FLST FuelStream Inc (CE)

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

 

Washington, D.C. 20549

 

FORM 10-K

 

[X]		ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
		For the year ended December 31, 2014
[   ]		TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from              to

Commission file number: 333-14477

 

FUELSTREAM, INC.

(Exact name of registrant as specified in its charter)

 

Delaware		87-0561426
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)
510 Shotgun Road, Suite 110 Fort Lauderdale, Florida		33326
(Address of principal executive offices)		(Zip Code)

 

(954) 423-5345

(Registrant’s telephone number, including area code)

 

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

 

None		N/A
Title of each class		Name of each exchange on which registered

 

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

 

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

 

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

 

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

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Sections 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 ☒  No ☐

 

 

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to 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 ☐  No ☒

 

Indicate by checkmark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of 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. ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐		Accelerated filer ☐
Non-accelerated filer  ☐		Smaller reporting company ☒

 

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

 

Based on the closing price of our common stock as listed on the OTC Bulletin Board, the aggregate market value of the common stock of Fuelstream, Inc. held by non-affiliates as of June 30, 2014 was $381,872.

 

As of May 22, 2015, we had 1,938,172,724 shares of common stock outstanding.

 

DOCUMENTS INCORPORATED BY REFERENCE:  None.

 

 

 

 

TABLE OF CONTENTS
PART I			5
ITEM 1.	BUSINESS		5
ITEM 1A.	RISK FACTORS		7
ITEM 1B.	UNRESOLVED STAFF COMMENTS		7
ITEM 2.	PROPERTIES		7
ITEM 3.	LEGAL PROCEEDINGS		7
ITEM 4.	MINE SAFETY DISCLOSURES		8
PART II			9
ITEM 5.	MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUERS PURCHASES OF EQUITY SECURITIES		9
ITEM 6.	SELECTED FINANCIAL DATA		27
ITEM 7.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS		27
ITEM 7A.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK		32
ITEM 8.	FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA		33
ITEM 9.	CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE		92
ITEM 9A.	CONTROLS AND PROCEDURES		92
ITEM 9B.	OTHER INFORMATION		93
PART III			94
ITEM 10.	DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE		94
ITEM 11.	EXECUTIVE COMPENSATION		97
ITEM 12.	SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS		99
ITEM 13.	CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE		104
ITEM 14.	PRINCIPAL ACCOUNTANT FEES AND SERVICES		105
PART IV			105
ITEM 15.	EXHIBITS AND FINANCIAL STATEMENT SCHEDULES		105
SIGNATURES			106

 

 

 

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

Please see the note under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation,” for a description of special factors potentially affecting forward-looking statements included in this report.

 

PART I

 

ITEM 1. BUSINESS.

 

Company History

 

Fuelstream, Inc. (hereafter, “we”, “our”, “us”, “Fuelstream”, or the “Company”) was incorporated in the State of Delaware on July 12, 1996. Prior to April 2010, we had operated under the name of “SportsNuts, Inc.” and had been primarily engaged in sports marketing and management. In April 2010, we underwent a reorganization to change our management and business model as further described herein, and changed the Company’s name to “Fuelstream, Inc.” On April 11, 2011, we entered into a joint venture agreement with Aviation Fuel International, Inc., a Florida corporation (“AFI”) and a purchaser and reseller of aviation fuel for commercial and private aircraft. On January 18, 2012, the joint venture was terminated upon completion of the acquisition of AFI, which is now a wholly-owned subsidiary of the Company. You can learn more about us at our website at www.thefuelstream.com. Our website, however, does not constitute a part of this report.

 

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

 

Operational Overview

Fuelstream is an in-wing and on-location supplier and distributor of aviation fuel to corporate, commercial, military, and privately-owned aircraft throughout the world. We also provide a variety of ground services either directly or through our affiliates, including concierge services, passenger and baggage handling, landing rights, coordination with local aviation authorities, aircraft maintenance services, catering, cabin cleaning, customs approvals, and third-party invoice reconciliation. Our personnel assist customers in flight planning and aircraft routing aircraft, obtaining permits, arranging overflies, and flight follow services. Our principal sources of revenues are from the gross selling price of fuel delivery contracts. Expenses which comprise the costs of goods sold include the acquisition price of fuel transported, as well as operational and staffing costs of the trucks and other vehicles used for delivery. General and administrative expenses have been comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling/marketing wages and benefits; advertising and promotional expenses; travel and other miscellaneous related expenses.

 

On May 10, 2012, we entered into a joint venture with Global Aviation International Limited (“Global”) and Summit Trading Limited (“Summit”) to provide aircraft fuel to Global clients and Global’s own aircraft fleet on a worldwide basis. Global is an international Air Transport Organization whose activities cover acquisition, refurbishment, heavy maintenance, leasing and chartering of aircraft, primarily throughout South Africa. Global also owns and leases its own commercial aircraft. As part of its obligations under the joint venture, Global is required to provide us office space, related equipment and supplies in its Johannesburg, South Africa headquarters, as well as access to all Global clients worldwide. On September 10, 2012, Global and Summit converted its interest in the joint venture into 1,547,662 and 515,888 shares of our common stock. In addition to Global’s own fleet, our agreement

 

with Global has enabled us to provide fuel to six new airline clients, as well as to aircraft of the South African government. We intend to expand our business with Global and add additional carriers and transportation organizations as regular clientele as we grow and develop our business.

 

Because we have incurred losses, income tax expenses are immaterial. No tax benefits have been booked related to operating loss carryforwards, given the uncertainty of the Company being able to utilize such loss carryforwards in future years. We anticipate incurring additional losses during the coming year.

 

Market

 

We believe that air transportation will play a substantial role in the growth of worldwide trade, particularly in less developed regions that do not have a cost-effective means of reaching deep water shipping ports or who are seeking to expand same-day access to international trading markets. Domestically, aircraft utilization, whether for passengers, freight, or corporate use, is closely correlated with the strength and growth of the U.S. economy. According to the FAA Aerospace Forecast for Fiscal Years 2006 to 2017, the U.S. economy will grow at an average annual rate of 3% for the next ten years. The world economy is expected to increase at an average annual rate of 3.1% over the same period. Long-term economic growth is predicted to be strong in Latin America and the Asia/Pacific regions with 3.8% and 3.6% average annual growth, respectively. More impressive is the forecasted growth for China, with a population of 1.3 billion, and India, with a population of 1.1 billion. Each of these country’s economies is expected to grow at an average annual rate of 5.8%. The FAA predicts that airline passenger growth in these regions will grow the fastest at 7.0% and 4.9% respectively. Closer to home, the study forecasts that passenger growth in the Atlantic markets will grow at 4.3% and Canadian trans-boarder markets will grow at 3.7% annually. U.S. commercial air cargo revenue ton-miles (RTM’s) are expected to grow at an average annual rate of 5.2% through 2017. The FAA forecasts jet fuel consumption to increase to an average annual rate of 3.7% for air carriers and 8.6% for general aviation for a weighted average total of 4.0% annually through the year 2017.

 

Competition

 

The fuel supply and logistics business is highly competitive. Our competitors and potential competitors include major oil companies, fuel resellers, fuel card companies, and independent fuel distributors of varying sizes. Most of our competitors have greater resources than we do and therefore have greater leverage with respect to securing long-term fuel delivery and supply contracts. We believe a high degree of competition in this industry will continue for the foreseeable future.

 

We believe that we can distinguish Fuelstream from our competition by providing precise accounting, exceptional customer service, comprehensive tax management, and competitive pricing. While we intend to offer some customers credit terms, in most cases the credit lines will be secured by corporate or personal guarantees, deposits, letters of credit or other bank instruments, and liens against fueled vehicles and aircraft.

 

Employees

 

As of December 31, 2014, we had six employees and used the services of various contract personnel from time to time. Although national unemployment rates remain high relative to historical averages, there exists a significant amount of competition for skilled personnel in the fuel delivery and logistics industry. Nevertheless, we expect to be able to attract and retain such additional employees as are necessary, commensurate with the anticipated future expansion of our business resulting from the acquisition of AFI described herein. Further, we expect to continue to use consultants, contract labor, attorneys and accountants as necessary.

 

Available Information

 

Fuelstream is subject to the information requirements of the Securities Exchange Act of 1934, as amended, and in accordance therewith files quarterly and annual reports, as well as other information with the Securities and Exchange Commission (“Commission”) under File No. 333-14477. Such reports and other information filed with the Commission can be inspected and copied at the public reference facilities maintained by the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates, and at various regional and district offices maintained by the Commission throughout the United States. Information about the operation of the Commission’s public reference facilities may be obtained by calling the Commission at 1-800-SEC-0330. The Commission also maintains a website at http://www.sec.gov that contains reports and other information regarding the Company and other registrants that file electronic reports and information with the Commission.

 

ITEM 1A. RISK FACTORS.

 

Since we are a smaller reporting company, we are not required to supply the information required by this Item 1A.

 

ITEM 1B. UNRESOLVED STAFF COMMENTS.

 

None.

 

ITEM 2. PROPERTIES.      

 

Our principal executive offices are located at 11650 South State Street, Suite 240, Draper, Utah 84020. We believe that our office facilities are suitable and adequate for our operations as currently conducted and contemplated.

 

ITEM 3. LEGAL PROCEEDINGS.

 

Ryan International Airlines. One of our subsidiaries, Aviation Fuel International ("AFI") is involved in disputes with two airlines: Ryan International Airlines, LLC ("Ryan") and Direct Air. Both aviation fuel customers litigation arise out of disputed amounts for the delivery of Jet Fuel. Disagreements between the parties resulted in both parties filing separate lawsuits in three actions. Ryan filed a cause of action in Case No. 09-57580, Ryan International Airlines, Inc. v. Aviation Flight Services, LLC (“AFS”) and Aviation Fuel International, Inc., (“AFI”), and sought recovery of $1,491,308.66 allegedly paid to AFS as pre-payment of aviation fuel and flight services under a contractual relationship between Ryan and AFS. AFI moved to dismiss the action, to which, Ryan has subsequently filed a notice of removal to the Federal District Court for the Northern District of Illinois, Bankruptcy Division Case No.: 12-80802. AFI filed an action for breach of contract for Ryan’s failure to pay certain Jet Fuel invoices for the delivery of fuel in the amount of $678,000; Aviation Fuel International v. Ryan International Airlines, Inc., a Kansas corporation, Wells Fargo Bank Northwest, Trustee N.A., a Utah corporation, RUBLOFF 757-MSN24794LLC, an Illinois limited liability company, RYAN 767 LLC, an Illinois limited liability company, AFT TRUST SUB I, a Delaware corporation, RYAN 767 N123 LLC, an Illinois limited liability company, and RUBLOFF 440 LLC, an Illinois corporation, Civil Action Case No. CACE 10-037788-04. AFI also filed the corresponding claims of liens under the FAA Aircraft Registration Branch, for each plane, registered and tail wing number listed therein. This action has also been recently noticed for been removal to the Federal District Court for the Northern District of Illinois, Bankruptcy Division

 

Case No.: 12-80802. In addition, as a result of Ryan’s filing a Federal Involuntary Bankruptcy Petition against Aviation Flight Services (“AFS”) on June 10, 2010, Case No.: 10-27313-JKO, (S.D. of Fla.), our subsidiary AFI, also filed and was discharged as a creditor in the amount of $269,000.

 

Southern Sky Air Tours, d/b/a Myrtle Beach Direct Air and Tours (Direct Air). On or about March 13, 2012, Southern Sky Air Tours, d/b/a Myrtle Beach Direct Air and Tours (“Direct Air”) ― a public charter operator ― ceased operations. Direct Air has subsequently filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Massachusetts (Worcester)(Case no. 12-40944). The Company currently has $122,000 in cash in escrow with Suntrust Bank, representing a partial payment by Direct Air for Fuel. This amount was unrecorded in the Company’s financial statements because it has been challenged by the debtor and has been sequestered by the bankruptcy court in the proceeding. This action is currently pending before the court, as it relates to the collection of the garnishment.

 

As a result of the non-payment for jet fuel by AFI customers, certain of AFI’s suppliers have filed actions that have resulted in judgment and garnishments, in the amount of $330,000. Most of these outstanding fuel delivery charges are secured, and being challenged through the Bankruptcy action through the lien filings by both the issuer and individual fuel providers. In addition, AFI incurred certain loan and debt obligations for which we are attempting to convert into our common stock.

 

Russell Adler. On January 11, 2013, Russell Adler, our former Chief Executive Officer, filed a cross-complaint against the Company, AFI, and other associated persons in the Seventeenth Judicial District Court, Broward County, Florida. Mr. Adler’s complaint alleges various causes of action, including indemnification from the Company in respect of litigation involving the Leyvas described above, damages for breach of Mr. Adler’s employment contract, fraud, unpaid legal fees, unjust enrichment, and quantum meruit. We believe Mr. Adler’s claims are without merit and intend to defend the same.

 

From time to time, we are also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with purchasers and suppliers of fuel. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon our financial condition or results of operations.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

Not Applicable.

 

 

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

Market Information

 

Our common stock is listed on the OTCQB under the symbol “FLST”. We had approximately 406 registered holders of our common stock as of December 31, 2014. Registered holders do not include those stockholders whose stock has been issued in street name. The last reported price for our common stock on April 13, 2015 was $0.0001 per share.

 

The following table reflects the high and low closing sales prices per share of our common stock during each calendar quarter as reported on the OTCQB, during the two fiscal years ended December 31, 2014:

 

		Price Range(1)
			High				Low
Fiscal 2014
Fourth quarter		$	0.0003			$	0
Third quarter		$	0.0031			$	0.0002
Second quarter		$	0.0158			$	0.0017
First quarter		$	0.066			$	0.012
Fiscal 2013
Fourth quarter		$	0.12			$	0.03
Third quarter		$	0.22			$	0.08
Second quarter		$	3.00			$	0.70
First quarter		$	3.25			$	1.21

 

____________________

(1)

The above quotations reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

 

Dividends and Distributions

 

We have not paid any cash dividends on our common stock since inception and do not anticipate paying cash dividends in the foreseeable future. We expect that that any future earnings will be retained for use in developing and/or expanding our business.

 

Sales of Unregistered Securities

 

On January 28, 2013, we issued an aggregate of 49,951 shares of common stock, valued at $82,419, to employees and consultants of the Company. Also on January 28, 2013, pursuant to our 2012 Equity Incentive Plan, we issued 150,000 common stock purchase options to each of our directors at an exercise price of $1.65 per share. The number of shares issued, at the time of such issuance, represented approximately 0.3% of the issued and outstanding shares of the Company.

 

On February 1, 2013, the Company issued a convertible debenture in the principal amount of $100,000 to Peak One.

 

On March 5, 2013, the Company issued a promissory note in the original principal amount of $7,500 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note is convertible at October 5, 2013 to common stock of the Company at a 40% discount to the average of the 3 lowest trading days in the 10 trading days previous to the conversion.

 

On May 31, 2013, the Company issued an aggregate of 254,000 shares of its common stock, valued at $304,800, to certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 1.6% of the issued and outstanding shares of the Company.

 

On June 10, 2013, the Company issued 45,454 shares of its common stock, valued at $30,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 0.2% of the issued and outstanding shares of the Company.

 

On July 1, 2013, the Company issued a promissory note in the original principal amount of $24,272 (“Note”) to a lender. The Note matures on April 1, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be convertible upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a conversion price equal at market price, or the lowest conversion price previously honored by the Company for any other debt conversion by an investor in 2013.

 

On July 11, 2013, the Company issued 266,134 shares of its common stock, valued at $40,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.7% of the issued and outstanding shares of the Company.

 

On July 16, 2013, the Company issued 448,028 shares of its common stock, valued at $25,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 2.82% of the issued and outstanding shares of the Company.

On July 29, 2013, the Company issued 806,451 shares of its common stock, valued at $15,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.95% of the issued and outstanding shares of the Company.

 

On August 1, 2013, the Company issued 786,163 shares of its common stock, valued at $10,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.6% of the issued and outstanding shares of the Company.

 

On August 2, 2013, the Company issued 864,779 shares of its common stock, valued at $11,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.83% of the issued and outstanding shares of the Company.

 

 

On August 6, 2013, the Company issued 75,000 shares of its common stock, valued at $4,500, to a consultant of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 0.4% of the issued and outstanding shares of the Company.

 

On August 8, 2013, the Company issued 300,000 shares of its common stock, valued at $3,816, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.5% of the issued and outstanding shares of the Company.

 

On August 9, 2013, the Company issued 300,000 shares of its common stock, valued at $3,816, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.56% of the issued and outstanding shares of the Company.

 

On August 12, 2013, the Company issued 264,779 shares of its common stock, valued at $3,368, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.36% of the issued and outstanding shares of the Company.

 

On July 19, 2013, the Company issued a promissory note in the original principal amount of $78,500 (“Note”) to a lender. The Note matures on April 22, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On August 13, 2013, the Company issued a promissory note in the original principal amount of $3,000 (“Note”) to a lender. The Note matures on February 13, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full.

 

On August 22, 2013, the Company issued an aggregate of 531,438 shares of its common stock, valued at $47,829, to certain employees and consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 2.7% of the issued and outstanding shares of the Company.

 

On August 22, 2013, the Company issued 2,017,036 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $137,985. The number of shares issued, at the time of such issuance, represented approximately 9.98% of the issued and outstanding shares of the Company.

 

On August 26, 2013, the Company issued a promissory note in the original principal amount of $53,000 (“Note”) to a lender. The Note matures on May 27, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

 

On August 29, 2013, the Company entered into a Settlement Agreement with a certain creditor and agreed to convert various loans and promissory notes in the collective amount of $933,000 into an aggregate of 5,480,000 shares of common stock of the Company. The number of shares issued, at the time of such issuance, represented approximately 23.06% of the issued and outstanding shares of the Company.

 

On October 1, 2013, the Company converted outstanding invoices of the Company in the aggregate amount of $211,254.30 to 2 promissory notes in the original principal amounts of $17,000, and $194,254.30 (the “Notes”) to two consultants of the Company. The Notes are due upon demand, and carry an interest rate of 10% per annum. The Notes at the election of the lender are convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On October 2, 2013, the Company recorded a $35,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial interest rate in the first 90 days of 0 percent, thereafter a one-time interest charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On October 4, 2013, the Company issued a promissory note in the original principal amount of $6,000 (“Note”) to a lender. The Note matures on November 4, 2013 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading days in the ten trading days previous to the conversion.

 

On October 5, 2013, the Company issued a promissory note in the original principal amount of $28,500 (“Note”) to a lender. The Note carries an interest rate of 8% per annum.

 

On October 13, 2013, the Company issued a promissory note in the original principal amount of $30,000 (“Note”) to a lender. The Note matures on October 13, 2014 and carries an interest rate of 6% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to conversion.

 

On October 17, 2013, the Company issued a promissory note in the original principal amount of $5,000 (“Note”) to a lender. The Note is due upon demand and carries an interest rate of 16% per annum.

 

On October 23, 2013, the Company issued a promissory note in the original principal amount of $42,500 (“Note”) to a lender. The Note matures on July 25, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

 

On October 23, 2013, the Company issued an aggregate of 2,100,000 shares of its common stock, valued at $708,500, to officers and directors, and certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 7.5% of the issued and outstanding shares of the Company.

 

On October 30, 2013, pursuant to the terms of a settlement agreement, the Company issued an additional 500,000 shares of common stock, valued at $35,000. The number of shares issued, at the time of such issuance, represented approximately 1.67% of the issued and outstanding shares of the Company.

 

On November 20, 2013, the Company issued an aggregate of 5,075,713 shares of its common stock, valued at $355,300, to certain employees and contract personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 16.74% of the issued and outstanding shares of the Company.

 

On November 21, 2013, the Company converted into 1,800,000 shares of common stock, valued at $28,300, a certain promissory note originally issued by the Company on December 7, 2004. The number of shares issued, at the time of such issuance, represented approximately 5.08% of the issued and outstanding shares of the Company.

 

On December 9, 2013, the Company recorded an additional $20,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial interest rate in the first 90 days of 0 percent, thereafter a one-time interest charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On December 12, 2013, the Company issued a promissory note in the original principal amount of $61,500 (“Note”) to a lender. The Note matures on December 12, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On December 12, 2013, the Company issued a promissory note in the original principal amount of $145,000 (“Note”) to a lender. The Note matures on December 12, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On December 13, 2013, the Company issued a promissory note in the original principal amount of $810 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading days in the ten trading days previous to the conversion.

 

 

On December 16, 2013, the Company converted into 250,000 shares of common stock, valued at $7,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 0.6% of the issued and outstanding shares of the Company.

 

On December 30, 2013, the Company converted into 277,778 shares of common stock, valued at $5,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 0.7% of the issued and outstanding shares of the Company.

 

On January 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amounts of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On January 13, 2014, the Company issued an aggregate of 2,859,067 shares of its common stock to certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 7.26% of the issued and outstanding shares of the Company.

 

On January 14, 2014, the Company converted into 1,660,026 shares of common stock, valued at $25,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.4% of the issued and outstanding shares of the Company.

 

On January 16, 2014, the Company issued a promissory note in the original principal amount of $3,000 (“Note”) to a lender. The Note matures on July 16, 2014 and carries an interest rate of 8% per annum.

