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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 August 31, 1999.
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.
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(Exact Name of Small Business Issuer as Specified in its Charter)
COLORADO 84-0846529
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(State or Other Jurisdiction of (I.R.S. Employer Identi-
Incorporation or Organization) fication Number)
218 CARMEN LANE, SUITE 208
SANTA MARIA, CA 93458
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Address of Principal Executive Offices
(805) 928-8688
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(Registrant's Telephone Number, Including Area Code)
216 SIXTEENTH STREET, SUITE 730
DENVER, COLORADO 80202
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(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 99,000,000 shares of the Registrant's $.001 par value common stock
outstanding as of August 31, 1999.
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ALFA RESOURCES, INC.
BALANCE SHEET
ASSETS
August 31 May 31
1999 1999
CURRENT ASSETS
Cash and cash equivalents $ 614 $ 20,860
Accounts Receivable-trade 1,250 700
Total current assets 1,864 21,560
Oil and gas properties using
the full cost method 625,000 1,430,126
Less: depletion, depreciation, amortization
and valuation allowance (200) (1,430,126)
624,800 0
Other assets 415,000 843,000
TOTAL ASSETS $1,041,664 $ 864,560
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts Payable $ 15,116 $ 23,941
Dividends Payable 26,673 26,673
Accrued Expenses 2,042 --
Current Portion of Long Term Debt 68,877 --
Total current liabilities 112,708 50,614
LONG TERM DEBT
Note Payable 131,123 --
SHAREHOLDERS' EQUITY
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; 99,000,000 shares
issued and outstanding 99,000 99,000
Additional paid-in capital 2,422,976 2,422,976
Accumulated deficit (2,017,090) (2,000,977)
Total shareholders' equity 797,833 813,946
TOTAL LIABILITIES AND SHARE-
HOLDERS' EQUITY $ 1,041,664 $ 864,560
The accompanying notes are an integral part of the financial statements.
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ALFA RESOURCES, INC.
STATEMENTS OF OPERATIONS
For the Three Months Ended August 31, 1999 and 1998
1999 1998
REVENUES
Oil and gas sales $ 1,250 $ 3,400
Interest and other income 70 93
Gain on sale of oil and gas properties 4,055 --
Total revenues 5,375 3,493
EXPENSES
Production 900 3,425
General and Administrative 18,346 9,318
Depletion, depreciation, amortization,
and valuation allowance 200 1,800
Interest expense 2,042 --
Total expenses 21,488 14,543
Net Income (Loss) $(16,113) $(11,050)
Net (Loss) per share $ * $ *
Weighted average shares
outstanding 99,000,000 44,865,212
* less than $(0.01) per share
The accompanying notes are an integral part of the financial statements.
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ALFA RESOURCES, INC.
STATEMENTS OF CASH FLOWS
For the Three Months Ended August 31, 1999 and 1998
1999 1998
Cash provided by (used in) operations:
Net Income (Loss) $(16,113) $(11,050)
Adjustments:
Depletion, depreciation and amortization 200 1,800
(Increase) decrease in accounts receivable (550) 354
(Increase) decrease in Prepaid expense -- 2,900
(Increase) decrease in other assets 428,000 --
Increase (decrease) in accounts payable (8,825) 6,317
Increase (decrease) in accrued expenses 2,042 (336)
Cash provided by (used in) operations 404,754 (15)
Cash flows from financing activities:
Assumption of debt 200,000 --
Net cash provided by financing activities 200,000 --
Cash used in investing activities:
Purchase of oil and gas properties (625,000) --
Net cash provided by investing activities (625,000) --
Net increase (decrease) in cash (20,246) (15)
Cash, beginning of period 20,860 10,830
Cash, end of period $ 614 $ 10,815
The accompanying notes are an integral part of the financial statements.
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ALFA RESOURCES, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1999
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. With the acquisition of new oil and gas properties
and the increase in oil prices, management expects to generate net income 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, 1999.
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.
