U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended September 30, 2017

[   ] Transition Report under Section 13 or 15(d) of the Exchange Act

For the Transition Period from ________to __________

Commission File Number: 333-197642

Alpha Energy, Inc.

(Exact Name of Registrant as Specified in its Charter)

Registrant's Phone:970-568-6862

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or 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 [   ]☒ No [X]☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted 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 such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [   ]☐

Securities registered pursuant to Section 12(b) of the Exchange Act:

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [   ]☐ No [X]☒

As of November 10, 2017,May 14, 2021 the issuer had 17,016,42818,299,428 shares of common stock issued and outstanding.

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ITEM 1. FINANCIAL STATEMENTS

ALPHA ENERGY, INC.

Unaudited

NOTE 1 – BASIS OF PRESENTATION

The accompanyinginterim unaudited interimconsolidated financial statements have been prepared byin accordance with accounting principles generally accepted in the Company without audit.United States and should be read in conjunction with the audited financial statements and notes thereto for the years ended December 31, 2020 and 2019 which are included on a Form 10-K filed on April 29, 2021. In the opinion of management, all adjustments (whichwhich include only normal recurring adjustments)adjustments, necessary to present fairly the financial position, results of operations, and cash flows as of September 30, 2017, and for allthe periods presented herein,shown have been made.

reflected herein. The results of operations for the three months ended March 31, 2021 are not necessarily indicative of the operating results for the full year. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for years ended December 31, 2020 and 2019 have been omitted.

Principles of Consolidation

Our consolidated financial statements include our accounts and the most recent fiscal period, as reportedaccounts of our 100% owned subsidiary, Alpha Energy Texas Operating, LLC. All intercompany transactions and balances have been eliminated.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the Form 10-K, have been omitted. It is suggestedUnited States of America requires management to make estimates and assumptions that these unaudited interim financial statements be read in conjunction withaffect the reported amounts of assets and liabilities at the date of the financial statements and notes thereto includedthe reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company’s system of internal accounting control is designed to assure, among other items, that (1) recorded transactions are valid; (2) all valid transactions are recorded and (3) transactions are recorded in the Company’s December 31, 2016 auditedperiod in a timely manner to produce financial statements. Thestatements which present fairly the financial condition, results of operations and cash flows of the company for the three and nine months ended September 30, 2017 are not necessarily indicative of the operating results for the full year.respective periods being presented.

Related party policyBasic and Diluted Loss per share

InNet loss per share is provided in accordance with FASB ASC 850,260-10, "Earnings (Loss) per Share". Basic loss per share is computed by dividing net loss attributable to common stockholders by the Company discloses:weighted average number of common shares outstanding during the nature ofperiod. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the related party relationship(s) involved; a description ofperiod. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the transactions, including transactions tothree months ended March 31, 2021 and 2020, there were 148,328 and 128,578 shares issuable from convertible credit line payable which no amounts or nominal amounts were ascribed,considered for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of thetheir dilutive effects, of the transactions on the financial statements; the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.respectively.

Revenue recognitionThe reconciliation of basic and diluted loss per share is as follows:

Fair Value of Financial Instruments

The Company records revenues fromapplies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the sales of natural gas and crude oil when the production is produced and sold, and also when collectability is ensured.financial statements on a recurring basis. The Company maydefines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the future have an interest with other producers in certain properties,measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which case the Company willwould transact and the market-based risk measurements or assumptions that market participants would use in pricing the sales methodasset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to account for gas imbalances. Under this method, revenue will be recorded onmeasure fair value into three levels and bases the basiscategorization within the hierarchy upon the lowest level of natural gas actually sold byinput that is available and significant to the Company. The Company also reduces revenue for other owners’ natural gas sold by the Company that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company’s remaining over- and under-produced gas balancing positions are considered in the Company’s proved oil and natural gas reserves. The Company had no gas imbalances at September 30, 2017 or December 31, 2016.fair value measurement:

Impairment

Level 1 – Quoted prices in active markets for identical assets or liabilities.

