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**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION**

**Washington, D.C. 20549**

**______________________**

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**FORM 10-Q**

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**[ X ] Quarterly Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

For the quarterly period ended March 31, 2013

 

OR

 

**[ ] Transition Report Pursuant to Section 13 or 15(d) of theSecurities Exchange Act of 1934**

 

For the transition period from ________ to ___________

 

Commission file number: 333-14477

 

**FUELSTREAM, INC.**

(Name of Small Business Issuer in Its Charter)

 

 

 

 

 

 

 

 

 

 

Indicate by check mark whether the registrant(1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the past 12months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filingrequirements for the past 90 days. Yes [X] No [ ]

 

Indicate by check markwhether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File requiredto be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months(or for such shorter period that the registrant was required to submit and post such files). Yes [X] No []

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Indicate by check mark whether the registrantis a large accelerated filer, an accelerated filer, non-accelerated filer, or a smaller reporting company. See definition of “largeaccelerated filer,”“accelerated filer,” and “smaller reporting company in Rule 12b-2 of the Exchange Act.(Check one):

 

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Indicate by check mark whether the registrantis a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [ ] No [X]

 

**APPLICABLE ONLY TO ISSUERS INVOLVED IN BANKRUPTCY**

**PROCEEDINGS DURING THE PRECEDING FIVE YEARS**

 

Check whether the registrant has filed all documentsand reports required to be filed by Sections 12, 13, or 15(d) of the Exchange Act of 1934 after the distribution of securitiesunder a plan confirmed by a court. Yes [ ] No [ ]

 

**APPLICABLE ONLY TO CORPORATE ISSUERS**

 

State the number of shares outstanding of eachof the issuer’s classes of common equity, as of the latest practicable date. As of May 15, 2013, the Company had outstanding15,266,799 shares of common stock, par value $0.0001 per share.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

**PARTI**

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**FINANCIALINFORMATION**

 

TheCondensed Consolidated Financial Statements of the Company are prepared as ofMarch 31, 2013. 

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**ITEM1.	FINANCIAL STATEMENTS REQUIRED BY FORM 10-Q**

 

 

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**FUELSTREAM INC. AND SUBSIDIARIES**

Notes to the Unaudited Condensed ConsolidatedFinancial Statements

March 31, 2013

 

NOTE 1 -	SIGNIFICANT ACCOUNTING POLICIES AND NATURE OFOPERATIONS

 

*Basis of Presentation*

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The accompanying unaudited condensed consolidatedfinancial statements have been prepared by the Company pursuant to the rules and regulations of the Securities and Exchange Commission.Certain information and footnote disclosures normally included in financial statements prepared in accordance with U.S. generallyaccepted accounting principles have been condensed or omitted in accordance with such rules and regulations. The information furnishedin the interim consolidated financial statements includes normal recurring adjustments and reflects all adjustments, which, inthe opinion of management, are necessary for a fair presentation of such financial statements. Although management believes thedisclosures and information presented are adequate to make the information not misleading, it is suggested that these interim consolidatedfinancial statements be read in conjunction with the Company’s audited financial statements and notes thereto included inits Form 10-K filed on April 16, 2013. Operating results for the three months ended March 31, 2013 are not necessarily indicativeof the results to be expected for the year ending December 31, 2013. 	

 

*Organization and Nature of Operation*

 

Fuelstream, Inc. (the“Company”) was incorporated under the laws of the State of Delaware on July 12, 1996 under the name of“Durwood, Inc.” From April 6, 1999 to April 9, 2010, the Company operated as a sports marketing firm underthe name of “Sportsnuts”Inc. On April 9, 2010, the Company changed its name to Fuelstream, Inc. and changedits business model to become a fuel transportation and logistics company.

 

On April 11, 2011, the Company enteredinto a joint venture agreement (“Joint Venture”) with Aviation Fuel International, Inc., a Florida corporation(“AFI”) and a purchaser and reseller of aviation fuel for commercial and private aircraft. The Joint Venturerequired the Company to contribute up to $200,000 in respect of supplying aviation fuel to various commercial aircraftvia tanker trucks which were intended to be acquired by the Joint Venture. The Company ultimately contributed $183,500 inconnection with the Joint Venture. On January 18, 2012, the Joint Venture was terminated upon completion of the acquisitionof AFI, which is now a wholly-owned subsidiary of the Company (refer to note 3).

