All Energy Corp - FORM 10-Q - November 21, 2011
Attached files
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
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[ X ]
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Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly
period ended September 30, 2011
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[ ]
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Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
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Commission File No. 0-29417
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ALL Fuels & Energy Company
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(Exact name of registrant as specified in its charter)
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(State or Other Jurisdiction of
incorporation or organization)
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(I.R.S. Employer
Identification Number)
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6165 N.W. 86th Street, Johnston, Iowa 50131
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(Address of principal executive offices, including zip code)
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(Issuer’s telephone number, including area code)
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Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90
days. Yes [X] No [ ]
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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. (Check one):
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Large accelerated filer [ ]
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Accelerated filer [ ]
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Non-accelerated filer [ ] (Do not check if a smaller reporting company)
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Smaller reporting company [ X ]
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Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes [ ] No [ X ]
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As of November 16, 2011, there were 87,894,654 shares of the issuer’s common stock outstanding.
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PART I - FINANCIAL INFORMATION
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Item 1. Financial Statements
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INDEX TO FINANCIAL STATEMENTS
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ALL Fuels & Energy Company
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Consolidated Balance Sheets as of September 30, 2011 (unaudited), and December 31, 2010 (audited)
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3
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Consolidated Statements of Operations for the Three Months and Nine Months Ended September 30,
2011 (unaudited) and 2010 (unaudited), and the Period from Commencement of Development Stage
(June 7, 2004) to September 30, 2011 (unaudited)
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4
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Consolidated Statements of Cash Flows for the Nine Months Ended September 30, 2011 (unaudited)
and 2010 (unaudited), and the Period from Commencement of Development Stage (June 7, 2004) to
September 30, 2011 (unaudited)
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6
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Notes to Consolidated Financial Statements
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8
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ALL FUELS & ENERGY COMPANY
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(a development stage company)
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CONSOLIDATED BALANCE SHEETS
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September 30, 2011, and December 31, 2010
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9/30/11
(unaudited)
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12/31/10
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Cash and cash equivalents
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$25,740
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$31,243
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Prepaid expenses
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---
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18,807
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Total current assets
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25,740
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50,050
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Property and equipment - at cost
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Oil and gas properties
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6,650
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---
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Less accumulated depreciation
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(2,806)
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(2,223)
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Total property and equipment - net
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7,177
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1,110
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Investment in Treaty Belize Energy, Ltd.
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100,000
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---
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Total other assets
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100,000
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---
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Total assets
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$132,917
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$51,160
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LIABILITIES AND STOCKHOLDERS’ EQUITY
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Accounts payable and accrued expenses
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$54,018
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$74,469
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Accrued expenses - related party
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577,055
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388,990
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Notes payable - related party
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53,000
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88,611
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Notes payable - third parties
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130,000
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71,000
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Total current liabilities
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814,073
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623,070
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Preferred stock, $.01 par value; 50,000,000 shares authorized, -0- and -0- shares
issued and outstanding
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---
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---
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Common stock, $.01 par value; 700,000,000 shares authorized, 91,009,800
and 64,682,747 shares issued in 2011 and 2010, respectively, and 83,959,800
and 57,632,747 shares outstanding in 2011 and 2010, respectively
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910,098
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646,829
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Additional paid-in capital
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16,428,771
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16,275,180
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Treasury stock, at cost; 7,050,000 and 7,050,000 shares
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(150,000)
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(150,000)
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Receivable from shareholder
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(50,000)
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(50,000)
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Accumulated deficit
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(6,423,944)
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(6,423,944)
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Deficit accumulated during the development stage
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(11,396,081)
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(10,869,975)
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Total stockholders’ equity (deficit)
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(681,156)
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(571,910)
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Total liabilities and stockholders’ equity
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$132,917
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$51,160
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The accompanying notes are an integral part of these statements.
