in connection
          with the use of the PNT device on glaucoma patients for any of the studies
          conducted. However, as of March 3, 2000, the FDA is maintaining that the
          PNT
          product presents “significant risk” to patients and is requiring the additional
          patient study proceed under “significant risk” criteria.
  Under
          the
          IDE regulation, a sponsor of a clinical study may charge for the investigational
          device, provided that the price charged for the device is no larger than
          that
          necessary to recover costs of manufacture, research, development, and handling
          associated with the device. The IDE regulation does not prohibit or limit
          charges for medical or laboratory services. It is the Registrant’s position that
          approximately $1,000,000 of net losses incurred by the Registrant in connection
          with its Scottsdale treatment center and certain past management salaries
          are
          properly recoverable under the IDE regulation, and the Registrant therefore
          intends to impose a charge on the distribution of PNT product to clinical
          investigators who purchase the PNT product and enroll in its IDE studies
          which
          are consistent with the IDE regulation.
  The
          manufacturer of a medical device which is to be distributed in the United
          States
          must be inspected and registered with the FDA. The company which currently
          manufactures the Registrants’s
          suction ring and the company which sterilizes and packages this ring are
          registered as medical device manufacturers with the FDA. The Registrant’s
          facility was inspected and registered with the FDA as a manufacturer of
          the
          predecessor fixation device product and the PNT product in
          1996.




No
      medical device may be advertised for sale in the United States with a false
      or
      misleading label or advertisement. The fixation device which preceded the PNT
      product device was advertised, used and sold as a device for certain types
      of
      invasive eye surgeries. Therefore, that product was labeled as only being used
      for eye surgery, and not the treatment of glaucoma. The labeling of the
      Registrant’s PNT product as a glaucoma treatment device or a device for the
      lowering of inter-ocular pressure of glaucoma patients must be approved by
      the
      FDA (or the product must be exempt from FDA registration as a Class I or Class
      II device), for the Registrant to advertise and sell its PNT device as a
      glaucoma treatment product.





**Patent**




On
      February 11, 1997, the U.S. Patents and Trademarks Office issued a
      seventeen-year patent to Ophthalmic International, L.L.C., Patent Number
      5,601,548, for the process, equipment and the procedure. The Registrant
      believes, without assurance, that this patent provided the Registrant with
      a
      substantial competitive advantage over current glaucoma treatment competitors.
      The Registrant is not aware of any other patent being granted for glaucoma
      treatment.




The
      Registrant followed a policy of aggressively pursuing claims of infringement
      on
      its patent and the Registrant did not believe its patent, or product or services
      infringed on the rights of any other person.




9
 **Table
              of Contents**
 **Index
              to Financial Statements**


**Competition**




The
      medical device and service industries are highly competitive. The Registrant’s
      patented device and treatment process were in competition with established
      and
      future glaucoma treatment procedures and products. Since Medicare does not
      currently reimburse patients for the cost of these prescription medications
      but
      has paid for the PNT procedure, the Registrant believes a substantial number
      of
      the glaucoma patients in the U.S. would benefit economically from the PNT
      procedure to the extent their prescription medication could be
      reduced.





**Employees**




In
      addition to its two officers, Dr. LiVecchi, its Medical Director and John
      Sharkey, its Director of Business Development, during 2006 the Registrant
      engaged three persons as full-time consultants, an administrative
      employee at the corporate headquarters, and a European marketing consultant
      in Italy.  Dr. LiVecchi resigned as Medical Director in December
      2006.





**Subsequent
        Events**
  On
        January 26, 2007, Registrant and G. Richard Smith, an individual residing
        in Arizona,
        entered into an Asset Sales Agreement (the “ASA”) dated as of January 24,
        2007,
        pursuant to which the Registrant agreed to sell and Mr. Smith agreed to
        purchase substantially all of the Registrant’s assets, except for the European distribution
        agreements (collectively the “Assets”). The purchase price for the Assets
        pursuant to the ASA was $300,000 in cash (the “Purchase Price”). The Purchase
        Price was paid upon the closing of the transaction. Upon receipt of the Purchase
        Price, the Registrant, pursuant to the terms of the ASA, used the Purchase
        Price to pay certain of the Registrant’s outstanding debts and accounts payable.
        Under the terms of the ASA, Mr. Smith assumed certain of the existing debts
        and
        liabilities of the Registrant and its subsidiaries that existed on the date
        of
        execution of the ASA, which remained unpaid after the Purchase Price and an
        additional $200,000 had been paid out by the Registrant on such outstanding debts
        and
        liabilities. Prior to January 26, 2007, Mr. Smith was Chairman of the Registrant’s
        board of directors and was the Registrant’s corporate secretary.
  On
        January 19, 2007, Registrant’s Board of Directors and the holders of a majority
        of Registrant’s
        outstanding common stock approved a 1-for-100 reverse stock split
        of
        the Registrant’s outstanding common stock (the “2007 Reverse Split”). The
        2007
        Reverse Split became effective on February 5, 2007, and was applicable to
        all
        the common stock of the Registrant outstanding on that date.
  On
        February 6, 2007, the Registrant completed the sale of 47,000,000 restricted
        shares of its
        post-2007 Reverse Split common stock to Ms. Karen Sandhu in a private transaction
        with gross proceeds to the Registrant from the sale equaling $200,000 (the
        “Offering”). The Registrant
        used the net proceeds from the Offering to pay outstanding debts and liabilities
        of the Registrant.
 10
 **Table
              of Contents**
 **Index
              to Financial Statements**
  Pursuant
            to the terms of a Stock Purchase Agreement dated as of January 26, 2007, by
            and
            between Mr. Marco Gutierrez, Mr. G. Richard Smith, Mr. Gary R. Smith
            and Mr.
            John
            LiVecchi (the “SPA”), Mr. Gutierrez purchased a total of 160,994,722 shares
            (the “Shares”) of pre-2007 Reverse Split common stock of the Registrant from
            Messrs. Smith, Smith and LiVecchi (the “Sellers”) for an aggregate purchase price
            of
            $100,000. The transactions memorialized in the SPA closed on February 2,
            2007.
            In connection with the closing of the SPA, the Sellers agreed to return all
            of
            the stock options held by them to the Registrant for cancellation.
  On
            January 26, 2007, the Board of Directors of the Registrant appointed
            Mr. Peter Gelb
            to
            serve as a director of the Registrant to fill a vacancy on the Board
            of Directors
            that was created by the prior resignation of Dr. John T. LiVecchi.
  On January
            26, 2007, Mr. G. Richard Smith, Gary R. Smith and Mr. Mark R. Smith resigned
            from the Board of Directors of the Registrant and from all executive officer
            positions held by them with the Registrant.
  On
            January 26, 2007, the Board
            of
            Directors of the Registrant appointed Mr. Marco Gutierrez to serve as a
            director of the Registrant to fill a vacancy on the Board of Directors.
  On
            February 25, 2007, the Board of Directors of the Registrant approved
            the conversion
            of an aggregate of three hundred thousand dollars ($300,000) of an outstanding
            note of the Registrant (the “Note”) into shares of the Registrant’s common
            stock. The conversion price of the shares of common stock to be issued
            was valued
            at
            $0.001 per share by the Registrant’s Board of Directors.
  Upon
            the
            eventual full conversion of the Note to common shares, the approved conversion
            of the Note to common stock would result in the issuance by the Registrant
            of an aggregate of 300,000,000 restricted shares of its common stock .
            In
            addition, there would be a charge against earnings for the issuance of
            the
            option to convert the debt of approximately $90,000,000.  The
            holder of the
            shares of underlying common stock issued upon conversion of the Note may
            have
            been entitled to request the removal of any restrictive legends that would
            be
            attached to the common shares so issued in accordance with the provisions
            of Rule 144(k) under the Securities Act of 1933, as amended.
  On
            March
            26, 2007, the Registrant and the Noteholder mutually agreed to rescind
            the terms of
            the
            conversion of the Note to common stock as described above. It was mutually
            agreed between the Registrant
            and the Noteholder that, based solely on the current market price of
            the
            Registrant’ s
            common stock
            on
            its primary trading market, the conversion of the Note to common stock
            on the
            terms described no
            longer
            accurately reflected the value of the Note, would have an adverse effect
            on the
            financial statements
            of the Registrant, and therefore was not in the best interests of the
            Registrant. As of March 26, 2007,
            the
            Note had not been presented to the Registrant’s transfer agent for conversion to
            shares of common stock
            and
            no shares of common stock had been issued under the above described terms
            of
            conversion. As
            a
            result of the rescission of the conversion terms of the Note, all of
            the
            $300,000 Note shall remain
            outstanding as a valid and existing liability of the Registrant. The
            Registrant and the Noteholder have
            not
            reached any agreements as to the terms of a future conversion of the
            Note.
  On
            February 27, 2007, Registrant’s Articles of Incorporation were amended to
            change
            its name to Continental Fuels, Inc. and to increase its authorized capital
            to 900,000,000 common stock shares and 100,000,000 preferred stock shares.


11
 **Table
            of Contents**
 **Index
            to Financial Statements**
  On
          March
          14, 2007 Registrant announced the appointment of Timothy Brink as its President
          and Ernesto Haberer as Vice President of Business Development. (See “Item
          9.
          Directors, Executive Officer, Promoters and Control Persons,”
below.)
  On
          March
          19, 2006 Registrant announced an agreement to acquire petroleum trading
          and
          storage companies
          from Universal Property Development and Acquisition Corporation (“UPDAC”) for
          $2.5 Million
          in cash and shares of Registrant’s convertible preferred stock valued at $5.0
          Million (the “Preferred
          Stock”). The Preferred Stock will be convertible into 500,000,000 common stock
          shares and will also have voting rights which will equal approximately
          70% of
          Registrant’s total votes at any shareholders meeting. Therefore, upon the
          closing of this transaction UPDAC
          will have control of the Registrant.


**Item
              2.**
            **Description
                of Property.**




Registrant
      entered into a five-year lease for approximately 3,500 square feet of space
      at a
      monthly rent
      of
      $4,520 commencing on December 1, 2004. During 2006, the Registrant’s address was
      16857 E. Saguaro Boulevard,
      Fountain Hills, Arizona 85268.




In
      January 2007, as part of the sale of the Registrant’s assets,
      this
      lease was assigned to G. Richard Smith.




In
      April 2007, the Registrant entered into a one year lease for approximately
      430
      square feet of space at a monthly rent of $1,988.  The Registrant’s address
      is 9901 IH 10 West, Suite 800, San Antonio, Texas 78230.




**Item
              3.**
            **Legal
                Proceedings.**





No
      legal
      proceedings are currently pending against or by the Registrant.





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


On
        February 21, 2006, pursuant to Nevada statutes the number of Registrant’s
        authorized and outstanding
        common stock shares was reduced in a 10-for-1 reverse stock split (the “2006
        Reverse Split”).   The 2006 Reverse Split was approved
        by the consent of the holders of a majority of Registrant’s outstanding common
        stock at the time.
  On March
        17,
        2006 and November 1, 2006, Registrant’s Articles of Incorporation were amended
        to increase the number of authorized
        common stock shares to 200,000,000 and 400,000,000, respectively. These
        amendments to the Articles of Incorporation were
        approved by the consent of the holders of a majority of Registrant’s outstanding
        common stock at the time.
  On
          January 26, 2007, all of Registrant’s subsidiaries and all assets of Registrant,
          except for the European distribution agreements, were sold to G. Richard
          Smith, Registrant’s Chairman, for $300,000 in cash and the assumption of certain
          trade debts (the “Sale of Assets”).   The
          Sale
          of Assets was approved by the consent of theholders
          of a majority of Registrant’s outstanding common stock at the time.
 On
          February 5, 2007, a 1-for-100 reverse stock split of Registrant’s
          outstanding common stock (the “2007 Reverse Split”) became effective. All common
          stock numbers set forth in this document have been adjusted for the 2007
          Reverse
          Split. The 2007 Reverse Split was approved by the consent of the holders
          of a
          majority of Registrant’s outstanding common stock at the time.
 On
        February 27, 2007, Registrant’s Articles of Incorporation were amended to
        change
        its name to Continental Fuels, Inc. and to increase its authorized capital
        to 900,000,000 common stock shares and 100,000,000 preferred stock shares. This amendment to the Articles of Incorporation was
        approved by the consent of the holders of a majority of Registrant’s outstanding
        common stock at the time.
 12
 **Table
              of Contents**
 **Index
              to Financial Statements**


**PART
      II**








**Item
              5.**
            **Market
                for Common Equity and Related Stockholder
                Matters.**





**Market
      Information**





During
      2006, the principal U.S. market in which the Registrant’s common shares (all of
      which are one class, $.001 par value) were traded was the over-the-counter
      bulletin board market under the symbols “CDIK.” From February 5, 2000 to March
      23, 2007, Registrant’s common stock was traded under the symbol “CNDI” and
      on March 23, 2007, commenced trading under the symbol “CFUL.” Such
      over-the-counter market quotations reflect inter-dealer prices without retail
      markup, markdown or commission and may not necessarily represent actual
      transactions. The following table shows the low and the high trading prices
      in
      2005 and 2006, by fiscal quarter, as adjusted for the 10-for-1 reverse stock
      split on February 21, 2006, the 1-for-100 reverse stock split on February 5,
      2007, and through March 1, 2007.




After
      the reverse split on February 5, 2007,
      Registrant’s shares traded under the symbol “CNDI.”




**Low**
            
            **High**January
                1, 2005 - March 31, 2005
            $50.00
            
            $92.00April
                1, 2005 - June 30, 2005
            $31.00
            
            $64.00July
                1, 2005 - September 30, 2005
            $20.00
            
            $30.00October
                1, 2005 - December 31, 2005
            $10.00
            
            $21.00January
                1, 2006 - March 31, 2006
            $5.50
            
            $14.00April
                1, 2006 - June 30, 2006
            $2.70
            
            $5.50July
                1, 2006 - September 30, 2006
            $0.50
            
            $2.70October
                1, 2006 - December 31, 2006
            $0.20
            
            $0.80January
                1, 2007 - March 1, 2007
            $0.30
            
            $2.70




Registrant’s
      common stock is also traded on the Frankfurt and Hamburg, Germany
      exchanges.





**Recent
      Sales of Restricted Securities**





All
      securities sold by Registrant were registered on Form S-8 or were reported
      previously in a quarterly filing by Registrant.


13
 **Table
            of Contents**
 **Index
            to Financial Statements**


On
      February 6, 2007, Registrant completed the sale of 47,000,000 restricted shares
      of its post-Reverse
      Stock Split Common Stock to Ms. Karen Sandhu in a private transaction
      with gross proceeds to the Registrant from the sale equaling $200,000 (the
      “Offering”). Ms. Sandhu is an accredited investor (as defined in Rule 501 of
      Regulation D). The purchase price of the Offering shares was paid in cash.
      The shares
      of
      Common Stock issued in the Offering are restricted shares and were issued
      in
      a transaction exempt from the registration requirements of the Securities
      Act of 1933, as amended (the “Securities Act”) pursuant to Section 4(2)
      of
      the Securities Act and Rule 506 of Regulation D thereunder and Registrant affixed
      appropriate legends to the stock certificates issued in the Offering. The shares
      issued in the Offering are subject to Rule 144 under the Securities Act and
      therefore generally cannot be resold for a period of twelve months from the date
      of
      purchase. No general solicitations were made in connection with the Offering,
      and prior to making any offer or sale, the Registrant had reasonable grounds
      to believe and believed that Ms. Sandhu was capable of evaluating the merits
      and risks of the investment and was able to bear the economic risk of the investment.





**Stockholders**





The
      Registrant has approximately 346 stockholders of record, including nominee
      firms for securities dealers.





**Dividends**





The
      Registrant has not paid or declared any dividends upon its common shares since
      its inception and, by reason of its present financial status and its
      contemplated financial requirements, does not intend to pay or declare any
      dividends upon its common shares within the foreseeable future.





**Common
      Stock**





From
      January 1, 2006 to February 21, 2006, the authorized capital stock of the
      Registrant consisted of 400,000,000 shares of common stock, par value $0.001
      per
      share.




On
      February 21, 2006, a 10-for-1
      reverse stock split  of Registrant’s
      outstanding common stock(the “2006 Reverse Split”) became effective.