 

On May 10, 2012, the Company alongwith two partners formed AFI South Africa LLC (“AFI SA”),immediately the Company purchased shares of the otherpartners to become 100% owner of AFI SA (refer to note 3). AFI SA was effective as Limited Liability Company under the Act bythe filing organization with the office of the Secretary of State of Florida on May 11, 2012. The Company has been organizedfor the purpose of partnering with Global Aviation for brokering the sale of Fuel for aircraft in South Africa.

 

*Use of Estimates*

 

The preparation of unaudited condensedconsolidated financial statements in conformity with accounting principles generally accepted in the United States of America requiresmanagement to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingentassets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reportingperiod. Actual results could differ from those estimates.

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*Revenue Recognition*

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The Company recognizes revenue inaccordance with Accounting Standards Codification subtopic 605-10,Revenue Recognition (“ASC 605-10”)which requires that four basic criteria must be met before revenue can be recognized: (1) persuasive evidence of anarrangement exists; (2) delivery has occurred; (3) the selling price is fixed and determinable; and (4) collectability isreasonably assured. Determination of criteria (3) and (4) are based on management's judgments regarding the fixed natureof the selling prices of the products delivered and the collectability of those amounts.

 

**FUELSTREAM INC. AND SUBSIDIARIES**

Notes to the Unaudited Condensed ConsolidatedFinancial Statements

March 31, 2013

 

NOTE 1 -	SIGNIFICANT ACCOUNTING POLICIES AND NATURE OFOPERATIONS (Continued)

 

ASC605-10 incorporates AccountingStandards Codification subtopic 605-25, Multiple-Element Arraignments(“ASC 605-25”). ASC 605-25 addressesaccounting for arrangements that may involve the delivery or performance of multiple products, services and/or rights to useassets.

 

*Principles of Consolidation*

 

The consolidated financial statements have been prepared in accordancewith accounting principles generally accepted in the United States (“US GAAP”) and include the Company and its wholly-ownedsubsidiaries. All inter-company accounts and transactions have been eliminated

 

*Cash*

 

The Company considers cash to consist of cash on hand and temporaryinvestments having an original maturity of 90 days or less that are readily convertible into cash.

 

*Income Taxes*

 

The Company has adopted Accounting StandardsCodification subtopic 740-10, Income Taxes (“ASC 740-10”) which requires the recognition of deferred tax liabilitiesand assets for the expected future tax consequences of events that have been included in the financial statement or tax returns.Under this method, deferred tax liabilities and assets are determined based on the difference between financial statements andtax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.Temporary differences between taxable income reported for financial reporting purposes and income tax purposes consist primarilyof timing differences such as deferred officers’ compensation and stock based compensation accounting.

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*Net Loss per share*

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The Company complies with accounting anddisclosure requirements of FASB ASC 260, “Earnings Per Share.” Net loss per ordinary share is computed by dividingnet loss applicable to ordinary shareholders by the weighted average number of ordinary shares outstanding for the period. Commonshare equivalents are excluded from the diluted earnings (loss) per share computation if their effect is anti-dilutive.

 

*Stock based compensation*

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The Company follows AccountingStandards Codification subtopic 718-10, Compensation (“ASC 718-10”) which requires that all share-based paymentsto both employees and non-employees be recognized in the income statement based on their fair values.

 

Stock based compensation recorded in the unaudited condensed consolidatedfinancial statements for the three months ended March 31, 2013 and 2012 were $145,670 and $-0- respectively.

 

*Financial Instruments*

 

On January 1, 2008, the Company adopted FASB ASC 820-10-50, “FairValue Measurements.” This guidance defines fair value, establishes a three-level valuation hierarchy for disclosures of fairvalue measurement and enhances disclosure requirements for fair value measures. The three levels are defined as follows:

 

- Level1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilitiesinactive markets.

