UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

_______________

FORM 10-Q

______________

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

For the quarterly period ended September 30, 2008

 ̈TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from: _____________ to _____________

FUELNATIONä INC.

(Name of small issuer in its Charter)

_____________

|                                |                    
|------------------------------- | -------------------
|Florida                         | 65-0827283         
|(State or other jurisdiction of | (I.R.S. Employer   
|Incorporation or organization)  | Identification No.)

999 Stinson Way, Suite 301

West Palm Beach, Florida 33411

(Address of principal executive offices)

561-383-8212

(Issuer's telephone number, including area code)

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

Securities registered pursuant to Section 12(g) of the Act:

Common Stock, $.01 par value

Class A Convertible Preferred Stock, $.01 par value

|                                                                                                                                                                                                                                              |   |                            |   |                           |   |  |  | 
|--------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- | - | -------------------------- | - | ------------------------- | - |  |  | 
|Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 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.                                                                                                                                    | ý | Yes                        |  ̈ | No                       
|                                                                                                                                                                                                                                             
|Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.                                                                                   
|                                                                                                                                                                                                                                              |  
|Large accelerated filer                                                                                                                                                                                                                       |  ̈ |                            |   | Accelerated filer         |  ̈ | 
|Non-accelerated filer                                                                                                                                                                                                                         |  ̈ | (Do not check if a smaller |   | Smaller reporting company | ý | 
|                                                                                                                                                                                                                                              |   | reporting company)         |   |                           |   | 
|                                                                                                                                                                                                                                              |  
|Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).                                                                                                                             
|                                                                                                                                                                                                                                              |  ̈ | Yes                        | ý | No                       
|                                                                                                                                                                                                                                              |  
|Indicate the number of shares outstanding of each of the issuers classes of common stock, as of the latest practicable date.                                                                                                                
|The Registrants common stock outstanding as of November 11, 2008, was 955,366,239 shares.                                                                                                                                                   













---

FUELNATION, INC.

[A DEVELOPMENT STAGE COMPANY]

CONTENTS



|                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                       
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|PART I  FINANCIAL INFORMATION                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|ITEM 1.      FINANCIAL STATEMENTS.
1
ITEM 2.      MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
19
ITEM 3.      QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
26
ITEM 4.      CONTROLS AND PROCEDURES
26
PART II  OTHER INFORMATION
ITEM 1.      LEGAL PROCEEDINGS
28
ITEM 1A.   RISK FACTORS
28
ITEM 2.      UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
28
ITEM 3.      DEFAULTS UPON SENIOR SECURITIES.
28
ITEM 4.      SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
32
ITEM 5.      OTHER INFORMATION
32
ITEM 6.      EXHIBITS
32









ii



---

CAUTION CONCERNING FORWARD-LOOKING STATEMENTS



The following discussion should be read in conjunction with our Financial Statements and notes thereto included herein. This quarterly financial statement is un-audited and contains forward-looking statements that involve risks and uncertainties, principally in the sections entitled description of business, risk factors, and managements discussion and analysis of financial condition and results of operations. All statements other than statements of historical fact contained in this quarterly financial statement, including statements regarding future events, our future financial performance, business strategy and plans and objectives of management for future operations, are forward-looking statements. We have attempted to identify forward-looking statements by terminology including anticipates, believes, can, continue, could, estimates, expects, intends, may, plans, potential, predicts, should or will or the negative of these terms or other comparable terminology. Although we do not make forward-looking statements unless we believe we have a reasonable basis for doing so, we cannot guarantee their accuracy. These statements are only predictions and involve known and unknown risks, uncertainties and other factors, including the risks outlined under risk factors or elsewhere in this quarterly financial statement, which may cause our or our industrys actual results, levels of activity, performance or achievements to be materially different from any future results, levels of activity, performance or achievements expressed or implied by these forward-looking statements. Moreover, we operate in a very competitive and rapidly changing environment. New risks emerge from time to time and it is not possible for us to predict all risk factors, nor can we address the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause our actual results to differ materially from those contained in any forward-looking statements.

You should not place undue reliance on any forward-looking statement, each of which applies only as of the date of this quarterly financial statement. Before you invest in our common stock, you should be aware that the occurrence of the events described in the section entitled risk factors and elsewhere in this quarterly financial statement could negatively affect our business, operating results, financial condition and stock price. Except as required by law, we undertake no obligation to update or revise publicly any of the forward-looking statements after the date of this quarterly financial statement to conform our statements to actual results or changed expectations.



FuelNation, Inc. is referred to herein as the Company, "FuelNation", we, our or us.



iii



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PART I  FINANCIAL INFORMATION



ITEM 1.

FINANCIAL STATEMENTS.

FUELNATION INC.

(A Development Stage Company)

CONSOLIDATED BALANCE SHEETS

|                                                                                                            |  |               |             |   |              |   |             |  
|----------------------------------------------------------------------------------------------------------- |  | ------------- | ----------- | - | ------------ | - | ----------- | -
|                                                                                                            |  | September 30, |             |   | December 31, |  
|                                                                                                            |  | 2008          |             |   | 2007         |  
|                                                                                                            |  | [Unaudited]   |             |   | [Audited]    |  
|                                                                                                            |  |               |             |   |              |  
|ASSETS                                                                                                      |  |               |             |   |              |  
|Cash                                                                                                        |  | $             | 11,170      |   |              | $ |            |  
|Property and equipment, net of accumulated depreciation of $276,844                                         |  |               |            |   |              |   |            |  
|Other receivables- current                                                                                  |  |               | 168,001     |   |              |   | 166,148     |  
|Total  Assets                                                                                               |  | $             | 179,171     |   |              | $ | 166,148     |  
|                                                                                                            |  |               |             |   |              |   |             |  
|LIABILITIES AND STOCKHOLDERS' [DEFICIT]                                                                     |  |               |             |   |              |   |             |  
|CURRENT LIABILITIES:                                                                                        |  |               |             |   |              |   |             |  
|Cash overdraft                                                                                              |  | $             |            |   |              | $ | 1,162       |  
|Accounts payable                                                                                            |  |               | 1,399,476   |   |              |   | 1,399,475   |  
|Accrued Liabilities                                                                                         |  |               | 908,804     |   |              |   | 643,964     |  
|Payroll and Taxes Payable                                                                                   |  |               | 2,312,374   |   |              |   | 2,297,469   |  
|Due to Affiliates                                                                                           |  |               | 2,618,145   |   |              |   | 2,732,379   |  
|Note payable                                                                                                |  |               | 790,000     |   |              |   | 100,000     |  
|Other Payables                                                                                              |  |               | 360,042     |   |              |   | 150,102     |  
|                                                                                                            |  |               |             |   |              |   |             |  
|Total Current Liabilities                                                                                   |  |               | 8,388,841   |   |              |   | 7,324,551   |  
|                                                                                                            |  |               |             |   |              |   |             |  
|Commitments and Contingencies                                                                               |  |               |            |   |              |   |            |  
|                                                                                                            |  |               |             |   |              |   |             |  
|                                                                                                            |  |               |             |   |              |   |             |  
|STOCKHOLDERS' EQUITY [DEFICIT]:                                                                             |  |               |             |   |              |   |             |  
|                                                                                                            |  |               |             |   |              |   |             |  
|Preferred Stock, $.01 par value, 5,000,000 shares authorized;                                               |  |               |             |   |              |   |             |  
|5,350 and 29,286 issued and outstanding at September 30, 2008 and December 31, 2007 respectively            |  |               | 54          |   |              |   | 293         |  
|Common Stock, $.01 par value, 1,500,000,000 shares authorized;                                              |  |               |             |   |              |   |             |  
|783,718,180 and 144,143,148 issued and outstanding at September 30, 2008 and December 31, 2007 respectively |  |               | 7,837,182   |   |              |   | 1,441,431   |  
|Additional paid-in capital                                                                                  |  |               | 42,233,771  |   |              |   | 46,562,823  |  
|(Deficit) Accumulated in the Development Stage                                                              |  |               | (58,280,677 | ) |              |   | (55,162,950 | )
|Total Stockholders' [Deficit]                                                                               |  |               | (8,209,670  | ) |              |   | (7,158,403  | )
|                                                                                                            |  |               |             |   |              |   |             |  
|Total Liabilities and Stockholders' [Deficit]                                                               |  | $             | 179,171     |   |              | $ | 166,148     |  



The accompanying notes are an integral part of these financial statements.





1



---







FUELNATION INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                            |  |                    |             |   |      |   |            |  
|------------------------------------------- |  | ------------------ | ----------- | - | ---- | - | ---------- | -
|                                            |  | Three Months Ended |            
|                                            |  | September 30,      |            
|                                            |  | 2008               |             |   | 2007 |  
|                                            |  |                    |             |   |      |  
|Revenue                                     |  | $                  |            |   |      | $ |           |  
|                                            |  |                    |             |   |      |   |            |  
|Operating expenses:                         |  |                    |             |   |      |   |            |  
|Salaries and wages including related taxes  |  |                    | 77,046      |   |      |   | 67,385     |  
|Consulting fees                             |  |                    | 99,700      |   |      |   |            |  
|Consulting fees - related party             |  |                    |             |   |      |   |            |  
|Legal and professional                      |  |                    | 33,018      |   |      |   | 12,989     |  
|Marketing and promotion                     |  |                    |             |   |      |   |            |  
|Rent                                        |  |                    |            |   |      |   | 8,706      |  
|Rent - related party                        |  |                    |             |   |      |   |            |  
|Depreciation                                |  |                    |            |   |      |   |            |  
|Other general and administrative expenses   |  |                    | 120,457     |   |      |   | 14,840     |  
|Impairment loss on technology               |  |                    |             |   |      |   |            |  
|Write down of inventory                     |  |                    |             |   |      |   |            |  
|Loss - deposits                             |  |                    |             |   |      |   |            |  
|Financing costs                             |  |                    |             |   |      |   |            |  
|Non - cash consulting fees                  |  |                    | 93,000      |   |      |   |            |  
|Non - cash consulting fees - related party  |  |                    |             |   |      |   |            |  
|Non - cash financing costs                  |  |                    | 235,000     |   |      |   |            |  
|Non - cash general and administrative costs |  |                    |             |   |      |   |            |  
|Non - cash employee compensation            |  |                    |             |   |      |   |            |  
|Stock- based compensation expense           |  |                    | 47,646      |   |      |   | 47,646     |  
|Fuel oil transportation costs               |  |                    |             |   |      |   |            |  
|Research and development cost               |  |                    |            |   |      |   |           |  
|Total operating expenses                    |  |                    | 705,867     |   |      |   | 151,566    |  
|                                            |  |                    |             |   |      |   |            |  
|Operating Loss                              |  |                    | (705,867    | ) |      |   | (151,566   | )
|                                            |  |                    |             |   |      |   |            |  
|Other Income (Expense):                     |  |                    |             |   |      |   |            |  
|Other (Expense) Income                      |  |                    |            |   |      |   |           |  
|Interest expense - related party            |  |                    | (32,585     | ) |      |   | (32,726    | )
|Interest expense                            |  |                    | (20,034     | ) |      |   | (3,000     | )
|Total other (expense), net                  |  |                    | (52,619     | ) |      |   | (35,726    | )
|                                            |  |                    |             |   |      |   |            |  
|Net Loss                                    |  | $                  | (758,486    | ) |      | $ | (187,292   | )
|                                            |  |                    |             |   |      |   |            |  
|Basic and Diluted Net Loss per Common Share |  | $                  | (0.00       | ) |      | $ | (0.00      | )
|                                            |  |                    |             |   |      |   |            |  
|Basic and Diluted Weighted Average Common   |  |                    |             |   |      |   |            |  
|Shares Outstanding                          |  |                    | 752,648,886 |   |      |   | 84,160,520 |  



The accompanying notes are an integral part of these financial statements.