On
          March
          17, 2006 and November 1, 2006, Registrant’s Articles of Incorporation were
          amended to increase the number of authorized common stock shares to 200,000,000
          and 400,000,000, respectively.
  On
            February 5, 2007, a 1-for-100 reverse stock split of Registrant’s
            outstanding common stock (the “2007 Reverse Split”) became effective.
            All common stock numbers set forth in this document have been adjusted
            for the
            2007 Reverse Split.
  On
            February 25, 2007, the Board of Directors of the Registrant approved
            the conversion
            of an aggregate of three hundred thousand dollars ($300,000) of an outstanding
            note of the Registrant (the “Note”) into shares of the Registrant’s common
            stock. The conversion price of the shares of common stock to be issued
            was valued
            at
            $0.001 per share by the Registrant’s Board of Directors.
 14
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 Upon
                the
                eventual full conversion of the Note to common shares, the approved conversion
                of the Note to common stock would result in the issuance by the Registrant
                of an aggregate of 300,000,000 restricted shares of its common stock .
                In
                addition, there would be a charge against earnings for the issuance
                of the
                option to convert the debt of approximately $90,000,000.  The
                holder of the
                shares of underlying common stock issued upon conversion of the Note may
                have
                been entitled to request the removal of any restrictive legends that would
                be
                attached to the common shares so issued in accordance with the provisions
                of Rule 144(k) under the Securities Act of 1933, as amended.
  On
                March
                26, 2007, the Registrant and the Noteholder mutually agreed to rescind
                the terms of
                the
                conversion of the Note to common stock as described above. It was
                mutually
                agreed between the Registrant
                and the Noteholder that, based solely on the current market price
                of the
                Registrant’ s
                common stock
                on
                its primary trading market, the conversion of the Note to common
                stock on the
                terms described no
                longer
                accurately reflected the value of the Note, would have an adverse
                effect on the
                financial statements
                of the Registrant, and therefore was not in the best interests of
                the
                Registrant. As of March 26, 2007,
                the
                Note had not been presented to the Registrant’s transfer agent for conversion to
                shares of common stock
                and
                no shares of common stock had been issued under the above described
                terms of
                conversion. As
                a
                result of the rescission of the conversion terms of the Note, all
                of the
                $300,000 Note shall remain
                outstanding as a valid and existing liability of the Registrant. The
                Registrant and the Noteholder have
                not
                reached any agreements as to the terms of a future conversion of
                the
                Note.
  On
                February 27, 2007, Registrant’s Articles of Incorporation were amended to
                change
                its name to Continental Fuels, Inc. and to increase its authorized capital
                to 900,000,000 common stock shares and 100,000,000 preferred stock shares.
  As
                of
                April 6, 2007, there were 49,938,611 shares of common stock issued and
                outstanding.
  Holders
                of common stock are entitled to one vote for each share held on each
                matter to
                be acted upon by stockholders of the Registrant. Stockholders do
                not
                have preemptive rights or the right to cumulate votes for the election
                of
                directors. Shares are not subject to redemption nor to any liability
                for further
                calls. All shares of common stock issued and outstanding are entitled
                to receive
                such dividends, if any, as may be declared by the Board of Directors
                in its
                discretion out of funds legally available for that purpose, and to
                participate
                pro rata in any distribution of the Registrant’s assets upon liquidation or
                dissolution.
  In
                the
                event of liquidation or dissolution of the Registrant, all assets
                available for
                distribution after satisfaction of all debts and other liabilities
                and after
                payment or provision for any liquidation preference on any issued
                Preferred
                Stock are distributable among the holders of the common stock.
  The
                transfer agent for the Registrant’s common stock is Integrity
                Stock Transfer, 2920 N. Green Valley Parkway, Building 5 - Suite
                527, Henderson,
                Nevada 89014.





**Preferred
      Stock**


The
        Registrant is authorized to issue 100,000,000 shares of Preferred Stock,
        par
        value $.0001 per share, of which no shares were issued and outstanding at
        the
        date of this report. The Preferred Stock shares shall have the rights,
        limitations and obligations which the Board of Directors shall determine
        at the
        time the Preferred Stock is issued.
  On
        March
        19, 2006 Registrant announced an agreement to acquire petroleum trading and
        storage companies
        from Universal Property Development and Acquisition Corporation (“UPDAC”) for
        $2.5 Million
        in cash and shares of Registrant’s convertible preferred stock valued at $5.0 Million
        (the “Preferred Stock”). The Preferred Stock will be convertible into
        500,000,000 shares of common stock and will also have voting rights which
        will
        equal approximately
        70% of Registrant’s total votes at any shareholders meeting. Therefore, upon the
        closing of
        this
        transaction UPDAC will have control of the Registrant.


15
 **Table
            of Contents**
 **Index
            to Financial
            Statements**


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





The
      following discussion and analysis should be read in conjunction with our
      Consolidated Financial Statements and notes appearing elsewhere in this
      report.





**Critical
      Accounting Policies**





“Management’s
      Discussion and Analysis of Financial Condition and Results of Operations”
discusses our consolidated financial statements that have been prepared in
      accordance with accounting principles generally accepted in the United States
      of
      America. The preparation of these financial statements requires us to make
      estimates and assumptions that affect the reported amount of assets and
      liabilities at the date of the financial statements, the 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.
      On an
      on-going basis, we evaluate our estimates and judgments, including those related
      to revenue recognition, valuation allowances for inventory and accounts
      receivable, and impairment of long-lived assets. We base our estimates and
      judgments on historical experience and on various other factors that are
      believed to be reasonable under the circumstances. The result of these estimates
      and judgments form the basis for making conclusions about the carrying value
      of
      assets and liabilities that are not readily apparent from other sources. Actual
      results may differ from these estimates under different assumptions or
      conditions. The SEC suggests that all registrants list their most “critical
      accounting policies” in Management’s Discussion and Analysis. A critical
      accounting policy is one which is both important to the portrayal of the
      Company’s financial condition and results of operations and requires
      management’s most difficult, subjective or complex judgments, often as a result
      of the need
      to
      make estimates about the effect of matters that are inherently uncertain.
      Management believes the following critical accounting policies affect its more
      significant judgments and estimates in the preparation of its consolidated
      financial statements.





These
      policies include, but are not limited to, the carrying value of the inventory
      and fixed assets, the
      life
      of fixed assets, the expensing of the costs relating to FDA and European
      licensing activities, and the valuation of common stock related to compensation
      and other services. Complex judgments and estimates underlie these critical
      accounting policies, such as the estimated life of fixed assets for depreciation
      purposes, the market valuation of inventory in reporting inventory at the lower
      of cost or market, dividing consultants’ compensation between expense categories
      of FDA licensing activities and sales activities, dividing compensation and
      payments to third parties between cost of goods sold category and general and
      administrative expense, and the determination of the market value of restricted
      stock when issued as compensation or as repayment for loans.




**Year
        Ended December 31, 2006**
 
 **Operations.**
 
 Registrant
        continued delivery of its PNT products to its European distributors
        in 2006. Total sales were $90,076, with a cost of goods sold of $58,614.
        Registrant’s gross margin on its products sold was approximately 34.9%,
        but its marketing expenses for these European sales far exceeded the gross
        sales. Registrant sold its operations to its former Chairman in January
        2007 .


16
 **Table
              of Contents**
 **Index
              to Financial Statements**
 For
              the
              year ended December 31, 2006 Registrant experienced a loss from operations
              of $3,964,367, which was comprised primarily of its gross profit from
              European sales of $31,462, its general and administrative expenses incurred
              at the corporate level of $3,911,861, and interest expense of $83,968.
              93.6% of Registrant’s 2006 corporate expenses consisted of salaries and
              consulting wages of $1,012,660 (25.9%), officer and Director stock
              bonus and option
              compensation of $1,398,350 (35.7%), consultant stock bonus and option compensation
              of $201,370 (5.1%), employee stock bonus and option compensation of
              $84,720 (2.2%), professional expenses of $448,871 (11.6%) and public relations
              expenses of $513,611 (13.1%). In comparison, during 2005 86.1% of Registrant’s
              corporate expense of $2,230,801 consisted of salaries and wages of
              $941,118 (42.2%) ,
              officer
              and Director stock bonus and option compensation
              of $189,000 (8.5%), consultant stock bonus and option compensation
              of $76,500 (3.4%),
              employee stock bonus and option compensation of $18,000 (0.8%), professional
              expenses of $341,412 (15.3%) and public relations expense of $354,979
              (15.9%). The increase in salaries and consulting wages in 2006 from 2005
              resulted primarily from the increased salaries of Registrant’s officers and
              Directors. The
              stock bonus and option compensation was awarded for the execution
              of the distribution agreement in France and Canada. The increase in professional
              expenses in 2006 from 2005 occurred as a result of increased accounting
              expenses in 2006. The increase in public relation expenses in 2006 from
              2005
              resulted from more public relation firm contracts in 2006. Approximately
              98.2% of the corporate expenses in 2006 were paid with Registrant’s
              common stock in order to preserve Registrant’s cash resources. Registrant’s
              expenses will be entirely different after the January 2007 sale of
              Registrant’s assets to its former Chairman.
 
 **Liquidity
              and Capital Resources.**
  Because
                of the Registrant’s cash position at 2005 year-end and general and
                administrative expenses totaling approximately $3,900,000 per year,
                the Registrant
                suffered from a liquidity shortage during 2006. From January 1, 2006
                to
                December 31, 2006 Registrant borrowed a total of $323,200 from its three
                Directors. After Registrant’s transactions on January 26, 2007, all loans to
                Registrant’s former Directors were repaid except $15,775 owed to G. Richard
                Smith, $12,600 owed to Gary R. Smith, and $5,000 owed to Dr. LiVecchi,
                all of which are the liability of Registrant’s former Chairman.
 
 Continental
              Fuels, Inc., as Registrant will be establishing its own sources
              of capital and liquidity during 2007.




**Item
              7.**
            **Financial
                Statements.**





See
      Financial Statements starting on page F-1 for this information.





**Item
              8.**
            **Changes
                In and Disagreements with Accountants on Accounting and Financial
                Disclosure.**





The
      Registrant has not changed accountants or had any disagreements with its
      accountants during the audits of the last two fiscal years.


17
 **Table
            of Contents**
 **Index
            to Financial
            Statements**


**Item
              8A.**
            **Controls
                and Procedures.**





Our
      management has responsibility for establishing and maintaining adequate internal
      control over financial reporting for us. Our management uses a framework for
      establishing these internal controls. This framework includes review of
      accounting detailed records on at least a quarterly basis by multiple senior
      officers of Continental Fuels, Inc. (formerly Coronado Industries, Inc.), at
      least one of whom operates outside of the corporate finance and accounting
      area,
      and one of whom operates within the area of corporate finance and accounting.
      This review process includes review of significant accounting records and source
      documents, such as general journal entry records, accounts payable records,
      and
      monthly bank statement reconciliations. Documentary records are kept of this
      review process.





The
      Company carried out an evaluation, under the supervision and with the
      participation of the Company’s management, including its Chief Executive Officer
      and Chief Financial Officer, of the
      effectiveness, as of December 31, 2006, of the design and operation of the
      Company’s disclosure controls and procedures pursuant to Exchange Act Rule
      13a-15(e). Based upon that evaluation, the Chief Executive Officer and Chief
      Financial Officer concluded that the Company’s disclosure controls and
      procedures were ineffective
      to ensure that the information we are required to disclose in reports that
      we
      file or submit under the Securities and Exchange Act of 1934 is recorded,
      processed, summarized and reported within the time periods specified in
      Securities and Exchange Commission rules and forms. More specifically, the
      Company identified a material weakness due to a lack of sufficient personnel
      with appropriate knowledge in U.S. GAAP and lack of sufficient analysis and
      documentation of the application of U.S. GAAP to transactions, including but
      not
      limited to equity transactions.  Management plans to identify an
      appropriate service provider to eliminate this material weakness.





There
      have been no changes in our internal control over financial reporting during
      the
      year ended December 31, 2006 that have materially affected, or are reasonably
      likely to materially affect, the Company’s internal control over financial
      reporting.





The
      controls and procedures for our disclosure as well as our internal controls
      over
      financial reporting are processes designed by, or under the supervision of,
      the
      chief executive and chief financial officers, and effected by the board of
      directors, management and other personnel, to provide reasonable assurance
      regarding the reliability of financial reporting and the preparation of
      financial statements for external purposes in accordance with generally accepted
      accounting principles. We believe that a control system, no matter how well
      designed and operated, cannot provide absolute assurance that the objectives
      of
      the control system are met, and no evaluation of controls can provide absolute
      assurance that all control issues and instances of fraud, if any, within a
      company have been detected. However, our Chief Executive Officer and Chief
      Financial Officer have concluded that the Company’s disclosure controls and
      procedures and its internal controls and procedures are effective at providing
      that reasonable level of assurance.





Our
      management believes that upon significant future growth in the number of
      accounting transactions we process, additional review and enhancement of
      internal controls will be required. Our management is planning to assign
      additional staff resources to assist with support for growth in the internal
      controls area when the increase in transaction velocity dictates this as a
      prudent step in order to maintain our effective level of internal
      controls.





Our
      external auditors, Semple, Marchal & Cooper, LLP, have not issued an
      attestation report on management’s assessment of the Company’s internal control
      over financial reporting, as it is not yet required since the Company has less
      than $75 million in “public float.”





**Item
              8B.**
            **Other
                Information.**




None.


18
 **Table
            of Contents**
 **Index
            to Financial
            Statements**




**PART
      III**





**Item
              9.**
            **Directors,
                Executive Officers, Promoters and Control Persons; Compliance With
                Section
                16(a) of the Exchange Act.**




On
      January 26, 2007, the Board of Directors of the Registrant appointed Mr. Peter Gelb
      to
      serve as a director of the Registrant to fill a vacancy on the Board of Directors
      that was created by the prior resignation of Dr. John T. LiVecchi.




On January
      26, 2007, Mr. G. Richard Smith, Mr. Gary R. Smith and Mr. Mark R. Smith resigned
      from the Board of Directors of the Registrant and from all executive officer
      positions held by them with the Registrant.




On
      January 26, 2007, the Board
      of
      Directors of the Registrant appointed Mr. Marco Gutierrez to serve as a
      director of the Registrant to fill a vacancy on the Board of Directors.





On
      January 26, 2007, Mr. Marco Gutierrez was appointed to serve as the Secretary
      of
      the Registrant.




On
      February 26,  2007,
      Mr.
      Peter Gelb submitted to the Registrant his resignation from all his executive
      officer positions with the Registrant, including his position as Chief Executive
      Officer of the Registrant. Mr. Gelb’s resignation as Chief Executive Officer
      became effective on March 1, 2007. Mr. Gelb continues as a director of the
      Registrant and remains the Chairman of the Registrant’s Board of Directors.




On
      February 26, 2007, the board of directors of the Registrant approved the
      appointment of Mr. Timothy Brink as Chief Executive Officer, President and
      Chief
      Financial Officer of the Registrant, which appointment became effective on
      March 1, 2007.




In
      March
      2007, Registrant’s Board of Directors approved the appointment of
      Ernesto Haberer as Vice President of Business Development.




The
        Board
        of Directors of the Registrant currently consists of two members, Mr. Peter
        Gelb
        and Mr. Marco Gutierrez. The full Board of Directors of the Registrant consists
        of five seats. Currently, three seats of the Registrant’s Board of Directors are
        vacant.


19
 **Table
            of Contents**
 **Index
            to Financial Statements**


The
      directors and executive officers of the Registrant as of March 1, 2007 were
      as
      follows:




**Name
                and Address**
            ****
            **Position**Timothy
                Brink
              9901
                IH 10 West, Suite 800
              San
                Antonio, Texas 78230
            
            Chief
                Executive Officer, President and Chief Financial
                OfficerErnesto Haberer
                9901
                    IH 10 West, Suite 800
                  San
                    Antonio, Texas 78230
            
            Vice President
              of
              Business DevelopmentPeter
                Gelb
              9901
                    IH 10 West, Suite 800
                  San
                    Antonio, Texas 78230
            
            Director;
                ChairmanMarco
                Gutierrez
              700
                  North Courtnay Pkwy., #409
                Merritt
                  Island, Florida
                  32953
            
            Director;
                Secretary





**Timothy
      Brink**, age 43, has 17 years experience in petroleum retail
      operations. Mr. Brink has worked as an operational manager for several large
      companies including Southland Corp., Circle K, and Amerada Hess, Inc. Mr. Brink
      has also been employed as an Operations Manager by Garb-Ko, a 7-11 franchise
      chain in Michigan, Indiana, and Ohio. Mr. Brink specializes in developing
      marketing strategies to promote sales and overall profitability to meet
      long-term financial goals. While employed at Amerada Hess Mr. Brink was promoted
      into franchise operations (also called the Branded Retailer program). The
      Branded Retailer program helped Amerada Hess establish their desired market
      share. In 2001, Mr. Brink started his own chain of petroleum retail outlets
      in
      Florida. Mr. Brink sold his interest in the company in January of 2005. Since
      2005, Mr. Brink has been actively involved in oil trading and consulting. 
Mr. Brink was employed by Universal Property Development and Acquisition
      Corporation from July 2006 to February 2007.




Prior
      to
      1990, Mr. Brink served 6 years in the United States Air Force. He was an
      electrical avionics communications and navigation specialist. While serving
      as a
      Non-Commission Officer in the United States Air Force, Mr. Brink was a full
      time
      student. He attended the Community College of the Air Force, Florida State
      University, and Troy State University. Mr. Brink received a degree in Avionics
      System Technology, Electrical Engineering Technology, and a Masters in Business
      Management.




**Ernesto
      Haberer** ,
      age
      66, hasover 35
      years experience in the Oil Refining, Production, Petrochemical and Chemical
      fields, as well as in international sourcing and trading of petroleum products
      and equipment to Continental Fuels. He has occupied senior management and
      executive positions with major US and multinational firms in the United States,
      as well as in Switzerland, France, Argentina, Mexico, and Brazil. Mr. Habereris
      the
      owner andPresident ofIRC
      Group, Inc., aninternational trading and consulting business, with offices in the United
      States, United Kingdom, Switzerland, Mexico, Brazil, Malaysia and Indonesia.
      He
      is a member of American Chemical Society, NPRA (National Petroleum Refiners
      Association), Grupo Hulero Mexicano, ANIQ (Asociacion Nacional de la Industria
      Quuimica, Mexico), and the Brazilian Chemical Association, Camara Argentina
      de
      la Industria Quimica. Additionally, Mr. Haberer is a Founding Member and
      delegate to the Asia Pacific Economic Council (APEC) and has signed bilateral
      cooperation agreements with the Chamber of Industry and Commerce of Malaysia,
      Indonesia, and Singapore. Mr. Haberer is a graduate from the University of
      Montevideo (Uruguay), the University of Paris (France), and the INSEAD (France);
      he holds a BS and a PhD in Chemical and Nuclear Engineering, and an MBA. He
      is
      also a Member of the International Who’s Who of Businessmen.




