U.S. SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  FORM 10-KSB

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

                  For the fiscal year ended December 31, 2003

                         Commission file number 1-12350


                                 FuelNation Inc.
              ----------------------------------------------
                 (Name of Small Business Issuer in its Charter)

           Florida                                       65-0827283
-------------------------------                       ----------------
(State or Other Jurisdiction of                       (I.R.S. Employer
 Incorporation or Organization)                      Identification No.)

                          4121 SW 47th Ave., Suite 1301
                                 Davie, Florida
                    ----------------------------------------
                    (Address of Principal Executive Offices)

                                     33314
                                   (Zip Code)


                (Former Address of Principal Executive Offices)

                                 (954) 587-3775
                          (Issuer's Telephone Number)

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

         Securities registered under Section 12(g) of the Exchange Act:

                     Common Stock, par value $.01 per share
                                (Title of Class)

Check  whether the issuer (1) filed all reports  required to be filed by Section
13 or 15(d) of the  Exchange  Act  during the  preceding  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 [ ]

Check if disclosure of delinquent filers in response to Item 405 of Regulation
S-B is not contained in this form, and no disclosure will be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [X]

The issuer's revenue for its most recent fiscal year was $0

The aggregate market value of the common stock held by non-affiliates of the
issuer, 1,576,345 Shares, as of December 24, 2004, was approximately $6,935,918,
based on the closing bid of $4.40 for the issuer's common stock as reported on
the Pink Sheets. Shares of common stock held by each director, each officer
named in Item 9, and each person who owns 10% or more of the outstanding common
stock have been excluded from this calculation in that such persons may be
deemed to be affiliates. The determination of affiliate status is not
necessarily conclusive.

As of December 24, 2004, the issuer had 2,624,165 shares of common stock
outstanding.

DOCUMENTS INCORPORATED BY REFERENCE - NONE

Transitional Small Business Disclosure Format (Check one):  YES [ ] NO [X]

Indicate by check mark whether the registrant is an accelerated filer as defined
in Rule 12-b-2 of the Securities Exchange Act of 1934 YES [ ] NO [X]

<PAGE>
                               TABLE OF CONTENTS

                           FORM 10-KSB ANNUAL REPORT

                                FUELNATION INC.

                                                                            PAGE
                                                                            ----
Facing Page
Index
PART I
Item 1.    Description of Business..........................................  4
Item 2.    Description of Property..........................................  9
Item 3.    Legal Proceedings................................................  9
Item 4.    Submission of Matters to a Vote of
               Security Holders.............................................  9

PART II
Item 5.    Market for the Registrant's Common Equity
               and Related Stockholder Matters..............................  9
Item 6.    Management's Discussion and Analysis of
               Financial Condition and Results of
               Operations................................................... 12
Item 7     Financial Statements............................................. 17
Item 8.    Changes in and Disagreements on Accounting
               and Financial Disclosure..................................... 18
Item 8A.   Controls and Procedures  ........................................ 18

PART III
Item 9.    Directors, Executive Officers, Promoters
               and Control Persons, Compliance with
               Section 16(a) of the Exchange Act............................ 19
Item 10.   Executive Compensation........................................... 20
Item 11.   Security Ownership of Certain Beneficial
               Owners and Management........................................ 23
Item 12.   Certain Relationships and Related
               Transactions................................................. 24

PART IV
Item 13.   Exhibits and Reports of Form 8-K................................. 27
Item 14.   Principal Accountant Fees and Services........................... 28



SIGNATURES.................................................................. 29


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All share numbers in this Report have been adjusted for the 1-150 reverse stock
                        split effected January 27, 2003.

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

      The following discussion should be read in conjunction with our audited
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;

      .    Our ability to service our existing indebtedness;

      .    Our ability to raise additional capital, obtain debt financing, or
           generate sufficient revenues to fund our operating and development
           plan;

      .    Changes in Russian and Venezuelan law, currency regulations, and
           taxation

      .    Labor relations;

      .    U.S. and world economic conditions;

      .    Our success in completing development and exploration activities and
           political stability in Russia and Venezuela;

      .    Our present company structure;

      .    Our accumulated deficit and tax obligation;

      .    Supply and demand for refined petroleum products;

      .    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;

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<PAGE>

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

      .    Other unpredictable or unknown factors not discussed.

      Readers are urged to consider these factors carefully in evaluating the
forward-looking statements and are cautioned not to place undue reliance on
these forward-looking statements. The forward-looking statements included in
this report are made only as of the date of this report and we undertake no
obligation to publicly update these forward-looking statements to reflect new
information, future events or otherwise. In light of these risks, uncertainties
and assumptions, the forward-looking events might or might not occur. We cannot
assure you that projected results or events will be achieved.

                                     SUMMARY

Description of Development Stage Activities - FuelNation, Inc. [the "Company" or
"FuelNation"], a Florida corporation, located in Davie, Florida has been in the
development stage since its reorganization on October 13, 2000. The Company has
continuously worked on plans to build travel centers from 2000 to the present,
initially in the state of Florida, followed by additional locations in other key
states. Getting the approvals and permitting for the first couple of travel
centers are very capital intensive and time consuming. In addition, the Company
has also been engaged in the development of providing real-time e-commerce
communications in the petroleum marketing and energy services industry from 2000
to 2003. Currently the real-time-e-commerce has been re-prioritized with
generating income from oil trading in order to self fund the real-time
e-commerce development from the projected profits of the oil trading. Extensive
reorganizing and restructuring, as well as, seeking business procurement
opportunities have taken place to keep the company as a going concern and to
execute our plan of operation.

FuelNation Inc., through its newly established, wholly owned subsidiary, Leman
Energy Trading, Inc., a Panamanian Corporation, is engaged in oil and gas
wholesale marketing of unbranded petroleum transportation fuels and crude oil
trading in Western Siberia, Russia; Middle East and Southeast Asia. In this
regard, on May 28, 2004, FuelNation entered into a Frame Agreement for (1)
Establishment of Relationship and Procedure for Agreeing Sale Contracts; and (2)
Grant of Exclusive Rights to Distribute Petroleum Products And/Or Petrochemicals
in the United States and Europe (the "Frame Agreement") with Yugra Holding, a
Russian joint stock company, in the business of the exploration, extraction,
refinement and distribution of petroleum products and petrochemicals in Russia.
The Frame Agreement provides a basis and framework for the subsequent petroleum
product or petrochemical sale agreements during the Frame Agreement. The initial
term of the Frame Agreement is five years and renewable for an additional five
years at the option of FuelNation. As additional inducement for Yugra Holding,
FuelNation issued a Preferred Series A stock certificate to Yugra Holding, that
will be earned equally over the term of the contract that is equivalent to 5%
(five percent) of the issued and outstanding shares of FuelNation at the signing
of the agreement when earned over the term of the agreement.

Further, on May 28, 2004, FuelNation entered into a Contract with Yugra Holdings
for delivery of 500,000 MT of gas oil over the 12 months commencing July 2004.
The total value of the Contract is approximately $163,500,000. Subsequently,
after signing the delivery contract, due to the banks restrictions on
disclosures and reporting for multiple foreign entities, both Yugra Holding and
FuelNation had difficulty providing for the banking of the contract at our local
banks. We therefore cancelled the existing contract, established a wholly owned
subsidiary, Leman Energy Trading, Inc., a Panamanian Corporation and opened a
bank account and credit facility for oil trading in Geneva, Switzerland. In
order to be vertically integrated in the oil trading, and being able to take
title to oil contracts in large quantities, the Company has also engaged the
expertise of a world class Oil Trader to manage this operation and our global
oil trading activities which will be based in Geneva, Switzerland. In this
regard, financing is in place for all the fuel and crude oil products that will
be purchased by our European operations. These measures have enabled the Company
to purchase whatever available supply it can locate and profitably acquire. The
Company's new Senior Oil Trader, Mr. Hammed Yaghoobi, will be managing European
operations. Finally, an agreement has been reached for an initial $500 million
USD of existing oil contracts to be purchased through our European subsidiary,
thus providing immediate cash flow to the Company. As additional inducement for
the oil trader to manage and transact business through Leman Energy Trading,
Inc., FuelNation issued a Preferred Series A stock certificate to the oil
trader, that will be earned equally over five years that is equivalent to 5%
(five percent) of the issued and outstanding shares of FuelNation at the signing
of the agreement when earned over the term of the agreement.

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<PAGE>

FuelNation Inc., in addition, to the oil and gas wholesale marketing, is in the
final stages of planning to build and develop a portfolio of real estate assets
across the United States using our concept of the "Super Store" of Travel
Centers. Thus far all of the investment capital have been provided by Gerald A.
Brauser and his company Brauser Real Estate, LLC. Tentatively the development of
the project will be managed by Gerald A. Brauser who has established his real
estate career in 1955 as a Real Estate Management and Development Firm.
Throughout the 48 plus years history, the firm has been credited with a number
of notable accomplishments and a real estate portfolio exceeding $150 million.
Gerald A. Brauser's growing list of properties ranges in size from 7,200 to over
320,000 square feet in New York and Florida. At the time of filing this report,
Mr. Brauser's total investment nears $3,000,000 USD on behalf of the Travel
Center project for approvals and pre-closing expenses. The advances include
$250,000 in earnest deposit on the land, $600,000 pre-closing advance to seller
of the land, and over an additional $2,250,000 for architectural, engineering,
design, renderings, loan commitments, business expense and legal, etc.
Currently, FuelNation does not have any formal agreement signed with Mr. Brauser
for assumption of his contract or to jointly develop/operate the property.
FuelNation has worked directly with the architects and engineers and advanced
funds from Mr. Brauser for their services and work product. Mr. Brauser has
verbally offered to allow FuelNation to participate in the form of leasing the
property for fuel supply and operation or partnering by providing a loan on the
construction. In this regard, our director, Shaikh Isa Mohammed Isa Alkhalifa,
individually signed for a loan in the amount of $51,500,000 and received a loan
commitment to fund the construction of the project, subject to standard loan
conditions and we are reviewing the offer. Shaikh Isa has also signed for a
credit enhancement that will guarantee a bond issuance in the total amount of
$100 million dollars, in increments of $25 million dollars. Both loan offers and
the possibility for leasing are being analyzed by the board of directors and Mr.
Brauser for a final decision.

PART I

ITEM 1. DESCRIPTION OF BUSINESS

STRUCTURE OF FUELNATION

FuelNation Inc, through our 100 % wholly owned subsidiary, Leman Energy Trading,
Inc., a Panamanian Corporation registered in the Panamanian Registry Public Deed
No. 9421 on August 31, 2004. is engaged in oil and gas wholesale marketing of
unbranded petroleum transportation fuels and crude oil trading in Western
Siberia, Russia; Middle East and Southeast Asia. Currently, our director of
FuelNation, Shaikh Isa Mohammed Isa Alkhalifa, and our manager of Leman Energy
Trading, Inc., Hammed Yaghoobi, have been contacting ministries of oil and major
crude oil suppliers in Western Siberia, Russia; Middle East and Southeast Asia
to acquire crude oil and refined products. Credit facilities are in place to
acquire products and multiple offers are being sent to suppliers for purchases.
In this regard, we are prepared to acquire quantities of crude oil of 75,000 to
250,000 barrels per day and refined petroleum products of 50,000 to 100,000
metric tons per month.

FuelNation Inc., in addition to the oil and gas wholesale marketing, is in the
final stages of our planning to build and develop a portfolio of real estate
assets with our concept of the "Super Store" of Travel Centers located across
The United States. In this regard, our director, Shaikh Isa Mohammed Isa
Alkhalifa, individually signed for a loan in the amount of $51,500,000 and
received a loan commitment to fund the construction of the project, subject to
standard loan conditions and we are reviewing the offer. Shaikh Isa has also
signed for a credit enhancement that will guarantee a bond issuance in the total
amount of $100 million dollars, in increments of $25 million dollars. The Travel
Center operations and ownership will be owned in a wholly owned subsidiary of
FuelNation Inc.

FuelNation Inc. will be establishing a Russian Joint Stock Company in Moscow,
Russia to take title to purchases of crude oil and refined petroleum products as
part of our oil and fuels trading business.

A glossary of certain oil and gas terms used in this report is found at
"DESCRIPTION OF PROPERTY- Glossary of Terms."

We are subject to the informational requirements of the Securities Exchange Act
of 1934 and, in accordance with the Exchange Act, file annual, quarterly, and
current reports, proxy statements and other information with the Securities and
Exchange Commission, or SEC. You may read and copy any documents filed by us at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Please call the SEC at 1-800-SEC-0330 for further information on the
operation of the public reference room. Our SEC filings are also available to
the public through the SEC's internet site at www.sec.gov.

Our website address is www.FuelNation.com. We make available on this website
under "Investor Relations", free of charge, our annual reports on Form 10-KSB,
our quarterly reports on Form 10-QSB, our current reports on Form 8-K, Forms 3,


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4 and 5 filed via Edgar by our directors and executive officers and various
other SEC filings, including amendments to these reports, as soon as reasonably
practicable after we electronically file or furnish such reports to the SEC. The
information on our website, or on the site of our third-party service provider,
is not incorporated by reference into this report.

Our principal executive offices are located at 4121 SW 47th avenue, Suite 1301,
Davie, Florida 33314, and our telephone number is (954) 587-3775

FUELNATION HISTORY

FuelNation, Inc. was organized under the laws of the State of Florida on July 6,
1993 under the name International Pizza Corporation. On October 30, 1995, the
Company changed its name to QPQ Corporation, and on November 4, 1997, changed
its name to Regenesis Holdings, Inc. On October 17, 2000, the Company changed
its name to FuelNation, Inc. On January 27, 2003, the Company effected 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.

EMPLOYEES.

FuelNation currently has two full time employees. We also utilize the services
of independent contractors on an as-needed basis. Leman Energy Trading, Inc.
currently employs one person at its representative office in Geneva,
Switzerland. Leman Energy Trading, Inc. also uses independent contractors on as
needed basis.

RISK FACTORS

We Have Been in the Development Stage Since October 2000. We have generated no
revenues and have a deficit accumulated during our development stage. We expect
to incur additional losses during the time period we are reviewing and
negotiating potential opportunities to grow our services and products.

It is anticipated that we will, in all likelihood, sustain operating expenses
without corresponding revenues, at least until 2005, of which there can be no
assurance. This may result in our incurring a net operating loss which will
increase continuously until we achieve profitability. Revenues and profits, if
any, will depend upon various factors, including market acceptance of our
products, market awareness and general economic conditions. 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.

We are entering a new business in which we have no experience. FuelNation has
never engaged in oil and gas wholesale marketing and trading. Accordingly, we
are unable to guarantee success and there is no assurance that we can succeed in
this new business.

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.

Issuance of Future Shares and the conversion of preferred shares to common
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 and 23,454 Preferred shares that can be converted into common shares
at a fixed percentage of .00255 per preferred share. The future issuance of all
or part of the remaining authorized Common or preferred Stock may result in
substantial dilution in the percentage of Common and preferred 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. In addition, the preferred shares are
non-dilutive and could cause additional dilution to common shareholders when
converted to common shares of stock.

There is a Limited Market for Our Common Stock. Currently, our Common Stock
trades on the Over-the-Counter Pink Sheets. By its nature, the Pink Sheets is a
limited market and investors may find it more difficult to dispose of our
securities which are owned by them.

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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.

COMPETITION

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. Our potential competitors may establish or
strengthen cooperative relationships with our current or future channel
partners, thereby limiting our ability to sell services through these channels.
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.

REGULATIONS GOVERNING RUSSIAN JOINT STOCK COMPANIES

Russian joint stock companies are corporate entities with limited liability
similar to corporations formed under United States laws. Shareholders of Russian
joint stock companies generally are not liable for debts and obligations of the
company. However, shareholders of a bankrupt joint stock company may be held
liable for debts and obligations of the bankrupt company if they have exercised
their authority to undertake an action knowing that bankruptcy would be the
result of their actions. In closed joint stock companies, i.e. companies with a
limited number of shareholders, any transfer of shares by a shareholder to a
third party is subject to the pre-emptive right of the other shareholders to
acquire such shares at the price offered to a third party.

Under Russian law, a simple majority of voting shares is sufficient to control
adoption of most resolutions. Resolutions concerning amendment of the company
charter, reorganizations (including mergers), liquidation, any increase in
authorized shares, or certain "large" transactions require the approval of the
shareholders holding 75% of the outstanding shares.

A Russian joint stock company has no obligation to pay dividends to the holders
of common shares. Any dividends paid to shareholders must be recommended by the
board of directors and then approved by a majority vote at the general meeting
of shareholders. Dividends may be paid every quarter of a year.

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ENVIRONMENTAL REGULATION.

The government of the Russian Federations, Ministry of Natural Resources, and
other agencies establish special rules, restrictions and standards for
enterprises conducting activities affecting the environment. The general
principle of Russian environmental law is that any environmental damage must be
fully compensated. Under certain circumstances, top officers of the entity
causing substantial environmental damage may be subject to criminal liability.

RUSSIAN TAXATION.

