U.S Fuel (USFF) 10-Q 2008 Q2 Quarterly report

U.S. Securities and Exchange Commission

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 for the quarterly period ending June 30, 2008

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

For the transition period from _____to_____

Commission file number 000-31959

NUCLEAR SOLUTIONS, INC.

(Name of Small Business Issuer in its Charter)

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

5505 Connecticut Ave NW, Suite 191 Washington, DC 20015

(Address of principal executive offices)           (Zip Code)

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

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

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

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

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

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

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

APPLICABLE ONLY TO CORPORATE ISSUERS:

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. As of August 14, 2008 we had 93,665,981 shares of common stock issued and outstanding.

Contents		Page No.
Part I – Financial Information		3
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	15
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	18
Item 4.	Controls and Procedures	18
Part II – Other Information		19
Item 1.	Legal Proceedings	19
Item 1A.	Risk Factors	19
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	20
Item 3.	Defaults Upon Senior Securities	20
Item 4.	Submission of Matters to a Vote of Security Holders	20
Item 5.	Other Information	20
Item 6.	Exhibits	20
Signatures		21

2

PART I-FINANCIAL INFORMATION

Item 1.Financial Statements

NUCLEAR SOLUTIONS ,INC

AND SUBSIDIARIES

CONDENSED CONSOLIDATED BALANCE SHEETS

	June 30,			December 31,
	2008			2007
	(unaudited)
ASSETS
Current assets:
Cash	$	30,168		$	192,981
Receivable on sale of common stock		72,700			-
Prepaid expenses		216,622			112,900
Total current assets		319,490			305,881
Property and equipment, net of accumulated depreciation
of $30,105 and $28,019 as of June 30 2008 and December 31, 2007 respectively		5,539			7,625
Other assets		100,724			1,800
Total assets	$	425,753		$	315,306
LIABILITIES AND DEFICIENCY IN STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses	$	4,702,559		$	3,938,962
Accrued executive compensation		616,882			995,112
Convertible notes payable - related parties, net of discount of $18,110
and $5,115, as of June 30,2008 and December 31, 2007, respectively		18,334			45,885
Convertible notes payable - other, net of discount of $0 and
and $233,168, as of June 30,2008 and December 31, 2007, respectively		39,000			498,055
Total current liabilities		5,376,775			5,478,014
Derivative liability (Note 4)		42,875			13,311
Total liabilities		5,419,650			5,491,325
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, 93,665,981 and 73,734,095 issued and
outstanding, as of June 30,2008 and December 31,2007 respectively		9,367			7,374
Additional paid-in capital		19,540,501			16,802,581
Deferred equity based expense		(1,194,858	)		(1,058,503	)
Accumulated deficit		(23,348,907	)		(20,927,471	)
Total deficiency in stockholders' equity		(4,993,897	)		(5,176,019	)
Total liabilities and deficiency in stockholders' equity	$	425,753		$	315,306

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

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NUCLEAR SOLUTIONS, INC.

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENTS OF LOSSES

(unaudited)

	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2008			2007			2008			2007
Revenue	$	-		$	-		$	-		$	100,000
Executive compensation		171,563			13,750			237,917			27,500
Consulting		580,725			755,009			1,211,046			1,487,062
Legal and professional fees		187,675			171,532			416,800			418,444
General and administrative expenses		33,292			39,670			109,045			80,897
Depreciation and amortization		858			1,656			2,086			3,324
		974,113			981,617			1,976,894			2,017,227
Loss from operations		(974,113	)		(981,617	)		(1,976,894	)		(1,917,227	)
Other Income(expenses)
Interest expense		(185,378	)		(160,377	)		(437,978	)		(200,936	)
Change in fair value of derivative liability		(4,400	)		(31,670	)		(6,564	)		(72,620	)
Loss before provision for income taxes		(1,163,891	)		(1,173,664	)		(2,421,436	)		(2,190,783	)
Provision for income taxes		-			-
Net loss	$	(1,163,891	)	$	(1,173,664	)	$	(2,421,436	)	$	(2,190,783	)
Basic and diluted loss per share	$	(0.01	)	$	(0.02	)	$	(0.03	)	$	(0.04	)
Weighted average number of common shares
outstanding, basic and diluted		88,449,446			58,150,890			84,119,971			56,186,115

