10-K 1 nsol-10k123109v45.htm nsol-10k123109v45.htm - Generated by SEC Publisher for SEC Filing

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

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

For the fiscal year ended December 31, 2009

 

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

 

For the transition period from __________to_________

 

Commission file number: 000-31959

 

Nuclear Solutions, Inc.

(Name of registrant as specified in its charter)

 

NEVADA

 

88-0433815

(State or other jurisdiction of incorporation or organization)

 

(I.R.S. Employer Identification No.)

 

5505 Connecticut Ave NW, Ste. 191, Washington, DC 20015

(Address of principal executive offices, including zip code)

 

Registrant’s telephone number including area code: (202) 787-1951

 

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

 

Securities registered under Section 12(g) of the Act:
Common Stock, $0.0001 Par Value

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes o    No  x

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Exchange Act. Yes o    No  x

Indicate by check mark if 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 past 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x    No o

Indicate by check mark if disclosure of delinquent filers in response to Item 405 of Regulation S-K is not  contained herein, and will not be contained, to the best of the registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company (as defined in Rule 12b-2 of the Act):

Large accelerated filer 

o

Accelerated filer

o

Non-accelerated filer   

o

Smaller reporting company

x

 

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

 

As of December 31, 2009, there were 97,890,981 shares of the issuer's common stock outstanding. The aggregate market value of the shares of the issuer's voting stock held by non-affiliates was $5,808,659 based the average of the bid and asked price as quoted on the OTC Electronic Bulletin Board on June 30, 2009. The sum excludes the shares held by officers, directors, and stockholders whose ownership exceeded 10% of the outstanding shares at June 30, 2009, in that such persons may be deemed affiliates of the Company. This determination of affiliate status is not necessarily a conclusive determination for other purposes.

[1]

 


 

FORM 10-K ANNUAL REPORT

FISCAL YEAR ENDED DECEMBER 31, 2009

NUCLEAR SOLUTIONS INC

 

Item

 

Page

PART I

 

 

 

1.

Business

 3

1A.

Risk Factors

12

1B.

Unresolved Staff Comments

17

2.

Properties

17

3.

Legal Proceedings

17

4.

Removed and Reserved

17

 

 

 

PART II

 

 

 

5.

Market for Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

18

6.

Selected Financial Data

19

7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

20

7A.

Quantitative and Qualitative Disclosures About Market Risk

22

8.

Financial Statements and Supplementary Data

F1

9.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure

23

9A(T).

Controls and Procedures

23

9B.

Other Information

24

 

 

 

PART III

 

 

 

10.

Directors, Executive Officers and Corporate Governance

25

11.

Executive Compensation

30

12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

31

13.

Certain Relationships and Related Transactions, and Director Independence

33

14.

Principal Accountant Fees and Services

34

 

 

 

 

PART IV

 

 

 

 

15.

Exhibits and Financial Statement Schedules

35

 

 

 

[2]

 


 

PART I

 

CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

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

 

Item 1. Description of Business

 

(a) Our Corporate History.

 

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

 

(b) Business of the Issuer.

 

Nuclear Solutions, Inc. and its wholly owned subsidiary, Fuel Frontiers, Inc. is engaged in the research, development, and commercialization of innovative technologies and processes, which are generally early-stage, theoretical or commercially unproven. We operate a highly technical business and our primary mission is to develop facilities to produce ultra-clean synthetic diesel from coal and other materials using a plasma-based gasification system and a conventional synthesis gas-to-fuel reforming system based upon Fisher-Tropsch technology. In 2008, The Board of Directors elected to focus the company exclusively on the production of synthetic fuels through the FFI subsidiary. Prior to that, the company was developing nuclear technologies in the areas of shielded nuclear material detection and nuclear micro-batteries in addition to the production of synthetic fuels. Due to the difficulties encountered in raising capital in a declining economic climate coupled with the limited resources of the company, management made the decision to place all nuclear technology development programs into a dormant state. The company will continue to maintain the intellectual property associated with the shielded nuclear detection technology program and will seek a buyer or a master licensee for the patents. The company is discontinuing all further business development associated with nuclear micro battery technology and other nuclear legacy technologies.

[3]

 


 

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

 

In 2005, the company entered the ultra-clean synthetic fuels business through a new subsidiary called Fuel Frontiers, Inc. (formerly known as Future Fuels, Inc.). The primary business of Fuel Frontiers, Inc. (FFI) is to plan, design, finance, construct, and operate multiple gas-to-liquid synthetic fuel synthesis facilities worldwide to transform virtually cost-free waste materials such as used tires, waste coal, solid and liquid municipal wastes, biomass, and other similar low-value societal refuse into high-value gas-to-liquid fuels such as ultra-clean diesel. Fuel Frontiers, Inc. (FFI) is focused on the production of ultra-clean GTL Diesel fuel. Management made a decision to concentrate on the market for ultra-clean GTL Diesel fuel due to the maturity and stability of the diesel market place and the greater certainties associated with distribution, integration, production costs and profit margins. Originally, our approach to the production of ultra-clean synthetic fuel was highly focused on the utilization of virtually cost free waste materials as feedstock for our process. We believe our approach to the production of ultra-clean synthetic fuels is differentiated by our business model and technical approach. Our business model focuses on the flexibility to use virtually cost free waste materials, some of which are renewable, in combination with conventional feed stocks such as coal or petroleum coke, as opposed to other approaches which must lock in a certain type of homogeneous feedstock. Our technical approach involves the use of a low-emission plasma processing (gasification) system to convert the waste materials into synthesis gas which is then converted into ultra-clean synthetic diesel.

 

System Overview

 

The FFI approach for the production of ultra-clean diesel occurs in two stages. In the first stage the feedstock material is fed into a plasma processing system such as the Westinghouse Plasma Gasifier (WPG) which transforms the feedstock material into synthesis gas, which is composed of carbon, hydrogen and oxygen. The heart of Westinghouse’s Plasma Gasifier contains a plasma field that reaches temperatures up to 10,000 degrees Fahrenheit. The plasma breaks down feedstock materials--such as coal, used tires, wood wastes as well as petroleum coke and other materials--to their core elements in a clean and efficient manner which generates significant amounts of synthesis gas. Excess heat energy is removed from the resulting synthesis gas and recovered to generate electricity on-site which can be used to provide power to the system. The cooled synthesis gas is then refined for purity and passed to the second stage. In the second stage, the refined synthesis gas, which is composed primarily of carbon, hydrogen and oxygen, is converted into ultra-clean diesel though a modified Fischer-Tropsch gas-to-liquids synthesis process for diesel fuels. The process applies a metallic catalyst to chemically transform the synthesis gas into a liquid fuel which is then refined to fuel-grade standards. This approach is not entirely new, as early as 1936 in Germany similar technology was used with coal-produced synthesis gas to produce diesel and alcohols on a commercial scale. The FFI approach to ultra-clean synthetic fuel production differs from other approaches mainly because our system can utilize multiple feedstock materials that are normally difficult to utilize in a conventional gasifier. The ability to use heterogeneous materials is a benefit of a plasma processing system. The Westinghouse Plasma Gasifier has the proven capability to transform a wide variety of waste materials into the synthesis gas in an efficient and environmentally friendly manner.

 

Notable Events

 

On November 3, 2005, FFI signed a land lease agreement with Venture III Associates, a New Jersey General Partnership, and a permit and feedstock agreement with Ocean County Recycling Center, Inc., a New Jersey corporation. FFI entered into a fifteen-year land lease with Venture III Associates, renewable for up to 90 years, for an approximate six-acre site in Toms River, New Jersey to build a proposed 52 million gallon waste-to-fuel production facility in exchange for 1,000,000 shares of FFI common stock. When the facility commences operations FFI will pay Venture III $240,000 dollars annually in equal monthly installments, plus three (3%) percent of the net operating profit of the waste-to-fuel facility when the facility begins operations. The payment of the 1,000,000 shares of FFI common stock was deferred by Venture III until groundbreaking occurs for the waste to fuel facility on said property. Originally, this project was intended to produce synthetic ethanol. Due to unfavorable market conditions for ethanol and local community concerns this project is being reevaluated by management to determine an appropriate technology and target product that will present a viable and attractive opportunity to our shareholders and the local community. In 2007, FFI and Connecticut-based Startech Environmental Corporation have mutually terminated their global strategic alliance to utilize startech plasma gasification systems, which was originally entered into on March 13, 2006. In 2007, we paid $100,000 to Westinghouse Plasma Corporation (WPC) for engineering services related to the design engineering of a Westinghouse Plasma Gasification system intended for an FFI synthetic diesel facility. In February 2008, FFI paid Shaw Stone & Webster (Shaw), a division of The Shaw Group Inc., for engineering services that will provide a technical basis for a 400 Tonne per day Coal-To-Liquid (CTL) Ultra-Clean Diesel fuel production facility in Muhlenberg County, Kentucky. On July 23, 2008, Jack Young, 79, Vice President of Nuclear Solutions, Inc. and President of our subsidiary, Fuel Frontiers, Inc., tendered his resignation from both executive officer positions. Subsequently, on July 24, 2008, the board of directors appointed David C. Maland, 52, to succeed Mr. Young as President of Fuel Frontiers, Inc. (FFI). Prior to his appointment as president, Mr. Maland was an independent business consultant for the last five years.

[4]

 


 

Development Agreement and Amendments:

 

In 2007, Kentucky fuel Associates agreed to pay Fuel Frontiers, Inc. $2,000,000 per facility as associated with a Development Agreement between FFI and Kentucky Fuel Associates, Inc. (herein, KFA) which was originally signed on July 30, 2007 and subsequently amended twice. The purpose of the Development Agreement is to initially explore development opportunities for a coal-to-gas-to-liquid fuels (CTL) production facility in the State of Kentucky. FFI has focused corporate efforts in the area of CTL production technologies. KFA has expertise and business relationships in Kentucky which may compliment FFI’s CTL efforts. FFI has granted KFA the exclusive right to locate and develop CTL production projects in the State of Kentucky and the non-exclusive right to perform the same functions throughout the United States. KFA will also have the right to match any third parties proposals for CTL production projects in the United States, subject to FFI’s approval. In consideration of the Development Agreement and for each site located by KFA and accepted by FFI for development, FFI has agreed to pay KFA Seven (7%) percent of the net pre-tax income for each CTL production facility for the life of each facility. Additionally, in consideration for KFA’s $2,000,000 funding, FFI will grant KFA a two and one-half (2.5%) percent equity interest in the first CTL facility developed by KFA. The Development Agreement has a ten (10) year term and is renewable, at the election of the parties, for an additional five (5) year term. The Agreement may be terminated for a breach of any material provision which remains uncured for more than ninety (90) days following written notice of the breach. On September 3, 2008, FFI received $625,000 from Kentucky Fuel Associates. These funds were initially granted to KFA by Muhlenberg County, Kentucky for the design, engineering and related development expenditures for a Coal-to-Liquids (“CTL”) facility to be located in Muhlenberg county designated for the production of ultra-clean synthetic diesel fuel from local coal. In May 2008, KFA announced it would assign the $625,000 grant over to its development partner Fuel Frontiers, Inc. The $625,000 received represents a partial payment associated with this Development Agreement. Competition in the alternative and synthetic fuel marketplace is developing. We have identified Range Fuels, Inc. of Colorado as developing a similar approach to the production of ethanol using wood wastes which are converted in to syngas and subsequently into ethanol. We believe their approach differs from ours in the way their syngas is produced and in the variety of simultaneous feed materials that can be processed. Currently, we are focusing our efforts in the state of Kentucky, Muhlenberg County for our first coal to ultra-clean diesel production facility. The projected output of a typical project can range from approximately 50,000,000 gallons per year to 200,000,000 gallons per year. We currently estimate that the inside battery limits cost of an ultra-clean synthetic diesel waste-to-fuel facility producing approximately 50,000,000 gallons per year could range from $300,000,000 to $400,000,000. This estimate range is qualified by the fact that the actual cost of any facility can be significantly affected by factors such as the exact nature and terms of the project, the market price for engineering, labor and raw construction materials and any environmental or regulatory costs which are highly project dependent.

 

We will require additional capital to develop these projects. Over the next twelve months, we anticipate raising additional capital through debt, grants or equity financing. The financing requirements for each project can be substantially different from one another and may or may not result in significant dilution and or increased indebtedness of the company. We intend to build our facilities with modular expansion capability to allow for increased future production and/or gasification of additional or diverse feedstock (waste materials). As of the date of this report, we have retained Stone and Webster, LTD. Of Milton Keynes, England, a subsidiary of the Shaw Group for design engineering, procurement, construction, and production operations for our renewable fuel projects currently in the planning stages.

[5]

 


 

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

 

The Company owned 100% of the issued and outstanding common stock of FFI represented by 30,000,000 shares. On June 12, 2009, the Company entered into a Stock Purchase Agreement and sold 10%, or 3,000,000 FFI common shares (the “Shares”) to Schrader & Associates Defined Benefit Pension Plan (herein, “Schrader”) for the sum of $350,000.

 

FFI granted Schrader demand and piggyback registration rights on the Shares. Schrader granted the Company the first right of refusal to match or exceed any third party bona fide offer to purchase the Shares until June 12, 2014.

 

Additionally, on June 12, 2009, in consideration of $5,000, the Company granted Schrader an option to purchase an additional 10% of FFI for the sum of $350,000. The option expired on September 12, 2009.

 

On June 30, 2009, Schrader partially exercised the option and purchased an additional 1,500,000 common shares of FFI, which represents 5.0% percent of the issued and outstanding common stock of FFI, for proceeds of $175,000.

 

Management Agreement

 

In conjunction with the sale of its partial interest in FFI on June 12, 2009, the Company, FFI and Schrader entered into a Management Agreement, (the “Agreement”). The Agreement states that the Company will use the proceeds of the sale of the Shares according to the Company’s use of proceeds Schedule which is attached the Agreement. Additionally, the Company has agreed to nominate and appoint, and or vote into office one person named by Schrader who will be seated as a member of the FFI board of directors for a 12-month term.

 

FFI, upon receipt of funds from the Company’s use of proceeds schedule, has agreed to purchase certain real property located in Muhlenberg, Kentucky (the “Muhlenberg Property”) for the proposed construction of a Coal-to-Liquids (CTL) plant for approximately $150,000. FFI has agreed to take title to the Muhlenberg Property in such a manner so that the property ownership would automatically transfer to Schrader in the event FFI were to file a petition in Bankruptcy Court, wind-up or liquidate.

 

Additionally, if FFI were to abandon its pursuit of a CTL plant on the Muhlenberg Property because FFI’s inability to obtain all appropriate approvals and permits required for a CTL plant, then FFI would sell the Muhlenberg Property and use the net proceeds to acquire another property for a CTL plant according to the same type of acquisition and title structure.

 

If FFI were able to secure an off-take agreement or fuel purchase agreement for fuels from its proposed CTL Plant, that would permit FFI to secure project financing, or if FFI were to secure project financing using the Muhlenberg or similar property as collateral, the Schrader would quit claim the future interest in and to the property to FFI.

