U.S.
Securities and Exchange Commission


Washington,
D.C. 20549





FORM
10-Q


(Mark
One)





x
            QUARTERLY
      REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
              for
      the quarterly period ending June 30,
2009








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


For the
transition period from _____to_____








Commission
file number    000-31959








NUCLEAR
SOLUTIONS, INC.





(Name of
Small Business Issuer in its Charter)








NEVADA
              88-0433815(State
      of Incorporation)
              (IRS
      Employer identification No.)








5505
Connecticut Ave NW, Suite 191 Washington, DC 20015





(Address
of principal executive
offices)        (Zip Code)








Issuer's
telephone number, (202) 787-1951








Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for
such shorter period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90 days. Yes x  
No o





Indicate
by check mark whether the registrant is a large accelerated filer, an
accelerated filer, or a non-accelerated filer. See definitions of “accelerated
filer and large accelerated filer in Rule 12b-2 of the Exchange Act. (Check
one):


Large
accelerated filer o,
Accelerated filer o,
Non-accelerated filer o,
Smaller reporting company x





Indicate
by check mark whether the registrant is a shell company (as defined by Rule
12b-2 of the Exchange Act). Yes o  No
x





APPLICABLE
ON TO ISSUERS INVOLVED IN BANKRUPTCY PROCEEDINGS DURING THE PRECEDING FIVE
YEARS





Indicate
by check mark whether the registrant (1) filed all reports required to be filed
by Section 13 or 15(d) of the Exchange Act subsequent to the distribution of
securities under a plan confirmed by the court. Yes o No
o





APPLICABLE
ONLY TO CORPORATE ISSUERS:





Indicate
the number of shares outstanding of each of the issuer's classes of common
stock, as of the latest practicable date. As of August 19, 2009 we had
97,890,981 shares of common stock issued and outstanding.










Contents
              Page
      No.Part
      I – Financial Information
              3Item
      1. Financial Statements
              3Item
      2. Management’s Discussion and Analysis of Financial Condition and Results
      of Operations
              16Item
      3. Quantitative and Qualitative Disclosures About Market
    Risk
              20Item
      4. Controls and Procedures
              21Part
      II – Other Information
              22Item
      1. Legal Proceedings
              22Item
      1A. Risk Factors
              22Item
      2. Unregistered Sales of Equity Securities and Use of
    Proceeds
              22Item
      3. Defaults Upon Senior Securities
              22Item
      4. Submission of Matters to a Vote of Security Holders
              22Item
      5. Other Information
              22Item
      6. Exhibits
              22Signatures
              23







2


PART
I
 FINANCIAL
INFORMATION
  Item 1.  Financial
Statements.
 
 NUCLEAR
SOLUTIONS, INC. AND SUBSIDIARY
 
 INDEX
TO FINANCIAL STATEMENTS
 
 PageCondensed
      Consolidated Balance Sheets
                  as
      of June 30, 2009 (Unaudited) and December 31, 2008
                4Condensed
      Consolidated Statements of Operations
                  for
      the three months ended June 30, 2009 and 2008 (Unaudited)
                5Condensed
      Consolidated Statements of Stockholders’ Equity
                  Year
      ended December 31, 2008 and the three months ended June 30, 2009
      (Unaudited)
                6Condensed
      Consolidated Statements of Cash Flows
                  for
      the three months ended June 30, 2009 and 2008 (Unaudited)
                7Notes
      to Condensed Consolidated Financial Statements (Unaudited)
                8 - 15


3




NUCLEAR
      SOLUTIONS ,INCAND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED BALANCE
SHEETS
  June
      30
                                        
                                        
                                        December
      31,2009
                                        
                                        
                                        2008(unaudited)ASSETSCurrent
      assets:Cash
                                        
                                        $
                                        317,685
                                        
                                        
                                        $
                                        176,279Prepaid
      Expenses
                                        
                                        
                                        -
                                        
                                        
                                        
                                        12,900Total
      current assets
                                        
                                        
                                        317,685
                                        
                                        
                                        
                                        189,179Property
      and equipment, net of accumulated depreciationof  $4,235 and
      $3,492 as of June 30, 2009 and December 31, 2008,
    respectively
                                        
                                        
                                        3,195
                                        
                                        
                                        
                                        3,938Other
      assets
                                        
                                        
                                        35,600
                                        
                                        
                                        
                                        84,100Total
      assets
                                        
                                        $
                                        356,480
                                        
                                        
                                        $
                                        277,217LIABILITIES
      AND DEFICIENCY IN STOCKHOLDERS' EQUITYCurrent
      liabilities:Accounts
      payable and accrued expenses
                                        
                                        $
                                        5,056,791
                                        
                                        
                                        $
                                        4,687,644Accrued
      executive compensation
                                        
                                        
                                        1,081,208
                                        
                                        
                                        
                                        846,583Advance
      payments received
                                        
                                        
                                        -
                                        
                                        
                                        
                                        154,114Convertible
      notes payable - related parties, net of discount of $0 and
      $1,666as
      of June 30, 2009 and December 31, 2008 respectively
                                        
                                        
                                        -
                                        
                                        
                                        
                                        19,778Convertible
      notes payable - other, net of discount of $0as
      of June 30, 2009 and December 31, 2008
                                        
                                        
                                        39,000
                                        
                                        
                                        
                                        39,000Total
      current liabilities
                                        
                                        
                                        6,176,999
                                        
                                        
                                        
                                        5,747,119Derivative
      liability (Note 4)
                                        
                                        
                                        -
                                        
                                        
                                        
                                        1,660Total
      liabilities
                                        
                                        
                                        6,176,999
                                        
                                        
                                        
                                        5,748,779Commitments
      and contingenciesDeficiency
      in stockholders' equityPreferred
      stock, $0.0001 par value; 10,000,000 sharesauthorized,
      no shares issued and outstanding
                                        
                                        
                                        -
                                        
                                        
                                        
                                        -Common
      stock, $0.0001 par value; 100,000,000shares
      authorized,  97,890,981 and 97,490,981 issued
      andoutstanding,
      as of June 30, 2009 and December 31, 2008 respectively
                                        
                                        
                                        9,789
                                        
                                        
                                        
                                        9,749Additional
      paid-in capital
                                        
                                        
                                        19,964,510
                                        
                                        
                                        
                                        19,931,944Deferred
      equity based expense
                                        
                                        
                                        (155,586
                                        )
                                        
                                        
                                        (437,698
                                        )Accumulated
      deficit
                                        
                                        
                                        (26,166,145
                                        )
                                        
                                        
                                        (24,975,557
                                        )Deficiency
      in Nuclear Solutions, Inc. stockholders' equity
                                        
                                        
                                        (6,347,432
                                        )
                                        
                                        
                                        (5,471,562
                                        )Noncontrolling
      Interest
                                        
                                        
                                        526,913
                                        
                                        
                                        
                                        -Total
      deficiency in stockholders' equity
                                        
                                        
                                        (5,820,519
                                        )
                                        
                                        
                                        (5,471,562
                                        )Total
      liabilities and deficiency in stockholders' equity
                                        
                                        $
                                        356,480
                                        
                                        
                                        $
                                        277,217
  The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
  4
   NUCLEAR
      SOLUTIONS, INC.AND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENTS OF LOSSES(unaudited)
  For
      the Three Months Ended June 30,
                                    
                                    
                                    For
      the Six Months Ended June 30,2009
                                    
                                    
                                    2008
                                    
                                    
                                    2009
                                    
                                    
                                    2008Revenue
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    -Executive
      compensation
                                    
                                    
                                    125,313
                                    
                                    
                                    
                                    171,563
                                    
                                    
                                    
                                    250,625
                                    
                                    
                                    
                                    237,917Consulting
                                    
                                    
                                    160,067
                                    
                                    
                                    
                                    580,725
                                    
                                    
                                    
                                    445,712
                                    
                                    
                                    
                                    1,211,046Legal
      and professional fees
                                    
                                    
                                    123,275
                                    
                                    
                                    
                                    187,675
                                    
                                    
                                    
                                    381,525
                                    
                                    
                                    
                                    416,800General
      and administrative expenses
                                    
                                    
                                    61,712
                                    
                                    
                                    
                                    33,292
                                    
                                    
                                    
                                    254,212
                                    
                                    
                                    
                                    109,045Depreciation
      and amortization
                                    
                                    
                                    371
                                    
                                    
                                    
                                    858
                                    
                                    
                                    
                                    743
                                    
                                    
                                    
                                    2,086Payments
      received pursuant to collaborative arrangement
                                    
                                    
                                    (28,490
                                    )
                                    
