U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
Quarterly Report Under
the Securities Exchange Act of 1934
For Quarter Ended: September 30, 2002
Commission File Number: 1-12350
FUELNATION INC.
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(Exact name of small business issuer as specified in its charter)
Florida
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(State or other jurisdiction of incorporation or organization)
65-0827283
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(IRS Employer Identification No.)
4121 SW 47th Ave.
Davie, Florida
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(Address of principal executive offices)
33314
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(Zip Code)
(954) 587-3775
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(Issuer's Telephone Number)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Securities Exchange Act of 1934 during the past 12 months (or
for such shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90 days:
Yes [X] No [ ].
The number of shares of the registrant's only class of common stock issued and
outstanding, as of November 18, 2002 was 233,481,254 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
Our unaudited financial statements for the three and nine month periods ended
September 30, 2002 and 2001 are attached hereto.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS/PLAN OF OPERATION
The following discussion should be read in conjunction with our unaudited
Financial Statements and notes thereto included herein. In connection with, and
because we desire to take advantage of, the "safe harbor" provisions of the
Private Securities Litigation Reform Act of 1995, we caution readers regarding
certain forward looking statements in the following discussion and elsewhere in
this report and in any other statement made by, or on our behalf, whether or not
in future filings with the Securities and Exchange Commission. Forward looking
statements are statements not based on historical information and which relate
to future operations, strategies, financial results or other developments.
Forward looking statements are necessarily based upon estimates and assumptions
that are inherently subject to significant business, economic and competitive
uncertainties and contingencies, many of which are beyond our control and many
of which, with respect to future business decisions, are subject to change.
These uncertainties and contingencies can affect actual results and could cause
actual results to differ materially from those expressed in any forward looking
statements made by, or on our behalf. We disclaim any obligation to update
forward looking statements.
OVERVIEW
FuelNation Inc. ("we," "us," "our," "FuelNation" or the "Company") is a
Florida-based development stage corporation engaged in the development of
providing real-time e-commerce communications and energy services. Our
operations are conducted through strategic alliances, which principally are
engaged in advanced technology and services solutions for the petroleum
marketing industry, i.e., oil companies, marketers, transports, gas stations and
convenience stores worldwide, and the development of one of the worlds most
integrated communications platform for the petroleum industry. We intend to use
Broadband that delivers data to remote stations at speeds reaching 45Mbps,
satellite technology, global positioning system (GPS) with real-time tracking
and path logging of delivery vehicles. We have developed the R2R(sm)
communications technology which allows multiple point of sales, tank monitors,
global positioning system, VSAT, wireless PDA devices, Internet phones,
automated teller machines, back office software, price signs and numerous other
equipment manufacturers to integrate and seamlessly exchange data in an open
architecture environment.
We were incorporated under the laws of the state of Florida on July 6, 1993
under the name "International Pizza Corporation." We have had two other names
and business plans since our incorporation, including QPQ Corporation and
Regenesis Holdings, Inc. We changed our name to the current name in October 2000
and adopted the business plan described under "Plan of Operation" below. In
conjunction with our most recent name change, in October 2000 Triad Petroleum,
LLC ("Triad") and Triad's owners as a group, acquired 96% interest in our
company pursuant to the terms of a Share Sale and Contribution Agreement in
exchange for the assignment of all of the rights, title, interest, marketing
rights, patent rights, royalty rights, and any other rights in the Intellectual
Property and technology, and any related trademarks and service marks (or
applications made thereby) Triad may have had with regard to said Intellectual
Property.
The following information is intended to highlight developments in our
operations, to present our results of operations to date, our plan of operation,
to identify key trends affecting our business and to identify other factors
affecting our business for the nine month periods ended September 30, 2002 and
2001.
Results of Operations
Comparison of Results of Operations for the three and nine month periods ended
September 30, 2002 and 2001
We generated no revenues during the three and nine months periods ended
September 30, 2002 and 2001 and it is not anticipated that we will be able to
generate any revenues in the foreseeable future unless and until we begin
marketing our technology or otherwise acquire an existing entity which generates
revenues and profits.
2
Total operating expenses were $3,033,555 for the nine months ended September 30,
2002, compared to $26,450,813 for the nine months ended September 30, 2001. The
expenses incurred during the nine-month period ended September 30, 2002 arose
primarily from salaries and wages ($535,550), professional and consulting fees
($216,970), non-cash consulting fees ($714,000), non-cash employee compensation
($458,066),write down of capitalized software development costs ($891,747) and
other general and administrative expenses ($140,240). These expenses decreased
in 2002 over the same period in 2001 by reducing the use of outside consultants,
which resulted in a decrease in non-cash consulting fees of $14,931,218.
Non-cash employee compensation decreased by $5,754,900 in 2002 compared with the
same period in 2001. This was offset by an increase in salaries and wages of
$166,445 due to employment of additional staff to support the related
technology. Additionally, we incurred interest expense of $25,817 in 2002. As a
result, we incurred a net loss of $3,051,258 for the nine months ended September
30, 2002.
Total operating expenses were $1,561,128 for the three months ended September
30, 2002, compared to $3,426,772 for the three months ended September 2001. The
expenses incurred during the three month period ended September 2002 arose
primarily from salaries and wages ($184,711), professional and consulting fees
($36,225), non-cash consulting fees ($394,000) write down of capitalized
software development costs ($891,747) and other general and administrative
expenses ($33,202). These expenses decreased in 2002 over the same period in
2001 by reducing the use of outside consultants, which resulted in a decrease in
non- cash consulting fees of $2,630,796. Additionally, we incurred interest
expense of $8,937 in 2002. As a result, we incurred a net loss of $1,564,934 for
the three months ended September 30, 2002.
Plan of Operation
At the current time we have experienced a major set back in our financing plans
for the issuance of taxable revenue notes. On August 13, 2002 the company signed
a term sheet to issue taxable revenue notes in the amount of $80 million and
paid a refundable application fee of $80,000 that was accepted by the lender. On
August 16, 2002 the lender issued a commitment to fund $80 million and requested
another $80,000 commitment fee and the performance of several other obligations
or the commitment would expire on August 23, 2002. The commitment has since
expired and the lender has asked us to resubmit an application for $100 million
of bond funding with a modified business plan to reflect construction of the
Travel Center and the Technology Center only. The current acquisitions in the
petroleum marketing industry are on hold until we have additional funding or
alternative means of acquiring the companies. As of the date of this filing the
modified business plan has been submitted to the lender for their review and the
application is expected to be submitted during the month of November.