[6]

 


 

About Our Nuclear Technology Development Business:

 

Please note: The Company’s nuclear technologies are no longer under active development. This section is being provided as a matter of historical reference and as a historical reference to provide a background into the previous business development efforts of the company. The company operates this business by hiring technical expertise to develop innovative and emerging technologies that we believe have significant market potential. We strive to develop technologies identified as viable to the point that they may be licensed, joint-ventured or sold to an industrial or governmental entity, or otherwise commercialized. We do not maintain technical facilities or a laboratory of our own. Our business model is to utilize the technical facilities and capabilities of appropriate outside laboratories under contract to us when appropriate. By taking advantage of existing technology infrastructures, this preferred method of technology development reduces capital investment costs and the length of time required to develop technologies. This is especially important in light of the extensive requirements for the government approval and safe handling of nuclear materials. Any development efforts contemplated or planned that involve nuclear materials are intended to be carried out by an existing and already licensed scientific or technical facility through the establishment of a contractual relationship. This approach also mitigates the potential liability involved with the handling and use of nuclear materials. We have identified several facilities in the United States and abroad that have the capabilities we may require in the future. As an example, we may contract with or establish a teaming relationship with a U. S. national laboratory such as Los Alamos National Labs, Lawrence Livermore National Labs, or others that have a history and willingness to perform work under well-established contracting channels such as Cooperative Research and Development Agreements (CRADA) and Work for Others (WFO) agreements. Although we believe this is adequate for our development purposes and preferable in the case of nuclear material handling, we may choose to operate our own laboratory facility in the future, subject to available capital. When a technology is deemed market ready, the company will offer it to potential customers for commercial licensing. As an example, after the successful prototype construction and operation of our shielded nuclear material detector, we will offer the sensor system to companies that have the appropriate experience to integrate the sensor into a working environment to meet the performance criteria as required by the end user. We do not intend to establish technology or product manufacturing operations of our own, nor do we intend to establish extensive marketing and distribution operations of our own except in the case of our subsidiaries that are involved in the production of synthetic fuels. Our business model as it relates to product technology development is centered on the sale and/or licensing of our technologies through strategic partnerships with companies that have established manufacturing, sales and marketing infrastructures. By way of example, companies that could be potential partners for our shielded nuclear material detection technology may be: Lockheed-Martin, General Atomics, Raytheon and other such companies. Currently we do not have any partnership agreements or material contracts with the aforementioned companies. Our primary role, when developing a product technology, is to add value by initially developing and providing the enabling core intellectual property to our customers and partners. Typically, after licensing, we will remain involved as a consultant for the customer to ensure appropriate technology transfer to the customer and to assist with any improvements or modification that may be needed during the course of commercialization. This is a highly leveraged business model that is believed by management to offer the greatest advantages in terms of corporate flexibility, and reduced capital requirements compared to a traditional research and development operation. However, management is opportunistic and may consider adopting a production model if the right conditions are met. We will pursue all avenues that will lead to the commercialization of our technologies. Since our business model is to establish partnerships during development and ultimately as production and marketing partners for our technologies, we are constantly looking for and evaluating potential strategic partners. We especially require partnerships to take advantage of the business opportunities available through government agencies such as the Homeland Security Advanced Projects Agency (HSARPA), The Defense Advanced Research Projects Agency (DARPA) and others. A partnering relationship with experienced companies that have a positive track record of providing products or services to the government agencies that are our potential customers in the related field will probably increase the likelihood that we could secure money from the government to develop one of our technologies for a specific government need.

 

The following is a general example of a technology development plan:

 

1)       A market opportunity is identified in an area of interest to us.

2)       A technical assessment of the opportunity and existing related technologies is performed with an appropriate combination of in-house and outside analysis.

3)       If the technical assessment indicates a viable market, research is performed to identify and define an appropriate technology.

4)       The technology identified in the previous step is reevaluated in light of the expected development costs and market opportunity. A decision is made to proceed with identified technology, suspend development, or research supplementary approaches.

5)       Intellectual property is secured through initiation of the patent process and/or identified technology is licensed. Selected technologies may be kept proprietary or trade secret.

6)       Selected technology is validated by an appropriate laboratory under contract.

7)       Once successfully validated, the technology is then marketed to appropriate entities for licensing or sale. Depending on the technology being developed, a strategic partnership arrangement may be consummated at many different points along the development track. The company intends to commercialize our technologies through: strategic partners, joint-venture partners, licensees, and other customers who will carry out project implementation, manufacturing, end-user marketing activities, and deployment of our technologies. We intend to generate revenue from the licensing, sale, and other usage agreements associated with our technologies.

[7]

 


 

NUCLEAR TECHNOLOGIES:

GRAVIMETRIC SHIELDED NUCLEAR MATERIAL/PORTABLE NUCLEAR WEAPON DETECTOR (Patented, United States Patents 7,298,469, 7,511,831 and 7,511,832)

 

Please note: The Company’s nuclear technologies are no longer under active development. This section is being provided as a matter of historical reference and as a historical reference to provide a background into the previous business development efforts of the company. We are developing a new and unique technology to be integrated into a passive primary portal system that would screen trucks and shipping containers in real time for the presence of shielded nuclear weapons useable materials such as Uranium (U-235) and Plutonium (Pu-239). The company is working on funding the prototype construction of a highly sensitive, portable, low cost, and ruggedized detection device that responds to minute gravitational gradient anomalies. These disturbances are produced by high-density nuclear materials such as Uranium and Plutonium. Unlike radiation, the force of gravity cannot be shielded and is a unique new concept for the detection of shielded nuclear weapons. The company is unaware of any other device with similar targeted performance and size. The company owns three issued United States Patents covering technology for the detection of shielded nuclear materials (United States Patents 7,298,469, 7,511,831 and 7,511,832) On March 15, 2005, we entered into a License Agreement with I.P. Technology Holding, Inc.(IPTH), a New Jersey corporation. We granted I.P. Technology a limited license for the right to the purchase and resell products based on our patent pending technology for the detection of shielded fissile nuclear materials to all non-federal police and fire agencies in the United States for the patent life of the technology. Additionally, IPTH has the right to sub-license their rights under the terms of the license with the approval of the company. IPTH has agreed to pay Nuclear Solutions the sum of Nine Million Seven Hundred Thousand ($9,700,000) Dollars over a ten (10) year period, payable on a Bi-annual basis in the amount of $485,000 Dollars, or more, until paid in full. To the extent this technology is commercialized, we will be entitled to an eight (8%) percent royalty payment on all I.P. Technology Holding gross revenue related to this technology. On January 10, 2006 we modified the March 15, 2005 licensing agreement with I.P. Technology Holding, Inc. Wherein license fees totaling $465,416 on December 31, 2005 were deferred until April 2006 and IPTH's payment schedule was changed to biannual. Due to the suspension of active development related to this technology, the company has no expectation of further revenue being received under the terms of the licensing agreement with IPTH.

 

Over the next 12 months, subject to available resources, our development plan for our gravimetric nuclear material detector is as follows:

·         Maintain the related intellectual property.

·         Secure a strategic commercial development partner.

·         Seek a potential buyer or master licensee for the technology.

[8]

 


 

Nuclear Micro-Batteries

 

Please note: The Company’s nuclear technologies are no longer under active development. This section is being provided as a matter of historical reference and as a historical reference to provide a background into the previous business development efforts of the company. This program is aimed at developing embeddable micro-batteries that can supply long-lasting power for computer chips, micro motors, remote sensors, implantable medical devices, and other defense and aerospace applications. This technology is also known as radioisotope micro power generation or RIMS (radioisotope micro power sources). The science of nanotechnology is the design of Electrical and mechanical systems smaller than the width of a human hair. The field of nanotechnology includes making functional microscopic mechanical devices like motors, gear systems, and pumps. This field also includes making electronic circuits on an atomic scale. An opportunity exists to address the problem of providing reliable power to these devices for a long period of time. As electronic circuits and nanomachines grow ever smaller, a problem is created by the fact that conventional batteries cannot shrink to the same size and still hold enough power for the device to function for a reasonable period of time. Our micro battery technology may solve this problem by drawing energy from an embedded radioactive isotope due to the fact that radioisotope batteries are known to have power densities up to 1,000 times greater than achievable with conventional chemical battery technology. In order to focus our limited resources more effectively, management has elected to suspend this program until further notice. In November 2003, the Company entered into a licensing option agreement for three issued U.S. patents for nuclear micro-battery technology (Pat. Nos. 6,118,204; 6,238,812) with Jackie Brown. The company purchased a one-year option to exclusively license the technology, with an additional six month first right of refusal, in exchange for 100,000 shares of our common stock. In January 2008, the company renewed its exclusive license option agreement with Jackie Brown in exchange for 300,000 shares of common stock and the payment of all patent maintenance fees for the patents subject to the license agreement. When the company does choose to exercise its rights under the licensing option agreement, we will execute a license royalty agreement for 7% of the after tax profits on the sale or licensing of the technology to be paid to Ms. Brown. In January 2009, the License option agreement with Ms. Brown expired. The company is not currently in discussions with Ms. Brown to renew the license option agreement. Our micro battery technology relies on the application of Tritiated amorphous silicon as a beta voltaic, thin film, intrinsic energy conversion device. A beta voltaic battery is a radioisotope based battery that converts energy from beta particles released by a beta emitting source, such as tritium, into electrical power. Common semiconductor designs of beta voltaic batteries use a semiconductor p-n junction device that is either directly exposed to beta decay (Lucent Technologies, Betabatt) or is illuminated by photons created when betas strike a phosphor(Trace Photonics, Inc.). These common beta voltaic batteries suffer from technical problems in that the directly irradiated cells suffer material degradation of the p-n junction limiting the operating life to days while the photo conversion systems are indirect and limited by efficiency to less than 1%. Furthermore, another limitation of conventional beta voltaic batteries and P-N junction devices is the self-absorption of beta energy in the source itself. In order to reduce the self-absorption of beta energy we incorporate the isotope into the lattice of a semiconductor. Tritiated amorphous silicon is a novel thin film material where a suitable radioisotope is bonded with silicon in the amorphous network or adjacent to it. Thin-film contact potential Tritiated amorphous silicon cells have been built and operation verified by an independent laboratory. We are aware of several types of radioisotope batteries in development by organizations such as Lucent, The University of Wisconsin, and Trace Photonics, Inc. and Betabatt, Inc. While we believe that our technology is superior due to higher resistance to degradation, our competitors have greater access to capital and resources.

 

The operation of our micro battery was proven by an independent lab. However, it is still considered a development stage technology. We cannot guarantee that this technology will receive any additional patents or that the technology can be successfully commercialized.

 

The company does not anticipate engaging in further development activities regarding nuclear micro-battery technology over the next 12 months.

[9]

 


 

TRITIATED WATER REMEDIATION TECHNOLOGY (TWR)

 

Please note: The Company’s nuclear technologies are no longer under active development. This section is being provided as a matter of historical reference and as a historical reference to provide a background into the previous business development efforts of the company. The company was previously developing a technique for Tritiated water remediation by way of isotope separation. This was to be a method to reduce the volume of stored water contaminated with tritium, the radioactive isotope of hydrogen. The TWR development program was aimed at developing a Tritiated water separation technology that can be transportable and modular or integrated directly into a nuclear power plant. The specific target market for this technology is tritium contaminated water (Tritiated water) produced as a by-product of nuclear complex activities. In 2004 we filed two patent applications with the United States Patent and Trademark Office to secure the rights to the tritium remediation technology. Additionally in 2005 we filed 2 international patent applications based on our previously filed U.S. Patent Applications. Due to the company’s shift to the production of synthetic fuels the pending patents associated with this technology have been abandoned. The company does not anticipate engaging in further development activities regarding TWR technology over the next 12 months.

 

Competition

 

Competition in the fields in which the company is endeavoring is complex. During 2009, we did not generate any revenues and we are competing against companies that have significantly greater financial, technical, political and human resources. We are competing with national laboratories, universities, and established corporations, such as Lockheed-Martin, General Atomics, and Raytheon among other similar companies. There are well-established organizations within our business segments that have both name recognition and histories of implemented technologies. In nuclear-related businesses, the competitive field is relatively small but intense and can raise significant barriers to entry. Competition usually stems from name recognition, price, marketing resources, and expertise. Although we have retained marketing and consulting expertise, established competitors could enter the market with new, competing technologies at any time. Our ability to complete will depend on the capabilities of the market-ready technologies and how well we will be able to market these technologies. Additional methods of competition include prior track record of competing for government contracts and experience, greater access to scientific and technical personnel, greater access to capital, greater access to technical facilities, and name or brand establishment.

[10]

 


 

Plan for the next 12 months

 

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

 

Significant Assets

 

Our significant assets include: Our portfolio of intellectual property which includes trade secrets and know-how in the areas of weapon detection via specific density detection (United States Patents 7,298,469, 7,511,831 and 7,511,832), project development work and engineering associated with the CTL projects in Kentucky and our fifteen-year land lease with Venture III Associates, renewable for up to 90 years, for an approximate six-acre site in New Jersey.

 

Progress

 

Progress in the development of our technologies has been slower than expected due to the lack of personnel and lack of working capital. We anticipate increasing staffing levels over the next 12 months. We estimate a working capital requirement of at least $500,000 dollars over the next 12 months to maintain operations at a minimum level. For the year ended December 31, 2009, we have relied on the services of outside consultants. We currently have one full time employee. In order for us to attract and retain quality personnel, we anticipate we will have to offer competitive salaries to future employees. We do anticipate our employment base will increase to approximately 5 full time employees during the next 12 months. The successful development of any of our current projects would necessitate that we would incur additional cost for personnel. This projected increase in personnel is dependent upon our generating revenues and obtaining sources of financing. There is no guarantee that we will be successful in raising the funds required or generating revenues sufficient to fund the projected increase in the number of employees. We believe that the success of our business will depend, in part, on our ability to attract, retain, and motivate highly qualified sales, technical and management personnel, and upon the continued service of our senior management and key sales and technical personnel. We cannot assure you that we will be able to successfully attract, retain, and motivate a sufficient number of qualified personnel to conduct our business in the future. We have two executive officers. John Fairweather is the President and Chief Executive Officer. Kenneth Faith, Chief Financial and Principle accounting officer. John Fairweather is the president of our subsidiary Fuel Frontiers, Inc. In addition to the named officers, we retain the following independent contractors and consultants: 1- technical and scientific, 5-business consultants, 1-lobbyist, 3-legal, and 2-administrative. Our employees are currently not represented by a collective bargaining agreement, and we believe that our relations with our employees are good.

[11]

 


 

Item 1A. RISK FACTORS

 

The Company is subject to a high degree of risk. The following risks, if any one or more occurs, could materially harm the business, financial condition or future results of operations of the Company. If that occurs, the trading price of the Company’s common stock could decline.

 

Cautionary Factors that may Affect Future Results

 

We provide the following cautionary discussion of risks, uncertainties and possible inaccurate assumptions relevant to our business and our products. These are factors that we think could cause our actual results to differ materially from expected results. Other factors besides those listed here could adversely affect us.

 

Trends, Risks and Uncertainties

 

The Company has sought to identify what it believes to be the most significant risks to its business as discussed in "Risk Factors" above, but cannot predict whether or not or to what extent any of such risks may be realized nor can there be any assurances that the Company has identified all possible risks that might arise. Investors should carefully consider all of such risk factors before making an investment decision with respect to the Company's common stock.

 

Limited operating history; anticipated losses; uncertainly of future results

 

The Company has only a limited operating history upon which an evaluation of the Company and its prospects can be based. The Company’s prospects must be evaluated with a view to the risks encountered by a company in an early stage of development, particularly in light of the uncertainties relating to the business model that the Company intends to market and the potential acceptance of the Company’s business model. The Company will be incurring costs to develop, introduce and enhance its products, to establish marketing relationships, to acquire and develop products that will complement each other, and to build an administrative organization. To the extent that such expenses are not subsequently followed by commensurate revenues, the Company's business, results of operations and financial condition will be materially adversely affected. There can be no assurance that the Company will be able to generate sufficient revenues from the sale of its products and services. The Company expects that negative cash flow from operations may exist for the next 12 months as it continues to develop and market its products and services. If cash generated by operations is insufficient to satisfy the Company's liquidity requirements, the Company may be required to sell additional equity or debt securities. The sale of additional equity or convertible debt securities would result in additional dilution to the Company's shareholders.

