Edgar Filing: FUELNATION INC

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, 2003

Commission File Number: 1-12350

FUELNATION INC.

(Exact name of small business issuer as specified in its charter)

Florida
(State or other jurisdiction of incorporation or organization)

65-0827283
(IRS Employer Identification No.)

4121 SW 47th Ave.
Davie, Florida
(Address of principal executive offices)

33314
(Zip Code)

(954) 587-3775
(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 December 04, 2003 was 2,294,493 shares.

PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

FUELNATION INC.
(A Development Stage Company)
BALANCE SHEET

September 30, December 31,
2003 2002
(Unaudited) (Audited)
------------ ------------
ASSETS

CURRENT ASSETS:

Cash $ 1 $ 612
Inventories -- 499,749
Other 321,120 81,120
------------ ------------
Total Current Assets 321,121 581,481
------------ ------------
FIXED ASSETS:
Office Furniture and Equipment and Computer Systems, net of
accumulated depreciation of $158,566 and $119,964 88,113 126,715
------------ ------------

OTHER ASSETS:
Deposits on Equipment -- 752,500
------------ ------------
-- 752,500
------------ ------------
Total Assets $ 409,234 $ 1,460,696
============ ============

LIABILITIES AND STOCKHOLDERS' [DEFICIT]

CURRENT LIABILITIES:
Cash Overdraft $ 223 $
Accounts payable 743,191 672,803
Accrued Liabilities 583,699 329,540
Payroll and Taxes Payable 1,160,457 880,414
Convertible Debt 35,953 35,953
Note Payable - related party 328,000
Note Payable 25,000 25,000
Due to Affiliates 111,606 121,332
Other Payables 149,500 149,500
------------ ------------
Total Current Liabilities 3,137,629 2,214,542

Commitments and Contingencies

Common Stock Subject to Repurchase, 57,108 Shares Issued and
Outstanding at September 30, 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 and 2,214,050 issued and outstanding at
September 30,2003 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 (36,102,194) (34,127,645)
------------ ------------
Total Stockholders' [Deficit] (6,276,368) (4,301,819)
------------ ------------
Total Liabilities and Stockholders' [Deficit] $ 409,234 $ 1,460,696
============ ============

See Accompanying Notes

FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS
(Unaudited)

For the Three Months
Ended September 30,
----------------------------
2003 2002
----------- -----------

Revenue $ -- $ --
----------- -----------
Operating expenses:
Salaries and wages including related taxes 75,247 184,711
Consulting fees -- --
Consulting fees - related party 55,384 --
Legal and professional -- 36,225
Marketing and promotion -- --
Rent 6,200 --
Rent - related party -- --
Depreciation 12,868 21,243
Other general and administrative expenses 31,270 33,202
Impairement Loss on Technology -- 891,747
Write down of Inventory -- --
Loss on Equipment deposit -- --
Research and development cost -- --
Financing Costs -- --
Non - Cash Consulting fees -- 57,740
Non - Cash Consulting fees - related party -- --
Non - Cash Printing costs -- --
Non - Cash Financing costs -- --
Non - Cash Employee Compensation -- --
----------- -----------
Total operating expenses 180,969 1,224,868
----------- -----------
Operating Loss (180,969) (1,224,868)

Other Income (Expense):
Other (Expense) Income -- 5,131
Interest expense - related party (4,100) --
Interest expense (869) (8,937)
----------- -----------
Total other (expense), net (4,969) (3,806
----------- -----------
Net Loss $ (185,938) $(1,228,674)
=========== ===========
Basic and Diluted Net Loss per Common Share $ (0.08) $ (0.82)
=========== ===========
Basic and Diluted Weighted Average Common
Shares Outstanding 2,294,001 1,492,271
=========== ===========

See Accompanying Notes

FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF OPERATIONS

Accumulative in
For the Nine Months Ended the Development
September 30, Stage
---------------------------- FROM
2003 2002 September 30, 2000
TO
September 30, 2003
----------- ----------- ------------

Revenue $ -- $ -- $ --
----------- ----------- ------------
Operating expenses:
Salaries and wages including related taxes 227,468 535,550 1,737,986
Consulting fees 86,110 39,714 158,942
Consulting fees - related party 166,152 -- 442,698
Legal and professional 24,342 216,970 847,927
Marketing and promotion -- -- 467,158
Rent 35,728 -- 261,628
Rent - related party -- -- 45,387
Depreciation 38,602 37,268 158,566
Other general and administrative expenses 112,146 140,240 649,489
Impairement Loss on Technology -- 891,747 1,581,747
Write down of Inventory 499,749 -- 499,749
Loss on Equipment deposit 752,500 -- 752,500
Research and development cost -- -- 10,000
Financing Costs 20,270 -- 110,270
Non - Cash Consulting fees -- 640,661 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 -- 455,561 6,863,527
----------- ----------- ------------
Total operating expenses 1,963,067 2,957,711 35,360,061
----------- ----------- ------------
Operating Loss (1,963,067) (2,957,711) (35,360,061)

Other Income (Expense):
Other (Expense) Income -- 8,114 (694,982)
Interest expense - related party (8,200) -- (8,200)
Interest expense (3,282) (25,817) (38,951)
----------- ----------- ------------
Total other (expense), net (11,482) (17,703) (742,133)
----------- ----------- ------------
Net Loss $(1,974,549) $(2,975,414) $(36,102,194)
=========== =========== ============
Basic and Diluted Net Loss per Common Share (0.86) (2.22)
=========== ===========
Basic and Diluted Weighted Average Common
Shares Outstanding 2,287,520 1,340,836
=========== ===========

See Accompanying Notes

FUELNATION INC.
(A Development Stage Company)
STATEMENTS OF CASH FLOWS

For the Nine Months Ended
September 30, Accumulative in
---------------------------- the Development
2003 2002 Stage
----------- ----------- -----------

Cash Flows from Operating Activities:
Net loss $(1,974,549) $(2,975,414) $(36,102,194)
Adjustments to reconcile net loss to net cash
provided by (used) in operating activities:
Depreciation 38,602 37,268 158,566
Non- Cash Employee Compensation -- 455,561 6,863,527
Non- Cash Consulting Fees -- 640,661 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
Loss on Equipment Deposit 752,500 -- 752,500
Other -- -- 58,508
Write - Down of Technology and Inventory 499,749 891,747 2,081,496
Amortization of Convertible Debt -- 22,894 30,394

