UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

 

[X]      Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 forthe Fiscal Year Ended December 31, 2009

 

[ ]        Transition Report Under Section 13 or 15(d) of the Securities Exchange Act of 1934 for theTransition Period From ________ to ________

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)* |   | *(IRS Employer IdentificationNumber)* |
|---------------------------------------------------------------------|--------|---------------------------------------|

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

*(Address of Principal Executive Offices, Including Zip Code)*

            Registrant’s telephone number, including area code:  (515) 331-6509

            Securities Registered under Section 12(b) of the Exchange Act: None

            Securities Registered under Section 12(g) of the Exchange Act: Common Stock, $0.01 parvalue

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the SecuritiesAct.  Yes [ ] No [X]

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of theAct.  Yes [ ] No [X]

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) ofthe Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrantwas 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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (Section 229.405of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitiveproxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to thisForm 10-K. [  ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer,or a smaller reporting company. See the definitions of "large accelerated filer", "accelerated filer" and "smallerreporting 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]

 

The aggregate market value of the voting stock held by non-affiliates computed based on the closing price of suchstock as of June 30, 2009, was approximately $400,000.

 

The number of shares outstanding of the issuer's common equity as of April 14, 2010, was 52,674,386 shares ofcommon stock, par value $.01.

 

Documents Incorporated by Reference: None.

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

            The SEC encourages companies to disclose forward-looking information so that investorscan better understand a company’s future prospects and make informed investment decisions. ThisAnnual Report on Form 10-K contains “forward-looking statements” within the meaning of thePrivate Securities Litigation Reform Act of 1995. These forward-looking statements include, amongothers, statements about our beliefs, plans, objectives, goals, expectations, estimates and intentionsthat are subject to significant risks and uncertainties and are subject to change based on variousfactors, many of which are beyond our control. The words “may”, “could”, “should”, “would”,“believe”, “anticipate”, “estimate”, “expect”, “intend”, “plan”, “target”, “goal” and similarexpressions are intended to identify forward-looking statements.

            All forward-looking statements, by their nature, are subject to risks and uncertainties. Ouractual future results may differ materially from those set forth in the forward-looking statements. Ourability to achieve our financial objectives could be adversely affected by many factors, including,without limitation, the following factors:

 

            –          the risk of substantial inflation;

 

            –          the survival of the Unites States’ economy as a free-market economy;

 

            –          the strength of the United States economy;

 

            –          changes in the securities markets;

 

            –          legislative or regulatory changes;

 

            –          events that deprive us of the services of our president, Dean E. Sukowatey;

 

            –          whether we are able to obtain adequate capital with which to accomplish ourobjectives; and

 

            –          our ability to manage the risks involved in the foregoing.

            However, other factors besides those listed above or discussed elsewhere in this AnnualReport also could adversely affect our results, and you should not consider any such list of factorsto be a complete set of all potential risks or uncertainties.  These forward-looking statements are notguarantees of future performance, but reflect the present expectations of future events by ourmanagement and are subject to a number of factors and uncertainties that could cause actual resultsto differ materially from those described in the forward-looking statements.  Any forward-lookingstatements made by us speak only as of the date they are made.  We do not undertake to update anyforward-looking statement, except as required by applicable law.

PART I

Item 1.  Business

Available Information

            ALL Fuels & Energy Company files or furnishes annual, quarterly and current reports, proxystatements and other documents with the SEC under the Securities Exchange Act of 1934 (the"Exchange Act").  The public may read and copy any materials that we file with the SEC at theSEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549.  The public mayobtain information on the operation of the Public Reference Room by calling the SEC at1-800-SEC-0330.  Also, the SEC maintains an Internet website that contains reports, proxy andinformation statements, and other information regarding issuers, including us, that file electronicallywith the SEC.  The public can obtain any documents that we file with the SEC athttp://www.sec.gov.

            We also make available, free of charge through our internet website(www.allfuelsandenergy.com), our Annual Report on Form 10-K, Quarterly Reports on Form 10-Q,Current Reports on Form 8-K and, if applicable, amendments to those reports filed or furnishedpursuant to Section 13(a) of the Exchange Act as soon as reasonably practicable after weelectronically file such material with, or furnish it to, the SEC.

Business Objective

            With the condition of the ethanol industry becoming weakened over the past two years, webegan to pursue certain ethanol-related opportunities through our Ethanol Group.  However, itremains our goal to become a significant producer of ethanol and its co-products in the United States,that is, to become a producer of at least 500 million gallons of ethanol annually.

Recent and Current Business Activities

            *Acquisition Activities*.  During the first quarter of 2010, we have identified at least threeexisting ethanol plants that we are attempting to acquire.

            In March 2010, we announced that we had secured an agreement for a period of exclusivityin which to negotiate and sign a purchase agreement to acquire an ethanol plant located in theMidwest United States.  We have begun our due diligence efforts to complete the proposed purchaseand continue to negotiate the final terms of the proposed acquisition.  We believe that we will be ableto reach an agreement on the terms of the proposed acquisition.  However, while we believe that wewill be able to obtain the financing necessary to complete this acquisition, we have not yet obtainedany binding commitment for such financing.

            The acquisition opportunity described in the foregoing paragraph became available to usshortly after the conclusion of our unsuccessful 2009 efforts to acquire another ethanol plant.  Theseefforts related to an ethanol plant located in Jefferson, Wisconsin, and owned by Renew Energy,LLC, as a debtor-in-possession under Chapter 11 of the Bankruptcy Code.  Throughout the last halfof 2009, we focused on acquiring the Renew Energy plant.  These efforts resulted in our leading ateam that achieved a “qualified bidder” status for the auction of the Renew Energy plant.  At theauction of the Renew Energy plant, we submitted a bid of $77 million, the highest bid at the auction.However, a bid of $72 million submitted by Valero Energy was selected as the “best” bid at theauction.  Following the auction, we filed a motion in the bankruptcy court seeking to nullify theauction, in light of certain perceived irregularities occurring at the auction.  We were not successfulin these efforts.

            While not successful in our efforts in acquiring the Renew Energy plant, those effortsprovided invaluable business relationships that we believe will serve us well in the future.

            *Ethanol-Related Activities.*  As 2008 came to an end, in response to the ethanol industry’sthen-current state of high stress, we created a business division known as “ALL Fuels EthanolGroup”.  We believe there exist numerous opportunities to leverage our ethanol expertise to becomean active participant in the ethanol production industry through this division.  In 2009, the EthanolGroup generated approximately $8,000 in revenues.  We continue to develop this division, whileprimarily seeking the acquisition of one or more ethanol plants.

Our Company in the Current Business Climate

            *General*.  2008 and 2009 were years of high stress for the ethanol industry.  The ethanolindustry continues its recovery from the period of historically-high oil prices occurring throughoutmost 2008.  The industry recovery has been made more difficult by the recent downturn in the U.S.economy and the associated chaos in the national and international financial markets.  However, inthe current climate, we believe there exist numerous opportunities to leverage our company’s ethanolexpertise to become an active participant in the ethanol production industry.

            *Acquisition Activity*.  As discussed above, despite the ethanol industry’s experiencing a greatdegree of uncertainty, we continue to pursue the acquisition of one or more operating ethanolproduction facilities.  In March 2010, we announced that we had secured an agreement for a periodof exclusivity in which to negotiate and sign a purchase agreement to acquire an ethanol plantlocated in the Midwest United States.  We have begun our due diligence efforts to complete theproposed purchase and continue to negotiate the final terms of the proposed acquisition.  We believethat we will be able to reach an agreement on the terms of the proposed acquisition.  However, whilewe believe that we will be able to obtain the financing necessary to complete this acquisition, wehave not yet obtained any binding commitment for such financing.  There is no assurance that wewill be able to obtain the funding needed to purchase a facility.

            *ALL Fuels Ethanol Group*.  In response to the ethanol industry’s high-stress state during2008, we created a business division known as “ALL Fuels Ethanol Group”.  We believe there existnumerous opportunities to leverage our ethanol expertise to become an active participant in theethanol production industry through this division.  In 2009, the Ethanol Group generatedapproximately $8,000 in revenues.  We continue to develop this division, while primarily seekingthe acquisition of one or more ethanol plants.

            *Enzyme Development*.  During 2008 and the first half of 2009, we pursued an agreement witha leading research institution for the development and commercialization of an ethanol “super”enzyme, producing cellulosic ethanol with theoretical significant savings in ethanol production costs.These efforts have been halted until such time as we possess adequate capital with which to continueour efforts in this area.  There is no assurance that we will ever be successful in developing andcommercializing any enzyme products.

Our Competitive Advantages and Disadvantages

            *Competitive Advantages*.  Our management believes our company possesses a high level ofexpertise in the ethanol industry, particularly in the ethanol production process.   Our Ethanol Groupefforts seek to exploit this ethanol expertise.

            *Competitive Disadvantages*.  While our management believes we possess certain competitiveadvantages, there are certain competitive disadvantages that we must overcome.  Initially, we havenot achieved name recognition with the ethanol industry.  Further, we do not possess excess capitalwith which to accomplish our Ethanol Group’s objectives nor do we possess capital sufficient forthe acquisition of an operating ethanol plant. We may never obtain sufficient capital with which toaccomplish our objectives.

Ethanol Industry Overview

            Over the past decade, the ethanol industry has grown significantly, with United Statesproduction increasing from 1.63 billion gallons in 2000 to 10.75 billion gallons in 2009, accordingto the Renewable Fuels Association.  According to the U.S. Energy Information Administration,ethanol blends accounted for approximately 8% of the U.S. gasoline supply for all of 2009.  Due toenvironmental concerns, increasing and volatile crude oil prices, energy independence concerns andassociated national security concerns, we believe that ethanol will continue to experience increaseddemand in the U.S., as there remains a focus on reducing reliance on petroleum-based transportationfuels.

            Currently, most U.S. ethanol is produced from corn grown in Illinois, Iowa, Minnesota,Nebraska and South Dakota, where corn is abundant. In addition to corn, the production processemploys natural gas or, in some cases, coal to power the production facilities. Proximity to sufficientlow-cost corn (or other feedstock) and natural gas supply are important competitive factors forethanol producers.

            Ethanol is marketed across the U.S. as a gasoline blend component that serves as a clean airadditive, an octane enhancer and a renewable fuel resource. It is blended with gasoline (i) as anoxygenate to help meet fuel emission standards, (ii) to improve gasoline performance by increasingoctane levels and (iii) to extend fuel supplies. Also, a small amount of ethanol is used as E85, arenewable fuels-driven blend comprised of up to 85% ethanol. We expect that the use of ethanol asE85 will continue to grow.

            Historically, the principal factors affecting the price of ethanol are:

 

            -          The price of gasoline. The price of ethanol over the long term has moved in relationto the price of gasoline, which closely follows the price of oil.

 

            -          Federal ethanol tax incentives. The Volumetric Ethanol Excise Tax Credit (VEETC)enables refiners and blenders to pay a premium for ethanol relative to the price ofgasoline.

 

            -          Supply and Demand Fundamentals of Ethanol. The ethanol industry has experiencedrapid growth in supply capacity and demand, in recent years. During periods whensupply has exceeded demand, the price of ethanol has tended to drop below the costof wholesale gasoline plus the value of the VEETC. During periods when demandhas exceeded supply, the price of ethanol tended to be at or above the cost ofwholesale gasoline plus the value of the VEETC.

            It is our belief that the environmental benefits of ethanol use, the ability of ethanol to improvegasoline performance, the usefulness of ethanol as a fuel-supply extender, the favorable productioneconomics associated with ethanol and the current favorable government incentives could enableethanol to comprise an increasingly larger portion of the U.S. fuel supply.

            *Environmental Benefits*.  During the 1990’s, federal laws began to mandate the use ofoxygenates in reformulated gasoline in cities with unhealthy levels of air pollution, on a seasonal orfull-time basis.  At that time, these oxygenates included ethanol and methyl tertiary butyl ether(MTBE) which, when blended with gasoline, reduce vehicle emissions. Although the federaloxygenate requirement was eliminated in 2006, oxygenated gasoline continues to be used, in orderto meet various current federal and state air emissions standards.  In the U.S., the refining industryhas substantially abandoned the use of MTBE, making ethanol the primary clean-air oxygenatecurrently in use.

            *Improved Gasoline Performance*.  With an octane rating of 113, ethanol is used to increasethe octane value of the gasoline with which it is blended.  Gasoline enhanced with ethanol improvesengine performance.  Ethanol is used as an octane enhancer in two ways.  First, ethanol is used toproduce regular grade gasoline from lower-octane gasoline blending stocks.  Second, ethanol is usedto upgrade regular grade gasoline to premium grades.

            *Fuel-Supply Extender*.  Currently, ethanol is an important blending component used byrefiners to extend gasoline supplies.  From 1980 to 2008, domestic petroleum refinery outputincreased approximately 29%, while domestic gasoline consumption increased approximately 36%,during the same period. (Source: Energy Information Administration). By blending ethanol withgasoline, refiners are able to expand the volume of the gasoline they are able to sell.  In 2009, anethanol industry trade association requested that the U.S. Environmental Protection Agency (EPA)approve the use of gasoline containing up to 15% ethanol.  The EPA has not taken any formal actionwith respect to this request.  Should the EPA permit the requested increase in allowable ethanolcontent in gasoline, we believe that an increase in demand for ethanol could result.

            *Economics of Ethanol Blending*.  The cost to produce a gallon of ethanol is currently at orbelow the cost of producing a gallon of petroleum-based gasoline.  This favorable productionenvironment is further enhanced by the existing blender’s $0.45 per gallon tax credit.

            *Renewable Fuels Mandate*. In addition to the existing blender’s tax credit, the expansion inethanol usage has also been driven by federal legislative actions requiring the use of renewable fuels,including ethanol.  The Energy Independence and Security Act of 2007, confirmed by the EPAregulations on the Renewable Fuel Standard, or RFS 2, issued on February 3, 2010, mandated aminimum usage of corn-derived renewable fuels of 10.5 billion gallons in 2009 and 12.0 billiongallons in 2010.  This mandate for corn-based ethanol increases to 15.0 billion gallons for 2015.

Ethanol Production Process

            Ethanol is typically either produced by a dry-milling or wet-milling process. Although thetwo processes feature numerous technical differences, the primary operating trade-off of thewet-milling process is a higher co-product yield in exchange for a lower ethanol yield.  In thedry-mill process of converting corn into ethanol, each bushel of corn yields approximately 2.8gallons of ethanol and approximately 18 pounds of distillers grains.

            *Ethanol Co-Products*.

            Dried Distillers Grain with Solubles (DDGS).  A co-product of dry-mill ethanol production,DDGS is a high-protein and high-energy animal feed that is sold primarily as an ingredient in beefand dairy cattle feed. DDGS consists of the concentrated nutrients remaining after the starch in cornis converted to ethanol.