20
 **Table
            of Contents**
 **Index
            to Financial
            Statements**






**Peter Gelb**,
      age 61, has extensive experience in the financial services industry. During
      the past
      ten
      years, Mr. Gelb has worked in the capital markets, debt financing, equity
      financing, and private investment areas of that industry. From 2006 to the present,
      Mr. Gelb has been a Managing Director of Copper Beech Equity Partners LLC,
      a
      boutique investment banking firm located in New York City. From 2004 to 2006,
      Mr.
      Gelb was a Managing Director of First Wall Street Capital. From 2001 to
      2004,
      Mr. Gelb was a Senior Vice-President at Deutsche Financial Services and from
      1996
      to 2001, Mr. Gelb was a Senior Vice-President at US Capital Markets. A
      former
      CPA, Mr. Gelb received his BS degree from the Wharton Business School and
      an
      MBA from Columbia University. Mr. Gelb is not a member of any other boards of
      directors.




**Marco
        Gutierrez**, age 34,
        has experience in the retail merchandising and licensing
        field.  From
        February 2004 until February 2007, he was Assistant Director of Merchandise
        Buying for Ron Jon Surf Shop, which has stores in several locations in the
        United States, as well as Canada and Mexico.  Prior to entering the retail
        industry, Mr. Gutierrezwas
        a
        Physical Therapist for Brevard HealthWorx from June of 2002 until October
        of
        2003.
  During
        2006, Registrant’s Board of Directors served as its Audit Committee because
        Registrant was too small to have an Audit Committee at that time. During
        2006,
        Registrant did not have an audit committee financial expert because no one
        on
        the Board of Directors was so qualified.  It is not known at this time
        whether Continental Fuels, Inc., as Registrant, will have an audit committee
        or
        an audit committee financial expert.





During
      2006, Registrant had not adopted a code of ethics for any of its officers,
      because Registrant had been advised by counsel that any such code of ethics
      may
      be materially different than existing state and federal law, and, if so, may
      subject Registrant’s officers to personal liability in addition to and different
      from liability under current state and federal law.  It is not known at
      this time whether Continental Fuels, Inc., as Registrant, will adopt a code
      of
      ethics for its officers.


21
 **Table
            of Contents**
 **Index
            to Financial Statements**


**Item
              10.**
            **Executive
                Compensation.**


The
      following table sets forth the salaries of the Registrant’s two officers for the
      fiscal year ending December 31, 2006.




**Annual
                    Compensation**
                
                **Long-Term
                      Compensation****Other**
                
                **Restricted**
                
                **Securities****Annual**
                
                **Stock**
                
                **Underlying**
                
                **LTIP**
                
                **All
                    other****Name
                    and Principal**
                
                
                
                **Salary**
                
                **Bonus**
                
                **Compensation**
                
                **Award(s)**
                
                **Options/**
                
                **Payouts**
                
                **Compensation****Position**
                
                **Year**
                
                **($)**
                
                **($)**
                
                **($)**
                
                **($)**
                
                **SARs
                    (#)**
                
                **($)**
                
                **($)**G.
                    Richard Smith
                
                
                2006
                
                $
                187,500
                (1)
                $
                332,500
                (2)
                $
                –
                
                $
                –
                
                
                200,000
                (3)
                $
                –
                
                $
                –Chairman
                
                
                2005
                
                
                150,000
                (4)
                
                69,000
                (5)
                
                –
                
                
                –
                
                
                –
                
                $
                –
                
                $
                –2004
                
                
                150,000
                (6)
                
                –
                
                
                –
                
                
                –
                
                
                965,200
                (7)
                
                –
                
                
                –Gary
                    R. Smith
                
                
                2006
                
                
                187,500
                (1)
                
                332,500
                (2)
                
                –
                
                
                –
                
                
                200,000
                (3)
                
                –
                
                
                –President
                
                
                2005
                
                
                150,000
                (4)
                
                69,000
                (5)
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –2004
                
                
                150,000
                (6)
                
                –
                
                
                –
                
                
                –
                
                
                965,200
                (7)
                
                –
                
                
                –
  (1)
                  $120,834
                      of this salary was paid in 294,717 shares of restricted common
                      stockin
                      August 2006. The remaining $66,668 of salary was waived and
                      forfeited inNovember
                      2006.
 (2)
                  $238,500
                      of this amount was paid in 45,000 shares of restricted common
                      stockin
                      March 2006, $84,000 of this amount was paid in 35,000 shares
                      of restricted
                      stock in August 2006, and $10,000 of this amount was paid in 50,000
                      shares of restrictedcommon
                      stock in December 2006.
 (3)
                  Stock
                      options for 200,000 shares of restricted common stock with
                      an exerciseprice
                      of $5.30 were granted in March 2006, but were forfeited and
                      waived inAugust
                      2006.
 (4)
                    The
                        salary to G. Richard Smith was paid in 1,471,665 restricted
                        common stock
                        shares and thesalary
                        to Gary R. Smith was paid in 1,666,667 restricted common
                        stock
                        shares.
 (5)
                      This
                          bonus was paid in 760,000 restricted common stock
                          shares.
 (6)
                      $150,000
                          of annual salary was accrued for each of G. Richard Smith
                          and Gary R.
                          Smith during 2004. All of their accrued salary in 2004
                          was forgiven in
                          January 2005.
 (7)
                      5,000
                          of these options were granted in June 2004 and 4,652 were
                          granted in
                          January 2005. 5,000 of these options have a ten-year term,
                          were
                          immediately exercisable and have an exercise price of $68.00
                          per share.
                          3,000 of these options have a ten-year term, were immediately
                          exercisable
                          and have an exercise price of $55.00 per share. 1,652 of
                          these options
                          have a five-year term, were exercisable as of January 2006 and have
                          an exercise price of $60.50 per share.  All of these options were
                          waived and forfeited on January 26,
                          2007.


22
 **Table
            of Contents**
 **Index
            to Financial Statements**


The
      following table sets forth certain information concerning the stock options
      (with stock appreciation rights) granted during the 2006 fiscal year to the
      Company’s chief executive officer and each other executive officer.





**Name**
            
            **Number
                of**
              **Securities**
              **Underlying**
              **Options/SARs**
              **Granted
                (#)**
            
            **%
                of Total**
              **Options/SARs**
              **Granted
                to**
              **Employees
                in**
              **Fiscal
                Year**
            
            **Exercise
                or Base**
              **Price
                ($/Sh)**
            
            **Expiration**
              **Date**G.
                Richard Smith
            
            200,000
                (1)
            
            0%
            
            $5.30
            
            (1)Gary
                R. Smith
            
            200,000
                (1)
            
            0%
            
            $5.30
            
            (1)


(1)
              These
                  options were forfeited and waived in August
                  2006.


The
      following table sets forth information concerning each exercise of stock options
      and the value of unexercised options (with stock appreciation rights) at
      December 31, 2006 for the Company’s chief executive officer and each other
      officer.


****
            
            ****
            
            ****
            **Number
                of Securities**
              **Underlying
                Unexercised**
              **Options/SARS
                At FY-End(#)**
            ****
            **Value
                of**
              **Unexercised
                In-the-Money**
              **Options/SARS
                At FY-End($)**
            ******Name**
            ****
            **Shares
                Acquired**
              **on
                Exercise (#)**
            ****
            **Value
                Realized ($)**
            ****
            **Exercisable/Unexercisable**
            ****
            **Exercisable/Unexercisable**G.
                Richard Smith
            
            
            0
            
            $
            0
            
            
            12,254
                / 0 (1)
            
            
            $0
                / $0 (2)Gary
                R. Smith
            
            
            0
            
            $
            0
            
            
            6,805
                / 0 (1)
            
            
            $0
                / $0 (2)


_______________


(1)
                All
                    other options previously granted to this individual have been
                    exercised or
                    waived as of December 31, 2005, and these options were waived
                    on January
                    26, 2007.


(2)
            Based
                on a December 29, 2006 trading price of $0.20 per
                share.




The
      Registrant currently has no pension, retirement, annuity, savings or similar
      benefit plan which provides compensation to its executive officers or
      directors.


23
 **Table
            of Contents**
 **Index
            to Financial Statements**


**Item
              11.**
            **Security
                Ownership of Certain Beneficial Owners and Management and Related
                Stockholder Matters.**





As
      of
      April 6, 2007, there were 49,938,611 outstanding shares. The following table
      sets forth the name, address, number of shares beneficially owned, and the
      percentage of the Registrant’s total outstanding common stock shares owned by:
      (i) each of the Registrant’s Officers and Directors; (ii) the Registrant’s
      Officers and Directors as a group; and (iii) other shareholders of 5% or more
      of
      the Registrant’s total outstanding common stock shares.





**Name
                and Address of**
              **Beneficial
                Owner (1)**
            
            **Company
                Position**
            
            **Number
                of**
              **Shares
                Owned**
            
            **Percent**
              **of
                Class**Timothy
              Brink (2)
            
            Chief
              Executive Officer
            
            0
            
            0%Ernesto Haberer
              (2)
            
            Vice President of Business
              Development
            
            0
            
            0%Peter
              Gelb (2)
            
            Director
            
            0
            
            0%Marco Gutierrez
              (3)
            
            Director
            
            1,609,948
            
            3.2%Karen
              Sandhu (4)
            
            
            
            47,000,000
            
            94.1%UPDAC(5)
            
            
            
            0
            
            0%G.
                Richard Smith (6)
            
            
            
            0
            
            0%Gary
                R. Smith (9)
            
            
            
            0
            
            0%John
                T. LiVecchi (8)
            
            
            
            0
            
            0%Officers
                and Directors
              as
                a Group (4 persons) (9)
            
            
            
            1,609,948
            
            3.2%




(1)
              As
                  used in this table, a beneficial owner of a security includes any
                  personwho,
                  directly or indirectly, through contract, arrangement, understanding,relationship
                  or otherwise has or shares (a) the power to vote, or direct thevoting
                  of, such security or (b) investment power which includes the power
                  todispose,
                  or to direct the disposition of, such security. In addition, a
                  personis
                  deemed to be the beneficial owner of a security if that person
                  has the
                  rightto
                  acquire beneficial ownership of such security within 60
                  days.
 (2)
                Mr.
                    Brink’s, Mr. Haberer’s and Mr. Gelb’s address is 9901
                    IH 10 West, Suite 800,San
                    Antonio, Texas 78230.
 (3)
                Mr.
                    Gutierrez’ address is 700 North Courtnay Pkwy., #409, Merritt Island,Florida
                    32953.  If the transaction with UPDAC is completed, Mr. Gutierrez’
                    shares will represent approximately 1.0% of Registrant’s voting
                    shares.  (See Note 5,
                    below.)
 (4)
              Ms.
                  Sandhu’s address is 43111 University Place, Miami, Florida 33146.  If
                  the transaction with UPDAC is completed, Ms. Sandhu’s shares will
                  represent approximately 28.2% of Registrant’s voting shares.  (See
                  Note 5, below.)
 (5)
                On
                    March 19, 2007, Registrant announced an agreement to acquire
                    petroleum
                    trading andstorage
                    companies from UPDAC for$2.5
                    Million in cash and shares of Registrant’s convertible preferred stock
                    valued at $5.0Million
                    (the “Preferred Stock”). The Preferred Stock will also have voting rights
                    which will equalapproximately
                    70% of Registrant’s total votes at any shareholders meeting.  As
                    chief executive officer of UPDAC, Kamal Abdallah will be responsible
                    for
                    voting UPDAC’s Preferred Stock at any Registrant shareholder
                    meeting.  UPDAC’s address is 14255 Hwy 1, Suite 209, Juno Beach,
                    Florida 33408.
 (6)
              G.
                  Richard Smith was a former officer and director of the Registrant
                  whoresigned
                  from his positions with the Registrant on January 26,
                  2007.
 (7)
              Gary
                  R. Smith was a former officer and director of the Registrant whoresigned
                  from his positions with the Registrant on January 26,
                  2007.
 (8)
              John
                  LiVecchi was a former officer and director of the Registrant whoresigned
                  from his positions with the Registrant in December
                  2006.


(9)
              If
                  the transaction with UPDAC is completed, the shares of Registrant’s
                  officers and Directors will represent approximately 1.0% of the
                  Registrant’s voting shares.  (See Note 5,
                  above.)
  24
 **Table
            of Contents**
 **Index
            to Financial Statements**


The
      following table sets forth certain information concerning outstanding equity
      compensation plans approved by Registrant’s shareholders and not approved by
      Registrant’s shareholders at December 31, 2006.




**Plan
                Category**
            ****
            **Number
                of Shares**
              **to
                be Issued**
              **for
                Options**
            
            **Weighted
                Average**
              **Exercise
                Price**
            
            **Number
                of Shares**
              **to
                be Issued Other**
              **Than
                Options**Approved
              By
                Shareholders
            
            21,059
                (1)
            
            $11.00
            
            0Not
                Approved
              By
                Shareholders
            
            0
            
            $0
            
            0


(1)
              All
                  of these options were waived and forfeited on January 26,
                  2007.




**Item
              12.**
            **Certain
                Relationships and Related
                Transactions.**





From
      September 30, 2004 through January 31, 2005, G. Richard Smith had loaned the
      Registrant $45,000; Gary R. Smith had loaned Registrant $45,000; and Dr. John
      T.
      LiVecchi had loaned Registrant $40,000. These loans accrued interest at 15%
      per
      annum. $40,000 of each of these loans plus interest were repaid on February
      1,
      2005 with G. Richard Smith exercising stock options for 3,722 shares, Gary
      R.
      Smith exercising stock options for 3,715 shares and the issuance of 1,153 shares
      to Dr. John T. LiVecchi.




From
      February 28, 2005 through December 31, 2005, G. Richard Smith loaned Registrant
      a total of $110,000
      (which accrued a total of $1,808.22 in interest) for which he was issued a
      total
      of 10,573
      restricted common stock shares during the year, a portion of which were
      exercised stock options.
      From February 28, 2005 through December 31, 2005, Gary R. Smith loaned
      Registrant a total
      of
      $120,000 (which accrued a total of $1,610.95 in interest) for which he was
      issued a total of 11,685
      restricted common stock shares during the year, a portion of which were
      exercised stock options.
      From February 28, 2005 through December 31, 2005, John T. LiVecchi loaned
      Registrant a
      total
      of $130,000 (which accrued a total of $2,151.37 in interest) for which he was
      issued a total of
      2,940
      restricted common stock shares during the year for $130,000 of debt plus all
      accrued interest.




During
      2005, G. Richard Smith exercised options for 9,747 shares of restricted common
      stock in
      conversion of $107,211 of debt and accrued interest. During 2005, Gary R. Smith
      exercised options
      for 10,196 shares of restricted common stock in conversion of $112,147 of debt
      and accrued
      interest. In December 2005, G. Richard Smith and Gary R. Smith each waived
      and
      returned to
      Registrant 39,338 options to purchase shares. In December 2005, John T. LiVecchi
      waived and
      returned to Registrant 28,938 options to purchase shares.




From
      January 1, 2006 through March 31, 2006, G. Richard Smith loaned the Registrant
      $69,000; Gary R. Smith had loaned Registrant $35,000; and Dr. John T. LiVecchi
      had loaned Registrant $37,000. These loans accrued interest at 15% per annum.




From
      April 1, 2006 through June 30, 2006, G. Richard Smith loaned the Registrant
      $28,375; Gary R. Smith had loaned Registrant $32,000; and Dr. John T. LiVecchi
      had loaned Registrant $40,000. At June 30, 2006, G. Richard Smith was owed
      a
      total of $97,375; Gary R. Smith was owed a total of $67,000; and Dr. John T.
      LiVecchi was owed a total of $87,000. These loans accrued interest at 15% per annum.


25
 **Table
                of Contents**
 **Index
                to Financial Statements**
  From
                July
                1, 2006 through September 30, 2006, G. Richard Smith loaned the Registrant
                $30,000; Gary R. Smith had loaned Registrant $20,000; and Dr. John
                T. LiVecchi
                had loaned Registrant $5,000. On August 24, 2006, G. Richard Smith
                was repaid
                $99,000 of principal and $5,389 of interest by the issuance of 254,609 restricted
                common stock shares; Gary R. Smith was repaid $87,000 of principal
                and $3,999
                of
                interest by the issuance of 221,948 restricted common stock shares; and
                John
                LiVecchi was repaid $87,000 of principal and $6,613 of interest by
                the issuance
                of 228,326 restricted common stock shares.
  G.
                Richard Smith and Gary R. Smith each loaned the Company $10,000 from
                October 1,
                2006 through December 31, 2006.  Dr. LiVecchi made no loans to the
                Company in the fourth quarter of 2006.
                At
                December 31, 2006, G. Richard Smith was owed $15,775, Gary R. Smith
                was owed
                $12,600 and Dr. LiVecchi was owed $5,000.
  In
                2003,
                G. Richard Smith loaned the Company $300,000 to repay a third party long-term
                loan. That loan bears interest at the rate of 16% per annum, is secured
                by the Registrant’s assets and the interest thereon is paid monthly.  This
                note is still outstanding on April 6, 2007, but the assets previously
                securing
                the repayment of the note were sold to G. Richard Smith on January
                26,
                2007.
  In
                March
                2006, G. Richard Smith, Gary R. Smith and John T. LiVecchi each were
                issued a
                stock bonus of 45,000 restricted shares valued at $238,500 and were
                granted a
                stock option to purchase up to 200,000 restricted common stock shares
                at a per
                share exercise price of $5.30 with an expiration date of March 23,
                2016. 
In August 2006, G. Richard Smith, Gary R. Smith and John T. LiVecchi
                waived and
                forfeited their rights to the 200,000 stock options granted in March
                2006. 
On January 26, 2007, they waived and forfeited their rights to all
                other
                outstanding options.
  On
                January 26, 2007, Registrant and G. Richard Smith, Chairman and a
                Director of Registrant,
                entered into an Asset Sales Agreement (the “ASA”) dated as of January 24,
                2007,
                pursuant to which the Registrant agreed to sell and Mr. Smith agreed to
                purchase substantially all of the Registrant’s assets, except for the European distribution
                agreements (collectively the “Assets”). The purchase price for the Assets
                pursuant to the ASA was $300,000 in cash (the “Purchase Price”). Under the terms
                of
                the ASA, Mr. Smith assumed certain of the existing debts and liabilities of
                the
                Registrant and its subsidiaries that existed on the date of execution
                of the
                ASA,
                which remain unpaid after the Purchase Price and an additional $200,000 had
                been
                paid out by the Registrant on such outstanding debts and liabilities. The
                Board
                of Directors of the Registrant determined that the Purchase Price
                for the
                Assets was fair to the shareholders of the Registrant based on the
                recent market
                prices of Registrant’s common stock and Registrant’s past
                performance.


