**UNITED STATES**

**SECURITIES AND EXCHANGE COMMISSION        Washington, D.C. 20549         **

**FORM 10-Q**

*(Mark One)*

þ     Quarterly report pursuant toSection 13 or 15(d) of the Securities Exchange Act of 1934 for the quarterly period ended **September****30****, 200****9**.

o     Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 for the transition period from to .

Commission file number: **000-29321**

**ALLIED RESOURCES, INC****.**

(Exact name of registrantas specified in its charter)

| **Nevada**(State or other jurisdiction of                    incorporation or organization) | **000-31390**

(I.R.S. Employer 

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 changedsince last report)

Indicate by check markwhether the registrant: (1) 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days: Yes        þNo 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 as defined by Rule 12b-2 of the Exchange Act:

Large accelerated filer oAccelerated filer oNon-accelerated filer oSmaller 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 oNo þ

At November 13, 2009, the number of shares outstanding of the registrant's common stock, $0.001 par value (the only class of voting stock), was 5,653,011.

----

**TABLE OF CONTENTS**

**
**PART I. - FINANCIAL INFORMATION**
     **ITEM 1.     FINANCIAL STATEMENTS**  3   Balance Sheets as of September 30, 2009 (unaudited) and December 31, 2008 (audited)      4   Unaudited Condensed Statements of Operations for the three and nine month periods ended September 30, 2009 and September 30, 2008   5   Unaudited Condensed Statements of Cash Flows for the nine month periods ended September 30, 2009 and September 30, 2008  6   Condensed Notes to Unaudited Financial Statements  7  **ITEM 2.    Management's Discussion and Analysis of Financial Condition and Results of Operations**  8  **ITEM 3.    Quantitative and Qualitative Disclosures about Market Risk**  16  **ITEM 4T.  Controls and Procedures**  16                
**PART II. - OTHER INFORMATION**
     **ITEM 1.     Legal Proceedings**  16  **ITEM 1A.  Risk Factors**  16  **ITEM 2.     Unregistered Sales of Equity Securities and Use of Proceeds**  20  **ITEM 3.     Defaults upon Senior Securities**  21  **ITEM 4.     Submission of Matters to a Vote of Securities Holders**  21  **ITEM 5.     Other Information**  21  **ITEM 6.     Exhibits**  21  **Signatures**  22  **Index to Exhibits**  23 **

2

----

**PART I – FINANCIAL INFORMATION**

**ITEM 1.     FINANCIAL STATEMENTS**

As used herein, the terms “Allied,” “we,” “our,” “us,” “it,” and “its”refer toAllied Resources, Inc., a Nevada corporation, unless otherwise indicated. In the opinion of management, the accompanying unaudited        financial statements included in this Form 10-Qreflect 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.

3

Return to Table of Contents

----

| ALLIED RESOURCES, INC.                           |
|--------------------------------------------------|
| BALANCE SHEETS                                   |
|                                             |   |   |   |   |
|                                             |   | September 30, |   | December 31, |
|                                             |   | 2009 |   | 2008 |
| ASSETS                                           |   | (Unaudited) |   | (Audited) |
| Current assets:                                  |   |   |   |   |
| Cash                                             | $ | 1,147,348 |   | 1,052,625 |
| Accounts receivable                              |   | 72,753 |   | 96,974 |
|                                             |   |   |   |   |
| Total current assets                             |   | 1,220,101 |   | 1,149,599 |
|                                             |   |   |   |   |
| Oil and gas properties (proven), net (successful |   |   |   |   |
| efforts method)                                  |   | 1,048,581 |   | 1,132,774 |
| Deferred tax asset                               |   | 883,000 |   | 867,000 |
| Deposits                                         |   | 704,701 |   | 704,701 |
|                                             |   |   |   |   |
| Total assets                                     | $ | 3,856,383 |   | 3,854,074 |
|                                             |   |   |   |   |
| LIABILITIES AND STOCKHOLDERS' EQUITY             |   |   |   |   |
| Current liabilities:                             |   |   |   |   |
| Accounts payable                                 | $ | 13,887 |   | 13,667 |
|                                             |   |   |   |   |
| Total current liabilities                        |   | 13,887 |   | 13,667 |
|                                             |   |   |   |   |
| Asset retirement obligation                      |   | 175,243 |   | 168,955 |
| Accrued tax liabilities                          |   | 40,000 |   | 40,000 |
|                                             |   |   |   |   |
| Total liabilities                                |   | 229,130 |   | 222,622 |
|                                             |   |   |   |   |
| Commitments and contingencies                    |   |   |   |   |
|                                             |   |   |   |   |
| Stockholders' equity:                            |   |   |   |   |
| Common stock, $.001 par value; 50,000,000 shares |   |   |   |   |
| authorized, 5,653,011 issued and outstanding     |   | 5,653 |   | 5,653 |
| Additional paid-in capital                       |   | 9,771,590 |   | 9,742,618 |
| Accumulated deficit                              |   | (6,149,990) |   | (6,116,819) |
| Total stockholders' equity                       |   | 3,627,253 |   | 3,631,452 |
| Total liabilities and stockholders' equity       | $ | 3,856,383 |   | 3,854,074 |

