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<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 1 – ORGANIZATION AND NATURE OF THE BUSINESS</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i><u>Organization</u></i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Alternative Fuels Americas, Inc. (“AFAI”, “Company”) is a development stage company. The Company was incorporated in 1993 and has engaged in a number of businesses. Its name was changed on May 11, 2007 to NetSpace International Holdings, Inc. (a Delaware corporation) (“NetSpace”). NetSpace acquired all the capital stock of Alternative Fuels Americas, Inc. (a Florida corporation) in January 2010 and filed a Certificate of Amendment to the Certificate of Incorporation on October 13, 2010 changing the Company’s name from NetSpace International Holdings, Inc. to Alternative Fuels Americas, Inc. (a Delaware corporation).</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has two wholly-owned subsidiaries, Alternative Fuels Americas, Inc. (a Florida corporation) and Alternative Fuels Costa Rica AFA-CR, LTDA., located in Costa Rica.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i><u>Nature of the business</u></i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company intends to be a “seed to pump” biofuels company. Operations will be in Latin America and will include growing plants suitable for conversion into biofuels, extraction of crude oil from plant matter, refining the crude oil into international grade biodiesel, and selling the refined oil to end users in countries where the oil is produced.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i><u>Risks</u></i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has been operating since April 2012 with extremely limited available cash. In the three months ended September 30, 2012, the Company raised $62,000 from stockholder loans. However, the Company desperately needs additional sources of financing. See Note 2. If such financing is not obtained, the Company may have to curtail its operations.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company is subject to all the risks inherent in an early stage company in the biodiesel industry and has numerous competitors globally. These competitors may have more substantial resources and be able to succeed in manufacturing products faster than those that are contemplated by the Company’s plan of operations. Many of these competitors have substantially greater financial and technical resources and production and marketing capabilities than the Company, primarily in other parts of the world.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 2 - LIQUIDITY AND GOING CONCERN</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s consolidated financial statements as of and for the three and nine months ended September 30, 2012 have been prepared on a going concern basis, which contemplates the realization of assets and the settlement of liabilities and commitments in the normal course of business. The Company incurred a net loss of $1,361,285 for the year ended December 31, 2011 and $869,341 for the nine months ended September 30, 2012. At September 30, 2012 the Company has a working capital deficiency of $1,969,865 and is totally dependent on its ability to raise capital. The Company has a plan of operations and acknowledges that its plan of operations may not result in generating positive working capital in the near future. Although management believes that it will be able to successfully execute its business plan, which includes third-party financing and capital issuance, and meet the Company’s future liquidity needs, there can be no assurances in that regard. These matters raise substantial doubt about the Company’s ability to continue as a going concern. The consolidated financial statements do not include any adjustments that might result from the outcome of this material uncertainty.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Management recognizes that the Company must generate additional funds to successfully develop its operations and activities to become a seed to pump biofuels company. Management plans include:</p>
<p style="text-align: justify; text-indent: -0.25in; margin: 0pt 0px 0pt 39.75pt; font: 10pt symbol;"> </p>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 21.75pt;"></td>
<td style="width: 18pt;"><font style="font-family: symbol;">·</font></td>
<td style="text-align: justify;"><font style="font-family: times new roman, times, serif;">the creation of Special Purpose Vehicles/Entities with which to generate capital for use in a geographic region,</font></td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 21.75pt;"></td>
<td style="width: 18pt;"><font style="font-family: symbol;">·</font></td>
<td style="text-align: justify;"><font style="font-family: times new roman, times, serif;">the sale of additional equity and debt securities,</font></td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 21.75pt;"></td>
<td style="width: 18pt;"><font style="font-family: symbol;">·</font></td>
<td style="text-align: justify;"><font style="font-family: times new roman, times, serif;">alliances and/or partnerships with entities interested in and having the resources to support the further development of the Company’s business plan,</font></td>
</tr>
</table>
<table style="margin-top: 0pt; width: 100%; font: 10pt times new roman, times, serif; margin-bottom: 0pt;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: top;">
<td style="width: 21.75pt;"></td>
<td style="width: 18pt;"><font style="font-family: symbol;">·</font></td>