As a Russian resident entity, a company is subject to all applicable Russian
taxes, many of which currently impose a significant burden on profits. The most
significant Russian taxes and duties affecting a company include:

(i)    20% value added tax (established pursuant to Chapter 21 of the Tax Code
       of Russia), applicable only to domestic sale of goods in Russia and the
       Ukraine. Starting from 1/1/2004 VAT was reduced to 18%. No value added
       tax is payable on goods exported to the West from Russia;

(ii)   20 to 24% profit tax which includes 6% federal profit tax, 12 to 16%
       regional profit tax and 2% local tax (in accordance with Chapter 25 of
       the Tax Code of Russia). Russian law allows the carry forward and use of
       losses, subject to limitations;

(iii)  Income tax on dividends payable to a Company's shareholders. The tax must
       be withheld by a Company from the amount distributed to each shareholder.
       The current rate of tax on dividends payable to corporate foreign
       shareholders is 15%. However, dividends payable to a foreign owned
       Company, if a United States resident company, are subject to the
       regulations of the United States - Russia's tax treaty limits the tax on
       dividends payable to a foreign owned Company to 5% (as long as a
       Company's holds more than a 10% interest in the Russian Company);

(iv)   Tax on production of minerals applicable to all subsoil users producing
       minerals, including crude oil. For the period ending on December 31,
       2004, the tax is temporarily established at 340 rubles (ca. USD 11.50)
       per metric ton produced by the taxpayer multiplied by a factor (F)
       calculated pursuant to the formula:

            F = (U-8) x R/252 where:

            U - means the average market price of Urals blend crude oil (in
            dollars per barrel) during the relevant tax period;

            R - means the average ruble for dollar exchange rate quoted by the
            Central Bank of Russia for the relevant tax period.

         After expiration of the temporary tax rate period, the tax will apply
         at the rate of 16.5% of the value of the oil produced by the taxpayer;

(v)    Unified social tax (established pursuant to Chapter 24 of the Tax Code of
       Russia) at the rate of up to 35.6% of the payroll;

(vi)   Transport tax (established pursuant to Chapter 28 of the Tax Code of
       Russia) payable by owners of motor vehicles at the rate established by
       regional authorities based on the type and capacity of the vehicle. The
       maximum amount of tax payable by an owner of a motor car per year is RUR
       150 (ca. USD 5.1) per horsepower;

(vii)  Oil export duty, currently in the amount of USD 33.9 per ton of crude oil
       being exported, increasing to USD 35.2 in 2004;

(viii) Regional property tax payable annually at 2.2% of the value of net assets
       of the entity.

The Russian tax system currently is undergoing a major reorganization. New tax
laws including those setting forth rules for application of the value-added tax,
profit tax, and tax on the production of minerals were enacted within the last
four years. The cost of legal and accounting advice to keep up with changes in


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the Russian tax laws may be significant and penalties for violations, even
inadvertent ones, may be steep. If revisions impose confiscatory taxes, our
profitability will be adversely affected.

Credit Losses. Our petroleum marketing businesses will be extending secured
credit to most of their customers. We recognize that extending credit and
setting the appropriate reserves for receivables is largely a subjective
decision based on knowledge of the customer and the industry. Active management
of our credit risk is essential to our success. We will be insuring our
receivables with Sovereign Risk insurance, when applicable or available.
Diversification of credit risk is difficult since the petroleum marketing
business will be our sole income for approximately the next twelve months of
operations Our sales executives and their respective staff will meet regularly
to evaluate credit exposure, in the aggregate and by individual credit. Credit
exposure also includes the amount of estimated unbilled sales. Our bank has
offered to provide credit risk insurance and commodity price hedging insurance,
when applicable and available.

World oil prices have been very volatile over the last several years, and since
fuel costs represent a significant part of some companies operating expenses,
the volatility in fuel prices can adversely affect our customers' business, and
consequently our credit losses.

We may also incur credit losses due to other causes, including deteriorating
conditions in the world economy, or in the shipping, and continued conflicts and
instability in the Middle East, Asia and Latin America, as well as potential
future terrorist activities and possible military retaliation. Any credit
losses, if significant, will have a material adverse effect on our financial
position and results of operations.

Senior Management. Our ability to maintain our competitive position is dependent
largely on the services of our senior management and professional team. If we
are unable to retain the existing senior management and professional personnel,
or to attract other qualified senior management and professional personnel, our
businesses will be adversely affected.

Loan agreements and demand notes. We are a party to certain loan agreements and
demand notes from time to time. These loan agreements and demand notes impose
certain operating and financial restrictions on us. Our failure to comply with
obligations under these loan agreements and demand notes, including meeting
certain financial ratios, could result in an event of default. An event of
default, if not cured or waived, would permit acceleration of any outstanding
indebtedness under the agreement, and impair our ability to receive advances and
issue letters of credit, and may have a material adverse effect on us.

Market Risks. Our fuel services are provided through relationships with the
large independent oil suppliers and government owned oil companies. We could be
adversely affected by industry consolidation due to increased merger activity in
the petroleum and transportation business. We could also be adversely affected
because of increased competition from the larger oil companies who may choose to
directly market to smaller companies or to provide less advantageous credit and
price terms to us. Moreover, a rapid and sustained increase in fuel prices could
affect the credit limits extended to us by our suppliers, potentially impacting
our liquidity and profitability. Conversely, a rapid decline in fuel prices
could adversely affect our profitability because of any inventory that may be
held by us in pipelines or during delivery.

We conduct the vast majority of our business transactions in U.S. dollars.
However, in certain markets, primarily in Europe, payments are sometimes
denominated in local currency. This subjects us to foreign currency exchange
risk, which may adversely affect our results of operations and financial
condition. We seek to minimize the risks from currency exchange rate
fluctuations through our regular operating and financing activities.

REGULATION

The principal laws and regulations affecting our businesses are as follows:

Environmental Regulations. Our activities, including discontinued operations,
are subject to substantial regulation by federal, state and local government
agencies, both in and outside the United States, which enforce laws and
regulations governing the transportation, sale, storage and disposal of fuel and
the collection, transportation, processing, storage, use and disposal of
hazardous substances and wastes, including waste oil and petroleum products. For
example, United States Federal and state environmental laws applicable to us
include statutes that: (i) allocate the cost of remedying contamination among
specifically identified parties, and prevent future contamination; (ii) impose
national ambient standards and, in some cases, emission standards, for air
pollutants which present a risk to public health or welfare; (iii) govern the
management, treatment, storage and disposal of hazardous wastes; and (iv)
regulate the discharge of pollutants into waterways. International treaties also
prohibit the discharge of petroleum products at sea. The penalties for


                                       8
<PAGE>

violations of environmental laws include injunctive relief, recovery of damages
for injury to air, water or property, and fines for non-compliance. See "Risk
Factors," above.

TRADEMARKS/PATENTS

We received a trademark registration for the name FUELNATION from United States
Patent and Trademark Office), Serial Number 76056889.

We received a Service Mark registration for the R2R (Rack 2 Retail) service name
with United States Patent and Trademark Office, Serial Number 76171137.

GOVERNMENT REGULATIONS

We are not subject to any extraordinary governmental regulations relating to our
business.

ITEM 2. DESCRIPTION OF PROPERTY

In March 2002, we moved our principal place of business to 4121 SW 47th Ave.,
Suite 1301, Davie, Florida. This location consists of approximately 700 square
feet of executive office space and approximately 500 square feet of warehouse
and storage space. FuelNation Group, LLC, a company 100% owned by the current
CEO, signed a 3 year lease renewal on July 8, 2004, and sub leases to FuelNation
Inc. for the same terms and conditions. This lease obligates the company to a
base monthly rent of $1,184.50, year one, $1,220.04, Year two, $1,256.64 year
three, plus tax pursuant to a written lease which expires in August 31, 2007. We
believe that this new space is adequately sufficient to meet our future growth
demands. Furthermore, we believe that there exists sufficient available office
space and that we could effectively lease additional space within the immediate
area, if so required.

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.

ITEM 3. LEGAL PROCEEDINGS

FuelNation currently is not a party to any material legal proceedings. (See
additional information under the heading "Subsequent events" in Note 16 of the
Notes to Financial Statements.)

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the year ended December 31, 2003 the following were approved by a
majority of our shareholders by written consent:

     1.  Reverse stock split. We have approved a 150 to 1 reverse stock split of
         the outstanding common stock.

     2.  Amendment to Certificate of Incorporation: We have approved an
         amendment to our Certificate of Incorporation that, when effective,
         will change our authorized capital stock to 100,000,000 shares of
         common stock and 5,000,000 shares of preferred stock. The Certificate
         of Amendment to be filed with the Secretary of State of the State of
         Florida is attached to this document as Exhibit A.

     3.  Stock Option Plan. Our 2002 Stock Option Plan has been approved. The
         2002 Plan is attached to this document as Exhibit B.

PART II

ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS

Common stock. FuelNation Inc's common stock is currently traded on the Pink
Sheets under the symbol "FLNA." As of December 24, 2004 FuelNation Inc.'s common
stock was held by 604 stockholders of record and an estimated 2,000 additional


                                       9
<PAGE>

stockholders whose shares were held for them in street name or nominee accounts.
Set forth below are the high and low closing sale prices per share of our common
stock for each quarter of 2003 and 2002, as reported by NASDAQ.

These quotations reflect prices between dealers, do not include retail mark-ups,
markdowns, commissions and may not necessarily represent actual transactions.

All share numbers in this Report have been adjusted for the 1-150 reverse stock
split effective January 27, 2003.

                                                    Sales Price per share

                  Quarter Ended                       High          Low
                  -------------                    --------      --------
            First Quarter ended 3/31/03            $  0.300      $  0.300
            Second Quarter ended 6/30/03           $  0.300      $  0.300
            Third Quarter ended 9/30/03            $  0.300      $  0.300
            Fourth Quarter ended 12/31/03          $  8.500      $  8.500

            First Quarter ended 3/31/02            $ 10.500      $  9.150
            Second Quarter ended 6/30/02           $  3.300      $  2.700
            Third Quarter ended 9/30/02            $  0.570      $  0.480
            Fourth Quarter ended 12/31/02          $  0.555      $   .465

The transfer agent for our common stock is Continental Stock Transfer and Trust
Company, 17 Battery Place, 8th Floor, New York, New York 10004, telephone (212)
509-4000.

We have never paid cash dividends on our common stock.

We do not anticipate paying cash dividends on our common stock in the
foreseeable future. We currently intend to retain our future earnings to finance
the improvement and expansion of our business. Future dividends on our common
stock, if any, will be at the discretion of our board of directors and will
depend on, among other things, our results of operations, cash requirements and
surplus, financial condition, contractual restrictions and other factors that
our board of directors may deem relevant.

SALES OF UNREGISTERED SECURITIES

In June 2001, we issued 30,000 shares of our common stock as consideration for
equipment deposits and consulting services valued at $1,442,500. Additionally,
in April 2001, Mr. Salmonson, then our CEO, transferred 17,917 shares of our
common stock owned by him valued at $1,209,375 to the same entity. In December
2001, we entered into an agreement (the "Put Option") to repurchase all such
stock at a price of $97.50 per share (an aggregate of $4,671,875) at the option
of the holders. We do not expect the Put Option to be exercised in the near term
and have valued them at the fair market value of the common stock when issued
($2,651,875). Mr. Salmonson has agreed to accept shares of common stock equal to
the number of common shares he transferred to pay these expenses.

In December 2001, we entered into an agreement (the "Put Agreement") to
repurchase 3,790 and 5,401 shares of our common stock from two separate groups
of individuals at a price of $97.50 per share (an aggregate of $896,098) at the
option of the holders. Such individuals had purchased their stock through our
Regulation D offering in December 2000 at the same price of $97.50 as the Put
Agreement. The amount of $896,098 has been reclassified from stockholders'
equity to common stock subject to repurchase at December 31, 2002.

In February 2002, Christopher Salmonson, exercised options to purchase 8,352
shares of our common stock at an exercise price of $1.50 per share. The Company
incurred a non-cash charge to operations of $85,187 and the proceeds from the
exercise of $12,528 were utilized to offset the due to affiliate.

In May 2002, options to purchase 111,722 shares of Company common stock were
granted to the CEO and employees of the Company at an option price of $1.50 per
share as consideration for accrued compensation owed .The relevant shares were
registered as part of an S-8 registration statement filed with the SEC. The
Company incurred a non-cash charge to operations of $370,373. These options were
exercised in May 2002.

During the second quarter of 2002, options to purchase 36,667 shares of our
common stock were granted to consultants at an exercise price of $3.00 per


                                       10
<PAGE>

share. The options were exercise the second quarter of 2002 for a total exercise
price of $110,000. The options were valued at $197,175. The relevant shares were
registered as part of an S-8 registration statement filed with the SEC.

Three demand notes came due in the months of August and September of 2002 and
the Company was unable to extend the term on the notes or make payment on the
notes. Restricted common shares owned and pledged by an affiliate, Fuel America,
secured the collateral for these demand notes. Loans were advanced to Fuel
America, using restricted common shares of FuelNation Inc as collateral. The
funds were advanced to FuelNation from the affiliate and treated as a demand
note. These amounts are included in due to affiliates in the accompanying
financial statements.

During August 2002 the Company was required to pay $330,000 on a demand note
resulting from a 12-month loan advanced by a group of shareholders of
FuelNation Inc. that matured on April 19, 2002. This note was extended until
August 2002 while waiting for the note funding to be completed. Since the delay
of the note funding the lender group has defaulted against the collateral of
133,333 restricted common shares of FuelNation stock pledged by an affiliate
Fuel America. In 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 has
received confirmation and written verification from the lender that the total
proceeds they received on the securities satisfied the obligation.

During 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. In 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 has received confirmation and written verification from the lender that
the total proceeds they received on the securities satisfied the obligation.

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. In 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 has
received confirmation and written verification from the lender that the total
proceeds they received on the securities satisfied the obligation.

During the fourth quarter of 2002, 23,334 shares of our common stock were issued
to William C. Schlecht a director and secretary of the Company in exchange for
additional service's incurred by him in his capacity as director and Secretary
of the Company. The value of these shares was $21,000.

During the fourth quarter 2002, the Company granted options to purchase 66,667
shares of Company common stock to Mr. Salmonson, for Consulting Services at an
exercise price of $.82 per share. The Company incurred a non-cash charge to
operations of $38,251, the proceeds upon exercise reduced the amount due to
affiliate by $54,667.

In December 2002, the Company granted options to purchase 66,667 shares of
common stock to the then new CEO and President, Mr. Brodzki, pursuant to the
terms and conditions of his employment contract. The Company incurred a non-cash
charge to operations of $40,000.

During the fourth quarter of 2002, 156,667 shares of our common stock were
issued to Shaikh Isa Mohammed Isa Al-Khalifa a director of the Company as
payment for his corporate guarantee and payment of bills in Bahrain. The value
of these shares was $94,000.

During 2002, 65,555 shares of common stock were issued to various individuals
for consulting and printing services, which resulted in a non-cash charge to
operations of $307,000.

During 2002, the Company granted options to purchase 124,665 shares of common
stock to various individuals for consulting services, the various consultants
had an exercise price ranging from $0.41 to $1.50 per share. The Company
incurred a non-cash charge to operations of $213,387.

During 2002, the Company issued 335,730 shares of common stock to Mr. Salmonson
in replacement of shares pledged by him as collateral for a third party loan to
an affiliated entity. These funds were advanced to the Company by the affiliated
entity. The Company was unable to repay the advance causing the affiliate to
default the collateralized shares to be surrendered. In addition, the Company
granted options to purchase 80,000 shares of common stock to the affiliate as
partial repayment of advances made by the affiliate to fund the Company's
operations. These options were exercised in 2002 at a price of $1.50 per share.
The value of the replacement shares amounted to $201,438 and the value of the
options plus the proceeds upon exercise approximated $234,000 and were offset
against the amount due to affiliate.

                                       11
<PAGE>

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, valued at $14,900
were issued to a consultant to finalize a settlement of a civil suit.

In October 2003, the Company issued 376 shares of preferred stock in exchange
for the release of an agreement the Company entered into to repurchase 3,790
shares of common stock valued at $396,500.

In December 2003, 25 shares of preferred stock was issued to a former
convertible note holder as full release to the Company of all obligations and
liabilities attached to the convertible note.

In October 2003, 409 shares of preferred stock was issued to three (3)
individual convertible note holders in exchange for release to the Company of
all obligations and liabilities attached to the convertible notes.

In December 2003, 164 shares of preferred stock was issued for a subscription of
$105,000 and replacement of 53,800 shares of common stock. The subscription
receivable was still outstanding as of December 31, 2003.

In December 2003, 1,064 shares of preferred stock was issued for $180,200 and
replacement of 61,849 shares of common stock.

In December 2003, 162 shares of preferred stock was issued as a replacement of
6,995 shares of common stock owned by existing shareholders.

In December 2003, Mr. Salmonson, was issued 2,800 shares of preferred stock as
consideration under the non-dilution clause in his employment contract.

As of December 2003, 134,143 shares of common stock owned by existing
shareholders were replaced by the Company by virtue of various settlement and
subscription agreements. The 134,143 shares of common stock have subsequently
been subscribed for by a unrelated third party for $1,340,900. The $1,340,900
subscription receivable has been shown as a contra equity account in the
financial statements.

In December 2003, 8,000 preferred shares were issued to Alkhalifa Petroleum
Corporation. These shares were issued in payment for Shaikh Isa Alkhalifa
guaranteeing a credit facility for the purchase of petroleum products.

All of the above shares were issued pursuant to an exemption provided by Section
4(2) under the Securities Act of 1933.

ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION OR
        PLAN OF OPERATION

The following discussion and analysis of our plan of operation should be read in
conjunction with the financial statements and the related notes. This document
contains 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
which are based upon current expectations that involve risks and uncertainties,
such as our plans, objectives, expectations and intentions. Our actual results
and the timing of certain events could differ materially from those anticipated
in these forward-looking statements as a result of certain factors, including
those set forth under "Risk Factors," "Business" and elsewhere in this document.

