AlumiFuel Power Corp - Annual Report: 2013 (Form 10-K)

afpw_10k.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

x	ANNUAL REPORT UNDER SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended: DECEMBER 31, 2013

¨	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For transition period from _________________to_________________.

Commission File Number 333-57946

ALUMIFUEL POWER CORPORATION

(Name of small business issuer in its charter)

NEVADA		88-0448626
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification Number)

7315 EAST PEAKVIEW AVENUE, ENGLEWOOD, COLORADO 80111

(Address of principal executive offices)(Zip Code)

Issuer's telephone number, including area code: (303) 796-8940

Securities registered pursuant to Section 12(b) of the Exchange Act: None

Securities registered under Section 12(g) of the Exchange Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act: ¨Yes xNo

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Exchange Act. ¨

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15 (d) of the Exchange during the past 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 Days: xYes ¨No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained in this form, and will not be contained, to the best of the Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K: x

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer:

Large Accelerated Filer	o	Accelerated Filer	o
Non-Accelerated Filer	o	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 xNo

The aggregate market value of the voting common equity held by non-affiliates of the issuer as of March 31, 2014 was $1,390,000, based on the last sale price of the issuers common stock ($0.0008 per share) as reported by the OTCQB.

The Registrant had 1,737,327,282 shares of common stock outstanding as of March 31, 2014.

Documents incorporated by reference: None

ALUMIFUEL POWER CORPORATION

FORM 10-K

THIS REPORT MAY CONTAIN CERTAIN “FORWARD-LOOKING” STATEMENTS AS SUCH TERM IS DEFINED IN THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995 OR BY THE SECURITIES AND EXCHANGE COMMISSION IN ITS RULES, REGULATIONS AND RELEASES, WHICH REPRESENT THE REGISTRANT’S EXPECTATIONS OR BELIEFS, INCLUDING BUT NOT LIMITED TO, STATEMENTS CONCERNING THE REGISTRANT’S OPERATIONS, ECONOMIC PERFORMANCE, FINANCIAL CONDITION, GROWTH AND ACQUISITION STRATEGIES, INVESTMENTS, AND FUTURE OPERATIONAL PLANS. FOR THIS PURPOSE, ANY STATEMENTS CONTAINED HEREIN THAT ARE NOT STATEMENTS OF HISTORICAL FACT MAY BE DEEMED TO BE FORWARD-LOOKING STATEMENTS. WITHOUT LIMITING THE GENERALITY OF THE FOREGOING, WORDS SUCH AS “MAY”, “EXPECT”, “BELIEVE”, “ANTICIPATE”, “INTENT”, “COULD”, “ESTIMATE”, “MIGHT”, OR “CONTINUE” OR THE NEGATIVE OR OTHER VARIATIONS THEREOF OR COMPARABLE TERMINOLOGY ARE INTENDED TO IDENTIFY FORWARD-LOOKING STATEMENTS. THESE STATEMENTS BY THEIR NATURE INVOLVE SUBSTANTIAL RISKS AND UNCERTAINTIES, CERTAIN OF WHICH ARE BEYOND THE REGISTRANT’S CONTROL, AND ACTUAL RESULTS MAY DIFFER MATERIALLY DEPENDING ON A VARIETY OF IMPORTANT FACTORS, INCLUDING UNCERTAINTY RELATED TO ACQUISITIONS, GOVERNMENTAL REGULATION, MANAGING AND MAINTAINING GROWTH, THE OPERATIONS OF THE COMPANY AND ITS SUBSIDIARIES, VOLATILITY OF STOCK PRICE AND ANY OTHER FACTORS DISCUSSED IN THIS AND OTHER REGISTRANT FILINGS WITH THE SECURITIES AND EXCHANGE COMMISSION.

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PART I

ITEM 1. DESCRIPTION OF BUSINESS

(a) General development of business.

We were incorporated in the state of Nevada on January 19, 2000 under the name Organic Soils.Com, Inc.

Pursuant to an Agreement and Plan of Reorganization dated as of March 24, 2005 (the “Share Exchange Agreement”), by and between Organic Soils.com, Inc. and Inhibetex Therapeutics, Inc., a Colorado corporation (“Inhibetex”), Organic Soils.com, Inc. and Inhibetex entered into a share exchange whereby all of the issued and outstanding capital stock of Inhibetex, on a fully-diluted basis, were exchanged for like securities of Organic Soils.com, Inc., and whereby Inhibetex became a wholly owned subsidiary of Organic Soils.com, Inc. (the “Share Exchange”). The Share Exchange was effective as of May 19, 2005 at which time we also changed our name to Inhibiton Therapeutics, Inc. (the “Registrant” or the “Company”).

Pursuant to an Agreement Concerning the Exchange of Securities by and among the Company, HPI Partners, LLC (“HPI”), a Colorado Limited Liability Company, and the Security Holders of HPI Partners, LLC (the “HPI Members”) dated March 4, 2009, (the “Share Exchange Agreement”), the parties entered into a share exchange whereby all of the issued and outstanding membership interests of HPI were exchanged for 171,123,297 shares of the Company’s $0.001 par value common stock and 418,500 shares of the Company’s $0.001 par value Series A Preferred Stock, through which HPI and its wholly-owned subsidiary AlumiFuel Power, Inc. ("API") became a wholly owned subsidiaries of the Company (the “Share Exchange”). The 418,500 shares of the Company’s Series A Preferred Stock automatically converted to 34,397,261 shares of the Company’s $0.001 par value common stock upon approval by the Company’s stockholders of an increase in the number of authorized common shares effective on May 28, 2009. In addition, the HPI Members received warrants to purchase up to 14,302,500 shares of the Company’s $0.001 par value common stock, in exchange for a like number of HPI warrants that are exercisable until March 4, 2012 at an exercise price of $0.12 per share. The Share Exchange was effective as of May 5, 2009, upon closing of the transaction among the parties.

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This acquisition was treated as a reverse-merger with HPI being the accounting acquirer including a recapitalization of its equity with Inhibiton Therapeutics, Inc. as the legal surviving entity. Effective on May 28, 2009, the Company changed its name from Inhibiton Therapeutics, Inc. to AlumiFuel Power Corporation. As a result of this transaction, the Company has ceased any further operations related to its previous cancer therapy research and development business.

In February 2010, the Company formed its new subsidiary, AlumiFuel Power International, Inc. ("AFPI"). In connection with the formation of the AFPI, the Company and AFPI executed a License Agreement through which AFPI received certain international marketing rights and the rights to utilize certain intellectual property from the Company for exploitation in countries and territories outside of North America in exchange for 25,000,000 shares of the Company's $0.001 par value common stock. The Company also purchased 15,000,000 shares of AFPI common stock at $0.01 per share. On July 31, 2011, the Company and AFPI executed a Patent Purchase Agreement through which the Company sold AFPI the international patent rights to certain of the Company's intellectual property. In exchange for the sale of these rights, the Company received 7,500,000 shares of AFPI common stock. As of December 31, 2012, we owned 39,984,494 shares of AFPI common stock or 64% of the shares outstanding.

In December 2011, we formed a new wholly owned subsidiary, AlumiFuel Power Technologies, Inc. ("APTI"), but didn't begin significant operations until February 2012. APTI was formed as a separate entity to leverage the Company's hydrogen generation technology to take advantage of potential complimentary technologies.

In December 2012, we formed a new wholly owned subsidiary, NovoFuel, Inc. (“NovoFuel”) and in 2013 transferred all of the assets related to our hydrogen generation business to NovoFuel in exchange for 12,000,000 shares of its common stock; 2,000,000 of which were allocated to our majority-owned subsidiary, AFPI, in exchange for the return of the European intellectual property and marketing rights back to the Company for use by NovoFuel. Novofuel was formed as a separate entity in anticipation of executing a transaction with Genport, SrL of Italy. In October 2013, the Company signed a Memorandum of Understanding with Genport, SrL of Italy to combine and integrate their technologies, assets and operations into NovoFuel, contingent upon closing of private financing of up to $4,500,000 for the venture. On closing of a capital investment, NovoFuel common shares are to be allocated to Genport shareholders in exchange for 100% of Genport shares. Although Genport would then be a wholly-owned subsidiary of NovoFuel, Genport, SrL would retain its status as an Italian company under Italian law. Following the closing of the transaction, NovoFuel will have operations in the United States and Italy. As of the date of this report, this financing has not been completed and the Company cannot guarantee it will be completed.

(b) Financial information about segments.

Through December 31, 2013, we operated in only one industry segment.

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AlumiFuel Power Corporation is a company that during 2013 operated primarily through its subsidiaries NovoFuel, APTI and AFPI. We are an early production stage alternative energy company that generates hydrogen gas and superheated steam through the chemical reaction of aluminum, water, and proprietary additives. This technology is ideally suited for multiple niche applications requiring on-site, on-demand fuel sources, serving National Security and commercial customers. Hydrogen generated by our products can fill inflatable devices such as weather balloons, feed fuel cells for portable and back-up power, and can replace costly, hard-to-handle and high pressure K-Cylinders. Our hydrogen/heat output is also being designed and developed to drive turbine-based underwater propulsion systems and auxiliary power systems, and as the fuel for Flameless Ration Heaters. Our technology has significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products. This unique technology is based on the exothermic chemical reaction of aluminum powder and water. The Company intends to operate as much as possible utilizing path-to-market partners for each target application to help keep its overhead and infrastructure costs down.

The Company's first commercially available product was the PBIS-1000 portable balloon inflation device. Existing technologies for balloon inflation include: hydrogen and helium cylinders; assorted toxic solid fuel systems; expensive on-site electrolysis; and unwieldy chemical hydrogen generators. Our technology utilizes a unique, simple portable generation/launching system that is:

•	Field deployable

•	Can be launched at remote locations

•	Is a cost-effective total system solution

•	Is portable and easy to use

•	Is made of non-toxic materials

As a result of input from the initial customer, the Company has worked to produce a quieter more rugged next generation PBIS-1000 unit that is a significant upgrade over the system produced and sold in 2010. The production unit has a simpler design with fewer components, and is lighter, more compact, more ruggedized for military applications, more user-friendly, quieter and more cost effective. Using a higher grade stainless steel construction with better corrosion properties and durable fluorocarbon rubber for all seals, the upgraded unit can better withstand required pressures and temperatures over its long expected lifetime. The reactor and water tanks, as well as all plumbing lines and connectors, have been optimized for weight, simplicity, and cost, and are stamped and certified with the ASME code – a standard requirement for commercial pressure vessels. The unit meets military specification requirements for vibration, environmental and drop tests, and is housed in a molded polyethylene carrying case used regularly by the military.

In addition, a more effective packaging configuration of the company’s proprietary AlumiFuel fuel cartridges increases the speed of the reaction and the hydrogen yield, while reducing cartridge cost. The versatile PBIS-1000 unit can produce 1,000 liters of hydrogen in 20 minutes at ambient temperature and atmospheric pressure using only two 32oz AlumiFuel cartridges.

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In 2011, we were awarded a contract with the United States Air Force Special Operations Command to deliver a PBIS-2000 Portable Balloon Inflation System. Originally slated for delivery in late February 2012, working with the customer the Company delivered the unit in April 2012. In September 2012, we received a Purchase Order/Contract from the U.S. Air Force Special Operations Command to make certain modifications to the PBIS-2000 delivered in April 2012. These modifications were made and the unit was returned to the customer in January 2013.

The PBIS-2000 expands the capability of our current family of hydrogen generators, which includes the PBIS-1000 (for 100g balloons) and the PBIS-lite (designed for 30g pieball balloons). The PBIS-2000 generates sufficient hydrogen to inflate a 200g weather balloon within 20 minutes using up to 6 AlumiFuel Cartridges contained in a single reactor vessel; this represents significantly more hydrogen than is required for the PBIS-1000. While the footprint, weight and safety features of the PBIS-2000 are similar to the PBIS-1000, the configuration has been modified such that the system operates at ambient (atmospheric) pressure (below 10 psig) so that the user never has to deal with a high pressure system such as the industry standard K-Cylinder (2265 psig).

The PBIS series of man-portable reactor and launching units use our proprietary AlumiFuel technology to produce hydrogen through the powerful chemical reaction of powdered aluminum, water and proprietary additives. The devices require only a simple water hand pump and two to six small AlumiFuel cartridges to propagate the reaction and generate sufficient lift gas to launch a 5-foot diameter weather balloon. This innovation, which enables on the spot generation of hydrogen without any external energy or toxic chemicals, is easier to use and is cheaper than current lift gas solutions. Traditionally, helium has been used as the primary lift gas, but with the increasing scarcity and cost of helium, users are realizing the benefits of switching to hydrogen. These portable launching units are far more mobile and cost effective than other on-site hydrogen generation systems. The Company estimates the current weather balloon lift gas market is $150-$200 million per year and encompasses military as well as civil government meteorological users worldwide; with more than 1,000,000 weather balloons and special purpose balloons launched annually for telecom relay, cloud height measurement and military/national security applications. The customer base for the PBIS units includes various governmental users both civil and military.

Our AlumiFuel cartridges utilize standard 32 oz aluminum drink cans and our "stuffing" is outsourced to a third party volume packager/assembler with industrial scale packaging techniques & processes. The packager is able to support all product applications and provides shipping/distribution/supply chain logistics while we control our proprietary additives. Each 32 oz cartridge generates 500 liters of hydrogen equaling approximately 100 watts of power for 16 hours in a non-toxic can that can be thrown away in any municipal dump after use.

We intend to focus or commercial activities on several “here-and-now” market driven & addressable applications:

·	Team with major path-to-market partners for each target application

·	Target early adopters of advanced hydrogen technology – government and commercial

·	Engage production partners on outsourcing basis

·	Position AlumiFuel cartridges as “razor blades” and reactors as “razors”

·	Leverage our cheaper and more efficient logistics chain vs. bulky hydrogen K-cylinders

·	Emphasize our safe “dry hydrogen” product profile

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We believe our technology is different because:

·	Tomorrow’s fuel today; hydrogen generated on-demand, on-site, off-grid

o	No storage or delivery issues as with other hydrogen generation processes

o	No reformers

o	No hydrogen processors

o	No electrolysis

o	No post-production compression or storage

o	No expensive new hydrogen infrastructure required

o	Novel packaging of aluminum powder & additives into cartridges

o	Inserting cartridge and water into portable generator produces .999 pure hydrogen

·	Cost-effective total system life cycle

o	Abundant, inexpensive raw materials (aluminum + additives)

o	Low-cost production

o	Novel and efficient hydrogen generation process - no energy consumption in creating or compressing hydrogen

o	Commercially usable neutral byproducts – spent powder is recyclable

·	Environmentally friendly and safe

o	Non-toxic, impurity-free products throughout life-cycle

o	Pollution-free, safe and manageable production processes

o	Clean burn - no harmful emissions; no carbon monoxide, carbo dioxide, or sulfur compounds produced

o	Reaction initiated under ambient conditions - no external energy input required

·	Competitive advantages

o	Generates 1.2 cubic meters of hydrogen per 1kg of aluminum – 95% efficiency is 10% better than for methanol reforming

o	None of methanol’s highly toxic or inflammable qualities

o	Demonstrated gravimetric hydrogen storage capacity of 10% is equivalent to methanol without the safety/handling downsides

o	No toxic/hazardous/corrosive disposal or transportation issues with fuel (active or spent) as with other hydrogen generation technologies

o	No degradation in production of hydrogen by cartridges during lifetime storage testing

o	Very high usable energy densities – 3.2kWh/l and 3.1kWh/kg – up to 5X greater energy density than Lithium-ion batteries

·	Practical ability to engineer reactions at required scales and durations

·	Can displace current technologies/products

Other potential products include hydrogen/steam generators including turbine-based underwater propulsion systems, drop-in recyclable cartridges and flameless heater packs. Ours is an enabling technology that can deliver up to five times the energy density (runtime) of lithium batteries, which can open up doors for new power applications.

Of equal importance to the weather balloon market, the PBIS product family can easily be tailored to feed fuel cells to generate electricity for back-up, stand-by, auxiliary and portable power. We have had ongoing discussions with major fuel cell companies regarding technology collaboration for other applications.

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In November 2013, NovoFuel signed an agreement with Genport, srl of Italy to combine and integrate their technologies, assets and operations into NovoFuel based on certain future financing conditions.

A lengthy due diligence process convinced both parties that the prospective business combination can result in a new multinational alternative energy corporation with unique capabilities and opportunities. Genport and NovoFuel explored various transaction structures and vehicles for combining their businesses and operations. NovoFuel’s objective is to seek a private financing of up to $4,500,000 to support working capital and development efforts to integrate, and roll out advanced portable and backup power products in response to growing global demands. With the signing of this agreement, efforts began by NovoFuel and its banking advisor to evaluate a variety of private and strategic financing options. The terms of the agreement are contingent upon closing of the financing. The parties believe that the synergistic combination of Genport’s hybrid fuel cells, solar power systems, and lithium-ion battery packs, along with NovoFuel Power’s AlumiFuel hydrogen generation systems, can bring powerful alternative energy capabilities to the global marketplace. The above terms, conditions, and market focus are embodied in a Memorandum of Agreement, signed on October 30, 2013. Following the closing of the transaction if it occurs, NovoFuel will have operations in the United States and Italy.

The same AlumiFuel hydrogen generation technology used for lift gas applications, such as the PBIS-2000 being field tested by the USAF Special Operations Command can be applied to backup and hybrid power generation. The large ($6 billion+) and growing worldwide back-up and hybrid generation power market, traditionally served by lead-acid batteries and gasoline or diesel generators, is increasingly adopting hydrogen PEM fuel cell systems combined with lithium-ion batteries to replace these earlier technologies.

All of the U.S. wireless Telecom carriers have begun installing fuel cell-based backup power systems, and NovoFuel has had discussions with key players in this market about applying the combination of AlumiFuel and Genport technologies.

The Hydrogen Economy

Current applications include selected utility vehicles, and back-up, auxiliary, portable and remote power generation. Although Honda Motor Corporation currently produces a vehicle for lease in California, it is anticipated a mass market for automotive applications won't occur until later in this decade. Current public perception is that the hydrogen economy is tied to the automotive market. The Company believes the following must occur to commercialize automotive applications: volume manufacturing, lower cost and increased reliability of hydrogen fuel cells must be achieved; automakers must adopt the increased use of fuel cells; a new fuel distribution infrastructure including bulk hydrogen production plants near dispersed customers, (e.g. service stations) must be built.

The Company believes there is limited public awareness of substantial and growing pre-automotive markets being driven by early adopters of hydrogen technology. These technologies include hydrogen fuel cells for back-up, portable and auxiliary power applications as well as the delivery of longer run-times, lower emissions, cheaper operations than present battery, generator sets, diesel, and other technologies.

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The Company also believes its technology can impact the hydrogen economy through the favorable economics of supply and demand and a push for “green” energy to drive the hydrogen industry to evolve on many scales for many applications. As the increased demand for pre-automotive fuel cells will decrease cost of components and create viable supplier base for automotive fuel cells, API believes it is in the forefront of the transition to the hydrogen economy. Our technology and products will help accelerate the transition including “sweet spot” applications (back-up, portable, auxiliary and remote power) to facilitate increased usage and capability of hydrogen fuel cells. We believe we can leverage our cheaper logistics chain to replace delivery of hard-to-handle K-cylinders for hydrogen storage. The Company’s unique non-fuel cell applications can facilitate early market entry and a providing a source of revenue while fuel cell applications mature.

In today’s pre-automotive market, hydrogen can be used to power nearly every end-use energy need. Fuel cells— which directly convert the chemical energy in hydrogen to electricity with only water and heat as byproducts—are the key to making it happen. Hydrogen-fueled Polymer Electrolyte Membrane (also called Proton Exchange Membrane or “PEM”) fuel cells are leading candidates for use in fuel cell vehicles. Although it will be a while before fuel cell vehicles reach every dealer’s showroom, PEM fuel cells are commercially available today for certain applications – most notably: backup power (1-10kW), portable power (50W – 1kW), and specialty vehicles. The largest of these near-term markets is emergency backup power, with an addressable market of $5 billion in the near term. Today’s commercially available PEM fuel cells are particularly appropriate for these applications requiring intermittent backup. This includes a wide range of communication and data control systems for which backup power is essential.

Backup power technologies currently include batteries and generators operating on diesel, propane, or gasoline. Most backup power communication and control systems use a combination of generators and batteries to provide redundancy to avoid service disruptions. Although these systems are reliable and well established, concerns with batteries and generators are encouraging customers to seek out alternatives that provide high reliability and durability at a reasonable cost. Compared to batteries, fuel cells offer longer continuous runtime and greater durability in harsh outdoor environments under a wide range of temperature conditions. With fewer moving parts, they require less maintenance than both generators and batteries. They can also be monitored remotely, reducing actual maintenance time. Compared to generators, fuel cells are quieter and have no emissions.PEM fuel cells can also offer significant cost advantages over both battery-generator systems and battery-only systems when shorter run-time capability of up to three days is sufficient. In a study for the U.S. Department of Energy, Battelle Memorial Institute analyzed lifecycle costs of emergency response radio towers, comparing fuel cells with 2 kW battery-only backup of 8 hours and 5 kW battery-generator backup of 52 hours, 72 hours, and 176 hours. On a lifecycle basis, PEM fuel cells can provide service at substantially lower total cost than current technologies (the higher cost of the 176- hour fuel cell system results from the cost of hydrogen storage tank rental).

