ALLIED RESOURCES, INC.
CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS
March 31, 2015
Note 1 – Basis of Presentation
The accompanying unaudited condensed financial statements have been prepared by management in
accordance with the instructions in Form 10-Q and, therefore, do not include all information and
footnotes required by generally accepted accounting principles and should, therefore, be read in
conjunction with the Company’s Form 10-K for the year ended December 31, 2014, filed with the
Securities and Exchange Commission. These statements do include all normal recurring adjustments
which the Company believes necessary for a fair presentation of the statements. The interim operations
are not necessarily indicative of the results to be expected for the full year ended December 31, 2015.
Note 2 – Additional Footnotes Included By Reference
There has been no material change in the information disclosed in the notes to the financial statements
included in the Company’s Form 10-K for the year ended December 31, 2014, filed with the Securities
and Exchange Commission. Therefore, those footnotes are included herein by reference.
Note 3 – Subsequent Events
The Company evaluated its March 31, 2015 financial statements for subsequent events through the date
the financial statements were issued. The Company is not aware of any subsequent events which would
require recognition or disclosure in the financial statements.
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ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
This Management’s Discussion and Analysis of Financial Condition and Results of Operations and other
parts of this quarterly report contain forward-looking statements that involve risks and uncertainties.
Forward-looking statements can also be identified by words such as “anticipates,” “expects,” “believes,”
“plans,” “predicts,” and similar terms. Forward-looking statements are not guarantees of future
performance and our actual results may differ significantly from the results discussed in the forward-
looking statements. Factors that might cause such differences include but are not limited to those
discussed in the subsection entitled Forward-Looking Statements and Factors That May Affect Future
Results and Financial Condition below. The following discussion should be read in conjunction with our
financial statements and notes thereto included in this report. Our fiscal year end is December 31. All
information presented herein is based on the three month periods ended March 31, 2015 and March 31,
2014.
Allied is an independent oil and natural gas producer involved in the exploration, development,
production and sale of oil and gas derived from properties located in Calhoun and Ritchie Counties, West
Virginia, and Goliad, Edwards and Jackson Counties, Texas.
Discussion and Analysis
General
Allied intends to utilize available cash to acquire additional oil and gas producing properties and to
implement improved production practices on existing wells to increase production and expand reserves
where practicable. Allied believes that it can achieve production growth while expanding reserves through
improved exploitation of its existing inventory of wells by disposing of non-productive wells and
enhancing producing wells. An evaluation for this objective of our existing portfolio of oil and gas
properties is constantly under consideration. Allied also intends to continue to expand non-operated and
explore opportunities for operated acquisitions of additional oil or gas producing properties.
Recovery from producing wells is consistently evaluated to consider cost-efficient work-over methods
designed to improve the performance of the wells. When considering the drilling of new wells, we
conduct a geological review of the prospective area, in cooperation with our independent operator, to
determine the potential for oil and gas. Our own consultants then review available geophysical data
(generally seismic and gravity data) opine as to the prospect for success. In the event that our evaluation
of available geophysical data indicates that the target has significant accumulations of oil and gas, we
then consider the economic feasibility of drilling. The presence of oil and gas for any specific target
cannot guarantee economic recovery. Production depends on many factors including drilling and
completion costs, the distance to pipelines and pipeline pressure, current energy prices, accessibility to the
site, and whether the project is developmental or solely a wildcat prospect.
Allied’s business development strategy is prone to significant risks and uncertainties certain of which can
have an immediate impact on its efforts to realize positive net cash flow and deter future prospects of
production growth. Historically Allied has not been able to generate sufficient cash flow from operations
to sustain operations and fund exploration or development costs. Therefore, there can be no assurance that
the wells currently producing will provide sufficient cash flows to sustain operations. Should Allied be
unable to generate sufficient cash flow from existing properties, it may have to sell certain properties or
interests in such properties or seek financing through alternative sources such as the sale of its common
stock.
8
West Virginia Well Information
Allied owns varying interests in a total of 145 wells in West Virginia on several leases held by an
independent operator. Some leases contain multiple wells. All the wells in which we have an interest are
situated on developed acreage spread over 3,400 acres in Ritchie and Calhoun Counties. Depth of the
producing intervals varies from 1,730 ft to 5,472 ft. Many of our wells are situated on the same leases and
as such share production equipment in order to minimize lease operating costs.