We have identified certain policies as critical to our business operations and
the understanding of our results of operations. The impact and any associated
risks related to these policies on our business operations is discussed
throughout Management's Discussion and Analysis of Financial Condition and
Results of Operations where such policies affect our reported and expected
financial results. See the section entitled "Critical Accounting Policies" at
the end of this discussion.

                                       12
<PAGE>

OVERVIEW

FuelNation Inc. is an independent oil and gas marketing company whose current
focus is Western Siberia, Russia; Middle East and Southeast Asia.

In 2003, FuelNation achieved several milestones in its finances and operations,
as well as faced some challenges. Highlights include the following:

We have been able to assemble the management to assist in executing the oil
trading in Geneva, Switzerland and we have also completed the agreement to buy
crude oil in Russia and have it refined for export.

An even more important factor in executing our acquisition strategy is the
Company's ability to attract the capital necessary to acquire and develop its
acquisition targets. In this regard, the Company has been working to develop
strong relationships with commercial, primarily European banks, which are active
in Russia and the former Soviet Union. FuelNation has traditionally financed its
operations by raising equity or borrowing from affiliates, but it is the opinion
of its management that the acquisition of crude oil and refined petroleum
products is best financed with a combination of debt and equity. This approach
is less dilutive to existing shareholders and offers the Company greater
flexibility. Based on its discussions with various lending institutions,
FuelNation management is confident of its ability to secure bank financing for
crude oil and refined petroleum products.

Most acquisitions will require FuelNation to provide at least some equity
financing, The Company needs to engage and maintain an active investor relations
program and is also in frequent contact with investment banks, both in the U.S.
and abroad, as well as with institutional and industry sources of private
capital.

2005 OPERATIONAL AND FINANCIAL OBJECTIVES

In 2005, FuelNation intends to continue its efforts to procure crude oil supply
contracts and refined petroleum from Western Siberia, Russia; Middle East and
Southeast Asia. These contracts will generally range from one to five years in
duration and sometimes longer. We anticipate the company can procure contracts
that provide quantities of crude oil of 75,000 to 250,000 barrels per day and
refined petroleum products of 50,000 to 100,000 metric tons per month and much
larger. This procurement of crude oil can provide the company approximately
$3,000,000 to $10,000,000 per day of revenues and approximately $22,500 to
$75,000 per day in trading profits based on today's oil prices and margins. This
procurement of refined petroleum products can provide the company approximately
$25,750,000 to $128,750,000 per month of revenues and approximately $100,000 to
$500,000 per month in trading profits based on today's oil prices and margins.

We also intend to finalize the loan commitment to acquire the travel center
property and partner with a developer and management company to oversee and
build the project. We currently have identified two management companies and
have proposals in front of three major developers. This first location is in the
final stages and we have already prepared the way for our second location in
central Florida. These travel centers will give us a solid distribution channel
for our petroleum products acquired abroad.

SOURCES AND USES OF FUNDS

To date the Company's primary source of liquidity is cash provided by equity
offerings. Capital markets will continue to be utilized in order to maintain the
Company's indebtedness at moderate levels to enable the Company to have the
necessary financial flexibility to react to future opportunities. The Company's
primary needs for cash are for the operation, development, production,
exploration and acquisition of oil and gas properties and working capital
obligations.

RESULTS OF OPERATIONS

      (Comparison of Results of Operations for the years ended December 31, 2003
and 2002)

      We generated no revenues during the years ended December 31, 2003 and
2002. It is anticipated that we will be able to generate revenues in 2005 once
we finalize our fuel supply agreement and begin delivering fuel to petroleum


                                       13
<PAGE>

marketers and end users. In addition, once we finalize the financing and
complete the building of Phase One of the travel center we will generate
revenues from that facility. Total operating expenses were $ 2,499,117 for the
year ended December 31, 2003, compared to $ 4,398,465 for the year ended
December 31, 2002. The expenses incurred during the year ended December 31, 2003
arose primarily from salaries and wages, including related payroll expenses
($608,143), legal and professional ($115,348),loss on deposits ($1,022,500),
write down of inventory($499,749) and other general and administrative expenses
($79,615). These expenses decreased in 2003 over the same period in 2002,
primarily due to impairment loss of technology of $1,581,747, decrease in
consulting fees of ($84,879), decrease in non-cash consulting fees ($794,813),
and a reduction in the employment of staff to support the related technology and
general overhead which resulted in a decrease in non -cash employee compensation
of ($495,561)and other general and administrative expenses of (107,046).The
decreases were offset by an increase in loss on equipment deposit of ($752,500),
loss on application deposit of ($270,000) and write down of inventory of
($499,749).

      Additionally, we incurred interest expense of $18,030 in 2003 compared
with interest expense of $26,687 in 2002. As a result, we incurred a net loss of
$2,517,147 for the year ended December 31, 2003, compared to a Net Loss of
$4,425,152 for the year ended December 31, 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 attain vertical integration to the extent that we
have an ownership stake in every phase of an oil sale, from the extraction of
oil, to the refining and storage stage, to the shipping stage, and ultimately to
the wholesale and retail sale of oil products. We intend to build this vertical
integration through strategic partnerships and through strategic joint ventures
and acquisitions.

      Once we achieve the above described vertical integration, we will sign
crude oil and refined oil supply contracts and wholesale these shipments for
immediate profit and cash flow. We have established the banking credit facility
with one of the largest European banking centers for the oil purchasing. We are
currently making purchase offers to oil suppliers to acquire long term supply
contracts.

      Our next objective is 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.

      Growth 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.

                                       14
<PAGE>

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 them significant bonus
opportunities if those levels are exceeded. For the remainder of our employees,
earnings will be 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.

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.

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.

Top World Oil Producers, 2003*
         Country              Total Oil Production**
                            (million barrels per day)
1)  Saudi Arabia                        9.95
2)  United States                       8.84
3)  Russia                              8.44
4)  Iran                                3.87
5)  Mexico                              3.79
6)  China                               3.54
7)  Norway                              3.27
8)  Canada                              3.11
9)  United Arab Emirates                2.66
10) Venezuela                           2.58
11) United Kingdom                      2.39
12) Kuwait                              2.32
13) Nigeria                             2.25
*Table includes all countries total oil production exceeding 2 million barrels
pre day in 2002.
**Total Oil Production includes crude oil, natural gas liquids, condensate,
refinery gain, and other liquids.

Top World Oil Net Exporters, 2003*
         Country                  Net Oil Exports
                            (million barrels per day)
1)  Saudi Arabia                        8.38
2)  Russia                              5.81
3)  Norway                              3.02
4)  Iran                                2.48
5)  United Arab Emirates                2.29
6)  Venezuela                           2.23
7)  Kuwait                              2.00
8)  Nigeria                             1.93
9)  Mexico                              1.74
10) Algeria                             1.64
11) Libya                               1.25
*Table includes all countries with net exports exceeding 1 million barrels per
day in 2002.
This information is provided from the Energy Information Association.
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.html

                                       15
<PAGE>

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

Future cash flows will be influenced, among other factors, by the market price
of oil and gas as well as the number of existing signed petroleum contracts. To
the extent that oil prices decline, the Company's revenues, cash flows and
earnings could be adversely affected. The Company's management believes that
even if oil prices were to decline to a level that would have a material adverse
effect on cash flows, the Company would continue to meet its working capital
obligations and its 2004 capital budget (as discussed below).

At December 31, 2003 we had a working capital deficit of $3,113,313. For the
year ended December 31, 2003, net cash used by operating activities was
$185,624. This was primarily attributable to a net loss for the year of
$2,517,147 and offset by increase of payables and liabilities of $759,609, loss
of application deposit of $270,000, write -down of inventory of $499,748 and the
loss on equipment deposit of $752,000. For the year ended December 31, 2003, net
cash used in investing activities was $190,000 which resulted from a bond
issuance application deposit. For the year ended December 31, 2003, net cash
provided by financing activities was $375,012 which mainly resulted from the
proceeds of sale of preferred stock of $180,200 and net proceeds from related
party of $ $203,889

      The company intends to pay off its existing obligations in the approximate
amount of $3.1 million from the profits made by the future sales of petroleum
products

      It is anticipated that we will, in all likelihood, sustain operating
expenses without corresponding revenues, at least into 2005. 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.

Add capital commitments
Need the long-term obligations table

Contractual Obligations And Commercial Commitments

      The following tables summarize our contractual obligations and commercial
commitments as of December 31, 2003:
<TABLE>
<CAPTION>
                                                             Payments Due By Period
                                              -----------------------------------------------------
Significant Contractual Obligations   Total   Within 1 Year   2-3 Years   4-5 Years   After 5 Years
-----------------------------------   -----   -------------   ---------   ---------   -------------
<S>                                  <C>         <C>           <C>         <C>           <C>
Operating Leases                     $50,859     $12,852       $14,391     $14,820       $8,796

Capital Leases                            --
</TABLE>

      We are committed under a non-cancelable operating lease for our office
space, expiring at 2007. These leases generally provide minimum rent plus
payments for real estate taxes and operating expenses, subject to escalations.
Our lease payment obligations under these leases totaled $12,280 for 2003, and
an aggregate of $63,139 through 2007. We do not have any capital leases. We also
have a month to month lease with Echosat for a facility which houses its data
centers at $2,000 per month.

                                       16
<PAGE>

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 7. FINANCIAL STATEMENTS

Our financial statements required to be included in this Form 10-KSB are
appended hereto commencing on page F-1.

                                       17
<PAGE>

ITEM 8.   CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS

ITEM 8A.  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 report pursuant to Securities Exchange Act Rule
13a-15. 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.

                                       18
<PAGE>

PART III

ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS

The following table sets forth the names, positions with our Company and ages of
our executive officers and directors as of December 31, 2003. Our directors will
be elected at our annual meeting of stockholders. One half of the total number
of directors is elected at each annual meeting, and, therefore, each director
serves for two years or until his successor is elected and qualifies. The Board
elects officers and their terms of office are, excepting to the extent governed
by employment contract, at the discretion of the Board.

The directors and officers of our Company as of the date of this Report are as
follows:


         Name                    Age          Position
-------------------------        ---   ------------------------

Christopher R. Salmonson         38    Chief Executive Officer,
                                       President & Chairman
Shaikh Isa Mohammed
    Isa AlKhalifa                66    Director

William C. Schlecht              39    Secretary, Director

Christopher R. Salmonson, CEO, President and Chairman of our Board of Directors
from October 2000 to November 2002 when he stepped aside due to his pending
criminal prosecution. Mr. Salmonson has maintained his management with the
company and has resumed his position of CEO, Chairman of the board and President
in November 2003. Since 1993, Mr. Salmonson has engaged in a multi-faceted
career specializing in international business and finance, primarily operating
out of: The Peoples Republic of China; Jakarta, Indonesia; Manila, Philippines;
and the Middle East (including Manama, Bahrain and Riyadh, Saudi Arabia). Mr.
Salmonson has experience in matters concerning trade and project finance,
international negotiations, and Chinese and Indonesian currency conversion
efforts. Since 1994, Mr. Salmonson has been employed as a financial advisor to
the ruling family of Bahrain. Since 1997, Mr. Salmonson has been a licensed
mortgage broker in the State of Florida.

On August 15, 2002 the then CEO and President of the Company, Chris Salmonson,
was arrested by the Sheriff's Office in Broward County, Florida and was charged
with grand theft relating to a real estate transaction, which failed. This real
estate transaction is unrelated to the company and his positions in the company.
It is alleged that he received $1,670,000 from the Plaintiff in exchange for
real property that was never conveyed. 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.

                                       19
<PAGE>

Charles Brodzki was appointed interim President and CEO of the Company in
December 2002 to November 2003. Since 1979 he has served as partner/owner of
various law firms in South Florida. Currently he is a solo practitioner in
Montana. He graduated from the Wharton School of the University of Pennsylvania
in 1976 with B.S. Economics (majored in accounting) and University of Miami
School of Law in 1979 with J.D. He served as adjunct instructor of Business law
at Florida Atlantic University(1982-88) and has been a member of Florida Bar
since 1979. He is a former officer/director of various public companies and
consultant to various public companies.

Shaikh Isa Mohammed Isa AlKhalifa has served as a director of our company since
November 2000. In addition, he is a member of the ruling family of Bahrain. From
1988 to 1994, he served as the Bahrainian ambassador to Saudi Arabia. Since 1994
until the present, Shaikh Isa Mohammed Isa AlKhalifa has managed several
companies engaged primarily in business management, financial services and
management consulting. Shaikh Isa Mohammed Isa AlKhalifa's companies have
operations in Bahrain and throughout the Middle East. He holds degrees in
petroleum and chemical engineering.

William C. Schlecht, director, has served as a director of our company since
April 2001. Since December 1998, Mr. Schlecht has been the general manager and a
principal in Summit Body and Equipment, a privately held company that
specializes in the manufacture of custom and high volume van bodies and
specialty trailers. From June 1984 to December 1998, Mr. Schlecht served in the
United States Army where he was a sergeant in charge of the battalion wheeled
vehicles maintenance and operations, and oversaw the fleet of several hundred
trucks and trailers and the mechanics responsible for their operation.

ITEM 10. EXECUTIVE COMPENSATION

The following table shows, for the years ended December 31, 2003, 2002 and 2001,
the cash and other compensation paid by us to our Chief Executive Officer and to
each of the executive officers of our Company who had annual compensation in
excess of $100,000.
<TABLE>
<CAPTION>
                                Annual Compensation                               Long-Term Compensation
                          ------------------------------                     --------------------------------
                                                             Other           Restricted          Securities
Name and                                                     Annual          Stock               Underlying
Principal Position         Year     Salary         Bonus     Compensation    Awards              Options/SARs
                                      ($)                                       ($)                  (#)
----------------------    ------   ------------   -------    ------------    ----------          ------------
<S>                        <C>      <C>             <C>         <C>            <C>                <C>
Chris Salmonson(1)         2003     240,000 (3)     --
Chairman and Chief         2002     240,000 (3)     --                                             8,352 (4)(6)
Executive Officer          2001     240,000                                                       95,868 (5)

Charles Brodzki(2)         2002          --         --          --             --                 66,667 (7)
Chief Executive Officer
</TABLE>

(1) Mr. Salmonson stepped aside from his position in December 2002 and reclaimed
it in November 2003.

(2) Mr. Brodzki was appointed in December 2002 until November 2003. The position
held by Mr. Brodzki was relinquished when Mr. Brodzki's letter agreement expired
in November 2003. Mr. Salmonson has resumed his former positions, since November
2003.

(3) As of December 31, 2003 and 2002, $240,000 and $166,152 of his salary due
Mr. Salmonson has been accrued respectively..

(4) In February 2002 Mr Salmonson was granted options to purchase 8,352 shares
of our common stock pursuant to the terms of his Employment Agreement. This
option was exercisable at a price of $1.50 per share. He exercised these options
in February 2002.

(5) In April 2001, Mr. Salmonson was granted options to purchase 95,868 shares
of our common stock pursuant to the terms of his Employment Agreement. This
option was exercisable at a price of $1.50 per share. He exercised these options
in September 2001.

(6) This number does not include an option to purchase 66,667 shares of our
common stock granted to Mr. Salmonson pursuant to his consulting agreement.
These options were exercised in fourth quarter 2002.

(7) In December 2002, Mr. Brodski was granted options to purchase 66,667 shares
of our common stock pursuant to the terms of his Employment Agreement. This
option was exercisable at a price of $.60 per share. He exercised these options
in December 2002.

                                       20
<PAGE>
<TABLE>
<CAPTION>
                                         OPTION/SAR GRANTS IN CURRENT FISCAL YEAR
----------------------------------------------------------------------------------------------------------------
Name                      Number of Securities   Percent of              Exercise Or Base       Expiration Date
                          Underlying             Total Options/          Price
                          Options/SARs           SARs Granted To         ($/Sh)
                          Granted (#)            Employees In Fiscal
                                                 Year
----------------------------------------------------------------------------------------------------------------
<S>                          <C>                      <C>                     <C>                      <C>
Chris Salmonson              --                       --                      --                       --
----------------------------------------------------------------------------------------------------------------
Charles Brodzki              --                       --                      --                       --
----------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND FY-END OPTION/SAR VALUES

----------------------------------------------------------------------------------------------------------------
Name                      Shares                 Value                   Number Of              Value Of
                          Acquired On            Realized                Securities             Unexercised
                          Exercise (#)           ($)                     Underlying             In-The-Money
                                                                         Unexercised            Options/SARs
                                                                         Options/SARs           At FY-End ($)
                                                                         At FY-End (#)          Exercisable/
                                                                         Exercisable/           Unexercisable
                                                                         Unexercisable
----------------------------------------------------------------------------------------------------------------
<S>                        <C>                   <C>                     <C>                    <C>
Chris Salmonson             8,352                $85,187                 0/0                    0/0
----------------------------------------------------------------------------------------------------------------
Charles Brodzki            66,667                $40,000                 0/0                    0/0
----------------------------------------------------------------------------------------------------------------
</TABLE>

<TABLE>
<CAPTION>
                                    EQUITY COMPENSATION PLAN INFORMATION
-------------------------------------------------------------------------------------------------------------

                                                                                       Number of securities
                                                                                             remaining
                                                     Number of                             available for
                                                   securities to                          future issuance
                                                     be issued          Weighted-          under equity
                                                        upon        average exercise       compensation
                                                    exercise of         price of               plans
                                                    outstanding        outstanding          (excluding
                                                      options,          options,            securities
                                                      warrants          warrants           reflected in
                                                     and rights        and rights           column (a))
                                                        (a)                (b)                  (c)
-------------------------------------------------------------------------------------------------------------
<S>                                                    <C>               <C>                   <C>
Equity compensation plans approved by                  12,670            $1.50                 60,278
  security holders...........................
-------------------------------------------------------------------------------------------------------------
Equity compensation plans not approved                      0                0                      0
  security holders...........................
-------------------------------------------------------------------------------------------------------------
                Total........................          12,670            $1.50                 60,278

-------------------------------------------------------------------------------------------------------------
</TABLE>

Employment Agreements

In April 2001, we entered into employment agreements with Chris Salmonson, and
James L. Wilson, our former CFO and on February 10, 2001, we entered into
employment agreements with Daniel Willmott, John T. Leta, Kevin A. White and
Michael D. Freudenberg. Mr. Wilmott, Mr. Leta, Mr. White and Mr.


