UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the

quarterly period ended ~~March~~June 3130, 2016.

Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the

transition period from

Commission file number: 000-29321

ALLIED RESOURCES, INC.

(Exact name of registrant as specified in its charter)

Nevada

000-31390

(State or other jurisdiction of

(I.R.S. Employer

incorporation or organization)

Identification No.)

1403 East 900 South, Salt Lake City, Utah 84105

(Address of principal executive offices) (Zip Code)

(801) 582-9609

(Registrant’s telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or

15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that

the registrant was required to file such reports), and (2) has been subject to such filing requirements for the

past 90 days. Yes þ No o

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web

site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation

S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant

was required to submit and post such files). Yes þ No o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated

filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and

“smaller reporting company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer o Accelerated filer o Non-accelerated filer o Smaller reporting company þ

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange

Act). Yes o No þ

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest

practicable date. The number of shares outstanding of the issuer’s common stock, $0.001 par value (the only

class of voting stock), at ~~May~~August 2322, 2016, was 5,653,011.

TABLE OF CONTENTS

PART 1- FINANCIAL INFORMATION

Item1.

Financial Statements:

Balance Sheets as of

~~March~~June 3130, 2016 (Unaudited) and December 31, 2015 (audited)

Unaudited Condensed Statements of Operations for the

three and six month ~~period~~periods ended ~~March~~June 3130, 2016 and ~~March~~June 3130, 2015

Unaudited Condensed Statements of Cash Flows for the

~~three~~six month ~~period~~periods ended ~~March~~June 3130, 2016 and ~~March~~June 3130, 2015

Condensed Notes to Unaudited Financial Statements

Item 2.

Management's Discussion and Analysis of Financial Condition and Results of

Operations

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Item 4.

Controls and Procedures

PART II-OTHER INFORMATION

Item 1.

Legal Proceedings

Item 1A.

Risk Factors

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

Item 3.

Defaults Upon Senior Securities

Item 4.

Mine Safety Disclosures

Other Information

Exhibits

PART I – FINANCIAL INFORMATION

ITEM 1.

FINANCIAL STATEMENTS

As used herein, the terms “Allied,” “we,” “our,” “us,” “it,” and “its” refer to Allied Resources, Inc., a

Nevada corporation, unless otherwise indicated. In the opinion of management, the accompanying

unaudited financial statements included in this Form 10-Q reflect all adjustments (consisting only of

normal recurring accruals) necessary for a fair presentation of the results of operations for the periods

presented. The results of operations for the periods presented are not necessarily indicative of the results

to be expected for the full year.

ALLIED RESOURCES, INC.

BALANCE SHEETS

~~March~~June 3130,

December 31,

2016

2015

ASSETS

(Unaudited)

(Audited)

Current assets:

Cash

1,~~233~~205,~~571~~851

1,265,126

Accounts receivable

2528,~~926~~981

25,723

Total current assets

1,~~259~~234,~~497~~832

1,290,849

Oil and gas properties (proven), net (successful

efforts method)

~~543~~528,~~303~~457

558,255

Deposits

704,701

Total assets

2,~~507~~467,~~501~~990

2,553,805

LIABILITIES AND STOCKHOLDERS' EQUITY

Current liabilities:

Accounts payable

1449,~~345~~469

13,047

Total current liabilities

1449,~~345~~469

13,047

Asset retirement obligation

~~237~~240,~~514~~418

234,610

Total liabilities

~~251~~289,~~859~~887

247,657

Commitments and contingencies

Stockholders' equity:

Common stock, $.001 par value; 50,000,000 shares

authorized, 5,653,011 issued and outstanding

5,653

Additional paid-in capital

9,916,458

Accumulated deficit

(7,~~666~~744,~~469~~008)

(7,615,963)

Total stockholders' equity

2,~~255~~178,~~642~~103

2,306,148

Total liabilities and stockholders' equity

2,~~507~~467,~~501~~990

2,553,805

The accompanying notes are an integral part of these financial statements

ALLIED RESOURCES, INC.