Our working interest is defined as interest in oil and gas that includes responsibility for all drilling,
developing, and operating costs varying from 18.75% to 75%. Our net revenue interest is defined as that
portion of oil and gas production revenue after deduction of royalties, varying from 15.00% to 65.625%.
Texas Well Information
Allied owns varying interests in a total of 10 wells in Texas on four leases held by independent operators.
All the wells in which we have an interest are situated on developed acreage spread over 2,510 acres in
Goliad, Edwards and Jackson Counties. Depth of the producing intervals varies from 7,600 ft to 9,600 ft.
Our working interest is defined as interest in oil and gas that includes responsibility for all drilling,
developing, and operating costs varying from 3.73% to 21%. Our net revenue interest is defined as that
portion of oil and gas production revenue after deduction of royalties, varying from 3.9388% to 12.75%.
Exploration, Development and Operations
The recent dramatic decline in oil prices has affected Allied’s business and will continue to do so should
current prices remain consistent or continue to decline. Nevertheless, Allied intends to continue to
identify non-operated oil and gas producing properties for purchase, acquire oil and gas leases that it will
operate and implement improved production efficiencies on existing wells. Our criteria for purchasing oil
and gas producing properties is defined by short term returns on investment, long term growth in revenue,
and development potential, while our criteria for acquiring oil and gas leases is predicated on a proven
record of historical production and our own capacity to operate any given field. The decrease in prices for
oil and the continuation of low natural gas prices is yet to increase the number of opportunities available
to us due to our relatively limited cash position and the general belief among those in the energy business
that prices will rebound in the near term stabilizing at $60-70 per barrel within the next 12 months.
We are further considering future prospects for the development of the virtually untapped Marcellus and
Utica shale formations that appear to underlie Allied’s oil and gas interests in West Virginia, particularly
in Ritchie County. The Marcellus and Utica shale structures that have formed under much of
Pennsylvania, Ohio, New York, West Virginia and adjacent states have become a major reservoir for
hydrocarbon recovery. Drilling by other operators in Ritchie County has indicated successful rates of
recovery and our own open hole well logs indicate the presence of potentially productive Marcellus shale
at a depth of 6,000 feet varying in thickness from 50 – 60 feet. We have been approached by active
operators in the area to conduct potential joint development of this potential resource with the expectation
that hydrocarbon reserves meet the probable reserves criteria. However, since exploration of the
Marcellus and Utica shale in Ritchie County is relatively recent no oil or natural gas reserves underlying
our interests have yet been determined. We intend to conduct a probable reserve evaluation this year to
value probable reserves. Nevertheless, our future plans to develop these shale formations continue to be
tempered by the high risk/reward ratio of exploratory drilling in the near term based on anticipated pricing
for oil and natural gas over the next five years.
9
Results of Operations
During the period from January 1, 2015 through March 31, 2015, Allied was engaged in evaluating
acquisition opportunities in Texas, examining the operating efficiencies of existing wells, and overseeing
the operation of its oil and gas assets by independent operators. The operation and maintenance of
Allied’s oil and gas operations is wholly dependent on the services provided by five different independent
operators. While the services provided by these operators have proven adequate, the fact that Allied is
dependent on the operations of third parties to maintain its operations and produce revenue does impact
its own ability to realize a net profit.
For the three months ended March 31, 2015, Allied realized a net loss due primarily to the decline in
energy prices and depletion over the comparable three month period. Allied believes that the immediate
key to its ability to return to profitability are energy prices. Should oil and gas prices rise, and expenses
remain relatively consistent, Allied believes that it will be able to return to net profits in future periods.