 

The accompanying notes are an integral part of these financial statements

4

Return to Table of Contents

----

| ALLIED RESOURCES, INC                        |
|----------------------------------------------|
| UNAUDITED CONDENSED STATEMENTS OF OPERATIONS |
|                                         |   |   |   |   |   |   |   |   |
|                                         |   | Three Months Ended |   | Nine Months Ended |
|                                         |   | September 30, |   | September 30, |
|                                         |   | 2009 |   | 2008 |   | 2009 |   | 2008 |
|                                         |   |   |   |   |   |   |   |   |
| Oil and gas revenues                         | $ | 194,628 |   | 324,317 |   | 528,305 |   | 1,017,469 |
|                                         |   |   |   |   |   |   |   |   |
| Operating expenses:                          |   |   |   |   |   |   |   |   |
| Production costs                             |   | 108,391 |   | 129,111 |   | 318,710 |   | 383,422 |
| Depletion and amortization                   |   | 31,143 |   | 28,182 |   | 84,193 |   | 86,927 |
| General and administrative expenses          |   | 47,687 |   | 44,674 |   | 184,125 |   | 133,943 |
|                                         |   |   |   |   |   |   |   |   |
|                                         |   | 187,221 |   | 201,967 |   | 587,028 |   | 604,292 |
|                                         |   |   |   |   |   |   |   |   |
| Income (loss) from operations                |   | 7,407 |   | 122,350 |   | (58,723) |   | 413,177 |
|                                         |   |   |   |   |   |   |   |   |
| Interest income                              |   | 2,698 |   | 3,652 |   | 9,552 |   | 10,350 |
|                                         |   |   |   |   |   |   |   |   |
| Income (loss) before provision for           |   |   |   |   |   |   |   |   |
| income taxes                                 |   | 10,105 |   | 126,002 |   | (49,171) |   | 423,527 |
|                                         |   |   |   |   |   |   |   |   |
| Provision (benefit) for income               |   |   |   |   |   |   |   |   |
| taxes - deferred                             |   | 3,000 |   | 42,000 |   | (16,000) |   | 143,000 |
|                                         |   |   |   |   |   |   |   |   |
| Net income (loss)                            | $ | 7,105 |   | 84,002 |   | (33,171) |   | 280,527 |
|                                         |   |   |   |   |   |   |   |   |
|                                         |   |   |   |   |   |   |   |   |
| Income (loss) per common share -             |   |   |   |   |   |   |   |   |
| - basic and diluted                          | $ | - |   | 0.01 |   | (0.01) |   | 0.05 |
|                                         |   |   |   |   |   |   |   |   |
| Weighted average common shares -             |   |   |   |   |   |   |   |   |
| - basic and diluted                          |   | 5,653,000 |   | 5,653,000 |   | 5,653,000 |   | 5,653,000 |