Portable Power applications, including emergency response, man-portable soldier power, battery charger, emergency medical equipment power, outdoor mobile camera surveillance, entertainment mobile power and recreational power, represent a $3.3 billion market in the near term. As each year passes, hydrogen fuel cells capture an increasingly larger share of this market from older technologies such as fossil-fuel gensets and batteries. Moreover, novel hybrid solutions can involve a combination of fuel cells and lithium-ion batteries.

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Competition

Since hydrogen power generation technologies have the potential to replace existing power products, competition will come from improvements to current power technologies and from new alternative energy technologies. Each potential target market is currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers use proven and widely accepted technologies such as internal combustion engines and turbines as well as coal, oil, electricity and nuclear powered generators.

There are a number of companies using reforming technologies for hydrogen generation, including, Airgas, H2Gen, Air Products, HyGear, and others. While many of these companies are further down the commercialization and production road, we believe our hydrogen generation technology is less expensive than a reformer-based approach for potential target applications, and that the technology is superior to other non-reforming hydrogen generation technologies in terms of cost, weight, safety and use of non-toxic materials.

Additionally, there are competitors working on developing technologies using other than hydrogen power generation systems (such as fuel cells, advanced Lithium-ion batteries, battery/fuel cell hybrids and hybrid battery/ICEs) like Ballard Power and Plug Power in certain targeted markets.

There are many different individuals, institutions and companies across the United States, Canada, Europe and Japan, including corporations, national laboratories and universities that are actively engaged in the development and manufacture of alternative energy technologies including hydrogen generation technologies. Each of these competitors has the potential to capture market share in any potential future target markets.

Many of these competitors have substantial financial resources, customer bases, strategic alliances, manufacturing, marketing and sales capabilities, and businesses or other resources which give them significant competitive advantages over us.

Government Regulation

We are not currently subject to any specific governmental regulations other than those common to any operating business. While we believe our hydrogen power generation products are environmentally benign, we may be subject to national or local environmental laws regarding the disposal or recycling of aluminum or water waste or other unforeseen by-products from our developing technologies. Additionally, we may be subject to customary regulations related to the shipment of hazardous materials for our AlumiFuel cartridges.

It is possible that we will encounter industry-specific government regulations in the future in any jurisdictions in which we may operate. Regulatory approvals may be required for the design, installation and operation of stationary and mobile hydrogen fuel stations and other fuel cell systems should we successfully develop and implement those products. It is our intention to comply with all necessary governmental regulations that may be imposed on products or services we develop for commercial use. Any delay in gaining necessary regulatory approval for future products or services could cause a delay in our development and growth.

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Research and Development

We have expensed $593 on direct research and development costs during the past two years expensed in the fiscal year ended December 31, 2012. All of these costs were borne by us. These amounts do not include the day-to-day operating costs associated with our operations but do include expenses for laboratory supplies, design and development costs not directly related to the manufacturing process of our products. We now consider the company ready for commercialization and will only expend further research and development costs in anticipation of future new products, if any.

Employees

We currently have one full-time employee located in the Philadelphia area. This does not include our corporate officers who each devote at least thirty hours per week on the operations of the Company, outsourced administrative personnel or our Chief Technical Officer who works as a consultant on an as needed basis.

ITEM 1A. RISK FACTORS

The purchase of shares of our common stock is very speculative and involves a very high degree of risk. An investment in our stock is suitable only for the persons who can afford the loss of their entire investment. Accordingly, investors should carefully consider the following risk factors, as well as other information set forth herein, in making an investment decision with respect to securities of Inhibiton.

The market price of our common stock fluctuates significantly.

The market price of our common shares fluctuates significantly in response to factors, some of which are beyond our control, such as:

·	the announcement of new products or product enhancements by us or our competitors;

·	developments concerning intellectual property rights and regulatory approvals;

·	quarterly variations in our and our competitors’ results of operations;

·	changes in earnings estimates or recommendations by securities analysts;

·	developments in our industry; and

·	general market conditions and other factors, including factors unrelated to our own operating performance.

·	dilution and increases in our shares outstanding including issuances under convertible notes and debentures

Further, the stock market in general has recently experienced extreme price and volume fluctuations. Continued market fluctuations could result in extreme volatility in the price of our common shares, which could cause a decline in the value of our common shares. You should also be aware that price volatility might be worse if the trading volume of our common shares is low.

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Because we gained access to the public markets pursuant to a share exchange, we may not be able to attract the attention of major brokerage firms.

Additional risks may exist since we gained access to the public markets through a share exchange. Security analysts of major brokerage firms may not cover us since there is no incentive to brokerage firms to recommend the purchase of our common stock. No assurance can be given that brokerage firms will want to conduct any secondary offerings on our behalf in the future.

Trading of our common stock is limited and changes to the OTCQB may result in the Company moving to the OTC Pink market.

Trading of our common stock is conducted on the OTC Markets Group's OTCQB. This has adversely effected the liquidity of our securities, not only in terms of the number of securities that can be bought and sold at a given price, but also through delays in the timing of transactions and reduction in security analysts' and the media's coverage of us. This may result in lower prices for our common stock than might otherwise be obtained and could also result in a larger spread between the bid and asked prices for our common stock. In addition, the OTCQB recently announced that they will soon require that all companies on the OTCQB pay certain fees and maintain a minimum bid price of $0.01 per share. As our common stock routinely trades below that price, we may not be able to meet the requirements to remain on the OTCQB and may begin trading on the OTC Pink market.

Because it is a “penny stock,” it will be more difficult for you to sell shares of our common stock.

Our common stock is a “penny stock.” Broker-dealers who sell penny stocks must provide purchasers of these stocks with a standardized risk-disclosure document prepared by the SEC. This document provides information about penny stocks and the nature and level of risks involved in investing in the penny-stock market. A broker must also give a purchaser, orally or in writing, bid and offer quotations and information regarding broker and salesperson compensation, make a written determination that the penny stock is a suitable investment for the purchaser, and obtain the purchaser’s written agreement to the purchase. The penny stock rules may make it difficult for you to sell your shares of our stock. Because of the rules, there is less trading in penny stocks. Also, many brokers choose not to participate in penny-stock transactions. Those brokers that do accept penny stocks are applying more stringent rules and requiring significant documentation for depositing stock certificates into brokerage accounts. Accordingly, you may not always be able to deposit and resell shares of our common stock publicly at times and prices that you feel are appropriate. In addition, restrictions placed on electronic transfer of our common stock may significantly increase the time it takes for stockholders to collect on stock sales transactions once their shares are sold.

Our stock has been subjected to a DTC “Chill” that restricts the trading of our common stock to paper certificates making trading our stock more difficult.

Our common stock has been, but is not currently as of the filing of this report, subject to a “Chill” by the Depository Trust Company (“DTC”) which restricts the electronic trading of our common stock and forces that trading to be completed through paper certificates. This limits a stockholders’ ability to purchase and sell our stock and may cause delays in a stockholders’ ability to deposit stock into brokerage accounts and/or experience refusals to accept our stock by larger brokerage firms. Although our stock is not currently subject to a “Chill”, if one is again imposed on us by the DTC in the future, such action may prevent our stockholders from being able to trade their shares on a timely basis as well as incur additional fees and expenses to trade our stock.

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Risks Related to Our Business

We currently have limited product revenues and will need to raise additional capital to operate our business.

We generated only $13,400 and $61,134 in revenues in 2013 and 2012. While we anticipate we may generate further limited revenues from the sale of our PBIS portable balloon inflation devices and may have further R&D income from other projects in the future, any revenues generated from those sales in the fiscal year ending December 31, 2014 will not be sufficient to fund our operating needs during 2014 and there is no assurance any revenues in future periods will be sufficient to fund our operating needs. Therefore, for the foreseeable future, we will have to fund our operations and capital expenditures from additional financing, which may not be available on favorable terms, if at all. If we are unable to raise additional funds on acceptable terms, or at all, we may be unable to complete further product development or have the funds necessary to buy the raw materials for future orders. Any additional sources of financing will likely involve the sale of our equity securities or issuance of debt instruments convertible into shares of our common stock, which will have a substantial dilutive effect on our stockholders. During 2012 and 2013, our primary source of financing was from the issuance of convertible debt that resulted in a significant increase in our shares outstanding. This trend is expected to continue for the foreseeable future.

We are not currently profitable and may never become profitable.

We have a history of significant losses and expect to incur substantial losses and negative operating cash flow for the foreseeable future, and we may never achieve or maintain profitability. Even if we succeed in developing and commercializing one or more products, we expect to incur substantial losses for the foreseeable future and may never become profitable. We also expect to continue to incur significant operating and capital expenditures and anticipate that our expenses will not be offset by our revenues in any substantial way.

We also expect to experience negative cash flow for the foreseeable future as we work to commercialize our technology while funding our operating losses and capital expenditures. As a result, we will need to generate significant revenues or raise additional capital in order to achieve and maintain profitability. We may not be able to generate these revenues or achieve profitability in the future. Our failure to achieve or maintain profitability could negatively impact the value of our stock.

We have raised capital through the use of convertible debt instruments that causes substantial dilution to our stockholders.

Because of the size of our Company and its status as a "penny stock" as well as the current economy and difficulties in companies our size finding adequate sources of funding, we have been forced to raise capital through the issuance of convertible notes and other debt instruments. These debt instruments carry favorable conversion terms to their holders of up to 60% discounts to the market price of our common stock on conversion and in many cases provide for the immediate sale of our securities into the open market. Accordingly, this has caused significant dilution to our stockholders and will continue to do so in 2014 and the foreseeable future. As of December 31, 2013, we had approximately $483,000 in convertible debt outstanding. This convertible debt balance as well as additional convertible debt we incur in the future will cause substantial dilution to our stockholders.

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The hydrogen power technology development business has a limited operating history on which to evaluate our business plan and currently possesses unproven hydrogen generation technology.

We will be required to continue engineering development on our hydrogen power generation technology against specific target applications and products. Our business plan is subject to further product development and there is a lack of meaningful historical financial data that makes it difficult to evaluate its prospects. To the extent that we are able to implement our business plan, our business will be subject to all of the problems that typically affect a business with a limited operating history, such as unanticipated expenses, capital shortfalls, delays in technology development and possible cost overruns.

We may not be able to achieve commercialization of any new products on the timetable we anticipate, or at all.

We cannot guarantee that we will be able to continue to develop commercially viable hydrogen power generation products on the timetable we anticipate, or at all. The continued commercialization of hydrogen power generation products require substantial technological advances to improve the efficiency, functionality, durability, reliability, cost and performance of these products and to develop commercial volume manufacturing processes for these products. Developing the technology for high-volume commercialization may require substantial capital, and we cannot assure you that we will be able to generate or secure sufficient funding on acceptable terms to pursue commercialization plans on a larger scale. In addition, before any new product can be released to market, it must be subjected to numerous field tests. These field tests may encounter problems and delays for a number of reasons, many of which are beyond our control. If these field tests reveal technical defects or reveal that our potential products do not meet performance goals, including useful life, reliability, and durability, our commercialization schedule could be delayed, and potential purchasers may decline to purchase future systems and products.

The commercialization of hydrogen power generation systems also may depend on our ability to significantly reduce the costs of future systems and products. We cannot assure you that we will be able to sufficiently reduce the cost of these products versus existing technologies without reducing performance, reliability and durability, which would adversely affect consumers’ willingness to buy future products.

We cannot assure you that we will be able to successfully execute our business plan.

The execution of our business plan poses many challenges and is based on a number of assumptions. We cannot assure you that we will be able to execute our business plan. Narrowing the scope of our development activities may not accelerate product commercialization. If we experience significant cost overruns on any of our product development programs, or if our business plan is more costly than anticipated, certain research and development activities may be delayed or eliminated, resulting in changes or delays to our commercialization plans. We also cannot assure that we will complete any transaction with Genport resulting from the Memorandum of Understanding signed in October 2013 as it requires us to raise at least $4.5 million dollars in order to complete any potential business combination.

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Potential fluctuations in our financial and business results makes forecasting difficult and may restrict our access to funding for our commercialization plan.

We expect our operating results to vary significantly from quarter to quarter and even year to year. As a result, quarter to quarter or year to year comparisons of these operating results are not expected to be meaningful. Due to our hydrogen power technology business’ stage of development, it is difficult to predict potential future revenues if any or results of operations accurately. It is likely that in one or more future quarters our operating results will fall below the expectations of investors or securities analysts, if any, who follow our Company. In addition, investors or security analysts may misunderstand our business decisions or have expectations that are inconsistent with our business plan. This may result in our business activities not meeting their expectations. Not meeting investor or security analyst expectations may materially and adversely impact the trading price of our common shares, and increase the cost and restrict our ability to secure required funding to pursue our commercialization plans.

A mass market for our products may never develop or may take longer to develop than we anticipate.

The hydrogen power generation systems we currently market and intend to market are sold in markets that are still emerging or may be subject to governmental spending cutbacks. As a result, we do not know whether end-users will want to use those products. The development of a mass market for the hydrogen power generation technology may be affected by many factors, some of which are beyond our control, including the emergence of newer, more competitive technologies and products, the future cost of raw materials used by our systems, regulatory requirements, consumer perceptions of the safety of any developed products and related fuels, and consumer reluctance to buy a new product.

If a mass market fails to develop or develops more slowly than anticipated, we may be unable to recover the losses it will have incurred in the development of our current and potential future products and may never achieve profitability. In addition, we cannot guarantee that we will be able to develop, manufacture or market any products if sales levels do not support the continuation of those products.

Regulatory changes could hurt the market for our products.

Changes in existing government regulations and the emergence of new regulations with respect to hydrogen generation systems may hurt the market for any developed products. Environmental laws and regulations in the U.S. and other countries have driven interest in alternate energy systems. We cannot guarantee that these laws and policies will not change. Changes in these laws and other laws and policies or the failure of these laws and policies to become more widespread could result in consumers abandoning their interest in hydrogen generation systems in favor of alternative technologies. In addition, as alternative energy products are introduced into the market, the governments in countries we intend to market our products may impose burdensome requirements and restrictions on the use of these technologies that could reduce or eliminate demand for some or all of our potential products.

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If we fail to protect our intellectual property rights, competitors may be able to use our technology, which could weaken our competitive position, eliminate the potential for future revenue and increase costs.

We believe that our long-term success will depend to a large degree on our ability to protect the proprietary technology that we have developed or any other technology that we may develop or acquire in the future. Although we intend to aggressively pursue anyone we reasonably believe is infringing upon our intellectual property rights, initiating and maintaining suits against third parties that may infringe upon those intellectual property rights will require substantial financial resources. In addition, significant financial resources could be required to defend against any suits brought against us claiming our infringement of others’ intellectual property rights. We may not have the financial resources to bring or defend such suits and if it such suits emerge, we may not prevail. Regardless of our success in any such actions, we could incur significant expenses in connection with such suits.

Failure to protect any intellectual property rights could seriously harm our business and prospects because we believe that developing new systems and products that are unique to us is critical to our success. We will rely on patent, trade secret, trademark and copyright law to protect our intellectual property. However, some of the intellectual property may not be covered by any patent or patent application, and certain patents will eventually expire. We cannot assure that any present or future issued patents will protect the technology. Moreover, our patent position is subject to complex factual and legal issues that may give rise to uncertainty as to the validity, scope and enforceability of a particular patent. Accordingly, there is no assurance that:

·	any of the patents or patent applications developed, acquired or licensed by us will not be invalidated, circumvented, challenged, rendered unenforceable, or licensed to others; or

·	any potential future patent applications will be issued with the breadth of claim coverage sought by us, if issued at all.

In addition, effective patent, trademark, copyright and trade secret protection may be unavailable, limited or not applied for in certain countries.

We may also seek to protect any proprietary intellectual property, including intellectual property that may not be patented or patentable, in part by confidentiality agreements and, if applicable, inventors’ rights agreements with strategic partners and employees. We can provide no assurance that these agreements will not be breached, that we will have adequate remedies for any breach or that such persons or institutions will not assert rights to intellectual property arising out of these relationships.

Future intellectual property may be acquired without typical representations and warranties. If necessary or desirable, we may seek further licenses under the patents or other intellectual property rights of others. However, we can give no assurances that we will obtain such licenses or that the terms of any offered licenses will be acceptable to us. The failure to obtain a license from a third party for intellectual property we use could cause us to incur substantial liabilities and to suspend the development, manufacture or shipment of products or our use of processes requiring the use of such intellectual property.

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We may be involved in intellectual property litigation that causes us to incur significant expenses or prevents us from selling any developed products.

We may become subject to lawsuits in which it is alleged that we have infringed the intellectual property rights of others or commence lawsuits against others who we believe are infringing upon our rights. Involvement in intellectual property litigation could result in significant expense, adversely affecting the development of the challenged product or intellectual property and diverting the efforts of our technical and management personnel, whether or not such litigation is resolved in its favor. In the event of an adverse outcome as a defendant in any such litigation, we may, among other things, be required to:

·	pay substantial damages;

·	cease the development, manufacture, use, sale or importation of any developed products that infringe upon other patented intellectual property;

·	expend significant resources to develop or acquire non-infringing intellectual property;

·	discontinue processes incorporating infringing technology; or

·	obtain licenses to the infringing intellectual property.

We can provide no assurance that we would be successful in such development or acquisition, or that such licenses would be available upon reasonable terms. Any such development, acquisition or license could require the expenditure of substantial time and other resources and could have a material adverse effect on our business and financial results.

We will face significant competition.

As alternative energy technologies including hydrogen power generation technologies have the potential to replace existing power products, competition for those products will come from current power technologies, from improvements to current power technologies and from new alternative power technologies, including other types of alternative energy technologies. Each of our target markets is currently serviced by existing manufacturers with existing customers and suppliers. These manufacturers use proven and widely accepted technologies such as internal combustions engines and turbines as well as coal, oil and nuclear powered generators.

Additionally, there are competitors working on developing technologies other than hydrogen power generation systems (such as fuel cells, advanced Lithium-ion batteries and battery/fuel cell hybrids) in each of our targeted markets. Some of these technologies are as capable of fulfilling existing and proposed regulatory requirements as our technology.

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The loss of the services of certain key employees, or the failure to attract additional key individuals, would materially adversely affect our business.

Our success will depend on the continued services of certain technology development and marketing personnel. In addition, our success depends in large part on our ability in the future to attract and retain key management, engineering, scientific, manufacturing and operating personnel. Recruiting personnel for the alternative energy industries is highly competitive. We cannot guarantee that we will be able to attract and retain qualified executive, managerial and technical personnel needed for the development of potential products business. Our failure to attract or retain qualified personnel could have a material adverse effect on our business. Liquidity issues, discussed earlier, could severely impact our ability to attract qualified key personnel or retain existing personnel.

Hydrogen products use inherently dangerous, flammable fuels, which could subject our business to product liability claims.

Hydrogen technology exposes us to potential product liability claims that are inherent in hydrogen and products that use hydrogen. Our products utilize fuel canisters to be sold by us that may be considered hazardous materials and subject us to certain rules and regulations for the manufacture, sale and transport of hazardous materials. Hydrogen is a flammable gas and therefore a potentially dangerous product. Any accidents involving our technology or products could materially impede widespread market acceptance and demand for hydrogen energy products. In addition, we may be held responsible for damages beyond the scope of any insurance coverage. We also cannot predict whether we will be able to maintain any necessary insurance coverage on acceptable terms.

Our business may be concentrated in countries outside of the United States.

We intend to market our hydrogen generation products to countries outside of the United States both through our operating subsidiary AFPI and potentially through partners including our proposed transaction with Novofuel and Genport, srl. We will be subject to the risks and uncertainties inherent in doing business outside of the United States including varied governmental laws, rules and regulations as well as import and export restrictions. There is no assurance we will be successful in complying those laws, rule or regulations or that we will not inadvertently fail to comply. Failure to comply with the laws, rule and/or regulations in the various countries we intend to market our products could put us at risk for governmental actions that could inhibit our ability to transaction business in those countries. This could also expose us to significant costs for fines, tariffs, litigation, or other risks related to governmental actions.

Restrictions on currency exchange and fluctuations in foreign currency rates may limit our ability to receive and use our revenues effectively.

Foreign exchange transactions subject us to significant foreign exchange controls and may require the approval of governmental authorities both in and outside the Unites States. In addition, foreign currency fluctuations expose us to certain risks and uncertainties of doing business in foreign currencies and we may incur substantial losses as a result of those fluctuations.

AFPI is no longer listed on the Deutsche Börse Frankfurt Stock Exchange and there is not guarantee that we will be able to find another suitable exchange to list AFPI's common stock.

The Company's subsidiary AFPI was traded on the Deutsche Börse Frankfurt First Quotation Board until December 2012 under the symbol "9AP" at which time the Deutsche Börse Group closed the First Quotation board on which 9AP traded. Therefore, at present, there is no trading market for AFPI's common stock. While the Company has identified the GXG Markets as an alternative market there is no assurance that a listing will be successful on that or any other acceptable stock exchange and if not, that the Company can find a suitable market for listing of AFPI's common stock. As a result, the Company may no longer be able to pursue funding opportunities utilizing AFPI and the shareholders of AFPI may not ever be able to trade their common stock.

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ITEM 2. PROPERTIES.

Our executive offices are located at 7315 East Peakview Avenue, Englewood, Colorado 80111 and are provided to us on a month to month basis by a corporation in which our officers and director are affiliated. During 2013 and 2012 we paid $1,200 per month for these facilities, which increased to $1,500 in January 2014. This monthly fee includes the use of office space as well as the use of business machines, telephone equipment and other office equipment and supplies. The Company paid rent for office space and facilities of our President in West Palm Beach, Florida totaling $5,341 in 2012, with no fees paid in 2013, but is under no lease obligations with respect to that facility.