Changes in Assets and Liabilities: -- --
Inventory -- -- (499,748)
Due from Escrow Accounts -- -- (45,000)
Due from Affiliates -- 393,984 304,680
Other -- 33,048 8,705
Increase [Decrease] in : -- --
Accounts Payable 70,388 83,208 776,104
Due to Affiliates (9,726) -- 394,749
Accrued Liabilites 254,159 63,881 663,791
Payroll and Taxes Payable 280,043 324,037 1,160,457
----------- ----------- -----------
Net cash provided by (used) in (88,834) (29,125) (1,963,292)
operating activities -- -- --
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 (240,000) (80,000) (320,000)
Cash Received in Acquisition -- -- 1,109
----------- ----------- -----------
Net cash used in investing activities (240,000) (82,667) (1,513,197)
----------- ----------- -----------
Cash Flows from Financing Activities:
Cash Overdraft 223 -- 223
Proceeds from issuance of common stock -- 110,000 3,453,118
Proceeds from Issuance of Convertible Debt -- -- 35,953
Proceeds (Payment) of Loans Payable -- -- (100,000)
Proceeds - Note Payable related party 328,000 -- 328,000
Debt Restructuring -- -- (255,804)
Exercise of Stock options -- -- 15,000
----------- ----------- -----------
Net cash provided by financing activities 328,223 110,000 3,476,490
----------- ----------- -----------
Net (Decrease) Increase in Cash (611) (1,792) 1

Cash, Beginning of Period 612 2,196 --
----------- ----------- -----------
Cash, End of Period $ 1 $ 404 $ 1
=========== =========== ===========
Supplemental Disclosures of Cash Flow Information:
Cash paid during the period for interest: $ -- $ 1,546 $ 2,716
=========== =========== ===========
Cash paid during the period for Income Taxes: $ -- $ -- $ --
=========== =========== ===========

See Accompany Notes

Supplemental Disclosures of Non Cash Investing and Financing Activities:

During the Nine Months Ended September 30, 2003 and September 30, 2002
-----------------------------------------------------------

In February 2003, an additional 23,334 shares of common stock were issued to a
consultant in settlement of the civil suit. The related cost of these shares was
accrued at December 31, 2002.

Inventory with a book value of $ 499,749 was written off in the second quarter
of 2003.

Deposits on Equipment with a book value of $752,500 were written off in the
second quarter 2003.

The following transaction occurred in 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
$85,187 was recorded as non cash employee compensation.

Options to purchase 111,722 shares of common stock were issued and exercised by
employees of the Company in satisfaction of accrued payroll costs of $167,582,
as well as non-cash employee compensation of $370,374

Options to purchase 53,333 shares of common stock were issued and exercised by
two consultants. Non-cash consulting expense of $297,921 was recorded, which
represented the fair value of the common stock at the time of issuance.

The Company issued 40,000 shares of common stock to a consultant for services
rendered. Non-cash consulting expense of $285,000 was recorded, which
represented the fair value of the common stock at the time of issuance.

The Company granted options to purchase 80,000 shares of common stock,
which were exercised at a price of $1.50 per share, to an affiliated company as
partial repayment of the loan due to the affiliated entity. The fair value of
the options plus the proceeds upon exercise approximated $234,000 which was the
amount offset against the amount due to the affiliate.

The Company granted options to purchase 51,333 shares of common stock, which
were exercised at a price ranging from $1.20 to $1.70 per share to a consultant
for services rendered. Non-cash consulting expense of $57,740 was recorded,
which represented the fair value of the common stock at the time of issuance.

See Attached Accompanying Notes

FUELNATION INC.
(A Development Stage Company)
September 30, 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.

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, 2003,has a working
capital deficiency of $2,816,508 and a capital deficiency of approximately $36.1
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, 2002 Form 10-KSB.

Note 3. Restructuring Charges

The Company has temporarily put on hold its development of providing real
time e-commerce communications in petroleum marketing and energy services. As a
result management has taken a write off of inventory of $499,749 and equipment
deposit of $752,500 in the second quarter of 2003.

Note 4. 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 nine months ended September 30, 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. At September 30, 2003 there were 300,000
authorized and un-issued options outstanding which could dilute future earnings
per share.

Note 5. Advances and Notes - Related Parties

The Company has borrowed monies from related parties to fund operations.
At September 30, 2003 the balance owed to affiliates was $111,606. Currently,
there are no interest or repayment terms for the debt and it is treated as if
due on demand. 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 $328,000 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 used $240,000 of
these proceeds to satisfy the application and commitment fees related to the
bond financing and standby letter of credit. The loan is currently in default
and there are ongoing discussions to covert this debt into preferred equity of
The Company.

Note 6. Stockholders' Equity - Issuance of Common Stock

On January 27,2003, the Company affected a 150:1 reverse split of its
common stock. At the same time, the Company amended its certificate of
incorporation authorizing it to issue 105,000,000 shares of capital stock, of
which 5,000,000 shares are classified as preferred stock, par value of $.01 per
share, issuable in one or more series and 100,000,000 shares are classified as
common stock, par value $.01. All periods presented have been restated to
reflect the 150:1 reverse split of common stock.

In February 2003, an additional 23,334 shares of common stock were issued
to a consultant to finalize a settlement of a civil suit.

Note 7. New Authoritative Accounting Pronouncements

In April 2003, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No 149, "Amendment of Statement 133
on Derivative Instruments and Hedging Activities" ("FASB 149"), which clarifies
financial accounting and reporting for derivative instruments, including certain
derivative instruments embedded in other contracts and for hedging activities,
under FASB Statement No. 133, "Accounting For Derivative Instruments and Hedging
Activities." SFAS No. 149 is effective for contracts entered into or modified
after June 30, 2003 and for hedging relationships designated after June 30,
2003.