THREE MONTHS ENDED MARCH 31
2015
2014
CHANGE # CHANGE %
AVERAGE DAILY PRODUCTION
Oil (bbls/day)
7
4
3
75%
Natural gas (mcf/day)
263
134
129
96%
Barrels of oil equivalent (boe/day)
51
26
25
93%
PROFITABILITY
Petroleum and natural gas revenue
$
111,101 $
131,224
(20,123)
-15%
Net Revenue
111,101
131,224
(20,123)
-15%
Production and operating costs
89,398
90,625
(1,227)
-1%
Field netback
21,703
40,599
(18,896)
-47%
G&A
34,542
67,743
(33,201)
-49%
Net cash flow from operations
(12,839)
(27,144)
14,305
53%
Depletion, depreciation and other charges
11,313
6,667
4,646
70%
Future income taxes
-
-
-
0%
Net loss from operations
$
(24,152) $
(33,811)
9,659
29%
PROFITABILITY PER BOE
Oil and gas revenue (average selling price)
24.28
55.37
(31.08)
-56%
Production and operating costs
19.54
38.24
(18.70)
49%
Field netback ($/boe)
4.74
17.13
(12.39)
-72%
Net loss ($/boe)
(5.28)
(14.27)
8.99
63%
Cash flow from operations ($/boe)
(2.81)
(11.45)
8.65
75%
Revenue
Revenue for the three month period ended March 31, 2015, decreased to $111,101 from $131,224 for the
comparable period ended March 31, 2014, a decrease of 15%. The decrease in revenue over the
comparable three month periods can be attributed to the change in energy prices paid when comparing the
respective periods despite the increase in production of both oil and natural gas in the current period.
Allied believes that revenue will increase over near term future periods as energy prices stabilize and
production levels remain relatively consistent.
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Net Losses
Net losses for the three month period ended March 31, 2015, decreased to $22,935 as compared to net
losses of $33,293 for the three month period ended March 31, 2014, a decrease of 32%. The decrease in
net losses over the comparable three month periods can be attributed to the decrease in general and
administrative expenses and production costs offset by an increase in depletion expense.
Allied expects to return to net income in future periods as revenues are expected to increase with oil and
natural gas prices, and increased productivity in the field.
Operating Expenses
General and administrative expenses for the three month period ended March 31, 2015, decreased to
$34,542 from $67,743 for the comparable three month period ended March 31, 2014, a decrease of 49%.
The decrease in general administrative expenses over the comparable three month periods can be
attributed to expenses related to field due diligence activities in the prior three month period.
Allied expects that general and administrative expenses will remain relatively consistent in future periods.
Depletion expenses for the three month periods ended March 31, 2015, and March 31, 2014 were $11,313
and $6,667 respectively, an increase of 70%.
Depletion expenses are expected to continue to increase in relation to the value attributed to aging oil and
gas assets.
Production costs for the three month periods ended March 31, 2015, and March 31, 2014 were $89,398
and $90,625 respectively, a decrease of 1%. The decrease in production costs over the three month
comparable periods can be attributed to a decrease in work over costs.
Allied expects that production costs will increase over future periods as existing wells age and require
more vigorous maintenance.
Income Tax Expense
As of December 31, 2014, Allied has net operating loss (NOL) carry forwards of approximately
$2,143,000. Should substantial changes in our ownership occur there would be an annual limitation of the
amount of NOL carry forward which could be utilized. The ultimate realization of these carry forwards is
due, in part, on the tax law in effect at the time and future events, which cannot be determined. During the
year ended December 31, 2014, a valuation allowance was recorded against this net operating loss carried
forward.
Capital Expenditures
Allied made no capital expenditures on property or equipment for the three months ended March 31, 2015
or 2014.
Liquidity and Capital Resources
Allied had a working capital surplus of $1,449,697 as of March 31, 2015, and has funded its cash needs
since inception with revenues generated from operations, debt instruments and private equity placements.
11
Existing working capital and anticipated cash flow are expected to be sufficient to fund operations over
the next twelve months.
Total current assets as of March 31, 2015, were $1,461,394 which consisted of $1,378,858 in cash and
$82,536 in accounts receivable. Total assets were $2,769,818 which consisted of current assets, proven oil
and gas properties of $603,723 and deposits of $704,701.
Total current liabilities as of March 31, 2015, were $11,697 which consisted of accounts payable. Total
liabilities were $238,008 which consisted of current liabilities and an asset retirement obligation of
$226,311.
Stockholders’ equity as of March 31, 2015, was $2,531,810.
Net cash used in operating activities for the three month period ended March 31, 2015 was $33,303 as
compared to net cash used in operating activities of $3,677 for the three month period ended March 31,
2014. Net cash used in operating activities in the current period can be attributed primarily to a number of
items that are book expense items which do not affect the total amount relative to actual cash used
including depletion and amortization, and accretion expense. Balance sheet accounts that actually affect
cash, but are not income statement related items that are added or deducted to arrive at net cash used in
operating activities, include accounts receivable and accounts payable.