**Item
              13.**
            **Exhibits.**





Reference
      is herewith made to the financial statements and notes thereto included herein
      and to the cover page of this 10-KSB with respect to documents incorporated
      by
      reference in accordance with Rule 12b-33.




**Exhibit**
              **Number**
            ****
            **Description**10.1*#
            
            Marketing,
                Sales and Distribution Agreement between
                LaboratoriesDOLIAGE and Coronado Industries, Inc. dated April 21,
                200623*
            
            Consent
                of Michael K. Hair, P.C.31.1*
            
            Certificate
                of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200231.2*
            
            Certificate
                of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley
                Act of 200232.1*
            
            Certificate
                of Chief Executive Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 200232.2*
            
            Certificate
                of Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley
                Act of 2002 ______________


*
              Filed
                  herewith.
 #
              Confidential
                  treatment has been requested with respect to certain portions of this
                  exhibit. Omitted portions have been filed separately with the Securities
                  and Exchange Commission.  The copy filed herewith omits the
                  information subject to the confidentiality request. Omissions are
                  designated as [ * ].


26
 **Table
            of Contents**
 **Index
            to Financial
            Statements**





**Item
              14.**
            **Principal
                Accountant Fees and
                Services.**





In
      the
      2006 fiscal year, the Company incurred $73,600 to its auditor for auditing
      services; $10,900 for audit-related services; and $3,700 for tax services. 
In the 2005 fiscal year, the Company incurred $46,400 to its auditor for
      auditing services; $4,000 for audit-related services; and $3,900 for tax
      services.  In the 2004 fiscal year, the Company incurred $46,968 to its
      auditor for auditing services; $2,600 for audit-related services; and $5,665
      for
      tax services.





27
 **Table
          of Contents**
 **Index
          to Financial
          Statements**


**SIGNATURES**





Pursuant
      to the requirements of Section 13 or 15(d) of the Securities Exchange Act of
      1934, the Registrant has duly caused this report to be signed on its behalf
      on
      April 16, 2007 by the undersigned, thereunto authorized.


**CONTINENTAL
                  FUELS, INC.**By:
                /s/ 
                  Timothy BrinkTimothy
                    Brink
                  Chief
                    Executive Officer, President and Chief Financial
                    Officer


Pursuant
      to the requirements of the Securities Exchange Act of 1934, this report has
      been
      signed by the following persons on behalf of the Registrant and in the
      capacities on the date(s) indicated.


**Name**
                ****
                **Title**
                ****
                **Date**/s/ 
                    Timothy Brink
                  
                  Timothy
                    Brink
                
                Chief
                      Executive Officer, President and Chief Financial Officer
                
                April
                    16, 2007/s/ 
                    Peter Gelb
                  
                  Peter
                    Gelb
                
                Chairman
                  of the Board; Director
                
                April
                      16, 2007/s/ Marco Gutierrez
                  Marco
                    Gutierrez
                
                Secretary;
                  Director
                
                April
                    16, 2007
 28
 **Table
              of Contents**
 **Index
              to Financial
              Statements**


**SUPPLEMENTAL
      INFORMATION AND
      EXHIBITS**







**SUPPLEMENTAL
      INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TO SECTION 15(d) OF
      THE
      SECURITIES EXCHANGE ACT OF 1934 BY REGISTRANTS WHICH HAVE NOT REGISTERED
      SECURITIES PURSUANT TO SECTION 12 OF THE ACT.**





The
      Registrant’s fiscal year ended December 31, 2006. The Registrant currently has
      not held its Annual Meeting of Stockholders.





Four
      copies of all material to be mailed to stockholders with respect to such meeting
      will be furnished to the Securities and Exchange Commission but such documents,
      when furnished, will not be deemed to be filed with the Securities and Exchange
      Commission or otherwise subject to liabilities of Section 18 of the Act (except
      to the extent that the Registrant specifically incorporates such material by
      reference in any subsequent Form 10-KSB); it is expected that such documents
      will consist of a Form of Proxy, Notice of Annual Meeting, Information Statement
      with Schedules and/or Exhibits annexed thereto.







29
 **Table
          of Contents**
 **Index
          to Financial
          Statements**


**INDEX
      TO FINANCIAL STATEMENTS**





PageReport
                of Independent Registered Public Accounting
                Firm
            F-2Consolidated
                Balance Sheets as of December 31, 2006 and
                2005
            F-3Consolidated
                Statements of Operations for the Years
                Ended December 31, 2006 and 2005
            F-4Consolidated
                Statements Changes in Stockholders’ Equity for
                the Years Ended December 31, 2006 and 2005
            F-5Consolidated
                Statements of Cash Flows for the Years
                Ended December 31, 2006 and 2005
            F-6Notes
                to Consolidated Financial
                Statements
            F-8









F-1
 **Table
          of Contents**
 **Index
          to Financial
          Statements**




**Report
        of Independent Registered Public Accounting Firm**
 To
          the
          Board of Directors and Stockholders of
 Continental
          Fuels, Inc. (formerly Coronado Industries, Inc.)
  We
          have
          audited the accompanying consolidated balance sheets of Continental Fuels,
          Inc.
          (formerly Coronado Industries, Inc.) as of December 31, 2006 and 2005 and
          the
          related consolidated statements of operations, changes in stockholders’ equity
          (deficit), and cash flows for the years then ended. These financial statements
          are the responsibility of the Company’s management. Our responsibility is to
          express an opinion on these financial statements based on our
          audits.
  We
          conducted our audits in accordance with the standards of the Public Company
          Accounting Oversight Board (United States). Those standards require that
          we plan
          and perform the audit to obtain reasonable assurance about whether the
          financial
          statements are free of material misstatement. An audit includes examining,
          on a
          test basis, evidence supporting the amounts and disclosures in the
          financial statements. 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 consolidated financial statements referred to above present
          fairly,
          in all material respects, the financial position of Continental Fuels,
          Inc.
          (formerly Coronado Industries, Inc.) at December 31, 2006 and 2005, and
          the
          results of its operations, changes in stockholders’ equity (deficit) and its
          cash flows for the years then ended in conformity with accounting principles
          generally accepted in the United States of America.
 
 The
          accompanying consolidated financial statements have been prepared assuming
          that
          the Company will continue as a going concern. As discussed in Note 1 to
          the
          consolidated financial statements, the Company’s significant operating losses
          and negative working capital raise substantial doubt about its ability
          to
          continue as a going concern. The consolidated financial statements do not
          include any adjustments that might result from the outcome of this
          uncertainty.
 
 
 /s/
          Semple, Marchal & Cooper, LLP
 
 Phoenix,
          Arizona
 March
          22,
          2007
  F-2
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
 **CONTINENTAL
                    FUELS, INC.**
                  **(FORMERLY
                    CORONADO INDUSTRIES, INC.)**
                ************************
                ******CONSOLIDATED
                    BALANCE SHEETS**
                ******DECEMBER
                    31, 2006 AND 2005**
                ******ASSETS****December
                    31,****2006**
                
                **2005**CURRENT
                    ASSETSCash
                    & Cash Equivalents
                
                $
                –
                
                $
                12,340Accounts
                    Receivable
                
                
                24,478
                
                
                14,015Inventory
                
                
                12,206
                
                
                24,289Prepaid
                    Expenses
                
                
                14,866
                
                
                14,078Total
                    Current Assets
                
                
                51,550
                
                
                64,721Property
                    and equipment, net
                
                
                6,098
                
                
                8,121OTHER
                    ASSETSDeposits
                
                
                4,520
                
                
                4,520TOTAL
                    ASSETS
                
                $
                62,168
                
                $
                77,363
 **LIABILITIES
                    AND STOCKHOLDERS’ EQUITY (DEFICIT)**CURRENT
                    LIABILITIESNotes
                    payable - related parties
                
                $
                333,375
                
                $
                310,000Notes
                    payable
                
                
                132,349
                
                
                100,000Bank
                    overdraft
                
                
                1,770
                
                
                –Accounts
                    payable
                
                
                164,080
                
                
                63,546Accrued
                    salaries
                
                
                15,000
                
                
                470,500Accrued
                    interest
                
                
                12,669
                
                
                7,631Accrued
                    taxes
                
                
                163,794
                
                
                115,821TOTAL
                    LIABILITIES
                
                
                823,037
                
                
                1,067,498COMMITMENTS
                
                
                –
                
                
                –STOCKHOLDERS’
                  EQUITY (DEFICIT)Preferred
                      Stock - $.0001 par value; 100,000,000 shares authorized, none
                      issued or
                      outstanding
                
                
                –
                
                
                –Common
                      Stock - $.001 par value; 900,000,000 shares authorized 2,812,323
                      and
                      278,796 shares issued and outstanding at December 31, 2006
                      and 2005,
                      respectively
                
                
                2,812
                
                
                279Additional
                    paid-in capital
                
                
                19,408,417
                
                
                15,217,317Accumulated
                    deficit
                
                
                (20,172,098
                )
                
                (16,207,731
                )TOTAL
                    STOCKHOLDERS’ EQUITY(DEFICIT)
                
                
                (760,869
                )
                
                (990,135
                )TOTAL
                    LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)
                
                $
                62,168
                
                $
                77,363The
                    accompanying notes are an integral part of these financial
                    statements.
 F-3
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
 **CONTINENTAL
                      FUELS, INC.**
                    **(FORMERLY
                      CORONADO INDUSTRIES, INC.)**
                ******CONSOLIDATED
                    STATEMENTS OF OPERATIONS**
                ******FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
                ******For
                    the Year Ended December 31,****2006**
                
                **2005**PRODUCT
                    REVENUES
                
                $
                90,076
                
                $
                109,330Cost
                    of Product Revenues
                
                
                58,614
                
                
                76,046GROSS
                    PROFIT
                
                
                31,462
                
                
                33,284GENERAL
                    & ADMINISTRATIVE EXPENSESSalaries
                    and wages
                
                
                1,012,660
                
                
                941,118Salaries
                    and option bonuses–
                    officers and directors
                
                
                1,398,350
                
                
                189,000–
                    consultants
                
                
                201,370
                
                
                76,500–
                    employees
                
                
                84,720
                
                
                18,000Public
                    relations and marketing
                
                
                513,611
                
                
                354,979Legal
                    and professional fees
                
                
                334,538
                
                
                229,999FDA
                    expense
                
                
                114,333
                
                
                111,413Rent
                    expense
                
                
                54,240
                
                
                63,697Miscellaneous
                    expense
                
                
                198,039
                
                
                246,095TOTAL
                    GENERAL & ADMINISTRATIVE EXPENSES
                
                
                3,911,861
                
                
                2,230,801LOSS
                    FROM OPERATIONS
                
                
                (3,880,399
                )
                
                (2,197,517
                )OTHER
                    INCOME (EXPENSES)Extinguishment
                    of Debt
                
                
                –
                
                
                10,481Interest
                    expense
                
                
                (83,968
                )
                
                (71,143
                )TOTAL
                    OTHER INCOME (EXPENSES)
                
                
                (83,968
                )
                
                (60,662
                )NET
                    LOSS
                
                $
                (3,964,367
                )
                $
                (2,258,179
                )Basic
                    Loss per Share
                
                $
                (3.82
                )
                $
                (10.68
                )Weighted
                    Average Shares Outstanding
                
                
                1,036,940
                
                
                211,490The
                    accompanying notes are an integral part of these financial
                    statements.


F-4
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
 **CONTINENTAL
                          FUELS, INC.**
                        **(FORMERLY
                          CORONADO INDUSTRIES, INC.)**
                ******CONSOLIDATED
                    STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY
                    (DEFICIT)**
                ******FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND 2005****Additional**
                
                
                
                **Stockholders’****Common
                    Stock**
                
                **Paid-in**
                
                **Accumulated**
                
                **Equity****Shares**
                
                **Par
                    Value**
                
                **Capital**
                
                **Deficit**
                
                **(Deficit)**BALANCE
                    AT DECEMBER 31, 2004 (POST-SPLIT)
                
                
                183,292
                
                $
                183
                
                $
                12,668,586
                
                $
                (13,949,552
                )
                $
                (1,280,783
                )Stock
                    issued for debt & interest
                
                
                43,259
                
                
                43
                
                
                519,443
                
                
                –
                
                
                519,486Stock
                    Issued for services
                
                
                51,595
                
                
                52
                
                
                1,256,672
                
                
                –
                
                
                1,256,724Forgiveness
                    of officer salaries
                
                
                –
                
                
                –
                
                
                751,417
                
                
                –
                
                
                751,417Stock
                    options exercised
                
                
                650
                
                
                1
                
                
                21,199
                
                
                –
                
                
                21,200Net
                    loss
                
                
                –
                
                
                –
                
                
                –
                
                
                (2,258,179
                )
                
                (2,258,179
                )BALANCE
                    AT DECEMBER 31, 2005
                
                
                278,796
                
                
                279
                
                
                15,217,317
                
                
                (16,207,731
                )
                
                (990,135
                )Stock issued
                    for services
                
                
                1,343,256
                
                
                1,343
                
                
                1,697,438
                
                
                –
                
                
                1,698,781Stock
                    and options issued for bonuses
                
                
                465,500
                
                
                465
                
                
                1,967,475
                
                
                –
                
                
                1,967,940Reverse
                    stock split - Fractional Shares
                
                
                2
                
                
                –
                
                
                –
                
                
                –
                
                
                –Forgiveness
                    of officer salaries
                
                
                –
                
                
                –
                
                
                229,756
                
                
                –
                
                
                229,756Stock
                    issued for debt and interest
                
                
                724,769
                
                
                725
                
                
                296,431
                
                
                –
                
                
                297,156Net
                    loss for the year ended, December 31, 2006
                
                
                –
                
                
                –
                
                
                –
                
                
                (3,964,367
                )
                
                (3,964,367
                )BALANCE
                    AT DECEMBER 31, 2006
                
                
                2,812,323
                
                $
                2,812
                
                $
                19,408,417
                
                $
                (20,172,098
                )
                $
                (760,869
                )The
                    accompanying notes are an integral part of these financial
                    statements.
  F-5
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
 **CONTINENTAL
                        FUELS, INC.**
                      **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
                ******CONSOLIDATED
                    STATEMENTS OF CASH FLOWS**
                ******FOR
                    THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
                ******For
                    the Year Ended December 31,****2006**
                
                **2005**INCREASE
                    (DECREASE) IN CASH AND CASH EQUIVALENTS:CASH
                    FLOWS FROM OPERATING ACTIVITIES:Net
                    Loss
                
                $
                (3,964,367
                )
                $
                (2,258,179
                )Adjustments
                      to reconcile net loss to net cash used by operating
                      activities:Depreciation
                
                
                2,023
                
                
                2,138Stock
                    issued for salaries, consulting & interest
                
                
                1,667,135
                
                
                1,266,710Forgiveness
                    of officer salaries
                
                
                229,756
                
                
                751,417Stock
                    and options issued for bonuses
                
                
                1,967,940
                
                
                –Accounts
                    payable converted to debt
                
                
                32,348
                
                
                –Changes
                    in Assets and Liabilities:Accounts
                    Receivable
                
                
                (10,463
                )
                
                27,271Prepaid
                    Expenses
                
                
                (788
                )
                
                888Inventory
                
                
                12,083
                
                
                (9,157
                )Deferred
                    Compensation
                
                
                –
                
                
                20,833Accounts
                    payable
                
                
                100,534
                
                
                (7,037
                )Accrued
                    salaries
                
                
                (455,500
                )
                
                (217,817
                )Accrued
                    interest
                
                
                5,038
                
                
                2,829Accrued
                    taxes
                
                
                47,972
                
                
                (25,314
                )NET
                    CASH USED IN OPERATING ACTIVITIES
                
                
                (318,486
                )
                
                (445,418
                )CASH
                    FLOWS FROM FINANCING ACTIVITIES:Bank
                    Overdraft
                
                
                1,770
                
                
                –Repayment
                    of notes payable - related parties
                
                
                (26,824
                )
                
                –Proceeds
                    from borrowings
                
                
                381,200
                
                
                436,500Repayment
                    of notes payable
                
                
                (50,000
                )
                
