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

                                   FORM 10-QSB

 (Mark One)
  [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 OF THE SECURITIES EXCHANGE
      ACT OF 1934

                 For the Quarterly Period Ended March 31, 2004
                                                --------------

 [ ] TRANSITION REPORT UNDER SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT
     OF 1934

     For the transition period from _____________ to ___________________
    Quarterly Report Under

                         Commission File Number: 1-12350

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

              Florida                                   65-0827283
            -----------                                 -----------
  (State or other jurisdiction of                      (IRS Employer
   incorporation or organization)                    Identification No.)

                         4121 SW 47th Avenue, Suite 1301
                                 Davie, Florida
                    (Address of principal executive offices)

                                      33314
                                   (Zip Code)

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

Check whether the registrant (1) filed all reports required to be filed by
Section 13 or 15(d) of the Securities Exchange Act during the preceding 12
months (or for such shorter period that the registrant was required to file such
reports), and (2) has been subject to such filing requirements for the past 90
days.

Yes  [X]      No  [ ]

Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-3 of the Exchange Act).

Yes  [ ]      No  [X]


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

Indicate by check mark whether the registrant has filed all documents and
reports required to be filed by Sections 12, 13 or 15(d) of the Securities
Exchange Act of 1934 subsequent to the distribution of securities under a plan
confirmed by a court.

Yes  [ ]      No  [ ]

                      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 April 06, 2005, the issuer had 2,726,212 shares of common stock
outstanding.


<PAGE>

                         PART I - FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS.

                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
                                  BALANCE SHEET

<TABLE>
<CAPTION>
                                                                                 March 31,     December 31,
                                                                                   2004            2003
                                                                               ------------    ------------
                                                                                (Unaudited)      (Audited)
<S>                                                                            <C>             <C>
                                     ASSETS
                                     ------

CURRENT ASSETS:
   Cash                                                                        $     46,375    $         --
                                                                               ------------    ------------
TOTAL CURRENT ASSETS                                                                 46,375              --
                                                                               ------------    ------------
FIXED ASSETS:
   Office Furniture and Equipment and Computer Systems, net of
     accumulated depreciation of $182,323 and $170,100                               65,744          76,580
                                                                               ------------    ------------
OTHER ASSETS:
   Deposits                                                                             835             835
                                                                               ------------    ------------
                                                                                        835             835
                                                                               ------------    ------------
TOTAL  ASSETS                                                                  $    112,954    $     77,415
                                                                               ============    ============
                     LIABILITIES AND STOCKHOLDERS' [DEFICIT]
                     ---------------------------------------
CURRENT LIABILITIES:
   Cash Overdraft                                                              $         --    $      2,465
   Accounts payable                                                                 791,987         764,196
   Accrued Liabilities                                                              413,295         407,786
   Payroll and Taxes Payable                                                      1,498,765       1,439,145
   Note Payable                                                                     100,000          25,000
   Due to Affiliates                                                                175,324         325,221
   Other Payables                                                                   149,500         149,500
                                                                               ------------    ------------
TOTAL CURRENT LIABILITIES                                                         3,128,871       3,113,313
                                                                               ------------    ------------
COMMITMENTS AND CONTINGENCIES                                                            --              --
                                                                               ------------    ------------
COMMON STOCK SUBJECT TO REPURCHASE, 53,318 SHARES ISSUED AND
OUTSTANDING AT MARCH 31, 2004 AND DECEMBER 31, 2003                               3,178,474       3,178,474
                                                                               ------------    ------------
STOCKHOLDERS' [DEFICIT]:

   Preferred Stock, $.01 par value, 5,000,000 shares
      authorized; 16,686 and 13,000 issued and outstanding at March 31, 2004
      and December 31, 2003 respectively                                                167             130
   Common Stock, $.01 par value, 100,000,000 shares
      authorized; 2,241,200  issued and outstanding at March 31,2004
      and December 31, 2003                                                          22,412          22,412
    Subscriptions Receivable                                                     (2,464,775)     (1,445,900)
   Additional paid-in capital                                                    34,221,615      31,853,778
   (Deficit) Accumulated in the Development Stage                               (37,973,810)    (36,644,792)
                                                                               ------------    ------------
TOTAL STOCKHOLDERS' [DEFICIT]                                                    (6,194,391)     (6,214,372)
                                                                               ------------    ------------
TOTAL LIABILITIES AND STOCKHOLDERS' [DEFICIT]                                  $    112,954    $     77,415
                                                                               ============    ============
</TABLE>



                             See Accompanying Notes

                                       2

<PAGE>


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

<TABLE>
<CAPTION>
                                                                                 Accumulative
                                                                                   in the
                                                                                 Development
                                                  For the Three Months Ended      Stage From
                                                           March 31,            Sept. 30, 2000
                                                 ---------------------------      to March 31,
                                                     2004            2003            2004
                                                 ------------    ------------    ------------
<S>                                              <C>             <C>             <C>
REVENUE                                          $         --    $         --    $         --
                                                 ------------    ------------    ------------
OPERATING EXPENSES:
   Salaries and wages including related taxes          60,622          66,508       2,179,283
   Consulting fees                                     42,000          55,385         184,119
   Consulting fees - related party                         --         221,162
   Legal and professional                              23,050           1,256         961,983
   Marketing and promotion                                 --         467,158
   Rent                                                 5,654          25,056         298,991
   Rent - related party                                    --          45,387
   Depreciation                                        12,224          12,867         182,324
   Other general and administrative expenses           48,959          63,015         665,917
   Impairement Loss on Technology                          --       1,581,747
   Write down of Inventory                            499,749
   Loss on Equipment deposit                        1,022,500
   Research and development cost                           --          10,000
   Financing Costs                                         --         113,042
   Non - Cash Consulting fees                       1,110,000              --      18,124,280
   Non - Cash Consulting fees - related party              --       3,644,251
   Non - Cash General and administrative costs         21,000              --          42,000
   Non - Cash Financing costs                              --         112,200
   Non - Cash Employee Compensation                        --              --       6,863,527
                                                 ------------    ------------    ------------
TOTAL OPERATING EXPENSES                            1,323,509         224,087      37,219,620
                                                 ------------    ------------    ------------