 

Risk Factors:

 

INTELLECTUAL PROPERTY RIGHTS

 

The company regards its patents, trademarks, trade secrets, and other intellectual property (collectively, the "Intellectual Property Assets") as critical to its success. The company relies on a combination of patents, trademarks, and trade secret and copyright laws, as well as confidentiality procedures, contractual provisions, and other similar measures, to establish and protect its Intellectual Property Assets.

 

We generally enter into confidentiality and invention agreements with our employees and consultants. However, patents and agreements and various other measures we take to protect our intellectual property from use by others may not be effective for various reasons, including the following:

 

Our pending patent applications may not be granted for various reasons, including the existence of similar patents or defects in the applications; parties to the confidentiality and invention agreements may have such agreements declared unenforceable or, even if the agreements are enforceable, may breach such agreements;

 

The costs associated with enforcing patents, confidentiality and invention agreements or other intellectual property rights may make aggressive enforcement cost prohibitive;

 

Even if we enforce our rights aggressively, injunctions, fines and other penalties may be insufficient to deter violations of our intellectual property rights; and

 

Other persons may independently develop proprietary information and techniques that, although functionally equivalent or superior to our intellectual proprietary information and techniques, do not breach our patented or unpatented proprietary rights.

 

Because the value of our company and common stock is rooted primarily in our proprietary intellectual property, our inability to protect our proprietary intellectual property or gain a competitive advantage from such rights could have a material adverse effect on our business.

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In addition, we may inadvertently be infringing on the proprietary rights of other persons and may be required to obtain licenses to certain intellectual property or other proprietary rights from third parties. Such licenses or proprietary rights may not be made available under acceptable terms, if at all. If we do not obtain required licenses or proprietary rights, we could encounter delays in product development or find that the development or sale of products requiring such licenses is foreclosed.

 

We anticipate that any business model we develop will be subject to change. At this time it is impossible for us to predict the degree to which demand for our products will evolve or whether any potential market will be large enough to provide any meaningful revenue or profit for us.

 

We have not been profitable since our inception. Although we believe that we may recognize revenues during the next twelve months based on our license agreement with IPTH, and expressions of interest from third parties, there can be no assurances as to when and whether we will be able to commercialize our products and technologies and realize any revenues. Our technologies have never been utilized on a large-scale commercial basis.

 

We expect that we will continue to generate losses until at least such time as we can commercialize our technologies. No assurance can be given that we can complete the development of any technology or that, if any technology is fully developed, it can be manufactured and marketed on a commercially viable basis. Furthermore, no assurance can be given that any technology will receive market acceptance. We are subject to all risks inherent in the establishment of a developing or new business. Certain nuclear technologies we are developing may be regulated now or in the future by the United States Government and may subject to regulatory requirements or export restrictions.

 

Management of Growth

 

The Company expects to experience growth in the number of employees relative to its current levels of employment and the scope of its operations. In particular, the Company may need to hire scientists, as well as sales, marketing and administrative personnel. Additionally, acquisitions could result in an increase in employee headcount and business activity. Such activities could result in increased responsibilities for management. The Company believes that its ability to attract, train, and retain qualified technical, sales, marketing, and management personnel, will be a critical factor to its future success. During strong business cycles, the Company may experience difficulty in filling its needs for qualified personnel.

 

The Company's future success will be highly dependent upon its ability to successfully manage the expansion of its operations. The Company's ability to manage and support its growth effectively will be substantially dependent on its ability to implement adequate financial and management controls, reporting systems, and other procedures and hire sufficient numbers of financial, accounting, administrative, and management personnel. The Company is in the process of establishing and upgrading its financial accounting and procedures. There can be no assurance that the Company will be able to identify, attract, and retain experienced accounting and financial personnel. The Company's future operating results will depend on the ability of its management and other key employees to implement and improve its systems for operations, financial control, and information management, and to recruit, train, and manage its employee base. There can be no assurance that the Company will be able to achieve or manage any such growth successfully or to implement and maintain adequate financial and management controls and procedures, and any inability to do so would have a material adverse effect on the Company's business, results of operations, and financial condition.

 

The Company's future success depends upon its ability to address potential market opportunities while managing its expenses to match its ability to finance its operations. This need to manage its expenses will place a significant strain on the Company's management and operational resources. If the Company is unable to manage its expenses effectively, the Company's business, results of operations, and financial condition may be materially adversely affected.

 

Risks associated with acquisitions

 

As a major component of its business strategy, the Company expects it may acquire assets, and businesses, and, or technologies relating to or complementary to its business model. Any acquisitions by the Company would involve risks commonly encountered in acquisitions of companies. These risks would include, among other things, the following: the Company could be exposed to unknown liabilities of the acquired companies; the Company could incur acquisition costs and expenses higher than it anticipated; fluctuations in the Company's quarterly and annual operating results could occur due to the costs and expenses of acquiring and integrating new businesses or technologies; the Company could experience difficulties and expenses in assimilating the operations and personnel of the acquired businesses; the Company's ongoing business could be disrupted and its management's time and attention diverted; the Company could be unable to integrate successfully.

 

Liquidity and Working Capital Risks; Need for Additional Capital to Finance Growth and Capital Requirements

 

We have had limited working capital and we are relying upon notes (borrowed funds) to operate. We may seek to raise capital from public or private equity or debt sources to provide working capital to meet our general and administrative costs until net revenues make the business self-sustaining. We cannot guarantee that we will be able to raise any such capital on terms acceptable to us or at all. Such financing may be upon terms that are dilutive or potentially dilutive to our stockholders. If alternative sources of financing are required, but are insufficient or unavailable, we will be required to modify our growth and operating plans in accordance with the extent of available funding.

[13]

 


 

 

New Business

We are a new business and you should consider factors which could adversely affect our ability to generate revenues, which include, but are not limited to, maintenance of positive cash flow, which depends on our ability both to raise capital and to obtain additional financing as required, as well as the level of sales revenues.

 

Potential fluctuations in quarterly operating results -

 

Our quarterly operating results may fluctuate significantly in the future as a result of a variety of factors, most of which are outside our control, including: the interest in our products; seasonal trends in purchasing, the amount and timing of capital expenditures and other costs relating to the development of our products; price competition or pricing changes in the industry; technical difficulties or system downtime; general economic conditions. Our quarterly results may also be significantly impacted by the impact of the accounting treatment of acquisitions, financing transactions or other matters. Particularly at our early stage of development, such accounting treatment can have a material impact on the results for any quarter. Due to the foregoing factors, among others, it is likely that our operating results will fall below our expectations or those of investors in some future quarter.

 

Dependence Upon Management

 

Our future performance and success are dependent upon the efforts and abilities of our management team, directors and key contractors. If we lost the services key members of management or other key employees before we could get a qualified replacement, that loss could materially adversely affect our business. We do not maintain key man life insurance on any of our Management.

 

Lack of Independent Directors

 

We cannot guarantee that our Board of Directors will have a majority of independent directors in the future. In the absence of a majority of independent directors, our executive officers, who are also principal stockholders and directors, could establish policies and enter into transactions without independent review and approval thereof. This could present the potential for a conflict of interest between the Company and its stockholders generally and the controlling officers, stockholders, or directors.

 

Limitation of Liability and Indemnification of Officers and Directors

 

Our officers and directors are required to exercise good faith and high integrity in our management affairs. Our Articles of Incorporation provide, however, that our officers and directors shall have no liability to our shareholders for losses sustained or liabilities incurred which arise from any transaction in their respective managerial capacities unless they violated their duty of loyalty, did not act in good faith, engaged in intentional misconduct or knowingly violated the law, approved an improper dividend or stock repurchase, or derived an improper benefit from the transaction. Our Articles and By-Laws also provide for the indemnification by us of the officers and directors against any losses or liabilities they may incur as a result of the manner in which they operate our business or conduct the internal affairs, provided that in connection with these activities they act in good faith and in a manner that they reasonably believe to be in, or not opposed to, the best interests of the Company, and their conduct does not constitute gross negligence, misconduct or breach of fiduciary obligations.

 

Audit's Opinion Expresses Doubt About The Company's Ability To Continue As a "Going Concern".

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Delays in the Introduction of Our Products

 

The Company may be subject to regulation by numerous governmental authorities. Failure to obtain regulatory approvals or delays in obtaining regulatory approvals by the Company, its collaborators or licensees would adversely affect the marketing of products developed by the Company, as well as hinder the Company's ability to generate product revenues. Further, there can be no assurance that the Company, its collaborators or licensees will be able to obtain the necessary regulatory approvals. Although the Company does not anticipate problems satisfying any of the regulations involved, the Company cannot foresee the possibility of new regulations that could adversely affect the business of the Company.

 

Dependence on Independent Parties to Produce our Products

[14]

 


 

 

The Company may be dependent upon current and future collaborations with and among independent parties to research, develop, test, manufacture, sell, or distribute our products. The Company intends to continue to rely on such collaborative arrangements. Some of the risks and uncertainties related to the reliance on such collaborations include, but are not limited to 1) the ability to negotiate acceptable collaborative arrangements, 2) the fact that future or existing collaborative arrangements may not be successful or may not result in products that are marketed or sold, 3) such collaborative relationships may actually act to limit or restrict the Company, 4) collaborative partners are free to pursue alternative technologies or products either on their own or with others, including the Company's competitors 5) the Company's partners may terminate a collaborative relationship and such termination may require the Company to seek other partners, or expend substantial additional resources to pursue these activities independently. These efforts may not be successful and may interfere with the Company's ability to manage, interact and coordinate its timelines and objectives with its strategic partners.

 

Government Regulation

 

Our products and technologies and our ongoing research and development activities are subject to regulation for safety, efficacy and quality by numerous governmental authorities in the United States and other countries. Depending on the technology, regulatory approvals and certification may be necessary from the Department of Transportation, Department of Energy, Nuclear Regulatory Commission, Environmental Protection Agency, Department of Defense, and other federal, state, or local facilities. Failures or delays by the company or its affiliates or licensees in obtaining the required regulatory approvals would adversely affect the marketing of products that the company develops and our ability to receive product revenues or royalties. Limited Market Due To Penny Stock

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The Company's stock differs from many stocks, in that it is a "penny stock." The Securities and Exchange Commission has adopted a number of rules to regulate "penny stocks." These rules include, but are not limited to, Rules 3a5l-l, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6 and 15g-7 under the Securities and Exchange Act of 1934, as amended. Because our securities probably constitute "penny stock" within the meaning of the rules, the rules would apply to us and our securities. The rules may further affect the ability of owners of our stock to sell their securities in any market that may develop for them. There may be a limited market for penny stocks, due to the regulatory burdens on broker-dealers. The market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. Stockholders should be aware that, according to the Securities and Exchange Commission Release No. 34- 29093, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. These patterns include: - Control of the market for the security by one or a few broker- dealers that are often related to the promoter or issuer; - Manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; - "Boiler room" practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; - Excessive and undisclosed bid-ask differentials and markups by selling broker- dealers; and - The wholesale dumping of the same securities by promoters and broker- dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. Furthermore, the "penny stock" designation may adversely affect the development of any public market for the Company's shares of common stock or, if such a market develops, its continuation. Broker-dealers are required to personally determine whether an investment in "penny stock" is suitable for customers. Penny stocks are securities (i) with a price of less than five dollars per share; (ii) that are not traded on a "recognized" national exchange; (iii) whose prices are not quoted on the NASDAQ automated quotation system (NASDAQ-listed stocks must still meet requirement (i) above); or (iv) of an issuer with net tangible assets less than $2,000,000 (if the issuer has been in continuous operation for at least three years) or $5,000,000 (if in continuous operation for less than three years), or with average annual revenues of less than $6,000,000 for the last three years. Section 15(g) of the Exchange Act, and Rule 15g-2 of the Commission require broker-dealers dealing in penny stocks to provide potential investors with a document disclosing the risks of penny stocks and to obtain a manually signed and dated written receipt of the document before effecting any transaction in a penny stock for the investor's account. Potential investors in the Company's common stock are urged to obtain and read such disclosure carefully before purchasing any shares that are deemed to be "penny stock." Rule 15g-9 of the Commission requires broker- dealers in penny stocks to approve the account of any investor for transactions in such stocks before selling any penny stock to that investor. This procedure requires the broker-dealer to (i) obtain from the investor information concerning his or her financial situation, investment experience and investment objectives; (ii) reasonably determine, based on that information, that transactions in penny stocks are suitable for the investor and that the investor has sufficient knowledge and experience as to be reasonably capable of evaluating the risks of penny stock transactions; (iii) provide the investor with a written statement setting forth the basis on which the broker-dealer made the determination in (ii) above; and (iv) receive a signed and dated copy of such statement from the investor, confirming that it accurately reflects the investor's financial situation, investment experience and investment objectives. Compliance with these requirements may make it more difficult for the Company's stockholders to resell their shares to third parties or to otherwise dispose of them.

 

Potential Inability of Officers to Devote Sufficient Time to the Operations of the Business

 

Our officers are not currently being paid all of their salaries. In some cases, officers are not paid at all. Unless we are able to secure additional funding for operations, we cannot guarantee that they will be able to continue to devote sufficient time to the operations of the business.

 

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Item 1B. UNRESOLVED STAFF COMMENTS

 

Not Applicable to a Smaller Reporting Company

 

Item 2. Description of Property

 

Our principal business address is 1025 Connecticut Ave NW, Suite 1000 Washington, DC 20036 and our principal mailing address is 5505 Connecticut Ave NW, #191, Washington, DC 20015.

 

In December 2008, we entered into a twelve-month lease for office space. The square footage of the facility is approximately 1,200 Sq ft. The 2009 annual leasehold cost was $33,600. We anticipate a change in office space over the next 12 months.

 

We own a fee simple interest in approximately 75 acres of unimproved real property in Muhlenberg County, Kentucky.

 

Item 3. LEGAL PROCEEDINGS

 

The Company is not a party to any pending legal proceeding.

 

Item 4. Removed and Reserved

 

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PART II

 

Item 5. MARKET FOR COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

 

Our common stock is traded on the OTC Electronic Bulletin Board. The following table sets forth the high and low prices of our common stock for each quarter for the years 2008 and 2009, including the first quarter of 2009. The quotations set forth below reflect inter-dealer prices, without retail mark-up, mark-down or commission and may not represent actual transactions.

Recent Market Prices

 

Our common stock trades on the OTC market under the symbol “NSOL.OB.”

 

Table 1.

 

Bid Information

 

Fiscal Quarter Ended

Low

High

 

 

 

March 31, 2010

0.03

0.03

 

 

 

December 31, 2009

0.02

0.02

September 30, 2009

0.03

0.04

June 30, 2009

0.05

0.07

March 31, 2009

0.03

0.02

 

 

 

December 31, 2008

0.0135

0.01

September 30, 2008

0.085

0.10

June 30, 2008

0.155

0.18

March 31, 2008

0.33

0.29

 

 

Holders

 

Our company has approximately 5300 shareholders of its common stock as of December 31, 2009 holding 97,890,981 common shares.

 

Dividends

 

There are no restrictions imposed on the Company which limit its ability to declare or pay dividends on its common stock, except for corporate state law limitations. No cash dividends have been declared or paid to date and none are expected to be paid in the foreseeable future.

