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: March 31, 2003
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 June 03, 2003 was 2,293,031 shares.
PART I
ITEM 1. FINANCIAL STATEMENTS.
Our unaudited financial statements for the three months ended March 31, 2003 and
2002 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") , a
Florida-based development stage corporation which was incorporated in Florida in
1993, is engaged in the development of providing real-time e-commerce
communications in petroleum marketing and energy services and planning to build
and develop a portfolio of real estate assets with our concept of the "Super
Store" of Travel Centers across America.
The Company's business model will be conducted through two divisions, "Super
Store" Travel Center Division ("Travel Center"), and the "Super" Petroleum
Marketing Division ("Petroleum Marketing").
The "Super Store" Travel Center Division. FuelNation plans to build the "Super
Store" of Travel Centers in the state of Florida and additional locations in key
states. We have focused our attention to the needs of the industry and our
location planning to the most populous areas in the state. The plans for the
first location 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.
The site selected for the first FuelNation Travel Center is currently located in
an area that is overseen by a Community Redevelopment Agency (CRA). This
location was studied and selected as an ideal location in the "Final Report;
Commercial Vehicle Driver Survey, Truck Stop Terminal Facility Research Project,
dated March 1999. The site is approximately 5 miles west of Port Everglades and
Fort Lauderdale/Hollywood International Airport. The port has unbeatable
connections through the adjacent Fort Lauderdale/Hollywood International Airport
and the direct links with all of Florida's highway system via I-595. Almost all
gasoline, aviation and power plant fuel consumed in South Florida enters through
the seaport, which has reached its capacity.
We not only intend to cater to the traveling public we fully intend to offer our
products to the local community as well. The Travel Center will boast a fresh
farmers market, grocery store and open shop environment with local community
operators. There will be several full service and fast food restaurants, almost
every type of service needed for the transportation and tourism industry. Car
and truck washes and full service repair facilities for cars as well as tractor
trailers. Complete medical, hair stylist, entertainment, clothing, electronics,
new truck sales, and most major transportation parts and warranty
representatives on site. Shuttles and limousine service will be available to and
from most of the major attractions and transportation hubs. Parking will be in
great abundance as well as hospitality with our 200 room hotel.
The founders of FuelNation have been working on the concept of the "Super Store"
of Travel Centers since 1999. The establishing of site selection, zoning
approvals, and governmental approvals has been a daunting task. The project has
been approved to receive the proceeds of $100 million in secured taxable revenue
notes which are credit enhanced and guaranteed by a major lending institution.
The company was required to raise monies to pay for closing costs and issuance
fees in an amount of approximately $5 million. The company originally made
application for $330 million in note offerings and was approved, but decided to
break it into smaller portions because of the difficulty in raising the funds
needed to close and the upfront costs to execute such an enormous business plan.
The Travel Center project is on target to fund and break ground this year and
targeted to provide onsite fueling by end of year 2003. We have been working
diligently to satisfy all requirements to complete the underwriting for the $100
million secured taxable revenue notes. As of the date of this filing all current
conditions and fees have been paid and the company is waiting for document
preparation from the placement agents prior to the notes being offered.
Page 2 of 18
There has been a tremendous difficulty in raising money to execute our complete
business plan during the past 2 years. We have been approached by several
lenders introducing financing proposals, which only addressed our short term,
not long term needs. We have placed all technology development on hold until we
are able to obtain financing. In light of all the changes in the economy, energy
markets, national security, stock and money markets we have been actively
positioning the company for these current and upcoming changes. We have
identified the ability to finance future growth and acquisitions with Secured
Taxable Revenue Notes for approved "Public Purpose Projects". Public Purpose
Projects means "any capital project which furthers the purposes of the
ordinance, whether real or personal property, including any building, land,
fixture, vehicle, equipment, facility, streets, transportation facilities,
street lighting, sidewalks, drainage, sewers, water and utility systems, power
facilities, community facilities, health facilities, recreational facilities,
security, public lodging facilities, educational facilities, etc.."
Our revised business plan and note financing application in the amount of $100
million allows us to integrate and execute our business plan using "Public
Purpose Projects" which create jobs, development, expansion, education and
additional revenue for municipalities. Our first "Public Purpose Project" is to
build the "Super Store" of Travel Centers starting in the state of Florida.
FuelNation will work jointly with local universities to provide on site
accredited studies and college credits for students and faculty that train at
our location. The professors will be assigned to key projects at our site, i.e.,
food and beverage, hotel and hospitality, chemical engineering, transportation
and marketing. The professors will work with graduate students and students in
part time positions to earn college credits and on the job training. The
relationship with the universities gives us wide selection of qualified
assistance and supervised training. It also gives additional assistance with the
development of our communications platform with the complete use of the
universities resources. See "Item 6-Management's Discussion and Analysis or Plan
of Operation" for a more detailed description of the financing.