OPERATING LOSS                                     (1,323,509)       (224,087)    (37,219,620)

OTHER INCOME (EXPENSE):
   Other (Expense) Income                                  --              --        (694,982)
   Interest expense - related party                    (3,509)             --         (15,218)
   Interest expense                                    (2,000)         (1,543)        (43,990)
                                                 ------------    ------------    ------------
TOTAL OTHER (EXPENSE), NET                             (5,509)         (1,543)       (754,190)
                                                 ------------    ------------    ------------

NET LOSS                                         $ (1,329,018)   $   (225,630)   $(37,973,810)
                                                 ============    ============    ============

Basic and Diluted Net Loss per Common Share      $      (0.58)   $      (0.10)
                                                 ============    ============

Basic and Diluted Weighted Average Common
Shares Outstanding                                  2,294,518       2,281,038
                                                 ============    ============
</TABLE>



                             See Accompanying Notes

                                        3

<PAGE>

                                 FUELNATION INC.
                          (A DEVELOPMENT STAGE COMPANY)
                            STATEMENTS OF CASH FLOWS

                                   (Unaudited)

<TABLE>
<CAPTION>
                                                                            For the Three Months Ended
                                                                                     March 31,            Accumulative in
                                                                           ----------------------------   the Development
                                                                               2004            2003            Stage
                                                                           ------------    ------------    ------------
<S>                                                                        <C>             <C>             <C>
Cash Flows from Operating Activities:
   Net loss                                                                $ (1,329,018)   $   (225,630)   $(37,973,810)
   Adjustments to reconcile net loss to net cash provided by
      (used) in operating activities:
         Depreciation                                                            12,224          12,867         182,324
        Write - Down of Technology                                                   --              --       1,581,747
        Write - Down of Inventory                                                    --              --         499,749
         Non- Cash Employee Compensation                                             --              --       6,863,527
         Non- Cash Consulting Fees                                            1,110,000              --      18,124,280
         Non- Cash  Consulting Fees -Related Party                                   --              --       3,644,251
         Non- Cash Financing Costs                                                   --              --         112,200
         Non- Cash General and administrative Costs                              21,000              --          42,000
         Write- Down of Investments                                                  --              --         657,686
         Write- Down of Deposits                                                     --              --       1,022,500
         Other                                                                       --              --          58,508
        Amortization of Discount on Convertible Debt                                 --              --          30,394
                                                                           ------------    ------------    ------------
         Changes in Assets and Liabilities:                                          --              --              --
         Inventory                                                                   --              --        (499,748)
         Due from Escrow Accounts                                                    --              --         (45,000)
         Due from Affiliates                                                         --              --         304,680
         Other                                                                       --              --           8,990
Increase [Decrease] in :
         Accounts Payable                                                        37,790          24,381         834,899
         Accrued Liabilites                                                       5,509          89,653         504,626
         Payroll and Taxes Payable                                               59,620          93,347       1,498,765
                                                                           ------------    ------------    ------------
                  Net cash provided by (used) in operating activities           (82,875)         (5,382)     (2,547,432)
                                                                           ------------    ------------    ------------
Cash Flows from Investing Activities:
   Payments for Technology                                                           --              --        (544,903)
   Payment for Fixed Assets                                                      (1,388)             --        (248,067)
  Advances Toward Pending Acquisition                                                --              --        (402,724)
  Bond Issuance Deposit                                                              --              --        (320,000)
  Refund of Bond Issuance Deposit                                                50,000
  Cash Received in Acquisition                                                       --              --           1,109
                                                                           ------------    ------------    ------------
                  Net cash used in investing activities                          (1,388)             --      (1,464,585)
                                                                           ------------    ------------    ------------
Cash Flows from Financing Activities:
   Cash Overdraft                                                                (2,465)             --              --
   Net Proceeds from issuance of common stock                                    50,000              --       3,503,118
   Net Proceeds from issuance of preferred  stock                               133,000              --         313,200
   Proceeds from Issuance of Convertible Debt                                        --              --          35,953
   Proceeds from Related Party Debt                                                  --              --         832,069
   Payment of Related Party Debt                                               (149,897)             --        (373,602)
   Payment of Convertible Debt                                                       --              --         (11,542)
   Exercise of Stock Options                                                         --              --          15,000
   Proceeds from Issuance of Note Payable                                       100,000              --         100,000
   Payment of Loans Payable                                                          --              --        (100,000)
   Debt Restructuring                                                                --              --        (255,804)
                                                                           ------------    ------------    ------------
                  Net cash provided by financing activities                     130,638              --       4,058,392
                                                                           ------------    ------------    ------------