 

Recent Sales of Unregistered Securities

 

During the fourth quarter of 2009, the Company did not sell any unregistered securities.

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Securities Authorized for Issuance Under Equity Compensation Plans

 

The following table summarizes our equity compensation plan information as of December 31, 2009.  Information is included for equity compensation plans not approved by our security holders.

 

Plan Category

Number of Securities

 to be issued

 upon exercise of

 outstanding options,

 warrants and rights

 

(a)

Weighted-average

Exercise price of

 outstanding options,

 warrants, and rights

 

(b)

Number of Securities

 remaining available for

 future issuance

 under equity

 compensation plans

 (excluding securities

 reflected in column (a)

 

(c)

 

 

 

 

Equity Compensation Plans approved by security holders

None

None

None

Equity Compensation Plans not approved by security holders

5,500,000 (1)

$ 0.62

-0-

 

5,000,000 (2)

$0.625

-0-

 

5,000,000 (3)

$0.52

113,447

Total

15,500,000

 

113,447

 

(1) On August, 17, 2005, the company adopted a Stock Grant Plan. The plan reserved 5,500,000 shares. The Plan was registered on a Form S-8 registration statement filed on November 16, 2004. The Plan is administered by our Board of Directors. Directors, officers, employees, consultants, attorneys, and others who provide services to our Company are eligible participants. Participants are eligible to be granted warrants, options, common stock as compensation. During 2007, we issued 1,367,307 shares from this Plan.

 

(2) On March 7, 2007, the company adopted a Stock Grant Plan. The plan reserved 5,000,000 shares. The Plan was registered on Form S-8 Registration Statement filed on March 9, 2007. Directors, officers, employees, consultants, attorneys, and others who provide services to our Company are eligible participants. Participants are eligible to be granted warrants, options, common stock as compensation. During 2007, we issued 5,000,000 shares from this Plan.

 

(3) On November 28, 2007, the company adopted a Stock Grant Plan. The plan reserved 5,000,000 shares. The Plan was registered on Form S-8 Registration Statement filed on December 6, 2007. Directors, officers, employees, consultants, attorneys, and others who provide services to our Company are eligible participants. Participants are eligible to be granted warrants, options, common stock as compensation. During 2007, we issued 470,957 shares from this Plan leaving a balance of 4,529,043 in the Plan. During 2008, we issued 4,019,886 shares from this Plan leaving a balance of 513,447 at December 31, 2008. During 2009, we issued 400,000 shares from this Plan leaving a balance of 113,447 at December 31, 2009.

 

Item 6. SELECTED FINANCIAL DATA

 

Not Applicable to Smaller Reporting Companies

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Item 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

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

 

Business Overview

 

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

 

In 2009, The Board of Directors elected to focus the company exclusively on the production of synthetic fuels through the FFI subsidiary. Prior to that, the company was developing nuclear technologies in the areas of shielded nuclear material detection and nuclear micro-batteries in addition to the production of synthetic fuels. Due to the difficulties encountered in raising capital in a declining economic climate coupled with the limited resources of the company, management made the decision to place all nuclear technology development programs into a dormant state. The company will continue to maintain the intellectual property associated with the shielded nuclear detection technology program and will seek a buyer or a master licensee for the patents. The Company will look to create a partnership to develop a prototype for a nuclear material detection device using it’s six patents. The company is discontinuing all further business development associated with nuclear micro-battery technology and other nuclear legacy technologies. It is the intent of the company to spin off FFI once adequate capital is raised to move projects forward. Management team for FFI has been identified and will consist of Key Members of KFA.

 

Plan of Operation

 

We will need to raise additional money to fund our operations. Management estimates a minimum capital requirement of $500,000 to maintain operations at a minimum level. We intend to use debt, equity or a combination thereof to fund this project. There is no guarantee that we will be able to successfully raise the required funds for operations, or that such funds will be available on terms satisfactory to us. Any inability to raise additional funds would require that we significantly scale back our planned operations and would lengthen the period of time required to bring the technology to the marketplace.

 

Since our products and technologies are still in development and there can be no assurances as to when and whether we will be able to commercialize our products and technologies. Our technologies have never been utilized on a large-scale commercial basis.

Over the next 12 months we expect that we will continue to generate losses until at least such time as we can generate revenue. No assurance can be given that we can complete the development of any project or technology or that, if any technology or project is fully developed, it can be manufactured and marketed on a commercially viable basis. Furthermore, no assurance can be given that any technology or product will receive market acceptance. Until commercial operations are established, no assurance can be given that the Company's technologies will be commercially successful. Being a company with limited resources, we are subject to all risks inherent with the establishment of a developing or new business. The technologies and synthetic fuel projects we are developing may be regulated now or in the future by the United States Government and may subject to regulatory requirements or export restrictions. We are also subject to additional regulations concerning nuclear technologies. Some of the technologies we develop may be subject to the Atomic Energy Act of 1954.

 

The implementation of Company's business development phases outlined above will be dependent on successful financing. Financing options may include a combination of debt and equity financing. Equity financing may result in a substantial equity dilution to existing shareholders.

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Comparison of Results of Operations for the year ended December 31, 2009 to the year ended December 31, 2008

 

Results of Operations

 

REVENUES: The Company reported revenues of $0 from our existing technology license agreement, for the year ended December 31, 2009 and for the year ended December 31, 2008.

 

Business Concentration

 

For the year ended December 31, 2009, and the year ended December 31, 2008, the balance of all accounts receivables was from one customer.

 

TOTAL COSTS AND EXPENSES: Total costs and expenses from continuing operations decreased from $3,622,270 for the year ended December 31, 2008 to $1,756,397 for the year ended December 31, 2009. The principal reason for this decrease was due to a decrease in consulting fees, executive compensation, legal, and professional fees resulting from the concentration of the company’s efforts on its synthetic fuel projects and suspension of nuclear technology projects.

 

OPERATING EXPENSES: Operating expenses from continuing operations decreased from $3,622,270 for the year ended December 31, 2008 to $1,756,397 for the year ended December 31, 2009. This decrease was primarily due to decreased business development activities, as stated above. Depreciation expense decreased for the year 2009 versus the year 2008, decreasing from $3,687 for the year ended December 31, 2008 to $2,207, for the year ended December 31, 2009. This decrease is due to the write-down of office equipment that is no longer in use.

 

INTEREST EXPENSE: Interest expense decreased from $457,891 for the year ended December 31, 2008 to $4,975 for the year ended December 31, 2009. This decrease is due primarily to a reduction in debt incurred to finance company operations.

 

SALES, GENERAL AND ADMINISTRATIVE EXPENSES

 

Expenses increased by $51,060 during the year ended December 31, 2009 to a total amount of $380,530 as compared to $329,470 for the year ended December 31, 2008. The increase was due to increased travel and general business expenses related to the development of the company’s synthetic fuel projects.

 

NET LOSS: The Company incurred a net loss of ($1,771,817) for the year ended December 31, 2009, compared with a net loss of ($4,048,086) for the year ended December 31, 2008, which reflects a year-to-year decrease in the amount of loss for the period of $2,276,269. The principal reason for this decrease was due to a decrease in consulting fees, executive compensation, legal and professional fees resulting from the concentration of the company’s efforts on its synthetic fuel projects and suspension of nuclear technology projects.

 

LIQUIDITY AND CAPITAL RESOURCES

 

As of December 31, 2009, we had a working capital deficit of $6,350,978 which compares to a working capital deficit of $ 5,557,940 as of December 31, 2008. As a result of our operating losses for the year ended December 31, 2009, we generated a cash flow deficit of $588,715 from operating activities. Cash flows used in investing activities was $106,171 during the period. Cash flows provided by financing activities were $520,183 on proceeds from short-term notes payable.

 

Additional financing will be required in order to meet our current and projected cash flow deficits from operations and development. We are seeking financing in the form of equity or debt in order to provide the necessary working capital. We are in discussions with potential sources of funding; however we currently have no fully executed commitments for financing. There is no guarantee that we will be successful in raising the funds required. We intend to use the proceeds derived from revenues or financing to pay salaries, and general and administrative expenses, purchase land and continue development of our synthetic fuel projects in Kentucky. By adjusting our operations and development to the level of capitalization, we believe that a working capital level of $500,000 minimum will be sufficient to sustain the basic company operations over the next 12 months.

 

Currently management does not have sufficient capital resources to meet projected cash flow deficits through the next twelve months. If we are not successful in generating sufficient liquidity from operations or in raising sufficient capital resources, on terms acceptable to us, this could have a material adverse effect on our business, results of operations, liquidity and financial condition.

 

Auditors' opinion expresses doubt about the Company's ability to continue as a going concern. The independent auditors report on the company's December 31, 2009 financial statements included in this Report states that the Company's recurring losses raise substantial doubts about the Company's ability to continue as a going concern.

[21]

 


 

Item 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Cash and Cash Equivalents

 

We have historically invested our cash and cash equivalents in short-term, fixed rate, highly rated and highly liquid instruments which are reinvested when they mature throughout the year. Although our existing investments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-term investments could be affected at the time of reinvestment as a result of intervening events. As of December 31, 2009, we had cash and cash equivalents aggregated $1,576.

 

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

 

Debt

 

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

 

[22]

 


 

Item 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

 

INDEX TO FINANCIAL STATEMENTS

a)

 

 

 

Page No. 

 

 

 

Report of Independent Registered Public Accounting Firm

 

F2

 

 

 

Consolidated Balance Sheets at December 31, 2009 and 2008

 

F3

 

 

 

Consolidated Statements of Losses for the years ended December 31, 2009, and 2008

 

F4

 

 

 

Consolidated Statements of Deficiency in Stockholders' Equity for the years ended December 31, 2009, and 2008

 

F5

 

 

 

Consolidated Statements of Cash Flows for the years ended December 31, 2009, and 2008

 

F7

 

 

 

Notes to Consolidated Financial Statements

 

F8 to F19

 

 

b) Financial statement schedules

Not applicable.

 

[F1]

 


 

 

RBSM LLP

Certified Public Accountants

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors

Nuclear Solutions, Inc.

Washington, D.C.

 

We have audited the accompanying consolidated balance sheets of Nuclear Solutions, Inc. and subsidiary (the "Company"), as of December 31, 2009 and 2008 and the related consolidated statements of losses, deficiency in stockholders' equity, and cash flows for each of the two years in the period ended December 31, 2009. These financial statements are the responsibility of the company's management. Our responsibility is to express an opinion on these financial statements based upon our audits.

 

We conducted our audits in accordance with standards of the Public Company Accounting Oversight Board (United States of America). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatements. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion.

 

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2009 and 2008, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2009, inconformity with accounting principles generally accepted in the United States of America.

 

The accompanying consolidated financial statements have been prepared assuming the Company will continue as a going concern. As discussed in Note 3 to the consolidated financial statements, the Company has suffered recurring losses from operations. This raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

 

 

 

 

 

/s/ RBSM  LLP     

 

 

 

 RBSM  LLP

 

 

 

Certified Public Accountant

 

 

New York, NY

April 15, 2010

 

[F2]

 


 

NUCLEAR SOLUTIONS ,INC

AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEET

December 31,

December 31,

2009

2008

Current assets:

Cash

 $         1,576

 $     176,279

Notes Receivables

          24,000

                -  

Accrued Interest

              500

                -  

Prepaid Expenses

           1,800

          12,900

Total current assets

          27,876

        189,179

Property and equipment, net of accumulated depreciation

  of  5,698 as of December 31, 2009 and $3,492 as of December 31, 2008 , respectively

        107,903

           3,938

Other assets

                -  

          84,100

Total assets

 $     135,779

 $     277,217

LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable and accrued expenses

 $  5,103,783

 $  4,687,644

Accrued executive compensation

     1,221,071

        846,583

Advance payments received

                -  

        154,114

Notes payable - related parties

          15,000

          19,778

Convertible notes payable - other, net of discount of $0 and

and $0, as of December 31, 2009 and December 31, 2008 respectively

          39,000

          39,000

Total current liabilities

     6,378,854

     5,747,119

Derivative liability (Note 4)

                -  

           1,660

Total liabilities

     6,378,854

     5,748,779

Commitments and contingencies

Deficiency in stockholders' equity

Preferred stock, $0.0001 par value; 10,000,000 shares

  authorized, no shares issued and outstanding

 -

 -

Common stock, $0.0001 par value; 100,000,000

  shares authorized,  97,890,981 and 97,490,981 issued and

  outstanding, as of December 31, 2009 and December 31, 2008 respectively

           9,789

           9,749

Additional paid-in capital

   19,964,510

   19,931,944

Deferred equity based expense

                -  

       (437,699)

Accumulated deficit

  (26,729,793)

  (24,975,556)

Total deficiency in stockholders' equity

    (6,755,494)

    (5,471,562)

Noncontrolling Interest

        512,419

                -  

Total deficiency in stockholders' equity

    (6,243,075)

    (5,471,562)

Total liabilities and deficiency in stockholders' equity

 $     135,779

 $     277,217

The accompanying notes are an integral part of the consolidated financial statements.

[F3]

 


 

 

NUCLEAR SOLUTIONS, INC.

AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF LOSSES

For the Years Ended December 31,

2009

2008

Revenue

 $                 -  

 $                 -  

Executive compensation

           432,188

           581,042

Consulting

           584,297

        2,548,508

Legal and professional fees

           511,289

           630,449

General and administrative expenses

           380,530

           329,470

Depreciation and amortization

               2,207

               3,687

Payments received pursuant to collaborative arrangement

          (154,114)

          (470,886)

 

         1,756,397

        3,622,270

Loss from operations

        (1,756,397)

       (3,622,270)

Other Income (expense)

Interest expense

              (4,975)

          (457,891)

Interest Income

                  502

                 478

Change in fair value of derivative liability

            (10,947)

             31,597

Loss before provision for income taxes

        (1,771,817)

       (4,048,086)

Provision for income taxes

                    -  

                    -  

Net loss

        (1,771,817)

       (4,048,086)

Net Loss attributable to the noncontrolling interest

             17,581

                    -  

Net Loss attributable to Nuclear Solutions, Inc.

common shareholders

 $     (1,754,236)

 $     (4,048,086)

Basic and diluted loss per share

 $             (0.02)

 $             (0.04)

Weighted average number of common shares

outstanding, basic and diluted

       97,693,721

       90,055,670

The accompanying notes are an integral part of the consolidated financial statements.

