<PAGE>
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, 1996.
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 November 30, 1996.
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ALFA RESOURCES, INC.
CONSOLIDATED BALANCE SHEET
ASSETS
November 30 May 31
1996 1996
CURRENT ASSETS
Cash and cash equivalents $ 25,537 $ 29,790
Accounts Receivable-trade, net of
allowance for bad debts of 7,383 43,472
Other receivables -- 4,997
Total current assets 32,920 78,259
Oil and gas properties using
the full cost method 1,430,126 1,441,535
Less: depletion, depreciation, amortization
and valuation allowance (1,412,622) (1,409,022)
17,504 32,513
Other assets 2,629 9,038
TOTAL ASSETS $ 53,053 $ 119,810
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
CURRENT LIABILITIES
Accounts Payable $ 7,010 $ 42,335
Dividends Payable 26,673 26,463
Accrued Expenses 246 9,770
Total current liabilities 33,929 78,568
Minority Interest -- 69,619
Commitments and contingencies
SHAREHOLDERS' EQUITY (Deficit)
Preferred Stock, $1.00 par value;
authorized 10,000,000 shares, 292,947
shares issued & outstanding 292,947 240,875
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 2,409,636 2,409,636
Accumulated deficit (2,728,324) (2,723,753)
Total shareholders' equity (Deficit) 19,124 (28,377)
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY (DEFICIT) $ 53,053 $ 119,810
The accompanying notes are an integral part of the financial statements.
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ALFA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Three Months Ended November 30, 1996 and 1995
1996 1995
REVENUES
Oil and gas sales $ 9,770 $ 38,965
Management Fees 1,125 9,662
Interest and other income 95 747
Total revenues 10,990 49,374
EXPENSES
Production 1,139 34,528
General and Administrative (8,096) 33,678
Depletion, depreciation, amortization, and
valuation allowance 1,800 31,200
Interest -- 6,396
Total expenses (5,157) 105,802
Gain on Sale of Assets 1,135 --
Income (loss) before minority interest 17,282 (56,428)
(Gain) Loss Attributable to
minority interest (3,441) --
Net Income (Loss) before discontinued operations $ 13,841 $ (56,428)
Loss from discontinued operations $ (8,123) --
Net Income (Loss) $ 5,718 (56,428)
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.
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ALFA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF OPERATIONS
For the Six Months Ended November 30, 1996 and 1995
1996 1995
REVENUES
Oil and gas sales $ 20,891 $ 116,944
Management Fees 3,000 14,275
Interest and other income 385 3,212
Total revenues 24,276 134,431
EXPENSES
Production 10,187 85,818
General and Administrative 6,937 56,533
Depletion, depreciation, amortization, and
valuation allowance 3,600 62,400
Interest -- 12,791
Total expenses 20,724 217,542
Gain on Sale of Assets -- --
Income (loss) before minority interest 3,552 (83,111)
(Gain) Loss Attributable to
minority interest -- --
Net Income (Loss) before discontinued operations $ 3,552 $ (83,111)
Loss from discontinued operations $ (8,123) --
Net Income (Loss) $ (4,571) (83,111)
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.
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ALFA RESOURCES, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Six Months Ended November 30, 1996 and 1995
1996 1995
Cash provided by (used in) operations:
Net Income (Loss) $ (4,571) $(83,111)
Adjustments:
Minority Interest -- --
Depletion, depreciation and amortization 3,600 62,400
(Increase) decrease in accounts receivable 41,086 (30,954)
(Increase) decrease in other assets 6,409 --
Increase (decrease) in accounts payable (35,325) (98,591)
Increase (decrease) in dividends payable 210 --
Increase (decrease) in accrued expenses (9,524) 1,384
Amortization of debt discount -- 12,791
Cash provided by (used in) operations 1,885 (136,081)
Cash provided by (used in) investing
activities:
Sale of oil and gas properties and equipment -- 67,280
Cash provided by (used in)investing activities -- 67,280
Cash provided by (used in) financing activities:
Preferred stock 52,072 --
Discontinued operations 11,409 --
Minority interest (69,619) --
Cash provided by (used in) financing activities (6,138) --
Net increase (decrease) in cash (4,253) (68,801)
Cash, beginning of period 29,790 133,155
Cash, end of period $ 25,537 $ 64,354
The accompanying notes are an integral part of the financial statements.