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

4

NUCLEAR SOLUTIONS, INC

AND SUBSIDIARIES

CONDENSED CONSOLIDATED STATEMENT OF DEFICIENCY IN STOCKHOLDERS' EQUITY

FOR THE PERIOD JANUARY 1, 2008 TO JUNE 30, 2008

(unaudited)

													Total Deficiency
	Common Stock				Additional		Deferred Equity			Accumulated			in Stockholders'
	Shares		Amount		Paid - In Capital		Based Expense			Deficit			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		1,495,440		149		477,269		-			-			477,418
Shares issued for accrued expenses		1,299,446		130		535,870		-			-			536,000
Shares issued for payment of debt and Interest		17,137,000		1,714		1,539,781		-			-			1,541,495
Beneficial conversion feature		-		-		185,000		-			-			185,000
Deferred compensation		-		-		-		(1,245,668	)		-			(1,245,668	)
Amortization of deferred compensation		-		-		-		1,109,313			-			1,109,313
Net loss		-		-		-		-			(2,421,436	)		(2,421,436	)
Balance June 30, 2008		93,665,981	$	9,367	$	19,540,501	$	(1,194,858	)	$	(23,348,907	)	$	(4,993,897	)

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

5

NUCLEAR SOLUTIONS ,INC

AND SUBSIDIARY

CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS

(unaudited)

	For The Six Months Ended June 30,
	2008			2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(2,421,436	)	$	(2,190,782	)
Adjustments to reconcile net loss to net cash
used in operating activities:
Depreciation and amortization		2,086			3,324
Amortization of debt discount - beneficial conversion feature of
convertible note and warrants		428,174			154,107
Change in fair value of derivative liability		6,564			72,620
Stock and warrants issued for services		1,606,071			2,668,857
Changes in operating assets and liabilities:
Accounts receivable
Prepaid Expenses		(123,146	)		(105,800	)
Other Assets		(79,500	)		7,500
Accounts payable and accrued expenses		64,957			(925,474	)
Accrued executive compensation		145,417			(16,280	)
Net cash used in operating activities		(370,813	)		(331,928	)
CASH FLOWS FROM INVESTING ACTIVITIES:		-			-
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of debt		208,000			461,980
Net cash provided by financing activities		208,000			461,980
Net increase in cash		(162,813	)		130,052
Cash, beginning of period		192,981			31,451
Cash, end of period	$	30,168		$	161,503
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	$	428,174		$	154,107
Payment of debt and interest with common stock	$	925,808		$	357,895
Beneficial conversion discount	$	208,000		$	420,871
Payment of accrued expenses with common stock	$	1,059,647		$	56,350

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

6

NUCLEAR SOLUTIONS, INC.

AND SUBSIDIARIES

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

JUNE 30, 2008

(Unaudited)

NOTE 1 - ORGANIZATION AND NATURE OF OPERATIONS

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

On September 2, 2005 the Company formed a wholly owned subsidiary, Fuel Frontiers Inc., formally, Future Fuels, Inc., which has 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 June30, 2008.

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

Basis of Presentation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with Regulation S-X promulgated by the Securities and Exchange Commission and do not include all of the information and footnotes required by generally accepted accounting principles in the United States for complete financial statements. In the opinion of management, these interim financial statements include all adjustments, which include only normal recurring adjustments, necessary in order to make the financial statements not misleading. The results of operations for such interim periods are not necessarily indicative of results of operations for a full year. The unaudited condensed consolidated financial statements should be read in conjunction with the audited consolidated financial statements and notes thereto of the Company and management's discussion and analysis of financial condition and results of operations included in the Company's Annual Report for the year ended December 31, 2007 as filed with the Securities and Exchange Commission on Form 10-K.

Business Concentration

For the six months ended June 30, 2007 we earned all of our revenue from one customer.