In May 2003, the FASB issued Statement of Financial Accounting Standards
No. 150, "Accounting for Certain financial Instruments with Characteristics of
both Liabilities and Equity" ("SFAS 150"), which established standards for how
an issuer classifies and measures certain financial instruments. SFAS 150
requires that an issuer classify certain financial instruments as liabilities
(or assets in some circumstances) that were previously classified as equity.
Financial instruments which embody an unconditional obligation requiring the
issuer to redeem or repurchase it by the transfer of assets or by issuing a
variable number of its equity shares must be classified as a liability. SFAS 150
is effective for financial instruments entered into or modified after May 31,
2003, and otherwise is effective at the beginning of the first interim period
beginning after June 15, 2003.

Note 8. 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 illustrates 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 Nine Months
Ended September 30, Ended September 30,
----------------------------- ------------------------------
2003 2002 2003 2002
------------ ----------- ------------- -----------

Net Loss, as reported $ (185,938) $(1,228,674) $ (1,974,549) $(2,975,417)

Add: Stock-based employee compensation
expense as reported (--) -- (--) 455,561

Deduct: Stock-based employee compensation
expense determined under the fair value
based method -- (474,837) -- (563,391)
----------- ----------- ------------- -----------
Pro- Forma Net Loss $ (185,938) $(1,228,674) $ (1,974,549) $(3,083,244)
=========== =========== ============= ===========

Basic and Diluted Loss per Share:
As Reported $ (.08) $ (.82) $ (.86) $ (2.22)
Pro Forma $ (.08) $ (.82) $ (.86) $ (2.29)

Note 9. Contingencies and Legal Proceedings.

The following is a summary of pending legal proceedings to which we
are a party and our property is subject. Any judgments recorded,
were default judgments from the inability of FuelNation to properly fund
and/or defend the allegations in the complaint. The company has recently
retained legal counsel to represent our interests in these cases
and all options are being researched. We believe that the ultimate resolution
of these claims, to the extent not previously provided for, will not have a
material adverse effect on our financial condition. However, an adverse outcome
of any one or more of these matters could have a material effect on
quarterly or annual operating results or cash flows.

On July 25, 2002 the Company was served with a civil action from one of
the four individual note holders, Peter Gianoukas vs. FuelNation Inc. (Docket
No. L4202-02 in the Superior Court of New Jersey), in the principal amount of
$11,541. The note has been repurchased by the company and the case has been
dismissed with Prejudice. Additional information is available in Subsequent
events below.

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. The company has entered into a stipulation for settlement with the
shareholder, and paid a $1,500 fee for the right to extend the buy back of the
shares until January 15, 2004.

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.

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. As of the date of this filing, there have been no subsequent requests
for information.

Note 10. Subsequent Events

In December 2003 FuelNation entered into a Fuel Supply Agreement with
ALKHALIFA PETROLEUM CORP., a Florida for Profit Corporation, 100% owned and
controlled by FuelNation's director Sheikh Isa Mohammed Isa Al-Khalifa. The
company has entered into this relationship with ALKHALIFA PETROLEUM CORP.,
to allow Sheikh Isa Mohammed Isa Al-Khalifa to use his Petroleum relationships
and Contacts to negotiate the most favorable terms on fuel supply and provide
the company the necessary credit in order to receive the supplies of fuel to
implement our business plan and maintain a competitive pricing on fuel. In
addition to the Fuel Supply Contract, Sheikh Isa Mohammed Isa Al-Khalifa has
made arrangements for FuelNation to receive a marketing and advertising
allowance for a period of 10 years, commencing with the term of the fuel supply
agreement. The marketing and advertising allowance will pay FuelNation
$200,000 per month for a total of $2,400,000 annually for a period of 10
years. This lease allows the fuel supplier the right to advertise on site
and is additional consideration to FuelNation for agreeing to execute a fuel
supply agreement. In order to assist FuelNation with additional financing's
we have asked that the obligations for the 10 year marketing and advertising
lease agreement be secured by a documentary letter of credit issued by one of
the world's top banks. The marketing and advertising lease is contingent upon
the closing of the Travel Center project and the lease will commence January
2004 through January 2014.

In November 2003 the company authorized the issuance of up to 30,000
shares of Series A Convertible Preferred Stock. Because this offering is
limited to accredited investors in reliance upon exemptions contained in
the Securities Act of 1933 ("Securities Act") and Rule 506 promulgated
thereunder and applicable state securities laws, the Shares are being sold
without registration under the Securities Act. The price per Share is
$1,000.00 ("Original Purchase Price"). Each Preferred share will always
maintain a conversion ratio to common stock such that the percentage of
ownership in the Company represented by one share of Series A Convertible
Preferred Stock is constant. One share of Series A Convertible Preferred
Stock is equal to .00255% of the total issued and fully diluted common stock
of the Company. The Series A Convertible Preferred Stock upon issuance of
all 30,000 shares will maintain 76.5% percent ownership and votes on a fully
diluted basis. The common shareholders would then maintain 23.5% of the votes.
Non-cumulative dividends on the Series A Preferred will be at the rate of 8% per
share per annum ("Dividends"). Dividends will be payable only if, as and when
declared by the Board of Directors ("Board"). The Company intends to file a
registration statement and have the preferred shares trade on an exchange.
Upon the registration statement for the preferred shares becoming effective,
and the preferred shares becoming tradable, the conversion feature and the
anti-dilution will be removed from the shares.

In November 2003 the Company has been in discussions with certain
investors and common shareholders to Convert their common stock and invest in
the Preferred share offering. Because this offering is limited to accredited
investors in reliance upon exemptions contained in the Securities Act of 1933
("Securities Act") and Rule 506 promulgated there under and applicable state
securities laws, the Shares are being sold without registration under the
Securities Act. All applicable filings and or disclosures will be filed.

On November 10, 2003 FuelNation executed a Consulting agreement with
Waterville Investment Research located at 1641 Third Avenue, 15A, New York, NY
10128. The Term of the agreement is for one year commencing until November 20,
2004. The company operates a research and public relations Firm with a web site
located at(www.watervilleresearch.com). Waterville will be providing data and
research on FuelNation's business, history of FuelNation's trading stock,
prospects for FuelNation, managements view of our trading stock relevant to the
market, quarterly updates on FuelNation for one-year, provide reports to retail
clients, investment houses, brokerage firms and research centers. The cost to
the company is 25 restricted preferred shares at a value of $25,000 dollars and
$500.00 dollars in cash.