Net (Decrease) Increase in Cash                                                  46,375          (5,382)         46,375
Cash, Beginning of Period                                                            --             612              --
                                                                           ------------    ------------    ------------
Cash, End of Period                                                        $     46,375    $     (4,770)   $     46,375
                                                                           ============    ============    ------------
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
   Cash paid during the period for interest:                               $         --    $         --    $      2,716
                                                                           ============    ============    ============
   Cash paid during the period for Income Taxes:                           $         --    $         --    $         --
                                                                           ============    ============    ============
</TABLE>

                             See Accompanying Notes
                                       4

<PAGE>


SUPPLEMENTAL DISCLOSURES OF NON CASH INVESTING AND FINANCING ACTIVITIES:

DURING THE THREE MONTHS ENDED MARCH 31, 2004 AND MARCH 31, 2003

1) During the first quarter of 2004, 2,501 shares of common stock owned by
existing shareholders was replaced with preferred stock of the Company by virtue
of various settlement and subscription agreements between the Company and the
shareholders. In turn, the 2,501 shares of common stock were subscribed for by a
unrelated third party for $78,500. As of March 31, 2004 the amount had not been
received. The $78,500 subscription receivable has been shown as a contra- equity
account in the financial statements

2) During the first quarter of 2004, the Company released 23,334 shares of
restricted common stock held by a third party, and in turn the third party
cancelled a $25,000 promissory note held by him.

3) During the first quarter of 2004, the Company replaced 165,493 shares of
common stock owned by existing shareholders by issuing 1,079 shares of preferred
stock valued at $1,079,000. The 165,493 shares of common stock were subscribed
for by an unrelated third party for $1,078,375. As of March 31, 2004 the amount
had not been received. The $1,078,375 subscription receivable has been shown as
a contra- equity account in the financial statements

4) In March 2004, 10 shares of preferred stock was issued to settle a collection
suit for attorneys fees.

5) During the frist quarter of 2004, a total of 1,110 shares of preferred stock
valued at $1,121,000,000 was issued to various consultants for services
performed and has been shown as non -cash consulting fees in the financial
statements

6) In March 2004, 511 shares of preferred stock was issued to the CEO of the
Company for shares personally pledged by him to the Internal Revenue Service as
guarantee for the payment of payroll tax liabilities.

7) The Company issued 797 shares of preferred stock to the CEO of the Company
pursuant to the terms of the CEO's employment agreement.

8) In March 2004, 21 shares of preferred stock valued at $21,000 was issued for
services performed realting to the travel center and has been shown as non -
cash general and administrative costs in the financial statements

The following transaction occurred in 2003:

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


                             See Accompanying Notes

                                        5



<PAGE>

                                 FUELNATION INC.
                          (A Development Stage Company)
                                 March 31, 2004
                                   (Unaudited)

Note 1. Basis of Presentation

      The accompanying unaudited financial statements of FuelNation Inc. (the
"Company") have been prepared in accordance with Regulation S-B promulgated by
the Securities and Exchange Commission and do not include all of the information
and footnotes required by generally accepted accounting principles in the United
States for complete financial statements. In the opinion of management, these
interim financial statements include all adjustments necessary in order to make
the financial statements not misleading. The results of operations for such
interim period are not necessarily indicative of results of operations for a
full year. The unaudited financial statements should be read in conjunction with
the audited financial statements and notes thereto of the Company and
management's discussion and analysis of financial condition and results of
operations included in the Annual Report on Form 10-KSB for the year ended
December 31, 2003.

     The accompanying unaudited interim financial statements have been prepared
on a going concern basis, which contemplates the realization of assets and the
liquidation of liabilities in the normal course of business. However, the
Company has a history of net losses and as of March 31, 2004 ,has a working
capital deficiency of $3,082,496 and a capital deficiency of approximately $37.9
million.________. Since October 2000, the Company has relied on financial
support from equity financing and loans from affiliated entities. Management is
currently seeking additional financing; however no assurances can be made that
such financing will be consummated. The continuation of the Company as a going
concern is dependent upon its ability to obtain financing, and to use the
proceeds from any such financing to increase its business to achieve profitable
operations. The accompanying financial statements do not include any adjustments
that would result should the Company be unable to continue as a going concern.

Note 2. Significant Accounting Policies

      The accounting policies followed by the Company are set forth in Note 2 to
the Company's financial statements in the December 31, 2003 Form 10-KSB.


Note 3. Basic and Diluted Loss Per Share

      Basic loss per share reflects the amount of loss for the period
attributable to each share of common stock outstanding during the reporting
period. Diluted loss per share reflects basic loss per share, while giving
effect to all dilutive potential common shares that were outstanding during the
period, such as common shares that could result from the potential exercise or
conversion of securities into common stock. The computation of diluted loss per
share does not assume conversion, exercise, or contingent issuance of securities
that would have an anti- dilutive effect on loss per share (i.e. reducing loss
per share). The dilutive effect, if any, of outstanding options and warrants and
their equivalents would be reflected in dilutive earnings per share by the
application of the treasury stock method which recognizes the use of proceeds
that could be obtained upon the exercise of operations and warrants in computing
diluted earnings per share. It assumes that any proceeds would be used to
purchase common stock at the average market price of the common stock during the
period. For the three months ended March 31, 2004 and 2003, all of the Company's
potential common shares were anti-dilutive and a dual presentation of loss per
share is not required. At March 31, 2004 there were 300,000 authorized and
un-issued options outstanding which could dilute future earnings per share.

                                       6

<PAGE>

Note 4. Related Party Transactions

The Company has borrowed monies from related parties to fund operations. In 2003
the Company borrowed $328,000 from the Chief Executive Officer ["CEO"] At March
31,2004 and 2003,the balance owed to affiliates was $175,324 and $325,221,
respectively. Currently, there are no repayment terms for the debt and it is
treated as if due on demand. Interest at the rate of 5% per annum is being
charged on the amount advanced in 2003. For the three months ended March 31,2004
and 2003,interest expense on loans from related parties was $3,509 and $0
respectively.