The "Super" Petroleum Marketing Division. We intend to consolidate several
petroleum marketers and automate their existing customer base with real time
e-commerce solutions to create a "Super" Petroleum Marketer. The first phase of
our expansion plan will be supplying fuel and offering our automation to
existing branded and unbranded sites for long established petroleum marketers.
The second phase will be aligning our e-commerce automation with transportation
lines to roll-out the FuelNation Brand and identity with unmatched e-commerce
and automation. The third phase will be to identify key assets in the petroleum
marketing industry and acquire them.
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.
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 world's 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 believe that the value of our product is driven from many factors, including;
economical installation, customizable, rapid scalability, 24 hour help desk,
dependable hardware connection, no setup or programming at site, no equipment
purchases, centralized and scalable main frame database, automated polling and
populating of data from existing hardware, automated population of existing
software, open architecture programming, real time reporting and many more. Our
programmers have successfully written the programming code that communicates to
most of the top hardware and software suppliers for this industry. During the
past two years, we have installed our product for no charge at several
well-established leading companies during the development process. In exchange
for the companies working with us during our development process, our
programmers have been granted complete access to their existing management,
networks, supply chain, vendors, and service contractors for valuable industry
knowledge and guidance. All of this development and valuable industry knowledge
and guidance has led us to the introduction of our service offering and the
company's flagship product, a complete network management system from rack to
retail ("R2R(sm) that utilizes broadband and wireless technology. The remotely
connected system, accessible via any web enabled device, allows oil producers,
major oil companies, petroleum marketers, transports, convenience stores and
major franchises to collect and integrate data from several pieces of equipment
simultaneously, track deliveries with global positioning systems, forecast fuel
inventory needs, manage electronic safe deposits, track detailed retail sales,
automate rebates, enhance security and shrinkage controls, automate payroll
functions, monitor product costs and adjust pricing in "real-time." The R2R(sm)
solution is designed to increase profitability and reduce costs. We believe that
our advantage lies in the multiple solutions achieved through the utilization of
the non-proprietary programmable router which solves the hardware connectivity
issue with a broadband satellite link-up connected to the tank monitors,
point-of-sales cash registers, and many other data generating devices. The
result is a seamless solution enabling efficient economic controls without the
current manual administrative headaches.
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 three month periods ended March 31, 2003 and
2002.
Page 3 of 18
Results of Operations
Comparison of Results of Operations for the three month periods ended March 31,
2003 and 2002
We generated no revenues during the three month periods ended March 31, 2003 and
2002 and it is not anticipated that we will be able to generate any revenues in
the foreseeable future unless and until we finalize our bond financing and begin
building the travel center and marketing our technology to petroleum marketers
or otherwise acquire an existing entity which generates revenues and profits.
2
Total operating expenses were $224,087 for the three months ended March 31,
2003, compared to $423,305 for the three months ended March 31, 2002. The
expenses incurred during the three-month period ended March 31, 2003 arose
primarily from salaries and wages ($66,508), professional and consulting fees
($56,641) and other general and administrative expenses ($88,071). These
expenses decreased in 2003 over the same period in 2002 by reducing the
employment of staff to support the related technology which resulted in a
decrease in salaries and wages of $121,663 and reducing the use of outside
consultants which resulted in a decrease of professional and consulting fees of
$29,125. Non-Cash Employee Compensation decreased by $87,693 in 2003 compared
with the same period in 2002.
Additionally, we incurred interest expense of $1,543 in 2003. As a result, we
incurred a net loss of $225,630 for the three months ended March 31, 2003,
compared to a Net Loss of $431,745 for three months ended March31, 2002.
Plan of Operation
Because we have not generated any revenues as of the date of this Report, we
hereby submit our Plan of Operation pursuant to the requirements of Regulation
SB, promulgated under the Securities Act of 1933, as amended.
Our objective is to be the leading "Super" Petroleum Marketer engaged in the
development of providing petroleum supply with e-commerce communications in
petroleum marketing and energy services and to build and develop a portfolio of
real estate assets with our concept of the "Super Store" of Travel Centers
across America.
The Company's business model will be conducted through two subsidiaries, "Super"
Petroleum Marketing Division ("Marketing Division"), and the "Super Store"
Travel Center Division ("Travel Center").
The "Super Store" Travel Center Division. FuelNation has plans to build the
"Super Store" of Travel Centers in the state of Florida and additional locations
in key states. We have focused our attention to the needs of the industry and
our location planning to the most populous areas in the state. 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.