The Company was able to arrange the $3,300,000 needed to pay for the cost of
issuance and the funds to guarantee the interest shortfall for the $100 million
dollar bond funding and received verification of the availability of the funds
dated November 01, 2002. All indications from the lender are still positive for
the issuance of the taxable revenue notes and they are waiting for our revised
application submission.
Our success is subject to the completion of our taxable revenue bond issue,
however, there can be no assurances that the Company will be successful in
acquiring additional capital or that such capital, if available, will be on
terms and conditions acceptable to the Company.
In line with FuelNation's business strategy, we are preparing the application
for the issuance of a taxable revenue bond offering in the amount of $100
million to build one of the largest and most technology advanced Travel Centers
in the state of Florida. The plans currently consist of a 105,500 sf Travel
Center, 75,000sf 200 room hotel, 24 pump fueling depot, truck wash, 35,000 sf
retail mall, 20,000 sf spa and gym, 30,000 sf of offices for the technology
center, 19,000 sf of repair, 11,300 sf convenience store, 7,500 sf truck sales,
858 tractor trailer parking slots and 539 car parking slots.
We will be preparing documentation to list FuelNation on the BBXSM (Bulletin
Board ExchangeSM) exchange that will eventually take the place of the OTC
Bulletin Board (R) (OTCBB). The BBX will appeal to many of the same companies
that are currently quoted on the OTCBB, but will be a higher quality market.
The BBX will have qualitative listing standards, but will have no minimum share
price, income, or asset requirements. In addition, the BBX will have an
electronic trading system to allow order negotiation and automatic execution.
The new system will bring increased speed and reliability to trade executions,
as well as improve the overall transparency of the marketplace.
3
Our objective is to be the leading worldwide provider of real- time e-commerce
and business-to-business communications in the petroleum marketing industry. Our
vertical integration strategy is to purchase existing petroleum marketers,
transport companies, dealers and related facilities in key distribution markets
We intend to finance these purchases by issuing taxable revenue bonds and
raising additional equity through private placements and equity financing
through an equity line of credit. However, there can be no assurances that the
Company will be successful in acquiring additional capital or that such capital,
if available, will be on terms and conditions acceptable to the Company.
The executive and operational offices of FuelNation will be centralized in the
new headquarters to be built and located at the 45-acre Travel Center in Davie,
Florida. FuelNation will build its technology headquarters at the Davie, Florida
location and with the assistance of students and faculty from local universities
to assist with the development of our technology
We have placed all technology development on hold until we are able to obtain
financing. The revised business plan and bond financing application allocates
$25 million dollars to our technology center. We have developed proprietary
technology that allows us to provide fully integrated services relating to the
inventory, sales, distribution and financial reporting functions in the fuel
industry. Marketed under the service mark R2R(SM) ("Rack to Retail"), this
technology completely automates and streamlines the data collection processes
for centralization, retrieval and integration of inventory, financial and
accounting information in the fuel industry.
Sales Strategy
Once additional financing is obtained our products and services will be marketed
through direct and indirect channels. We intend to accomplish our direct selling
in several ways, including:
- our web sites;
- direct sales by our own staff and technology partners;
- affiliate programs;
- original equipment manufacturers; and
- tradeshows.
For our indirect sales efforts, we will use independent resellers. Reseller
organizations can offer all of our services. These third party sales
organizations are either already involved in marketing to the petroleum
industry. Those in the reseller program purchase our services at a discounted
rate and then re-sell them to their clients. They can either use us to bill
their customers for these services or invoice their customers under their own
name.
For resellers, we believe the key element is residual, transaction-based income.
Resellers that manage the entire transactions will receive a per transaction
fee, plus sign-up fees if the reseller uses our suggested retail pricing. Many
resellers actually charge higher prices when the market will bear it. The use of
resellers allows us to leverage our resources to maximize revenues. By working
with companies as resellers, we strategically develop an outside sales
organization that already has sound, existing relationships with merchants.
These resellers recognize that income derived from our installation fees and
recurring transaction charges provide them with significant revenue potential.
Most competitors sell products using a direct sales force.
4
We will use a variety of marketing activities to increase market awareness of
our services and educate our target audience. In addition to building awareness
of our brand, our marketing activities focus on generating leads for our sales
efforts. To build awareness and attract new merchants we conduct marketing and
partnership programs including advertising, public relations activities,
referral programs, co-branded initiatives, virtual seminars and trade shows.
Our vertical integration strategy is to purchase existing petroleum marketers
and dealers in key distribution markets. We will focus upon the complete
automation of these companies and allow them to continue to operate and
consolidate additional marketers in their markets. This approach has been
received very favorably and we are in negotiations with several very large
marketers on this strategy. However, there can be no assurances that these
negotiations will result in our obtaining contracts, or if we obtain these
contracts, we will become profitable. If we acquire these entities, the
marketers will continue to operate their companies as wholly owned subsidiaries
of our Company and we will provide the high-speed networks and communications to
their existing facilities and equipment. Our current tests on petroleum
marketers to date have shown increases in EBIDTA approaching 30% with the
increased efficiencies in automating manual processes, less shrinkage, improved
buying power.
Data Centers and Network Access
Our data center in the United States is located at leased facilities at Echosat
in Lexington, Kentucky. A data center is a facility containing servers, modem
banks, network circuits and other physical equipment necessary to connect users
to the Internet. The data center has multiple levels of redundant connectivity
to the Internet, back-up power, fire suppression, seismic reinforcement and
security surveillance 24 hours a day, 7 days a week. The current base monthly
rent is $2,000 per month, on a month to month basis.
Our data center in the Middle East is currently located at leased facilities at
BATELCO in Manama Bahrain. The current base monthly rent is $7,000 per month, on
a month to month basis.
The technology underlying our e-commerce and Business-to- Business transaction
services provides the following benefits:
Scalability. Our services allow us to deliver consistent quality of service as
transaction volumes grow, and to handle daily and seasonal peak periods. As a
result, we do not have to expand these areas of their transaction-processing
infrastructure as their businesses grow.