The accompanying notes are an integral part of these financial statements

5

Return to Table of Contents

----

| ALLIED RESOURCES, INC                             |
|---------------------------------------------------|
| UNAUDITED CONDENSED STATEMENTS OF CASH FLOWS      |
| Nine Months Ended September 30, 2009 and 2008     |
|                                              |   |   |   |   |
|                                              |   | 2009 |   | 2008 |
| Cash flows from operating activities:             |   |   |   |   |
| Net income (loss)                                 | $ | (33,171) |   | 280,527 |
| Adjustments to reconcile net income (loss) to net |   |   |   |   |
| cash provided by operating activities:            |   |   |   |   |
| Depletion and amortization                        |   | 84,193 |   | 86,927 |
| Stock option compensation expense                 |   | 28,972 |   | - |
| Accretion expense                                 |   | 6,288 |   | 5,991 |
| Deferred tax asset                                |   | (16,000) |   | 143,000 |
| (Increase) decrease in:                           |   |   |   |   |
| Accounts receivable                               |   | 24,221 |   | (51,219) |
| Other assets                                      |   | - |   | 2,643 |
| Increase (decrease) in:                           |   |   |   |   |
| Accounts payable                                  |   | 220 |   | 4,007 |
| Accrued liabilities                               |   | - |   | (5,600) |
|                                              |   |   |   |   |
| Net cash provided by operating activities         |   | 94,723 |   | 466,276 |
|                                              |   |   |   |   |
|                                              |   |   |   |   |
| Cash flows from investing activities:             |   | - |   | - |
|                                              |   |   |   |   |
| Cash flows from financing activities:             |   | - |   | - |
|                                              |   |   |   |   |
| Net increase in cash                              |   | 94,723 |   | 466,276 |
|                                              |   |   |   |   |
| Cash, beginning of period                         |   | 1,052,625 |   | 441,130 |
|                                              |   |   |   |   |
| Cash, end of period                               | $ | 1,147,348 |   | 907,406 |

The accompanying notes are an integral part of these financial statements

6

Return to Table of Contents

----

ALLIED RESOURCES, INC.            CONDENSED NOTES TO UNAUDITED FINANCIAL STATEMENTS

September30, 2009

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, 2008, 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, 2009.                  

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, 2008, filed with the Securities and Exchange Commission. Therefore, those footnotes are included herein by reference.

Note 3 – Subsequent Events         

The Company evaluated subsequent events from the balance sheet date through November 13, 2009.

7

Return to Table of Contents

----

**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 reportcontain 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 threemonthand ninemonthperiodsended September30, 2009. 

**ALLIED**         

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**

Allied intends to continue to purchase non-operated oil and gas producing propertiesand acquireoil and gas leases that it canoperate. Our criteria forpurchasing oil and gas producing properties is        defined by short term returns on investment, long term growth in revenue, and development potential, while ourcriteria for acquiring oil and gas leases is predicated on a proven record of historical production. The recent downturn in prices for energyhasgiven rise to new opportunities to purchase interests in distressed oil and gas properties directly from banks and        leasehold owners that might otherwise have been unavailable to us. Allied also believes that it canincrease production and expand reserves by disposing of non-productive wells whileimproving the production capacity ofexisting wells. 

Allied has also consideredthe prospect of future exploration of the virtually untapped Marcellus shale formationthat underlies ouroil and gas interests in West Virginia, particularly in Ritchie County.Drilling in Ritchie County has indicatedsuccessful rates of recovery and our own open hole well logs indicate the presence of a potentially productive Marcellus shale at a depth of 6,000 feet.Nonetheless, Allied has no immediate plans for exploratory drilling due to current state of prices paid for natural gas. 

***West Virginia Well Information***

Allied owns varying interests in a total of 145 wellsin West Virginiaon several leasesheld 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. Allied believes thatoperating in West Virginia has certain advantages over other locations, including:          

|  | ·      | relatively inexpensive drilling and completion operations,and |
|--|----------------------------------------|---------------------------------------------------------------|

|  | ·      | the absence of poisonous gas often associated with oil and gas production. |
|--|----------------------------------------|----------------------------------------------------------------------------|

Many of our wellsare situated on the same leases and as suchshare production equipment in order to minimize lease operating costs. 

8

Return to Table of Contents

----

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 13wellsin Texason four leases managedby independent operatorsand an interest in a pipeline gathering system. 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 ftto 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 2.68% to 12.75%.         

Allied’s business development strategy is prone to significant risks and uncertainties certain of which can have an immediate impact on its efforts to maintainpositive net cash flow and deter future prospects of expanding operations. The recent downturn in the prices paid for oil and natural gas is one        good example of uncertainties associated with the energy sector. Another example is the uncertainty associated with production volumes as older wells deplete over time. Allied can provide no assurance that current operations will continue to produce sufficient cash flows to maintain its business.Should Allied be unable to generate sufficient cash flow itmay have to sell assets or seek debt or equity        financingto continue operations. 