On October 21, 2003, the Company and the controlling shareholders
Successfully entered into a SHARE SALE AND CONTRIBUTION AGREEMENT WITH BRAUSER
REAL ESTATE, LLC. ("Brauser"). WHEREAS, BRAUSER wishes to acquire, develop and
finance the Travel Center Project in Davie, Florida [see August 2003 subsequent
event note] and simultaneously contract with FuelNation to purchase the
facility, From BRAUSER, with assumption of the debt and the issuance of common
and Preferred Shares for the BRAUSER equity; and WHEREAS, BRAUSER wishes to
acquire from the Controlling Shareholder's and the Company a sufficient number
of shares of common Stock, and to be issued Series A Convertible Preferred
stock, to provide BRAUSER With ownership of fifty-one percent (51%) of the
issued and outstanding shares of Common stock of the Company (the "Shares") for
his equity contribution not to Exceed twenty million dollars. As of December 03,
2003 BRAUSER and FuelNation's Director Sheikh Isa Mohammed Isa Al-Khalifa have
signed and executed a loan commitment in the amount of $20,000,000 dollars for
the acquisition of the land. Discussions with the lender are ongoing to increase
the loan an additional $18,000,000 dollars, immediately after the closing on the
purchase of the land, for the construction of the Travel Center, which is
contingent on the land closing.

In September 2003 FuelNation authorized the issuance of a one-year
subordinated promissory note which accrues interest at the rate of 18% in the
amount of $1,000,000. The note will be convertible into $0.50 cent shares of
FuelNation common stock at the option of the holder. The Company has agreed to
replace the note issuance with the Series A Convertible Preferred stock as
described above.

In September 2003 three of the current convertible debt holders were
issued one-year subordinated promissory notes, as described above, in the
amount of $48,823, in settlement of their original notes totaling $24,412 as
described above. The Company has agreed to replace the note issuance with the
Series A Convertible Preferred stock as described above and cancel the note
issuance.

In August 2003, FuelNation Travel Center, LLC ("FNTC"), a special purpose
corporation, changed issuers for the bond offering because of the inability of
the prior lender to satisfy our requirements and investors concerns. The new
issuer for the bonds is a political body and one of the top bond issuers in the
state of Florida. As of November 2003 we will be borrowing construction
financing from a lending institution and issuing bonds to pay off the
construction lender.

In July 2003 The company has entered into a stipulation for settlement
with a shareholder and has agreed to buy back the shares prior to January 15,
2004 in a case entitled Richard Maddox vs. FuelNation Inc.
(CASE#02-22492-CACE-25) Broward County, Florida (17th Judicial Circuit).

ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS/PLAN OF OPERATION

Forward-Looking Statements

The following discussion should be read in conjunction with our unaudited
Financial Statements and notes thereto included herein. Certain statements in
this document are forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of
1934. These statements are subject to the safe harbor provisions of this
legislation. Words such as "expects," "intends," "plans," "projects,"
"believes," "estimates," "will" and similar expressions typically identify such
forward-looking statements. Forward looking statements are statements not based
on historical information and which relate to future operations, strategies,
financial results or other developments.

Even though we believe our expectations regarding future events are based
on reasonable assumptions, forward-looking statements are not guarantees of
future performance. Important factors that could cause actual results to differ
materially from those contained in our forward-looking statements include, among
others, changes in:

. Industry-wide petroleum margins;

. Construction materials and labor, availability of underground and
above Ground petroleum storage, dispensing and transportation
equipment;

. Petroleum and other raw material costs, the cost of transportation
of petroleum, embargoes, industry expenditures for the discovery and
production of crude oil, military conflicts between, or internal
instability in, one or more oil-producing countries, governmental
actions, and other disruptions of our ability to obtain refined
petroleum products;

. Market volatility due to world and regional events;

. Availability and cost of debt and equity financing;

. Labor relations;

. U.S. and world economic conditions;

. Supply and demand for refined petroleum products;

. Reliability and efficiency of our operating facilities which are
affected by such potential hazards as equipment malfunctions, travel
center construction/repair delays, explosions, fires, fuel spills and
the impact of severe weather and other factors which could result in
significant unplanned downtime;

. Actions taken by competitors which may include both pricing and
expansion or retirement of fuel supply capacity;

. Civil, criminal, regulatory or administrative actions, claims or
proceedings and regulations dealing with protection of the
environment, including refined petroleum product composition and
characteristics;

. Acts of war or terrorism;

. Ability to purchase, transport and sell refined petroleum products
And lubricants;

. Other unpredictable or unknown factors not discussed.

Because of all of these uncertainties, and others, you should not place
undue reliance on our forward-looking statements. We disclaim any obligation to
update forward looking statements.

OVERVIEW AND ONGOING RESTRUCTURING DISCUSSED

FuelNation Inc. ("we," "us," "our," "FuelNation" or the "Company"), a
Florida-based development stage corporation which was incorporated in Florida in
1993. We are planning to build and develop a portfolio of real estate assets
with our concept of the "Super Store" of Travel Centers across The United
States. We have also been engaged in the development of providing real-time
e-commerce communications in petroleum marketing and energy services.

BUSINESS MODEL DISCUSSED FROM 2000 TO PRESENT

2000 TO 2001

The Company's business model since the change of management and control in
October 2000, is to penetrate the petroleum market through the acquisition of
well established petroleum marketers and their existing fuel supply base
regionally. We assembled and developed leading edge technology that provided the
company the necessary management controls and inventory tracking in order to
execute our proposed business plan. Development partnerships were established
with the leading equipment suppliers, satellite and telephone companies,
transportation companies, petroleum companies and petroleum marketers. The
controls developed to manage the acquisitions were installed at key locations in
the United States as well as Manama, Bahrain in the Middle East. Data servers
were installed in Lexington, Kentucky at Echosat Communications, a leading
satellite and full service communications company, and in Manama, Bahrain at
Batelco, a full service telephone company throughout the entire Middle East. The
data servers were installed to collect, store and manage data in a secured,
centralized environment to execute an efficient management of petroleum
acquisitions. Installations were installed at no charge in several of the worlds
leading oil Company location's in order to test and develop live data through
the networks and provide a fee based automation service to the industry.