High reliability. Our systems are engineered to provide high reliability, and we
provide transaction processing and support 24 hours a day, 7 days a week.
Secure messaging. All communications between our system are facilitated by an
encrypted protocol.
Real-time responses. Because our services enable online e- commerce and
Business-to-Business transactions in real-time, clients can improve their level
of customer satisfaction and reduce their support costs by avoiding delayed
responses and minimizing the need for follow-up communications.
Product Development
Our Florida-based product development team has been responsible for the design,
development, testing and release of our core software and services. We have a
well-defined software development methodology that we believe enables us to
deliver services that satisfy real business needs for the global market while
meeting commercial quality expectations. We emphasize quality assurance
throughout our software development lifecycle. We believe that a strong emphasis
placed on analysis, design and rapid prototyping early in the project lifecycle
reduces the number and costs of defects that may be found in later stages. Our
development methodology focuses on delivery of product to a global market,
enabling localization into multiple languages, multi-currency payment
processing, global fraud detection, and local regulatory compliance from a
single code base.
When appropriate, we utilize third parties to expand the capacity and technical
expertise of our internal product development organization. On occasion, we have
licensed third-party technology that we feel provides the strongest technical
alternative. We believe this approach shortens time-to- market without
compromising our competitive position, product quality or service.
5
Manufacturing
We do not have the capacity to manufacture the router devices and have used
contract manufacturers for the devices made to date. For the foreseeable future,
we intend to continue to use contract manufacturers for the router device. We
believe that there are multiple vendors and manufacturers available and that we
will not rely on any one source.
Intellectual Property
Our success depends upon our proprietary technology. We rely on a combination of
patent, copyright, trademark and trade secret rights, confidentiality procedures
and licensing arrangements to establish and protect our proprietary rights.
As part of our confidentiality procedures, we generally enter into
non-disclosure agreements with our employees, distributors, and corporate
partners and into license agreements with respect to our software, documentation
and other proprietary information. Despite these precautions, third parties
could reverse engineer, copy or otherwise obtain our technology without
authorization, or develop similar technology independently. While we police the
use of our services and technology through online monitoring and functions
designed into our products, an unauthorized third-party may nevertheless gain
unauthorized access to our services or pirate our software. We are unable to
determine the extent to which piracy of our intellectual property or software
exists. Software piracy is a prevalent problem in our industry. Effective
protection of intellectual property rights may be unavailable or limited in
foreign countries. We cannot assure you that the protection of our proprietary
rights will be adequate or that our competitors will not independently develop
similar technology, duplicate our services or design around any intellectual
property rights we hold.
Liquidity and Capital Resources
At September 30, 2002, we had $404 in cash and working capital deficit of
$1,741,957. For the nine month period ended September 30, 2002, net cash used by
operating activities was $249,364. This was primarily attributable to a net loss
for the period of $3,051,258 and offset by increase of payables and liabilities
of $ 471,126, expenses paid on behalf of the Company by an affiliated Company of
$173,745,write-down of capitalized software development costs of $891,747, non-
cash consulting expense of $714,000 and non-cash employee compensation of
$458,066 arising from stock options granted to an officer of the company .
Our ability to meet our future obligations in relation to the orderly payment of
our recurring obligations on a current basis is totally dependent on our ability
to commence generating revenues and attain a profitable level of operations,
receive required working capital advances from our shareholders or obtain
capital from outside sources.
During the nine months ended September 30, 2002 cash provided by financing
activities was $330,239 which comprised of the sale of common stock for $110,000
and $232,766 borrowed from Fuel America LLC ("Fuel America"), an entity
controlled by our Chairman of the Board/Chief Executive Officer, Christopher R.
Salmonson. In February 2002, Mr. Salmonson exercised options to purchase
1,252,761 shares of our common stock at an exercise price of $.01 per share. The
proceeds of $12,527 were used to reduce the amount due to Fuel America. At
September 30, 2002,the balance owed Fuel America was $427,199.Currently, there
are no interest repayment terms for the debt and it is treated as if due on
demand.
In October 2001, we borrowed approximately $36,000 from four(4)individuals and
issued 9% convertible subordinated promissory notes, which were due September
30, 2002 and are convertible into 258,654 shares of our common stock, at a rate
of one share of common stock for each $0.139 principal amount of notes.
Additionally, we issued stock purchase warrants to the noteholders, which
entitled these noteholders to purchase 517,309 shares of our common stock at an
exercise price of approximately $.15 per share. The warrants were issued at
twice the conversion rate of our common stock (two warrants for each $0.139
principal amount of notes).The notes are shown net of a discount of
approximately $30,000 which represents the fair value assigned to the warrants
that were issued. The discount is being amortized over the life of the debt.
Amortization amounted to approximately $22,893 for the nine months ended
September 30,2002 and is charged to interest expense. Currently three of the
four note holders are discussing the conversion of their notes to common stock
at a reduced conversion rate. As of the date of this filing these Notes are in
default.
We have primarily funded our payroll costs through borrowing from related
parties. Payroll taxes have become delinquent since the second quarter of 2001.
These liabilities, which include penalties and interest through September 30,
6
2002, amount to $680,882. Penalties (to the maximum limits) and interest will
accrue on such payroll tax liabilities, as well as additional payroll tax
liabilities incurred subsequent to September 30, 2002, until paid.
We have a signed letter of intent with one of the largest southeast petroleum
marketer's since January 9, 2002 to purchase the marketer for $28,500,000 and
the assumption of approximately $40 million dollars of liabilities. The first
acquisition will provide FuelNation with approximately $200 million of sales and
$14 million of EBIDTA. However, as of the date of this Report, until the bond
funding is complete there will be no definitive agreement between any third
party and us and there can be no assurances that such an agreement will be
reached in the future. As of the date of this filing we have mutually postponed
the acquisition until we are able to complete our financing.
We intend to continue our discussions with investment bankers and others to
provide or assist in providing additional financing. However, as of the date of
this Report, the only direction for financing is directed toward the bond
funding, and no assurance can be given that we will obtain any such financing.
ITEM 4. CONTROLS AND PROCEDURES.