2



---





FUELNATION INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

|                                            |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|------------------------------------------- |  | ----------------- | ----------- | - | ------------------ | - | ---------- | ------------------------------------------ |  | - | ----------- | -
|                                            |  |                   |             |   |                    |   |            | Accumulative in the Development
Stage From | 
|                                            |  | Nine Months Ended |             |   | September 30,
2000 |  
|                                            |  | September 30,     |             |   | To                 |  
|                                            |  | 2008              |             |   | 2007               |   |            | September 30,
2008                         | 
|                                            |  |                   |             |   |                    |   |            |                                            | 
|                                            |  |                   |             |   |                    |   |            |                                            | 
|Revenue                                     |  | $                 |            |   |                    | $ |           |                                            |  | $ |            |  
|                                            |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Operating expenses:                         |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Salaries and wages including related taxes  |  |                   | 257,707     |   |                    |   | 250,975    |                                            |  |   | 4,016,516   |  
|Consulting fees                             |  |                   | 440,690     |   |                    |   | 88,004     |                                            |  |   | 1,444,141   |  
|Consulting fees - related party             |  |                   |             |   |                    |   |            |                                            |  |   | 221,162     |  
|Legal and professional                      |  |                   | 78,594      |   |                    |   | 156,170    |                                            |  |   | 1,440,219   |  
|Marketing and promotion                     |  |                   |             |   |                    |   |            |                                            |  |   | 512,293     |  
|Rent                                        |  |                   | 16,624      |   |                    |   | 35,658     |                                            |  |   | 442,147     |  
|Rent - related party                        |  |                   |             |   |                    |   |            |                                            |  |   | 45,387      |  
|Depreciation                                |  |                   |            |   |                    |   |            |                                            |  |   | 276,847     |  
|Other general and administrative expenses   |  |                   | 478,233     |   |                    |   | 107,707    |                                            |  |   | 2,336,328   |  
|Impairment loss on technology               |  |                   |             |   |                    |   |            |                                            |  |   | 1,581,747   |  
|Write down of inventory                     |  |                   |             |   |                    |   |            |                                            |  |   | 499,749     |  
|Loss - deposits                             |  |                   |             |   |                    |   |            |                                            |  |   | 1,022,500   |  
|Financing costs                             |  |                   | 295,000     |   |                    |   |            |                                            |  |   | 465,042     |  
|Non - cash consulting fees                  |  |                   | 587,790     |   |                    |   |            |                                            |  |   | 29,903,386  |  
|Non - cash consulting fees - related party  |  |                   |             |   |                    |   |            |                                            |  |   | 3,644,251   |  
|Non - cash financing costs                  |  |                   | 658,800     |   |                    |   |            |                                            |  |   | 771,000     |  
|Non - cash general and administrative costs |  |                   |             |   |                    |   |            |                                            |  |   | 42,000      |  
|Non - cash employee compensation            |  |                   |             |   |                    |   |            |                                            |  |   | 6,962,527   |  
|Stock- based compensation expense           |  |                   | 142,938     |   |                    |   | 297,320    |                                            |  |   | 839,369     |  
|Fuel oil transportation costs               |  |                   |             |   |                    |   | 357,881    |                                            |  |   | 657,881     |  
|Research and development cost               |  |                   |            |   |                    |   |           |                                            |  |   | 10,000      |  
|Total operating expenses                    |  |                   | 2,956,376   |   |                    |   | 1,293,715  |                                            |  |   | 57,134,492  |  
|                                            |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Operating Loss                              |  |                   | (2,956,376  | ) |                    |   | (1,293,715 | )                                          |  |   | (57,134,492 | )
|Other Income (Expense):                     |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Other (Expense) Income                      |  |                   |            |   |                    |   | 1          |                                            |  |   | (694,954    | )
|Interest expense - related party            |  |                   | (95,765     | ) |                    |   | (91,288    | )                                          |  |   | (296,651    | )
|Interest expense                            |  |                   | (65,584     | ) |                    |   | (9,002     | )                                          |  |   | (154,580    | )
|Total other (expense), net                  |  |                   | (161,349    | ) |                    |   | (100,289   | )                                          |  |   | (1,146,185  | )
|                                            |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Net Loss                                    |  | $                 | (3,117,725  | ) |                    | $ | (1,394,004 | )                                          |  | $ | (58,280,677 | )
|                                            |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Basic and Diluted Net Loss per Common Share |  | $                 | (0.01       | ) |                    | $ | (0.02      | )                                          |  |   |             |  
|Basic and Diluted Weighted Average Common   |  |                   |             |   |                    |   |            |                                            |  |   |             |  
|Shares Outstanding                          |  |                   | 415,737,651 |   |                    |   | 79,756,635 |                                            |  |   |             |  

The accompanying notes are an integral part of these financial statements.



3



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FUELNATION INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

|                                                          |  |                   |            |   |      |   |            |                                       |  |   |             |   | 
|--------------------------------------------------------- |  | ----------------- | ---------- | - | ---- | - | ---------- | ------------------------------------- |  | - | ----------- | - | 
|                                                          |  |                   |            |   |      |   |            | Accumulative
During
Development
Stage | 
|                                                          |  | Nine Months Ended |            |   |     
|                                                          |  | September 30,     |            |   |     
|                                                          |  | 2008              |            |   | 2007 |   |            |                                      
|                                                          |  |                   |            |   |      |   |            |                                       | 
|Operating Activities:                                     |  |                   |            |   |      |   |            |                                       | 
|Net loss                                                  |  | $                 | (3,117,725 | ) |      | $ | (1,394,004 | )                                     |  | $ | (58,280,677 | )
|Adjustments to reconcile net loss to net cash provided by |  |                   |            |   |      |   |            |                                       | 
|(used) in operating activities:                           |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Depreciation                                              |  |                   |           |   |      |   |            |                                       |  |   | 276,847     |  
|Write- down of Technology                                 |  |                   |            |   |      |   |            |                                       |  |   | 1,581,747   |  
|Write- down of Inventory                                  |  |                   |            |   |      |   |            |                                       |  |   | 499,749     |  
|Non- Cash Employee Compensation                           |  |                   |            |   |      |   |            |                                       |  |   | 6,962,527   |  
|Non- Cash Consulting Fees                                 |  |                   | 587,790    |   |      |   |            |                                       |  |   | 29,903,386  |  
|Non- Cash Consulting Fees -Related Party                  |  |                   |            |   |      |   |            | 3,644,251                             | 
|Non- Cash Financing Costs                                 |  |                   | 658,800    |   |      |   |            |                                       |  |   | 771,000     |  
|Non- Cash General and Administrative Costs                |  |                   |            |   |      |   |            | 42,000                                | 
|Write- Down of Investments                                |  |                   |            |   |      |   |            |                                       |  |   | 657,686     |  
|Write- Down of Deposits                                   |  |                   |            |   |      |   |            |                                       |  |   | 1,022,500   |  
|Other                                                     |  |                   | 2,152      |   |      |   |            |                                       |  |   | 60,660      |  
|Amortization of Discount on Convertible Debt              |  |                   |            |   |      |   |            | 30,394                                | 
|Stock based compensation expense                          |  |                   | 142,938    |   |      |   | 297,320    |                                       |  |   | 839,369     |  
|                                                          |  |                   |            |   |      |   |            |                                       |  |   |            |  
|Changes in Assets and Liabilities:                        |  |                   |            |   |      |   |            |                                       |  |   |             |  
|[Increase] Decrease in:                                   |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Inventory                                                 |  |                   |            |   |      |   |            |                                       |  |   | (499,748    | )
|Due from Escrow Accounts                                  |  |                   |            |   |      |   |            |                                       |  |   | (45,000     | )
|Due from Affiliates                                       |  |                   | 346,045    |   |      |   | 546,996    |                                       |  |   | 3,109,043   |  
|Other                                                     |  |                   | (1,853     | ) |      |   | 59,835     |                                       |  |   | (36,176     | )
|                                                          |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Increase [Decrease] in :                                  |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Accounts Payable                                          |  |                   |           |   |      |   | 504,961    |                                       |  |   | 1,432,388   |  
|Accrued Liabilities                                       |  |                   | 509,839    |   |      |   | 100,288    |                                       |  |   | 1,245,136   |  
|Payroll and Taxes Payable                                 |  |                   | 14,905     |   |      |   | 9,104      |                                       |  |   | 2,312,372   |  
|                                                          |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Net cash provided by (used) in operating activities       |  |                   | (857,109   | ) |      |   | 124,500    |                                       |  |   | (4,470,546  | )
|                                                          |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Investing Activities:                                     |  |                   |            |   |      |   |            |                                       |  |   |             |  
|Payments for Technology                                   |  |                   |           |   |      |   |           |                                       |  |   | (544,903    | )
|Purchase of Fixed Assets                                  |  |                   |           |   |      |   |            |                                       |  |   | (276,846    | )
|Bond Issuance Deposit                                     |  |                   |            |   |      |   |            |                                       |  |   | (380,000    | )
|Refund of Bond Issuance Deposit                           |  |                   |            |   |      |   |            |                                       |  |   | 50,000      |  
|Advances Toward Pending Acquisition                       |  |                   |            |   |      |   |            |                                       |  |   | (402,724    | )
|Cash Received in Acquisition                              |  |                   |           |   |      |   |           |                                       |  |   | 1,109       |  
|Net cash used in investing activities                     |  |                   |           |   |      |   |           |                                       |  |   | (1,553,364  | )





4



---





FUELNATION INC.

(A Development Stage Company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Continued)



|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|------------------------------------------------- |  | - | ------- | - |  | - | -------- | ------- |  | - | --------- | -
|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|Financing Activities:                             |  |   |         |   |  |   |          |         |  |   |           |  
|Payment for option                                |  |   |        |   |  |   |          |         |  |   |          |  
|Cash Overdraft                                    |  |   | (1,161  | ) |  |   | 712      |         |  |   |          |  
|Net Proceeds from issuance of common stock        |  |   | 424,440 |   |  |   |          |         |  |   | 4,482,909 |  
|Net Proceeds from issuance of preferred stock     |  |   |         |   |  |   |          | 610,200 | 
|Proceeds from Issuance of Convertible Debt        |  |   |         |   |  |   |          |         |  |   | 35,953    |  
|Proceeds from Related Party Debt                  |  |   |         |   |  |   |          |         |  |   | 832,069   |  
|Payment of Related Party Debt                     |  |   |         |   |  |   |          |         |  |   | (223,705  | )
|Payment of Convertible Debt                       |  |   |         |   |  |   |          |         |  |   | (11,542   | )
|Exercise of Stock Options                         |  |   |         |   |  |   |          |         |  |   | 15,000    |  
|Debt Restructuring                                |  |   |         |   |  |   |          |         |  |   | (255,804  | )
|Net Proceeds / (Payments) of Loans Payable        |  |   | 445,000 |   |  |   | (132,398 | )       |  |   | 550,000   |  
|Net cash provided by financing activities         |  |   | 868,279 |   |  |   | (131,686 | )       |  |   | 6,035,080 |  
|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|Net (Decrease)  in Cash                           |  |   | 11,170  |   |  |   | (7,186   | )       |  |   | 11,170    |  
|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|Cash, Beginning of Period                         |  |   |        |   |  |   | 7,186    |         |  |   |          |  
|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|Cash, End of Period                               |  | $ | 11,170  |   |  | $ |         |         |  | $ | 11,170    |  
|                                                  |  |   |         |   |  |   |          |         |  |   |           |  
|Supplemental Disclosure of Cash Flow Information: |  |   |         |   |  |   |          |         | 
|Cash paid during the period for interest:         |  | $ | 6,500   |   |  | $ | 2        |         |  | $ | 9,222     |  
|Cash paid during the period for Income Taxes:     |  | $ |        |   |  | $ |         |         |  |   | .         |  



The accompanying notes are an integral part of these financial statements.







5



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Supplemental Schedule of Non Cash Investing and Financing Activities:



During the nine months ended September 30, 2008 and 2007

During the first quarter of 2008, 75 shares of preferred stock were converted into 12,429,152 shares of common stock based on a conversion rate formula.



During the second quarter of 2008, 21,011 shares of preferred stock were converted into 347,774,072 shares of common stock based on a conversion rate formula.



During the second quarter of 2008, 3,187 shares of preferred stock owned by the CEO of the Company were converted into 52,751,224 shares of common stock based on a conversion rate formula.



During the second quarter of 2008, a total of 49,479,000 shares of common stock valued at $494,790 was issued to various consultants for services performed and has been shown as non -cash consulting fees in the financial statements.



During the second quarter of 2008, a total of 42,380,000 shares of common stock valued at $423,800 was issued to various lenders as incentive to loan the Company money and has been shown as non -cash financing costs in the financial statements.



During the second quarter of 2008, 215,176 shares of common stock valued at $2,152 was issued as a gift to a former employee and has been shown as non -cash other in the financial statements.



During the third quarter of 2008, 2,019 shares of preferred stock were converted into 33,418,488 shares of common stock based on a conversion rate formula.



During the third quarter of 2008, a total of 9,300,000 shares of common stock valued at $93,000 was issued to various consultants for services performed and has been shown as non -cash consulting fees in the financial statements.