                                       21
<PAGE>

Freudenberg were computer engineers employed to develop and maintain our
technology, information systems and website. The employment agreements all
provide for annual salaries ranging from $90,000/year to $130,000/year and also
provide for three-year terms, with three of the agreements commencing
retroactive to October or November of 2000. As of December 31, 2003 all
agreements have expired with the exception of Mr Salmonson.

The employment agreement with our former Chairman, Chief Executive Officer and
President, Chris Salmonson provides for an annual base salary of $240,000, and
stock options equal to 8% of the total amount of issued and outstanding stock.
As of December 31, 2003, $406,152 of the salary due Mr. Salmonson has been
accrued.

In October 2001, we entered into a two year employment agreement with Trevor
Klein as Director of Finance. The employment agreement provides for annual
salary of$125,000 the first year and $130,000 the second year. Mr. Klein
resigned in October 2002.

In November 2002, Mr. Salmonson relinquished his positions until in order to
have adequate time to prepare a defense of the charges and allegations against
him. He continued to be a consultant for FuelNation during such period on the
same economic terms set forth in his employment agreement. As of December 2003
he has resumed his position as President, CEO and Chairman.

Effective December 5, 2002 Charles Brodzki became CEO and President pursuant to
a letter agreement executed on November 27, 2002. Mr. Brodzki's compensation
will be shares of common stock equal to 10% of the outstanding common stock and
an additional 10% of the outstanding common stock upon the receipt of funding in
excess of $1,000,000 or of completion of the note funding.

2002 Stock Option Plan

The purpose of the 2002 Plan is to advance FuelNation's interests by providing
an additional incentive to attract and retain qualified and competent persons as
employees and consultants, upon whose efforts and judgment our success is
largely dependent, through the encouragement of stock ownership by these
persons.

The 2002 Plan was effective as of April 18, 2002 and amended on December 2,
2002, and unless sooner terminated by our board of directors in accordance with
the terms of the 2002 Plan, will terminate on July 4, 2010. Employees of
FuelNation and its subsidiaries, who are selected by the stock option committee
of the committee, or if there is no Stock Option committee by the board of
directors, may participate in the 2002 Plan; however, no incentive stock option,
as defined in Section 422 of the Internal Revenue Code of 1986 (the "Code" or
"Internal Revenue Code") will be granted to a consultant who is not also our
employee.

The 2002 Plan provides for the issuance of incentive stock options ("Incentive
Stock Options") and nonqualified Stock Options ("Nonqualified Stock Options").
An Incentive Stock Option is an option to purchase common stock that meets the
definition of "incentive stock option" set forth in Section 422 of the Code. A
Nonqualified Stock Option is an option to purchase common stock that meets
certain requirements in the Plan but does not meet the definition of an
"incentive stock option" set forth in Section 422 of the Code. Nonqualified
Stock Options and Incentive Stock Options are sometimes referred to herein as
"Options."

180,000 shares of common stock were originally reserved under the 2002 Plan and
options for all of the shares have been granted and shares issued pursuant to
Options. In November 2002, an additional 480,000 shares (as adjusted for the
reverse split) were authorized, and only 233,334 were reserved under thePlan due
to the availability of authorized shares until the reverse split was completed.
In 2004 the remaining shares of 246,668 were reserved for the plan. If any
Option granted pursuant to the 2002 Plan terminates, expires, or is canceled or
surrendered, in whole or in part, shares subject to the unexercised portion may
again be issued pursuant to the exercise of Options granted under the 2002 Plan.
The shares acquired upon exercise of Options granted under the 2002 Plan will be
authorized and unissued shares of common stock.

The 2002 Plan is administered by a committee of two or more directors (the
"Committee") or, if a Committee is not designated by the Board of Directors, by
the Board of Directors as a whole. The Committee has the right to determine,
among other things, the persons to whom Options are granted, the number of
shares of common stock subject to Options, the exercise price of Options and the
term thereof.

All of our employees, including officers and directors and consultants, are
eligible to receive grants under the 2002 Plan; however, no Incentive Stock
Options may be granted to a consultant who is not also an employee of FuelNation
or any of our subsidiaries. Upon receiving grants of Options, each holder of the
Options (the "Optionee") will enter into an option agreement with that contains
the terms and conditions deemed necessary by the Committee.

                                       22
<PAGE>

Terms and Conditions of Options

Option Price

For any Option granted under the 2002 Plan, the option price per share of common
stock may be any price not less than par value per share as determined by the
Committee; however, the option price per share of any Incentive Equity Incentive
may not be less than the fair market value of the common stock on the date such
Incentive Equity Incentive is granted. Under the 2002 Plan, the "fair market
value" is the closing price of shares on the business day immediately preceding
the date of grant; however, if the shares are not publicly traded, then the fair
market value will be as the Committee will in its sole and absolute discretion
determine in a fair and uniform manner.

Exercise of Options

Each Option is exercisable in such amounts, at such intervals and upon such
terms as the Committee may determine. In no event may an Option be exercisable
after ten years from the date of grant. If (i) FuelNation will sell all or
substantially all of its assets to an unaffiliated entity, (ii) FuelNation
consummates a merger, consolidation, share exchange or reorganization with
another corporation or other entity and, as a result of such merger,
consolidation, share exchange or reorganization, less than a majority of the
combined voting power of the outstanding securities of the surviving entity
immediately after such transaction is held in the aggregate by the holders of
securities of FuelNation that were entitled to vote generally in the election of
directors of FuelNation ("Voting Stock") immediately before such transaction, or
(iii) when the common stock is publicly traded pursuant to a tender offer or
exchange offer for securities of FuelNation, or in any other manner, any person
or group within the meaning of the Securities Exchange Act of 1934, acquires
beneficial ownership of more than 50% of the Voting Stock (the surviving
corporation or purchaser described in this paragraph, the "Purchaser", and any
such event described in this paragraph, a "Change of Control"), then FuelNation
will negotiate in good faith to reach an agreement with the Purchaser that the
Purchaser will either assume the obligations of FuelNation under the outstanding
Options or convert the outstanding Options into options of at least quality
value as to capital stock of the Purchaser; but if such an agreement is not
reached, then the Options will become fully vested and exercisable and
FuelNation will provide written notice to each Optionee, that his Option has
become fully vested and exercisable, whether or not such Option will then be
exercisable under the terms of his Option Agreement. To the extent that the
Optionees exercise the Options before or on the effective date of the Change of
Control, FuelNation will issue all Common Stock purchased by exercise of those
Options, and those shares of Common Stock will be treated as issued and
outstanding for purposes of the Change of Control. Upon a Change of Control,
where the outstanding Options are not assumed by the surviving corporation or
the acquiring corporation, the Plan will terminate, and any unexercised Options
outstanding under the Plan at that date will terminate.

Unless further limited by the Committee in any Option, shares of common stock
purchased upon the exercise of Options must be paid for in cash, by certified or
official bank check, by money order, with already owned shares of common stock,
or a combination of the above. The Committee, in its sole discretion, may accept
a personal check in full or partial payment.

Outstanding Options

As of December 17, 2004, Options for 353,054 shares had been granted pursuant to
the 2002 Plan.

ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.

The table below lists the beneficial ownership of our voting securities by each
person known by us to be the beneficial owner of more than 5% of such
securities, as well as by all our directors and officers. Unless otherwise
indicated, the shareholders listed possess sole voting and investment power with
respect to the shares shown.
<TABLE>
<CAPTION>

-----------------------------------------------------------------------------------------
Name and Address                          Number of Shares          Percent of Class
                                         Common       Preferred      Common  Preferred
-----------------------------------------------------------------------------------------
<S>                                     <C>           <C>            <C>          <C>
Chris Salmonson                         634,727(1)(2) 2,800          27.6%        21.5%
4121 SW 47th Ave
Davie, Florida 33314
-----------------------------------------------------------------------------------------
</TABLE>


                                       23
<PAGE>
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------
Name and Address                          Number of Shares          Percent of Class
                                         Common       Preferred      Common  Preferred
-----------------------------------------------------------------------------------------
<S>                                     <C>           <C>            <C>          <C>
Robert Simmons                          433,334(3)                   18.9%
222 N. Ocean Blvd
Delray Beach, Florida 33483

-----------------------------------------------------------------------------------------
Shaikh Isa  Mohammed Isa AlKhalifa      156,667       8,000(6)        6.8%        61.5%
P.O Box 20257
Manama, Bahrain

-----------------------------------------------------------------------------------------
Charles Brodzki                         233,092                      10.2%            %
1325 North 7th Avenue
Bozeman, Montana 59715

-----------------------------------------------------------------------------------------
William Schlecht                         23,334(4)                                    %
24 NE Middlefield road
Portland, OR 97211

-----------------------------------------------------------------------------------------
All officers and directors as a group 1,047,820                      45.7%            %
(3 persons)
------------------------------------------------------------------------------------------
</TABLE>

* Less than 1%

(1) Includes 409,200 shares owned by Fuel America LLC, of which Mr. Salmonson
and his wife are sole principals.

(2) Mr. Salmonson has voting rights over 634,727 shares beneficially owned by
himself and Fuel America LLC.

(3) 433,333 shares held in the name of Rapture Holdings, Inc., of which Mr.
Simmons is principal and sole shareholder.

(4) Mr. Schlecht owns 23,334 shares beneficially owned by him.

(5) Mr. Brodzki has only been issued 66,667 shares in December 2002 of the
233,092 required by the Company under his employment agreement.

(6) These represent shares owned by Alkhalifa Petroleum Corp., which Shaikh Isa
Mohammed Isa AlKhalifa is an affiliated party.

ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

The Company has borrowed monies from related parties to fund operations. In 2003
the Company borrowed $328,000 from the Chief Executive Officer ["CEO"]and in
2002, the Company borrowed approximately $504,000 from Fuel America LLC ["Fuel
America"] and Fuel Nation Group, LLC ["FNG"],( entities controlled by the
Chairman of the Board/Chief Executive Officer ["CEO"]), At December 31, 2003 and
2002, the balance owed to affiliates was $325,221 and $121,332,respectively.
Currently, there are no interest or repayment terms for the debt and it is
treated as if due on demand. Interest at the rate of 5% per annum is being
charged on the amount advanced in 2003. At December 31, 2003 and 2002 , interest
booked on loans from related parties was $11,709 and $0 respectively. The amount
borrowed from the CEO in 2003 arose by the CEO personally guaranteeing and
pledging shares of common stock owned by him for a $320,000 deposit made by a
third party on behalf of the Company to fund a loan committment application. The
amount of the loan has subsequently been assigned between the CEO and the
Company and has been recorded in the balance owed to affiliates.

During 2003, the Company issued 8,000 shares of preferred stock to Alkhalifa
petroleum Corp. a company controlled by a director of the Company, Shaikh Isa


                                       24
<PAGE>

Mohammed Isa Alkhalifa, in exchange for personally guaranteeing an $8,000,000
bank line of credit on behalf of the Company.As of December 31, 2003 the line of
credit had not been utilized.

In December 2003, the CEO was issued 2,800 shares of preferred stock as
consideration under the non-dilution clause in his employment contract.

During 2002, the Company used proceeds from common stock issuances in the amount
of approximately $180,000 to repay amounts borrowed from Fuel America and Fuel
Nation Group. In July 2002, the Company granted options to purchase 80,000
shares of common stock valued at approximately $234,000 to Fuel America and Fuel
Nation Group as repayment for amounts borrowed such options were exercised in
2002.

In February and December 2002, the then former CEO, Mr Salmonson, was granted
and exercised options to purchase 8,352 and 66,667 shares of common stock at
exercise prices of $1.50 and $.82 per share as consideration under the
non-dilution clause in his employment contract [See Note 11 for compensation
expense related to issuance of these options]. The proceeds of $12,528 and
$54,667 were utilized to reduce the amounts due to affiliates

In May 2002, options to purchase 78,240 shares of common stock were granted and
exercised by the then former CEO, Mr Salmonson, at an exercise price of $1.50
per share as consideration for accrued compensation. In June 2002, the former
CEO paid a nonrefundable fee related to the proposed bond issuance at that time
to an investment banker of $90,000 on behalf of the Company. The amount is
included in due to affiliates.

In December 2002, the then CEO, Mr Brodski, was granted and exercised options to
purchase 66,667 shares of common stock valued at $40,000 per his employment
agreement.

In December 2002, the Company issued 156,667 shares of common stock to a
director of the Company in exchange for the satisfaction of accrued liabilities
in the amount of $94,000 assumed by the director.

In December 2002, the Company issued 23,333 shares of common stock valued at
$21,000 to a director of the Company for consulting services.

In October 2001, the then CEO, Mr Salmonson, exercised options to purchase
95,868 shares of common stock at an exercise price of $1.50 per share [See Note
11 for compensation expense related to issuance of these options]. The proceeds
of $143,802 were used to reduce the amount due to Fuel America. Also, in 2001, a
Company loan payable of $30,000 was settled by the then CEO issuing shares of
Company common stock owned by him to the loanholder. The loan amount of $30,000
was offset against the amount due to Fuel America.

In 2001, the then CEO, Mr Salmonson, transferred 94,917 shares of common stock
owned personally by him to several non-affiliated entities for consulting and
professional services incurred by the Company. The Company recorded a non-cash
charge to operations in 2001 of $4,052,875 for such services which represented
the fair value of such stock when transferred. This amount was credited to
additional paid-in capital. The then CEO has agreed to accept shares of common
stock equal to the number of shares he transferred to pay the Company's
expenses.

In 2001, the Company shared office space with Triad, who together leased such
facility from an entity controlled by a principal stockholder of the Company.
The lease expired in the fourth quarter of 2001 and since then rent was on a
month-to-month basis until March 2002 when the Company vacated these premises.
Rent expense amounted to $38,974 and $6,413 in 2001 and 2000, respectively.

In 2001, the Company, through its then former CEO,Mr Salmonson, pledged shares
of common stock to be issued for various consulting services. The Company
recorded a non-cash charge to expense of $9,200,880 which was equal to the fair
value of such shares at the time they were pledged. Such shares were not issued
as of December 31, 2001 and the total amount of $9,200,880 was credited to
additional paid-in capital.

Three demand notes came due in the months of August and September 2002 and the
company was unable to extend the term on the notes or make payment on the notes.
Restricted common shares owned and pledged by an affiliate Fuel America secured
the collateral for these demand notes. Loans were advanced to Fuel America,
using restricted common shares of FuelNation Inc as collateral. The funds were
advanced to FuelNation from the affiliate and treated as a demand note. These
amounts are included in due to affiliates in the accompanying financial
statements.

During the month of August 2002 the company was required to pay $330,000 on a
demand note resulting from a 12-month loan advanced by a group of shareholders
of FuelNation Inc. that matured on April 19, 2002. This note was extended until


                                       25
<PAGE>

August 2002 while waiting for the note funding to be completed. Since the delay
of the note funding the lender group has defaulted against the collateral of
133,333 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 has received confirmation and written verification from the lender
that the total proceeds they received on the securities satisfied the
obligation.

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 has received confirmation and written
verification from the lender that the total proceeds they received on the
securities satisfied the obligation.

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 has received confirmation and written verification from the lender
that the total proceeds they received on the securities satisfied the
obligation.

In August, 2002, the board of Directors pursuant to the purchase contract dated
September 14, 2000 between Triad Petroleum, Inc. and Regenesis Holdings, Inc.
exercised our rights in the purchase contract article 6, item 6.7, (resignation
of directors and officers) to demand the resignation of Edwin Ruh, Jr. as a
director. The current active board of directors consist of three individuals;
Shaikh Isa Mohammed Isa Alkhalifa, William Schlecht and Chris Salmonson. On or
about December 1, 2000, we retained Veritas Venture Labs, LLC to perform
consulting services for us pursuant to a written consulting agreement. Based in
Boston, Massachusetts, Veritas Ventures Lab, LLC is owned and/or controlled by
Edwin Ruh, one of our former directors. Pursuant to two separate consulting
agreements, Veritas was paid $221,000. In addition, its individual constituents
were issued a total of 6,667 shares of our Common Stock and were granted an
option to purchase 10,000 shares at $1.50 per share, which they exercised in
2001.The Company incurred a non-cash charge to operations of $3,585,000 related
to the stock issuance and options granted.