Allied expects to transition to cash flow provided by operations in future periods as net losses are
expected to decrease in the near term with an increase in energy prices.
Net cash flow used in investing activities for the three month periods ended March 31, 2015 and March
31, 2014 was nil.
Allied expects to use cash flow in investing activities over future periods as it continues to evaluate
existing wells, identify exploration opportunities and considers additional acquisitions which activities
will require investment.
Net cash flow from financing activities for the three month periods ended March 31, 2015 and March 31,
2015 was nil.
Allied does not expect to realize cash flow from financing activities in the near term.
Allied has adopted a stock option plan pursuant to which it can grant up to 750,000 options to purchase
shares of its common stock to employees, directors, officers, consultants or advisors on the terms and
conditions set forth therein. As of March 31, 2015, 600,000 options with an exercise price of $0.35 had
been granted, all of which have vested.
Allied has no lines of credit or other bank financing arrangements in place.
Allied had no commitments for future capital expenditures that were material at March 31, 2015.
Allied has no defined benefit plan or contractual commitment with any of its officers or directors except
each members participation in our stock option plan and an executive agreement with its sole executive
officer that provides for a monthly fee and participation in our stock option plan.
Allied has no current plans for the purchase or sale of any plant or equipment.
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Allied has no current plans to make any changes in the number of employees.
Allied does not expect to pay cash dividends in the foreseeable future.
Off Balance Sheet Arrangements
As of March 31, 2015, Allied has no significant off-balance sheet arrangements that have or are
reasonably likely to have a current or future effect on our financial condition, changes in financial
condition, revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources
that are material to stockholders.
Forward Looking Statements and Factors That May Affect Future Results and Financial Condition
The statements contained in the section titled Management’s Discussion and Analysis of Financial
Condition and Results of Operations, with the exception of historical facts, are forward looking
statements within the meaning of Section 27A of the Securities Act. We are ineligible to rely on the safe-
harbor provision of the Private Litigation Reform Act of 1995 for forward looking statements made in
this current report. Forward looking statements reflect our current expectations and beliefs regarding our
future results of operations, performance, and achievements. These statements are subject to risks and
uncertainties and are based upon assumptions and beliefs that may or may not materialize. These
statements include, but are not limited to, statements concerning:
§ our anticipated financial performance and business plan;
§ uncertainties related to production volumes of oil and gas;
§ the sufficiency of existing capital resources;
§ uncertainties related to future oil and gas prices;
§ uncertainties related the quantity of our reserves of oil and gas;
§ the volatility of the stock market and;
§ general economic conditions.
We wish to caution readers that our operating results are subject to various risks and uncertainties that
could cause our actual results to differ materially from those discussed or anticipated including the factors
set forth in the section entitled “Risk Factors” included elsewhere in this report. We also wish to advise
readers not to place any undue reliance on the forward looking statements contained in this report, which
reflect our beliefs and expectations only as of the date of this report. We assume no obligation to update
or revise these forward looking statements to reflect new events or circumstances or any changes in our
beliefs or expectations, other than is required by law.
Critical Accounting Policies and Estimates
Accounting for Oil and Gas Property Costs. Allied (i) follows the successful efforts method of accounting
for the costs of its oil and gas properties, (ii) amortizes such costs using the units of production method
and (iii) evaluates its proven properties for impairment whenever events or changes in circumstances
indicate that their net book value may not be recoverable. Adverse changes in conditions (primarily gas
price declines) could result in permanent write-downs in the carrying value of oil and gas properties as
well as non-cash charges to operations that would not affect cash flows.
Estimates of Proved Oil and Gas Reserves. An independent petroleum engineer annually estimates
Allied’s proven reserves. Reserve engineering is a subjective process that is dependent upon the quality of
13
available data and the interpretation thereof. In addition, subsequent physical and economic factors such
as the results of drilling, testing, production and product prices may justify revision of such estimates.
Therefore, actual quantities, production timing, and the value of reserves may differ substantially from
estimates. A reduction in proved reserves would result in an increase in depreciation, depletion and
amortization expense.