UNAUDITED CONDENSED STATEMENTS OF OPERATIONS

Three Months Ended ~~March 31, 2016 and 2015~~

Six Months Ended

June 30,

2016

2015

2016

2015

Oil and gas revenues

7985,~~991~~344

~~111~~53,~~101~~190

165,335

164,291

Operating expenses:

Production costs

8276,~~269~~208

8966,~~398~~802

158,477

156,200

Depletion and amortization

14,~~952~~846

11,~~313~~173

29,798

22,486

General and administrative expenses

3472,~~657~~319

3487,~~542~~601

~~131~~106,~~878~~976

~~135~~122,~~253~~143

163,373

165,576

295,251

300,829

Loss from operations

(5178,~~887~~029)

(24112,~~152~~386)

(129,916)

(136,538)

Interest income

~~1,381~~490

~~1,217~~760

~~Loss before provision for income taxes~~1,871

~~(50~~1,~~506)~~977

~~(22,935)~~Loss before provision for

income taxes

(77,539)

(111,626)

(128,045)

(134,561)

Provision for income taxes

Net loss

(5077,~~506~~539)

(22111,~~935~~626)

~~Loss per common share - basic and diluted~~(128,045)

(134,561)

Loss per common share -

basic and diluted

(0.01)

-(0.02)

~~Weighted average common shares - basic and diluted~~(0.02)

(0.02)

Weighted average common shares -

basic and diluted

5,653,000

The accompanying notes are an integral part of these financial statements

ALLIED RESOURCES, INC.

UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS

~~Three~~Six Months Ended ~~March~~June 3130, 2016 and 2015

2016

2015

Cash flows from operating activities:

Net loss

(50128,~~506~~045)

(22134,~~935~~561)

Adjustments to reconcile net loss to net

cash used in operating activities:

Depletion and amortization

1429,~~952~~798

1122,~~313~~486

Accretion expense

25,~~904~~808

25,~~767~~533

(Increase) decrease in:

Accounts receivable

(~~203~~3,258)

~~(21~~43,~~410)~~737

Increase ~~(decrease)~~ in:

Accounts payable

136,~~298~~422

(35,~~038)~~728

Net cash used in operating activities

(3159,~~555~~275)

(3357,~~303~~077)

Cash flows from investing activities:

Cash flows from financing activities:

Net decrease in cash

(3159,~~555~~275)

(3357,~~303~~077)

Cash, beginning of year

1,265,126

1,412,161

Cash, end of year

1,~~233~~205,~~571~~851

1,~~378~~355,~~858~~084

The accompanying notes are an integral part of these financial statements

ALLIED RESOURCES, INC.

CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

~~March~~June 3130, 2016

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, 2015, 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, 2016.

Note 2 – Additional Footnotes Included By Reference

There have been no material changes 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, 2015, filed with the Securities

and Exchange Commission. Therefore, those footnotes are included herein by reference.

Note 3 – Subsequent Events

The Company evaluated its ~~March~~June 3130, 2016, financial statements for subsequent events through the date the

~~the~~ financial statements were issued. The Company is not aware of any subsequent events which would

require recognition or disclosure in the financial statements.

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 and six month periods ended ~~March~~June 3130, 2016 and ~~March 31,~~June

30, 2015.

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 revenue 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.

Allied’s financial condition, results of operations and the carrying value of its oil and natural gas

properties depends primarily upon the prices it receives for oil and natural gas production and the quantity

of that production. Oil and natural gas prices historically have been volatile and in the last six months of

2014 through the ~~end of 2015 into the~~ first ~~month~~six months of 2016 the price paid for oil and natural gas has plummeted. The

~~plummeted. The~~ reasons for the drastic fall in energy prices ~~has~~have been attributed to a combination of oversupply as a direct

~~oversupply as a direct~~ result of the revolution in shale recoveries, worldwide economic malaise and geopolitical reasons. The

~~geopolitical reasons. The~~ price crash has eliminated positive cash flow from operations which in turn has impacted the amount of

~~impacted the amount of~~ cash available for future capital expenditures. A continued drop in oil and natural gas prices could also

~~gas prices could also~~ incur a write down of the carrying value of our properties as can further decreases in production. Since

production. ~~Since production~~ leads to the depletion of oil and gas reserves, Allied’s ability to develop or acquire additional

~~acquire additional~~ economically recoverable oil and gas reserves is vital to its future success.