**Results of Operations**

 

Allied’s financial condition, results of operations and the carrying value of our oil and natural gas properties depends primarily upon the prices we receive for oil and natural gas production and the quantity of that production. Oil and natural gas prices historically have been volatile and are likely to continue to be volatile in the        future. This price volatility can immediately affect Allied’s available cash flow which can in turn impact the availability of net cash flow for capital expenditures. A drop in oil and natural gas prices could also incur a write down of the carrying value of our properties as can future decreases inproduction. Allied’s success will depend on oil and naturalgas prices and productionquantities. Since production leads to the depletion of oil and gas reserves, Allied’s ability to develop or acquire economically recoverable oil and gas reserves is vital to continued operations. Unless Allied continues to obtainadditional reserves, declinesin production will eventually lead to significant decreases in revenue. 

During the ninemonth period ended September30, 2009Alliedwas focused onoverseeing the operation of itsoil and gas assets        by independent operators,evaluating opportunities for the development or acquisition of additional oil and gas assetsand seeking out available oil and gas leases. 

9

Return to Table of Contents

----

| **Nine****Months Ended****SEPTEMBER****30** |   | **200****9** |   | **200****8** | **Change****#** | **Change****%** |
|---------------------------------------------|--------|--------------|--------|--------------|-----------------|-----------------|
|                                        |   |         |   |         |            |            |
| **Average Daily Production**                |   |         |   |         |            |            |
|                                        |   |         |   |         |            |            |
| Oil (bbls/day)                              |   | 5            |   | 10           | (5)             | -50%            |
| Natural gas (mcf/day)                       |   | 279          |   | 320          | (41)            | -13%            |
| Barrels of oil equivalent (boe/day)         |   | 52           |   | 63           | (12)            | -19%            |
|                                        |   |         |   |         |            |            |
| **Profitability**                           |   |         |   |         |            |            |
|                                        |   |         |   |         |            |            |
| Petroleum and natural gas revenue           | $      | 528,305      | $      | 1,017,469    | (489,164)       | -48%            |
| Net Revenue                                 |   | 528,305      |   | 1,017,469    | (489,164)       | -48%            |
| Production and operating costs              |   | 318,710      |   | 383,422      | (64,712)        | -17%            |
| Field netback                               |   | 209,595      |   | 634,047      | (424,452)       | -67%            |
| G&A                                     |   | 184,125      |   | 133,943      | 50,182          | 37%             |
| Depletion, depreciation and other charges   |   | 84,193       |   | 86,927       | (2,734)         | -3%             |
| Future income taxes                         |   | -            |   | -            | -               | 0%              |
| Net earnings from operations                | $      | (58,723)     | $      | 413,177      | (471,900)       | -114%           |
|                                        |   |         |   |         |            |            |
| **Profitability per****BOE**                |   |         |   |         |            |            |
|                                        |   |         |   |         |            |            |
| Oil and gas revenue (average sellingprice)  |   | 37.58        |   | 58.63        | (21.06)         | -36%            |
| Production and operating costs              |   | 22.67        |   | 22.10        | 0.57            | 3%              |
| Field netback ($/boe)                       |   | 14.91        |   | 36.54        | (21.63)         | -59%            |
| Net earnings ($/boe)                        |   | (4.18)       |   | 23.81        | (27.99)         | -118%           |
| Cash flow from operations ($/boe)           |   | 1.81         |   | 28.82        | (27.01)         | -94%            |

***Revenue***

Revenue for the three month period ended September 30, 2009 decreased to $194,628 from $324,317for the comparable period ended September 30, 2008, a decrease of 40%. Revenue for the nine month period September 30, 2009 decreased to $528,305 from $1,017,469for the        comparable period ended September 30, 2008, a decrease of 48%. The decrease in revenueover the three and nine month comparative periodsis due to a decline in the average selling price for oil and natural gas, and a decline inoil and natural production. The decrease in production can be attributed to both the natural depletion of natural resources over time and well failures        over the current period. Alliedencountered problems with threeof its oil producing wells over the most recent ninemonth period.          

Allied anticipates that revenue will continue to decrease in the near termwith decreases in revenue and volatile pricing for oil and gas products.

10

Return to Table of Contents

----

***Net******Income******/Losses***

Net incomefor the threemonth period ended September 30, 2009 was $7,105,as compared to net incomeof $84,002for the comparable period ended September30, 2008, a decrease of 92%.Net losses for the ninemonth period endedSeptember 30, 2009 were $33,171,as compared to net incomeof $280,527for the comparable period ended September30, 2008. The        transition tonet losses over the ninemonth periodscan be primarily attributed to decreases in oil and gas revenues in the current period.          