                                    
                                    -
                                    
                                    
                                    
                                    (154,114
                                    )
                                    
                                    
                                    -442,248
                                    
                                    
                                    
                                    974,113
                                    
                                    
                                    
                                    1,178,703
                                    
                                    
                                    
                                    1,976,894Net
      Loss from operations
                                    
                                    
                                    (442,248
                                    )
                                    
                                    
                                    (974,113
                                    )
                                    
                                    
                                    (1,178,703
                                    )
                                    
                                    
                                    (1,976,894
                                    )Other
      Income(expenses)Interest
      expense
                                    
                                    
                                    (1,134
                                    )
                                    
                                    
                                    (185,378
                                    )
                                    
                                    
                                    (4,025
                                    )
                                    
                                    
                                    (437,978
                                    )Change
      in fair value of derivative liability
                                    
                                    
                                    (7,505
                                    )
                                    
                                    
                                    (4,400
                                    )
                                    
                                    
                                    (10,947
                                    )
                                    
                                    
                                    (6,564
                                    )Loss
      before provision for income taxes
                                    
                                    
                                    (450,887
                                    )
                                    
                                    
                                    (1,163,891
                                    )
                                    
                                    
                                    (1,193,675
                                    )
                                    
                                    
                                    (2,421,436
                                    )Provision
      for income taxes
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -
                                    
                                    
                                    
                                    -$
                                    (450,887
                                    )
                                    
                                    $
                                    (1,163,891
                                    )
                                    
                                    $
                                    (1,193,675
                                    )
                                    
                                    $
                                    (2,421,436
                                    )Add
      Net Loss attributable to the noncontrolling interest
                                    
                                    $
                                    3,087
                                    
                                    
                                    $
                                    -
                                    
                                    
                                    $
                                    3,087
                                    
                                    
                                    $
                                    -Net
      Loss attributable to Nuclear Solutions, Inc.common
      shareholders
                                    
                                    $
                                    (447,800
                                    )
                                    
                                    $
                                    (1,163,891
                                    )
                                    
                                    $
                                    (1,190,588
                                    )
                                    
                                    $
                                    (2,421,436
                                    )Basic
      and diluted loss per share
                                    
                                    $
                                    (0.00
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.01
                                    )
                                    
                                    $
                                    (0.03
                                    )Weighted
      average number of common sharesoutstanding,
      basic and diluted
                                    
                                    
                                    97,495,377
                                    
                                    
                                    
                                    88,449,446
                                    
                                    
                                    
                                    97,493,191
                                    
                                    
                                    
                                    84,119,971
  The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
  5
 NUCLEAR
      SOLUTIONS, INCAND
      SUBSIDIARIESCONDENSED
      CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS'
    EQUITYFOR
      THE PERIOD JANUARY 1, 2009 TO June 30, 2009(unaudited)
 Total
      DeficiencyCommon
      Stock
                                  
                                  
                                  
                                  
                                  
                                  Additional
                                  
                                  
                                  Deferred
      Equity
                                  
                                  
                                  Accumulated
                                  
                                  
                                  Noncontrolling
                                  
                                  
                                  in
      Stockholders'Shares
                                  
                                  
                                  Amount
                                  
                                  
                                  Paid
      - In Capital
                                  
                                  
                                  Based
      Expense
                                  
                                  
                                  Deficit
                                  
                                  
                                  Interest
                                  
                                  
                                  EquityBalance
      January  1, 2009
                                  
                                  
                                  97,490,981
                                  
                                  
                                  $
                                  9,749
                                  
                                  
                                  $
                                  19,931,944
                                  
                                  
                                  $
                                  (437,698
                                  )
                                  
                                  $
                                  (24,975,557
                                  )
                                  
                                  -
                                  
                                  
                                  $
                                  (5,471,562
                                  )Shares
      issued for accrued expenses
                                  
                                  
                                  400,000
                                  
                                  
                                  
                                  40
                                  
                                  
                                  
                                  19,960
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  
                                  20,000Deferred
      compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (150,000
                                  )
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (150,000
                                  )Amortization
      of deferred compensation
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  432,112
                                  
                                  
                                  
                                  -
                                  
                                  
                                  -
                                  
                                  
                                  
                                  432,112Sale
      of subsidiary shares to noncontrollinginterest
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  530,000
                                  
                                  
                                  
                                  530,000Reclassification
      of derivative liability upon settlement
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  12,606
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  12,606Net
      loss
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  -
                                  
                                  
                                  
                                  (1,190,588
                                  )
                                  
                                  
                                  (3,087
                                  )
                                  
                                  
                                  (1,193,675
                                  )Balance
      June 30, 2009
                                  
                                  
                                  97,890,981
                                  
                                  
                                  $
                                  9,789
                                  
                                  
                                  $
                                  19,964,510
                                  
                                  
                                  $
                                  (155,586
                                  )
                                  
                                  $
                                  (26,166,145
                                  )
                                  
                                  $
                                  526,913
                                  
                                  
                                  $
                                  (5,820,519
                                  )
  The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
  6
  NUCLEAR
      SOLUTIONS ,INCAND
      SUBSIDIARYCONDENSED
      CONSOLIDATED STATEMENT OF CASH FLOWS(unaudited)
  For
      The Six Months Ended June 30,2009
                                              
                                              
                                              2008CASH
      FLOWS FROM OPERATING ACTIVITIES:Net
      loss
                                              
                                              $
                                              (1,190,588
                                              )
                                              
                                              $
                                              (2,421,436
                                              )Adjustments
      to reconcile net loss to net cashused
      in operating activities:Depreciation
      and amortization
                                              
                                              
                                              743
                                              
                                              
                                              
                                              2,086Amortization
      of debt discount - beneficial conversion feature ofconvertible
      note and warrants
                                              
                                              
                                              1,666
                                              
                                              
                                              
                                              428,174Change
      in fair value of derivative liability
                                              
                                              
                                              10,947
                                              
                                              
                                              
                                              6,564Loss
      attributable to noncontrolling interest
                                              
                                              
                                              (3,087
                                              )
                                              
                                              
                                              -Stock
      and warrants issued for services
                                              
                                              
                                              -
                                              
                                              
                                              
                                              1,606,071Amortization of deferred compensation
                                              
                                              
                                              432,112
                                              
                                              
                                              
                                              -Changes
      in operating assets and liabilities:Prepaid
      Expenses
                                              
                                              
                                              12,900
                                              
                                              
                                              
                                              (123,146
                                              )Other
      Assets
                                              
                                              
                                              48,500
                                              
                                              
                                              
                                              (79,500
                                              )Accounts
      payable and accrued expenses
                                              
                                              
                                              242,519
                                              
                                              
                                              
                                              64,957Accrued
      executive compensation
                                              
                                              
                                              234,625
                                              
                                              
                                              
                                              145,417Advance
      payments received
                                              
                                              
                                              (154,114
                                              )
                                              
                                              
                                              -Net
      cash used in operating activities
                                              
                                              
                                              (363,777
                                              )
                                              
                                              
                                              (370,813
                                              )CASH
      FLOWS FROM INVESTING ACTIVITIES:Net
      cash used in investing activities
                                              
                                              
                                              -
                                              
                                              
                                              
                                              -CASH
      FLOWS FROM FINANCING ACTIVITIES:Proceeds
      from issuance of common stock
                                              
                                              
                                              530,000
                                              
                                              
                                              
                                              -Payment
      of Loans
                                              
                                              
                                              (24,817
                                              )
                                              
                                              
                                              208,000Net
      cash provided by financing activities
                                              
                                              
                                              505,183
                                              
                                              
                                              
                                              208,000Net
      increase/(decrease) in cash
                                              
                                              
                                              141,406
                                              
                                              
                                              
                                              (162,813
                                              )Cash,
      beginning of period
                                              
                                              
                                              176,279
                                              
                                              
                                              
                                              192,981Cash,
      end of period
                                              
                                              $
                                              317,685
                                              
                                              
                                              $
                                              30,168Supplemental
      disclosures:Cash
      paid for:Interest
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Income
      taxes
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              -Non-cash
      investing and financial activities:Amortization
      of debt discount - beneficial conversion feature ofconvertible
      note and warrants
                                              
                                              $
                                              1,666
                                              
                                              
                                              $
                                              428,174Reclassification
      of derivative liability to equity upon settlement
                                              
                                              $
                                              12,606
                                              
                                              
                                              $
                                              -Payment
      of debt and interest with common stock
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              925,808Beneficial
      conversion discount
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              208,000Payment
      of accrued expenses with common stock
                                              
                                              $
                                              -
                                              
                                              
                                              $
                                              1,059,647
  The
accompanying notes are an integral part of the unaudited condensed consolidated
financial statements.
  7




NUCLEAR
SOLUTIONS, INC.