Commitments for financing for the first potential acquisitions were issued
by EMAC Enterprise Mortgage Acceptance Corporation) in the amount of $20 million
dollars. These funds were to acquire portions of our first acquisitions based in
Mount Vernon, Missouri. These acquisitions would have given FuelNation the
management and industry talent with two generations of experience, along with
market penetration to execute the business plan. EMAC for whatever reasons was
unable to complete the funding and has subsequently went out of business. The
acquisition was put on hold and alternative financing was being pursued.

Commitments were signed for additional financing in the amount of $35
million dollars in equity financing. This financing was arranged by and through
Westminster Securities and final documents were executed on September 06, 2001.
FuelNation was required to register the securities for sale prior to the
funding. In the next five days September 11, 2001, and the terrorist events that
followed, forced the company to seek an alternate means of financing because the
equity would have been too dilutive to the common stockholders.

2002 TO 2003

In early 2002 we paid fees and signed a commitment with Sovereign Funding,
LLC to issue taxable revenue Bonds in the amount of $330 million dollars.
Sovereign had represented that they would be issuing the bonds through Public
Agencies as defined in Chapter 163, Florida Statutes, means a political
subdivision, agency, or officer of this state or of any state of the United
States, and of any commonwealth, territory, possession, or protectorate of the
United States. Financings are made available outside the Area of Operation of
the Authority by utilizing Interlocal Agreements with Public Agencies which have
geographical jurisdiction for the project to be financed. Financing can be
provided for any "Project" as defined in the ordinance. We negotiated and agreed
to have an Interlocal agreement issued from Middletown, Ohio through one of our
proposed petroleum marketing acquisition candidates. The Interlocal agreement
was approved and Sovereign Funding required FuelNation to pay Sovereign a fee in
the amount of 3.5% of the Bond funding amount.

On July 29, 2002, FuelNation entered into a letter agreement with Sheikh
Isa Mohammed Isa Al-Khalifa, a director of the Company, to provide a cost of
issuance and shortfall letter of credit for the Company's proposed $330 million
taxable municipal bond issue in amounts equal to approximately 3.5% (three and
one half percent) of the bond amount for a total of approximately $10,500,000
in three installments of approximately $3,500,000.

FuelNation was to issue a taxable Municipal Bond Issue in the amount of
$330,000,000 USD in three series, A,B,C of approximately $110,000,000 each, for
the purpose of developing a public purpose travel and transportation center in
Davie, Florida and the acquisition and consolidation of five (5) petroleum
marketers/petroleum transporters and centralize the acquisitions with automation
and tracking of petroleum from the state of Ohio. FuelNation was using a Public
Agency, as defined in Chapter 163, Florida Statutes for the bond issuance with
an Interlocal agreement between a public agency in Ohio and Florida.

On August 15, 2002 the company issued a press release to announce the
funding and the bond commitment was signed and all monies for the fees were
raised. Three hours after the press release the CEO and President was arrested
and all company operations and financings came to a complete stop and the then
current CEO and President voluntarily agreed to step down from his role as an
officer of the company and defend a personal legal battle, unrelated to the
company as is further detailed in the filing. 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.

2003 TO PRESENT

In January 2003 FuelNation incorporated a new single purpose entity named
FuelNation Travel Center, LLC (FNTC) in order to enter into a modified and new
financing commitment with Sovereign Funding, LLC to fund $100 million of the
$330 million in taxable revenue bonds. 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.

FuelNation was required to pay application and commitment fees for the
bond issuance in the amount of $328,000 dollars and provide prepayment of
interest for the bonds in the form of a letter of credit for the Company's
proposed $100 million dollar taxable revenue bond issue in amounts equal to
approximately 3.5% (three and one half percent) of the bond amount. In April
2003 Gerald Brauser, an investor, advanced on behalf of FuelNation Travel
Center, LLC the necessary fees and commitment monies to Sovereign Funding, LLC.
During the next six months Gerald Brauser provided proof of the resources to
Sovereign Funding, LLC of his ability to issue the funds for closing to pay all
costs for the taxable revenue bond and paid $328,000 in fees to Sovereign
Funding, LLC. FuelNation's due diligence discovered that Sovereign Funding, LLC
had funded a Prior taxable revenue bond, November 2002 and that Sovereign
Funding was unable to deliver the Appropriate credit enhancement to allow the
borrowers to draw funds from the bond Issue. FuelNation elected to terminate the
business relationship with Sovereign Funding, LLC and requested a full refund of
all fees and expenses paid to Sovereign Funding, LLC and approached the Public
Agency directly for a bond issuance.

In September 2003 Gerald Brauser, the owner of BRAUSER REAL ESTATE, LLC,
committed to purchase the land for the Travel Center from the owner Jolmy
Enterprises, Inc., and convey the purchase of the Property to FuelNation in
exchange for 51% ownership of the issued and outstanding shares of
FuelNation, as is further detailed in the October 21, 2003, SHARE SALE AND
CONTRIBUTION AGREEMENT WITH BRAUSER REAL ESTATE, LLC. Gerald Brauser has paid
an at risk deposit on the contract to the owner of the property in the amount
of $850,000 dollars and has retained the services of Plana International Corp.
Attention: Jaime Plana for the design and architectural services related to the
project. All site plan submissions and fuel designs have been submitted to the
appropriate authorities for approval.

In November 2003 Mr. Brauser and Sheikh Isa Mohammed Isa Al-Khalifa signed
a commitment with a New Jersey based, construction lender for the amount of $20
million dollars. Mr. Brauser advanced a non-refundable commitment fee in the
amount of $225,000 dollars, which has been paid and he has agreed to pay an
additional $400,000 at closing of the loan as per the commitment. The attorneys
are currently working on the due diligence check list and providing all of the
necessary documentation as required to complete the lenders requirements and to
close the purchase.