Allied expects net losses to continue in the near termin line with continued decreases in revenue.

******

***Expenses***

General and administrative expenses for the threemonth period ended September 30, 2009 increased to $47,687 from $44,674for the comparable period ended September30, 2008, an increase of 7%.General        and administrative expenses for the nine month period ended September 30, 2009 increased to $184,125 from $133,943for the comparable period ended September30, 2008, an increase of 37%. The increasein general administrative expenses over the threeand ninemonth periodscan be primarily attributed toconsultingfeesand stock option expenses.          Allied expectsthat general and administrative expenses will remain relatively consistent over future periods. 

Depletion expenses for the three month periods ended September30, 2009, and 2008 were $31,143 and $28,182respectively. Depletion expenses for the nine month periods ended September 30,2009 and 2008 were $184,125and $133,943respectively.

Production costsfor the three month periods ended September30, 2009, and September30, 2008 were $108,391 and $129,111respectively, a decrease of 16%. Production costs for the nine month periods        ended September 30, 2009, and September30,2008 respectively were $318,710 and $383,422 respectively, a decrease of 17%. Production costsinclude the cost of maintaining the wells, severance taxes, miscellaneous expenses for soap, solvent, gasoline or electricity and expenses such as those incurred in swabbing, dozer work or rig time. The decrease in production costs over the        current three and ninemonth periodscan be attributed to decreasedproduction.          

Allied expects that production expenses will increase over future periods as the ages of our wells increase so too does the cost of maintaining production from such wells.

 

****

***Income Tax Expense***

As of December 31, 2008Allied has a net operating loss (NOL) carry forwards of approximately $2,433,000. 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.

 

****

***Impact of Inflation***

Allied believes that inflation has had an effect on operations over the past three years in connection with production costs. Allied believes that it can offset inflationary increases in production costs by increasing revenue and improving operating efficiencies. 

******

11

Return to Table of Contents

----

***Liquidity and Capital Resources***

 

Cash flow provided by operations for the ninemonth period ended September 30, 2009 was $94,723as compared to cash flow provided by operations of $466,276for the comparable period ended September30, 2008. The decreasein cash flow provided by operations in the current period can be attributed to net losses as compared to net income in the prior period.          

Allied expects that cash flow provided by operations will increase as we increasenet income from operations.          

Cash flow used ininvesting activities for the nineperiods ended September 30, 2009 and September30, 2008 was $0.          

Allied expects to use cash flow in investing activities infuture periods as itevaluates existing wells, identifies exploration opportunities and considers additional acquisitions. 

Cash flow from financing activities for the ninemonth periods ended September30, 2009and September30, 2008was $0.          

Allied does not expect to realizecash flow fromfinancing activities in the near term. 

Allied has a working capital surplus of $1,206,214asof September30, 2009and 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 the remainder of2009.          Since earnings are reinvested in operations, cash dividends are not expected to be paid in the foreseeable future.         

Allied had no lines of credit or other bank financing arrangements.          

Commitments for future capital expenditures were not material at the end of the period. 

Allied hasadopted a stock option planpursuant to which it can grant up to 750,000 options to purchase shares of its common stockto employees, directors, officers, consultants or advisors of the Company on the terms and conditions set        forth therein. As of September30, 2009,600,000 options hadbeen granted.

Allied has entered into an agreement with its chief executive officer that provides for a five year term, effective July 1, 2008, that includes a monthly fee and participation in Allied’s 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. 

***Off Balance Sheet Arrangements*** 

As of September30, 2009, Alliedhas 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 arematerial to stockholders.         

12

Return to Table of Contents

----

***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.        A safe-harbor provision may not be applicable to the forward looking statements made in this report because of certain exclusions under Section 27A (b). 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 fromthose discussed or anticipatedincluding 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 that is required by law.

***Stock-Based Compensation***

Allied has adopted Accounting Standards Codification Topic (“ASC”) 718, formerly SFAS No. 123 (revised 2004) (SFAS No. 123R), Share-Based Payment, which addresses the accounting for stock-based payment transactions in which an enterprise receives employee services in exchange for (a) equity        instruments of the enterprise or (b) liabilities that are based on the fair value of the enterprise’s equity instruments or that may be settled by the issuance of such equity instruments. 