During the third quarter of 2008, a total of 23,500,000 shares of common stock valued at $235,000 was issued

to various lenders as incentive to loan the Company money and has been shown as non -cash financing costs in the financial statements.



The following transactions occurred in 2007:



During the second quarter of 2007, 2,602 shares of preferred stock were converted into 12,708,168 shares of common stock based on a conversion rate formula.



6



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS

[1]

Nature of Operation and Basis of Presentation

FuelNation Inc., before being acquired in October 2000 was formerly known as International Pizza Corporation, QPQ Corporation and Regenesis Holdings, Inc., is currently a development stage company under the provisions of Statement of Financial Accounting Standards ("SFAS") and was incorporated under the laws of the State of Florida on July 6, 1993. Prior to changing its business model in June 2005, the Company had been a development stage enterprise attempting to establish and operate retail convenience stores and travel centers from 2000 to present. In addition, the Company was also engaged in the development of providing real-time e-commerce communications in the petroleum marketing and energy services industry from 2000 to 2003. In conjunction with the Company discontinuing its former business model in June 2005, it intends to reposition itself as a Global Energy Services company through the Global acquisition of regional best-of-breed Global Energy Services providers. As of September 30, 2008, the Company has not produced revenues since inception (unaudited) and will continue to report as a development stage company until significant revenues are produced.

The unaudited financial statements included herein have been prepared by the Company without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The financial statements reflect all adjustments that are, in the opinion of management, necessary to fairly present such information. All such adjustments are of a normal recurring nature. Although the Company believes that the disclosures are adequate to make the information presented not misleading, certain information and footnote disclosures, including a description of significant accounting policies normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America (US GAAP), have been condensed or omitted pursuant to such rules and regulations.

These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Companys 2007 Annual Report on Form 10-KSB filed with the Securities and Exchange Commission. The results of operations for interim periods are not necessarily indicative of the results for any subsequent quarter or the entire year ending December 31, 2007.

Description of Development Stage Activities - FuelNation, Inc. [the "Company" or "FuelNation"], a Florida corporation, located in West Palm Beach, Florida has been in the development stage since its reorganization on October 13, 2000. In conjunction with the Company discontinuing its former business model in June 2005, it intends to reposition itself as a Global Energy Services company through the Global acquisition of regional best-of-breed Global Energy Services providers. Management believes the company has been positioned properly as a Global Energy Services enterprise and has procured ample opportunities to enter the Global Energy Services business with a competitive advantage. This advantage is realized by partnering with strategic relationships developed over the years to obtain acquisition and business opportunities otherwise only offered to select groups and not at public auction. This model is proving itself very effective based on the possible opportunity to own a minority interest ownership in Ventspils Nafta Terminal LTD., which is the largest Baltic Sea Region oil and petroleum product transshipment terminal operating in Ventspils port liquid cargo area. In addition, the Energy from Waste opportunity that was presented to us to participate in the design, build and management of a 5,000 metric ton per day energy from waste facility in Sao Paulo, Brazil, that was procured by SEFICO, Inc and offered to FuelNation Inc.  The ownership of SEFICO, Inc. is affiliated by our association with Mr. Emilio Zabaleta our manager of FuelNation Government Services, whom has operated his family company Sefico Inc. www.sefico.com since 1961 and whose family has been in the waste to energy business for the past 47 years. Sefico is providing the technical knowhow, management and licensing for the waste to energy installations. The details of both the Ventspils Nafta Terminal LTD. and the Energy from Waste acquisitions are further described under the heading Plan of Operation.

To Further our development to become a Global Energy Services Enterprise we have established several subsidiaries that each have a specific purpose in the energy services as described below. These subsidiaries allow the developmental stage of the company to be closely monitored and more efficiently track expenses for specific geographic projects. These subsidiaries have managers and consultants operating them without salaries. FuelNation Inc. pays for the expense reimbursement to procure opportunities until such time the subsidiary is able to generate income and sustain its own operations. The managers and consultants in some cases will receive restricted common stock in FuelNation for their services.



7



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)

[1]

Nature of Operation and Basis of Presentation-Continued

Since the establishment of our subsidiaries The Company conducts all of its operations through the following operating subsidiaries, which are referred to as the "Operating Subsidiaries" As of September 30, 2008 :

·

Leman Energy Trading, Inc. a Panamanian company incorporated on August 31, 2004, owned 100% by FuelNation Inc. Leman has signed several contracts in Iraq for the purchase and transportation of Petroleum Products;

·

FuelNation Government Services LLC, a Florida limited liability company, incorporated on March, 22, 2006 owned 100% by FuelNation Inc. The government Services division establishes joint ventures with governments for purchase, transportation, storage and resale of petroleum products and crude oil., which allows us to cooperate with the local government and share profits and opportunities in their regions;

·

FN Capital Services LLC, a Florida limited liability company, Incorporated on March 29, 2006 owned 100% by FuelNation Inc. This company was established to secure financing and support for the subsidiaries of FuelNation Inc;

·

FuelNation Antigua & Barbuda Ltd., an Antigua & Barbuda company, incorporated on ­September 4, 2006 owned 50% by FuelNation and 50% by the Antigua & Barbuda Government. This company is established for purchase, transportation, storage and resale of petroleum products and crude oil;

·

VNT Fuel Energy Cyprus Trading Limited (VNT), a Cyprus corporation, incorporated on April 20, 2006 owned 100% by FuelNation Inc. This company was formed primarily to hold the shares of Nika Oil Limited and seek additional acquisition opportunities in Russia and the former CIS and Baltic States;

·

Nika Oil Limited, a Russian limited Liability Company, incorporated on March 8, 2007 owned 30% VNT Fuel Energy Cyprus Trading Limited and 70% by Russian Nationals. This company was established for resale of petroleum products and crude oil, acquisition of storage facilities and transportation infrastructure principally in Russia and the former CIS and Baltic States.

·

Waste Energy Of Brazil One, LLC, a Florida limited liability company, Incorporated on November 27, 2007  owned 100% by FuelNation Inc. This company was established to secure the design, build and management and financing for our First 5,000 metric ton per day energy from waste facility in Sao Paulo, Brazil.

·

Waste Energy Of Brazil Two, LLC, a Florida limited liability company, Incorporated on November 27, 2007 owned 100% by FuelNation Inc. This company was established to secure the design, build and management and financing for a Second 5,000 metric ton per day energy from waste facility in Sao Paulo, Brazil.









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8



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[1]

Nature of Operation and Basis of Presentation-Continued

Organization - FuelNation, Inc. was organized under the laws of the State of Florida on July 6, 1993 under the name International Pizza Corporation. On October 30, 1995, the Company changed its name to QPQ Corporation, and on November 4, 1997, changed its name to Regenesis Holdings, Inc. On October 17, 2000, the Company changed its name to FuelNation, Inc. On January 27, 2003, the Company effected a 150:1 reverse split of its common stock. At the same time, the Company amended its certificate of incorporation authorizing it to issue 105,000,000 shares of capital stock, of which 5,000,000 shares are classified as preferred stock, par value of $.01 per share, issuable in one or more series and 100,000,000 shares are classified as common stock, par value $.01. On June 15, 2005, the Company effected a 900 percent stock dividend in the form of a 10-for-1 forward split of FuelNation's common stock to holders of record June 3, 2005 payable June 17, 2005. On August 15, 2007 the Company amended its certificate of incorporation authorizing it to issue 505,000,000 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 500,000,000 shares are classified as common stock, par value $.01. On March 20, 2008 the Companys Articles of Incorporation were amended to increase the Companys authorized shares of common stock from 500,000,000 to 1,500,000,000.

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

Basis of Presentation

The consolidated financial statements include the financial position of FuelNation Inc, its consolidated wholly-owned subsidiaries, and certain entities requiring consolidation in accordance with FIN No 46, Consolidation of Variable Interest Entities.

Significant inter-company transactions have been eliminated.

[2]

Summary of 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, 2007 Quarterly financial statement -KSB

Recent Accounting Pronouncements

In September 2006, the Securities and Exchange Commission issued Staff Accounting Bulletin No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (SAB 108), which provides interpretive guidance on the consideration of the effects of prior year misstatements for the purpose of a materiality assessment. The adoption of SAB 108 did not have a material effect on the Companys financial statements.



9



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[2]

Summary of Significant Accounting Policies-Continued

Recent Accounting Pronouncements-Continued

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS 157). SFAS 157 defines fair value, establishes a framework for measuring fair value in GAAP, and expands disclosures about fair value measurements. SFAS 157 will be applied prospectively and will be effective for periods beginning after November 15, 2007. The Company is currently evaluating the effect, if any, of SFAS 157 on the Companys consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159 "The Fair Value Option for Financial Assets and Financial Liabilities". SFAS No. 159 permits entities to choose, at specified election dates, to measure eligible items at fair value (the "fair value option"). A business entity shall report unrealized gains and losses on items by which the fair value option has been elected in earnings at each subsequent reporting date. The objective is to improve financial reporting by providing entities with the opportunity to mitigate volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. SFAS No. 159 is effective as of the beginning of an entity's first fiscal year that begins after November 15, 2007. Early adoption is permitted as of the beginning of a fiscal year that begins on or before November 15, 2007, provided the entity also elects to apply the provisions of SFAS No. 157, "Fair Value Measurements". The Company does not expect the adoption of SFAS No. 159 to have a material effect on its financial statements

In December 2007, the FASB issued SFAS No. 160, 'Non-controlling Interests in Consolidated Financial Statements - an amendment of ARB No. 51. The objective of this Statement is to improve the relevance, comparability, and transparency of the financial information that a reporting entity provides in its consolidated financial statements by establishing accounting and reporting standards that require the following changes. The ownership interests in subsidiaries held by parties other than the parent be clearly identified, labeled, and presented in the consolidated statement of financial position within equity, but separate from the parent's equity. The amount of consolidated net income attributable to the parent and to the non-controlling interest be dearly identified and presented on the face of the consolidated statement of income. When a subsidiary is deconsolidated, any retained non-controlling equity investment in the former subsidiary is initially measured at fair value. The gain or loss on the deconsolidation of the subsidiary is measured using the fair value of any non-controlling equity investment rather than the carrying amount of that retained investment and entities provide sufficient disclosures that clearly identify and distinguish between the interests of the parent and the interests of the non-controlling owners. The changes to current practice resulting from the application of SFAS No. 160 is effective for financial statements issued for fiscal years beginning alter December 15, 2008, and interim periods within those fiscal years. The adoption of SFAS No. 160 before December 15, 2008 is prohibited. The Company has not evaluated the effect, if any, that SFAS No. 160 will have on its financial statements.

In December 2007, the FASB issued SFAS No. 141(R), 'Business Combinations - Revised,' that improves the relevance, representational faithfulness, and comparability of the information that a reporting entity provides in its financial reports about a business combination and its effects.  To accomplish that, this statement establishes principles and requirements how the acquirer recognizes and measures in its financial statements the identifiable assets acquired, the liabilities assumed, and any non-controlling interest in the acquiree, recognizes and measures the goodwill acquired in the business combination or a gain from a bargain purchase, and determines what information to disclose to enable users of the financial statements to evaluate the nature and financial effects of the business combination. The changes to current practice resulting from the application of SFAS No. 141(R) are effective for financial statements issued for fiscal years beginning after December 15, 2008. The adoption of SFAS No. 141(R) before December 15, 2008 is prohibited. The Company does not expect the adoption of SFAS No. 141(R) to have a material effect on its financial statements.



10



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[2]

Summary of Significant Accounting Policies-Continued

In March 2008, the FASB issued SFAS No. 161,Disclosures about Derivative Instruments and Hedging Activitiesan amendment of FASB Statement No. 133 . SFAS No. 161 gives financial statement users better information about the reporting entity's hedges by providing for qualitative disclosures about the objectives and strategies for using derivatives, quantitative data about the fair value of and gains and losses on derivative contracts, and details of credit-risk-related contingent features in their hedged positions. The standard is effective for financial statements issued for fiscal years and interim periods beginning after November 15, 2008, with early application encouraged, but not required. We do not anticipate the adoption of SFAS No. 161 will have a material effect on the Companys financial statements.

[3]

Going Concern

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

The Company remains in the development stage with no source of revenues. The Company intends to reposition itself as an Energy Services management company and expects to continue to report as a development stage company until the Company completes its first acquisition of a Global Energy Services business. However, there can be no assurances as to when this may occur as the execution of the Companys business plan is dependent upon its ability to raise the funding necessary to finance its proposed acquisition strategy. Until the Company completes its first acquisition it will generate no revenues and will incur losses to the extent of its costs of operation and overhead necessary to support its infrastructure as a public company.

