-----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, FHaLirVsXZuF0ZvOK8H5Kb1CVBbJt3krIaJEmlDVkOfbbYyG8FkhQWw2UwPrhs8V osyQkZhQ05Pslv57nFjJzQ== 0000948830-99-000019.txt : 19990115 0000948830-99-000019.hdr.sgml : 19990115 ACCESSION NUMBER: 0000948830-99-000019 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19981130 FILED AS OF DATE: 19990114 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: 99505948 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 November 30, 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 780 DENVER, COLORADO 80202 -------------------------------------- Address of Principal Executive Offices (303) 572-1136 -------------------------------------------------- (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 50,000,000 shares of the Registrant's $.001 par value common stock outstanding as of November 30, 1998. ALFA RESOURCES, INC. BALANCE SHEET ASSETS November 30 May 31 1998 1998 CURRENT ASSETS Cash and cash equivalents $ 11,839 $ 10,830 Accounts Receivable-trade 700 1,054 Prepaid expense -- 2,900 Total current assets 12,539 14,784 Oil and gas properties using the full cost method 1,447,289 1,430,126 Less: depletion, depreciation, amortization and valuation allowance (1,442,895) (1,422,132) 4,394 7,994 Other assets 3,000 3,000 TOTAL ASSETS $ 19,933 $ 25,778 LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT) CURRENT LIABILITIES Accounts Payable $ 24,971 $ 14,727 Dividends Payable 26,673 26,673 Accrued Expenses -- 336 Total current liabilities 51,644 41,736 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; 50,000,000 shares issued and outstanding 50,000 44,865 Additional paid-in capital 2,421,976 2,421,976 Accumulated deficit (2,796,634) (2,775,746) Total shareholders' equity (Deficit) (31,711) (15,958) TOTAL LIABILITIES AND SHARE- HOLDERS' EQUITY (DEFICIT) $ 19,933 $ 25,778 The accompanying notes are an integral part of the financial statements. -2- ALFA RESOURCES, INC. STATEMENTS OF OPERATIONS For the Three Months Ended November 30, 1998 and 1997 1998 1997 REVENUES Oil and gas sales $ 4,237 $ 8,530 Interest and other income 54 230 Total revenues 4,291 8,760 EXPENSES Production 4,047 6,991 General and Administrative 8,281 5,455 Depletion, depreciation, amortization, and valuation allowance 1,800 1,800 Total expenses 14,128 14,246 Net Income (Loss) $ (9,837) $ (5,486) Net (Loss) per share $ * $ * Weighted average shares outstanding 48,288,404 44,865,212 The accompanying notes are an integral part of the financial statements. -3- ALFA RESOURCES, INC. STATEMENTS OF OPERATIONS For the Six Months Ended November 30, 1998 and 1997 1998 1997 REVENUES Oil and gas sales $ 7,637 $ 13,475 Interest and other income 147 503 Total revenues 7,784 13,978 EXPENSES Production 7,472 11,525 General and Administrative 17,599 18,624 Depletion, depreciation, amortization, and valuation allowance 3,600 3,600 Total expenses 28,671 33,749 Net Income (Loss) $ (20,887) $ (19,771) Net (Loss) per share $ * $ * Weighted average shares outstanding 46,576,808 44,865,212 The accompanying notes are an integral part of the financial statements. -4- ALFA RESOURCES, INC. STATEMENTS OF CASH FLOWS For the Six Months Ended November 30, 1998 and 1997 1998 1997 Cash provided by (used in) operations: Net Income (Loss) $(20,887) $(19,771) Adjustments: Depletion, depreciation and amortization 3,600 3,600 (Increase) decrease in accounts receivable 354 280 (Increase) decrease in prepaid expense 2,900 -- Increase (decrease) in accounts payable 10,243 6,547 Increase (decrease) in accrued expenses (336) -- Cash provided by (used in) operations (4,126) (9,344) Cash flows from financing activities Stock issued for services 5,135 -- Net cash provided by financing activities 5,135 -- Net increases in cash and equivalents 1,009 -- Cash, beginning of period 10,830 37,143 Cash, end of period $ 11,839 $ 27,798 The accompanying notes are an integral part of the financial statements. -5- ALFA RESOURCES, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS NOVEMBER 30, 1998 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES CONSOLIDATION AND BASIS OF ACCOUNTING 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 reduced administrative 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 capi- talized costs and reserves in the cost center is significantly changed. In addition to normal depletion, net capitalized costs are subject to a cei- ling 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 November 30, 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 rea- sonably 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 issued to insiders are considered to be outstanding from the beginning -6- 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 November 30, 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, 1998, 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 November 30, 1998, the Company had a working capital deficit in the amount of $39,105. 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 reduced 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 six months ended November 30, 1998, and 1997, were $(4,126) and $(9,344) respectively. The decrease in cash provided during the last period is principally due the Company's net loss. Net cash provided by financing activities totaled $5,135 for the six months ended November 30, 1998 compared to $-0- for the nine months ended November 30, 1997. The increase is due to stock issued to Directors for services. 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- YEAR 2000 Alfa has no proprietary software. The Company has checked with the manu- facturers of it's software package and has been informed that a new version addressing the Year 2000 problem will be available mid-1999. Alfa does not expect to incur any significant costs related to the Year 2000 problem. RESULTS OF OPERATIONS THREE MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO NOVEMBER 30, 1998 Alfa's oil and gas sales decreased 50% to $4,237 in 1998 from $8,530 in 1997. This decrease is primarily due to the previous sale of properties. Interest and other income decreased to $54 in 1998 from $230 in 1997. Production expenses decreased 42% to $4,047 in 1998 from $6,991 in 1997. This decrease resulted primarily from previous sale of properties. General and Administrative expenses increased 52% to $8,281 in 1998 from $5,455 in 1997. This increase is principally due to officers and directors compensation. 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. SIX MONTHS ENDED NOVEMBER 30, 1998 COMPARED TO NOVEMBER 30, 1998 Alfa's oil and gas sales decreased 43% to $7,637 in 1998 from $13,475 in 1997. This decrease is primarily due to the previous sale of properties. Interest and other income decreased to $147 in 1998 from $5030 in 1997. Production expenses decreased 35% to $7,472 in 1998 from $11,525 in 1997. This decrease resulted primarily from previous sale of properties. General and Administrative expenses decreased 6% to $17,599 in 1998 from $18,624 in 1997. This decrease is principally due to decreased activity of the Company and management's attempt to decrease expenses and other costs. 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. -9- 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. Dated: January 12, 1999 By:/s/ C.L. Norstrom C.L. Nordstrom, President Dated: January 12, 1999 By:/s/ Dennis R. Staal Dennis R. Staal, Chief Financial and Accounting Officer -10- 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 of the Company's Form 10-QSB for the quarter ended November 30, 1998, and is qualified in its entirety by reference to such financial statements. 6-MOS MAY-31-1998 NOV-30-1998 11,839 0 700 0 0 12,539 1,447,289 1,442,895 19,933 51,644 0 50,000 0 292,947 (374,658) 19,933 7,637 7,784 0 0 28,671 0 0 0 0 (20,887) 0 0 0 (20,887) 0 0
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