In December 2003 Mr. Brauser and Sheikh Isa Mohammed Isa Al-Khalifa agreed
to fund the cost of issuance and prepay the interest on the issuance of $25
million dollars of Taxable Secured Revenue notes, Series 2003A for the
FuelNation Travel Center project. The Issuer will be a Public Agency, as defined
in Chapter 163, Florida Statutes for the bond. Mr. Brauser has agreed to pay for
the cost of issuance and the first year of interest in the amount of
approximately $750,000 dollars. Sheikh Isa Mohammed Isa Al-Khalifa has agreed to
have a letter of credit issued from a major financial banking institution which
maintains a credit Rating of "AA" or better for the rating and guarantee of
repayment on the bonds. Mr. Brauser and Sheikh Isa Mohammed Isa Al-Khalifa
intend to secure an additional $75 million dollars from the same series of
Taxable Secured Revenue notes in order to complete the second and third phases
of construction. The Note issuer has provided the necessary documentation
including the loan agreement, trust indenture and the escrow agreement to make
the deposit of the $750,000 dollars to start the issuance of the notes. Mr.
Brauser and Sheikh Isa Mohammed Isa Al-Khalifa are attempting to execute the
documents before year end 2003.

UPON completion of the conditions in the SHARE SALE AND CONTRIBUTION
AGREEMENT WITH BRAUSER REAL ESTATE, LLC. the business for FuelNation 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
"SuperStore" 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 three phases of construction.

PHASE I - (ESTIMATED COMPLETION AND OPENING MAY 01, 2004) - Begins project
construction with a 40,000 sf Travel Center where we will feed our guests in
a 10,000 sf all you can eat buffet restaurant. Additional areas will house
20,000 sf of drivers lounge, food service, and grocery store. Attached to
the Travel Center will be a tunnel type car wash. Two convenience stores will
be located at the fueling islands. The large fueling facility will have a 24
pump diesel fueling depot capable of filling left and right side truck tanks
simultaneously and a 10 pump automotive fueling area able to fuel 20 cars at
once. Phase I includes a state of the art 210 foot long truck and bus wash by
InterClean, weight scales, and 311 tractor trailer parking slots.

PHASE II (ESTIMATED CONSTRUCTION START DATE JUNE 2004) - 190,000 sf Travel
Center and Office building complete with multiple restaurants, retail stores
and Class "A" office space with an adjacent three story parking garage.

PHASE III (ESTIMATED CONSTRUCTION START DATE DECEMBER 2004)- Additional
190,000 sf Luxury 200 room hotel.

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 deli and 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.

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
$25 million with an increase of an additional $75 million for a total 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.

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.

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, 2003 and
2002.

Results of Operations

Comparison of Results of Operations for the nine and three month periods
ended September 30, 2003 and 2002

We generated no revenues during the nine and three month periods ended
September 30, 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
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. Total operating expenses were $ 180,969 for the three
months ended September 30, 2003, compared to $ 1,224,868 for the three months
ended September 30, 2002. The expenses incurred during the three-month period
ended September 30, 2003 arose primarily from salaries and wages ($75,247),
consulting fees-related party ($55,384) and other general and administrative
expenses ($31,270). These expenses decreased in 2003 over the same period in
2002, primarily due to impairment loss of technology of $891,749, decrease in
non-cash consulting fees of 57,740 and a reduction in the employment of staff to
support the related technology which resulted in a decrease in salaries and
wages of $109,464.

Additionally, we incurred interest expense of $4,969 in 2003 compared with
interest expense of $8,937 in 2002. As a result, we incurred a net loss of
$185,938 for the three months ended September 30, 2003,compared to a Net Loss of
$1,228,674 for three months ended September 30, 2002.

Total operating expenses were $ 1,963,067 for the nine months ended
September 30, 2003, compared to $ 2,957,711 for the nine months ended September
30, 2002. The expenses incurred during the nine-month period ended September 30,
2003 arose primarily from salaries and wages ($227,468), professional and
consulting fees ($110,452), consulting fees-related party ($166,152) write down
of inventory ($499,749), loss on equipment deposit ($752,500) and other general
and administrative expenses ($112,146). These expenses decreased in 2003 over
the same period in 2002, primarily due to impairement loss on technology of
$891,747, decrease in non-cash consulting fees of $640,661, decrease in non-cash
employee compensation of $455,561, a reduction of employment of staff to support
the related technology which resulted in a decrease in salaries and wages of
$308,082 and reducing general and administrative expenses which resulted in a
decrease of $28,094. This was offset by loss of equipment deposit of $752,500 in
2003,

Additionally, we incurred interest expense of $11,482 in 2003 compared
with interest expense of $25,817 in 2002. As a result, we incurred a net loss of
$1,974,549 for the nine months ended September 30, 2003, compared to a Net Loss
of $2,975,414 for nine months ended September 30, 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 the United States. We intend to accomplish this goal, grow our business,
enhance earnings and improve our return on capital by executing the following
strategies, which we believe capitalize on our existing competitive strengths.

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 Company will execute the Travel Center division first because the
financing and capital investment is in place and is ready to implement. It will
also be our centralized operations center and headquarters. We intend to focus
our direction on generating income from operations and fuel supply immediately.

Our concept in the Travel Center has never been tested or implemented any
where else in the world. We are installing 24 side-by-side fueling lanes for
diesel fueling, which is the largest diesel fueling depot open to the public in
the world. We intend to lease fueling lanes to major oil companies, national and
regional trucking companies, municipalities, bus and tour operators and large
fleet accounts. The price will not be the driving factor in our operations, fuel
lanes will be leased and fuel supplied and managed on behalf of the customers.
Our income will be constant with the leased fuel lanes and not subject to market
fluctuations and competitive pricing. Each and every leased fuel lane will be
able to manage their own pricing and we will manage the facility and provide all
of the amenities on site.

We have been signing up marketing and advertising contracts to start
generating income before the grand opening of the Travel Center.

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 three phases of construction.

PHASE I - (ESTIMATED COMPLETION AND OPENING MAY 01, 2004) - Begins project
construction with a 40,000 sf Travel Center where we will feed our guests in a
10,000 sf all you can eat buffet restaurant. Additional areas will house 20,000
sf of drivers lounge, food service, and grocery store. Attached to the Travel
Center will be a tunnel type car wash. Two convenience stores will be located at
the fueling islands. The large fueling facility will have a 24 pump diesel
fueling depot capable of filling left and right side truck tanks simultaneously
and a 10 pump automotive fueling area able to fuel 20 cars at once. Phase I
includes a state of the art 210 foot long truck and bus wash by InterClean,
weight scales, and 311 tractor trailer parking slots.

PHASE III (ESTIMATED CONSTRUCTION START DATE DECEMBER 2004)- Additional
190,000 sf Luxury 200 room hotel.