AND
SUBSIDIARIES
 
 NOTES
TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
 
 JUNE
30, 2009
 (Unaudited)
 
 
 
 
 NOTE
1 - ORGANIZATION AND NATURE OF OPERATIONS
 
 Nuclear
Solutions, Inc. ("the "Company") was organized February 27, 1997 under the laws
of the State of Nevada, as Stock Watch Man, Inc. On September 12, 2001, the
Company amended its articles of incorporation to change its name to Nuclear
Solutions, Inc.
 
 On
September 2, 2005 the Company formed a wholly owned subsidiary, Fuel Frontiers
Inc.(“FFI”), formally, Future Fuels, Inc., which had minimal operations through
June 30, 2008.
 
 On July
31, 2006 the company formed a wholly owned subsidiary, Liquidyne Fuels, which
has had no activity through June 30, 2009.
 
 The
unaudited condensed consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany transactions and
balances have been eliminated in the unaudited condensed consolidated financial
statement.
 
 Sale
of subsidiary common stock
 
 The
      “Company owned 100% of the issued and outstanding common stock of FFI
      represented by 30,000,000 shares. On June 12, 2009, the Company entered
      into a Stock Purchase Agreement and sold 10%, or 3,000,000 FFI common
      shares (the “Shares”) to Schrader & Associates Defined Benefit Pension
      Plan (herein, “Schrader”) for the sum of
  $350,000.
 
 FFI
      granted Schrader demand and piggyback registration rights on the
      Shares.Schrader
      granted the Company the first right of refusal to match or exceed any
      third party bona fide offer to purchase the Shares until June 12,
      2014.
 
 Additionally,
      on June 12, 2009, in consideration of $5,000, the Company granted
      Schrader an option to purchase an additional 10% of FFI for the sum of
      $350,000.  The option expires on September 12, 2009. On June 30,
      2009, Schrader partially exercised the option and purchased an additional
      1,500,000 common shares of FFI, which represents 5.0% percent of the
      issued and outstanding common stock of FFI, for proceeds of
      $175,000.
 
 The
investment by Schrader in FFI is recorded as a noncontrolling interest in the
financial statements and is summarized as follows at June 30, 2009:
 
 8
 Sale
      of FFI shares
                      
                      $
                      525,000Sale
      of option
                      
                      
                      5,000Allocated
      loss
                      
                      
                      (3,087
                      )Balance
      at June 30, 2009
                      
                      $
                      526,913
 Management
Agreement
 
 In
conjunction with the sale of its partial interest in FFI on June 12, 2009, the
Company, FFI and Schrader entered into a Management Agreement, (the
“Agreement”).  The Agreement states that the Company will use the
proceeds of the sale of the Shares according to the Company’s use of proceeds
Schedule which is attached the Agreement.   Additionally, the
Company has agreed to nominate and appoint, and or vote into office one person
named by Schrader who will be seated as a member of the FFI board of directors
for a 12-month term.
 
 FFI, upon
receipt of funds from the Company’s use of proceeds schedule, has agreed to
purchase certain real property located in Muhlenberg, Kentucky (the “Muhlenberg
Property”) for the proposed construction of a Coal-to-Liquids (CTL) plant for
approximately $150,000.  FFI has agreed to take title to the
Muhlenberg Property in such a manner so that the property ownership would
automatically transfer to Schrader in the event FFI were to file a petition in
Bankruptcy Court, wind-up or liquidate.
 
 Additionally,
if FFI were to abandon its pursuit of a CTL plant on the Muhlenberg Property
because FFI’s inability to obtain all appropriate approvals and permits required
for a CTL plant, then FFI would sell the Muhlenberg Property and use the net
proceeds to acquire another property for a CTL plant according to the same type
of acquisition and title structure.
 
 If FFI
were able to secure an off-take agreement or fuel purchase agreement for fuels
from its proposed CTL Plant, that would permit FFI to secure project financing,
or if FFI were to secure project financing using the Muhlenberg or similar
property as collateral, the Schrader would quit claim the future interest in and
to the property to FFI.
 
 Business
 
 Nuclear
Solutions, Inc. is engaged in the research, development, and commercialization
of innovative product technologies, which are generally early-stage, theoretical
or commercially unproven. We operate a highly technical business and our primary
mission is to develop advanced product technologies to address emerging market
opportunities in the fields of homeland security, nanotechnology, and nuclear
remediation. Our wholly owned subsidiary Fuel Frontiers, Inc. concentrates on
developing fuel production facilities to produce ultra-clean synthetic diesel
from feedstocks such as coal.
  Basis
of Presentation
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared in accordance with Regulation S-X promulgated by the Securities and
Exchange Commission and do not include all of the information and footnotes
required by generally accepted accounting principles in the United States for
complete financial statements. In the opinion of management, these interim
financial statements include all adjustments, which include only normal
recurring adjustments, necessary in order to make the financial statements not
misleading. The results of operations for such interim periods are not
necessarily indicative of results of operations for a full year. The unaudited
condensed consolidated financial statements should be read in conjunction with
the audited consolidated financial statements and notes thereto of the Company
and management's discussion and analysis of financial condition and results of
operations included in the Company's Annual Report for the year ended December
31, 2008 as filed with the Securities and Exchange Commission on Form
10-K.
 
 
 9
 
   NOTE
2 - ACCOUNTING POLICIES AND PROCEDURES
 
 Revenue
Recognition
 
 Revenues
are recognized in the period that services are provided. For revenue from
product sales, the Company recognizes revenue in accordance with Staff
Accounting Bulletin No. 104, “Revenue Recognition” ("SAB104"), which superseded
Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements”
("SAB101"). SAB 101 requires that four basic criteria must be met before revenue
can be recognized: (1) persuasive evidence of an arrangement exists; (2)
delivery has occurred; (3) the selling price is fixed and determinable; and (4)
collectibility is reasonably assured. Determination of criteria (3) and (4) are
based on management's judgments regarding the fixed nature of the selling prices
of the products delivered and the collectibility of those amounts. Provisions
for discounts and rebates to customers, estimated returns and allowances, and
other adjustments are provided for in the same period the related sales are
recorded. The Company defers any revenue for which the product has not been
delivered or is subject to refund until such time that the Company and the
customer jointly determine that the product has been delivered or no refund will
be required. Payments received in advance are deferred.
  SAB 104
incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"),
“Multiple-Deliverable Revenue Arrangements”. EITF 00-21 addresses accounting for
arrangements that may involve the delivery or performance of multiple products,
services and/or rights to use assets. The effect of implementing EITF 00-21 on
the Company's consolidated financial position and results of operations was not
significant.
 
 Licensing
fee income generally is being recognized ratably over the term of the license.
The Company's management has determined that the collectibility and length of
time to collect the remaining contracted price due from its licensee can not be
reasonably assured. Accordingly, revenues will be recognized as
collected.
 
 Collaborative
Arrangement
 
 The
Company, through its subsidiary FFI, has entered into a collaborative
arrangement with Kentucky Fuel Associates, Inc.  (“KFA”) for the
development of coal-based gas-to-liquid (CTL) fuel production facilities in the
State of Kentucky. KFA has agreed to provide an initial funding of $2,000,000
per site to be applied by FFI towards any and all costs and expenses incurred in
the ordinary course of business for the development, construction and arranging
of financing to closure including without limitation the following costs:
engineering, procurement, administrative, development management, financing,
legal, operations and maintenance costs for each said fuel production facility.
In consideration for KFA’s initial minimum funding contribution, KFA will
receive 7% of the annual net pre-tax income of each jointly developed CTL diesel
fuel facility and 2.5% equity interest in the first CTL diesel fuel facility
developed by FFI and KFA. Additionally, KFA will have the exclusive right to
develop CTL diesel fuel facilities with FFI in the state of Kentucky and a
conditional first right of refusal to develop CTL diesel fuel facilities in the
remainder of the United States.
 
 We are
accounting for this agreement pursuant to EITF 07-01, “Accounting for
Collaborative Arrangements”. During the three and six months ended June 30, 2009
we expended $28,490 and $154,114, respectively, towards the development of the
initial CTL facility. We have reported this amount as payments received pursuant
to collaborative agreements. The unexpended balance of payments received of $0
and $154,114 at June 30, 2009 and December 31, 2008, respectively, is reported
as a current liability as advance payments received.
 