 

On January 22, 2014, the Company issued a Note in the original principal amount of $212,500. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date. The net proceeds of the Note were used to redeem and retire two 8% convertible notes that were issued to Asher Enterprises, Inc. in the aggregate principal amount of $131,500 (hereafter, collectively, the “Asher Notes”) The Asher Notes were issued on July 19th, 2013 and August 26th, 2013.

 

On January 22, 2014, the Company issued a promissory note in the original principal amount of $5,000 (“Note”) to a lender. The Note matures on July 22, 2014 and carries an interest rate of 8% per annum.

 

On January 27, 2014, the Company converted into 809,067 shares of common stock, valued at 25,245, a loan originally received by the Company on July 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.95% of the issued and outstanding shares of the Company.

 

 

On January 29, 2014, the Company converted into 1,166,667 shares of common stock, valued at $17,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 2.76% of the issued and outstanding shares of the Company.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $16,000 (“Note”) to a lender. The Note matures on January 30, 2015 and carries an interest rate of 8% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $78,500 (“Note”) to a lender. The Note matures on November 3, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $11,209 (“Note”) to a lender. The Note matures on June 2, 2014 and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the market.

 

On February 10, 2014, the Company converted into 1,237,624 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 2.85% of the issued and outstanding shares of the Company.

 

On February 18, 2014, the Company converted into 1,470,588 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 3.29% of the issued and outstanding shares of the Company.

 

On February 20, 2014, the Company recorded an additional $25,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial interest rate in the first 90 days of 0 percent, thereafter a one-time interest charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On March 3, 2014, the Company issued 1,000,000 shares of its common stock, valued at $20,000, to a consultant of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 2.16% of the issued and outstanding shares of the Company.

 

On March 4, 2014, the Company converted into 2,083,333 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.42% of the issued and outstanding shares of the Company.

 

 

On March 5, 2014, the Company issued a promissory note in the original principal amount of $10,000 (“Note”) to a lender. The Note matures on September 5, 2014 and carries an interest rate of 8% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On March 17, 2014, the Company converted into 2,210,884 shares of common stock, valued at $13,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.49% of the issued and outstanding shares of the Company.

 

On March 31, 2014, the Company converted into 2,529,762 shares of common stock, valued at $17,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.92% of the issued and outstanding shares of the Company.

 

On April 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On April 1, 2014, the Company issued a promissory note in the original principal amounts of $25,000 (the “Note”) to a consultant of the Company for services rendered. The Note carries an interest rate of 10% per annum, and at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a conversion price of $0.005 per share.

 

On April 1, 2014, the Company issued a promissory note in the original principal amounts of $93,000 (the “Note”) to a consultant of the Company for services rendered. The Note carries an interest rate of 10% per annum, and at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 25%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On April 1, 2014, the Company converted into 744,048 shares of common stock, valued at $5,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.37% of the issued and outstanding shares of the Company.

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $145,000 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $6,669 (“Note”) to a lender. The Note matures on May 1, 2014 and carries an interest rate of 10% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $83,500 (“Note”) to a lender. The Note matures on January 2, 2015 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On April 3, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $14,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On April 7, 2014, the Company converted into 1,200,000 shares of common stock, valued at $20,640, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.19% of the issued and outstanding shares of the Company.

 

On April 8, 2014, the Company converted into 1,070,205 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.91% of the issued and outstanding shares of the Company.

 

On April 9, 2014, the Company converted into 3,656,379 shares of common stock, valued at $18,434, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 6.42% of the issued and outstanding shares of the Company.

 

On April 9, 2014, the Company issued a promissory note in the original principal amount of $2,679.16 (“Note”) to a lender. The Note matures on May 9, 2014 and carries an interest rate of 10% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On April 28, 2014, the Company converted into 2,400,000 shares of common stock, valued at $16,560, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.96% of the issued and outstanding shares of the Company.

 

On May 2, 2014, the Company converted into 3,125,000 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.96% of the issued and outstanding shares of the Company.

 

 

On May 2, 2014, the Company converted into 2,500,000 shares of common stock, valued at $16,500, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.78% of the issued and outstanding shares of the Company.

 

On May 6, 2014, the Company converted into 6,854,167 shares of common stock, valued at $71,333, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 9.98% of the issued and outstanding shares of the Company.

 

On May 6, 2014, the Company converted into 3,125,000 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.14% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 5,630,630 shares of common stock, valued at $12,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 7.16% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 3,400,000 shares of common stock, valued at $13,600, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.03% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 3,400,000 shares of common stock, valued at $38,114, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.87% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 995,833 shares of common stock, valued at $12,846, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.09% of the issued and outstanding shares of the Company.

 

On May 8, 2014, the Company converted into 4,504,504 shares of common stock, valued at $9,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.89% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 5,000,000 shares of common stock, valued at $36,100, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.17% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 3,041,667 shares of common stock, valued at $22,813, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.9% of the issued and outstanding shares of the Company.

 

 

On May 9, 2014, the Company converted into 4,750,000 shares of common stock, valued at $29,925, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.54% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 3,500,000 shares of common stock, valued at 35,000, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 3.2% of the issued and outstanding shares of the Company.

 

On May 12, 2014, the Company issued 500,000 shares of its common stock, valued at $2,150, to a director of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 0.4% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 3,500,000 shares of common stock, valued at $22,085, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.08% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company issued 500,000 shares of restricted common stock, valued at $50,000, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 0.42% of the issued and outstanding shares of the Company.

 

On May 15, 2014, the Company converted into 9,615,384 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 8.19% of the issued and outstanding shares of the Company.

 

On May 16, 2014, the Company issued a promissory note in the original principal amount of $1,975 (“Note”) to a lender. The Note matures on November 16, 2014 and carries an interest rate of 8% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On May 19, 2014, the Company issued 500,000 shares of restricted common stock, valued at $50,000, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 0.3% of the issued and outstanding shares of the Company.

 

On May 21, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $4,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On May 22, 2014, the Company converted into 4,166,667 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.26% of the issued and outstanding shares of the Company.

 

 

On May 23, 2014, the Company converted into 3,505,263 shares of common stock, valued at $14,722, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.66% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 3,750,000 shares of common stock, valued at $16,688, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.77% of the issued and outstanding shares of the Company.

 

On May 15, 2014, the Company converted into 9,567,901 shares of common stock, valued at $15,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 6.89% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 5,044,270 shares of common stock, valued at $9,940, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.31% of the issued and outstanding shares of the Company.

 

On May 30, 2014, the Company converted into 4,461,282 shares of common stock, valued at $25,250, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.84% of the issued and outstanding shares of the Company.

 

On May 30, 2014, the Company converted into 1,050,410 shares of common stock, valued at $3,151, a loan originally received by the Company on August 13, 2013. The number of shares issued, at the time of such issuance, represented approximately 0.65% of the issued and outstanding shares of the Company.

 

On June 3, 2014, the Company converted into 6,987,877 shares of common stock, valued at $12,578, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.29% of the issued and outstanding shares of the Company.

 

On June 3, 2014, the Company converted into 16,025,641 shares of common stock, valued at $25,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.45% of the issued and outstanding shares of the Company.

 

On May 19, 2014, the Company issued 2,000,000 shares of restricted common stock, valued at $7,800, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 1.07% of the issued and outstanding shares of the Company.

 

On June 11, 2014, the Company converted into 17,948,718 shares of common stock, valued at $28,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.56% of the issued and outstanding shares of the Company.

 

 

On June 11, 2014, the Company converted into 8,000,000 shares of common stock, valued at 42,080, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.89% of the issued and outstanding shares of the Company.

 

On June 12, 2014, the Company converted into 8,240,741 shares of common stock, valued at $13,350, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.85% of the issued and outstanding shares of the Company.

 

On June 23, 2014, the Company converted into 18,055,556 shares of common stock, valued at $19,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 8.13% of the issued and outstanding shares of the Company.

 

On June 26, 2014, the Company converted into 4,545,455 shares of common stock, valued at 6,354, a portion of a certain convertible promissory note originally issued by the Company on October 4, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.89% of the issued and outstanding shares of the Company.

 

On June 27, 2014, the Company converted into 6,437,879 shares of common stock, valued at $8,498, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 2.63% of the issued and outstanding shares of the Company.

 

On June 30, 2014, the Company issued a promissory note in the original principal amount of $1,928.50 (“Note”) to a lender. The Note matures on December 30, 2014 and carries an interest rate of 8% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On July 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On July 1, 2014, the Company issued a promissory note in the original principal amount of $5,000 (“Note”) to a lender. The Note is due upon demand, and carries an interest rate of 12% per annum.

 

On July 14, 2014, the Company converted into 24,057,318 shares of common stock, valued at $18,360, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.59% of the issued and outstanding shares of the Company.

 

On July 14, 2014, the Company issued a promissory note in the original principal amount of $5,000 (“Note”) to a lender. The Note is due upon demand, and carries an interest rate of 12% per annum.

 

 

On July 14, 2014, the Company converted into 15,517,241 shares of common stock, valued at 27,000, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 5.64% of the issued and outstanding shares of the Company.

 

On July 15, 2014, the Company converted into 14,202,945 shares of common stock, valued at $10,266, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.66% of the issued and outstanding shares of the Company.

 

On July 15, 2014, the Company converted into 14,291,666 shares of common stock, valued at $10,290, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.69% of the issued and outstanding shares of the Company.

 

On July 17, 2014, the Company converted into 25,757,576 shares of common stock, valued at $76,242, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 8.07% of the issued and outstanding shares of the Company.

 

On July 18, 2014, the Company converted into 8,400,000 shares of common stock, valued at $28,224, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.43% of the issued and outstanding shares of the Company.

 

On July 22, 2014, the Company converted into 16,428,571 shares of common stock, valued at $13,800, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.65% of the issued and outstanding shares of the Company.

 

On July 23, 2014, the Company converted into 13,047,619 shares of common stock, valued at $10,960, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 3.53% of the issued and outstanding shares of the Company.

 

On July 24, 2014, the Company converted into 21,323,529 shares of common stock, valued at $35,824, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.57% of the issued and outstanding shares of the Company.

 

On July 24, 2014, the Company converted into 6,944,444 shares of common stock, valued at $5,000, a portion of a certain convertible promissory note originally issued by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 1.71% of the issued and outstanding shares of the Company.

 

On July 24, 2014, the Company converted into 10,401,348 shares of common stock, valued at $14,458, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.53% of the issued and outstanding shares of the Company.

 

On July 30, 2014, the Company converted into 37,037,037 shares of common stock, valued at $45,926, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 8.79% of the issued and outstanding shares of the Company.

 

On August 6, 2014, the Company converted into 21,851,852 shares of common stock, valued at $11,800, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.76% of the issued and outstanding shares of the Company.

 

On August 6, 2014, the Company issued a promissory note in the original principal amount of $5,000 (“Note”) to a lender. The Note is due upon demand, and carries an interest rate of 12% per annum.

 

On August 6, 2014, the Company converted into 45,740,741 shares of common stock, valued at $75,015 a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 9.52% of the issued and outstanding shares of the Company.

 

On August 7, 2014, the Company issued a promissory note in the original principal amount of $1,569 (“Note”) to a lender. The Note is due upon demand, and carries an interest rate of 12% per annum.

 

On August 11, 2014, the Company converted into 26,812,500 shares of common stock, valued at $42,175, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.09% of the issued and outstanding shares of the Company.

 

On August 11, 2014, the Company converted into 45,740,741 shares of common stock, valued at $56,719, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 8.27% of the issued and outstanding shares of the Company.

 

On August 12, 2014, the Company converted into 15,131,579 shares of common stock, valued at $11,500, a portion of a certain convertible promissory note originally issued by the Company on March 5, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.52% of the issued and outstanding shares of the Company.

 

On August 13, 2014, the Company converted into 29,761,905 shares of common stock, valued at $12,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.85% of the issued and outstanding shares of the Company.

 

On August 19, 2014, the Company converted into 16,666,667 shares of common stock, valued at $28,000, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 2.59% of the issued and outstanding shares of the Company.

 

On August 20, 2014, the Company converted into 36,826,054 shares of common stock, valued at $31,670, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 5.58% of the issued and outstanding shares of the Company.

 

 

On August 22, 2014, the Company converted into 24,888,889 shares of common stock, valued at $22,933, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.57% of the issued and outstanding shares of the Company.

 

On August 22, 2014, the Company converted into 62,500,000 shares of common stock, valued at $43,753, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 8.66% of the issued and outstanding shares of the Company.

 

On August 22, 2014, the Company converted into 52,729,500 shares of common stock, valued at $36,934, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 6.72% of the issued and outstanding shares of the Company.

 

On August 25, 2014, the Company converted into 40,476,190 shares of common stock, valued at $17,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.83% of the issued and outstanding shares of the Company.

 

On August 29, 2014, the Company issued a promissory note in the original principal amount of $7,000 (“Note”) to a lender. The Note matures on November 1, 2014 and carries an interest rate of 12% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On September 2, 2014, the Company converted into 30,833,333 shares of common stock, valued at $19,606, a portion of a certain convertible promissory note originally issued by the Company on October 5, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.51% of the issued and outstanding shares of the Company.

 

On September 10, 2014, the Company converted into 62,500,000 shares of common stock, valued at $37,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 6.88% of the issued and outstanding shares of the Company.

 

On September 10, 2014, the Company converted into 76,923,077 shares of common stock, valued at $34,308, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.92% of the issued and outstanding shares of the Company.

 

On September 17, 2014, the Company converted into 48,000,000 shares of common stock, valued at 32,640, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.58% of the issued and outstanding shares of the Company.

 

On September 18, 2014, the Company converted into 53,720,027 shares of common stock, valued at $14,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.9% of the issued and outstanding shares of the Company.

 

On September 18, 2014, the Company converted into 50,000,000 shares of common stock, valued at $21,000, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.35% of the issued and outstanding shares of the Company.

 

On September 4, 2014, the Company issued a promissory note in the original principal amount of $6,000 (“Note”) to a lender. The Note is due upon demand, and carries an interest rate of 12% per annum.

 

On September 26, 2014, the Company converted into 95,000,000 shares of common stock, valued at $28,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.92% of the issued and outstanding shares of the Company.

 

On September 30, 2014, the Company converted into 63,583,333 shares of common stock, valued at $7,630, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.91% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 100,000,000 shares of common stock, valued at 30,000, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.36% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 53,000,000 shares of common stock, valued at $19,080, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.63% of the issued and outstanding shares of the Company.

 

On October 7, 2014, the Company converted into 74,166,666 shares of common stock, valued at $8,900, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.9% of the issued and outstanding shares of the Company.

 

On October 8, 2014, the Company converted into 51,000,000 shares of common stock, valued at $18,360, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.21% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 67,000,000 shares of common stock, valued at $13,400, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 4.09% of the issued and outstanding shares of the Company.

 

On October 16, 2014, the Company converted into 32,083,333 shares of common stock, valued at $5,133, a portion of a certain convertible promissory note originally issued by the Company on March 31, 2014. The number of shares issued, at the time of such issuance, represented approximately 1.88% of the issued and outstanding shares of the Company.

 

 

On October 16, 2014, the Company converted into 52,833,333 shares of common stock, valued at $8,454, a portion of a certain convertible promissory note originally issued by the Company on March 31, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.04% of the issued and outstanding shares of the Company.

 

On October 17, 2014, the Company converted into 62,500,000 shares of common stock, valued at 12,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.49% of the issued and outstanding shares of the Company.

 

On October 24, 2014, the Company converted into 84,916,667 shares of common stock, valued at $13,587, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 4.39% of the issued and outstanding shares of the Company.

 

With respect to the transactions noted above. Each of the recipients of securities of the Company was an accredited investor, or is considered by the Company to be a “sophisticated person”, inasmuch as each of them has such knowledge and experience in financial and business matters that they are capable of evaluating the merits and risks of receiving securities of the Company. No solicitation was made and no underwriting discounts were given or paid in connection with these transactions. The Company believes that the issuance of its securities as described above was exempt from registration with the Securities and Exchange Commission pursuant to Section 4(2) of the Securities Act of 1933.

 

Penny Stock Rules

 

The SEC has also adopted rules that regulate broker-dealer practices in connection with transactions in “penny stocks” as such term is defined by Rule 15g-9. Penny stocks are generally equity securities with a price of less than $5.00 (other than securities registered on certain national securities exchanges or quoted on the Nasdaq system provided that current price and volume information with respect to transactions in such securities is provided by the exchange or system).

 

Our shares constitute penny stocks under the Exchange Act. The shares may remain penny stocks for the foreseeable future. The classification of our shares as penny stocks makes it more difficult for a broker-dealer to sell the stock into a secondary market, which makes it more difficult for a purchaser to liquidate his or her investment. Any broker-dealer engaged by the purchaser for the purpose of selling his or her shares in Fuelstream will be subject to the penny stock rules.

 

The penny stock rules require a broker-dealer, prior to a transaction in a penny stock not otherwise exempt from those rules, deliver a standardized risk disclosure document approved by the SEC, which: (i) contains a description of the nature and level of risk in the market for penny stocks in both public offerings and secondary trading; (ii) contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of the Securities Act; (iii) contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and significance of the spread between the bid and ask price; (iv) contains a toll-free telephone number for inquiries on disciplinary actions; (v) defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and (vi) contains such other information and is in such form as the SEC shall require by rule or regulation. The broker-dealer also must provide to the customer, prior to effecting any transaction in a penny stock, (i) bid and offer quotations for the penny stock; (ii) the compensation of the broker-dealer and its salesperson in

 

the transaction; (iii) the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the market for such stock; and (iv) monthly account statements showing the market value of each penny stock held in the customer’s account.

 

In addition, the penny stock rules require that, prior to a transaction in a penny stock not otherwise exempt from those rules, the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgment of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitability statement. These disclosure requirements will have the effect of reducing the trading activity in the secondary market for our stock because it will be subject to these penny stock rules. Therefore, stockholders may have difficulty selling those securities.

 

ITEM 6. SELECTED FINANCIAL DATA.

 

Not required.

 

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

 

Forward-Looking Statements

 

This report contains forward-looking statements that involve risks and uncertainties. We use words such as anticipate, believe, plan, expect, future, intend and similar expressions to identify such forward-looking statements. You should not place too much reliance on these forward-looking statements. Our actual results are likely to differ materially from those anticipated in these forward-looking statements for many reasons.

 

Overview

 

We are a fuel transportation and logistics company which facilitates the sale and distribution of aviation and other fuels to corporate and commercial consumers. Our principal sources of revenues result from the gross selling price of fuel delivery contracts, but also include revenue from ancillary services related to the supply of fuel. Expenses which comprise the costs of goods sold include the acquisition price of fuel, as well as operational and staffing costs of the trucks and other vehicles used for delivery. General and administrative expenses have been comprised of administrative wages and benefits; occupancy and office expenses; outside legal, accounting and other professional fees; travel and other miscellaneous office and administrative expenses. Selling and marketing expenses include selling/marketing wages and benefits, advertising and promotional expenses, as well as travel and other miscellaneous related expenses.

 

Because we have incurred losses, income tax expenses are immaterial. No tax benefits have been booked related to operating loss carryforwards, given our uncertainty of being able to utilize such loss carryforwards in future years. We anticipate incurring additional losses during the coming year.

 

 

Results of Operations

 

Following is management’s discussion of the relevant items affecting results of operations for the years ended December 31, 2014 and 2013.

 

Revenues. The Company generated net revenues of $689,338 during the year ended December 31, 2014 as compared to $30,000 for the year ended December 31, 2013. The increase is mainly the result of the Company’s ability to obtain funding necessary to purchase our main product, aviation jet fuel. We continue to pursue substantial funding through investment and the application for lines of credit with financial institutions.

 

Cost of Sales. Our cost of sales for the year ended December 31, 2014 was $609,625 as compared to $26,895 for the year ended December 31, 2013. Our cost of sales consisted principally of the acquisition price of fuel and other petrochemicals delivered to customers and clients, other related services provided directly or outsourced through our affiliates, as well as operational and staffing costs with respect thereto. The increase is a correlation to the increase in sales as described above.

 

Selling, General and Administrative Expenses. Selling, general and administrative expenses were $1,488,177 for the year ended December 31, 2014, as compared to $2,795,600 during the year ended December 31, 2013. During the years ended December 31, 2014 and 2013, the Company issued 6,050,000, and 8,586,102, shares of common stock, respectively, to our joint venture partners for business development and other consultants. The stock was valued at $175,450 and $1,538,349, respectively,expensed as SG&A during the years ended December 31, 2014 and 2013. We anticipate that SG&A expenses will increase commensurate with an increase in our operations.

 

Other Income (Expense). The Company had net other expense of $1,825,157 for the year ended December 31, 2014 compared to net other expense of $1,350,147 for the year ended December 31, 2013. During 2014, other expenses incurred were comprised primarily of interest expenses related to notes payable in the amount of $2,205,087 which includes the amortization of debt discount of $1,542,950 and non-cash expenses of $518,304. These expenses were offset by a gain on the change in fair value of a derivative liability of $898,234.

 

Liquidity and Capital Resources

 

As of December 31, 2014, our primary source of liquidity consisted of $811 in cash and cash equivalents. We hold most of our cash reserves in local checking accounts with local financial institutions. Since inception, we have financed our operations through a combination of short and long-term loans, and through the private placement of our common stock.