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ALL FUELS & ENERGY COMPANY
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(a development stage company)
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CONSOLIDATED STATEMENTS OF OPERATIONS
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For the Three Months and Nine Months Ended September 30, 2011 and 2010, and the Period from
Commencement of Development Stage (June 7, 2004) to September 30, 2011
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Three Months Ended 9/30
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Nine Months Ended 9/30
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2011
(unaudited)
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2010
(unaudited)
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2011
(unaudited)
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2010
(unaudited)
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Period from
Commence-ment of
Development
Stage (June
7, 2004) to
9/30/11
(unaudited)
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Revenues
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$---
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$---
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$---
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$---
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$8,092
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Operating Costs and Expenses
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Consulting
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4,851
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17,249
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9,823
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30,811
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7,766,704
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Legal and professional
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15,122
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10,423
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30,212
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56,015
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1,304,723
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Impairment charge
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---
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---
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---
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---
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333,540
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Depreciation and amortization
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184
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238
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583
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747
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8,732
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General and administrative
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75,429
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76,729
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237,355
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242,930
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2,193,090
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Total operating expenses
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95,586
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104,639
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277,973
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330,503
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11,606,789
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Beneficial conversion expense
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---
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---
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(3,889)
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(221,172)
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(171,000)
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Interest expense
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(55,519)
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(3,709)
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(59,467)
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(9,874)
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(131,931)
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Interest income
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6
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5
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14
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22
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51,372
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Rental income
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---
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---
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---
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---
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66,250
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Loss on sale of land
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---
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---
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---
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---
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(1,278)
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Loss in investment
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(25,000)
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---
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(25,000)
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---
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(25,000)
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Equity loss in subsidiary
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---
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---
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---
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---
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(233,340)
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Convertible debt/warrant
expense
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(171,060)
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---
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(171,060)
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---
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(171,060)
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Debt forgiveness income
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11,269
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94,566
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11,269
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94,566
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105,834
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Total other income
(expense)
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(240,304)
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90,862
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(248,133)
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(136,458)
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(510,153)
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Net loss
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$(335,890)
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$(13,777)
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$(526,106)
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$(466,961)
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$(12,108,850)
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Basic
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$(0.00)
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$(0.00)
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$(0.00)
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$(0.01)
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Diluted
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$(0.00)
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$(0.00)
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$(0.00)
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$(0.00)
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Weighted average number of
shares outstanding:
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Basic
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52,674,386
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52,674,386
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76,386,438
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52,286,607
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Diluted
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67,718,828
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67,718,828
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90,289,216
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70,842,544
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The accompanying notes are an integral part of these statements.
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ALL FUELS & ENERGY COMPANY
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(a development stage company)
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CONSOLIDATED STATEMENTS OF CASH FLOWS
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For the Nine Months Ended September 30, 2011 and 2010, and the Period from
Commencement of Development Stage (June 7, 2004) to September 30, 2011
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Nine Months Ended September 30,
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2011
(unaudited)
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2010
(unaudited)
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Period from
Commencement of
Development
Stage (June 7,
2004) to 9/30/11
(unaudited)
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CASH FLOWS FROM OPERATING ACTIVITIES
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Net loss
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$(526,106)
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$(466,961)
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$(12,108,850)
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Adjustments to reconcile net loss to cash used for
operating activities:
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Loss on sale of land
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---
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---
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1,278
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Loss on disposition of fixed assets
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---
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---
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187
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Forgiveness of debt
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11,269
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94,566
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105,834
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Equity loss in subsidiary
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---
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---
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14,485
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Depreciation and amortization
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583
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747
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8,732
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Non-cash beneficial conversion feature
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3,889
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221,172
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171,000
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Non-cash warrant expense
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171,060
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---
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171,060
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Options issued for compensation
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---
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---
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6,999,585
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Loss on investments
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25,000
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---
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25,000
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Stock issued for services and compensation
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1,300
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42,000
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1,244,645
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Impairment charge
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---
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---
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333,540
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Increase (decrease) in prepaids
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18,807
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(11,370)
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(87,820)
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Increase in accounts payable
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170,145
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14,382
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466,923
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Net cash used for operating activities
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(124,053)
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(105,464)
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(2,654,401)
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CASH FLOWS FROM INVESTING ACTIVITIES
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Purchase of land
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---
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---
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(951,238)
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Investment in Treaty Belize Energy LTD
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(125,000)
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---
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(125,000)
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Investment in oil and gas property
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(6,650)
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---
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(6,650)
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Increase in accrued liabilities - related party
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---
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---
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40,056
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Proceeds from sale of land
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---
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---
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461,960
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Purchase of office equipment
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---
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---
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(4,160)
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Payments on construction-in-progress
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---
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---
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(193,720)
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Net cash used in investing activities
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(131,650)
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---
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(778,752)
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The accompanying notes are an integral part of these statements.
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ALL FUELS & ENERGY COMPANY
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(a development stage company)
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CONSOLIDATED STATEMENTS OF CASH FLOWS (cont.)