DISCLOSURE CONTROLS AND PROCEDURES
Within the 90 days prior to the date of this report, the Company carried out an
evaluation, under the supervision and participation of the Company's Chief
Executive Officer and acting Chief Financial Officer (the "Officers") of the
effectiveness of the design and operation of the Company's disclosure controls
and procedures pursuant to Securities Exchange Act Rule 13a-14. Based upon that
evaluation, the Officers concluded that the Company's disclosure controls and
procedures are effective in timely alerting them to material information
relating to the Company required to be included in the Company's periodic SEC
filings, including this report.
INTERNAL CONTROLS
There were no significant changes made in the Company's internal controls or in
other factors that could significantly affect these controls subsequent to the
date of their evaluation.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS.
In the second quarter of 2002, the Company received a default judgment in the
amount of $104,700 plus interest in favor of Penton Media, Inc . The Company
plans to negotiate a payment plan for the amount owed.
On July 25, 2002 the company was served with a civil action from one of the four
(4) individual note holders, Peter Gianoukas, in the amount of $11,541.00
principal amount. Further details on the notes are given in the Liquidity and
Capital Resources section of this report. The note holder claims we are in
default on the note and has demanded payment. All note holders have been mailed
their interest checks and have cashed the interest checks, excluding Mr. Peter
Gianoukas, which refuses to cash his interest check and sue The Company. The
note was due on September 30, 2002 and not yet been paid. The Company will
defend this suit with all remedies of the law. As of the date of this filing we
are working diligently on converting notes to equity in the company.
On July 30, 2002 The Company was served with a civil suit from CLX & Associates,
Inc., attention Robert Weidenbaum claiming FuelNation owes them $140,000 worth
of stock. FuelNation signed a consulting agreement in March 2002 under the
premises that CLX & Associates, Inc was a public relations firm and they would
assist the company. The Company intends to defend this suit with all remedies of
the law.
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ITEM 2. CHANGES IN SECURITIES.
In February 2002, our CEO, Christopher Salmonson, exercised options to purchase
1,252,761 shares of our common stock at an exercise price of $.01 per share.
In May 2002, 16,758,232 options were granted to purchase shares of Company
common stock to the CEO and employees of the Company at an option price of $.01
per share as consideration for accrued compensation owed .The relevant shares
were registered as part of an S-8 registration statement filed with the SEC. The
Company incurred a non-cash charge to operations of $370,373. These options were
simultaneously exercised in May 2002.
During the second quarter of 2002,we issued 8,000,000 shares of our common stock
in exchange for consulting services. These shares were valued at $320,000. The
relevant shares were registered as part of an S-8 registration statement filed
with the SEC.
During the second quarter of 2002, 5,500,000 shares of our common stock were
sold for $110,000. The relevant shares were registered as part of an S-8
registration statement filed with the SEC.
During the third quarter of 2002,we issued 19,700,000 shares of our common stock
in exchange for consulting services. These shares were valued at $394,000. The
relevant shares were registered as part of an S-8 registration statement filed
with the SEC.
Three demand notes came due in the months of August and September and the
company was unable to extend the term on the notes or make payment on the notes.
Restricted common shares owned and pledged by an affiliate Fuel America secured
the collateral for thesedemand notes. Loans were advanced to Fuel America, using
restricted common shares of FuelNation Inc as collateral. The funds were
advanced to FuelNation from the affiliate and treated as a demand note. These
amounts are included in due to affiliates in the accompanying financial
statements.
During the month of August 2002 the company was required to pay ($330,000.00) on
a demand note resulting from a 12-month loan advanced by a group of shareholders
of FuelNation Inc. that matured on April 19, 2002. This note was extended until
August 2002 while waiting for the bond funding to be completed. Since the delay
of the bond funding the lender group has defaulted against the collateral of
20,000,000 restricted common shares of FuelNation stock pledged by an affiliate
Fuel America. The Company has agreed to replace these shares to the affiliate.
The collateral has a restrictive legend and is subject to all rules as may be
imposed by Rule 144 of the Securities Act of 1933, as amended.
During the month of September 2002, the company was required to pay ($65,000.00)
on a 60-day demand note and resulted in the lender, Richard Gladstone,
defaulting against the collateral of 4,002,000 restricted common shares of
FuelNation stock pledged by an affiliate Fuel America. The Company has agreed to
replace these shares to the affiliate. The collateral has a restrictive legend
and is subject to all rules as may be imposed by Rule 144 of the Securities Act
of 1933, as amended.
During the month of September 2002 the company was required to pay ($100,000.00)
on a 60-day demand note, and resulted in the lender, Peter Knight, defaulting
against the collateral of 26,357,500 restricted common shares of FuelNation
stock pledged by an affiliate Fuel America. The Company has agreed to replace
these shares to the affiliate. The collateral has a restrictive legend and is
subject to all rules as may be imposed by Rule 144 of the Securities Act of
1933, as amended.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE
ITEM 5. OTHER INFORMATION
On August 15, 2002 the CEO and President of the company, Chris Salmonson, was
arrested by the Sheriff's Office in Broward County, Florida and was held on
charges of grand theft relating to a real estate transaction, that failed, with
a church. It is alleged that he received $1,670,000 from the Church in exchange
for real property that was never conveyed to the Church. The CEO and President
8
denies that he has committed any offense or violation of law and has assured the
Company that he will vigorously defend himself against the charges made against
him. Mr. Salmonson has retained counsel with respect to these matters, and
counsel is working toward his defense.
The current CEO and President, Chris Salmonson, has agreed to step down from his
management roll as CEO and President until the allegations against him are
settled. The board of directors has reviewed key people to assist with the
management and funding responsibilities and agreed in principal to a successor
CEO and President subject to a formal agreement being signed with the successor
CEO and President and the appropriate actions being adopted by the Company.
Chris Salmonson has agreed to stay on as a consultant and guide the Company
through on the funding of the taxable revenue notes.
The board of Directors pursuant to the purchase contract dated September 14,
2000 between Triad Petroleum, Inc. and Regenesis Holdings, Inc. exercised our
rights in the purchase contract article 6, item 6.7, (resignation of directors
and officers) to demand the resignation of Edwin Ruh, Jr. as a director
effective immediately. The current active board of directors consist of three
individuals; Shaikh Isa Mohammed Isa Alkhalifa, William Schlecht and Chris
Salmonson.