Level 2 – Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in pricing the asset or liability.

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregatecarrying amount of the presentCompany’s financial instruments consisting of cash and cash equivalents, accounts payable, notes payable and convertible notes approximates fair value due either to length of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of costmaturity or interest rates that approximate prevailing market value of unproved properties includedrates unless otherwise disclosed in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period. During the year ended December 31, 2016, the Company evaluated the future production of its leases through the termination of each lease. Through its analysis, the Company determined the present value of future production was less than the carrying value of the leases on the balance sheet. The Company recorded an impairment loss of $35,432 during the years ended December 31, 2016. The Company performed an additional analysis during the nine months ended September 30, 2017 and determined its proved and unproved properties were fully impaired and recorded an impairment loss of $11,250 during the nine months ended September 30, 2017.these financial statements.

Derivative Liabilities

Recently Issued Accounting Standards Not Yet Adopted

The Company recordshas reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements will have a debt discount relatedsignificant effect on its financial statements.

Reclassification

Certain reclassifications may have been made to the issuanceour prior year’s financial statements to conform to our current year presentation. These reclassifications had no effect on our previously reported results of convertible debts that have conversion features at adjustable rates. The debt discount for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The debt discount will be accreted by recording additional non-cash gains and losses related to the change in fair market values of derivative liabilities over the life of the convertible notes.operations or accumulated deficit.

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NOTE 2 – GOING CONCERN

The Company’s interim unaudited financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company hasdoes not yethave any cash or other current assets, nor does it have an established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of issuance of this report.concern. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

NOTE 3 – COMMON STOCK WARRANTS OIL AND GAS PROPERTIES

Through the year ended December 31, 2014,On September 8, 2020, the Company issued warrantsentered into an Option Agreement with Kadence Petroleum, LLC. (“Kadence”) to acquire oil and gas assets in connection with common stock issued for cash.Logan County in Central Oklahoma, called the “Logan 2 Project” in the Agreement). During due diligence it was discovered that Kadence did not have title to the properties in the agreement. The following table summarizes all stock warrant activity forCompany had advanced $85,500 in option payments through March 31, 2021. The agreement is cancelled and the nine months ended September 30, 2017:Company wrote off the $85,500 as of March 31, 2021.

NOTE 4 – RELATED PARTY TRANSACTIONS

The Company received advances from related parties totaling $129,000 and $0 during the three months ended March 31, 2021 and 2020, respectively. The advances from related parties are not convertible, bear no interest and are due on demand. As of March 31, 2021 and December 31, 2020, there was $388,744 and $181,000 of short term advances due to related parties, respectively.

During the ninethree months ended September 30, 2017,March 31, 2021, a related party paid $13,244 of expenses on behalf of the Company borrowed $8,031 and made repayments on short term$65,500 for unpaid oil and gas assets acquired. During the three months ended March 31, 2020, a related party loans payablepaid $459 of $18,736. During the nine months ended September 30, 2017, a significant shareholder made payment of $2,630 for expenses on behalf of the Company. The advances are non-interest bearingAs of March 31, 2021 and due on demand. ThereDecember 31, 2020, there was $9,780$152,818 and $17,855$120,568 of accounts payable and accrued expenses due to related parties, respectively.

The Chief Financial Officer allows the use of his residence as an office for the Company at no charge.

NOTE 5 – COMMON STOCK

The Company is authorized to issue up to 10,000,000 shares of September 30, 2017$0.001 par value preferred stock and December65,000,000 shares of $0.001 par value common stock.

The Company compensates each of its directors with 4,000 shares of common stock each month. During the quarter ended March 31, 2016, respectively.2021 and 2020, the Company issued 48,000 shares of common stock valued at $48,000.

During the ninethree months ended September 30, 2017,March 31, 2021, the Company made advancesissued 90,000 shares of common stock with a fair value of $90,000 to related partiessettle accounts payable of $445 which were repaid during the same period.$210,250. The advances are non-interest bearing and dueCompany recognized a gain of $120,250 on demand. There was $0 due from related parties assettlement of September 30, 2017 and December 31, 2016, respectively.accounts payable.