Estimates of Asset Retirement Obligations. In accordance with ASC 410, Allied makes estimates of
future costs and the timing thereof in connection with recording its future obligations to plug and abandon
wells. Estimated abandonment dates will be revised in the future based on changes to related economic
lives, which vary with product prices and production costs. Estimated plugging costs may also be adjusted
to reflect changing industry experience. Increases in operating costs and decreases in product prices
would increase the estimated amount of the obligation and increase depreciation, depletion and
amortization expense. Cash flows would not be affected until costs to plug and abandon were actually
incurred.
Critical Accounting Policies
In Note 1 to the audited financial statements for the years ended December 31, 2014 and 2013, included
in our Form 10-K, Allied discusses those accounting policies that are considered to be significant in
determining the results of operations and its financial position. Allied believes that the accounting
principles utilized by it conform to accounting principles generally accepted in the United States.
The preparation of financial statements requires Allied’s management to make significant estimates and
judgments that affect the reported amounts of assets, liabilities, revenues and expenses. By their nature,
these judgments are subject to an inherent degree of uncertainty. On an on-going basis, Allied evaluates
estimates. Allied bases its estimates on historical experience and other facts and circumstances that are
believed to be reasonable, and the results form the basis for making judgments about the carrying value of
assets and liabilities. The actual results may differ from these estimates under different assumptions or
conditions.
Recent Accounting Pronouncements
In August 2014, the Financial Accounting Standards Board (FASB) issued Accounting Standards Updates
(ASU) 2014-15 requiring an entity’s management to evaluate whether there are conditions or events,
considered in aggregate, that raise substantial doubt about entity’s ability to continue as a going concern
within one year after the date that the financial statements are issued (or within one year after the date that
the financial statements are available to be issued when applicable). The amendments to (ASU) 2014-15
are effective for the annual period ending after December 15, 2016, and for annual periods and interim
periods thereafter. Early application is permitted.
Other pronouncements issued by the FASB or other authoritative accounting standards groups with future
effective dates are either not applicable or are not expected to be significant to the financial statements of
Allied.
ITEM 3.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET
RISK
Not required.
ITEM 4.
CONTROLS AND PROCEDURES
14
Evaluation of Disclosure Controls and Procedures
In connection with the preparation of this report on Form 10-Q, an evaluation was carried out by Allied’s
management, with the participation of the chief executive officer and chief financial officer, of the
effectiveness of Allied’s disclosure controls and procedures (as defined in Rules 13a-15(e) of the
Securities Exchange Act of 1934 (“Exchange Act”)). Disclosure controls and procedures are designed to
ensure that information required to be disclosed in reports filed or submitted under the Exchange Act is
recorded, processed, summarized, and reported within the time periods specified in the Commission’s
rules and forms and that such information is accumulated and communicated to management, including
the chief executive officer and chief financial officer, to allow timely decisions regarding required
disclosures.
Based on that evaluation, Allied’s management concluded, as of the end of the period covered by this
report, that Allied’s disclosure controls and procedures were effective in recording, processing,
summarizing, and reporting information required to be disclosed, within the time periods specified in the
Commission’s rules and forms, and that such information was accumulated and communicated to
management, including the chief executive officer and chief financial officer, to allow timely decisions
regarding required disclosures.
Changes in Internal Control over Financial Reporting
There have been no changes in internal control over financial reporting (as defined in Rule 13a-15(f) of
the Exchange Act) during the quarter ended March 31, 2015, that materially affected, or are reasonably
likely to materially affect, Allied’s internal control over financial reporting.
15
PART II – OTHER INFORMATION
ITEM 1.
LEGAL PROCEEDINGS
None.
ITEM 1A.
RISK FACTORS
Our future operating results are highly uncertain. Before deciding to invest in us or to maintain or increase
your investment, you should carefully consider the risks described below, in addition to the other
information contained in this quarterly report. If any of these risks actually occur, our business, financial
condition or results of operations could be seriously harmed. In that event, the market price for our
common stock could decline and you might lose all or part of your investment.
Risks Related to Allied’s Business
We have a history of significant operating losses, which losses may reoccur in the future.
Since our inception in 1979, our expenses have often exceeded our income, resulting in losses and an
accumulated deficit of $7,367,366 at December 31, 2014, which had increased to $7,390,301 at March 31,
2015. We recorded a net loss of $22,935 for the three month period ended March 31, 2015 and may
continue to realize future net losses if revenues do not increase. Our expectation of profitability depends
on higher energy prices and increased production through exploration, development or acquisition.
