Quality$tocks.netCompany Analysis

All Fuels & Energy Company is in the process to strategically acquire, design, build and operate the most efficient plants in the industry, producing 500 million gallons of ethanol a year. All Fuels is in the process of purchasing a plant in Stanley, Wisconsin, and building a plant in Manchester, Iowa. In addition, management is in talks to purchase two other plants in undisclosed locations.

All Fuels has purchased one hundred fifty acres of land in Manchester, Iowa, to build an ethanol plant. The plans for the plant are to produce 100 million gallons of ethanol a year. With all the permits in place, $17 million incentive credits,Engineering Procurement Contract and design engineering, the value of the Manchester site is approximately $10 million. All Fuels hired three engineering firms to complete the permitting, and has identified the general and mechanical contractor to build this plant at an estimated $200 to $250 million.

In addition, All Fuels has a term sheet in place to purchase a plant in Stanley, Wisconsin, named Ace. The Ace plant has been producing ethanol for 2 ½ years and made $100 million in revenues last year. EBITDA (earnings before interest, taxes, depreciation, and amortization) was slightly under $35 million. The corn has been hedged with futures. This plant was built by Delta T and managed by the Pacesetter Group. Both groups have extensive ties with All Fuels.

Though All Fuels & Energy is in the early phases of development, the stock looks to be at a substantial discount to what the company could be worth. For our target price, we will extrapolate estimates from the Ace plant, even though it has not been purchased. The plant produces forty million gallons of ethanol and $34 million in EBITDA. All Fuels has fifty million shares outstanding. This equates to $.68 per share in EBITDA. If the stock trades at five times EBITDA, this would come to a price of $3.40. Though All Fuels’s goal of production is many times this, we will use this as the target and adjust as acquisitions become defined.

All Fuels & Energy Company (AFSE.PK)

Holmes R. Osborne III, CFAJuly 17, 2007

Target Price: $3.40

All Fuels & Energy Company6165 NW 86th StreetJohnston, IA 50131651-998-0612www.allenergycompany.com

Symbol AFSE

Current Price 0.65

52 Week High 2.70

52 Week Low 0.17

Exchange OTC

QualityStocks.net3370 N. Hayden Rd.Suite 123-591Scottsdale, AZ. 85251480-308-0703

www.QualityStocks.net

Quality$tocks.netCompany Analysis

Ethanol

Ethanol is a clean burning substitute or additive to gasoline for automobiles. In America, the chief source of ethanol is corn. Ethanol burns much cleaner than gasoline and releases less carbon dioxide into the atmosphere. Carbon dioxide contributes to green house gases and smog.

It takes one bushel of corn to produce 2.8 gallons of ethanol. Ethanol is used in a blend with gasoline. All cars in the U.S. can run on E10, which contains 10% ethanol. In the U.S., some gas stations offer E10 while others do not. Many of the stations in corn producing states offer E10. The U.S. uses approximately 160 billion gallons of gasoline a year. If every gas station offered E10, the demand for ethanol for E10 would be sixteen billion gallons. Currently, it is five billion gallons. In the future, E10 is probably the best source for ethanol in the U.S.

E85 contains 85% ethanol and 15% unleaded gasoline. This is the highest proportion of ethanol an engine can use. Some gasoline must be added in the mixture so that the spark plugs will ignite the fuel. Pure ethanol is not volatile enough to ignite alone. If a station does not offer E85, the automobile may also run entirely on gasoline. In Brazil, 50% of its automobiles can use up to 100% ethanol. However, in Brazil, the ethanol is mainly produced from sugar. Sugar produces more ethanol than corn because it yields higher amounts of energy when converted.

Production Process

Corn is brought to the plant via train rails and truck. Trains play a vital role in the delivery of the corn to the plant and delivery of the finished product. Canadian Northern Railways is in the process of planning a hub for All Fuels in Manchester, IA. The corn is then stored and milled. In the milling process, the corn is crushed. Next, the corn is mixed with water and distilled. Like the process of making beer or alcohol, it must ferment. After this process, the water must be removed so as not to have an adverse effect on automobile engines.

There are some byproducts of this process that have commercial uses. Not all of the corn is used in the making of ethanol. What is leftover can be used for livestock, swine, and poultry.

Automobiles

There are eleven million are hybrid and flex fuel vehicles on the road in the U.S. according to the Auto Alliance. Five million of these have E85 engines. The leaders in E85 are GM, Ford, Chrysler, Mercedes, and Nissan. Each manufacturer is adding more models that can run on ethanol. The Indy Car Series now uses 100% ethanol in its race cars. Archer Daniels Midland estimates that the European Union had 2% of its vehicles run on alternative fuel in 2005 and will increase to 5.75% by 2010.