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 dramatic decline in oil prices over the last twenty ~~seven~~four months has had a significant negative effect on

on Allied’s business. Even though production has ~~remained~~increased ~~relatively consistent~~ revenues over the last two years have

~~annual period have~~ plummeted. ~~The~~Revenue ~~revenue~~ will ~~continue~~decrease tounless ~~decrease~~prices ~~until~~increase. ~~such~~During ~~time~~the assecond quarter of 2016 prices ~~increase.~~for oil

~~During the first quarter of 2016 prices for oil~~ and natural gas appear to be trending towards a gradual recovery. However, the strength of any sustained

recovery. ~~However,~~has been challenged since the ~~strength~~end of ~~any~~the ~~sustained~~second ~~recovery~~quarter ~~over~~as ~~time~~the ~~can~~prices inpaid nofor ~~way~~oil behave ~~assured.~~been in

retreat.

Allied will continue to identify non-operated oil and gas producing properties for purchase, oil and gas

leases that it could 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 has increased the

opportunities available to us though we are limited by our limited cash position and the expectation that

prices for oil will increase to average around $50.00 per NYMEX WTI Crude barrel and natural gas will

increase to average around $3.72 per mcf within the next 12 months.

We are further considering future prospects for the development of the Marcellus and Utica shale

formations that underlie Allied’s oil and gas interests in West Virginia. The Marcellus and Utica shale

structures that underlay much of Pennsylvania, Ohio, New York, West Virginia and adjacent states are

major reservoirs for hydrocarbon recovery. Drilling by third party operators in Ritchie County, West

Virginia 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 that varies in thickness from 50 – 60

feet. We ~~have~~were ~~been~~ approached by an active operator in the area that ~~seeks~~sought the right to ~~potentially~~ develop this resource

~~this~~though ~~prospective~~no ~~resource~~agreement was reached. NoNevertheless, no oil or natural gas reserves underlying our interests in ~~West Virginia have~~

West Virginia have been proven. ~~However,~~although we have obtained a probable reserve calculation. ~~that places a value on probable~~The

calculation places a value on probable reserves underlying certain of our leases in Ritchie County based ~~on our portion of an estimated royalty~~

on our portion of an estimated royalty payment that would issue if a third party operator recovered ~~commercial quantities of oil and natural gas~~

commercial quantities of oil and natural gas from our leases. Any future plans to develop these shale ~~formations continue to be tempered by the high~~

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~~

based on anticipated pricing for oil and natural gas over the next five years.

Results of Operations

During the period from January 1, 2016 through ~~March~~June 3130, 2016, Allied was engaged in evaluating

~~acquisition~~development opportunities, 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~~six months ended ~~March~~June 3130, 2016, Allied realized a net loss due primarily to

to the decline in energy prices over the comparable ~~three~~six month period. ~~Allied~~despite ~~believes~~a ~~that~~significant ~~the~~increase ~~immediate~~in

production. Allied believes that the key to its ability to return to profitability is energy prices. Unless oil ~~and natural gas prices rise, and~~

~~expenses~~and ~~remain~~natural ~~relatively~~gas ~~consistent~~prices rise, Allied will continue to realize net losses in future periods.

~~THREE~~SIX MONTHS ENDED ~~MARCH~~JUNE 3130

2016

2015

CHANGE # CHANGE %

AVERAGE DAILY PRODUCTION

Oil (bbls/day)

711

1410

~~200~~91%

Natural gas (mcf/day)

268

~~263~~232

536

216%

Barrels of oil equivalent (boe/day)

5150

1516

2932%

PROFITABILITY

Petroleum and natural gas revenue

79165,~~991~~335 $

~~111~~164,~~101~~291

~~(31~~1,~~110)~~044

~~-28~~1%

Net Revenue

79165,~~991~~335

~~111~~164,~~101~~291

~~(31~~1,~~110)~~044

~~-28~~1%

Production and operating costs

82158,~~269~~477

89156,~~398~~200

(72,~~129)~~277

-81%

Field netback

(26,~~278)~~858

218,~~703~~091

(~~23,981~~1.233)

-~~110~~15%

G&A

34106,~~657~~976

34122,~~542~~143

~~115~~(15,167)