 

 

**FUELSTREAM INC. AND SUBSIDIARIES**

Notes to the Unaudited Condensed ConsolidatedFinancial Statements

March 31, 2013

 

NOTE 1 -	SIGNIFICANT ACCOUNTING POLICIES AND NATURE OFOPERATIONS (Continued)

 

- Level 2 inputs to thevaluation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that areobservable for the asset or liability, either directly or indirectly, for substantially the full term of the financialinstrument.

 

- Level 3 inputs to valuation methodologyare unobservable and significant to the fair measurement.

 

Thecarrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilitieseach qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time betweenthe origination of such instruments and their expected realization and their current market rate of interest.

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*Recently Accountingpronouncements*

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The Company has adopted all applicable recently-issuedaccounting pronouncements.  The adoption of the accounting pronouncements, including any not yet effective, is not anticipatedto have a material effect on the financial position or results of operations of the Company.

 

*Reclassification*

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Certain reclassifications have been madeto prior periods' data to conform to the current period's presentation. These reclassifications had no effect on reported incomeor losses

 

NOTE 2 -	GOING CONCERN CONSIDERATIONS

 

Theaccompanying unaudited condensed consolidated financial statements have been prepared using generally accepted accountingprinciples applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in thenormal course of business. As reported in its Annual Report on Form 10-K for the year ended December 31, 2012, the Companyhas an accumulated deficit of $51,842,805 from inception of the Company through December 31, 2012. The accumulated deficit asof March 31, 2013 was $52,422,066 and the total stockholders’ deficit at March 31, 2013 was $5,779,414 and hadworking capital deficit (current liabilities minus current assets) of $5,343,526, continued losses and negative cash flowsfrom operations. These factors combined, raise substantial doubt about the Company’s ability to continue as a goingconcern. Management’s plans to address and alleviate these concerns are as follows:

 

The Company’s management continuesto develop a strategy of exploring all options available to it so that it can develop successful operations and have sufficientfunds, therefore, as to be able to operate over the next twelve months. The Company is attempting to improve these conditions byway of financial assistance through issuances of additional equity and by generating revenues by brokering the sale of aircraftfuel. No assurance can be given that funds will be available, or, if available, that it will be on terms deemed satisfactory tomanagement.

 

The ability of the Company to continue asa going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventuallyattain profitable operations. The accompanying condensed consolidated financial statements do not include any adjustments relatingto the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might resultfrom the outcome of these uncertainties.

 

 

**FUELSTREAM INC. AND SUBSIDIARIES**

Notes to the Unaudited Condensed ConsolidatedFinancial Statements

March 31, 2013

 

NOTE 3 -	ACQUISITION

On January 18, 2012 the Companycompleted the acquisition of 100% of the equity of Aviation Fuel International, Inc., a Florida corporation (“AFI”).AFI is a purchaser and reseller of aviation fuel for commercial and private aircraft. The consideration for the acquisition ofAFI consisted of 7,400,000 shares of restricted common stock and a note payable in the amount of $1,000,000.

NOTE 4 -	LOSS CONTINGENCIES

The Company is involved with variouslegal proceedings as described in Part II Item I of this Form 10-Q. The Company has evaluated these contingencies per the requirementsof ASC 450-20 (previously SFAS 5, “Accounting for Contingencies”) and determined that the likelihood of loss from theseproceedings are remote.

 

NOTE 5- 	ACCOUNTS RECEIVABLE

 

Accounts receivable at March 31, 2013 and December31, 2012 are as follow:

 

 

The Company was involved in disputes with the aboveaccounts receivable and has filed a lawsuit.

NOTE 6 -	ACCOUNTS PAYABLE AND ACCRUED EXPENSES

The accounts payable of $898,151, as ofMarch 31, 2013, includes two parties who are seeking motion for entry for final garnishment judgment, The Company has assumedthese two accounts payable with the acquisition of AFI (refer to note 3). Per court order interest is calculated at rate of6% per annum on $325,138 on one of the accounts payable and 18% on $211,471 of the second accounts payable. Accrued interestof $79,826 has been accounted and accrued in accrued expenses.

 

**FUELSTREAM INC. AND SUBSIDIARIES**

Notes to the Unaudited Condensed ConsolidatedFinancial Statements

March 31, 2013

 

NOTE 7 - 	NOTES PAYABLE