            Wet Distillers Grains with Solubles (WDGS).  WDGS is similar to DDGS, except that thefinal drying stage applied to DDGS is bypassed and the product is sold as a wet feed. WDGS is anexcellent livestock feed with better nutritional characteristics than DDGS. However, higher costs ofstorage and transportation are associated with WDGS.

            Corn Oil.  Corn oil can be produced as a co-product of ethanol production by installingequipment to separate the oil from the distillers grains during the production process. Corn oil canbe sold as an animal feed and commands higher prices than DDGS. It can also be used to producebiodiesel, a clean burning alternative fuel that can be used in diesel engines with petroleum dieselto lower emissions and improve lubricity.

Raw Material Supply and Pricing; Risk Management

            Our management will seek to mitigate our exposure to commodity price fluctuations bypurchasing a portion of our corn requirements on a fixed price basis and by purchasing corn andnatural gas futures contracts. To mitigate ethanol price risk, our management intends to sell a portionof our future production under fixed price and indexed contracts. It can be expected that our indexedcontracts will be referenced to a futures contract, such as unleaded gasoline on the NYMEX, and thatwe may hedge a portion of the price risk associated with index contracts by selling exchange-tradedunleaded gasoline contracts. Our management believes this strategy will reduce somewhat thevolatility of our operating results. However, no assurances can be made in this regard.

Marketing

            During the early years of our operations, we intend to have agreements with one or morecompanies for the marketing, including billing, receipt of payment and other administrative services,for all of the ethanol that we produce. In addition, we will have marketing agreements for the DDGSand carbon dioxide generated by a facility. Should we ever determine to market and sell our ownethanol, we will be required to establish our own marketing, distribution, transportation and storageinfrastructure. Involved in this undertaking would be obtaining sufficient numbers of railcars andstorage depots near our customers and at other strategic locations to ensure efficient delivery of ourfinished ethanol product. Also, we would be required to hire or retain an outside marketing and salesforce and logistical and other operational personnel to staff adequately our distribution activities.

            With respect to our distillers grains, we expect that they will be sold locally for use as animalfeed, during the first years of our operations.

Competition

            *Domestic Competition*.  The ethanol industry is highly competitive.  Our prospectivecompetitors are located throughout the United States, nearly all of which can be expected to possessgreater resources than our company.  In 2009, the three largest ethanol producers in North Americawere Archer-Daniels-Midland Company, POET, LLC and Valero Energy Corporation.  Accordingto the RFA, as of March 18, 2010, there were 189 ethanol-producing plants in the U.S., with a totalannual production capacity of 12.6 billion gallons of ethanol.  As of that date, several new plantswere under construction or undergoing expansion.  By the end of 2010, annual U.S. ethanolproduction capacity could be in excess of 13.0 billion gallons.

            *Foreign Competition*.  Foreign producers of ethanol are an additional source of competitionin the ethanol industry.  The impact of this foreign competition may significantly in the future.  Largeinternational companies with extensive resources have developed, or are developing, increasedforeign ethanol production capacities.  Brazil, the second largest ethanol producer in the world,produces ethanol primarily from sugarcane, a lower-cost feed stock than is corn.  The Caribbeanregion is also eligible for tariff reduction or elimination upon importation to the United States undera program known as the Caribbean Basin Initiative.  Ethanol imported from Caribbean Basincountries may become a less expensive alternative to ethanol domestically produced, althoughinfrastructure deficiencies may temper the market impact on the U.S.

            *Ethanol Co-Products*.  With respect to distillers grains (DDGS and WDGS), we will competeprimarily with other ethanol producers, as well as a number of large and small suppliers ofcompeting animal feed. We believe the principal competitive factors are price, proximity topurchasers and product quality. We cannot assure you that we will be able to compete successfullyin this market.

Legislation and Regulatory Matters

            *The Energy Independence and Security Act of 2007*. On December 19, 2007, the EnergyIndependence and Security Act of 2007 was enacted into law. This law significantly increases themandated usage of renewable fuels (ethanol, bio-diesel or any other liquid fuel produced frombiomass or biogas).  The law increases the renewable fuels standard established originally under theEnergy Policy Act of 2005 to 36 billion gallons by 2022, of which the mandate for corn-basedethanol is limited to 15 billion gallons by 2015.

            *The Federal Ethanol Tax Incentive Program*. First passed in 1979, the VEETC (commonlyreferred to as the “blender’s credit”) program allows gasoline distributors who blend ethanol withgasoline to receive a federal excise tax credit of $0.45 per gallon of pure ethanol used, that is, $0.045per gallon for E10 (gasoline with an ethanol content of 10% ethanol) and $0.3825 per gallon for E85(gasoline with an ethanol content of 85% ethanol).  Currently, the blender’s credit is to expire inDecember 31, 2010.  However, our management believes the blender’s credit will be extended priorto expiration, as has been done historically.  To ensure that the blender’s credit serves to boostdomestic production, federal policy has insulated the domestic ethanol industry from foreigncompetition by levying a $0.54 per gallon tariff on all imported ethanol.

            Ethanol imports from 24 countries in Central America and the Caribbean Islands are exemptfrom this tariff under the Caribbean Basin Initiative (CBI), in order to encourage economicdevelopment in that region. Under the terms of the CBI, member nations may export ethanol intothe U.S. up to a total limit of 7% of U.S. production per year (with additional exemptions fromethanol produced from feedstock in the Caribbean region over the 7% limit). In 2006, there were alsosignificant imports of ethanol from non-CBI countries. Although these imports were subject to thetariff, significant increases in the price of ethanol in 2006 made the importation of ethanol fromnon-CBI countries profitable, in spite of the tariff. During 2009, there were no material imports ofethanol into the U.S.  In the past, significant imports of ethanol into the U.S. have had a negativeeffect on ethanol prices.

            *Use of Fuel Oxygenates*. Ethanol is used by the refining industry as a fuel oxygenate, which,when blended with gasoline, allows engines to burn fuel more completely and reduce emissions frommotor vehicles. The use of ethanol is an oxygenate had been propelled by regulatory factors,specifically two programs in the federal Clean Air Act Amendments of 1990, that required the useof oxygenated gasoline in areas with unhealthy levels of air pollution.  Although the federaloxygenate requirements for reformulated gasoline included in the Clean Air Act were completelyeliminated on May 5, 2006, by the Energy Policy Act of 2005, refiners continue to use oxygenatedgasoline in order to meet continued federal and state fuel emission standards.

            *State Mandates*. Several states, including Missouri and Oregon, have enacted mandates thatcurrently require ethanol blends of 10% ethanol in motor fuel sold within the state. Another state,Minnesota, has a 20% renewable fuel mandate that goes into effect in 2012. These mandates serveto increase demand for ethanol. As more states consider mandates, or if existing mandates arerelaxed or eliminated, the demand for ethanol can be affected.

Environmental Matters

            Once established, our ethanol production operations will be subject to various federal, stateand local environmental laws and regulations, including those relating to the discharge of materialsinto the air, water and ground; the generation, storage, handling, use, transportation and disposal ofhazardous materials; and the health and safety of our employees. These laws, regulations and permitsalso can require expensive pollution control equipment or operational changes to limit actual orpotential impacts to the environment. A violation of these laws and regulations or permit conditionscan result in substantial fines, natural resource damage, criminal sanctions, permit revocations and/orfacility shutdowns. We do not anticipate a material adverse effect on our business or financialcondition as a result of our compliance with these requirements. Currently, we cannot predictwhether we will incur material capital expenditures for environmental controls, beyond the initialconstruction costs.

            There is a risk of liability for the investigation and cleanup of environmental contaminationat each of the properties that we own or operate and at off-site locations where we arrange for thedisposal of hazardous substances. If these substances have been or are disposed of or released at sitesthat undergo investigation and/or remediation by regulatory agencies, we may be responsible underCERCLA or other environmental laws for all or part of the costs of investigation and/or remediationand for damage to natural resources. We may also be subject to related claims by private partiesalleging property damage and personal injury due to exposure to hazardous or other materials at orfrom these properties. Some of these matters may require us to expend significant amounts forinvestigation and/or cleanup or other costs.

            In addition, new laws, new interpretations of existing laws, increased governmentalenforcement of environmental laws or other developments could require us to make additionalsignificant expenditures. Continued government and public emphasis on environmental issues canbe expected to result in increased future investments for environmental controls at our ongoingoperations. Present and future environmental laws and regulations (and related interpretations)applicable to our then-current operations, more vigorous enforcement policies and discovery ofcurrently unknown conditions may require substantial capital and other expenditures. Our airemissions will be subject to the federal Clean Air Act, the federal Clean Air Act Amendments of1990 and similar state and local laws and associated regulations. The U.S. EPA has promulgatedNational Emissions Standards for Hazardous Air Pollutants, or NESHAP, under the federal CleanAir Act that could apply to facilities that we may own or operate, if the emissions of hazardous airpollutants exceed certain thresholds. Because other domestic ethanol manufacturers will have similarrestrictions, however, we believe that compliance with more stringent air emission control or otherenvironmental laws and regulations is not likely to materially affect our competitive position.

Employees

            We currently have two employees, who are also officers. We expect that we will hirenon-management employees as such time as we complete an acquisition of one or more ethanolplants. We will continue to retain the services of independent contractors and outside professionalson an as-needed basis.

Item 1A.     Risk Factors

            Not applicable.

Item 1B.  Unresolved Staff Comments

            Not applicable.

Item 2.  Properties

            We lease a small office in Johnston, Iowa, at a monthly rental of $250.  We own officeequipment necessary to conduct our current business.

Item 3. Legal Proceedings

            We are not currently involved in any legal proceedings.

Item 4. Submission of Matters to Vote of Security Holders

            No matter was submitted to our shareholders during the last three months of 2008.

            In April 2007, holders of approximately 60% of our common stock, acting by written consentin lieu of a meeting, approved an amendment to our amended and restated certificate ofincorporation, whereby our authorized capital would be increased to 700,000,000 shares of $0.01par value common stock and 50,000,000 shares of $0.01 par value preferred stock. It is expected thatsuch amendment will be filed in the near future.

PART II

Item 5.  Market for Registrant’s Common Equity, Related Stockholder Matters

                    and Issuer Purchases of Equity Securities.

Market Information

            Our common stock is quoted on the OTC Bulletin Board, under the symbol “AFSE”.  Thetable below sets forth, for the periods indicated, the high and low sale prices for our common stock,as reported by the OTC Bulletin Board.

|   | Period |   | High* |   | Low* |   |
|--------|--------|--------|-------|--------|------|--------|

|   | 2008 | First Quarter |   | $.71 |   | $.45 |   |
|--------|------|---------------|--------|------|--------|------|--------|

|   |   | Second Quarter |   | $.74 |   | $.17 |   |
|--------|--------|----------------|--------|------|--------|------|--------|

|   |   | Third Quarter |   | $.22 |   | $.03 |   |
|--------|--------|---------------|--------|------|--------|------|--------|

|   |   | Fourth Quarter |   | $.03 |   | $.01 |   |
|--------|--------|----------------|--------|------|--------|------|--------|

|   | 2009 | First Quarter |   | $.03 |   | $.02 |   |
|--------|------|---------------|--------|------|--------|------|--------|

|   |   | Second Quarter |   | $.03 |   | $.0175 |   |
|--------|--------|----------------|--------|------|--------|--------|--------|

|   |   | Third Quarter |   | $.03 |   | $.0125 |   |
|--------|--------|---------------|--------|------|--------|--------|--------|

|   |   | Fourth Quarter |   | $.116 |   | $.013 |   |
|--------|--------|----------------|--------|-------|--------|-------|--------|

|   | 2010 | First Quarter |   | $.06 |   | $.012 |   |
|--------|------|---------------|--------|------|--------|-------|--------|

|   |  * | The foregoing prices have been adjusted to reflect a (a) one-for-seventeen reverse split ofour common stock occurring in September 2004 and (b) a one-share-for-every-two-sharesforward split of our common stock occurring in May 2007. |
|--------|---------|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

              You should note that our common stock is likely to experience significant fluctuations in its price and tradingvolume. We cannot predict the future trading patterns of our common stock.

Holders

              On April 5, 2010, the number of record holders of our common stock, excluding nominees and brokers, was275 holding 52,674,386 shares.

Dividends

              We have never paid cash dividends on our common stock. We intend to re-invest any future earnings into ourcompany for the foreseeable future.

Securities Authorized for Issuance Under Equity Compensation Plans

| Plan Category |   | Number of securities to beissued upon exercise ofoutstanding options,warrants and rights |   | Weighted average

exercise price ofoutstanding options,warrants and rights |   | Number of securitiesremaining available forfuture issuance |
|---------------|--------|------------------------------------------------------------------------------------------|--------|----------------------------------------------------------------------------|--------|------------------------------------------------------------|

| Equity compensation plansapproved by security holders |   | -0- |   | -0- |   | -0- |
|-------------------------------------------------------|--------|-----|--------|-----|--------|-----|

| Equity compensation plansnot approved by securityholders |   | -0- |   | -0- |   | -0- |
|----------------------------------------------------------|--------|-----|--------|-----|--------|-----|

| Individual CompensationArrangements |   | -0- |   | -0- |   | -0- |
|-------------------------------------|--------|-----|--------|-----|--------|-----|

Recent Issuances of Unregistered Securities

              During the last three months of 2009, we issued unregistered securities, as follows:

              1.  (a) Securities Sold.  In November 2009, we issued a $10,000 principal amount convertible promissory note,bearing interest at 10% per annum and payable on demand; (b) Underwriter or Other Purchasers. Such convertiblepromissory note was issued to Dean E. Sukowatey; (c) Consideration. Such convertible promissory note was issued inconsideration of a $10,000 loan; (d) Exemption from Registration Claimed. The convertible promissory note is exemptfrom registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2) thereof andRule 506 thereunder, as a transaction not involving a public offering; and (e) Terms of Conversion or Exercise. Theconvertible promissory note may be converted into shares of common stock at the rate of one share for every $.01 ofindebtedness converted.

              Subsequent to December 31, 2009, we have issued unregistered securities, as follows:

              2.  (a) Securities Sold.  In January 2010, we issued an $11,000 principal amount convertible promissory note,bearing interest at 10% per annum and payable on demand; (b) Underwriter or Other Purchasers. Such convertiblepromissory note was issued to Dean E. Sukowatey; (c) Consideration. Such convertible promissory note was issued inconsideration of a $11,000 loan; (d) Exemption from Registration Claimed. The convertible promissory note is exemptfrom registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2) thereof andRule 506 thereunder, as a transaction not involving a public offering; and (e) Terms of Conversion or Exercise. Theconvertible promissory note may be converted into shares of common stock based on the market price of our commonstock on the date of conversion.

              3.  (a) Securities Sold.  In January 2010, we issued a $65,000 principal amount convertible promissory note,bearing interest at 8% per annum and payable on demand; (b) Underwriter or Other Purchasers. Such convertiblepromissory note was issued to Asher Enterprises, Inc.; (c) Consideration. Such convertible promissory note was issuedpursuant to a securities purchase agreement; (d) Exemption from Registration Claimed. The convertible promissory noteis exempt from registration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2)thereof and Rule 506 thereunder, as a transaction not involving a public offering; and (e) Terms of Conversion orExercise. The convertible promissory note may be converted into shares of common stock at the rate of one share forevery $.01 of indebtedness converted.