 

We have sustained significant net losses which have resulted in an accumulated deficit at December 31, 2014 of $59,219,068, negative working capital (excess of current liabilities over current assets) of $6,659,235 and are currently experiencing a substantial shortfall in operating capital which raises doubt about our ability to continue as a going concern. We generated a net loss for the year ended December 31, 2014 of $3,233,621 compared to a net loss in 2013 of $4,142,642. Without additional revenues, working capital loans, or equity investment, there is substantial doubt as to our ability to continue operations. During the year ended December 31, 2014 the Company used a net amount of $496,390 in operating activities. The largest item which affected operating activities was the amortization of debt discounts of $1,542,950 and the change in accounts payable and accrued expenses of $992,745. During the year ended December 31, 2014 the Company was provided a net amount of $497,201 in financing activities. The largest item in financing activities was the proceeds from notes payable in the amount of $661,198.

 

We believe these conditions have resulted from the inherent risks associated with small public companies. Such risks include, but are not limited to, the ability to (i) generate revenues and sales of our products and services at levels sufficient to cover our costs and provide a return for investors, (ii) attract additional capital in order to finance growth, and (iii) successfully compete with other comparable companies having financial, production and marketing resources significantly greater than those of the Company.

 

We believe that our capital resources are insufficient for ongoing operations, with minimal current cash reserves, particularly given the resources necessary to expand our fuel brokerage business. We will likely require considerable amounts of financing to make any significant advancement in our business strategy. There is presently no agreement in place that will guarantee financing for our Company, and we cannot assure you that we will be able to raise any additional funds, or that such funds will be available on acceptable terms. Funds raised through future equity financing will likely be substantially dilutive to current shareholders. Lack of additional funds will materially affect our Company and our business, and may cause us to substantially curtail or even cease operations. Consequently, you could incur a loss of your entire investment in the Company.

 

Off-Balance Sheet Arrangements

 

We do not have any off-balance sheet arrangements.

 

Critical Accounting Policies

 

Financial Reporting Release No. 60, published by the SEC, recommends that all companies include a discussion of critical accounting policies used in the preparation of their financial statements. While all these significant accounting policies impact our consolidated financial condition and results of operations, we view certain of these policies as critical. Policies determined to be critical are those policies that have the most significant impact on our consolidated financial statements and require management to use a greater degree of judgment and estimates. Actual results may differ from those estimates.

 

We believe that given current facts and circumstances, it is unlikely that applying any other reasonable judgments or estimate methodologies would cause a material effect on our consolidated results of operations, financial position or liquidity for the periods presented in this report.

 

We believe the following more critical accounting policies are used in the preparation of our consolidated financial statements:

 

Principles of Consolidation

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

 

Concentrations of Credit Risk

For the years ended December 31, 2014 and 2013, one customer accounted for 100% of total revenue, respectively, representing a material amount of customer concentration. For the year ended December 31, 2014 and 2013, one disputed customers accounted for 97% and 100%, respectively, of total accounts receivable, representing a material amount of credit risk.

 

 

Cash and Cash Equivalents

Cash Equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

 

Accounts Receivable

Accounts receivable are recorded net of the allowance for doubtful accounts of $670,000 as of December 31, 2014 and 2013, respectively. The Company generally offers 30-day credit terms on sales to its customers and requires no collateral. The Company maintains an allowance for doubtful accounts which is determined based on a number of factors, including each customer’s financial condition, general economic trends and management judgment.

 

Revenue Recognition

Revenue from the sale of fuel is recognized when the sales price is fixed or determinable, collectability is reasonably assured and title passes to the customer, which is when the delivery of fuel is made to our customer directly from us, the supplier or a third-party subcontractor. Our fuel sales are generated principally as a fuel reseller, although at some point we intend to have inventories from which we may make deliveries. When acting as a fuel reseller, we generally purchase fuel from the supplier, mark it up and contemporaneously resell the fuel to the customer, normally taking delivery for purchased fuel at the same place and time as the delivery is made to the customer. We record the gross sale of the fuel as we generally take inventory risk, have latitude in establishing the sales price, have discretion in the supplier selection, maintain credit risk and are the primary obligor in the sales arrangement. Returns or discounts, if any, are netted against gross revenues. For the years ended December 31, 2014 and 2013, sales are recorded net of the allowance for returns and discounts of $-0-.

 

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 amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. On a periodic basis, management reviews those estimates, including those related to valuation allowances, loss contingencies, income taxes, and projection of future cash flows.

 

Advertising

The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense is included in cost of sales in the consolidated statements of operations as it relates directly to the revenues associated with events managed by the Company. Advertising expense for the years ended December 31, 2014 and 2013 was $-0-.

 

Basic and Fully Diluted Net Loss Per Share

The basic income (loss) per share of common stock is based on the weighted average number of shares issued and outstanding during the period of the financial statements. The Company has no common stock equivalents outstanding.

 

Research and Development     

Research and development costs are charged to operations when incurred and are included in operating expenses.

 

Recent Accounting Pronouncements

We have reviewed accounting pronouncements issued during the past two years and have adopted any that are applicable to our company. We have determined that none had a material impact on our consolidated financial statements.

 

 

Financial Instruments

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

 

- Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

- Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

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

 

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

 

Share Based Payments

The Company accounts for its stock based compensation under ASC 718 “Compensation – Stock Compensation” 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. 

 

There were various other accounting standards and interpretations recently issued, none of which are expected to a have a material impact on the Company's consolidated financial position, operations or cash flows.

 

MANAGEMENT’S PLAN TO CONTINUE AS A GOING CONCERN

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plans to obtain such resources for the Company include (1) obtaining capital from the sale of its securities, and (2) short-term borrowings from shareholders or related party when needed. However, management cannot provide any assurance that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations.

 

Our independent registered public accounting firm’s report contains and explanatory paragraph which has expressed substantial doubt about our ability to continue as a going concern, which may hinder our ability to obtain future financing.

 

 

Forward-Looking Statements

 

This report contains or incorporates by reference forward-looking statements within the meaning of the United States Private Securities Litigation Reform Act of 1995 concerning our future business plans and strategies, the receipt of working capital, future revenues and other statements that are not historical in nature. In this report, forward-looking statements are often identified by the words “anticipate,” “plan,” “believe,” “expect,” “estimate,” and the like. These forward-looking statements reflect our current beliefs, expectations and opinions with respect to future events, and involve future risks and uncertainties which could cause actual results to differ materially from those expressed or implied.

 

Other uncertainties that could affect the accuracy of forward-looking statements include:

 

•

the worldwide economic situation;

•

any changes in interest rates or inflation;

•

the willingness and ability of third parties to honor their contractual commitments;

•

our ability to raise additional capital, as it may be affected by current conditions in the  stock market and competition for risk capital;

•

our capital expenditures, as they may be affected by delays or cost overruns;

•

environmental and other regulations, as the same presently exist or may later be amended;

•

our ability to identify, finance and integrate any future acquisitions; and

•

the volatility of our common stock price.

 

This list is not exhaustive of the factors that may affect any of our forward-looking statements. You should read this report completely and with the understanding that our actual future results may be materially different from what we expect. These forward-looking statements represent our beliefs, expectations and opinions only as of the date of this report. We do not intend to update these forward looking statements except as required by law. We qualify all of our forward-looking statements by these cautionary statements.

 

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not Applicable.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

 

CONTENTS
		Page
Report of Independent Registered Public Accounting Firm		34
Consolidated Balance Sheets		35
Consolidated Statements of Operations		36
Consolidated Statements of Stockholders’ Deficit		37
Consolidated Statements of Cash Flows		38
Notes to the Consolidated Financial Statements		39

 

 

 

 REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Directors and Stockholders of

Fuelstream, Inc.

 

We have audited the accompanying consolidated balance sheets of Fuelstream, Inc. (the “Company”), as of December 31, 2014 and 2013, and the related consolidated statements of operations, stockholders’ deficit and cash flows for each of the two years in the period ended December 31, 2014. These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

 

We have conducted our audits in accordance with the 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 misstatement. 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 also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that 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 Fuelstream, Inc. as of December 31, 2014 and 2013, and the consolidated results of its operations and its cash flows for each of the two years in the period ended December 31, 2014, in conformity 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 2 to the accompanying consolidated financial statements, the Company has suffered recurring losses from operations, generated negative cash flows from operating activities, and has an accumulated deficit as of December 31, 2014, which raises substantial doubt about its ability to continue as a going concern. Management's plans in regard to this matter are described in Note 2. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

/s/RBSM LLP

 

New York, New York

 

May 22, 2015

 

 

 

FUELSTREAM, INC.
Consolidated Balance Sheets
ASSETS
		December 31,				December 31,
		2014				2013
CURRENT ASSETS
Cash and cash equivalents		$	811			$	—
Accounts receivable, net of allowance			28,000				28,000
Total Current Assets			28,811				28,000
TOTAL ASSETS		$	28,811			$	28,000
LIABILITIES AND STOCKHOLDERS' DEFICIT
CURRENT LIABILITIES
Accounts payable		$	959,469			$	826,832
Due to related parties			52,973				56,973
Accrued expenses			1,215,086				788,771
Convertible debenture/notes payable - short term (net of
discount of $6,358 and $286,751, respectively)			634,141				226,250
Convertible notes payable - related parties			280,722				211,254
Notes payable			1,034,610				1,093,382
Notes payable - related parties			2,138,106				2,115,870
Derivative liability			372,939				558,548
Total Current Liabilities			6,688,046				5,877,880
LONG TERM LIABILITIES
Convertible debenture/notes payable (net of discount of
$-0- and $50,082, respectively)			—				4,918
Total Long Term Liabilities			—				4,918
TOTAL LIABILITIES			6,688,046				5,882,798
STOCKHOLDERS' DEFICIT
Preferred stock, $0.0001 par value; 200 shares
authorized, 200 and 200 shares issued and outstanding			—				—
Common stock, $0.0001 par value; 2,500,000,000
and 150,000,000 shares authorized, 1,938,172,724 and
37,709,552 shares issued and outstanding, respectively			193,817				3,771
Additional paid-in capital			52,366,016				50,126,878
Accumulated deficit			(59,219,068	)			(55,985,447	)
Total Stockholders' Deficit			(6,659,235	)			(5,854,798	)
TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT		$	28,811			$	28,000
The accompanying notes are an integral part of these consolidated financial statements.

 

FUELSTREAM, INC.
Consolidated Statements of Operations
		For the Year Ended
		December 31,
		2014				2013
NET SALES		$	689,338			$	30,000
COST OF SALES			609,625				26,895
GROSS MARGIN			79,713				3,105
OPERATING EXPENSES
Selling, general and administrative			1,488,177				2,795,600
Total Operating Expenses			1,488,177				2,795,600
LOSS FROM OPERATIONS			(1,408,464	)			(2,792,495	)
OTHER INCOME (EXPENSES)
Gain on forgiveness of debt			—				43,920
Gain on change in fair value of derivative liability			898,234				233,667
Non-cash finance charge			(518,304	)			(464,442	)
Interest expense (including amortization of debt discount
of $1,542,950 and $657,161, respectively)			(2,205,087	)			(1,163,292	)
Total Other Expenses			(1,825,157	)			(1,350,147	)
LOSS BEFORE INCOME TAXES			(3,233,621	)			(4,142,642	)
INCOME TAX EXPENSE			—				—
NET LOSS		$	(3,233,621	)		$	(4,142,642	)
BASIC AND DILUTED:
Net loss per common share		$	(0.00	)		$	(0.19	)
Weighted average shares outstanding			699,995,338				21,605,080
The accompanying notes are an integral part of these consolidated financial statements.

 

 

FUELSTREAM, INC.
Consolidated Statements of Stockholders' Deficit
For the Period January 1, 2013 through December 31, 2014
																		Additional								Total
		Preferred Stock								Common Stock								Paid-in				Accumulated				Stockholders'
		Shares				Amount				Shares				Amount				Capital				Deficit				Deficit
Balance, January 1, 2013			200			$	—				15,216,848			$	1,522			$	46,413,042			$	(51,842,805	)		$	(5,428,241	)
Common stock issued for services,
January 2013			—				—				49,951				5				82,414				—				82,419
Fair value of vested options			—				—				—				—				249,643				—				249,643
Common stock issued for services,
May 2013			—				—				254,000				25				304,775				—				304,800
Common stock issued for conversion of debt			—				—				11,889,566				1,189				1,473,224				—				1,474,413
Common stock issued for services,
August 2013			—				—				606,438				61				52,269				—				52,330
Common stock issued for services,
October 2013			—				—				2,600,000				260				743,240				—				743,500
Common stock issued for services,
November 2013			—				—				5,075,713				508				354,792				—				355,300
Beneficial conversion feature relating to
convertible debt			—				—				—				—				311,488				—				311,488
Common stock sold for cash			—				—				2,017,036				202				141,991				—				142,193
Net loss for the year ended
December 31, 2013			—				—				—				—				—				(4,142,642	)			(4,142,642	)
Balance, December 31, 2013			200				—				37,709,552				3,771				50,126,878				(55,985,447	)			(5,854,798	)
Common stock issued for conversion of debt			—				—				1,894,413,172				189,441				1,577,569				—				1,767,010
Common stock issued for services,
January 2014			—				—				2,050,000				205				143,295				—				143,500
Common stock issued for services,
February 2014			—				—				1,000,000				100				19,900				—				20,000
Common stock issued for services,
Q2 2014			—				—				3,000,000				300				11,650				—				11,950
Beneficial conversion feature relating to
convertible debt			—				—				—				—				348,722				—				348,722
Fair value of vested options			—				—				—				—				138,002				—				138,002
Net loss for the year ended
December 31, 2014			—				—				—				—				—				(3,233,621	)			(3,233,621	)
Balance, December 31, 2014			200			$	—				1,938,172,724			$	193,817			$	52,366,016			$	(59,219,068	)		$	(6,659,235	)
The accompanying notes are an integral part of these consolidated financial statements

 

 

FUELSTREAM, INC.
Consolidated Statements of Cash Flows
		For the Year Ended
		December 31,
		2014				2013
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss		$	(3,233,621	)		$	(4,142,642	)
Adjustments to reconcile net loss to net
cash used in operating activities:
Notes payable realted party issued for services			—				80,000
Gain on conversion of debt			—				(43,920	)
Common stock issued for services and finance expenses			175,450				1,538,351
Stock based compensation			138,002				249,643
Operating expenses incurred by noteholders on behalf of the Company			272,034				83,482
Non-cash interest expenses			518,284				464,441
Change in fair value of derivative liability			(898,234	)			(233,669	)
Amortization of debt discounts			1,542,950				657,160
Changes in operating assets and liabilities:
Accounts receivable			—				152,000
Accounts payable and accrued expenses			992,745				613,229
Due to related parties			(4,000	)			73,973
Net Cash Used in Operating Activities			(496,390	)			(507,952	)
CASH FLOWS FROM INVESTING ACTIVITIES:			—				—
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from sale of common stock			—				142,193
Net proceeds from notes payable			661,198				400,600
Net proceeds from notes payable - related parties			26,000				—
Payments on notes payable			(189,997	)			(78,000	)
Net Cash Provided by Financing Activities			497,201				464,793
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		$	811			$	(43,159	)
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD			—				43,159
CASH AND CASH EQUIVALENTS, END OF PERIOD		$	811			$	—
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Payments For:
Interest		$	585			$	7,795
Income taxes		$	—			$	—
Non-cash investing and financing activity:
Initial derivative liability on convertible note payable		$	1,389,373			$	860,708
Beneficial conversion feature on convertible note credited to additional paid in capital		$	336,790			$	311,488
Common stock issued for settlement of notes payable and accrued interest		$	784,528			$	1,376,880
Reclassification from accrued interest to note payable - related party		$	—			$	837,370
Reclassification of note from related party to non-related party		$	—			$	228,300
Reclassification from due to related party to convertible note payable - related party		$	—			$	121,254
Accrued expenses paid by convertible noteholder		$	—			$	31,500
Common stock issued for accrued expenses and accrued interest		$	—			$	73,297
Common stock issued for the conversion of notes payable and accrued interest related party		$	221,532			$	—
Accrued interest converted to notes payable		$	131,659			$	—
Accounts payable converted to notes payable related party		$	256,000			$	—
The accompanying notes are an integral part of these consolidated financial statements.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 1 - 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 under the name of “Sportsnuts,” Inc. On April 9, 2010, the Company changed its name to Fuelstream, Inc. and changed its business model to become a fuel transportation and logistics company.

 

On April 11, 2011, the Company entered into 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 Venture required the Company to contribute up to $200,000 in respect of supplying aviation fuel to various commercial aircraft via tanker trucks which were intended to be acquired by the Joint Venture. The Company ultimately contributed $183,500 in connection with the Joint Venture. On January 18, 2012, the Joint Venture was terminated upon completion of the acquisition of AFI, which is now a wholly-owned subsidiary of the Company (refer to note 3)

 

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

 

NOTE 2 - GOING CONCERN CONSIDERATIONS

 

The accompanying consolidated financial statements have been prepared using generally accepted accounting principles applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The accumulated deficit as of December 31, 2014 was $59,219,068 and the total stockholders’ deficit at December 31, 2014 was $6,659,235 and had working capital deficit, continued losses, and negative cash flows from operations. These factors combined, raise substantial doubt about the Company’s ability to continue as a going concern. Management’s plans to address and alleviate these concerns are as follows:

 

The Company’s management continues to develop a strategy of exploring all options available to it so that it can develop successful operations and have sufficient funds, therefore, as to be able to operate over the next twelve months. The Company is attempting to improve these conditions by way of financial assistance through issuances of additional equity and by generating revenues by facilitating the sale of aircraft fuel. No assurance can be given that funds will be available, or, if available, that it will be on terms deemed satisfactory to management. The ability of the Company to continue as a going concern is dependent upon its ability to successfully increase market share, margins on fuel resales, and greater industry visibility.

 

NOTE 3 - ACQUISITION

 

On January 18, 2012 the Company completed 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 of AFI consisted of 7,400,000 shares of restricted common stock, loan receivable adjusted for $183,500 and a note payable in the amount of $1,000,000. As part of the acquisition, the Company recorded goodwill in the amount of $6,000,410.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

				Amount
Accounts receivable acquired				$850,000
Goodwill acquired				6,000,410
Less liabilities assumed
Note payable acquired				1,356,300
Accounts payable acquired				536,610
Net liabilities assumed				(1,892,910)
Total Purchase price				$4,957,500

 

The total purchase price was $4,957,500 which was paid by issuance of 7,400,000 shares of common stock, payment adjusted through loan receivable of $183,500 and issuance of note payable of $1,000,000.

 

Goodwill represents the excess of the purchase price over the fair value of the net identifiable tangible assets acquired. As of December 31, 2012, the Company impaired the total goodwill. Management performed impairment analysis in fourth quarter of 2012 and decided to write off goodwill.

 

On May 10, 2012, the Company along with two partners formed AFI South Africa LLC (“AFI SA”), during the year itself the Company purchased shares of the other partners to become 100% owner of AFI SA. AFI SA was effective as Limited Liability Company under the Act by the filing organization with the office of the Secretary of State of Florida on May 11, 2012. The Company has been organized for the purpose of partnering with Global Aviation for brokering the sale of Fuel for aircraft in South Africa.

 

On September 2012, the Company issued 2,063,550 shares of Common stock to the partner to purchase there 20% interest in AFI SA. The Company charged to operation the fair value of the shares issued of $5,158,875.

 

NOTE 4 - SIGNIFICANT ACCOUNTING POLICIES

 

a.  Principles of Consolidation

 

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

 

b.   Concentrations of Credit Risk

 

For the year ended December 31, 2014 and 2013, one customer accounted for 100% of total revenue, respectively, representing a material amount of customer concentration. For the year ended December 31, 2014 and 2013, one disputed customers accounted for 97% and 100%, respectively, of total accounts receivable, representing a material amount of credit risk.

 

c.  Cash and Cash Equivalents

 

Cash Equivalents include short-term, highly liquid investments with maturities of three months or less at the time of acquisition.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

d.  Accounts Receivable

 

Accounts receivable are recorded net of the allowance for doubtful accounts of $670,000 as of December 31, 2014 and 2013, respectively. The Company generally offers 30-day credit terms on sales to its customers and requires no collateral. The Company maintains an allowance for doubtful accounts which is determined based on a number of factors, including each customer’s financial condition, general economic trends and management judgment.

 

e.  Revenue Recognition

 

Revenue from the sale of fuel is recognized when the sales price is fixed or determinable, collectability is reasonably assured and title passes to the customer, which is when the delivery of fuel is made to our customer directly from us, the supplier or a third-party subcontractor. Our fuel sales are generated principally as a fuel reseller, although at some point we intend to have inventories from which we may make deliveries. When acting as a fuel reseller, we generally purchase fuel from the supplier, mark it up and contemporaneously resell the fuel to the customer, normally taking delivery for purchased fuel at the same place and time as the delivery is made to the customer. We record the gross sale of the fuel as we generally take inventory risk, have latitude in establishing the sales price, have discretion in the supplier selection, maintain credit risk and are the primary obligor in the sales arrangement. Returns or discounts, if any, are netted against gross revenues. For the years ended December 31, 2014 and 2013, sales are recorded net of the allowance for returns and discounts of $-0-.