Effective on July 1, 2009, API entered into a lease for its primary office and laboratory space in the University City Science Center in Philadelphia, Pennsylvania. Totaling approximately 2,511 square feet, the term of the agreement is for five years and six months expiring on December 31, 2014. In November 2011, API vacated these premises. Terms of the lease called for the following payments: months one through three $0; months four through nine at half rent of $3,871; months ten through twelve at $7,742; months thirteen through twenty-four at $7,936; and increasing at the rate of 2.5% until the least term was to end in 2014. In addition, the Company was obligated to pay certain common area maintenance fees that were $1,886 per month in 2011. Please see legal proceedings below for more information on a settlement reached with the landlord in 2013 regarding this lease.

The Company's subsidiary APTI currently leases an executive office in the Philadelphia area on a month-to-month basis for monthly rent of $217 plus associated fees.

ITEM 3. LEGAL PROCEEDINGS.

On November 30, 2011, API was notified that a Judgment by Confession had been entered against it in the Court of Common Pleas Philadelphia County in Philadelphia, Pennsylvania by Wexford-UCSC II, L.P., its former landlord. The Judgment by Confession assesses total damages of $428,232, which is comprised of the following: $73,995 for unpaid monthly rent, maintenance fees, interest and late charges for the period through November 30, 2011; attorney's fees of $5,000; rent and maintenance charges of $10,020 for December 2011; and the value of future rent payments for the period from January 1, 2012 to December 31, 2014 of $339,217. The complaint alleged a breach of contract and event of default for API related to this lease. As of March 31, 2013, the Company had recorded $67,429 in rent expense that was included in "accounts payable, other" as of that date. The additional judgment amount totaling $360,803 was expensed as "litigation contingency" on our statements of operations and is recorded under the same name as a liability on balance sheets at March 31, 2013.

We reached a Settlement Agreement with Wexford-UCSC II, L.P. in May 2013. Pursuant to the terms of the Settlement Agreement, the Company paid a cash payment of $2,000 and issued a Convertible Promissory Note in the amount of $75,000, as described more fully as "Wexford Convertible Note" in Note 3 - Notes Payable above. Also pursuant to the terms of the Settlement Agreement, AlumiFuel Power, Inc., AlumiFuel Power Corporation and all affiliated entities and persons have been fully released. As a result of this settlement, we recorded a gain of $351,232 listed as litigation contingency under "other income (expense" on our statements of operations for the difference between the total assessed damages of $428,232 and the settlement amount valued at $77,000.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

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PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES.

(a) Market information

Our common stock is not listed on any exchange; however, market quotes for the Company’s common stock (under the symbol “AFPW”) may be obtained from the OTC Markets "QB" platform (“OTCQB”). The OTCQB is a regulated quotation service that displays real-time quotes, last-sale prices and volume information in over-the-counter (“OTC”) securities. The following table sets forth, for the indicated fiscal periods, the high and low sales prices (as reported by the OTCQB) for the Company’s common stock. Effective on April 24, 2013, the Company effectuated a 1 for 200 reverse stock split and as a result, all sales prices for periods prior to April 24, 2013 have been restated to reflect that reverse stock split.

	Price
	High		Low
Fiscal year ended December 31, 2013
Quarter ended December 31, 2013	$	0.0012	$	0.0001
Quarter ended September 30, 2013	$	0.0126	$	0.0005
Quarter ended June 30, 2013	$	0.0591	$	0.0024
Quarter ended March 30, 2013	$	0.04	$	0.02


Fiscal year ended December 31, 2012
Quarter ended December 31, 2012	$	0.04	$	0.02
Quarter ended September 30, 2012	$	0.08	$	0.02
Quarter ended June 30, 2012	$	0.34	$	0.06
Quarter ended March 30, 2012	$	0.34	$	0.18

The prices set forth in this table represent quotes between dealers and do not include commissions, mark-ups or mark-downs, and may not represent actual transactions.

(b) Holders

The number of record holders of our common stock as of March 31, 2014, was 167 according to our transfer agent. This amount excludes an indeterminate number of shareholders whose shares are held in “street” or “nominee” name at a brokerage firm.

We have never declared or paid a cash dividend on our common stock and do not anticipate paying any cash dividends in the foreseeable future.

(d) Securities authorized for issuance under equity compensation plans

We have the following securities authorized for issuance under our equity compensation plans as of December 31, 2013, including options issued under our 2009 Stock Incentive Plan approved by our security holders effective May 26, 2009.

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Equity Compensation Plan Information

Plan category	Number of securities to be issued upon exercise of outstanding options, warrants and rights		Weighted-average exercise price of outstanding options, warrants and rights		Number of securities remaining available for future issuance under equity compensation plans (excluding securities reflected in column (a))
	(a)		(b)		(c)
Equity compensation plans approved by security holders		100,000	$	15.00		-0-
Equity compensation plans not approved by security holders		-0-	$	-0-		-0-
Total		100,000	$	15.00		-0-

Recent Sales of Unregistered Equity Securities

During the three month period from October 1, 2013 to December 31, 2013 we issued 395,482,141 shares of our common stock upon the conversion of $60,028 in principal and $3,749 in accrued interest on our various convertible notes and debentures. In addition, $102,450 was recorded for additional derivative liability and interest expense for a total cost to the Company of $166,227 or $0.0004 per share.

We offered and sold the securities in reliance on an exemption from federal registration under Section 4(2) of the Securities Act of 1933 and Rule 506 promulgated thereunder. We relied on this exemption and rule based on the fact that there were a limited number of investors, all of whom were accredited investors and (i) either alone or through a purchaser representative, had knowledge and experience in financial and business matters such that each was capable of evaluating the risks of the investment, and (ii) we had obtained subscription agreements from such investors indicating that they were purchasing for investment purposes only. The securities were not registered under the Securities Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements. The disclosure contained herein does not constitute an offer to sell or a solicitation of an offer to buy any securities of the Company, and is made only as permitted by Rule 135c under the Securities Act.

ITEM 6. SELECTED FINANCIAL DATA.

This information is not required for Smaller Reporting Companies.

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ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

General:

The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the Company’s consolidated financial statements and notes thereto for the years ended December 31, 2013 and 2012.

The independent auditors’ reports on our financial statements for the years ended December 31, 2013 and 2012 include a “going concern” explanatory paragraph that describes substantial doubt about our ability to continue as a going concern. Management’s plans in regard to the factors prompting the explanatory paragraph are discussed below and also in Note 1 to the audited consolidated financial statements for the year ended December 31, 2013.

While our independent auditor has presented our financial statements on the basis that we are a going concern, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business over a reasonable length of time, they have raised a substantial doubt about our ability to continue as a going concern.

For the fiscal year ended December 31, 2013, the financial statements include the results of the Company and its subsidiaries NovoFuel, API, HPI, AFPI, and APTI. For the fiscal year ended December 31, 2012, the financial statements include the results of the Company and its subsidiaries API, HPI, AFPI, and APTI.

The Company is a an early production stage alternative energy company that generates hydrogen gas and steam for multiple niche applications requiring on-site, on-demand fuel sources. Our hydrogen drives fuel cells for back-up, remote, and portable power, fills inflatable devices such as weather balloons, and can replace costly, hard-to-handle and high pressure K-Cylinders. Its steam/hydrogen output is also being designed to drive turbine-based underwater propulsion systems and auxiliary power systems. We feel we have significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products.

Our technology is based on the exothermic reaction of aluminum powder and water, combined with proprietary additives which act as catalysts, initiators and reactants. Novel packaging of the aluminum powder and additives into cartridges enables them to be inserted into a generator/reactor, where an infusion of water results in the rapid generation of highly pure hydrogen and superheated steam.

We have a seasoned management team and have developed working relationships with certain major industry players as path-to-market partners, including major defense contractors and commercial fabricators of the company’s reactors and cartridge products on an outsourcing basis.

We have completed the design and engineering modifications necessary and begun limited production of our Portable Balloon Inflation Systems. In September 2011, we received an order from the United State Air Force Strategic Operations Command to produce one PBIS-2000 portable balloon inflation device. This order, originally scheduled for delivery in the first quarter of 2012, and was delivered in April 2012 producing revenue of $61,134. In the fourth quarter ended December 31, 2012, the U.S. Air Force returned the PBIS-2000 unit to the Company to make certain paid design improvements. The work was completed in January 2013 and the unit was returned to the Air Force at that time. Revenue from the design improvements of $13,440 were recorded in the first quarter of 2013 with all costs related to the improvements in 2012 recorded as "work in progress" on our balance sheets at December 31, 2012.

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LIQUIDITY AND CAPITAL RESOURCES

To address the going concern situation addressed in our financial statements at December 31, 2013 and 2012, we anticipate we will require over the next twelve months approximately $900,000 of additional capital to fund the Company’s operations. This amount does not include any amounts that may be necessary to pay off existing debt or accrued expenses. We presently believe the source of funds will primarily consist of several components that include: debt financing, which may include further loans from our officers or directors as detailed more fully in the accompanying financial statements; the sale of our equity securities in private placements or other equity offerings or instruments; as well as minimal cash flows from operations through the production of PBIS reactors and the resultant sales of AlumiFuel cartridges. As in 2013, during 2014 we anticipate a majority of our capital resources will come from convertible debt instruments. These instruments typically contain a significant discount to the market value of our common stock of up to 60% causing the issuance of shares below market value prices causing substantial dilution to our stockholders.

During the year ended December 31, 2013, we received a net of approximately $428,000 from our financing activities, primarily from the issuance of convertible and other notes payable totaling $516,616. These amounts were offset by approximately $82,000 in payments on various notes payable. This is compared to cash provided by financing activities of $601,000 in the year ended December 31, 2012 primarily from the issuance of convertible and other notes payable totaling $859,318.

In the year ended December 31, 2013, net cash used in operating activities was $423,458. This compared to net cash used in operating activities of $598,583 for same period in 2012. The 2013 amount included a $1,193,249 net loss that included approximately $546,818 in non-cash charges and credits to operating assets and liabilities primarily from increases in derivative liabilities and amortization of discount on debentures payable related to our convertible notes outstanding, that was partially offset by the recovery of bad debt from payments by FFFC. The 2011 amount included a $2,305,265 net loss that included approximately $1,242,250 in non-cash charges and credits to operating assets and liabilities primarily from increases in derivative liabilities and amortization of discount on debentures payable related to our convertible notes outstanding.

We can make no assurance that we will be successful in raising the funds necessary for our working capital requirements as suitable financing may not be available and we may not have the ability to sell either equity or debt securities under acceptable terms or in amounts sufficient to fund our needs. Our inability to access various capital markets or acceptable financing could have a material effect on our commercialization efforts, results of operations and deployment of our business strategies and severely threaten our ability to operate as a going concern. This includes raising the $4.5 million necessary to move forward with the equity exchange between NovoFuel and Genport, which there is no assurance we can complete.

During the remainder of our fiscal year and for the foreseeable future, we will be concentrating on raising the necessary working capital through debt instruments and equity financing to insure our ability to continue our development and implement other business strategies. The Company's plans to raise additional capital through the sale of equity or equity related securities including those in the form of convertible debt will result in the issuance of Company securities and significant dilution to our current shareholders.

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(b) Results of Operations

The Company’s results of operations for the periods ended December 31, 2013 and 2012 reported include the consolidated operations of the Company and its subsidiaries NovoFuel, HPI, API and AFPI with the elimination of applicable intercompany accounts.

Year ended December 31, 2013

For the year ended December 31, 2013, our total revenue was $13,440 from the work completed to make changes and improvements to the PBIS-2000 prototype unit sold to the U.S. Air Force Strategic Operations Command and requested by them. For the year ended December 31, 2012, our total revenue was $61,234 from the sale of a PBIS-2000 prototype unit to the U.S. Air Force Strategic Operations Command. Our total operating costs and expenses were $763,065 in 2013 compared to $1,175,635 in 2012. Costs of goods sold was $21,421 for the year ended December 31, 2013 as compared to expense of $25,829 for the year ended December 31, 2012. Our costs to complete the improvements to the PBIS-2000 unit exceeded the revenues from the Air Force creating a gross loss of $7,981. The 2013 loss included $334,065 comprised of related party expense that included officer and key employee management fees as well as rent and bonuses paid to related parties as compared to $433,510 in the 2012 period. This decreased in 2013 primarily from the Company decreasing the use of related technical personnel as it moved away from R&D. Product development expense was $0 for the year ended December 31, 2013 versus $593 for the year ended December 31, 2012 as our limited financial resources prohibited any meaningful research and development in 2013 as we moved toward commercialization. These expenses include laboratory supplies, design and development costs not directly related to the manufacturing process of our products. The 2013 expense also includes $3,239 in stock based compensation for costs related to the issuance of warrants. Stock based compensation expense for the year ended December 31, 2012 totaled $126,000 primarily for costs related to the issuance of stock to consultants and the issuance of warrants to subsidiary officers and consultants 2012.

The balance of $424,846 and $618,182 for “other” SG&A expenses in the periods ended December 31, 2013 and December 31, 2012 was comprised of the following:

	Year ended December 31, 2013			Year ended December 31, 2012
General and administrative	$	128,889		$	197,952
Legal and accounting		29,611			32,600
Professional services		175,974			191,471
Bad debt expense		11,122			8,780
Bad debt recovery		(120,750	)		(45,154	)
Salaries		200,000			227,533
	$	424,846		$	613,182

The “other” SG&A expense during the year ended December 31, 2013 saw decreases in nearly all categories and included a significant decrease in general and administrative expenses as well as salaries with the departure of our laboratory employees in Philadelphia after the Company’s change in direction to one of commercialization. There also was a significant offset due to recovery of bad debt for payments received from FFFC on allowed for debt. The “other” SG&A expense during the year ended December 31, 2012 included a significant decrease in general and administrative expenses as the Company worked to decrease its expenses for its Philadelphia location in that year.

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The company recorded $(422,203) in “other income (expense)” during the year ended December 31, 2013 as compared to $(1,164,935) in the year ended December 31, 2012. This decrease is primarily attributed to a decrease in fair value adjustments of derivative liabilities for changes to the value of convertible notes in 2013. The 2013 amount also included $351,232 gained from the settlement of litigation related to our former Philadelphia office location. Interest expense was slightly lower in the 2013 period at $(107,107) versus $(126,966) in 2012 due to decreased interest expense on derivatives resulting from the lower conversion prices in 2013 and the resulting decrease in interest expense for the expense incurred for the difference in the conversion price versus the market price upon conversions.

Year ended December 31, 2012

For the year ended December 31, 2012, our total revenue was $61,234 from the sale of a PBIS-2000 prototype unit to the U.S. Air Force Strategic Operations Command. For the year ended December 31, 2011, our total revenue was $2,574 from fees related to subcontracting on a U.S. Navy Unmanned Underwater Vehicle development project. Our total operating costs and expenses were $1,175,635. Cost of goods sold $25,829 for the year ended December 31, 2012 as compared to expense of $1,897,220 with reactor production costs for the year ended December 31, 2011 of $4,151. The 2012 loss included $435,510 comprised of related party expense that included officer and key employee management fees as well as rent and bonuses paid to related parties as compared to $336,338 in the 2011 period. Product development expense was $593 for the year ended December 31, 2012 versus $10,357 for the year ended December 31, 2011 as our limited financial resources prohibited any meaningful research and development in 2012. These expenses include laboratory supplies, design and development costs not directly related to the manufacturing process of our products. The 2012 expense also includes $126,000 in stock based compensation primarily for costs related to the issuance of stock to consultants and the issuance of warrants to subsidiary officers and consultants 2012. Stock based compensation expense for the year ended December 31, 2011 totaled 640,600 in stock based compensation primarily for costs related to the issuance of stock to consultants, the issuance of stock below market prices in private placements as well as the issuances of warrants to subsidiary officers, consultants and employees in 2011.

The balance of $613,182 and $962,299 for “other” SG&A expenses in the periods ended December 31, 2012 and December 31, 2011 was comprised of the following:

	Year ended December 31, 2012			Year ended December 31, 2011
General and administrative	$	197,952		$	366,383
Legal and accounting		32,600			64,107
Professional services		191,471			190,263
Bad debt expense		8,780			3,175
Bad debt recovery		(45,154	)		-
Salaries		227,533			338,371
	$	613,182		$	962,299

The “other” SG&A expense during the year ended December 31, 2012 included a significant decrease in general and administrative expenses as well as salaries with the departure of certain laboratory employees. In addition, the amount was lower due to the recovery of bad debt for payments received from FFFC that had been previously allowed for. The “other” SG&A expense during the year ended December 31, 2011 included a significant decrease in general and administrative expenses as the Company saw a substantial decrease in professional services fees. Legal and accounting costs were lower primarily from significantly lower legal expenses in 2012.

During the fiscal year ended December 31, 2013, the Company did not engage in any off-balance sheet arrangements as defined in Item 303(c) of the SEC’s Regulation S-B.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Market risk is the potential loss arising from adverse changes in market rates and prices, such as interest rates and a decline in the stock market. We do not enter into derivatives or other financial instruments for trading or speculative purposes. We have limited exposure to market risks related to changes in interest rates. We do not currently invest in equity instruments of public or private companies for business or strategic purposes.

The principal risks of loss arising from adverse changes in market rates and prices to which we are exposed relate to interest rates on debt. We have only fixed rate debt. We had $1,105,944 of debt outstanding as of December 31, 2013 including convertible debentures and notes with a face value totaling $487,212, which has been borrowed at fixed rates ranging from 6% to 12%. All of this fixed rate debt is due on demand or is due during the current fiscal year.

ITEM 8. FINANCIAL STATEMENTS.

The financial statements and related information required to be filed are indexed and begin on page F-1 and are incorporated herein.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

Not applicable.

ITEM 9A. CONTROLS AND PROCEDURES.

Evaluation of Disclosure Controls and Procedures

A review and evaluation was performed by the Company's management, including the Company's Chief Executive Officer (the "CEO") who is also the Chief Financial Officer (the “CFO”), of the effectiveness of the design and operation of the Company's disclosure controls and procedures as of the end of the period covered by this quarterly report. Based on that review and evaluation, the CEO /CFO has concluded that as of December 31, 2013, disclosure controls and procedures, were effective at ensuring that the material information required to be disclosed in our Exchange Act reports is recorded, processed, summarized and reported as required in the application of SEC rules and forms.

-25-

Management’s Report on Internal Controls over Financial Reporting

Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is a set of processes designed by, or under the supervision of, a company’s principal executive and principal financial officers, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with GAAP and includes those policies and procedures that:

•	Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect our transactions and dispositions of our assets;

•	Provide reasonable assurance our transactions are recorded as necessary to permit preparation of our financial statements in accordance with GAAP, and that receipts and expenditures are being made only in accordance with authorizations of our management and directors; and

•	Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statement.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. It should be noted that any system of internal control, however well designed and operated, can provide only reasonable, and not absolute, assurance that the objectives of the system will be met. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Our CEO/CFO has evaluated the effectiveness of our internal control over financial reporting as described in Exchange Act Rules 13a-15(e) and 15d-15(e) as of the end of the period covered by this report based upon criteria established in “Internal Control-Integrated Framework” issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) to the extent possible given the limited personnel resources and technological infrastructure in place to perform the evaluation. Based upon our management’s discussions with our auditors and other advisors, our CEO/CFO believe that, during the period covered by this report, such internal controls and procedures were not effective as described below.

Due to the small size and limited financial resources, our corporate secretary and chief executive officer are the only individuals involved in the accounting and financial reporting. As a result, there is limited segregation of duties in the accounting function, leaving all aspects of financial reporting and physical control of cash in the hands of two individuals. This limited segregation of duties represents a material weakness. We will continue periodically review our disclosure controls and procedures and internal control over financial reporting and make modifications from time to time considered necessary or desirable.

This Annual Report does not include an attestation report of our independent registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our independent registered public accounting firm pursuant to temporary rules of the SEC that permit us to provide only management’s report in this annual report.

Changes in Internal Control over Financial Reporting

There have been no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, the Company’s internal controls over financial reporting.

ITEM 9B. OTHER INFORMATION.

Not applicable.

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PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE.

(a)(b)(c) Identification of directors and executive officers

The following table sets forth the name, age, position and office term of each executive officer and director of the Company.

NAME	AGE	POSITION	SINCE
Henry Fong	78	President, Principal Executive Officer, Principal Accounting Officer and Director	May 2005

Thomas B. Olson	48	Secretary	May 2005

Not applicable.

(d) Family relationships

None.

(e) Business experience

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HENRY FONG

Mr. Fong has been the president and a director of the Company since May 2005. Mr. Fong has been a director of FastFunds Financial Corporation, a publicly traded company with limited business operations, since June 2004. Mr. Fong has been a Director of SurgLine International, Inc. (f/k/a China Nuvo Solar Energy, Inc.) since March 2002 and was its president from March 2002 through September 1, 2011. SurgLine is a publicly traded company that sources and distributes high quality FDA approved medical and surgical products at discount prices. Mr. Fong was the Chief Executive Officer of Techs Loanstar, Inc. (and its predecessor companies), a publicly traded Company that provides software technology solutions to the healthcare market, from April 2008 to July 2011. Since July 2009 Mr. Fong has been the sole director, President and Chief Financial Officer of PB Capital International, Inc. (“PBIC”), a blank check shell company that filed Form 10 registration statement which went effective in October 2009. From July 2010 to September 2013, Mr. Fong was President and a director of Green Energy TV, Inc., a privately-held owner of "green" websites, most notably greenenergytv.com. Since December 2008, Mr. Fong has been President and a director of Carbon Capture Corporation, a privately held owner of certain carbon based intellectual property. Since June 2012, Mr. Fong has been President and a director of Greenfield Farms Food, Inc., a publicly-traded purveyor of grass-fed beef. From 1959 to 1982 Mr. Fong served in various accounting, finance and budgeting positions with the Department of the Air Force. During the period from 1972 to 1981 he was assigned to senior supervisory positions at the Department of the Air Force headquarters in the Pentagon. In 1978, he was selected to participate in the Federal Executive Development Program and in 1981, he was appointed to the Senior Executive Service. In 1970 and 1971, he attended the Woodrow Wilson School, Princeton University and was a Princeton Fellow in Public Affairs. Mr. Fong received the Air Force Meritorious Civilian Service Award in 1982. Mr. Fong has passed the uniform certified public accountant exam. In March 1994, Mr. Fong was one of twelve CEOs selected as Silver Award winners in FINANCIAL WORLD magazine's corporate American "Dream Team."