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For the Nine Months Ended September 30, 2011 and 2010, and the Period from
Commencement of Development Stage (June 7, 2004) to September 30, 2011
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Nine Months Ended September 30,
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2011
(unaudited)
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2010
(unaudited)
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Period from
Commencement of
Development
Stage (June 7,
2004) to 9/30/11
(unaudited)
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CASH FLOWS FROM FINANCING ACTIVITIES
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Proceeds from sale of common stock for cash
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---
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---
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2,703,623
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Principal payments on notes payable - related party
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(25,000)
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---
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(28,988)
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Proceeds from notes payable - third party
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268,200
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100,000
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368,200
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Proceeds from notes payable - related party
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7,000
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11,000
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78,000
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Proceeds from long-term debt, net of deferred
borrowing costs
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---
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---
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483,120
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Purchase of treasury stock
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---
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---
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(150,000)
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Contributions from shareholders
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---
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---
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950
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Net cash provided by financing activities
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250,200
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111,000
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3,454,905
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NET CHANGE IN CASH
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(5,503)
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5,536
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21,752
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Cash, beginning of period
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31,243
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4,748
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3,988
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Cash, end of period
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$25,740
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$10,284
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$25,740
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The accompanying notes are an integral part of these statements.
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ALL FUELS & ENERGY COMPANY
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(a development stage company)
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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September 30, 2011
(unaudited)
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Note 1. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying unaudited interim financial statements of ALL Fuels & Energy Company (the “Company”) have been
prepared by the Company in accordance with accounting principles generally accepted in the United States of America,
pursuant to the Securities and Exchange Commission rules and regulations. In management’s opinion, all adjustments
necessary for a fair presentation of the results for interim periods have been reflected in the interim financial statements.
The results of operations for any interim period are not necessarily indicative of the results for a full year. All adjustments
to the financial statements are of a normal recurring nature.
Certain information and footnote disclosures normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. Such disclosures are those that would
substantially duplicate information contained in the most recent audited financial statements of the Company, such as
significant accounting policies and stock options. Management presumes that users of the interim statements have read
or have access to the audited financial statements and notes thereto included in the Company’s Annual Report on Form
10-K for the year ended December 31, 2010.
Note 2. Going Concern
The Company has incurred losses totaling $12,108,850 through September 30, 2011, and had a working capital deficit
of $788,333 at September 30, 2011. Because of these conditions, the Company will require additional working capital
to continue operations and develop its business. The Company intends to raise additional working capital either through
private placements, public offerings and/or bank financing.
There are no assurances that the Company will be able to achieve a level of revenues adequate to generate sufficient cash
flow from operations or obtain additional financing through private placements, public offerings and/or bank financing
necessary to support the Company’s working capital requirements. To the extent that funds generated from any private
placements, public offerings and/or bank financing are insufficient, the Company will have to raise additional working
capital. No assurance can be given that additional financing will be available, or if available, will be on terms acceptable
to the Company. If adequate working capital is not available, the Company may not continue its operations or execute
its business plan.
These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financial
statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or
the amount and classification of liabilities that might be necessary should the Company be unable to continue as a going
concern.
Note 3. Management’s Plans for Liquidity
From the third quarter of 2009 through July 2011, the Company obtained a total of $76,000 in loans from its directors,
which provided the Company with a portion of the capital needed to sustain its operations. In April 2011, the Company
obtained a total of $25,000 in loans from third parties, which provided the Company with a portion of the capital needed
to sustain its operations. Until August 2011, all of these loans were payable on demand, bore interest at 10% per annum
and were convertible, at the lenders’ option, into shares of the Company’s common stock at the rate of one share for
every $.01 of debt converted. In August 2011, each of these loans were revised and extended to September 2012. See
Note 11. Significant Transaction.
In January 2010, the Company borrowed $65,000 from a third party, and in May 2010, the Company borrowed $35,000
from the same third party, through the issuance of convertible promissory notes, payable in October 2010 (which was
not extended and the balance due as of December 31, 2010, is $92,500) and February 2011, respectively, bearing interest
at 8% per annum, and convertible into a number of shares based on the market price of the Company’s common stock.
On the dates of issuance, these promissory notes were convertible into an aggregate of approximately 16,000,000 shares
of Company common stock. The first of these convertible promissory notes has been partially converted as follows: (i)
in August 2010, $7,500 was converted into 2,508,361 shares of the Company’s common stock; (ii) in January 2011,
$6,000 was converted into 3,000,000 shares of the Company’s common stock; and (iii) in July 2011, $4,000 was
converted into 3,076,923 shares of the Company’s common stock.
In August 2011, the Company obtained $220,700 through the issuance of convertible promissory notes, the proceeds
from which are expected to be sufficient to sustain the Company’s current level of operations through the first quarter
of 2012. See Note 11. Significant Transaction.
The Company intends to commit its available capital to the exploration, development, acquisition and production of
crude oil and natural gas. See Note 12. Oil and Gas Investments.