The "Super" Petroleum Marketing Division. We intend to consolidate petroleum
marketers and automate their existing customer base with real time e-commerce
solutions. The first phase of our expansion plan will be supplying fuel and
offering our automation to existing branded and unbranded sites for long
established petroleum marketers. The second phase will be aligning our
e-commerce automation with transportation lines to roll-out the FuelNation Brand
and identity with unmatched e-commerce and automation. The third phase will be
to identify key assets in the petroleum marketing industry and acquire them.
We not only intend to cater to the traveling public we fully intend to offer our
products to the local community as well. The Travel Center will boast a fresh
farmers market, grocery store and open shop environment with local community
operators. There will be several full service and fast food restaurants, almost
every type of service needed for the transportation and tourism industry. Car
and truck washes and full service repair facilities for cars as well as tractor
trailers. Complete medical, hair stylist, entertainment, clothing, electronics,
new truck sales, and most major transportation parts and warranty
representatives on site. Shuttles and limousine service will be available to and
from most of the major attractions and transportation hubs.
We intend to finance these purchases with the issuance and sale of secured
taxable revenue notes. We have been negotiating the issuance of $100,000,000 of
secured taxable revenue notes. As of the date of this Report, we have
successfully negotiated approval for the issuance of $100,000,000 of secured
taxable revenue notes. We currently have paid an application and commitment fee
and legal retainers for the note offering of $320,000. We are also required to
have a bank issue a cost of issuance and short fall letter of credit in the
amount of approximately $4,000,000 which is refundable from the proceeds of the
note issue. We have received a commitment for a cost of issuance and short fall
letter of credit from a major institution.
Our concept to build a "Super" Petroleum Marketer has been developed during our
live onsite testing and development period over the past two years. The industry
has not experienced a substantial consolidation at the Petroleum Marketer level
while missing the economies of scale from the consolidation process. Currently
there have been limited economical resources or the means to communicate with
several hundreds or even thousands of pieces of equipment without being cost
prohibitive. At FuelNation 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.
Page 4 of 18
The R2R(sm) technology is an inventory management system that allows multiple
point of sales, tank monitors, 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 without installing computer software. The R2R(sm) technology
includes a proprietary router box connected to an existing retail or wholesale
location, which automatically collects, integrates and distributes the data, in
various formats, to the customer at a centralized location. By utilizing this
technology, the pricing, monitoring of sales, inventory status and reordering of
fuel can be done remotely including through a remote apparatus such as a PDA. In
other words, from a distant location, an R2R(sm) customer can regularly monitor
fuel sales on a real-time basis as well as change the pricing at retail fuel
pumps to reflect current market conditions. Furthermore, the system enables the
automatic reordering of fuel based upon the actual volume of sales and remaining
quantity of fuel at the applicable pump.
The automated system serves as a significant mechanism for companies to monitor
their fuel sales, inventory, and costs. In addition, financial lenders can also
have access to the data in order to monitor the operations of their borrowers on
a real time basis. We expect to receive fees and/or royalty payments either on a
fixed basis per month or on a per gallon basis charge. We intend to license our
technology to service stations, truck stops and/or customers that are otherwise
involved in the distribution and sale of fuel.
We believe that our product offering is unique and is not available via any
other method. The industry is a very difficult market to penetrate. We
originally started marketing our system to the major oil companies and felt this
would give us the immediate market share and the vertical integration we
desired. During our sales initiatives we discovered the following:
The oil companies' main drive is gallons and market share. The oil companies
distribute their products through petroleum marketers, dealers and some company
owned stores. The oil companies require the petroleum marketers and the dealers
to use their credit card processors. This equipment for the credit card
processing is supplied through the oil company and paid by the petroleum
marketers and the dealers. The oil companies typically charge 3% processing fee
for the use of all credit cards on the network and offer their own branded
credit card processing for no charge. The majority of all of the credit card
processing is Visa and MasterCard and therefore the burden and costs are passed
down the food chain to the petroleum marketers and the dealers for the credit
card processing fees.
The reporting requirements of the industry are very labor intensive and the
burden is always passed down to the petroleum marketers and the dealers. New
equipment and programs are usually offered through the major oil companies to
the petroleum marketers and the dealers with a percentage of the offering always
being rebated back to the oil company. There are other alternative equipment and
service suppliers in the industry and they are limited on their entry to the
market by being approved and certified to operate on their credit-processing
network. Our approach is and will continue to be providing the industry with an
open architecture and shared information environment that allows entry to
virtually all equipment and service suppliers. Other industries have state of
the art communications and networks and first class accounting and reporting
packages. We believe the petroleum industry is behind the market by decades.
