10-Q 1 afseq210.htm

U.S. SECURITIES AND EXCHANGE COMMISSION

Washington, D.C.

Form 10-Q

(Mark one)

[ X ]

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended June 30, 2010

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

Commission File No. 0-29417

	ALL Fuels & Energy Company
	(Exact name of registrant as specified in its charter)

DELAWARE

62-1581902

(State or Other Jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

6165 N.W. 86th Street, Johnston, Iowa 50131

(Address of principal executive offices, including zip code)

(515) 331-6509

(Issuer’s telephone number, including area code)

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 [ ]

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):

Large accelerated filer [ ]

Accelerated filer [ ]

Non-accelerated filer [ ] (Do not check if a smaller reporting company)

Smaller reporting company [ X ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes [ ] No [ X ]

As of August 13, 2010, there were 52,674,386 shares of the issuer’s common stock outstanding.

PART I - FINANCIAL INFORMATION

Item 1. Financial Statements

INDEX TO FINANCIAL STATEMENTS

Page

ALL Fuels & Energy Company

Consolidated Balance Sheets as of June 30, 2010 (unaudited), and December 31, 2009 (audited)

Consolidated Statements of Operations for the Three Months and Six Months Ended June 30, 2010 (unaudited) and 2009 (unaudited), and the Period from Commencement of Development Stage (June 7, 2004) to June 30, 2010 (unaudited)

Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2010 (unaudited) and 2009 (unaudited), and the Period from Commencement of Development Stage (June 7, 2004) to June 30, 2010 (unaudited)

Notes to Consolidated Financial Statements

ALL FUELS & ENERGY COMPANY

(a development stage company)

CONSOLIDATED BALANCE SHEETS

June 30, 2010, and December 31, 2009

6/30/10

(unaudited)

12/31/09

ASSETS

Current assets

Cash and cash equivalents

$37,504

$4,748

Prepaid expenses

223

1,721

Total current assets

37,727

6,469

Property and equipment - at cost

Equipment

3,333

Less accumulated depreciation

(1,747)

(1,238)

Total property and equipment - net

1,586

2,095

Total assets

$39,313

$8,564

LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT)

Current liabilities

Accounts payable and accrued expenses

$428,435

$298,674

Notes payable - related party

71,000

60,000

Notes payable - third party

100,000

---

Total current liabilities

599,435

358,674

Stockholders’ equity

Common stock, $.01 par value; 80,000,000 shares authorized, 52,674,386 and 50,624,386 shares issued and outstanding

526,745

506,245

Additional paid-in capital

16,402,936

16,180,264

Treasury stock, at cost

(150,000)

Receivable from shareholder

(50,000)

Accumulated deficit

(6,423,944)

Deficit accumulated during the development stage

(10,865,859)

(10,412,675)

Total stockholders’ equity (deficit)

(560,122)

(350,110)

Total liabilities and stockholders’ equity (deficit)

$39,313

$8,564

The accompanying notes are an integral part of these statements.

ALL FUELS & ENERGY COMPANY

(a development stage company)

CONSOLIDATED STATEMENTS OF OPERATIONS

For the Three Months and Six Months Ended June 30, 2010 and 2009, and the Period from Commencement of Development Stage (June 7, 2004) to June 30, 2010

Three Months Ended June 30,

Six Months Ended June 30,

2010

(unaudited)

2009

(unaudited)

2010

(unaudited)

2009

(unaudited)

Period from

Commence-ment of Development

Stage (June 7,

2004) to 6/30/10

(unaudited)

Revenues

$---

$3,092

$---

$8,092

Operating Costs and Expenses

Consulting

12,687

22,455

13,562

91,385

7,729,897

Legal and professional

17,084

30,353

45,592

46,989

1,248,405

Impairment charge

---

333,540

Depreciation and amortization

236

---

509

341

7,673

General and administrative

79,540

63,064

166,201

163,864

1,803,911

Total operating expenses

109,547

115,872

225,864

302,579

11,123,426

Other income (expense)

Beneficial conversion expense

(145,172)

---

(221,172)

---

(281,172)

Interest expense

(3,542)

---

(6,165)

---

(65,100)