THOMAS B. OLSON

Mr. Olson has been secretary of the Company since May 2005. From March 2002 until December 2010, Mr. Olson was the secretary of China Nuvo Solar Energy, Inc., a publicly traded company developing alternative energy solutions. From June 2004 to September 2011, Mr. Olson was the Secretary of FastFunds Financial Corporation, a publicly traded company with limited business operations. Mr. Olson has been an officer of Equitex 2000, Inc., a privately held entity since its inception in 2001. Mr. Olson has attended Arizona State University and the University of Colorado at Denver.

(f) Involvement in certain legal proceedings

Not applicable.

(g) Promoters and control persons

Not applicable.

(h) Audit committee financial expert.

See (i) below.

(i) Identification of the audit committee

The Company does not currently have an audit committee of the board of directors, as none is required, and the board believes it can effectively serve in that function and, therefore, currently does. Management believes that certain individuals on the board of directors may have the necessary attributes to serve as a financial expert on an audit committee, if required.

-28-

Code of Ethics

We have adopted a Code of Ethics for our senior financial management, which includes our chief executive officer and chief financial officer as principal executive and accounting officers, that has been filed as exhibit 14.1 to this report.

ITEM 11. EXECUTIVE COMPENSATION.

(a) General

We currently have two executive officers including our President, Mr. Henry Fong, who is also our principal executive officer and our principal financial officer; and Mr. Thomas B. Olson, who is our Secretary.

(b) Compensation discussion and analysis

The Board of Directors has estimated the value of management services for the Company at the monthly rate of $8,000 and $2,000 for the president and secretary/treasurer, respectively. The estimates were determined by comparing the level of effort to the cost of similar labor in the local market and this expense totaled $120,000 for the years ended December 31, 2013 and 2012. In addition, beginning October 1, 2010 the Company's president and treasurer were accruing a management fee of $7,500 and $3,500, respectively, for their services as managers of AFPI. This amount totaled $132,000 for each of the years ended December 31, 2013 and 2012. In December 2012, the Company awarded a one-time management fee to its officers totaling $100,000. As of December 31, 2013, the Company owed $369,692 to its officers for management services.

In September 2009, the Company's board directors authorized a bonus program for the Company's officers related to their efforts raising capital to fund the Company's operations. Accordingly, the Company's president and secretary are eligible to receive a bonus based on 50% of the traditional "Lehman Formula" whereby they will receive 2.5% of the total proceeds of the first $1,000,000 in capital raised by the Company, 2.0% of the next $1,000,000, 1.5% of the next $1,000,000, 1% of the next $1,000,000 and .5% of any proceeds above $4,000,000. The amount is capped at $150,000 per fiscal year. During the years ended December 31, 2013 and 2012, the Company recorded bonus expense of $4,065 and $3,510, respectively to a corporation owned by Messrs. Fong and Olson under this bonus program. At December 31, 2013 there was $3,048 payable under the bonus plan.

In August 2012, agreed to issue a warrant to Mr. Cade with the condition that he agreed to cancel 15,000,000 warrants issued in 2011. Accordingly, the previously issued warrant was cancelled and a warrant to purchase a total of 64,285,714 shares of common stock was issued. This warrant vested immediately, is exercisable for a period of five years, and is exercisable at $0.002 per share. This warrant was valued at $6,429 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in statements of operations at December 31, 2012.

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(c)	Summary compensation table

The following table summarizes the compensation accrued to our principal executive officer, principal financial officer and any other executive officers for the years ended December 31, 2013 and 2012, whose total compensation exceeded $100,000.

Name and Principal Position	Fiscal Year	Salary		Bonus		Option Awards		All Other Compensation		Total
Henry Fong	2013	$	96,000	$	3,252		0	$	90,000	$	189,252
President & Director; Principal Executive Officer & Principal Accounting Officer	2012	$	96,000	$	2,808		0	$	165,000	$	263,808

David J. Cade	2013	$	200,000		0		0	$	0	$	200,000
President, AlumiFuel Power Technologies, Inc. & NovoFuel, Inc.	2012	$	200,000		0		0	$	6,429	$	206,429

(d) Grants of plan based awards table

There were no grants made to officers in the years ended December 31, 2013 or 2012.

(e) Narrative disclosure to summary compensation table and grants

For Mr. Fong in 2013 and 2012, in addition to management fees and bonus as discussed above, other compensation represents management fees to Mr. Fong from AFPI of $60,000.

For 2013, Mr. Cade’s compensation included only his accrued salary. For Mr. Cade in 2012, in addition to salary, other compensation represents the value, at issuance, of 64,285,714 warrants granted Mr. Cade during 2012. This amount represents their value ($0.0001) on the grant date based upon the Black-Scholes option pricing model. These warrants are exercisable at $0.002 per share, until August 1, 2017.

(f) Outstanding equity awards at fiscal year end table

Option Awards

Stock Awards

Name

Number of Securities Underlying Unexer-cised Options

(#)

Exer-cisable

Number of Securities Under-lying Unexer-cised Options

(#)

Unexer-cisable

Equity Incentive Plan Awards: Number of Securities Under-lying Unexer-cised Unearned Options

(#)

Option Exercise Price

($)

Option Expiration

Date

Number of Securities That Have Not Vested

(#)

Market Value of Securities That Have Not Vested

($)

Equity Incentive Plan Awards: Number of Unearned Securities or Other Rights That Have Not Vested

(#)

Equity Incentive Plan Awards: Market or Payout Value of Unearned Securities or Other Rights That Have Not Vested

($)

(a)

(b)

(c)

(d)

(e)

(f)

(g)

(h)

(i)

(j)

Henry Fong

97,000

14.00

3/4/2014

22,500

21.00

10/5/2014

19,463

8.20

3/11/2015

-30-

(g) Option exercises and stock vested table

Not applicable.

(h) Pension benefits

Not applicable.

(i) Nonqualified defined contribution and other nonqualified deferred compensation plans

Not applicable.

(j) Potential payments upon termination or change-in-control

Not applicable.

(k) Compensation of directors

Not applicable.

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

(a) Security ownership of certain beneficial owners.

(b) Security ownership of management.

The following table sets forth information known to the Company with respect to the beneficial ownership (as such term is defined in Rule 13d-3 under the Securities Exchange Act of 1934, as amended) of the outstanding common stock of the Company as of March 31, 2013 by: (1) each person known by the Company to beneficially own 5% or more of the Company’s outstanding common stock; (2) each of the named executive officers as defined in Item 402(a)(3); (3) each of the Company’s directors; and (4) all of the Company’s named executive officers and directors as a group. The number of shares beneficially owned is determined under rules promulgated by the SEC, and the information is not necessarily indicative of beneficial ownership for any other purpose. Including those shares in the tables does not, however, constitute an admission that the named stockholder is a direct or indirect beneficial owner of those shares.

-31-

Name of Beneficial Owner	Number of Shares Beneficially Owned (1)		Preferred Stock (2)		Number of Options Warrants Beneficially Owned		Total Shares Beneficially Owned		Percent of Class

Henry Fong (3) 7315 East Peakview Ave Englewood, CO 80111		4,550		154,405		44,963		49,513		0.003	%
Thomas B. Olson (4) 7315 East Peakview Ave Englewood, CO 80111		2,242		98,938		22,015		24,257		0.001	%
David J. Cade (5) 2 Bala Plaza, Ste 300 Bala Cynwyd, PA 19004		403		138,462		3,214,429		3,214,832		0.185	%
All Executive Officers and Directors as a Group (3 persons) (3)(4)(5)		7,195		391,805		3,281,407		3,288,602		0.05	%

__________

(1)

As of March 31, 2014, 1,737,327,282 shares of our common stock were outstanding. Beneficial ownership is determined in accordance with the rules of the SEC, and includes general voting power and/or investment power with respect to securities. Shares of common stock subject to options or warrants currently exercisable or exercisable within 60 days of the record date are deemed outstanding for computing the beneficial ownership percentage of the person holding such options or warrants but are not deemed outstanding for computing the beneficial ownership percentage of any other person. Except as indicated by footnote, the persons named in the table above have the sole voting and investment power with respect to all shares of common stock shown as beneficially owned by them.

(2)

In August 2011, the Company authorized the issuance of up to 750,000 shares of $0.001 par value Series B Preferred Stock (the "Series B Preferred"). The Series B Preferred has a stated value of $1.00 and pays a dividend of 8% payable quarterly in our common stock. In the event of a liquidation of the Company, the holders of Series B Preferred then outstanding will be entitled to receive a liquidation preference, before any distribution is made to the holders of our common stock, in an aggregate amount equal to the par value of their shares of Series B Preferred. Each share of Series B Preferred is convertible into that number of shares of common stock on terms that are equal to (i) 100% of the Stated Value divided by (ii) 52% of the average of the three lowest day closing bid prices of the Company’s common stock for the 10 trading days immediately preceding the conversion. There is a Mandatory Conversion Date of July 12, 2016. At any time after the date of issuance of the Series B Preferred until the Mandatory Conversion Date, we may redeem, in cash, the Series B Preferred in accordance with the following: (a) if prior to or on the first anniversary of the date of issue at 105% of the Stated Value thereof and (b) if after the first anniversary of the date of issue and prior to the Mandatory Conversion Date at 110% of the Stated Value thereof. If all shares of Series B Preferred were to be converted to shares of common stock as of March 31, 2014, a total of 839,190,170 shares would be issued to the Company's officers and directors giving them effective control of the Company. The Series B Preferred also carries voting rights on an "as if converted" basis providing for effective control of the Company by the above named officers.

(3)

In addition to securities owned directly by Mr. Fong, these amounts also consist of: 4,550 common shares and 64,191 Series B Preferred shares held by a limited liability corporation in which Mr. Fong is the majority member; 29,500 shares Series B Preferred held by a corporation in which Mr. Fong has voting and dispositive powers; and 44,963 shares exercisable under our 2009 Stock Incentive Plan. These shares do not include any shares held by Mr. Fong's spouse of which he disclaims any beneficial ownership.

(4)

In addition to securities owned directly by Mr. Olson, these amounts consist of: 1,500 common shares held by a limited liability corporation in which Mr. Olson is the sole member; 742 common shares held by HF Services, LLC of which Mr. Olson is a member, which represents his portion of the membership interest; 61,700 shares of Series B Preferred owned by two corporations in which Mr. Olson has voting and dispositive powers; and 22,015 shares exercisable under our 2009 Stock Incentive Plan.

(5)	Includes a warrant to purchase up to 3,214,429 shares of common stock.

-32-

We are not aware of any arrangements that could result in a change in control of the Company. The current officers of the Company maintain effective control of the company through their ownership of the Company's Series B Preferred stock.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

(a) Transactions with related persons

Our offices are provided to us on a month to month basis by a corporation in which our officers and director are affiliated. We paid $1,200 per month for use of office space in 2013 and 2012 and will pay $1,500 per month in 2014. This fee includes the use of business machines, telephone equipment and other office equipment. The Company also pays a management fee to this corporation of $6,500 per month for services related to the bookkeeping, accounting and corporate governance functions of its subsidiaries.

(b) Review, approval or ratification of transactions with related persons

Our entire board of directors is responsible for the review, approval or ratification of transactions with related persons. The board routinely reviews material related party transactions to ensure such transactions are reasonable, appropriate, and in the best interests of the Corporation. We have no written policies with respect to the review and approval of related party transactions and records of such reviews are contained in the minutes and/or reports of the board of directors as appropriate.

Director Independence

Our board of directors has one director and has no standing sub-committees at this time due to the associated expenses and the small size of our board. We are not currently listed on a national securities exchange that has requirements that a majority of the board of directors be independent and have no members of our board considered “independent” under the definition set forth in the listing standards of the NASDAQ Stock Market, Inc., which is the definition that our board has chosen to use for the purposes of the determining independence.

In performing the functions of the audit committee, our board oversees our accounting and financial reporting process. In this function, our board performs several functions. Our board, among other duties, evaluates and assesses the qualifications of the Company’s independent auditors; determines whether to retain or terminate the existing independent auditors; meets with the independent auditors and financial management of the Company to review the scope of the proposed audit and audit procedures on an annual basis; reviews and approves the retention of independent auditors for any non-audit services; reviews the independence of the independent auditors; reviews with the independent auditors and with the Company’s financial accounting personnel the adequacy and effectiveness of accounting and financial controls and considers recommendations for improvement of such controls; reviews the financial statements to be included in our annual and quarterly reports filed with the Securities and Exchange Commission; and discusses with the Company’s management and the independent auditors the results of the annual audit and the results of our quarterly financial statements.

-33-

We do not currently have a standing compensation committee or non-employee directors. When we have non-employee directors on our board, those non-employee directors consider executive officer compensation, and our entire board participates in the consideration of director compensation. Non-employee board members would oversee would compensation policies, plans and programs. Our non-employee board members would further review and approve corporate performance goals and objectives relevant to the compensation of our executive officers; review the compensation and other terms of employment of our Chief Executive Officer and our other executive officers; and administer our equity incentive and stock option plans.

Each of our directors participates in the consideration of director nominees. In addition to nominees recommended by directors, our board will consider nominees recommended by shareholders if submitted in writing to our secretary. Our board believes that any candidate for director, whether recommended by shareholders or by the board, should be considered on the basis of all factors relevant to our needs and the credentials of the candidate at the time the candidate is proposed. Such factors include relevant business and industry experience and demonstrated character and judgment.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

R.R. Hawkins & Associates International served as the Company's certifying accountant for the fiscal years ended December 31, 2013 and 2012.

Audit Fees

Fees for audit services billed in fiscal year ended December 31, 2013 totaled $12,500 and consisted of audit of the Company’s annual financial statements. Fees for audit services billed in fiscal year ended December 31, 2012 totaled $12,500 and consisted of audit of the Company’s annual financial statements. For the fiscal year ended December 31, 2012, the Company paid R.R. Hawkins & Associates International $6,000 for reviews of the Company's quarterly financial statements.

Audit-Related Fees

There were no other aggregate fees billed in the year ended December 31, 2013 or 2012 for assurance and related services by the principal accountants that were reasonably related to the performance of the audit or review of the financial statements that were not reported above.

Tax Fees

There were no aggregate fees billed the year ended December 31, 2013 or 2012 for professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning.

All Other Fees

There were no other aggregate fees billed in the year ended December 31, 2013 and 2012 for products and services provided by the principal accountant, other than the services reported above.

-34-

PART IV

ITEM 15. EXHIBITS

Exhibits

2.1		Agreement and Plan of Reorganization by and between the Registrant and Inhibetex Therapeutics, Inc. dated March 24, 2005 (incorporated by reference to Exhibit No. 1 of Registrant’s Current Report on Form 8-K filed on March 29, 2005).
2.2		Articles of Exchange relating to the share exchange by and between Inhibiton Therapeutics, Inc. (formerly known as Organic Soils.com, Inc.) and Inhibetex Therapeutics, Inc. as filed with the Nevada Secretary of State on May 19, 2005 (incorporated by reference to the like numbered exhibit of Registrant’s Current Report on Form 8-K filed on May 25, 2005).
2.3		Statement of Share Exchange relating to the share exchange by and between Inhibiton Therapeutics, Inc. (formerly known as Organic Soils.com, Inc.) and Inhibetex Therapeutics, Inc. as filed with the Colorado Secretary of State on May 19, 2005 (incorporated by reference to the like numbered exhibit of Registrant’s Current Report on Form 8-K filed on May 25, 2005).
2.4		Agreement Concerning the Exchange of Securities by and among Inhibiton Therapeutics, Inc. , HPI Partners, LLC, and the Security Holders of HPI Partners, LLC dated March 4, 2009 (incorporated by reference to exhibit number 2.1 of Registrant’s Current Report on Form 8-K filed on May 11, 2009)
3.1		Amended and Restated Articles of Incorporation of Inhibiton Therapeutics, Inc (incorporated by reference to the like numbered exhibit of Registrant’s Current Report on Form 8-K filed on June 3, 2009).
3.2		Amended and Restated Articles of Incorporation of AlumiFuel Power Corporation filed August 24, 2011 (incorporated by reference to exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on August 30, 2011)
3.3		Amended and Restated Articles of Incorporation of AlumiFuel Power Corporation filed December 7, 2011 (incorporated by reference to exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on December 12, 2011)
3.4		Bylaws (incorporated by reference to the like numbered exhibit of Registrant’s Registration Statement on Form SB-2 filed on March 30, 2001).
3.5		Certificate of Designation of Series B Preferred Stock (incorporated by reference to exhibit number 3.1 of Registrant’s Quarterly Report on Form 10-Q for the period ended June 30, 2011, filed on August 19, 2011).
3.6		Amended and Restated Articles of Incorporation of AlumiFuel Power Corporation filed September 12, 2012 (incorporated by reference to exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on September 12, 2012)

-35-

3.7		Amended and Restated Articles of Incorporation of AlumiFuel Power Corporation filed April 24, 2013 (incorporated by reference to exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on April 30, 2013)
3.8		Amended and Restated Articles of Incorporation of AlumiFuel Power Corporation filed October 14, 2013 (incorporated by reference to exhibit 3.1 of Registrant’s Current Report on Form 8-K filed on October 18, 2013)
10.1		License Agreement between AlumiFuel Power Corporation and AlumiFuel Power International, Inc. dated March 26, 2010. (incorporated by reference to exhibit number 10.1 of Registrant’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2010, filed on May 24, 2010).
14.1		Code of Ethics (filed herewith).
21.1		List of Subsidiaries (filed herewith).
31.1		Certification pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith).
32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).

101.INS **		XBRL Instance Document

101.SCH **		XBRL Taxonomy Extension Schema Document

101.CAL **		XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF **		XBRL Taxonomy Extension Definition Linkbase Document

101.LAB **		XBRL Taxonomy Extension Label Linkbase Document

101.PRE **		XBRL Taxonomy Extension Presentation Linkbase Document

** XBRL (Extensible Business Reporting Language) information is furnished and not filed or a part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections.

-36-

SIGNATURES

In accordance with Section 13 or 15(d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	ALUMIFUEL POWER CORPORATION
	(Registrant)

Date: April 15, 2014	By:	/s/ Henry Fong
		Henry Fong
		President, Principal Executive Officer and Principal Financial Officer

In accordance with the Exchange Act, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

Date: April 15, 2014	By:	/s/ Henry Fong
		Henry Fong
		Director

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	Page

Reports of Independent Registered Public Accounting Firm		F-2

Consolidated Balance Sheets at December 31, 2013 and 2012		F-3

Consolidated Statement of Operations for the years ended December 31, 2013 and 2012		F-4

Consolidated Statement of Changes in Shareholders' Deficit for the years ended December 31, 2013 and 2012		F-5

Consolidated Statement of Cash Flows for the years ended December 31, 2013 and 2012		F-7

Notes to Consolidated Financial Statements		F-8

F-1

To the Board of Directors and Shareholders

AlumiFuel Power Corporation

Centennial, Colorado

Report of Independent Registered Public Accounting Firm

We have audited the consolidated balance sheets of AlumiFuel Power Corporation as of December 31, 2013, and 2012 and the related consolidated statements of operations, statement of shareholders’ deficit and cash flows for the years ending December 31, 2013 and 2012. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of AlumiFuel Power Corporation as of December 31, 2013 and 2012, and, the consolidated results of operations, statement of shareholders’ deficit and its cash flows for the years then ended, in conformity with generally accepted accounting principles in the United States of America.