During 2003, the Company issued 8,000 shares of preferred stock to Alkhalifa
petroleum Corp. a company controlled by a director of the Company, Shaikh Isa
Mohammed Isa Alkhalifa, in exchange for personally guaranteeing an $8,000,000
bank line of credit on behalf of the Company. The line of credit is to be
utilized for future purchases and resale of petroleum products. As of March 31,
2004 the line of credit had not been utilized.


Note  5.  Notes Payable

In January 2004 the Company received $100,000 in total from two individuals and
incurred two demand notes for $50,000 each .The $100,000 proceeds were to be
utilized for a future Bond deposit. The demand notes bears interest at 12% per
annum. At March 31, 2004 the notes were still outstanding.

During the first quarter of 2004, the Company released 23,334 shares of
restricted common stock held by a third party and in turn the third party
cancelled a $ 25,000 promissory note held by him. [See Note 6] . Note 6.
Stockholders' Equity - Issuance of Common Stock

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

In February 2003 23,334 shares of restricted common stock was issued to settle a
liability in the amount of $25,000. The restriction was released in the first
quarter of 2004.

Preferred Stock

Preferred Stock - The Company authorized the issuance of up to 30,000 shares of
Series A Convertible Preferred Stock ("Series A Preferred" or the "Preferred").
Price per Share: $1,000.00 ("Original Purchase Price").

Each Preferred share will always maintain a conversion ratio to common stock
such that the percentage of ownership in the Company represented by one share of
Series A Convertible Preferred Stock is constant. One share of Series A
Convertible Preferred Stock is equal to .00255% of the total issued and fully
diluted common stock of the Company. The Series A Convertible Preferred Stock
upon issuance of all 30,000 shares will maintain 76.5% percent ownership and
votes on a fully diluted basis. The common shareholders would then maintain

Dividend Provisions: Non-cumulative dividends on the Series A Preferred will be
at the rate of 8% per share per annum ("Dividends"). Dividends will be payable
only if, as and when declared by the Board of Directors ("Board"). Liquidation
Preference: The Series A Preferred shall have liquidation rights senior to all
other outstanding securities of the Company, including all other series of
preferred shares and any class or series of Common Stock of the Company ("Junior
Stock"). The holders of Preferred Stock shall be entitled to receive upon a
Liquidation Event, in preference to and prior to any distribution to the holders
of Junior Stock, an amount (the "Preference Amount") equal to $2,000 for each
share of Preferred Stock plus all accrued but unpaid dividends on such Preferred
Stock, whether or not declared. After payment of the Preference Amount, the
holders of the Preferred Stock shall participate with the holders of the Junior
Stock on an as converted to Common Stock basis in the distribution of all of the
remaining proceeds available upon the consummation of a Liquidation Event. A
"Liquidation Event" shall include, in addition to the actual liquidation,
dissolution or winding up of the Company, any merger, reorganization,
consolidation or the like in which the Company's voting securities are exchanged
for or converted into less than a majority of the voting securities of the
surviving or resulting entity and/or any sale of all or substantially all of the
stock or assets of the Company.

                                       7

<PAGE>

Conversion: The holders of Series A Preferred will have the option to convert
the Series A Preferred, at any time, into shares of common stock of the Company.
One (1) Series A Convertible Preferred Stock is equal to .00255% of the total
issued and fully diluted common stock of the Company. Automatic Conversion: The
Series A Stock automatically will be converted into common stock at the then
applicable conversion rate on the majority vote of the holders of the Series A
Convertible Preferred Stock voting together.

Voting Rights: The holder of each share of the Series A Preferred will have the
right to vote the percentage of shares of common stock issuable upon conversion
of the Series A Preferred at the then applicable conversion percentage. The
holders of Series A Stock shall be entitled to vote on all matters on which the
common stockholders can vote and, in addition, shall have certain special voting
rights (see "Protective Provisions") .

Protective Provisions: The consent of the majority of holders of the Series A
Preferred, voting together as a single class, will be required for any action
which (a) alters or changes any of the powers, preferences, privileges or rights
of the Series A Preferred or increases or decreases the total number of
authorized shares of Series A Preferred, (b) authorizes or issues additional
shares (whether of any existing series of preferred stock or of a new class of
equity or debt) having preferences prior to or on a parity with Series A
Preferred as to dividends, liquidation, redemption or assets (c) reclassifies
any common stock into shares having preferences prior to or on a parity with the
Series A Preferred as to dividends, liquidation, redemption or assets, (d)
authorizes the issuance of more than the agreed upon number of shares of common
stock at a price less than the Series A Preferred price. The consent of the
majority of holders of the Series A Preferred, voting together as a single
class, will be required for any action which (e) amends, repeals or adds to any
provision of the Company's articles of incorporation or bylaws, (f) pays or
declares any dividend or distribution on any shares, or declares any redemption
of shares (other than employee stock repurchases pursuant to standard vesting
arrangements), (g) sells, leases, conveys, exchanges, transfers or otherwise
disposes of all or substantially all of the assets of the Company; (h)
authorizes any merger of the Company with another entity; or (i) authorizes the
voluntary or involuntary liquidation, dissolution or winding up of the Company
or its business. Consent of the holders of at least a majority of the Series A
Preferred, voting together as a single class, will be required for (i) any sale
by the Company of substantially all of its assets, (ii) any merger of the
Company with another entity, (iii) any liquidation or winding up of the Company,
(iv) any amendment of the Company's charter, or (v) certain other actions
materially affecting the Series A Preferred.