Prior to changing its business model, the Company had been a development stage enterprise attempting to establish and operate retail convenience stores and travel centers from 2000 to present. In addition, the Company was also engaged in the development of providing real-time e-commerce communications in the petroleum marketing and energy services industry from 2000 to 2003. In conjunction with the Company discontinuing its former business model, it intends to reposition itself as a Global Energy Services Enterprise through the Global acquisition of regional best-of-breed Global Energy Services providers.

Provided it can secure adequate funding in order to finance its growth objectives, the Company plans to achieve this objective by completing an initial platform acquisition and then expanding its geographic presence and service offerings through a combination of synergistic acquisitions and the organic expansion of its growing base of Global Energy Services operations.

Management recognizes that the Company must raise significant funding in order to commence its acquisition and operating strategy. Management intends to accomplish this through a combination of debt and equity financing or other means that it deems necessary, with a view toward building a global Energy Services Enterprise. However, no assurance can be given that the Company will be successful in raising additional capital. Even assuming the Company successfully raises additional equity, there can be no assurance that the Company will achieve profitability or positive cash flow. If management is unable to raise additional capital and expected significant revenues do not result in positive cash flow, the Company may not be able to meet its obligations and continue operations as a going concern.

[4]

Related Party Transactions

The Company has borrowed monies from related parties to fund operations. For the nine months ended September, 30, 2008 and 2007 the Company borrowed (repaid) approximately a net amount of( $86,135) and $597,175 respectively from(to) the Chief Executive Officer [CEO]. At September 30, 2008 and 2007, the balance owed to the [CEO] was $2,482,120 and $2,668,931 respectively and is included in Due to Affiliates. 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 owed. For the nine months ended September 30, 2008 and 2007, interest expense on loans from related parties was $95,765 and $91,288 respectively.



11



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[4]

Related Party Transactions-Continued

In May 2006, to make payment under a secured promissory note and pledge agreement dated April 15, 2004 to the Department of Treasury, Internal Revenue Service, the CEO converted 511 shares of preferred stock to 1,556,506 shares of common stock (stock certificate #1969), which were pledged as collateral to the Internal Revenue Service, to satisfy outstanding payroll tax liabilities. On May 22, 2006 The company received a letter from the Department of Treasury, Internal Revenue Service, requesting that the common stock be sold and the company was instructed to remit a copy of the sales transaction report along with all sales proceeds using certified funds. As of the date of this report, the stock certificate has not been sold and we have been instructed by the Department of Treasury, Internal Revenue Service to forward the original certificate to their office. Management believes the sale of the common shares should be sufficient to cover the majority or all of the payroll tax liability in the year 2008.

In March 2006, the CEO was issued 10,000 shares of preferred stock as consideration under the non-dilution clause in his employment contract as amended. The company intends to extend the employment agreement and add additional incentives for income and shares of equity based on performance.

In November 2007, the CEO was issued 4,900 shares of preferred stock as consideration under the non-dilution clause in his employment contract as amended.

In November 2007, 14,000,000 shares of common stock were issued to the CEO at an exercise price of $0.01 per share as consideration for accrued compensation.

In June 2008, the CEO converted 3,187 shares of preferred stock into 52,751,224 shares of common stock at the calculated conversion rate.

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.

During 2006, the 8,000 shares were gifted out to various existing shareholders.

An amount of $853,908 was advanced to Nika oil. Nika Oil Ltd. is a Russian limited liability company and FuelNation Inc. owns a 30% interest in this company. These funds were advanced from FuelNation to pay for acquisition costs of the terminal in the Baltic Sea. The repayment of these funds will take place at the closing of the terminal acquisition, which is schedule by December 2008. No interest has been charged on this outstanding amount. The amount owing has been eliminated on Consolidation of the financial statements [See Basis of Presentation  note 1]

An amount of $128,540 was advanced to Leman Energy, from FuelNation to pay for acquisition costs of the terminal in the Baltic Sea. Leman Energy Trading Inc. is a Panamanian corporation FuelNation Inc. owns a 100% interest in this company. The repayment of these funds will take place at the closing of the terminal acquisition, which is schedule by December 2008. No interest has been charged.. The amount owing has been eliminated on Consolidation of the financial statements [See Basis of Presentation  note 1]

[6]

Other Receivables

Included in other receivables is an amount of $130,000 owing from First Equity. These monies were advanced from FuelNation to pay for Government costs incurred in Venezuela for financing on behalf of Leman Energy Trading, Inc., Collection procedures are commencing and attempts are being made to collect the full amount of funds owed. Management believes this amount will be fully repaid in 2008.Also included in other receivables is deposits and advances made to employees amounting to $38,001.



12



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[7]

Notes Payable

In 2008 the Company borrowed an additional $200,000, increasing the original loan amount from $100,000 to the new loan amount of $300,000. The note is payable on April 12, 2008 and the total amount of the principal and interest may be paid in cash or shares of FuelNation Inc. Interest on the note is being charged at 12% per annum on the loan amount, and the Company has agreed to give the note holder an equity kicker of 1,000 Series A Preferred Shares of FuelNation, Inc. In the event an additional 30 day extension is requested by the Company to repay the loan, an additional equity kicker of 1,000 Series A Preferred Shares of FuelNation Inc and the same 12% interest per annum will apply. As collateral for the loan, the CEO has pledged 10,000 Series A Preferred Shares of FuelNation Inc. As of September 30, 2008 the principal amount owing was $300,000. For the nine months ended September 30, 2008 and 2007 interest expense was $26,000 and $0 respectively. As the repayment date is past due, the note is currently in default. Both parties have mutually agreed that in October 2008, full repayment of the note will be in the form of shares of common stock of the Company.

In January 2008, VNT Fuel Energy Cypress Trading Limited (100% wholly owned by FuelNation Inc) executed a Secured Promissory Note in the sum of $490,000 inclusive of fees of $245,000 and interest, to be repaid on or before April 7,2008. As collateral for the loan, the CEO has pledged 4,900 shares of preferred Series A Shares of FuelNation Inc. Interest on the promissory note are being charged at 18% per annum on the amount owing. At September 30, 2008 the amount owing was $490,000 and for the nine months ended September 30, 2008 interest expense was $33,075 As the repayment date is past due, the note is currently in default.

In January 2008, the Company executed a Note Payable for $100,000. The terms and conditions of the note call for unpaid principle and all accrued and unpaid interest to be due and payable on April 10, 2008 and an arrangement fee of $50,000 for a total of $154,500. The principal note, including interest and fees was paid in full in the second quarter of 2008. For the nine months ended September 30, 2008 interest expense was $6,500.

[8]

Payroll and Taxes Payable

The Company has primarily funded its payroll costs through borrowing from related parties [See Note 4]. Payroll taxes have become delinquent since the second quarter of 2001. These liabilities through September 30, 2008 amount to approximately $696,000 and in addition we have recorded interest and penalties in the amount of $270,000. In addition the company has recorded a payroll liability for wages owed in the amount of $1,300,000. Penalties [to the maximum limits] and interest will accrue on such payroll tax liabilities, as well as additional payroll tax liabilities incurred subsequent to September 30, 2008, until paid. In 2006, the CEO pledged shares of preferred stock owned by him to the Internal Revenue Service as guarantee for the payment of payroll tax liabilities. The company has retained a Tax attorney to assist in these negotiations with the Internal Revenue Service and believes a resolution will be forth coming in 2008.

[9]

Stockholders' Equity

Capital Stock - On August 15, 2007 the Company amended its certificate of incorporation authorizing it to issue 505,000,000 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 500,000,000 shares are classified as common stock, par value $.01. On March 20, 2008 the Companys Articles of Incorporation were amended to increase the Companys authorized shares of common stock from 500,000,000 to 1,500,000,000.

Preferred Stock

Up to 30,000 shares of Series A Convertible Preferred Stock has been authorized. The price is $1,000 per share. Each Series A convertible Preferred share is equal to .00255% of the total issued and fully diluted common stock of the Company. Each Preferred share will always maintain a conversion ratio to common stock such that the percentage ownership in the Company represented by one share of Series A Convertible Preferred Stock is constant. Noncumulative dividend on the Series A preferred will be at the rate of 8% per share per annum. Dividends will be payable only if, and when declared by the Board of Directors. On June 30, 2008 the company had a total 7,369 Series A convertible Preferred shares issued and outstanding.



13



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[9]

Stockholders' Equity-Continued

FUELNATION INC. pursuant to the authority contained in the Company's Articles of Incorporation, the unanimous written consent of the Board of Directors of the Company Dated April 29, 2008, and the Written Consent of the Shareholders, has declared a (Mandatory Conversion Event). All outstanding shares of the Series A Preferred Stock shall, without any action on the part of the holder hereof or the Corporation, be converted automatically into shares of the Common Stock at the applicable Conversion Rate. The conversion rate in effect with respect to each share of the Series A Preferred Stock (the "Conversion Rate") shall be equal to 16,552 shares of Common Stock of the Corporation.  Certificates evidencing shares of Series A Preferred Stock must be surrendered at the transfer agent for the Common Stock. This notification was mailed by Continental Stock Transfer & Trust Company the companies transfer agent.

We requested all holders of Series A Preferred Stock to send their stock certificates to our transfer agent to receive shares of Common Stock of the Corporation. This is a mandatory conversion and your common shares will not be sent to you until you have surrendered your Series A Preferred Stock certificate.

During 2007, 3,269 shares of preferred stock were converted into 15,965,796 shares of common stock based on a conversion formulae, of 4,884 shares of common stock issued for every one share of preferred stock converted.

During 2007, 1,500 shares of preferred stock were issued to various individuals for consulting and other services, which resulted in a non-cash charge to operations of $200,000.

In November 2007, the CEO was issued 4,900 shares of preferred stock as consideration under the non-dilution clause in his employment contract as amended.

In the first quarter of 2008, 751 shares of preferred stock were converted into 12,429,152 shares of common stock based on a conversion formulae, of 16,552 shares of common stock issued for every one share of preferred stock converted.

In the second quarter of 2008, 21,011 shares of preferred stock were converted into 347,774,072 shares of common stock based on a conversion formulae, of 16,552 shares of common stock issued for every one share of preferred stock converted.

In June 2008, the CEO converted 3,187 shares of preferred stock into 52,751,224 shares of common stock at the calculated conversion rate.

In the third quarter of 2008, 2,019 shares of preferred stock were converted into 33,418,488 shares of common stock based on a conversion formulae, of 16,552 shares of common stock issued for every one share of preferred stock converted.

Common Stock

During 2007, 9,500,000 shares of common stock were issued for $100,000.

During 2007, 33,225,000 shares of common stock were issued to various individuals for consulting and other services, which resulted in a non-cash charge to operations of $996,750.

In November 2007, the CEO was issued 14,000,000 shares of common stock as consideration for accrued compensation at a price of $140,000.

In February 2008, 6,780,000 shares of common stock were issued for $30,000.

In February 2008, 16,000,000 shares of common stock were issued to the CEO at par value.

In June 2008, 9,520,000 shares of common stock were issued for $124,540.

In June 2008, 49,479,000 shares of common stock were issued to various individuals for consulting and other services, which resulted in a non-cash charge to operations of $494,790.

In June 2008, 42,380,000 shares of common stock were issued to various lenders as incentive to loan the Company money, which resulted in a non-cash charge to operations of $423,800.



14



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[9]

Stockholders' Equity-Continued

In June 2008, 215,176 shares of common stock valued at $2,152 were issued as a gift to a former employee.

In July 2008, 6,300,000 shares of common stock were issued to various individuals for consulting and other services, which resulted in a non-cash charge to operations of $63,000.

In July 2008, 9,500,000 shares of common stock were issued to various lenders as incentive to loan the Company money, which resulted in a non-cash charge to operations of $95,000.

In July 2008, 30,027,920 shares of common stock were issued to an individual at par value for consulting and other services. The amount of the issuance of $300,279 was offset against the CEOs loan account to the Company

In August 2008, 6,000,000 shares of common stock were issued for $60,000.

In August 2008, 3,000,000 shares of common stock were issued to an individual for consulting and other services, which resulted in a non-cash charge to operations of $30,000.

In September 2008, 14,000,000 shares of common stock were issued to a lender as incentive to loan the Company money, which resulted in a non-cash charge to operations of $140,000.