 

f.  Estimates

 

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

 

g.  Advertising

 

The Company follows the policy of charging the costs of advertising to expense as incurred. Advertising expense is included in cost of sales in the consolidated statements of operations as it relates directly to the revenues associated with events managed by the Company. Advertising expense for the years ended December 31, 2014 and 2013 was $-0-.

 

h.  Basic and Fully Diluted Net Loss Per Share

 

		For the Years Ended December 31,
		2014				2013
Basic and fully diluted net loss per share:
Loss (numerator)		$	(3,233,621	)		$	(4,142,642	)
Shares (denominator)			699,995,338				21,605,080
Per share amount		$	(0.00	)		$	(0.19	)

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The basic loss per share of common stock is based on the weighted average number of shares issued and outstanding during the period of the financial statements. Diluted EPS assumes the exercise of stock option and the conversion of convertible debt, provided the effect is not anti-dilutive. The effect of computing diluted loss per share is anti-dilutive and, as such, basic and diluted loss per share is the same for the years ended December 31, 2014 and 2013.

 

i.  Income Taxes

 

The Financial Accounting Standards Board (FASB) has issued FASB ASC 740-10.  FASB ASC 740-10 clarifies the accounting for uncertainty in income taxes recognized in an enterprise's financial statements. This standard requires a company to determine whether it is more likely than not that a tax position will be sustained will be sustained upon examination based upon the technical merits of the position.  If the more-likely-than-not threshold is met, a company must measure the tax position to determine the amount to recognize in the financial statements.  As a result of the implementation of this standard, the Company performed a review of its material tax positions in accordance with recognition and measurement standards established by FASB ASC 740-10.  

 

Deferred taxes are provided on a liability method whereby deferred tax assets are recognized for deductible temporary differences and operating loss and tax credit carryforwards and deferred tax liabilities are recognized for taxable temporary differences.  Temporary differences are the differences between the reported amounts of assets and liabilities and their tax basis.  Deferred tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion or all of the deferred tax assets will not be realized.  Deferred tax assets and liabilities are adjusted for the effects of changes in tax laws and rates on the date of enactment.

 

At December 31, 2014 the Company had net operating loss carryforwards of approximately $20,146,000 that may be offset against future taxable income through 2034. No tax benefits have been reported in the financial statements, because the potential tax benefits of the net operating loss carry forwards are offset by a valuation allowance of the same amount.

 

Due to the change in ownership provisions of the Tax Reform Act of 1986, net operating loss carryforwards for Federal income tax reporting purposes are subject to annual limitations.

 

Should a change in ownership occur, net operating loss carryforwards may be limited as to use in the future.

 

Net deferred tax assets consist of the following components as of December 31, 2014 and 2013:

 

		2014				2013
Deferred tax assets:
NOL Carryover		$	7,349,000			$	6,250,000
Valuation allowance			(7,349,000	)			(6,250,000	)
Net deferred tax asset		$	—			$	—

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The actual provision for income taxes differs from the amount computed by applying the federal statutory rate to losses before income taxes at December 31, 2014 and 2013, as follows:

 

		2014				2013
Federal income taxes at statutory rate			(34	)%			(34	)%
State income tax, net of federal benefit			(8.7	)			(8.7	)
Permanent differences			0				0
Valuation allowance			42.7	%			42.7	%

 

The income tax provision differs from the amount of income tax determined by applying the U.S. federal and state income tax rates of 34% to pretax income from continuing operations for the years ended December 31, 2014 and 2013 due to the following:

 

		2014				2013
Current Federal Tax		$	—			$	—
Current State Tax			—				—
Change in NOL Benefit			1,099,000				1,005,000
Valuation allowance			(1,099,000	)			(1,005,000	)
		$	—			$	—

 

At December 31, 2014, the Company had no unrecognized tax benefits that, if recognized, would affect the effective tax rate.

 

The Company did not have any tax positions for which it is reasonably possible that the total amount of unrecognized tax benefits will significantly increase or decrease within the next 12 months.

 

The Company includes interest and penalties arising from the underpayment of income taxes in the statements of operations in the provision for income taxes.  As of December 31, 2014 and 2013, the Company had no accrued interest or penalties related to uncertain tax positions.

 

The tax years that remain subject to examination by major taxing jurisdictions are those for the years ended December 31, 2014, 2013 and 2012.

 

j.  Reclassifications

 

Certain amounts in the accompanying consolidated financial statements have been reclassified to conform to the current year presentation. These reclassifications have no material effect on the consolidated financial statements.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

k.  Accrued Expenses

 

Accrued expenses consisted of the following:

 

		December 31,
		2014				2013
Accrued compensation		$	59,027			$	28,672
Misc. loans payable			5,000				5,000
Accrued interest – related party			419,013				255,177
Accrued interest- on note payable			548,938				370,894
Accrued interest- on accounts payable			183,108				129,028
Total accrued expenses		$	1,215,086			$	788,771

 

l.  Recently Issued Accounting Standards

 

In June of 2014 the Financial Accounting Standards Board issued Accounting Standards Update ASU 2014-10, “Elimination of Certain Financial Reporting Requirements, Including an Amendment to Variable Interest Entities Guidance in Topic 810, Consolidation” (“ASU 2014-10”). The amendments in ASU 2014-10 remove the definition of a development stage entity from the master glossary of the Accounting Standards Codification, thereby removing the financial reporting distinction between development stage entities and other reporting entities from U.S. GAAP. In addition, the amendments eliminate the requirements for development stage entities to (1) present inception-to-date information in the statements of income, cash flows, and shareholder equity, (2) label the financial statements as those of a development stage entity, (3) disclose a description of the development stage activities in which the entity is engaged, and (4) disclose in the first year in which the entity is no longer a development stage entity that in prior years it had been in the development stage.

 

The amendments also clarify that the guidance in Topic 275, Risks and Uncertainties, is applicable to entities that have not commenced planned principal operations.

 

The adoption of ASU 2014-10 did not have a significant impact on our results of operations, financial condition or cash flow. 

 

In June 2014, the FASB issued ASU 2014-12, "Compensation - Stock Compensation (Topic 718): Accounting for Share-Based Payments When the Terms of an Award Provide That a Performance Target Could be Achieved after the Requisite Service Period." This ASU provides more explicit guidance for treating share-based payment awards that require a specific performance target that affects vesting and that could be achieved after the requisite service period as a performance condition. The new guidance is effective for annual and interim reporting periods beginning after December 15, 2015. The Company does not expect the adoption of this guidance to have a material impact on the financial statements.

 

In August 2014, the FASB issued ASU 2014-15, “Presentation of Financial Statements – Going Concern (Topic 205-40)”, which requires management to evaluate whether there is substantial doubt about an entity’s ability to continue as a going concern for each annual and interim reporting period. If substantial doubt exists, additional disclosure is required. This new standard will be effective for the Company for annual and interim periods beginning after December 15, 2016. Early adoption is permitted. The Company expects to adopt this new standard for the fiscal year ending December 31, 2015 and the Company will continue to assess the impact on its financial statements.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Other recent accounting pronouncements issued by the FASB and the SEC did not, or are not believed by management to have a material impact on the Company's present or future consolidated financial statements.

 

m.  Financial Instruments

 

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

 

- Level 1 inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

- Level 2 inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

- Level 3 inputs to valuation methodology are unobservable and significant to the fair measurement. The carrying amounts reported in the balance sheets for the cash and cash equivalents, receivables and current liabilities each qualify as financial instruments and are a reasonable estimate of fair value because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest.

 

n.  Share Based Payments

 

The Company accounts for its stock based compensation under ASC 718 “Compensation – Stock Compensation” 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. 

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 5 - ACCOUNTS RECEIVABLE

 

Accounts receivable at December 31, 2014 and 2013 are as follow:

 

		2014
Accounts receivable (on acquisition)		$	698,000
			698,000
Less: allowance on accounts receivable			(670,000)
Accounts receivable, net		$	28,000

 

		2013
Accounts receivable (on acquisition)		$	698,000
			698,000
Less: allowance on accounts receivable			(670,000)
Accounts receivable, net		$	28,000

 

The Company was involved in disputes with $698,000 of the above accounts receivable and has filed a lawsuit (refer to note 15).

 

NOTE 6 - ACCOUNTS PAYABLE

 

The accounts payable of $959,469 and $826,832 as of December 31, 2014 and 2013 respectively, includes two parties who are seeking motion for entry for final garnishment judgment, The Company has assumed these two accounts payable with the acquisition of AFI (refer to note 3). Per court order interest is calculated at rate of 6% per annum on $325,138 on one of the accounts payable and 18% on $192,061 of the second accounts payable. As of December 31, 2014 and 2013 the Company has accrued interest payable on these accounts of $183,108 and $129,028 which is included in accrued expenses.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 7 - NOTES PAYABLE

 

Notes payable consisted of the following:
		December 31, 2014				December 31, 2013
Notes payable, issued on May 6, 2011, unsecured, interest at 10%per annum, due on demand.		$	59,500			$	59,500
Notes payable, issued on August 25, 2010, unsecured, interest at 10%per annum due on demand.			172,500				172,500
Notes payable issued on October 18, 2010 to individual, unsecured, interest at 15% per annum, due on demand.(1)			786,300				786,300
Notes payable issued on October 5, 2013 to individual, unsecured, interest at 8% per annum, due on demand.			—				28,500
Notes payable issued on October 17, 2013 to a company, unsecured, interest at 16% per annum, due on demand.			—				5,000
Notes payable issued on October 4, 2013, January 16, 2014, and January 22, 2014 to a company, unsecured, interest at 8% per annum, due on demand.			8,000				6,000
Notes payable issued on March 5, 2013 to individual, unsecured, interest at 8% per annum, due on demand.			7,500				7,500
Notes payable issued on July 1, 2013 to a company, unsecured, interest at 8% per annum, due on demand.			810				28,082
Total notes payable			1,034,610				1,093,382
Less: current portion			(1,034,610	)			(1,093,382	)
Long-term notes payable		$	—			$	—
Maturities of notes payable are as follows:
Year Ending December 31,							Amount
2015						$	1,034,610
Total						$	1,034,610

 

Accrued interest on notes payable for the years ended December 31, 2014 and 2013 was $505,482 and $363,507, respectively.

 

1)  This Note payable was assumed on the acquisition of AFI. The Company is negotiating a settlement agreement for $786,300, inclusive of all interest on the date of settlement.

 

 

 

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 8 - CONVERTIBLE DEBENTURE/NOTES PAYABLE

		December 31, 2014				December 31, 2013
Notes payable issued on March 21, 2012, unsecured, interest included, due on March 21, 2014,convertible into common stock at $1.00 per share (less unamortized debt discount of $-0- and $12,616, respectively)		$	—			$	92,384
Convertible note issued on March 2013, unsecured, interest at 8%, due on October 05, 2013.			—				10,000
Convertible note issued on January 2014, unsecured, interest at 8%, due on November 3, 2014. Unamortized debt discount of $0 and $92,011, respectively			—				81,989
Convertible note issued on October 2013, December 2013 and February 2014, unsecured, zero interest if paid on or before 90 days otherwise one time interest charge of 12%, due on October 2, 2015 December 9, 2015 and February 20, 2016. Unamortized debt discount of $2,352 and $50,082, respectively			1,768				4,918
Convertible note issued on October 2013, unsecured, interest at 6%, due on October 13, 2014 (in default). Unamortized debt discount of $-0- and $23,507, respectively			9,912				6,493
Convertible note issued on December 2013 and January 2014, unsecured, interest at 8%, due on December 12, 2014, July 20, 2014 (in default) and January 30, 2015. Unamortized debt discount of $-0- and $58,299, respectively			115,000				3,201
Convertible note issued on December 2013, unsecured, interest at 6%, due on December 12, 2014. Unamortized debt discount of $-0- and $100,317, respectively			—				32,183
Convertible note issued on January 2, 2014, unsecured, interest at 10%, due on June 2, 2014 (in default), convertible into common stock at 60% of the bid price on the date of conversion, (less unamortized debt discount of $-0- and $-0-, respectively)			11,209				—
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on April 10, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively.			6,669				—
Convertible note issued on April 4, 2014, unsecured, interest at 10%, due on May 4, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively.			2,679				—
Convertible note issued on March 31, 2014, unsecured, interest at 8%, due on January 2, 2015. Unamortized debt discount of $580 and $-0-, respectively.			72,730				—

 

Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on September 1, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively.			93,000				—
Convertible note issued on June 4, 2014, unsecured, interest at 16%, due on April 1, 2000 (in default). Unamortized debt discount of $-0- and $-0-, respectively.			25,000				—
Convertible note issued on June 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $-0- and $-0-, respectively.			25,000				—
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on December 1, 2014. Unamortized debt discount of $-0- and $-0-, respectively.			25,000				—
Convertible note issued on May 16, 2014, unsecured, interest at 8%, due on November 16, 2014 (in default). Unamortized debt discount of $-0- and $-0-, respectively.			1,975				—
Convertible note issued on June 30, 2014, unsecured, interest at 8%, due on December 30, 2014. Unamortized debt discount of $-0- and $-0-, respectively.			1,929				—
Convertible note issued on July 9, 2014, unsecured, interest at 10%, due on February 9, 2015. Unamortized debt discount of $827 and $-0-, respectively.			3,730				—
Convertible note issued on September 8, 2014, unsecured, interest at 8%, due on December 30, 2014. Unamortized debt discount of $-0- and $-0-, respectively.			1,890				—
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015. Unamortized debt discount of $978 and $-0-, respectively.			89,022				—
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015. Unamortized debt discount of $978 and $-0-, respectively.			89,022				—
Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015. Unamortized debt discount of $155 and $-0-, respectively.			14,095				—

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Convertible note issued on October 1, 2014, unsecured, interest at 12%, due on January 1, 2015. Unamortized debt discount of $489 and $-0-, respectively.			44,511				—
Total notes payable			634,141				231,168
Less: current portion			(634,141	)			(226,250	)
Long-term convertible debenture/notes payable		$	—			$	4,918

 

Convertible note issued March 21, 2012

 

On March 21, 2012, the Company issued a $250,000 Convertible Promissory Note which is convertible into 250,000 shares of the Company’s common stock at the holder’s option, or $1.00 per share, and there is no fluctuation in this conversion rate.

 

In accordance with ASC 470-20, the Company recognized an embedded beneficial conversion feature present in the note. The Company allocated a portion of the proceeds equal to the intrinsic value of that feature to additional paid-in capital. The Company recognized and measured an aggregate of $250,000 of the proceeds, which is equal to the intrinsic value of the embedded beneficial conversion feature, to additional paid-in capital and a discount against the note. The debt discount attributed to the beneficial conversion feature is charged to current period operations as interest expense using the effective interest method over the term of the note.

 

In the year 2012, the holder of the promissory note made payments of $200,000 directly to vendors of the Company for purchase of fuel and paid $50,000 directly to the Company. As part of the joint venture agreement the Company has agreed to pay 50% of all the profits generated by all the fuel transactions in South Africa.

 

On December 12, 2013, the Note holder assigned $145,000 of its note to another note holder.

 

During the year 2014, the balance of $105,000 of the note was assigned to another note holder convertible note of February 20, 2014 (see below).

 

Convertible debenture March 2013:

 

On March 5, 2013 the Company issued a $10,000 Convertible Promissory Note against expenses incurred,which bears interest at a rate of 8%, payable on October 5, 2013 The Maker of this Note shall have option after the affected date (October 5, 2013), in its sole discretion, to convert all or part of the principal balance and accrued interest on this Note to common stock of the Maker at a 40% discount of the average three lowest trading days in the ten trading days previous to the conversion.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The Note was in default during the year ended December 31, 2013 and $5,000 was charged to interest expenses as penalty.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

During the year 2014 this note was transferred to the third party account with accrued interest on July 9, 2014 convertible promissory note (refer to paragraph Convertible note July 9, 2014 below).

 

The outstanding balance as of December 31, 2014 on this note is $0.

 

Convertible debenture July 2013 August 2013, October 2013 and January 2014

 

On July 19, 2013, the Company issued a $78,500 Convertible Promissory Note which bears interest at a rate of 8% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

On August 26, 2013, the Company issued a $53,000 Convertible Promissory Note which bears interest at a rate of 8% and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

On October 23, 2013, the Company issued a $42,500 Convertible Promissory Note which bears interest at a rate of 8%, due on July 25, 2014 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause.

 

On January 30, 2014, the Company issued a $78,500 Convertible Promissory Note which bears interest at a rate of 8%, due on November 3, 2014 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause.

 

The Company received a net of $185,000 from the debenture holder, $6,500 was paid towards the accrued legal expenses and due diligence fees and $36,000 toward legal and professional fees and $25,000 was paid toward accrued professional fees.

 

During the year ended December 31, 2014, the Company paid $131,500 for July 2013, August 2013 and October 2013 note. In addition, the Company paid $42,500 as a prepayment penalty which has been recorded as interest expense.

 

The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $130,485 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			268.98	%
Risk free rate:			0.08	%

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The initial fair value of the embedded debt derivative of $130,485 was allocated as a debt discount up to the proceeds of the note ($78,500) with the remainder ($51,985) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The Company issued common stock for the conversion of balance note of $121,000.

 

Convertible debenture October 2013, December 2013 and February 2014

 

During the year ended December 30, 2014, the Company issued notes of total a $25,000 Convertible Promissory Note which bears interest at a rate of 8%, due on February 20, 2016 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause.

 

The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $39,722 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			270.02	%
Risk free rate:			0.34	%

 

The initial fair value of the embedded debt derivative of $39,722 was allocated as a debt discount up to the proceeds of the note ($25,000) with the remainder ($14,722) charged to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance as of December 31, 2014 is $4,120.

 

Convertible debenture October 13, 2013:

 

On October 13, 2013, the Company issued a $30,000 Convertible Promissory Note which bears interest at a rate of 6%, due on October 13, 2014 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest five prior trading days immediately preceding the date of conversion. Default rate of interest is 24% per annum.

 

The Company received a net of $26,100 from the convertible note holder; $1,500 was paid towards the legal expenses and $2,400 toward third party fees.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company identified embedded derivatives related to the Convertible Promissory Note entered into in October 2013. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $57,750 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			277	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $57,750 was allocated as a debt discount up to the proceeds of the note ($30,000) with the remainder ($27,750) charged to current period operations as non-cash interest expense for the year ended December 31, 2013.

 

During the year 2014 the Company issued 15,261,282 shares for of common stock to convert note amount of $20,087. The closing balance as of December 31, 2014 is $9,912.

 

Convertible debenture December 2013 and January 2014

 

During the year ended December 31, 2014, the Company issued two notes of total a $228,500 Convertible Promissory Note which bears interest at a rate of 8%, due on July 20, 2014 and January 30, 2015 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the rate of twenty two percent (22%) per annum from the due date thereof until the same is paid (“Default Interest”) and the note also has prepayment penalty clause.

 

The Company identified embedded derivatives related to the Convertible Promissory Note entered into in January 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of the derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $383,457 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			267.19%-268.98	%
Risk free rate:			0.07%-0.10	%

 

The initial fair value of the embedded debt derivative of $383,457 was allocated as a debt discount up to the proceeds of the note ($228,500) with the remainder ($154,957) charged to current period operations as interest expense for the year ended December 31, 2014. The outstanding balance of this note is $115,000 as of December 31, 2014.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Convertible debenture December 12, 2013:

 

On December 12, 2013 one of above note holder assigned its Note of $145,000 to another holder, which bears interest at a rate of 8%, payable on December 12, 2014 and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause. During the year 2013, the Company issued 527,778 shares of company common stock in exchange of convertible note of $12,500.

 

During the year 2014 note amount of $132,000 converted to shares of common stock and outstanding balance as of December 31, 2014 is $0.

 

Convertible debenture January 2, 2014

 

During the year ended December 31, 2014, the Company issued notes of total a $11,209 Convertible Promissory Note which bears interest at a rate of 8%, due on June 2, 2014 and is convertible into the Company’s common stock at the maker’s option, at the conversion rate of 40% of the lowest three day trading price for ten trading days immediately preceding the date of conversion. Any amount of principal or interest on this Note which is not paid when due shall bear interest at the lesser of i) 10 percent (10%) per annum or ii) the maximum rate allowed under the applicable law until paid in full or until the Note is reinstated.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $7,473 and was recorded as debt discount. The outstanding balance on this note is $11,209 as of December 31, 2014.

 

Convertible debentures February 20, 2014:

 

During the year ended December 31, 2014, the Company issued Convertible note of $145,000 for expenses incurred of $40,000 and transfer of loan of $105,000. The Convertible Promissory Note bears interest at a rate of 8%, due on December 30, 2014 is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified Debt discount of $96,667 related to the Convertible Promissory Note issued on February 20, 2014. The accounting treatment of debt discount financial instruments requires that the Company record the Debt discount on notes as of the inception date of the Convertible Promissory note and amortized it over the period of note. The Company has fully amortized $96,667 and charged to current period operations as interest expense for the year ended December 31, 2014.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

During the year 2014 note amount of $145,000 converted to shares of common stock and outstanding balance as of December 31, 2014 is $0.