0-12%

Net cash flow from operations

(36100,~~657~~118)

(12114,~~839~~052)

~~(24~~13,~~096)~~934

~~-188~~12%

Depletion, depreciation and other charges

1429,~~952~~798

1122,~~313~~486

37,~~639~~312

3233%

Future income taxes

Net loss from operations

(51129,~~887~~916) $

(24136,~~152~~538)

(276,~~735~~622)

~~-115~~5%

PROFITABILITY PER BOE

Oil and gas revenue (average selling price)

13.3976

2418.2815

(104.9039)

-4524%

Production and operating costs

13.7719

1917.5426

(54.7707)

-3024%

Field netback ($/boe)

(0.~~38)~~57

40.7489

(50.1332)

-~~108~~36%

Cash flow from operations ($/boe)

(68.1833)

(212.8160)

(34.~~37)~~27

~~-120~~34%

Net loss ($/boe)

(810.6882)

(515.2809)

(34.~~40)~~27

~~-164~~28%

Revenue

Revenue for the three month period ended ~~March~~June 3130, 2016, ~~decreased~~increased to $7985,~~991~~344 from $~~111~~53,~~101~~190 for the

comparable period ended ~~March~~June 3130, 2015, aan ~~decrease~~increase of 2860%. ~~The~~Revenue ~~decrease~~for inthe ~~revenue~~six ~~over~~month ~~the~~period ended

~~comparable~~June ~~three~~30, ~~month~~2016, ~~periods~~increased ~~can~~to be$165,335 ~~attributed~~from to$164,291 for the ~~forty~~comparable ~~five~~period ~~percent~~ended ~~(45%)~~June ~~decline~~30, in2015, ~~energy prices~~an

~~paid~~increase of 1%. The increase in revenue over the comparable three month periods ~~despite~~can ~~the~~be ~~significant~~attributed ~~increase~~to ~~in oil production in~~ the

increase in production and a slight increase in energy prices in the current three month period. over that

~~Allied~~production ~~believes~~and ~~that~~energy ~~revenue~~prices ~~will~~realized ~~increase~~ in ~~future~~the ~~periods~~prior ~~based~~three onmonth ~~current~~period. ~~assets~~The ifincrease ~~energy~~in ~~prices~~revenue over the

~~continue~~comparative six month periods can be attributed to the increase ~~and~~in production ~~levels~~offset ~~remain~~by ~~relatively~~lower ~~consistent.~~energy

prices paid in the current six month period over energy prices realized in the prior six month period.

Allied believes that revenue can only increase in future periods based on current assets if energy prices

increase and production of oil and natural gas remains relatively consistent.

Net Losses

Net losses for the three month period ended ~~March~~June 3130, 2016, ~~increased~~decreased to $5077,~~506~~539 as compared to net

losses of $22111,~~935~~626 for the three month period ended ~~March~~June 3130, 2015, ana ~~increase~~decrease of ~~120~~31%. ~~The~~Net ~~increase~~losses infor the

~~net~~six ~~losses~~month ~~over~~period ~~the~~ended ~~comparable~~June ~~three~~30, ~~month~~2016, ~~periods~~decreased ~~can be attributed~~ to ~~the~~$128,045 ~~decline~~from in$134,561 ~~energy~~for ~~prices~~the ~~paid~~comparable period

ended June 30, 2015, a decrease of 5%. The decrease in net losses over the comparable three month ~~periods.~~

periods can be attributed to the increase in production and revenue over the comparable three month

periods. The decrease in net losses over the comparable six month period can be attributed to the increase

in production and a decrease in general and administrative costs.

Allied does not expect to return to net income in future periods based on current energy prices which

expectation will not change unless revenues increase and current productivity remains consistent.