See Note 9, (Preferred stock) for additional equity transactions.

[10]

Income Taxes

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

|          |  |                                      |   |                                      |   |  
|--------- |  | ------------------------------------ | - | ------------------------------------ | - | -
|          |  | Nine months ended
September 30,
2008 |   | Nine months ended
September 30,
2007
|Current   |  |                                      |   |                                      |   |  
|Federal   |  | $                                    |  |                                      | $ | 
|State     |  | $                                    |  |                                      | $ | 
|TOTALS    |  | $                                    |  |                                      | $ | 
|          |  |                                      |   |                                      |   |  
|Deferred: |  | $                                    |  |                                      | $ | 
|Federal   |  | $                                    |  |                                      | $ | 
|State     |  | $                                    |  |                                      | $ | 
|TOTALS    |  | $                                    |  |                                      | $ | 
|          |  |                                      |   |                                      |   |  
|TOTALS    |  | $                                    |  |                                      | $ | 



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



|                                       |  |                                                   |  |                                                 
|-------------------------------------- |  | ------------------------------------------------- |  | ------------------------------------------------
|                                       |  | Nine months ended
September 30,
2008  (Unaudited) |  | Nine months ended
September 30,
2007 (Unaudited)
|Computed Federal Statutory Tax Benefit |  | (34%)                                             |  | (34%)                                           
|                                       |  |                                                   |  |                                                 
|Valuation of Temporary Differences     |  | 34%                                               |  | 34%                                             
|Actual                                 |  |                                                  |  |                                                





15



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[10]

Income Taxes-Continued

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



|                                 |  |                                                  |             |                              |   |             |  
|-------------------------------- |  | ------------------------------------------------ | ----------- | ---------------------------- | - | ----------- | -
|                                 |  | Nine months ended
September 30,
2008
(Unaudited) |             | Year ended
December 31,
2007 |  
|Deferred Tax Asset - Long-Term:  |  |                                                  |             |                              |   |             |  
|Net Operating Loss Carry forward |  | $                                                | 4,359,430   |                              | $ | 3,592,000   |  
|Start-up Costs                   |  |                                                  | 5,281,000   |                              |   | 4,901,000   |  
|Stock Based Compensation         |  |                                                  | 11,500,289  |                              |   | 11,445,000  |  
|Valuation Allowance              |  |                                                  | (21,140,719 | )                            |   | (19,938,000 | )
|Long-Term Deferred Tax Asset     |  |                                                  |             |                              | $ |            |  



Total valuation allowance increased by $1,202,719 for the nine months ended September 30, 2008, and $808,000 and $745,000 in 2007 and 2006, respectively.

At December 31, 2007, the Company had approximately $9,200,000 of federal net operating tax loss carry forwards expiring at various dates through 2022. The Tax Reform Act of 1986 enacted a complex set of rules which limit a company's ability to utilize net operating loss carry forwards and tax credit carry forwards in periods following an ownership change. These rules define an ownership change as a greater than 50 percent point change in stock ownership within a defined testing period which is generally a three-year period. As a result, the Company's utilization of its net operating loss carry forwards could be significantly limited.

[11]

Stock Options and Warrants

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

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

As of September 30, 2008 and December 31, 2007, no options were available to grant under the Plan.



16



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[11]

Stock Options and Warrants-Continued

A summary of the changes in outstanding common stock options and warrants is as follows:



|                       |          |          |                                          |  |         |  |                                         |           |                                        |  |       |  |  |     
|---------------------- | -------- | -------- | ---------------------------------------- |  | ------- |  | --------------------------------------- | --------- | -------------------------------------- |  | ----- |  |  | ----
|                       | Warrants |          | Warrants
Weighted
Average
Exercise
Price |  | Options |  | Options
Weighted
Average
Exercise
Price |           | Options
Weighted
Average
Contract
Life
|Outstanding  12/31/05 |          | 701,152  |                                          |  | $4.31   |  |                                         | 3,126,696 |                                        |  | $0.03 |  |  |     
|Granted                |          |         |                                          |  |         |  |                                         | 150,000   |                                        |  | $0.15 |  |  |     
|Expired /Forfeited     |          | (710,152 | )                                        |  | $4.31   |  |                                         |           |                                        |  |       |  |  |     
|                       |          |          |                                          |  |         |  |                                         |           |                                        |  |       |  |  |     
|Outstanding  12/31/06 |          |         |                                          |  |         |  |                                         | 3,276,696 |                                        |  | $0.04 |  |  |     
|Granted                |          |         |                                          |  |         |  |                                         | 4,000,000 |                                        |  | $0.15 |  |  |     
|Expired /Forfeited     |          |         |                                          |  |         |  |                                         |          |                                        |  |       |  |  |     
|                       |          |          |                                          |  |         |  |                                         |           |                                        |  |       |  |  |     
|Outstanding  12/31/07 |          |         |                                          |  |         |  |                                         | 7,276,696 |                                        |  | $0.10 |  |  | 1.61
|Exercisable  12/31/07 |          |         |                                          |  |         |  |                                         | 5,489,188 |                                        |  | $0.12 |  |  | 1.41
|                       |          |          |                                          |  |         |  |                                         |           |                                        |  |       |  |  |     
|Outstanding  09/30/08 |          |         |                                          |  |         |  |                                         | 7,150,000 |                                        |  | $0.10 |  |  | .88 
|Exercisable  09/30/08 |          |         |                                          |  |         |  |                                         | 5,974,983 |                                        |  | $0.11 |  |  | .79 



The following table summarizes information about stock options at September 30, 2008:



|                        |  |                           |  |                                    |  |                                  |  |           |  |                                    |  |                                  | 
|----------------------- |  | ------------------------- |  | ---------------------------------- |  | -------------------------------- |  | --------- |  | ---------------------------------- |  | -------------------------------- | 
|                        |  | Outstanding Stock Options |  | Exercisable Stock Options         
|Range of
Exercise
Price |  | Numbers                   |  | Weighted-
Average
Contractual
Life |  | Weighted-
Average
Exercise
Price |  | Number    |  | Weighted-
Average
Contractual
Life |  | Weighted- Average
Exercise
Price
|$0.03 - $0.03           |  | 3,000,000                 |  | 1.42 Years                         |  | $0.03                            |  | 1,874,983 |  | 1.42 Years                         |  | $0.03                           
|$0.15 - $0.15           |  | 4,150,000                 |  | 0.50 Years                         |  | $0.15                            |  | 4,100,000 |  | 0 .50 Years                        |  | $0.15                           
|                        |  |                          |  |                                    |  |                                 |  |           |  |                                    |  |                                 
|                        |  |                          |  |                                    |  |                                 |  |           |  |                                    |  |                                 
|                        |  |                          |  |                                    |  |                                 |  |           |  |                                    |  |                                 
|TOTALS                  |  | 7,150,000                 |  |                                    |  |                                  |  | 5,974,983 |  |                                    |  |                                 



Total compensation costs recognized for stock based employee compensation awards was $142,938 and $297,320 for the nine months ended September 30, 2008 and 2007, respectively.

The Black-Scholes option valuation model was developed for use in estimating the fair value of traded options which have no vesting restrictions and are fully transferable. In addition, option valuation models require the input of highly subjective assumptions including the expected stock price volatility. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing models do not necessarily provide a reliable single measure of the fair value of its employee stock options.



17



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FUELNATION, INC.

(A DEVELOPMENT STAGE COMPANY)

CONSOLIDATED NOTES TO FINANCIAL STATEMENTS (CONTINUED)





[11]

Stock Options and Warrants-Continued



|                                                                |                     |  |                    
|--------------------------------------------------------------- | ------------------- |  | -------------------
|                                                                | 2007                |  | 2006               
|Black-Scholes Assumptions:                                      |                     |  |                    
|                                                                |                     |  |                    
|Risk-Free Interest Rate                                         | 3.25%               |  | 3.25%              
|Expected Volatility                                             | 181.73%             |  | 107.91%            
|Expected Life                                                   | 2                   |  | 5                  
|Dividend Yield                                                  | 0.00%               |  | 0.00%              
|                                                                |                     |  |                    
|Weighted Average Expected Life :                                | 2007                |  | 2006               
|                                                                | Expected Life Years |  | Expected Life Years
|                                                                |                     |  |                    
|Options Number                                                  |                     |  |                    
|3,276,696                                                       |                     |  | 3.15               
|7,276,696                                                       | 1.61                |  |                    
|Weighted Average Fair Value of Options Granted During the Year: | $0.86               |  | $0.64              



[12]

Litigation

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

[13]

Fair Value of Financial Instruments

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







18



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ITEM 2.

MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION

The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and notes appearing elsewhere in this report.

Critical Accounting Policies

Managements Discussion and Analysis of Financial Condition and Results of Operations discusses our consolidated financial statements that have been prepared in accordance with accounting principles generally accepted in the United States of America. The preparation of these financial statements requires us to make estimates and assumptions that affect the reported amount of assets and liabilities at the date of the financial statements, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. On an on-going basis, we evaluate our estimates and judgments, including those related to revenue recognition, valuation allowances for inventory and accounts receivable, and impairment of long-lived assets. We base our estimates and judgments on historical experience and on various other factors that are believed to be reasonable under the circumstances. The result of these estimates and judgments form the basis for making conclusions about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. The SEC suggests that all registrants list their most critical accounting policies in Managements Discussion and Analysis. A critical accounting policy is one which is both important to the portrayal of the Companys financial condition and results of operations and requires managements most difficult, subjective or complex judgments, often as a result of the need to make estimates about the effect of matters that are inherently uncertain. Management believes the following critical accounting policies affect its more significant judgments and estimates in the preparation of its consolidated financial statements.

These policies include, but are not limited to, the carrying value of the inventory and fixed assets, the life of fixed assets, the expensing of the costs relating to development activities, and the valuation of common stock related to compensation and other services. Complex judgments and estimates underlie these critical accounting policies, such as the estimated life of fixed assets for depreciation purposes, the market valuation of inventory in reporting inventory at the lower of cost or market, dividing consultants compensation between expense categories of development activities and sales activities, dividing compensation and payments to third parties between cost of goods sold category and general and administrative expense, and the determination of the market value of restricted stock when issued as compensation or as repayment for loans.

For the nine months and three months ended September 30, 2008 and 2007 Operations.

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

OVERVIEW

We are a development stage company implementing a new business plan.

We have recently discontinued our former business model involving the development of travel centers, and adopted a new model involving the development of Global Energy Services providers. We have not yet commenced operations or completed an acquisition under our new business model. As a result, we have virtually no operating history under our current business model. Even though we are being managed by senior executives with significant experience in the industry, our limited operating history makes it difficult to predict the longer-term success of our business model.

We have not yet acquired any operating business.

Although the Company has identified an acquisition candidate, we have yet to acquire any company in the Energy Services business and there can be no assurance that we will be able to complete any such acquisition on terms acceptable to us if at all.  Unless and until we complete such an acquisition, our business will consist solely of identifying and negotiating with potential acquisition candidates.



19



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Our present levels of capital may limit the implementation of our business strategy.

The objective of our business strategy is to build a global Energy Services organization. Critical to this strategy is an aggressive acquisition program which will require the acquisition of a number of diverse companies within the Energy Services covering a variety of geographic regions and specialized service offerings. The cash we seek to raise in the private placement of equity and debt Offerings will only be sufficient to finance a certain portion of the cash needed to close on our Initial Acquisition.  As a result, after our Initial Acquisition is completed, we will have limited cash resources.  Our ability to make additional acquisitions thereafter without securing additional financing from outside sources will be limited. This may limit or slow our ability to achieve the critical mass we may need to achieve our Global Energy Services objectives.

Risks related to acquisition financing.

When we complete our Offering, we will have only sufficient capital to make our Initial Acquisition.  In order to pursue our acquisition strategy in the longer term, we will require additional financing, which we intend to obtain through a combination of traditional debt financing or the placement of debt and equity securities. We may finance some portion of our future acquisitions by either issuing equity or by using shares of our common stock for all or a substantial portion of the consideration to be paid. In the event that the common stock does not attain or maintain a sufficient market value, or potential acquisition candidates are otherwise unwilling to accept common stock as part of the consideration for the sale of their businesses, we may be required to utilize more of our cash resources, if available, in order to maintain our acquisition program. If we do not have sufficient cash resources, our growth could be limited unless we are able to obtain additional capital through debt or equity financings.