              4.  (a) Securities Sold. 1,000,000 shares of common stock were issued; (b) Underwriter or Other Purchasers.Such shares of common stock were issued to Newlan & Newlan; (c) Consideration. Such shares of common stock wereissued pursuant to a legal services letter agreement and were valued at $10,000, in the aggregate; and (d) Exemption fromRegistration Claimed. These securities are exempt from registration under the Securities Act of 1933, as amended,pursuant to the provisions of Section 4(2) thereof and Rule 506 thereunder, as a transaction not involving a publicoffering. This purchaser was a sophisticated investor capable of evaluating an investment in our company.

              5.  (a) Securities Sold. 50,000 shares of common stock were issued; (b) Underwriter or Other Purchasers.  Suchshares of common stock were issued to Brad Knaack; (c) Consideration. Such shares of common stock were issued asa bonus and were valued at $2,000; and (d) Exemption from Registration Claimed. These securities are exempt fromregistration under the Securities Act of 1933, as amended, pursuant to the provisions of Section 4(2) thereof and Rule506 thereunder, as a transaction not involving a public offering. This purchaser was a sophisticated investor capable ofevaluating an investment in our company.

Item 6.  Selected Financial Data

              Not applicable.

Item 7.  Management’s Discussion and Analysis of Financial Condition and Results of Operations

Critical Accounting Policies

              While we believe that the factors considered provide a meaningful basis for the accounting policies applied inthe preparation of the condensed consolidated financial statements, we cannot guarantee that our estimates andassumptions will be accurate. If such estimates and assumptions prove to be inaccurate, we may be required to makeadjustments to these estimates in future periods.

              *Litigation and Tax Assessments*. Should we become involved in lawsuits, we intend to assess the likelihood ofany adverse judgments or outcomes of any of these matters as well as the potential range of probable losses. Adetermination of the amount of accrual required, if any, for these contingencies will be made after careful analysis of eachmatter. The required accrual may change from time to time, due to new developments in any matter or changes inapproach (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 governmentalauthorities incidental to our business activities. We anticipate that we will record reserves for any estimated probablelosses for any such proceeding.

              *Stock-Based Compensation*. We account for stock-based compensation based on the provisions of AccountingStandard Codification (“ASC”) 718 Share Based Payments.  ASC 718 requires companies to apply a fair-value-basedmeasurement method in accounting for share-based payment transactions with employees and to record compensationcost for all stock awards granted after the required effective date and for awards modified, repurchased or cancelled afterthat date. The scope of ASC 718 encompasses a wide range of share-based compensation arrangements, including shareoptions, 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 hasnot implemented that materially affect our financial statements.

Results of Operations

              For 2009, our monthly cash operating expenses, which include salary, professional fees and costs associatedwith the pursuit of business opportunities, averaged approximately $70,000.  Should we be successful in commencingother business opportunities, our operating expenses will increase, although we are unable to predict the amount of suchincrease.

              *Revenues*.  For the year ended December 31, 2009, we generated $8,092 in revenues.  We did not generate anyrevenues during the year ended December 31, 2008.  During each year, we actively pursued numerous businessopportunities, including the acquisition of one or more existing ethanol production facilities.  Our Ethanol Groupbusiness generated our 2009 revenues.  We continue to develop this division, while primarily seeking the acquisition ofone or more ethanol plants.  We cannot predict whether we will be successful in these efforts.

              *Expenses*.  Our operating expenses during the years ended December 31, 2009 and 2008, were $581,043 and$1,931,332, respectively.  Our non-cash operating expenses, which include stock issued for services and options issuedfor services, totalled $57,192 and $877,180, for those years, respectively.

Financial Condition

              At December 31, 2009, we had $4,748 in cash and a working capital deficit of $352,205.  These positions aredown from December 31, 2008, levels, when we had $314,224 in cash and working capital of $181,205.  During 2009,we funded our ongoing operations with the cash remaining from the 2008 sale of a parcel of land.  At December 31,2009, and currently, our company was and is substantially illiquid.  As discussed below, we will remain illiquid, unlessand until we complete the acquisition of an ethanol plant or our Ethanol Group successfully generates a significantlyhigher level of business.  There is no assurance that we will be successful in our business endeavors.

Management’s Plans Relating to Future Liquidity

              We currently possess approximately a small amount of cash.  We will require significant additional capital tomaximize the potential for strategic acquisitions.  We may never obtain capital for this purpose.  Should we locate anexisting ethanol plant that we are able to acquire, we would be unable to complete any such acquisition, withoutsignificant financing.  While our management believes we will be able to secure the financing, in the form of debt, equityor a combination thereof, necessary to complete any such proposed acquisition, there is no assurance that such will bethe 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 equityinvestment or a loan in any amount.

Capital Expenditures

              During 2009, our capital expenditures were $2,194.  During 2008, our capital expenditures were $7,332.Should we obtain the capital required to purchase one or more existing ethanol plants, our capital expenditures will besignificant.  However, we cannot predict the exact amount of these potential expenditures.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

              Not Applicable.

Item 8. Financial Statements and Supplementary Data

              The required financial statements appear at the end of the Annual Report on Form 10-K, beginning on page F-1.

Item 9. Changes In and Disagreements With Accountants on Accounting and Financial Disclosure

              On May 14, 2009, Farmer, Fuqua & Huff, P.C. declined to stand for re-election as our independent auditor, inconjunction with a general change in the firm’s direction in relation to its SEC practice.  At the time, there was nodisagreement with respect to any matter of accounting principles or practices, financial statement disclosure or auditingscope or procedure.

              On August 12, 2009, Farmer, Fuqua & Huff, P.C. was re-engaged as our independent auditor, to audit ourfinancial statements for the year ended December 31, 2009.  The decision to re-engage our auditor was unanimouslyapproved by our board of directors.

Item 9A(T).  Controls and Procedures

Evaluation of Disclosure Controls and Procedures

              We maintain disclosure controls and procedures, as such term is defined in Rules 13a-15(f) and 15d-15(f) ofthe Securities Exchange Act of 1934 (“the Exchange Act”), that are designed to provide reasonable assurance that theinformation required to be disclosed by us in reports filed under the Exchange Act is (i) recorded, processed, summarizedand reported within the time periods specified in the SEC’s rules and forms and (ii) accumulated and communicated toour management as appropriate to allow timely decisions regarding disclosure.  Additionally, in designing disclosurecontrols and procedures, our management necessarily was required to apply its judgment in evaluating the cost-benefitrelationship of possible disclosure controls and procedures. The design of any disclosure controls and procedures alsois based in part upon certain assumptions about the likelihood of future events, and there can be no assurance that anydesign will succeed in achieving its stated goals under all potential future conditions.  Based on his evaluation as of theend of the period covered by this Annual Report on Form 10-K, our President, who also serves as our principal financialand accounting officer, has concluded that our disclosure controls and procedures were effective.

Management’s Report on Internal Control Over Financial Reporting

              Our management is responsible for establishing and maintaining adequate internal control over financialreporting as defined in Rule 13a-15(f) of the Exchange Act.  Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may become inadequate because of changes in conditions, or the degree ofcompliance with the policies or procedures may deteriorate.

              Our management assessed the effectiveness of our internal control over financial reporting as of December 31,2009.  In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizationsof the Treadway Commission in Internal Control-Integrated Framework.  Based on the assessment using those criteria,our management concluded that the internal control over financial reporting was effective at December 31, 2009.

              This Annual Report does not include an attestation report of our registered public accounting firm regardinginternal control over financial reporting.  Our management’s report was not subject to attestation by our registered publicaccounting firm, pursuant to temporary rules of the SEC that permit us to provide only management's report in thisAnnual Report.

Changes in Internal Control over Financial Reporting

              There have been no changes in our internal control over financial reporting during our fourth fiscal quarter thathas materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

Item 9B.  Other Information.

Employment Agreements

              In December 2009, we entered into employment agreements with two of our officers, Dean E. Sukowatey andJames R. Broghammer. These employment agreements are for an initial term of three years and may renew for additionalone-year periods. While the terms of these employment agreements commenced in December 2009, salary accrualsthereunder will not begin unless and until we complete the acquisition of an ethanol plant; provided, however, that salaryaccruals of our president, Mr. Sukowatey, under his prior employment agreement will continue unaffected by his newemployment agreement, until such time as we complete the acquisition of an ethanol plant. At that time, Mr. Sukowatey'ssalary accruals will begin under his new employment agreement. Also, upon the acquisition of an ethanol plant, we areto issue a total of 8,585,024 shares of its common stock as bonuses to Messrs. Sukowatey (1,284,466 shares) andBroghammer (7,300,55 8 shares). Our board of directors has determined that these shares will valued at $.012 per share,or $103,020, in the aggregate, based on the market price of our common stock on December 18, 2009, the date of grantof these bonuses. In addition, our board of directors determined it to be in the best interest of our company and ourshareholders that we reimburse these officers for their respective income tax liabilities resulting from these common stockbonuses.

Third-Party Loan

              In January 2010, we borrowed $65,000 from a third party, through the issuance of an convertible promissorynote, payable in October 2010.

PART III

Item 10.  Directors, Executive Officers and Corporate Governance

Directors and Officers

              The following table sets forth the officers and directors of ALL Fuels & Energy Company.

|   | Name |   | Age |   | Position(s) |   |
|--------|------|--------|-----|--------|-------------|--------|

|   | Dean E. Sukowatey

James R. Broghammer

Brad Knaack |   | 57

47

36 |   | President, Acting Chief Financial Officer,

    Secretary and Director

Chief Operating Officer and Director

Director |   |
|--------|-----------------------------------------------------|--------|------------|--------|--------------------------------------------------------------------------------------------------------------------------------------------|--------|

              Our current officers and directors serve until the next annual meeting of our board of directors or until theirrespective successors are elected and qualified. All officers serve at the discretion of our board of directors. There existno family relationships between our officers and directors.  Certain information regarding the backgrounds of each ofthe officers and directors is set forth below.

              Dean Sukowatey has served as president, acting chief financial officer, secretary and a director of the Companysince January 2007, and has served in similar capacities for ALL Energy Company since its inception in August 2006.He has 19 years’ experience on Wall Street as a broker, trader, fund manager and consultant at several firms, includingMerrill Lynch, Paine Webber, Lehman Brothers and A.G. Edwards. For more than the five years prior to becoming ALLEnergy’s president in August 2006, he managed two private funds and provided consulting and investment bankingservices. Mr. Sukowatey graduated from the University of Wisconsin with a B.S. degree in Microbiology.

              James R. Broghammer has, for over 20 years, lead various operations that process corn into ethanol, cornsyrup, fructose, pharmaceutical sugars, food starches and industrial grade starches.  His experience includes employmentwith Archer Daniels Midland, Penford Products Company and, most recently, Pacesetter Management Group, aVirginia-based ethanol plant management company, where he has served as president since 2003.  As president ofPacesetter Management Group, Mr. Broghammer is responsible for current ethanol production operations of ACEEthanol, Stanley, WI, and Pine Lake Corn Processors, Steamboat Rock, IA.  In addition, Mr. Broghammer also servesas president of Iowa River Railroad, the first short-line railroad started in Iowa in over twenty years, running fromMarshalltown, IA, to Ackley, IA.

              Brad Knaack has, from 1990 to the present, been the proprietor of a Correctionville, Iowa-based agronomybusiness specializing in seed sales to farmers. Also, from 2001 to the present, Mr. Knaack has served as AviationManager for Prince Manufacturing Corporation, a North Sioux City, South Dakota-based manufacturer of customhydraulic cylinders and components. Mr. Knaack earned a B.A. degree in Industrial Technology from the University ofNorthern Iowa, Cedar Falls, Iowa.

Founders

              The founders of our subsidiary, ALL Energy Company, are Dean Sukowatey and Sun Bear, LLC, a Texaslimited liability company owned by Scott B. Gann. Information with respect to Mr. Sukowatey’s background appearsabove.

              Currently, Mr. Gann is the founder and president of Oso Capital, a Dallas, Texas-based investment bankingfirm.  For more than the five year prior to his founding Oso Capital, Mr. Gann served as Managing Director ofInvestments at Sanders, Morris, Harris, Inc., in its Dallas, Texas, office.  Mr. Gann is an officer and a director ofHumanity Capital Holding Corp., a company that files periodic reports under the Securities Exchange Act of 1934.  Mr.Gann is a licensed stock broker, holding Series 63, Series 7 and Series 65 licenses. Mr. Gann was a defendant in a lawsuitstyled Securities and Exchange Commission, Plaintiff, v. Scott B. Gann and George B. Fasciano, Defendants, UnitedStates District Court, Northern District of Texas, Dallas Division, Case No. 305CV-063L. In April 2008, the judge inthis case found that Mr. Gann had violated Section 10 of the Securities Exchange Act of 1934 and Rule 10b-5 thereunderwith respect to certain market timing practices in trading securities of certain mutual funds. The filed  judgment containsa permanent injunction restraining Mr. Gann from violating Section 10 of the Exchange Act and Rule 10b-5 thereunder,disgorgement of Mr. Gann’s profits and a civil monetary penalty.

Board of Directors

              Our full board or directors did not meet during 2009; the board of directors took action by unanimous writtenconsent in lieu of a meeting on three occasions.

Audit Committee

              There currently does not exist an audit committee of our board of directors. However, our current board intendsto form such a committee in the near future and will appoint an independent director to serve on such committee whoqualifies as and audit committee financial expert. This person shall be independent (as that term is used in Item7(d)(3)(iv) of Schedule 14A under the Exchange Act).

Compensation of Directors

              None of our current directors is paid for his services as directors.

Limitation of Liability and Indemnification

              Our amended and restated certificate of incorporation contains provisions limiting the liability of directors. Ourrestated certificate of incorporation provides that a director will not be personally liable to us or to our shareholders formonetary damages for any breach of fiduciary duty as a director, but will continue to be subject to liability for thefollowing:

 

              –            any breach of the director’s duty of loyalty to us or to our shareholders;

 

              –            acts or omissions not in good faith or that involve intentional misconduct or a knowing violation oflaw;

 

              –            unlawful payment of dividends or unlawful stock repurchases or redemptions; and

 

              –            any transaction from which the director derived an improper personal benefit.

              If Delaware law is amended to authorize corporate action further eliminating or limiting the personal liabilityof a director, then the liability of our directors will be eliminated or limited to the fullest extent permitted by Delawarelaw, as so amended. Our restated certificate of incorporation does not eliminate a director’s duty of care and, inappropriate circumstances, equitable remedies such as injunctive or other forms of non-monetary relief remain availableunder Delaware law. Our restated certificate of incorporation does not affect a director’s responsibilities under any otherlaws, such as state or federal securities laws or state or federal environmental laws.