The accompanying financial statements have been prepared assuming the Company will continue as a going concern. As discussed in note 1 to the financial statements, the Company has incurred net losses since inception, a retained deficit of $3,548,534 and no working capital, which raise substantial doubt about its ability to continue as a going concern. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/S/ R.R. Hawkins and Associates International, a PC

April 14, 2014

Los Angeles, CA

5777 W. Century Blvd. , Suite No. 1500

Los Angeles, CA 90045

T: 310.553.5707 F: 310.553.5337

www.rrhawkins.com

F-2

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Consolidated Balance Sheets

	December 31,			December 31,
	2013			2012

Assets
Cash	$	9,872		$	5,216
Deposits		—			313
Prepaid expenses		—			—
Notes receivable (Note 5)		—			8,000
Work in progress (Note 1)		—			18,732
Other current assets		—			744

Total current assets		9,872			33,005

Property and equipment, less accumulated depreciation
of $7,283 (2013) and $5,799 (2012) (Note 1)		196			1,111
Deferred debt issuance costs (Note 3)		2,082			12,340

Total long-term assets		2,278			13,451

Total assets	$	12,150		$	46,456

Liabilities and Shareholders’ Deficit
Current liabilities:
Accounts and notes payable:
Accounts payable, related party (Note 2)	$	425,346		$	336,639
Accounts payable, other		524,746			571,424
Derivative liability, convertible notes payable (Note 3)		712,992			693,269
Notes payable, related party (Note 2)		42,868			27,207
Notes payable, other (Note 3)		580,063			489,373
Convertible notes payable, net of discount of
$92,772 (2013) and $137,253 (2012) (Note 3)		390,240			244,247
Litigation contingency (Note 7)		-			360,803
Payroll liabilities (Note 7)		134,083			118,647
Accrued expenses (Note 7)		500,000			298,463
Dividends payable (Note 6)		78,071			45,747
Accrued interest payable:
Interest payable, convertible notes (Note 3)		93,347			69,205
Interest payable, related party notes (Note 2)		9,180			7,008
Interest payable, notes payable other (Note 3)		65,547			30,521

Total current liabilities		3,547,524			3,292,553

Capital leases (Note 7)		-			389
Long-term convertible notes payable net of current portion,
net of discount of $0 (2013) and $32,083 (2012)		-			2,917

Total long-term liabilities		-			3,306

Total liablities		3,547,524			3,295,859

Commitments and contingencies		—			—

Shareholders’ deficit: (Notes 1 & 6)
Preferred stock, $.001 par value; 10,000,000 shares authorized,		404,055			404,055
404,055 (2013) and 404,055 (2012) shares
issued and outstanding

Common stock, $.001 par value; 760,000,000 (2013) and		631,402			22,239
7,500,000,000 (2012) shares authorized,
631,402,195 (2013) and 22,238,636 (2012) shares
issued and outstanding
Additional paid-in capital		14,322,968			14,543,507
Accumulated deficit		(22,939,333	)		(21,746,084	)

Total shareholders' deficit of the Company		(7,580,908	)		(6,776,283	)

Non-controlling interest (Note 1)		4,045,534			3,526,880

Total shareholders' deficit		(3,535,374	)		(3,249,403	)

Total liabilities and shareholders' deficit	$	12,150		$	46,456

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-3

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Consolidated Statement of Operations

	Year ended			Year ended
	December 31,			December 31,
	2013			2012

Revenue (Note 1)
Reactor sales	$	13,440		$	61,134
Consulting fees		-			-
Total revenue		13,440			61,134

Cost of goods sold (Note 1)		(21,421	)		(25,829	)

Gross loss		(7,981	)		35,305

Operating costs and expenses:
Product development expense (Note 1)		-			593
Selling, general and administrative expenses
Related party (Note 2)		334,065			433,510
Stock-based compensation (Note 9)		3,239			126,000
Depreciation		915			2,352
Other (Note 4)		424,846			613,180

Total operating costs and expenses		(763,065	)		(1,175,635	)

Loss from operations		(771,046	)		(1,140,330	)

Other income (expense)
Litigation contingency (Note 7)		351,232			-
Interest (expense) income, amortization
of convertible note discount (Note 3)		(401,225	)		(503,517	)
Interest expense (Note 3)		(107,107	)		(126,966	)
Fair value adjustment of derivative liabilities (Note 3)		(265,103	)		(534,452	)

		(422,203	)		(1,164,935	)

Loss before income taxes		(1,193,249	)		(2,305,265	)

Income tax provision (Note 8)		-			-

Net loss		(1,193,249	)		(2,305,265	)

Net loss attributable to non-controlling interest (Note 1)		64,979			55,178

Net loss attributable to Company	$	(1,128,270	)	$	(2,250,087	)

Basic and diluted loss per common share	$	(0.01	)	$	(0.26	)

Weighted average common shares
outstanding (Notes 1 & 9)		83,211,445			8,730,190

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-4

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders' Deficit

Years Ended December 31, 2013 and 2012

											Additional						Non-		Total
	Common stock				Preferred stock						paid-in			Accumulated			controlling		shareholders
	Shares		Par value		Shares			Par value			capital			deficit			interest		deficit

Balance at December 31, 2011 (Restated)		4,638,146	$	4,638		521,162		$	521,162			14,206,702		$	(19,440,819	)	$	2,403,918	$	(2,304,399	)

January 2012, issuance of convertible
notes (Note 3)		-		-		-			-			4,167			-			-		4,167

January through December 2012, issuance of
common stock in private placements (Note 6)		350,000		350		-			-			70,650			-			-		71,000

January through December 2012, issuance of common stock
to convertible noteholders (Notes 3 & 6)		16,766,027		16,766		-			-			1,188,836			-			-		1,205,602

January through December 2012, issuance of common stock
on conversion of debt (Notes 3 & 6)		331,500		332		-			-			91,228			-			-		91,560

January through December 2012, redemption of
preferred stock (Note 6)		-		-		(110,857	)		(110,857	)		-			-			-		(110,857	)

January through December 2012, dividends on Series B
Preferred Stock (Note 6)		-		-		-			-			(33,344	)		-			-		(33,344	)

January through December 2012, changes in ownership of
subsidiary common stock by Parent (Note 1)		-		-		-			-			163,758			-			-		163,758

January through December 2012, issuance of common stock
on preferred stock conversion (Note 6)		52,966		53		(6,250	)		(6,250	)		6,197			-			-		-

January through December 2012, issuance of common stock
for services (Note 6)		100,000		100		-			-			19,900			-			-		20,000

January through December 2012, issuance of warrants to
purchase common stock (Note 6)		-		-		-			-			40,000			-			-		40,000

Equity of AlumiFuel Power International,
Inc. subsidiary, net of non-controlling interest (Note 1)		-		-		-			-			(1,214,587	)		-			1,067,784		(146,803	)

Net loss		-		-		-			-			-			(2,305,265	)		55,178		(2,250,087	)

Balance at December 31, 2012 (Restated)		22,238,639	$	22,239		404,055		$	404,055		$	14,543,507		$	(21,746,084	)	$	3,526,880	$	(3,249,403	)

(CONTINUED)

F-5

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Consolidated Statement of Changes in Shareholders' Deficit

Years Ended December 31, 2013 and 2012

	Common stock				Preferred stock				Additional paid-in			Accumulated			Non-controlling		Total shareholders
	Shares		Par value		Shares		Par value		capital			deficit			interest		deficit

Balance at December 31, 2012 (Restated)		22,238,636	$	22,239		404,055	$	405,055		14,543,507		$	(21,746,084	)	$	3,526,880	$	(3,249,403	)

May 2013, Reverse stock split (1 for 200)
shares issued for fractional shares (Note 6)		641		-		-		-		-			-			-		-

January through December 2013, issuance of common
stock to convertible noteholders (Notes 3 & 6)		607,322,918		607,323		-		-		286,155			-			-		893,478

January through December 2013, issuance of common		1,840,000		1,840		-		-		34,960			-			-		36,800
stock on conversion of debt (Notes 3 & 6)

January through December 2013, dividends on Series B
Preferred Stock (Note 6)		-		-		-		-		(32,324	)		-			-		(32,324	)

January through December 2013, issuance of warrants
to purchase common stock (Note 6)		-		-		-		-		3,239			-			-		3,239

Issuance of equity by AlumiFuel Power International,
Inc. subsidiary, net of non-controlling interest (Note 1)		-		-		-		-		5,700			-			-		5,700

Equity of AlumiFuel Power International,
Inc. subsidiary, net of non-controlling interest (Note 1)		-		-		-		-		(518,269	)		-			453,675		(64,594	)

Net loss		-		-		-		-		-			(1,194,742	)		64,979		(1,129,763	)

Balance at December 31, 2013		631,402,195	$	631,402		404,055	$	405,055		14,322,968		$	(22,939,333	)	$	4,045,534	$	(3,535,374	)

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-6

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Consolidated Statement of Cash Flows

	Year ended			Year ended
	December 31,			December 31,
	2013			2012

Cash flows from operating activities:
Net loss	$	(1,193,249	)	$	(2,305,265	)
Adjustments to reconcile net loss to net cash
used by operating activities:
Non-cash interest expense (Note 6)		274,886			58,410
Stock based compensation (Note 6)		3,239			126,000
Debt issuance costs (Note 4)		16,758			45,536
Beneficial conversion feature (Note 6)		18,400			-
Allowance for bad debt (Note 5)		9,900			8,780
Recovery of bad debt expense (Note 5)		(95,750	)		(45,155	)
Depreciation and amortization		915			2,352
Change in fair value of derivative liability (Note 3)		49,900			534,436
Amortization of discount on debentures payable (Note 3)		327,134			503,517
Change in non-controlling interest (Note 1)		(58,564	)		8,376
Changes in operating assets and liabilities:
Accounts and other receivables		94,593			35,733
Work in progress (Note 1)		18,732			(18,732	)
Prepaid expenses and other assets		313			159
Accounts payable and accrued expenses		(115,505	)		210,529
Related party payables (Note 2)		88,706			224,937
Dividends payable (Note 6)		32,324			45,747
Interest payable		103,810			(33,943	)
Net cash used in operating activities		(423,458	)		(598,583	)

Cash flows from investing activities:
Purchase of equipment		-			-
Issuance of notes receivable (Note 3)		-			-
Net cash used in investing activities		-			-

Cash flows from financing activities:
Proceeds from convertible notes (Note 3)		151,000			229,000
Proceeds from notes payable, related (Note 2)		36,100			52,970
Proceeds from notes payable, other (Note 3)		329,516			408,590
Proceeds from sales of common stock (Note 6)		-			5,000
Proceeds from sales of subsidiary equity (Notes 1 & 6)		-			163,758
Proceeds from sale of subsidiary stock by parent (Notes 1 & 6)		-			-
Payments under capital leases (Note 7)		(389	)		(1,555	)
Payments on notes payable (Note 3)		(56,176	)		(63,835	)
Payments on notes payable, related (Note 2)		(20,439	)		(60,400	)
Payments to placement agents (Note 3)		(6,500	)		(21,500	)
Payments on convertible notes payable (Note 3)		(5,000	)		-
Payments on redemption of preferred stock (Note 3)		-			(110,857	)
Net cash provided by financing activities		428,112			601,171

Net change in cash and cash equivalents		4,656			2,588

Cash and cash equivalents:
Beginning of period		5,216			2,628

End of period	$	9,872		$	5,216

Supplemental disclosure of cash flow information:
Cash paid during the period for:
Income taxes	$	-		$	-
Interest	$	17,447		$	8,555

Noncash financing transactions:
Notes and interest payable converted to stock	$	343,088		$	489,194
Notes payable related converted to preferred stock	$	-		$	1,118,538

SEE ACCOMPANYING NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

F-7

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization and Basis of Presentation

AlumiFuel Power Corporation (the “Company”) was incorporated on January 19, 2000 under the laws of the state of Nevada as Organicsoils.com, Inc. The Company operates primarily through its subsidiaries, NovoFuel, Inc. (“Novofuel”), AlumiFuel Power, Inc., a Colorado corporation ("API"), AlumiFuel Power Technologies, Inc., a Colorado corporation ("APTI") and AlumiFuel Power International, Inc. ("AFPI"), a Canadian corporation. The Company is a an early production stage alternative energy company producing products that generate hydrogen gas and steam for multiple niche applications requiring on-site, on-demand fuel sources. Our hydrogen drives fuel cells for back-up, remote, and portable power, fills inflatable devices such as weather balloons, and can replace costly, hard-to-handle and high pressure K-Cylinders. Its steam/hydrogen output is also being designed to drive turbine-based underwater propulsion systems and auxiliary power systems. Our technology has significant differentiators in performance, adaptability, safety and cost-effectiveness in its target market applications, with no external power required and no toxic chemicals or by-products. AFPI was formed as the international marketing arm of the Company.

The financial statements contained herein for the years ended December 31, 2013 and 2012 comprise the consolidated financial statement of the Company and its subsidiaries API, APTI, AFPI, and HPI Partners, LLC ("HPI").

Formation of NovoFuel, Inc.

During the nine month period ended September 30, 2013, we transferred all of the assets related to our hydrogen generation business to a new wholly owned subsidiary, NovoFuel, Inc. in exchange for 12,000,000 shares of Novofuel common stock; 2,000,000 of which were allocated to our majority-owned subsidiary, AFPI, in exchange for the return of the European intellectual property and marketing rights back to the Company for use by NovoFuel. Novofuel was formed as a separate entity in anticipation of executing a transaction with Genport, SrL of Italy. In November 2013, the Company signed an agreement with Genport, SrL of Italy to combine and integrate their technologies, assets and operations into NovoFuel, contingent upon closing of private financing of up to $4,500,000 for the venture. On closing of a capital investment, NovoFuel common shares are to be allocated to Genport shareholders in exchange for 100% of Genport shares. Although Genport would then be a wholly-owned subsidiary of NovoFuel, Genport, SrL would retain its status as an Italian company under Italian law. Following the closing of the transaction, NovoFuel will have operations in the United States and Italy. As of the date of this report, this financing has not been completed and the Company cannot guarantee it will be completed.

Formation of AlumiFuel Power International, Inc.

In February 2010, the Company formed its subsidiary, AFPI. In connection with the formation of the AFPI, the Company and AFPI executed a License Agreement through which AFPI received certain international marketing rights and the rights to utilize certain intellectual property from the Company for exploitation in countries and territories outside of North America in exchange for 25,000,000 shares of the Company's $0.001 par value common stock. In addition, the Company purchased 15,000,000 shares of AFPI common stock at $0.01 per share. On July 31, 2011, the Company and AFPI executed a Patent Purchase Agreement through which the Company sold AFPI the international patent rights to certain of the Company's intellectual property. In exchange for the sale of these rights, the Company received 7,500,000 shares of AFPI common stock valued at $10,275,000, the market value of the stock on the Deutsche Börse Frankfurt Stock Exchange on the agreement date. As of December 31, 2011, AFPI had issued a total of 13,911,864 shares of its common stock in the private placements, warrant exercises, stock issued to consultants and stock issued to officers and directors in exchange for fees. As a result of these transactions, the total number of AFPI shares outstanding at December 31, 2012 was 62,411,864.

F-8

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the year ended December 31, 2013, AFPI issued 5,700,000 shares to holders of certain notes of the Company pursuant to the issuance of those notes. These shares were valued at $5,700, which amount was booked as interest expense. Following this issuance there were 68,111,864 shares of AFPI outstanding as of December 31, 2013.

During the year ended December 31, 2012, the Company sold a total of 8,373,271 shares of AFPI in both private and public transactions for total proceeds of Euro 131,461 or approximately $171,997 and recorded expense on the transfer of 20,048 shares to consultants for fees valued at $7,516, which is reflected on the statements of changes in stockholders' deficit. In addition, the Company purchased 1,016,978 shares at a cost of $106,001. As a result, the Company owned 39,984,494 shares of AFPI common stock at December 31, 2012. During the year ended December 31, 2013, the Company paid 384,615 shares of AFPI common stock to the trustee of its German bank accounts in payment of fees resulting in the Company owning 39,599,879 shares of AFPI common stock at December 31, 2013.

We maintain a custody account for our cash and securities in Germany that had a cash balance of $583 and $245 at December 31, 2013 and 2012, respectively, and is reflected as Cash on our balance sheet.

In December 2012, the Deutsche Börse Frankfurt Stock Exchange closed the First Quotation Board, the exchange on which AFPI's common stock traded. The Company anticipates applying for listing on the GXG Markets on which it will seek admission to the GXG Markets' First Quote segment, which is the new European stock exchange catering to early stage growth companies.

The value of all shares of AFPI held by the Company have been eliminated on consolidation of the financial statements at December 31, 2013 and 2012 as intercompany accounts. At December 31, 2013 there were 28,511,985 shares held by shareholders other than the Company representing 41.9% of the outstanding common shares of AFPI as of that date. This represents a non-controlling interest in AFPI that totaled $4,045,534 based on AFPI's outstanding total equity of $9,665,317 at December 31, 2013. In addition, $64,979 in the net loss of AFPI of $155,227 for the year ended December 31, 2013 has been attributed to the non-controlling interest of those stockholders. At December 31, 2012 there were 22,427,370 shares held by shareholders other than the Company representing 35.9% of the outstanding common shares of AFPI as of that date. This represents a non-controlling interest in AFPI that totaled $3,526,880 based on AFPI's outstanding total equity of $9,814,756 at December 31, 2012. In addition, $55,177 in the net loss of AFPI of $153,552 for the year ended December 31, 2012 has been attributed to the non-controlling interest of those stockholders

Going Concern

Inherent in the Company’s business are various risks and uncertainties, including its limited operating history. The Company’s future success will be dependent upon its ability to market its products including its portable balloon inflation devices including the PBIS-1000 (of which the Company sold three units in 2010) and the PBIS-2000 (of which the Company delivered one unit to the U.S. Air Force in 2012, which unit the Air Force returned to the Company in the fourth quarter of 2012 to make certain paid improvements, which totaled $13,440 in revenue during 2013).

F-9

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The accompanying financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. As shown in the accompanying financial statements, the Company has incurred operating losses since inception, used significant cash in support of its operating activities and, based upon current operating levels, requires additional capital or significant restructuring to sustain its operations for the foreseeable future. These factors, among others, may indicate that the Company will be unable to continue as a going concern for a reasonable period of time.

The financial statements do not include any adjustments relating to the recoverability and classification of assets and liabilities that might be necessary should the Company be unable to continue as a going concern. The Company’s continuation as a going concern is dependent on its ability to raise capital through equity offerings and debt borrowings to meet its obligations on a timely basis and ultimately to attain profitability through the successful commercialization of its products.

Principals of Consolidation

The consolidated financial statements include the accounts of the Company and its wholly owned subsidiaries NovoFuel, HPI, API, APTI and AFPI. All intercompany balances and transactions have been eliminated.

Use of Estimates

The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and Cash Equivalents

The Company considers all highly liquid securities with original maturities of three months or less when acquired to be cash equivalents. Cash equivalents at December 31, 2013 and 2012 were $-0-.

Income Taxes

The Company accounts for income taxes under the provisions of ASC Topic 740, formerly known as SFAS No. 109, “Accounting for Income Taxes”. ASC Topic 740 requires recognition of deferred tax liabilities and assets for the expected future tax consequences of events that have been included in the financial statements or tax returns. Under this method, deferred tax liabilities and assets are determined based on the difference between the financial statement and tax bases of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse. A valuation allowance for net deferred taxes is provided unless the ability to realize the deferred amount is judged by management to be more likely than not. The effect on deferred taxes from a change in tax rates is recognized in income in the period that includes the enactment date. More information on the Company’s income taxes is available in Note 6. Income Taxes in these financial statements.

F-10

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The Company has analyzed filing positions in all of the federal and state jurisdictions where it is required to file income tax returns, as well as all open tax years in these jurisdictions. The Company has identified its federal tax return and its state tax return in Colorado as “major” tax jurisdictions, as defined. We are not currently under examination by the Internal Revenue Service or any other jurisdiction. The Company believes that its income tax filing positions and deductions will be sustained on audit and does not anticipate any adjustments that will result in a material adverse effect on the Company’s financial condition, results of operations, or cash flow. Therefore, no reserves for uncertain income tax positions have been recorded pursuant to ASC 740.

Stock-based Compensation

The Company has certain stock option plans approved by its stockholders, and also grants options and warrants to consultants outside of its stock option plan pursuant to individual agreements.

The Company accounts for compensation expense for its stock-based employee compensation plans and issuances of options and warrants to consultants in accordance with ASC Topic 718, formerly known as SFAS No. 123R "Share Based Payment" which replaced SFAS No. 123, "Accounting for Stock-Based Compensation" (“SFAS No. 123”) and supersedes Opinion No. 25 of the Accounting Principles Board, "Accounting for Stock Issued to Employees" (APB 25). The Company has elected the modified-prospective method, under which prior periods are not revised for comparative purposes. See Note 5. Capital Stock for further information on the Company's stock options plans and other warrant/option issuances.

Property, equipment and leaseholds

Property, equipment and leaseholds are stated at cost, and depreciation is provided by use of accelerated and straight-line methods over the estimated useful lives of the assets. The cost of leasehold improvements is depreciated over the estimated useful life of the assets or the length of the respective leases, whichever period is shorter. The estimated useful lives of property, equipment and leaseholds are as follows:

Office equipment, furniture and vehicles	5 years
Computer hardware and software	3 years
Leasehold improvements	7 years

The Company's property and equipment consisted of the following at December 31, 2013 and 2012:

	Cost				Accumulated Depreciation				Balance
	2013		2012		2013		2012		2013		2012
Equipment	$	5,799	$	5,799	$	5,799	$	5,220	$	0	$	2,595
Furniture		1,680		1,680		1,484		1,148		196		868

Total	$	7,479	$	7,479	$	7,283	$	6,368	$	196	$	1,111

Investment Securities

The Company accounts for its ownership of the common stock of FastFunds Financial Corporation ("FFFC") in accordance with APB Opinion No. 18 (APB 18), The Equity Method of Accounting for Investments in Common Stock, which provides that the equity method of accounting should be used by an investor whose investment in voting stock gives it the ability to exercise significant influence over operating and financial policies of an investee even though the investor holds less than a majority of the voting stock. Because the Company owned approximately 34% of FFFC's common stock in 2011, but not a majority of the shares, the Company has the ability to exercise significant control over FFFC's operations. Under the equity method, the investment account is adjusted quarterly to recognize the Company's share of the income or losses of FastFunds. Accordingly, since FastFunds has recorded significant net losses in each of its last two fiscal years, the investment has been written down and remains at zero.

F-11

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Research and Development

Research and development costs are expensed as incurred. In each of the years ended December 31, 2013 and 2012, the Company incurred $0 and $593 in direct research and development costs, identified as "product development expense" on our statements of operations.

Debt Issue Costs

The costs related to the issuance of debt are capitalized and amortized to interest expense using the straight-line method over the lives of the related debt. The straight-line method results in amortization that is not materially different from that calculated under the effective interest method.