Composition of the Board: The Board of Directors of the Company will, effective
on the date of the Series A Preferred Closing, consist of five persons, which
shall include (a) the CEO, and (b) two representatives of the Series A Preferred
Investors. Directed shares: In the event the Company's underwriters in any
public offering allow the Company to direct the purchasers of any public
offering shares, the Series A Preferred Investors will be offered the right to
purchase a percentage of such shares equal to such Investors' pro rata share of
the Company's outstanding shares.

Registration Rights: (1) Demand Rights: If, at any time after June 1, 2007 (but
not within 6 months of the effective date of any registration), Investors
holding at least 40% of the common stock issued or issuable upon conversion of
the Series A Convertible Preferred Stock request that the Company file a
Registration Statement covering at least 20% of the common stock issued or
issuable upon conversion of the Series A Convertible Preferred Stock (or any
lesser percentage if the anticipated aggregate offering price would exceed
$5,000,000), the Company will use its best efforts to cause such shares to be
registered. The Company will not be obligated to effect more than two
registrations under these demand right provisions. Registrations on Form S-3:
Holders of common stock issued or issuable upon conversion of the Series A
Convertible Preferred Stock will have the right to require the Company to file
up to three Registration Statements on Form S-3 (or any equivalent successor
form), provided the anticipated aggregate offering price in each registration on
Form S-3 will exceed $2,000,000; and provided further that no more than one
registration on Form S-3 may be requested in any 12 month period.

                                       8
<PAGE>

Piggy-Back Registration: The Investors will be entitled to "piggyback"
registration rights on registrations of the Company, subject to the right of the
Company and its underwriters to reduce or eliminate in view of market conditions
the number of shares of the Investors proposed to be registered. Registration
Expenses: The registration expenses (exclusive of underwriting discounts and
commissions) of all of the registrations under paragraphs (1), (2) and (3) above
will be borne by the Company. Transfer of Registration Rights: The registration
rights may be transferred to a transferee who acquires at least 20% of an
Investor's shares. Transfer of registration rights to a partner or shareholder
of any Investor will be without restriction as to minimum shareholding. The
registration rights will terminate at such time as the holder is able to sell
its common stock under Rule 144 without restriction. No Registration of
Preferred: The registration rights set forth herein apply only to the Common and
the Company will never be obligated to register any of the Preferred.

During the first quarter of 2004, the Company replaced 165,493 shares of common
stock owned by existing shareholders by issuing 1,079 shares of preferred stock.
The 165,493 shares of common stock have subsequently been subscribed for by an
unrelated third party for $1,078,375. The $1,078,375 subscription receivable has
been shown as a contra- equity account in the financial statements.

During the first quarter of 2004, 17 shares of preferred stock was issued for a
subscription of $17,000 The subscription receivable was still outstanding as of
March 31, 2004.

In March 2004, 10 shares of preferred stock was issued to settle a collection
suit for attorney fees.

During the first quarter of 2004,a total of 1,110 shares of preferred stock was
issued to various consultants for services performed and has been shown as
non-cash consulting fees in the financial statements.

During the first quarter of 2004, 21 shares of preferred stock was issued for
services performed relating to the travel center and has been shown as non-cash
general and administrative costs in the financial statements.

During the first quarter of 2004, the Company issued 141 shares of preferred
stock for proceeds of $28,000 and replacement of 2,501 shares of common stock
owned by existing shareholders by virtue of various settlement and subscription
agreements. The 2,501 shares of common stock have subsequently been subscribed
for by an unrelated third party for $78,500. The $78,500 subscription receivable
has been shown as a contra- equity account in the financial statements.

In March 2004, 511 shares of preferred stock was issued to the CEO of the
Company for shares personally pledged by him to the Internal Revenue Service as
guarantee for the payment of payroll tax liabilities.

In March 2004, 797 shares of preferred stock was issued to the CEO of the
Company pursuant to the terms of the CEO's employment agreement.


Note 7. New Authoritative Accounting Pronouncements

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

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

                                       9

<PAGE>

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

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

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


Note 8 Contingencies and Legal Proceedings.

      In the normal course of business, the Company is exposed to a number of
other asserted and unasserted potential claims. Management, after review and
consultation with counsel, believes it has meritorious defenses and considers
that any liabilities from these matters would not materially affect the
financial position, liquidity or results of operations of the Company. See
additional information included in the Annual Report on Form 10-KSB for the year
ending December 31, 2003.

Note 9 Subsequent Events

In April 2005, we entered in a First Amendment and Restatement to The Stock
Assignment And Purchase Agreement Dated November 15, 2003 Between Fuelnation
Inc., (Hereinafter Referred To As "Seller / Assignor") and Sefico Inc.,
(Hereinafter Referred To As "Purchaser"). SEFICO Agreed to issue a bank
guarantee (standby letter of credit) to FuelNation Inc. in the amount of
$3,500,000 for the deferred payment of the total amount of common stock
purchased. The term of the standby letter of credit will be for a period of one
year.

In March 2005 we signed a three year employment contract and hired a Vice
President and Chief Investor Relations Officer, James A. Connolly III. The
annualized base salary of $125,000 until March 31, 2006 and $150,000 until March
31, 2007 and $200,000 for the remainder of the Initial Term.