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.

Grow Through Acquisitions and Discretionary Capital Expenditure Projects.
We intend to pursue timely and cost-effective acquisitions of Petroleum
Marketers and undertake discretionary capital expenditure projects to improve,
upgrade, and potentially expand and automate their distribution. We will pursue
opportunities that we believe will be promptly accretive to earnings and improve
our return on capital, assuming historic average margins.

We believe that the continuing consolidation in our industry, the
strategic divestitures by major integrated oil companies will present us with
attractive acquisition opportunities. We believe we are well situated to
capitalize on these acquisitions and discretionary capital project
opportunities.

In executing the strategies outlined above, we want to own and operate
Travel Centers and Petroleum Marketers, whether they be acquired or supplied
in the future, which not only prosper in good market conditions, but are
resilient during downturns in the market. We believe this resiliency can be
created by, among other things:

o being a low-cost operator of safe and reliable petroleum marketing
with a continuous focus on controlling cost;

o having an inherent cost advantage due to economies of scale,
such as the cost advantage which comes from having e-commerce
connectivity and centralized processing capabilities;

o owning petroleum marketers in strategic geographic locations; and

o having the capability to distribute a variety of
the fuels required by varying regional fuel specifications.

Create an Organization Highly Motivated to Enhance Earnings and Improve
Return on Capital. We intend to create an organization in which employees are
highly motivated to enhance earnings and improve return on capital. In order to
create this motivation, we will adopt a new annual incentive program under
which the annual bonus award for every employee in the organization is dependent
to a substantial degree upon earnings. The primary parameter for determining
bonus awards under the program for our executive officers and our senior level
management team members is earnings. The program allows our executive officers
and other senior management team members to earn annual bonus awards only if
certain predetermined earnings levels are met, and provides significant bonus
opportunities if those levels are exceeded. For the remainder of our employees,
earnings are a substantial factor which determines whether a bonus pool is
available for annual rewards. In approving annual awards under the program, the
compensation committee of our board of directors will also consider our return
on capital, and our environmental, heath and safety performance.

We intend to finance these purchases with construction and institutional
lenders. The permanent financing will be secured by 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.

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.

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.

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 Manama, Bahrain is located at leased facilities at the
local telephone company Batelco. We have suspended all operations in the country
of Bahrain until the company is properly capitalized. Our equipment is still
installed at the location in Bahrain and we have discontinued our lease in
Bahrain until further notice. Our director Shaikh Isa Mohammed Isa Alkhalifa, a
resident of Bahrain, was issued shares in 2002 to satisfy any obligations we may
have in the country of Bahrain for his guarantee.

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

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 US fuel retailing market is the largest single market in the world,
accounting for 26% of the global market's value in 2002. The market reached a
value of $237 billion in 2002, having grown with a compound annual growth rate
(CAGR) of 7.9% in the 1998-2002 period. This growth was considerably stronger
than that of the global market itself leading to the US market's share of the
wider market increasing by 6.3% between 1998 and 2002, accounting for 26% of the
global market by the end of this period.

The leading sector of the US's fuel retailing market in 2002 was the
gasoline sector, which accounted for 77% of the market. Auto diesel was the
second largest sector in the market, whilst automotive LPG is slowly becoming an
increasingly important facet of the market (although it still accounts for less
than 0.1% of the market in volume terms).

During the next five years, the market is expected to experience slowly
increasing growth rates, with considerably less fluctuation than experienced
between 1998 and 2002. By 2007 the market is forecast to reach a value of $257.3
billion, a CAGR of 1.7% in the 2002-2007 period, slightly higher than the global
market's CAGR of 1.5%. The US market's moderately strong growth is highlighted
by the slight increase in its share of the global market; from its 26% share in
2002, the market is forecast to account for 26.3% by 2007, a 0.9% increase
compared.

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.

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 September 30, 2003, we had a working capital deficit of $2,816,508. For
the nine month period ended September 30, 2003, net cash used by operating
activities was $88,834. This was primarily attributable to a net loss for the
period of $1,974,549 and offset by increase of payables and liabilities of
$594,590 and a write -down of inventory of $499,749 and the loss on equipment
deposit of $752,000. The company intends to pay off its existing obligations in
the approximate amount of $3.1 million from the funding of $100,000,000 secured
taxable notes and issuance of preferred shares.

It is anticipated that we will, in all likelihood, sustain operating
expenses without corresponding revenues, at least until the end of 2004. 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.

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 $328,000 with 5% interest and to guarantee performance and
payment of a consulting agreement in the amount of $150,000, both obligations
were 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
$100,000,000 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 a
commitment on a $20,000,000 loan for the acquisition of the land. In addition we
have verbal commitments that has over subscribed our preferred share offering.

We have changed issuers for the bond offering because of the inability of
the prior lender to satisfy our requirements and investors concerns. We have
paid fees for the application, commitment and legal retainers in the amount of
$270,000 and are seeking a full refund of these funds from the prior issuer. The
new issuer for the bonds is a political body and one of the top bond issuers in
the state of Florida. We are in the process of finalizing details for the bond
issuance and the first phase of construction. There can be no assurance that the
letter of credit will be attained, that the bond funding will be completed, that
the Company will realize sufficient proceeds to complete the Travel Center or
that the Company will generate sufficient cash flow from operations to pay for
these obligations.

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
acquisition financing in the amount of $20,000,000 dollars for the land, 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.

Our Success is Dependent upon the Management of Growth. Successful
implementation of our business plan will expose us to increased competition,
greater overhead, marketing and support costs and other risks associated with
entry into new markets and solicitation of new customers. We face all risks
which are associated with any new business, such as under-capitalization, cash
flow problems, and personnel, financial and resource limitations, as well as
special risks associated with our proposed operations. To manage growth
effectively, our management will need to implement and continue to improve and
expand operational, financial and management information systems and to expand,
train, motivate and manage employees. Should we be unable to manage growth
effectively, our results of operations could be adversely affected.

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.

We are subject to competition. There are several thousand Petroleum
Marketers and approximately 4,500 travel plazas and truckstops, and many major
oil companies that operate company owned locations. Our travel centers will
compete with those in the immediate areas of our centers.