Our entry to the market is being focused on working with major petroleum
marketers and dealer networks through consolidation and automation. We have
discovered that when several petroleum marketers and dealers are very satisfied
with your products and services and they request the major oil companies to
approve our products and services, they typically get what they want. This
process is not fast, but it is very effective. The oil companies are starting to
follow the lead of petroleum marketers and dealer networks because they see the
efficiencies first hand. We feel confident the industry will start to make
significant changes to the manual processes and allow a more open environment
once they see others operating.
Given the magnitude of these fuel markets, we completed our B2B applications and
automating manual processes. We also intend to find one or more partners to
assist in retail sales of the "Super" Petroleum Marketer concept and
installation of our R2R system. There are also multiple advertising
opportunities that we intend to pursue, including the displaying of our logo at
automated locations and on fuel transports.
Sales Strategy
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 petroleum marketer
resellers. Reseller organizations can offer all of our services. These third
party petroleum marketer sales organizations are already involved in marketing
to the petroleum industry. Those in the petroleum marketer 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 petroleum marketer 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 petroleum marketer 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 petroleum marketer
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.
Page 5 of 18
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 and
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. 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 $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:
o 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.
o 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.
o Secure messaging. All communications between our system are
facilitated by an encrypted protocol.
o 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 was 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.
Trends
The United States petroleum marketing industry is estimated at $134.2 billion
dollars for 1999, with an anticipated size of $204.8 billion dollars by 2005,
assuming a 7.3 percent growth rate in gas consumption over 10 years. The number
of retail fuel outlets in the U.S., which was approximately 182,600 in 1998, is
estimated at 250,000 by 2005. According to U.S. Government figures, the total
demand for oil will increase to 112 million barrels per day with prices
remaining steady at $28 per barrel in the year 2020.
Our product has been installed and operational at several well established
leading petroleum companies in the United States as well as Manama, Bahrain for
the past two years. The product has been proven to be very successful and
profitable for the petroleum marketers during our development and testing stage.
We have studied and surveyed existing and potential customers for a marketing
strategy.
Page 6 of 18
There can be no assurance that any of our potential products and services can be
successfully marketed. Our technology has no historical results upon which to
forecast future operations. It is expected that business, operating results and
financial condition will be materially adversely affected if revenues do not
meet our projections.
These trends taken together create a picture of opportunity for our future
growth. We anticipate that the vertical integration strategy will bode well for
our future, as activity along the entire value chain should increase not just in
the domestic sense but globally as well. However, there can be no assurances
that this will occur.
Inflation
Inflation has not had a significant impact on our results of operations and is
not anticipated to have a significant negative impact in the foreseeable future.
However, there is no assurance that inflation will not have a material adverse
impact on our future results of operations.
Liquidity and Capital Resources
At March 31, 2003, we had $12,403 in cash and working capital deficit of
$1,845,824. For the three month period ended March 31, 2003, net cash provided
by operating activities was $11,791. This was primarily attributable to a net
loss for the period of $225,630 and offset by increase of payables and
liabilities of $ 207,381. The company intends to pay off its existing
obligations in the approximate amount of $2.4 million from the issuance and
funding of $100,000,000 secured taxable revenue notes.
It is anticipated that we will, in all likelihood, sustain operating expenses
without corresponding revenues, at least until the end of 2003. There is no
assurance that we will achieve our expansion goals and the failure to achieve
such goals would have an adverse impact on us.
Additional Financings will be required. In April 2003 the former CEO and board
members made arrangements to have a standby letter of credit issued by a bank in
the amount of $500,000 to secure a loan in the amount of $320,000 with 5%
interest and to guarantee performance and payment of a consulting agreement in
the amount of $150,000, both obligations are due in 6 months. The loans have
been secured by stock owned by the affiliates and guarantees by the affiliates.
The Company is currently negotiating to have an additional standby letter of
credit issued for another $500,000 to secure additional loans to assist the
company in completing the secured taxable note offering. Our success is
dependent upon our ability to raise additional capital. As of the date of this
Report, we have successfully negotiated the commitment for the issuance of
$100,000,000 of loans resulting from the issuance of a special purpose entity of
secured taxable revenue notes. We currently have paid an application and
commitment fee and legal retainers for the note offering of $320,000. We are
also required to have a bank issue a cost of issuance and short fall letter of
credit in the amount of approximately $4,000,000 which is refundable from the
proceeds of the note issue. We have received a commitment for a cost of issuance
and short fall letter of credit from a major institution.
We are also in discussions with investment bankers and others to provide or
assist in providing additional financing. However, as of the date of this
Report, we do not have any written commitments for any additional financing
other than the issuance of the $100,000,000 secured taxable notes and the cost
of issuance and short fall letter of credit in the amount of approximately
$4,000,000 which is refundable from the proceeds of the note issue and the
additional letter of credit for $500,000, and no assurance can be given that we
will obtain any other additional financing. The failure to infuse any other
additional capital into our Company may affect our ability to fully implement
our business plan described herein.