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ALFA RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOVEMBER 30, 1996
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) and its wholly owned subsidiary, Granite Alfa Corporation.
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. Certain current
production revenue is being withheld by operators to liquidate trade payables,
and this situation is expected to continue through much of fiscal year 1997.
Management intends to use unencumbered production revenue and 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.
Meteor Developments, Inc. ("Meteor") which was owned 80% by Alfa has been
liquidated.
OIL AND GAS ACCOUNTING
The Company and its subsidiaries account 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 years quarter.
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.
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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 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 Consolidated Balance Sheet as of November 30,
1996, and the Consolidated Statement of Operations and the Consolidated
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,
1996, 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, 1996, the Company
had a working capital deficit in the amount of ($1,009). Management has
liquidated its subsidiary. Management's intent is to use the Company as a
public shell merger candidate.
Some current production revenue is currently being withheld by operators to
liquidate operators' liens for trade payables and this situation is expected
to continue through fiscal 1997. Management intends to use unencumbered pro-
duction 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,
1996, and 1995, were $1,885 and ($136,081) respectively. The increase in cash
provided during the last period is principally due to the payment of accounts
payable, the Company's net loss and collection of receivables.
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Sale of oil and gas properties provided $0 in for the six months ended
November 30 , 1996 compared to $67,280 cash flows in the six month period
ended November 30, 1995.
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.
RESULTS OF OPERATIONS
THREE MONTHS ENDED NOVEMBER 30, 1996 COMPARED TO NOVEMBER 30, 1995
Alfa's oil and gas sales decreased 75% to $9,770 in 1996 from $38,965 in
1995. This decrease is primarily due to the sale of properties. Management
fees decreased 75% to $1,125 in 1996 from $9,662 in 1995. This decrease is
due to discontinuation of the services the Company was providing. Interest
and other income decreased to $95 in 1996 from $747 in 1995.
Production expenses decreased 97% to $1,139 in 1996 from $34,528 in 1995. This
decrease resulted primarily from sale of properties. General and Admin-
istrative expenses decreased 124% to $(8,096) in 1996 from $33,678 in 1995.
This decrease is due to decreased activity of the Company and management's
attempt to decrease expenses which reduced salaries and other costs and
discontinued operations of Meteor.
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
continue to 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.
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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.
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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 9, 1997 By/s/C.L. Nordstrom
C.L. Nordstrom, President
Dated: January 9, 1997 By/s/Dennis R. Staal
Dennis R. Staal, Chief
Financial and Accounting
Officer
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<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from the
consolidated balance sheets and consolidated statements of operations found on
pages 2, 3 and 4 of the Company's Form 10-QSB for the quarter ended November
30, 1996, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> NOV-30-1996
<PERIOD-END> NOV-30-1996
<CASH> 46,379
<SECURITIES> 0
<RECEIVABLES> 30,088
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 76,467
<PP&E> 1,441,535
<DEPRECIATION> (1,410,822)
<TOTAL-ASSETS> 116,218
<CURRENT-LIABILITIES> 88,706
<BONDS> 0
<COMMON> 44,865
0
240,875
<OTHER-SE> (324,406)
<TOTAL-LIABILITY-AND-EQUITY> 116,218
<SALES> 11,121
<TOTAL-REVENUES> 13,286
<CGS> 9,048
<TOTAL-COSTS> 0
<OTHER-EXPENSES> 16,833
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (10,289)
<INCOME-TAX> 0
<INCOME-CONTINUING> (10,289)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (10,289)
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