              In addition, we have entered into agreements to indemnify our directors and executive officers to the fullestextent permitted under Delaware law, including the non-exclusivity provisions of Delaware law, and under our bylaws,subject to limited exceptions. These agreements, among other things, provide for indemnification of our directors andexecutive officers for fees, expenses, judgments, fines, and settlement amounts incurred by any of these persons in anyaction or proceeding to which any of those persons is, or is threatened to be, made a party by reason of the person’sservice as a director or officer, including any action by us, arising out of that person’s services as our director or officeror that person’s services provided to any other company or enterprise at our request. We believe that these bylawprovisions and agreements are necessary to attract and retain qualified persons as directors and officers. We also intendto maintain liability insurance for our officers and directors.

              The limitation of liability and indemnification provisions in our restated certificate of incorporation and bylawsmay discourage shareholders from bringing a lawsuit against directors for breach of their fiduciary duties. They may alsoreduce the likelihood of derivative litigation against directors and officers, even though an action, if successful, mightbenefit us and our shareholders. A shareholder’s investment may be adversely affected to the extent we pay the costs ofsettlement and damage awards against directors and officers pursuant to these indemnification provisions.

Compliance with Section 16(a) of the Exchange Act

              Section 16(a) of the Securities Exchange Act of 1934, as amended, requires the registrant's officers anddirectors, and persons who own more than 10% of a registered class of the registrant's equity securities, to file reportsof ownership and changes in ownership of equity securities of the Registrant with the Securities and ExchangeCommission.  Officers, directors and greater-than 10% shareholders are required by the Securities and ExchangeCommission regulation to furnish the registrant with copies of all Section 16(a) forms that they file.

              Based solely upon a review of Forms 3 and 4 and amendments thereto furnished to us during our most recentfiscal year and Forms 5 and amendments thereto furnished to us with respect to our most recent fiscal year, no Section16(a) forms were timely filed. Each of our officers and directors has indicated that these reports will be filed in the nearfuture.

Item 11. Executive Compensation

              The following table sets forth certain compensation information for: (i) each person who served as the chiefexecutive officer of ALL Fuels & Energy Company at any time during the years ended December 31, 2009, 2008 and2007, regardless of compensation level, and (ii) each of our other executive officers, other than the chief executiveofficer, serving as an executive officer at any time during 2009, 2008 and 2007. The foregoing persons are collectivelyreferred to herein as the “named executive officers”. Compensation information is shown for the years ended December31, 2009, 2008 and 2007.

Summary Compensation Table

| Name and Principal Position | Year | Salary

($) | Bonus

($) | StockAwards($) | OptionAwards($) | Non-EquityIncentive PlanCompensation

($) | Non-qualifiedDeferredCompensationEarnings

($) | All OtherCompensation($) | Total

($) |
|-----------------------------|------|-------------|------------|----------------|-----------------|-------------------------------------------|------------------------------------------------|--------------------------|------------|

| Dean E. Sukowatey | 2009 | 240,000(1) | --- | --- | --- | --- | --- | --- | 240,000(1) |
|-------------------|------|------------|-----|-----|-----|-----|-----|-----|------------|

| President and Acting Chief FinancialOfficer | 2008 | 240,000 | --- | --- | --- | --- | --- | --- | 240,000 |
|---------------------------------------------|------|---------|-----|-----|-----|-----|-----|-----|---------|

|   | 2007 | 240,000 | --- | --- | --- | --- | --- | --- | 240,000 |
|--------|------|---------|-----|-----|-----|-----|-----|-----|---------|

| Brian K. Gibson | 2009 | --- | --- | --- | --- | --- | --- | --- | --- |
|-----------------|------|-----|-----|-----|-----|-----|-----|-----|-----|

| Former Treasurer | 2008 | --- | --- | --- | --- | --- | --- | --- | --- |
|------------------|------|-----|-----|-----|-----|-----|-----|-----|-----|

|   | 2007 | --- | --- | --- | --- | --- | --- | --- | --- |
|--------|------|-----|-----|-----|-----|-----|-----|-----|-----|

| David Loflin | 2009 | --- | --- | --- | --- | --- | --- | --- | --- |
|--------------|------|-----|-----|-----|-----|-----|-----|-----|-----|

| Former President and Acting ChiefFinancial Officer | 2008 | --- | --- | --- | --- | --- | --- | --- | --- |
|----------------------------------------------------|------|-----|-----|-----|-----|-----|-----|-----|-----|

|   | 2007 | --- | --- | 80,000 | --- | --- | --- | --- | 80,000 |
|--------|------|-----|-----|--------|-----|-----|-----|-----|--------|

(1) $120,000 of Mr. Sukowatey’s salary was accrued and unpaid.

Employment Contracts and Termination of Employment and Change-in-Control Agreements

              Our president, Dean E. Sukowatey, is currently employed under an employment agreement with ALL EnergyCompany, our subsidiary.  Mr. Sukowatey's employment agreement has a term of seven years, ending in August 2013.Mr. Sukowatey's annual salary is $240,000.In connection with his employment agreement, Mr. Sukowatey executed anindemnity agreement, a confidentiality agreement and an agreement not to compete. We have entered into a newemployment agreement with Mr. Sukowatey, as described below.

              In December 2009, we entered into employment agreements with two of our officers, Dean E. Sukowatey andJames R. Broghammer.  These employment agreements are for an initial term of three years and may renew for additionalone-year periods. While the terms of these employment agreements commenced in December 2009, salary accrualsthereunder will not begin unless and until we complete the acquisition of an ethanol plant; provided, however, that salaryaccruals of our president, Mr. Sukowatey, under his prior employment agreement will continue until such time as wecomplete the acquisition of an ethanol plant.  At that time, Mr. Sukowatey's prior agreement will expire and be replacedby his new employment agreement. Also, upon the acquisition of an ethanol plant, we are to issue a total of 8,505,024shares of its common stock as bonuses to Messrs. Sukowatey (1,284,466 shares) and Broghammer (7,300,558 shares).Our board of directors has determined that these shares will be valued at $.012 per share, or $103,020, in the aggregate,based on the market price of our common stock on December 18, 2009, the date of grant of these bonuses. In addition,our board of directors determined it to be in the best interest of our company and our shareholders that we reimbursethese officers for theft- respective income tax liabilities resulting from these common stock bonuses.

              We have no compensatory plan or arrangement that results or will result from the resignation, retirement or anyother termination of an executive officer's employment or from a change in control or a change in an executive officer'sresponsibilities following a change in control.

Outstanding Option Awards at Year End

              The following table provides certain information regarding unexercised options to purchase common stock,stock options that have not vested and equity-incentive plan awards outstanding at December 31, 2009, for each namedexecutive officer.

Outstanding Equity Awards at Fiscal Year-End

|   | Option Awards | Stock Awards |
|--------|---------------|--------------|

| Name | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Exercisable | Number ofSecuritiesUnderlyingUnexercisedOptions (#)Unex-ercisable | EquityIncentive

Plan Awards:Number ofSecuritiesUnderlyingUnexercisedUnearnedOptions (#) | OptionExercisePrice ($) | OptionExpirationDate | NumberofSharesor UnitsofStockThatHaveNotVested(#) | MarketValueofSharesor UnitsofStockThatHaveNotVested($) | EquityIncentivePlanAwards:Number ofUnearnedShares,Units orOtherRights ThatHave NotVested (#) | EquityIncentivePlanAwards:Market orPayoutValue ofUnearnedShares,Units orOtherRights ThatHave NotVested ($) |
|------|----------------------------------------------------------------|-------------------------------------------------------------------|------------------------------------------------------------------------------------------|-------------------------|----------------------|---------------------------------------------------|--------------------------------------------------------|----------------------------------------------------------------------------------------------|------------------------------------------------------------------------------------------------------------|

| Dean E. Sukowatey | --- | --- | --- | --- | n/a | --- | n/a | --- | --- |
|-------------------|-----|-----|-----|-----|-----|-----|-----|-----|-----|

| James R. Broghammer | --- | --- | --- | --- | n/a | --- | n/a | --- | --- |
|---------------------|-----|-----|-----|-----|-----|-----|-----|-----|-----|

| Scott D. Zabler | 5,520,366(1) | --- | --- | .55 | 12/2017 | --- | n/a | --- | --- |
|-----------------|--------------|-----|-----|-----|---------|-----|-----|-----|-----|

(1) In March 2010, Mr. Zabler tendered all of these warrants for cancellation; we subsequently cancelled such warrants

Director Compensation

              The following table sets forth the compensation paid to our directors for our fiscal years ended December 31,2009, 2008 and 2007.

Director Compensation

| Name | Fees Earned orPaid in Cash($) | Stock Awards($) | OptionAwards ($) | Non-EquityIncentive PlanCompensation($) | NonqualifiedDeferredCompensationEarnings ($) | All OtherCompensation($) | Total ($) |
|------|-------------------------------|-----------------|------------------|-----------------------------------------|----------------------------------------------|--------------------------|-----------|

| CURRENT DIRECTORS |   |   |   |   |   |   |   |
|-------------------|--------|--------|--------|--------|--------|--------|--------|

| Dean E. Sukowatey | --- | --- | --- | --- | --- | (1) | --- |
|-------------------|-----|-----|-----|-----|-----|-----|-----|

| James R. Broghammer | --- | --- | --- | --- | --- | (1) | --- |
|---------------------|-----|-----|-----|-----|-----|-----|-----|

| Scott D. Zabler | --- | --- | --- | --- | --- | --- | --- |
|-----------------|-----|-----|-----|-----|-----|-----|-----|

| FORMER DIRECTORS |   |   |   |   |   |   |   |
|------------------|--------|--------|--------|--------|--------|--------|--------|

| Scott D. Zabler | --- | --- | --- | --- | --- | (1) | --- |
|-----------------|-----|-----|-----|-----|-----|-----|-----|

| Steven J. Leavitt | --- | 19,350(2) | --- | --- | --- | --- | --- |
|-------------------|-----|-----------|-----|-----|-----|-----|-----|

| Brian K. Gibson | --- | 19,350(2) | --- | --- | --- | --- | --- |
|-----------------|-----|-----------|-----|-----|-----|-----|-----|

| Mark W. Leonard | --- | 32,550(3) | --- | --- | --- | --- | --- |
|-----------------|-----|-----------|-----|-----|-----|-----|-----|

| David Loflin | --- | --- | --- | --- | --- | --- | --- |
|--------------|-----|-----|-----|-----|-----|-----|-----|

| Waddell D. Loflin | --- | --- | --- | --- | --- | --- | --- |
|-------------------|-----|-----|-----|-----|-----|-----|-----|

| James Kaufman | --- | --- | --- | --- | --- | --- | --- |
|---------------|-----|-----|-----|-----|-----|-----|-----|

     (1)               Prior to Mr. Zabler's becoming a director of our company, in December 2007, we issued 5,520,366 warrants to purchase a like number of shares our common stock, at an exercise priceof $.55 per share. Subsequent to December 31, 2009, in March 2010, Mr. Zabler tendered all of these warrants for cancellation; we subsequently cancelled such warrants.

     (2)               $15,000 of this amount relates to stock awards made in 2007; $4,350 of this amount relates to stock awards made in 2008

     (3)               This amount relates to stock awards made in 2008.

Item 12.  Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

              The following table sets forth, as of the date hereof, information regarding beneficial ownership of our capitalstock by (i) each person, or group of affiliated persons, known by us to be the beneficial owner of more than five percentof any class of our voting securities; (ii) each of our directors; (iii) each of the named executive officers; and (iv) alldirectors and executive officers as a group. Beneficial ownership is determined in accordance with the rules of the SEC,based on voting or investment power with respect to the securities. In computing the number of shares beneficially ownedby a person and the percentage ownership of that person, shares of common stock underlying warrants held by that personare deemed to be outstanding if the warrants are exercisable within 60 days of the date hereof.  All percentages in thefollowing table are based on a total of 59,774,386 shares of common stock outstanding as if the date hereof.

              Except as indicated in the footnotes below, we believe, based on information furnished to us, that the personsand entities named in the table below have sole voting and investment power with respect to all shares of common stockshown as beneficially owned by them. Unless otherwise indicated, the address for each of the shareholders in the tablebelow is c/o ALL Fuels & Energy Company, 6165 N.W. 86th Street, Johnston, Iowa 50131.

|   | Beneficially Owned |
|--------|--------------------|

| Name and Address of Beneficial Owner |   | Shares |   | Percent (1) |
|--------------------------------------|--------|--------|--------|-------------|

| Dean E. Sukowatey |   | 15,815,534 (2) |   | 26.46% |
|-------------------|--------|----------------|--------|--------|

| James R. Broghammer |   | 2,699,442 |   | 4.52% |
|---------------------|--------|-----------|--------|-------|

| Brad Knaack |   | 50,000 |   |  * |
|-------------|--------|--------|--------|---------|

| ALL Energy Company (3) |   | 7,050,000 |   | 11.79% |
|------------------------|--------|-----------|--------|--------|

| Sun Bear, LLC (4) |   | 8,219,808 |   | 13.75% |
|-------------------|--------|-----------|--------|--------|

| All directors, executive officers and founders,including ALL Energy Company, as a group (5persons) |   | 33,834,784 |   | 56.60% |
|----------------------------------------------------------------------------------------------------|--------|------------|--------|--------|

     *        Less than 1%.

    (1)      Based on 59,774,386 shares of our common stock outstanding, which number of shares includes 7,100,000shares underlying convertible promissory notes that are currently convertible.  See Note 2.

    (2)      7,100,000 have not been issued.  These shares underlie convertible promissory notes that are payable ondemand.

    (3)      ALL Energy Company is a wholly-owned subsidiary of ALL Fuels & Energy Company.

    (4)      Scott B. Gann is the owner of this entity and possesses voting and investment control of the shares owned byit. Sun Bear, LLC is a founder of ALL Energy Company.

Item 13.  Certain Relationships and Related Transactions, and Director Independence.

2009

              *Loans from Director*.  During the last half of 2009, one of our directors, Dean E. Sukowatey, loaned us a totalof $60,000 for use as working capital. Subsequent to December 31, 2010, in January 2010, Mr. Sukowatey made anadditional loan to us in the amount of $11,000. All of the loans made by Mr. Sukowatey are payable on demand, bearinterest at 10% per annum and are convertible, at his option, into shares of our common stock at the rate of one sharefor every $.01 of debt converted.  Mr. Sukowatey has indicated that he will not demand payment of these loans, until suchtime as we have adequate funds with which to repay the loans.