 

Convertible debentures March 10, 2014 and April 9, 2014:

 

During the year ended December 31, 2014, the Company issued Convertible notes of $6,669 and $2,679 for expenses incurred the Convertible Promissory Notes which bears interest at a rate of 10%, due on April 9, 2014 and May 9, 2014 respectively,are convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified Debt discounts of $6,629 and $1,182 related to the Convertible Promissory Note issued on March 10, 2014 and April 9, 2014 respectively. The accounting treatment of debt discount financial instruments requires that the Company record the Debt discount on notes as of the inception date of the Convertible Promissory note and amortized it over the period of note. The Company has fully amortized $6,629 and $1,182 and charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $6,669 and $2,679.

 

Convertible debentures March 31, 2014:

 

During the year ended December 31, 2014, the Company issued note of $83,500 Convertible Promissory Note which bears interest at a rate of 8%, due on January 2, 2015 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on March 31, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $157,749 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			266.94	%
Risk free rate:			0.10	%

 

The initial fair value of the embedded debt derivative of $157,749 was allocated as a debt discount up to the proceeds of the note ($83,500) with the remainder ($74,249) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $73,310.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Convertible debentures April 1, 2014:

 

During the year ended December 31, 2014, the Company issued note of $93,000 for expenses incurred, the Convertible Promissory Note which bears interest at a rate of 10%, due on September 9, 2014 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 75% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on April 1, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $111,104 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			266.94	%
Risk free rate:			0.05	%

 

The initial fair value of the embedded debt derivative of $111,104 was allocated as a debt discount up to the proceeds of the note ($93,000) with the remainder ($18,104) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $93,000.

 

Convertible debentures April 1, 2014 June 1, 2014 and June 4, 2014:

 

During the year ended December 31, 2014, the Company issued three convertible note of $25,000 each, $50,000 for expenses incurred and $25,000 transfer of loan. One Convertible promissory note bears interest at 16% and other two notes bears interest rate of 10%. The notes of $25,000 each which due September 9, 2014 and December 1, 2014 are convertible into the Company’s common stock at the holder’s option at conversion price of $0.05, and the note of $25,000 which is due on demand is convertible at the conversion rate of 75% of the average of the lowest trading price for five trading days immediately preceding the date of conversion.

 

The Company identified Debt discount of $25,000 each related to the Convertible Promissory Note issued on April 1, 2014 and June 6, 2014. The accounting treatment of debt discount financial instruments requires that the Company record the Debt discount on note as of the inception date of the Convertible Promissory Note and amortized it over the period of note. The Company has fully amortized $50,000 and charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance for these three convertible notes payable as of December 31, 2014 is $25,000 each.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Convertible debentures May 16, 2014:

 

During the year ended December 31, 2014, the Company issued Convertible note of $1,975 for expenses incurred the Convertible Promissory Note which bears interest at a rate of 8%, due on November 16, 2014 is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified Debt discount of $1,391 related to the Convertible Promissory Note issued on May 16, 2014. The accounting treatment of debt discount financial instruments requires that the Company record the Debt discount on notes as of the inception date of the Convertible Promissory note and amortized it over the period of note. The Company has fully amortized $1,391 and charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $1,975.

 

Convertible debentures June 30, 2014:

 

During the year ended December 31, 2014, the Company issued Convertible note of $1,929 for expenses incurred the Convertible Promissory Note which bears interest at a rate of 8%, due on December 30, 2014 is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified Debt discount of $1,417 related to the Convertible Promissory Note issued on June 30, 2014. The accounting treatment of debt discount financial instruments requires that the Company record the Debt discount on notes as of the inception date of the Convertible Promissory note and amortized it over the period of note. The Company has fully amortized $1,417 and charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $1,929.

 

Convertible debentures July 9, 2014:

 

During the year ended December 31, 2014, the Company issued note of $16,056 through transfer of convertible note, accrued interest and miscellaneous loans payable, the Convertible Promissory Note which bears interest at a rate of 10%, due on February 9, 2015 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on July 9, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $20,585 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Dividend yield:			-0-	%
Volatility			294.57	%
Risk free rate:			0.07	%

 

The initial fair value of the embedded debt derivative of $20,585 was allocated as a debt discount up to the proceeds of the note ($16,056) with the remainder ($4,529) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $4,557 after $11,500 converted to shares of common stock during the year ended December 31, 2014.

 

Convertible debentures September 8, 2014:

 

During the year ended December 31, 2014, the Company issued note of $1,890 for expenses incurred, the Convertible Promissory Note which bears interest at a rate of 8%, due on December 30, 2014 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the average of the lowest three day trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on September 8, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $3,150 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			305.21	%
Risk free rate:			0.03	%

 

The initial fair value of the embedded debt derivative of $3,150 was allocated as a debt discount up to the proceeds of the note ($1,890) with the remainder ($1,260) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $1,890.

 

Convertible debenture August 2014 and September 2014

 

During the year ended December 31, 2014, the Company issued notes of total a $58,498 Convertible Promissory Note which bears interest at a rate of 12%, due on November 1, 2014 and is convertible into the Company’s common stock at the holder’s option, at the conversion rate of 60% of the lowest day trading price for ten trading days immediately preceding the date of conversion.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company identified embedded derivatives related to the Convertible Promissory Note entered into in August and September 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $97,497 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			304.14%-309.19	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $97,497 was allocated as a debt discount up to the proceeds of the note ($58,498) with the remainder ($38,998) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The Company repaid these notes in cash during the year ended December 31, 2014.

 

Convertible debentures October 1, 2014:

 

During the year ended December 31, 2014, the Company issued note of $90,000, the Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the lowest trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $150,000 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			309.19	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $150,000 was allocated as a debt discount up to the proceeds of the note ($90,000) with the remainder ($60,000) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $90,000.

 

Convertible debentures October 2014:

 

During the year ended December 31, 2014, the Company issued note of $90,000, the Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the lowest trading price for ten trading days immediately preceding the date of conversion.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $150,000 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			309.19	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $150,000 was allocated as a debt discount up to the proceeds of the note ($90,000) with the remainder ($60,000) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $90,000.

 

Convertible debentures October 1, 2014:

 

During the year ended December 31, 2014, the Company issued note of $14,250 the Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the lowest trading price for ten trading days immediately preceding the date of conversion.

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $23,750 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			309.19	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $23,750 was allocated as a debt discount up to the proceeds of the note ($14,250) with the remainder ($9,500) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $14,250.

 

Convertible debentures October 1, 2014:

 

During the year ended December 31, 2014, the Company issued note of $45,000 the Convertible Promissory Note which bears interest at a rate of 12%, due on January 1, 2015 and is convertible into the Company’s common stock at the holder’s option,at the conversion rate of 60% of the lowest trading price for ten trading days immediately preceding the date of conversion.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on October 1, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $75,000 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			309.19	%
Risk free rate:			0.02	%

 

The initial fair value of the embedded debt derivative of $75,000 was allocated as a debt discount up to the proceeds of the note ($45,000) with the remainder ($30,000) charged to current period operations as interest expense for the year ended December 31, 2014.

 

The outstanding balance as of December 31, 2014 is $45,000.

 

The fair value of the described embedded derivative of $340,825 at December 31, 2014 was determined using the Binomial Lattice Model with the following assumptions:

 

Dividend yield:			-0-	%
Volatility			334.26	%
Risk free rate:			0.00	%

 

At December 31, 2014, the Company adjusted the recorded fair value of the derivative liability to market on both notes resulting in noncash, non-operating gain of $884,692 for the year ended December 31, 2014.

 

During the year ended December 31, 2014 and 2013 the Company amortized $1,325,064 and $462,157, respectively, of beneficial debt discount to the operations as interest expense.

 

Maturities of notes payable are as follows:
Year Ending December 31,		Amount
2015		$	640,499
Total			640,499
Less: Unamortized debt discount			(6,358	)
Total		$	634,141

 

Accrued interest on convertible notes payable for the years ended December 31, 2014 and 2013 was $43,456 and $7,387, respectively.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 9 - CONVERTIBLE NOTES PAYABLE - RELATED PARTIES

 

Convertible Notes payable - related parties consist of the following

		December 31, 2014				December 31, 2013
Convertible note issued in October 2013, unsecured, interest at 8%, due on demand.		$	1,710			$	17,000
Convertible note issued in October 2013, unsecured, interest at 8%, due on demand.			42,470				194,254
Convertible note issued in January 2014, unsecured, interest at 10%, due on demand.			45,000				—
Convertible note issued on April 3, 2014, unsecured, interest at 10%, due on demand.			14,000				—
Convertible note issued on April 1, 2014, unsecured, interest at 10%, due on demand.			45,000				—
Convertible note issued on May 21, 2014, unsecured, interest at 10%, due on demand.			4,000				—
Convertible note issued on June 4, 2014, unsecured, interest at 16%, due on April 1, 2000.			30,542				—
Convertible note issued on July 1, 2014, unsecured, interest at 10%, due on demand.			45,000				—
Convertible note issued on November 5, 2014, unsecured, interest at 10%, due on demand.			4,000				—
Convertible note issued on November 5, 2014, unsecured, interest at 10%, due on demand.			45,000				—
Convertible note issued on December 1, 2014, unsecured, interest at 10%, due on demand.			4,000				—
Total convertible notes payable - related parties			280,722				211,254
Less: current portion			(280,722	)			(211,254	)
Long-term convertible notes payable - related parties		$	—			$	—

 

Convertible debenture October 2013

 

On October 1, 2013 the Company issued a $17,000 Convertible Promissory Note against the accounts payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $15,692 and was recorded as debt discount. During the year ended December 31, 2013, debt discount of $15,692 was amortized.

 

During the year 2014, the Company issued 15,035,714 shares for the Conversion of note of $15,290. The outstanding balance as of December 31, 2014 is $1,710

 

Convertible debenture October 1, 2013

 

On October 2013 the Company issued a $194,254 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $179,312 and was recorded as debt discount. During the year ended December 31, 2013, debt discount of $179,312 was amortized.

 

During the year 2014, the Company issued 340,906,979 shares for the conversion of note of $151,784. The outstanding balance as of December 31, 2014 is $42,470.

 

Convertible debenture January 1, 2014

 

On January 2014 the Company issued a $45,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $45,000 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $45,000 was amortized. The outstanding balance as of December 31, 2014 is $45,000.

 

Convertible debenture April 1, 2014

 

In April 2014 the Company issued a $45,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $30,000 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $30,000 was amortized. The outstanding balance as of December 31, 2014 is $45,000

 

Convertible debenture April 3, 2014

 

In April 2014 the Company issued a $14,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $9,333 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $9,333 was amortized. The outstanding balance as of December 31, 2014 is $14,000

 

Convertible debenture May 21, 2014

 

In May 2014 the Company issued a $4,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $4,000 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $4,000 was amortized. The outstanding balance as of December 31, 2014 is $4,000

 

Convertible debenture June 4, 2014

 

In June 2014 the Company issued a $50,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The Company identified embedded derivatives related to the Convertible Promissory Note issued on June 4, 2014. These embedded derivatives included certain conversion features. The accounting treatment of derivative financial instruments requires that the Company record the fair value of these derivatives as of the inception date of the Convertible Promissory Note and to adjust the fair value as of each subsequent balance sheet date. At the inception of the Convertible Promissory Note, the Company determined a fair value of $46,875 of the embedded derivative. The fair value of the embedded derivative was determined using the Binomial Lattice Model based on the following assumptions:

 

Dividend yield:			-0-	%
Volatility			290.02	%
Risk free rate:			0.00	%

 

The initial fair value of the embedded debt derivative of $46,875 was allocated as a debt discount for the year ended December 31, 2014. During the year ended December 31, 2014, debt discount of $46,875 was amortized.

 

During the year 2014, the Company issued 19,458,498 shares for the conversion of note of $19,458. The outstanding balance as of December 31, 2014 is $30,542

 

Convertible debenture July 1, 2014

 

In July 2014 the Company issued a $45,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $30,000 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $30,000 was amortized. The outstanding balance as of December 31, 2014 is $45,000

 

Convertible debenture November 5, 2014

 

In November 2014 the Company issued a $4,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $2,667 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $2,667 was amortized. The outstanding balance as of December 31, 2014 is $4,000

 

Convertible debenture November 5, 2014

 

In November 2014 the Company issued a $45,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $30,000 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $30,000 was amortized. The outstanding balance as of December 31, 2014 is $45,000

 

Convertible debenture December 1, 2014

 

In December 2014 the Company issued a $4,000 Convertible Promissory Note against the account payable, which bears interest at a rate of 10%, payable on demand and is convertible into the Company’s common stock at the holder’s option at 40% discount to the lowest trading price in five days prior to date of notice of conversion. Additionally in no event the floor price for the exercise can't go below $0.00004. If these notes are converted at this rate, the number of shares issued would be in excess of the authorized limit of share issuance. If the Borrower is unable to issue any shares under this provision due to the fact that there is an insufficient number of authorized and unissued shares available, the Holder promises not to force the Borrower to issue these shares or trigger an Event of Default, provided that Borrower takes

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

immediate steps required to get the appropriate level of approval from shareholders or the board of directors, where applicable to raise the number of authorized shares to satisfy the Notice of Conversion. In the event of default the Company has to pay 150% time the sum of outstanding principal and accrued interest. The note also has prepayment penalty clause.

 

The Company analyzed the convertible debts for derivative accounting consideration under ASC 815 “Derivatives and Hedging” and determined that derivative accounting is not applicable. The Company further analyzed the convertible debts for a beneficial conversion feature under ASC 470-20 on the date of the notes and determined that a beneficial conversion feature exists. The intrinsic value of the beneficial conversion feature was determined to be $2,667 and was recorded as debt discount. During the year ended December 31, 2014, debt discount of $2,667 was amortized. The outstanding balance as of December 31, 2014 is $4,000

 

The fair value of the described embedded derivative of $33,333 at December 31, 2014 was determined using the Binomial Lattice Model with the following assumptions:

 

Dividend yield:			-0-	%
Volatility			334.26	%
Risk free rate:			0.00	%

 

At December 31, 2014, the Company adjusted the recorded fair value of the derivative liability to market on both notes resulting in noncash, non-operating gain of $13,542 for the year ended December 31, 2014.

 

For the year ended December 31, 2014 and 2013, interest expenses charged on the above notes is $38,933 and $4,843, respectively. Accrued interest on convertible notes payable – related parties as of December 31, 2014 and 2013 was $38,933 and $4,843, respectively.

 

During the year ended December 31, 2014 and 2013 the Company amortized $217,886 and $195,004, respectively,of beneficial debt discount to the operations as interest expense.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 10 - NOTES PAYABLE - RELATED PARTIES

 

Notes payable - related parties consist of the following:
		December 31, 2014				December 31, 2013
Note payable to a related individual, secured by tangible and intangible assets of the Company, interest at 16%, principal and interest due April 1, 2000, past due. Note is convertible into common stock of the Company at $0.10 per share. Note is in default (1)		$	—			$	1,087,370
Note payable to a related individual, secured by tangible and intangible assets of the Company, interest at 16%, principal and interest due April 1, 2000, past due. Note is convertible into common stock of the Company at $0.10 per share, Note is in default. (1)			1,080,973				—
Note payable to a related individual, interest at 8%, past due. Note is in default(2)			1,000,000				1,000,000
Notes payable to related individuals, unsecured,interest at 10%, due on demand (3)			28,500				28,500
Notes payable to related individuals, unsecured,interest at 12%, due on demand (4)			28,633				—
Total notes payable - related parties			2,138,106				2,115,870
Less: current portion			(2,138,106	)			(2,115,870	)
Long-term notes payable - related parties		$	—			$	—
Maturities of notes payable - related parties are as follows:
Year Ending December 31,							Amount
2015						$	2,138,106
Total						$	2,138,106

Accrued interest on notes payable – related parties for the years ended December 31, 2014 and 2013 was $380,080 and $250,334, respectively. During the years ended December 31, 2014 and 2013, total interest expense to related party was $197,372 and $207,380, respectively.

 

1)

This note was originally issued for $450,000. During the year ended December 31, 2014, the principle value of $450,000 along with accrued interest of $837,370 was converted to two new notes for $1,087,370 and $200,000. In the year 2013 the Company issued 2,100,000 shares of the common stock against settlement of the new note of $200,000 from above. In the year 2014, the Company issued 3,500,000 shares of common stock for Note value of $35,000 and accrued interest of $6,650. The Balance note along with the balance accrued interest of $130,603 was transferred to another note holder for $1,080,973. The accrued interest as of December 31, 2014 is $134,378.

 

2)

This note was issued for the acquisition of AFI on January 28, 2012. As of December 31, 2014 and 2013, the Company had accrued interest on the note in the amount of $233,863 and $154,082, respectively.

3)

During the year ended December 31, 2013, one of the note holder for $15,000 along with accrued interest of $13,300 transferred its loan to a non- related party. During the year 2013 itself the Company issued 1,800,000 shares of the common stock to settle $28,300 of note of non- related party. Accrued interest as of December 31, 2014 and 2013 is $10,585 and $7,743, respectively.

4)

During the year 2014, the Company issued the note value of $26,000 in cash and $2,632 for expenses incurred. Accrued interest as of December 31, 2014 is $1,255

 

NOTE 11 - COMMON AND PREFERRED STOCK TRANSACTIONS

 

Preferred Stock

The Company is authorized to issue 200 preferred shares of $0.0001 par value. As of December 31, 2014 and 2013 the Company has 200 shares of preferred stock as issued and outstanding. Although the preferred stock carries no dividend, distribution, liquidation or conversion rights, each share of preferred stock carries ten million (10,000,000) votes and holders of our preferred stock are able to vote together with our common stockholders on all matters. Consequently, the holder of our preferred stock is able to unilaterally control the election of our board of directors and, ultimately, the direction of our Company.

 

On February 10, 2014, the Board of Directors of the Company approved an amendment and restatement of the Certificate of Designation to the Company’s Certificate of Incorporation. The Certificate of Designation concerns the rights, preferences, privileges, and restrictions of Series “A” Preferred Stock (the “Preferred Stock”). The amended and restated Certificate of Designation has increased the conversion rights applicable to each share of Preferred Stock from ten million (10,000,000) to twenty million (20,000,000).

 

Common stock

The Company is authorized to issue 2,500,000,000 shares of $0.0001 par value of common stock. As of December 31, 2014 and 2013 the Company had 1,938,172,724 and 37,709,552 shares of common stock as issued and outstanding.

 

On January 28, 2013, we issued an aggregate of 49,951 shares of common stock, valued at $82,419, to employees and consultants of the Company. Also on January 28, 2013, pursuant to our 2012 Equity Incentive Plan, we issued 150,000 common stock purchase options to each of our directors at an exercise price of $1.65 per share.

 

On February 1, 2013, the Company issued a convertible debenture in the principal amount of $100,000 to Peak One.

 

On March 5, 2013, the Company issued a promissory note in the original principal amount of $7,500 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note is convertible at October 5, 2013 to common stock of the Company at a 40% discount to the average of the 3 lowest trading days in the 10 trading days previous to the conversion.

 

On May 31, 2013, the Company issued an aggregate of 254,000 shares of its common stock, valued at $304,800, to certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 1.6% of the issued and outstanding shares of the Company.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On June 10, 2013, the Company issued 45,454 shares of its common stock, valued at $30,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 0.2% of the issued and outstanding shares of the Company.

 

On July 1, 2013, the Company issued a promissory note in the original principal amount of $24,272 (“Note”) to a lender. The Note matures on April 1, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be convertible upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a conversion price equal at market price, or the lowest conversion price previously honored by the Company for any other debt conversion by an investor in 2013.

 

On July 11, 2013, the Company issued 266,134 shares of its common stock, valued at $40,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.7% of the issued and outstanding shares of the Company.

 

On July 16, 2013, the Company issued 448,028 shares of its common stock, valued at $25,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 2.82% of the issued and outstanding shares of the Company.

On July 29, 2013, the Company issued 806,451 shares of its common stock, valued at $15,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.95% of the issued and outstanding shares of the Company.

 

On August 1, 2013, the Company issued 786,163 shares of its common stock, valued at $10,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.6% of the issued and outstanding shares of the Company.

 

On August 2, 2013, the Company issued 864,779 shares of its common stock, valued at $11,000, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 4.83% of the issued and outstanding shares of the Company.

 

On August 6, 2013, the Company issued 75,000 shares of its common stock, valued at $4,500, to a consultant of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 0.4% of the issued and outstanding shares of the Company.

 

On August 8, 2013, the Company issued 300,000 shares of its common stock, valued at $3,816, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.5% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On August 9, 2013, the Company issued 300,000 shares of its common stock, valued at $3,816, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.56% of the issued and outstanding shares of the Company.

 

On August 12, 2013, the Company issued 264,779 shares of its common stock, valued at $3,368, to Peak One in connection with the conversion of a debenture issued by the Company to Peak One in October 2012. The number of shares issued, at the time of such issuance, represented approximately 1.36% of the issued and outstanding shares of the Company.

 

On July 19, 2013, the Company issued a promissory note in the original principal amount of $78,500 (“Note”) to a lender. The Note matures on April 22, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On August 22, 2013, the Company issued an aggregate of 531,438 shares of its common stock, valued at $47,829, to certain employees and consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 2.7% of the issued and outstanding shares of the Company.

 

On August 22, 2013, the Company issued 2,017,036 shares of unregistered common stock to an accredited investor in exchange for cash in the amount of $137,985. The number of shares issued, at the time of such issuance, represented approximately 9.98% of the issued and outstanding shares of the Company.

