-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, SToUSFQZgPfhwVnLm6b4EYYcl/r6a344eOO4pn4qkbtMSVSpiSn8uA8xHcjshB+O g30kAaMA63gTwF0AiDOkzA== 0000948830-98-000079.txt : 19980413 0000948830-98-000079.hdr.sgml : 19980413 ACCESSION NUMBER: 0000948830-98-000079 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980228 FILED AS OF DATE: 19980410 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALFA RESOURCES INC CENTRAL INDEX KEY: 0000354767 STANDARD INDUSTRIAL CLASSIFICATION: CRUDE PETROLEUM & NATURAL GAS [1311] IRS NUMBER: 840846529 STATE OF INCORPORATION: CO FISCAL YEAR END: 0531 FILING VALUES: FORM TYPE: 10QSB SEC ACT: SEC FILE NUMBER: 000-10157 FILM NUMBER: 98591467 BUSINESS ADDRESS: STREET 1: 216 16TH ST STE 730 CITY: DENVER STATE: CO ZIP: 80202 BUSINESS PHONE: 3035721135 MAIL ADDRESS: STREET 1: 216 16TH ST STE 730 CITY: DENVER STATE: CO ZIP: 80202 10QSB 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-QSB X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the quarterly period ended February 28, 1998. OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934. For the transition period from _______, 19___ to _______, 19___. Commission File Number: 0-10157 ALFA RESOURCES, INC. --------------------------------------------------------------- (Exact Name of Small Business Issuer as Specified in its Charter) COLORADO 84-0846529 ------------------------------ ----------------------- (State or Other Jurisdiction of (I.R.S. Employer Identi- Incorporation or Organization) fication Number) 216 SIXTEENTH STREET, SUITE 730 DENVER, COLORADO 80202 -------------------------------------- Address of Principal Executive Offices (303) 572-1135 -------------------------------------------------- (Registrant's Telephone Number, Including Area Code) N/A -------------------------------------------------- (Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report) Check whether the Issuer (1) has filed all reports required to be filed by Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter period that the Issuer was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. _____ _____ X Yes No _____ _____ There were 44,865,212 shares of the Registrant's $.001 par value common stock outstanding as of February 28, 1998. ALFA RESOURCES, INC. BALANCE SHEET ASSETS February 28 May 31 1998 1997 CURRENT ASSETS Cash and cash equivalents $ 28,791 $ 37,143 Accounts Receivable-trade, net of allowance for bad debts of 1,578 1,858 Total current assets 30,369 39,001 Oil and gas properties using the full cost method 1,447,289 1,447,289 Less: depletion, depreciation, amortization and valuation allowance (1,435,585) (1,430,185) 11,704 17,104 Other assets 7,616 7,616 TOTAL ASSETS $ 49,689 $ 63,721 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts Payable $ 11,616 $ 2,634 Dividends Payable 26,673 26,673 Accrued Expenses 7,950 7,950 Total current liabilities 46,239 37,257 Commitments and contingencies SHAREHOLDERS' EQUITY (Deficit) Preferred Stock, $1.00 par value; authorized 10,000,000 shares, 292,947 shares issued & outstanding 292,947 292,947 Common stock, $.001 par value; authorized 150,000,000 shares; 44,865,212 shares issued and outstanding 44,865 44,865 Additional paid-in capital 2,421,976 2,421,976 Accumulated deficit (2,756,338) (2,733,324) Total shareholders' equity (Deficit) 3,450 26,464 TOTAL LIABILITIES AND SHARE- HOLDERS' EQUITY (DEFICIT) $ 49,689 $ 63,721 The accompanying notes are an integral part of the financial statements. -2- ALFA RESOURCES, INC. STATEMENTS OF OPERATIONS For the Three Months Ended February 28, 1998 and 1997 1998 1997 REVENUES Oil and gas sales $ 5,721 $ 11,010 Management Fees -- 1,500 Interest and other income 182 202 Total revenues 5,903 12,712 EXPENSES Production 4,251 3,620 General and Administrative 3,094 3,750 Depletion, depreciation, amortization, and valuation allowance 1,800 1,800 Total expenses 9,145 9,170 Net Income (Loss) $ (3,242) $ 3,542 Net (Loss) per share $ * $ * Weighted average shares outstanding 44,865,212 44,865,212 The accompanying notes are an integral part of the financial statements. -3- ALFA RESOURCES, INC. STATEMENTS OF OPERATIONS For the Nine Months Ended February 28, 1998 and 1997 1998 1997 REVENUES Oil and gas sales $ 19,196 $ 31,901 Management Fees -- 4,500 Interest and other income 685 587 Total revenues 19,881 36,988 EXPENSES Production 15,776 13,807 General and Administrative 21,718 10,687 Depletion, depreciation, amortization, and valuation allowance 5,400 5,400 Total expenses 42,894 29,894 Net Income (Loss) before discontinued operations $ (23,013) $ 7,094 Loss from discontinued operations $ -- $ (8,123) Net Income (Loss) $ (23,013) $ (1,029) Net (Loss) per share $ * $ * Weighted average shares outstanding 44,865,212 44,865,212 The accompanying notes are an integral part of the financial statements. -4- ALFA RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Nine Months Ended February 28, 1998 and 1997 1998 1997 Cash provided by (used in) operations: Net Income (Loss) $(23,013) $ (1,029) Adjustments: Depletion, depreciation and amortization 5,400 5,400 (Increase) decrease in accounts receivable 280 41,086 (Increase) decrease in other assets -- 6,409 