              *Employment Agreements*.  In December 2009, we entered into employment agreements with two of our officers,Dean E. Sukowatey and James R. Broghammer. These employment agreements are for an initial term of three years andmay renew for additional one-year periods.  While the terms of these employment agreements commenced in December2009, salary accruals thereunder will not begin unless and until we complete the acquisition of an ethanol plant; provided,however, that salary accruals ($240,000 annually) of our president, Mr. Sukowatey, under his prior employmentagreement will continue until such time as we complete the acquisition of an ethanol plant.  At that time, Mr. Sukowatey'sprior agreement will expire and be replaced by his new employment agreement.  Under these employment agreements,the annual salaries of Messrs. Sukowatey and Broghammer are to start at $220,000, and increase to $240,000 and$265,000 during the initial term, then increase to $292,000 for each renewal term. Also, upon the acquisition of anethanol plant, we are to issue a total of 8,585,024 shares of its common stock as bonuses to Messrs. Sukowatey(1,284,466 shares) and Broghammer (7,300,558 shares). Our board of directors has determined that these shares willvalued at $.012 per share, or $103,020, in the aggregate, based on the market price of our common stock on December18, 2009, the date of grant of these bonuses. In addition, our board of directors determined it to be in the best interestof our company and our shareholders that we reimburse these officers for their respective income tax liabilities resultingfrom these common stock bonuses.

2008

 

              *Director Bonuses*.  During 2008, each of our three former directors, except for Dean E. Sukowatey, was issuedshares of our common stock, in consideration of their services as a director.  A total of 75,000 shares of common stockwere issued to these persons, which shares were valued at $41,400, in the aggregate.

2007

              *Warrant Issuances*.  In December 2007, we issued a total of 11,040,732 common stock purchase warrants topurchase a like number of shares our common stock, at an exercise price of $.55 per share.  These warrants were issuedto two persons, James R. Broghammer and Scott D. Zabler, approximately ten months prior to their becoming directorsof our company.  We issued these warrants in consideration of the invaluable consulting services provided on our behalfby each of Messrs. Broghammer and Zabler.  The issuance of these warrants resulted in a compensation expense of$6,075,213.  Mr. Broghammer’s warrants were cancelled in December 2009; Mr. Zabler’s warrants were cancelled inMarch 2010, when he resigned as a director.

              *Director Bonuses*. During 2007, two of our directors, Brian K. Gibson and Steven J. Leavitt, were each issued15,000 shares of our common stock, in consideration of their services as a director. These shares were valued at the then-current market price of our common stock, an aggregate value of $30,000.

              *Change-in-Control Transaction*.  In January 2007, there occurred a change in control of ALL Fuels & EnergyCompany.  Pursuant to a stock purchase agreement, ALL Energy Company, a Delaware corporation, purchased7,050,000 shares, or 57.24%, of our then-outstanding common stock from David Loflin. ALL Energy Company paid$150,000 for the 7,050,000 shares of our common stock, which funds were derived from ALL Energy Company’sworking capital.

              *Reorganization Agreement*. On April 9, 2007, we completed the acquisition of 100% of the outstanding capitalstock of ALL Energy Company, a Delaware corporation. Pursuant to the acquisition agreement, we issued a total of37,995,000 shares of our common stock to the ALL Energy Company shareholders. In determining the number of sharesof our common stock to be issued under the acquisition agreement, our board of directors did not employ any standardvaluation formula or any other standard measure of value.

              *Retention Bonus*. In January 2007, our former president, David Loflin, was issued 3,000,000 shares of ourcommon stock, as a retention bonus for his agreeing to work as much as necessary for us to have the greatest opportunityto achieve success in establishing and expanding our start-up web page publishing business. Our board of directorsbelieved it to be in our best interests and those of our shareholders to compensate Mr. Loflin in this matter. These shareswere valued, for financial reporting purposes, at $.026 per share, or $80,000, in the aggregate.

              *ALL Energy Company - Stock Bonuses*. In connection with their becoming members of the board of directorsof ALL Energy Company, each of Brian K. Gibson and Steven J. Leavitt was issued 5,000 shares of ALL EnergyCompany’s common stock, as a bonus. These bonus shares were valued by ALL Energy Company at $3.00 per share,or $30,000, in the aggregate.

              *Settlement Agreement*.  In December 2007, we entered into a settlement agreement with our current president,Dean E. Sukowatey, our subsidiary, ALL Energy Company, our former president, David Loflin, and our current legalcounsel, Newlan & Newlan.  Pursuant to the settlement agreement, each of the parties released any and all claims againsteach of the other parties. Also, Mr. Loflin agreed to tender for cancellation a total of 1,238,100 shares of our commonstock.  Further, the shares of our common stock owned by ALL Energy Company, Mr. Loflin and Newlan & Newlan aresubject to certain lock-up provisions.

Director and Officer Indemnification

              Our amended and restated certificate of incorporation contains provisions limiting liability of directors. Inaddition, we have entered into agreements to indemnify our directors and officers to the fullest extent permitted underDelaware law. Please see “Item 10.  Directors, Executive Officers and Corporate Governance”.

Item 14.  Principal Accounting Fees and Services

              The following table sets forth fees billed to us by our auditors during the fiscal years ended December 31, 2009and 2008, for: (i) services rendered for the audit of our annual financial statements and the review of our quarterlyfinancial statements, (ii) services by our auditors that are reasonably related to the performance of the audit or reviewof our financial statements and that are not reported as Audit Fees, (iii) services rendered in connection with taxcompliance, tax advice and tax planning and (iv) all other fees for services rendered.

|   |   |   | Year EndedDecember 31, 2009 |   | Year EndedDecember 31, 2008 |   |
|--------|--------|--------|-----------------------------|--------|-----------------------------|--------|

|   | Audit Fees |   | $21,000 |   | $25,000 |   |
|--------|------------|--------|---------|--------|---------|--------|

|   | Audit related fees |   | $0 |   | $0 |   |
|--------|--------------------|--------|----|--------|----|--------|

|   | Tax |   | $0 |   | $0 |   |
|--------|-----|--------|----|--------|----|--------|

|   | All other fees |   | $0 |   | $0 |   |
|--------|----------------|--------|----|--------|----|--------|

Item 15.  Exhibits, Financial Statement Schedules

              The following documents are filed as part of this Report:

 

              1.           Financial Statements

 

                            –            Report of Independent Registered Public Accounting Firm

 

                            –            Balance Sheets as of December 31, 2009 and 2008

 

                            –            Statements of Operations for the Years Ended December 31, 2009 and 2008, and the Periodfrom Commencement of Development Stage (June 7, 2004) to December 31, 2009

 

                            –            Statements of Stockholders’ Equity for the Years Ended December 31, 2009 and 2008, andthe Period from Commencement of Development Stage (June 7, 2004) to December 31, 2009

 

                            –            Statements of Cash Flows for the Years Ended December 31, 2009 and 2008, and the Periodfrom Commencement of Development Stage (June 7, 2004) to December 31, 2009

                            –            Notes to Financial Statements

 

              2.           Financial Statement Schedules

 

Other schedules and exhibits are omitted because the required information either is not applicable oris shown in the financial statements or the notes thereto.

              3.           Exhibits Required to be Filed by Item 601 of Regulation S-K

|   | Exhibit No. |   | Description |
|--------|-------------|--------|-------------|

|   | 10.1 * |   | Employment Agreement between Registrant and Dean E. Sukowatey. |
|--------|--------|--------|----------------------------------------------------------------|

|   | 10.2 * |   | Employment Agreement between Registrant and James R. Broghammer. |
|--------|--------|--------|------------------------------------------------------------------|

|   | 10.3 * |   | Convertible Promissory Note, face amount $50,000, issued by Registrant infavor of Dean E. Sukowatey. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------|

|   | 10.4 * |   | Convertible Promissory Note, face amount $10,000, issued by Registrant infavor of Dean E. Sukowatey. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------|

|   | 10.5 * |   | Convertible Promissory Note, face amount $11,000, issued by Registrant infavor of Dean E. Sukowatey. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------|

|   | 10.6 * |   | Securities Purchase Agreement between Registrant and Asher Enterprises, Inc. |
|--------|--------|--------|------------------------------------------------------------------------------|

|   | 10.7 * |   | Convertible Promissory Note, face amount $65,000, issued by Registrant infavor of Asher Enterprises, Inc. |
|--------|--------|--------|-----------------------------------------------------------------------------------------------------------|

|   | 10.8 * |   | Letter Agreement between Registrant and Newlan & Newlan. |
|--------|--------|--------|--------------------------------------------------------------|

|   | 22.1 * |   | Subsidiaries of Registrant. |
|--------|--------|--------|-----------------------------|

|   | 31.1 * |   | Certification as Adopted Pursuant to Section 302 (a) of the Sarbanes-Oxley Actof 2002. |
|--------|--------|--------|----------------------------------------------------------------------------------------|

|   | 32.1 * |   | Certification Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant toSection 906 of the Sarbanes-Oxley Act of 2002. |
|--------|--------|--------|------------------------------------------------------------------------------------------------------------------------|

|   | * filed herewith. |
|--------|-------------------|

SIGNATURES

              Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the Registrant hasduly caused this Annual Report on Form 10-K to be signed on April 15, 2010, on its behalf by the undersigned, thereuntoduly authorized.

                                                                                      ALL FUELS & ENERGY COMPANY

                                                                                      By: /s/ DEAN E. SUKOWATEY

                                                                                                    Dean E. Sukowatey

                                                                                                    President

              Pursuant to the requirements of the Securities Exchange Act of 1934, this Annual Report on Form 10-K hasbeen signed on April 15, 2010, by the following persons on behalf of the Registrant, in the capacities indicated:

|   | /s/ DEAN E. SUKOWATEY |   |   |
|--------|-----------------------|--------|--------|

|   | Dean E. Sukowatey

*President (principal executive officer),Secretary, Acting Chief Financial Officer(principal financial officer) and Director* |   |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|--------|

|   |
|--------|

|   |   |   |   |
|--------|--------|--------|--------|

|   | James R. Broghammer

*Chief Operating Officer and Director* |   |   |
|--------|-------------------------------------------------------------|--------|--------|

|   |
|--------|

|   | /s/ BRAD KNAACK |   |   |
|--------|-----------------|--------|--------|

|   | Brad Knaack

*Director* |   |   |
|--------|-------------------------|--------|--------|

SUPPLEMENTAL INFORMATION TO BE FURNISHED WITH REPORTS FILED PURSUANT TOSECTION 15(D) OF THE ACT BY REGISTRANTS WHICH HAVE NOT REGISTERED SECURITIESPURSUANT TO SECTION 12 OF THE ACT.

To the Board of Directors and

Shareholders of ALL Fuels & Energy Company

We have audited the accompanying consolidated balance sheets of ALL Fuels & Energy Company (a development stagecompany) and subsidiaries as of December 31, 2009 and 2008, and the related consolidated statements of operations,stockholders’ equity (deficit) and cash flows for the years ended December 31, 2009 and 2008, and from the date ofcommencement of the development stage (June 7, 2004) to December 31, 2009. ALL Fuels & Energy Company’smanagement is responsible for these consolidated financial statements. Our responsibility is to express an opinion onthese consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (UnitedStates). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether theconsolidated financial statements are free of material misstatement. The company is not required to have, nor were weengaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internalcontrol over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, butnot for the purpose of expressing an opinion on the effectiveness of the company's internal control over financialreporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidencesupporting the amounts and disclosures in the consolidated financial statements, assessing the accounting principles usedand significant estimates made by management, as well as evaluating the overall financial statement presentation. Webelieve that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financialposition of ALL Fuels & Energy Company and subsidiaries as of December 31, 2009 and 2008, and the consolidatedresults of their operations and their cash flows for the years ended December 31, 2009 and 2008, and from the date ofcommencement of the development stage (June 7, 2004) to December 31, 2009, in conformity with accounting principlesgenerally accepted in the United States of America.

The accompanying consolidated financial statements have been prepared assuming that the Company will continue asa going concern. As discussed in Note 2 to the consolidated financial statements, the Company suffered losses fromoperations and has a working capital deficiency, which raises substantial doubt about its ability to continue as a goingconcern. Management’s plans regarding those matters also are described in Note 2. The consolidated financial statementsdo not include any adjustments that might result from the outcome of this uncertainty.

*/s/ FARMER, FUQUA & HUFF, P.C.*

Farmer, Fuqua & Huff, P.C.

Plano, Texas

April 15, 2010

|   | ALL FUELS & ENERGY COMPANY

(a development stage company) |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED BALANCE SHEETS |   |
|--------|-----------------------------|--------|

|   | December 31, 2009 and 2008 |   |
|--------|----------------------------|--------|

|   | 2009 |   | 2008 |
|--------|------|--------|------|

| ASSETS |
|--------|

| Current assets |
|----------------|

|   | Cash and cash equivalents | $4,748 |   | $314,224 |
|--------|---------------------------|--------|--------|----------|

|   | Prepaid expenses | 1,721 |   | 7,439 |
|--------|------------------|-------|--------|-------|

|   | Total current assets | 6,469 |   | 321,663 |
|--------|----------------------|-------|--------|---------|

| Property and equipment - at cost |
|----------------------------------|

|   | Equipment | 3,333 |   | 1,729 |
|--------|-----------|-------|--------|-------|

|   | Less accumulated depreciation | (1,238) |   | (815) |
|--------|-------------------------------|---------|--------|-------|

|   | Total property and equipment - net | 2,095 |   | 914 |
|--------|------------------------------------|-------|--------|-----|

|   | Total assets | $8,564 |   | $322,577 |
|--------|--------------|--------|--------|----------|

| LIABILITIES AND STOCKHOLDERS’ EQUITY (DEFICIT) |
|------------------------------------------------------|

| Current liabilities |
|---------------------|

|   | Accounts payable and accrued expenses | $298,674 |   | $140,458 |
|--------|---------------------------------------|----------|--------|----------|

|   | Notes payable - related party | 60,000 |   | --- |
|--------|-------------------------------|--------|--------|-----|

|   | Total current liabilities | 358,674 |   | 140,458 |
|--------|---------------------------|---------|--------|---------|

| Stockholders’ equity (deficit) |
|--------------------------------------|

|   | Common stock, $.01 par value; 80,000,000 shares authorized,50,624,386 and 51,624,386 shares issued and outstanding | 506,245 |   | 516,245 |
|--------|--------------------------------------------------------------------------------------------------------------------|---------|--------|---------|

|   | Additional paid-in capital | 16,180,264 |   | 16,053,072 |
|--------|----------------------------|------------|--------|------------|

|   | Treasury stock, at cost | (150,000) |   | (150,000) |
|--------|-------------------------|-----------|--------|-----------|

|   | Receivable from shareholder | (50,000) |   | (50,000) |
|--------|-----------------------------|----------|--------|----------|

|   | Accumulated deficit | (6,423,944) |   | (6,423,944) |
|--------|---------------------|-------------|--------|-------------|

|   | Deficit accumulated during the development stage | (10,412,675) |   | (9,763,254) |
|--------|--------------------------------------------------|--------------|--------|-------------|

|   | Total stockholders’ equity (deficit) | (350,110) |   | 182,119 |
|--------|--------------------------------------------|-----------|--------|---------|

|   | Total liabilities and stockholders’ equity (deficit) | $8,564 |   | $322,577 |
|--------|------------------------------------------------------------|--------|--------|----------|

|   |
|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY

(a development stage company) |   |
|--------|---------------------------------------------------------------|--------|

|   | CONSOLIDATED STATEMENTS OF OPERATIONS |   |
|--------|---------------------------------------|--------|

|   | For the Years Ended December 31, 2009 and 2008, and the Period from Commencementof Development Stage (June 7, 2004) to December 31, 2009 |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   |   |   | 2009 |   | 2008 |   |   |   | Period from