In February 2005 we signed a three year employment contract and hired a Vice
President and Chief Investor Relations Officer, Joel Brownstein. The annualized
base salary of $125,000 until March 31, 2006 and $150,000 until March 31, 2007
and $200,000 for the remainder of the Initial Term.

                                       10

<PAGE>

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

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

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


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

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS

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

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

      o    Industry-wide petroleum margins;

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

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

      o    Market volatility due to world and regional events;

      o    Availability and cost of debt and equity financing;

      o    Our ability to service our existing indebtedness;

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

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

      o    Labor relations;

      o    U.S. and world economic conditions;

                                       11
<PAGE>

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

      o    Our present company structure;

      o    Our accumulated deficit and tax obligation;

      o    Supply and demand for refined petroleum products;

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

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

      o    Acts of war or terrorism;

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

      o    Other unpredictable or unknown factors not discussed.

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


OVERVIEW

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

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

                                       12

<PAGE>

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

FuelNation Inc., in addition, to the oil and gas wholesale marketing, is in the
final stages of planning to build and develop a portfolio of real estate assets
across the United States using our concept of the "Super Store" of Travel
Centers. Thus far all of the investment capital have been provided by Gerald A.
Brauser and his company Brauser Real Estate, LLC. Tentatively the development of
the project will be managed by Gerald A. Brauser who has established his real
estate career in 1955 as a Real Estate Management and Development Firm.
Throughout the 48 plus years history, the firm has been credited with a number
of notable accomplishments and a real estate portfolio exceeding $150 million.
Gerald A. Brauser's growing list of properties ranges in size from 7,200 to over
320,000 square feet in New York and Florida. As of January 2005, Mr. Brauser has
closed on the purchase of the land in Davie Florida with the seller. Currently,
FuelNation does not have any formal agreement signed with Mr. Brauser for
assumption of his contract or to jointly develop/operate the property.
FuelNation has worked directly with the architects and engineers and advanced
funds from Mr. Brauser for their services and work product. Mr. Brauser has
verbally offered to allow FuelNation to participate in the form of leasing the
property for fuel supply and operation or partnering by providing a loan on the
construction. In this regard, our director, Shaikh Isa Mohammed Isa Alkhalifa,
individually signed for a loan in the amount of $51,500,000 and received a loan
commitment to fund the construction of the project, subject to standard loan
conditions and we are reviewing the offer. Shaikh Isa has also signed for a
credit enhancement that will guarantee a bond issuance in the total amount of
$100 million dollars, in increments of $25 million dollars. Both loan offers and
the possibility for leasing are being analyzed by the board of directors for a
final decision.

STRUCTURE OF FUELNATION

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

                                       13

<PAGE>

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

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

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

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

Our website address is www.FuelNation.com. We make available on this website
under "Investor Relations", free of charge, our annual reports on Form 10-KSB,
our quarterly reports on Form 10-QSB, our current reports on Form 8-K, Forms 3,
4 and 5 filed via Edgar by our directors and executive officers and various
other SEC filings, including amendments to these reports, as soon as reasonably
practicable after we electronically file or furnish such reports to the SEC. The
information on our website, or on the site of our third-party service provider,
is not incorporated by reference into this report.

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

RESULTS OF OPERATIONS

      (Comparison of Results of Operations for the three month periods ended
March 31, 2004 and 2003)

      We generated no revenues during the three month periods ended March 31,
2004 and 2003. It is anticipated that we will be able to generate revenues in
2005 once we finalize our fuel supply agreement and begin delivering fuel to
petroleum marketers and end users. In addition, once we finalize the financing
and complete the building of Phase One of the travel center we will generate
revenues from that facility. Total operating expenses were $ 1,323,509 for the
three month periods ended March 31, 2004, compared to $ 224,807 for the three
month periods ended March 31, 2003. The expenses incurred during the three month
periods ended March 31, 2004 arose primarily from salaries and wages, including
related payroll expenses ($60,622), legal and professional ($23,050),consulting
fees ($42,000), other general and administrative expenses ($48,959),non - cash
consulting fees $1,110,000) and non - cash general
and administrative costs ($21,000). These expenses increased in 2004 over the
same period in 2003, primarily due to non- cash consulting fees ($1,110,000) and
non - cash general and administrative costs ($21,00).

Additionally, we incurred interest expense of $5,509 in 2004 compared with
interest expense of $1,543 in 2003. As a result, we incurred a Net loss of
$1,329,018 for the three month periods ended March 31, 2004, compared to a Net
Loss of $225,630 for the three month periods ended March 31, 2003.

                                       14
<PAGE>

PLAN OF OPERATION

      Because we have not generated any revenues as of the date of this Report,
we hereby submit our Plan of Operation pursuant to the requirements of
Regulation SB, promulgated under the Securities Act of 1933, as amended.

       Our objective is to attain vertical integration to the extent that we
have an ownership stake in every phase of an oil sale, from the extraction of
oil, to the refining and storage stage, to the shipping stage, and ultimately to
the wholesale and retail sale of oil products. We intend to build this vertical
integration through strategic partnerships and through strategic joint ventures
and acquisitions.

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

      Our next objective is to build and develop a portfolio of real estate
assets with our concept of the "Super Store" of Travel Centers across the United
States. We intend to accomplish this goal, grow our business, enhance earnings
and improve our return on capital by executing the following strategies, which
we believe capitalize on our existing competitive strengths.