 Use
of Estimates
 
 The
preparation of financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at the date of
the financial statements and the reported amounts of revenues and expenses
during the reporting periods. Actual results could differ from those
estimates.
  10
  Loss
Per Share
 
 Basic and
diluted loss per common share for all periods presented is computed based on the
weighted average number of common shares outstanding during the year as defined
by SFAS No. 128, "Earnings Per Share". The assumed exercise of common stock
equivalents was not utilized since the effect would be anti-dilutive. At June
30, 2009 and 2008, the Company had 553,575 and 801,675 potentially dilutive
securities, respectively.
  Liquidity
 
 As shown
in the accompanying unaudited condensed consolidated financial statements, the
Company has incurred net losses of $1,190,588 and $2,421,436 during the six
month periods ended June 30, 2009 and 2008, respectively. The Company's current
liabilities exceeded its current assets by $5,859,314 as of June 30, 2009.
Consequently, its operations are subject to all risks inherent in the
establishment of a new business enterprise.
 
 Fair
Value Accounting
 
 In
September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB
Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair
value, establishes a framework for measuring fair value in generally accepted
accounting principles, and expands disclosures about fair value measurements.
The provisions of FAS 157 were adopted January 1, 2008. In February 2008, the
FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No.
157” (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of FAS 157 for
nonfinancial assets and nonfinancial liabilities, except for items that are
recognized or disclosed at fair value in the financial statements on a recurring
basis (at least annually). The provisions of FSP FAS 157-2 are effective for the
Company’s fiscal year beginning January 1, 2009.
 
 FAS 157
establishes a fair value hierarchy that prioritizes the inputs to valuation
techniques used to measure fair value. The hierarchy gives the highest priority
to unadjusted quoted prices in active markets for identical assets or
liabilities (Level 1 measurements) and the lowest priority to unobservable
inputs (Level 3 measurements). The three levels of the fair value hierarchy
under FAS 157 are described below:
  Level
      1
              Unadjusted
      quoted prices in active markets that are accessible at the measurement
      date for identical, unrestricted assets or
  liabilities;
 
 Level
      2
              Quoted
      prices in markets that are not active, or inputs that are observable,
      either directly or indirectly, for substantially the full term of the
      asset or liability;
 
 Level
      3
              Prices
      or valuation techniques that require inputs that are both significant to
      the fair value measurement and unobservable (supported by little or no
      market activity).
  
 
 11
  The
following table sets forth the Company’s financial liabilities measured at fair
value by level within the fair value hierarchy. As required by FAS 157, assets
and liabilities are classified in their entirety based on the lowest level of
input that is significant to the fair value measurement. The Company designates
cash equivalents as Level 1. As of June 30, 2009 and December 31, 2008, the
Company did not have any cash equivalents, therefore there were no assets
measured at fair value.
 
 Fair
      Value at June 30, 2009Total
                      
                      
                      Level
      1
                      
                      
                      Level
      2
                      
                      
                      Level
      3Liabilities:Conversion
      option liability
                      
                      $
                      39,000
                      
                      
                      $
                      -
                      
                      
                      $
                      39,000
                      
                      
                      $
                      -
  The
Company’s conversion option liability is valued using pricing models and the
Company generally uses similar models to value similar instruments. Where
possible, the Company verifies the values produced by its pricing models to
market prices. Valuation models require a variety of inputs, including
contractual terms, market prices, yield curves, credit spreads, measures of
volatility, and correlations of such inputs. These financial liabilities do not
trade in liquid markets, and as such, model inputs cannot generally be verified
and do involve significant management judgment. Such instruments are typically
classified within Level 3 of the fair value hierarchy.
  The table
below sets forth a summary of changes in the fair value of the Company’s Level 3
financial liabilities (detachable warrants and conversion option liabilities)
for the six months ended June 30, 2009.
 
 Balance
      at beginning of period
                    
                    $
                    1,660Change
      in fair value of conversion option
                    
                    
                    10,947Reclassification
      to equity upon repayment of debt
                    
                    
                    (12,607
                    )Balance
      at end of period
                    
                    $
                    -
 
 The total
amount of the changes in fair value for the period was included in net loss as a
result of changes in the Company’s stock price from December 31,
2008.
 
 In
February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option
for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159 permits
entities to choose to measure many financial instruments and certain other items
at fair value, with the objective of improving financial reporting by mitigating
volatility in reported earnings caused by measuring related assets and
liabilities differently without having to apply complex hedge accounting
provisions. The provisions of FAS 159 were adopted January 1, 2008. The Company
did not elect the Fair Value Option for any of its financial assets or
liabilities, and therefore, the adoption of FAS 159 had no impact on the
Company’s unaudited condensed consolidated financial position, results of
operations or cash flows.
 
 New
Accounting Pronouncements
 
 In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160).
SFAS 160 requires that non-controlling (or minority) interests in subsidiaries
be reported in the equity section of the company’s balance sheet, rather than in
a mezzanine section of the balance sheet between liabilities and equity. SFAS
160 also changes the manner in which the net income of the subsidiary is
reported and disclosed in the controlling company’s income statement. SFAS 160
also establishes guidelines for accounting or changes in ownership percentages
and for deconsolidation. SFAS 160 is effective for financial statements for
fiscal years beginning on or after December 15, 2008 and interim periods within
those years. The adoption of SFAS 160 did not have a material impact on our
consolidated financial position, results of operations or cash
flows.
  12
  In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative
Instruments and Hedging Activities-an amendment of FASB Statement No.
133” (SFAS 161). SFAS 161 requires enhanced disclosures about an entity’s
derivative and hedging activities and thereby improves the transparency of
financial reporting. SFAS 161 is effective for financial statements issued for
fiscal years and interim periods beginning after November 15, 2008, with early
application encouraged. The adoption of SFAS 161 did not have a material impact
on our consolidated financial position, results of operations or cash
flows.
  In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This Statement identifies the sources
of accounting principles and the framework for selecting the principles to be
used in the preparation of financial statements of nongovernmental entities that
are presented in conformity with generally accepted accounting principles (GAAP)
in the United States (the GAAP hierarchy).  This Statement will not
have an impact on the Company’s financial statements.
 
 In June
2008, the FASB issued Emerging Issues Task Force No. 07-5 (EITF 07-5), Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own Stock. EITF 07-5
requires entities to evaluate whether an equity-linked financial instrument (or
embedded feature) is indexed to its own stock by assessing the instrument’s
contingent exercise provisions and settlement provisions. Instruments not
indexed to their own stock fail to meet the scope exception of Statement of
Financial Accounting Standards No. 133, “Accounting for Derivative
Instruments and Hedging Activities”, paragraph 11(a), and should be
classified as a liability and marked-to-market. The statement is effective for
fiscal years beginning after December 15, 2008 and is to be applied to
outstanding instruments upon adoption with the cumulative effect of the change
in accounting principle recognized as an adjustment to the opening balance of
retained earnings. The adoption of this pronouncement will not have a
significant impact on the Company’s consolidated financial position and results
of operations.
 
 In
January 2009, the FASB issued Financial Statement of Position (“FSP”) Issue No.
EITF No. 99-20-1, “Amendments
to the Impairment Guidance of EITF Issue No. 99-20” (“FSP EITF No.
99-20-1”). FSP EITF No. 99-20-1 amends the impairment guidance in EITF Issue No.
99-20, “Recognition of
Interest Income and Impairment on Purchased Beneficial Interests and Beneficial
Interests that Continue to be Held by a Transferor in Securitized Financial
Assets” to achieve more consistent determination of whether an
other-than-temporary impairment has occurred. The Company adopted FSP EITF No.
99-20-1 and it did not have a material impact on the consolidated financial
statements.
  Effective
January 1, 2009, the Company adopted the Financial Accounting Standards Board's
Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1,
“Determining Whether
Instruments Granted in Share-Based Payment Transactions are Participating
Securities.”  The FSP required that all unvested share-based
payment awards that contain non-forfeitable rights to dividends should be
included in the basic Earnings Per Share (EPS) calculation.  This
standard did not affect the unaudited condensed consolidated financial position
or results of operations.
  In April
2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and Presentation of
Other-Than-Temporary Impairments” (“FSP FAS No. 115-2”). FSP FAS No.
115-2 provides guidance in determining whether impairments in debt securities
are other than temporary, and modifies the presentation and disclosures
surrounding such instruments. This FSP is effective for interim periods ending
after June 15, 2009, but early adoption is permitted for interim periods ending
after March 15, 2009. The adoption of this standard during the second quarter of
2009 had no impact on the Company’s consolidated financial position or results
of operations.
  13
 In April
2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the
Volume and Level of Activity for the Asset or Liability Have Significantly
Decreased and Identifying Transactions That Are Not Orderly” (“FSP FAS
No. 157-4”). FSP FAS No. 157-4 provides additional guidance in determining
whether the market for a financial asset is not active and a transaction is not
distressed for fair value measurement purposes as defined in SFAS No. 157,
“Fair Value
Measurements.” FSP FAS No. 157-4 is effective for interim periods ending
after June 15, 2009, but early adoption is permitted for interim periods ending
after March 15, 2009. The adoption of this standard during the second quarter of
2009 had no impact on the Company’s consolidated financial position or results
of operations.
  In April
2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, “Interim Disclosures about Fair Value
of Financial Instruments” (“FSP FAS No. 107-1 and APB 28-1”). This FSP
amends FASB Statement No. 107, “Disclosures about Fair Values of Financial
Instruments,” to require disclosures about fair value of financial instruments
in interim financial statements as well as in annual financial statements. APB
28-1 also amends APB Opinion No. 28, “Interim Financial Reporting,”
to require those disclosures in all interim financial statements. This standard
is effective for interim periods ending after June 15, 2009, but early adoption
is permitted for interim periods ending after March 15, 2009. The adoption of
this standard during the second quarter of 2009 had no impact on the Company’s
consolidated financial position or results of operations.
 