Fair Value of Financial Instruments

The estimated fair value of financial instruments has been determined by the Company using available market information and appropriate methodologies; however, considerable judgment is required in interpreting information necessary to develop these estimates. Accordingly, the Company’s estimates of fair values are not necessarily indicative of the amounts that the Company could realize in a current market exchange.

The fair values of cash and cash equivalents, current non-related party accounts receivable, and accounts payable approximate their carrying amounts because of the short maturities of these instruments.

The fair values of notes and advances receivable from non-related parties approximate their net carrying values because of the allowances recorded as well as the short maturities of these instruments. The fair values of receivables from related parties are not practicable to estimate, based upon the related party nature of the underlying transactions.

The fair values of notes and loans payable to non-related parties approximate their carrying values because of the short maturities of these instruments. The fair value of long-term debt to non-related parties approximates carrying values, net of discounts applied, based on market rates currently available to the Company.

Loss per Common Share

Loss per share of common stock is computed based on the weighted average number of common shares outstanding during the period. Stock options, warrants, and common stock underlying convertible promissory notes are not considered in the calculations for the periods ended December 31, 2013 and 2012, as the impact of the potential common shares, which totaled approximately 7,426,230,633 (December 31, 2013) and 35,263,790 (December 31, 2012), would be anti-dilutive, but not decrease loss per share. Therefore, diluted loss per share presented for the years ended December 31, 2013 and 2012 is equal to basic loss per share.

F-12

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Accounting for obligations and instruments potentially settled in the Company’s common stock

In connection with any obligations and instruments potentially to be settled in the Company's stock, the Company accounts for the instruments in accordance with ASC Topic 815, "Accounting for Derivative Financial Instruments Indexed to, and Potentially Settled in a Company’s Own Stock". This issue addresses the initial balance sheet classification and measurement of contracts that are indexed to, and potentially settled in, the Company's stock. Under this pronouncement, contracts are initially classified as equity or as either assets or liabilities, depending on the situation. All contracts are initially measured at fair value and subsequently accounted for based on the then current classification. Contracts initially classified as equity do not recognize subsequent changes in fair value as long as the contracts continue to be classified as equity. For contracts classified as assets or liabilities, the Company reports changes in fair value in earnings and discloses these changes in the financial statements as long as the contracts remain classified as assets or liabilities. If contracts classified as assets or liabilities are ultimately settled in shares, any previously reported gains or losses on those contracts continue to be included in earnings. The classification of a contract is reassessed at each balance sheet date.

Revenue Recognition

Revenues on product sales are recognized upon shipment of the product to the customer. Payment terms are typically 30 to 60 days net due following order delivery, depending on the customer. Fee revenues for research and development contracts are typically recognized on milestone dates outlined in the contracts. In instances where definable dates are not outlined, fee revenue is recognized when received.

During the fiscal year ended December 31, 2012 the Company recorded revenue totaling $61,134 an order from the U.S. Air Force Strategic Operations Command to produce one PBIS-2000 portable balloon inflation device.

In the fourth quarter ended December 31, 2012, the U.S. Air Force returned the PBIS-2000 unit to the Company to make certain paid design improvements. The work was completed in the first quarter of 2013 and the unit was returned to the Air Force at that time. Expenditures made during the fourth quarter of 2012 on this project was reflected as "Work in progress" on our balance sheets and was offset against the revenue received in the first quarter of 2013.

Derivative Instruments

In connection with the issuances of equity instruments or debt, the Company may issue options or warrants to purchase common stock. In certain circumstances, these options or warrants may be classified as liabilities, rather than as equity. In addition, the equity instrument or debt may contain embedded derivative instruments, such as conversion options or listing requirements, which in certain circumstances may be required to be bifurcated from the associated host instrument and accounted for separately as a derivative liability instrument. The Company accounts for derivative instruments under the provisions of ASC Topic 815, “Derivatives and Hedging”, formerly known as SFAS No. 133, "Accounting for Derivative Instruments and Hedging Activities".

F-13

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Recent Accounting Pronouncements

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): “Presentation of Unrecognized Tax Benefit When a Net Operating Loss Carryforward, A Similar Tax Loss, or a Tax Credit Carryforward Exists (A Consensus the FASB Emerging Issues Task Force)”. ASU 2013-11 provides guidance on financial statement presentation of unrecognized tax benefit when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists. The FASB’s objective in issuing this ASU is to eliminate diversity in practice resulting from a lack of guidance on this topic in current US GAAP. This ASU applies to all entities with unrecognized tax benefits that also have tax loss or tax credit carryforwards in the same tax jurisdiction as of the reporting date. This amendment is effective for public entities for fiscal years beginning after December 15, 2013 and interim periods within those years. We do not expect the adoption of this standard to have a material impact on the Company’s consolidated financial statements.

Other recent accounting pronouncements issued by the FASB (including its Emerging Issues Task Force), the AICPA, and the Securities Exchange Commission (the “SEC”) did not or are not believed by management to have a material impact on our present or future consolidated financial statements.

NOTE 2. RELATED PARTY TRANSACTIONS

Related Party Accounts Payable

The Board of Directors has estimated the value of management services for the Company at the monthly rate of $8,000 and $2,000 for the president and secretary/treasurer, respectively. The estimates were determined by comparing the level of effort to the cost of similar labor in the local market and this expense totaled $120,000 for each of the years ended December 31, 2013 and 2012. In addition, beginning October 1, 2010 the Company's president and treasurer were accruing a management fee of $7,500 and $3,500, respectively, for their services as managers of AFPI. This amount totaled $132,000 for the years ended December 31, 2013 and 2012. In December 2012, the Company awarded a one-time management fee to its officers totaling $100,000. As of December 31, 2013 and 2012, the Company owed $369,692 and $276,792, respectively to its officers for management services.

In September 2009, the Company's board directors authorized a bonus program for the Company's officers related to their efforts raising capital to fund the Company's operations. Accordingly, the Company's president and secretary are eligible to receive a bonus based on 50% of the traditional "Lehman Formula" whereby they will receive 2.5% of the total proceeds of the first $1,000,000 in capital raised by the Company, 2.0% of the next $1,000,000, 1.5% of the next $1,000,000, 1% of the next $1,000,000 and .5% of any proceeds above $4,000,000. The amount is capped at $150,000 per fiscal year. During the years ended December 31, 2013 and 2012, the Company recorded $4,065 and $3,510, respectively to a corporation owned by Messrs. Fong and Olson under this bonus program. At December 31, 2013 and 2012, respectively, there was $3,048 and $964 payable under the bonus plan.

In the years ended December 31, 2013 and 2012, APTI paid a management fee of $6,500 per month to a company owned by the Company’s officers for services related to its bookkeeping, accounting and corporate governance functions. For each of the years ended December 31, 2013 and 2012, these management fees totaled $78,000. As of December 31, 2013 and 2012, the Company owed $14,485 and $33,319 in accrued fees and related expenses.

The Company rented office space, including the use of certain office machines, phone systems and long distance fees, from a company owned by its officers at $1,200 per month in 2013 and 2012. This fee is month-to-month and is based on the amount of space occupied by the Company and includes the use of certain office equipment and services. Rent expense totaled $14,400 for each of the years ended December 31, 2013 and 2012, respectively. A total of $700 and $0 in rent expense was accrued but unpaid at December 31, 2013 and 2012.

F-14

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Accounts payable to related parties consisted of the following at December 31, 2013 and 2012:

	2013		2012
Management fees and related expenses payable to officers	$	396,171	$	313,611

Bonus payable to officers		3,048		984

Rent payable to affiliate of officers		-		-

Accrued other expenses payable to officers		26,127		22,044

Total accounts payable, related party	$	425,346	$	336,639

Related Party Notes Payable

AlumiFuel Power Corporation

The Company has issued promissory notes to its president for loans made to it from time-to-time at an interest rate of 8% per annum and due on demand. During the year ended December 31, 2012, $3,055 in principal and $116 in accrued interest was paid on these notes leaving no balance due at December 31, 2012. During the year ended December 31, 2013 an additional $500 was loaned that remained payable at December 31, 2013. There was $28 and $0 in accrued interest payable at December 31, 2013 and 2012, respectively.

Prior to the year ended December 31, 2012, the president of API loaned the Company $4,500 in promissory notes bearing interest at 8% and due on demand of which $1,512 was outstanding at the end of 2011. No further loans or payments were made during the years ended December 31, 2013 or 2012 leaving a principal balance of $1,512 in both years with accrued interest of $365 and $244 payable at December 31, 2013 and 2012, respectively.

From time to time, the Company has issued promissory notes to a company owned by its president which at December 31, 2011 had a balance due of $118. The notes bear an interest rate of 8% per annum and are due on demand. During the year ended December 31, 2012, an additional $18,550 was loaned and a total of $18,365 in principal and $185 in interest was paid leaving balances due of $302 in principal and $7 in interest. During the year ended December 31, 2013, an additional $18,100 was loaned and a total of $5,086 in principal and $415 in interest was paid leaving balances due of $13,316 in principal and $169 in interest.

The Company has executed two promissory notes with a company affiliated with a Company’s officer. These notes carry an interest rate of 8% per annum and are due on demand. As of December 31, 2011 of $935 in principal and $339 in accrued interest was payable on these notes. During the year ended December 31, 2012, an additional $4,500 was loaned and no principal or interest was repaid leaving balances due at that date of $5,435 in principal and $628 in interest. No loans or payment occurred in 2013 leaving balances due of $5,435 in principal and $1,064 in interest at December 31, 2013.

At December 31, 2011, the Company owed $2,165 in principal and $282 in accrued on a promissory note issued to a partnership affiliated with the Company’s president. These notes carry an interest rate of 8% and are due on demand. There were no further transactions with this partnership during the years ended December 31, 2013 or 2012 leaving $2,165 in principal payable in both years along with $630 and $456 in accrued interest payable, respectively.

F-15

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Prior to 2012, the Company issued a promissory note to a partnership affiliated with its president and secretary in the amount of $5,000. This note carries and interest rate of 8% per annum and is due on demand. There have been no payments of principal or interest on this note. At the years ended December 31, 2013 and 2012, $5,000 in principal with $1,888 and $1,488, respectively, in accrued interest remained outstanding on this note.

During the year ended December 31, 2012, the Company borrowed $9,770 from a Corporation owned by its Secretary. During the year ended December 31, 2013, an additional $15,000 was loaned. These notes carry an interest rate of 8% per annum and are due on demand. All of the respective 2012 notes were repaid in 2012 with $6 in interest leaving $2 in accrued interest payable at December 31, 2012. Of the 2013 loans, $11,000 was paid in 2013 along with $80 in interest leaving $4,000 in principal and $2 in interest payable at December 31, 2013.

From time to time, a company owned by the Company's officers has loaned the Company funds that at December 31, 2011 totaled $1,268 in principal. These notes are due on demand and carry an interest rate of 8%. During the year ended December 31, 2012, an additional $15,950 was loaned and $17,218 in principal with $269 in interest was repaid leaving no amounts due at year end. During the year ended December 31, 2013, an additional $2,500 was loaned and $1,500 in principal with $1 in interest was repaid leaving $1,000 in principal and $19 in accrued interest payable at December 31, 2013.

As of December 31, 2011, the company owed a corporation affiliated with the Company's officers $19,583. During the year ended December 31, 2012, $9,993 in principal and $607 in interest was repaid on these notes leaving balances due of $9,590 in principal and $1,050 in interest due at that date. There were no further transaction in 2013 leaving $9,590 in principal and $1,817 in interest payable at December 31, 2013.

At December 31, 2011, the Company owed $350 to a company affiliated with the Company's officers. This note is due on demand and bears interest at 8% per annum. The principal balance of $350 along with accrued interest of $307 and $279 remained outstanding at December 31, 2013 and 2012, respectively.

As of December 31, 2011, the Company owed $2,853 to an affiliate of the Company's president. This note is due on demand and bears interest at 8% per annum. During the years ended December 31, 2012 no transactions took place leaving $2,853 in principal and $255 in interest due at December 31, 2013. The entire principal balance and $147 of interest was repaid in 2013 leaving no principal but $291 in interest due at December 31, 2013.

As of both December 31, 2013 and 2012, $2,365 in accrued interest, but no principal, remained payable on two notes previously issued to third parties.

HPI Partners, LLC

In periods prior to December 31, 2011, HPI received loans from Company officers or their affiliates that were repaid in prior periods. Accrued interest due totaling $235 remained unpaid on these paid notes as of both December 31, 2013 and 2012.

F-16

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Notes and interest payable to related parties consisted of the following at December 31, 2013 and 2012:

	2013		2012
Notes payable to officers; interest at 8% and due on demand	$	1,512	$	1,512

Notes payable to affiliates of Company officers; interest at 8% and due on demand		41,356		25,695

Notes payable, related party		42,868		27,207

Interest payable related party		9,180		7,008

Total principal and interest payable, related party	$	52,048	$	34,215

NOTE 3. NOTES PAYABLE

AlumiFuel Power Corporation

From time to time the Company has issued various promissory notes payable to an unaffiliated trust which had a balance due of $9,785 at December 31, 2011. All notes bear an interest rate of 8% and are due on demand. During the year ended December 31, 2012, and additional $376,150 in principal was loaned by the trust and a total of $3,835 in principal and $915 in interest was repaid in cash. In addition, during the year ended December 31, 2012, the trust sold $227,250 in principal on these notes to unaffiliated third parties that were converted to common stock of the Company. As of December 31, 2012, $154,850 in principal and $9,301 in interest remained unpaid on these notes. During the year ended, 2013, the trust loaned the Company $76,700 and sold $38,300 in principal on these notes to unaffiliated third parties that converted that balance to convertible notes and/or common stock of the Company. In addition, the Trust was repaid $23,236 in principal and $13,535 in interest during 2013. Please see note Note 6 Capital Stock below for further information on the note sale and conversion transactions. As of December 31, 2013, $170,014 in principal and $13,641 in interest remained unpaid on these notes.

As of December 31, 2011, $32,732 in principal was outstanding on a demand promissory note from an unaffiliated third party with interest payable at 8%. During the years ended December 31, 2013 and 2012, no further transactions occurred leaving a principal balance of $32,732 at the end of both years with interest due of $5,581 and $2,962 as of December 31, 2013 and 2012, respectively.

As of December 31, 2011, the Company owed an unaffiliated third party $26,000. The notes to this party are due on demand and bear interest at 8% per annum. In the year ended December 31, 2012, a total of $118,351 in debt due this party from our subsidiary API was converted to two promissory notes of the Company under the same terms. An additional $43,087 was loaned during the year ended December 31, 2013. During the year ended December 31, 2013, $144,351 of these notes was purchased by an unaffiliated third parties and became convertible notes. As a result of these transactions, there was $43,087 and $144,352 in principal due this party at December 31, 2013 and 2012, respectively with $6,316 and $3,324 in accrued interest payable at December 31, 2013 and 2012, respectively.

F-17

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the year ended December 31, 2012, the Company borrowed a total of $26,440 from an unaffiliated third party. These notes carried interest rates of 60% for $13,000 and 36% for $13,440 of the principal balance. The $13,000 note was due on April 1, 2012; on November 1, 2012 the terms of the note were changed to make it convertible at market at which time the interest rate was lowered to 8%. The $13,440 was repaid in 2013 upon receipt of payment by the U.S. Air Force on the design improvements being made to the PBIS-2000 unit shipped during 2012. In addition, in November 2012, the Company purchased 1,000,000 shares of AFPI stock from this entity and issued them a promissory note of $100,000 in payment. This note is due in November 2013 and carries an interest rate of 8%. Interest payments of $806 were made during the year ended December 31, 2012 on these notes. As a result of these transactions, the principal balance on these notes was $126,440 with interest payable of $6,920 at December 31, 2012; with a principal balance of $113,000 and interest payable of $19,539 at December 31, 2013.

During the year ended December 31, 2012, the Company borrowed $6,000 from an unaffiliated third party. This note carries interest at a rate of 8% and is due on demand. No principal or interest was repaid on this note during the year ended December 31, 2012 leaving a principal balance of $6,000 and interest payable of $467 as of that date. No further transactions took place in 2013 leaving a principal balance due of $6,000 with interest payable of $947 at December 31, 2013.

In years previous to 2012, the Company borrowed $20,000 from an unaffiliated third party. This note was due on demand and carried interest rate of 8% per annum. The entire principal balance of this note was repaid at June 30, 2010 with accrued interest payable balance of $57 due as of December 31, 2013 and 2012.

Many of the Company's notes issued to unaffiliated third parties contain provisions allowing them to be converted to common stock of the Company at market price on the date of conversion.

AlumiFuel Power, Inc.

As of December 31, 2011, the entire principal balance on certain accounts receivable financing loans totaling $6,000 was due and payable. During the year ended December 31, 2012 the entire principal balance of these loans was repaid along with $5,400 in accrued interest leaving no principal balance due and interest payable of $1,050 at both December 31, 2013 and 2012.

AlumiFuel Power International, Inc.

At December 31, 2011, AFPI owed $17,678 to an unaffiliated third party that was changed to a derivative convertible note in January 2012. The remaining balances due on this note are derivative convertible notes as explained more fully under the section "AlumiFuel Power Corporation Convertible Promissory Notes" below.

In the fourth quarter of 2011, the entire balance of a $50,000 note was sold to an unaffiliated third party and became a derivative convertible note as explained more fully under the section "Convertible Promissory Notes" below. During the year ended December 31, 2011, the Company accrued interest and fees totaling $22,000 prior to the note sale with no payments made to the outstanding fees leaving total fees due of $23,549 as of that date. In addition this party was owed $2,556 in accrued interest from notes payable prior to 2012. During the quarter ended June 30, 2012, $26,100 of the accrued interest payable was converted to a convertible promissory note leaving an interest balance due of $5 at both December 31, 2013 and 2012.

As of December 31, 2012 there was a balance due an unaffiliated third party of $25,000 at with an interest rate of 12% issued prior to December 31, 2011. No payments were made in 2012 or 2013 leaving a principal balance due at December 31, 2013 and 2012 of $25,000 with accrued interest payable of $8,786 and $5,787 at December 31, 2013 and 2012, respectively.

F-18

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the year ended December 31, 2013, the Company was loaned a total of Euro 144,650 from unaffiliated third parties. This amount represented $190,230 as of December 31, 2013. These notes are due one year from issuance with an interest rate of 10% and may be converted to AFPI common stock after six months outstanding and if AFPI's common stock begins trading again. As of December 31, 2013, there was a total of $8,978 in interest payable on these notes, which interest may be paid in shares of AFPI common stock.

HPI Partners, LLC

In periods prior to 2011, the Company issued various a notes payable to unaffiliated third parties through HPI. These notes were also repaid in the periods prior to December 31, 2011 leaving interest payable of $647 at December 31, 2012 and 2011.

Notes and interest payable to others consisted of the following at December 31, 2013 and 2012:

	2013		2012
Notes payable, non-affiliates; interest at 8% and due on demand	$	580,063	$	489,373

Interest payable, non-affiliates		65,547		30,521

Total principal and interest payable, other	$	645,610	$	519,894

AlumiFuel Power Corporation Convertible Promissory Notes

Convertible Notes and Debentures with Embedded Derivatives:

From time-to-time, we issue convertible promissory notes and debentures with conversion features that we have determined represent an embedded derivative as they are convertible into a variable number of shares upon conversion. Accordingly, these notes are not considered to be conventional debt under EITF 00-19 and the embedded conversion feature must be bifurcated from the debt host and accounted for as a derivative liability. The Company believes that the aforementioned embedded derivatives meet the criteria of ASC 815 (formerly SFAS 133 and EITF 00-19), and should be accounted for separately as derivatives with a corresponding value recorded as a liability. Accordingly, the fair value of these derivative instruments are recorded as a liability on the consolidated balance sheet with the corresponding amount recorded as a discount to the notes in the period in which they are issued. Such discount is capitalized and amortized over the life of the notes. The change in the fair value of the liability for derivative contracts is credited to other income (expense) in the consolidated statements of operations at the end of each quarter. The face amount of the corresponding notes are stripped of their conversion feature due to the accounting for the conversion feature as a derivative, which is recorded using the residual proceeds to the conversion option attributed to the debt.

2009/2010 Convertible Debentures

In September 2009 through January 2010 we issued $435,000 of 6% unsecured convertible debentures in transactions with private investors (the “Debentures”). We received net proceeds from the Debentures of $363,190 after debt issuance costs of $71,810 paid to the placement agent. Additionally, the placement agent received a one-time issuance of 900,000 shares of our $0.001 par value common stock valued at $117,000 or $0.13 per share, the market price for our common stock on the date of issuance.

F-19

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Among other terms of the offering, the Debentures were originally due in January 2013, but have been extended to December 31, 2013. The Debentures are convertible at a conversion price equal to 75% of the lowest closing bid price per share of the Company’s common stock for the twenty (20) trading days immediately preceding the date of conversion.

The debt issuance costs of $188,810 were being amortized over the three year term of the Debentures so that as of December 31, 2013, all $188,810 of these costs had been expensed as debt issuance costs.

The beneficial conversion feature (an embedded derivative) included in the Debentures resulted in an initial debt discount of $435,000 and an initial loss on the valuation of derivative liabilities of $71,190 for a derivative liability balance of $506,190 at issuance.

The fair value of the Debentures were calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
9/29/2009	$	207,429	3 years	$	0.105	$	0.13		195	%		1.38	%
10/15/2009	$	117,800	3 years	$	0.075	$	0.12		196	%		1.38	%
11/15/2009	$	77,778	3 years	$	0.045	$	0.09		193	%		1.38	%
12/15/2009	$	15,200	3 years	$	0.038	$	0.05		192	%		1.13	%
1/19/2010	$	67,667	3 years	$	0.03	$	0.04		195	%		1.38	%
1/28/2010	$	20,317	3 years	$	0.04	$	0.05		195	%		1.38	%

As of December 31, 2011, the total face value of the Debentures outstanding was $153,500.