Operating Expenses

General and administrative expenses for the three month period ended ~~March~~June 3130, 2016, ofdecreased ~~$34,657~~to

~~remained relatively consistent with the~~ $3472,~~542~~319 inas compared to general and administrative ~~expense~~expenses ~~incurred~~of ~~during~~$87,601 for the three month period ended

~~comparable~~June ~~three~~30, ~~month~~2015, ~~period~~a ~~ended~~decrease ~~March~~of ~~31, 2015~~17%. General and administrative expenses for the six month period ended

~~Allied~~June ~~expects~~30, ~~that~~2016, ~~general~~decreased ~~and~~to ~~administrative~~$106,976 ~~expenses~~as ~~will~~compared ~~remain~~to ~~relatively~~general ~~consistent~~and inadministrative ~~future~~expenses ~~periods.~~of $122,143, a

~~Depletion~~decrease ~~expenses~~of ~~for~~12%. ~~the~~The ~~three~~decrease ~~month~~in ~~periods~~general ~~ended~~and ~~March~~administrative ~~31,~~expenses ~~2016,~~over ~~and~~the ~~March~~comparable ~~31,~~three ~~2015,~~and ~~were~~six

~~$14,952~~month ~~and~~periods ~~$11,313~~can ~~respectively,~~be anattributed ~~increase~~to oflower ~~32%.~~professional fees paid in the current periods over the prior

periods.

Allied expects that general and administrative expenses will continue to decline in future periods.

Depletion expenses for the six month periods ended June 30, 2016, and June 30, 2015, were $29,798 and

$22,486 respectively, an increase of 33%.

Depletion expenses are expected to remain relatively consistent in relation to the value attributed to aging

oil and gas assets.

Production costs for the three month periods ended ~~March~~June 3130, 2016, and ~~March~~June 3130, 2015, were $8276,~~269~~208 and

~~and~~ $8966,~~398~~802 respectively, aan ~~decrease~~increase of 814%. ~~The~~Production ~~decrease in production~~ costs ~~over~~for the ~~three~~six month periods ended June 30,

~~comparable~~2016, ~~periods~~and ~~can~~June be30, ~~attributed~~2015, towere a$158,477 ~~decrease~~and in$156,200 ~~work~~respectively, ~~over~~an ~~costs.~~increase of 1%, The increase in

production costs over the three and six month comparable periods can be attributed to an increase in work

over costs, well down time and adverse weather conditions.

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, 2015, Allied has net operating loss (NOL) carry forwards of approximately

$2,354,000. 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, 2015, 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~~June 3130, 2016

or 2015.

Liquidity and Capital Resources

Allied had a working capital surplus of $1,~~245~~185,~~152~~363 as of ~~March~~June 3130, 2016, and has funded its cash needs

since inception with revenues generated from operations, debt instruments and private equity placements.

Existing working capital and anticipated cash flow are expected to be sufficient to fund operations. over

~~Total~~the ~~current~~next ~~assets~~twelve ~~as of March 31, 2016, were $1,259,497 which consisted of $1,233,571 in cash and~~months.

~~$25,926~~Total incurrent ~~accounts~~assets ~~receivable.~~as ~~Total~~of ~~assets~~June 30, 2016, were $21,~~507~~234,~~501~~832 which consisted of ~~current assets~~$1,205,851 ~~proven~~in ~~oil~~cash and

~~and~~$28,981 ~~gas~~in ~~properties~~accounts ofreceivable. Total assets were $~~543~~2,~~303~~467,990 ~~and~~which ~~deposits~~consisted of ~~$704~~current assets,~~701.~~ proven oil

~~Total~~and ~~current~~gas ~~liabilities~~properties as of ~~March 31, 2016, were~~ $14528,~~345~~457 ~~which~~and ~~consisted~~deposits of ~~accounts payable~~$704,701. ~~Total~~

Total current liabilities as of June 30, 2016, were $~~251~~49,~~859~~469 which consisted of ~~current~~accounts ~~liabilities~~payable. ~~and an asset retirement obligation of~~Total

liabilities were $~~237~~289,~~514.~~887 which consisted of current liabilities and an asset retirement obligation of

~~Stockholders’ equity as of March 31, 2016, was~~ $2240,~~255,642~~418.

~~Net~~Stockholders’ ~~cash~~equity ~~used~~as inof ~~operating~~June ~~activities for the three month period ended March 31~~30, 2016, was $312,~~555 as~~178,103.

~~compared~~Net ~~to net~~ cash used in operating activities ~~of $33,303~~ for the ~~three~~six month period ended ~~March~~June 3130, 2016, was $59,275 as

compared to net cash used in operating activities of $57,077 for the six month period ended June 30,

2015. 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 continue to rely on net cash flow used in operating activities until net losses decrease or

are eliminated as the result of any increase in energy prices.