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NOTE 2 - ACCOUNTING POLICIES AND PROCEDURES

Revenue Recognition

Revenues are recognized in the period that services are provided. For revenue from product sales, the Company recognizes revenue in accordance with Staff Accounting Bulletin No. 104, Revenue Recognition ("SAB104"), which superceded Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements ("SAB101"). SAB 101 requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of an arrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectibility is reasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed nature of the selling prices of the products delivered and the collectibility of those amounts. Provisions for discounts and rebates to customers, estimated returns and allowances, and other adjustments are provided for in the same period the related sales are recorded. The Company defers any revenue for which the product has not been delivered or is subject to refund until such time that the Company and the customer jointly determine that the product has been delivered or no refund will be required. Payments received in advance are deferred.

SAB 104 incorporates Emerging Issues Task Force 00-21 ("EITF 00-21"), Multiple-Deliverable Revenue Arrangements. EITF 00-21 addresses accounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to use assets. The effect of implementing EITF 00-21 on the Company's consolidated financial position and results of operations was not significant.

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

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.

Loss Per Share

Basic and diluted loss per common share for all periods presented is computed based on the weighted average number of common shares outstanding during the year as defined by SFAS No. 128, "Earnings Per Share". The assumed exercise of common stock equivalents was not utilized since the effect would be anti-dilutive. At June 30, 2008 and 2007, the Company had 801,675 and 12,317,665 potentially dilutive securities, respectively.

Stock Based Compensation

The Company uses the fair value method for equity instruments granted to non-employees and uses the Black Scholes model for measuring the fair value. The stock based fair value compensation is determined as of the date of the grant or the date at which the performance of the services is completed (measurement date) and is recognized over the periods in which the related services are rendered. 

Fair Value Accounting

In September 2006, the Financial Accounting Standards Board (“FASB”) issued FASB Statement No. 157, “Fair Value Measurements” (“FAS 157”). FAS 157 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles, and expands disclosures about fair value measurements. The provisions of FAS 157 were adopted January 1, 2008. In February 2008, the FASB staff issued Staff Position No. 157-2 “Effective Date of FASB Statement No. 157” (“FSP FAS 157-2”). FSP FAS 157-2 delayed the effective date of FAS 157 for nonfinancial assets and nonfinancial liabilities, except for items that are recognized or disclosed at fair value in the financial statements on a recurring basis (at least annually). The provisions of FSP FAS 157-2 are effective for the Company’s fiscal year beginning January 1, 2009. 

8

FAS 157 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FAS 157 are described below:

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

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

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

The following table sets forth the Company’s financial liabilities measured at fair value by level within the fair value hierarchy. As required by FAS 157, assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Company designates cash equivalents as Level 1. As of June 30, 2008, and December 31, 2007, the Company did not have any cash equivalents, therefore there were no assets measured at fair value.

	Fair Value at June 30, 2008
	Total		Level 1		Level 2		Level 3
Liabilities:
Conversion option liability	$	42,875	$	-	$	-	$	42,875

The Company’s conversion option liability is valued using pricing models and the Company generally uses similar models to value similar instruments. Where possible, the Company verifies the values produced by its pricing models to market prices. Valuation models require a variety of inputs, including contractual terms, market prices, yield curves, credit spreads, measures of volatility, and correlations of such inputs. These financial liabilities do not trade in liquid markets, and as such, model inputs cannot generally be verified and do involve significant management judgment. Such instruments are typically classified within Level 3 of the fair value hierarchy.

The table below sets forth a summary of changes in the fair value of the Company’s Level 3 financial liabilities (detachable warrants and conversion option liabilities) for the six months ended June 30, 2008.

Balance at beginning of period	$	13,311
Additions to derivative instruments		23,000
Change in fair value of conversion option		6,564
Balance at end of period	$	42,875

The total amount of the changes in fair value for the period was included in net loss as a result of changes in the Company’s stock price from December 31, 2007.