<td style="text-align: justify;"><font style="font-family: times new roman, times, serif;">other business transactions to assure continuation of the Company’s development and operations.</font></td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICES AND BASIS OF PRESENTATION</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Basis of presentation</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The<b> </b>accompanying unaudited condensed consolidated financial statements of the Company and the notes thereto have been prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange commission (“SEC”). The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited financial statements and the notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on May 21, 2012.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The information presented as of September 30, 2012 and for the three and nine months ended September 30, 2012 has not been audited. In the opinion of management, the unaudited interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2012, the condensed consolidated results of its operations for the three and nine months ended September 30, 2011 and 2012, and its condensed consolidated changes in net capital deficiency and cash flows for the nine months ended September 30, 2012. The results of operations for the three and nine months ended September 30, 2011 and 2012 are not necessarily indicative of the results for the full year.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Use of estimates</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Concentration of credit risk</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. Management believes the financial risks associated with these financial instruments are minimal. The Company places its cash with high credit quality financial institutions and makes short-term investments in high credit quality money market instruments of short-term duration. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Cash and cash equivalents</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company considers all investments purchased with original maturities of three months or less to be cash and cash equivalents.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Fair value of financial instruments</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company follows the provisions of ASC 820. This Topic defines fair value, establishes a measurement framework and expands disclosures about fair value measurements.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The carrying amount of financial instruments including cash, accounts payable and accrued expenses, and notes payable approximates fair value at December 31, 2011 and September 30, 2012.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Property and equipment</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Furniture, fixtures and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred, and major renovations or improvements are capitalized.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Long-lived assets</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows. During the year ended December 31, 2011 and the nine months ended September 30, 2012, there were no deemed impairments of long-lived assets.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i> </i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Reclassifications</i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Certain amounts in 2011 were reclassified to conform to the 2012 presentation. These reclassifications had no effect on consolidated net loss for the periods presented.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 4 – DEBT</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 96%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">December 31, <br />2011</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">September 30, <br />2012</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Loan payable - stockholder, 8%, due on demand</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">297,050</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">620,300</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Convertible note - stockholder, 10%, due April 30, 2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">297,050</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">645,300</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">At the option of the holder the convertible note may be converted into shares of the Company’s common stock at the lesser of $0.40 or 20% discount to the market price, as defined, of the Company’s common stock.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 5 –STOCKHOLDERS’ EQUITY</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has 10,000,000 shares of preferred stock authorized with a par value of $0.001, of which 100,000 shares have been designated as Series C convertible preferred stock (“Series C” or “Series C preferred stock”). The Board has the authority to issue the shares in one or more series and to fix the designations, preferences, powers and other rights, as it deems appropriate.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Each share of Series C has 433.9297 votes on any matters submitted to a vote of the stockholders of the Company and is entitled to dividends equal to the dividends of 433.9297 shares of common stock. Each share of Series C preferred stock is convertible at any time at the option of the holder into 433.9297 shares of common stock.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has 250,000,000 shares of common stock authorized with a par value of $0.001. Each share of common stock has one vote per share for the election of directors and all other items submitted to a vote of stockholders. The common stock does not have cumulative voting rights, preemptive, redemption or conversion rights.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 6 –LEASES</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company is obligated under operating lease agreements for its corporate office, which expires January 2013, and for land in Costa Rica for use in its planting and farming operations, which expires in 2020. There is an option to extend the Costa Rica lease for an additional 10 years.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Minimum future lease commitments are:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 96%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center;">Year ended <br />December 31:</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: center;" colspan="2"> </td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center; width: 20%;">2012</td>