Interest income

123

51,346

Rental income

---

66,250

Loss on sale of land

---

(1,278)

Equity loss in subsidiary

---

(14,485)

(233,340)

Total other income (expense)

(148,705)

(227,320)

(14,362)

(463,294)

Net loss

$(258,252)

$(112,755)

$(453,184)

$(308,849)

$(11,578,628)

Income (loss) per share:

Basic

$(0.00)

$(0.01)

Diluted

$(0.00)

$(0.01)

Weighted average number of shares outstanding:

Basic

52,674,386

51,291,053

52,286,607

51,457,719

Diluted

67,718,828

51,291,053

70,842,544

51,457,719

The accompanying notes are an integral part of these statements.

ALL FUELS & ENERGY COMPANY

(a development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2010 and 2009, and the Period from Commencement of Development Stage (June 7, 2004) to June 30, 2010

Six Months Ended June 30,

2010

(unaudited)

2009

(unaudited)

Period from

Commencement of Development

Stage (June 7,

2004) to 6/30/10

(unaudited)

CASH FLOWS FROM OPERATING ACTIVITIES

Net loss

$(453,184)

$(308,849)

$(11,578,628)

Adjustments to reconcile net loss to cash used for

operating activities:

Loss on sale of land

---

1,278

Loss on disposition of fixed assets

---

186

187

Depreciation and amortization

509

341

7,673

Non-cash beneficial conversion feature

221,172

---

281,172

Options issued for compensation

---

57,192

6,999,585

Stock issued for services and compensation

22,000

---

1,198,345

Impairment charge

---

333,540

Increase (decrease) in prepaids

1,498

119

(88,043)

Increase in accounts payable

129,761

370,804

Net cash used for operating activities

(78,244)

(250,992)

(2,474,087)

The accompanying notes are an integral part of these statements.

ALL FUELS & ENERGY COMPANY

(a development stage company)

CONSOLIDATED STATEMENTS OF CASH FLOWS

For the Six Months Ended June 30, 2010 and 2009, and the Period from Commencement of Development Stage (June 7, 2004) to June 20, 2010 (cont.)

Six Months Ended June 30,

2010

(unaudited)

2009

(unaudited)

Period from

Commencement of Development

Stage (June 7,

2004) to 6/30/10

(unaudited)

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of land

---

(951,238)

Increase in accrued liabilities - related party

---

40,056

Proceeds from sale of land

---

461,960

Purchase of office equipment

---

(1,294)

(4,160)

Payments on construction-in-progress

---

(193,720)

Net cash used in investing activities

---

(1,294)

(647,102)

CASH FLOWS FROM FINANCING ACTIVITIES

Proceeds from sale of common stock for cash

---

2,653,623

Principal payments on related party advances

---

(3,988)

Proceeds from notes payable - third party

100,000

---

100,000

Proceeds from notes payable - related party

11,000

---

71,000

Proceeds from long-term debt, net of deferred borrowing costs

---

483,120

Purchase of treasury stock

---

(150,000)

Contributions from shareholders

---

950

Net cash provided by financing activities

111,000

---

3,154,705

NET CHANGE IN CASH

32,756

(252,286)

33,516

Cash, beginning of period

4,748

314,224

3,988

Cash, end of period

$37,504

$61,938

$37,504

The accompanying notes are an integral part of these statements.

ALL FUELS & ENERGY COMPANY

(a development stage company)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2010

(unaudited)

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, 2009.

Note 2. Going Concern

The Company has incurred losses totaling $11,578,628 through June 30, 2010, and had limited working capital at June 30, 2010. 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

Since the third quarter of 2009, $71,000 in loans from a director provided the Company with a portion of the capital necessary to sustain its operations. All of the loans made by this director are payable on demand and bear interest at 10% per annum and are 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. This director has indicated that he will not demand payment of these loans, until such time as the Company has adequate funds with which to repay the loans. During the first six months of 2010, the Company borrowed a total of $100,000 from a third party, through the issuance of convertible promissory notes, $65,000 of which is payable in October 2010 and $35,000 of which is payable in February 2011, bearing interest at 8% per annum, and convertible into a number of shares based on the market price of our common stock.