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 and a commitment letter for funding has been accepted and signed. As of
the date of this filing all current conditions and fees have been paid and the
company is waiting for document preparation and time lines from the placement
agents
The Company was able to arrange the $4,000,000 needed to pay for the cost of
issuance and the funds to guarantee the interest shortfall for the $100 million
secured taxable notes and received verification of the availability of the
funds. All indications from the lender are still positive for the issuance of
the secured taxable revenue notes.
Our success is subject to the completion of our taxable revenue note 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.
Page 7 of 18
Critical Accounting Policies
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States requires management of the Company to
make assumptions, estimates and judgments that affect the amounts reported in
the financial statements, including the notes thereto, and related disclosures
of commitments and contingencies, if any. The Company considers its critical
accounting policies to be those that require the more significant judgments and
estimates in the preparation of the Company's financial statements, including
the following: impairment of long-lived assets; capitalized technology costs and
accounting for expenses in connection with stock issuances, stock options and
warrants. Management relies on historical experience and on other assumptions
believed to be reasonable under the circumstances in making its judgment and
estimates. Actual results could differ materially from those estimates. There
have been no significant changes in the assumptions, estimates and judgments in
the preparation of these financial statements from the assumptions, estimates
and judgments used in the preparation of the Company's prior years audited
financial statements.
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.
On July 25, 2002 the Company was served with a civil action from one of the four
individual note holders, Peter Gianoukas, in the amount of $11,541 principal
amount. Further details on the notes are given in the Liquidity and Capital
Resources section of this report. The note holder claimed we were in default on
the note and demanded payment. The note was due on September 30, 2002 and not
yet been paid. As of the date of this filing Mr. Gianoukas received a final
default judgment in the state of New Jersey. The Company will defend this suit
with all remedies of the law. As of the date of this filing we are working
diligently to resolve the default.
On December 2, 2002 in a case entitled Richard Maddox vs. FuelNation Inc.
(CASE#02-22492-CACE-25) Broward County, Florida (17th Judicial Circuit), the
Company was named as a defendant by a shareholder in a securities-related suit
for money damages in the amount of $25,000 based on allegations of unjust
enrichment. Responsive pleadings in defense of the claim have been filed,
including affirmative defenses. A trial date is scheduled for August 2003.
On January 17, 2003 the Company was served with a civil suit from Andrew Telsey
vs. FuelNation Inc. (Case# 03-001019-CACE-11) Broward County, Florida (17th
Judicial Circuit). The Company was named as defendant in a collection suit for
attorneys fees in the amount of $24,197.93 based on allegations of breach of
agreement and quantum merit. Responsive pleadings in defense of the claim have
been filed, including affirmative defenses. The parties are now engaged in
pre-trial discovery with no trial date scheduled. The Company deems the lawsuit
frivolous and without merit and is pondering the filing of a counterclaim.
Page 8 of 18
On February 28, 2003 the Company was served with a civil suit from Exodus
Resources, Inc. vs FuelNation Inc. and Chris Salmonson (Case# 03-5178-CA-06)
Dade County, Florida (11th Judicial Circuit). The Company and former CEO were
named as co-defendants, jointly and severally, by a shareholder in a securities
related suit for money damages exceeding $15,000.00 (plus special damages) based
on allegations of breach of fiduciary duty and fraud. Responsive pleadings in
defense of the claim have been filed, including affirmative defenses. The
parties are now engaged in pre-trial discovery with no trial date scheduled. The
Company deems the lawsuit frivolous and without merit and is pondering the
filing of a counterclaim.
In April 2003, our independent auditors received a request from the SEC seeking
the production of documents in connection with an informal investigation. The
Company has not received the notice The Company cannot predict when this
investigation will be completed, nor can it predict what the results of this
investigation may be. It is possible that the Company will be required to pay
fines, consent to injunctions on future conduct, or suffer other penalties, each
of which could have a material adverse effect on its business. The Company
cannot assure you that the effects and result of this investigation will not be
material and adverse to its business, financial condition and liquidity.
ITEM 2. CHANGES IN SECURITIES. - NONE
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 then 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
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.
Mr. Salmonson stepped down from his management role 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 secured taxable revenue
notes.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -
(a) Exhibits - none
(b) Reports on Form 8-K
(1) January 27, 2003.
Page 9 of 18
FUELNATION INC.