Our future business operations principally will involve Energy Services this will primarily be in two very distinct platforms of the Energy business. The First Platform will be providing Energy Services in the transportation of petroleum products and crude oil and in some instances negotiating agreements for purchase, storage and resale of petroleum products and crude oil. The Second Platform will be providing Energy Services in the Solid Waste Management business and in some instances designing, building, managing, receiving, baling, transportation, storage, resale and disposal of Solid Waste.

We have assembled a management team to assist in executing the Energy Services business plan. We have executed a memorandum of understanding to buy the Ventspils Nafta Terminal. Our business plan is contingent upon receiving adequate financing. Our primary needs for cash are for the acquisition, operation, development of our business strategy and for working capital obligations.

OPERATIONAL AND FINANCIAL OBJECTIVES

We have adopted a Plan of Operation to assist with the execution of our business objectives; we have identified funding sources and will be actively pursuing additional debt and equity opportunities. All of these details are further described below.

Financial Condition and Changes in Financial Condition

Our continued activities are dependent on obtaining adequate financing. Our financial condition for the nine months and three months ended at September 30, 2008, compared with six and three months ended at September 30, 2007, is summarized as follows:

Liquidity and Capital Resources

At September 30, 2008, we had negative working capital of $8,209,670 compared to $6,609,462 at September 30, 2007.

Net cash outflows provided (used) from operating activities was ($857,109) for the nine months ended September 30, 2008, compared to $124,500 for the nine months ended September 30, 2007. This cash outflow for the nine months ended September 30, 2008 is primarily due to the net loss from operations of $3,117,725 which was offset by non-cash  consulting fees of $587,790, non cash financing cost $658,800, increase in due from affiliates of $346,045 an increase in accrued liabilities of $509,839 and stock based compensation expense of $142,938.  The cash provided from operating activities for the nine months ended September 30, 2007 are primarily due to the net loss of operations of $1,394,004 offset by  increase in accounts payable of $504,961,  increase in due from affiliates of $546,996, and stock based compensation expense of $297,320.



20



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Our independent registered public accounting firm has issued a going concern opinion on our audited financial statements for the fiscal year ended December 31, 2007 since we have experienced recurring net losses and at September 30, 2008 have a working capital deficiency. Further, as stated in Note 3 to our consolidated financial statements for the nine months ended September 30, 2008, we have experienced significant losses from operations totaling $(3,117,725) and $(1,394,004) for the nine months ended September 30, 2008 and 2007, respectively and had an accumulated deficit of $(58,280,677) for the period from our inception to September 30, 2008. We had a stockholders deficit for the nine months ended September 30, 2008 and 2007 of $(8,209,670) and $(6,609,462), respectively. Our operations have been largely reliant upon loans from our affiliates. At September 30, 2008 and September 30, 2007, we were indebted to our affiliates in the amount of $(2,618,145) and $(2,862,500) respectively, the funds of which have enabled us to continue our operations. Our ability to continue as a going concern is contingent upon our ability to secure additional financing, increase ownership equity, and attain profitable operations. In addition, our ability to continue as a going concern must be considered in light of the problems, expenses and complications frequently encountered in established markets and the competitive environment in which we operate.

Results of Operations

We incurred net losses of $(758,486) during the quarter ended September 30, 2008, representing an increase of $(571,194) over the 2007 quarter. This increase is due to the company using outside consulting and incurring a non-cash consulting expense and non-cash financing costs

An analysis of the major components of the results of operations is as follows:

Revenues

To date the company has not had any revenues and there can be no assurances we will have revenues in the future. In Iraq, we have shipped fuel-oil for third parties and have booked this as a net expense for fuel oil transportation costs at nine months ended September 30, 2008 and 2007 of $(0) and $(357,881), respectively. The management and board of directors anticipates these operations in Iraq will commence again in third second quarter 2009 and the company will be able to have sustained revenues, however, there can be no assurances the operations in Iraq will be able to re-commence. In addition, we will attempt to generate revenues through our crude oil supply agreement with Nika Oil Ltd, by first quarter 2009, where we would begin delivering crude oil to end users. Further, we will attempt to generate revenues by first quarter 2009 from baling municipal solid waste in Sao Paulo, Brazil through Waste Energy of Brazil Once, LLC and in Palm Beach County, through a to be formed operating subsidiary, where the company maintains its headquarters, into 3 ton bales and storing at remote locations for future sale to companies that operate energy from waste facilities.  It is anticipated the baling will be able to provide revenues by first quarter 2009 because there is less uncertainties operating a business in the United States, than there is in Russia, Iraq, Brazil or other countries.

Total Costs and Expenses

Total costs and expenses increased by $(571,194) for the quarters ended September 30, 2008, from $(187,292) for the comparable 2007 period. Total costs and expenses increased as a result of the company using outside consulting and incurring non-cash loan financing costs and non-cash consulting fees.

Uncertainties and Trends

RESULTS OF OPERATIONS

We generated no revenues during the nine months ended September 30, 2008 and 2007. We will attempt to generate revenues through our crude oil supply agreement with Nika Oil Ltd, by first quarter 2009, where we would begin delivering crude oil to end users. In addition, we will attempt to generate revenues by first quarter 2009 from baling municipal solid waste in Sao Paulo, Brazil through Waste Energy of Brazil Once, LLC and in Palm Beach County, through a to be formed operating subsidiary, where the company maintains its headquarters, into 3 ton bales and storing at remote locations for future sale to companies that operate energy from waste facilities. Total operating expenses were $705,867 for the quarters ended September 30, 2008, compared to $ 151,566 for the quarters ended September 30, 2007. The expenses incurred during the quarters ended September 30, 2008 arose primarily from salaries and wages, including related payroll expenses ($77,046), legal and professional ($33,018),consulting fees($99,700), non-cash consulting fees($93,000), non-cash financing costs($235,000) and other general and administrative expenses ($120,457). The changes in these expenses in 2008 compared to the same period in 2007,



21



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were, increase in consulting fees of ($99,700), increase in non-cash consulting fees($93,000), increase in non-cash financing costs($235,000) and a increase in other general and administrative expenses of ($105,617). Additionally, we incurred interest expense of $52,619 in 2008 compared with interest expense of $35,726 in 2007. As a result, we incurred a net loss of $758,486 for the quarters ended September 30, 2008, compared to a Net Loss of $187,292 for the quarters ended September 30, 2007.

PLAN OF OPERATION

To date, our activities remain in the development stage. We did not earn any revenues from operations for the three and nine months ended September 30, 2008 and 2007, and we do not anticipate earning any revenues until such time as we are able to acquire a platform business and commence operations. We will attempt to generate revenues through our crude oil supply agreement with Nika Oil Ltd, by first quarter 2009, where we would begin delivering crude oil to end users. In addition, we will attempt to generate revenues by first quarter 2009 from baling municipal solid waste in Sao Paulo, Brazil through Waste Energy of Brazil Once, LLC and in Palm Beach County, through a to be formed operating subsidiary, where the company maintains its headquarters, into 3 ton bales and storing at remote locations for future sale to companies that operate energy from waste facilities.

We intend to build a leading global Energy Services company by acquiring regional best-of-breed Energy Services providers. Through Global acquisitions, we plan to establish third-party Global Energy Services, offering a full range of transportation and distribution solutions. In addition to transportation services, we also intend to provide a broad range of value added supply chain management services, including order fulfillment, inventory management and storage.

We plan to achieve this objective by completing an initial platform acquisition in the Energy Services industry and then expanding our geographic presence and service offerings through a combination of synergistic acquisitions and the organic expansion of our growing base of Global Energy Services operations.

Once our platform acquisition is completed, the focus of our strategy will be on acquiring and integrating Global Energy Services businesses that are likely to benefit from our anticipated access to sources of financing and long-term growth strategy. Acquisition targets will be selected based upon their ability to demonstrate:

·

historic levels of profitability;

·

a proven record of delivering superior Global Energy Services;

·

an established customer base of large and mid-sized companies; and

·

opportunities for significant growth within Global segments of our business.

Once acquisitions are completed, we intend to create additional shareholder value by improving productivity through the implementation or adoption of our technologies and business processes, improving transportation margins through the leverage of our growing purchasing power and enhancing the opportunity for organic growth through cross-selling opportunities and expanded services offerings.

Our strategy has been designed to take advantage of shifting market dynamics. The third party Global Energy Services industry continues to grow as an increasing number of businesses outsource their Global Energy Services functions to more cost effectively manage and extract value from their supply chains. In addition, the industry is positioned for further consolidation as it remains highly fragmented, and as customers are demanding the types of sophisticated and broad reaching service offerings that can more effectively be handled by larger more diverse organizations.

Given the size and highly fragmented composition of the industry, management believes there is an excellent opportunity to execute a consolidation strategy through the selective acquisition of other companies with complementary businesses with earnings in the range of $30 million to $50 million annually that have the potential, with our Energy Services, to increase their growth and earnings by thirty-five percent (35%) annually. We believe that companies of this size may be receptive to our acquisition program and will understand the synergies and business potential we deliver with the acquisition.  In addition, lending and equity should have far greater opportunities on a consolidated basis after the acquisition is completed.



22



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In addition, we believe through our energy services there is an excellent opportunity to execute a consolidation strategy through the selective long term leasing and eventually the acquisition and development of Solid Waste Transfer Facilities globally. These Transfer Facilities will be targeted in major cities that have a minimum excess Solid Waste removal requirement of 3,000 tons per day. We intend to sign long term leases of transfer facilities and install a solid waste shredder, baler and wrapper that packages solid waste in three (3) ton bales to be transported and stored at remote locations for resell at a future date as fuel for energy from waste plants.

We have entered into a memorandum of understanding to acquire our first business and have also entered into a real estate purchase contract to secure a location to design, build and manage energy from waste facility in Sao Paulo, Brazil (as described below). We have also identified a number of additional companies that may be suitable as lease and acquisition candidates and we are in preliminary discussions with a select number of them. Our preliminary discussions indicate we could sign a lease for a transfer station in Palm Beach County this fourth quarter 2008 which will allow us to start our baling of solid waste and generating revenues by first quarter 2009. We are actively looking for a transfer station in Sao Paulo, Brazil to lease and start our baling of solid waste and generating revenues by first quarter 2009.

Our acquisition strategy is, however, dependent upon, among other factors, our ability to secure additional financing through the sale of debt or equity securities, and the development of an active trading market for our securities, neither of which can be assured.

We do not anticipate hiring any additional employees until we complete our initial acquisition or sign a lease to operate a transfer station to begin our baling of municipal solid waste. Except for our leasing and acquisition strategy, we do not anticipate acquiring any material property or equipment during the next twelve months outside of this business platform.

Proposed Acquisition

First Proposed Acquisition: FuelNation intends on acquiring a MINORITY INTEREST ownership in the largest Baltic Sea Region oil and petroleum product transshipment terminal operating in Ventspils port liquid cargo area. On October 17, 2007, Nika Oil Ltd. entered into a Memorandum of Understanding with Ventspils NAFTA for the purchase of the Ventspils Nafta Terminal in Ventspils, Latvia. Ventspils Nafta Terminal LTD. is the largest Baltic Sea Region oil and petroleum product transshipment terminal operating in Ventspils port liquid cargo area. THIS MEMORANDUM OF UNDERSTANDING IS NON-BINDING AND ONLY REFLECTS THE INTENTION OF THE PARTIES AND IS SUBJECT TO AN EXECUTED AGREEMENT. WE DO NOT HAVE A WRITTEN INDICATION OF PURCHASE PRICE OTHER THAN VERBAL INDICATIONS FROM ALL PARTIES TO THE TRANSACTION DURING THE SIGNING OF THE MEMORANDUM OF UNDERSTANDING THAT THE DEPRECIATED ASSET VALUE WOULD BE A STARTING POINT. Crude oil and petroleum products are received by pipeline and railways. The tank farm of the enterprise exceeds 1 million cubic meters. Nika Oil plans to attempt to have the Russian government approve the re-opening of the crude oil pipeline that supplies Ventspils Nafta Terminal from Russia to Latvia. This pipeline was shut down in a dispute between Russia and Latvia in January 2003. It is managements understanding the agreement to re-open the pipeline is obtainable by fourth quarter 2008.

a)

We are responsible for arranging the financing of the terminal for our Russian partners. We do not have a written indication of purchase price other than verbal indications from all parties to the transaction during the signing of the Memorandum of Understanding. It is in the best interest of all parties to reach an arrangement that is mutually beneficial since the opening the supply of crude oil through this pipeline benefits all parties involved. Nika Oil has agreed to arrange a substantial supply of Crude oil through the pipeline from the Russian government in order to secure conventional financing from European lenders.

b)

Nika Oil is responsible to provide the oil supply from the Russian government to Ventspils Nafta Terminal in Latvia. Nika Oil has assured our board of directors that the negotiations are ongoing and the agreement to re-open the pipeline is obtainable by fourth quarter 2008.

c)

In addition to financing the purchase of the terminal we are responsible to open a trade line of credit to purchase crude oil from Russia. This trade line of credit is available through numerous money center banks in Europe and provides for substantial leverage with the crude oil as collateral. We have identified the European banks that will provide our financing and in this regard we are discussing the financial structures available for purchase in first quarter 2009. However, there is no assurance we will be able to obtain any such financing.