                –Proceeds
                    from exercise of options
                
                
                –
                
                
                21,200NET
                    CASH PROVIDED BY FINANCING ACTIVITIES
                
                
                306,146
                
                
                457,700**(Continued)**The
                    accompanying notes are an integral part of these financial
                    statements.
  F-6
 **Table
                of Contents**
 **Index
                to Financial
                Statements**
 **CONTINENTAL
                            FUELS, INC.**
                          **(FORMERLY
                            CORONADO INDUSTRIES, INC.)**
                    ******CONSOLIDATED
                        STATEMENTS OF CASH FLOWS**
                    ******FOR
                        THE YEARS ENDED DECEMBER 31, 2006 AND 2005**
                      **(Continued)**
                    ******For
                        the Year Ended December 31,****2006**
                    
                    **2005**NET
                      CHANGE IN CASH & CASH EQUIVALENTS
                    
                    
                    (12,340
                    )
                    
                    12,282CASH
                      AND CASH EQUIVALENTS AT BEGINNING OF PERIOD
                    
                    
                    12,340
                    
                    
                    58CASH
                      AND CASH EQUIVALENTS AT END OF PERIOD
                    
                    $
                    –
                    
                    $
                    12,340Supplemental
                        disclosure of cash flow information:Cash
                        paid during the year for:Interest
                    
                    $
                    56,262
                    
                    $
                    58,325Non-cash
                        Transactions:Issuance
                        of common stock for services
                    
                    
                    1,698,781
                    
                    
                    1,266,710Issuance
                        of common stock for debt
                    
                    
                    16,155
                    
                    
                    509,500Issuance
                        of common stock for interest
                    
                    
                    281,000
                    
                    
                    9,989Issuance
                        of common stock and options for bonuses
                    
                    
                    1,967,940
                    
                    
                    795,417Proceeds
                        from borrowings - Related Parties
                    
                    
                    –
                    
                    
                    436,500Forgiveness
                        of officers salaries
                    
                    
                    229,756
                    
                    
                    751,417Accounts
                        payable converted to debt
                    
                    
                    32,348
                    
                    
                    –The
                        accompanying notes are an integral part of these financial
                        statements.
  F-7
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
 **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
        TO
        THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
          1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
          USE OF
          ESTIMATES**
 
 **ORGANIZATION**
 
 Coronado
          Industries, Inc. (the “Company”) was
          originally
          incorporated under the laws of the State of New York in December 1989 as
          First
          Lloyd Funding, Inc., which subsequently changed its name to Logical Computer
          Services of New York, Ltd. In September 1996, the Company changed its name
          to
          Coronado Industries, Inc. The Company was a non-operating shell corporation
          with
          nominal net assets prior to its merger on November 5, 1996, when the Company
          acquired one hundred percent (100%) of the assets of Ophthalmic International,
          L.L.C. and American Glaucoma.
 
 The
          stockholders of American Glaucoma and Ophthalmic International, L.L.C.,
          which
          are the same for both corporations, obtained majority control of the Company
          in
          the combination, and therefore, were considered the accounting acquirer.
          Therefore, the transaction was accounted for as a reverse merger.
 
 The
          Company was in the development stage from its acquisition of Ophthalmic
          International, L.L.C. and American Glaucoma in November 1996 through September
          1997. In September 1997, American Glaucoma opened its first glaucoma treatment
          clinic in Scottsdale, Arizona. Ophthalmic International, L.L.C. has received
          a
          patent on the method for treating Open Angle Glaucoma, as well as the devices
          used in the treatment, including the Vacuum Fixation Device. The Company
          intends
          to manufacture and market the patented Vacuum Fixation Device and the patented
          suction rings to major medical supply companies and health care providers
          throughout the world.
  On
          February 27, 2007, the Company’s Articles of
          Incorporation were amended to
          change
          its name to Continental Fuels, Inc.
  **GOING
          CONCERN**
 
 The
          Company’s financial statements are presented on a going concern basis, which
          contemplates the realization of assets and the satisfaction of liabilities
          in
          the normal course of business. The Company has not made an operating profit
          since its reorganization in 1996. Further, the Company has a working capital
          deficit of $(771,487) and an accumulated deficit
          of $(20,172,098).
 The
            Company's continuation as a going concern is dependent upon receiving
            additional
            financing. The Company anticipates that during its 2007 fiscal year it
            will need
            to raise substantial funds to support its working capital needs and to
            continue
            to execute the requirements of its business plan. Management of the Company
            is
            currently in a process of trying to secure additional capital. There
            can be no
            assurance that the Company will be successful in this capital raise or
            with
            other attempts to raise sufficient capital.
  The
          financial statements do not include any adjustments to reflect the possible
          future effects of the recoverability and classification of assets or the
          amounts
          and classifications of liabilities that may result from the uncertainty
          of the
          Company’s ability to continue as a going concern
 F-8
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
  **CONTINENTAL
                  FUELS, INC.**
 **(FORMERLY
                  CORONADO INDUSTRIES, INC.)**
 NOTES
              TO
              THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
                1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS
                AND USE OF
                ESTIMATES (Continued)**
 
 **PRINCIPLES
                OF CONSOLIDATION**
 
 The
                consolidated financial statements include the activity of Continental
                Fuels,
                Inc. (formerly Coronado Industries, Inc.), together with its wholly-owned
                subsidiaries, Ophthalmic International, Inc., American Glaucoma,
                Inc. and
                Ophthalmic International, LLC. All significant inter-company accounts
                and
                transactions have been eliminated. All of the above subsidiaries
                were inactive
                for the years ended December 31, 2006 and 2005.
  **RECLASSIFICATIONS**
 
 Certain
                  balances in the accompanying December 31, 2005 consolidated balance sheet
                  were reclassified to conform to the current year’s
                  presentation.




**PERVASIVENESS
      OF ESTIMATES**





The
      preparation of financial statements in conformity with generally accepted
      accounting principles 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.





**CASH
      AND CASH EQUIVALENTS**





Cash
      and
      cash equivalents are considered to be all highly liquid investments purchased
      with an initial maturity of three (3) months or less.





**INVENTORIES**





Inventories
      consist primarily of materials and parts and are stated at the lower of cost,
      as
      determined on a first-in, first-out (FIFO) basis, or market.





**ACCOUNTS
      RECEIVABLE**





The
      Company follows the allowance method of recognizing uncollectible accounts
      receivable. The allowance method recognized bad debt expense as a percentage
      of
      accounts receivable based on a review of the individual accounts outstanding
      and
      the Company’s prior history of uncollectible accounts receivable. As of December
      31, 2006 and 2005, the Company has not established an allowance for
      uncollectible accounts receivable as they believe that all accounts are
      currently collectible. The Company does not record interest income on delinquent
      accounts receivable balances until it is received.




F-9
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
            USE OF
            ESTIMATES (Continued)**
 **PROPERTY
              AND EQUIPMENT**
 
 Property
              and equipment are stated at cost. Maintenance and repairs that neither
              materially add to the value of the property nor appreciably prolong
              its life are
              charged to operations as incurred. Betterments or renewals are capitalized
              when
              incurred. Depreciation is provided using the straight line method over the
              following useful lives:
  Office furniture &
                      Equipment
                    5
                        - 7 YearsMachinery
                    5
                        - 7 YearsLeasehold Improvements
                    5
                        Years
 **LONG
                        LIVED
                        ASSETS**





Long
      lived assets are accounted for in accordance with SFAS No. 144, “Accounting for
      the Impairment or Disposal of Long-Lived Assets.” The statement requires that
      long-lived assets be reviewed for impairment whenever events or changes in
      circumstances indicate that the carrying amount of an asset may not be
      recoverable. Assets to be disposed of are reported at the lower of carrying
      amount or fair value less cost to sell.





**DEFERRED
      INCOME TAXES**





Deferred
      income taxes are provided on an asset and liability method, whereby deferred
      tax
      assets are recognized for deductible temporary differences and operating loss
      and tax credit carry forwards and deferred tax liabilities are recognized for
      taxable temporary differences. Temporary differences are the differences between
      the reported amounts of assets and liabilities and their tax basis. 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.





**STOCKHOLDERS’
      EQUITY**





On
      January 19, 2007, the Company’s Board of Directors approved a 1-for-100 stock
      split (the “Reverse Stock Split”) of all of the Company’s issued common stock,
      par value $0.001 per share (”Common Stock”) effective February 5, 2007.  In
      addition, on February 16, 2007, the Company filed an amendment to its Restated
      Certificate of Incorporation to effect an increase in the authorized capital
      stock from 400,000,000 shares of $.001 par value common stock and 50,000,000
      shares of $.001 par value preferred stock to 900,000,000 shares of $.001 par
      value common stock and 100,000,000 shares of $.001 par value preferred
      stock. Prior
      to
      the filing, the amendment was approved by the Company’s shareholders at a
      special meeting and by the Company’s Board of Directors. The Reverse Stock Split
      became effective on February 5, 2007. All share and per share information
      included in these consolidated financial statements has been adjusted to give
      retroactive effect of the Reverse Stock Split.




F-10
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
            USE OF
            ESTIMATES (Continued)**
  **LOSS
              PER SHARE**
 
 Basic
              loss per share includes no dilution and is computed by dividing loss
              to common
              stockholders by the weighted average number of common shares outstanding
              for the
              period. Assumed exercise of the outstanding stock options and warrants
              at
              December 31, 2006 and 2005 of 153,458 and 21,058, respectively, have
              been
              excluded from the calculation of basic net loss per common share as
              their effect
              is anti-dilutive (decreases the loss per share). In addition, as the
              Company has
              a net loss available to common stockholders for the years ended December
              31,
              2006 and 2005 the diluted EPS calculation has been excluded from the
              financial
              statements.
  **REVENUE
            RECOGNITION**





The
      company recognizes revenue based on guidance provided in Securities and Exchange
      Commission (“SEC”) Staff Accounting Bulletin (“SAB”) No. 104, “Revenue
      Recognition,” and in accordance with Emerging Issues Task Force (“EITF”) Issue
      No. 00-21, “Revenue Arrangements with Multiple Deliverables.” The Company
      recognizes revenue when persuasive evidence of an arrangement exists, delivery
      has occurred or services have been rendered, our price is fixed or determinable,
      and collection is reasonably assured. We recognize revenue on our standard
      products when title passes to the customer upon shipment. The standard products
      do not have customer acceptance criteria. The company has standard rights of
      return that are accounted for as a warranty provision under SFAS No. 5,
“Accounting for Contingencies.” The company does not have any price protection
      agreements or other post shipment obligations. For custom equipment where
      customer acceptance is part of the sales agreement, revenue will be recognized
      when the customer has accepted the product. In cases where custom equipment
      does
      not have customer acceptance as part of the sales agreement, revenue will be
      recognized upon shipment, as long as the system meets the
      specifications as agreed upon with the customer. Certain transactions may have
      multiple deliverables, with the deliverables clearly defined. To the extent
      that
      the secondary deliverables are other than perfunctory, the company will
      recognize the revenue on each deliverable, if separable, or on the completion
      of
      all deliverables, if not separable.





**INTANGIBLE
      ASSETS**





The
      Company reviews its intangible assets at least annually to evaluate potential
      impairment by comparing the carrying value of the intangible assets with
      expected future net operating cash flows
      from the related operations. If the expected future net operating cash flows
      are
      less than the carrying value, the Company recognizes an impairment loss equal
      to
      the amount by which the carrying value exceeds the discounted expected future
      net operating cash flows from the related operations.





**STOCK
      BASED COMPENSATION**





Prior
      to
      January 1, 2006, the Company had applied APB Opinion No. 25 and related
      interpretations in accounting for its stock-based plans as was permitted under
      SFAS No. 123, “Accounting for Stock-Based Compensation.” Under SFAS No. 123,
      companies could, but were not required to, elect to recognize compensation
      expense for all stock-based awards using a fair value methodology. The Company
      had adopted the disclosure-only provisions, as permitted by SFAS No. 123.


In
          December 2004, the FASB issued SFAS No. 123R, “Share-Based Payment (Revised
          2004).” SFAS No. 123R establishes standards for the accounting for transactions
          in which an entity (i) exchanges its equity instruments for goods or services,
          or (ii) incurs liabilities in exchange for goods or services that are based
          on
          the fair value of the entity’s equity instruments or that may be settled by the
          issuance of the equity instruments. SFAS No. 123R eliminates the ability
          to
          account for stock-based compensation using APB 25 and requires that such
          transactions be recognized as compensation cost in the income statement
          based on
          their fair values on the date of the grant.
 F-11
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
            USE OF
            ESTIMATES (Continued)**
 **STOCK
              BASED COMPENSATION (Continued)**


Effective
      January 1, 2006, the Company adopted the fair value recognition provisions
      of
      SFAS 123R “Share-Based Payment” (“SFAS 123R”) using the modified prospective
      approach.  SFAS No. 123R applies to new awards and to awards modified,
      repurchased, or cancelled after December 15, 2005. Additionally, compensation
      cost for the portion of awards for which the requisite service has not been
      rendered (generally referring to non-vested awards) that are outstanding as
      of
      December 15, 2005 must be recognized as the remaining requisite service is
      rendered during the period of and/or the periods after the adoption of SFAS
      No.
      123R. The attribution of compensation cost for those earlier awards will be
      based on the same method and on the same grant-date fair values previously
      determined for the pro forma disclosures required for companies that did not
      adopt the fair value accounting method for stock-based employee compensation.
       For purposes of estimating the grant date fair value of stock options, the
      Company uses the Black-Scholes options pricing model.


**** Assumptions
        used to determine compensation expense are determined as
        follows:




·
            Expected
                term is determined using a weighted average of the contractual term
                of the
                award;


·
            Expected
                volatility of award grants is measured using the weighted average
                of
                historical daily changes in the market price of the Company’s common stock
                over the expected term of the
                award;


·
            Risk-free
                interest rate is equivalent to the implied yield on zero-coupon U.S.
                Treasury bonds with a remaining maturity equal to the expected term
                of the
                awards; and


·
            Forfeitures
                are based on the history of cancellations of awards granted and
                management’s analysis of potential
                forfeitures.




Under
      the
      modified prospective method, results for prior periods have not been restated
      to
      reflect the effects of implementing SFAS No. 123(R). The following pro-forma
      information, as required by SFAS No. 148, “Accounting for Stock-Based
      Compensation - Transaction and Disclosure, an amendment of FASB Statement No.
      123,” is presented for comparative purposes and illustrates the effect on net
      loss and net loss per common share for the year ended December 31, 2005 as
      if
      the Company had applied the fair value recognition provisions of SFAS No. 123
      to
      stock-based compensation prior to January 1, 2006.


**2005**Net
                    loss:As
                    Reported
                
                $
                (2,258,179
                )Add:
                      Stock-based employee compensation expense included in reported
                      net income,
                      net of related tax effects
                
                
                –Deduct:
                        Total stock based employee compensation expense determined
                        under fair
                        value based method for all awards, net of related tax
                        effects
                
                
                (233,000
                )Pro
                    forma net loss
                
                $
                (2,491,179
                )Loss
                    per share:As
                    reported
                
                $
                (10.68
                )Pro
                    forma
                
                $
                (11.78
                )
  F-12
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
            USE OF
            ESTIMATES (Continued)**
  **STOCK
            BASED COMPENSATION (Continued)**
  As
            a
            result of adopting SFAS 123(R) on January 1, 2006, our net loss for the
            year
            ended December 31, 2006 is approximately $522,000 higher than if we had
            continued to account for share-based compensation under APB 25. The adoption
            of
            this standard had no impact on our provision for income taxes because
            of the
            valuation allowance for our deferred tax assets due to our history of
            recurring
            net losses.
 **FAIR
            VALUE OF FINANCIAL INSTRUMENTS**





The
      carrying values of our financial instruments included in current assets and
      current liabilities approximated their respective fair values at each balance
      sheet date due to the immediate or short-term maturity of these financial
      instruments. The fair value of long-term notes payable and lease obligations
      is
      based on current rates at which we could borrow funds with similar remaining
      maturities.




During
      the years ended December 31, 2006 and 2005, the Company had one major customer
      representing approximately 97.2% and 76.4% of total revenues.




**RECENT
      ACCOUNTING PRONOUNCEMENTS**




In
        February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS
        No.159, “The Fair Value Option for Financial Assets and Financial Liabilities -
        Including an amendment of FASB Statement No.115”. SFAS No.159 permits entities
        to choose to measure eligible financial instruments and other items at fair
        value at specified election dates. A business entity shall report unrealized
        gains and losses on items for which the fair value option has been elected
        in
        earnings at each subsequent reporting date. The fair value option may be
        applied
        instrument by instrument but only upon the entire instrument - not portions
        of
        the instrument. Unless a new election date occurs, the fair value option
        is
        irrevocable. SFAS No.159 is effective as of the beginning of an entity’s first
        fiscal year that begins after November 15, 2007. The Company does not expect
        that the adoption of SFAS No. 159 will have a material effect on the Company’s
        consolidated financial statements.
 
 In
        September 2006, the SEC issued SAB No. 108, “Considering the Effects
        of Prior Year Misstatements when Quantifying Misstatements in Current Year
        Financial Statements,” to address diversity in practice in quantifying financial
        statement misstatements. SAB No. 108 requires that the Company quantify
        misstatements based on their impact on each of its financial statements and
        related disclosures. SAB No. 108 is effective as of the end of the 2006
        fiscal year, allowing a one-time transitional cumulative effect adjustment
        to
        retained earnings as of January 1, 2006 for errors that were not previously
        deemed material, but are material under the guidance in SAB No. 108. The
        adoption of SAB No. 108 did not have a material effect on its financial
        statements.