 In May
2009, the FASB issued SFAS No. 165, “Subsequent Events”
(“SFAS No. 165”). SFAS No. 165 establishes general standards
of accounting for and disclosure of events that occur after the balance sheet
date but before financial statements are issued or are available to be issued.
SFAS No. 165 will be effective for interim and annual financial
periods ending after June 15, 2009. The Company adopted
SFAS No. 165 during the three months ended June 30, 2009 and
evaluated subsequent events through the issuance date of the financial
statements. SFAS No. 165 did not have a material impact on the
Company’s consolidated financial position or results of
operations.
 
 In June
2009, the FASB issued SFAS No. 166, “Accounting for Transfers and
Servicing of Financial Assets – an amendment of SFAS Statement No. 140”
(“SFAS No. 166”). SFAS No. 166 will require more information about transferred
of financial assets and where companies have continuing exposure to the risks
related to transferred financial assets. SFAS 166 is effective at the start of a
company’s first fiscal year beginning after November 15, 2009, or January 1,
2010 for companies reporting earnings on a calendar-year basis.
 
 In June
2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation
No. 46(R)” (“SFAS No. 167”). SFAS No. 167 will change how a company
determines when an entity that is insufficiently capitalized or is not
controlled through voting (or similar rights) should be consolidated. Under SFAS
No. 167, determining whether a company is required to consolidate an entity will
be based on, among other things, an entity's purpose and design and a company's
ability to direct the activities of the entity that most significantly impact
the entity's economic performance. SFAS 167 is effective at the start of a
company’s first fiscal year beginning after November 15, 2009, or January 1,
2010 for companies reporting earnings on a calendar-year basis.
  In June
2009, the FASB issued SFAS No. 168, “The FASB Accounting Standards
Codification and the Hierarchy of Generally Accepted Accounting Principals – a
replacement of FAS No.162” (“SFAS No. 168”). SFAS 168 represents the last
numbered standard to be issued by FASB under the old (pre-Codification)
numbering system, and amends the GAAP hierarchy. On July 1, FASB will launch new
FASB’s Codification (full name: the FASB Accounting Standards Codification TM.)
The Codification will supersede existing GAAP for nongovernmental entities;
governmental entities will continue to follow standards issued by FASB's sister
organization, the Governmental Accounting Standards Board (GASB). This
pronouncement has no effect on the Company’s financial statements.
 
 Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company's present or future
unaudited condensed consolidated financial statements.
  14
 
 NOTE
3 - GOING CONCERN
 
 The
accompanying unaudited condensed consolidated financial statements have been
prepared on a going concern basis, which contemplates the realization of assets
and the settlement of liabilities and commitments in the normal course of
business. As reflected in the accompanying unaudited condensed consolidated
financial statements, the Company has a net loss of $1,190,588 for the six
months ended June 30, 2009, and a working capital deficiency of $5,859,314 and a
stockholders' deficiency of $5,820,519 at June 30, 2009. These factors raise
substantial doubt about its ability to continue as a going concern. The ability
of the Company to continue as a going concern is dependent on the Company's
ability to raise additional funds and implement its business plan. The
accompanying unaudited condensed consolidated financial statements do not
include any adjustments that might be necessary if the Company is unable to
continue as a going concern.
  The
Company is actively pursuing additional equity financing through discussions
with investment bankers and private investors. There can be no assurance the
Company will be successful in its effort to secure additional equity
financing.
 
 If
operations and cash flows continue to improve through these efforts, management
believes that the Company can continue to operate. However, no assurance can be
given that management's actions will result in profitable operations or the
resolution of its liquidity problems.
 
 The
Company's existence is dependent upon management's ability to develop profitable
operations and resolve its liquidity problems. Management anticipates the
Company will attain profitable status and improve its liquidity through the
continued developing, marketing and selling of its services and additional
equity investment in the Company.
 
 NOTE
4 - CONVERTIBLE DEBT
 
 Notes
payable at June 30, 2009 and December 31, 2008:
 June
      30,
                        
                        
                        December
      31,2009
                          (unaudited)
                        
                        
                        2008Global
      Atomic Inc. demand note payable to related party at 10% per year,
      convertible into common stock at $1.00 per share
                        
                        $
                        4,000
                        
                        
                        $
                        4,000International
      Fission demand note payable to related party at 10% per year, convertible
      into common stock at $1.00 per share
                        
                        
                        15,000
                        
                        
                        
                        15,000Jackie
      Brown, demand note payable to related party, non -interest bearing,
      convertible into common stock at $1.00 per share
                        
                        
                        20,000
                        
                        
                        
                        20,000John
      Powers note payable to related party, convertible into common stock At a
      50% discount to market; interest rate 14%; maturity June 4,
      2009
                        
                        
                        —
                        
                        
                        
                        13,444John
      Powers note payable to related party, convertible into common stock At a
      50% discount to market; interest rate 14%; maturity June 4,
      2009
                        
                        
                        —
                        
                        
                        
                        8,000Total
      notes payable
                        
                        
                        39,000
                        
                        
                        
                        60,444Less:
      current portion
                        
                        
                        39,000
                        
                        
                        
                        (60,444
                        )Balance
      notes payable (long term portion)
                        
                        $
                        —
                        
                        
                        $
                        —
  During
the three months ended June 30, 2009, we repaid two convertible notes
aggregating $21,444. As a result, the fair value of the derivative liability
associated with the conversion feature of these notes on the date of repayment,
aggregating $12,607, was reclassified to additional paid-in
capital.




NOTE
5 - STOCKHOLDER'S EQUITY
 
 During
the six months ended June 30, 2009 the Company issued 400,000 shares of common
stock as payment of expenses accrued at December 31, 2008 in the amount of
$20,000




15




Item
      2.
            Management’s
      Discussion and Analysis of Financial Condition and Results of
      Operation





When used
in this Form 10-Q and in our future filings with the Securities and Exchange
Commission, the words or phrases will likely result, management expects, or we
expect, will continue, is anticipated, estimated or similar expressions are
intended to identify forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Readers are cautioned not to
place undue reliance on any such forward-looking statements, each of which speak
only as of the date made. These statements are subject to risks and
uncertainties, some of which are described below. Actual results may differ
materially from historical earnings and those presently anticipated or
projected. We have no obligation to publicly release the result of any revisions
that may be made to any forward-looking statements to reflect anticipated events
or circumstances occurring after the date of such statements.





Business
Overview





CAUTIONARY
NOTE REGARDING FORWARD-LOOKING STATEMENTS





This
quarterly report on Form 10-Q contains many forward-looking statements, which
involve risks and uncertainties, such as our plans, objective, expectations and
intentions. You can identify these statements by our use of words such as "may,"
"expect," "believe," "anticipate," "intend," "could," "estimate," "continue,"
"plans," or other similar words or phrases. Some of these statements include
discussions regarding our future business strategy and our ability to generate
revenue, income, and cash flow. We wish to caution the reader that all
forward-looking statements contained in this Form 10-Q are only estimates and
predictions. Our actual results could differ materially from those anticipated
as a result of risk facing us or actual events differing from the assumptions
underlying such forward-looking statements. Readers are cautioned not to place
undue reliance on any forward-looking statements contained in this quarterly
report on Form 10-Q. Readers are cautioned not to place undue reliance on these
forward-looking statements. We undertake no obligation to update any of these
factors or to publicly announce any change to our forward-looking statements
made herein, whether as a result of new information, future events, changes in
expectations or otherwise.