Note 4. Business of the Company
Until August 2011, the Company actively pursued the acquisition of one or more ethanol plants. As of August 2011,
the Company’s efforts in this regard had not been successful. In August 2011, the Company changed its business to the
exploration, development, acquisition and production of crude oil and natural gas within the United States. See Note
12. Oil and Gas Investments.
It is expected that the Company will be required to obtain capital from third parties, in order to consummate any
significant acquisition transaction.
Note 5. Prepaid Expenses
At September 30, 2011, the Company had no prepaid expenses. At September 30, 2010, the Company had prepaid
expenses of $13,091, which represented prepaid insurance.
Note 6. Non-cash Investing and Financing Activities
At September 30, 2011, the Company had the following non-cash investing and financing activities:
– Note payable in the amount of $10,000 in exchange for common stock.
– Reduction of accounts payable - related party in exchange for stock in the amount of $13,800.
Note 7. Notes Payable - Related Parties
From the third quarter of 2009 through July 2011, the Company obtained $71,000 in loans from one of its directors, the
proceeds from which provided the Company with a portion of the capital needed to sustain its operations. On the dates
of issuance, these promissory notes were convertible into a total of 7,100,000 shares of Company common stock. Until
August 2011, these loans were payable on demand, bore interest at 10% per annum and were convertible, at the director’s
option, into shares of the Company’s common stock at the rate of one share for every $.01 of debt converted. In August
2011, each of these loans was revised and extended to September 2012. See Note 11. Significant Transaction.
In April 2011, another Company director loaned $5,000 to the Company. On the date of issuance, these promissory notes
were convertible into a total of 500,000 shares of Company common stock. Until August 2011, this loan was payable
on demand, bore interest at 10% per annum and were convertible, at the director’s option, into shares of the Company’s
common stock at the rate of one share for every $.01 of debt converted. In August 2011, this loan was revised and
extended to September 2012. See Note 11. Significant Transaction.
Note 8. Notes Payable - Third Parties
In January 2010, the Company borrowed $65,000 from a third party, and in May 2010, the Company borrowed $35,000
from the same third party, through the issuance of convertible promissory notes, payable in October 2010 (which was
not extended and the balance due as of December 31, 2010, is $92,500) and February 2011, respectively, bearing interest
at 8% per annum, and convertible into a number of shares based on the market price of the Company’s common stock.
On the dates of issuance, these promissory notes were convertible into an aggregate of approximately 16,000,000 shares
of Company common stock. The first of these convertible promissory notes has been partially converted as follows: (i)
in August 2010, $7,500 was converted into 2,508,361 shares of the Company’s common stock; (ii) in January 2011,
$6,000 was converted into 3,000,000 shares of the Company’s common stock; and (iii) in July 2011, $4,000 was
converted into 3,076,923 shares of the Company’s common stock. On August 15, 2011, the Company entered into an
assignment agreement with this third party where they would assign their debt to five third party note holders in the
amount of $90,000 for the unpaid principal and interest owed to them. In connection with this assignment the Company
had debt forgiveness income in the amount of $11,269 which has been reflected in the accompanying financial
statements.
In April 2011, the Company borrowed $20,000 from a third party, through the issuance of a convertible promissory note,
payable on demand, bearing interest at 10% per annum, and convertible, at the third party’s option, into shares of the
Company’s common stock at the rate of one share for every $.01 of debt converted. On the date of issuance, this
promissory note was convertible into 2,000,000 shares of Company common stock. In August 2011, this loan was
revised and extended to September 2012. See Note 11. Significant Transaction.
Also in April 2011, the Company borrowed $5,000 from a third party for use as working capital, through the issuance
of a convertible promissory note, payable on demand, bearing interest at 10% per annum, and convertible, at the third
party’s option, into shares of the Company’s common stock at the rate of one share for every $.01 of debt converted.
On the date of issuance, these promissory notes were convertible into a total of 1,000,000 shares of Company common
stock. In August 2011, this loan was revised and extended to September 2012. See Note 11. Significant Transaction.
Further, in August 2011, the Company issued convertible promissory notes with an aggregate principal amount of
$220,700. These convertible promissory notes mature on September 1, 2013, accrue interest at 8% per annum and are
payable at maturity, unless converted by the holder into shares of Company common stock at a conversion rate $0.00069
per share ($0.0345 per share post-reverse split (see Note 10. Convertible Promissory Notes and Warrants and Note 11.
Significant Transaction)).
Note 9. Capital Stock
Common Stock for Bonus
During the first nine months of 2011, the Company did not issue any shares as a bonus. In March 2010, the Company
issued 50,000 shares of its common stock as a bonus to one of its directors. These shares were valued at $.04 per share,
or $2,000, in the aggregate.
Common Stock for Services
During the first nine months of 2011, the Company issued 50,000 shares of common stock in payment of $500 in
consulting services.