(A Development Stage Company)
BALANCE SHEET
March 31, December 31,
ASSETS 2003 2002
------ ------------ ------------
(Unaudited) (Audited)
CURRENT ASSETS:
Cash $ 12,403 $ 612
Inventories 499,749 499,749
Other 81,120 81,120
------------ ------------
Total Current Assets 593,272 581,481
------------ ------------
FIXED ASSETS:
Office Furniture and Equipment and Computer Systems, net of
accumulated depreciation of $132,831 and $119,964 113,848 126,715
------------ ------------
OTHER ASSETS:
Deposits on Equipment 752,500 752,500
Technology -- --
------------ ------------
Total Other Assets 752,500 752,500
------------ ------------
Total Assets $ 1,459,620 $ 1,460,696
============ ============
LIABILITIES AND STOCKHOLDERS' [DEFICIT]
---------------------------------------
CURRENT LIABILITIES:
Accounts payable $ 697,184 $ 672,803
Accrued Liabilities 419,193 329,540
Payroll and Taxes Payable 973,761 880,414
Convertible Debt 35,953 35,953
Note Payable 25,000 25,000
Due to Affiliates 138,505 121,332
Other Payables 149,500 149,500
------------ ------------
Total Current Liabilities 2,439,096 2,214,542
------------ ------------
Commitments and Contingencies -- --
------------ ------------
Common Stock Subject to Repurchase, 57,108 Shares Issued and
Outstanding at March 31, 2003 and December 31, 2002 3,547,973 3,547,973
------------ ------------
STOCKHOLDERS' [DEFICIT]:
Preferred Stock, $.01 par value, 5,000,000 shares
authorized; none issued and outstanding -- --
Common Stock, $.01 par value, 100,000,000 shares
authorized; 2,237,385 shares and 2,214,051 shares issued and outstanding at
March 31, 2003 and December 31, 2002 respectively 22,374 22,141
Additional paid-in capital 29,803,452 29,803,685
(Deficit) Accumulated in the Development Stage (34,353,275) (34,127,645)
------------ ------------
Total Stockholders' [Deficit] (4,527,449) (4,301,819)
------------ ------------
Total Liabilities and Stockholders' [Deficit] $ 1,459,620 $ 1,460,696
============ ============
See Accompanying Notes
Page 10 of 18
FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)
For the Three Months Ended
March 31, Accumulative in
---------------------------- the Development
2003 2002 Stage
------------ ------------ ------------
Revenue $ -- $ -- $ --
------------ ------------ ------------
Operating expenses:
Salaries and wages including related taxes 66,508 188,171 1,577,026
Consulting fees 55,385 19,456 183,601
Consulting fees - related party -- 221,162
Legal and professional 1,256 66,310 824,841
Marketing and promotion -- 467,158
Rent 25,056 -- 250,956
Rent - related party -- 45,387
Depreciation 12,867 3,825 132,831
Other general and administrative expenses 63,015 57,850 600,358
Impairement Loss on Technology -- 1,581,747
Research and development cost -- 10,000
Financing Costs -- 90,000
Non - Cash Consulting fees -- -- 17,014,280
Non - Cash Consulting fees - related party -- 3,644,251
Non - Cash Printing costs -- 21,000
Non - Cash Financing costs -- 92,956
Non - Cash Employee Compensation -- 87,693 6,863,527
------------ ------------ ------------
Total operating expenses 224,087 423,305 33,621,081
------------ ------------ ------------
Operating Loss (224,087) (423,305) (33,621,081)
Other Income (Expense):
Other (Expense) Income -- -- (694,982)
Interest expense (1,543) (8,440) (37,212)
------------ ------------ ------------
Total other (expense), net (1,543) (8,440) (732,194)
------------ ------------ ------------
Net Loss $ (225,630) $ (431,745) $(34,353,275)
============ ============ ============
Basic and Diluted Net Loss per Common Share $ (0.10) $ (0.36)
============ ============
Basic and Diluted Weighted Average Common
Shares Outstanding 2,281,038 1,194,642
============ ============
See Accompanying Notes
Page 11 of 18
FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS
(Unaudited)
For the Three Months Ended
March 31, Accumulative in
------------------------------ the Development
2003 2002 Stage
----------- ----------- -------------
Cash Flows from Operating Activities:
Net loss $ (225,630) $ (431,745) $(34,353,275)
Adjustments to reconcile net loss to net cash provided by
(used) in operating activities:
Depreciation 12,867 3,825 132,831
Non- Cash Employee Compensation -- 87,693 6,863,527
Non- Cash Consulting Fees -- -- 17,014,280
Non- Cash Consulting Fees -Related Party -- 3,644,251
Non- Cash Financing Costs 92,956
Non- Cash Printing Costs 21,000
Write- Down of Investments -- 657,686
Other 58,508
Write - Down of Technology 1,581,747
Amortization of Convertible Debt -- 7,631 30,394
--
Changes in Assets and Liabilities: --
Inventory -- -- (499,748)
Due from Escrow Accounts -- (45,000)
Due from Affiliates -- 304,680
Other -- 16,667 8,705
Increase [Decrease] in :
Accounts Payable 24,381 48,890 730,097
Due to Affiliates 17,173 154,754 421,648
Accrued Liabilites 89,653 21,809 499,285
Payroll and Taxes Payable 93,347 93,104 973,761
------------ ------------ ------------