During the year ended December 31, 2012, the debenture holders converted a total of $106,500 in face value of the debentures to 2,431,667 shares of our common stock, or $0.044 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $143,929 and as of December 31, 2012, the total face value of the Debentures outstanding was $47,000.

During the year ended December 31, 2013, the debenture holders converted a total of $37,000 in face value of the debentures to 2,466,667 shares of our common stock, or $0.015 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $49,333 and as of December 31, 2013, the total face value of the Debentures outstanding was $10,000.

At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. Therefore, for the period from their issuance to that date, the Company has recorded an expense and decreased the previously recorded liabilities by $492,857 resulting in a derivative liability balance of $13,333 at December 31, 2013.

F-20

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	13,333		3 years		$	0.0055				188	%			1.25	%

2011 Convertible Notes

During the year ended December 31, 2011, the Company entered into four separate note agreements from September through December with an institutional investor for the issuance of a convertible promissory notes in the aggregate amount of $152,500. These notes were completely repaid as of September 30, 2012. We received net proceeds from the 2011 Convertible Notes of $142,500 after debt issuance costs of $10,000 paid for lender legal fees. These debt issuance costs were amortized over the period the Notes were outstanding.

The fair value of the 2011 Convertible Notes was calculated at each issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
5/13/2011	$	111,364	9 months	$	0.0022	$	0.0089		163	%		0.19	%
9/2/2011	$	33,333	9 months	$	0.002	$	0.001		155	%		0.09	%
10/24/2011	$	48,485	9 months	$	.0017	$	.0033		210	%		0.09	%
12/12/2011	$	42,500	9 months	$	.001	$	.002		218	%		0.08	%

The beneficial conversion feature (an embedded derivative) included in the 2011 Convertible Notes resulted in total initial debt discounts of $142,500 and a total initial loss on the valuation of derivative liabilities of $83,182 for a derivative liability balance of $235,682 total for their issuances. As of December 31, 2011, and the total face value of the 2011 Convertible Notes outstanding was $117,500.

During the year ended December 31, 2012, the note holders converted the entire remaining balance of $117,500 in face value and $3,300 in accrued interest to 2,390,219 shares of our common stock, or $0.06 per share. As a result of these transactions, the entire derivative liability of $235,682 for the converted notes was extinguished as of December 31, 2012.

Converted AFPI Notes

In November and December 2011, two holders of certain demand promissory notes issued by AFPI totaling $125,000 sold them to an unaffiliated third party investor (the "Converted AFPI Notes"). We agreed to allow conversion of the Converted AFPI Notes into shares of our common stock at a 50% discount to the lowest three trading prices in the ten days prior to conversion. The principal balance on these notes was $85,000 at December 31, 2011. In addition, in January 2012, we agreed to convert $22,500 in accrued interest on these notes to a convertible note with the same conversion terms, interest at a rate of 8% and due in 12 months.

The beneficial conversion feature (an embedded derivative) included in the Converted AFPI Notes resulted in an initial debt discount of $147,500 and an initial loss on the valuation of derivative liabilities of $110,133 for a derivative liability balance of $257,633 at issuance.

F-21

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
4/4/2011	$	58,824	3 months	$	0.0009	$	0.0021		179	%		0.25	%
12/1/2011	$	83,333	6 months	$	0.0006	$	0.0021		199	%		0.07	%
12/1/2011	$	83,333	6 months	$	0.0006	$	0.0021		199	%		0.07	%
1/2/12	$	32,143	12 months	$	0.0007	$	0.0015		226	%		0.11	%

During the year ended December 31, 2012, the note holders converted $107,500 face value and $1,144 in interest payable on the notes to 3,045,755 shares of our common stock, or $0.04 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $210,574 for the converted notes and as of December 31, 2012, and the total face value of the Converted AFPI Notes outstanding was $0.

November 2011 Note

In November 2011, a holder of debt issued by AFPI totaling $52,000 sold that debt to an unaffiliated third party investor. As part of this transaction, the Company agreed to amend the terms of the debt for the new holder in the form of an amended promissory note (the "November 2011 Note"). The November 2011 Note matured in November 2012, carries an interest rate of 12% and is convertible into shares of our common stock at a 50% discount to the lowest trading price in the three days prior to conversion. The Company may prepay the notes at any time they remain outstanding at 150% of the outstanding principal balance, however, the holder may convert the notes to stock within three days of such notice.

The beneficial conversion feature (an embedded derivative) included in the November 2011 Note resulted in an initial debt discount of $52,000 and an initial loss on the valuation of derivative liabilities of $86,667 for a derivative liability balance of $138,667 at issuance.

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
11/23/11		$	138,667		12 months		$	0.0008			$	0.0026				241	%			0.1	%

During the year ended December 31, 2012, the note holders converted the entire $39,000 face value of the notes to 368,333 shares of our common stock, or $0.10 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $55,714 for these notes and as of December 31, 2012, the total face value of the Debentures outstanding was $-0-.

January 2012 Convertible Notes

In January 2012 we issued two convertible notes of $25,000 each for a total of $50,000 to an unaffiliated third party investor. These notes are due six months from issuance, carry interest at 10% per annum and are convertible at $0.0012 per share. The Company has determined that the conversion feature does not represent an embedded derivative as the conversion price was known and was not variable making it conventional. The Company determined there was a beneficial conversion feature related to the January 2012 Convertible Notes based on the difference between the conversion price of $0.0012 and the market price of the Company’s common stock on the issue dates and recorded as interest expense $4,167 with an offset to additional paid-in capital.

F-22

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

January 2012 Interest Note

In January 2012, we converted a total of $26,100 in interest payable on $75,000 in notes of the Company and AFPI to an unaffiliated note holder to a convertible note. This note is due in January 2013 and carries an interest rate of 8% per annum. The note is convertible into shares of our common stock at a 50% discount to the lowest three trading prices in the ten days prior to conversion.

The beneficial conversion feature (an embedded derivative) included in the January 2012 Interest Note resulted in an initial debt discount of $26,100 and an initial loss on the valuation of derivative liabilities of $11,186 for a derivative liability balance of $37,286 at issuance.

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
1/2/12		$	37,286		12 months		$	0.0007			$	0.0014				226	%			0.11	%

At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding January 2012 Interest Note. As a result, for the period from their issuance to December 31, 2013, the Company has recorded an adjustment and increased the previously recorded liabilities by $14,914 resulting in a derivative liability balance of $52,200 at December 31, 2013.

The fair value of the convertible note was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	52,200		6 months		$	0.00005				312	%			0.13	%

September 2012 Convertible Note

In September 2012 we issued $35,000 of 6% unsecured convertible debenture with a private investor (the “Sept Debenture”). The Sept Debenture is due in September and is convertible at 50% of the lowest closing bid price per of the Company’s common stock for the twenty (20) trading days immediately preceding the date of conversion. In addition, the Sept Debenture provides for adjustments in the case of certain corporate actions.

Debt issuance costs totaling $11,500 are being amortized over the three year term of the Sept Debenture or such shorter period as the Sept Debenture may be outstanding. Accordingly, as the Sept Debenture is converted to common stock, that amount of debt issuance costs attributable to the amounts converted will be accelerated and expensed as of the applicable conversion dates. As of December 31, 2012, $958 of these costs had been expensed as debt issuance costs.

F-23

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The beneficial conversion feature (an embedded derivative) included in the Sept Debenture resulted in an initial debt discount of $35,000 and an initial loss on the valuation of derivative liabilities of $35,000 for a derivative liability balance of $70,000 at issuance.

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
9/27/12		$	70,000		3 years		$	0.00005			$	0.0002				271	%			0.33	%

At December 31, 2012, the Company revalued the derivative liability balance of the remaining outstanding January 2012 Interest Note. As a result, for the period from their issuance to December 31, 2012, the Company recorded no adjustment to the previously recorded liabilities resulting in a derivative liability balance of $70,000 at December 31, 2012.

During the year ended December 31, 2013, the note holder converted the entire $35,000 in face value of the Sept Debenture to 47,442,640 shares of our common stock, or $0.0007 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $70,000.

October 2012 Convertible Notes

In October 2012 we issued $10,000 of 8% unsecured convertible debenture with a private investor at which time the investor also purchased $50,000 in existing notes from one of our third party note holders (together the “October Notes”). The October Notes are due in October 2013 and are convertible at 50% of the lowest closing price per share of the Company’s common stock for the thirty (30) trading days immediately preceding the date of conversion.

Debt issuance costs totaling $1,000 are being amortized over the term of the October Notes or such shorter period as the October Notes may be outstanding. As of December 31, 2013, $208 of these costs had been expensed as debt issuance costs.

The beneficial conversion feature (an embedded derivative) included in the October Notes resulted in an initial debt discount of $60,000 and an initial loss on the valuation of derivative liabilities of $60,000 for a derivative liability balance of $120,000 at issuance.

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
10/12/12	$	50,000	1 year	$	0.00005	$	0.0002		236	%		0.18	%
10/17/12	$	10,000	1 year	$	0.00005	$	0.0002		236	%		0.18	%

During the year ended December 31, 2012, the debenture holders converted a total of $32,500 in face value of the debentures to 3,250,000 shares of our common stock, or $0.01 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $65,000 and as of December 31, 2012, the total face value of the Debentures outstanding was $27,500.

F-24

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the year ended December 31, 2013, the October Notes holders converted a total of $24,520 in face value of the October Notes plus $514 in interest to 21,581,793 shares of our common stock, or $0.0011 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $60,000 and as of September 30, 2013, the total face value of the October Notes outstanding was $2,980.

At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. Therefore, for the period from their issuance to that date the Company has recorded an expense and decreased the previously recorded liabilities by $114,040 resulting in a derivative liability balance of $5,960 at December 31, 2013.

The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	5,960		1 year		$	0.00005				312	%			0.13	%

October/November Convertible Notes

In October and November 2012 a private investor purchased a total of $139,600 in existing notes from one of our third party note holders (together the “October/November Notes”). The notes were amended to include a maturity date that is nine months from the amendment date or July/August 2013 and have an 8% interest rate.

The October/November Notes are convertible at 50% ($124,300) and 45% ($15,300) of the lowest closing bid price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the October/November Notes resulted in an initial debt discount of $139,600 and an initial loss on the valuation of derivative liabilities of $143,000 for a derivative liability balance of $282,600 at issuance.

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
10/11/12	$	13,000	9 months	$	0.00005	$	0.0002		208	%		0.06	%
11/15/12	$	15,300	9 months	$	0.000045	$	0.0001		255	%		0.16	%
11/29/12	$	50,000	9 months	$	0.00005	$	0.0001		255	%		0.16	%
11/30/12	$	61,300	9 months	$	0.00005	$	0.0001		255	%		0.16	%

During the year ended December 31, 2012, the debenture holders converted a total of $14,600 in face value of the debentures to 3,250,000 shares of our common stock, or $0.01 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $31,000 and as of December 31, 2012, the total face value of the Debentures outstanding was $125,000.

F-25

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During year ended December 31, 2013, the note holders converted a total of $46,901 in face value of the October/November Notes to 111,750,000 shares of our common stock, or $0.00042 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $66,962 and as of December 31, 2013, the total face value of the October/November Notes outstanding was $78,099.

At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding Debentures. For the period from their issuance to December 31, 2012, there was an $126,962 decrease to the previously recorded liabilities resulting in a derivative liability balance of $155,638 at December 31, 2013.

The fair value of the Debentures was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	155,638		9 months		$	0.00005				258	%			0.11	%

2012 and 2013 Asher Convertible Notes

During the six month period ended June 30, 2012, the Company entered into four separate note agreements with an institutional investor for the issuance of convertible promissory notes in the aggregate amount of $134,000 on the following dates and in the following amounts (together the "2012 Asher Convertible Notes"):

Date of Issue	Amount		Due Date
1/24/12	$	36,000	October 19, 2012
3/7/12	$	33,000	December 5, 2012
4/12/12	$	32,500	January 16, 2013
5/10/12	$	32,500	February 13, 2013

During the nine month period ended September 30, 2013, the Company entered into note agreements with the same institutional investor for the issuance of convertible promissory notes in the aggregate amount of $50,000 on the following dates and in the following amounts (the "2013 Asher Convertible Notes"):

Date of Issue	Amount		Due Date
5/31/13	$	27,500	February 24, 2014
7/31/13	$	22,500	April 22, 2014

Together, the above notes comprise the "2012 and 2013 Asher Convertible Notes".

The 2012 and 2013 Asher Convertible Notes are convertible at 50% of the average of the lowest three trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion and carry an interest rate of 8% per annum.

We received net proceeds from the 2012 Asher Convertible Notes of $124,000 after debt issuance costs of $10,000 paid for lender legal fees. As of December 31, 2013, all of these costs had been expensed as debt issuance costs.

The beneficial conversion feature (an embedded derivative) included in the 2012 Asher Convertible Notes resulted in total initial debt discounts of $134,000 and a total initial loss on the valuation of derivative liabilities of $96,167 for a derivative liability balance of $230,167 total for their issuances.

F-26

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

We received net proceeds from the 2013 Asher Convertible Notes of $45,000 after debt issuance costs of $5,000 paid for lender legal fees. These debt issuance costs will be amortized over the terms of the 2013 Asher Convertible Notes or such shorter period as the Notes may be outstanding. As of December 31, 2013, $3,541 of these costs had been expensed as debt issuance costs.

The beneficial conversion feature (an embedded derivative) included in the 2013 Asher Convertible Notes resulted in total initial debt discounts of $50,000 and a total initial loss on the valuation of derivative liabilities of $38,500 for a derivative liability balance of $88,500 total at issuance.

The fair value of the 2012 and 2013 Asher Convertible Notes were calculated at each issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
1/24/12	$	60,000	9 months	$	0.0006	$	0.0014		220	%		0.09	%
3/7/12	$	66,000	9 months	$	0.0005	$	0.0011		133	%		0.14	%
4/12/12	$	66,667	9 months	$	0.00045	$	0.0014		140	%		0.17	%
5/10/12	$	37,500	9 months	$	0.0004	$	0.0009		112	%		0.17	%
5/31/13	$	49,500	9 months	$	0.0025	$	0.0082		328	%		0.11	%
7/31/13	$	39,000	9 months	$	0.00075	$	0.0016		313	%		0.11	%

During the year ended December 31, 2012, the 2012 Asher Convertible Notes holders converted a total of $28,100 in principal to 2,810,000 shares of our common stock, or $0.01 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $56,200 and as of December 31, 2012, the total face value of the 2012 Asher Convertible Notes outstanding was $105,900.

During the year ended December 31, 2013, the 2012 Asher Convertible Notes holders converted the remaining $105,900 principal and $7,960 in interest to 147,451,365 shares of our common stock, or $0.0007 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $230,167.

During the year ended December 31, 2013, the 2013 Asher Convertible Notes holders converted a total of $10,390 in principal to 97,380,953 shares of our common stock, or $0.0001 per share. As a result of all conversions, the Company recorded a decrease to the derivative liability of $17,317 and as of December 31, 2013, the total face value of the 2012 Asher Convertible Notes outstanding was $39,610.

At December 31, 2013, the Company revalued the derivative liability balance of the outstanding 2013 Asher Convertible Notes and as a result, for the period from their issuance to December 31, 2013, the Company has recorded an adjustment and decreased the previously recorded liabilities by $9,280 resulting in a derivative liability balance of $79,220 at December 31, 2013.

F-27

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The fair value of the 2013 Asher Convertible Notes was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	79,220		9 months		$	0.00005				258	%			0.11	%

February 2013 Notes

In February 2013, an investor purchased a note in the amount of $26,000 from one of our third party note holders (the "February 2013 Notes"). The February 2013 Notes may be converted at any time at the lower of a discount to market of 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion, or $0.00005, as adjusted for splits and other events. This note has an interest rate of 8% per annum and is due in January 2014.

The beneficial conversion feature (an embedded derivative) included in the February 2013 Notes resulted in an initial debt discount of $26,000 and an initial loss on the valuation of derivative liabilities of $26,000 for a derivative liability balance of $52,000 at issuance.

The fair value of the February 2013 Notes was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
2/13/13			52,000		1 year		$	0.00005			$	0.0001				296	%			0.15	%

During the year ended December 31, 2013, the note holders converted a total of $26,000 in face value of the February 2013 Notes to 13,852,300 shares of our common stock, or $0.0019 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $52,000 and as of September 30, 2013, the total face value of the February 2013 Notes outstanding was $0.

May 2013 Notes

In May 2013 we issued $2,500 of 8% unsecured convertible note with the same private investor (the “May 2013 Notes”). The May 2013 Notes are due in February 2014 and are convertible at 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the May 2013 Notes resulted in an initial debt discount of $2,500 and an initial loss on the valuation of derivative liabilities of $2,232 for a derivative liability balance of $4,732 at issuance.

F-28

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The fair value of the Converted AFPI Notes was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
5/14/13		$	4,732		1 year		$	0.0013			$	0.0025				365	%			0.11	%

At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding May 2013 Notes totaling $2,500. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $268 resulting in a derivative liability balance of $5,000 at December 31, 2013.

The fair value of the May 2013 Notes was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	5,000		1 year		$	0.00005				312	%			0.13	%

2013 CareBourn Notes

In the year ended December 31, 2013 a private investor purchased a total of $118,351 in existing notes from one of our third party note holders and loaned an additional $32,000 in new notes for a total of $118,351 (together the “2013 CareBourn Notes”). The assumed notes have an interest rate of 6% per annum. The new notes are due in December 2013 and have an 8% interest rate.

The 2013 Convertible Notes are convertible at a conversion price (the “Conversion Price”) for each share of common stock equal to 50% of the lowest closing bid price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the 2013 CareBourn Notes resulted in an initial debt discount of $151,351 and an initial loss on the valuation of derivative liabilities of $91,683 for a derivative liability balance of $242,034 at issuance.

The fair value of the 2013 CareBourn Notes was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
2/5/13	$	59,683	6 months	$	0.00005	$	0.0001		271	%		0.11	%
3/7/13	$	15,000	9 months	$	0.00005	$	0.0001		295	%		0.13	%
3/22/13	$	17,000	9 months	$	0.00005	$	0.0001		295	%		0.13	%
11/14/13	$	58,667	6 months	$	0.0004	$	0.0002		133	%		0.10	%

During the year ended December 31, 2013, the note holders converted a total of $17,140 in face value of the 2013 CareBourn Notes to 60,100,000 shares of our common stock, or $0.0003 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $30,256 and as of December 31, 2013, the total face value of the 2013 Convertible Notes outstanding was $133,211.

F-29

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

At December 31, 2013, the Company revalued the derivative liability balance of the remaining outstanding 2013 Convertible Notes. For the period from their issuance to that date there was an increase of $24,387 to the previously recorded liabilities resulting in a derivative liability balance of $266,421 at December 31, 2013.

The fair value of the 2013 Convertible Notes was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value		Term	Assumed Conversion Price		Volatility Percentage			Interest Rate
$	64,000	6 months	$	0.00035		258	%		0.11	%
$	202,421	9 months	$	0.00035		138	%		0.09	%

JMJ Convertible Note

In June 2013 we issued $16,500 of 12% unsecured convertible note with a private investor (the “JMJ Convertible Note”). The JMJ Convertible Note is due in May 2014 and is convertible at 60% of the lowest trading price per share of the Company’s common stock for the twenty-five (25) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the JMJ Convertible Note resulted in an initial debt discount of $16,500 and an initial loss on the valuation of derivative liabilities of $15,180 for a derivative liability balance of $31,680 at issuance.

The fair value of the JMJ Convertible Note was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
6/6/13		$	31,660		1 year		$	0.0025			$	0.0073				367	%			0.14	%

During the year ended December 31, 2013, the note holders converted a total of $2,200 in face value of the 2013 CareBourn Notes to 22,000,000 shares of our common stock, or $0.0001 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $3,667 and as of December 31, 2013, the total face value of the 2013 Convertible Notes outstanding was $14,300.

At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding JMJ Convertible Note. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and decreased the previously recorded liabilities by $7,847 resulting in a derivative liability balance of $23,833 at December 31, 2013.

The fair value of the JMJ Convertible Note was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	23,833		1 year			0.00006				312	%			0.013	%

F-30

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Bohn Convertible Note

In May 2013 we issued a $20,000 8% unsecured convertible note with a private investor (the “Bohn Convertible Note”). The Bohn Convertible Note is due in November at a conversion price of 75% of the lowest trading price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the Bohn Convertible Note resulted in an initial debt discount of $20,000 and an initial loss on the valuation of derivative liabilities of $11,429 for a derivative liability balance of $31,429 at issuance.

The fair value of the Bohn Convertible Note was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
6/6/13		$	31,249		6 months		$	0.0028			$	0.0060				292	%			0.08	%

At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding Bohn Convertible Note. Therefore, for the period from its issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $8,571 resulting in a derivative liability balance of $40,000 at December 31, 2013.

The fair value of the Bohn Convertible Note was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	40,000		6 months		$	0.0003				139	%			0.09	%

Wexford Convertible Note

In May 2013, we issued a $75,000 convertible note to the former landlord of API as part of a settlement agreement with respect to a Judgment by Confession entered against API in the Court of Common Pleas Philadelphia County in Philadelphia as described more fully in Note 7 - Commitments and Contingencies below. This note is due in May 2014 and carries an interest rate of 8% per annum. This note may be converted at any time beginning on November 30, 2013 into shares of our common stock at the average of the lowest three (3) Trading Prices for the common stock during the ten trading days prior to the Conversion Date. As this note is convertible at market, there is no imbedded derivative and therefore no corresponding derivative liability.