<td style="width: 66%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">4,475</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,700</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,667</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,500</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,500</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center; padding-bottom: 1pt;">After 2016</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">20,250</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2">Total future minimum rental payments</td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">42,092</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Rent expense was $6,244 for the year ended December 31, 2011 and $3,600 and $10,800 for the three and nine months ended September 30, 2012, respectively.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 8 – COMMITMENTS AND CONTINGENCIES</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has an agrarian Parcel Lease Agreement with an independent third party giving it the option to lease 1,000 hectares of land in Costa Rica upon which it may commence a planting and farming program. This option expires in February 2013. By mutual agreement of the parties, the lease may be expanded to cover up to 5,000 hectares of land. The lease agreement, which would run through March 2030, provides for an initial semi-annual rental of $350 per hectare ($350,000 annually) for the first five years, increasing by $50 per hectare for each subsequent five-year period. In addition to planting and farming, crude oil extraction may also be performed on the land.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">From time to time the Company may become subject to threatened and/or asserted claims arising in the ordinary course of business. Management is not aware of any matters, either individually or in the aggregate, that are reasonably likely to have a material adverse effect on the Company’s financial condition, results of operations or liquidity.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 9 – SUBSEQUENT EVENTS</b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company evaluates events and transactions occurring subsequent to the date of the financial statements for the matters requiring recognition or disclosure in the financial statements.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">On December 1, 2012, two of the Company’s outside directors resigned. Replacements have not been selected at January 18, 2013.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Use of estimates</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates, and the differences could be material</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Concentration of credit risk</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash. Management believes the financial risks associated with these financial instruments are minimal. The Company places its cash with high credit quality financial institutions and makes short-term investments in high credit quality money market instruments of short-term duration. The Company maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Cash and cash equivalents</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company considers all investments purchased with original maturities of three months or less to be cash and cash equivalents.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Fair value of financial instruments</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company follows the provisions of ASC 820. This Topic defines fair value, establishes a measurement framework and expands disclosures about fair value measurements.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The carrying amount of financial instruments including cash, accounts payable and accrued expenses, and notes payable approximates fair value at December 31, 2011 and September 30, 2012.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Property and equipment</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Furniture, fixtures and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets, which range from three to five years. Routine maintenance and repairs are charged to expense as incurred, and major renovations or improvements are capitalized.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Long-lived assets</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company reviews long-lived assets and certain identifiable intangibles held and used for possible impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In evaluating the fair value and future benefits of its intangible assets, management performs an analysis of the anticipated undiscounted future net cash flow of the individual assets over the remaining amortization period. The Company recognizes an impairment loss if the carrying value of the asset exceeds the expected future cash flows. During the year ended December 31, 2011 and the nine months ended September 30, 2012, there were no deemed impairments of long-lived assets.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Reclassifications</i></b></p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;">Certain amounts in 2011 were reclassified to conform to the 2012 presentation. These reclassifications had no effect on consolidated net loss for the periods presented.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">Minimum future lease commitments are:</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 96%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td style="border-bottom: black 1pt solid; text-align: center;">Year ended <br />December 31:</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="text-align: center;" colspan="2"> </td>
<td style="padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center; width: 20%;">2012</td>
<td style="width: 66%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">4,475</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center;">2013</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,700</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center;">2014</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">3,667</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center;">2015</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,500</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: center;">2016</td>
<td> </td>
<td style="text-align: left;"> </td>
<td style="text-align: right;">4,500</td>