Net cash provided by (used) in operating activities 11,791 2,628 (1,862,667)
------------ ------------ ------------
Cash Flows from Investing Activities:
Payments for Technology -- -- (544,903)
Payment for Fixed Assets -- (2,667) (246,679)
Advances Toward Pending Acquisition -- (402,724)
Bond Issuance Deposit -- (80,000)
Cash Received in Acquisition -- -- 1,109
------------ ------------ ------------
Net cash used in investing activities -- (2,667) (1,273,197)
------------ ------------ ------------
Cash Flows from Financing Activities:
Proceeds from issuance of common stock 3,453,118
Proceeds from Issuance of Convertible Debt 35,953
Payment of Loans Payable (100,000)
Debt Restructuring (255,804)
Exercise of Stock options -- -- 15,000
------------ ------------ ------------
Net cash provided by financing activities -- -- 3,148,267
------------ ------------ ------------
Net (Decrease) Increase in Cash 11,791 (39) 12,403
Cash, Beginning of Period 612 2,196 --
------------ ------------ ------------
Cash, End of Period $ 12,403 $ 2,157 $ 12,403
------------ ------------ ------------
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest: $ -- $ -- $ 2,716
------------ ------------ ------------
Cash paid during the period for Income Taxes: $ -- $ -- $ --
------------ ------------ ------------
Supplemental Disclosures of Non Cash Investing and Financing Activities:
During the Three Months Ended March 31, 2003 and March 31, 2002
---------------------------------------------------------------
In February 2003, additionally 23,334 shares of common stock
were issued to consultant a settlement of the civil suit. The related
cost of these shares was accrued at December 31, 2002.
The following transaction occurred in 2002:
-------------------------------------------
In February 2002, options to purchase 8,352 shares of common stock were issued
and exercised by the then CEO of the Company at the exercise price of $1.50 per
share.
The proceeds totaling $12,528 were offset against the amount due
to affiliates and $87,693 was recorded as non cash employee compensation.
See Accompanying Notes
Page 12 of 18
FUELNATION INC.
(A Development Stage Company)
March 31, 2003
(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 necessarily 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, 2002.
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, 2002 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 three months ended March 31, 2003 and 2002, 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
The Company has borrowed monies from related parties to fund operations. During
the three months ended March 31, 2003 the Company borrowed approximately $17,173
from the former Chairman of the Board/Chief Executive ["CEO"] . At March 31,
2003 the balance owed to affiliates was $138,505 . Currently, there are no
interest or repayment terms for the debt and it is treated as if due on demand.
Page 13 of 18
FUELNATION INC.
(A Development Stage Company)
March 31, 2003
(Unaudited)
Note 6. New Authoritative Accounting Pronouncements
On April 30, 2002, the Financial Accounting Standards Board ("FASB") issued
Statement No 145, Rescission of FASB Statement No. 4, 44, and 64,Amendment of
FASB Statement No. 13, and Technical Corrections. Statement 145rescinds
Statement 4, which required all gains and losses from extinguishment of debt to
be aggregated and, if material, classified as an extraordinary item, net of
related income tax effect. As a result, the criteria in Opinion 30 will now be
used to classify those gains and losses. Statement 64 amended Statement 4, and
is no longer necessary because Statement 4 has been rescinded. 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 existing pronouncements. While those corrections are not substantive in
nature, in some instances they may change accounting practice.
In July 2002, the FASB issued SFAS No. 146, "Accounting for Costs Associated
with Exit or Disposal Activities" ("SFAS 146"), which addresses the recognition,
measurement, and reporting of costs associated with exit or disposal activities,
and supercedes Emerging Issues Task Force Issue No. 94-3, "Liability Recognition
for Certain Employee Termination Benefits and Other Costs to Exit an Activity
(including Certain Costs Incurred in a Restructuring)" ("EITF 94-3"). The
provisions of SFAS 146 are effective for exit or disposal activities that are
initiated after December 31, 2002, with early application encouraged. The
Company expects to adopt SFAS 146, effective January 1, 2003. In October 2002,
the FASB issued SFAS No. 147, "Acquisitions of Certain Financial Institutions"
("SFAS 147"). SFAS 147 provides guidance on the accounting for the acquisition
of a financial institution. SFAS 147 applies to all financial institution
acquisitions except those between two or more mutual enterprises.
In December 2002, the FASB issued SFAS No. 148, "Accounting for Stock-Based
Compensation-Transition and Disclosure" ("SFAS 148"). SFAS 148 amends SFAS no.