 

[F4]

 


 

NUCLEAR SOLUTIONS, INC AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY

FOR THE PERIOD JANUARY 1, 2008 TO DECEMBER 31, 2009

 

Total Deficiency

Common Stock

Additional

Deferred Equity

Accumulated

Non-Controlling

in Stockholders'

Shares

Amount

Paid - In Capital

Based Expense

Deficit

Interest

 

Equity

Balance January 1, 2008

73,734,095

$7,374

 $ 16,802,581

$(1,058,503)

$(20,927,471)

 $ -  

 $ (5,176,019)

Shares issued for services

5,320,440

531

863,358

-  

-  

-  

863,889

Shares issued for accrued expenses

1,299,446

130

535,870

-  

-  

-  

536,000

Shares issued for payment of debt and Interest

16,271,524

1,627

1,467,168

-  

-  

-  

1,468,795

Shares issued for cash

865,476

87

74,913

-  

-  

-  

75,000

Beneficial conversion feature

-  

-  

185,000

-  

-  

-  

185,000

Reclassify derivative liability

-  

-  

3,054

-  

-  

-  

3,054

Cash received in excess of stock issued

-  

-  

-  

-  

-  

-  

-  

Deferred compensation

-  

-  

-  

 (1,319,378)

-  

-  

 (1,319,378)

Amortization of deferred compensation

-  

-  

-  

1,940,183

-  

-  

1,940,183

Net loss

-  

-  

-  

-  

 (4,048,086)

-  

(4,048,086)

Balance December 31, 2008

97,490,981

 $ 9,749

 $19,931,944

$ (437,698)

 $(24,975,557)

 $-  

$(5,471,562)

Shares issued for accrued expenses

400,000

40

19,960

-  

-  

20,000

Deferred compensation

-  

-  

-  

(150,000)

-  

-  

 (150,000)

Amortization of deferred compensation

-  

-  

-  

587,698

-  

-  

587,698

Sale of subsidiary shares to noncontrolling

  interest

-  

-  

-  

-  

-  

530,000

530,000

Reclassification of derivative liability upon settlement

-  

-  

12,606

-  

-  

-  

12,606

Net loss

-  

-  

-  

-  

 (1,754,236)

$(17,581)

(1,771,817)

Balance December 31, 2009

97,890,981

$9,789

 $19,964,510

$-  

 $ (26,729,793)

$512,419

$(6,243,075)

[F5]

 


 

 

[F6]

 


 

NUCLEAR SOLUTIONS ,INC

AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Years Ended December 31,

2009

2008

CASH FLOWS FROM OPERATING ACTIVITIES:

Net loss

 $     (1,754,236)

 $     (4,048,086)

Adjustments to reconcile net loss to net cash

  used in operating activities:

    Depreciation and amortization

               2,207

               3,687

   Amortization of debt discount - beneficial conversion feature of

   convertible note and warrants   

               1,666

            444,617

   Change in fair value of derivative liability

             10,947

            (31,597)

   Loss attributable to noncontrolling interest

            (17,581)

                    -  

   Amortization of deferred compensation

            587,697

         2,823,412

Changes in operating assets and liabilities:

  Accounts receivable

            (24,500)

  Prepaid Expenses

             12,900

            100,000

  Other Assets

             82,300

            (82,300)

  Accounts payable and accrued expenses

            289,511

            (23,667)

  Accrued executive compensation

            374,488

            375,118

  Advance payments received

           (154,114)

            154,114

Net cash used in operating activities

           (588,715)

           (284,702)

CASH FLOWS FROM INVESTING ACTIVITIES:

  Purchases of property and equipment

           (106,171)

                    -  

Net cash used in investing activities

           (106,171)

                    -  

CASH FLOWS FROM FINANCING ACTIVITIES:

Proceeds from issuance of debt

            208,000

Proceeds from sale of subsidiary shares

            530,000

             75,000

Proceeds from issuance of notes and loans

             15,000

Payments on Loans

            (24,817)

            (15,000)

Net cash provided by financing activities

            520,183

            268,000

Net  increase (decrease) in cash

           (174,703)

            (16,702)

Cash, beginning of period

            176,279

            192,981

Cash, end of period

 $            1,576

 $         176,279

Supplemental disclosures:

Cash paid for:

  Interest

  Income taxes

Non-cash investing and financial activities:

Amortization of debt discount - beneficial conversion feature of

convertible note and warrants   

 $            1,666

 $         442,601

Reclassification of derivative liability to equity upon settlement

 $           12,606

 $                 -  

Payment of debt and interest with common stock

 $                 -  

 $         925,808

Beneficial conversion discount

 $                 -  

 $         208,000

Payment of accrued expenses with common stock

 $           20,000

 $      1,078,987

The accompanying notes are an integral part of the consolidated financial statements.

[F7]

 


 

 

NUCLEAR SOLUTIONS, INC.

AND SUBSIDIARIES

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 

DECEMBER 31, 2009 and 2008

 

 

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

 

Nuclear Solutions, Inc. ("the "Company") was organized February 27, 1997 under the laws of the State of Nevada, as Stock Watch Man, Inc. On September 12, 2001, the Company amended its articles of incorporation to change its name to Nuclear Solutions, Inc.

 

On September 2, 2005 the Company formed a wholly owned subsidiary, Fuel Frontiers Inc.(“FFI”), formally, Future Fuels, Inc., which had minimal operations through June 30, 2008.

 

On July 31, 2006 the company formed a wholly owned subsidiary, Liquidyne Fuels, which has had no activity through December 31, 2009.

 

The consolidated financial statements include the accounts of the Company and its subsidiaries. All significant intercompany transactions and balances have been eliminated in the consolidated financial statement

 

Business

 

Nuclear Solutions, Inc. is engaged in the research, development, and commercialization of innovative product technologies, which are generally early-stage, theoretical or commercially unproven. We operate a highly technical business and our primary mission is to develop advanced product technologies to address emerging market opportunities in the fields of homeland security, nanotechnology, and nuclear remediation. Our subsidiary Fuel Frontiers, Inc. concentrates on developing fuel production facilities to produce ultra-clean synthetic diesel from feedstocks such as coal.

F-7

[F8]

 


 

NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES

 

Revenue Recognition

 

Revenues are recognized in the period that services are provided. For revenue from product sales, the Company recognizes revenue in accordance with Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 605 “Revenue Recognition”. ASC 605 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred.

 

Licensing fee income generally is being recognized ratably over the term of the license. The Company's management has determined that the collectibility and length of time to collect the remaining contracted price due from its licensee can not be reasonably assured. Accordingly, revenues will be recognized as collected.

 

Collaborative Arrangement

 

The Company, through its subsidiary FFI, has entered into a collaborative arrangement with Kentucky Fuel Associates, Inc. (“KFA”) for the development of coal-based gas-to-liquid (CTL) fuel production facilities in the State of Kentucky. KFA has agreed to provide an initial funding of $2,000,000 per site to be applied by FFI towards any and all costs and expenses incurred in the ordinary course of business for the development, construction and arranging of financing to closure including without limitation the following costs: engineering, procurement, administrative, development management, financing, legal, operations and maintenance costs for each said fuel production facility. In consideration for KFA’s initial minimum funding contribution, KFA will receive 7% of the annual net pre-tax income of each jointly developed CTL diesel fuel facility and 2.5% equity interest in the first CTL diesel fuel facility developed by FFI and KFA. Additionally, KFA will have the exclusive right to develop CTL diesel fuel facilities with FFI in the state of Kentucky and a conditional first right of refusal to develop CTL diesel fuel facilities in the remainder of the United States.

 

We are accounting for this agreement pursuant to ASC Topic 808 “Collaborative Arrangements”. During the years ended December 31, 2009 and 2008 we have reported $154,114 and $470,886, respectively, as payments received pursuant to collaborative agreements. The unexpended balance of payments received of $0 and $154,114 at December 31, 2009 and 2008, respectively, is reported as a current liability as advance payments received.

[F9]

 


 

Noncontrolling Interest

 

As a result of adopting ASC 810-10 Consolidations – Variable Interest Entities , we present non-controlling interests as a component of equity on our Consolidated Balance Sheets and Consolidated Statement of Deficiency in Stockholders’ Equity. 

 

Use of Estimates

 

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

 

Concentrations of Credit Risk

 

Financial instruments and related items which potentially subject the Company to concentrations of credit risk consist primarily of cash. The Company places its cash and temporary cash investments with credit quality institutions and has not experienced any losses in its accounts.

 

Property and Equipment

 

The cost of furniture and equipment is depreciated over the estimated useful life of the assets utilizing the straight-line method of depreciation based on estimated useful lives of five years. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed and any resulting gain or loss is recognized.

 

Intangible and Long-lived Assets

 

The Company follows ASC 360, “Property Plant and Equipment” , which establishes a “primary asset” approach to determine the cash flow estimation period for a group of assets and liabilities that represents the unit of accounting for a long lived asset to be held and used.  Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.  The carrying amount of a long-lived asset is not recoverable if it exceeds the sum of the undiscounted cash flows expected to result from the use and eventual disposition of the asset.  Long-lived assets to be disposed of are reported at the lower of carrying amount or fair value less cost to sell.  

 

Income Taxes

 

The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income.  

 

Stock Based Compensation

 

The Company accounts for its stock based compensation under ASC 718 “Compensation – Stock Compensation” which was adopted in 2006, using the fair value based method. Under this method, compensation cost is measured at the grant date based on the value of the award and is recognized over the service period, which is usually the vesting period.  This guidance establishes standards for the accounting for transactions in which an entity exchanges it equity instruments for goods or services. It also addresses transactions in which an entity incurs liabilities in exchange for goods or services that are based on the fair value of the entity’s equity instruments or that may be settled by the issuance of those equity instruments.

 

Loss Per Share

 

The Company utilizes ASC 260, “Earnings Per Share” for calculating the basic and diluted loss per share.  The assumed exercise of common stock equivalents was not utilized since the effect would be anti-dilutive. At December 31, 2009 and 2008, the Company had 554,525 and 1,054,940 potentially dilutive securities, respectively.

[F10]

 


 

Liquidity

 

As shown in the accompanying consolidated financial statements, the Company has incurred net losses of $1,754,236 and $4,048,086 during the years ended December 31, 2009 and 2008, respectively. The Company's current liabilities exceeded its current assets by $6,350,977 as of December 31, 2009. Consequently, its operations are subject to all risks inherent in the establishment of a new business enterprise.

 

Fair value of financial instruments

 

In April 2009, the Company adopted accounting guidance which requires disclosures about fair value of financial instruments in interim financial statements as well as in annual financial statements.

 

Our short-term financial instruments, including cash, notes receivable and convertible notes payable, consist primarily of instruments without extended maturities, the fair value of which, based on management’s estimates, reasonably approximate their book value. The fair value of our notes is based on management estimates and reasonably approximates their book value based on their current maturity. The fair value of the Company’s derivative instruments is determined using option pricing models.

 

Effective November 1, 2008, the Company adopted new accounting guidance pursuant to ASC 820 which established a framework for measuring fair value and expands disclosure about fair value measurements. The Company did not elect fair value accounting for any assets and liabilities allowed by previous guidance. Effective January 1, 2009, the Company adopted the provisions accounting guidance that relate to non-financial assets and liabilities that are not required or permitted to be recognized or disclosed at fair value on a recurring basis. Effective April 1, 2009, the Company adopted new accounting guidance which provides additional guidance for estimating fair value in accordance with ASC 820, when the volume and level of activity for the asset or liability have significantly decreased. The adoptions of the provisions of ASC 820 did not have a material impact on our financial position or results of operations.

ASC 820 defines fair value as the amount that would be received for an asset or paid to transfer a liability (i.e., an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. ASC 820 describes the following three levels of inputs that may be used:

 

·         Level 1   Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities;

 

·         Level 2   Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly, for substantially the full term of the asset or liability;

 

·         Level 3   Prices or valuation techniques that require inputs that are both significant to the fair value measurement and unobservable (supported by little or no market activity).

 

As of December 31, 2009 and 2008, the Company did not have any cash equivalents, therefore there were no assets measured at fair value. The Company’s conversion option liability was valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. These financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.

 

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (detachable warrants and conversion option liabilities) for the years ended December 31, 2009 and 2008.

2009

2008

Balance at beginning of year

$           1,660

$         13,311

  Additions to derivative instruments

-  

23,000

  Change in fair value of conversion option

10,946

 (31,597)

  Reclassification to equity upon repayment of debt

 (12,606)

 (3,054)

Balance at end of year

$                -  

$           1,660

 

The total amount of the changes in fair value for the period was included in net loss as a result of changes in the Company’s stock price during 2009 and 2008.

[F11]

 


 

New Accounting Pronouncements

 

With the exception of those discussed below, there have been no recent accounting pronouncements or changes in accounting pronouncements during 2009, as compared to the recent accounting pronouncements described in the Company’s Annual Report on Form 10-K for the year ended December 31, 2008, that are of significance, or potential significance to the Company.

 

Accounting Standards Codification and GAAP Hierarchy — Effective for interim and annual periods ending after September 15, 2009, the Accounting Standards Codification and related disclosure requirements issued by the FASB became the single official source of authoritative, nongovernmental GAAP. The ASC simplifies GAAP, without change, by consolidating the numerous, predecessor accounting standards and requirements into logically organized topics. All other literature not included in the ASC is non-authoritative. We adopted the ASC as of September 30, 2009, which did not have any impact on our results of operations, financial condition or cash flows as it does not represent new accounting literature or requirements.   All references to pre-codified U.S. GAAP have been removed from this Form 10-K.

 

In December 2007 the FASB issued new accounting guidance which establishes accounting and reporting standards for the non-controlling interest in a subsidiary and for the deconsolidation of a subsidiary. It clarifies that a non-controlling interest in a subsidiary is an ownership interest in the consolidated entity that should be reported as equity in the consolidated financial statements. This guidance changes the way the consolidated income statement is presented. It requires consolidated net income to be reported at amounts that include the amounts attributable to both the parent and the non-controlling interest. It also requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the non-controlling interest. This guidance establishes disclosure requirements in the consolidated financial statements, which will enable users to clearly distinguish between the interests of the parent’s owners and the interests of the non-controlling owners of a subsidiary. The guidance is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008; earlier adoption is prohibited. The adoption of this guidance had no impact to the Company’s consolidated financial position, results of operations, or cash flows.

 

In May 2009, the FASB issued new accounting guidance which establishes general standards of accounting for and disclosures of events that occur after the balance sheet date but before financial statements are issued or are available to be issued. The guidance will be effective for interim and annual financial periods ending after June 15, 2009. The Company adopted the guidance during the three months ended June 30, 2009. The adoption of this guidance had no impact on the Company’s consolidated financial position, results of operations, or cash flows.

[F12]

 


 

In October 2009, the FASB issued ASU No. 2009-13, Multiple-Deliverable Revenue Arrangements—a consensus of the FASB Emerging Issues Task Force , that provides amendments to the criteria for separating consideration in multiple-deliverable arrangements. As a result of these amendments, multiple-deliverable revenue arrangements will be separated in more circumstances than under existing U.S. GAAP. The ASU does this by establishing a selling price hierarchy for determining the selling price of a deliverable. The selling price used for each deliverable will be based on vendor-specific objective evidence if available, third-party evidence if vendor-specific objective evidence is not available, or estimated selling price if neither vendor-specific objective evidence nor third-party evidence is available. A vendor will be required to determine its best estimate of selling price in a manner that is consistent with that used to determine the price to sell the deliverable on a standalone basis. This ASU also eliminates the residual method of allocation and will require that arrangement consideration be allocated at the inception of the arrangement to all deliverables using the relative selling price method, which allocates any discount in the overall arrangement proportionally to each deliverable based on its relative selling price. Expanded disclosures of qualitative and quantitative information regarding application of the multiple-deliverable revenue arrangement guidance are also required under the ASU. The ASU does not apply to arrangements for which industry specific allocation and measurement guidance exists, such as long-term construction contracts and software transactions. ASU No. 2009-13 is effective beginning January 1, 2011. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated results of operations and financial condition.