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We anticipate The payment for the Leveraged buyout will be completed in under 12 months from cash flow and financing as follows: Our Bilateral negotiation with the Russian and Latvia governments for the opening of the pipeline upon our purchase of 100% of the outstanding shares of the Ventspils Nafta Terminals SIA is anticipated to take place in fourth quarter 2008. The Russian Government has ordered on March 18, 2008 the oil to flow through

the pipeline in the amount of 30,000,000 metric tons (MT) annually. In addition, the Russian Government has agreed to allow an additional 5,000,000 MT annually of crude oil to flow for the benefit of Nika Oil Ltd to resell.



·

$210,000,000 of the leveraged buyout can be committed through Supplier credits (fees for oil terminal transit to be contracted from Transneft the Russian pipeline monopoly with a Russian Government-controlled monopoly oil pipeline operator OAO AK Transneft. The OAO AK Transneft supplier credit will be 30,000,000 metric tons (MT) of crude oil annually x $7.00 per MT fee = $210,000,000 annually. Our group has negotiated an annual 30,000,000 MT order of crude oil transport through the Ventspils Nafta Terminals SIA. There is no assurance, even with a government order; we will be able to obtain this agreement or the financing to complete this agreement.



·

$140,000,000 of the leveraged buyout is committed through the discounting of the 5,000,000 MT annually of crude oil to flow for the benefit of Nika Oil Ltd to resell. The $140,000,000 equity will be raised by discounting one year of the 5,000,000 metric ton (36,500,000 barrels) crude oil contract. This contract has the potential to generate a gross Profit of $140,000,000 USD. There is no assurance, even with a government order; we will be able to obtain this agreement or the financing to complete this agreement.



The financing of the terminal and all costs associated with closing the transaction should require debt/equity financing in the amount of approximately $350 million USD. In the event we close on the Terminal and receive the 5,000,000 metric ton annual crude oil contract we will be required to open a letter of credit to pay for crude oil purchases on a monthly revolving basis. This will require us to open a trade line of credit from a money center bank in an amount equal to the monthly volumes of crude oil purchased by Nika Oil, estimated to be in the monthly amount of $215 Million USD (36,500,000 barrels of crude oil x $70.00 per barrel totals $2,555,000,000 divided by 12 months equals $215,000,000 monthly) for the first year and then increases each additional year. The financing for the trade line of credit and the terminal purchase are being negotiated with the money center banks, and waiting for the final terms in the contracts for purchase of both the terminal and the crude oil.

We will be a minority shareholder in the terminal and will also participate on all crude oil sales as per our percentage ownership. The pipeline was build to have a maximum capacity of 80 million metric tons annually. It is the estimate of management that pipeline will be capable of handling 20 million metric tons of crude oil without any major upgrades. It is estimated an investment to replace outdated pumping stations will require investment from the owners of the pipeline in order to increase pipeline capacity. During initial meetings these improvements can be made in a matter of 6 months and can bring the capacity closer to the 40-60 million metric ton annual levels if the crude oil production is available.

We believe that conventional financing is available for energy related financing. Although management feels confident the financing will be available for this type of acquisition; there is no warranty that we will be able to adequately secure financing to complete the financing.

In event the company is not able to secure financing, or is delayed in securing financing, we could lose our entire investment and expenses we have incurred on attempting to acquire this acquisition and there could be possible penalties, fines or fees imposed for not completing the financing for the purchase that we have not foreseen.

Second Proposed Acquisition: On September 08, 2008, Waste Energy Of Brazil One, LLC, a wholly owned subsidiary of FuelNation Inc. entered into a purchase and sale contract with PREMODISA SOROCABA PRÉ-MOLDADOS LTDA, with headquarters in the city of Sorocaba, Săo Paulo, Brazil. This contract is for the purchase of 200,000 (two hundred thousand) square meters of land located in Sorocaba, Săo Paulo, Brazil. The Purchase price for the land is R$15,000,000 or approximately ($7,500,000 USD) that will be paid through 12 (twelve) equal monthly installments 6 months from signing or upon the sooner of approval to construct two waste to energy plants or a period of 180 days. The original plans called for two plants comprising of one Municipal Solid Waste Plant processing 1,500 metric tons daily of waste, producing 30MWh of power.  The second plant was going to handle 500 metric tons daily of Industrial /hazardous waste. The current plans have been modified based on our discussions with the municipality, power companies and our engineering firms.  They have collectively agreed to build energy



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from waste plants that have an EXACT MATCH to stay with a consistent matching plant design and size that allows materials, parts and equipment to be produced in multiple manufacturing plants to the same specifications. In this regard we will be following the EXACT MATCH concept and intend on building one Mega plant in Sao Paulo, Brazil that can handle 5,000 metric tons daily of waste, producing 150MWh of power. This Mega plant will be built with EPI Technology (Energy Products of Idaho). Design, Engineering, Construction and Management with be provided by SEFICO Inc. The Mega Plant will be supplied by installing 1,000 Metric ton per day balers in five transfer station locations around the geographic area of the mega plant.

We are in discussions with a group of accredited investors based in the Bahamas that have given us a proposal to invest in restricted common equity securities in FuelNation Inc. at an average price of $0.12 per share for a total investment of approximately $4,500,000 USD.  In addition the same investor group has asked to have the ability to subscribe to warrants to purchase restricted common shares of stock over a three year period at an average price of $0.19 per share for a total investment of $11,000,000 USD. The use of these funds would be restricted to the Waste Energy Of Brazil LLC project in Sao Paulo, Brazil.  These funds would specifically allow us to complete the design, engineering, government approvals over the next six months to obtain and enter into a contract to sell the electric power created by the energy from waste facility in the amount of 150MwH by signing a long term Take and Pay Power Purchase Agreement with a major energy company in Brazil. The total cost to build this plant will be approximately $500,000,000 USD. The financing will be secured by selling the electrical power through the signing of a Power Purchase Agreement and also by applying for USA government guarantees through their EXIM Bank financing programs.

Additional Proposed Acquisition:The opportunities in Iraq are long term in nature, and there will be no immediate benefits. The risks associated with development and employment in Iraq is great, although the rewards can be much greater. We have been very successful in procuring the proper appointments in ministry and negotiating with well established companies and individuals that are native to the country through our manager in Iraq, Dr. Waleed Abdul Malik Alrawi. Our Executive Manager in Iraq: Dr. Waleed Abdul Malek Alrawi holds a Bachelors Degree and a Masters Degree in Military Science and completed his PHD in Islamic History in December 2004. Dr. Waleed Abdul Malek Alrawi, has maintained several positions in the military for the Iraq Government and recently retired from his position in April 2003 as the Secretary of the Minister of Defense. Dr. Waleed Abdul Malek Alrawi is currently in fulltime employment and represents FuelNation and its wholly owned subsidiary Leman Energy Trading, Inc. to procure contracts and assist with the redevelopment of Iraq. Management believes we will be able to secure a successful contract by second quarter 2009 in Iraq.

OFF-BALANCE SHEET ARRANGEMENTS

The company is not a party to any off balance sheet financing.

CAPITAL COMMITMENTS

We have committed capital to our activities to acquire a minority interest in the Ventspils Nafta Terminal. This additional capital in the amount of $10,000,000 must be borrowed from investors and deposited into our trading account to purchase crude oil. The terms of this deposit are being negotiated with the investor, and management believes a combination of debt and equity participation will be best suited while the deposit is being used for crude oil purchases. These funds are to be secured from the account deposit and the crude oil purchases providing we reach a successful arrangement from the investor. However, we can give no assurance that we will be successful in securing any debt or equity financing.

Additional capital in the amount of $350,000,000 will need to be raised for the acquisition of the terminal. These funds will be secured by the assets of the projects and the income derived from the asset. We currently are in negotiations with private and institutional lenders, and management believes a combination of debt and equity participation will be required for the investment funds. However, we can give no assurance that we will be successful in securing any debt or equity financing.



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LONG-TERM OBLIGATIONS TABLE

|                                                                  |  |                        |  |                  |  |           |  |           |  |                  
|----------------------------------------------------------------- |  | ---------------------- |  | ---------------- |  | --------- |  | --------- |  | -----------------
|                                                                  |  | Payments Due By Period
|Contractual Obligations                                           |  | Total                  |  | Less Than
1 Year |  | 1-3 years |  | 3-5 Years |  | More Than
5 Years
|Long Term Debt Obligations                                        |  |                       |  |                 |  |          |  |          |  |                 
|Capital Lease Obligations                                         |  |                       |  |                 |  |          |  |          |  |                 
|Operating Lease Obligations                                       |  |                       |  |                 |  |          |  |          |  |                 
|Purchase Obligations                                              |  |                       |  |                 |  |          |  |          |  |                 
|Other Long Term Liabilities reflected on Balance Sheet under GAAP |  |                       |  |                 |  |          |  |          |  |                 
|TOTAL                                                             |  |                       |  |                 |  |          |  |          |  |                 



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. This data center allows our operating subsidiaries to communicate on a centralized exchange server and exchange information, ideas, company communications and secure documents.  In addition this data center hosts our company web and internet site.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required for smaller reporting company.

ITEM 4.

CONTROLS AND PROCEDURES

Disclosure Controls and Procedures

The Company's management evaluated, with the participation of its Chief Executive Officer (CEO) and acting Chief Financial Officer (CFO), the effectiveness of the design/operation of its disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (Exchange Act)) as of September 30, 2008.

Disclosure controls and procedures refer to controls and other procedures designed to ensure that information required to be disclosed in the reports we file or submit under the Exchange Act, is recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC and that such information is accumulated and communicated to our management, including our chief executive officer and chief financial officer, as appropriate, to allow timely decisions regarding required disclosure. In designing and evaluating our disclosure controls and procedures, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives, and management is required to apply its judgment in evaluating and implementing possible controls and procedures.

Management conducted its evaluation of disclosure controls and procedures under the supervision of our principal executive officer and our principal financial officer. Based on that evaluation, management concluded that our financial disclosure controls and procedures were effective related to the preparation of the 10-q filing as of September 30, 2008.

Managements Report on Internal Control over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management is also required to assess and report on the effectiveness of our internal control over financial reporting in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404). Management assessed the effectiveness of our internal control over financial reporting as of September 30, 2008. In making this assessment, we used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control - Integrated Framework.



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Changes in Internal Controls over Financial Reporting

There have been no changes in internal control over financial reporting during the three months ended September 30, 2008, that has materially affected or is reasonably likely to materially affect the Companys internal control over financial reporting.



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PART II  OTHER INFORMATION

ITEM 1.

LEGAL PROCEEDINGS

We are not a party to any material legal proceedings other than arbitration for wrongful termination of a ship charter, which is currently in arbitration in London. The arbitration is: W-O Marine Pte. Ltd v. FuelNation Inc. Leman Energy Trading, Inc., chartered a ship the 28th of October 2006, for a period of six months with a six month renewal at our option, to purchase and transport fuel-oil from Iraq to other countries in the Arabian Gulf. Upon arrival of the chartered ship to the southern port of Khor Al-Zubair in Iraq, the pipeline supplying the ships at the southern port of Khor Al-Zubair was disrupted during the cold weather for a period of approximately 30 to 45 days. and the ships crew needed to return to Fujairah, UAE, for supplies and refueling. Upon return to Iraq, we had missed a window to pick up fuel-oil and we waited behind other ships for the pipeline to reopen. Time had lapsed and Leman Energy Trading, Inc. was forced to sublet the ships on short term charters to competitors at a substantial loss transporting fuel-oil from Iraq to Fujairah, UAE. In March 2006, the ship owner wrongfully terminated the charter before expiration and we are currently litigating our losses in the London Arbitration courts. The Arbitrator ruled in favor of FuelNation for the wrongful termination. We are currently arbitrating our claims for losses, and Management believes we should be successful in this arbitration. If successful, we will be entitled to receive approximately $500,000 from W-O Marine.