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

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

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

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

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

      o     owning petroleum marketers in strategic geographic locations; and

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

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

                                       15
<PAGE>

DATA CENTERS AND NETWORK ACCESS

      Our data center in the United States is located at leased facilities at
Echosat in Lexington, Kentucky. A data center is a facility containing servers,
modem banks, network circuits and other physical equipment necessary to connect
users to the Internet. The data center has multiple levels of redundant
connectivity to the Internet, back-up power, fire suppression, seismic
reinforcement and security surveillance 24 hours a day, 7 days a week. The
current base monthly rent is $2,000 per month, on a month to month basis.

TRENDS

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

Top World Oil Producers, 2003*
         Country                 Total Oil Production**
                               (million barrels per day)
1)  Saudi Arabia                           9.95
2)  United States                          8.84
3)  Russia                                 8.44
4)  Iran                                   3.87
5)  Mexico                                 3.79
6)  China                                  3.54
7)  Norway                                 3.27
8)  Canada                                 3.11
9)  United Arab Emirates                   2.66
10) Venezuela                              2.58
11) United Kingdom                         2.39
12) Kuwait                                 2.32
13) Nigeria                                2.25

--------------
*Table includes all countries total oil production exceeding 2 million barrels
pre day in 2002. **Total Oil Production includes crude oil, natural gas liquids,
condensate, refinery gain, and other liquids.

Top World Oil Net Exporters, 2003*
         Country                        Net Oil Exports
                                  (million barrels per day)
1)  Saudi Arabia                              8.38
2)  Russia                                    5.81
3)  Norway                                    3.02
4)  Iran                                      2.48
5)  United Arab Emirates                      2.29
6)  Venezuela                                 2.23
7)  Kuwait                                    2.00
8)  Nigeria                                   1.93
9)  Mexico                                    1.74
10) Algeria                                   1.64
11) Libya                                     1.25

--------------
*Table includes all countries with net exports exceeding 1 million barrels per
day in 2002.
This information is provided from the Energy Information Association.
http://www.eia.doe.gov/emeu/cabs/topworldtables1_2.html

These trends taken together create a picture of opportunity for our future
growth. We anticipate that the vertical integration strategy will bode well for
our future, as activity along the entire value chain should increase not just in
the domestic sense but globally as well. However, there can be no assurances
that this will occur.

                                       16
<PAGE>

INFLATION

      Inflation has not had a significant impact on our results of operations
and is not anticipated to have a significant negative impact in the foreseeable
future. However, there is no assurance that inflation will not have a material
adverse impact on our future results of operations.

LIQUIDITY AND CAPITAL RESOURCES

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

At March 31, 2004 we had a working capital deficit of $3,082,496. For the three
months ending March 31, 2004, net cash used by operating activities was $82,875.
This was primarily attributable to a net loss for the year of
$1,329,018 and offset by increase of payables and liabilities of $102,919, non -
cash consulting fees of $1,110,000 and non - cash general and administrative
costs of $21,000. For the three months ending March 31, 2004, net cash used in
investing activities was $1,388 which resulted from the purchase of computer
equipment. For the three months ending March 31, 2004, net cash provided by
financing activities was $130,638 which mainly resulted from the proceeds of
sale of preferred stock of $133,000, net proceeds of sale of common stock of
$50,000, proceeds from issuance of note payable of $100,000 and offset by
payment to related party of $ $149,897.

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

      It is anticipated that we will, in all likelihood, sustain operating
expenses without corresponding revenues, at least into 2005. There is no
assurance that we will achieve our expansion goals and the failure to achieve
such goals would have an adverse impact on us.

Contractual Obligations And Commercial Commitments

      The following tables summarize our contractual obligations and commercial
commitments as of March 31, 2004:

<TABLE>
<CAPTION>
                                                             Payments Due By Period
                                              -----------------------------------------------------
Significant Contractual Obligations   Total   Within 1 Year   2-3 Years   4-5 Years   After 5 Years
-----------------------------------   -----   -------------   ---------   ---------   -------------
<S>                                  <C>         <C>           <C>         <C>           <C>
Operating Leases                     $47,646     $12,852       $14,391     $14,820       $5,583
Capital Leases                            --
</TABLE>

      We are committed under a non-cancelable operating lease for our office
space, expiring at 2007. These leases generally provide minimum rent plus
payments for real estate taxes and operating expenses, subject to escalations.
Our lease payment obligations under these leases totaled $12,280 for 2003, and
an aggregate of $59,926 through 2007. We do not have any capital leases. We also
have a month to month lease with Echosat for a facility which houses its data
centers at $2,000 per month.

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

                                       17

<PAGE>

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

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

Critical Accounting Policies

      The preparation of financial statements in conformity with accounting
principles generally accepted in the United States requires management of the
Company to make assumptions, estimates and judgments that affect the amounts
reported in the financial statements, including the notes thereto, and related
disclosures of commitments and contingencies, if any. The Company considers its
critical accounting policies to be those that require the more significant
judgments and estimates in the preparation of the Company's financial
statements, including the following: impairment of long-lived assets;
capitalized technology costs and accounting for expenses in connection with
stock issuances, stock options and warrants. Management relies on historical
experience and on other assumptions believed to be reasonable under the
circumstances in making its judgment and estimates. Actual results could differ
materially from those estimates. There have been no significant changes in the
assumptions, estimates and judgments in the preparation of these financial
statements from the assumptions, estimates and judgments used in the preparation
of the Company's prior years audited financial statements.

ITEM 3. CONTROLS AND PROCEDURES.