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Quality$tocks.netCompany Analysis

Some gas stations offer blender pumps. Blender pumps allow the consumer to choose how much ethanol they want to add to their fuel. If a truck wants to pull a heavy load, it may want more gasoline than ethanol in the mixture. However, if the truck has no load to pull, the owner may want to use more ethanol than gas. Blender pumps are becoming more common in certain parts of the country and thus will make ethanol more attractive to certain consumers.

Current Environment for Ethanol

There are two main reasons for the rise in the demand for ethanol. The most important reason is the high price of oil. The U.S. must import 2/3 of all the oil it consumes. This dependence on the importation of oil also contributes to the trade deficit. Much of this oil is imported from countries with unstable relationships with the U.S. Because of this situation, the U.S. is looking for alternatives to oil. Ethanol is actually less expensive to produce than gasoline. It costs approximately $1.50 to produce a gallon of ethanol. Regardless of the price of oil, we can grow our own corn and the Midwest is friendlier than the Mideast.

As Exxon’s CEO Lee Raymond stated in an interview with Fortune, Exxon has no incentive to be involved with alternative energy. When oil is $10 a barrel, everyone loves cheap gas and is not interested in ethanol. When oil is $100 a barrel, the oil companies make so much money that they do not want alternatives. This attitude is echoed

throughout the oil world. Many companies advertise what they spend on alternative sources. Unfortunately, what they spend is a meager sum compared to what will make a difference.

The second reason for alternative energy sources is the environment. After almost twenty-five years of ozone discussion, it has finally become widely accepted in the U.S. that the atmosphere has been damaged by mankind. Though this theory was accepted a long time ago in many other countries, it has only recently been embraced by Americans.

Government Legislation

Recently, the House of Representatives and Senate passed a bill requiring that the U.S. produce thirty six billion gallons of ethanol by 2022. Of this thirty six billion, thirty five billion must be cellulose. Cellulose is not only corn but other biofuels too. This will greatly drive the demand for ethanol.

Producing plants get many tax breaks from the federal, state, and local governments. Federal legislation includes a $.51 a gallon tax incentive for oil refiners to blend ethanol into gasoline. All Fuels is getting a ten year break on property taxes from the city of Manchester that equates to $6.6 million. Also, the city is planning on building the infrastructure to pipe the millions of gallons of water needed for the plant. The Iowa Department of Economic Development has awarded a sales and use tax credit in an amount in excess of $10.4 million for the High Quality Job Creation Act. As one can see, local and state governments are interested in the jobs that ethanol producers can create.

In some states such as California, ethanol and hybrid cars may use the High Occupancy Lanes. This creates a demand for people wanting to save time in rush hour traffic. E85 also has fewer taxes per gallon than gasoline and registration fees can be lower. Illinois and many states offer grants for building ethanol plants. The stations that dispense E85 can get incentives from home states. Many urban areas check automobiles for smog and charge hefty testing fees. Flex fuel automobiles may be exempt or will easily pass the tests. The government is creating many incentives for ethanol cars and producers.

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Quality$tocks.netCompany Analysis

Competition

Archer Daniels Midland (ADM) is the largest company in the ethanol business with twenty eight years of experience and thirty six billion dollars in all sources of revenue. ADM is building two 275 million gallon plants located in Columbus, Nebraska, and Cedar Rapids, Iowa. It is expanding its ethanol capacity to 1.65 billion gallons and is adding 2,400 railcars to transport ethanol and biodiesel. Incidentally, the company also makes plastics from corn.

ADM plans to dramatically increase its capital expenditures supporting this business in the next few years. In short, a company with so many diversified operations has identified ethanol as its leading source of revenue and profit growth.

Another global leader in biofuels is Bunge. Bunge has several plants in the U.S. and is building more. In addition to corn ethanol, Bunge has sugar based ethanol plants in Brazil and soybean based BIODIESEL plants in the U.S.

Corn

No discussion is complete when discussing ethanol without bringing up the price of corn. Recently, the Agriculture Department reported that ninety three million acres of corn will be planted this year. This is 18.6% higher than last year and is the most corn planted since WWII. Because of an increase in the amount of corn being planted and favorable weather, this could lead to a

decrease in the price of corn, which is favorable to ethanol producers. The December corn contract dropped from over $4 a bushel to $3.51 recently. All Fuels CEO Dean Sukowatey indicated that management will hedge against rises in the price of corn.

According to an article in the Wall Street Journal, ethanol is expected to consume 30% of corn, up from 14% in 2006. General Mills, Tyson Foods, and Nestle have cited rising corn and commodity prices and as the chief reason for increasing the price of their products. Ethanol producers are unfairly being blamed for the spike in the price of commodities. The rise in costs for most foods has more to do with the rise in oil than in corn. It only takes about $.03 worth of corn to make a box of Corn Flakes.