The leading B2B ASP providers offer technologies and services related to
procurement, supply-chain management, financial services, logistics, Electronic
Customer Relationship Management "eCRM", sell- side solutions, back-end
integration and enterprise resource planning ("ERP"). We anticipate either B2B
ASPs or existing oil companies, or a combination of the two, to scrutinize our
products, attempt to replicate their offering and compete directly with us.

Many companies that are competitors have longer operating histories,
substantially greater financial, technical, marketing or other resources, or
greater name recognition than we do. Our competitors may be able to respond more
quickly than we can to new or emerging technologies and changes in customer
requirements. Competition could seriously impede our ability to sell additional
services on terms favorable to us. Our potential competitors may develop and
market new technologies that render our existing or future services obsolete,
unmarketable or less competitive. Competitive pressures could reduce our market
share or require the reduction of the prices of our services, either of which
could materially and adversely affect our business, results of operations or
financial condition.

We Have Not Paid Dividends on our Common Stock and do not Anticipate the
Payment of Dividends in the Future. No dividends have been paid on our shares of
Common Stock and management does not anticipate the payment of cash dividends in
the foreseeable future. If operations become profitable, it is anticipated that,
for the foreseeable future, any income received there from would be devoted to
future operations and that cash dividends would not be paid to shareholders.

We Will Need Additional Personnel to Implement Our Business Plan. We
believe that it will be necessary to increase our permanent sales, marketing and
administrative staff in order to implement our business plan. Although we
believe that necessary additional personnel to staff us is available, there can
be no assurance that we will be successful in assembling an effective staff in a
timely manner, particularly as we face considerable competition from other
companies for such personnel. There can be no assurance that we will be able to
attract and retain additional qualified personnel, and any inability to do so
could have a material adverse affect on us.

Issuance of Future Shares May Dilute Investors Share Value. Our Articles
of Incorporation, as amended, authorizes the issuance of 100,000,000 Common
Shares, $.01 par value per share, and 5,000,000 Preferred Shares, $.01 par value
per share. As of the date of this Report, there are 2,294,493 shares of Common
Stock issued and outstanding. The future issuance of all or part of the
remaining authorized Common Stock may result in substantial dilution in the
percentage of Common Stock held by our then existing shareholders. Moreover, any
Common Stock issued in the future may be valued on an arbitrary basis by our
Board of Directors. The issuance of shares for future services or acquisitions
or other corporate actions may have the effect of diluting the value of the
shares held by investors, and might have an adverse effect on our trading
market.

Our Common Stock is classified as a "Penny Stock," which has Adverse
Effects. the Securities and Exchange Commission has adopted Rule 15g-9, which
established the definition of a "penny stock," for purposes relevant to us, as
any equity security that has a market price of less than $5.00 per share or with
an exercise price of less than $5.00 per share, subject to certain exceptions.
For any transaction involving a penny stock, unless exempt, the rules require:
(i) that a broker or dealer approve a person's account for transactions in penny
stocks; and (ii) the broker or dealer receive from the investor a written
agreement to the transaction, setting forth the identity and quantity of the
penny stock to be purchased. In order to approve a person's account for
transactions in penny stocks, the broker or dealer must (i) obtain financial
information and investment experience and objectives of the person; and (ii)
make a reasonable determination that the transactions in penny stocks are
suitable for that person and that person has sufficient knowledge and experience
in financial matters to be capable of evaluating the risks of transactions in
penny stocks. The broker or dealer must also deliver, prior to any transaction
in a penny stock, a disclosure schedule prepared by the Commission relating to
the penny stock market, which, in highlight form, (i) sets forth the basis on
which the broker or dealer made the suitability determination; and (ii) that the
broker or dealer received a signed, written agreement from the investor prior to
the transaction. Disclosure also has to be made about the risks of investing in
penny stock in both public offering and in secondary trading, and about

commissions payable to both the broker-dealer and the registered representative,
current quotations for the securities and the rights and remedies available to
an investor in cases of fraud in penny stock transactions. Finally, monthly
statements have to be sent disclosing recent price information for the penny
stock held in the account and information on the limited market in penny stocks.

The foregoing required penny stock restrictions currently apply to our
Common Stock. If our Common Stock is ever approved for listing on a national
stock exchange, it would have certain price and volume information provided on
a current and continuing basis. While it is management's intention to have our
Common Stock approved for trading on a national stock exchange in the future, we
currently do not qualify under the various listing criteria for such listing.
There can be no assurances that any of our securities will qualify for exemption
from these restrictions in the future. Because our Common Stock is subject to
the rules on penny stocks, the market liquidity for our Common Stock has been
severely adversely affected.

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 3. CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

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 as of the end
of the period covered by this quarterly report 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 vs. FuelNation Inc. (Docket
No. L4202-02 in the Superior Court of New Jersey), in the amount of $11,541
principal amount. The note has been repurchased by the company and the case has
been dismissed with Prejudice.

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.

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 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.

During the month of September 2002, the company was required to pay
$65,000 on a 60-day demand note and resulted in the lender, Richard Gladstone,
defaulting against the collateral of 26,680 restricted common shares of
FuelNation stock pledged by an affiliate, Fuel America. As of December 31, 2002
the Company has replaced 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. The company is waiting for confirmation
and written verification from the lender of the total proceeds they received on
the securities to satisfy the obligation and to see if any additional funds are
owed.

During September 2002 the company was required to pay $100,000 on a 60-day
demand note, and resulted in the lender, defaulting against the collateral of
175,717 restricted common shares of FuelNation stock pledged by an affiliate,
Fuel America. As of December 31, 2002 the Company has replaced 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.
The company is waiting for confirmation and written verification from the lender
of the total proceeds they received on the securities to satisfy the obligation
and to see if any additional funds are owed.

The Company is in discussions with certain debt holders and vendors to
convert their indebtedness into common or preferred equity of the Company. It is
the intention of the Company to negotiate most of the outstanding indebtedness
into common or preferred 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

31.1 CHIEF EXECUTIVE OFFICER CERTIFICATION

32.1 CERTIFICATION PURSUANT TO 18 U.S.C. SECTION 1350, AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

(b) Reports on Form 8-K

(1) January 27, 2003.
(2) October 22, 2003.

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: December 7, 2003

By: /s/ Charles Brodzki
--------------------------
Charles Brodzki,
President