DISCLOSURE CONTROLS AND PROCEDURES

      The Company carried out an evaluation, under the supervision and
participation of the Company's Chief Executive Officer and acting Chief
Financial Officer (the "Officers") of the effectiveness of the design and
operation of the Company's disclosure controls and procedures as of the end of
the period covered by this quarterly report pursuant to Securities Exchange Act
Rule 13a-14. Based upon that evaluation, the Officers concluded that the
Company's disclosure controls and procedures are effective in timely alerting
them to material information relating to the Company required to be included in
the Company's periodic SEC filings, including this report.

INTERNAL CONTROLS

      There were no significant changes made in the Company's internal controls
or in other factors that could significantly affect these controls subsequent to
the date of their evaluation.

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<PAGE>

                           PART II. OTHER INFORMATION



ITEM 1. LEGAL PROCEEDINGS.

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

ITEM 2. CHANGES IN SECURITIES, USE OF PROCEEDS AND ISSUER PURCHASES OF EQUITY
        SECURITIES

The securities described below represent our securities sold by us for the
period starting January 01, 2004 and ending March 31, 2004 that were not
registered under the Securities Act of 1933, as amended, and Rule 506
promulgated there under and applicable state securities laws, all of which were
issued by us pursuant to exemptions under the Securities Act. Underwriters were
involved in none of these transactions. Please refer to our financial statements
Note 6. Stockholders' Equity - Issuance of Common and Preferred Stock under the
heading "Preferred Stock" for a complete description of the securities.

ISSUANCES OF STOCK FOR SERVICES

During the first quarter of 2004, FuelNation issued a total of 1,131 shares of
Preferred Stock valued at $1,131,000 to Consultants for services on behalf of
the company. These offers and sales were made in reliance on the exemption under
Section 4(2) of the Securities Act. No advertising or general solicitation was
employed in offering the securities. The offers and sales were made to
accredited investors and transfer of the Preferred Stock was restricted in
accordance with the requirements of the Securities Act of 1933.

ISSUANCES OF STOCK FOR SATISFACTION OF OBLIGATIONS

In March 2004, FuelNation issued a total of 10 shares of Preferred Stock valued
at $10,000 to satisfy obligations on behalf of the company. These offers and
sales were made in reliance on the exemption under Section 4(2) of the
Securities Act. No advertising or general solicitation was employed in offering
the securities. The offers and sales were made to accredited investors and
transfer of the Preferred Stock was restricted in accordance with the
requirements of the Securities Act of 1933.

ISSUANCES OF STOCK FOR CASH

During the first quarter of 2004, FuelNation issued a total of 158 shares of
Preferred Stock valued at $158,000 for proceeds of $28,000, subscription
receivable of $17,000 and replacement of 2,501 shares of common stock owned by
existing shareholders by virtue of various settlement and subscription
agreements. The proceeds from the sale of preferred stock were used for general
corporate operational purposes. The subscription receivable was still
outstanding as of March 31,2004. These offers and sales were made in reliance on
the exemption under Section 4(2) of the Securities Act. No advertising or
general solicitation was employed in offering the securities. The offers and
sales were made to accredited investors and transfer of the Preferred Stock was
restricted in accordance with the requirements of the Securities Act of 1933.

ISSUANCES OF STOCK FOR REPLACEMENT OF COMMON STOCK

During the first quarter of 2004, FuelNation issued a total of 1,079 shares of
Preferred Stock valued at $1,079,000 for replacement of 165,493 shares of common
stock. These offers and sales were made in reliance on the exemption under
Section 4(2) of the Securities Act. No advertising or general solicitation was
employed in offering the securities. The offers and sales were made to
accredited investors and transfer of the Preferred Stock was restricted in
accordance with the requirements of the Securities Act of 1933.

ISSUANCES OF STOCK FOR GUARANTEE

In March 2004, FuelNation issued a total of 511 shares of Preferred Stock valued
at $511,000 to the CEO of the Company for shares personally pledged by him to
the Internal Revenue Service as guarantee for the payment of payroll tax
liabilities. These offers and sales were made in reliance on the exemption under
Section 4(2) of the Securities Act. No advertising or general solicitation was
employed in offering the securities. The offers and sales were made to
accredited investors and transfer of the Preferred Stock was restricted in
accordance with the requirements of the Securities Act of 1933.

                                       19

<PAGE>

ISSUANCES OF STOCK FOR EMPLOYMENT

In March 2004, FuelNation issued a total of 797 shares of Preferred Stock valued
at $797,000 to the CEO of the Company pursuant to the terms of the CEO's
employment agreement. These offers and sales were made in reliance on the
exemption under Section 4(2) of the Securities Act. No advertising or general
solicitation was employed in offering the securities. The offers and sales were
made to accredited investors and transfer of the Preferred Stock was restricted
in accordance with the requirements of the Securities Act of 1933.


ITEM 3. DEFAULTS UPON SENIOR SECURITIES - NONE



ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - NONE



ITEM 5. OTHER INFORMATION



ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K -

      (a) Exhibits

            31.1  Chief Executive Officer Certification

            31.2  Principal Financial Officer

            32.1  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

            32.2  Certification Pursuant to 18 U.S.C. Section 1350, as Adopted
                  Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



      (b) Reports on Form 8-K

           (1) January 25, 2005

           (2) April 06, 2005


                                       20

<PAGE>

                                   SIGNATURES

      Pursuant to the requirements of Section 12 of the Securities and Exchange
Act of 1934, the Registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.

                                      FUELNATION, INC.
                                        (Registrant)

                                      Dated: April 06, 2005

                                      By: /s/ Chris R. Salmonson
                                          --------------------------
                                          Chris R. Salmonson,
                                          President




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