 

In October 2009, the FASB issued ASU No. 2009-14, Certain Revenue Arrangements That Include Software Elements—a consensus of the FASB Emerging Issues Task Force , that reduces the types of transactions that fall within the current scope of software revenue recognition guidance. Existing software revenue recognition guidance requires that its provisions be applied to an entire arrangement when the sale of any products or services containing or utilizing software when the software is considered more than incidental to the product or service. As a result of the amendments included in ASU No. 2009-14, many tangible products and services that rely on software will be accounted for under the multiple-element arrangements revenue recognition guidance rather than under the software revenue recognition guidance. Under the ASU, the following components would be excluded from the scope of software revenue recognition guidance:  the tangible element of the product, software products bundled with tangible products where the software components and non-software components function together to deliver the product’s essential functionality, and undelivered components that relate to software that is essential to the tangible product’s functionality. The ASU also provides guidance on how to allocate transaction consideration when an arrangement contains both deliverables within the scope of software revenue guidance (software deliverables) and deliverables not within the scope of that guidance (non-software deliverables). ASU No. 2009-14 is effective beginning January 1, 2011. The Company does not expect that the adoption of this guidance will have a material impact on its consolidated results of operations and financial condition.

[F13]

 


 

NOTE 3 - GOING CONCERN

 

The accompanying consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying consolidated financial statements, the Company has a net loss of $1,754,236 and $4,048,086 during the years ended December 31, 2009 and 2008, respectively and a working capital deficiency of $6,350,977 and a stockholders' deficiency of $6,243,075 at December 31, 2009. These factors raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional funds and implement its business plan. The accompanying consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

The Company is actively pursuing additional equity financing through discussions with investment bankers and private investors. There can be no assurance the Company will be successful in its effort to secure additional equity financing.

 

If operations and cash flows continue to improve through these efforts, management believes that the Company can continue to operate. However, no assurance can be given that management's actions will result in profitable operations or the resolution of its liquidity problems.

 

The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued developing, marketing and selling of its services and additional equity investment in the Company.

 

NOTE 4 - CONVERTIBLE DEBT

 

Notes payable at December 31, 2009 and 2008:

 

 

December 31,

 

 

December 31,

 

 

 

 

    2009

 

 

 

    2008

 

Global Atomic Inc. demand note payable to related party at 10% per year, convertible into common stock at $1.00 per share

 

 $

4,000

 

 

 $

4,000

 

International Fission demand note payable to related party at 10% per year, convertible into common stock at $1.00 per share

 

 

15,000

 

 

 

15,000

 

Jackie Brown, demand note payable to related party, non -interest bearing, convertible into common stock at $1.00 per share

 

 

20,000

 

 

 

20,000

 

John Powers note payable to related party, convertible into common stock at a 50% discount to market; interest rate 14%; maturity June 4, 2009

 

 

 

 

 

13,444

 

John Powers note payable to related party, convertible into common stock at a 50% discount to market; interest rate 14%; maturity June 4, 2009

 

 

 

 

 

8,000

 

Total notes payable

 

 

39,000

 

 

 

60,444

 

Less: current portion

 

 

(39,000)

 

 

 

(60,444

)

Balance notes payable (long term portion)

 

$

 

 

$

 

 

During 2009, we repaid two convertible notes aggregating $21,444. As a result, the fair value of the derivative liability associated with the conversion feature of these notes on the date of repayment, aggregating $12,606, was reclassified to additional paid-in capital.

During March 2008 the Company received advances from Denise Barbato in the amount of $50,000. The advances are convertible into common stock at the rate of $0.084 per share pursuant to the January, 2004 debt consolidation agreement and are due on December 31, 2008. Since the advances are convertible at a discount to market, the Company has recorded a debt discount related to the beneficial conversion feature in the amount of $50,000, based on the proceeds received. The discount has been fully expensed at December 31, 2008, since the debt was settled through the issuance of common stock on April 27, 2008.

 

During the three months ended March 31, 2008 the Company issued an aggregate of 8,887,000 shares of common stock as payment of $737,221 of principle and $9,287 of accrued interest to Denise Barbato.

 

During April 2008 the Company issued an aggregate of 2,134,524 shares of common stock as payment of $179,002 of principle and $298 of accrued interest to Denise Barbato.

 

For the years ended December 31, 2009 and 2008, the Company reflected a charge of $10,947and a credit of $31,597 respectively, representing the change in the value of our embedded conversion options during the periods.

 

For the years ended December 31, 2009 and 2008, the Company reflected charges of $1,666 and $444,617 respectively, representing the amortization of debt discount as interest expense during the periods.

[F14]

 


 

NOTE 5 – NOTE PAYABLE

 

On December 3, 2009, the Company executed a promissory note in the amount of $15,000. The note bears no interest and was due April 3, 2010. The note was repaid on March 11, 2010.

 

NOTE 6 – STOCKHOLDER'S EQUITY

 

The Company is authorized to issue 100,000,000 shares of common stock with $0.0001 par value per share. As of December 31, 2009 and 2008, the Company has issued and outstanding 97,890,981 and 97,490,981 shares of common stock, respectively.

 

During the year ended December 31, 2009 the Company issued 400,000 shares of common stock as payment of expenses accrued at December 31, 2008 in the amount of $20,000.

 

During the year ended December 31, 2008 the Company issued an aggregate of 5,320,440 shares of common stock, valued at $863,888, for consulting services.

 

During the year ended December 31, 2008 the Company issued 1,299,446 shares as payment of expenses accrued at December 31, 2007 in the amount of $536,000.

 

On June 10, 2008 the Company issued 5,250,000 shares as payment of accrued executive compensation of $542,987. Of this amount, $523,647 was accrued at December 31, 2007.

 

During April 2008 we issued 865,476 shares to Denise Barbato for proceeds of $75,000. The proceeds were received in the third quarter.

 

During the year ended December 31, 2008 the Company issued 11,021,524 shares of common stock as payment of $925,808 of principal and interest due to Denise Barbato.

 

 NOTE 7 – NONCONTROLLING INTEREST

 

The Company owned 100% of the issued and outstanding common stock of FFI represented by 30,000,000 shares. On June 12, 2009, the Company entered into a Stock Purchase Agreement and sold 10%, or 3,000,000 FFI common shares (the “Shares”) to Schrader & Associates Defined Benefit Pension Plan (herein, “Schrader”) for the sum of $350,000.

 

FFI granted Schrader demand and piggyback registration rights on the Shares.

 

Schrader granted the Company the first right of refusal to match or exceed any third party bona fide offer to purchase the Shares until June 12, 2014.

 

Additionally, on June 12, 2009, in consideration of $5,000, the Company granted Schrader an option to purchase an additional 10% of FFI for the sum of $350,000.  The option expired on September 12, 2009. On June 30, 2009, Schrader partially exercised the option and purchased an additional 1,500,000 common shares of FFI, which represents 5.0% percent of the issued and outstanding common stock of FFI, for proceeds of $175,000.

 

The investment by Schrader in FFI is recorded as a noncontrolling interest in the financial statements and is summarized as follows at December 31, 2009:

 

Sale of FFI shares

 

$

525,000

 

Sale of option

 

 

5,000

 

Allocated loss

 

 

(17,581

)

 

 

 

 

 

Balance at December 30, 2009

 

$

512,419

 

 

[F15]

 


 

Management Agreement

 

In conjunction with the sale of its partial interest in FFI on June 12, 2009, the Company, FFI and Schrader entered into a Management Agreement, (the “Agreement”).  The Agreement states that the Company will use the proceeds of the sale of the Shares according to the Company’s use of proceeds Schedule which is attached the Agreement.   Additionally, the Company has agreed to nominate and appoint, and or vote into office one person named by Schrader who will be seated as a member of the FFI board of directors for a 12-month term.

 

FFI, upon receipt of funds from the Company’s use of proceeds schedule, has agreed to purchase certain real property located in Muhlenberg, Kentucky (the “Muhlenberg Property”) for the proposed construction of a Coal-to-Liquids (CTL) plant for approximately $150,000.  FFI has agreed to take title to the Muhlenberg Property in such a manner so that the property ownership would automatically transfer to Schrader in the event FFI were to file a petition in Bankruptcy Court, wind-up or liquidate.

 

Additionally, if FFI were to abandon its pursuit of a CTL plant on the Muhlenberg Property because FFI’s inability to obtain all appropriate approvals and permits required for a CTL plant, then FFI would sell the Muhlenberg Property and use the net proceeds to acquire another property for a CTL plant according to the same type of acquisition and title structure.

 

If FFI were able to secure an off-take agreement or fuel purchase agreement for fuels from its proposed CTL Plant, that would permit FFI to secure project financing, or if FFI were to secure project financing using the Muhlenberg or similar property as collateral, the Schrader would quit claim the future interest in and to the property to FFI.

 

NOTE 8 – NOTES RECEIVABLE

 

During 2009 the Company advanced an aggregate of $24,000 to KFA pursuant to promissory notes bearing interest at 5% and maturing January 22, 2010.

 

NOTE 9 - PROPERTY AND EQUIPMENT

 

Property and equipment at December 31, 2009 and 2008 consists of the following:

 

 

 

2009

 

 

2008

 

Land

 

$

95,726

 

 

$

 

Fixtures and equipment

 

 

17,875

 

 

 

7,430

 

 

 

 

113,601

 

 

 

7,430

 

Less: accumulated depreciation

 

 

(5,698

)

 

 

(3,492

)

 

 

 

 

 

 

 

 

 

Net property and equipment

 

$

107,903

 

 

$

3,938

 

 

Depreciation expense totaled $2,207 and 3,687 for the years ended December 31, 2009 and 2008, respectively.

 

During 2009 the Company purchased a parcel of land for $95,726 to be utilized in the CTL project.

 

NOTE 10 - ACCRUED EXECUTIVE COMPENSATION

 

The Company had an Employment Agreement with Paul M. Brown, its former president, whereby the Company was to pay Mr. Brown an annual base salary of $250,000. For the year ended December 31, 2002, the amount accrued until Mr. Brown's death was $142,667. As of December 31, 2009 and 2008 the amount accrued was $142,667.

 

On September 13, 2001, the Company hired Patrick Herda as the vice president of business development. Currently Mr. Herda is the President and CEO of the company. For the year 2006, Mr. Herda's salary was $110,000 and for the year 2007 Mr. Herda's salary was $55,000. The Company has been unable to pay Mr. Herda's his full salary and these unpaid sums have been accrued. On January 10, 2006 Mr. Herda entered into a 3-way agreement whereby he irrevocably assigned deferred compensation totaling $542,987 to IPTH in exchange for a guarantee to receive a minimum of $80,000 in cash salary from Nuclear Solutions, Inc. for the 2006 fiscal year. On June 10, 2008 pursuant to the January 10, 2006 agreement the Company issued 5,250,000 shares to IPTH valued at $542,987. As of December 31, 2009 and 2008, the amount accrued was $171,376 and $31,576, respectively.

[F16]

 


 

On January 23, 2002, the Company hired John Dempsey as the vice president at an annual base salary of $120,000. Mr. Dempsey resigned effective September 5, 2005. The Company has been unable to pay Mr. Dempsey's full salary in past years and these unpaid sums have been accrued. As of December 31, 2009 and 2008, the amount accrued was $328,799 and at Mr. Dempsey's discretion will be paid back either in cash or common stock at a price of $1 per share.

 

Kenneth Faith, the company’s Chief Financial Officer did not receive a salary during fiscal year ending December 31, 2007.  The board of directors authorized setting Mr. Faith’s annual base salary at $225,000 commencing March 1, 2008. During 2008, the Company has been unable to pay Mr. Faith's his full salary and has accrued the unpaid amount. As of December 31, 2009 and 2008, the amount accrued was $382,500 and $167,500, respectively.

 

John Powers, independent director of the company, did not receive a salary during fiscal year ending December 31, 2007.  The board of directors authorized setting Mr. Powers 2008 directors’ compensation at $26,250 commencing March 1, 2008. During 2009 and 2008, the Company has been unable to pay Mr. Powers his compensation and has accrued the unpaid amount. As of December 31, 2009 and 2008, the amount accrued was $41,562 and $21,875, respectively.

 

Jack Young, as Vice President of Nuclear Solutions, Inc. did not receive a salary during fiscal year ending December 31, 2007. Commencing March 2008, the board of directors authorized setting Mr. Young’s annual base salary at $185,000. The Company has been unable to pay Mr. Young his full salary and has accrued the unpaid amount. As of December 31, 2009 and 2008, the amount accrued was $154,167.

 

NOTE 11 - COMMITMENTS AND CONTINGENCIES

 

November 3, 2005, FFI entered into a fifteen-year land lease with Venture III Associates, renewable for up to 90 years, for an approximate six-acre site in Toms River, New Jersey to build a proposed 52 million gallon waste-to-ethanol production facility in exchange for 1,000,000 shares of FFI common stock. When the facility commences operations FFI will pay Venture III $240,000 dollars annually in equal monthly installments, plus three (3%) percent of the net operating profit of the waste-to-ethanol facility when the facility begins operations. The payment of the 1,000,000 shares of FFI common stock was deferred by Venture III until groundbreaking occurs for the waste to fuel facility on said property.

 

For the years ended December 31, 2009 and 2008, the company paid $33,600 and $53,212 in rent expense respectively. The Company does not currently have any long-term lease commitments except as noted above.

 

NOTE 12 -OPTIONS AND WARRANTS

 

The following table summarizes the changes in options and warrants outstanding and the related exercise prices for the shares of the Company's common stock issued by the Company as of December 31, 2009

 

 

 

Number of
Shares

 

 

Weighted
Average
Exercise Price

 

 

 

 

 

 

 

 

Outstanding at December 31, 2007

 

 

 

 

 

 

Granted

 

 

500,000

 

 

 $

0.35

 

Exercised

 

 

 

 

 

 

Canceled or expired

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding at December 31, 2008

 

 

500,000

 

 

 

0.35

 

Granted

 

 

 

 

 

 

Exercised

 

 

 

 

 

 

Canceled or expired

 

 

 

 

 

 

Outstanding at December 31, 2009

 

 

500,000

 

 

$

0.35

 

 

The outstanding warrants expire on March 22, 2010.

[F17]

 


 

NOTE 13 - NON-QUALIFIED STOCK GRANT AND OPTION PLAN

 

The Company has adopted Non-Qualified Stock Grant and Option Plan. The Plan is administered by the Company's Board of Directors. Directors, officers, employees, consultants, attorneys, and others who provide services to Company are eligible participants. Participants are eligible to be granted warrants, options, common stock as compensation.

 

On June 30, 2003, the Company adopted the 2003 Non-Qualified Stock Grant and Option Plan. The Plan reserved 5,000,000 shares. The Plan was registered on a Form S-8 registration statement on July 28, 2003. On March 30 2004, the Company adopted the 2004 Non-Qualified Stock Grant and Option Plan. The Plan reserved 5,000,000 shares. The Plan was registered on a Form S-8 registration statement on March 30, 2004. The Company issued 5,000,000 shares to thirteen individual comprised of consultants, attorneys and others who provided services to Company during 2004. On November 10, 2004, the Company adopted the 2005 Non-Qualified Stock Grant and Option Plan. The Plan reserved 4,000,000 shares. The Plan was registered on a Form S-8 registration statement filed on November 16, 2004. The Company issued 2,071,601 shares to six individuals comprised of consultants, attorneys and others who provided services to the Company during 2004. On August 5, 2005, the Company adopted another 2005 Non-Qualified Stock Grant and Option Plan. The Plan reserved 5,500,000 shares. The Plan was registered on a Form S-8 registration statement filed on August 17, 2005.

 

On March 9, 2007, the Company registered 5,000,000 common shares under a new Stock Grant Plan. The Stock Grant Plan is intended to serve as an incentive to and to encourage stock ownership by certain directors, officers, employees of and certain persons rendering contract services to the Company, so that they may acquire or increase their proprietary interest in the success of the Corporation, and to encourage them to remain in the Corporation's service.