During the first nine months of 2010, the Company issued 2,000,000 shares of common stock in payment of $20,000
in legal services.
Common Stock for Debt Extensions
During the first nine months of 2011, the Company issued 200,000 shares of common stock in consideration of the
extension of the maturity dates on convertible promissory notes, with an aggregate principal balance of $103,000, from
payable on demand to payable on September 1, 2012.
Warrant Cancellation
In March 2010, a former Company director tendered for cancellation 5,520,366 warrants to purchase a like number of
shares of Company common stock. The Company accepted such tender and cancelled all of such warrants.
Note 10. Convertible Promissory Notes and Warrants
In August 2011, the Company issued convertible promissory notes with an aggregate principal balance of $220,700 as
discussed in Note 9. In conjunction with these notes, the Company issued a total of 100,000,000 common stock purchase
warrants to purchase a like number of shares of common stock, at an exercise price of $.005 per share, and 100,000,000
common stock purchase warrants to purchase a like number of shares of common stock at an exercise price of $.0075.
All of these warrants are currently exercisable and expire in 2015. These warrants were issued to five third parties, in
consideration for their notes payable.
Accordingly, we calculated the fair value of the warrants using the Black-Scholes option pricing model. The calculation
of the fair value of these warrants resulted in the net cash proceeds of the debt being less than the fair value of the
warrants. As a result, the warrants were then recorded at fair value in the amount of $391,760 to additional paid in
capital, a debt discount was recorded of $220,700 and the difference of $171,060 was recorded in the accompanying
statement of operations. The debt discount will be recognized over the life of the loan.
In addition, it is possible that, in future periods, the Company will incur charges against earnings as a result of the
issuance of these warrants. The timing or amount of any such future charges cannot be predicted.
Note 11. Significant Transaction
Partial Conversion of Convertible Promissory Note
In January 2010, the Company borrowed $65,000 from a third party through the issuance of a convertible promissory
note, convertible into a number of shares based on the market price of the Company’s common stock. In Ja nuary 2011,
$6,000 of the principal amount of such convertible note was converted into 3,000,000 shares of the Company’s common
stock. In July 2011, $4,000 of the principal amount of such convertible promissory note was converted into a total of
3,076,923 shares of the Company’s common stock. Following such conversion transactions, the remaining principal
balance under such convertible promissory note was $47,500. On August 15, 2011, the Company entered into an
assignment agreement with this third party where they would assign their debt to five third party note holders in the
amount of $90,000 for the unpaid principal and interest owed to them. In connection with this assignment the Company
had debt forgiveness income in the amount of $11,269 which has been reflected in the accompanying financial
statements.
Change in Control
In August 2011, the Company and certain of its affiliates entered into and completed a series of transactions (collectively,
the “Transaction”).
Pursuant to the Transaction, one of the Company’s officers and directors obtained control of the Company. However,
management of the Company did not change in connection with the Transaction.
Change of Business Plan
In connection with the Transaction and because the Company had been unable to acquire an ethanol plant, the Company’s
management has changed the Company's plan of business from the acquisition of an ethanol plant to the exploration,
development, acquisition and production of crude oil and natural gas within the United States.
Reverse Split
On August 12, 2011, the board of directors of the Company authorized a 50-to-1 reverse split of the Company’s
outstanding common stock. At a special shareholders’ meeting held, the reverse split was approved. The effective date
of this reverse split is expected to be in November 2011. The Company’s financial statements for future periods will
reflect this reverse split.
Financing Transaction and Issuance of Securities
As part of the Transaction, the Company issued:
– Convertible promissory notes with an aggregate principal amount of $220,700. These convertible
promissory notes mature on September 1, 2013, accrue interest at 8% per annum and are payable at
maturity, unless converted by the holder into shares of Company common stock at a conversion rate
$0.00069 per share ($0.0345 per share post-reverse split);
– Series A Warrants that provide the holders the right to purchase up to a total of 100,000,000 shares
(2,000,000 shares post-reverse split) of Company common stock at an exercise price of $0.005 per
share ($0.25 per share post-reverse split); and
– Series B Warrants that provide the holders the right to purchase up to a total of 100,000,000
(2,000,000 shares post-reverse split) shares of Company common stock at an exercise price of $0.0075
per share ($0.375 per share post-reverse split).
The Series A Warrants and Series B Warrants expire on August 15, 2015. The convertible promissory notes, the Series
A Warrants and the Series B Warrants contain standard adjustment provisions for stock splits, distributions,
reorganizations, mergers and consolidations.