<td style="text-align: left;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: center; padding-bottom: 1pt;">After 2016</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">20,250</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 2.5pt;" colspan="2">Total future minimum rental payments</td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">42,092</td>
<td style="text-align: left; padding-bottom: 2.5pt;"></td>
</tr>
</table>
1969865
0.40
0.20
4475
6244
3600
10800
10000
1,000 hectares
5,000 hectares
350
350000
50
62000
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b>NOTE 7 –RELATED PARTY TRANSACTIONS</b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has a consulting agreement, renewable annually at its discretion, with a director to assist in developing financing strategies and strategic relationships with both U.S. and foreign governments. The agreement calls for monthly payments, in cash or stock at the Company’s discretion, of $10,000.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company has agreements covering its Chief Executive Officer and its Chief Operating Officer positions. Such agreements provide for minimum compensation levels and are subject to annual adjustment.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b> </b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The Company’s largest shareholder has from time to time provided unsecured loans to the Company which are due on demand and bear interest at 8%. At September 30, 2012 the aggregate amount of the loans was $620,300 and accrued but unpaid interest amounted to $34,201. See Note 4.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"><b><i>Basis of presentation</i></b></p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The<b> </b>accompanying unaudited condensed consolidated financial statements of the Company and the notes thereto have been prepared in accordance with the instructions for Form 10-Q and Article 10 of Regulation S-X of the Securities and Exchange commission (“SEC”). The December 31, 2011 condensed consolidated balance sheet data was derived from audited financial statements but does not include all disclosures required by accounting principles generally accepted in the United States of America. The unaudited condensed consolidated financial statements included herein should be read in conjunction with the audited financial statements and the notes thereto that are included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2011 filed with the SEC on May 21, 2012.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The information presented as of September 30, 2012 and for the three and nine months ended September 30, 2012 has not been audited. In the opinion of management, the unaudited interim financial statements include all adjustments, consisting only of normal recurring adjustments, necessary to present fairly the Company’s financial position as of September 30, 2012, the condensed consolidated results of its operations for the three and nine months ended September 30, 2011 and 2012, and its condensed consolidated changes in net capital deficiency and cash flows for the nine months ended September 30, 2012. The results of operations for the three and nine months ended September 30, 2011 and 2012 are not necessarily indicative of the results for the full year.</p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<p style="text-align: justify; margin: 0pt 0px; font: 10pt times new roman, times, serif;">The accompanying consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries. All intercompany accounts and transactions have been eliminated in consolidation.</p>
<p style="margin: 0pt 0px; font: 10pt times new roman, times, serif;"> </p>
<table style="width: 96%; border-collapse: collapse; font: 10pt times new roman, times, serif;" cellspacing="0" cellpadding="0">
<tr style="vertical-align: bottom;">
<td nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">December 31, <br />2011</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
<td style="border-bottom: black 1pt solid; text-align: center;" colspan="2" nowrap="nowrap">September 30, <br />2012</td>
<td style="padding-bottom: 1pt;" nowrap="nowrap"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="text-align: left; width: 70%;">Loan payable - stockholder, 8%, due on demand</td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">297,050</td>
<td style="text-align: left; width: 1%;"> </td>
<td style="width: 1%;"> </td>
<td style="text-align: left; width: 1%;">$</td>
<td style="text-align: right; width: 12%;">620,300</td>
<td style="text-align: left; width: 1%;"> </td>
</tr>
<tr style="background-color: white; vertical-align: bottom;">
<td style="text-align: left; padding-bottom: 1pt;">Convertible note - stockholder, 10%, due April 30, 2013</td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">-</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
<td style="padding-bottom: 1pt;"> </td>
<td style="border-bottom: black 1pt solid; text-align: left;"> </td>
<td style="border-bottom: black 1pt solid; text-align: right;">25,000</td>
<td style="text-align: left; padding-bottom: 1pt;"> </td>
</tr>
<tr style="background-color: #ccffcc; vertical-align: bottom;">
<td style="padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">297,050</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
<td style="padding-bottom: 2.5pt;"> </td>
<td style="border-bottom: black 2.5pt double; text-align: left;">$</td>
<td style="border-bottom: black 2.5pt double; text-align: right;">645,300</td>
<td style="text-align: left; padding-bottom: 2.5pt;"> </td>
</tr>
</table>
The Company is obligated under operating lease agreements for its corporate office, which expires January 2013, and for land in Costa Rica for use in its planting and farming operations, which expires in 2020. There is an option to extend the Costa Rica lease for an additional 10 years.
Each share of Series C has 433.9297 votes on any matters submitted to a vote of the stockholders of the Company.
Entitled to dividends equal to the dividends of 433.9297 shares of common stock.
433.9297
0.08
0.10
Due on demand
2013-04-30
0
25000
2013-02-28
00015307462013-01-18
00015307462012-12-31
4700
3667
4500
4500
20250
42092
34201
0001530746afai:RelatedPartyTransactionsMember2012-09-30
0.08