During September 2002, three of the four programmers have resigned from
employment of the Company and have found alternative employment. The programmers
have agreed to assist the Company on a consulting basis with the technology and
support and have continued to provide their services for the Company. We have
currently stopped providing any free or discounted services to clients for Beta
testing and are awaiting the note funding to commence in order to implement our
strategy. The current technologies is running seamlessly at the Echosat
Communications location in Lexington, Kentucky and discussions for joint
marketing or add on services to the satellite installations are being pursued.

                                       26
<PAGE>

FUELNATION INC.
(A Development Stage Company)
September 30, 2002
(Unaudited)

ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K

(a) Index to Exhibits

2     Regenesis-Triad Share Sale and Contribution Agreement dated September 14,
      2000(1)

3.1   Articles of Incorporation of International Pizza Corporation(2)

3.2   Bylaws of International Pizza Corporation(2)

3.3   Amendment to Articles Incorporation, setting forth Designations, rights
      and preferences of Series A Preferred Stock (2)

3.4   Amendment to Articles of Incorporation changing name to Regenesis
      Holdings, Inc.(2)

3.5   Amendment to Articles of Incorporation, increasing authorized capital and
      setting forth designations, rights and Preferences of Series B and
      Series C Preferred Stock(3)

3.6   Amendment to Articles of Incorporation, restating Designations, rights and
      preferences of Series C Preferred Stock (4)

3.7   Amendment to Articles of Incorporation (5)

3.8   Amendment to Articles of Incorporation (6)

3.9   Amendment to Articles of Incorporation (13)

10.0  Triad-FuelNation Assignment & Assumption Agreement dated October 13,
      2000 (1)

10.1  Trial-Regenesis Assignment and Assumption of License Agreement with
      Licensor (1)

10.2  Employment Agreement with Christopher Salmonson (1)

10.3  Employment Agreement with James L. Wilson (1)

10.4  Consulting Agreement with EchoSat (7)

10.5  Consulting Agreement with Veritas Venture (7)

10.5  Employment Agreement with Paul Sapita (8)

10.6  Restated Employment Agreement with Chris Salmonson (8)

10.7  Agreement with Charles Brodzki (13)

10.8  Board resolution modifying Salmonson Employment Agreement

10.9  Contribution and Distribution Agreement dated January 23, 2003 among
      William Schlecht, FuelNation Travel Center LLC and FuelNation, Inc.

                                       27
<PAGE>

10.10 2002 Stock Option Plan (14)

17.1  Letter of Resignation of James L. Wilson(12)

31.1  Certification

31.2  Certification

32.1  Certification

32.2  Certification

(1) Previously filed as an exhibit in the Company's Form 10-KSB/A1 for the
fiscal year ended December 31, 2000.

(2) Previously filed as an exhibit in the Company's Form 10-KSB for the fiscal
year ended December 31, 1997.

(3) Previously filed as an exhibit in the Company's Form 8-K dated 02/18/99
February 18, 1999.

(4) Previously filed as an exhibit in the Company's Form 10-KSB for the fiscal
year ended December 31, 1998.

(5) Previously filed as an exhibit in the Company's Form 10-QSB for the period
ended June 30, 2000.

(6) Previously filed as an exhibit in the Company's Form 10-QSB for the period
ended September 30, 2000.

(7) Previously filed as an exhibit in the Company's Registration Statement on
Form S-8 dated June 14, 2001.

(8) Previously filed as an exhibit in the Company's Registration Statement on
Form S-8 dated August 8, 2001

(9) Previously filed as an exhibit in the Company's Form 8-K dated January 19,
2001.

(10) Previously filed as an exhibit in the Company's Form 8-K/A1 dated April 25,
2001.

(11) Previously filed as an exhibit in the Company's Form 8-K/A1 dated February
7, 2002.

(12) Previously filed as an exhibit in the Company's Form 8-K dated December 12,
2001.

(13) Previously filed as an exhibit in the Company's Registration Statement on
Form S-8 dated December 13, 2002

(14) Previously filed as an exhibit in the Company's Information Statement on
Schedule 14C.

(b) Reports on Form 8-K

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

Item 14.   Principal Accountant Fees and Services

                                                           2003     2002
                                                         -------   -------
14.1    AUDIT FEES                                       $75,000   $73,000
14.2    AUDIT-RELATED FEES
14.3    TAX FEES
14.4    ALL OTHER FEES
14.5    (i)  DISCLOSURE OF AUDIT COMMITTEE'S
             PRE-APPROVAL POLICIES AND PROCEDURES;
        (ii) DISCLOSE THE PERCENTAGE OF SERVICES
             DESCRIBED THAT WERE APPROVED BY THE
             AUDIT COMMITTEE.

                                       28
<PAGE>

14.1 SIGNATURES

In accordance with Section 13 or 15(d) of the Securities Exchange Act of 1934,
the Company caused this report to be signed on its behalf by the undersigned,
thereunto duly authorized, on December 28, 2004.

FUELNATION INC.
(Registrant)

                     By: /s/ CHRIS R. SALMONSON
                         -------------------------------------------
                         CHRIS R.SALMONSON, President,
                           Chief Executive Officer

In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities indicated on
December 28, 2004.

                     By: /s/ SHAIKH ISA MOHAMMED ISA ALKHALIFA
                         -------------------------------------------
                         Shaikh Isa Mohammed Isa AlKhalifa, Director


                     By: /s/ WILLIAM C. SCHLECHT
                         -------------------------------------------
                         William C. Schlecht, Director


                     By: /s/ CHRIS R. SALMONSON
                         -------------------------------------------
                         CHRIS R. SALMONSON, President, Chief Executive
                           Officer and Chairman of the board

                                       29


<PAGE>

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Stockholders and the Board of Directors of FuelNation, Inc.
Davie, Florida

We have audited the accompanying balance sheet of FuelNation, Inc. [a
development stage company] as of December 31, 2003, and the related statements
of operations, changes in stockholders' equity [deficit], and cash flows for
each of the two years and the cumulative period ended December 31, 2003. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with the Standards of The Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of FuelNation, Inc. [a development
stage company] as of December 31, 2003, and the results of its operations and
its cash flows for each of the two years and the cumulative period ended
December 31, 2003, in conformity with accounting principles generally accepted
in the United States of America.

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 3 to the
financial statements, the Company is in the development stage, has suffered
significant losses and has a working capital deficiency of $3,113,313 and a
deficit accumulated in the development stage of $36,644,792 as of December 31,
2003 that raise substantial doubt about its ability to continue as a going
concern. Management's plans in regard to these matters are also described in
Note 3. The financial statements do not include any adjustments which might
arise from the outcome of these uncertainties.

MOORE STEPHENS, P.C.
Certified Public Accountants.

Cranford, New Jersey
November 23, 2004

                                      F-1

<PAGE>
                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                            ASSETS

                                                                         December 31,
                                                                            2003
                                                                        -------------
<S>                                                                     <C>
Current Assets                                                          $         --

Property and equipment, net of accumulated depreciation of $170,100           76,580

Other assets                                                                     835
                                                                        ------------
TOTAL  ASSETS                                                           $     77,415
                                                                        ============

              LIABILITIES AND STOCKHOLDERS' [DEFICIT]

CURRENT LIABILITIES:
   Cash Overdraft                                                       $      2,465
   Accounts payable                                                          764,196
   Accrued Liabilities                                                       407,786
   Payroll and Taxes Payable                                               1,439,145
   Due to Affiliates                                                         325,221
   Note payable                                                               25,000
   Other Payables                                                            149,500
                                                                        ------------

TOTAL CURRENT LIABILITIES                                                  3,113,313
                                                                        ------------

COMMITMENTS AND CONTINGENCIES                                                     --
                                                                        ------------

COMMON STOCK SUBJECT TO REPURCHASE, 53,318 SHARES ISSUED AND
OUTSTANDING AT DECEMBER 31, 2003                                           3,178,474
                                                                        ------------

STOCKHOLDERS' EQUITY [DEFICIT]:

   Preferred Stock, $.01 par value, 5,000,000 shares
      authorized; 13,000  issued and outstanding                                 130
   Common Stock, $.01 par value, 100,000,000 shares
      authorized; 2,241,174 issued and outstanding                            22,412
   Subscriptions Receivable                                               (1,445,900)
   Additional paid-in capital                                             31,853,778
   (Deficit) Accumulated in the Development Stage                        (36,644,792)
                                                                        ------------
TOTAL STOCKHOLDERS' [DEFICIT]                                             (6,214,372)
                                                                        ------------

TOTAL LIABILITIES AND STOCKHOLDERS' [DEFICIT]                           $     77,415
                                                                        ============
</TABLE>


                                      F-2
<PAGE>
                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
                                                                                                Accumulative in
                                                                                                the Development
                                                                                                    Stage
                                                                                                     From
                                                                 Years Ended                   September 30, 2000
                                                                 December 31,                          To
                                                          2003                   2002           December 31, 2003
                                                       -----------           -----------       ------------------
<S>                                                    <C>                   <C>                   <C>
REVENUE                                                $        --           $        --           $         --
                                                       -----------           -----------           ------------

OPERATING EXPENSES:
   Salaries and wages including related taxes              608,143               688,498              2,118,661
   Consulting fees                                          13,903                98,782                142,119
   Consulting fees - related party                                                    --                221,162
   Legal and professional                                  115,348               212,776                938,933
   Marketing and promotion                                                        60,591                467,158
   Rent                                                     67,437               117,900                293,337
   Rent - related party                                                               --                 45,387
   Depreciation                                             50,136                50,136                170,100
   Other general and administrative expenses                79,615               186,661                616,958
   Impairment loss on technology                                               1,581,747              1,581,747
   Write down of inventory                                 499,749               499,749
   Loss - deposits                                       1,022,500             1,022,500
   Financing costs                                          23,042                90,000                113,042
   Non - cash consulting fees                                                    735,562             17,014,280
   Non - cash consulting fees - related party                                     59,251              3,644,251
   Non - cash financing costs                               19,244                    --                112,200
   Non - Cash printing costs                                                      21,000                 21,000
   Non - cash employee compensation                                              495,561              6,863,527
   Research and development cost                                --                    --                 10,000
                                                       -----------           -----------           ------------
TOTAL OPERATING EXPENSES                                 2,499,117             4,398,465             35,896,111
                                                       -----------           -----------           ------------

OPERATING LOSS                                          (2,499,117)           (4,398,465)           (35,896,111)

OTHER INCOME (EXPENSE):
   Other (Expense) Income                                       --                    --               (694,982)
   Interest expense - related party                        (11,709)              (11,709)
   Interest expense                                         (6,321)              (26,687)               (41,990)
                                                       -----------           -----------           ------------
TOTAL OTHER (EXPENSE), NET                                 (18,030)              (26,687)              (748,681)
                                                       -----------           -----------           ------------

NET LOSS                                               $(2,517,147)          $(4,425,152)          $(36,644,792)
                                                       ========================================================

Basic and Diluted Net Loss per Common Share            $     (1.10)          $     (3.08)
                                                       ===========           ===========

Basic and Diluted Weighted Average Common
Shares Outstanding                                       2,290,677             1,437,012
                                                       ===========           ===========

</TABLE>

                                      F-3
<PAGE>
                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)
<TABLE>
<CAPTION>
                                                                                        (Deficit)
                                                                         Additional   Acumulated in
                                Preferred Stock         Common Stock      Paid-In    the Development  Subscription
                              Shares     Amount       Shares     Amount    Capital        Stage        Receivable          Total
                              ------     ------       ------     ------  ----------  ---------------  ------------         -----
<S>                           <C>    <C>           <C>         <C>       <C>           <C>             <C>            <C>
Balance - December 31, 1999   33,333    $50,000      626,667     $6,267     $ 390,577                                    $ 446,844

October 2000 - Acquired
   Equity of Shell in
   Stock Acquisition                                  40,444        404      (774,124)                                    (773,720)
October 2000 - Retirement
   of Common Stock in Lieu
   of Debt Paid by
   Related Party                                      (2,267)       (23)           23
November 2000 - Conversion
   of Preferred Stock to
   Common Stock              (33,333)   (50,000)     333,333      3,334        46,666
December 2000 - Issuance
   of Common Stock in
   Private Placement
   Transaction                                        34,621        346     3,144,762                                    3,145,108
Net Loss                                                                                  (1,205,251)                   (1,205,251)

                            ------------------------------------------------------------------------------------------------------
Balance - December 31, 2000       --         --    1,032,798     10,328     2,807,904     (1,205,251)                    1,612,981

February 2001 - Issuance
   of Common Shares in
   Private Placement
   Transactions                                          256          3        24,997                                       25,000
February 2001 - Issuance of
   Stock Options for
   Consulting Services                                                      2,985,000                                    2,985,000
March 2001 - Issuance of
   Common Shares in Private
   Placement Transactions                                677          7       101,493                                      101,500
March 2001 - Shares Pledged
   for Consulting Costs                                                     9,200,880                                    9,200,880
April 2001 - Issuance of
   Common Shares
   and Affiliate-
   Owned Company
   Common Stock
   for Consulting Costs                               13,333        133     3,149,242                                    3,149,375
April 2001 - Cancellation
   of Shares Issued
   in Private
   Placement Transaction                                (103)        (1)       (9,999)                                     (10,000)
April 2001 - Issuance of
   Stock Options
   to Employees                                                             6,212,966                                    6,212,966
June 2001 - Issuance of
   Common Stock
   in Satisfaction
   of Liabilities
   and Payment
   of Professional Expenses                            2,704         27       275,473                                      275,500
</TABLE>

                                      F-4
<PAGE>
                                 FUELNATION INC.
                         (A DEVELOPMENT STAGE COMPANY)
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)
<TABLE>
<CAPTION>
                                                                                        (Deficit)
                                                                         Additional   Acumulated in
                                Preferred Stock         Common Stock      Paid-In    the Development  Subscription
                              Shares     Amount       Shares     Amount    Capital        Stage        Receivable          Total
                              ------     ------       ------     ------  ----------  ---------------  ------------         -----
<S>                           <C>    <C>           <C>         <C>       <C>           <C>             <C>            <C>
June 2001 - Issuance of
   Common Stock for Payment
   of Technology
   and Consulting Costs                               30,000        300     1,442,200                                    1,442,500
June 2001 - Issuance
   of Common
   Stock to Acquire
   Assignment
   of Contract                                         1,933         19       208,781                                      208,800
June 2001 - Issuance
   of Common
   Stock for Payment
   of Consulting
   Costs and Exercise
   of Stock
   Options                                            16,667        167       614,833                                      615,000
August 2001 - Issuance of
   Warrants and
   Affiliate-Owned
   Company Common Stock for
   Consulting Costs                                                         3,024,796                                    3,024,796
September 2001 -
   Stock Options
   Exercised by Officers
   Pursuant to
   Employment Agreements                              96,868        969       144,332                                      145,301
October 2001 - Issuance of
   Stock Options
   to Employees
   and Warrants
   and Affiliate-
   Owned Company
   Common Stock
   to Non-Employee
   for Financing
   and Consulting Costs                                                       696,850                                      696,850
November 2001 - Consulting
   Costs - Shares not
   yet Issued                                                                 240,000                                      240,000
December 2001 -
  Grant of Put Options                               (57,107)      (572)   (3,547,401)                                  (3,547,973)
Net Loss                                                                                 (28,497,242)                  (28,497,242)
                            ------------------------------------------------------------------------------------------------------
Balance - December 31, 2001       --         --    1,138,026     11,380    27,572,347    (29,702,493)                   (2,118,766)
</TABLE>

                                      F-5
<PAGE>
                                 FUELNATION INC.
                         (A DEVELOPMENT STAGE COMPANY)
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)
<TABLE>
<CAPTION>
                                                                                        (Deficit)
                                                                         Additional   Acumulated in
                                Preferred Stock         Common Stock      Paid-In    the Development  Subscription
                              Shares     Amount       Shares     Amount    Capital        Stage        Receivable          Total
                              ------     ------       ------     ------  ----------  ---------------  ------------         -----
<S>                           <C>    <C>           <C>         <C>       <C>           <C>             <C>            <C>

February 2002 -
   Stock Options
   Issued and Exercised by
   Officer Pursuant to
   Employment Agreement                                8,352         84        97,631                                       97,715
May 2002 - Issuance of
   Common Stock for Payment
   of Consulting Services                             40,000        400       284,600                                      285,000
May 2002 - Issuance and
   Exercise of Stock Options
   by Consultant for Payment
   of Consulting Services                             49,999        500       407,421                                      407,921
May 2002 - Stock Options
   Issued and Exercised by
   Employees in Lieu of
   Payroll and
   Accrued Payroll                                   111,722      1,117       536,839                                      537,956
July 2002 - Stock Options
   Issued and Exercised by
   an Affiliate Company for
   Debt Repayment                                     80,000        800       233,200                                      234,000
July 2002 - Issuance and
   Exercise of Stock Options
   by Consultant for
   the Payment
   of Consulting Services                             18,000        180        53,820                                       54,000
August 2002 - Issuance and
   Exercise of Stock Options
   by Consultant for
   the Payment
   of Consulting Services                             33,333        333        73,917                                       74,250
October 2002 - Issuance and
   Exercise of Stock
   Options by
   Consultant for the
   Payment of
   Consulting Services                                20,000        200         8,950                                        9,150
December 2002 -
   Stock Options
   Issued and Exercised by
   Officer Pursuant to
   Employment Agreement                               66,667        667        39,333                                       40,000
December 2002 - Issuance
   and Exercise of Stock
   Options by Former Officer
   Pursuant to Employment
   Agreement                                          66,667        667        92,251                                       92,918
December 2002 - Issuance of
   Common Stock to Replace
   Shares Pledged as
   Collateral by Affiliate                           335,730      3,357       198,081                                      201,438
</TABLE>