Increase (decrease) in accounts payable 8,981 (34,864) Increase (decrease) in dividends payable -- 210 Increase (decrease) in accrued expenses -- (9,524) Cash provided by (used in) operations (8,352) 6,788 Cash provided by (used in) investing activities: Sale of oil and gas properties and equipment -- 3,286 Cash provided by (used in) investing activities -- 3,286 Cash provided by (used in) financing activities: Preferred stock -- 52,072 Discontinued operations -- 8,123 Minority interest -- (69,619) Cash provided by (used in) financing activities -- (9,424) Net increase (decrease) in cash (8,352) 650 Cash, beginning of period 37,143 29,790 Cash, end of period $ 28,791 $ 30,440 The accompanying notes are an integral part of the financial statements. -5- ALFA RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS FEBRUARY 28, 1997 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND BASIS OF ACCOUNTING The financial statements include the accounts of Alfa Resources, Inc., ("Alfa" or the "Company"). The accompanying financial statements have been prepared on the basis of a going concern. However, the Company has depleted its working capital because of past operating losses, and has experienced the loss of production income because most of its oil and gas properties have been sold. Management intends to use unencumbered production revenue and possibly other sources to meet admin-istrative costs and continue in operation, but this cannot be assured. A decrease in the price of oil or other unexpected circumstances could cause operations to cease within a short period of time. OIL AND GAS ACCOUNTING The Company accounts for oil and gas properties using the "full cost" method. Under this method, all costs associated with property acquisition, exploration and development activities are capitalized, including costs of unsuccessful activities. Oil and gas properties are depleted using the units-of-production method based on the ratio of current period production to estimated proved oil and gas reserve quantities. No gain or loss resulting from the disposition of oil and gas properties is recognized unless the relationship between capitalized costs and reserves in the cost center is significantly changed. In addition to normal depletion, net capitalized costs are subject to a ceiling limitation required by the Securities and Exchange Commission (SEC). Such costs are limited to the present value (discounted at 10%) of the future net revenues from proved oil and gas properties, using year end costs and prices, after considering potential future income tax effects. There were no charges related to the ceiling limitation during the quarter ending February 28, 1998. Revenue from oil and gas production is recognized upon sale to unaffiliated purchasers. CASH EQUIVALENTS Cash equivalents include money-market accounts or other highly-liquid debt instruments with an original maturity of three months or less. USE OF ESTIMATES Preparation of financial statements in accordance with generally accepted accounting principles requires the use of estimates. The unaudited oil and gas reserve estimates prepared by management should be considered as reasonably possible to change, which can affect depletion and the net carrying value of oil and gas properties. INCOME (LOSS) PER SHARE Income (loss) per share is computed by dividing the net income (loss) by the weighted average number of common shares outstanding during the period. Shares -6- issued to insiders are considered to be outstanding from the beginning of the period issued. Common stock equivalents represented by options are not included as shares outstanding if their effect is antidilutive, or if estimated market value has not exceeded exercise price. 2. ADJUSTMENTS In the opinion of the Company, the accompanying unaudited financial statements contain all adjustments (consisting of normal recurring accruals only) necessary to present fairly, the Balance Sheet as of February 28, 1998, and the Statement of Operations and the Statement of Cash flow for the six months then ended. 3. ADDITIONAL DETAILS For additional details of the Company's financial condition, refer to the notes to the Company's annual financial statements for the year ended May 31, 1997, filed in the Company's Form 10-KSB annual report. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY AND CAPITAL RESOURCES The Company continues to have working capital problems because of continued losses and has sold property to satisfy debts. Several properties were not able to generate sufficient revenue to pay operating costs in prior years and were shut in and subsequently disposed of. At February 28, 1998, the Company had a working capital deficit in the amount of $15,870. Management's intent is to use the Company as a public shell merger candidate. Management intends to use unencumbered production revenue and other sources, such as sales proceeds, to meet administrative costs and continue in operation, but this cannot be assured. A decrease in the price of oil could cause operations to cease within a short period of time. If the Company is not able to sell assets and to settle its debts, the Company may not be