**Alliedaccountsfor equity instruments issued in exchange for the receipt of goods or services from other than employeesin        accordance with ASC 505. Costs are measured at the estimated fair market value of the consideration received or the estimated fair value of the equity instruments issued, whichever is more reliably measurable. The value of equity instruments issued for consideration other than employee services is determined on the earliest of a performance commitment or completion of performance by the provider of goods or services.**

13

Return to Table of Contents

----

***Critical Accounting Policies and Estimates***

Accounting for Oil and Gas Property Costs. As more fully discussed in Note 1 to the Financial Statements, 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, 2008 and 2007, 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.

14

Return to Table of Contents

----

***Recent Accounting Pronouncements***

In September 2009, the Financial Accounting Standards Board (FASB) issued ASU2009-12, *Fair Value Measurements and Disclosures (Topic 820): Investments in Certain Entities That Calculate Net Asset Value per Share (or Its Equivalent).*This update provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures – Overall, for the fair value measurement of investments in certain entities that calculate net asset value per share (or its equivalent). The amendments in this update are effective for interim and annual periods ending after December 15, 2009. Early application is permitted in financial statements for earlier interim and annual periods that have        not been issued. The adoption of this update will have no material effect on the Company’s financial condition or results of operations.

In August 2009, the FASB issued ASU2009-05, *Fair Value Measurements and Disclosures (Topic 820): Measuring Liabilities at Fair Value*. This update provides amendments to Subtopic 820-10, Fair Value Measurements and Disclosures – Overall,        for the fair value measurement of liabilities. The guidance provided in this update is effective for the first reporting period beginning after issuance. The adoption of this statement has hadno material effect on the Company’s financial condition or results of operations.

In June 2009, the FASB issued SFAS No. 168, *The FASB Accounting Standards Codification**TM**and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement        No. 162*, which is codified in FASB ASC 105, *Generally Accepted Accounting Principles*(“ASC 105”). ASC 105 establishes the Codification as the source of authoritative GAAP in the United States (the “GAAP hierarchy”) recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of the Securities and        Exchange Commission (“SEC”) under authority of federal securities laws are also sources of authoritative GAAP for SEC registrants. Once the Codification is in effect, all of its content will carry the same level of authority and the GAAP hierarchy will be modified to include only two levels of GAAP, authoritative and non-authoritative. ASC 105 is effective for financial statements issued for interim and annual periods ending after September 15, 2009. The adoptionof ASC 105 has had no material effect on the Company’s financial condition or results of operation.

In June 2009, the FASB issued SFAS No. 167, *Amendments to FASB Interpretation No. 46(R)*(“SFAS No. 167”), which amends the consolidation guidance applicable to variable interest entities. The amendments significantly affect the overall consolidation        analysis under FASB ASC 810, *Consolidation*and require an enterprise to perform an analysis to determine whether the enterprise’s variable interest or interests give it a controlling financial interest in a variable interest entity. SFAS No. 167 has not yet been codified and in accordance with ASC 105, remains authoritative guidance until such time that it is integrated in the FASB ASC. SFAS        No. 167 is effective as of the beginning of the first fiscal year that begins after November 15, 2009, early adoption is prohibited. The adoption of this update will have no material affect on the Company’s financial condition or results of operations.

In June, 2009, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No 166, *Accounting for Transfers of Financial Assets—an amendment of FASB Statement No. 140*” (“SFAS 166”). This statement removes        the concept of a qualifying special-purpose entity Statement 140 and removes the exception from applying Interpretation No. 46 (revised December 2003), *Consolidation of Variable Interest Entities,*to qualifying special-purpose entities. SFAS No. 166 has not yet been codified and in accordance with ASC 105, remains authoritative guidance until such time that it is integrated in the FASB ASC. SFAS        No. 166 is effective for financial asset transfers occurring after the beginning of an entity’s first fiscal year that begins after November 15, 2009 and early adoption is prohibited. The adoption of this statement will have no material affect on the financial statements. The adoption of this statement will have no material effect on the Company’s financial condition or results of operations. 

15

Return to Table of Contents

----

In May, 2009, FASB issued ASC 855 *Subsequent Events*whichestablishes principles and requirements for subsequent events. In accordance with the provisions of ASC 855, the Company currently evaluates subsequent events through the date the        financial statements are available to be issued.

**ITEM 3.     ****QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK**

Not required.

**ITEM 4T.     ****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 the chief financial officer, of the effectiveness of Allied’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under 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 the chief financial officer, to allow timely decisions regarding required disclosures.