On November 8, 2006, the SEC instituted an administrative proceeding against us alleging that we had a class of equity securities registered with the SEC, but that we were delinquent in our periodic filings since we last filed our quarterly report for the period ended March 31, 2004. On June 5, 2007, the Securities and Exchange Commission issued an Order Dismissing Proceeding Based on Lack of Registration regarding us. The SEC Order dismissing the proceeding against us was based on a motion by the SECs Division of Enforcement, which stated that we no longer had any class of securities registered in accordance with Securities and Exchange Act Section 12 and that such proceeding was moot and should be dismissed.

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. Our operations are subject to federal, state and local laws and regulations. Currently, we are not involved, or the subject of, any pending or existing litigation. (See additional information under the heading Subsequent events.)

ITEM 1A.

RISK FACTORS

Not required for smaller reporting company.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On February 14, 2008 we sold 80,000 shares of our common stock to Joseph Gorfien at $0.01 per share or an aggregate payment to us of $800.

On February 14, 2008 we sold 1,000,000 shares of our common stock to Scott Bader at $0.01 per share or an aggregate payment to us of $10,000.

On February 14, 2008 we sold 1,000,000 shares of our common stock to Steve Bader at $0.01 per share or an aggregate payment to us of $10,000.

On February 14, 2008 we sold 4,700,000 shares of our common stock to Victor Spektor at $0.01 per share or an aggregate payment to us of $4,700.00.

On February 14, 2008 we issued 8,000,000 shares of our common stock to Christa Salmonson, Custodian in exchange for off-setting the loan account obligating us to pay Christa Salmonsons Dad, Chris Salmonson our Chief Executive Officer. Each share was valued at $0.01 or an aggregate of $80,000.

On February 14, 2008 we issued 8,000,000 shares of our common stock to Christian Salmonson, Custodian in exchange for off-setting the loan account obligating us to pay Christa Salmonsons Dad, Chris Salmonson our Chief Executive Officer. Each share was valued at $0.01 or an aggregate of $80,000.

On February 22, 2008 David popper converted 220 shares of our preferred shares into 1,074,480 shares of our common stock at the calculated conversion rate



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On March 17, 2008 Tower Communication converted 686 shares of our preferred shares into 11,354,672 shares of our common stock at the calculated conversion rate

On April 3, 2008 E Stewart ETAL converted 1,722 shares of our preferred shares into 28,502,544 shares of our common stock at the calculated conversion rate

On April 11, 2008 Condon ETAL converted 376 shares of our preferred shares into 6,223,552 shares of our common stock at the calculated conversion rate

On April 24, 2008 T Cole converted 10 shares of our preferred shares into 165,520 shares of our common stock at the calculated conversion rate

On April 24, 2008 Joe Cole converted 120 shares of our preferred shares into 1,986,240 shares of our common stock at the calculated conversion rate

On April 24, 2008 Steve Rissman converted 555 shares of our preferred shares into 9,186,360 shares of our common stock at the calculated conversion rate

On May 20, 2008 Harold Gelb ETAL converted 1,472 shares of our preferred shares into 24,364,544 shares of our common stock at the calculated conversion rate

On May 21, 2008 James Koch converted 34 shares of our preferred shares into 562,768 shares of our common stock at the calculated conversion rate

On May 21, 2008 Kent Hagood converted 228 shares of our preferred shares into 3,773,856 shares of our common stock at the calculated conversion rate

On June 2, 2008 David Garms converted 119 shares of our preferred shares into 1,969,688 shares of our common stock at the calculated conversion rate

On June 6, 2008 Terry Garms converted 119 shares of our preferred shares into 5,246,984 shares of our common stock at the calculated conversion rate

On June 6, 2008 David Devalk converted 15,149 shares of our preferred shares into 250,746,248 shares of our common stock at the calculated conversion rate

On June 12, 2008 we sold 2,500,000 shares of our common stock to Victor Spektor at $0.007 per share or an aggregate payment to us of $19,000.

On June 12, 2008 we sold 50,000 shares of our common stock to David Fenster at $0.05 per share or an aggregate payment to us of $2,500.

On June 12, 2008 we sold 120,000 shares of our common stock to Almog Veig at $0.05 per share or an aggregate payment to us of $6,000.

On June 12, 2008 we sold 200,000 shares of our common stock to Herbert Miller at $0.05 per share or an aggregate payment to us of $10,000.

On June 12, 2008 we sold 25,000 shares of our common stock to Jerry Carroll at $0.03 per share or an aggregate payment to us of $750.

On June 12, 2008 we sold 75,000 shares of our common stock to Thomas Nelson at $0.02 per share or an aggregate payment to us of $2,250.

On June 12, 2008 we sold 700,000 shares of our common stock to Richard Ahlborn at $0.03 per share or an aggregate payment to us of $21,000.

On June 12, 2008 we sold 250,000 shares of our common stock to Raymond Plevyak at $0.03 per share or an aggregate payment to us of $7,500.

On June 12, 2008 we sold 100,000 shares of our common stock to Mark Steele at $0.03 per share or an aggregate payment to us of $3,000.



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On June 12, 2008 we issued 375,000 shares of our common stock to Isa Hishmeh in exchange for consulting services rendered by Isa Hishmeh. Each share of common stock was valued at $0.01 or an aggregate of $3,750.

On June 12, 2008 we issued 500,000 shares of our common stock to William Carey in exchange for energy related consulting services rendered by William Carey. Each share of common stock was valued at $0.01 or an aggregate of $5,000.

On June 12, 2008 we sold 5,000,000 shares of our common stock to Eric Clough as Trustee at $0.01 per share or an aggregate payment to us of $50,000.

On June 12, 2008 we issued 1,000,000 shares of our common stock to Peter Gianoukas in exchange for a lending fee related to a loan made by Peter Gianoukas to the Company. Each share of common stock was valued at $0.01 or an aggregate of $10,000.

On June 12, 2008 we sold 500,000 shares of our common stock to Jay Zelesnick at $0.05 per share or an aggregate payment to us of $2,500.

On June 12, 2008 we issued 33,104,000 shares of our common stock to Graham Tanaka in exchange for a lending fee related to a loan made by Graham Tanaka to the Company. Each share of common stock was valued at $0.01 or an aggregate of $331,040.

On June 12, 2008 we issued 33,104,000 shares of our common stock to AlKhalifa Petroleum in exchange for energy related consulting services rendered by AlKhalifa Petroleum. Each share of common stock was valued at $0.01 or an aggregate of $331,040.

On June 12, 2008 we issued 500,000 shares of our common stock to William Carey in exchange for energy related consulting services rendered by William Carey. Each share of common stock was valued at $0.01 or an aggregate of $5,000.

On June 12, 2008 Chris Salmonson converted 3,187 shares of our preferred shares into 52,751,224 shares of our common stock at the calculated conversion rate.

On June 12, 2008 we issued 8,276,000 shares of our common stock to Michael Flax in exchange for a lending fee related to a loan made by Michael Flax to the Company. Each share of common stock was valued at $0.01 or an aggregate of $82,760...

On June 12, 2008 we issued 500,000 shares of our common stock to Moore Stephens P.C.  in exchange for audit related consulting services rendered by Moore Stephens P.C. Each share of common stock was valued at $0.01 or an aggregate of $5,000.

On June 12, 2008 we issued 15,000,000 shares of our common stock to David Schneider in exchange for energy related consulting services rendered by David Schneider. Each share of common stock was valued at $0.01 or an aggregate of $150,000.

On June 13, 2008 Michael Flax converted 710 shares of our preferred shares into 11,751,920 shares of our common stock at the calculated conversion rate.

On June 20, 2008 Milton and Patricia Scott converted 46 shares of our preferred shares into 761,392 shares of our common stock at the calculated conversion rate.

On June 25, 2008 Antonio Ultimo converted 153 shares of our preferred shares into 2,532,456 shares of our common stock at the calculated conversion rate.

On July 7, 2008 Arthur Rosen converted 16 shares of our preferred shares into 264,832 shares of our common stock at the calculated conversion rate.

On July 18, 2008 David Bogenschutz converted 2,000 shares of our preferred shares into 33,104,000 shares of our common stock at the calculated conversion rate.

On July 22, 2008 Shelby Evans converted 3 shares of our preferred shares into 49,656 shares of our common stock at the calculated conversion rate.



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On July 23, 2008 we issued 3,000,000 shares of our common stock to Frank Lamendola in exchange for audit related consulting services rendered by Frank Lamendola. Each share of common stock was valued at $0.01 or an aggregate of $30,000.

On July 23, 2008 we issued 3,000,000 shares of our common stock to Trevor Klein in exchange for accounting related consulting services rendered by Trevor Klein. Each share of common stock was valued at $0.01 or an aggregate of $30,000.

On July 23, 2008 we issued 300,000 shares of our common stock to Gary Richie in exchange for consulting services rendered by Gary Richie. Each share of common stock was valued at $0.01 or an aggregate of $3,000.

On July 23, 2008 we issued 30,027,920 shares of our common stock to Michael Flax in exchange for loans arranged by Michael Flax to the Company. Each share of common stock was valued at $0.01 or an aggregate of $300,279.

On July 23, 2008 we issued 4,000,000 shares of our common stock to Alan Judd in exchange for loans arranged by Alan Judd to the Company. Each share of common stock was valued at $0.01 or an aggregate of $40,000.

On July 23, 2008 we issued 1,750,000 shares of our common stock to Bernard Gallagher in exchange for a lending fee related to a loan made by Bernard Gallagher to the Company. Each share of common stock was valued at $0.01 or an aggregate of $17,500.

On July 23, 2008 we issued 750,000 shares of our common stock to Ray Hocking in exchange for a lending fee related to a loan made by Ray Hocking to the Company. Each share of common stock was valued at $0.01 or an aggregate of $7,500.

On July 23, 2008 we issued 750,000 shares of our common stock to Philip Englefield in exchange for a lending fee related to a loan made by Philip Englefield to the Company. Each share of common stock was valued at $0.01 or an aggregate of $7,500.

On July 23, 2008 we issued 750,000 shares of our common stock to Robin Ashby in exchange for a lending fee related to a loan made by Robin Ashby to the Company. Each share of common stock was valued at $0.01 or an aggregate of $7,500.

On July 23, 2008 we issued 1,000,000 shares of our common stock to Rob Loosemore in exchange for a lending fee related to a loan made by Rob Loosemore to the Company. Each share of common stock was valued at $0.01 or an aggregate of $10,000.

On July 23, 2008 we issued 500,000 shares of our common stock to Michael Gelardi in exchange for a lending fee related to a loan made by Michael Gelardi to the Company. Each share of common stock was valued at $0.01 or an aggregate of $5,000.

On August 18, 2008 we sold 6,000,000 shares of our common stock to Alan Leibowitz at $0.01 per share or an aggregate payment to us of $60,000.

On August 18, 2008 we issued 3,000,000 shares of our common stock to David Popper in exchange for legal related consulting services rendered by David Popper. Each share of common stock was valued at $0.01 or an aggregate of $30,000.

On September 5, 2008 we issued 14,000,000 shares of our common stock to Hank Yusem in exchange for a lending fee related to a loan made by Hank Yusem to the Company. Each share of common stock was valued at $0.01 or an aggregate of $140,000.



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ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

Not Applicable

ITEM 4.

SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

During the year ended December 31, 2007 the following were approved by a majority of our shareholders by written consent:

1.

On August 15, 2007 the Company amended its certificate of incorporation authorizing it to issue 505,000,000 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 500,000,000 shares are classified as common stock, par value $.01. (In addition, On March 20, 2008 the Companys Articles of Incorporation were amended. See Subsequent events below)

ITEM 5.

OTHER INFORMATION

Not Applicable

ITEM 6.

EXHIBITS

|                |  |                                                                                                                       
|--------------- |  | ----------------------------------------------------------------------------------------------------------------------
|Exhibit 
Number |  | Description                                                                                                           
|31.1            |  | Chief Executive Officer and Acting Chief Financial Officer Certification                                              
|32.1            |  | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002



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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, on November 21, 2008.

| |                 |                                   
| | --------------- | ----------------------------------
| | FUELNATION INC.
| | (Registrant)   
| |                 |                                   
| |                 |                                   
| | By:             | /s/ CHRIS R. SALMONSON            
| |                 | Chris R. Salmonson,               
| |                 | President, Chief Executive Officer







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