However, it is likely that the Company will require additional funds, in order to sustain its operations through the remainder of 2010. The Company will require substantial additional capital to purchase one or more existing ethanol production facilities or to pursue other business opportunities. The Company believes it will be able to secure the financing, in the form of debt, equity or a combination thereof, necessary to complete these opportunities. The Company does not have a current commitment for an equity investment or a loan in any amount.

During the remainder of 2010, the Company intends to commit its available capital, if any, to its pursuit of the acquisition of an existing ethanol production facility and its Ethanol Group activities. The needed funding will be sought from third parties.

Note 4. Business of the Company

Ethanol Plant Acquisition Activities. Since the third quarter of 2009, the Company has actively pursued the acquisition of one or more ethanol plants. To date, the Company’s efforts in this regard have not been successful. However, the Company continues its efforts and, currently, has identified three such plants and has begun negotiations for their acquisition. The Company has entered into a letter of intent with respect to the acquisition of an ethanol plant located in the Midwest United States. The Company will be required to obtain capital from third parties, in order to consummate any such acquisition transaction.

ALL Fuels Advisory Group. In October 2008 and in response to the ethanol industry’s then-current state, the Company created a new business division known as “ALL Fuels Advisory Group”. The Company’s management believes there exist numerous opportunities to leverage the Company’s in-house ethanol expertise to provide industry-best advisory services through Advisory Group. Currently, the Advisory Group is pursuing numerous opportunities to garner consulting contracts. Advisory Group was created in response to the ethanol industry’s current a high level of stress. As the ethanol industry attempts to stabilize itself in the wake of the tumult caused by the recent period of historically-high oil prices, during the first half of 2008, immediately followed by a sudden drop from those historically-high prices, the Company is offering its advisory services to the industry. During the first half of 2009, the Company focused primarily on the development of Advisory Group, which produced $8,092 in revenues during the first half of 2009.

Enzyme Opportunity. While the Company’s ethanol-related enzyme development activities are not currently active, the Company continues to seek a third party that is interested in funding the Company’s enzyme development plans. The Company’s activities have been aimed at producing one or more “super” enzymes that would serve to produce ethanol from cellulosic plant material. The Company believes such an enzyme product would, in theory, reduce ethanol productions costs by up to 50% compared to traditional corn-based production. In addition, these enzyme development activities would produce one or more additive enzyme products that would serve to enhance corn ethanol production by 5% to 10%. It is likely that approximately $1.5 million is required over a 24-month period to complete the development of up to ten market-ready enzymes.

Note 5. Prepaid Expenses

At June 30, 2010, the Company had prepaid expenses of $223, which represents prepaid insurance.

At June 30, 2009, the Company had prepaid expenses of $7,320, which represents prepaid insurance.

Note 6. Notes Payable - Related Party

In January 2010, a director made a loan to the Company in the amount of $11,000. At June 30, 2010, this director had made loans to the Company in the total amount of $71,000. These loans are payable on demand and bear interest at 10% per annum and are 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. This director has indicated that he will not demand payment of these loans, until such time as the Company has adequate funds with which to repay the loans.

Note 7. Notes Payable - Third Party

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 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 approximately 18,000,000 shares of Company common stock.

Note 8. Capital Stock

Common Stock for Director 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 six months of 2010, the Company issued 2,000,000 shares of common stock in payment of $20,000 in legal services.

During the first six months of 2009, the Company issued no shares to consultants for services.

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 9. Subsequent Event

Promissory Note Conversion

In August 2010, $7,500 of a convertible promissory note was converted into approximately 2,500,000 shares of the Company’s common stock.

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

General

Ethanol Plant Acquisition Activities. Since the third quarter of 2009, the Company has actively pursued the acquisition of one or more ethanol plants. To date, the Company’s efforts in this regard have not been successful. However, the Company continues its efforts and, currently, has identified four such plants and has begun negotiations for their acquisition. The Company has entered into a letter of intent with respect to the acquisition of an ethanol plant located in the Midwest United States. The Company will be required to obtain capital from third parties, in order to consummate any such acquisition transaction. There is no assurance that we will be able to obtain the funding needed to purchase an ethanol plant.