Net cash flow used in investing activities for the ~~three~~six month periods ended ~~March~~June 3130, 2016, and ~~March~~June 30,

~~31,~~ 2015, 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~~six month periods ended ~~March~~June 3130, 2016, and ~~March~~June 3130, 2015,

~~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~~June 3130, 2016, 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.

12Allied had no commitments for future capital expenditures that were material at June 30, 2016.

Allied had no commitments for future capital expenditures that were material at March 31, 2016.

Allied has no defined benefit plan or contractual commitment with any of its officers or directors except

each member’s participation in our stock option plan and an executive agreement with its chief 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.

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~~June 3130, 2016, Allied has no significant off-balance sheet arrangements that have or are reasonably

~~reasonably~~ likely to have a current or future effect on our financial condition, changes in financial condition,

~~condition,~~ revenues or expenses, results of operations, liquidity, capital expenditures, or capital resources that are

~~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

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, 2015 and 2014, 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

Allied’s management has evaluated the recently issued accounting pronouncements through the filing

date of these financial statements and has determined that the application of these pronouncements will

not have a material impact on Allied’s financial position and results of operations.

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET

RISK

Not required of smaller reporting companies.

ITEM 4.

CONTROLS AND PROCEDURES

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~~June 3130, 2016, that materially affected, or are reasonably

likely to materially affect, Allied’s internal control over financial reporting.

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 $7,615,963 at December 31, 2015, which had increased to $7,~~666~~744,~~469~~008 at ~~March~~June 3130,

2016. We recorded a net loss of $50128,~~506~~045 for the ~~three~~six month period ended ~~March~~June 3130, 2016 and may continue

~~continue~~ to realize net losses if revenues do not increase. Any expectation of future profitability depends on higher

~~on higher~~ energy prices and consistent production. Allied’s success in this continued endeavor can in no way be

~~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

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.

Climate change and greenhouse gas restrictions.

Due to concern over the risk of climate change, a number of countries have adopted, or are considering

the adoption of, regulatory frameworks to reduce greenhouse gas emissions. These include adoption of

cap and trade regimes, carbon taxes, restrictive permitting, increased efficiency standards, and incentives

or mandates for renewable energy. These requirements could make our products more expensive,

lengthen project implementation times, and reduce demand for hydrocarbons, as well as shift hydrocarbon

demand toward relatively lower-carbon sources such as natural gas. Current and pending greenhouse gas

regulations may also increase our compliance costs for our independent operators, such as for monitoring

or sequestering emissions.

Government sponsorship of alternative energy.

Many governments are providing tax advantages and other subsidies to support alternative energy sources

or are mandating the use of specific fuels or technologies. Governments are also promoting research into

new technologies to reduce the cost and increase the scalability of alternative energy sources. Our future

results may depend in part on the success of those research efforts and on our ability to adapt and apply

the strengths of our current business model to providing the energy products of the future in a cost-

competitive manner.

Risks Related to Allied’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.

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.

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

None.

ITEM 3.

DEFAULTS ON SENIOR SECURITIES

None.

ITEM 4.

MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.

OTHER INFORMATION

~~None.~~On August 10, 2016, Allied’s board of directors determined to terminate the company’s registration under

Section 12(g) of the Securities and Exchange Act of 1934 (“Exchange Act”). The board of directors’

decision is due to the impact of net losses over the last two years caused by a combination of decreasing

revenues and the general and administrative costs attendant to registration under the Exchange Act.

Allied will instead subscribe to the OTC Disclosure & News Service in order to publish its financial

reports and material news to ensure that adequate current information is available to the public markets.

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.

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~~August 2322, 2016

Ruairidh Campbell

Chief Executive Officer, Chief Financial Officer, Principal Accounting Officer and Director

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, 2013

(incorporated by reference to the Form 10-K filed on March 31, 2014).

14 *

Code of Ethics adopted May 3, 2004 (incorporated by reference to the Form 10-KSB filed

on May 26, 2004).

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).

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 29, 2016).

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.

Filing Compare · ALLIED RESOURCES INC