                                      F-6
<PAGE>
                                 FUELNATION INC.
                         (A DEVELOPMENT STAGE COMPANY)
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)
<TABLE>
<CAPTION>
                                                                                        (Deficit)
                                                                         Additional   Acumulated in
                                Preferred Stock         Common Stock      Paid-In    the Development  Subscription
                              Shares     Amount       Shares     Amount    Capital        Stage        Receivable          Total
                              ------     ------       ------     ------  ----------  ---------------  ------------         -----
<S>                           <C>    <C>           <C>         <C>       <C>           <C>             <C>            <C>
December 2002 - Issuance
   and Exercise of Stock
   Options by Consultant
   for the
   Payment of Consulting
   Services                                           39,999        400        55,351                                       55,751
December 2002 - Issuance of
   Common Stock for
   the Payment
   of Consulting Services                              2,222         22         1,978                                        2,000
December 2002 - Issuance of
   Common Stock for Payment
   of Printing Services                               23,333        234        20,766                                       21,000
December 2002 - Issuance of
   Common Stock to Director
   to Replace Shares
   Pledged as Collateral                             156,667      1,567        92,433                                       94,000
December 2002 - Issuance of
   Common Stock to
   Director for
   Payment of Consulting
   Services                                           23,333        233        20,767                                       21,000
December 2002 -
   Consulting Costs -
   Shares not yet Issued                                                       14,000                                       14,000
Net Loss                                                                                  (4,425,152)                   (4,425,152)
                            ------------------------------------------------------------------------------------------------------
Balance - December 31, 2002       -- $       --    2,214,050     22,141    29,803,685    (34,127,645)                   (4,301,819)
</TABLE>

                                      F-7
<PAGE>
                                 FUELNATION INC.
                         (A DEVELOPMENT STAGE COMPANY)
            STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY ( DEFICIT)
<TABLE>
<CAPTION>
                                                                                        (Deficit)
                                                                         Additional   Acumulated in
                                Preferred Stock         Common Stock      Paid-In    the Development  Subscription
                              Shares     Amount       Shares     Amount    Capital        Stage        Receivable          Total
                              ------     ------       ------     ------  ----------  ---------------  ------------         -----
<S>                           <C>    <C>           <C>         <C>       <C>           <C>             <C>            <C>
February 2003 - Issuance of
  common stock
  in satisfaction
  of liability                                        23,334        233          (233)                                          --
December 2003 - Issuance of
  preferred stock
  to affiliate for
  guarantee of
  line of credit               8,000         80                                   (80)                                          --
December 2003 - Issuance of
  preferred stock
  to replace convertible
  debt and conversion of
  common stock for
  preferred stock                409          4       (7,709)       (77)       54,968                                       54,895
October 2003 - Issuance of
  preferred stock
  to replace common stock
  subject to repurchase          376          4           --         --       369,496                                      369,500
December 2003 - Issuance of
  preferred stock
  in settlement of
  convertible debt                25          1                                    (1)                                          --
December 2003 -Issuance of
  preferred stock
  for subscription of stock      164          2      (53,800)      (538)      105,536                      (105,000)            --
December 2003 -Purchases of
  preferred stock
  and issuance of
  preferred stock
  for conversion
  of common stock              1,064         10      (61,849)      (618)      180,808                                      180,199
December 2003- Issuance of
  preferred stock
  for conversion of
  common stock                   162          2       (6,995)       (70)           68                                           --
December 2003 -Issuance of
  preferred stock
  to Officer pursuant to
  employment agreement         2,800         28                                   (28)                                          --
December 2003 -
  Subscription of
  common stock               134,143      1,341    1,339,559               (1,340,900)            --
Beneficial conversion
  feature
  of preferred
  stock issuance                     (2,070,463)                            2,070,463                                           --
Amortization of beneficial
  conversion feature
  on preferred
  stock issuance                      2,070,463                            (2,070,463)                                          --
Net Loss                                                                                  (2,517,147)                   (2,517,147)

                            ------------------------------------------------------------------------------------------------------
Balance December 31, 2003     13,000 $      130    2,241,174   $ 22,412  $ 31,853,778  $ (36,644,792)  $ (1,445,900)  $ (6,214,372)
                            ======================================================================================================
</TABLE>

                                      F-8
<PAGE>
                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
                                                                                                            Accumulative
                                                                                Years Ended                    During
                                                                                 December 31,                Development
                                                                             2003             2002              Stage
                                                                          -----------      -----------      ------------
<S>                                                                       <C>              <C>              <C>
Cash Flows:
   Net loss                                                               $(2,517,147)     $(4,425,152)     $(36,644,792)
   Adjustments to reconcile net loss to net cash provided by
      (used) in operating activities:
         Depreciation                                                          50,136           50,136           170,100
         Write- down of Technology                                                           1,581,747         1,581,747
         Write- down of Inventory                                             499,749                            499,749
         Non- Cash Employee Compensation                                                       495,561         6,863,527
         Non- Cash Consulting Fees                                                             735,562        17,014,280
         Non- Cash  Consulting Fees -Related Party                                              59,251         3,644,251
         Non- Cash Financing Costs                                             19,244               --           112,200
         Non- Cash Printing Costs                                                               21,000            21,000
        Write- Down of Investments                                                                  --           657,686
        Write- Down of Deposits                                             1,022,500               --         1,022,500
         Other                                                                                  33,508            58,508
        Amortization of Discount on Convertible Debt                                            22,894            30,394
                                                                                                            ------------
         Changes in Assets and Liabilities:
            [Increase] Decrease in:
         Inventory                                                                              60,591          (499,748)
         Due from Escrow Accounts                                                                   --           (45,000)
         Due from Affiliates                                                                        --           304,680
         Other                                                                    285               --             8,990

Increase [Decrease] in :
         Accounts Payable                                                      91,393          305,281           797,109
         Accrued Liabilites                                                    89,485          188,731           499,117
         Payroll and Taxes Payable                                            558,731          355,987         1,439,145
                                                                          -----------      -----------      ------------

                  Net cash provided by (used) in operating activities        (185,624)        (514,903)       (2,464,557)
                                                                          -----------      -----------      ------------

Cash Flows from Investing Activities:
   Payments for Technology                                                         --               --          (544,903)
   Purchase of Fixed Assets                                                    (2,666)        (246,679)
   Bond Issuance Deposit                                                     (240,000)         (80,000)         (320,000)
   Refund of Bond Issuance Deposit                                             50,000           50,000
   Advances Toward Pending Acquisition                                                              --          (402,724)
  Cash Received in Acquisition                                                     --               --             1,109
                                                                          -----------      -----------      ------------
                  Net cash used in investing activities                      (190,000)         (82,666)       (1,463,197)
                                                                          -----------      -----------      ------------
                                                                                                            ------------

Cash Flows from Financing Activities:
   Cash Overdraft                                                               2,465                              2,465
   Net Proceeds from issuance of common stock                                                  191,510         3,453,118
   Net Proceeds from issuance of preferred stock                              180,200                            180,200
   Proceeds from Issuance of Convertible Debt                                                       --            35,953
   Proceeds from Related Party Debt                                           328,000          504,069           832,069
   Payment of Related Party Debt                                             (124,111)         (99,594)         (223,705)
   Payment of Convertible Debt                                                (11,542)                           (11,542)
   Exercise of Stock Options                                                                        --            15,000
   Debt Restructuring                                                                                           (255,804)
   Payment of Loans Payable                                                        --               --          (100,000)
                                                                          -----------      -----------      ------------

                  Net cash provided by financing activities                   375,012          595,985         3,927,754
                                                                          -----------      -----------      ------------



Net (Decrease)  in Cash                                                          (612)          (1,584)               --

Cash, Beginning of Period                                                         612            2,196                --
                                                                          -----------      -----------      ------------

Cash, End of Period                                                       $        --      $       612      $         --
                                                                          ===========      ===========      ============

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
   Cash paid during the period for interest:                              $        --      $     2,043      $      2,716
                                                                          ===========      ===========      ============
   Cash paid during the period for Income Taxes:                          $        --      $        --      $         --
                                                                          ===========      ===========      ============
</TABLE>

                                      F-9
<PAGE>
                                    FUELNATION INC.
                             (A DEVELOPMENT STAGE COMPANY)
                                STATEMENTS OF CASH FLOWS


SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 2003:

     1)   The Company issued 376 shares of preferred stock in exchange for the
          satisfaction of 3,790 shares of common stock subject to repurchase
          totaling $369,500

     2)   The Company entered into a subscription agreement to increase the
          amount of convertible debt owed by the Company by $24,412. Accordingly
          the company recorded a finance cost charge of $19,244 and offset
          accrued interest by $5,168. An addendum to the subscription agreement
          was signed whereby the Company agreed to issue 409 shares of preferred
          stock in exchange for the satisfaction of convertible debt of $
          48,897, interest expense of $2,197 and replacement of 7,709 shares of
          common stock.

     3)   The Company issued 8,000 shares of preferred stock to Alkhalifa
          Petroleum Corporation a corporation controlled by a director of the
          Company, for such director personally guaranteeing an $8,000,000 line
          of credit on behalf of the Company.

     4)   The Company issued 25 shares of preferred stock to settle an amount
          owing to a convertible debt holder valued at $25,000.

     5)   The Company issued 164 shares of preferred stock for replacement of
          53,800 shares of common stock and a subscription of $105,000 of
          preferred stock. As of December 31, 2003 the Company had not yet
          received the subscription amount. The subscription receivable has been
          shown as a contra - equity account in the financial statements.

     6)   The Company replaced 1,064 shares of common stock owned by existing
          shareholders by issuing preferred shares in conjunction with a
          Subscription agreement for preferred shares valued at $1,064,000.

     7)   The Company replaced 6,995 shares of common stock owned by existing
          shareholders by issuing 162 shares of preferred stock valued at
          $162,000.

     8)   The Company issued 2,800 shares of preferred stock to the CEO of the
          Company pursuant to the terms of the CEO's employment agreement.

     9)   As of December 31, 2003, 134,143 shares of common stock owned by
          existing shareholders were replaced with preferred stock of the
          Company by virtue of various settlement and subscription agreements
          between the Company and the shareholders. In turn, the 134,143 shares
          of common stock were subscribed for by a unrelated third party for
          $1,340,900. As of December 31, 2003 the amount had not been received.
          The $1,340,900 subscription receivable has been shown as a contra-
          equity account in the financial statements


SUPPLEMENTAL SCHEDULE OF NON CASH INVESTING AND FINANCING ACTIVITIES:
During the year ended December 31, 2002:
The Company issued the following:
<TABLE>
<CAPTION>
                                                                        Issued for

                                                                         Consulting
                                                       Consulting        Services -         Employee        Printing
                                 Issued                 Services       Related Party      Compensation      Services
                                 ------                ----------      -------------      ------------      --------
             <S>                                           <C>                 <C>                <C>            <C>
              88,888 Shares of Common Stock                $ 286,000           $ 21,000                          $21,000
             204,665 Stock Options                           378,040                              40,000


                                                     --------------------------------------------------------------------
                                                           $ 664,040           $ 21,000         $ 40,000         $21,000
                                                     ====================================================================

</TABLE>

     Additionally, the following transactions occurred in 2002:
     1)   The Company entered into a consulting contract settlement agreement
          and recorded a non-cash expense of $46,522 which was the fair value of
          options issued and exercised for 23,333 shares of common stock and
          23,333 additional shares of common stock issuable by the Company per
          the agreement. 23,333 shares were not issued as of December 31, 2002
          and the fair value of $14,000 was credited to additional paid-in
          capital. The settlement also required the Company to pay an additional
          $25,000 of consulting costs. The Company executed a six month note
          payable for $25,000 which accrues interest at 8% per annum.
     2)   Options to purchase 8,352 and 66,667 shares of common stock were
          issued and exercised by the then CEO of the Company at the exercise
          price of $1.50 and $.81 per share, respectively. The proceeds totaling
          $67,195 were offset against the amount due to affiliates and $85,187
          was recorded as non-cash employee compensation and $38,251 was
          recorded as non-cash consulting fees - related party.
     3)   The Company issued 335,730 shares of common stock to the former CEO of
          the Company in replacement of shares pledged by the then CEO as
          collateral for third party loans to an affiliated company. The funds
          were advanced to the Company by the affiliate. The Company was unable
          to repay the advance causing the affiliate to default and the pledged
          shares to be surrendered. The fair value of the replacement shares in
          the amount of $201,438 was offset against the amount due to affiliate.
     4)   The Company issued 156,667 shares of common stock in exchange for the
          satisfaction of accrued liabilities totaling $94,000 which were
          assumed by a director of the Company.
     5)   Options to purchase 111,722 shares of common stock were granted and
          exercised by employees of the Company in satisfaction of accrued
          payroll costs of $167,582, as well as current year non-cash employee
          compensation of $370,374.
     6)   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 a 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.


                                      F-10



<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS

[1] Description of Business

Organization - FuelNation, Inc. was organized under the laws of the State of
Florida on July 6, 1993 under the name International Pizza Corporation. On
October 30, 1995, the Company changed its name to QPQ Corporation, and on
November 4, 1997, changed its name to Regenesis Holdings, Inc. On October 17,
2000, the Company changed its name to FuelNation, Inc. On January 27, 2003, the
Company effected 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.

Description of Development Stage Activities - FuelNation, Inc. [the "Company" or
"FuelNation"], a Florida corporation, located in Davie, Florida has been in the
development stage since its reorganization on October 13, 2000. The Company has
continuously worked on plans to build travel centers from 2000 to the present,
initially in the state of Florida, followed by additional locations in other key
states. Getting the approvals and permitting for the first couple of travel
centers are very capital intensive and time consuming. In addition, the Company
has also been engaged in the development of providing real-time e-commerce
communications in the petroleum marketing and energy services industry from 2000
to 2003. Currently the real-time-e-commerce has been re-prioritized with
generating income from oil trading in order to self fund the real-time
e-commerce development from the projected profits of the oil trading.

FuelNation Inc, through our 100 % wholly owned subsidiary, Leman Energy Trading,
Inc., a Panamanian Corporation registered in the Panamanian Registry Public Deed
No. 9421 on August 31, 2004. is engaged in oil and gas wholesale marketing of
unbranded petroleum transportation fuels and crude oil trading in Western
Siberia, Russia; Middle East and Southeast Asia. Currently, our director of
FuelNation, Shaikh Isa Mohammed Isa Alkhalifa, and our manager of Leman Energy
Trading, Inc., Hammed Yaghoobi, have been contacting ministries of oil and major
crude oil suppliers in Western Siberia, Russia; Middle East and Southeast Asia
to acquire crude oil and refined products. Credit facilities are in place to
acquire products and multiple offers are being sent to suppliers for purchases.
In this regard, we are prepared to acquire quantities of crude oil of 75,000 to
250,000 barrels per day and refined petroleum products of 50,000 to 100,000
metric tons per month.

Reorganization - The financial statements give effect to the acquisition
agreement [the "agreement"] of FuelNation, Inc. [formerly Regenesis Holdings,
Inc. ["Regenesis"] with Triad Petroleum, LLC ["Triad"]. The closing date of the
agreement was October 13, 2000, however, for accounting purposes the transaction
is treated as being effective September 30, 2000. In connection with the
agreement, Regenesis issued 626,667 shares of common stock and 33,333 shares of
newly designated Series D preferred stock, convertible into 333,333 shares of
common stock to the members of Triad. As a result of the agreement, the members
of Triad will own approximately 96% of the outstanding common stock of
Regenesis. For accounting purposes, the agreement is being recorded as a
recapitalization with the members of Triad as the acquirers. The 626,667 shares
of common stock and 33,333 shares of Series D preferred stock are shown as
outstanding for all periods presented in the same manner as for a stock split.
In November 2000, the 33,333 shares of Series D preferred stock were converted
into 333,333 shares of common stock. The members of Triad relinquished their
entire rights and ownership in the technology of the proprietary computer and
software system [the "Technology"] in exchange for such shares. The financial
statements of the Company reflect the results of operations of the development
stage operations of the Technology acquired from Triad and Regenesis from
October 13, 2000. The financial statements prior to October 13, 2000 reflect the
development stage operations of the Technology acquired from Triad. Pro forma
information on this transaction is not presented as, at the date of this
transaction, Regenesis is considered a public shell and accordingly, the
transaction will not be considered a business combination. Concurrent with the
transaction, Regenesis Holdings, Inc. changed its name to FuelNation, Inc. No
adjustment of assets to "fair value" has been recorded.

[2] Summary of Significant Accounting Policies

Cash and Cash Equivalents - Cash equivalents are comprised of certain highly
liquid investments with a maturity of three months or less when purchased. The
Company had no cash equivalents as of December 31, 2003.

Inventory - Inventory consists of technological components which will be used in
the Company's operations. Inventory is stated at the lower of cost [determined
by the first in, first out ["FIFO"] method] or market. During 2003 and 2002
inventory in the amount of $499,749 and $60,590 were written off respectively.

                                      F-11
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #2

[2] Summary of Significant Accounting Policies [Continued]

Property and Equipment and Depreciation - Expenditures for improvements and
additions are capitalized at cost while expenditures for normal repairs and
maintenance are charged against income as incurred. Depreciation and
amortization are provided primarily using the straight-line method over
estimated useful lives as follows:

Office Furniture and Equipment 5 Years Computer Equipment 5 Years

During 2003 and 2002, depreciation expense was $50,136 and $50,136,
respectively.