Based on thatevaluation, Allied’s management concluded, as of the end of the period covered by this report, that Allied’s disclosure controls and procedures were effectivein recording, processing, summarizing, and reporting information required to be        disclosed, within the time periods specified in the Commission’s rules and forms.

***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 theperiodendedSeptember30, 2009, 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 1****A****.****     RISK FACTORS         **

Ourfuture operating results are highly uncertain. Before deciding toinvest in us or to maintain or increase your investment, you should carefullyconsider the risks described below, in addition to the other informationcontained in this quarterlyreport. If any of these risks actually occur, ourbusiness, financial condition or results of operations could be seriouslyharmed. In that event, the market price for our commonstock could decline and you mightlose all or part of your        investment.

16

Return to Table of Contents

----

**Risks Related t****o****Allied****’s Business**

***We have a history of significant operating losses, which******losses may continue to reoccur******.***

        Since our inception in 1979, our expenses have often exceeded our income, resulting in losses and an accumulated deficit of $6,149,990 at September 30, 2009. We recorded a net lossof $33,171 for the nine month period ended September30, 2009 and may continue to realize net losses if revenues do not increase.Our expectation of an increase in revenuedepends on higherenergy prices and additional production fromexploration, 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 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.

17

Return to Table of Contents

----

***Allied’s future performance depends on our ability to find or acquire additional oil or natural gas reserves.***

        Unless Allied successfully replaces the reserves that itproduces, defined reserves will decline, resulting in a decrease in oil and natural gas production, that will produce lower revenues, in turn decreasingcash flows from operations. Allied has historically obtained the majority of itsreserves 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 ifcash flows from operations are reduced, and access to external sources of capital is unavailable. Should Allied not make significant capital expenditures to increase reserves itwill not be able to maintain current production rates and expenses will overtake 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 partiesto produce revenue from our assets could restrict our ability to continue generating a net profit on        operations.

**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 islimited due to low trading volumesand 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 difficultyin selling their shares in the market place.

***We incur significant expenses as a result of******the Sarbanes-Oxley Act of 2002******, which******expenses may continue to******negatively impact our        financial performance.***         We incur significant legal, accounting and other expenses as a result of the Sarbanes-Oxley Act of 2002, as well as related rules implemented by the Commission, which control the corporate governance practices of public companies. Compliance with these laws, rules and regulations, including compliance with Section 404 of the Sarbanes-Oxley Act of 2002,as discussed in the following risk factor, hassubstantially        increased our expenses, including legal and accounting costs, and madesome activities more time-consuming and costly. Further, expenses related to our compliance may increase in the future, as legislation affecting smaller reporting companies comes into effect that may negatively impact our financial performance to the point of having a material adverse effect on our results of operations and financial condition.

18

Return to Table of Contents

----

***Our internal controls over financial reporting may not be considered effective******in the future******, which could result in a loss of investor confidence in our financial reports and in turn have an adverse effect on our stock        price.***

        Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 we arerequired to furnish a report by our management on our internal controls over financial reporting. Such report must contain, among other matters, an assessment of the effectiveness of our internal controls over financial reporting as of the end of the year, including a statement as to whether or not our internal controls over financial reporting are effective. This assessment must        include disclosure of any material weaknesses in our internal controls over financial reporting identified by management. If we are unable to continue to assert that our internal controls are effective, our shareholderscould lose confidence in the accuracy and completeness of our financial reports, which in turn could cause our stock price to decline.

***Allied******does not pay dividends.***

Allied has not paid dividendson its common stocksince inception and has no present 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,        ouroperating and financial condition,our capital requirements, and general business conditions. Shareholdersshould not expect any direct cash flow from maintaining their investmentin Allied stock.

***Allied may require additional capital funding.***

Allied may require additional funds, either through additional equity offerings or debt placements, in order to expand itsoperations. Such additional capital may result in dilution to ourcurrent shareholders. Further, ourability 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 usto meet ourfinancial commitments.         

***If the******market******price of our common stock declines as the******selling security holders******sell their        stock******,******selling******security holder******s 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 the selling security holderssell material amounts of common stock could encourage short sales by the selling security holdersor 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 a company’s stock creates an incentive for market participants to reduce the value of that company’s common stock. If a significant market for short selling our common stock develops, the market price of our common stock could be        significantly depressed.