Note:
There have been no material changes from our description of business disclosed
in our annual report on Form 10-K for the year ended December 31, 2008. The
information that follows is condensed and adapted from the information contained
in our annual report on form 10-K for the year ended December 31,
2008.





Our
Corporate History:





The
Company was organized February 27, 1997 under the laws of the State of Nevada,
as Stock Watch Man, Inc. an internet e-commerce company. On September 12, 2001,
the Company amended its articles of incorporation to change its name to Nuclear
Solutions, Inc. At that time, our primary business was the development of a new
type of nuclear reactor technology. As of the date of this report, our business
is now focused on the production of synthetic diesel fuel from coal
concentrating its efforts exclusively on coal-to-diesel projects already
underway in the state of Kentucky.





Our
Business:





Nuclear
Solutions, Inc. and its wholly owned subsidiary, Fuel Frontiers, Inc. is engaged
in the research, development, and commercialization of innovative technologies
and processes, which are generally early-stage, theoretical or commercially
unproven. We operate a highly technical business and our primary mission is to
develop facilities to produce ultra-clean synthetic diesel from coal and other
materials using a plasma-based gasification system and a conventional synthesis
gas-to-fuel reforming system based upon Fisher-Tropsch technology.





In 2008,
The Board of Directors elected to focus the company exclusively on the
production of synthetic fuels through the FFI subsidiary. Prior to that, the
company was developing nuclear technologies in the areas of shielded nuclear
material detection and nuclear micro-batteries in addition to the production of
synthetic fuels. Due to the difficulties encountered in raising capital in a
declining economic climate coupled with the limited resources of the company,
management made the decision to place all nuclear technology development
programs into a dormant state.  The company will continue to maintain
the intellectual property associated with the shielded nuclear detection
technology program and will seek a buyer or a master licensee for the
patents.  The company is discontinuing all further business
development associated with nuclear micro battery technology and other nuclear
legacy technologies.





Production
of Ultra-Clean Synthetic Fuels through our subsidiary Fuel Frontiers,
Inc.





In 2005,
the company entered the ultra-clean synthetic fuels business through a new
subsidiary called Fuel Frontiers, Inc. (formerly known as Future Fuels, Inc.).
The primary business of Fuel Frontiers, Inc. (FFI) is to plan, design, finance,
construct, and operate multiple gas-to-liquid synthetic fuel synthesis
facilities worldwide to transform virtually cost-free waste materials such as
used tires, waste coal, solid and liquid municipal wastes, biomass, and other
similar low-value societal refuse into high-value gas-to-liquid fuels such as
ultra-clean diesel.







16


Fuel
Frontiers, Inc. (FFI) is focused on the production of ultra-clean GTL Diesel
fuel. Management
made a decision to concentrate on the market for ultra-clean GTL Diesel fuel due
to the maturity and stability of the diesel market place and the greater
certainties associated with distribution, integration, production costs and
profit margins.





Originally,
our approach to the production of ultra-clean synthetic fuel was highly focused
on the utilization of virtually cost free waste materials as feedstock for our
process.





We
believe our approach to the production of ultra-clean synthetic fuels is
differentiated by our business model and technical approach. Our business model
focuses on the flexibility to use virtually cost free waste materials, some of
which are renewable, in combination with conventional feed stocks such as coal
or petroleum coke, as opposed to other approaches which must lock in a certain
type of homogeneous feedstock. Our technical approach involves the use of a
low-emission plasma processing (gasification) system to convert the waste
materials into synthesis gas which is then converted into ultra-clean synthetic
diesel.





System
Overview





The FFI
approach for the production of ultra-clean diesel occurs in two stages. In the
first stage the feedstock material is fed into a plasma processing system such
as the Westinghouse Plasma Gasifier (WPG) which transforms the feedstock
material into synthesis gas, which is composed of carbon, hydrogen and oxygen.
The heart of Westinghouse’s Plasma Gasifier contains a plasma field that reaches
temperatures up to 30,000 degrees Centigrade. The plasma breaks down feedstock
materials--such as coal, used tires, wood wastes as well as petroleum coke and
other materials--to their core elements in a clean and efficient manner which
generates significant amounts of synthesis gas. Excess heat energy is removed
from the resulting synthesis gas and recovered to generate electricity on-site
which can be used to provide power to the system. The cooled synthesis gas is
then refined for purity and passed to the second stage. In the second stage, the
refined synthesis gas, which is composed primarily of carbon, hydrogen and
oxygen, is converted into ultra-clean diesel though a modified Fischer-Tropsch
gas-to-liquids synthesis process for diesel fuels. The process applies a
metallic catalyst to chemically transform the synthesis gas into a liquid fuel
which is then refined to fuel-grade standards. This approach is not entirely
new, as early as 1936 in Germany similar technology was used with coal-produced
synthesis gas to produce diesel and alcohols on a commercial scale. The FFI
approach to ultra-clean synthetic fuel production differs from other approaches
mainly because our system can utilize multiple feedstock materials that are
normally difficult to utilize in a conventional gasifier. The ability to use
heterogeneous materials is a benefit of a plasma processing system. The
Westinghouse Plasma Gasifier has the proven capability to transform a wide
variety of waste materials into the synthesis gas in an efficient and
environmentally friendly manner.





Currently,
we are focusing our efforts in the state of Kentucky, Muhlenberg County for
our first coal to ultra-clean diesel production facility. The projected output
of a typical project can range from approximately 50,000,000 gallons per year to
200,000,000 gallons per year. We currently estimate that the inside battery
limits cost of an ultra-clean synthetic diesel waste-to-fuel facility producing
approximately 50,000,000 gallons per year could range from $300,000,000 to
$400,000,000. This estimate range is qualified by the fact that the actual cost
of any facility can be significantly affected by factors such as the exact
nature and terms of the project, the market price for engineering, labor and raw
construction materials and any environmental or regulatory costs which are
highly project dependent. We will require additional capital to develop these
projects. Over the next twelve months, we anticipate raising additional capital
through debt, grants or equity financing. The financing requirements for each
project can be substantially different from one another and may or may not
result in significant dilution and or increased indebtedness of the
company.





We intend
to build our facilities with modular expansion capability to allow for increased
future production and/or gasification of additional or diverse feedstock (waste
materials). As of the date of this report, we have retained Stone and Webster,
LTD. Of Milton Keynes, England, a subsidiary of the Shaw Group for design
engineering, procurement, construction, and production operations for our
renewable fuel projects currently in the planning stages. As a matter of policy
and our business model, we intend to outsource engineering, procurement,
construction as well as daily facility management and operations of any future
facilities to qualified and experienced providers.





Over the
next twelve months, we anticipate that FFI's development efforts will continue
to focus on engineering plant designs as well as project development and
financing. These elements will play critical roles in the establishment of FFI's
waste-to-fuel projects. While we believe that the appropriate technologies for
waste-to-synthetic fuels such as ultra-clean diesel are commercially available,
there is, however, no guarantee that commercially available technologies will be
appropriate in every instance for the production of fuels and any of FFI's
proposed facilities. Moreover, there could be unexpected problems or delays in
the funding, construction and operation of the facility. There is no guarantee
that FFI will be successful in raising the capital required for this project.
Over the next twelve months we anticipate that FFI will require a minimum of
approximately $500,000 to sustain operations. We anticipate raising this money
through debt and/or equity financing which may result in substantial dilution,
and/or increase the company's indebtedness.




17





Plan for
the next 12 months





Over the
next 12 months, we plan on raising working capital to fund development of these
technological areas through private placements of debt or equity, using our
common stock in lieu of cash, and applying for government grants, where
appropriate. The implementation of Company's business development phases
outlined above will be dependent on successful financing. Financing options may
include a combination of debt and equity financing. Equity financing may result
in a substantial equity dilution to existing shareholders.




Within
the next six months and subject to available resources, the company anticipates
holding one or more special shareholder meetings to refer certain matters to the
shareholders for approval and resolution.




Progress





Progress
in the development of our technologies have been slower than expected due to the
lack of personnel and lack of working capital. We anticipate increasing staffing
levels over the next 12 months. We estimate a working capital requirement of at
least $500,000 dollars over the next 12 months to maintain operations at a
minimum level.