Additionally, the Transaction triggered an adjustment to the conversion price in the Company’s previously outstanding
convertible promissory notes [original principal amounts of $65,000 ($47,500 current principal amount) and $35,000]
from a variable conversion price to a fixed conversion price of $0.00069 per share ($0.0345 per share post-reverse split).
In connection with the Transaction, these previously outstanding convertible promissory notes were assigned to new third
party investors.
Extensions of Promissory Notes
In connection with the Transaction, the Company issued a total of 200,000 shares (post-reverse split) of Company
common stock (100,000 shares to directors and 100,000 shares to third parties), in consideration of the extension of the
maturity dates on convertible promissory notes with an aggregate principal amount of $103,000 from payable on demand
to payable on September 1, 2012.
Debt Conversion Agreement
Prior to the Transaction, the Company owed its sole officer a total of $535,650 in accrued and unpaid salary. In
connection with the Transaction, the Company and its officer entered into a debt conversion agreement with respect to
$534,650 of such accrued and unpaid salary. Pursuant to the debt conversion agreement, the Company’s officer agreed
to convert the $534,650 in accrued and unpaid salary into shares of Company common stock at a conversion price of
$0.00069 per share ($0.0345 per share post-reverse split), upon the Company effecting the 50-to-1 reverse split. The
debt conversion agreement has been amended once, pursuant to which amendment the Company’s officer had the right
to convert $13,800 of the accrued and unpaid salary amount into a total of 20,000,000 shares (pre-reverse split) of
Company common stock. The Company’s officer did so convert $13,800 of the accrued and unpaid salary amount into
20,000,000 shares, leaving $521,850 in accrued and unpaid salary subject to the debt conversion agreement.
Lock-up Agreement
In connection with the debt conversion agreement, the Company and its officer entered into a lock-up agreement with
respect to the shares that have been and are to be issued to the officer under the debt conversion agreement. The lock-up
period is for nine months from the date or dates of issuance.
Amended and Restated Employment Agreement
In connection with the Transaction, the Company and its officer entered into an amended and restated employment
agreement. Pursuant to this amended and restated employment Agreement, the Company is to pay its officer up to
$240,000 per year as follows: beginning at $12,500 per month for 4 months; $15,000 per month from month 5 until the
Company closes on a debt or equity financing of at least $1,000,000; and $20,000 per month thereafter. This officer’s
compensation is no longer connected to the acquisition of an ethanol plant. The initial term of this amended and restated
employment agreement expires in August 2014.
Assignment Agreement
In connection with the Company’s and its officer’s executing the amended and restated employment agreement, the
Company and its officer also entered into an assignment agreement. Pursuant to this assignment agreement, the
Company’s officer agreed to forgive $1,000 of his accrued and unpaid salary in exchange for the Company’s assigning
the name “ALL Fuels & Energy Company” to him. This assignment is to become effective at such time as the Company
changes its corporate name.
Note 12. Oil and Gas Investments
The Company has purchased 4% of the outstanding shares in Treaty Belize Energy, LTD, a Belize corporation that is
seeking to development an oil and gas property located in Belize, for a cash investment of $125,000. The Company
recognized a loss on the investment for the quarter in the amount of $25,000 related to options paid during the
acquisition.
Also, the Company has entered into a participation agreement with respect to an oil and gas property located in
Louisiana, pursuant to which the Company holds a 5% in such property and has made payments totaling $6,650.
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
Recent Transactions
Change in Control. In August 2011, our company and certain of our affiliates entered into and completed a
series of transactions (collectively, the “Transaction”).
Pursuant to the Transaction, one of our officers and directors obtained control of our company. However, our
management did not change in connection with the Transaction.
Change of Business Plan. In connection with the Transaction and because we had been unable to acquire an
ethanol plant, our management has changed our plan of business from the acquisition of an ethanol plant to the
exploration, development, acquisition and production of crude oil and natural gas within the United States.
Reverse Split. On August 12, 2011, our board of directors authorized a 50-to-1 reverse split of our outstanding
common stock. We have filed a preliminary proxy statement with the SEC with respect the reverse split and other
matters. Only after a final proxy statement has been filed with the SEC and delivered to our shareholders of record on
August 19, 2011, the special shareholders’ meeting held and the reverse split approved and the necessary stated filings
made will the reverse split become effective. The effective date of this reverse split is expected to be in October 2011.
Our financial statements for future periods will reflect this reverse split.
Financing Transactions and Issuances of Securities. In connection with the Transaction, we entered into a
series of financing-related agreements and issued securities thereunder. Please see the information under “Financial
Condition” for a more complete description of these agreements and securities issuances.
Critical Accounting Policies
While we believe that the factors considered provide a meaningful basis for the accounting policies applied in
the preparation of the condensed consolidated financial statements, we cannot guarantee that our estimates and
assumptions will be accurate. If such estimates and assumptions prove to be inaccurate, we may be required to make
adjustments to these estimates in future periods.
