**UNITED
      STATES**


**SECURITIES
      AND EXCHANGE COMMISSION**


**WASHINGTON,
      D.C. 20549**





**FORM
      10-KSB/A**





(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/A or any
      amendment to this Form 10-KSB/A. 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



















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





**CONTINENTAL
      FUELS, INC.**





**Form
      10-KSB/A**


**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











**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.










**Explanatory
      Note**




This
      amendment on Form 10-KSB/A is being filed to amend our annual report on
      Form 10-KSB for the year ended December 31, 2006, as filed with the
      Securities and Exchange Commission on April 17, 2007, (the “Original Report”),
      solely for the purpose of making one correction. This amendment reflects the
      following change:





·
            An
                adjustment to the Consolidated Statements of Cash Flows to correct
                an
                erroneous inputted number.





This
      amendment does not reflect events occurring after the filing of the Original
      Report, or modify or update those disclosures affected by subsequent events.
      This Amendment continues to speak as of the date of the Original Report, and
      does not modify or update any other item or disclosures in the Original
      Report.











4








**PART
      I**








**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.)







5




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
      Ownership of 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


6






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.




7






**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”).




8






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.






9






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.




10






**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.




11






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.


12






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 the holders 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.







13







**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.







14






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.




15







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.







16




**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.






17






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.




18




**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











19







**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.







20






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, has over 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. Haberer is the owner and President of IRC
      Group, Inc., an international 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.






21








**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. Gutierrez was 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.




22







**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 stock
                in
                August 2006. The remaining $66,668 of salary was waived and forfeited
                in
                November 2006.





(2)
            $238,500
                of this amount was paid in 45,000 shares of restricted common stock
                in
                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 restricted common stock in December
                2006.





(3)
            Stock
                options for 200,000 shares of restricted common stock with an exercise
                price of $5.30 were granted in March 2006, but were forfeited and
                waived
                in August 2006.





(4)
            The
                salary to G. Richard Smith was paid in 1,471,665 restricted common
                stock
                shares and the salary 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.







23






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.







24







**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
                person
                who, directly or indirectly, through contract, arrangement, understanding,
                relationship or otherwise has or shares (a) the power to vote, or
                direct
                the voting of, such security or (b) investment power which includes
                the
                power to dispose, or to direct the disposition of, such security.
                In
                addition, a person is deemed to be the beneficial owner of a security
                if
                that person has the right to 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 and storage companies from 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 also have voting rights
                which will equal approximately 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
                who
                resigned from his positions with the Registrant on January 26,
                2007.





(7)
            Gary
                R. Smith was a former officer and director of the Registrant who
                resigned
                from his positions with the Registrant on January 26,
                2007.





(8)
            John
                LiVecchi was a former officer and director of the Registrant who
                resigned
                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.)




25






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.










26






>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/A with respect to documents incorporated
      by
      reference in accordance with Rule 12b-33.




**Exhibit**
              **Number**
            
            **Description**10.1*#
            
            Marketing,
                Sales and Distribution Agreement between Laboratories DOLIAGE 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 [ * ].




27




**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.










28




**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
            
            Chief
                Executive Officer, President and Chief Financial
                Officer
            
            April
                16, 2007Timothy
                  Brink/s/ 
                Peter Gelb
            
            Chairman
                of the Board; Director
            
            April
                16, 2007Peter
                  Gelb/s/
                Marco Gutierrez
            
            Secretary;
                Director
            
            April
                16, 2007Marco
                  Gutierrez







29




**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/A); 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.






30







**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 and2005
            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







**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






**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






**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
            
            
            211,490




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







F-4






**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






**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
            
            
            1,714,938
            
            
            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










**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
            
            
            281,000
            
            
            509,500Issuance
                of common stock for interest
            
            
            16,155
            
            
            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







**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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











F-23






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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






**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.




**NOTE
      10 - RESTATEMENT OF CURRENT YEAR'S FINANCIAL INFORMATION**





An
      error
      was made in the Company's originally issued financial statements for the year
      ended December 31, 2006. A number was incorrectly inputted into the Company’s
      Consolidated Statements of Cash Flows. The errors and corrections thereof did
      not otherwise affect originally reported financial information.







F-40