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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 Balance Sheet as of August 31, 1999, and
the Statement of Operations and the Statement of Cash flow for the three
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,
1999, 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
Alfa continues to have working capital problems. The company has sold it's
older oil and gas properties at a gain of $4,055; and has acquired interest in
new oil and gas properties which are expected to generate a positive cash flow
to the Company within the next six to eight months. This interest, valued at
$625,000, was acquired through an exchange in Other Assets of $425,000; and
the balance of $200,000 was undertaken as a liability. $68,877 of these
liabilities are current. At August 31, the Company had a working capital
deficit of $110,844.
YEAR 2000
Alfa has no proprietary software. The Company has acquired from the
manufacturer of it's software package, a new version of it's software that is
Year 2000 compliant. Alfa does not expect to incur any significant costs
related to the Year 2000 problem.
RESULTS OF OPERATIONS
THREE MONTHS ENDED AUGUST 31, 1999 COMPARED TO AUGUST 31, 1998
All of the oil and gas properties that were held by Alfa as of May 31, 1999
were
sold during the quarter ended August 31, 1999. In this same quarter, Alfa
acquired a 25% interest in the oil and gas properties of Delta Petroleum
located in LaSalle Parish, Louisiana. Alfa's proportionate share of the
proved reserves and valuation, based on SEC PV-10 case, is $625,000. Pursuant
to this acquisition, $425,000 was adjusted against Other Assets; and the
balance of $200,000 was undertaken as a liability. Payments against this
liability are based on future oil production; and it is estimated that $68,877
will be payable within the current fiscal year and $131,123 in future fiscal
years.
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Oil and gas revenues decreased from $3,400 in 1998 to $1,250 in 1999 because
the new property did not start producing until the last month of the quarter
and is still not producing at full capacity. Interest and other income
decreased from $93 in 1998 to $70 in 1999. Net gain from the sale of oil and
gas properties in 1999 was $4,055. There were no sales of oil and gas
properties in 1998.
Production expenses decreased from $3,425 in 1998 to $900 in 1999 because of
lower production. General and Administrative expenses increased from $9,318 in
1998 to $18,346 in 1999 due to increased activity in seeking out business
opportunities and the subsequent need for paid staffing. Interest expense
increased from zero to $2,042 because of the liabilities associated with the
new property.
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.
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.
RELATED PARTY TRANSACTIONS
In August, 1999, all of the Company's oil and gas operations held as of May
31, 1999 were assigned to Mystique Resources Company in exchange for services
rendered and assumption of the outstanding liabilities related to those
operations. Mystique Resources Company is owned by a former officer and
director of the Company. The net gain to the Company from this transaction
was $7,055.
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.
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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.
/signed/ Sultan Mahmud
Dated: October 21, 1999 By:/s/ Sultan Mahmud
Sultan Mahmud, President
Dated: October 21, 1999 By:/s/ Nancy R. Heck
Nancy R. Heck, Chief
Financial and Accounting
Officer
<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
page 2, 3 and 4 of the Company's Form 10-QSB for the quarter ended August
31, 1999, and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> MAY-31-2000
<PERIOD-END> AUG-31-1999
<CASH> 614
<SECURITIES> 0
<RECEIVABLES> 1,250
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 1,864
<PP&E> 625,000
<DEPRECIATION> ( 200)
<TOTAL-ASSETS> 1,041,664
<CURRENT-LIABILITIES> 112,708
<BONDS> 0
<COMMON> 99,000
0
292,947
<OTHER-SE> 405,886
<TOTAL-LIABILITY-AND-EQUITY> 1,041,664
<SALES> 1,250
<TOTAL-REVENUES> 5,375
<CGS> 900
<TOTAL-COSTS> 21,488
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 2,042
<INCOME-PRETAX> (16,113)
<INCOME-TAX> 0
<INCOME-CONTINUING> (16,113)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,113)
<EPS-BASIC> 0
<EPS-DILUTED> 0
</TABLE>