Commence-ment ofDevelopment

Stage (June 7,

2004) to12/31/09

(unaudited) |
|--------|--------|--------|------|--------|------|--------|--------|--------|-----------------------------------------------------------------------------------------|

| Revenues |   |   | $8,092 |   | $--- |   |   |   | $8,092 |
|----------|--------|--------|--------|--------|------|--------|--------|--------|--------|

| Operating Costs and Expenses |   |   |   |   |   |   |   |   |   |
|------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

|   | Consulting |   |   | 92,435 |   | 913,987 |   |   |   | 7,716,335 |
|--------|------------|--------|--------|--------|--------|---------|--------|--------|--------|-----------|

|   | Legal and professional |   |   | 84,247 |   | 309,072 |   |   |   | 1,202,813 |
|--------|------------------------|--------|--------|--------|--------|---------|--------|--------|--------|-----------|

|   | Impairment charge |   |   | --- |   | 193,720 |   |   |   | 333,540 |
|--------|-------------------|--------|--------|-----|--------|---------|--------|--------|--------|---------|

|   | General and administrative |   |   | 404,361 |   | 514,553 |   |   |   | 1,644,874 |
|--------|----------------------------|--------|--------|---------|--------|---------|--------|--------|--------|-----------|

|   | Total operating expenses |   |   | 581,043 |   | 1,931,332 |   |   |   | 10,897,562 |
|--------|--------------------------|--------|--------|---------|--------|-----------|--------|--------|--------|------------|

| Other income (expense) |   |   |   |   |   |   |   |   |   |
|------------------------|--------|--------|--------|--------|--------|--------|--------|--------|--------|

|   | Beneficial conversionexpense |   |   | (60,000) |   | --- |   |   |   | (60,000) |
|--------|------------------------------|--------|--------|----------|--------|-----|--------|--------|--------|----------|

|   | Interest expense |   |   | (2,120) |   | (23,543) |   |   |   | (58,935) |
|--------|------------------|--------|--------|---------|--------|----------|--------|--------|--------|----------|

|   | Interest income |   |   | 135 |   | 7,023 |   |   |   | 51,329 |
|--------|-----------------|--------|--------|-----|--------|-------|--------|--------|--------|--------|

|   | Rental income |   |   | --- |   | 40,000 |   |   |   | 66,250 |
|--------|---------------|--------|--------|-----|--------|--------|--------|--------|--------|--------|

|   | Equity loss in subsidiary |   |   | (14,485) |   | (218,855) |   |   |   | (233,340) |
|--------|---------------------------|--------|--------|----------|--------|-----------|--------|--------|--------|-----------|

|   | Loss on sale of land |   |   | --- |   | (1,278) |   |   |   | (1,278) |
|--------|----------------------|--------|--------|-----|--------|---------|--------|--------|--------|---------|

|   | Total other income (expense) |   |   | (76,470) |   | (196,653) |   |   |   | (235,974) |
|--------|------------------------------|--------|--------|----------|--------|-----------|--------|--------|--------|-----------|

| Net loss |   |   | $(649,421) |   | $(2,127,985) |   |   |   | $(11,125,444) |
|----------|--------|--------|------------|--------|--------------|--------|--------|--------|---------------|

| Income (loss) per share |   |   | $(0.01) |   | $(0.04) |   |   |   |   |
|-------------------------|--------|--------|---------|--------|---------|--------|--------|--------|--------|

| Weighted average number of sharesoutstanding (basic and diluted) |   |   | 51,120,270 |   | 51,399,797 |   |   |   |   |
|------------------------------------------------------------------|--------|--------|------------|--------|------------|--------|--------|--------|--------|

|   |
|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2009 and 2008, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2009 |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Balance, June7, 2004 | 1,758,981 | $17,590 | $6,385,950 | $--- | $--- | $(6,423,944) | $--- | $(20,404) |   |
|----------------------|-----------|---------|------------|------|------|--------------|------|-----------|--------|

| Stock issuedfor services at$.34 per share | 750,000 | 7,500 | 247,500 | --- | --- | --- | --- | 255,000 |   |
|-------------------------------------------|---------|-------|---------|-----|-----|-----|-----|---------|--------|

| Stock issuedfor services at$.167 pershare | 150,000 | 1,500 | 23,500 | --- | --- | --- | --- | 25,000 |   |
|-------------------------------------------|---------|-------|--------|-----|-----|-----|-----|--------|--------|

| Stock issuedat $.14 pershare | 357,150 | 3,571 | 46,429 | (50,000) | --- | --- | --- | --- |   |
|------------------------------|---------|-------|--------|----------|-----|-----|-----|-----|--------|

| Contributionsfromstockholders | --- | --- | 20,754 | --- | --- | --- | --- | 20,754 |   |
|-------------------------------|-----|-----|--------|-----|-----|-----|-----|--------|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (284,350) | (284,350) |   |
|----------|-----|-----|-----|-----|-----|-----|-----------|-----------|--------|

| Balance,December 31,2004 | 3,016,131 | 30,161 | 6,724,133 | (50,000) | --- | (6,423,944) | (284,350) | (4,000) |   |
|--------------------------|-----------|--------|-----------|----------|-----|-------------|-----------|---------|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2008 and 2007, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2008 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (100) | (100) |   |
|----------|-----|-----|-----|-----|-----|-----|-------|-------|--------|

| Balance,December 31,2005 | 3,016,131 | 30,161 | 6,724,133 | (50,000) | --- | (6,423,944) | (284,450) | (4,100) |   |
|--------------------------|-----------|--------|-----------|----------|-----|-------------|-----------|---------|--------|

| Stock issuedfor bonus at$.023 pershare | 3,375,000 | 33,750 | 42,750 | --- | --- | --- | --- | 76,500 |   |
|----------------------------------------|-----------|--------|--------|-----|-----|-----|-----|--------|--------|

| Stock issuedfor bonus at$.027 pershare | 150,000 | 1,500 | 2,500 | --- | --- | --- | --- | 4,000 |   |
|----------------------------------------|---------|-------|-------|-----|-----|-----|-----|-------|--------|

| Stock issuedfor legalservices at$.027 pershare | 750,000 | 7,500 | 12,500 | --- | --- | --- | --- | 20,000 |   |
|------------------------------------------------|---------|-------|--------|-----|-----|-----|-----|--------|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2008 and 2007, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2008 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Stock issuedfor services at$.027 pershare | 75,000 | 750 | 1,250 | --- | --- | --- | --- | 2,000 |   |
|-------------------------------------------|--------|-----|-------|-----|-----|-----|-----|-------|--------|

| Stock issuedfor web pageassets at $.027per share | 1,950,000 | 19,500 | 32,500 | --- | --- | --- | --- | 52,000 |   |
|--------------------------------------------------|-----------|--------|--------|-----|-----|-----|-----|--------|--------|

| Contributionsfromstockholder | --- | --- | 600 | --- | --- | --- | --- | 600 |   |
|------------------------------|-----|-----|-----|-----|-----|-----|-----|-----|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (155,000) | (155,000) |   |
|----------|-----|-----|-----|-----|-----|-----|-----------|-----------|--------|

| Balance,December 31,2006 | 9,316,131 | 93,161 | 6,816,233 | (50,000) | --- | (6,423,944) | (439,450) | (4,000) |   |
|--------------------------|-----------|--------|-----------|----------|-----|-------------|-----------|---------|--------|

| Stock issuedfor bonus at$.026 pershare | 3,000,000 | 30,000 | 50,000 | --- | --- | --- | --- | 80,000 |   |
|----------------------------------------|-----------|--------|--------|-----|-----|-----|-----|--------|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2008 and 2007, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2008 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Stock issuedin acquisition | 37,995,000 | 379,950 | 1,253,805 | --- | --- | --- | --- | 1,633,755 |   |
|----------------------------|------------|---------|-----------|-----|-----|-----|-----|-----------|--------|

| Stock issuedfor services at$.67 per share | 390,000 | 3,900 | 258,300 | --- | --- | --- | --- | 262,200 |   |
|-------------------------------------------|---------|-------|---------|-----|-----|-----|-----|---------|--------|

| Stock issuedfor services at$.75 per share | 150,000 | 1,500 | 111,000 | --- | --- | --- | --- | 112,500 |   |
|-------------------------------------------|---------|-------|---------|-----|-----|-----|-----|---------|--------|

| Stock issuedfor cash | 75,000 | 750 | 74,250 | --- | --- | --- | --- | 75,000 |   |
|----------------------|--------|-----|--------|-----|-----|-----|-----|--------|--------|

| Stock issuedas bonus at$1.00 pershare | 30,000 | 300 | 29,700 | --- | --- | --- | --- | 30,000 |   |
|---------------------------------------|--------|-----|--------|-----|-----|-----|-----|--------|--------|

| Stock issuedfor cash onoptionexercise | 50,000 | 500 | 31,286 | --- | --- | --- | --- | 31,786 |   |
|---------------------------------------|--------|-----|--------|-----|-----|-----|-----|--------|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2008 and 2007, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2008 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Stock issuedin privateoffering forcash | 359,588 | 3,597 | 282,053 | --- | --- | --- | --- | 285,650 |   |
|----------------------------------------|---------|-------|---------|-----|-----|-----|-----|---------|--------|

| Treasurystock | --- | --- | --- | --- | (150,000) | --- | --- | (150,000) |   |
|---------------|-----|-----|-----|-----|-----------|-----|-----|-----------|--------|

| Warrants | --- | --- | 6,075,213 | --- | --- | --- | --- | 6,075,213 |   |
|----------|-----|-----|-----------|-----|-----|-----|-----|-----------|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (7,195,819) | (7,195,819) |   |
|----------|-----|-----|-----|-----|-----|-----|-------------|-------------|--------|

| Balance,December 31,2007 | 51,365,719 | 513,658 | 14,981,840 | (50,000) | (150,000) | (6,423,944) | (7,635,269) | 1,236,285 |   |
|--------------------------|------------|---------|------------|----------|-----------|-------------|-------------|-----------|--------|

| Stock issuedfor services | 1,000,000 | 10,000 | 530,000 | --- | --- | --- | --- | 540,000 |   |
|--------------------------|-----------|--------|---------|-----|-----|-----|-----|---------|--------|

| Sharescancelled | (1,238,000) | (12,380) | 12,380 | --- | --- | --- | --- | --- |   |
|-----------------|-------------|----------|--------|-----|-----|-----|-----|-----|--------|

| Stock bonus | 75,000 | 750 | 40,650 | --- | --- | --- | --- | 41,400 |   |
|-------------|--------|-----|--------|-----|-----|-----|-----|--------|--------|

| Stock issuedfor cash | 405,000 | 4,050 | 192,589 | --- | --- | --- | --- | 196,639 |   |
|----------------------|---------|-------|---------|-----|-----|-----|-----|---------|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | STATEMENT OF STOCKHOLDERS’ (DEFICIT) EQUITY |   |
|--------|---------------------------------------------------|--------|

|   | For the Years Ended December 31, 2008 and 2007, and the Period from Commencement ofDevelopment Stage (June 7, 2004) to December 31, 2008 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   | Shares | Amount | AdditionalPaid-in Capital | StockholderReceivable | TreasuryStock | AccumulatedDeficit | DeficitAccumulatedduringDevelopmentStage | Stockholder’s(Deficit)Equity |   |
|--------|--------|--------|---------------------------|-----------------------|---------------|--------------------|------------------------------------------|------------------------------------|--------|

| Options | --- | --- | 285,780 | --- | --- | --- | --- | 285,780 |   |
|---------|-----|-----|---------|-----|-----|-----|-----|---------|--------|

| Stock issuedfor services | 16,667 | 167 | 9,833 | --- | --- | --- | --- | 10,000 |   |
|--------------------------|--------|-----|-------|-----|-----|-----|-----|--------|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (2,127,985) | (2,127,985) |   |
|----------|-----|-----|-----|-----|-----|-----|-------------|-------------|--------|

| Balance,December 31,2008 | 51,624,386 | $516,245 | $16,053,072 | $(50,000) | $(150,000) | $(6,423,944) | $(9,763,254) | $182,119 |   |
|--------------------------|------------|----------|-------------|-----------|------------|--------------|--------------|----------|--------|

| Options | --- | --- | 57,192 | --- | --- | --- | --- | 57,192 |   |
|---------|-----|-----|--------|-----|-----|-----|-----|--------|--------|

| Beneficialconversion | --- | --- | 60,000 | --- | --- | --- | --- | 60,000 |   |
|----------------------|-----|-----|--------|-----|-----|-----|-----|--------|--------|

| Sharescancelled | (1,000,000) | (10,000) | 10,000 | --- | --- | --- | --- | --- |   |
|-----------------|-------------|----------|--------|-----|-----|-----|-----|-----|--------|

| Net loss | --- | --- | --- | --- | --- | --- | (649,421) | (649,421) |   |
|----------|-----|-----|-----|-----|-----|-----|-----------|-----------|--------|

| Balance,December 31,2009 | 50,624,386 | $506,245 | $16,180,264 | $(50,000) | $(150,000) | $(6,423,944) | $(10,412,675) | $(350,110) |   |
|--------------------------|------------|----------|-------------|-----------|------------|--------------|---------------|------------|--------|

| 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 Years Ended December 31, 2009 and 2008, and the Period from Commencementof Development Stage (June 7, 2004) to December 31, 2009 |   |
|--------|------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   |   |   | 2009 |   | 2008 |   |   |   | Period from