Allied’s success in this continued endeavor can in no way be assured.
Oil and natural gas prices are volatile. Any substantial decrease in prices would adversely affect our
financial results.
Allied’s future financial condition, results of operations and the carrying value of our oil and natural gas
properties depend primarily upon the prices we receive for oil and natural gas production. Oil and natural
gas prices historically have been volatile and are likely to continue to be volatile in the future. Allied’s
cash flow from operations is highly dependent on the prices we receive for oil and natural gas. This price
volatility also affects the amount of Allied’s cash flow available for capital expenditures and our ability to
borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of
additional factors that are beyond our control. These factors include:
§ the level of consumer demand for oil and natural gas;
§ the domestic and foreign supply of oil and natural gas;
§ the ability of the members of the Organization of Petroleum Exporting Countries to agree to and
maintain oil price and production controls;
§ the price of foreign oil and natural gas;
§ domestic governmental regulations and taxes;
§ the price and availability of alternative fuel sources;
§ weather conditions;
§ market uncertainty;
§ political conditions or hostilities in energy producing regions, including the Middle East; and
§ worldwide economic conditions.
These factors and the volatility of the energy markets generally make it extremely difficult to predict
future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices
16
would not only reduce revenue, but could reduce the amount of oil and natural gas that Allied can
produce economically and, as a result, could have a material adverse effect on our financial condition,
results of operations and reserves. Should the oil and natural gas industry experience significant price
declines, Allied may, among other things, be unable to meet our financial obligations or make planned
expenditures.
Allied’s future performance depends on its ability to find or acquire additional oil or natural gas
reserves.
Unless Allied successfully replaces the reserves that it produces, defined reserves will decline, resulting in
a decrease in oil and natural gas production, that will produce lower revenues, in turn decreasing cash
flows from operations. Allied has historically obtained the majority of its reserves through acquisition.
The business of exploring for, developing or acquiring reserves is capital intensive. Allied may not be
able to obtain the necessary capital to acquire additional oil or natural gas reserves if cash flows from
operations are reduced, and access to external sources of capital is unavailable. Should Allied not make
significant capital expenditures to increase reserves it will not be able to maintain current production rates
and expenses will continue to exceed revenue.
The results of our operations are wholly dependent on the production and maintenance efforts of
independent operators.
The operation and maintenance of our oil and natural gas operations is wholly dependent on independent
local operators. While the services provided by operators of our properties in the past have proven
adequate for the successful operation of our oil and natural gas wells, the fact that we are dependent on
operations of third parties to produce revenue from our assets could restrict our ability to generate a net
profit on operations.
Risks Related to the Company’s Stock
The market for our stock is limited and our stock price may be volatile.
The market for our common stock is limited due to low trading volumes and the small number of
brokerage firms acting as market makers. The average daily trading volume for our stock has varied
significantly from week to week and from month to month, and the trading volume often varies widely
from day to day. Due to these limitations there is volatility in the market price and tradability of our stock,
which may cause our shareholders difficulty in selling their shares in the market place.
Allied has not paid dividends to the shareholders of its common stock.
Allied has not paid any dividends to the shareholders of its common stock and has no intention of paying
dividends in the foreseeable future. Any future dividends would be at the discretion of our board of
directors and would depend on, among other things, future earnings, our operating and financial
condition, our capital requirements, and general business conditions.
17
Allied may require additional capital funding.
Allied may require additional funds, either through additional equity offerings or debt placements, in
order to expand our operations. Such additional capital may result in dilution to our current shareholders.
Further, our ability to meet short-term and long-term financial commitments will depend on future cash.
There can be no assurance that future income will generate sufficient funds to enable us to meet our
financial commitments.
If the market price of our common stock declines as our security holders sell their stock, selling
security holders or others may be encouraged to engage in short selling, depressing the market price.
The significant downward pressure on the price of the common stock as security holders sell material
amounts of common stock could encourage short sales by the selling security holders or others. Short
selling is the selling of a security that the seller does not own, or any sale that is completed by the delivery
of a security borrowed by the seller. Short sellers assume that they will be able to buy the stock at a lower
amount than the price at which they sold it short. Significant short selling of Allied’s stock would create
an incentive for market participants to reduce the value of our common stock. If a significant market for
short selling in our common stock develops, the market price for our common stock could be significantly
depressed.