We
believe that the success of our business will depend, in part, on our ability to
attract, retain, and motivate highly qualified sales, technical and management
personnel, and upon the continued service of our senior management and key sales
and technical personnel. We cannot assure you that we will be able to
successfully attract, retain, and motivate a sufficient number of qualified
personnel to conduct our business in the future.





Results
of Operations





REVENUES:
The Company reported revenues of $0 from our existing technology license
agreement, for the six months ended June 30, 2008 as compared with revenues from
continuing operations of $0 for the six months ended June 30, 2009.





TOTAL
COSTS AND EXPENSES: Total costs and expenses from continuing operations
decreased from $1,976,894 for the six months ended June 30, 2008 to $1,178,703
for the six months ended June 30, 2009. The principal reason for this decrease
was due to lower consulting expenses.





OPERATING
EXPENSES: Operating expenses from continuing operations decreased from
$1,976,894 for the six months ended June 30, 2008 to $1,178,703 for the six
months ended June 30, 2009. This decrease was primarily due to lower consulting
expenses. Depreciation expense decreased from $2,086 for the six months ended
June 30, 2008 to $743, for the six months ended June 30, 2009. This decrease was
due to writing off obsolete assets.





INTEREST
EXPENSE: Interest expense decreased from $437,978 for the six months ended June
30, 2008 to $4,025 for the six months ended June 30, 2009. This decrease is due
primarily to the repayment of loans.





GENERAL
AND ADMINISTRATIVE: General & Administrative expenses increased by $145,167
during the six months ended June 30, 2009 to a total amount of $254,212 as
compared to $109,045 for the six months ended June 30, 2008. The increase was
primarily due to the expense resulting from the accounting treatment of a
technology option that expired.





NET LOSS:
The Company incurred a net loss of ($1,190,588) for the six months ended June
30, 2009, compared with a net loss of ($2,421,436) for the six months ended June
30, 2008, which reflects a year-to-year decrease in the amount of loss for the
period of $1,230,848. The principal reason for this decrease was due to a
decrease in consulting fees and interest expense.




18





LIQUIDITY
AND CAPITAL RESOURCES:




As of
June 30, 2009, we had a working capital deficit of $5,859,314 which compares to
a working capital deficit of $5,057,285 as of June 30, 2008. As a result of our
operating losses for the six-month period ended June 30, 2009, we generated a
cash flow deficit of $363,777 from operating activities. Cash flows used in
investing activities were $0 during the period. Cash flows provided by financing
activities were $505,183 on proceeds from issuance of common stock.





Additional
financing will be required in order to meet our current and projected cash flow
deficits from operations and development. We are seeking financing in the form
of equity capital in order to provide the necessary working capital. There is no
guarantee that we will be successful in raising the funds required. We intend to
use the proceeds derived from revenues or financing to pay salaries, and general
and administrative expenses to maintain the core operations of the
company.





If we are
not successful in generating sufficient liquidity from operations or in raising
sufficient capital resources, on terms acceptable to us, this could have a
material adverse effect on our business, results of operations liquidity and
financial condition.





New
Accounting Pronouncements




In
December 2007, the FASB issued SFAS No. 160, “Non-controlling Interests in
Consolidated Financial Statements-an amendment of ARB No. 51” (SFAS 160). SFAS
160 requires that non-controlling (or minority) interests in subsidiaries be
reported in the equity section of the company’s balance sheet, rather than in a
mezzanine section of the balance sheet between liabilities and equity. SFAS 160
also changes the manner in which the net income of the subsidiary is reported
and disclosed in the controlling company’s income statement. SFAS 160 also
establishes guidelines for accounting or changes in ownership percentages and
for de-consolidation. SFAS 160 is effective for financial statements for fiscal
years beginning on or after December 15, 2008 and interim periods within those
years. The adoption of SFAS 160 did have a material impact on our financial
position, results of operations or cash flows.





Effective
January 1, 2009, the Company adopted the Financial Accounting Standards Board's
Staff Position (FSP) on the Emerging Issues Task Force (EITF) Issue No. 03-6-1,
“Determining Whether Instruments Granted in Share-Based Payment Transactions are
Participating Securities.”  The FSP required that all unvested
share-based payment awards that contain non-forfeitable rights to dividends
should be included in the basic Earnings Per Share (EPS)
calculation.  This standard did not affect the unaudited condensed
consolidated financial position or results of operations.





In April
2009, the FASB issued FSP FAS No. 115-2 and FAS No. 124-2, “Recognition and
Presentation of Other-Than-Temporary Impairments” (“FSP FAS No. 115-2”). FSP FAS
No. 115-2 provides guidance in determining whether impairments in debt
securities are other than temporary, and modifies the presentation and
disclosures surrounding such instruments. This FSP is effective for interim
periods ending after June 15, 2009, but early adoption is permitted for interim
periods ending after March 15, 2009. The Company plans to adopt the provisions
of this Staff Position during the second quarter of 2009, but does not believe
this guidance will have a significant impact on its unaudited condensed
consolidated financial statements.





In April
2009, the FASB issued FSP FAS No. 157-4, “Determining Fair Value When the Volume
and Level of Activity for the Asset or Liability Have Significantly Decreased
and Identifying Transactions That Are Not Orderly” (“FSP FAS No. 157-4”). FSP
FAS No. 157-4 provides additional guidance in determining whether the market for
a financial asset is not active and a transaction is not distressed for fair
value measurement purposes as defined in SFAS No. 157, “Fair Value
Measurements.” FSP FAS No. 157-4 is effective for interim periods ending after
June 15, 2009, but early adoption is permitted for interim periods ending after
March 15, 2009. The Company will apply the provisions of this statement
prospectively beginning with the second quarter 2009, and does not expect its
adoption to have a material effect on its unaudited
condensed  consolidated financial statements.





In April
2009, the FASB issued FSP FAS No. 107-1 and APB 28-1, “Interim Disclosures about
Fair Value of Financial Instruments” (“FSP FAS No. 107-1 and APB 28-1”). This
FSP amends FASB Statement No. 107, “Disclosures about Fair Values of Financial
Instruments,” to require disclosures about fair value of financial instruments
in interim financial statements as well as in annual financial statements. APB
28-1 also amends APB Opinion No. 28, “Interim Financial Reporting,” to require
those disclosures in all interim financial statements. This standard is
effective for interim periods ending after June 15, 2009, but early adoption is
permitted for interim periods ending after March 15, 2009. The Company plans to
adopt FSP FAS No. 107-1 and APB 28-1 and provide the additional disclosure
requirements beginning in second quarter 2009.




Subsequent
Events
 
 The
Company adopted SFAS No. 165, “Subsequent Events” effective with the six months
ended June 30, 2009.   Subsequent events are events or
transactions about which information becomes available after the balance sheet
date but before the financial statements are issued or are available to be
issued.  In the case of the Company as a public entity, the applicable
cutoff date is the date the financial statements are issued, whereas prior to
SFAS No. 165 the cutoff date could be the date the financial statements were
available for issuance.
 
 The
statement requires that certain subsequent events (“recognized subsequent
events”) be recorded in the financial statements of the latest preceding period
currently being issued.  These items provide evidence about conditions
that existed at the date of that balance sheet, including estimates inherent in
preparing the financial statements for that period.   Other
subsequent events (“nonrecognized subsequent events”) are not recorded in
balance sheet for the latest preceding period currently being issued. Those
items relate to conditions that arose only after the balance sheet
date.   Disclosure is required for nonrecognized subsequent
events if necessary to prevent those financial statements from being
misleading.


19





In March
2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments
and Hedging Activities,” which changes the disclosure requirements for
derivative instruments and hedging activities. SFAS No. 161 requires enhanced
disclosures about (a) how and why an entity uses derivative instruments, (b) how
derivative instruments and related hedged items are accounted for under SFAS No.
133, “Accounting for Derivative Instruments and Hedging Activities” and its
related interpretations, and (c) how derivative instruments and related hedged
items affect an entity’s financial position, financial performance, and cash
flows.





In May
2008, the FASB issued SFAS No. 162, “The Hierarchy of Generally Accepted
Accounting Principles.”  This Statement identifies the sources of
accounting principles and the framework for selecting the principles to be used
in the preparation of financial statements of nongovernmental entities that are
presented in conformity with generally accepted accounting principles (GAAP) in
the United States (the GAAP hierarchy).  This Statement will not have
an impact on the Company’s financial statements.