In February 2007, the FASB issued FASB Statement No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities” (“FAS 159”). FAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value, with the objective of improving financial reporting by mitigating volatility in reported earnings caused by measuring related assets and liabilities differently without having to apply complex hedge accounting provisions. The provisions of FAS 159 were adopted January 1, 2008. The Company did not elect the Fair Value Option for any of its financial assets or liabilities, and therefore, the adoption of FAS 159 had no impact on the Company’s consolidated financial position, results of operations or cash flows.

9

New Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement’s disclosure requirements are effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the future impacts and disclosures of this standard.

In May 2008, the FASB issued FAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“FAS 162”). FAS 162 identifies the sources of accounting generally accepted accounting principles in the United States. FAS 162 is effective sixty days following the SEC’s approval of PCAOB amendments to AU Section 411, “The Meaning of ‘Present fairly in conformity with generally accepted accounting principles’“. The Company is currently evaluating the potential impact, if any, of the adoption of FAS 162 on its consolidated financial statements.

NOTE 3 - GOING CONCERN

The accompanying unaudited condensed consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. As reflected in the accompanying unaudited condensed consolidated financial statements, the Company has a net loss of $2,421,436 for the six months ended June 30, 2008, and a working capital deficiency of $5,057,285 and a stockholders' deficiency of $4,993,897 at June 30, 2008. These factors raise substantial doubt about its ability to continue as a going concern. The ability of the Company to continue as a going concern is dependent on the Company's ability to raise additional funds and implement its business plan. The accompanying unaudited condensed consolidated financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

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

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

The Company's existence is dependent upon management's ability to develop profitable operations and resolve its liquidity problems. Management anticipates the Company will attain profitable status and improve its liquidity through the continued developing, marketing and selling of its services and additional equity investment in the Company. The accompanying financial statements do not include any adjustments that might result should the Company be unable to continue as a going concern.

10

NOTE 4 - CONVERTIBLE DEBT

Notes payable at June 30, 2008 and December 31, 2007:

	June 30,			December 31,
	2008 (unaudited)			2007
Denise Barbato, bearing interest at 10% per year, convertible into common stock   at $0.084 per share. The note is payable on December 31, 2008	$	—		$	34,723
Denise Barbato, bearing interest at 10% per year, convertible into common stock   at $0.084 per share. The notes are payable on December 31, 2008		—			696,500
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, convertible into common stock
At a 50% discount to market; interest rate 14%; maturity June 4, 2009		13,444			12,000
John Powers note, convertible into common stock
At a 50% discount to market; interest rate 14%; maturity March 17, 2009		8,000			12,000
John Powers note, convertible into common stock
At a 50% discount to market; interest rate 14%; maturity April 25, 2009		15,000			—
Total notes payable		75,444			782,223
Less: current portion		(75,444	)		(782,223	)
Balance notes payable (long term portion)	$	—		$	—

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 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 June 30, 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.

11

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.

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. We have 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.

The embedded conversion option related to the Powers note is accounted for under EITF issue No. 00-19. We have determined that the embedded conversion option is a derivative liability. Accordingly, the embedded conversion option will be marked to market through earnings at the end of each reporting period. The conversion option is valued using the Black-Scholes valuation model.

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 discount is being amortized over the term of the debt, through April 25, 2009.

The embedded conversion option related to the Powers note is accounted for under EITF issue No. 00-19. We have determined that the embedded conversion option is a derivative liability. Accordingly, the embedded conversion option will be marked to market through earnings at the end of each reporting period. The conversion option is valued using the Black-Scholes valuation model.

For the three months ended June 30, 2008 and 2007, the Company reflected a charge of $4,400 and $31,670, respectively, representing the change in the value of our embedded conversion options during the periods.

For the six months ended June 30, 2008 and 2007, the Company reflected a charge of $6,564 and $72,760, respectively, representing the change in the value of our embedded conversion options during the periods.

For the three months ended June 30, 2008 and 2007, the Company reflected a charge of $183,584 and $134,476, respectively, representing the amortization of debt discount as interest expense during the periods.

For the six months ended June 30, 2008 and 2007, the Company reflected a charge of $428,174 and $154,107, respectively, representing the amortization of debt discount as interest expense during the periods.

NOTE5- 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 June 30, 2008 and December 31, 2007 and 2006, the Company has issued and outstanding 93,665,981 and 73,734,095 shares of common stock, respectively.