Deposits On Equipment - Deposits on equipment represent amounts paid, through
the issuance of common stock, on equipment purchased. The Company entered into a
stock repurchase agreement ["put option"] with the vendor [See Note 8]. The
vendor has retained title to the equipment until the put option is satisfied.
During 2003, the deposit on the equipment in the amount of $ 752,500 was
reserved for 100%

Concentration of Credit Risk - Financial instruments which potentially subject
the Company to concentrations of credit risk consist of cash and cash
equivalents. The Company places its cash with a high credit quality financial
institution, and as a result feels its exposure to such credit risk is limited.
At December 31, 2003, the Company had no amounts in the financial institution in
excess of FDIC insurance limits.

Use of Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.

Impairment - In August 2001, the Financial Accounting Standards Board ["FASB"]
approved Statement of Financial Accounting Standards ["SFAS"] No. 144,
"Accounting for the Impairment or Disposal of Long-Lived Assets." The Statement
requires that long-lived assets to be disposed of other than by sale be
considered held and used until they are disposed of. SFAS No. 144 requires that
long-lived assets to be disposed of by sale be measured at the lower of carrying
amounts or fair value less cost to sell and to cease depreciation
[amortization]. SFAS No. 144 recommends a probability-weighted cash flow
estimation approach in situations where alternative courses of action to recover
the carrying amount of a long-lived asset are under consideration or a range of
possible future cash flow amounts are estimated. Discontinued operations will no
longer be measured on a net realizable basis, and future operating losses will
no longer be recognized before they occur. Additionally, goodwill will be
removed from the scope of SFAS No. 144. As a result, goodwill will no longer be
required to be allocated to long-lived assets [unless they qualify as a
reporting unit] to be tested for impairment.

Capitalized Technology Costs - Capitalization of technology costs, including
computer software development costs begins upon the establishment of
technological feasibility. Technological feasibility for the Company's
technology is generally based upon achievement of a detail program design free
of high risk development issues. The establishment of technological feasibility
and the ongoing assessment of recoverability of capitalized technology costs
requires considerable judgement by management with respect to certain external
factors, including, but not limited to, technological feasibility, anticipated
future gross revenues, estimated economic life and changes in software and
hardware technology.

                                      F-12
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #3

[2] Summary of Significant Accounting Policies [Continued]

Capitalized Technology Costs [Continued] - Amortization of capitalized
technology costs commences when the related products become available for
general release to customers. Amortization is provided on a product by product
basis. The annual amortization is the greater of the amount computed using (a)
the ratio that current gross revenue for a product bear to the total of current
and anticipated future gross revenues for that product or (b) the straight-line
method over the remaining estimated economic life of the product.

The Company periodically performs reviews of the recoverability of such
capitalized technology costs. At the time a determination is made that
capitalized amounts are not recoverable based on the estimated cash flows to be
generated from the applicable technology net realizable value, any remaining
capitalized amounts are written off.

During 2002, the primary objective of the Company became obtaining funding for
the construction of a travel center, initially in the state of Florida, followed
by additional centers in locations in other key states. The sale and
installation of the Company's proprietary software system to the petroleum
marketing and energy services industry, as well as the acquisition of targeted
companies in this industry, while still an integral part of the Company's
operational plan, is currently secondary to the travel centers. As a result, in
2002, the Company incurred a charge of $1,581,747 for a total impairment loss on
the capitalized technology costs.

Advertising Expense - It is the Company's policy to expense advertising costs as
incurred. Advertising expense amounted to $-- and $60,591 in 2003 and 2002,
respectively.

Income Taxes - Pursuant to SFAS No. 109, "Accounting for Income Taxes," income
tax expense [or benefit] for the year is the sum of deferred tax expense [or
benefit] and income taxes currently payable [or refundable]. Deferred tax
expense [or benefit] is the change during the year in a company's deferred tax
liabilities and assets. Deferred tax liabilities and assets are determined based
on differences between financial reporting and tax basis of assets and
liabilities, and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse.

Income [Loss] Per Share - Basic earnings [loss] per share is computed by
dividing income [loss] available to common stockholders by the weighted average
number of common shares outstanding during the period. SFAS No. 128 also
requires a dual presentation of basic and diluted earnings per share on the face
of the statement of operations for all companies with complex capital
structures. Diluted earnings per share reflects the amount of earnings for the
period available to each share of common stock outstanding during the reporting
period, 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 earnings per share does not assume conversion,
exercise, or contingent issuance of securities that would have an antidilutive
effect on per share amounts [i.e., increasing earnings per share or reducing
loss per share]. The dilutive effect of outstanding options and warrants and
their equivalents are 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 exercise of options 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 during the period. Options and
warrants will have a dilutive effect only when the average market price of the
common stock during the period exceeds the exercise price of the options or
warrants. The Company's options and warrants were not included in the
computation of loss per share for 2003 and 2002 because to do so would have been
antidilutive for these years. See Note 11 for a detail of options and warrants
that could potentially dilute future earnings per share.

                                      F-13
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #4

[2] Summary of Significant Accounting Policies [Continued]

Stock-Based Compensation - The Company follows Accounting Principles Board
Opinion No. 25, "Accounting for Stock Issued to Employees" [APB No. 25] with
regard to the accounting for its employee stock options. Under APB No. 25,
compensation expense is recognized only when the exercise price of options is
below the market price of the underlying stock on the date of grant. The Company
applies the provisions of SFAS No. 123, "Accounting for Stock-Based
Compensation" to non- employee stock-based compensation and the pro forma
disclosure provisions of SFAS No. 123 as amended by SFAS No. 148 [See Note 15]
to employee stock-based compensation.

Reclassification - Certain items in the comparative financial statements have
been reclassified to conform to the current period's presentation.

[3] Going Concern

The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in the financial
statements, the Company is in the development stage, has a working capital
deficiency and has suffered significant losses. These factors, among others,
raise substantial doubt about its ability to continue as a going concern. The
financial statements do not include any adjustments that might result from the
outcome of this uncertainty. Management plans for the Company to raise capital
to fund operations through equity and/or debt financing. It is not possible to
predict at this time the success of management's efforts to raise capital.

[4] Related Party Transactions

The Company has borrowed monies from related parties to fund operations. In 2003
the Company borrowed $328,000 from the Chief Executive Officer ["CEO"]and in
2002, the Company borrowed approximately $504,000 from Fuel America LLC ["Fuel
America"] and Fuel Nation Group, LLC ["FNG"],( entities controlled by the
Chairman of the Board/Chief Executive Officer ["CEO"]). In 2003 and 2002
repayment of debt to related parties was $124,111 and $99,594 respectively. At
December 31, 2003 and 2002, the balance owed to affiliates was $325,221 and
$121,332,respectively. Currently, there are no repayment terms for the debt and
it is treated as if due on demand. Interest at the rate of 5% per annum is being
charged on the amount advanced in 2003. At December 31, 2003 and 2002 , interest
expense on loans from related parties was $11,709 and $0 respectively.

During 2003, the Company issued 8,000 shares of preferred stock to Alkhalifa
petroleum Corp. a company controlled by a director of the Company, Shaikh Isa
Mohammed Isa Alkhalifa, in exchange for personally guaranteeing an $8,000,000
bank line of credit on behalf of the Company. The line of credit is to be
utilized for future purchases and resale of petroleum products. As of December
31, 2003 the line of credit had not been utilized.

In December 2003, the CEO was issued 2,800 shares of preferred stock as
consideration under the non-dilution clause in his employment contract as
amended. The company intends to extend the employment agreement and add
additional incentives for income and shares of equity based on performance.

During 2002, the Company used proceeds from common stock issuances in the amount
of approximately $180,000 to repay amounts borrowed from Fuel America and
FuelNation group, LLC. In July 2002, the Company granted options to purchase
80,000 shares of common stock valued at approximately $234,000 to these
affiliates as repayment for amounts borrowed, these options were exercised in
2002. In December 2002, the Company issued 335,730 shares of common stock valued
at approximately $201,000 to its then former CEO to replace shares of common
stock owned by him [through Fuel America] and pledged as collateral to secure
three loans in the amounts of $330,000, $65,000 and $100,000 which proceeds were
used on behalf of the Company through loans from the affiliates. The lenders
defaulted against the collateral for non payment. The lender of the $330,000
loan has confirmed that the collateral of 133,333 shares of common stock has
satisfied the obligation. . The company has received confirmation and written
verification from the lender that the total proceeds they received on the
securities satisfied the obligation.

In February and December 2002, the then former CEO was granted and exercised
options to purchase 8,352 and 66,667 shares of common stock at exercise prices
of $1.50 and $.82 per share as consideration under the non-dilution clause in
his employment contract [See Note 11 for compensation expense related to
issuance of these options]. The proceeds of $12,528 and $54,667 were utilized to
reduce the amounts due to affiliates.

In May 2002, options to purchase 78,240 shares of common stock were granted and
exercised by the then former CEO at an exercise price of $1.50 per share as
consideration for accrued compensation.

                                      F-14
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #5

[4] Related Party Transactions [Continued]

In June 2002, the then CEO paid a nonrefundable fee related to the proposed bond
issuance at that time to an investment banker of $90,000 on behalf of the
Company. The amount is included in due to affiliates.

In December 2002, the then current CEO was granted and exercised options to
purchase 66,667 shares of common stock valued at $40,000 per his employment
agreement.

In December 2002, the Company issued 156,667 shares of common stock to a
director of the Company in exchange for the satisfaction of accrued liabilities
in the amount of $94,000 assumed by the director.

In December 2002, the Company issued 23,333 shares of common stock valued at
$21,000 to a director of the Company for consulting services.

[5] Notes Payable

In December 2002, the Company settled a civil action with a consultant. The
Company incurred a $25,000 promissory note payable in six months with interest
at 8%.
See Subsequent Event [Note 16]


                                      F-15
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #6

[6] Convertible Debt

In October 2001, the Company borrowed approximately $36,000 from four (4)
individuals and issued 9% convertible subordinated promissory notes [the
"Notes"], which were due by September 30, 2002 and are convertible into 1,725
shares of the Company's common stock (a rate of one share of common stock for
each $20.85 principal amount of notes). Additionally, the Company issued stock
purchase warrants to the noteholders, which entitled the noteholders to purchase
3,449 shares of common stock at an exercise price of approximately $22.50 per
share. The warrants were issued at twice the conversion rate of the common stock
(two warrants for each $20.85 principal amount of notes). The notes were
recorded net of a discount of approximately $30,000 which represents the fair
value assigned to the warrants that were issued. The discount was amortized over
the life of the debt. Amortization amounted to approximately $22,500 and $7,500
in 2002 and 2001, respectively, and is charged to interest expense. At December
31, 2002, such notes were in default. One of the note holders filed a civil
action in July 2002 and subsequently received a final default judgment. During
2003 in accordance with the final default judgment against the Company, $15,000
was paid to the former note holder to settle a default on a convertible note. In
addition 25 shares of preferred stock was also issued to the former note holder
as full release to the Company of all obligations and liabilities attached to
the convertible note. The Company incurred expense on the amount of $3,000 as a
result of the judgement.

In September 2003, the Company entered into new convertible debt agreements with
three (3) individual existing note holders to increase the face value of the
notes by $24,412 as compensation for the Company being in default of the
original notes and accrued interest. Interest is to be paid at 18% per annum. In
December 2003 the Company signed a addendum to the debt agreement, whereby the
Company agreed to issue a combined total of 409 shares of preferred stock to the
three note holders in exchange for full release of all obligations and
liabilities the Company may have with regard to the convertible debt holders.
The preferred shares were issued to the note holders in December 2003.

[7] Payroll and Taxes Payable

The Company has primarily funded its payroll costs through borrowing from
related parties [See Note 4]. Payroll taxes have become delinquent since the
second quarter of 2001. These liabilities which include penalties and interest
through December 31, 2003 amount to approximately $794,332. Penalties [to the
maximum limits] and interest will accrue on such payroll tax liabilities, as
well as additional payroll tax liabilities incurred subsequent to December 31,
2003, until paid. In 2004, the CEO pledged shares of preferred stock owned by
him to the Internal Revenue Service as guarantee for the payment of payroll tax
liabilities.

[8] Common Stock Subject to Repurchase

In October 2003, the Company issued 376 shares of preferred stock in exchange
for the release of an agreement the Company entered into to repurchase 3,790
shares of common stock valued at $396,500. The remaining Common Stock Subject to
Repurchase ["Put Option"] has been valued at the fair market value of the common
stock when issued[$3,178,474]. The Company does not expect the Put Option to be
exercised in the near term.

In June 2001, the Company issued 30,000 shares of the Company's common stock as
consideration for equipment deposits and consulting services valued at
$1,442,500. Additionally, in April 2001, the CEO transferred 17,917 shares of
Company common stock owned by him valued at $1,209,375 to the same entity. In
December 2001, the Company entered into an agreement ["Put Option"] to
repurchase all such stock at a price of $97.50 per share [an aggregate of
$4,671,875] at the option of the holders.

[9] Stockholders' Equity

Capital 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.

                                      F-16
<PAGE>

Preferred Stock

Up to 30,000 shares of Series A Convertible Preferred Stock has been
authorized.The price is $1,000 per share. Each Series A convertible Preferred
share is equal to .00255% of the total issued and fully diluted common stock of
the Company. Each Preferred share will always maintain a conversion ratio to
common stock such that the percentage ownership in the Company represented by
one share of Series A Convertible Preferred Stock is constant.
Noncumulative dividend on the Series A preferred will be at the rate of 8% per
share per annum. Dividends will be payable only if, and when declared by the
Board of Directors.

In February 2003 23,334 shares of common stock was issued to settle a liability
in the amount of $25,000.

In October 2003, the Company issued 376 shares of preferred stock in exchange
for the release of an agreement the Company entered into to repurchase 3,790
shares of common stock valued at $396,500.

In December 2003, the Company issued 8,000 shares of preferred stock to
Alkhalifa petroleum Corp. a company controlled by a director of the the Company,
Shaikh Isa Mohammed Isa Alkhalifa, in exchange for personally guaranteeing an
$8,000,000 bank line of credit on behalf of the Company.

In December 2003, 25 shares of preferred stock was issued to a former
convertible note holder as full release to the Company of all obligations and
liabilities attached to the convertible note.

In December 2003, 409 shares of preferred stock was issued to three (3)
individual convertible note holders in exchange for release to the Company of
all obligations and liabilities attached to the convertible notes.

In December 2003, 164 shares of preferred stock was issued for a subscription of
$105,000 and replacement of 53,800 shares of common stock. The subscription
receivable was still outstanding as of December 31, 2003.

In December 2003, 1,064 shares of preferred stock was issued for $180,200 and
replacement of 61,849 shares of common stock.

In December 2003, 162 shares of preferred stock was issued as a replacement of
6,995 shares of common stock owned by existing shareholders.

In December 2003, the CEO was issued 2,800 shares of preferred stock as
consideration under the non-dilution clause in his employment contract as
amended.

As of December 2003, 134,143 shares of common stock owned by existing
shareholders were replaced by the Company by virtue of various settlement and
subscription agreements. The 134,143 shares of common stock have subsequently
been subscribed for by a unrelated third party for $1,340,900. The $1,340,900
subscription receivable has been shown as a contra- equity account in the
financial statements.

In December 2002, 156,667 shares of common stock were issued to a member of the
Board of Directors in repayment of liabilities of $94,000 assumed personally by
the director.

                                      F-17
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #7

[9] Stockholders' Equity [Continued]

During 2002, 65,555 shares of common stock were issued to various individuals
for consulting and printing services, which resulted in a non-cash charge to
operations of $307,000, and 23,333 shares of common stock were issued to a
member of the Board of Directors for consulting services which resulted in a
non-cash charge to operations of $21,000.

During 2002, the Company issued 335,730 shares of common stock to Chris
Salmonson, the former CEO of the Company in replacement of shares pledged by the
then CEO as collateral for third party loans to an affiliated entity. These
funds were advanced to the Company by the affiliated entity. The Company was
unable to repay the advance causing the affiliate to default and the
collateralized shares to be surrendered. The stock was valued at $201,438, which
was offset against the amount due to affiliates.

See Notes 6, 8, 11 and 13 for additional equity transactions.

[10] Income Taxes

An analysis of the components of income taxes is as follows:


                                                 Years ended
                                                 December 31,
                                        ------------------------------
                                            2003              2002
                                        ------------      ------------
Current:
   Federal                              $         --      $         --
   State                                          --                --
                                        ------------      ------------

   Totals                                         --                --
                                        ------------      ------------

Deferred:
   Federal                                        --                --
   State                                          --                --
                                        ------------      ------------

   Totals                                         --                --
                                        ------------      ------------

   Totals                               $         --      $         --
   ------                               ============      ============


                                      F-18
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #8

[10] Income Taxes [Continued]

Income taxes for continuing operations differs from the amount computed by
applying the statutory federal income tax rate as follows:

                                                         Years ended
                                                            December 31,
                                                     --------------------------
                                                         2003           2002
                                                     -----------    -----------

Computed Federal Statutory Tax Benefit               $   856,000    $ 1,505,000
Permanent Difference - Non-Deductible Expense            (27,000)      (269,000)
Valuation of Temporary Differences                      (829,000)    (1,236,000)
                                                     -----------    -----------

Actual                                               $        --    $        --
------                                               ===========    ===========

The components of the net deferred tax asset and liability are as follows:

                                                            Years ended
                                                            December 31,
                                                     --------------------------
                                                         2003           2002
                                                     -----------    -----------

Deferred Tax Assets - Current:
   Vacation Accrual                                  $    49,000    $    34,000
   Accrued Compensation                                   82,000             --
   Valuation Allowance                                  (131,000)       (34,000)

   Current Deferred Tax Asset                        $        --    $        --
   --------------------------                        ===========    ===========

Deferred Tax Asset - Long-Term:
   Net Operating Loss Carryforward                   $3,120,000     $ 2,309,000
   Stock Options                                      2,208,000       2,208,000
   Valuation Allowance                               (5,328,000)     (4,517,000)
                                                     -----------    -----------

Long-Term Deferred Tax Asset                         $        --    $        --
----------------------------                         ===========    ===========

Total valuation allowance increased by $908,000 and $1,236,000 in 2003 and 2002,
respectively.