During the month of September the four programmers have resigned from employment
of the Company and are seeking alternative employment. The programmers have
agreed to assist the Company on a consulting basis with the technology and
support and have continued to provide their services for the Company. We have
currently stopped providing any free or discounted services to clients for Beta
testing and are awaiting the bond funding to commence in order to implement our
strategy. The current technologies is running seamlessly at the Echosat
Communications location in Lexington, Kentucky and discussions for joint
marketing or add on services to the satellite installations are being pursued.
The Company is in discussions with our debt holders and vendors to convert their
indebtedness into common equity of the Company. It is the intention of the
Company to negotiate most of the outstanding indebtedness into common equity of
the Company and thereby relieving any burden of fund raising for operations or
vendor supplies.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits - none
(b) Reports on Form 8-K
We did not file any reports on Form 8-K during the nine month period ended
September 30, 2002.
9
FUELNATION INC.
(A Development Stage Company)
BALANCE SHEET
September 30, 2002
(Unaudited)
ASSETS
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CURRENT ASSETS:
Cash $ 404
Inventory 560,339
Deposit on Application fee 80,000
Other 1,580
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Total Current Assets 642,323
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FIXED ASSETS:
Office Furniture and Equipment and Computer Systems, net of
accumulated depreciation of $107,097 139,583
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OTHER ASSETS:
Deposits on Equipment 752,500
Technology 690,000
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Total Other Assets 1,442,500
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Total Assets $ 2,224,406
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LIABILITIES AND STOCKHOLDERS' [DEFICIT]
---------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 618,311
Accrued Liabilities 298,690
Payroll and Taxes Payable 680,882
Convertible Debt 35,953
Due to Affiliates 600,944
Other Payables 149,500
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Total Current Liabilities 2,384,280
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Commitments and Contingencies --
------------
Common Stock Subject to Repurchase, 8,566,113 Shares Issued and
Outstanding at September 30, 2002 3,547,973
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STOCKHOLDERS' [DEFICIT]:
Preferred Stock, $.01 par value, 20,000,000 shares
authorized; none issued and outstanding --
Common Stock, $.01 par value, 350,000,000 shares
authorized; 221,914,891 issued and outstanding at September 30,2002 2,219,147
Additional paid-in capital 26,826,757
(Deficit) Accumulated in the Development Stage (32,753,751)
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Total Stockholders' [Deficit] (3,707,847)
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Total Liabilities and Stockholders' [Deficit] $ 2,224,406
============
See Accompanying Notes
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FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
NINE MONTHS ENDED SEPTEMBER 30, 2002
(Unaudited)
For the Nine Months Ended
September 30, Accumulative in
------------------------------ the Development
2002 2001 Stage
------------- ------------- -------------
Revenue $ -- $ -- $ --
------------- ------------- -------------
Operating expenses:
Salaries and wages including related taxes 535,550 369,105 1,357,570
Consulting fees 39,714 69,148
Consulting fees - related party 221,162
Legal and professional 216,970 169,007 827,779
Marketing and promotion 110,817 406,567
Rent - related party 28,866 45,387
Depreciation 37,268 124,790 107,096
Other general and administrative expenses 140,240 205,044 598,922
Research and development cost 10,000
Write Down of Capitalized Software Development Costs 891,747 891,747
Non - Cash Consulting fees 714,000 15,645,218 16,992,718
Non - Cash Consulting fees - related party 3,585,000 3,585,000
Non - Cash financing costs 92,956
Non - Cash Employee Compensation 458,066 6,212,966 6,826,032
------------- ------------- -------------
Total operating expenses 3,033,555 26,450,813 32,032,084
------------- ------------- -------------
Operating Loss (3,033,555) (26,450,813) (32,032,084)
Other Income (Expense):
Other (Expense) Income 8,114 (45,000) (686,868)
Interest expense (25,817) (2,674) (34,799)
------------- ------------- -------------
Total other (expense), net (17,703) (47,674) (721,667)
------------- ------------- -------------
Net Loss $ (3,051,258) $ (26,498,487) $ (32,753,751)
============= ============= =============
Basic and Diluted Net Loss per Common Share $ (0.02) $ (0.16)
============= =============
Basic and Diluted Weighted Average Common
Shares Outstanding 201,125,333 161,032,585
============= =============
See Accompanying Notes
11
FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 2002
(Unaudited)
For the Three Months Ended
September 30, Accumulative in
------------------------------ the Development
2002 2001 Stage
------------- ------------- -------------
Revenue $ -- $ -- $ --
------------- ------------- -------------
Operating expenses:
Salaries and wages including related taxes 184,711 144,536 1,357,570
Consulting fees 69,148
Consulting fees - related party 221,162
Legal and professional 36,225 45,046 827,779
Marketing and promotion 406,567
Rent - related party 10,041 45,387
Depreciation 21,243 69,942 107,096
Other general and administrative expenses 33,202 132,411 598,922
Research and development cost 10,000
Write Down of Capitalized Software Development Costs 891,747 891,747
Non - Cash Consulting fees 394,000 3,024,796 16,992,718
Non - Cash Consulting fees - related party 3,585,000
Non - Cash financing costs 92,956
Non - Cash Employee Compensation -- -- 6,826,032
------------- ------------- -------------
Total operating expenses 1,561,128 3,426,772 32,032,084
------------- ------------- -------------
Operating Loss (1,561,128) (3,426,772) (32,032,084)
Other Income (Expense):
Other (Expense) Income 5,131 (45,000) (686,868)
Interest expense (8,937) (1,117) (34,799)
------------- ------------- -------------
Total other (expense), net (3,806) (46,117) (721,667)
------------- ------------- -------------
Net Loss $ (1,564,934) $ (3,472,889) $ (32,753,751)
============= ============= =============
Basic and Diluted Net Loss per Common Share $ (0.01) $ (0.02)
============= =============
Basic and Diluted Weighted Average Common
Shares Outstanding 223,840,592 168,614,502
============= =============
See Accompanying Notes
12
FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2002 AND 2001
(Unaudited)
Accumulative in
the Development
2002 2001 Stage
------------ ------------ ------------
Cash Flows from Operating Activities:
Net loss $ (3,051,258) $(26,498,487) $(32,753,751)
Adjustments to reconcile net loss to net cash provided by
(used) in operating activities:
Depreciation 37,268 124,790 107,096
Non- Cash Employee Compensation 458,066 6,212,966 6,826,032
Non- Cash Consulting Fees 714,000 15,645,218 16,992,718
Non- Cash Consulting Fees -Related Party 3,585,000 3,585,000
Non- Cash Financing Costs 92,956
Write- Down of Investments 208,800 657,686
Other 32,500
Write - Down of Capitalized Software Development Costs 891,747 891,747
Amortization of Discount on Convertible Debt 22,894 -- 22,894
Changes in Assets and Liabilities:
Inventory -- (6,717) (560,339)
Due from Escrow Accounts (45,000)
Due from Affiliates 173,745 (86,493) 478,425
Other 33,048 445,697 41,753
Increase [Decrease] in :
Accounts Payable 83,208 172,440 483,643
Accrued Liabilites 63,881 146,134 284,782
Payroll and Taxes Payable 324,037 248,138 848,464
------------ ------------ ------------
Net cash provided by (used) in operating activities (249,364) 197,486 (2,013,394)
------------ ------------ ------------
Cash Flows from Investing Activities:
Payments for Technology -- (315,971) (544,903)
Payment for Fixed Assets (2,667) (9,173) (246,680)
Advances Toward Pending Acquisition (402,724)
Deposit for Application fee (80,000) (80,000)
Cash Received in Acquisition -- -- 1,109
------------ ------------ ------------
Net cash used in investing activities (82,667) (325,144) (1,273,198)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 110,000 116,500 3,371,608
Proceeds from Issuance of Convertible Debt 35,953
Payment of Loans Payable (100,000)
Debt Restructuring (255,804)
Increase in loan to officers and stockholders 220,239 -- 235,239
------------ ------------ ------------
Net cash provided by financing activities 330,239 116,500 3,286,996
------------ ------------ ------------
Net (Decrease) Increase in Cash (1,792) (11,158) 404
Cash, Beginning of Period 2,196 13,198 --
------------ ------------ ------------
Cash, End of Period $ 404 $ 2,040 $ 404
============ ============ ============
Supplemental Disclosure of Cash Flow Information:
Cash paid during the period for interest: $ 1,546 $ 2,674 $ 2,854
============ ============ ============
Cash paid during the period for Income Taxes: $ -- $ -- $ --
============ ============ ============
Supplemental Schedule of Non Cash Investing and Financing Activities:
During the Nine Month Period Ended September 30, 2002:
------------------------------------------------------
Options to purchase 1,252,761 shares of common stock were excercised by a
officer of the company and the amount of $ 12,527 was offset against the loan to
officers and stockholders.
The Company entered into three consulting agrements and issued a total of
27,700,000 shares of the Company's common stock for services. Accordingly a
non-cash expense of $714,000 was recorded which was the fair value of the common
stock at the time of issuance.
Options to purchase 16,758,232 shares of common stock were excercised by the CEO
and employees of the Company at an exercise price of $.01 per share as
consideration for accrued compensation owed. The Company incurred a non-cash
employee expense of $370,373.
During the Nine Month Period Ended September 30, 2001:
------------------------------------------------------
The Company issued the following stock options:
1,500,000 shares of common stock for consulting services $3,585,000
15,930,683 shares of common stock for employee compensation $6,212,966
2,000,000 stock purchase warrants for consulting services $ 599,796
The Company, through its CEO, pledged shares of common stock to be issued for
various consulting services. The Company recorded a non-cash charge to expense
of $ 9,200,880 which was equal to the fair value of such shares at the time they
were pledged. Such shares were not issued as of June 30,2001 and the total
amount of $ 9,200,880 was credited to additional paid-in capital.
The Company issued 4,500,000 shares of common stock for:
Equipment deposits $ 752,500
Technology 590,000
Consulting agreements 100,000
----------
$1,442,500
==========
The Company issued 300,000 shares of common stock for the payment of
professional fees valued at $203,500.
The Company issued 2,000,000 shares of common stock and a related party
transferred shares of Company common stock for consulting costs of $3,149,375.
The amount of $3,149,375 was recorded as additional paid in capital.
A related party transferred shares of Affiliate- Owned Company common stock for
consulting costs valued at $2,425,000. The amount of $2,425,000 was recorded as
additional paid in capital.
Options to purchase 14,530,239 shares of common stock were exercised by a
related party and the amount of $145,301 was offset against the amount due to
affiliates.
See Accompanying Notes
13
FUELNATION INC.
(A Development Stage Company)
September 30, 2002
(Unaudited)
Note 1. Basis of Presentation
The accompanying unaudited financial statements of FuelNation Inc. (the
"Company") have been prepared in accordance with Regulation S-B promulgated by
the Securities and Exchange Commission and do not include all of the information
and footnotes required by generally accepted accounting principles in the United
States for complete financial statements. In the opinion of management, these
interim financial statements include all adjustments necessary in order to make
the financial statements not misleading. The results of operations for such
interim period are not necessary indicative of results of operations for a full
year. The unaudited financial statements should be read in conjunction with the
audited financial statements and notes thereto of the Company and management's
discussion and analysis of financial condition and results of operations
included in the Annual Report on Form 10-KSB for the year ended December 31,
2001.
The accompanying unaudited interim financial statements have been prepared on a
going concern basis, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. However, the
Company has a history of net losses and as of September 30, 2002,has a working
capital deficiency of approximately $1,741,957 and a capital deficiency of
approximately $32.7 million. Since October 2000, the Company has relied on
financial support from equity financing and loans from affiliated entities.
Management is currently seeking additional financing; however no assurances can
be made that such financing will be consummated. The continuation of the Company
as a going concern is dependent upon its ability to obtain financing, and to use
the proceeds from any such financing to increase its business to achieve
profitable operations. The accompanying financial statements do not include any
adjustments that would result should the Company be unable to continue as a
going concern.
Note 2. Significant Accounting Policies
The accounting policies followed by the Company are set forth in Note 2 to the
Company's financial statements in the December 31, 2001 Form 10-KSB.
