Alternative Fuels Americas, Inc. (OTCMKTS:AFAI) Makes a Good Jump

Alternative Fuels Americas, Inc. (OTCMKTS:AFAI) is one of the many companies in the OTC markets that has recently decided to enter the medical marijuana sector, after the massive gains the MJ stocks make since the beginning of the year.

The company is regularly posting optimistic press releases and there was even a paid promotional campaign last month. The latest news are about their newly formed subsidiary, Marijuana Holdings Americas, Inc. who will be allegedly going to start its operations in Oregon.

This is the most probable reason behind the 26% gain in price that AFAI registered yesterday as it closed the session at $0.179 per share. We also saw some 1.6 million shares switch hands that generated $283 thousand in dollar volume.

We are quite interested on the matter of how they are going to start their operations in Oregon however, because, as mentioned in our previous article, the financial state of the company is rather dire. Below, you can see the numbers from their Q3 report for 2013 as a reminder.

• cash: $166
• total assets: $164 thousand
• current liabilities: $1.2 million
• total liabilities: $1.3 million
• revenues: $0
• net loss: $81 thousand

The company will surely need some financing in order to start operations, however, how will they choose to acquire it if they decide to do so. The most easy decision will be to issue more shares, because the current outstanding count is 68 million with 250 million authorized.

That, however, will most certainly cause dilution. Still, the current market cap of AFAI is a lot smaller than that of the bigger players like Growlife, Inc. (OTCBB:PHOT), Medical Marijuana, Inc. (OTCMKTS:MJNA) and Cannabis Science, Inc. (OTCMKTS:CBIS). They on the other hand have alrady made progress in their development and are in a much better financial position than AFAI.

AFAI reminds us most of ProTek Capital, Inc. (OTCMKTS:PRPM) and HPC POS System, Corp. (OTCMKTS:HPCS), two companies that suddenly decided to enter the medical marijuana sector, with similar financials.

This is the exact reason for which we would advise you to do your due diligence and weigh out the risks, especially when dealing with companies that suddenly decide to change their business plan and enter the medical marijuana industry, because of the hype.