In June
2008, the FASB issued Emerging Issues Task Force No. 07-5 (EITF 07-5),Determining Whether an Instrument
(or Embedded Feature) is Indexed to an Entity’s Own
Stock.  EITF 07-5 requires entities to evaluate whether an
equity-linked financial instrument (or embedded feature) is indexed to its own
stock by assessing the instrument’s contingent exercise provisions and
settlement provisions. Instruments not indexed to their own stock fail to meet
the scope exception of Statement of Financial Accounting Standards No. 133,Accounting for
Derivative Instruments and Hedging Activities , paragraph 11(a), and
should be classified as a liability and marked-to-market. The statement is
effective for fiscal years beginning after December 15, 2008 and is to be
applied to outstanding instruments upon adoption with the cumulative effect of
the change in accounting principle recognized as an adjustment to the opening
balance of retained earnings. The adoption of this pronouncement will not have a
significant impact on the Company’s consolidated financial position and results
of operations.





In
January 2009, the FASB issued Financial Statement of Position (“FSP”) Issue No.
EITF No. 99-20-1, “Amendments to the Impairment Guidance of EITF Issue No.
99-20” (“FSP EITF No. 99-20-1”). FSP EITF No. 99-20-1 amends the impairment
guidance in EITF Issue No. 99-20, “Recognition of Interest Income and Impairment
on Purchased Beneficial Interests and Beneficial Interests that Continue to be
Held by a Transferor in Securitized Financial Assets” to achieve more consistent
determination of whether an other-than-temporary impairment has occurred. The
Company adopted FSP EITF No. 99-20-1 and it did not have a material impact on
the consolidated financial statements.





Other
recent accounting pronouncements issued by the FASB (including its Emerging
Issues Task Force), the AICPA, and the SEC did not, or are not believed by
management to, have a material impact on the Company's present or future
unaudited condensed consolidated financial statements.





Item
3. Quantitative and Qualitative Disclosures About Market Risk





Cash and
Cash Equivalents





We have
historically invested our cash and cash equivalents in short-term, fixed rate,
highly rated and highly liquid instruments which are reinvested when they mature
throughout the year. Although our existing investments are not considered at
risk with respect to changes in interest rates or markets for these instruments,
our rate of return on short-term investments could be affected at the time of
reinvestment as a result of intervening events. As of June 30, 2009, we had cash
and cash equivalents aggregated $317,685.





The
Company does not issue or invest in financial instruments or their derivatives
for trading or speculative purposes.  The operations of the Company are
conducted primarily in the United States, and, are not subject to material
foreign currency exchange risk. Although the Company has outstanding debt
and related interest expense, market risk of interest rate exposure in the
United States is currently not material.




20





Debt





The
interest rate on our outstanding debt obligations are fixed and are not subject
to market fluctuations. Some of our convertible debt may have its interest costs
increased if the debt is converted into common stock because the conversion
price is a function of the market price of our common stock.





Item
4. Controls and Procedures.





Evaluation of Disclosure
Controls and Procedures





We
maintain disclosure controls and procedures (as defined in Rules 13a-15(e) and
15d-15(e) of the Securities Exchange Act of 1934, as amended (the “Exchange
Act”) that are designed to be effective in providing reasonable assurance that
information required to be disclosed in our reports under the Exchange Act is
recorded, processed, summarized and reported within the time periods specified
in the rules and forms of the Securities and Exchange Commission (the “ SEC”),
and that such information is accumulated and communicated to our management to
allow timely decisions regarding required disclosure.





In
designing and evaluating disclosure controls and procedures, management
recognizes that any controls and procedures, no matter how well designed and
operated, can provide only reasonable, not absolute assurance of achieving the
desired objectives. Also, the design of a control system must reflect the fact
that there are resource constraints and the benefits of controls must be
considered relative to their costs. Because of the inherent limitations in all
control systems, no evaluation of controls can provide absolute assurance that
all control issues and instances of fraud, if any, have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty and that breakdowns can occur because of simple error or mistake. The
design of any system of controls is based, in part, upon certain assumptions
about the likelihood of future events and there can be no assurance that any
design will succeed in achieving its stated goals under all potential future
conditions.





As of the
end of the period covered by this report, we carried out an evaluation, under
the supervision and with the participation of management, including our chief
executive officer and principal financial officer, of the effectiveness of the
design and operation of our disclosure controls and procedures. Based upon that
evaluation, management concluded that our disclosure controls and procedures are
effective as of June 30, 2009 to cause the information required to be disclosed
by us in reports that we file or submit under the Exchange Act is recorded,
processed, summarized and reported within the time periods prescribed by SEC,
and that such information is accumulated and communicated to management,
including our chief executive officer and principal financial officer, as
appropriate, to allow timely decisions regarding required
disclosure.





Evaluation of and Report on
Internal Control over Financial Reporting





Management
is responsible for establishing and maintaining adequate internal control over
financial reporting of the Company. Management, with the participation of our
principal executive officer and principal financial officer, has evaluated the
effectiveness of our internal control over financial reporting as of June 30,
2009 based on the criteria established in Internal Control – Integrated
Framework issued by the Committee of Sponsoring Organizations of the Treadway
Commission. Based on this evaluation, management concluded that, as of June 30,
2009, our internal control over financial reporting were effective in providing
reasonable assurance regarding the reliability of financial reporting and the
preparation of financial statements for external purposes in accordance with
U.S. generally accepted accounting principles.





This
annual report does not include an attestation report of the company's registered
public accounting firm regarding internal control over financial
reporting.  Management's report was not subject to attestation by the
company's registered public accounting firm pursuant to temporary rules of the
SEC that permit the company to provide only management's report in this annual
report.




21




Changes in Internal Control
over Financial Reporting





There was
no change in our internal controls over financial reporting identified in
connection with the requisite evaluation that occurred during our last fiscal
quarter that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.





Limitations.





Our
management, including our Principal Executive Officer and Principal Financial
Officer, does not expect that our disclosure controls or internal controls over
financial reporting will prevent all errors or all instances of fraud. A control
system, no matter how well designed and operated, can provide only reasonable,
not absolute, assurance that the control system's objectives will be met.
Further, the design of a control system must reflect the fact that there are
resource constraints, and the benefits of controls must be considered relative
to their costs. Because of the inherent limitations in all control systems, no
evaluation of controls can provide absolute assurance that all control issues
and instances of fraud, if any, within our company have been detected. These
inherent limitations include the realities that judgments in decision-making can
be faulty, and that breakdowns can occur because of simple error or mistake.
Controls can also be circumvented by the individual acts of some persons, by
collusion of two or more people, or by management override of the controls. The
design of any system of controls is based in part upon certain assumptions about
the likelihood of future events, and any design may not succeed in achieving its
stated goals under all potential future conditions. Over time, controls may
become inadequate because of changes in conditions or deterioration in the
degree of compliance with policies or procedures. Because of the inherent
limitation of a cost-effective control system, misstatements due to error or
fraud may occur and not be detected.





PART
II-OTHER INFORMATION







Item 1.
            Legal Proceedings.





The
Company is not a party to any pending material legal proceedings.





Item
      1A.
            Risk
      Factors





There
have been no material changes from risk factors disclosed in our annual report
on Form 10-K for the year ended December 31, 2008.





Item 2.
            Unregistered Sale of Equity
      Securities and Use of
Proceeds.





Item 3.
            Defaults upon Senior
      Securities.None.




Item 4.
                Submission of
      Matters to a Vote of Security
Holders.


No matter was submitted to a vote of
the security holders, through the solicitation of proxies or otherwise, during
the quarter of the fiscal year covered by this report.




Item
      5.
            Other
      Information.None.




Item
      6.
            Exhibits






(a)
Exhibits





Exhibit No.
            Description31.1
            Chief
      Executive Officer-Section 302 Certification pursuant to Sarbanes-Oxley
      Act.31.2
            Chief
      Financial Officer-Section 302 Certification pursuant to Sarbanes-Oxley
      Act.32.1
            Chief
      Executive Officer-Section 906 Certification pursuant to Sarbanes-Oxley
      Act.32.2
            Chief
      Financial Officer-Section 906 Certification pursuant to Sarbanes-Oxley
      Act.






22





SIGNATURES





In
accordance with the requirements of the Exchange Act, the registrant caused this
report to be signed on its behalf by the undersigned, thereunto duly
authorized.





Dated
:  August 19, 2009





NUCLEAR
SOLUTIONS, INC.





By:
                      /s/
      Patrick Herda
                      
                      By:
                      /s/
      Kenneth FaithPatrick
      Herda
                      
                      
                      Kenneth
      FaithTitle:
      President, CEO
                      
                      
                      Title:
      CFO














23