able to continue in business. Cash flows provided (used) in operations for the nine months ended February 28, 1998, and 1997, were $(8,352) and $(6,788) respectively. The decrease in cash provided during the last period is principally due the Company's net loss. Alfa sells most of its oil production to three major oil companies. However, in the event these purchasers discontinued oil purchases, Alfa has made contact with other purchasers who would purchase the oil. Alfa's past strategy has been the merger with or acquisition of other small independent oil and gas production companies and the acquisition of interests in producing oil and gas properties in exchange for cash and shares of Alfa's equity securities. Alfa's current financial position makes it extremely difficult to accomplish this business plan. Alfa's long-term needs, if it is able to overcome its current financial deficit, will continue to depend on many outside factors beyond its control, such as the demand for oil and natural gas, the price of oil and gas, the general economic climate and Alfa's ability to raise additional capital and to find a merger candidate. -7- RESULTS OF OPERATIONS THREE MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO FEBRUARY 28, 1997 Alfa's oil and gas sales decreased 52% to $5,721 in 1998 from $11,010 in 1997. This decrease is primarily due to decreased production. Management fees decreased to $-0- in 1998 from $1,500 in 1997. This decrease is due to discontinuation of the services the Company was providing. Interest and other income decreased to $182 in 1998 from $202 in 1997. Production expenses increased 17% to $4,251 in 1998 from $3,620 in 1997. This increase resulted primarily from workovers on the Company's properties. General and Administrative expenses decreased to $3,094 in 1998 from $3,750 in 1997. This decrease is due professional fees. Since net operating revenues from Alfa's oil production are very sensitive to changes in the price of oil, it is difficult for management to predict whether or not the Company will be profitable in the future. Unless oil prices increase, the Company will not be able to produce its marginal properties and since management has reduced its services, total revenues will continue to decline. NINE MONTHS ENDED FEBRUARY 28, 1998 COMPARED TO FEBRUARY 28, 1997 Alfa's oil and gas sales decreased 60% to $19,196 in 1998 from $31,901 in 1997. This decrease is primarily due to loss of production. Management fees decreased to $-0- in 1998 from $4,500 in 1997. This decrease is due to discontinuation of the services the Company was providing. Interest and other income increased to $685 in 1998 from $587 in 1997. Production expenses increased 14% to $15,776 in 1998 from $13,807 in 1997. This increase resulted primarily from workovers of properties. General and Administrative expenses increased 103% to $21,718 in 1998 from $10,687 in 1997. This increase is due to audit and professional fees. Since net operating revenues from Alfa's oil production are very sensitive to changes in the price of oil, it is difficult for management to predict whether or not the Company will be profitable in the future. Unless oil prices increase, the Company will not be able to produce its marginal properties and since management has reduced its services, total revenues will continue to decline. EFFECT OF CHANGES IN PRICES Changes in prices during the past few years have been a significant factor in the oil and gas industry. The price received for the oil and gas produced by Alfa has fluctuated significantly during the last year. Changes in the price that Alfa receives for its oil and gas is set by market forces beyond Alfa's control. That uncertainty in oil and gas prices make it more difficult for a company like Alfa to increase its oil and gas asset base and become a significant participant in the oil and gas industry. -8- PART II - OTHER INFORMATION Item 1. Legal Proceedings. None. Item 2. Changes in Securities. None. Item 3. Defaults Upon Senior Securities. None. Item 4. Submission of Matters to a Vote of Security Holders. None. Item 5. Other Information. None. Item 6. Exhibits and Reports on Form 8-K. None. SIGNATURES In accordance with the requirements of the Exchange Act, the Issuer caused this Report to be signed on its behalf by the undersigned, thereunto duly authorized. ALFA RESOURCES, INC. /s/ C.L. Nordstrom By____________________________ Dated: April 9, 1998 C.L. Nordstrom, President /s/ Dennis R. Staal Dated: April 9, 1998 By____________________________ Dennis R. Staal, Chief Financial and Accounting Officer -9- EX-27 2
5 This schedule contains summary financial information extracted from the consolidated balance sheets and consolidated statements of operations found on page 2, 3 and 4 of the Company's Form 10-QSB for the quarter ended February 28, 1998, and is qualified in its entirety by reference to such financial statements. 9-MOS MAY-31-1997 FEB-28-1998 28,791 0 1,578 0 0 30,369 1,447,289 (1,435,585) 49,689 46,239 0 44,865 0 292,947 (334,362) 49,689 19,196 19,881 15,776 15,776 27,118 0 0 (23,013) 0 (23,013) 0 0 0 (23,013) 0 0
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