Litigation and Tax Assessments. Should we become involved in lawsuits, we intend to assess the likelihood of
any adverse judgments or outcomes of any of these matters as well as the potential range of probable losses. A
determination of the amount of accrual required, if any, for these contingencies will be made after careful analysis of each
matter. The required accrual may change from time to time, due to new developments in any matter or changes in
approach (such as a change in settlement strategy) in dealing with these matters.
Additionally, in the future, we may become engaged in various tax audits by federal and state governmental
authorities incidental to our business activities. We anticipate that we will record reserves for any estimated probable
losses for any such proceeding.
Stock-Based Compensation. We account for stock-based compensation based on the provisions of Accounting
Standard Codification (“ASC”) 718 Share Based Payments. ASC 718 requires companies to apply a fair-value-based
measurement method in accounting for share-based payment transactions with employees and to record compensation
cost for all stock awards granted after the required effective date and for awards modified, repurchased or cancelled after
that date. The scope of ASC 718 encompasses a wide range of share-based compensation arrangements, including share
options, restricted share plans, performance-based awards, share appreciation rights and employee share purchase plans.
Recent Accounting Pronouncements. There were no recent accounting pronouncements that our company has
not implemented that materially affect our financial statements.
Results of Operations - First Nine Months 2011 vs. First Nine Months 2010
Revenues. During the First Nine Months 2011 and the First Nine Months 2010, we generated no revenues.
Unless and until we are successful in our new business of seeking the exploration, development, acquisition and
production of crude oil and natural gas, we do not expect that our operations will generate revenues. We cannot predict
whether we will be successful in these efforts.
Expenses. Our cash outlays for operating expenses during the First Nine Months 2011 were $124,053, up from
$105,464 for the First Nine Months 2010. Our non-cash operating expenses, which include stock issued for services,
totaled $1,300 and $42,000 for the First Nine Months 2011 and the First Nine Months 2010, respectively.
We have reduced our monthly operating expenses, such that they are, including salary and professional fees,
currently approximately $15,000. The level of such operating expenses are expected to remain at such levels for the
foreseeable future, unless we are successful in our new business of seeking the exploration, development, acquisition
and production of crude oil and natural gas.
Financial Condition
At September 30, 2011, we had $25,740 in cash and a working capital deficit of $788,333. At December 31,
2010, our cash position was $31,243 and our working capital deficit was $573,020. Following the Transaction, our
current cash position is adequate to sustain our current level of operations for approximately three months. In addition,
we will be required to obtain additional capital to capitalize on an available oil and gas business opportunity.
Financial Condition Following the Transaction.
Purchase Agreement. As part of the Transaction, we obtained loans in the total amount of $220,700 for use in
its current operations, including its efforts to locate and acquire a business opportunity in the oil and gas industry. In
connection with these loans, we issued the following securities:
– Convertible promissory notes with an aggregate principal amount of $220,700. These convertible
promissory notes mature on September 1, 2013, accrue interest at 8% per annum and are payable at
maturity, unless converted by the holder into shares of common stock at a conversion rate $0.00069
per share ($0.0345 per share post-reverse split);
– Series A Warrants that provide the holders the right to purchase up to a total of 100,000,000 shares
(2,000,000 shares post-reverse split) of common stock at an exercise price of $0.005 per share ($0.25
per share post-reverse split); and
– Series B Warrants that provide the holders the right to purchase up to a total of 100,000,000
(2,000,000 shares post-reverse split) shares of common stock at an exercise price of $0.0075 per share
($0.375 per share post-reverse split).
The Series A Warrants and Series B Warrants expire on August 15, 2015. The convertible promissory
notes, the Series A Warrants and the Series B Warrants contain standard adjustment provisions for
stock splits, distributions, reorganizations, mergers and consolidations.
Change of Terms in Existing Debt Instruments. The Transaction also triggered an adjustment to the conversion
price in our previously outstanding convertible promissory notes [original principal amounts of $65,000 ($47,500 current
principal amount) and $35,000] from a variable conversion price to a fixed conversion price of $0.00069 per share
($0.0345 per share post-reverse split). In connection with the Transaction, these previously outstanding convertible
promissory notes were assigned to new third party investors.
Extensions of Promissory Notes. In connection with the Transaction and subject to the effectuation of the 50-to-1 reverse split, we are to issue a total of 200,000 shares (post-reverse split) of Company common stock (100,000 shares
to directors and 100,000 shares to third parties), in consideration of the extension of the maturity dates on existing
convertible promissory notes with an aggregate principal amount of $103,000, from payable on demand to payable on
September 1, 2012.