During the six months ended June 30, 2008 the Company issued an aggregate of 1,495,440 shares of common stock, valued at $477,418, for consulting services.

During the six months ended June 30, 2008 the Company issued 1,299,447 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.

12

During April 2008 we issued 865,476 shares to Denise Barbato for a price of $72,700. At June 30 we had not received payment for these shares and the receivable is recorded as a deduction from stockholders’ equity at June 30, 2008.

During the six months ended June 30, 2008 the Company issued 11,021,524 shares of common stock as payment of $925,808 of principal and interest due to Denise Barbato.

During the six months ended June 30, 2007 the Company issued an aggregate of 2,432,665 shares of common stock, valued at $1,536,670, for consulting services.

13

During the six months ended June 30, 2007 the Company issued 74,718 shares as payment of expenses accrued at December 31, 2006 in the amount of $56,350

During January 2007 the Company issued 2,125,000 shares of common stock as payment of $178,500 of principal and interest due to Denise Barbato.

On June 20, 2007 the Company issued 2,000,000 shares of common stock as payment of $147,601 of principle and $20,399 of accrued interest to Denise Barbato.

During March 2007 the Company issued 25,000 shares of common stock as payment of $11,395 of principle and interest due to Long Lane Capital.

14

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

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

Business Overview

In July 2007, The Board of Directors elected to focus the company exclusively on the production of synthetic fuels. All other Nuclear Solutions business units including those in technology development are being suspended while the company focuses its resources on developing the business objectives of its wholly owned subsidiary Fuel Frontiers, Inc.

As previously disclosed in an 8-K filing, on July 23, 2008, Jack Young, 78, Vice President of Nuclear Solutions, Inc. and President of our subsidiary, Fuel Frontiers, Inc., tendered his resignation from both executive officer positions. He did not provide any details surrounding the reason for his resignation. Subsequently, on July 24, 2008, the board of directors appointed David C. Maland, 52, to succeed Mr. Young as President of Future Fuels, Inc. (FFI). Mr. Maland has been an independent business consultant for the last five years.

On August 4, 2008 The Company announced the appointment of Major General Lincoln Jones, III (USA Ret.), Mr. Dick Westfahl, and Mr. James McCulloch to a transitional advisory committee formed to identify and recommend candidates with a petroleum industry background for the position of President and CEO as well as other key senior management positions. In addition, this committee will make recommendations for guiding and financing the development of the company’s proposed coal-to-diesel projects in Kentucky.

The transitional advisory committee reports to the Board of Directors and will provide guidance, advice, and planning assistance for the company’s coal-to-diesel projects and future projects to produce synthetic diesel from coal and other feedstocks, such as oil refinery waste, petroleum coke, and scrap tires.

Each member of the transitional advisory committee will serve for a term of six months and will be compensated with 600,000 shares of Nuclear Solutions, Inc. common stock.

Major General Lincoln Jones is Chairman of Worldwide Strategic Partners, Inc., an energy consulting company. He was recently appointed to the Board of Directors of Global Resource Corporation, a publicly traded company that developed microwave technology for alternative fuel use. Major Jones retired from the Army as Deputy Commanding General U.S. Army V Corps, Germany where he was Deputy to the Former Secretary of State General Colin Powell. Following his Army career, General Jones was a key executive at Enron where he served as President of Enron Power Corp. (1991-98); Vice Chairman, Enron Europe (1996-98); and President, Enron Engineering & Construction (1993-96). During that time, he developed sixteen and operated eighteen power plants throughout the world. Since retiring from Enron in 1998, he has acted as a consultant for energy, military, and geopolitical issues.