 

On August 26, 2013, the Company issued a promissory note in the original principal amount of $53,000 (“Note”) to a lender. The Note matures on May 27, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On August 29, 2013, the Company entered into a Settlement Agreement with a certain creditor and agreed to convert various loans and promissory notes in the collective amount of $933,000 into an aggregate of 5,480,000 shares of common stock of the Company. The number of shares issued, at the time of such issuance, represented approximately 23.06% of the issued and outstanding shares of the Company.

 

On October 1, 2013, the Company converted outstanding invoices of the Company in the aggregate amount of $211,254.30 to 2 promissory notes in the original principal amounts of $17,000, and $194,254.30 (the “Notes”) to two consultants of the Company. The Notes are due upon demand, and carry an interest rate of 10% per annum. The Notes at the election of the lender are convertible into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On October 2, 2013, the Company recorded a $35,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

interest rate in the first 90 days of 0 percent, thereafter a one-time interest charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On October 4, 2013, the Company issued a promissory note in the original principal amount of $6,000 (“Note”) to a lender. The Note matures on November 4, 2013 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading days in the ten trading days previous to the conversion.

 

On October 13, 2013, the Company issued a promissory note in the original principal amount of $30,000 (“Note”) to a lender. The Note matures on October 13, 2014 and carries an interest rate of 6% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to conversion.

 

On October 23, 2013, the Company issued a promissory note in the original principal amount of $42,500 (“Note”) to a lender. The Note matures on July 25, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On October 23, 2013, the Company issued an aggregate of 2,100,000 shares of its common stock, valued at $708,500, to officers and directors, and certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 7.5% of the issued and outstanding shares of the Company.

 

On October 30, 2013, pursuant to the terms of a settlement agreement, the Company issued an additional 500,000 shares of common stock, valued at $35,000. The number of shares issued, at the time of such issuance, represented approximately 1.67% of the issued and outstanding shares of the Company.

 

On November 20, 2013, the Company issued an aggregate of 5,075,713 shares of its common stock, valued at $355,300, to certain employees and contract personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 16.74% of the issued and outstanding shares of the Company.

 

On November 21, 2013, the Company converted into 1,800,000 shares of common stock, valued at $28,300, a certain promissory note originally issued by the Company on December 7, 2004. The number of shares issued, at the time of such issuance, represented approximately 5.08% of the issued and outstanding shares of the Company.

 

On December 9, 2013, the Company recorded an additional $20,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial interest rate in the first 90 days of 0 percent, thereafter a one-time interest

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On December 12, 2013, the Company issued a promissory note in the original principal amount of $61,500 (“Note”) to a lender. The Note matures on December 12, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On December 12, 2013, the Company issued a promissory note in the original principal amount of $145,000 (“Note”) to a lender. The Note matures on December 12, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On December 13, 2013, the Company issued a promissory note in the original principal amount of $810 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading days in the ten trading days previous to the conversion.

 

On December 16, 2013, the Company converted into 250,000 shares of common stock, valued at $7,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 0.6% of the issued and outstanding shares of the Company.

 

On December 30, 2013, the Company converted into 277,778 shares of common stock, valued at $5,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 0.7% of the issued and outstanding shares of the Company.

 

On January 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amounts of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On January 13, 2014, the Company issued an aggregate of 2,859,067 shares of its common stock, valued at $200,135, to certain consulting personnel for services provided. The number of shares issued, at the time of such issuance, represented approximately 7.26% of the issued and outstanding shares of the Company.

 

On January 14, 2014, the Company converted into 1,660,026 shares of common stock, valued at $25,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.4% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On January 22, 2014, the Company issued a Note in the original principal amount of $212,500. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date. The net proceeds of the Note were used to redeem and retire two 8% convertible notes that were issued to Asher Enterprises, Inc. in the aggregate principal amount of $131,500 (hereafter, collectively, the “Asher Notes”) The Asher Notes were issued on July 19th, 2013 and August 26th, 2013.

 

On January 27, 2014, the Company converted into 809,067 shares of common stock, valued at 25,245, a loan originally received by the Company on July 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.95% of the issued and outstanding shares of the Company.

 

On January 29, 2014, the Company converted into 1,166,667 shares of common stock, valued at $17,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 2.76% of the issued and outstanding shares of the Company.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $16,000 (“Note”) to a lender. The Note matures on January 30, 2015 and carries an interest rate of 8% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $78,500 (“Note”) to a lender. The Note matures on November 3, 2014 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On January 30, 2014, the Company issued a promissory note in the original principal amount of $11,209 (“Note”) to a lender. The Note matures on June 2, 2014 and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the market.

 

On February 10, 2014, the Company converted into 1,237,624 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 2.85% of the issued and outstanding shares of the Company.

 

On February 18, 2014, the Company converted into 1,470,588 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 3.29% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On February 20, 2014, the Company recorded an additional $25,000 draw down and consideration in respect of a credit line and associated promissory note in the original principal amount of $300,000 (“Note”). The Maturity Date is two years from the effective date of each draw down (“Maturity Date”). The Note carries an initial interest rate in the first 90 days of 0 percent, thereafter a one-time interest charge of 12% will apply. The Note shall at the Maturity Date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at 60% of the average of the two lowest trade prices in the 25 trading days previous to the conversion.

 

On March 3, 2014, the Company issued 1,000,000 shares of its common stock, valued at $20,000, to a consultant of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 2.16% of the issued and outstanding shares of the Company.

 

On March 4, 2014, the Company converted into 2,083,333 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.42% of the issued and outstanding shares of the Company.

 

On March 5, 2014, the Company issued a promissory note in the original principal amount of $10,000 (“Note”) to a lender. The Note matures on September 5, 2014 and carries an interest rate of 8% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On March 17, 2014, the Company converted into 2,210,884 shares of common stock, valued at $13,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.49% of the issued and outstanding shares of the Company.

 

On March 31, 2014, the Company converted into 2,529,762 shares of common stock, valued at $17,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.92% of the issued and outstanding shares of the Company.

 

On April 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On April 1, 2014, the Company issued a promissory note in the original principal amounts of $25,000 (the “Note”) to a consultant of the Company for services rendered. The Note carries an interest rate of 10% per annum, and at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a conversion price of $0.005 per share.

 

On April 1, 2014, the Company issued a promissory note in the original principal amounts of $93,000 (the “Note”) to a consultant of the Company for services rendered. The Note carries an interest rate of 10% per annum, and at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 25% discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On April 1, 2014, the Company converted into 744,048 shares of common stock, valued at $5,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.37% of the issued and outstanding shares of the Company.

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $145,000 (“Note”) to a lender. The Note carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $6,669 (“Note”) to a lender. The Note matures on May 1, 2014 and carries an interest rate of 10% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On April 1, 2014, the Company issued a promissory note in the original principal amount of $83,500 (“Note”) to a lender. The Note matures on January 2, 2015 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the ten trading days previous to the conversion date.

 

On April 3, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $14,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On April 7, 2014, the Company converted into 1,200,000 shares of common stock, valued at $20,640, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.19% of the issued and outstanding shares of the Company.

 

On April 8, 2014, the Company converted into 1,070,205 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.91% of the issued and outstanding shares of the Company.

 

On April 9, 2014, the Company converted into 3,656,379 shares of common stock, valued at $18,434, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 6.42% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On April 9, 2014, the Company issued a promissory note in the original principal amount of $2,679.16 (“Note”) to a lender. The Note matures on May 9, 2014 and carries an interest rate of 10% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On April 28, 2014, the Company converted into 2,400,000 shares of common stock, valued at $16,560, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.96% of the issued and outstanding shares of the Company.

 

On May 2, 2014, the Company converted into 3,125,000 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.96% of the issued and outstanding shares of the Company.

 

On May 2, 2014, the Company converted into 2,500,000 shares of common stock, valued at $16,500, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.78% of the issued and outstanding shares of the Company.

 

On May 6, 2014, the Company converted into 6,854,167 shares of common stock, valued at $71,333, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 9.98% of the issued and outstanding shares of the Company.

 

On May 6, 2014, the Company converted into 3,125,000 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.14% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 5,630,630 shares of common stock, valued at $12,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 7.16% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 3,400,000 shares of common stock, valued at $13,600, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.03% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 3,400,000 shares of common stock, valued at $38,114, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.87% of the issued and outstanding shares of the Company.

 

On May 7, 2014, the Company converted into 995,833 shares of common stock, valued at $12,846, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.09% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On May 8, 2014, the Company converted into 4,504,504 shares of common stock, valued at $9,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 4.89% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 5,000,000 shares of common stock, valued at $36,100, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.17% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 3,041,667 shares of common stock, valued at $22,813, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.9% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 4,750,000 shares of common stock, valued at $29,925, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.54% of the issued and outstanding shares of the Company.

 

On May 9, 2014, the Company converted into 3,500,000 shares of common stock, valued at 35,000, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 3.2% of the issued and outstanding shares of the Company.

 

On May 12, 2014, the Company issued 500,000 shares of its common stock, valued at $2,150, to a director of the Company for services provided. The number of shares issued, at the time of such issuance, represented approximately 0.4% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 3,500,000 shares of common stock, valued at $22,085, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.08% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company issued 500,000 shares of restricted common stock, valued at $50,000, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 0.42% of the issued and outstanding shares of the Company.

 

On May 15, 2014, the Company converted into 9,615,384 shares of common stock, valued at $15,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 8.19% of the issued and outstanding shares of the Company.

 

On May 16, 2014, the Company issued a promissory note in the original principal amount of $1,975 (“Note”) to a lender. The Note matures on November 16, 2014 and carries an interest rate of 8% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40%discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On May 19, 2014, the Company issued 500,000 shares of restricted common stock, valued at $50,000, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 0.3% of the issued and outstanding shares of the Company.

 

On May 21, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $4,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On May 22, 2014, the Company converted into 4,166,667 shares of common stock, valued at $7,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.26% of the issued and outstanding shares of the Company.

 

On May 23, 2014, the Company converted into 3,505,263 shares of common stock, valued at $14,722, a portion of a certain convertible promissory note originally issued by the Company on October 23, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.66% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 3,750,000 shares of common stock, valued at $16,688, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.77% of the issued and outstanding shares of the Company.

 

On May 15, 2014, the Company converted into 9,567,901 shares of common stock, valued at $15,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 6.89% of the issued and outstanding shares of the Company.

 

On May 13, 2014, the Company converted into 5,044,270 shares of common stock, valued at $9,940, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.31% of the issued and outstanding shares of the Company.

 

On May 30, 2014, the Company converted into 4,461,282 shares of common stock, valued at $25,250, a portion of a loan originally received by the Company on October 14, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.84% of the issued and outstanding shares of the Company.

 

On May 30, 2014, the Company converted into 1,050,410 shares of common stock, valued at $3,151, a loan originally received by the Company on August 13, 2013. The number of shares issued, at the time of such issuance, represented approximately 0.65% of the issued and outstanding shares of the Company.

 

On June 3, 2014, the Company converted into 6,987,877 shares of common stock, valued at $12,578, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.29% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On June 3, 2014, the Company converted into 16,025,641 shares of common stock, valued at $25,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.45% of the issued and outstanding shares of the Company.

 

On May 19, 2014, the Company issued 2,000,000 shares of restricted common stock, valued at $7,800, to a consultant for services rendered. The number of shares issued, at the time of such issuance, represented approximately 1.07% of the issued and outstanding shares of the Company.

 

On June 11, 2014, the Company converted into 17,948,718 shares of common stock, valued at $28,000, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.56% of the issued and outstanding shares of the Company.

 

On June 11, 2014, the Company converted into 8,000,000 shares of common stock, valued at 42,080, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.89% of the issued and outstanding shares of the Company.

 

On June 12, 2014, the Company converted into 8,240,741 shares of common stock, valued at $13,350, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.85% of the issued and outstanding shares of the Company.

 

On June 23, 2014, the Company converted into 18,055,556 shares of common stock, valued at $19,500, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 8.13% of the issued and outstanding shares of the Company.

 

On June 26, 2014, the Company converted into 4,545,455 shares of common stock, valued at 6,354, a portion of a certain convertible promissory note originally issued by the Company on October 4, 2013. The number of shares issued, at the time of such issuance, represented approximately 1.89% of the issued and outstanding shares of the Company.

 

On June 27, 2014, the Company converted into 6,437,879 shares of common stock, valued at $8,498, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 2.63% of the issued and outstanding shares of the Company.

 

On June 30, 2014, the Company issued a promissory note in the original principal amount of $1,928.50 (“Note”) to a lender. The Note matures on December 30, 2014 and carries an interest rate of 8% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On July 1, 2014, the Company converted outstanding invoices of the Company into a promissory note in the original principal amount of $45,000 (the “Note”) to a consultant of the Company. The Note is due upon demand, and carries an interest rate of 10% per annum. The Note at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount from the lowest trading price in the five (5) days prior to the day that the Holder requests conversion.

 

On July 14, 2014, the Company converted into 24,057,318 shares of common stock, valued at $18,360, a portion of a loan originally received by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 9.59% of the issued and outstanding shares of the Company.

 

On July 14, 2014, the Company converted into 15,517,241 shares of common stock, valued at 27,000, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 5.64% of the issued and outstanding shares of the Company.

 

On July 15, 2014, the Company converted into 14,202,945 shares of common stock, valued at $10,266, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.66% of the issued and outstanding shares of the Company.

 

On July 15, 2014, the Company converted into 14,291,666 shares of common stock, valued at $10,290, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.69% of the issued and outstanding shares of the Company.

 

On July 17, 2014, the Company converted into 25,757,576 shares of common stock, valued at $76,242, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 8.07% of the issued and outstanding shares of the Company.

 

On July 18, 2014, the Company converted into 8,400,000 shares of common stock, valued at $28,224, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.43% of the issued and outstanding shares of the Company.

 

On July 22, 2014, the Company converted into 16,428,571 shares of common stock, valued at $13,800, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.65% of the issued and outstanding shares of the Company.

 

On July 23, 2014, the Company converted into 13,047,619 shares of common stock, valued at $10,960, a portion of a certain convertible promissory note originally issued by the Company in February, 2000. The number of shares issued, at the time of such issuance, represented approximately 3.53% of the issued and outstanding shares of the Company.

 

On July 24, 2014, the Company converted into 21,323,529 shares of common stock, valued at $35,824, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.57% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On July 24, 2014, the Company converted into 6,944,444 shares of common stock, valued at $5,000, a portion of a certain convertible promissory note originally issued by the Company on March 21, 2012. The number of shares issued, at the time of such issuance, represented approximately 1.71% of the issued and outstanding shares of the Company.

 

On July 24, 2014, the Company converted into 10,401,348 shares of common stock, valued at $14,458, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.53% of the issued and outstanding shares of the Company.

 

On July 30, 2014, the Company converted into 37,037,037 shares of common stock, valued at $45,926, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 8.79% of the issued and outstanding shares of the Company.

 

On August 6, 2014, the Company converted into 21,851,852 shares of common stock, valued at $11,800, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.76% of the issued and outstanding shares of the Company.

 

On August 6, 2014, the Company converted into 45,740,741 shares of common stock, valued at $75,015 a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 9.52% of the issued and outstanding shares of the Company.

 

On August 11, 2014, the Company converted into 26,812,500 shares of common stock, valued at $42,175, a portion of a certain convertible promissory note originally issued by the Company on December 12, 2013. The number of shares issued, at the time of such issuance, represented approximately 5.09% of the issued and outstanding shares of the Company.

 

On August 11, 2014, the Company converted into 45,740,741 shares of common stock, valued at $56,719, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 8.27% of the issued and outstanding shares of the Company.

 

On August 12, 2014, the Company converted into 15,131,579 shares of common stock, valued at $11,500, a portion of a certain convertible promissory note originally issued by the Company on March 5, 2013. The number of shares issued, at the time of such issuance, represented approximately 2.52% of the issued and outstanding shares of the Company.

 

On August 13, 2014, the Company converted into 29,761,905 shares of common stock, valued at $12,500, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.85% of the issued and outstanding shares of the Company.

 

On August 19, 2014, the Company converted into 16,666,667 shares of common stock, valued at $28,000, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 2.59% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On August 20, 2014, the Company converted into 36,826,054 shares of common stock, valued at $31,670, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 5.58% of the issued and outstanding shares of the Company.

 

On August 22, 2014, the Company converted into 24,888,889 shares of common stock, valued at $22,933, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.57% of the issued and outstanding shares of the Company.

 

On August 22, 2014, the Company converted into 62,500,000 shares of common stock, valued at $43,753, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 8.66% of the issued and outstanding shares of the Company.

 

On August 22, 2014, the Company converted into 52,729,500 shares of common stock, valued at $36,934, a portion of a certain convertible promissory note originally issued by the Company on January 30, 2014. The number of shares issued, at the time of such issuance, represented approximately 6.72% of the issued and outstanding shares of the Company.

 

On August 25, 2014, the Company converted into 40,476,190 shares of common stock, valued at $17,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.83% of the issued and outstanding shares of the Company.

 

On August 29, 2014, the Company issued a promissory note in the original principal amount of $7,000 (“Note”) to a lender. The Note matures on November 1, 2014 and carries an interest rate of 12% per annum. The Note, at the election of the lender is convertible into fully paid and non-assessable shares of common stock of the Company at a 40% discount to the average of the three lowest trading days in the ten trading days previous to the conversion.

 

On September 2, 2014, the Company converted into 30,833,333 shares of common stock, valued at $19,606, a portion of a certain convertible promissory note originally issued by the Company on October 5, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.51% of the issued and outstanding shares of the Company.

 

On September 10, 2014, the Company converted into 62,500,000 shares of common stock, valued at $37,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 6.88% of the issued and outstanding shares of the Company.

 

On September 10, 2014, the Company converted into 76,923,077 shares of common stock, valued at $34,308, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.92% of the issued and outstanding shares of the Company.

 

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On September 17, 2014, the Company converted into 48,000,000 shares of common stock, valued at 32,640, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.58% of the issued and outstanding shares of the Company.

 

On September 18, 2014, the Company converted into 53,720,027 shares of common stock, valued at $14,000, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.9% of the issued and outstanding shares of the Company.

 

On September 18, 2014, the Company converted into 50,000,000 shares of common stock, valued at $21,000, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.35% of the issued and outstanding shares of the Company.

 

On September 26, 2014, the Company converted into 95,000,000 shares of common stock, valued at $28,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.92% of the issued and outstanding shares of the Company.

 

On September 30, 2014, the Company converted into 63,583,333 shares of common stock, valued at $7,630, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.91% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 100,000,000 shares of common stock, valued at 30,000, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 7.36% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 53,000,000 shares of common stock, valued at $19,080, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.63% of the issued and outstanding shares of the Company.

 

On October 7, 2014, the Company converted into 74,166,666 shares of common stock, valued at $8,900, a portion of a certain convertible promissory note originally issued by the Company on October 1, 2013. The number of shares issued, at the time of such issuance, represented approximately 4.9% of the issued and outstanding shares of the Company.

 

On October 8, 2014, the Company converted into 51,000,000 shares of common stock, valued at $18,360, a portion of a certain convertible promissory note originally issued by the Company on October 2, 2013. The number of shares issued, at the time of such issuance, represented approximately 3.21% of the issued and outstanding shares of the Company.

 

On October 3, 2014, the Company converted into 67,000,000 shares of common stock, valued at $13,400, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 4.09% of the issued and outstanding shares of the Company.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

On October 16, 2014, the Company converted into 32,083,333 shares of common stock, valued at $5,133, a portion of a certain convertible promissory note originally issued by the Company on March 31, 2014. The number of shares issued, at the time of such issuance, represented approximately 1.88% of the issued and outstanding shares of the Company.

 

On October 16, 2014, the Company converted into 52,833,333 shares of common stock, valued at $8,454, a portion of a certain convertible promissory note originally issued by the Company on March 31, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.04% of the issued and outstanding shares of the Company.

 

On October 17, 2014, the Company converted into 62,500,000 shares of common stock, valued at 12,500, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 3.49% of the issued and outstanding shares of the Company.

 

On October 24, 2014, the Company converted into 84,916,667 shares of common stock, valued at $13,587, a portion of a certain convertible promissory note originally issued by the Company on January 21, 2014. The number of shares issued, at the time of such issuance, represented approximately 4.39% of the issued and outstanding shares of the Company.

 

NOTE 12 - OPTIONS AND WARRANTS

 

The Company has adopted FASB ASC 718, “Share-Based Payments” (“ASC 718”) to account for its stock options. The Company estimates the fair value of each stock award at the grant date by using the Black-Scholes option pricing model. The assumptions used to calculate the fair value of options granted are evaluated and revised, as necessary, to reflect market conditions and our experience. Compensation expense is recognized only for those options expect to vest, with forfeitures estimated at the date of grant based on our historical experience and future expectations.

 

The following table summarizes the changes in options outstanding issued to employees of the Company:

				Number of Shares				Weighted Average Exercise Price
	Outstanding as of January 1, 2013				70,000			$	0.01
	Granted				300,000				1.65
	Exercised				—				—
	Cancelled				—				—
	Outstanding at December 31, 2013				370,000			$	1.34
	Granted				—				—
	Exercised				—				—
	Cancelled				—				—
	Outstanding at December 31, 2014				370,000			$	1.34

 

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Common stock options outstanding and exercisable as of December, 2014 are:

 

		Options Outstanding												Options Exercisable
Expiration Date		Exercise Price				Number shares outstanding				Weighted Average Contractual Life (Years)				Number Exercisable				Weighted Average Exercise Price
October  1, 2018		$	0.01				70,000				4.75				65,000			$	0.01
January 2, 2019			1.65				300,000				5.00				218,630			$	1.65
Total							370,000								283,630

 

On January 28, 2013, pursuant to its 2012 Equity Incentive Plan, the Company issued 150,000 common stock purchase options to each of their directors at an exercise price of $1.65 per share. Out of which 75,000 were immediately vested and balance vesting over three years and expiring six years from issuance date.