At December 31, 2003, the Company had approximately $9,200,000 of federal net
operating tax loss carry forwards expiring at various dates through 2022. The
Tax Reform Act of 1986 enacted a complex set of rules which limit a company's
ability to utilize net operating loss carry forwards and tax credit carry
forwards in periods following an ownership change. These rules define an
ownership change as a greater than 50 percent point change in stock ownership
within a defined testing period which is generally a three-year period. As a
result, the Company's utilization of its net operating loss carry forwards could
be significantly limited.

[11] Stock Options and Warrants

Effective April 18, 2002 [amended December 2, 2002], the Company adopted the
2002 stock option plan [the "Plan"] which provides for the issuance of stock
options to key employees and consultants of the Company. Initially, 180,000
shares of common stock were reserved under the Plan. In November 2002, an
additional 480,000 shares were registered to be reserved under the Plan,
however, due to a lack of authorized shares available only 233,332 shares were
reserved under the Plan. In 2004 the remaining 246,668 shares were reserved
under the plan. The Plan, which provides for the issuance of both incentive
stock options [employees] and non-qualified stock options [employees and
consultants], will terminate on July 4, 2010, unless terminated earlier by the
Board of Directors.

                                      F-19
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #9

[11] Stock Options and Warrants [Continued]

The terms and conditions of each option granted are determined by a committee
consisting of two or more directors, or if no such committee is designated by
the Board of Directors, then by the Board of Directors as a whole, except for
the pricing of incentive stock options, which is determined using guidelines
established in the Internal Revenue Code.

As of December 31, 2003, 60,278 options were available to grant under the Plan.

During 2002, 353,054 options were granted under the Plan, of which 353,054 were
exercised.

During 2002, the Company granted options to purchase 161,331 shares of Company
common stock to various consultants at an exercise price ranging from $.41 to
$3.00 per share. The Company incurred non-cash charge to operations of $410,562,
the fair value at the date of grant.

In December 2002, the Company granted options to purchase 66,667 shares of
Company common stock to the then former CEO for consulting services at an
exercise price of $.82 per share. The Company incurred a non-cash charge to
operations of $38,251, the fair value at the date of grant, and the proceeds
upon exercise reduced the amount due to affiliates by $54,667.

In February 2002, the Company granted options to purchase 8,352 shares of common
stock at an exercise price of $1.50 to the then CEO pursuant to the terms of his
employment contract. The Company incurred a non-cash charge to operations of
$85,187, the fair value at the date of grant, and the proceeds upon exercise
reduced the amount due to affiliates by $12,528.

In July 2002, 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 a 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 affiliate.

In May 2002, the Company granted options to purchase 111,722 shares of Company
common stock to the five employees including the then CEO at an exercise price
of $1.50 per share. The Company incurred a non-cash charge to operations of
$370,374 and reduced accrued payroll by $167,582, the fair value at the date of
grant totaling $537,956.

In December 2002, the Company granted options to purchase 66,667 shares of
common stock to the then CEO and President, pursuant to the terms and conditions
of his employment agreement. The Company incurred a non-cash charge to
operations of $40,000, the fair value at the date of grant.

                                      F-20
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #10

[11] Stock Options and Warrants [Continued]

A summary of the changes in outstanding common stock options and warrants is as
follows:
<TABLE>
<CAPTION>
                                                Stock Options                    Warrants
                                        ----------------------------    ---------------------------
                                               Weighted-Average               Weighted-Average
                                           Shares      Exercise Price      Shares     Exercise
Price
                                        ------------    ------------    ------------   ------------
<S>                                         <C>         <C>                   <C>      <C>
Balance - December 31, 2001                   12,670            1.50          25,222         222.56
   Granted                                   494,739            1.51              --             --
   Exercised                                (494,739)          (1.51)             --             --
   Canceled                                       --              --              --             --
                                        ------------    ------------    ------------   ------------

Balance -
   December 31, 2002                          12,670    $       1.50          25,222   $     222.56


  Granted                                         --              --              --             --
   Exercised                                      --              --              --             --
   Canceled                                       --              --              --             --
                                        ------------    ------------    ------------   ------------

Balance Outstanding and Exercisable-
   December 31, 2003                          12,670    $       1.50          25,222   $     222.56
                                        ============    ============    ============   ============
</TABLE>

The options and warrants granted during 2002 are distributed as follows,
relative to the difference between the exercise price and the stock price at
grant date:
<TABLE>
<CAPTION>
                                                       Number       Weighted-Average Weighted-Average
                                                      Granted       Exercise Price     Fair Value
                                                    ------------     ------------     ------------
<S>                                                      <C>         <C>              <C>
Options - Exercise Price is Less Than Stock Price        318,074     $       1.61     $       4.43
                                                    ============     ============     ============

Options - Exercise Price is Equal to Stock Price         176,665     $        .69     $        .69
                                                    ============     ============     ============
</TABLE>

                                      F-21
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #11

[11] Stock Options and Warrants [Continued]

The following table summarizes information about stock options at December 31,
2003:
<TABLE>
<CAPTION>
      Outstanding and Exercisable Stock Options         Outstanding and Exercisable Warrants
    ---------------------------------------------- -----------------------------------------------
                                         Weighted-                                   Weighted-
                                          Average         Weighted-                  Average          Weighted-
Range of                                 Remaining         Average                   Remaining          Average
Exercise Prices            Shares    Contractual Life  Exercise Price     Shares  Contractual Life   Exercise Price
-------------------     ------------  ----------------  -------------- ------------- -------------
<S>                          <C>          <C>           <C>                   <C>        <C>           <C>
$  1.50 - $    1.50          12,670       4.41 Years    $      1.50               --                   $        --
$ 21.89 - $   23.51              --                     $        --            5,449     2.38 Years    $     22.48
$ 75.00 - $  225.00              --                     $        --           10,000     2.58 Years    $    150.00
$300.00 - $  375.00              --                     $        --            8,813     2.20 Years    $    346.64
$750.00 - $1,125.00              --                     $        --              960     1.17 Years    $    975.00
                        -----------                                    -------------

                             12,670                                           25,222
                        ===========                                    =============
</TABLE>

The Company applies Accounting Principles Board Opinion No. 25, Accounting for
Stock Issued to Employees, and related interpretations, for stock options issued
to employees in accounting for its stock option plans. Total compensation costs
recognized for stock based employee compensation awards was $-- and $495,561 for
the years ended December 31, 2003 and 2002, respectively.

The Black-Scholes option valuation model was developed for use in estimating the
fair value of traded options which have no vesting restrictions and are fully
transferable. In addition, option valuation models require the input of highly
subjective assumptions including the expected stock price volatility. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the subjective
input assumptions can materially affect the fair value estimate, in management's
opinion, the existing models do not necessarily provide a reliable single
measure of the fair value of its employee stock options. The weighted average
fair value of stock options granted to employees used in determining pro forma
amounts is estimated at $- and $3.96 during 2003 and 2002, respectively.

Pro forma information regarding net income or loss and net income or loss per
share has been determined as if the Company had accounted for its employee stock
options under the fair value method prescribed under SFAS No. 123, Accounting
for Stock Based Compensation. The fair value of options and warrants issued to
non-employees, as well as, the pro forma amounts attributable to employee stock
options is estimated at the date of grant using the Black-Scholes option-pricing
model with the following weighted average assumptions:

                                                           December 31,
                                                     ----------------------
                                                       2003          2002
                                                      --------      --------

Risk-Free Interest Rate                                   --            3.00%
Expected Life                                             --           1 Year
Expected Volatility                                       --           204.05%
Expected Dividends                                        --           None

                                      F-22
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #12

[11] Stock Options and Warrants [Continued]

The pro forma amounts are indicated below:
<TABLE>
<CAPTION>
                                                                    Years ended
                                                                    December 31,
                                                           ----------------------------
                                                               2003            2002
                                                           ------------    ------------
<S>                                                        <C>             <C>
Net Loss as Reported                                                       $ (4,425,152)
Stock-based Compensation Expense as Reported                                    495,561
Stock-based Compensation Expense Under Fair Value Method                       (603,991)
                                                           ------------    ------------

Pro Forma Net Loss                                                         $ (4,533,582)
Basic and Diluted Net Loss Per Share As Reported                           $      (3.08)
Pro Forma Basic and Diluted Net Loss Per Share                             $      (3.15)
</TABLE>

[12] Commitments and Contingencies

Employment Contracts - The Company has only one outstanding employment contracts
with its employees as of December 31, 2003. The aggregate commitment for future
salary at December 31, 2003 was approximately $406,000. In accordance with these
contracts, the employees were issued options to purchase 109,538 shares of the
Company's common stock in 2001 [See Note 11].

In November 2002, the then former CEO, Chris Salmonson agreed to relinquish his
position, to make available additional time to fight a personal legal battle
filed against him. He continued to be a consultant of the Company during such
period on the same economic terms set forth in his employment agreement, which
includes among other things annual compensation of $240,000 through March 2004.
There is also a non-dilution clause for the common stock ownership which
maintans ownership of 27.63%, as defined in the consulting agreement. The
contract is automatically renewed for two, two year periods. The former CEO was
issued options to purchase 75,019 shares of common stock in 2002 under this
agreement. In November 2003 Chris Salmonson resumed his position as CEO.

Effective December 5, 2002, a new CEO and President, Chas Brodzki, was hired
pursuant to a letter agreement executed on November 27, 2002. Per the terms of
the agreement, compensation is the issuance of shares of Company common stock
equal to 10% of the total outstanding shares of common stock with an additional
10% of the total outstanding common stock issuable upon the receipt of funding
in excess of $1,000,000 or the completion of the bond funding. No additional
funding was obtained and only 10% of the total outstanding shares were earned
[See Note 16].

As of December 31, 2002, 66,667 shares of common stock were issued to the then
CEO under his employment agreement. The balance of 166,425 shares were issued in
the fourth quarter of 2004 and simultaneously converted into 667 shares of
Preferred stock.

                                      F-23
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #13

[12] Commitments and Contingencies [Continued]

Operating Leases - FuelNation Group, LLC, an entity 100% owned by Chris
Salmonson, signed a 3 year lease renewal on July 8, 2004, for the office
location in Davie, Florida, and sub leases to FuelNation Inc. for the same terms
and conditions. This lease obligates the company to a base monthly rent of
$1,184.50, year one, $1,220.04, year two, $1,256.64 year three, plus tax
pursuant to a written lease which expires in August 31, 2007. Commitments for
future rent expense amount to $12,280 in 2003, $12,852 in 2004, $14,391 in 2005,
$14,820 in 2006 and $8,796 in 2007 for an aggregate amount of $63,139.

The Company leases a facility in Lexington, Kentucky which houses its data
centers. Rent is on a month-to-month basis $2,000 - Kentucky.

Rent expense amounted to $67,437 and $117,900 in 2003 and 2002, respectively.

Other - The Company has entered into several consulting and financial agreements
for which it issued stock or granted options or warrants as non-refundable
retainers. Primarily, these agreements have no future commitments unless some
event, such as a financing, occurs.

See Notes 13 and 16.

[13] Litigation

In the normal course of business, the Company is exposed to a number of other
asserted and unasserted potential claims. Management, after review and
consultation with counsel, believes it has meritorious defenses and considers
that any liabilities from these matters would not materially affect the
financial position, liquidity or results of operations of the Company. See
additional information in Subsequent events paragraph [16] below.

In February, 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. FuelNation filed a third
party claim against its attorney for malpractice. Exodus had its attorney enter
an appearance on behalf of FuelNation and agreed not to execute on any judgment
against FuelNation.

In January, 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. This case has been settled with the issuance of 10 preferred
shares.

In July, 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 in 2003 and the
case has been dismissed with Prejudice.

In December, 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 entered into a stipulation for settlement with the
shareholder, and agreed to purchase back his shares for $25,000. This case has
been settled. See Subsequent Events Note [16].


                                      F-24
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #14

[14] Fair Value of Financial Instruments

SFAS No. 107, "Disclosures about Fair Value of Financial Instruments," defines
the fair value of a financial instrument as the amount at which the instrument
could be exchanged in a current transaction between willing parties. In
assessing the fair value of its cash and cash equivalents, and accounts
payables, accrued expenses and short-term debt, management concluded that the
carrying amount of these financial instruments approximates fair value because
of their short maturities.

[15] Recently Issued Accounting Standards

In May 2003, FASB issued SFAS No. 150, "Accounting for Certain Financial
Instruments with Characteristics of both Liabilities and Equity. "SFAS No. 150
changes the accounting for certain financial instruments that under previous
guidance, could be classified as equity or "mezzanine" equity by now requiring
those instruments to be classified as liabilities (or assets in some
circumstances) in the statement of financial position. Further, SFAS No. 150
requires disclosure regarding terms of those instruments and settlement
alternatives. The guidance in SFAS No. 150 generally is effective for all
financial instruments entered into or modified after May 31, 2003, and is
otherwise effective at the beginning of the first interim period beginning after
June 15, 2003.

In November 2004 - The Financial Accounting Standards Board (FASB) has issued
FASB Statement No. 151, Inventory Costs, an amendment of ARB No. 43, Chapter 4.
The amendments made by statement 151 will improve financial reporting by
clarifying that abnormal amounts of idle facility expense, freight, handling
costs, and wasted materials (spoilage) should be recognized as current period
charges and by requiring the allocation of fixed production overheads to
inventory based on the normal capacity of the production facilities. The
guidance is effective for inventory costs incurred during fiscal years beginning
after June 15, 2005. Earlier application is permitted for inventory costs
incurred during fiscal years beginning after November 23, 3004. The provisions
of Statement 151 should be applied prospectively.

In January 2003, the FASB issued Interpretation No. 46 ("FIN 46"),
"Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51."
FIN 46 requires certain variable interest entities to be consolidated by the
primary beneficiary of the entity if the equity investors in the entity do not
have the characteristics of a controlling financial interest or do not have
sufficient equity at risk for the entity to finance its activities without
additional financial support from other parties. FIN 46 is effective for all new
variable interest entities created or acquired after January 31, 2003. For
variable interest entities created or acquired prior to February 1, 2003, the
provisions of FIN 46 must be applied for the first interim or annual period
beginning after December 15, 2003. In December 2003, the FASB issued
Interpretation No. 46(R) ("FIN 46R") which revised certain provisions of FIN 46.
Publicly reporting entities that are small business issuers must apply FIN 46R
to all entities subject to FIN 46R no later than the end of the first reporting
period that ends after December 15, 2004 (as of December 31, 2004, for a
calendar year enterprise). The effective date includes those entities to which
FIN 46 had previously been applied. However, prior to the application of FIN
46R, a public entity that is a small business issuer shall apply FIN 46 or FIN
46R to those entities that are considered special-purpose entities no later than
as of the end of the first reporting period that ends after December 15, 2003
(as of December 31, 2003 for a calendar year enterprise).

In December 2004 the FASB published FASB Statement No. 123(revised 2004), Share-
Based Payment. Statement 123(R) will provide investors and other users of
financial statements with more complete and neutral financial information by
requiring that the compensation cost relating to share-based payment
transactions be recognized in financial statements. That cost will be measured
based on the fair value of the equity or liability instrument issued. Public
entities that file as small business issuers will be required to apply Statement
123(R) in the first interim or annual reporting period that begins after
December 15, 2005.

With the exception of FIN 46,and 123(R) which may have an impact on future
financial statements, the Company expects that the adoption of the new
Statements will not have a significant impact on its financial statements.

                                      F-25
<PAGE>

FUELNATION, INC.
[A DEVELOPMENT STAGE COMPANY]
NOTES TO FINANCIAL STATEMENTS, Sheet #15

[16] Subsequent Events

In August 2004, we incorporated a 100% wholly owned subsidiary, Leman Energy
Trading, Inc., a Panamanian Corporation registered in the Panamanian Registry
Public Deed No. 9421.

In 2004, the CEO pledged shares of preferred stock owned by him to the Internal
Revenue Service as guarantee for the payment of payroll tax liabilities.

In 2004 in order to resolve a pending civil action with a third party
["Consultant"], the Company released 23,334 shares of restricted common stock
held by the Consultant and in turn the Consultant cancelled a $25,000 promissory
note held by him. The Company also entered into a consulting agreement with the
Consultant for a period of one year and in consideration for this agreement the
Company shall issue the consultant 10,000 restricted shares of common stock
within 30 days of the date of this agreement [See Note 5].

In 2004 in order to settle a Stipulation for Settlement in the case Richard
Maddox vs. FuelNation, Inc., whereby the Company would buy back the shares of
common stock held by the shareholder for $25,000,the Company paid the
shareholder $25,000 and in turn Mr. Maddox specifically waives and releases any
claims that he may have or may have had to such shares of stock.

                                      F-26