In
      September 2006, the FASB issues SFAS No. 158, “Employers’ Accounting for Defined
      Benefit Pension and Other Postretirement Plans - an amendment of FASB Statements
      No. 87, 88, 106 and 132(R)”. The statement requires an employer to recognize the
      over funded or under funded status of a defined benefit postretirement plan
      as
      an asset or liability in its statement of financial position and to recognize
      changes in that funded status in the year in which the changes occur through
      comprehensive income of a business entity or changes in unrestricted assets
      of a
      not-for-profit organization. SFAS
      No. 158 is effective for the beginning of an entity’s fiscal year that
      begins after December 15, 2006. The Company does not expect SFAS No. 158
      will have a material effect on its financial statements.


F-13
 **Table
            of Contents**
 **Index
            to Financial
            Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
            1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, NATURE OF OPERATIONS AND
            USE OF
            ESTIMATES (Continued)**
 
 **RECENT
            ACCOUNTING PRONOUNCEMENTS (Continued)**
 In September 2006, the FASB issued SFAS No. 157,
“Fair Value
              Measurements”.
              The
              statement standardizes the definition of fair value, establishes a
              framework for
              measuring in generally accepted accounting principles and sets forth
              the
              disclosures about fair value measurements. SFAS No. 157 is effective for
              the beginning of an entity’s fiscal year that begins after November 15, 2007.
              The Company does not expect SFAS No. 157 will have a material effect on its
              financial statements.
  In
            July
            2006, the FASB issued FASB Staff Position (FSP) FIN No. 13-2 “Accounting for a
            Change or Projected Change in the Timing of Cash Flows Relating to Income
            Taxes
            Generated by a Leveraged Lease Transaction”, that will become effective for
            fiscal years beginning after December 15, 2006. FSP FIN No. 13-2 addresses
            how a
            change in the timing of cash flows relating to income taxes generated
            by
            leveraged lease transaction affects the accounting by a lessor for that
            lease.
            The adoption of this FSP is not expected to have a material effect on
            the
            Company’s consolidated financial statements.





In
      June 2006, the FASB issued FASB Interpretation No. 48, “An
      Interpretation of FASB Statement No. 109,” which clarifies the accounting
      for uncertainty in income taxes recognized in a company’s financial statements
      in accordance with FASB Statement No. 109, “Accounting for Income Taxes.”
This Interpretation prescribes a recognition threshold and measurement attribute
      for the financial statement recognition and measurement of a tax position taken
      or expected to be taken in a tax return. FIN No. 48 reflects the benefit
      recognition approach, where a tax benefit is recognized when it is “more likely
      than not” to be sustained based on the technical merits of the position. This
      Interpretation is effective for fiscal years beginning after December 15,
      2006. The Company is evaluating the impact of FIN No. 48 on its financial
      statements.




In
      April
      2006, the FASB issued FASB Staff Position (FSP) FIN No. 46(R)-6, “Determining
      the Variability to Be Considered in Applying FASB Interpretation No. 46(R)”,
      that became effective beginning the third quarter of 2006. FSP FIN No. 46(R)-6
      clarifies that the variability to be considered in applying FASB Interpretation
      46(R) shall be based on an analysis of the design of the variable interest
      entity. The adoption of this FSP did not have a material effect on the Company’s
      consolidated financial statements.




In
      March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of
      Financial Assets,” which provides an approach to simplify efforts to obtain
      hedge-like (offset) accounting. This new Statement amends SFAS No. 140,
“Accounting for Transfers and Servicing of Financial Assets and Extinguishments
      of Liabilities,” with respect to the accounting for separately recognized
      servicing assets and servicing liabilities. SFAS No. 156 is effective for
      all separately recognized servicing assets and liabilities as of the beginning
      of an entity’s fiscal year that begins after September 15, 2006, with
      earlier adoption permitted in certain circumstances. The Company does not expect
      SFAS No. 156 will have a material effect on its financial
      statements.


F-14
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **RECENT
            ACCOUNTING PRONOUNCEMENTS (Continued)**
 The
              FASB
              has revised its guidance on SFAS No. 133 Implementation Issues as of
              March 2006. Several Implementation Issues were revised to reflect the
              issuance of SFAS No. 155, “Accounting for Certain Hybrid Financial
              Instruments - an Amendment of FASB Statements No. 133 and 140,” in
              February 2006. SFAS No. 155 allows any hybrid financial instrument
              that contains an embedded derivative that otherwise would require bifurcation
              under SFAS No. 133, “Accounting for Derivative Instruments and Hedging
              Activities” to be carried at fair value in its entirety, with changes in fair
              value recognized in earnings. In addition, SFAS No. 155 requires that
              beneficial interests in securitized financial assets be analyzed to
              determine
              whether they are freestanding derivatives or contain an embedded derivative.
              SFAS No. 155 also eliminates a prior restriction on the types of passive
              derivatives that a qualifying special purpose entity is permitted to
              hold. SFAS
              No. 155 is applicable to new or modified financial instruments in fiscal
              years beginning after September 15, 2006, though the provisions related to
              fair value accounting for hybrid financial instruments can also be
              applied to
              existing instruments. The Company does not expect SFAS No. 155 will have a
              material effect on its financial statements.
 **NOTE
            2. PROPERTY & EQUIPMENT**





At
      December 31, 2006 & 2005, property and equipment consists of the
      following:





**2006**
            
            **2005**Office
                furniture and equipment
            
            $
            58,433
            
            $
            58,433Machinery
                and equipment
            
            
            15,613
            
            
            15,613Leasehold
                improvements
            
            
            3,000
            
            
            3,00077,046
            
            
            77,046Less:
                accumulated depreciation
            
            
            (70,948
            )
            
            (68,925
            )Net
                property and equipment
            
            $
            6,098
            
            $
            8,121





Depreciation
      expense was $2,023 and $2,138, for the years ended December 31, 2006 and 2005,
      respectively.





**NOTE
      3. INVENTORY**





As
      of
      December 31, 2006 and 2005, inventory consisted of the following:




**2006**
            ****
            **2005**Raw
                materials
            
            $
            8,405
            
            $
            16,981Finished
                goods
            
            
            3,801
            
            
            7,308$
            12,206
            
            $
            24,289


F-15
 **Table
            of Contents**
 **Index
            to Financial
            Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS


**NOTE
      4. RELATED PARTY TRANSACTIONS**





As
      of
      December 31, 2006 and 2005, notes payable to related parties consist of the
      following:





**2006**
            ****
            **2005**16%
                  per annum note payable to a stockholder, principal and interest
                  due March,
                  2007
            
            $
            300,000
            
            $
            300,00018%
                  per annum note payable to a stockholder, principal and interest
                  due on
                  demand; unsecured
            
            
            2,000
            
            
            –15%
                  per annum notes payable to stockholders, principal and interest
                  due at
                  various times
            
            
            31,375
            
            
            10,000333,375
            
            
            310,000Less:
                Current Portion
            
            
            (333,375
            )
            
            (310,000
            )$
            –
            
            $
            –





**NOTE
      5. SHAREHOLDERS’ EQUITY**





On
      January 11, 2006, the Company approved the issuance of:  (i) 27,778
      (post-split) shares of restricted common stock to G. Richard Smith in conversion
      of $25,000 of accrued salary; (ii) 166,667 (post-split) shares of restricted
      common stock to Gary R. Smith in conversion of $150,000 of accrued salary;
      and
      (iii) 13,889 (post-split) shares of restricted common stock to John
      LiVecchi in conversion of $12,500 of accrued salary.





On
      January 11, 2006, the Company issued 70,000 (post-split) shares of restricted
      common stock valued at $63,000 to each of Messrs. Smith, Smith and LiVecchi
      as a
      stock bonus for services rendered in 2005.





On
      January 11, 2006, the Company’s Board of Directors approved the issuance of
      105,000 (post-split) restricted shares of its common stock to one employee
      and
      six consultants as stock bonuses valued at $94,500 for services rendered in
      2005.




F-16
 **Table
                  of Contents**
 **Index
                  to Financial
                  Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 **NOTES
            TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
              5. SHAREHOLDERS’ EQUITY (Continued)**
  During
              August 2006, 724,769 (post-split) shares of
              common stock were issued through the conversion of an aggregate of
              $297,155 of
              debt and interest.
  On
                July
                20, 2006, the Board of Directors approved the 2006 Coronado Industries,
                Inc.
                Employee and Consultant Stock Option Plan. The Plan authorizes the
                Company to
                grant stock options to key
                employees of the Company. Under the aforementioned Plan, 15,000 (post-split)
                shares of common stock were reserved for issuance.
  ****
                        **Weighted**
                        ****
                        ****
                        ****
                        ****
                        ****
                        ****
                        ********
                        ****
                        **Weighted**
                        ****
                        **Average**
                        ****
                        **Remaining**
                        ****
                        **Aggregate**
                        ****
                        **Aggregate**
                        ********
                        **Average**
                        ****
                        **Exercise
                            Price**
                        ****
                        **Contractual**
                        ****
                        **Fair**
                        ****
                        **Intrinsic**
                        ********
                        **Shares**
                        ****
                        **per
                            Share**
                        ****
                        **Term
                            (1)**
                        ****
                        **Value**
                        ****
                        **Value
                            (2)**Outstanding
                            July 20, 2006
                        
                        
                        –
                        
                        
                        –
                        
                        $
                        –
                        
                        $
                        –
                        
                        $
                        –Granted
                        
                        
                        15,000
                        
                        
                        2.40
                        
                        
                        9.5
                        
                        
                        –
                        
                        
                        –Exercised
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –Cancelled/Forfeited
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –
                        
                        
                        –Outstanding
                            December 31, 2006
                        
                        
                        15,000
                        
                        $
                        2.40
                        
                        
                        9.5
                        
                        $
                        –
                        
                        $
                        –Exercisable
                            December 31, 2006
                        
                        
                        15,000
                        
                        $
                        2.40
                        
                        
                        9.5
                        
                        $
                        –
                        
                        $
                        –
 ________________
  (1)
                            Remaining
                                contractual term is presented in
                                years.
  (2)
                            The
                                aggregate intrinsic value is calculated as the difference
                                between the
                                exercise price of the underlying awards and the closing
                                price of our
                                common stock as of December 31, 2006, for those awards that have an
                                exercise price currently below the closing price
                                as of December 31,
                                2006. Awards with an exercise price above the closing
                                price as of
                                December 31, 2006 are considered to have no intrinsic
                                value.
  During
                  January 2007, all of the 15,000 options were cancelled or
                  forfeited.
 F-17
 **Table
                                of Contents**
 **Index
                                to Financial
                                Statements**
  **CONTINENTAL
                              FUELS, INC.**
 **(FORMERLY
                              CORONADO INDUSTRIES, INC.)**
 **NOTES
                          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                            5. SHAREHOLDERS’ EQUITY (Continued)**
 On
              March
              24, 2006 the Board of Directors approved the 2006 Coronado Industries,
              Inc.
              Executive Stock Option Plan. The Plan authorizes the Company to grant
              stock
              options to key employees of the Company. Under the aforementioned Plan,
              600,000
              (post-split) shares of common stock were reserved for
              issuance.




As
      of
      December 31, 2006, all outstanding options granted under the 2006
      Coronado Industries, Inc. Executive Stock Option Plan have
      been exercised or cancelled. A summary of the activity of the plan is as
      follows:




****
                **Weighted**
                ****
                ****
                ****
                ****
                ****
                ****
                ********
                ****
                **Weighted**
                ****
                **Average**
                ****
                **Remaining**
                ****
                **Aggregate**
                ****
                **Aggregate**
                ********
                **Average**
                ****
                **Exercise
                    Price**
                ****
                **Contractual**
                ****
                **Fair**
                ****
                **Intrinsic**
                ********
                **Shares**
                ****
                **per
                    Share**
                ****
                **Term
                    (1)**
                ****
                **Value**
                ****
                **Value
                    (2)**Outstanding
                    March 24, 2006
                
                
                –
                
                
                –
                
                $
                –
                
                $
                –
                
                $
                –Granted
                
                
                600,000
                
                
                5.30
                
                
                9.23
                
                
                450,000Exercised
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Forfeited
                    or expired
                
                
                (600,000
                )
                
                (5.30
                )
                
                –
                
                
                (450,000
                )
                
                –Outstanding
                    December 31, 2006
                
                
                –
                
                $
                –
                
                
                –
                
                $
                –
                
                $
                –Exercisable
                    December 31, 2006
                
                
                –
                
                $
                –
                
                
                –
                
                $
                –
                
                $
                –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                The
                    aggregate intrinsic value is calculated as the difference between
                    the
                    exercise price of the underlying awards and the closing price
                    of our
                    common stock as of December 31, 2006, for those awards that have an
                    exercise price currently below the closing price as of December 31,
                    2006. Awards with an exercise price above the closing price as
                    of
                    December 31, 2006 are considered to have no intrinsic
                    value.
 F-18
 **Table
                        of Contents**
 **Index
                        to Financial
                        Statements**
  **CONTINENTAL
                      FUELS, INC.**
 **(FORMERLY
                      CORONADO INDUSTRIES, INC.)**
 **NOTES
                  TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                    5. SHAREHOLDERS’ EQUITY (Continued)**


On
      March
      24, 2006 the Board of Directors approved the 2006 Coronado Industries, Inc.
      Employee Stock Option Plan. The Plan authorizes the Company to grant stock
      options to key employees of the Company. Under the aforementioned Plan, 96,000
      (post-split) shares of common stock were reserved for
      issuance.


A
          summary
          of the activity of the plan is as follows:
 ****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        March 24, 2006
                    
                    
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
                    
                    $
                    –Granted
                    
                    
                    96,000
                    
                    
                    5.30
                    
                    
                    9.23
                    
                    
                    72,000Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    96,000
                    
                    $
                    5.30
                    
                    
                    9.23
                    
                    $
                    72,000
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    96,000
                    
                    $
                    5.30
                    
                    
                    9.23
                    
                    $
                    72,000
                    
                    $
                    –
 ________________
 (1)
                    Remaining
                        contractual term is presented in
                        years.
  (2)
                    The
                        aggregate intrinsic value is calculated as the difference
                        between the
                        exercise price of the underlying awards and the closing price
                        of our
                        common stock as of December 31, 2006, for those awards that have an
                        exercise price currently below the closing price as of December 31,
                        2006. Awards with an exercise price above the closing price
                        as of
                        December 31, 2006 are considered to have no intrinsic
                        value.
  During
                January 2007, all of the 96,000 options were
                cancelled.


F-19
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
  **CONTINENTAL
                  FUELS, INC.**
 **(FORMERLY
                  CORONADO INDUSTRIES, INC.)**
 **NOTES
              TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                5. SHAREHOLDERS’ EQUITY (Continued)**


On
      January 4, 2005, the Board of Directors approved the 2004 Coronado Industries,
      Inc. Executive Stock Option Plan, effective December 31, 2004. The Plan
      authorizes the Company to grant stock options to key employees of the Company.
      Under the aforementioned Plan, 63,956 (post-split) shares of common stock were
      reserved for issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2004 Coronado
      Industries, Inc. Executive Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:




****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              63,956
              
              $
              55.00
              
              
              7.62
              
              $
              2,355,138
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Cancelled/Forfeited
              
              
              (63,956
              )
              
              (55.00
              )
              
              –
              
              
              (2,355,138
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.


F-20
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            5. SHAREHOLDERS’ EQUITY
            (Continued)


On
      January 4, 2005, the Board of Directors approved the 2004 Coronado Industries,
      Inc. Employee Stock Option Plan, effective January 4, 2005. The Plan authorizes
      the Company to grant stock options to key employees of the Company. Under the
      aforementioned Plan, 2,900 (post-split) shares of common stock were
      reserved for issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2004 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:




****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              2,900
              
              $
              55.00
              
              
              8.00
              
              $
              109,330
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Cancelled/Forfeited
              
              
              (2,900
              )
              
              (55.00
              )
              
              –
              
              
              (109,330
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.
 F-21
 **Table
                          of Contents**
 **Index
                          to Financial
                          Statements**
  **CONTINENTAL
                        FUELS, INC.**
 **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
 **NOTES
                    TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                      5. SHAREHOLDERS’ EQUITY (Continued)**


On
      June
      22, 2004, the Board of Directors approved the 2004 Coronado Industries, Inc.
      Executive Bonus Stock Option Plan. The Plan authorizes the Company to grant
      stock options to key employees of the Company. Under the aforementioned Plan,
      15,000 (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2004 Coronado
      Industries, Inc. Executive Bonus Stock Option Plan have been exercised or
      cancelled. A summary of the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    15,000
                    
                    $
                    70.00
                    
                    
                    7.47
                    
                    $
                    940,500
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (15,000
                    )
                    
                    (70.00
                    )
                    
                    –
                    
                    
                    (940,500
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                        The
                            aggregate intrinsic value is calculated as the difference
                            between the
                            exercise price of the underlying awards and the closing
                            price of our
                            common stock as of December 31, 2006, for those awards that have an
                            exercise price currently below the closing price as of
                            December 31,
                            2006. Awards with an exercise price above the closing
                            price as of
                            December 31, 2006 are considered to have no intrinsic
                            value.
 F-22
 **Table
                                of Contents**
 **Index
                                to Financial
                                Statements**
  **CONTINENTAL
                              FUELS, INC.**
 **(FORMERLY
                              CORONADO INDUSTRIES, INC.)**
 **NOTES
                          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                            5. SHAREHOLDERS’ EQUITY (Continued)**
 On
                  June
                  22, 2004, the Board of Directors approved the 2004 Coronado Industries,
                  Inc.
                  Employee Bonus Stock Option Plan. The Plan authorizes the Company
                  to grant stock
                  options to key employees of the Company. Under the aforementioned
                  Plan, 3,350
                  (post-split) shares of common stock were reserved for
                  issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2004 Coronado
      Industries, Inc. Employee Bonus Stock Option Plan have been exercised or
      cancelled. A summary of the activity of the plan is as follows:




****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              3,350
              
              $
              70.00
              
              
              7.47
              
              $
              210,045
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              (150
              )
              
              –
              
              
              –
              
              
              –
              
              
              –Cancelled/Forfeited
              
              
              (3,200
              )
              
              (70.00
              )
              
              –
              
              
              (210,045
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________  (1)
                      Remaining
                          contractual term is presented in
                          years.
 (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.