 

The fair value of the vested portion (determined as described below) of $138,002 and $249,643 was charged to expenses and additional paid in capital during the year ended December 31, 2014 and 2013, respectively.

 

The fair value of these stock options granted and the significant assumptions used to determine those fair values, using a Black-Scholes option-pricing model are as follows:

 

Significant assumptions:
Risk-free interest rate at grant date			1.04%-0.89	%
Expected stock price volatility			199.38%-344.22	%
Expected dividend payout			—
Expected option life-years			6

 

NOTE 13 - RELATED PARTY TRANSACTIONS

 

From time to time, an officer of the Company and an entity they owns paid for expenses of the Company for which he has not been reimbursed. These unreimbursed expenses are disclosed as due to related parties. The balance due at December 31, 2014 and 2013 was 52,973 and $56,973, respectively.

 

During the year ended December 31, 2014 and 2013, the Company issued -0- and 1,826,622 shares to a major shareholder and Vice President of Sales of the Company, for services rendered to the Company regarding business in South Africa which was fair valued at market rate for $-0- and $247,733, respectively.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

NOTE 14 - FAIR VALUE OF FINANCIAL INSTRUMENTS

 

ASC 825-10 defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities required or permitted to be recorded at fair value, the Company considers the principal or most advantageous market in which it would transact and considers assumptions that market participants would use when pricing the asset or liability, such as inherent risk, transfer restrictions, and risk of nonperformance. ASC 825-10 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 825-10 establishes three levels of inputs that may be used to measure fair value: 

   

Level 1 - Quoted prices in active markets for identical assets or liabilities.

 

Level 2 - Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets with insufficient volume or infrequent transactions (less active markets); or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated by observable market data for substantially the full term of the assets or liabilities.

 

Level 3 - Unobservable inputs to the valuation methodology that are significant to the measurement of fair value of assets or liabilities.

 

To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is disclosed is determined based on the lowest level input that is significant to the fair value measurement.

 

Items recorded or measured at fair value on a recurring basis in the accompanying consolidated financial statements consisted of the following items as of December 31, 2014:

 

						Fair Value Measurements at December 31, 2014 using:
		December 31, 2014				Quoted Prices in Active Markets for Identical Assets (Level 1)				Significant Other Observable Inputs (Level 2)				Significant Unobservable Inputs (Level 3)
Liabilities:
Debt Derivative liabilities		$	372,939				—				—			$	372,939

 

The debt derivative  and warrant liabilities are measured at fair value using quoted market prices and estimated volatility factors based on historical prices for the Company’s common stock and are classified within Level 3 of the valuation hierarchy.

 

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

The following table provides a summary of changes in fair value of the Company’s Level 3 financial liabilities as of December 31, 2014 and 2013:

 

		Debt Derivative Liability
Balance, December 31, 2012		$	265,589
Initial fair value of debt derivatives at note issuances			860,708
Extinguished derivative liability			(334,082	)
Mark-to-market at December 31, 2013 - Embedded debt derivatives			(233,667	)
Balance, December 31, 2013		$	558,548
Initial fair value of debt derivatives at note issuances			1,389,373
Extinguished derivative liability			(676,748	)
Mark-to-market at December 31, 2014 - Embedded debt derivatives			(898,234	)
Balance, December 31, 2014		$	372,939
Net gain for the period included in earnings relating to the liabilities held at December 31, 2014		$	898,234

 

Level 3 Liabilities are comprised of our bifurcated convertible debt features on Companies our convertible notes.

 

NOTE 15 - COMMITMENTS AND CONTINGENCIES

 

Litigation

 

The Company is subject to certain legal proceedings and claims, which arise in the ordinary course of its business. Although occasional adverse decisions or settlements may occur, the Company believes that the final disposition of such matters should not have a material adverse effect on its financial position or results of operations.

 

Ryan International Airlines.

One of the Companies subsidiaries, Aviation Fuel International ("AFI") is involved in disputes with two airlines: Ryan International Airlines, LLC ("Ryan") and Direct Air. Both aviation fuel customers litigation arise out of disputed amounts for the delivery of Jet Fuel. Disagreements between the parties resulted in both parties filing separate lawsuits in three actions. Ryan filed a cause of action in Case No. 09-57580, Ryan International Airlines, Inc. v. Aviation Flight Services, LLC (“AFS”) and Aviation Fuel International, Inc., (“AFI”), and sought recovery of $1,491,308.66 allegedly paid to AFS as pre-payment of aviation fuel and flight services under a contractual relationship between Ryan and AFS. AFI moved to dismiss the action, to which, Ryan has subsequently filed a notice of removal to the Federal District Court for the Northern District of Illinois, Bankruptcy Division Case No.: 12-80802. AFI filed an action for breach of contract for Ryan’s failure to pay certain Jet Fuel invoices for the delivery of fuel in the amount of $678,000; Aviation Fuel International v. Ryan International Airlines, Inc., a Kansas corporation, Wells Fargo Bank Northwest, Trustee N.A., a Utah corporation, RUBLOFF 757-MSN24794LLC, an Illinois limited liability company, RYAN 767 LLC, an Illinois limited liability company, AFT TRUST SUB I, a Delaware corporation, RYAN 767 N123 LLC, an Illinois limited liability company, and RUBLOFF 440 LLC, an Illinois corporation, Civil Action Case No. CACE 10-037788-04. AFI also filed the corresponding claims of liens under the FAA Aircraft Registration Branch, for each plane, registered and

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

tail wing number listed therein. This action has also been recently noticed for been removal to the Federal District Court for the Northern District of Illinois, Bankruptcy Division Case No.: 12-80802. In addition, as a result of Ryan’s filing a Federal Involuntary Bankruptcy Petition against Aviation Flight Services (“AFS”) on June 10, 2010, Case No.: 10-27313-JKO, (S.D. of Fla.), our subsidiary AFI, also filed and was discharged as a creditor in the amount of $269,000.

 

Southern Sky Air Tours, d/b/a Myrtle Beach Direct Air and Tours (Direct Air).

On or about March 13, 2012, Southern Sky Air Tours, d/b/a Myrtle Beach Direct Air and Tours (“Direct Air”) ― a public charter operator ― ceased operations. Direct Air has subsequently filed for bankruptcy protection in the U.S. Bankruptcy Court for the District of Massachusetts (Worcester)(Case no. 12-40944). The Direct Air currently has $122,000 in cash in escrow with Suntrust Bank, representing a partial payment by Direct Air for Fuel. This amount was unrecorded in the Company’s financial statements because it has been challenged by the debtor and has been sequestered by the bankruptcy court in the proceeding. This action is currently pending before the court, as it relates to the collection of the garnishment.

 

As a result of the non-payment for jet fuel by AFI customers, certain of AFI’s suppliers have filed actions that have resulted in judgment and garnishments, in the amount of $330,000. Most of these outstanding fuel delivery charges are secured in, and being challenged through, the Bankruptcy action through the lien filings by both the issuer and individual fuel providers. In addition, AFI incurred certain loan and debt obligations for which the Company are attempting to convert into our common stock.

 

Julian Manuel Leyva and Gabriel Leyva.

On June 8, 2012, Julian Manuel Leyva and Gabriel Leyva (collectively, the “Leyvas”) filed a lawsuit in the Seventeenth Judicial Circuit Court, Broward County, Florida, against us, our subsidiary AFI, and various others, alleging various claims in connection with efforts to collect sums allegedly loaned to AFI between September 24, 2009 through February 11, 2011. The Leyvas are seeking damages of $570,000 plus interest in addition to additional damages from other parties to the lawsuit. $610,000 has been accounted as payable under note payable. During the year 2013 the Company issued 2,100,000 shares of common stock for settlement of $610,000.

 

Russell Adler.

On January 11, 2013, Russell Adler, our former Chief Executive Officer, filed a cross-complaint against the Company, AFI, and other associated persons in the Seventeenth Judicial District Court, Broward County, Florida. Mr. Adler’s complaint alleges various causes of action, including indemnification from the Company in respect of litigation involving the Leyvas described above, damages for breach of Mr. Adler’s employment contract, fraud, unpaid legal fees, unjust enrichment, and quantum meruit. The Company believes Mr. Adler’s claims are without merit and intend to defend the same.

 

From time to time, the Company is also a party to certain legal proceedings incidental to the normal course of our business including the enforcement of our rights under contracts with purchasers and suppliers of fuel. While the outcome of these legal proceedings cannot at this time be predicted with certainty, we do not expect that these proceedings will have a material effect upon its consolidated financial condition or results of operations.

 

Lease Commitments

 

The Company’s headquarters is located in Fort Lauderdale, Florida. Many administrative functions such as accounting and legal are performed in an office in Draper, UT.

FUELSTREAM, INC.

Notes to the Consolidated Financial Statements

December 31, 2014 and 2013

 

Future minimum lease and related payments are as follows:

 

2015		$	-
2016		-
2017		-
2018 and after		-

 

The Company’s main office is located in Fort Lauderdale, Florida. The lease had a term of 12 months, which began on August 1, 2012 and expires on July 31, 2014.  The Company currently pays rent and related costs of approximately $6,575 per month.

 

There is no lease obligation in its administrative office in Draper, Utah as only accounting and legal functions are performed there.

 

NOTE 16 - SUBSEQUENT EVENTS

 

On December 8, 2014, the board of directors and the holders of a majority in interest of our voting capital stock approved a 1-for-2,000 reverse split of our common shares (“Reverse Split”). The Reverse Split is still pending and has yet to be declared effective by FINRA.

 

On January 6, 2015, the Company issued a convertible promissory note in the original principal amount of $6,000 (“Note”) to a lender. The Note matures on October 10, 2015 and carries an interest rate of 8% per annum. The Note shall at the maturity date, be due and payable in full unless converted partially or in its entirety upon the election of the lender into fully paid and non-assessable shares of Common Stock of the Company at a 50% discount to the average of the three lowest daily trading prices as reported on the OTCQB for the twenty trading days previous to the conversion date.

 

 

 

 

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

On March 19, 2013, we dismissed our previous independent accountant, Morrill & Associates, LLC (“Morrill”), due to rules of the Public Company Accounting Oversight Board requiring the rotation of the audit partner principally responsible for the audit of our financial statements after a 5-year period. Because Morrill is a single-partner audit firm, we were required to seek new independent auditors for the Company. Our Board of Directors approved the decision to change the Company’s independent accountants.

 

During the year ended December 31, 2011 through to March 19, 2013, the date of Morrill’s dismissal, there were no disagreements with Morrill on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which disagreements, if not resolved to the satisfaction of Morrill would have caused it to make reference to the subject matter of the disagreements in connection with its report.

 

Also on March 19, 2013, we engaged RBSM LLP (“RBSM”), independent registered accountants, as our independent accountant following the dismissal of Morrill. Prior to the engagement of RBSM, the Company has not consulted with RBSM regarding either:

 

a)

the application of accounting principles to a specified transaction, either completed or proposed; or the type of audit opinion that might be rendered on the Company's financial statements, and neither a written report was provided to the Company nor oral advice was provided that RBSM concluded was an important factor considered by the Company in reaching a decision as to the accounting, auditing or financial reporting issue; or

 

b)

any matter that was either the subject of a disagreement (as that term is defined in Item 304(a)(1)(iv) of Regulation S-K and the related instructions to Item 304 of Regulation S-K), or a "reportable event" (as that term is defined in Item 304(a)(1)(v) of Regulation S-K).

 

We have not had any disagreements with any of our existing accountants during the past two fiscal years.

 

ITEM 9A. CONTROLS AND PROCEDURES

 

(a)   We maintain a system of controls and procedures designed to ensure that information required to be disclosed by us in reports that we file or submit under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within time periods specified in the SEC’s rules and forms and to ensure that information required to be disclosed by us in the reports that we file or submit under the Securities Exchange Act of 1934, as amended, is accumulated and communicated to our management, including our Chief Executive Officer and Principal Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. As of December 31, 2014, under the supervision and with the participation of our Chief Executive Officer and Principal Financial Officer, management has evaluated the effectiveness of the design and operation of our disclosure controls and procedures. Based on that evaluation, the Chief Executive Officer and Principal Financial Officer concluded that our disclosure controls and procedures were not effective.

 

As permitted by applicable SEC rules, this report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report, which is included in Item 8 above, was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

 

 

(b)   There were no changes in our internal control over financial reporting during the year ended December 31, 2014 that materially affected, or is reasonably likely to materially affect, our internal controls over financial reporting.

 

MANAGEMENT’S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING

 

Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) under the Exchange Act.

 

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:

 

-

Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and disposition of assets;

 

-

Provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our directors; and

 

-

Provide reasonable assurance regarding prevention and timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on our financial statements.

 

Internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems that are determined to be effective provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

 

Management assessed the effectiveness of our internal control over financial reporting based on criteria for effective internal control over financial reporting described in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission as determined to apply to a company our size.

 

Based on its assessment, management concluded that we maintained effective internal control over financial reporting as of December 31, 2014.

 

ITEM 9B. OTHER INFORMATION.

 

None.

PART III

 

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

 

Board of Directors

Our board of directors consists of the following one individual:

Name and Year First Elected Director(1)		Age		Background Information
John D. Thomas (2014)		43		Mr. Thomas, age 43, has practiced law specializing in general corporate law, securities, and mergers and acquisitions for his law firm, John D. Thomas P.C. since June, 2003. From April 3, 2014 to July 10, 2014, Mr. Thomas served as the Company’s interim Chief Executive Officer and Secretary. From September, 2013 through December, 2013, Mr. Thomas served on the Board of Directors of Helmer Directional Drilling Corp, a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. From March 2008 until March 2012, Mr. Thomas served as a member of the board of directors and chairman of the audit committee of Bayhill Capital, Inc. (BYHL.OB), a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. From July, 2009 to May, 2011, Mr. Thomas served as a member of the board of directors of Vican Resources, Inc. (OTC: VCAN), a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. Since August 2009, Mr. Thomas has been a member of the board of directors of London Pacific & Partners, Inc. (OTC: LDPP), a Los Angeles and London-based investment and advisory firm specializing in healthcare and hospitality finance. In August, 2009, Mr. Thomas entered into a settlement with the Commodity Futures Trading Commission wherein Mr. Thomas consented to an order of permanent injunction from his future involvement in commodity pools trading and commodities operations. Mr. Thomas holds a Juris Doctor degree from Texas Tech University School of Law and is licensed to practice law in Texas and Utah.

 

(1) The business address of Mr. Thomas is 11650 South State Street, Suite 240, Draper, Utah 84020.

 

Director Independence

 

We do not consider our sole member of our board of directors as an “independent director” in accordance with the published listing requirements of the NYSE Euronext Stock Exchange. The independence definition of the NYSE includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, we are required to consider “all relevant facts and circumstances” in making our determination as to the independence of our directors.

 

 

Compensation of Directors

 

Although we anticipate compensating the members of our board of directors in the future at industry levels, current members are not paid cash compensation for their service as directors. Each director may be reimbursed for certain expenses incurred in attending board of directors and committee meetings.

 

Board of Directors Meetings and Committees

 

Although various items were reviewed and approved by the Board of Directors via unanimous written consent during 2014, the Board held no in-person meetings during the fiscal year ended December 31, 2014.

 

We do not have Audit or Compensation Committees of our board of directors. Because of the lack of financial resources available to us, we also do not have an “audit committee financial expert” as such term is described in Item 401 of Regulation S-K promulgated by the SEC.

 

Changes in Procedures by which Security Holders May Recommend Nominees to the Board

 

Any security holder who wishes to recommend a prospective director nominee should do so in writing by sending a letter to the Board of Directors. The letter should be signed, dated and include the name and address of the security holder making the recommendation, information to enable the Board to verify that the security holder was the holder of record or beneficial owner of the company’s securities as of the date of the letter, and the name, address and resumé of the potential nominee. Specific minimum qualifications for directors and director nominees which the Board believes must be met in order to be so considered include, but are not limited to, management experience, exemplary personal integrity and reputation, sound judgment, and sufficient time to devote to the discharge of his or her duties. There have been no changes to the procedures by which a security holder may recommend a nominee to the Board during our most recently ended fiscal year.

 

 

Executive Officers

John D. Thomas is our sole executive officer, serving as our interim Chief Executive Officer and Secretary, as well as our principal accounting and financial officer. Mr. Thomas business background is as follows:

Name and Year First Appointed as Executive Officer		Age		Background Information
John D. Thomas (2014)		43		Mr. Thomas, age 43, has practiced law specializing in general corporate law, securities, and mergers and acquisitions for his law firm, John D. Thomas P.C. since June, 2003. From April 3, 2014 to July 10, 2014, Mr. Thomas served as the Company’s interim Chief Executive Officer and Secretary. From September, 2013 through December, 2013, Mr. Thomas served on the Board of Directors of Helmer Directional Drilling Corp, a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. From March 2008 until March 2012, Mr. Thomas served as a member of the board of directors and chairman of the audit committee of Bayhill Capital, Inc. (BYHL.OB), a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. From July, 2009 to May, 2011, Mr. Thomas served as a member of the board of directors of Vican Resources, Inc. (OTC: VCAN), a filer of reports pursuant to 13(a) and 15(d) of the Securities Exchange Act of 1934. Since August 2009, Mr. Thomas has been a member of the board of directors of London Pacific & Partners, Inc. (OTC: LDPP), a Los Angeles and London-based investment and advisory firm specializing in healthcare and hospitality finance. In August, 2009, Mr. Thomas entered into a settlement with the Commodity Futures Trading Commission wherein Mr. Thomas consented to an order of permanent injunction from his future involvement in commodity pools trading and commodities operations. Mr. Thomas holds a Juris Doctor degree from Texas Tech University School of Law and is licensed to practice law in Texas and Utah.

 

Section 16(a) Beneficial Ownership Reporting Compliance

 

We are required to identify each person who was an officer, director or beneficial owner of more than 10% of our registered equity securities during our most recent fiscal year and who failed to file on a timely basis reports required by Section 16(a) of the Securities Exchange Act of 1934.

 

During the fiscal year ended December 31, 2014, based solely upon a review of such materials as are required by the Securities and Exchange Commission, no officer, director or beneficial holder of more than ten percent of our issued and outstanding shares of Common Stock failed to timely file with the Securities and Exchange Commission any form or report required to be so filed pursuant to Section 16(a) of the Exchange Act of 1934.

 

 

Code of Ethics

 

The Company expects that its Officers and Directors will maintain appropriate standards of honesty and ethical conduct in connection with the performance of their duties on behalf of the Company. In recognition of this expectation, the Company has adopted a Code of Ethics. The purpose of this Code of Ethics is to codify standards the Company believes are reasonably necessary 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 and full, fair, accurate, timely and understandable disclosure in reports and documents that the Company files with, or submits to, the Securities and Exchange Commission (the “SEC”), or other regulatory bodies and in other public communications made by the Company.  

 

ITEM 11. EXECUTIVE COMPENSATION.

The following table summarizes the total compensation for the two fiscal years ended December 31, 2014 of each person who served as our principal executive officer or principal financial and accounting officer collectively, (the “Named Executive Officers”) including any other executive officer who received more than $100,000 in annual compensation from the Company. Except as noted in footnote (2) below, we did not award cash bonuses, stock awards, stock options or non-equity incentive plan compensation to any Named Executive Officer during the two years ended December 31, 2014, thus these items are omitted from the table below:

Summary Compensation Table
Name and Principal Position		Year				Salary				Stock Awards(1)				All Other Compensation				Total
John D. Thomas			2014			$	15,000			$	66,500			$	—			$	81,500
Chief Executive Officer			2013			$	—			$	—			$	—			$	—
Thomas McConnell			2014			$	17,500			$	—			$	—			$	17,500
former Chief Executive Officer			2013			$	—			$	—			$	—			$	—
Robert Catala			2014			$	—			$	—			$	—			$	—
former Chief Executive Officer			2013			$	87,512			$	40,080			$	—			$	127,592
Juan Carlos Ley			2014			$	—			$	—			$	—			$	—
former Chief Executive Officer			2013			$	31,950			$	41,250			$	—			$	73,200

 

(1)

Based on the closing price per share on the date of award.

 

There is no other arrangement or understanding between our directors and officers and any other person pursuant to which any director or officer was or is to be selected as such.

 

 

Equity Incentive Plan

 

On September 7, 2012, our Board of Directors adopted our 2012 Equity Incentive Plan (hereafter, the “Plan”). The Plan allows for the grant and issuance of common stock purchase options and grants of restricted common stock to employees, non-employee directors, consultants, and advisors of the Company. We have reserved 6,000,000 shares of common stock for issuance under the Plan. As of December 31, 2014, we have outstanding options to 4 persons under the Plan to acquire 370,000 shares of our common stock. During the year ended December 31, 2012, the Company granted 70,000 stock options to consultant with an exercise price of $0.01 and expiring ten years from issuance. Out of these options 50,000 were immediately vested and 20,000 were vested over the period of three years. During the year ended December 31, 2013, the Company issued 150,000 common stock purchase options to each of their directors at an exercise price of $1.65 per share. Out of which 75,000 were immediately vested and balance vesting over three years and expiring six years from issuance date. The options expire after 5 years if unexercised or if terminated earlier pursuant to the rules of the Plan. There are no other grants or awards currently outstanding under the Plan. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Plan which was filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on September 13, 2012.