 

On November 28, 2007, the company adopted a Stock Grant Plan. The plan reserved 5,000,000 shares. The Plan was registered on Form S-8 Registration Statement filed on December 6, 2007. Directors, officers, employees, consultants, attorneys, and others who provide services to our Company are eligible participants. Participants are eligible to be granted warrants, options, common stock as compensation.

 

NOTE 14 - INCOME TAXES

 

The Company utilizes ASC 740 “Income Taxes” which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred income taxes are recognized for the tax consequences in future years of differences between the tax bases of assets and liabilities and their financial reporting amounts at each year-end based on enacted tax laws and statutory tax rates applicable to the periods in which the differences are expected to affect taxable income. 

 

As of December 31, 2009 we have fully allowed for any deferred tax assets as management has determined that it is more-likely-than-not that we will no sustain the use of our net operating loss carryforwards and have established a valuation allowance for them. The valuation allowance increased by $616,000 and $1,400,000 during the years ended December 31, 2009 and 2008, respectively.

 

Significant components of the Company's deferred income tax assets at December 31, 2009 and 2008 are as follows:

 

 

 

2009

 

 

2008

 

Deferred income tax asset:

 

 

 

 

 

 

Net operating loss carryforward

 

$

8,044,000

 

 

$

7,428,000

 

Valuation allowance

 

 

(8,044,000

)

 

 

(7,428,000

)

 

 

 

 

 

 

 

 

 

Net deferred tax asset

 

$

-

 

 

$

-

 

 

The provision for income taxes differs from the amount computed by applying the statutory federal income tax rate to income before provision for income taxes. The sources and tax effects of the differences are as follows:

 

 

 

2009

 

 

2008

 

 

U.S. federal statutory rate

 

 

-35

%

 

 

-35

%

 

Valuation allowance

 

 

35

%

 

 

35

%

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

-

 

 

 

-

 

 

 

 

[F18]

 


 

As of December 31, 2009, the Company has a net operating loss carry forward, subject to limitations of Section 382 of the Internal Revenue Code, as amended, as follows:

 

Year

 

Amount

 

Expiration

 

 

 

 

 

2000

 

 $

28,719

 

2020

2001

 

 $

710,858

 

2021

2002

 

 $

1,902,582

 

2022

2003

 

 $

1,663,209

 

2023

2004

 

 $

1,474,681

 

2024

2005

 

 $

3,475,575

 

2025

2006

 

 $

2,627,526

 

2026

2007

 

 $

5,341,128

 

2027

2008

 

 $

4,000,000

 

2028

2009

 

 $

1,759,000

 

2028

 

The Company files income tax returns in the United States federal jurisdiction and certain states in the United States. The Company is in the process of preparing and filing its US federal returns. The 2000 through 2009 federal returns are considered open tax years as of the date of these consolidated financial statements. No tax returns are currently under examination by any tax authorities.

 

[F19]

 


 

Item 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE

 

We have had no disagreements on any matter of accounting principles or practices, financial statement disclosure, or auditing scope or procedures with any of our accountants for the year ended December 31, 2009 or any interim period. We have not had any other changes in nor have we had any disagreements, whether or not resolved, with our accountants on accounting and financial disclosures during our recent fiscal year or any later interim period.

 

Item 9A  CONTROLS AND PROCEDURES

 

Evaluation of Disclosure Controls and Procedures

 

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

 

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

 

As of the end of the period covered by this report, we carried out an evaluation, under the supervision and with the participation of management, including our chief executive officer and principal financial officer, of the effectiveness of the design and operation of our disclosure controls and procedures. Based upon that evaluation, management concluded that our disclosure controls and procedures are effective as of December 31, 2009 to cause the information required to be disclosed by us in reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods prescribed by SEC, and that such information is accumulated and communicated to management, including our chief executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

[23]

 


 

Evaluation of and Report on Internal Control over Financial Reporting

 

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of December 31, 2009 based on the criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on this evaluation, management concluded that, as of December 31, 2009, our internal control over financial reporting were effective in providing reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U. S. generally accepted accounting principles.

 

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

 

Changes in Internal Control over Financial Reporting

 

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

 

Limitations.

 

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

 

Item 9B.  OTHER INFORMATION.           None.

[23]

 


 

PART III

 

Item 10.  DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE

 

The following table sets forth the officers and directors of the Nuclear Solutions, Inc.

 

(a) Directors and Executive Officers

 

The following persons are the Directors and Executive Officers of Nuclear Solutions, Inc.

 

Name

 

Age

 

Position(s)

Term

 

 

 

 

 

 

Patrick Herda

 

39

 

President, CEO, Chairman Board Directors

6/03-10/1/09

John Fairweather

 

42

 

President, CEO, Chairman Board Directors

10/1/09-Present

Kenneth Faith

 

39

 

CFO, Principal Accounting Officer,

10/9/06-Present

 

 

 

 

Member Board of Directors

 

John Powers, Ph.D.

 

74

 

Member Board of Directors

5/7/02-10/1/09

 

Subsidiary: Fuel Frontiers, Inc

Name

 

Age

 

Position(s)

Term

 

 

 

 

 

 

John Fairweather

 

42

 

President, Chief Executive Officer, Director

10/1/09-Present

Patrick Herda

 

39

 

Director

9/02/05-10/1/09

David Maland

 

53

 

President

7/24/08-9/18/09

 

 

PATRICK HERDA, President, CEO, Chairman, Board of Directors, Resigned October 1, 2009

 

Patrick Herda, Joined Nuclear Solutions, Inc. in September 2001. He became the company's President and CEO on June 19, 2003 and resigned on October 1, 2009. As a full time officer, Herda provided the company with a portfolio of skills that blends business experience with scientific and technical aptitude developed in the course of working with technology companies over the last ten years. Herda's business background includes operations management, strategic planning, marketing, communications, business development, and fiscal planning. He has aptitude and experience in business, science, and technology that includes nuclear science, management of R&D, and industrial process control systems. From September 2001 to June 2003, he served as Vice President of Business Development for Nuclear Solutions, Assistant Secretary, and Chief Financial Officer. During that time, he was responsible for creating and managing strategic alliances with government and industrial partners, as well as identifying and developing new business opportunities for the company. From 1997 to 2001, Mr. Herda held the following concurrent positions: From 1997 to 2001, Herda was a managing member Particle Power Systems, LLC., a private nuclear R&D company. As a managing member, he was responsible for general operations concerning the development of innovative nuclear micro-battery power technologies for military and aerospace applications. From 1993 to 1995, Herda served as Vice President for Butler Audio, a Start-Up design and manufacturing firm for audio consumer electronics products. He successfully managed new product introduction, manufacturing, and strategic planning. Mr. Herda attended Drexel University in Philadelphia, PA, where he studied Commerce and Engineering, and Regis University in Denver, CO. where he studied business finance. Mr. Herda currently holds memberships in the American Nuclear Society, International Association for Energy Economics, and the Institute of Nuclear Materials Management.

 

JOHN R. FAIRWEATHER, Chief Executive Officer, President, Chairman of the Board of Directors.

Additionally, Mr. Fairweather is Chief Executive Officer, President and director of Fuel Frontiers, Inc., a Company subsidiary.

 

Mr. Fairweather was responsible for the development and operations for two Durable Medical Equipment companies. The first company, Alpine Medical, LLC was sold to Praxair, Inc. in 2002 for $60 million. The second company, Recover Care, LLC, recently sold for $167.5 million to WoundCo Holdings, Inc. Mr. Fairweather was responsible for evaluating and integrating companies from 12 mergers and acquisitions, growing and positioning them for sale. During his tenure as Chief Operating Officer of Camtec, Inc., a subsidiary of Recover Care, LLC, revenues doubled. He helped design 8 new products keeping Camtec at the forefront of the bariatric and safe patient handling market.

[24]

 


 

During the past five years, Mr. Fairweather has held a variety of executive level positions as outlined below:

 

Camtec, Inc., Cambridge, MD

 

Chief Operating Officer, 2005-2008

          Increased revenue from $4 million to $8.9 million.

          Modernized line including central locking, use of plastics and tilt features on current products.

          Managed research and development of all new products including low bed, bariatric low bed and medsurg bed.

          Wrote quality manuals and received ISO Certification 13485.

 

RecoverCare, LLC., Bensalem, PA

 

Senior Vice President, 2007-2008

          Increased revenue from $15.6 million to $17.4 million annually in the Northeast Region.

          Managed operations nationwide with revenue reaching $90 million.

          Optimized utilization of equipment to maintain average of 72%.

          Maximized distribution efficiency to reduce overtime per driver to less than 3 hours/week while still maintaining 4 hour service window.

          Responsible for Operations of all Mergers and Acquisitions including evaluation and integration.

 

VP, Operations, 2003-2005

          Developed, monitored and implemented operations procedures nationwide in accordance with state and federal agencies.

          Streamlined purchasing and operations to increase efficiency and cut costs.• Achieved CHAP accreditation.

          Responsible for Operations of all Mergers and Acquisitions including evaluation and integration.

 

Alpine Medical, LLC., Bensalem, PA

 

VP, Operations, 1999-2002

          Founded company in 1999. Grew revenue to $25 million in 3 years before selling to Praxair Healthcare, Inc.

          Managed purchasing, biomed, respiratory, IT and operations.

          Achieved JCAHO Accreditation with commendation.

          Developed and implemented operations policies and procedures in accordance with state and federal agencies.

 

KENNETH A. FAITH, Chief Financial Officer, Principal Accounting Officer, Member

of the Board of Directors.

 

On October 9, 2006, Mr. Faith was appointed Chief Financial Officer and Principal Accounting Officer. On December 7, 2006, the Board of Directors nominated Kenneth Faith to the Company's board of directors.

 

Mr. Faith holds a Bachelor of Science Degree in Accounting from Drexel University, Philadelphia, Pennsylvania.

 

During the past five years, Mr. Faith has held a variety of executive level positions as outlined below:

 

PFPC, Inc., Wilmington, DE. February 2006-Present. Title: Fund Accounting and Administration Director. Mr. Faith is responsible for financial reporting, budget analysis and client relations for one of the firm's five largest clients, 92 mutual funds, with a combined net assets of $50 billion.

 

Citco Mutual Fund Services, Inc., Malvern, PA. March 2003-November 2005. Title: Chief Operating Officer. Mr. Faith was responsible for daily operations, responses to requests for proposal, business planning and client relations of a start up mutual fund service provider. During Mr. Faith's tenure at Citco he was responsible for tripling service assets and firm revenues.

 

JP Morgan Fleming Asset Management, New York, NY & Wilmington, DE. March 2002-March 2003. Title: Vice President, Fund Financial Intermediaries Operations Quality & Analysis. Mr. Faith's responsibilities included creating analytical reporting for business monitoring, evaluating process flows for efficiency, coordinating with internal and external auditors and performing consulting services for the entire Fund organization. His additional responsibilities included establishing infrastructure to support launch and distribution of new products, improving operational workflows, insuring effective project implementation focused on reducing operational risk.

 

[25]

 


 

JOHN POWERS, Ph. D, Member Board of Directors

Mr. Powers joined Nuclear Solutions as a member of the board of directors on May 7, 2002 and resigned to pursue other business objectives on October 1, 2009.

John Powers is the Chairman of the FirTH Alliance, LLC. The Alliance, created to respond to the emerging terrorist threat, includes senior executives and public safety leaders who helped formulate the nation’s contingency planning, continuity of operations, emergency preparedness and infrastructure assurance programs.

John’s approach to Managing the Response to a Major Terrorist Event was highlighted in McGraw Hill’s 2004/2005 Annual Review of Homeland Security. It is based on an “automated game plan” across a region that will enable participating jurisdictions to respond decisively following a catastrophic incident.

John is concurrently serving as a principal in a DTRA effort to prevent the infiltration of a nuclear weapon into the US and is developing a comprehensive countermeasures architecture that will move detection and interdiction as close to the source as possible. The centerpiece of this proposed architecture will be a rigorous indications and warning system with levels of awareness and graduated response actions.

From 1996 to 1998, Dr. Powers served as a Commissioner and the Executive Director of the President’s Commission on Critical Infrastructure Protection. There, he managed the research, provided overall direction to the Commission’s deliberations and led the formulation of the “national structures” recommendations adopted by the President in PDD 63.

Dr. Powers joined the Federal Emergency Management Agency in 1983 and served as the head of its Office of Civil Preparedness and then its Office of Federal Preparedness. From 1993 to 1995, he served as the Director of Region V in Chicago, Illinois, and had responsibility for the Federal response to the "Great Midwest Flood" in those states.

From 1978 to 1983, he served as the Director of Research and Technical Assessment for the Department of Energy. His first assignment was as Executive Director for the Interagency Review Group on Nuclear Waste Management reporting to President Jimmy Carter and then as Executive Director of the DOE precursor to the Synthetic Fuels Corporation in which he managed the award of seven billion dollars to stimulate new alternative energy projects.

Previously, he created one of the early pattern recognition programs, developed the skin friction law used in the Polaris nose cone, projected, stochastically, the commercial value of the proposed new energy technologies (contributing to the cancellation of two $2 billion demo projects), created a safeguards and security design methodology for nuclear facilities (parts of which are still in use) and managed development of the National Coal Model.

In 1954, at the age of 19, he entered the U. S. Naval Flight Training program and upon completion was commissioned in the United States Marine Corps. After leaving active duty in 1958, he continued in the Marine Corps Reserve. As a reservist, he commanded an A4 squadron at Willow Grove, PA, and later, in Washington developed the concept and managed preparation of the Marine Corps Mobilization Management Plan and the DOD Master Mobilization Plan.

Dr. Powers holds a B. S. degree from Columbia University, an M. Div. degree from Princeton Theological Seminary, and a Ph. D. in physics from the University of Pennsylvania.

 

[26]

 


 

DAVID C. MALAND, President and Director, Fuel Frontiers, Inc. resigned October 1, 2009

On July 24, 2008, the board of directors appointed David C. Maland, to succeed Mr. Young as President of Fuel Frontiers, Inc. (FFI). Mr. Maland resigned his positions with Fuel Frontiers on September 18, 2009. Mr. Maland has been an independent business consultant for the last five years.

Mr. Maland joins FFI with over 25 years of experience in business development, within the Energy, Agricultural, and Technology industries. His career has spanned leadership positions in Sales, Marketing, Operations, Logistics and Executive Management. Mr. Maland’s ability to effectively manage fast growing business has placed one organization on the “INC 100 List” of fastest growing companies on two consecutive years. As a Business Consultant this experience brought him clients from fortune 500 to start-ups, on three continents. He has worked with diverse industries including Energy, Steel, Technology and Building, reinvigorating or growing revenue with programs for Marketing and Sales, New Market Evaluations, Venture Financing along with the corresponding business plans.

Mr. Maland has worked with Mr. Young in developing FFI business and economic performance models and in taking the lead in the Kentucky coal-to-liquid fuels (CTL) program. Mr. Maland has 17 years in transportation, distribution and marketing of propane gas and has a background in large-scale project information and management systems.

 

[27]

 


 

(b) Identify Significant Employees. None.

 

(c) Family Relationships. None known.

 

(d) Involvement in Certain Legal Proceedings. None of the Company's directors, officers, promoters or control persons, if any, during the past five years was, to the best of the Company's knowledge:

 

1.       A general partner or executive officer of a business that had a bankruptcy petition filed by or against it either at the time of the bankruptcy or within the two years before the bankruptcy;

 

2.       Convicted in a criminal proceeding or been subject to a pending criminal proceeding (excluding traffic violations and other minor offenses) ;

 

3.       Subject to any order, judgment, or decree, not subsequently reversed, suspended or vacated, of any court of competent jurisdiction, permanently or temporarily enjoining, barring, suspending or otherwise limiting his or her involvement in any type of business, securities or banking activities; and

 

4.       Found by a court of competent jurisdiction (in a civil action), the Securities and Exchange Commission or the Commodity Futures Trading Commission to have violated a federal or state securities or commodities law, and the judgment has not been reversed, suspended or vacated.