Mr. Dick Westfahl is a graduate of the U. S. Naval Academy, Annapolis, Maryland and the U.S. Naval Postgraduate School in Monterey, California with an M.S. in Oceanography. Mr. Westfahl has served as Managing Director of Enron Engineering and Construction Company (EECC) from 1997 to 2001. In this capacity he also served as Executive Vice President of National Energy Production Company (NEPCO). Prior to that position he was President of Raytheon Environmental Services Company, a subsidiary of Raytheon Engineers & Constructors Company; Regional Director of Business Development for Harding Lawson Associates, an environmental engineering and consulting firm; and Vice President-Deputy Manager of Stone & Webster Engineering Corporation. Mr. Westfahl is also an Executive Energy Consultant to Worldwide Strategic Partners since 2005, and is also currently President of Worldwide Capital Partners II, an energy consulting company. Mr. Westfahl is a retired U.S. Naval Officer with experience in various leadership positions for the U.S. Navy, including that of Commanding Officer of a nuclear submarine.

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Mr. James McCulloch graduated from Tulane University in 1974 with a B.A. in Political Science, and from Tulane University School of Law in 1977 with a J.D. degree. He has been a frequent author and speaker on legal and insurance issues. Mr. McCulloch retired from Global Santa Fe Corporation, an international offshore drilling and energy services company, in December 2007 consequent with that company's merger with Transocean Corporation.  At the time of his retirement he served as Senior Vice President and General Counsel, an office to which he had been appointed in 1999, and had responsibility for all legal and risk management functions of the organization. Mr. McCulloch currently also serves as an advisory board member of Sunland Construction, Inc., a privately held company engaged in the construction of natural gas pipelines and the provision of complementary services to energy customers in the U.S.

Production of Ultra-Clean Synthetic Fuels through our subsidiary Fuel Frontiers, 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 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 ultraclean 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 natural gas or petroleum coke, as opposed to other approaches which must lock in a certain type of homogeneous feedstock such as natural gas or coal by themselves. Our technical approach involves the use of a low-emission plasma processing system to convert the waste materials into synthesis gas which is then converted into a liquid fuel.

Currently, we are focusing our efforts in the state of Kentucky, Muhlenberg County for our first coal to ultraclean diesel production facility. Over the next twelve months, we anticipate raising additional capital through debt, grants or equity financing to fund our development efforts in the state of Kentucky.

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 are working with Westinghouse Plasma Corporation and Shaw Group, Energy & Chemicals for design engineering, procurement, construction, and production operations for our renewable fuel projects currently in the planning stages. As a matter of policy and our business model, we intend to outsource engineering, procurement, construction as well as daily facility management and operations of any future facilities to qualified and experienced providers.

System Overview

The FFI approach for the production of ultra-clean diesel occurs in two stages. In the first stage the feedstock material is fed into a plasma processing system such as the Westinghouse Plasma Gasifier (WPG) which transforms the feedstock material into synthesis gas, which is composed of carbon, hydrogen and oxygen. The heart of Westinghouse’s Plasma Gasifier contains a plasma field that reaches temperatures up to 30,000 degrees Centigrade. The plasma breaks down feedstock materials--such as waste coal, used tires, wood wastes, raw sewage, municipal solid wastes, biomass, low-grade waste-coal, and other agricultural by-products--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 waste 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.

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In July 2008, the company was informed by Kentucky officials associated with Muhlenberg County that the county allocated $625,000 from its coal severance fund towards engineering and development for our proposed Coal-to-Ultra-Clean Diesel production facility in Muhlenberg County, Kentucky.

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 through the underwriting of the bond authorization for which it has been approved. 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 or may not result in substantial dilution, and/or increase the company's indebtedness.

Results of Operations

REVENUES: The Company reported revenues of $100,000 from our existing technology license agreement, for the six months ended June 30, 2007 as compared with revenues from continuing operations of $0 for the six months ended June 30, 2008. The increase in revenues is attributable to our policy of recognizing revenues on a cash basis. During the second quarter of 2007, we received and recognized $0 in revenue in the three months ended June 30, 2007.

TOTAL COSTS AND EXPENSES: Total costs and expenses from continuing operations increased from $2,017,227 for the six months ended June 30, 2007 to $1,976,894 for the six months ended June 30, 2008. The principal reason for this decrease was due to a decrease in consulting fees, and an increase in executive compensation.