Allied’s common stock is currently deemed to be “penny stock”, which makes it more difficult for
investors to sell their shares.
Allied’s common stock is and will be subject to the “penny stock” rules adopted under section 15(g) of
the Exchange Act. The penny stock rules apply to companies whose common stock is not listed on the
NASDAQ Stock Market or other national securities exchange and trades at less than $5.00 per share or
that have tangible net worth of less than $5,000,000 ($2,000,000 if the company has been operating for
three or more years). These rules require, among other things, that brokers who trade penny stock to
persons other than “established customers” complete certain documentation, make suitability inquiries of
investors and provide investors with certain information concerning trading in the security, including a
risk disclosure document and quote information under certain circumstances. Many brokers have decided
not to trade penny stocks because of the requirements of the penny stock rules and, as a result, the number
of broker-dealers willing to act as market makers in such securities is limited. If Allied remains subject to
the penny stock rules for any significant period, it could have an adverse effect on the market, if any, for
Allied’s securities. If Allied’s securities are subject to the penny stock rules, investors will find it more
difficult to dispose of Allied’s securities.
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ITEM 2. UNREGISTERED
None.
ITEM 3. DEFAULTS ON SENIOR SECURITIES
None.
ITEM 4. MINE SAFETY DISCLOSURES
Not applicable.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS
Exhibits required to be attached by Item 601 of Regulation S-K are listed in the Index to Exhibits on page 21 of this Form 10-Q, and are incorporated herein by this reference.
19
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned, thereunto duly authorized.
Allied Resources, Inc.
Date
/s/ Ruairidh Campbell
May 15, 2015
Ruairidh Campbell
Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Director
20
INDEX TO EXHIBITS
Exhibit
Description
3.1*
Articles of Incorporation dated February 12, 2002 (incorporated by reference to the Form
10-SB/A filed on April 21, 2003).
3.2 *
Bylaws (incorporated by reference to the Form 10-SB/A filed on April 21, 2003).
10.1 *
Oil and Gas Well Operating Agreement between Allied and Allstate Energy Corporation
dated May 1, 1996 (incorporated by reference to the Form 10SB/A filed on April 21,
2003).
10.2 *
Amendments to Operating Agreements between Allied and Allstate Energy Corporation
dated May 10, 1996 (incorporated by reference to the Form 10SB/A filed on April 21,
2003).
10.3 *
Form Gas Purchase Agreement (incorporated by reference to the Form 10SB/A filed on
April 21, 2003).
10.4*
Consulting Agreement between Allied and Ruairidh Campbell dated July 1, 2008
(incorporated by reference to the Form 10-Q filed on November 14, 2008).
14 *
Code of Ethics adopted May 3, 2004 (incorporated by reference to the Form 10-KSB filed
on May 26, 2004).
31
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to Rule
13a-14 of the Securities and Exchange Act of 1934 as amended, as adopted pursuant to
Section 302 of the Sarbanes-Oxley Act of 2002 (attached).
32
Certification of the Chief Executive Officer and Chief Financial Officer pursuant to 18
U.S.C. Section 1350 as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of
2002 (attached).
99.1 *
Allied Resources, Inc. 2008 Stock Option Plan (incorporated by reference to the Form 10-
Q filed on November 14, 2008).
99.2*
Reserve report from Sure Engineering, LLC (incorporated by reference to the Form 10-K
filed on April 15, 2015).
101. INS
XBRL Instance Document†
101. PRE
XBRL Taxonomy Extension Presentation Linkbase†
101. LAB
XBRL Taxonomy Extension Label Linkbase†
101. DEF
XBRL Taxonomy Extension Label Linkbase†
101. CAL
XBRL Taxonomy Extension Label Linkbase†
101. SCH
XBRL Taxonomy Extension Schema†
*
Incorporated by reference to previous filings of Allied.
†
Pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed
“furnished” and not “filed” or part of a registration statement or prospectus for purposes
of Section 11 or 12 of the Securities Act of 1933, or deemed “furnished” and not “filed”
for purposes of Section 18 of the Securities and Exchange Act of 1934, and otherwise is
not subject to liability under these sections.
21