 

Compliance with Section 16(a) of the Securities Exchange Act of 1934

 

Section 16(a) of the Securities Exchange Act of 1934 requires the Company's directors and executive officers, and persons who own more than 10% of the Company's Common Stock, to file with the Securities and Exchange Commission initial reports of beneficial ownership and reports of changes in beneficial ownership of Common Stock of the Company. Officers, directors and greater than 10% shareholders are required by the Securities and Exchange Commission to furnish the Company with copies of all section 16(a) reports they file.

 

We received no reports covering purchase and sale transactions in our common stock during 2009, and we believe that each person who, at any time during 2009, was a director, executive officer, or beneficial owner of more than 10% of our common stock complied with all Section 16(a) filing requirements during 2009.

 

CODE OF ETHICAL CONDUCT.

 

On March 20, 2003, our board of directors adopted our code of ethical conduct that applies to all of our employees and directors, including our principal executive officer, principal financial officer, principal accounting officer or controller, and persons performing similar functions.

 

We believe the adoption of our Code of Ethical Conduct is consistent with the requirements of the Sarbanes-Oxley Act of 2002.

 

Our Code of Ethical Conduct is designed to deter wrongdoing and to promote:

 

          Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

          Full, fair, accurate, timely and understandable disclosure in reports and documents that we file or submit to the Securities & Exchange Commission and in other public communications made by us;

          Compliance with applicable governmental laws, rules and regulations,

          The prompt internal reporting to an appropriate person or persons identified in the code of violations of our Code of Ethical Conduct; and

          Accountability for adherence to the Code.

 

[28]

 


 

Item 11.  EXECUTIVE COMPENSATION

 

The following information is provided concerning the compensation of the named executive officers for the last two fiscal years:

 

Table 1.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Nonqualified

 

 

 

 

 

 

 

Name

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Non-Equity

 

 

Deferred

 

 

All

 

 

 

 

and

 

 

 

 

 

 

 

 

 

Stock

 

 

Option

 

 

Incentive Plan

 

 

Compensation

 

 

Other

 

 

 

 

Principal

 

 

 

Salary

 

 

Bonus

 

 

Awards

 

 

Awards

 

 

Compensation

 

 

Earnings

 

 

Compensation

 

 

Total

 

Position

 

Year

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

 

($)

 

(a)

 

(b)

 

(c)

 

 

(d)

 

 

(e)

 

 

(f)

 

 

(g)

 

 

(h)

 

 

(i)

 

 

(j)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patrick Herda,

 

2008

 

 

250,000

(1)

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

250,000

 

Pres., CEO and

 

2009

 

 

250,000

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

250,000

 

Director (1)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John Fairweather,

 

2009

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

Pres., CEO and

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Director (2)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ken Faith, CFO

 

2008

 

 

225,000

 

 

 

-0-

 

 

 

44,250

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

225,000

 

and Director (3)

 

2009

 

 

225,000

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

225,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jack Young, V.P

 

2008

 

 

185,000

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

-0-

 

 

 

185,000

 

 

(1) Patrick Herda, Nuclear Solutions, Inc. President and Chief Executive Officer’s base salary was $250,000 annually. Mr. Herda resigned his positions with the Company on October 1, 2009. Mr. Herda was paid $166,583 during 2008. The board authorized increasing Mr. Herda’s base annual salary to $250,000 commencing March 2, 2008. All unpaid salary has been accrued. As of December 31, 2009 and 2008, the amount accrued was $171,376 and $31,576, respectively. On January 10, 2006 Mr. Herda entered into a 3-way agreement whereby he irrevocably assigned deferred compensation totaling $542,987 to IPTH in exchange for a guarantee to receive a minimum of $80,000 in cash salary from Nuclear Solutions, Inc. for the 2006 fiscal year. On June 10, 2008 pursuant to the January 10, 2006 agreement the Company issued 5,250,000 shares to IPTH valued at $542,987.

 

(2) John Fairweather joined the company on October 1, 2009 replacing Mr. Herda as President, CEO and Chairman of the Board of Directors. Mr. Fairweather’s has agreed to work for the Company without compensation until such time as the Company is able to secure financing for operations.

 

(3) Kenneth Faith joined the Company in the last quarter of fiscal year 2006. Kenneth Faith, is Nuclear Solutions, Inc. Chief Financial and Principal Accounting Officer. During 2008, the board of directors authorized setting Mr. Faith’s annual base salary at $225,000 commencing March 2, 2008. During 2008, the Company paid Mr. Faith $20,000. The unpaid salary balance of $167,500 has been accrued. As of December 31, 2009 and 2008, the amount accrued was $382,500 and $167,500, respectively.

 

(3) Jack Young was Vice President of Nuclear Solutions, Inc. and President of Fuel Frontiers, Inc. Mr. Young resigned these two positions on July 23, 2008. During 2008, the board of directors authorized setting Mr. Young’s annual base salary at $185,000 as President of Fuel Frontiers, Inc. commencing March 2, 2008. The Company was unable to pay Mr. Young his full salary and has accrued the unpaid amount. As of December 31, 2009, the amount accrued was $154,167.

 

Grants of Plan-Based Awards

 

We made no grants from plans to any executive officer during the fiscal year ended December 31, 2009.We made three common stock grants of restricted stock to Patrick Herda, Kenneth Faith and Jack Young during the fiscal year ending December 31, 2007. The shares have not been issued.

 

[29]

 


 

Outstanding Equity Awards at Fiscal Year-End

 

There were outstanding equity awards to any executive officer at the end of the fiscal year ended December 31, 2009 representing equity grants made during 2007, as set forth in this report.

 

Director Compensation

 

The Company has not established any policy concerning director compensation. The board of directors authorized setting Mr. Powers 2008 directors’ compensation at $26,250 commencing March 1, 2008. During 2008, the Company has been unable to pay Mr. Powers his compensation and has accrued the unpaid amount. As of December 31, 2009, the amount accrued was $43,750 which represents $21,875 for fiscal year ending 2008 and $21,875 for three quarters of fiscal year ending 2009. Mr. Powers resigned his board position October 1, 2009.

 

Mr. Powers was the only director who received annual director compensation.

 

DIRECTOR INDEPENDENCE

 

The Board has determined that we do not have a majority of independent directors as that term is defined under Rule 4200(a) (15) of the Nasdaq Marketplace Rules, even though such definition does not currently apply to us, because we are not listed on Nasdaq.

 

MEETINGS AND COMMITTEES OF THE BOARD OF DIRECTORS

 

We presently have no Board committees. Until further determination, the full Board will undertake the duties of the audit committee, compensation committee and nominating committee. We do not currently have an “audit committee financial expert” since we currently do not have an audit committee in place.

 

The Company does not currently have a process for security holders to send communications to the Board.

 

Item 12.  SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS

 

Table 1 lists the persons who are known to the Company to be the owners of more than five percent of the Company’s equity shares according to the Company’s records as of December 31, 2009. Beneficial Ownership of more than 5% based on 97,890,981 common shares.

 

Beneficial Ownership of 5%.

 

(a) Our stock transfer agency records do not list any shareholders owning five percent or more of our common stock.

 

(b) Security Ownership of Management. Based on 97,890,981 shares as set forth in (a) above as of December 31, 2009.

[30]

 


 

Table 2.

 

(1)

 

(2)

 

(3)

 

 

(4)

 

Title of Class

 

Address

 

Amount and Nature

 

 

Percent of

Class

 

 

 

 

 

 

 

 

 

 

Common Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Patrick Herda

 

5505 Connecticut Ave NW

 

 

4,135,000

(1)

 

 

4.24

%

 

 

Suite 191

 

 

 

 

 

 

 

 

 

 

Washington, DC 20015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Kenneth Faith

 

5505 Connecticut Ave., NW

 

 

775,000

(2)

 

 

0.8

%

 

 

Suite 191

 

 

 

 

 

 

 

 

 

 

Washington, DC 20015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

John Powers

 

5505 Connecticut Ave NW

 

 

420,000

(3)

 

 

0.43

%

 

 

Suite 191

 

 

 

 

 

 

 

 

 

 

Washington, DC 20015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Jack Young

 

5505 Connecticut Ave NW

 

 

400,000

(4)

 

 

0.41

%

 

 

Suite 191

 

 

 

 

 

 

 

 

 

 

Washington, DC 20015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

 

 

 

5,730,000

 

 

 

5.87

%

 

1)       3,500,000 shares have been authorized for issuance, but have not yet been issued.

2)       600,000 shares have been authorized for issuance, but have not yet been issued.

3)       150,000 shares have been authorized for issuance, but have not yet been issued.

4)       400,000 shares have been authorized for issuance, but have not yet been issued.

 

(c) Changes in Control. To management’s knowledge, there are no arrangements which may result in a change in control.

 

[31]

 


 

Item 13.  CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE

 

(a) Transactions with Management and Others.

Except as otherwise set forth in this report, no member of management, executive officer, director, nominee for a director or security holder who is known to the Company to own of record or beneficially more than five percent of any class of the Company’s voting securities, nor any member of the immediate family of any of the foregoing persons, has had any direct or indirect material interest in any transaction to which the Company was or is to be a party.

On March 2, 2008, the board of directors established the following annual base salaries for its principal executive officers. There are no employment agreements between the company and any of its officers.

Patrick Herda, Nuclear Solutions, Inc. President and Chief Executive Officer’s base salary for the fiscal year ending December 31, 2007 was $55,000. During 2007, the board of directors authorized the issuance of 3,500,000 shares of common stock valued at $630,000. The shares have not been issued. The board authorized increasing Mr. Herda’s base annual salary to $250,000 commencing March 2, 2008.

Kenneth Faith, Nuclear Solutions, Inc. Chief Financial and Principal Accounting Officer did not receive a salary during fiscal year ending December 31, 2007. During 2007, the board of directors did authorize the issuance of 600,000 shares common stock valued at $108,000. The shares have not been issued. The board authorized setting Mr. Faith’s annual base salary at $225,000 commencing March 2, 2008.

Jack Young, Vice President of Nuclear Solutions, Inc. and President of Fuel Frontiers, Inc., a company subsidiary, did not receive a salary during fiscal year ending December 31, 2007. During 2007, the board of directors authorized the issuance of 400,000 shares to Mr. Young valued at $72,000. The board of directors authorized setting Mr. Young’s annual base salary at $185,000 as President of Fuel Frontiers, Inc. commencing March 2, 2008.

During 2007, the board of directors authorized the issuance of 150,000 shares to John Powers, member of the board of directors, valued at $27,000. The shares have not been issued.

The board of directors authorized setting Mr. Powers 2008 directors’ annual compensation at $26,250 commencing March 1, 2008. During 2008 and 2009, the Company has been unable to pay Mr. Powers his compensation and has accrued the unpaid amount. As of December 31, 2009, the amount accrued was $43,750 which represents $21,875 for fiscal year ending 2008 and $21,875 for three quarters of fiscal year ending 2009. Mr. Powers resigned his board position October 1, 2009.

On March 17, 2008 the Company received $8,000 pursuant to a promissory note payable to John Powers, a director, bearing interest at 14% per year and maturing on March 17, 2009. The note is convertible into common stock at the rate of 50% of market value. The Company recorded a debt discount related to the beneficial conversion feature in the amount of $8,000, based on the proceeds received. The discount is being amortized over the term of the debt, through March 17, 2009. This note was repaid on June 18, 2009.

On April 25, 2008 the Company received $15,000 pursuant to a promissory note payable to John Powers, a director, bearing interest at 14% per year and maturing on April 25, 2009. The note is convertible into common stock at the rate of 50% of market value. We have recorded a debt discount related to the beneficial conversion feature in the amount of $15,000, based on the proceeds received. The note was repaid on August 22, 2008 and the discount has been fully amortized.

On June 4, 2007 the Company received $12,000 pursuant to a promissory note payable to John Powers, a director, bearing interest at 12% per year and maturing on June 4, 2008. The note is convertible into common stock at the rate of 50% of market value. We have recorded a beneficial conversion feature in the amount of $12,000. The discount is being amortized over the term of the debt, through June 4, 2008. Amortization of debt discount for the year ended December 31, 2007 was $6,884. This note was repaid on June 18, 2009.

 

(b) Certain Business Relationships.

Except as set forth in (a) above, and to the knowledge of management, or as previously filed in the Company’s periodic reports, no director or nominee for director is or has been related to any person who has been a party to any transaction with the Company.

 

(c) Indebtedness of Management.

No member of the Company’s management is or has been indebted to the Company since the beginning of its last fiscal year.

 

(d) Transactions with Promoters. None.

[32]

 


 

Item 14.  PRINCIPAL ACCOUNTANT FEES AND SERVICES

 

The Company paid or accrued the following fees in each of the prior two fiscal years to its principal accountant during 2009 and 2008, RBSM LLP as our auditor for our fiscal year ending December 31, 2009.

 

 

 

Year End 12-31-09

 

 

Year End 12-31-08

 

Audit Fees

 

$

63,175

 

 

$

46,062

 

Audit-related Fees

 

 

-0-

 

 

 

-0-

 

Tax Fees

 

 

5,000

 

 

 

-0-

 

All other fees

 

 

-0-

 

 

 

-0-

 

Total Fees

 

$

68,175

 

 

$

46,062

 

 

AUDIT FEES. Audit fees consist of fees billed for professional services rendered for the audit of the Company's consolidated financial statements and review of the interim consolidated financial statements included in quarterly reports and services that are normally provided by the Company's principal accountants in connection with statutory and regulatory filings or engagements.

 

AUDIT-RELATED FEES. Audit related fees consist of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of the Company's consolidated financial statements and are not reported under "Audit Fees." There were no Audit-Related services provided in fiscal 2009 or 2008.

 

TAX FEES. Tax fees are fees billed for professional services for tax compliance, tax advice and tax planning.

 

ALL OTHER FEES. All other fees include fees for products and services other than the services reported above. There were no management consulting services provided in fiscal 2009 or 2008.

 

Policy on Audit Committee Pre-Approval of Audit and Permissible Non-Audit Services of Independent Auditors

 

The Company currently does not have a designated Audit Committee, and accordingly, the Company's Board of Directors' policy is to pre-approve all audit and permissible non-audit services provided by the independent auditors. These services may include audit services, audit-related services, tax services and other services. Pre-approval is generally provided for up to one year and any pre-approval is detailed as to the particular service or category of services and is generally subject to a specific budget. The independent auditors and management are required to periodically report to the Company's Board of Directors regarding the extent of services provided by the independent auditors in accordance with this pre-approval, and the fees for the services performed to date. The Board of Directors may also pre-approve particular services on a case-by-case basis.

 

To our knowledge, the Company's principal accountant during 2009 did not engage any other persons or firms other than the principal accountant's full-time, permanent employees.

[33]

 


 

PART IV

Item 15.   EXHIBITS AND FINANCIAL STATEMENT SCHEDULES

 

 

 

index

 

Certificate of Amendment of Articles of Incorporation of Stock Watch Man, Inc. filed Secretary of State Nevada on September 12, 2001 changing corporate name to Nuclear Solutions, Inc.

 

 

 

*3.2

 

Articles of Incorporation of Stock Watch Man, Inc.