OPERATING EXPENSES: Operating expenses from continuing operations increased from $2,017,227 for the six months ended June 30, 2007 to $1,976,894 for the six months ended June 30, 2007. This decrease was primarily due to a decrease in consulting fees and an increase in Legal as stated above. Depreciation expense decreased for the first six months of 2008 versus the first six months of 2007, decreasing from $3,324 for the six months ended June 30, 2007 to $2086, for the six months ended June 30, 2007. This slight decrease reflects no significant increase or decrease in depreciable assets for the respective periods.

INTEREST EXPENSE: Interest expense increased from $200,936 for the six months ended June 30, 2007 to $437,978 for the six months ended June 30, 2008. This increase is due primarily to increased debt to finance company operations.

GENERAL AND ADMINISTRATIVE: General & Administrative expenses increased by $28,148 during the six months ended June 30, 2008 to a total amount of $109,045 as compared to $80,897 for the six months ended June 30, 2007. The increase was due to increased travel and general business expenses.

NET LOSS: The Company incurred a net loss of (2,421,436) for the six months ended June 30, 2008, compared with a net loss of ($2,190,783) for the three months ended June 30, 2007, which reflects a year-to-year increase in the amount of loss for the period of $230,653. The principal reason for this increase was due to incurring more operating expenses as a result of increased business development activities.

LIQUIDITY AND CAPITAL RESOURCES:

As of June 30, 2008, we had a working capital deficit of $5,057,285 which compares to a working capital deficit of $ 5,130,196 as of June 30, 2007. As a result of our operating losses for the three month period ended June 31, 2008, we generated a cash flow deficit of $370,814 from operating activities. Cash flows used in investing activities was $0 during the period. Cash flows provided by financing activities were $208,000 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 capital in order to provide the necessary working capital. There is no guarantee that we will be successful in raising the funds required. We intend to use the proceeds derived from revenues or financing to pay salaries, and general and administrative expenses to maintain the core operations of the company.

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

New Accounting Pronouncements

In March 2008, the FASB issued SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities,” which changes the disclosure requirements for derivative instruments and hedging activities. SFAS No. 161 requires enhanced disclosures about (a) how and why an entity uses derivative instruments, (b) how derivative instruments and related hedged items are accounted for under SFAS No. 133, “Accounting for Derivative Instruments and Hedging Activities” and its related interpretations, and (c) how derivative instruments and related hedged items affect an entity’s financial position, financial performance, and cash flows. This statement’s disclosure requirements are effective for fiscal years and interim periods beginning after November 15, 2008. The Company is currently evaluating the future impacts and disclosures of this standard.

In May 2008, the FASB issued FAS No. 162 “The Hierarchy of Generally Accepted Accounting Principles” (“FAS 162”). FAS 162 identifies the sources of accounting generally accepted accounting principles in the United States. FAS 162 is effective sixty days following the SEC’s approval of PCAOB amendments to AU Section 411, “The Meaning of ‘Present fairly in conformity with generally accepted accounting principles’“. The Company is currently evaluating the potential impact, if any, of the adoption of FAS 162 on its consolidated financial statements.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Cash and Cash Equivalents

We have historically invested our cash and cash equivalents in short-term, fixed rate, highly rated and highly liquid instruments which are reinvested when they mature throughout the year. Although our existing investments are not considered at risk with respect to changes in interest rates or markets for these instruments, our rate of return on short-term investments could be affected at the time of reinvestment as a result of intervening events. As of June 30, 2008, we had cash and cash equivalents aggregated $30,168

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.

Item 4. Controls and Procedures.

Evaluation of and Report on Internal Control over Financial Reporting

The Company carried out, under the supervision and with the participation of the Company’s management, including the Company’s Chief Executive Officer and the Company’s Chief Financial Officer, an evaluation of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities and Exchange Act of 1934, as amended).  Based on their evaluation, the Company’s Chief Executive Officer and its Chief Financial Officer concluded that, as of June 30, 2008, the Company’s disclosure controls and procedures were not effective because of the material weakness identified as of such date discussed below.  Notwithstanding, the existence of the material weakness described below, management has concluded that the financial statements in this Form 10-Q fairly present, in all material respects, the Company’s financial position, results of operations and cash flows for the periods and dates presented.