F-23
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            5. SHAREHOLDERS’ EQUITY
            (Continued)


On
      September 19, 2003 the Board of Directors approved the 2003 Coronado Industries,
      Inc. Executive Stock Option Plan. The Plan authorizes the Company to grant
      stock
      options to key employees of the Company. Under the aforementioned Plan, 50,894
      (post-split) shares of common stock were reserved for
      issuance.





A
      summary
      of the activity of the plan is as follows:




****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              50,894
              
              $
              33.00
              
              
              6.00
              
              $
              1,373,836
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              (19,942
              )
              
              (33.00
              )
              
              –
              
              
              (538,316
              )
              
              –Cancelled/Forfeited
              
              
              (15,894
              )
              
              (33.00
              )
              
              –
              
              
              (429,050
              )
              
              –Outstanding
                  December 31, 2005
              
              
              15,058
              
              
              33.00
              
              
              6.00
              
              
              406,470
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              15,058
              
              $
              33.00
              
              
              6.00
              
              $
              406,470
              
              $
              –Exercisable
                  December 31, 2006
              
              
              15,058
              
              $
              33.00
              
              
              6.00
              
              $
              406,470
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.
  During
            January 2007, all of the 15,058 options were cancelled or
            forfeited.


F-24
 **Table
                    of Contents**
 **Index
                    to Financial
                    Statements**
  **CONTINENTAL
                  FUELS, INC.**
 **(FORMERLY
                  CORONADO INDUSTRIES, INC.)**
 **NOTES
              TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                5. SHAREHOLDERS’ EQUITY (Continued)**


On
      September 30, 2003 the Board of Directors approved the 2003 Coronado Industries,
      Inc. Employee Stock Option Plan. The Plan authorizes the Company to grant stock
      options to key employees of the Company. Under the aforementioned Plan, 2,100
      (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2003 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    1,800
                    
                    $
                    70.00
                    
                    
                    7.00
                    
                    $
                    102,600
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    (400
                    )
                    
                    (70.00
                    )
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (1,400
                    )
                    
                    (70.00
                    )
                    
                    –
                    
                    
                    (102,600
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                      The
                          aggregate intrinsic value is calculated as the difference
                          between the
                          exercise price of the underlying awards and the closing
                          price of our
                          common stock as of December 31, 2006, for those awards that have an
                          exercise price currently below the closing price as of
                          December 31,
                          2006. Awards with an exercise price above the closing price
                          as of
                          December 31, 2006 are considered to have no intrinsic
                          value.
 F-25
 **Table
                              of Contents**
 **Index
                              to Financial
                              Statements**
  **CONTINENTAL
                            FUELS, INC.**
 **(FORMERLY
                            CORONADO INDUSTRIES, INC.)**
 **NOTES
                        TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                          5. SHAREHOLDERS’ EQUITY (Continued)**


On
      January 13, 2003 the Board of Directors approved the 2002 Coronado Industries,
      Inc. Management Stock Option Plan, effective December 31, 2002. The Plan
      authorizes the Company to
      grant
      stock options to key employees of the Company. Under the aforementioned Plan,
      90,000 (post-split) shares of common stock were reserved for
      issuance.





A
      summary
      of the activity of the plan is as follows:


****
                      **Weighted**
                      ****
                      ****
                      ****
                      ****
                      ****
                      ****
                      ********
                      ****
                      **Weighted**
                      ****
                      **Average**
                      ****
                      **Remaining**
                      ****
                      **Aggregate**
                      ****
                      **Aggregate**
                      ********
                      ****
                      **Average**
                      ****
                      **Exercise
                          Price**
                      ****
                      **Contractual**
                      ****
                      **Fair**
                      ****
                      **Intrinsic**
                      ********
                      ****
                      **Shares**
                      ****
                      **per
                          Share**
                      ****
                      **Term
                          (1)**
                      ****
                      **Value**
                      ****
                      **Value
                          (2)**Outstanding
                          December 31, 2004
                      
                      
                      6,000
                      
                      $
                      12.00
                      
                      
                      4.00
                      
                      $
                      169,500
                      
                      $
                      –Granted
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Exercised
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Cancelled/Forfeited
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Outstanding
                          December 31, 2005
                      
                      
                      6,000
                      
                      
                      12.00
                      
                      
                      4.00
                      
                      
                      169,500
                      
                      
                      –Granted
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Exercised
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Forfeited
                          or expired
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –
                      
                      
                      –Outstanding
                          December 31, 2006
                      
                      
                      6,000
                      
                      $
                      12.00
                      
                      
                      4.00
                      
                      $
                      169,500
                      
                      $
                      –Exercisable
                          December 31, 2006
                      
                      
                      6,000
                      
                      $
                      12.00
                      
                      
                      4.00
                      
                      $
                      169,500
                      
                      $
                      –
 ________________
 (1)
                        Remaining
                            contractual term is presented in
                            years.
  (2)
                          The
                              aggregate intrinsic value is calculated as the difference
                              between the
                              exercise price of the underlying awards and the closing
                              price of our
                              common stock as of December 31, 2006, for those awards that have an
                              exercise price currently below the closing price as
                              of December 31,
                              2006. Awards with an exercise price above the closing
                              price as of
                              December 31, 2006 are considered to have no intrinsic
                              value.
  During
                      January 2007, all of the 6,000 options were cancelled or
                      forfeited.
 F-26
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            5. SHAREHOLDERS’ EQUITY
            (Continued)


On
      January 13, 2003 the Board of Directors approved the 2002 Coronado Industries,
      Inc. Employee Stock Option Plan, effective December 31, 2002 The Plan authorizes
      the Company to grant stock options to key employees of the Company. Under the
      aforementioned Plan, 42,000 (post-split) shares of common stock were reserved
      for issuance.




As
      of
      December 31, 2006, all outstanding options granted under the 2002 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:


****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              400
              
              $
              10.00
              
              
              5.00
              
              $
              12,000
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              (100
              )
              
              (10.00
              )
              
              –
              
              
              (3,000
              )
              
              –Cancelled/Forfeited
              
              
              (300
              )
              
              (10.00
              )
              
              –
              
              
              (9,000
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.
 F-27
 **Table
                          of Contents**
 **Index
                          to Financial
                          Statements**
  **CONTINENTAL
                        FUELS, INC.**
 **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
 **NOTES
                    TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                      5. SHAREHOLDERS’ EQUITY (Continued)**


On
      December 26, 2001 the Board of Directors approved the 2001 Coronado Industries,
      Inc. Management Stock Option Plan. The Plan authorizes the Company to grant
      stock options to key employees of the Company. Under the aforementioned Plan,
      2,964 (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted the 2001 Coronado Industries,
      Inc. Management Stock Option Plan have been exercised or cancelled. A summary
      of
      the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    2,984
                    
                    $
                    16.00
                    
                    
                    2.70
                    
                    $
                    163,800
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (2,984
                    )
                    
                    (16.00
                    )
                    
                    –
                    
                    
                    (163,800
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                        The
                            aggregate intrinsic value is calculated as the difference
                            between the
                            exercise price of the underlying awards and the closing
                            price of our
                            common stock as of December 31, 2006, for those awards that have an
                            exercise price currently below the closing price as of
                            December 31,
                            2006. Awards with an exercise price above the closing
                            price as of
                            December 31, 2006 are considered to have no intrinsic
                            value.
 F-28
 **Table
                                of Contents**
 **Index
                                to Financial
                                Statements**
  **CONTINENTAL
                              FUELS, INC.**
 **(FORMERLY
                              CORONADO INDUSTRIES, INC.)**
 **NOTES
                          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                            5. SHAREHOLDERS’ EQUITY (Continued)**


On
      December 26, 2001 the Board of Directors approved the 2001 Coronado Industries,
      Inc. Employee Stock Option Plan. The Plan authorizes the Company to grant stock
      options to key employees of the Company. Under the aforementioned Plan, 750
      (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2001 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    725
                    
                    $
                    200.00
                    
                    
                    5.00
                    
                    $
                    39,825
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (725
                    )
                    
                    (200.00
                    )
                    
                    –
                    
                    
                    (39,825
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                        The
                            aggregate intrinsic value is calculated as the difference
                            between the
                            exercise price of the underlying awards and the closing
                            price of our
                            common stock as of December 31, 2006, for those awards that have an
                            exercise price currently below the closing price as of
                            December 31,
                            2006. Awards with an exercise price above the closing
                            price as of
                            December 31, 2006 are considered to have no intrinsic
                            value.
 F-29
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            5. SHAREHOLDERS’ EQUITY
            (Continued)


On
      January 2, 2001 the Board of Directors approved the 2000 Coronado Industries,
      Inc. Management Bonus Stock Option Plan. The Plan authorizes the Company to
      grant stock options to key employees of the Company. Under the aforementioned
      Plan, 6,000 (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2000 Coronado
      Industries, Inc. Management Bonus Stock Option Plan have been exercised or
      cancelled. A summary of the activity of the plan is as follows:


****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              6,000
              
              $
              135.00
              
              
              4.00
              
              $
              57,000
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Cancelled/Forfeited
              
              
              (6,000
              )
              
              (135.00
              )
              
              –
              
              
              (57,000
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.
 F-30
 **Table
                          of Contents**
 **Index
                          to Financial
                          Statements**
  **CONTINENTAL
                        FUELS, INC.**
 **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
 **NOTES
                    TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                      5. SHAREHOLDERS’ EQUITY (Continued)**


On
      January 2, 2001 the Board of Directors approved the 2000 Coronado Industries,
      Inc. Management Stock Option Plan. The Plan authorizes the Company to grant
      stock options to key employees of the Company. Under the aforementioned Plan,
      2,600 (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2000 Coronado
      Industries, Inc. Management Bonus Stock Option Plan have been exercised or
      cancelled. A summary of the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    2,600
                    
                    $
                    198.00
                    
                    
                    2.70
                    
                    $
                    24,800
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (2,600
                    )
                    
                    (198.00
                    )
                    
                    –
                    
                    
                    (24,800
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                        The
                            aggregate intrinsic value is calculated as the difference
                            between the
                            exercise price of the underlying awards and the closing
                            price of our
                            common stock as of December 31, 2006, for those awards that have an
                            exercise price currently below the closing price as of
                            December 31,
                            2006. Awards with an exercise price above the closing
                            price as of
                            December 31, 2006 are considered to have no intrinsic
                            value.
 F-31
 **Table
                                of Contents**
 **Index
                                to Financial
                                Statements**
  **CONTINENTAL
                              FUELS, INC.**
 **(FORMERLY
                              CORONADO INDUSTRIES, INC.)**
 **NOTES
                          TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                            5. SHAREHOLDERS’ EQUITY (Continued)**


On
      January 2, 2001 the Board of Directors approved the 2000 Coronado Industries,
      Inc. Employee Stock Option Plan. The Plan authorizes the Company to grant stock
      options to key employees of the Company. Under the aforementioned Plan, 625
      (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 2000 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:


****
                    **Weighted**
                    ****
                    ****
                    ****
                    ****
                    ****
                    ****
                    ********
                    ****
                    **Weighted**
                    ****
                    **Average**
                    ****
                    **Remaining**
                    ****
                    **Aggregate**
                    ****
                    **Aggregate**
                    ********
                    ****
                    **Average**
                    ****
                    **Exercise
                        Price**
                    ****
                    **Contractual**
                    ****
                    **Fair**
                    ****
                    **Intrinsic**
                    ********
                    ****
                    **Shares**
                    ****
                    **per
                        Share**
                    ****
                    **Term
                        (1)**
                    ****
                    **Value**
                    ****
                    **Value
                        (2)**Outstanding
                        December 31, 2004
                    
                    
                    500
                    
                    $
                    135.00
                    
                    
                    4.00
                    
                    $
                    4,800
                    
                    $
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Cancelled/Forfeited
                    
                    
                    (500
                    )
                    
                    (135.00
                    )
                    
                    –
                    
                    
                    (4,800
                    )
                    
                    –Outstanding
                        December 31, 2005
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Granted
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Exercised
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Forfeited
                        or expired
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –
                    
                    
                    –Outstanding
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –Exercisable
                        December 31, 2006
                    
                    
                    –
                    
                    $
                    –
                    
                    
                    –
                    
                    $
                    –
                    
                    $
                    –
 ________________
 (1)
                      Remaining
                          contractual term is presented in
                          years.
  (2)
                        The
                            aggregate intrinsic value is calculated as the difference
                            between the
                            exercise price of the underlying awards and the closing
                            price of our
                            common stock as of December 31, 2006, for those awards that have an
                            exercise price currently below the closing price as of
                            December 31,
                            2006. Awards with an exercise price above the closing
                            price as of
                            December 31, 2006 are considered to have no intrinsic
                            value.
 F-32
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            5. SHAREHOLDERS’ EQUITY
            (Continued)


On
      November 3, 1999 the Board of Directors approved the 1999 Coronado Industries,
      Inc. Employee Stock Option Plan. The Plan authorizes the Company to grant stock
      options to key employees of the Company. Under the aforementioned Plan, 575
      (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under the 1999 Coronado
      Industries, Inc. Employee Stock Option Plan have been exercised or cancelled.
      A
      summary of the activity of the plan is as follows:


****
              **Weighted**
              ****
              ****
              ****
              ****
              ****
              ****
              ********
              ****
              **Weighted**
              ****
              **Average**
              ****
              **Remaining**
              ****
              **Aggregate**
              ****
              **Aggregate**
              ********
              ****
              **Average**
              ****
              **Exercise
                  Price**
              ****
              **Contractual**
              ****
              **Fair**
              ****
              **Intrinsic**
              ********
              ****
              **Shares**
              ****
              **per
                  Share**
              ****
              **Term
                  (1)**
              ****
              **Value**
              ****
              **Value
                  (2)**Outstanding
                  December 31, 2004
              
              
              550
              
              $
              200.00
              
              
              2.80
              
              $
              63,300
              
              $
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Cancelled/Forfeited
              
              
              (550
              )
              
              (200.00
              )
              
              –
              
              
              (63,300
              )
              
              –Outstanding
                  December 31, 2005
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Granted
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Exercised
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Forfeited
                  or expired
              
              
              –
              
              
              –
              
              
              –
              
              
              –
              
              
              –Outstanding
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –Exercisable
                  December 31, 2006
              
              
              –
              
              $
              –
              
              
              –
              
              $
              –
              
              $
              –
 ________________
 (1)
                Remaining
                    contractual term is presented in
                    years.
  (2)
                  The
                      aggregate intrinsic value is calculated as the difference between
                      the
                      exercise price of the underlying awards and the closing price
                      of our
                      common stock as of December 31, 2006, for those awards that have an
                      exercise price currently below the closing price as of December 31,
                      2006. Awards with an exercise price above the closing price
                      as of
                      December 31, 2006 are considered to have no intrinsic
                      value.
 F-33
 **Table
                          of Contents**
 **Index
                          to Financial
                          Statements**
  **CONTINENTAL
                        FUELS, INC.**
 **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
 **NOTES
                    TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                      5. SHAREHOLDERS’ EQUITY (Continued)**


On
      December 21, 1998 the Board of Directors approved the 1998 Coronado Industries,
      Inc. Stock Option Plan. The Plan authorizes the Company to grant stock options
      to key employees of the Company. Under the aforementioned Plan, 1,550
      (post-split) shares of common stock were reserved for
      issuance.





As
      of
      December 31, 2006, all outstanding options granted under 1998 Coronado
      Industries, Inc. Stock Option Plan have been exercised or cancelled. A summary
      of the activity of the plan is as follows:


****
                **Weighted**
                ****
                ****
                ****
                ****
                ****
                ****
                ********
                ****
                **Weighted**
                ****
                **Average**
                ****
                **Remaining**
                ****
                **Aggregate**
                ****
                **Aggregate**
                ********
                ****
                **Average**
                ****
                **Exercise
                    Price**
                ****
                **Contractual**
                ****
                **Fair**
                ****
                **Intrinsic**
                ********
                ****
                **Shares**
                ****
                **per
                    Share**
                ****
                **Term
                    (1)**
                ****
                **Value**
                ****
                **Value
                    (2)**Outstanding
                    December 31, 2004
                
                
                1,350
                
                $
                56.00
                
                
                2.00
                
                $
                186,235
                
                $
                –Granted
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Exercised
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Cancelled/Forfeited
                
                
                (1,350
                )
                
                (56.00
                )
                
                –
                
                
                (186,235
                )
                
                –Outstanding
                    December 31, 2005
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Granted
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Exercised
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Forfeited
                    or expired
                
                
                –
                
                
                –
                
                
                –
                
                
                –
                
                
                –Outstanding
                    December 31, 2006
                
                
                –
                
                $
                –
                
                
                –
                
                $
                –
                
                $
                –Exercisable
                    December 31, 2006
                
                
                –
                
                $
                –
                
                
                –
                
                $
                –
                
                $
                –
 ________________
 (1)
                  Remaining
                      contractual term is presented in
                      years.
  (2)
                    The
                        aggregate intrinsic value is calculated as the difference
                        between the
                        exercise price of the underlying awards and the closing price
                        of our
                        common stock as of December 31, 2006, for those awards that have an
                        exercise price currently below the closing price as of December 31,
                        2006. Awards with an exercise price above the closing price
                        as of
                        December 31, 2006 are considered to have no intrinsic
                        value.