WHC Capital Note

During the year ended December 31, 2013, an unaffiliated institutional investor purchased three notes totaling $19,900 from one of our third party note holders and issued a new notes in the amount of $10,000 for a total of $29,900 in amounts due (the "WHC Notes"). The WHC Notes may be converted at any time at a discount to market of 50% of the lowest closing price per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion as adjusted for splits and other events. This notes have an interest rate of 8% per annum and are due in June 2014.

F-31

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

The beneficial conversion feature (an embedded derivative) included in the WHC Notes resulted in an initial debt discount of $29,900 and an initial loss on the valuation of derivative liabilities of $25,178 for a derivative liability balance of $55,078 at issuance.

The fair value of the WHC Notes was calculated at issue date utilizing the following assumptions:

Issuance Date	Fair Value		Term	Assumed Conversion Price		Market Price on Grant Date		Volatility Percentage			Interest Rate
7/25/13		18,078	11 months		0.00115		0.0019		337	%		0.12	%
8/13/13		7,000	11 months		0.0005		0.0014		396	%		0.11	%
11/26/13		20,000	12 months		0.00015		0.0005		305	%		0.13	%
12/6/13		10,000	12 months		0.00015		0.0005		305	%		0.13	%

During the year ended December 31, 2013, the note holders converted a total of $13,688 in face value and $78 in interest of the WHC Notes to 61,828,388 shares of our common stock, or $0.0002 per share. As a result of these transactions, the Company recorded a decrease to the derivative liability of $23,280 and as of December 31, 2013, the total face value of the WHC Notes outstanding was $16,212.

At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding WHC Notes. Therefore, for the period from their issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $22,654 resulting in a derivative liability balance of $32,424 at December 31, 2013.

The fair value of the WHC Notes was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value		Term	Assumed Conversion Price		Volatility Percentage			Interest Rate
$	10,000	11 months		0.00005		278	%		0.13	%
$	22,424	12 months		0.0005		312	%		0.013	%

Schaper Note

In December 2013 we issued a $15,000 8% unsecured convertible note with a private investor (the “Schaper Note”). The Schaper Note is due in August 2014 at a conversion price of 50% of the lowest three trading prices per share of the Company’s common stock for the ten (10) trading days immediately preceding the date of conversion.

The beneficial conversion feature (an embedded derivative) included in the Schaper Note resulted in an initial debt discount of $15,000 and an initial loss on the valuation of derivative liabilities of $5,000 for a derivative liability balance of $20,000 at issuance.

The fair value of the Schaper Note was calculated at issue date utilizing the following assumptions:

Issuance Date		Fair Value			Term		Assumed Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
12/3/13		$	20,000		9 months		$	0.00015			$	0.0004				252	%			0.12	%

At December 31, 2013 the Company revalued the derivative liability balance of the remaining outstanding Schaper Note. Therefore, for the period from its issuance to December 31, 2013, the Company has recorded an expense and increased the previously recorded liabilities by $10,000 resulting in a derivative liability balance of $30,000 at December 31, 2013.

The fair value of Schaper Note was calculated at December 31, 2013 utilizing the following assumptions:

Fair Value			Term		Assumed Conversion Price				Volatility Percentage				Interest Rate
$	30,000		9 months		$	0.00005				258	%			0.11	%

F-32

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Debentures and convertible notes and interest payable consisted of the following at December 31, 2012 and 2011:

Short-term liabilities:	2012		2012

Convertible debentures; non-affiliates; interest at 6% and due December 2013; outstanding principal of $10,000 face value; net of discount of $0		10,000		44,395

2012 & 2013 Convertible Notes; non-affiliate, interest at 8%; due May 2012-April 2014; $39,610 face value net of discount of $18,650		20,960		102,289

January 2012 Convertible Notes; non-affiliate; interest at 8%; due January 2013		50,000		50,000

January 2012 Interest Note; non-affiliate; interest at 8%; due January 2013; $26,100 face value net of discount of $0		26,100		26,100

October 2012 Convertible Notes; non-affiliate; interest at 8%; due October 2013; $5,480 face value net of discount of $938		4,542		5,729

October/November Convertible Notes; non-affiliate; interest at 8%; $82,299 face value net of discount of $0		78,099		15,734

2013 CareBourn Notes; non-affiliate; interest at 6-8%; due August 2013 to August 2014; $133,211 face value net of discount of $44,000		89,211		-

JMJ Convertible Notes; non-affiliate; interest at 12%; due June 2014; $14,300 face value net of discount of $3,667		10,633		-

Bohn Convertible Note; non-affiliate; interest at 8%; due November 2013; $20,000 face value net of discount of $0		20,000		-

Wexford Convertible Note; non-affiliate; interest at 8%; $75,000 face value net of discount of $0		75,000		-

WHC Convertible Note; non-affiliate; interest at 8%; $16,212 face value net of discount of $12,184		4,028		-

Schaper Note; non-affiliate; interest at 8%; due August 2014; face value $15,000 net of discount of $13,333		1,667		-

Total short-term convertible notes	$	390,240	$	244,247

Interest payable, short-term convertible notes		93,347		68,476

Total principal and interest payable, short-term convertible notes	$	483,587	$	315,640

Long-term liabilities:

Convertible debentures; non-affiliates; interest at 6% and due September 2015; outstanding principal of $35,000 face value; net of discount of $32,083		-		2,917

Interest payable, long-term convertible notes		-		729

Total principal and interest payable, other	$	-	$	3,646

F-33

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 4. OTHER SELLING GENERAL AND ADMINISTRATIVE EXPENSES

Other selling general and administrative expense for the years ended December 31, 2013 and 2012 consisted of the following:

	Year ended December 31, 2013			Year ended December 31, 2012
General and administrative	$	128,889		$	197,952
Legal and accounting		29,611			32,600
Professional services		175,974			191,471
Bad debt expense		11,122			8,780
Recovery of allowed for debt		(120,750	)		(45,154	)
Salaries		200,000			227,533
	$	424,846		$	613,182

NOTE 5. NOTES RECEIVABLE

At December 31, 2013 and 2012, there were $152,353 and $307,578 in loans due the Company from FastFunds Financial Corporation (“FFFC”), an affiliate in which the Company is a minority stockholder, to assist FFFC in payment of its ongoing payment obligations and protect the Company's investment. Of this amount, $1,900 was advanced in 2013 and $8,780 was loaned in 2012. During the years ended December 31, 2013 and 2012, FFFC was able to repay $120,750 and $46,255 in principal and $17,325 in interest on these loans. Each of these loans carries an interest rate of 8% per annum and are due on demand. Management of the Company evaluated the likelihood of payment on these notes and has determined that an allowance of the entire balance due is appropriate. Accordingly, the Company recorded bad debt expense of $1,900 in the year ended December 31, 2013 and $8,780 in the year ended December 31, 2012 that is included in other selling, general and administrative expenses on the Company’s statement of operations for each period. The Company has allowed for all interest due on these notes and did not record any interest receivable during the years ended December 31, 2013 and 2012. Given the uncertainty of payments on these notes, if payments of interest are received they are considered interest income that is offset against interest expense.

As of December 31, 2013 and 2012, the Company had $8,000 due from an affiliated publicly traded company. This note carries interest at 8% per annum and is due on demand. The entire principal balance of $8,000 plus $1,222 and $743 in accrued interest remained receivable at December 31, 2012 and 2011, respectively. Management of the Company evaluated the likelihood of payment on these notes and has determined that an allowance of the entire balance due is appropriate. Accordingly, the Company recorded bad debt expense of $9,383 in the year ended December 31, 2013 that is included in other selling, general and administrative expenses on the Company’s statement of operations for each period. The Company also recorded bad debt expense of $1,222 in interest owed as of September 30, 2013, which is considered interest income and offset against income expense, and is no longer recording interest receivable on these notes.

F-34

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 6. CAPITAL STOCK

On September 12, 2012, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 3,010,000,000 shares to 7,510,000,000 shares, of which 10,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective September 6, 2012, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on September 6, 2012.

Effective on April 24, 2013, the Company effectuated a 1 for 200 reverse stock split. As a result of this transaction, a total of 6,406,699,320 shares of issued and outstanding pre-split common stock became 32,033,497 shares of post-split common stock. The Company filed a Certificate of Change with the Secretary of State of Nevada, pursuant to which the Company effectuated the reverse split as well as decreased the authorized capital stock of the Company from 7,510,000,000 shares to 760,000,000 shares, of which 750,000,000 shares are $0.001 par value common stock and 10,000,000 shares may be $0.001 par value preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. As a result of the reverse split, the number of shares outstanding and per share information for all prior periods presented have been retroactively restated to reflect the new capital structure.

On October 14, 2013, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 510,000,000 shares to 760,000,000 shares, of which 10,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective October 11, 2013, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on October 11, 2013.

Common Stock

During the year ended December 31, 2012, the Company issued 10,000,000 shares of common stock in a private placement to unaffiliated investors for total proceeds of $5,000 or $0.0005 per share. We recorded $6,000 in "stock compensation cost" in our statements of operations for the year ended December 31, 2012 to record the beneficial conversion feature relating to the difference between the market price and the sales price on the date of issuance.

During the year ended December 31, 2012, we issued a total of 3,353,204,766 shares of our common stock on the conversion of $493,893 in principal and interest on our various convertible promissory notes. In addition to the face value of the notes, the Company recorded $711,709 in additional expense for the derivative liability for a total cost to the Company of $1,205,602 or $0.00036 per share.

F-35

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

During the year ended December 31, 2012, we issued 66,300,000 shares of our common stock to a noteholder upon conversion of $33,150 in promissory notes. In addition to the face value of the notes, the Company recorded $58,410 in additional expense for the difference between the conversion price ($0.0005) and the market price on the issuance dates for a total cost to the Company of $91,560 or $0.0014 per share.

During the year ended December 31, 2012, we executed a consulting agreement with an unaffiliated third party through which we paid the consultant 20,000,000 shares of our common stock valued at $20,000 reflecting the market price on the date of issuance.

During the year ended December 31, 2012, we issued 60,000,000 shares to three unaffiliated purchasers of common stock that participated in private placements of our common stock in the previous six months. Due to delays in issuing the stock to these investors, the Company agreed to lower the purchase price for the shares to $0.003 per share. We recorded a total of $60,000 as "stock compensation cost" in our statements of operations for the nine months ended September 30, 2012 based on the market value of these shares on the date of issuance.

During the year ended December 31, 2012, 6,250 shares ($6,250) of our Series B Preferred Stock were converted to 10,593,220 shares of our common stock.

During the year ended December 31, 2013, we issued a total of 607,322,918 shares of our common stock on the conversion of $447,941 in principal and interest on our various convertible promissory notes. In addition to the converted principal and interest on the notes, the Company recorded $445,537 in additional expense for the derivative liability for a total cost to the Company of $893,478 or $0.0015 per share.

During the year ended December 31, 2013, we issued 1,840,000 shares of our common stock to a noteholder upon conversion of $18,400 in promissory notes. In addition to the face value of the notes, the Company recorded $18,400 in additional expense for the difference between the conversion price ($0.01) and the market price on the issuance dates for a total cost to the Company of $36,800 or $0.02 per share.

Preferred Stock

During the year ended December 31, 2012, 6,250 shares ($6,250) of our Series B Preferred Stock were converted to 10,593,220 shares of our common stock. We recorded an expense of $8,580 for the difference in the conversion price ($0.00059) and the market price on the conversion date. This amount is included in "stock based compensation" on our statements of operations.

Also during the year ended December 31, 2012, we redeemed a total of 110,857 shares ($110,857) of our Series B Preferred Stock. The Series B Preferred includes a redemption premium of 5% during the first year of issuance therefore the total redemption amount was $116,400. The balance of $5,543 for the redemption premium was recorded as interest expense on our statements of operations in the year ended December 31, 2012.

As a result of these transactions there were 404,055 shares of our Series B Preferred Stock outstanding at December 31, 2012 and 2013. There were $78,071 and $45,747 in dividends payable on our Series B Preferred stock at December 31, 2013 and 2012, respectively, including $32,324 and $33,344 in dividends accrued for the years then ended.

F-36

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

Warrants

In August 2012, the Company issued a total of 150,000,000 warrants to certain warrant holders that were officers and or consultants to API upon the condition that each holder agreed to cancel 35,000,000 warrants issued in July 2011 held by them. Accordingly, the previously issued warrants were cancelled and a total of 150,000,000 new warrants were issued. These warrants vested immediately, are exercisable for a period of five years, and are exercisable at $0.002 per share. These shares were valued at $15,000 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in year ended December 31, 2012 using the following assumptions:

Issuance Date		Fair Value			Term		Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
8/1/2012		$	15,000		5 years		$	0.002			$	0.0001				241	%			0.5	%

In May 2012, we executed a consulting agreement with an unaffiliated third party through which we issued three year warrants to purchase up to 30,000,000 shares of our common stock at exercise prices of $0.0015 (10,000,000 shares), $0.002 (10,000,000 shares) and $0.004 (10,000,000 shares). These warrants were valued at $25,000 using the Black-Scholes option pricing model. As the consulting agreement carries a six month term, the value of the warrants totaling $25,000 was expensed over that six month term of the agreement and is included in "stock-based compensation" at December 31, 2012. The value was determined using the Black Scholes option pricing model using the following assumptions:

Issuance Date		Fair Value			Term		Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
5/1/2012		$	25,000		3 years		$	0.0015 - $.0040			$	0.001				181	%			0.25	%

In March 2013, we issued a total of 150,000 warrants to an unaffiliated third party that are exercisable for a period of three years at an exercise price of $0.02 per share. These warrants were valued at $3,000 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in the nine month period ended September 30, 2013.

Issuance Date		Fair Value			Term		Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
3/7/13		$	3,000		3 years		$	0.001			$	0.0001				275	%			0.38	%

F-37

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In May 2013, we issued a total of 40,000 warrants to an unaffiliated third party that are exercisable for a period of three years at an exercise price of $0.01 per share. These warrants were valued at $239 based upon the Black Scholes option pricing model, which amount is included in "stock based compensation" in the nine month period ended September 30, 2013.

Issuance Date		Fair Value			Term		Conversion Price				Market Price on Grant Date				Volatility Percentage				Interest Rate
5/14/13		$	239		3 years		$	0.01			$	0.006				287	%			0.25	%

A summary of the activity of the Company’s outstanding warrants at December 31, 2012 and December 31, 2013 is as follows:

	Warrants		Weighted-average exercise price		Weighted-average grant date fair value
Outstanding and exercisable at December 31, 2012		940,000	$	0.40	$	0.20

Granted		190,000		0.016		0.017
Expired/Cancelled		-		-		-
Exercised		-		-		-

Outstanding and exercisable at December 31, 2013		1,130,000	$	0.43	$	0.07

The following table sets forth the exercise price range, number of shares, weighted average exercise price and remaining contractual lives of the warrants by groups as of December 31, 2012:

Exercise price range		Number of options outstanding		Weighted-average exercise price		Weighted-average remaining life

$	0.01		40,000		0.01	2.4 years

$	0.20 to $0.80		1,050,000		0.39	2.3 years

$	2.00		40,000		2.00	2.9 years

			1,130,000	$	0.43	2.5 years

Stock Options

On March 4, 2009, our board of directors authorized our 2009 Stock Incentive Plan which was amended on May 6, 2009 and approved by our stockholders effective on May 26, 2009. The plan allows for the issuance of up to 20,000,000 shares of our common stock through one or more incentive grants including stock options, stock appreciation rights, stock awards, restricted stock issuances and performance shares to officers, directors, employees and consultants of the Company. The plan is administered by our board of directors.

F-38

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

All options outstanding at December 31, 2012 are fully vested and exercisable. A summary of outstanding stock option balances under 2009 Stock Incentive Plan at December 31, 2011 and at December 31, 2013 is as follows:

2009 Stock Incentive Plan

	Options		Weighted-average exercise price		Weighted-average remaining contractual life (years)		Aggregate intrinsic value
Outstanding at December 31, 2012		100,000	$	15.00		1.7	$	0

Options granted		-		-		-		-

Outstanding at December 31, 2013		100,000	$	15.00		0.8	$	0

NOTE 7. COMMITMENTS AND CONTINGENCIES

Payroll Liabilities

Following the formation of API in May 2008, HPI hired certain former employees of Hydrogen Power, Inc. and maintained an office in Seattle, Washington for a period of approximately five months. During that time, API paid wages to these employees without the benefit of a payroll management service. Upon API's move from Seattle to Philadelphia, Pennsylvania in October 2008, the Company retained the services of a payroll management service to handle its payroll functions. During the period from May to October 2008, the Company recorded $52,576 in payroll liabilities due from wages paid to its employees and has been recording estimated penalties and interest quarterly on the balance. During the year ended December 31, 2012, the Company recorded additional estimated penalty and interest expense of $14,860 for an estimated balance due at that date of $118,647. During the year ended December 31, 2013, the Company recorded additional estimated penalty and interest expense of $15,436 for an estimated balance due at that date of $134,083. This amount is included on the balance sheets at December 31, 2013 and 2012 as “payroll liabilities”.

Office Lease Agreement

Effective on July 1, 2009, API entered into a lease for office and laboratory space in the University City Science Center in Philadelphia, Pennsylvania. Totaling approximately 2,511 square feet, the term of the agreement was for five years and six months expiring on December 31, 2014. In addition, the Company was obligated to pay certain common area maintenance fees of $1,886 per month during 2011.

F-39

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

In November 2011, the Company determined it could no longer sustain the significant payments under the lease and vacated the premises. On November 30, 2011, API was notified that a Judgment by Confession had been entered against it in the Court of Common Pleas Philadelphia County in Philadelphia, Pennsylvania by Wexford-UCSC II, L.P., its former landlord. The Judgment by Confession assesses total damages of $428,232, which is comprised of the following: $73,995 for unpaid monthly rent, maintenance fees, interest and late charges for the period through November 30, 2011; attorney's fees of $5,000; rent and maintenance charges of $10,020 for December 2011; and the value of future rent payments for the period from January 1, 2012 to December 31, 2014 of $339,217. The complaint alleged a breach of contract and event of default for API related to this lease. As of March 31, 2013, the Company had recorded $67,429 in rent expense that was included in "accounts payable, other" as of that date. The additional judgment amount totaling $360,803 was expensed as "litigation contingency" on our statements of operations and is recorded under the same name as a liability on balance sheets at March 31, 2013.

Capital Leases

In April 2010 we leased a copier for a period of three years at $129 per month. The contract includes a buyout at lease end for $1 at which time we will own the machine. We have capitalized the value of this machine at January 1, 2011 in the amount of $3,499 based on the then current value with an expected life of 5 years from the lease date and are depreciating this asset over that period. That amount was included in "property and equipment" under the assets portion of our balance sheet with the corresponding liability for future payments placed under "capital leases" in our liabilities. As each monthly payment was made, the amount under capital leases was reduced to reflect the balance due under the lease. As of the March 31, 2013 payment, the lease was completed. During the year ended December 31, 2013, a total of $387 was reduced in the "capital leases" account for payments made during the period resulting in a Capital leases liability of 0.

F-40

ALUMIFUEL POWER CORPORATION AND SUBSIDIARIES

Notes to Consolidated Financial Statements

NOTE 8. INCOME TAXES

A reconciliation of U.S. statutory federal income tax rate to the effective rate follows for the years ended December 31, 2013 and 2012:

	For the year ended December 31,			For the year ended December 31,
	2013			2012
U.S. statutory federal rate		34.00	%		34.00	%
State income tax rate		4.63	%		4.63	%
Net operating loss for which no tax
benefit is currently available		-38.63	%		-38.63	%
		0.00	%		0.00	%

At December 31, 2013, deferred tax assets consisted of a net tax asset of $8,862,200, due to operating loss carry forwards of $22,940,825, which was fully allowed for, in the valuation allowance of $8,862,400. The valuation allowance offsets the net deferred tax asset for which there is no assurance of recovery. The increase in the deferred tax assets and the corresponding valuation allowance during the year ended December 31, 2013 was $458,200 based on the $8,403,800 reported by the Company at December 31, 2012. The net operating loss carry forward expires through the year 2033.

The valuation allowance is evaluated at the end of each year, considering positive and negative evidence about whether the deferred tax asset will be realized. At that time, the allowance will either be increased or reduced; reduction could result in the complete elimination of the allowance if positive evidence indicates that the value of the deferred tax assets is no longer impaired and the allowance is no longer required.

Should the Company undergo an ownership change as defined in Section 382 of the Internal Revenue Code, the Company's tax net operating loss carry forwards generated prior to the ownership change will be subject to an annual limitation, which could reduce or defer the utilization of these losses.

NOTE 9. SUBSEQUENT EVENTS

On January 22, 2014, we filed Amended and Restated Articles of Incorporation with the Secretary of State of Nevada, pursuant to which the Company increased the authorized capital stock of the Company from 760,000,000 shares to 760,000,000 shares, of which 3,510,000,000 shares may be preferred stock having the voting powers, designations, preferences, limitations, restrictions and relative rights as determined by the board of directors from time to time. Effective January 21, 2014, the stockholders of the Company through a written consent executed by stockholders holding a majority of the shares of the Company’s common stock outstanding and entitled to vote, adopted and approved the Amended and Restated Articles of Incorporation, which were adopted by the Company’s board of directors on January 20, 2014.

Management has determined that there are no further events subsequent to the balance sheet date that should be disclosed in these financial statements.

F-41