123, "Accounting for Stock-Based Compensation" ("SFAS 123"), to provide
alternative methods of transition for a voluntary change to the fair value based
method of accounting for stock-based employee compensation. In addition, SFAS
148 amends the disclosure requirements of SFAS 123 to require prominent
disclosures in both annual and interim financial statements about the method of
accounting for stock-based employee compensation and the effect of the method
used on reported results. SFAS 148 is effective for fiscal periods beginning
after December 15, 2002.
In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities," which clarifies the application
of Accounting Research Bulletin No. 51, "Consolidated Financial Statements", to
certain entities in which equity investors do not have the characteristics of a
controlling financial interest or do not have sufficient equity at risk for the
entity to finance its activities without additional subordinated financial
support from other parties. FIN 46 is applicable immediately for variable
interest entities created after January 31, 2003. For variable interest entities
created prior to January 31, 2003, the provisions of FIN 46 are applicable no
later than July 1, 2003.
The Company adopted the above pronouncements effective January 1, 2003, except
for FIN 46 which was adopted February 1, 2003. With the exception of FIN 46,
which may have an impact on future financial statements, the adoption of the new
Statements did not have a significant impact on the Company's financial
statements.
Page 14 of 18
FUELNATION INC.
(A Development Stage Company)
March 31, 2003
(Unaudited)
Note 7. Stock-Based Compensation
The Company accounts for stock-based employee compensation under the measurement
principles of APB Opinion No. 25 " Accounting for Stock Issued to Employees" and
related interpretations. The following table illustrate the effect on Net Income
and Earnings (Loss) per share if the Company had applied the fair value
recognition provisions of FASB Statement No 123 to stock-based employee
compensation:
Three Months
Ended March 31,
--------------------------
2003 2002
----------- -----------
Net Loss, as reported $ (225,630) $ (431,745)
Add: Stock-based employee compensation
expense as reported -- 87,693
Deduct: Stock-based employee compensation
expense determined under the fair value
based method -- (88,554)
----------- -----------
Pro- Forma Net Loss $ (225,630) $ (432,606)
----------- -----------
Basic and Diluted Loss per Share:
As Reported $ (.10) $ (.36)
Pro Forma $ (.10) $ (.36)
Note 8. Subsequent Events
In April 2003, FuelNation Travel Center, LLC ("FNTC"), a special purpose
corporation, entered into a Commitment Letter pursuant to which a funding entity
agreed to provide FNTC with a funding facility of up to $100 million through a
two-year construction loan, which will then convert to a term loan. Funds will
be made available by the funding entity through a special purpose entity that
will be selling taxable bonds that will fund this project as well as unrelated
projects. The funds will be available to FNTC based upon an agreed upon
construction schedule and draw schedule. The interest rate on the loan will be
based on the interest rate on the bond offering. The term loan will be amortized
over 25 years and be due in 15 years. An affiliate of the funding entity will be
issued a 20% interest in FNTC. The loans will be secured by a first lien on the
project ,a pledge of the equity interests in FNTC and other related collateral.
FNTC has paid an application fee of $100,000, commitment fee, legal fees and
financial consulting fees of $270,000 and a loan fee of 4% or $4 million in the
form of a letter of credit, which has been guaranteed by a third party. FNTC is
also responsible to pay additional legal fees of $50,000 upon signing loan
documents of the lender and financial advisory fees at closing.
The manager and 100% owner of FNTC is William Schlecht, who is also a director
of the Company. In January 2003, Mr. Schlecht entered into an agreement with the
Company pursuant to which he agreed to assign his membership interests in FNTC
and remain as manager of FNTC until completion of the funding, in exchange for
the issuance of 100,000 shares of FuelNation common stock. The Company is not
required to provide any guarantees or other financial assurances to the funding
entity.
In April 2003 the former CEO and board members made arrangements to have a
standby letter of credit issued by a bank in the amount of $500,000 to secure a
loan in the amount of $320,000 with 5% interest and to guarantee performance and
payment of a consulting agreement in the amount of $150,000, both obligations
are due in 6 months. The loans have been secured by stock owned by the
affiliates and guarantees by the affiliates. The Company is currently
negotiating to have an additional standby letter of credit issued for another
$500,000 to secure additional loans to assist the Company in completing the
secured taxable note offering.
Page 15 of 18
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: June 3 , 2003
By: /s/ CHARLES BRODZKI
----------------------------
Charles Brodzki,
President
Page 16 of 18
I, Charles Brodzki, 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: June 3, 2003 /s/ CHARLES BRODZKI
-----------------------------------------
Charles Brodzki
Chief Executive Officer and Acting Chief
Financial Officer
Page 17 of 18