19

Return to Table of Contents

----

***Allied******’s shareholders may face significant restrictions on******their stock.***

Allied’sstock differs from many stocks in that it may be defined asa “penny stock.”The Commission has adopted a number of rules to regulate “penny stocks”including, but not limited        to, those rules from theSecurities Actas follows:

3a51-1     which defines penny stock as, generally speaking,those securities whichare not listed on either NASDAQ or a national securities exchange and are priced under $5, excludingsecurities of issuers that have net        tangible assets greater than $2 million if they have been in operation at least three years,greater than $5 million if in operation less than three years, or average revenue of at least $6 million for the last three years;

15g-1     which outlines transactions by broker/dealers which are exempt from 15g-2 through 15g-6 as those whose commissions from traders are lower than 5% total commissions;

15g-2     which details that brokers must disclose risks of penny stock on Schedule 15G;

15g-3     which details that broker/dealers must disclose quotes and other information relating to the penny stock market;

15g-4     which explains that compensation of broker/dealers must be disclosed;

15g-5     which explains that compensation of persons associated in connection with penny stock sales must be disclosed;

15g-6     which outlines that broker/dealers must send out monthly account statements; and

15g-9     which defines sales practice requirements. 

SinceAllied’s securities may constitute a “penny stock”within the meaning of the rules, the rules mayapply to us and our securities. Because these rules provide regulatory burdens upon broker-dealers, theymay affect the ability of shareholdersto sell their securities in any market that may develop; the rules themselves maylimitthemarket for penny stocks. Additionally, the market among dealers may not be active. Investors in penny stock often are unable to sell stock back to the dealer that sold them the        stock. The mark-ups or commissions charged by the broker-dealers may be greater than any profit a seller may make. Because of large dealer spreads, investors may be unable to sell the stock immediately back to the dealer at the same price the dealer sold the stock to the investor. In some cases, the stock may fall quickly in value. Investors may be unable to reap any profit from any sale of the stock, if they can sell it at all. 

Shareholders should be aware that, according to Commission Release No. 34-29093 dated April 17, 1991, the market for penny stocks has suffered from patterns of fraud and abuse. These patternsinclude: 

|  | ·      | control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; |
|--|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------|

|  | ·      | manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; |
|--|----------------------------------------|---------------------------------------------------------------------------------------------------------------------|

|  | ·      | “boiler room”practices involving high pressure sales tactics and unrealistic price projections by inexperienced sales persons; |
|--|----------------------------------------|--------------------------------------------------------------------------------------------------------------------------------------------|

|  | ·      | excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and |
|--|----------------------------------------|--------------------------------------------------------------------------------------------|

|  | ·      | the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the inevitable collapse of those prices with consequent investor losses. |
|--|----------------------------------------|-------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------|

**ITEM 2.     UNREGISTERED SALES OF EQUITY SECURITIES****AND USE OF PROCEEDS**         

None.

20

Return to Table of Contents

----

**ITEM 3.     DEFAULTS ON SENIOR SECURITIES**

None.          

**ITEM 4.     ****SUBMISSION OF MATTERS****TO A VOTE OF SECURITY HOLDERS         **

None.          

**ITEM 5.     OTHER INFORMATION         **

None.

**ITEM 6.     EXHIBITS**

Exhibitsrequired to be attached by Item 601 of Regulation S-Kare listed in the Index to Exhibits on page 23of this Form 10-Q, and are incorporated herein by this reference.

21

Return to Table of Contents

----

**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                                   November 13, 2009

Ruairidh Campbell                         

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

                    

22

Return to Table of Contents

----

**INDEX TO****EXHIBITS**

***Exhibit     ******     ******Description***

3(i) *     Articles of Incorporation dated February 12, 2002 (incorporated by reference to the Form 10-SB/A filed on April 21, 2003).

3(ii) *          Bylaws (incorporated by reference to the Form 10-SB/A filed on April 21, 2003).

10(i) *          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(ii) *          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(iii) *          Form Gas Purchase Agreement (incorporated by reference to the Form 10SB/A filed on April 21, 2003).

10(iv)           Consulting Agreement between Allied and Ruairidh Campbell dated July 1, 2008 (incorporatedby 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*     Allied Resources, Inc. 2008 Stock Option Plan (incorporated by reference to the Form 10-Q filed on November 14, 2008).

     *      Incorporated by reference to previous filings of Allied.

23

Return to Table of Contents

----