Note 3. Basic and Diluted Loss Per Share
Basic loss per share reflects the amount of loss for the period attributable to
each share of common stock outstanding during the reporting period. Diluted loss
per share reflects basic loss per share, while giving effect to all dilutive
potential common shares that were outstanding during the period, such as common
shares that could result from the potential exercise or conversion of securities
into common stock. The computation of diluted loss per share does not assume
conversion, exercise, or contingent issuance of securities that would have an
anti-dilutive effect on loss per share (i.e. reducing loss per share). The
dilutive effect, if any, of outstanding options and warrants and their
equivalents would be reflected in dilutive earnings per share by the application
of the treasury stock method which recognizes the use of proceeds that could be
obtained upon the exercise of operations and warrants in computing diluted
earnings per share. It assumes that any proceeds would be used to purchase
common stock at the average market price of the common stock during the period.
For the period from January 1, 2002 through September 30, 2002, and January 1,
2001 through September 30, 2001, the Company had outstanding warrants and stock
options to purchase 5,683,753 shares of common stock at prices ranging from
$0.01 to $7.50 per share and for the period from January 1, 2001 through
September 30, 2001, the Company had outstanding warrants and stock options to
purchase 466,000 shares of common stock at prices ranging from $2.50 to $7.50
per share.
For the nine months ended September 30, 2002 and 2001, all of the Company's
potential common shares were anti-dilutive and a dual presentation of loss per
share is not required.
Note 4. Advances - Related Parties
During the nine months ended September 30, 2002 the Company borrowed
approximately $232,766 from Fuel America LLC ["Fuel America"],and $173,745 from
Fuel Nation Group LLC ["Fuel Nation Group"] entities controlled by the Chairman
of the Board/Chief Executive Officer ["CEO"]. In February 2002, the CEO
exercised options to purchase 1,252,761 shares of common stock at an exercise
price of $.01 per share. The proceeds of $12,527 were used to reduce the amount
due to Fuel America. At September 30, 2002, the balance owed Fuel America was
$427,199 and owed Fuel Nation Group was $173,745. Currently, there are no
interest repayment terms for the debt and it is treated as if due on demand.
14
FUELNATION INC.
(A Development Stage Company)
September 30, 2002
(Unaudited)
Three demand notes came due in the months of August and September and the
company was unable to extend the term on the notes or make payment on the notes.
Restricted common shares owned and pledged by an affiliate Fuel America secured
the collateral for thesedemand notes. Loans were advanced to Fuel America, using
restricted common shares of FuelNation Inc as collateral. The funds were
advanced to FuelNation from the affiliate and treated as a demand note. These
amounts are included in due to affiliates in the accompanying financial
statements.
During the month of August 2002 the company was required to pay ($330,000.00) on
a demand note resulting from a 12-month loan advanced by a group of shareholders
of FuelNation Inc. that matured on April 19, 2002. This note was extended until
August 2002 while waiting for the bond funding to be completed. Since the delay
of the bond funding the lender group has defaulted against the collateral of
20,000,000 restricted common shares of FuelNation stock pledged by an affiliate
Fuel America. The Company has agreed to replace these shares to the affiliate.
The collateral has a restrictive legend and is subject to all rules as may be
imposed by Rule 144 of the Securities Act of 1933, as amended.
During the month of September 2002, the company was required to pay ($65,000.00)
on a 60-day demand note and resulted in the lender, Richard Gladstone,
defaulting against the collateral of 4,002,000 restricted common shares of
FuelNation stock pledged by an affiliate Fuel America. The Company has agreed to
replace these shares to the affiliate. The collateral has a restrictive legend
and is subject to all rules as may be imposed by Rule 144 of the Securities Act
of 1933, as amended.
During the month of September 2002 the company was required to pay ($100,000.00)
on a 60-day demand note, and resulted in the lender, Peter Knight, defaulting
against the collateral of 26,357,500 restricted common shares of FuelNation
stock pledged by an affiliate Fuel America. The Company has agreed to replace
these shares to the affiliate. The collateral has a restrictive legend and is
subject to all rules as may be imposed by Rule 144 of the Securities Act of
1933, as amended.
Note 5. Stockholders' Equity - Issuance of Common Stock
In February 2002, the CEO was granted and exercised options to purchase
1,252,761 shares of common stock at an exercise price of $.01 per share. The
Company incurred non-cash expense of $87,693.
In May 2002, 16,758,232 options were granted to purchase shares of Company
common stock to the CEO and employees of the Company at an option price of $.01
per share as consideration for accrued compensation owed . The Company incurred
a non-cash charge to operations of $370,373. These options were exercised in May
2002 and 16,758,232 shares of Company common stock were issued.
During the second quarter of 2002, 8,000,000 shares of our common stock were
issued in exchange for consulting services. The Company incurred non- cash
expense of $320,000.
During the second quarter of 2002, 5,500,000 shares of our common stock were
sold for $110,000.
During the third quarter of 2002, 19,700,000 shares of our common stock were
issued in exchange for consulting services. The Company incurred non- cash
expense of $394,000.
15
FUELNATION INC.
(A Development Stage Company)
September 30, 2002
(Unaudited)
Note 6. New Authoritative Accounting Pronouncements
On August 15, 2001, the FASB issued SFAS No.143, "Accounting for Asset
Retirement Obligations ["SFAS No.143"]. SFAS No.143 requires that the fair value
of a liability for an asset retirement obligation be recognized in the period in
which it is incurred if a reasonable estimate of fair value can be made. The
associated asset retirement costs are capitalized as part of the carrying amount
of the long-lived asset. SFAS No.143 will be effective for financial statements
issued for fiscal years beginning after June 15, 2002. An entity shall recognize
the cumulative effect of adoption of SFAS No.143 as a change in accounting
principle. The Company is not currently affected by this Statement's
requirements.
On April 30, 2002, the Financial Accounting Standards Board (FASB) issued
Statement No.145, Rescission of FASB Statements No.4, 44 and 64,Amendment of
FASB Statement No. 13 and Technical Corrections. The Statement updates,
clarifies and simplifies existing accounting pronouncements.
Statement 145 rescinds Statement 4, which required all gains and losses from
extinguishments of debt to be aggregated and, if material, classified as an
extraordinary item, net of related income tax effect. As result, the criteria in
Opinion 30 will now be used to classify those gains and losses. Statement 64 and
amended Statement 4, is no longer necessary because Statement 4 has been
rescinded.