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 Six Months 2010 vs. First Six Months 2009

Revenues. During the First Six Months 2010, we have not generated any revenues, though our Ethanol Group continues to seek ethanol services consulting contracts. We cannot predict whether our Ethanol Group will generate any revenues during the remainder of 2010. During the First Six Months 2009, we generated $8,092 in revenues through our Ethanol Group division.

Expenses. Our cash outlays for operating expenses during the First Six Months 2010 were $78,244, down from $250,992 for the First Six Months 2009. Our non-cash operating expenses, which include stock issued for services and options issued for services, totalled $22,000 and $57,192 for the First Six Months 2010 and the First Six Months 2009, respectively. Additionally, during the First Six Months 2010, we incurred a non-recurring non-cash operating expense of $221,172 which relates to a beneficial conversion feature associated with the issuance of promissory notes that are convertible into shares of our common stock.

We have dramatically reduced our monthly operating expenses, including salary and professional fees, to approximately $10,000. The level of such operating expenses are expected to remain at such levels for the foreseeable future, unless we are able complete the acquisition of an existing ethanol production facility, of which there is no assurance. Should our Ethanol Group continue to generate business opportunities, or should we be successful in acquiring an ethanol plant or becoming the operator of an ethanol plant, our operating expenses will significantly increase, although we are unable to predict the amount of such increase.

Financial Condition

At June 30, 2010, we had $37,504 in cash and a working capital deficit of $561,708. At December 31, 2009, our cash position was $4,748 and our working capital deficit was $352,205. We are currently seeking operating capital, so we will be able to sustain our current level of operations. Without additional operating capital, we will remain substantially illiquid. In addition, as discussed below, we will be required to obtain additional capital to pursue current business opportunities and otherwise to pursue our complete plan of business.

In January 2010, one of our directors made a loan to our company in the amount of $11,000. This loan is payable on demand and bears interest at 10% per annum and is convertible, at the director’s option, into shares of our common stock at the rate of one share for every $.01 of debt converted. This director has indicated that he will not demand payment of this loan, until such time as we have adequate funds with which to repay the loan. In January 2010, we borrowed $65,000 from a third party, and in May 2010, we borrowed $35,000 from the same third party, through the issuance of convertible promissory notes, payable in October 2010 and February 2011, respectively, bearing interest at 8% per annum, and convertible into a number of shares based on the market price of our common stock. In August 2010, $7,500 of such convertible promissory notes was converted into approximately 2,500,000 shares of our common stock. We are unable to predict if and when this third party will elect to elect further conversions of its promissory notes. On the dates of issuance, these promissory notes were convertible into approximately 18,000,000 shares of our common stock. Currently, these promissory notes are convertible into approximately 25,000,000 shares of our common stock.

Management’s Plans Relating to Future Liquidity

We currently possess approximately $10,000 in cash. However, we will require additional capital to maximize the potential for strategic acquisitions. We may never obtain capital for this purpose. Should we locate an existing ethanol production facility that we are able to acquire, we would be unable to complete any such acquisition, without significant financing. 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 acquisition, 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 lead 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 Six Months 2010, we made no capital expenditures. During the First Six Months 2009, we made $1,294 in 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 June 30, 2010, 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.

Recently, we secured the dismissal of a lawsuit filed in the Iowa District Court for Polk County, Case No. CL-112106, styled Polymer Pipe Technology, L.L.C. vs. ALL Energy Company, et al. Currently, we are not engaged in any legal proceeding.

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 matter was submitted to our shareholders, during the three months ended June 30, 2010. In April 2007, holders of approximately 60% of our common stock, acting by written consent in lieu of a meeting, approved an amendment to our amended and restated certificate of incorporation, whereby our authorized capital shares would be increased to 700,000,000 shares of common stock and 50,000,000 shares of preferred stock. This amendment to our amended and restated certificate of incorporation will be effected in the near future.

Item 5. Other Information.

None.

Item 6. Exhibits.

Exhibit No.

Description

31.1 *

Certification of Chief Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1 *

Certification of Chief Executive Officer and Principal Financial and Accounting Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

* filed herewith.

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: August 16, 2010.

ALL FUELS & ENERGY COMPANY

By:

/s/ DEAN E. SUKOWATEY

Dean E. Sukowatey, President and Acting Chief Financial Officer