Risks

The major risk is based upon the price of commodities. Commodities can be very difficult to forecast. If the price of corn rises sharply, it would increase the cost of ethanol. If the price of oil dropped back to $25 a barrel, it would make ethanol less attractive. Corn is about $3.30 as of the time of this report. The weather and amount of rainfall can affect the amount of corn grown. Though producers can hedge against this, it takes away from profits in good years. This is not the sweet corn one finds in a grocery store but the hard corn grown for livestock. Ethanol cannot entirely replace gasoline. There is not enough rain or land to produce enough corn to entirely supplant the supply of gas.

Currently, not many autos offer the engine that can run on E85. Also, major E85 manufactures Ford and General Motors are in a weak financial position and have junk rated bonds. Chrysler, which is one of the largest E85 manufacturers, was just acquired by a private equity company and its future could change. If more gasoline stations do not offer E10, which can be used in all cars, it could hamper the demand for ethanol as well.

Many oil producers who get the $.51 tax credit for blending ethanol are not passing the savings along to the consumer. This is making the price of ethanol higher than it should be and less attractive.

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Quality$tocks.netCompany Analysis

AFSE Team

All Fuels and Energy’s management team has extensive experience in investment banking, alternative energy, and agriculture. CEO Dean Sukowatey spent nineteen years on Wall Street. Founder James Broghammer has twenty years of experience working with ethanol, corn, and food processing and has worked for industry giants Archer Daniels Midland and Cargill. Bibb Swain has been building ethanol plants since 1984. Mr. Swain has also patented several methods for producing ethanol. Scott Zabler has been in the grains business for twenty five years. Mark Leonard has been involved with agriculture, banking, and politics for twenty years.

Delta T Delta T is a Virginia based company that has been building ethanol plants for twenty years. Many of the founders of All Fuels & Energy are also principals of Delta T. Delta T has constructed eighty facilities that specialize in dehydration and purification systems. From 1986 through 2005, Delta-T technology was installed in facilities with in excess of one billion gallons of production capacity for ethanol distillation/dehydration and in corn-to-ethanol facilities with in excess of 180 million gallons of production capacity. Currently, Delta-T is involved in the design and construction of facilities with new production capacity in excess of 500 million gallons located in the U.S., China and Europe, and has been awarded contracts relating to projects with an additional 450 million gallons of production capacity.

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Disclaimer & Forward-Looking Statements

QualityStocks (otherwise known as QS) is Small Cap News Portal for Small Cap public companies. QS has no investment banking or consultation conflicts thereby minimizing one of the inherent conflicts of interest between the research analysts and the companies they cover. QS is not a registered investment advisor or broker dealer. No information in this report should be construed as an endorsement to either buy or sell any securities mentioned in this report. The analyst(s) who prepared this report rely on publicly available information which neither the analyst, nor QS, can guarantee to be error-free or factually accurate. All conclusions in this report are deemed reasonable and appropriate by the author. The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” in regard to forward-looking statements. To fully comply with the requirements of this law, QS cautions all investors that such forward-looking statements in this report are not guarantees of future performance. Unknown risk, uncertainties, as well as other uncontrollable or unknown factors may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking statements. Readers of this report are urged to use due diligence in any purchase of security list herein. Readers should consult the Company’s SEC filings as well as our initial report on the firm to better understand the inherent risks associated with this security. There may be many uncontrollable or unknown factors which may cause actual results to materially differ from the results, performance or expectations expressed or implied by such forward-looking statements. Investors should exercise good judgment and perform adequate due-diligence prior to making any investment. QS has been compensated 12,000 shares of AFSE from 3rd party for a limited participation of the company in its research program and advertising. Ratings and price targets in this report should not be construed as recommendations or stock price predictors.

All decisions are made solely by the analysts. Holmes Osborne, CFA - Senior Analyst Holmes serves QualityStocks as a independent research analyst. He brings to the company over nine years experience in equity research and investment marketing. Prior to joining QualityStocks, Holmes worked as an equity analyst for an independent research provider. He has also held positions as investor relations officer for a NYSE-listed company and director of financial analysis for a large consulting firm. Holmes is a Chartered Financial Analyst (CFA). Holmes Osborne began his career as a financial consultant for Merrill Lynch Private Client Group in Naples, Florida. At Merrill Lynch Mr. Osborne assisted clients in asset management and estate planning. After Naples, Mr. Osborne managed trust portfolios for Merrill Lynch Trust Company (a division of Merrill Lynch’s mutual fund division) in Boca Raton, Florida. The trust department managed over $1 billion in clients’ assets. Upon leaving Florida, Mr. Osborne worked in management for Farmers Insurance Group in Los Angeles, California. Mr. Osborne has a degree in finance from the Martin J. Whitman School of Management at Syracuse University. He is a member of the CFA Society and holder of the Chartered Financial Analyst designation. Mr. Osborne is also a member of the Los Angeles Venture Capital Association, Malibu Rotary, and is on the board of the LA National Association of Business Economists.

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