Statement 44 was issued to establish accounting requirements for the effects of
transition to the provisions of the Motor Carrier Act of 1980. Because the
transition has been completed, Statement 44 is no longer necessary. Statement
145 amends Statement 13 to require that certain lease modifications that have
economic effects similar to sale-leaseback transactions be accounted for in the
same manner as sale-leaseback transactions. This amendment is consistent with
the FASB's goal of requiring similar accounting treatment for transactions that
have similar economic effects. This Statement also makes technical corrections
to exiting pronouncements. While those corrections are not substantive in
nature, in some instances, they may change accounting practice.
SFAS No. 146, Costs Associated with Exit or Disposal Activities, was issued in
June 2002. The Statement addresses financial accounting and reporting for costs
associated with exit or disposal activities and nullifies EITF Issue No. 94-3,
Liability Recognition for Certain Employee Termination Benefits and Other Costs
to Exit an Activity (including Certain Costs Incurred in a Restructuring). This
statement requires that a liability for a cost associated with an exit or
disposal activity be recognized when the liability is incurred. The statement is
effective for exit or disposal activities that are initiated after December 31,
2002, and will result in a change in accounting policy associated with the
recognition of liabilities in connection with future exit and disposal
activities.
The Company is not currently affected by this Statement's requirements.
Note 7. Subsequent Events
In line with FuelNation's business strategy, FuelNation has submitted an
application for the issuance of a taxable revenue note offering in the amount of
$100 million to build one of the largest and most technology advanced Travel
Centers in the state of Florida. The plans currently consist of a 105,500sf
Travel Center, 75,000sf 200 room hotel, 24 pump fueling depot, truck wash,
35,000sf retail mall, 20,000sf spa and gym, 30,000sf of offices for the
technology center, 19,000sf of repair, 11,300sf convenience store, 7,500sf truck
sales, 858 tractor trailer parking slots and 539 car parking slots.
Once the term sheet is agreed and signed a funding commitment is issued. The
funding should take place within approximately 60 days and we will be able to
start our construction immediately. The Company was able to arrange the
$3,300,000 needed to pay for the cost of issuance and the funds to guarantee the
interest shortfall for the $100 million dollar bond funding and received
verification of the availability of the funds dated November 01, 2002.
16
FUELNATION INC.
(A Development Stage Company)
September 30, 2002
(Unaudited)
We have mutually agreed to postpone the letter of intent with one of the largest
southeast petroleum marketer's signed by the Company since January 9, 2002 to
purchase the marketer for $28,500,000 and the assumption of approximately $40
million of liabilities. This acquisition would provide FuelNation with
approximately $200 million of sales and $14 million of EBIDTA. Talks will begin
again once and if the bond funding is completed. The acquisition strategy allows
the company to acquire key talent in the industry and seamlessly merge synergies
across the FuelNation network.
The current CEO and President, Chris Salmonson, has agreed to step down from his
management roll as CEO and President prior to funding, until the allegations
against him are settled. The board of directors has reviewed key people to
assist with the management and funding responsibilities and agreed in principal
to a successor CEO and President subject to a formal agreement being signed with
the successor CEO and President and the appropriate actions being adopted by the
Company. Chris Salmonson has agreed to stay on as a consultant and guide the
Company through on the funding of the taxable revenue notes.
The board of Directors pursuant to the purchase contract dated September 14,
2000 between Triad Petroleum, Inc. and Regenesis Holdings, Inc. exercised our
rights in the purchase contract article 6, item 6.7, (resignation of directors
and officers) to demand the resignation of Edwin Ruh, Jr. as a director
effective immediately. The current active board of directors consist of three
individuals; Shaikh Isa Mohammed Isa Alkhalifa, William Schlecht and Chris
Salmonson.
During the month of September the four programmers have resigned from employment
of the Company and are seeking alternative employment. The programmers have
agreed to assist the company on a consulting basis with the technology and
support and have continued to provide their services for the Company. We have
currently stopped providing any free or discounted services to clients for Beta
testing and are awaiting the bond funding to commence in order to implement our
strategy. The current technologies is running seamlessly at the Echosat
Communications location in Lexington, Kentucky and discussions for joint
marketing or add on services to the satellite installations are being pursued.
The Company is in discussions with our debt holders and vendors to convert their
indebtedness into common equity of the company. It is the intention of the
Company to negotiate most of the outstanding indebtedness into common equity of
the Company and thereby relieving any burden of fund raising for operations or
vendor supplies.
We are in the advanced stages of negotiating the issuance of common stock to
convert our commitment to repurchase 8,566,113 common shares issued and
outstanding at September 30, 2002 in the dollar amount of $3,547,973 to equity
in the company. This will remove the liability from our balance sheet and make
the total stockholders [deficit] decrease.
During the fourth quarter of 2002,we issued our director Shaikh Isa Mohammed Isa
AlKhalifa 23,500,000 shares of our common stock in exchange for the partial
settlement of debt in Manama, Bahrain personally guaranteed by Shaikh Isa
Mohammed Isa AlKhalifa. These shares were valued at $94,000.
During the fourth quarter of 2002,we issued our director William C. Schlecht
3,500,000 shares of our common stock in exchange for an expanded roll with the
company and consulting services. These shares were valued at $14,000.
During the fourth quarter of 2002,we issued Fuel America 50,359,500 shares of
our common stock in replacement of shares pledged by Fuel America for loans
advanced to the company that defaulted. These shares were valued at $201,438.
17
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities and Exchange Act of
1934, the Registrant has duly caused this report to be signed on its behalf by
the undersigned, thereunto duly authorized.
FUELNATION, INC.
(Registrant)
Dated: November 18 , 2002
By: /s/ CHRISTOPHER R. SALMONSON
----------------------------
Christopher R. Salmonson,
President
18
I, Christopher R. Salmonson, certify that:
1. I have reviewed this quarterly report on Form 10-QSB of FuelNation, Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) Designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b) Evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c) Presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) All significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b) Any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 18 , 2002 /s/ CHRISTOPHER R. SALMONSON
-----------------------------------------
Christopher R. Salmonson
Chief Executive Officer and Acting Chief
Financial Officer
19