Commence-ment ofDevelopment

Stage (June 7,

2004) to12/31/09

(unaudited) |
|--------|--------|--------|------|--------|------|--------|--------|--------|-----------------------------------------------------------------------------------------|

| CASH FLOWS FROM

 OPERATING ACTIVITIES |   |   |   |   |   |   |   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|

| Net loss |   | $(649,421) |   | $(2,127,985) |   |   |   | $(11,125,444) |
|----------|--------|------------|--------|--------------|--------|--------|--------|---------------|

|   | Adjustments to reconcile net loss to cash usedfor operating activities: |   |   |   |   |   |   |   |   |
|--------|-------------------------------------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|

|   | Loss on sale of land |   | --- |   | 1,278 |   |   |   | 1,278 |
|--------|----------------------|--------|-----|--------|-------|--------|--------|--------|-------|

|   | Loss on disposal of fixed assets |   | 187 |   | --- |   |   |   | 187 |
|--------|----------------------------------|--------|-----|--------|-----|--------|--------|--------|-----|

|   | Depreciation and amortization |   | 826 |   | 4,212 |   |   |   | 7,164 |
|--------|-------------------------------|--------|-----|--------|-------|--------|--------|--------|-------|

|   | Options issued for compensation |   | 57,192 |   | 867,180 |   |   |   | 6,999,585 |
|--------|---------------------------------|--------|--------|--------|---------|--------|--------|--------|-----------|

|   | Stock issued for services andcompensation |   | --- |   | 10,000 |   |   |   | 1,176,345 |
|--------|-------------------------------------------|--------|-----|--------|--------|--------|--------|--------|-----------|

|   | Impairment charge |   | --- |   | 193,720 |   |   |   | 333,540 |
|--------|-------------------|--------|-----|--------|---------|--------|--------|--------|---------|

|   | (Increase) decrease in prepaids |   | 5,718 |   | 45,198 |   |   |   | (89,541) |
|--------|---------------------------------|--------|-------|--------|--------|--------|--------|--------|----------|

|   | Non-cash beneficial conversion expense |   | 60,000 |   | --- |   |   |   | 60,000 |
|--------|----------------------------------------|--------|--------|--------|-----|--------|--------|--------|--------|

|   | Increase (decrease) in accounts payable |   | 158,216 |   | 56,466 |   |   |   | 241,043 |
|--------|-----------------------------------------|--------|---------|--------|--------|--------|--------|--------|---------|

| Net cash used for operating activities |   | (367,282) |   | (949,931) |   |   |   | (2,395,843) |
|----------------------------------------|--------|-----------|--------|-----------|--------|--------|--------|-------------|

| 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 |   |   |   | 461,960 |
|--------|----------------------------|--------|-----|--------|---------|--------|--------|--------|---------|

|   | Purchase of office equipment |   | (2,194) |   | (636) |   |   |   | (4,160) |
|--------|------------------------------|--------|---------|--------|-------|--------|--------|--------|---------|

|   | Payments on construction in progress |   | --- |   | (6,696) |   |   |   | (193,720) |
|--------|--------------------------------------|--------|-----|--------|---------|--------|--------|--------|-----------|

| Net cash used for investing activities |   | (2,194) |   | 454,628 |   |   |   | (647,102) |
|----------------------------------------|--------|---------|--------|---------|--------|--------|--------|-----------|

|   |
|--------|

| 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 Years Ended December 31, 2009 and 2008, and the Period from Commencementof Development Stage (June 7, 2004) to December 31, 2009 (cont.) |   |
|--------|--------------------------------------------------------------------------------------------------------------------------------------------------|--------|

|   |   |   | 2009 |   | 2008 |   |   |   | Period from

Commence-ment ofDevelopment

Stage (June 7,

2004) to12/31/09

(unaudited) |
|--------|--------|--------|------|--------|------|--------|--------|--------|-----------------------------------------------------------------------------------------|

| CASH FLOWS FROM

 FINANCING ACTIVITIES |   |   |   |   |   |   |   |   |
|---------------------------------------------|--------|--------|--------|--------|--------|--------|--------|--------|

|   | Proceeds from sale of common stock for cash |   | --- |   | 196,639 |   |   |   | 2,653,623 |
|--------|---------------------------------------------|--------|-----|--------|---------|--------|--------|--------|-----------|

|   | Principal payments on related party advances |   | --- |   | --- |   |   |   | (3,988) |
|--------|----------------------------------------------|--------|-----|--------|-----|--------|--------|--------|---------|

|   | Proceeds from long-term debt, net of deferredborrowing costs |   | --- |   | --- |   |   |   | 483,120 |
|--------|--------------------------------------------------------------|--------|-----|--------|-----|--------|--------|--------|---------|

|   | Proceeds from note payable - related party |   | 60,000 |   | --- |   |   |   | 60,000 |
|--------|--------------------------------------------|--------|--------|--------|-----|--------|--------|--------|--------|

|   | Purchase of treasury stock |   | --- |   | --- |   |   |   | (150,000) |
|--------|----------------------------|--------|-----|--------|-----|--------|--------|--------|-----------|

|   | Contributions from shareholders |   | --- |   | --- |   |   |   | 950 |
|--------|---------------------------------|--------|-----|--------|-----|--------|--------|--------|-----|

| Net cash used for financing activities |   | 60,000 |   | 196,639 |   |   |   | 3,043,705 |
|----------------------------------------|--------|--------|--------|---------|--------|--------|--------|-----------|

|   |
|--------|

| NET CHANGE IN CASH |   | (309,476) |   | (298,664) |   |   |   | 760 |
|--------------------|--------|-----------|--------|-----------|--------|--------|--------|-----|

| Cash, beginning of period |   | 314,224 |   | 612,888 |   |   |   | 3,988 |
|---------------------------|--------|---------|--------|---------|--------|--------|--------|-------|

| Cash, end of period |   | $4,748 |   | $314,224 |   |   |   | $4,748 |
|---------------------|--------|--------|--------|----------|--------|--------|--------|--------|

|   |
|--------|

| Supplemental information: |   |
|---------------------------|--------|

| Interest paid |   | $--- |   | $23,543 |   |   |   |   |
|---------------|--------|------|--------|---------|--------|--------|--------|--------|

| Taxes paid |   | $--- |   | $--- |   |   |   |   |
|------------|--------|------|--------|------|--------|--------|--------|--------|

|   |
|--------|

| The accompanying notes are an integral part of these statements. |
|------------------------------------------------------------------|

|   | ALL FUELS & ENERGY COMPANY |   |
|--------|--------------------------------|--------|

|   | (a development stage company) |   |
|--------|-------------------------------|--------|

|   | NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |   |
|--------|--------------------------------------------|--------|

|   | December 31, 2009 |   |
|--------|-------------------|--------|

| Note 1 | Summary of Significant Accounting Policies |
|--------|--------------------------------------------|

Organization and Business

ALL Fuels & Energy Company (the Company) was incorporated on October 5, 1994, in the state of Delaware as CableGroup South, Inc. In November 1998, the Company changed its name to Softnet Industries, Inc., and, in June 1999, thename was changed to ICrystal, Inc. In May 2007, the Company changed its name to ALL Fuels & Energy Company.

In June 2004, there occurred a change in control of the Company. Pursuant to an amended and restated stock purchaseagreement, Woodstock Investments, LLC purchased 602,588 shares, or 51.91%, of the then-outstanding common stockfrom existing shareholders. During 2004, the Company commenced the development stage and had no operations.

In August 2004, the Company filed an amended and restated certificate of incorporation, increasing the amount of sharesauthorized to 80,000,000 shares of common stock and 20,000,000 shares of preferred stock.

From 2004 through November 2006, the Company searched for a going business to acquire, without success. Due to thislack of success, the Company’s board of directors determined that it would be in the best interests of the Company andits shareholders for the Company to start a new business. After assessing the business opportunities available vis-a-visthe Company’s lack of available capital, in November 2006, the board of directors determined that the Company wouldbecome a publisher of web pages.

In January 2007, there occurred another change in control of the Company. Pursuant to a stock purchase agreement, ALLEnergy Company purchased 4,700,000, or 7,050,000 post-forward-split, shares, or 57.24%, of our outstanding commonstock from an existing shareholder.

After the January 2007 change in control, the Company’s new management determined to pursue a plan of businesswhereby the Company would become a producer of ethanol and its co-products. To that end, in April 2007, the Companyconsummated a plan and agreement of reorganization with ALL Energy Company. At the time of the reorganizationtransaction, ALL Energy Company was a development-stage ethanol company.

Pursuant to a settlement agreement in the first quarter of 2008, the Company’s former web page publishing business wasassigned to a third party. None of the assets or operations of the Company’s former web page publishing business areincluded in the accompanying financial statements.

*Ethanol Plant Acquisition Activities*.  During the last half of 2009, the Company actively pursued the acquisition of anethanol plant in Wisconsin.  The Company’s efforts in this regard were not successful.  However, the Company continuesto pursue the acquisition of one or more ethanol plants and, currently, has identified three such plants and has begunnegotiations for their acquisition.  The Company will be required to obtain capital from third parties, in order toconsummate any such acquisition transaction.

*ALL Fuels Advisory Group*.  Shortly after the Company’s new directors were appointed (October 2008) and in responseto the ethanol industry’s then-current state, the Company created a new business division known as “ALL Fuels AdvisoryGroup”.   The Company’s management believes there exist numerous opportunities to leverage the Company’s in-houseethanol expertise to provide industry-best advisory services through Advisory Group.  Advisory Group was created inresponse to the ethanol industry’s current a high level of stress.  As the ethanol industry attempts to stabilize itself in thewake of the tumult caused by the recent period of historically-high oil prices, during the first half of 2008, immediatelyfollowed by a sudden drop from those historically-high prices, the Company is offering its advisory services to theindustry.  During the first half of 2009, the Company focused primarily on the development of Advisory Group, whichproduced approximately $8,092 in revenues during 2009.  During the second half of 2009, Advisory Group did notgenerate any revenues.

*Enzyme Opportunity*.  The Company recorded its investment in AFSE Enzyme, LLC on the equity method. Under thismethod, the Company recorded its initial investment at its cost and increased the investment by any additional fundsinvested.  It then adjusted the amount of the investment by its share of the investee’s earnings or losses. Through 2008,the Company had invested $218,855 in the venture.  During the fourth quarter of 2008, the Company ended itsinvolvement in AFSE Enzyme and began to pursue the project without using AFSE Enzyme.  Due to there beingsignificant uncertainty that the Company will recover its investment, the Company wrote off the remaining investmentin AFSE Enzyme during 2008.  During 2009, the Company expended $-0- in furtherance of its enzyme developmentefforts.

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

*Polymer Pipe Opportunity*.  During the third quarter of 2008, the Company entered into an ethanol alliance agreementwith a private Iowa company, whereby the parties intended to form a series of entities for the purpose of engaging innumerous businesses related to the ethanol industry.  This business relationship has been abandoned.

*FASB Accounting Standards Codification*.  The Company presents its financial statements in accordance with generallyaccepted accounting principles in the United States (“GAAP”).  In June 2009, the Financial Accounting Standards Board(“FASB”) completed its accounting guidance codification project. The FASB Accounting Standards Codification(“ASC”) became effective for the Company’s financial statements issued subsequent to June 30, 2009, and is the singlesource of authoritative accounting principles recognized by the FASB to be applied by non-governmental entities in thepreparation of financial statements in conformity with GAAP.  As of the effective date, the company will no longer referto the authoritative guidance dictating its accounting methodologies under the previous accounting standards hierarchy.Instead, the Company will refer to the ASC Codification as the sole source of authoritative literature.

Basis of Presentation

The accompanying Consolidated Financial Statements include the accounts of the Company, its subsidiaries, all of whichare wholly-owned.  All significant inter-company balances and transactions have been eliminated in consolidation.

Accounting Estimates

In the preparation of financial statements in conformity with accounting principles generally accepted in the United Statesof America, it is necessary for management to make estimates and assumptions that affect the reported amounts of assetsand liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reportedamounts of revenues and expense for the year ended. Actual results could differ from those estimates.

Cash and Cash Equivalents

For purposes of the statement of cash flows, the Company considers all highly liquid debt instruments purchased

with a maturity of three months or less to be cash equivalents.

Loss per Share

Net loss per share is provided in accordance with ASC 260 Earnings per Share. Basic loss per share for each period iscomputed by dividing net loss by the weighted average number of shares of common stock outstanding during the period.Diluted loss per share reflects per share amounts that would have resulted if dilutive common stock equivalents had beenconverted to common stock. As of December 31, 2009, the Company had the following dilutive common stockequivalents outstanding:

 

              –            5,520,366 common stock purchase warrants to purchase a like number of shares, expiring in 2017, ata net exercise price of zero (these warrants were cancelled subsequent to December 31, 2009).

 

              –            6,212,000 shares underlying convertible promissory notes.

Income Taxes

The Company accounts for income taxes using the liability method. Deferred taxes are provided for temporarydifferences between the basis of assets and liabilities for financial reporting and income tax purposes at enacted tax rates.Deferred tax amounts represent the future tax consequences of those differences, which will be either deductible ortaxable when the assets and liabilities are recovered or settled. Valuation allowances are established when necessary toreduce deferred tax assets to the amounts expected to be realized.

The Company is subject to tax reporting in multiple jurisdictions, and considers the requirements of each jurisdiction,when preparing its estimates of taxes currently due or deferred. Each jurisdiction has its own oversight and enforcementbodies, and the Company is subject to audits in each taxing jurisdiction. The Company's provision for tax obligationsrepresents estimates, which are subject to changes and adjustments resulting from future events. (See Note 2)

Stock Based Compensation

The Company accounts for stock based compensation in accordance with ASC 718 Share Based Payment.  ThisStatement requires that transactions in which a company exchanges its equity instruments for goods or services beaccounted for using the fair-value method.

Recent Accounting Pronouncements

There were no recent accounting pronouncements that our company has not implemented that materially affect ourfinancial statements.

| Note 2 | Going Concern |
|--------|---------------|

The Company incurred losses totaling $(11,125,444) through December 31, 2009, and, at December 31, 2009, had aworking capital deficit of $352,205.  Because of these conditions, the Company will require additional working capitalto continue operations and develop its business.  The Company intends to raise additional working capital either throughprivate 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 cashflow from operations or obtain additional financing through private placements, public offerings and/or bank financingnecessary to support the Company’s working capital requirements. To the extent that funds generated from any privateplacements, public offerings and/or bank financing are insufficient, the Company will have to raise additional workingcapital.  No assurance can be given that additional financing will be available, or if available, will be on terms acceptableto the Company. If adequate working capital is not available the Company may not continue its operations or executeits business plan.

These conditions raise substantial doubt about the Company’s ability to continue as a going concern. The financialstatements do not include any adjustments relating to the recoverability and classification of asset carrying amounts orthe amount and classification of liabilities that might be necessary should the Company be unable to continue as a goingconcern.

| Note 3 | Management’s Plans for Liquidity |
|--------|----------------------------------------|

During the last half of 2009, $60,000 in loans from a director provided the Company with capital to sustain its operations.Subsequent to December 31, 2010, in January 2010, the same director made an additional loan to the Company in theamount of $11,000.  All of the loans made by this director are payable on demand and bear interest at 10% per annumand are convertible, at the director’s option, into shares of the Company’s common stock at the rate of one share for every$.01 of debt converted.  This director has indicated that he will not demand payment of these loans, until such time asthe Company has adequate funds with which to repay the loans.  Also, in January 2010, the Company borrowed $65,000from a third party, through the issuance of a convertible promissory note, payable in October 2010, bearing interest at8% 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 theremainder of 2010.  The Company will require substantial additional capital to purchase one or more existing ethanolproduction facilities or to pursue other business opportunities.  The Company believes it will be able to secure thefinancing, in the form of debt, equity or a combination thereof, necessary to complete these opportunities.  The Companydoes 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 acquisitionof an existing ethanol production facility and its Ethanol Group activities. The needed funding will be sought from thirdparties.

| Note 4 | Provision for Income Taxes |
|--------|----------------------------|

The Company recognizes deferred tax liabilities and benefits for the expected future tax consequences of events that havebeen included in the financial statements or tax returns.