**2005
        OPTION GRANTS**
 
 During
        May 2005, the Company granted 5,000 (post-split) options to an employee. 
The options vested immediately and had an exercise price of $55.00 and a
        term of
        ten years.  The aforementioned options were forfeited as of December 31,
        2005.
  F-34
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
  **CONTINENTAL
                    FUELS, INC.**
 **(FORMERLY
                    CORONADO INDUSTRIES, INC.)**
 **NOTES
                TO THE CONSOLIDATED FINANCIAL STATEMENTS**
 **NOTE
                  5. SHAREHOLDERS’ EQUITY (Continued)**
  **2005
                    OPTION GRANTS (Continued)**
 
 During
                    May 2005, the Board of Directors adopted the 2005 Employee and
                    Consultant
                    Compensation Plan for its employees and marketing, legal and
                    other consultants.
                    The Board voted to make available 1,200,000 (post-split) shares
                    of common stock
                    of the Corporation, which may be purchased by conversion of accrued
                    compensation
                    at a negotiated purchase price of not less than ninety percent
                    of the lowest
                    closing bid price in the week prior to when the accrued salary
                    or compensation
                    is due.
  Additionally,
                    during May 2005 the Board of Directors adopted the 2005-A Employee
                    and
                    Consultant Compensation Plan for its employees and marketing,
                    legal and other
                    consultants. The Board voted to make available 2,000,000 (post-split)
                    shares of
                    common stock of the Corporation which may be purchased by conversion
                    of accrued
                    compensation at a negotiated purchase price of not less than
                    ninety percent of
                    the lowest closing bid price in the week prior to when the accrued
                    salary or
                    compensation is due.
  2006
        OPTION GRANTS




During
      March, 2006, the Company granted an aggregate of 96,000 (post-split) options
      to
      two employees and six consultants. The options vested immediately and had
      exercise prices of $5.30 per share and a term of ten years. The aforementioned
      options were forfeited in January, 2007.


During
          March, 2006, the Company granted an aggregate of 600,000 (post-split) options
          to
          three officers. The options vested immediately and had exercise prices
          of $5.30
          per share and a term of ten years. The aforementioned options were forfeited
          in
          August, 2006.
 
 During
          2006, the Board of Directors adopted Employee and Consultant Compensation
          Plans
          for its employees and marketing, legal, and other consultants. The Board
          voted
          to make available shares of common stock of the Corporation, which may
          be
          purchased by conversion of accrued compensation at a negotiated purchase
          price
          of not less than ninety percent of the lowest closing bid price in the
          week
          prior to when the accrued salary or compensation is due. The following
          Plans
          were adopted during the year:
 
 ·
              The
                  2006-A Employee and Consultant Compensation Plan. The Plan will
                  include
                  10,000 (post-split) shares of its $.001 par value common
                  stock. ·
              The
                  2006-B Employee and Consultant Compensation Plan. The Plan will
                  include
                  2,000 (post-split) shares of its $.001 par value common
                  stock. ·
              The
                  2006-C Employee and Consultant Compensation Plan. The Plan will
                  include
                  10,000 (post-split) shares of its $.001 par value common
                  stock. ·
              The
                  2006-D Employee and Consultant Compensation Plan. The Plan will
                  include
                  20,000 (post-split) shares of its $.001 par value common
                  stock. ·
              The
                  2006-E Employee and Consultant Compensation Plan. The Plan will
                  include
                  25,000 (post-split) shares of its $.001 par value common
                  stock. ·
              The
                  2006-F Employee and Consultant Compensation Plan. The Plan will
                  included
                  40,000,000 (pre-split) shares of its $.001 par value common stock,
                  of
                  which 30,400,000 were issued as of December 31, 2006.  The remaining
                  9,600,000 shares were available for
                  issue.  The
            fair
            value of option grants is estimated as of the date of grant utilizing
            the
            Black-Scholes option-pricing model with the following weighted average
            assumptions for all grants, expected life of options of five (5) to ten
            (10)
            years, risk-free interest rates of five percent (5%), volatility of 66%
            to 140%,
            and a zero percent (0%) dividend yield. The weighted average fair value
            at date
            of grant for options granted during the years ended December 31, 2006
            and 2005
            approximated $4.93 and $4.70, respectively.
 F-35
 **Table
            of Contents**
 **Index
            to Financial
            Statements**
  **CONTINENTAL
              FUELS, INC.**
 **(FORMERLY
              CORONADO INDUSTRIES, INC.)**
 NOTES
          TO
          THE CONSOLIDATED FINANCIAL STATEMENTS
 **NOTE
        6. INCOME TAXES**





As
      of
      December 31, 2006 and 2005, the components of deferred income taxes are as
      follows:





**2006**
            
            **2005**Long-term
                Deferred Tax Assets (Liabilities)Net
                operating loss carry-forwards
            
            $
            7,050,000
            
            $
            5,685,000Less:
                valuation allowance
            
            
            (7,050,000
            )
            
            (5,685,000
            )Net
                Long-term Deferred Tax Asset
            
            $
            –
            
            $
            –





The
      Company has provided a full valuation allowance on its deferred tax asset as
      of
      December 31, 2006. The valuation allowance increased by approximately $1,365,000
      during the year ended December 31, 2006, primarily due to the increase in the
      net operating loss.


As
            of
            December 31, 2006, the Company has net operating loss carry-forwards
            available
            to offset future federal and state taxable income in the amounts of
            approximately $20,006,000 and $10,631,000,
            respectively, and expiring as follows:
 
 **Net
                      Loss Carry-forward**
                  ****
                  **Year
                      of******
                  ****
                  **Amount
                      Available**
                  ****
                  **Expiration****Year**
                  ****
                  **Federal**
                  ****
                  **State**
                  ****
                  **Federal**
                  ****
                  **State**1993
                  
                  137,000
                  
                  –
                  
                  2008
                  
                  —1994
                  
                  65,000
                  
                  –
                  
                  2009
                  
                  —1995
                  
                  97,000
                  
                  –
                  
                  2010
                  
                  —1996
                  
                  31,000
                  
                  –
                  
                  2011
                  
                  —1997
                  
                  561,000
                  
                  –
                  
                  2012
                  
                  —1998
                  
                  1,820,000
                  
                  –
                  
                  2018
                  
                  —1999
                  
                  1,048,000
                  
                  –
                  
                  2019
                  
                  —2000
                  
                  3,206,000
                  
                  –
                  
                  2020
                  
                  —2001
                  
                  2,400,000
                  
                  –
                  
                  2021
                  
                  —2002
                  
                  1,315,000
                  
                  1,315,000
                  
                  2022
                  
                  20072003
                  
                  1,136,000
                  
                  1,136,000
                  
                  2023
                  
                  20082004
                  
                  1,970,000
                  
                  1,970,000
                  
                  2024
                  
                  20092005
                  
                  2,260,000
                  
                  2,260,000
                  
                  2025
                  
                  20102006
                  
                  3,960,000
                  
                  3,960,000
                  
                  2026
                  
                  201120,006,000
                  
                  10,631,000
 F-36
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS


**NOTE
      7. COMMITMENTS**





**Consulting and
      Distribution Agreements**





During
      June 2006, the Company entered into an agreement for a New York Company to
      act
      as a consultant in the field of mergers and acquisitions for the period of
      one year. Shares in the amount of 45,000 (post-split) were issued upon
      signing and 15,000 (post-split) shares will be paid monthly for nine
      months.


During
              2005, the Company entered into a consulting agreement with Montaque
              Corporate
              Partners, Ltd. (Montaque). The agreement provides for a 10% royalty
              on sales of
              company products under any agreements completed with the significant
              assistance
              of Montaque.  During fiscal 2005, there were no agreements completed
              pursuant to this contract.
  Registrant
              executed a distribution agreement dated September 9, 2003, with EuPharmed
              s.r.l.
              of Rome, Italy (“EuP”) which grants the exclusive distribution rights for
              Registrant’s PNT products for the country of Italy to EuP for a period of five
              years (the “Italian Contract”). EuP may extend the agreement for an additional
              two years by agreeing to additional minimum purchases. EuP will conduct
              a one
              year randomized clinical trial of PNT involving 80 patients and four
              different
              clinics in Italy. EuP will bear all costs of this trial, except for
              the PNT
              equipment and rings which Registrant will provide free of charge.
  Registrant
              executed another agreement dated September 29, 2003, with EuP which
              grants to
              EuP the exclusive distribution rights to EuP for the countries of Algeria,
              Libya, Morocco and Tunisia on the same terms as the Italian Contract,
              except for
              the monthly minimum purchase quantities for these North African
              countries.
  Registrant
              executed a distribution agreement dated November 10, 2003, with Izasa,
              S.A. of
              Madrid, Spain (“Izasa”) which grants the exclusive distribution rights for
              Registrant’s PNT products for the country of Spain to Izasa for a period of five
              years (the “Spanish Contract”). Izasa may extend the agreement for an additional
              two years by agreeing to additional minimum purchases. This agreement
              provides
              for annual minimum purchase quantities commencing in January 2004.
              That date was
              postponed until after the Type 2a product classification was received
              by
              Registrant.
  Registrant
              executed another agreement dated December 5, 2003, with Izasa which
              grants to
              Izasa the exclusive distribution rights to Izasa for the country of
              Portugal on
              the same terms as the Spanish Contract, except for the monthly minimum
              purchase
              quantities for Portugal (the “Portuguese Contract”).
  Izasa
              was
              in violation of the Spanish Contract and the Portuguese Contract during
              2006 and
              2005 with respect to the number of units ordered by Izasa. Registrant
              is
              considering terminating these contracts with Izasa and negotiating
              a
              distribution contract with another company.
  **Operating
                    Leases**
 
 The
                    Company moved operations to new facilities in November 2004 at
                    which time the
                    Company entered into a new non-cancelable lease agreement for
                    office space in
                    Fountain Hills, Arizona commencing December 1, 2004 through December
                    15, 2009.
                    Monthly rent payments are $4,520.
 F-37
 **Table
                      of Contents**
 **Index
                      to Financial
                      Statements**
  **CONTINENTAL
                        FUELS, INC.**
 **(FORMERLY
                        CORONADO INDUSTRIES, INC.)**
 NOTES
                    TO
                    THE CONSOLIDATED FINANCIAL STATEMENTS


**NOTE
      7. COMMITMENTS (Continued)**




**Operating
      Leases (Continued)**





Future
      minimum lease payments under the Company’s operating lease as of December 31,
      2006 are as follows:





**Year
                Ending December 31:**2007
            
            
            54,2402008
            
            
            54,2402009
            
            
            54,240Future
                minimum lease payments
            
            $
            162,720





For
      the
      years ended December 31, 2006 and 2005, rent expense under the lease agreements
      was $54,260 and $63,697, respectively.


**NOTE
        8. NOTE PAYABLES**


**2006**
            ****
            **2005**15%
                per annum note payable to Robert Suliot, principaland
                interest payable on demand, through December, 2006;convertible
                into 700 shares of common stock at maturity
            
            $
            25,000
            
            $
            25,00015%
                per annum note payable to Robert Suliot, principaland
                interest payable on demand, through December, 2006;convertible
                into 700 shares of common stock at maturity
            
            
            25,000
            
            
            25,00015%
                per annum note payable to Robert Suliot, principaland
                interest payable on demand, through, November 2005;convertible
                into 30 shares of common stock at maturity
            
            
            –
            
            
            25,00015%
                per annum note payable to Robert Suliot, principaland
                interest payable on demand, through December, 2005;convertible
                into 30 shares of common stock at maturity
            
            
            –
            
            
            25,00015%
                per annum note payable to Robert Suliot, principaland
                interest payable on demand, through October, 2007;convertible
                into 20,000 shares of common stock at maturity
            
            
            50,000
            
            
            –10%
                per annum note payable to Clinreg Consulting Services,
                principaland
                interest due February 15, 2007, guaranteed by an officer
            
            
            32,349
            
            
            –132,349
            
            
            100,000Less:
                current portion
            
            
            (132,349
            )
            
            (100,000
            )$
            –
            
            $
            –


As
        of
        December 31, 2006, two of the above notes were in default.
 F-38
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS


**NOTE
      9. SUBSEQUENT EVENTS**




On
      January 19, 2007, the Company’s Board of Directors and the holders of a majority
      of Company’s outstanding common stock approved a 1-for-100 reverse stock split.
      The 2007 Reverse Split became effective on February 5, 2007, and was applicable
      to all the common stock of the Company outstanding on that date.





On
      January 26, 2007, G. Richard Smith entered into an Asset Sales Agreement (the
      “ASA”) dated as of January 24, 2007, pursuant to which the Company agreed to
      sell and G. Richard Smith agreed to purchase substantially all of the Company’s
      assets, except for the European distribution agreements (collectively the
“Assets”). The purchase price for the Assets pursuant to the ASA was $300,000 in
      cash (the “Purchase Price”). The Purchase Price was paid upon the closing of the
      transaction. Upon receipt of the Purchase Price, the Company, pursuant to the
      terms of the ASA, used the Purchase Price to pay certain outstanding debts
      and
      accounts payable. Under the terms of the ASA, G. Richard Smith assumed certain
      of the existing debts and liabilities of the Company and its subsidiaries that
      existed on the date of execution of the ASA, which remained unpaid after the
      Purchase Price. Prior to January 26, 2007, G. Richard Smith was Chairman of
      the
      Company’s board of directors and was the Company’s corporate secretary.


Pursuant
        to the terms of a Stock Purchase Agreement dated as of January 26, 2007,
        by and
        between Mr. Marco Gutierrez, Mr. G. Richard Smith, Mr. Gary R. Smith and
        Mr.
        John LiVecchi (the “SPA”), Mr. Marco Gutierrez purchased a total of 160,994,722
        shares (the “Shares”) of pre-2007 Reverse Split common stock of the Company from
        Mr. G. Richard Smith, Mr. Gary R. Smith and Mr. John LiVecchi (the “Sellers”)
        for an aggregate purchase price of $100,000. The transactions memorialized
        in
        the SPA closed on February 2, 2007. In connection with the closing of the
        SPA,
        the Sellers agreed to return all of the stock options held by them to the
        Registrant for cancellation.





On
      January 26, 2007, the Board of Directors of the Company appointed Mr. Peter
      Gelb
      to serve as director to replace the position left by the resignation of Dr.
      John
      T. LiVecchi.





On
      January 26, 2007, Mr. G. Richard Smith, Mr. Gary R. Smith, and Mr. Mark R.
      Smith
      resigned from the Board of Directors of the Company and from all executive
      officer positions held by them with the Company.





On
      January 26, 2007, the Board of Directors of the Company appointed Mr. Marco
      Gutierrez to serve as a director of the Company to fill a vacancy on the Board
      of Directors.





On
      February 6, 2007, the Company completed the sale of 47,000,000 restricted shares
      of its post-2007 Reverse Split common stock to Ms. Karen Sandhu in a private
      transaction with gross proceeds to the Company from the sale equaling $200,000
      (the “Offering”). The Company used the net proceeds from the Offering to pay
      outstanding debts and liabilities owed by the Company.




F-39
 **Table
              of Contents**
 **Index
              to Financial
              Statements**
  **CONTINENTAL
                FUELS, INC.**
 **(FORMERLY
                CORONADO INDUSTRIES, INC.)**
 NOTES
            TO
            THE CONSOLIDATED FINANCIAL STATEMENTS
 NOTE
            9. SUBSEQUENT EVENTS
            (Continued)
  On
          February 25, 2007, the Board of Directors approved the conversion of an
          aggregate of three hundred thousand dollars ($300,000) of an outstanding
          note of
          the Company (the “Note”) into shares of the Company’s common stock. The
          conversion price of the shares of common stock to be issued was valued
          at $0.001
          per share by the Company’s Board of Directors.





Upon
      the
      eventual full conversion of the Note to common shares, the approved conversion
      of the Note to common stock would result in the issuance by the Company of
      an
      aggregate of 300,000,000
      restricted shares of its common stock.  In addition, there would be a
      charge against earnings for the issuance of the option to convert debt of
      approximately $90,000,000.




On
      March,
      2007 Company’s Board of Directors cancelled the conversion of the Note with the
      consent of the Noteholder and terminated plans to issue 25,000,000 shares of
      common stock.




On
      February 27, 2007, the Company’s Articles of Incorporation were amended to
      change its name to Continental Fuels, Inc. and to increase its authorized
      capital to 900,000,000 common stock shares and 100,000,000 preferred stock
      shares.




On
      March
      14, 2007, the Company announced the appointment of Timothy Brink as its
      President and Ernesto Haberer as Vice President of Business
      Development.




On
      March
      19, 2007, Registrant announced an agreement to acquire petroleum trading and
      storage companies
      from Universal Property Development and Acquisition Corporation (“UPDAC”) for
      $2.5 Million
      in cash and shares of Registrant’s convertible preferred stock valued at $5.0
      Million (the “Preferred
      Stock”). The Preferred Stock will be convertible into 500,000,000 shares of
      common stock and will also have voting rights which will equal approximately
      70% of
      Registrant’s total votes at any shareholders meeting. Therefore, upon the
      closing of this transaction UPDAC
      will have control of the Registrant.




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