Debt Conversion Agreement. Prior to the Transaction, we owed our sole officer a total of $535,650 in accrued
and unpaid salary. In connection with the Transaction, our company and this officer entered into a debt conversion
agreement with respect to $534,650 of such accrued and unpaid salary. Pursuant to the debt conversion agreement, this
officer agreed to convert the $534,650 in accrued and unpaid salary into shares of our common stock at a conversion
price of $0.00069 per share ($0.0345 per share post-reverse split), upon the Company effecting the 50-to-1 reverse split.
The debt conversion agreement has been amended once, pursuant to which amendment this officer had the right to
convert $13,800 of the accrued and unpaid salary amount into a total of 20,000,000 shares (pre-reverse split) of common
stock. This officer did so convert $13,800 of the accrued and unpaid salary amount into 20,000,000 shares, leaving
$521,850 in accrued and unpaid salary subject to the debt conversion agreement.
Amended and Restated Employment Agreement. In connection with the Transaction, our company and our
officer entered into an amended and restated employment agreement. Pursuant to this amended and restated employment
Agreement, we are to pay this officer up to $240,000 per year as follows: beginning at $12,500 per month for 4 months;
$15,000 per month from month 5 until the Company closes on a debt or equity financing of at least $1,000,000; and
$20,000 per month thereafter. This officer’s compensation is no longer connected to the acquisition of an ethanol plant.
The initial term of this amended and restated employment agreement expires in August 2014.
Assignment Agreement. In connection with our entering into the amended and restated employment agreement
with our officer, we also entered into an assignment agreement. Pursuant to this assignment agreement, thisthe officer
agreed to forgive $1,000 of his accrued and unpaid salary in exchange for the our assigning the name “ALL Fuels &
Energy Company” to him. This assignment is to become effective at such time as the we change our corporate name.
Management’s Plans Relating to Future Liquidity
We currently possess approximately $10,000 in cash. However, we will likely require additional capital with
which to capitalize on a business opportunity in the oil and gas industry. We may never obtain capital for this purpose.
While our management believes we will be able to secure the financing, in the form of debt, equity or a combination
thereof, necessary to complete any such proposed transaction, there is no assurance that such will be the case. This
uncertainty in the availability of financing has been exacerbated by the recent severe downturn in the U.S. economy led
by the banking and securities industries. To date, we have not received a commitment for an equity investment or a loan
in any amount.
Capital Expenditures
During the First Nine Months 2011 and 2010, we made no capital expenditures. We cannot predict the amount
of any future capital expenditures, if any.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
Not applicable.
Item 4T. Controls and Procedures.
Our Chief Executive Officer/Acting Chief Financial Officer, after evaluating the effectiveness of our disclosure
controls and procedures, as defined in Rule 13a-15(e) of the Securities Exchange Act of 1934 has concluded that, as of
the end of the fiscal quarter covered by this report on Form 10-Q, our disclosure controls and procedures were effective
to provide reasonable assurances that information required to be disclosed in the reports filed or submitted under the
Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in
the Securities and Exchange Commission’s rules and forms and such information is accumulated and communicated to
management, including the Chief Executive Officer/Acting Chief Financial Officer, as appropriate, to allow timely
decisions regarding disclosures.
There was no change in our internal control over financial reporting during the quarter ended September 30,
2011, that has materially affected, or is reasonably likely to materially affect, our company’s internal control over
financial reporting.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None.
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.
None.
Item 3. Defaults upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
No matters were submitted to our shareholders during the three months ended September 30, 2011. Subsequent
to September 30, 2011, on October 28, 2011, we held a meeting of our shareholder, at which meeting our shareholders
approved a change of our corporate name from All Fuels & Energy Company to “All Energy Corporation”, approved
a reverse stock split of our common stock at a 1-for-50 ratio, which does not adjust the total number of shares authorized,
approved the ALL Fuels & Energy Company 2011 Stock Incentive Plan. The name change and reverse split are exected
to become effective in November 2011.
Item 5. Other Information.
None.
Item 6. Exhibits.
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31.1 *
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Certification of Chief Executive Officer and Principal Financial and Accounting
Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
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32.1 *
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Certification of Chief Executive Officer and Principal Financial and Accounting
Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
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SIGNATURES
In accordance with the requirements of the Securities Exchange Act of 1934, Registrant has duly caused this
report to be signed on its behalf by the undersigned, hereunto duly authorized.
Date: November 21, 2011.
ALL FUELS & ENERGY COMPANY
By: /s/ DEAN E. SUKOWATEY
Dean E. Sukowatey
President and Acting
Chief Financial Officer