Management is responsible for establishing and maintaining adequate internal control over financial reporting of the Company. Management, with the participation of our principal executive officer and principal financial officer, has evaluated the effectiveness of our internal control over financial reporting as of June 30, 2008 based on the criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission. Based on that evaluation, they concluded that, during the period covered by this report, such internal controls and procedures were not effective to detect the inappropriate application of US GAAP rules as more fully described below. This was due to deficiencies that existed in the design or operation of our internal control over financial reporting that adversely affected our internal controls and that may be considered to be material weaknesses.

The matters involving internal controls and procedures that the Company’s management considered to be material weaknesses under the standards of the Public Company Accounting Oversight Board were:

As defined by Auditing Standard No. 5, "An Audit of Internal Control Over Financial Reporting that is Integrated with an Audit of Financial Statements and Related Independence Rule and Conforming Amendments," established by the Public Company Accounting Oversight Board ("PCAOB"), a material weakness is a deficiency or combination of deficiencies that results more than a remote likelihood that a material misstatement of annual or interim financial statements will not be prevented or detected. In connection with the assessment described above, management identified the following control deficiencies that represent material weaknesses as of April 30, 2008:

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(1) Lack of an independent audit committee. We do not have an independent audit committee. We have never named an audit committee financial expert. It is our intension to establish an audit committee of the board and obtain a financial expert on our audit committee when we have sufficient capital resources and working capital to attract qualified independent directors and to maintain such a committee.

(2) Inadequate staffing and supervision within our bookkeeping operations. The relatively small number of employees who are responsible for bookkeeping functions prevents us from segregating duties within our internal control system. The inadequate segregation of duties is a weakness because it could lead to the untimely identification and resolution of accounting and disclosure matters or could lead to a failure to perform timely and effective reviews. During the quarter ending June 30, 2008, we had only three persons, two of which were executive officers, that performed nearly all aspects of our financial reporting process, including, but not limited to, access to the underlying accounting records and systems, the ability to post and record journal entries and responsibility for the preparation of the financial statements. This provides for a lack of review over the financial reporting process that may result in a failure to detect errors in spreadsheets, calculations, or assumptions used to compile the financial statements and related disclosures as filed with the SEC.

(3) Insufficient number of independent directors. At the present time, our Board of Directors does not consist of a majority of independent directors, a factor that is counter to corporate governance practices as set forth by the rules of various stock exchanges.

Our management determined that these deficiencies described above constituted material weaknesses. Due to a lack of financial and personnel resources, we are not able to, and do not intend to, immediately take any action to remediate these material weaknesses. We will not be able to do so until, if ever, we acquire sufficient financing and staff to do so. We will implement further controls as circumstances, cash flow, and working capital permit. Notwithstanding the assessment that our ICFR was not effective and that there were material weaknesses as identified in this report, we believe that our consolidated financial statements contained in our Quarterly Report on form 10-Q for the fiscal quarter ending June 30, 2008, fairly present our financial position, results of operations and cash flows for the years covered thereby in all material respects.

This 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.

PART II-OTHER INFORMATION

Item 1. Legal Proceedings.

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

Item 1A. Risk Factors

There have been no material changes from risk factors disclosed in our annual report on Form 10-K for the year ended December 31, 2007.

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

On June 10, 2008, The Company issued 5,250,000 common shares in exchange for full satisfaction of a debt of $542,987 owed and payable to I.P. Technology Holding, Inc. pursuant to the IPTH contract modification agreement dated 1-10-06.

We believe the securities issued above were issued in a private transaction pursuant to Section 4(2) of the Securities Act of 1933, as amended, (the “Securities Act”). These shares are considered restricted securities and may not be publicly resold unless registered for resale with appropriate governmental agencies or unless exempt from any applicable registration requirements.

Item 3. Defaults upon Senior Securities. None.

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

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

Item 5. Other Information.

None.

Item 6. Exhibits

(a) Exhibits

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

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SIGNATURES

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

Dated August 15, 2008

NUCLEAR SOLUTIONS, INC.

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

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