 

Outstanding Equity Awards at Fiscal Year-End

 

Our Named Executive Officers did not have any unexercised options or stock awards that have not vested outstanding at the end of our last fiscal year. Other than as noted above, we did not grant any equity awards to our Named Executive Officers or directors during 2014.

 

 

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

 

The following table sets forth the beneficial ownership of each of our directors and executive officers, and each person known to us to beneficially own 5% or more of the outstanding shares of our common stock, and our executive officers and directors as a group, as of April 13, 2015. Beneficial ownership is determined in accordance with the rules of the SEC and includes voting or investment power with respect to the securities. Unless otherwise indicated, we believe that each beneficial owner set forth in the table has sole voting and investment power and has the same address as us. Our address is 11650 South State Street, Suite 240 Draper, Utah 84020. As of April 7, 2015, we had 1,938,172,724 shares of common stock issued and outstanding and 200 shares of preferred stock issued and outstanding. While each of our shares of common stock holds one vote, each share of our preferred stock holds twenty million (20,000,000) votes. The following table describes the ownership of our voting securities (i) by each of our officers and directors, (ii) all of our officers and directors as a group, and (iii) each person known to us to own beneficially more than 5% of our common stock or any shares of our preferred stock.

Amount and Nature of Beneficial Ownership
Name		Sole Voting and Investment Power				Options Exercisable Within 60 Days				Other Beneficial Ownership				Total(1)				Percent of Class Outstanding(2)
John D. Thomas			1,460,000				—				—				1,460,000				*
Thomas McConnell, Jr.			750,000				75,000				—				825,000				*
Robert Catala			272,000				—				—				272,000				*
Sean Wagner(3)			12,392,668				—				—				12,392,668				*
John D. Thomas, P.C.(4)			1,460,000				—				—				1,460,000				*
KBM Worldwide, Inc.(5)			—				—				96,576,214				96,576,214				4.99	%
All current directors and executive officers as a group (1 person)			1,460,000				—				—				1,460,000				*

____________________

* Indicates less than one percent.

 

(1)

The calculation of total beneficial ownership for each person in the table above is based upon the number of shares of common stock beneficially owned by such person, together with any options, warrants, rights, or conversion privileges held by such person that are currently exercisable or exercisable within 60 days of the date of this prospectus.

(2)

Based on 1,935,395,089 shares of our common stock, par value $0.0001 per share, outstanding as of March 18, 2015. Excludes voting rights applicable to shares of our preferred stock. See footnotes (3) and (4) for a discussion of the percentage of outstanding voting rights beneficially held when taking into account our shares of preferred stock.

(3)

In addition to the shares of common stock shown above, Mr. Wagner also holds 200 shares of our preferred stock which collectively hold 4,000,000,000 votes. Mr. Wagner has granted a proxy to John D. Thomas, P.C. (“JDT”) covering the voting rights of these preferred shares, as well as 12,392,668 shares of common stock held by Mr. Wagner. If the votes of the preferred stock are taken into account, Mr. Wagner would beneficially hold 67.6% of the voting securities of the Company.

(4)

Excludes 200 shares of preferred stock. If the votes of the preferred stock and these shares of common stock are taken into account, JDT would beneficially hold 67.42% of the voting securities of the Company. John D. Thomas, the sole shareholder of JDT, is the sole executive officer and director of the Company.

(5)

A New York corporation owned and controlled by Seth Kramer, and a convertible noteholder of the Company in the principal amounts of $73,310 (the “First Note”) and $6,000 (the “Second Note”). The First Note and the Second Note are collectively referred to as the “Convertible Debt”. The First Note is convertible into shares of common stock at a 40% discount to the three lowest daily volume-weighted average prices as reported on the OTC for the ten trading days prior to the date of conversion. The Second Note is convertible into shares of common stock at a 50% discount to the three lowest daily volume-weighted average prices as reported on the OTC for the twenty trading days prior to the date of conversion. Because the Convertible Debt is convertible at the discretion of the holder, the actual conversion price is undetermined. Consequently, the shares of common stock that may actually be issued from

 

 

conversion of the Convertible Debt could be substantially more or less than this number. Based on 1,938,172,724 shares of our common stock issued and outstanding as of April 13, 2015, and assuming the conversion of the Convertible Debt into the maximum of 4.99% of the issued and outstanding shares of the Company as per the conversion terms of the Convertible Debt. If the entire amount of the Convertible Debt were converted at this price, the holder would receive 1,341,833,333 shares of common stock, or 40.94% of our outstanding shares (adjusted for the dilution caused by the issuance of these new shares).

 

DESCRIPTION OF CAPITAL STOCK

 

The following description of our capital stock is based on relevant portions of the Delaware General Corporation Law, or the “DGCL,” and on our Certificate of Incorporation (also sometimes referred to as our “charter”) and Bylaws. This summary may not contain all of the information that is important to you, and we refer you to the DGCL and our Certificate of Incorporation and Bylaws for a more detailed description of the provisions summarized below.

 

Fuelstream was organized as a corporation under the laws of the State of Delaware on July 12, 1996. As of December 31, 2014 our authorized capital stock consists of 250,000,000 shares of common stock, par value $0.0001 per share and 200 shares of preferred stock, par value $0.0001 per share. As of December 31, 2014, there were approximately 406 record holders of our common stock. We have also granted common stock purchase options under our 2012 Equity Incentive Plan as described under “Equity Incentive Plan” below. Other than 370,000 common stock purchase options awarded under our 2012 Equity Incentive Plan, there are no outstanding other options or warrants to purchase our stock.

 

On February 10, 2014, in connection with action taken by our board of directors and the holders of a majority in interest of our voting capital stock, we effected a restatement of our Certificate of Incorporation to increase the number of authorized shares of our common stock from 150,000,000 to 2,500,000,000.

 

On February 10, 2014, the Board of Directors of the Company approved an amendment and restatement of the Certificate of Designation to the Company’s Certificate of Incorporation. The Certificate of Designation concerns the rights, preferences, privileges, and restrictions of Series “A” Preferred Stock (the “Preferred Stock”). The amended and restated Certificate of Designation has increased the voting rights applicable to each share of Preferred Stock from ten million (10,000,000) to twenty million (20,000,000).

 

Our charter provides that our board of directors may not amend our Certificate of Incorporation without approval of our shareholders, including holders of our preferred shares. A decrease or increase in the number of shares of capital stock which we may issue would require an amendment of our charter.

 

 

At May 21, 2015, we had 1,938,172,724 shares of common stock issued and outstanding and 200 shares of preferred stock issued and outstanding. The number of shares outstanding does not include shares of common stock that we are required to issue in the event of a conversion of the Note.

 

Title of Class				Amount Authorized				Amount Held by Us or for our Account(1)				Amount Outstanding Exclusive of Amounts Shown Under(1)
	Common stock, par value $0.0001 per share				2,500,000,000				—				1,938,172,724
	Preferred stock, par value $0.0001 per share (2)				200				—				—
					2,500,000,200				—				1,938,172,724

____________________

(1)

Calculated as of May 21, 2015.

(2)

Shares of our preferred stock are not convertible into common stock. See “Preferred Stock” below.

 

Common Stock

 

Our charter authorizes us to issue up to 2,500,000,000 shares of common stock. All shares of our common stock have equal rights as to earnings, assets, dividends and voting privileges. If and when we issue shares of common stock to the selling stockholders as a result of conversion of the Note, such shares will be duly authorized, validly issued, fully paid and nonassessable. Distributions may be paid to the holders of our common stock if, as and when authorized by our board of directors and declared by us out of assets legally available therefore. Shares of our common stock have no preemptive, conversion or redemption rights and are freely transferable, except where their transfer is restricted by federal and state securities laws or by contract. In the event of our liquidation, dissolution or winding up, each share of our common stock would be entitled to share ratably in all of our assets that are legally available for distribution after we pay all debts and other liabilities and subject to any preferential rights of holders of our preferred stock, if any preferred stock is outstanding at such time. Each share of our common stock is entitled to one vote on all matters submitted to a vote of stockholders, including the election of directors.

 

On December 8, 2014, the board of directors and the holders of a majority in interest of our voting capital stock approved a 1-for-2,000 reverse split of our common shares (“Reverse Split”). The Reverse Split is still pending and has yet to be declared effective by FINRA.

 

Preferred Stock

Our charter authorizes us to issue up to 200 shares of preferred stock. All 200 of these preferred shares are issued and outstanding as of April 7, 2015. Although the preferred stock carries no dividend, distribution, liquidation or conversion rights, each share of preferred stock carries twenty million (20,000,000) votes and holders of our preferred stock are able to vote together with our common stockholders on all matters. Consequently, the holder of our preferred stock is able to unilaterally control the election of our board of directors and, ultimately, the direction of our Company.

 

Equity Incentive Plan

On September 7, 2012, our board of directors adopted our 2012 Equity Incentive Plan (hereafter, the “Plan”). The Plan allows for the grant and issuance of common stock purchase options and grants of restricted common stock to our employees, non-employee directors, consultants, and advisors. We have reserved 6,000,000 shares of common stock for issuance under the Plan. As of December 31, 2014, we have outstanding options to 4 persons under the Plan to acquire 370,000 shares of our common stock. During the year ended December 31, 2012, the Company granted 70,000 stock options to consultant with an exercise price of $0.01 and expiring ten years from issuance. Out of these options 50,000 were immediately vested and 20,000 were vested over the period of three years. During the year ended December 31, 2013, the Company issued 150,000 common stock purchase options to each of their directors at an exercise price of $1.65 per share. Out of which 75,000 were immediately vested and balance vesting over three years and expiring six years from issuance date. The options expire after 5 years if unexercised or if terminated earlier pursuant to the rules of the Plan. There are no other grants or awards currently outstanding under the Plan. The foregoing summary does not purport to be complete and is qualified in its entirety by reference to the Plan which was filed as an exhibit to our Current Report on Form 8-K, filed with the SEC on September 13, 2012.

Limitation of Liability of Directors and Officers; Indemnification and Advance of Expenses

Pursuant to our charter and under the General Corporation Law of Delaware (hereafter, the “DGCL”), our directors are not liable to us or our stockholders for monetary damages for breach of fiduciary duty, except for liability in connection with a breach of duty of loyalty, for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, for authorization of illegal dividend payments or stock redemptions under Delaware law or any transaction from which a director has derived an improper personal benefit. Our charter provides that we are authorized to provide indemnification of (and advancement of expenses) to our directors, officers, employees and agents (and any other persons to which applicable law permits us to provide indemnification) through Bylaw provisions, agreements with such persons, vote of stockholders or disinterested directors, or otherwise, to the fullest extent permitted by applicable law.

We have previously entered into indemnification agreements with certain of our current directors and officers. The indemnification agreement indemnifies the indemnitee to the fullest extent permitted by law, including against third-party claims and claims by or in right of the Company or any subsidiary or majority-owned partnership of the Company by reason of that person (including the advancement of expenses subject to certain conditions) (a) being a director, officer employee or agent of the Company, or of any subsidiary or majority-owned partnership of the Company or (b) serving at our request as a director, officer, employee or agent of another entity. If appropriate, we are entitled to assume the defense of the claim with counsel selected by us and approved by the indemnitee (which approval may not be unreasonably withheld). Separate counsel employed by the indemnitee will be at his or her own expense unless (1) the employment of separate counsel has been previously authorized by us, (2) the indemnitee reasonably concludes there may be a conflict of interest or (3) we have not, in fact, employed counsel to assume the defense of such claim.

Disclosure of Commission Position on Indemnification for Securities Act Liabilities

 

Insofar as indemnification for liabilities arising under the Securities Act may be permitted to our directors, officers and controlling persons pursuant to the provisions above, or otherwise, we have been advised that in the opinion of the SEC such indemnification is against public policy as expressed in the Securities Act, and is, therefore, unenforceable.

 

In the event that a claim for indemnification against such liabilities, other than the payment by us of expenses incurred or paid by one of our directors, officers, or controlling persons in the successful defense of any action, suit or proceeding, is asserted by one of our directors, officers, or controlling persons in connection

 

with the securities being registered, we will, unless in the opinion of our counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification is against public policy as expressed in the Securities Act, and we will be governed by the final adjudication of such issue

 

Provisions of the DGCL and Our Charter and Bylaws

 

Our charter and bylaws provide that our board of directors will have the exclusive power to make, alter, amend or repeal any provision of our bylaws.

 

Business Combinations

 

Section 203 of the DGCL, is applicable to corporations organized under the laws of the State of Delaware. Subject to certain exceptions set forth therein, Section 203 of the DGCL provides that a corporation shall not engage in any business combination with any “interested stockholder” for a three-year period following the date that such stockholder becomes an interested stockholder unless (a) prior to such date, the board of directors of the corporation approved either the business combination or the transaction which resulted in the stockholder becoming an interested stockholder, (b) upon consummation of the transaction which resulted in the stockholder becoming an interested stockholder, the interested stockholder owned at least 85% of the voting stock of the corporation outstanding at the time the transaction commenced (excluding certain shares) or (c) on or subsequent to such date, the business combination is approved by the board of directors of the corporation and by the affirmative vote of at least 66 2/3% of the outstanding voting stock which is not owned by the interested stockholder. Except as specified therein, an interested stockholder is defined to mean any person that (1) is the owner of 15% or more of the outstanding voting stock of the corporation; or (2) is an affiliate or associate of the corporation and was the owner of 15% or more of the outstanding voting stock of the corporation at any time within three years immediately prior to the relevant date, and the affiliates and associates of such person referred to in clause (1) or (2) of this sentence. Under certain circumstances, Section 203 of the DGCL makes it more difficult for an interested stockholder to effect various business combinations with a corporation for a three-year period, although the stockholders may, by adopting an amendment to the corporation's charter or by-laws, elect not to be governed by this section, effective twelve months after adoption. Our charter and by-laws do not exclude us from the restrictions imposed under Section 203 of the DGCL. It is anticipated that the provisions of Section 203 of the DGCL may encourage companies interested in acquiring us to negotiate in advance with the board of directors.

 

Change of Control

 

On December 14, 2011, John Thomas, the controlling shareholder of the Company and the Company’s former Chief Executive Officer, sold 200 shares of Series A Preferred Stock of the Company (the “Preferred Stock”) to Sean Wagner, the sole shareholder of AFI and the recipient of 7,400,000 shares of common stock in connection with the acquisition of AFI. The consideration for the Preferred Shares consisted of a secured promissory note (“Note”) issued by Mr. Wagner to Mr. Thomas, and required Mr. Wagner to grant Mr. Thomas a security interest in the Preferred Stock as well as the voting rights attached thereto until the Note is paid in full. Although the Preferred Stock carries no dividend, distribution, or liquidation rights, and is not convertible into common stock, each share of Preferred Stock carries 10,000,000 votes per share and is entitled to vote with the Company’s common stockholders on all matters upon which common stockholders may vote. As a result of the purchase and sale of the Preferred Stock, Mr. Wagner holds a controlling beneficial interest in the Company and, once the Note is paid in full, may unilaterally determine the election of the Board and other substantive matters requiring approval of the Company’s stockholders. In 2014 the voting power was amended from 10,000,000 to 20,000,000 votes per preference shares.

 

 

Board of Directors Meetings and Committees

 

Although various items were reviewed and approved by the Board of Directors via unanimous written consent during 2013, the Board held no formal meetings during the fiscal year ended December 31, 2014.

 

The Company does not have Audit or Compensation Committees of the Board of Directors. Because of the lack of financial resources available to the Company, the Company also does not have an “audit committee financial expert” as such term is described in Item 401 of Regulation S-K promulgated by the Securities and Exchange Commission.

 

Compensation of Directors

 

Although the Company anticipates compensating the members of its Board of Directors in the future at industry levels, current members are not paid cash compensation for their service as directors. Each director may be reimbursed for certain expenses incurred in attending Board of Directors and committee meetings.

 

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

 

Certain Relationships and Related Transactions

On May 12, 2014, we issued 500,000 shares of our common stock, valued at $2,150, to Thomas McConnell, a member of our board of directors, for his services as a director.

On November 20, 2013, we issued 3,539,046 shares of our common stock, valued at $247,733, to Sean Wagner, a principal shareholder of our Company, for services provided as our Vice President of Sales.

On October 23, 2013, we issued 250,000 shares of our common stock, valued at $37,500, to Thomas McConnell, a member of our board of directors, for his services as a director.

On October 23, 2013, we issued 250,000 shares of our common stock, valued at $37,500, to Robert Catala, our Chief Executive Officer, for services provided by Mr. Catala.

On January 28, 2013, we issued 25,000 shares of common stock, valued at $41,250, to our former Chief Executive Officer. Also on January 28, 2013, pursuant to our 2012 Equity Incentive Plan, we issued 150,000 common stock purchase options to two of our directors at an exercise price of $1.65 per share.

Director Independence

 

The Company’s sole member of the board of directors is not an “independent director” in accordance with the published listing requirements of the NYSE Euronext Stock Exchange. The independence definition of the NYSE includes a series of objective tests, such as that the director is not, and has not been for at least three years, one of our employees and that neither the director, nor any of his family members has engaged in various types of business dealings with us. In addition, we are required to consider “all relevant facts and circumstances” in making our determination as to the independence of our directors. We have not established any board committees. We hope in the future to add an independent director and establish one or more board committees, including an audit committee.

 

 

ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES.

 

The following table sets forth fees paid to our independent registered accounting firm, RBSM LLP for the years ended December 31, 2014 and 2013.

 

		2014				2013
Audit Fees		$	46,500			$	35,000
Audit Related Fees			-0-				-0-
Tax Fees			-0-				-0-
All Other Fees			-0-				-0-
Total Fees		$	46,500			$	35,000

 

It is the policy of the Board of Directors, which presently completes the functions of the Audit Committee, to engage the independent accountants selected to conduct our financial audit and to confirm, prior to such engagement, that such independent accountants are independent of the company. All services of the independent registered accounting firms reflected above were pre-approved by the Board of Directors.

 

PART IV

 

ITEM 15. EXHIBITS.

 

The following exhibits are filed with or incorporated by referenced in this report:

 

Exhibit Number		Description
3.1		Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Registrant’s Amended 10-Q filed on December 8, 2014).
3.2		Amended and Restated Bylaws (incorporated by reference to Exhibit 3.2 to Registrant’s Current Report on Form 8-K filed on June 17, 2011).
10.1.		Form of Indemnification Agreement (incorporated by reference to Exhibit 10.2 to Registrant’s Current Report on Form 8-K/A filed on September 18, 2012).
10.2		2012 Equity Incentive Plan (incorporated by reference to Exhibit 99.1 to Registrant’s Current Report on Form 8-K/A filed on September 18, 2012).
14.1		Code of Ethics for the Registrant.
21.1		Subsidiaries of the Registrant.
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 for John D. Thomas.
32		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 for John D. Thomas.

 

 

 

 

SIGNATURES

 

In accordance with Section 13 or 15(d) of the Exchange Act of 1934, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

			FUELSTREAM, INC.
			/s/ John D. Thomas
Dated: May 22, 2015			By: John D. Thomas, Chief Executive Officer, and Principal Financial Officer

 

In accordance with the Exchange Act, this Report has been signed below by the following persons on behalf of the Company and in the capacities and on the dates indicated.

 

/s/ John D. Thomas		Chief Executive Officer and sole director	May 22, 2015
John D. Thomas

 

 

 

 

 

Exhibit 31.1

 

CERTIFICATION

PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002

 

I, John D. Thomas of Fuelstream, Inc. (the “Company”), certify that:

 

1. I have reviewed this 10-K of the Company;

 

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented in this report;

 

4. As the Company's sole certifying officer I am responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have:

 

a. Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

b. Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

 

c. Evaluated the effectiveness of the Company's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

 

d. Disclosed in this report any change in the Company's internal control over financial reporting that occurred during the Company's most recent fiscal quarter (the Company's fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company's internal control over financial reporting; and

 

5. As the Company's sole certifying officerI have disclosed, based on my most recent evaluation of internal control over financial reporting, to the Company's auditors and the audit committee of the Company's board of directors (or persons performing the equivalent functions):

 

a. All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company's ability to record, process, summarize and report financial information; and

 

b. Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company's internal control over financial reporting.

 

Date: May 22, 2015

 

/s/ John D. Thomas

John D. Thomas

Principal Executive Officer and Principal Financial Officer

Exhibit 32

 

CERTIFICATION

PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

 

I, John D. Thomas, Principal Executive Officer and Principal Financial Officer of Fuelstream, Inc. (the “Company”) certify that:

 

1. I have reviewed the annual report on Form 10-K of the Company;

 

2. Based on my knowledge, this annual report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report; and

 

3. Based on my knowledge, the financial statements, and other financial information included in this annual report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the period presented in this annual report.

 

Date: May 22, 2015

 

/s/ John D. Thomas

John D. Thomas

Principal Executive Officer and Principal Financial Officer