Deferred tax liabilities and benefits are recognized using enacted tax rates in effect for the year in which the differencesare expected to reverse.

Deferred tax benefits and liabilities are calculated using enacted tax rates in Canada and the U.S. in effect for the yearin which the differences are expected to reverse.

The following is a schedule of the composition of the income tax benefit:

|   |   | 2009 |   | 2008 |   |   |
|--------|--------|------|--------|------|--------|--------|

| Net operating loss carryforward |   | $3,718,778 |   | $3,517,420 |   |   |
|---------------------------------|--------|------------|--------|------------|--------|--------|

| Timing difference related to options |   | 2,182,182 |   | 2,162,737 |   |   |
|--------------------------------------|--------|-----------|--------|-----------|--------|--------|

| Valuation |   | (5,900,960) |   | (5,680,157) |   |   |
|-----------|--------|-------------|--------|-------------|--------|--------|

| Total income tax benefit (liability) |   | $ 0 |   | $ 0 |   |   |
|--------------------------------------|--------|-----|--------|-----|--------|--------|

Reconciliation of the statutory federal income tax rate to the Company’s effective tax rate is as follows:

|   |   | 2009 |   | 2008 |   |   |
|--------|--------|------|--------|------|--------|--------|

| Net loss before taxes |   | $649,421 |   | $2,127,985 |   |   |
|-----------------------|--------|----------|--------|------------|--------|--------|

| U.S. statutory rate |   | 34% |   | 34% |   |   |
|---------------------|--------|-----|--------|-----|--------|--------|

| Change in deferred tax |   | (220,803) |   | (723,515) |   |   |
|------------------------|--------|-----------|--------|-----------|--------|--------|

| Change in deferred tax asset valuation account |   | 220,803 |   | 723,515 |   |   |
|------------------------------------------------|--------|---------|--------|---------|--------|--------|

| Total tax expense |   | $ 0 |   | $ 0 |   |   |
|-------------------|--------|-----|--------|-----|--------|--------|

| Effective tax rate |   | 0.0% |   | 0.0% |   |   |
|--------------------|--------|------|--------|------|--------|--------|

The net change in the valuation account was $220,803 and $723,515, in the years ended December 31, 2009 and 2008,respectively. The valuation allowance has been estimated in an amount equal to the projected future benefit of the losscarryforward because there is no assumption that the Company will generate sufficient income to utilize the tax benefit.The Company has incurred losses since its inception and has filed no income tax returns. The losses incurred to date maybe limited due to changes in control of the Company and limitations on the deductibility of fees for services paid throughthe issuance of common stock. In the event that all returns are filed and accepted by the taxing authority, the Companywill have unused net operating losses available for carry-forwards of approximately $10,942,000 that will start to expirein 2016 in the United States of America.

| Note 5 | 2007 Stock Ownership Plan |
|--------|---------------------------|

In October 2007, the board of directors adopted the 2007 Stock Ownership Plan (the “2004 Plan”), and authorized2,000,000 shares. Under the 2007 Plan, the Company may make awards to employees, non-employees, directors,consultants, and independent contractors of shares of common stock or derivative securities such as incentives andnon-qualified stock options. The 2007 Plan stipulates no terms or conditions for the awards to be granted. The value ofthe stock issued to consultants is based on fair market value of the goods or services received or stock prices obtainedfrom published data.

During 2009, no shares were issued under the 2007 Plan.

During 2008, a total of 1,016,667 shares, with a weighted-average fair value of approximately $.54 per share, were soldto consultants under the 2007 Plan.

During 2007, a total of 50,000 shares, with a weighted-average fair value of $.6357 per share, were sold to a consultantunder the 2007 Plan.

| Note 6 | Impairment Charge |
|--------|-------------------|

In November 2006, the Company entered into three separate asset purchase agreements, whereby the Company acquiredcertain web site domains and internet web pages associated therewith (the “web assets”), in exchange for 1,950,000restricted shares of common stock. There was no verifiable fair value of the web assets. The Company therefore recordedthese assets at the fair value of the issued shares. The fair value of the shares was determined to be $52,000.

Pursuant to ASC Topic 360 “Property, Plant and Equipment”, the Company has determined the carrying value of the webassets exceeds the sum of their expected future cash flows and, as of December 31, 2006, recorded an impairment chargeof $52,000. This charge, equal to the entire carrying value of the web assets, is reflected in the Company’s statementsof operations.

Following a change in control transaction occurring in January 2007, the Company’s web page publishing business wasassigned to a subsidiary. During 2006 and 2007, the web page publishing assets did not generate any revenues. Pursuantto a settlement agreement, in January 2008, the Company’s web page publishing business was assigned to a third party.

At December 31, 2008, the Company had paid $193,720 in construction-related expenses associated with the Company’sproposed ethanol production facility to be constructed on the Manchester, Iowa, land.  Inasmuch as the Company soldits Manchester, Iowa, land in November 2008, these construction-related expenses were written-off and appear as an“impairment charge” in the accompanying financial statements.

| Note 7 | Related Party Transactions |
|--------|----------------------------|

Director Loans

During the last half of 2009, one of the Company’s directors loaned the Company a total of $60,000 for use as workingcapital.  Subsequent to December 31, 2010, in January 2010, the same director made an additional loan to the Companyin the amount of $11,000.  All of the loans made by this director are payable on demand and bear interest at 10% perannum and are convertible, at the director’s option, into shares of the Company’s common stock at the rate of one sharefor every $.01 of debt converted.  This director has indicated that he will not demand payment of these loans, until suchtime as the Company has adequate funds with which to repay the loans.

In November 2008, one of the Company’s directors loaned the Company a total of $40,000 for use as working capital.This loan amount was repaid in December 2008, together with interest at the rate of 5% per annum.

Employment Agreements

Our president, Dean E. Sukowatey, is currently employed under an employment agreement with ALL Energy Company,our subsidiary.  Mr. Sukowatey's employment agreement has a term of seven years, ending in August 2013.  Mr.Sukowatey's annual salary is $240,000.  In connection with his employment agreement, Mr. Sukowatey executed anindemnity agreement, a confidentiality agreement and an agreement not to compete. We have entered into a newemployment agreement with Mr. Sukowatey, as described below.

In December 2009, the Company entered into employment agreements with two of its officers. These employmentagreements are for an initial term of three years and may renew for additional one-year periods.  While the terms of theseemployment agreements commenced in December 2009, salary accruals thereunder will not begin until the Companycompletes the acquisition of an ethanol plant; provided, however, that salary accruals of the Company’s president underhis prior employment agreement will continue unaffected by his new employment agreement, until such time as theCompany completes the acquisition of an ethanol plant, at which time salary accruals under his new employmentagreement will commence.  Also, upon the acquisition of an ethanol plant, the Company is to issue a total of 8,585,024shares of its common stock as bonuses.  The Company’s board of directors has determined that these shares, if issued,will be valued at $.012 per share, or $103,020, in the aggregate, based on the then-current market price of the Company’scommon stock.  In addition, the Company’s board of directors determined it to be in the best interest of the Companyand its shareholders that the Company reimburse these officers for their respective income tax liabilities resulting fromthese issuances, if and when they occur.

Warrant Cancellation

In December 2009, one of the Company’s directors tendered for cancellation 5,520,366 warrants to purchase a likenumber of shares of Company common stock.  The Company accepted such tender and cancelled all of such warrants.

Common Stock Bonuses

During 2008, the Company issued a total of 75,000 shares to two of its former directors as bonuses. The issuance of theseshares resulted in $41,400 in general and administrative expense in the accompanying statement of operations. TheCompany measured the transactions at the date of issuance at the then-quoted market price. There are no performancecommitments or penalties for non-performance, therefore the Company recorded the expense at the date of issuance.

| Note 8 | Fair Value of Financial Instruments |
|--------|-------------------------------------|

The fair value of accounts payable approximate their carrying amounts.

| Note 9 | Acquisition of ALL Energy Company |
|--------|-----------------------------------|

On April 9, 2007, the Company acquired ALL Energy Company, a Delaware corporation, pursuant to which ALL EnergyCompany became a wholly-owned subsidiary of the Company. The Company issued 37,995,000 shares of stock inexchange for 100% of the stock of ALL Energy Company. The transaction was accounted for under the purchase methodof accounting and resulted in net assets in the amount of approximately $1,630,000 being consolidated into the financialstatements of the Company consisting mostly of cash of approximately $359,000 and land and other capitalized assetsof approximately $1,149,000.  The activity related to ALL Energy Company from January 1, 2007, through December31, 2009, has been included in the accompanying financial statements.

| Note 10 | Forward Split of Common Stock |
|---------|-------------------------------|

In May 2007, the Company’s board of directors approved a forward split of the Company’s common stock at a ratio ofone(1)-new-share-for-every-two(2)-shares-owned, effective May 14, 2007. The financial statement presentation has beenadjusted to reflect this forward stock split.

| Note 11 | Prepaid Expenses |
|---------|------------------|

At December 31, 2009 and 2008, prepaid expenses, comprised entirely of insurance premiums, were $1,721 and $7,439,respectively.

| Note 12 | Land, Equipment and Construction in Progress |
|---------|----------------------------------------------|

In 2007, the Company purchased 152.5 acres near Manchester, Iowa, which was carried at its cost of $951,238.  TheCompany sold its Manchester property in November 2008, netting $461,960 in cash, resulting in a loss of $1,278.  In2009 and 2008, the Company acquired approximately $2,100 and $700 of office equipment, respectively.  As noted inNote 6, in 2008, $193,720 in construction-related expenses associated with the Company’s proposed ethanol productionfacility was written-off.

| Note 13 | Long-term Debt |
|---------|----------------|

On April 5, 2007, the Company obtained financing on the land discussed in Note 12.  In the transaction, the Companyobtained $488,000 in loan proceeds. The loan associated with the financing transaction bore interest at “prime” andmonthly interest-only payments until the end of the term.  This loan, including accrued and unpaid interest, was repaidin full in November 2008.

| Note 14 | Notes Payable – Related Party |
|---------|-------------------------------------|

During the last half of 2009, one of the Company’s directors loaned the Company a total of $60,000 for use as workingcapital.  Subsequent to December 31, 2010, in January 2010, the same director made an additional loan to the Companyin the amount of $11,000.  All of the loans made by this director are evidenced by promissory notes, are payable ondemand, bear interest at 10% per annum and are convertible, at the director’s option, into shares of the Company’scommon stock at the rate of one share for every $.01 of debt converted.  This director has indicated that he will notdemand payment of these loans, until such time as the Company has adequate funds with which to repay the loans.

| Note 15 | Non-cash Investing and Financing |
|---------|----------------------------------|

In conjunction with the acquisition discussed in Note 9, the Company received net assets, after assuming certainliabilities, of approximately $1,271,000 net of approximately $359,000 of cash received in the acquisition.

| Note 16 | Capital Stock |
|---------|---------------|

Common Stock for Services

During 2009, the Company issued no shares of its common stock for services.

During 2008, the Company issued a total of 1,016,667 shares of common stock to third-party consultants for services,resulting in $550,000 in non-cash compensation expense included in professional and legal expenses and consulting feesin the accompanying statements of operations. The Company measured the transactions at the respective dates of issuanceat the then-quoted market price. There are no performance commitments or penalties for non-performance, therefore theCompany recorded the expense at the date of issuance.

During 2008, the Company issued a total of 75,000 to its former directors as bonuses. The issuance of these sharesresulted in $41,400 in general and administrative expense in the accompanying statement of operations. The Companymeasured the transactions at the date of issuance at the then-quoted market price. There are no performance commitmentsor penalties for non-performance, therefore the Company recorded the expense at the date of issuance.

Cancellation of Stock

In June 2009, a total of 1,000,000 shares of Company common stock were cancelled; such shares were tendered forcancellation by two third-party consultants. 

In January 2008, a total of 1,238,100 shares of Company common stock were cancelled, pursuant a settlement agreement.

| Note 17 | Warrants |
|---------|----------|

In December 2007, the Company issued a total of 11,040,732 common stock purchase warrants to purchase a like numberof shares our common stock, at an exercise price of $.55 per share. All of these warrants are currently exercisable andexpire in 2017. These warrants were issued to two third parties (who subsequently became directors of the Company),in consideration of their invaluable consulting services in assisting the Company in accomplishing its business objectives.The issuance of these warrants resulted in a compensation expense of $6,075,213. In addition, it is possible that, in futureperiods, the Company will incur charges against earnings as a result of the issuance of these warrants. The timing oramount of any such future charges cannot be predicted.  In conjunction with the Company’s authorizing the issuancesof these warrants, the Company’s board of directors determined it to be in the best interest of the Company and itsshareholders that, in a manner and structure to be determined in the future, the Company pay a sum of cash to the issueesof the warrants in a total amount, net of income taxes, of approximately $6,100,000. Each portion of this amount ofcompensation will be expensed by the Company in the then-current period of its payment.

In December 2009, one of the Company’s directors tendered for cancellation 5,520,366 of these warrants to purchasea like number of shares of Company common stock.  The Company accepted such tender and cancelled all of suchwarrants.  In addition, subsequent to December 31, 2009, in March 2010, a former director tendered for cancellation theremaining 5,520,366 of these warrants to purchase a like number of shares of Company common stock.  The Companyalso accepted such tender and cancelled all of such warrants.

| Note 18 | Subsequent Events |
|---------|-------------------|

Related Party Loan

In January 2010, a director made a loan to the Company in the amount of $11,000.  This loan is payable on demand andbears interest at 10% per annum and is convertible, at the director’s option, into shares of the Company’s common stockat the rate of one share for every $.01 of debt converted.  This director has indicated that he will not demand paymentof this loan, until such time as the Company has adequate funds with which to repay the loan.

Third Party Loan

Also, in January 2010, the Company borrowed $65,000 from a third party, through the issuance of a convertiblepromissory note, payable in October 2010, bearing interest at 8% per annum, and convertible into a number of sharesbased on the market price of the Company’s common stock.  On the date of issuance, this promissory note wasconvertible into approximately 11,000,000 shares of Company common stock.

Warrant Cancellation

In March 2010, a former Company director tendered for cancellation 5,520,366 warrants to purchase a like number ofshares of Company common stock.  The Company accepted such tender and cancelled all of such warrants.

Common Stock for Bonus

In March 2010, the Company issued 50,000 shares of its common stock as a bonus to one of its directors.  These shareswere valued at $.04 per share, or $2,000, in the aggregate.

Common Stock for Services

In February 2010, the Company issued 2,000,000 shares of common stock in payment of $20,000 in legal services.

Date Through Which Subsequent Events Evaluated

The date to which events occurring after December 31, 2009, the date of the most recent balance sheet, have beenevaluated for possible adjustment to the financial statements or disclosure is April 15, 2010, which is the date on whichthe financial statements were available to be issued.