Fred Ziegler, who is the spouseThe Board of our President, Karen Ziegler, is an unpaid consultant for the Company. Although uncompensated and not having direct ownership of stock, he has the ability to exercise significant influence overDirectors authorized the Company given the personal relationship with oneto sell 1,750,000 shares of our officers.

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common stock at $1.00 per share to raise working capital. During the nine monthsquarter ended September 30, 2017, the majority owners ofMarch 31, 2021, the Company sold their stock in a private transaction to AEI Acquisition Company, LLC. Immediately after the close of the transaction, AEI Acquisition Company owned 85% of the issued and outstandingno shares of the Company.common stock. During the quarter ended March 31, 2020, the Company sold 18,000 shares of the common stock for total proceeds of $18,000.

During the nine months ended September 30, 2017, the Company converted existing notes payable due to AEI Acquisition Company of $87,366 to a convertible credit line. SeeNote

NOTE 6 – Convertible Credit Line Payable – Related Party.

NOTE 5 – NOTES PAYABLE

On February 1, 2017,March 30, 2019, the Company executed a promissory note for $56,216.$50,000 to ZQH (75%) and Pure (25%). The due date of the note is April 30, 2019 and has an interest rate of $50 per day. The note bears simpleis for an escrow payment made directly to Premier Gas Company, LLC to hold the Purchase and Sale Agreement dated January 29, 2019. The note is secured by 50,000 shares of the Company’s common stock at $1 per share. On June 25, 2020, the Company entered into a Purchase and Sale Agreement with Pure. and ZQH to acquire oil and gas assets in Oklahoma in consideration of a purchase price of $1,000,000. In connection with the purchase, the $50,000 note and accrued interest of $10,000 was added to the purchase price resulting in a total note payable balance of $1,060,000. During the year ended December 31, 2020, $10,750 of accrued interest which was previously outstanding was discharged and recorded as a gain on extinguishment of debt. The note payable of $1,060,000 was due to be paid on or before July 31, 2020 but remains outstanding to date. The balance of the note will increase by $50,000 per month thereafter up to a maximum amount of $200,000 through December 1, 2020. As of December 31, 2020, the Company recognized $200,000 of default interest that was added to the principal for a total payable of $1,160,000. If the purchase price is not fully paid on or before December 1, 2020, ZQH and Pure have the option to convert the balance outstanding into the Company’s common stock at a rateconversion price of 3.75%, is not convertible$1.00 per share and the note will also be subject to equitya monthly interest of the Company and is due on February 1, 2018.1%. During the three months ended June 30, 2017,March 31, 2021, the Company received additional advancesrecognized $50,000 of $7,600. Duringdefault interest that was added to the three months ended September 30, 2017,principal of the Company made repaymentsnote payable. As of $2,000 and received additional advances of $23,550. On September 1, 2017, the outstanding balance of $87,366 onMarch 31, 2021, the note payable balance was converted$1,210,000 with accrued interest of $33,890. The Company, Pure, and ZQH have entered into various Extension Agreements, the current one of which is dated March 28th, 2021 (the “Extension Agreement”). The Extension Agreement prevents Pure and ZQH from taking stock rather than cash through June 1, 2021, in return for which Company makes a monthly interest payment to a convertible credit line payable as discussed inNote 6 – Convertible Credit Line Payable – Related Party.ZQH and Pure of $10,083, which represents 1% annual interest on the Purchase Price, compounded monthly. The Extension Agreement allows the Company to extend that period beyond June 1, 2021 under similar terms.

NOTE 6 7 – CONVERTIBLE CREDIT LINE PAYABLE – RELATED PARTY

On September 1, 2017, the Company entered into a convertible credit line agreement to borrow up to $500,000. On the same date, the outstanding balance on a note payable of $87,366 was exchanged as a draw on the credit line. The loan modification is considered substantialconsidered substantial under ASC 470-50. The outstanding balance accrues interest at a rate of 7% per annum and the outstanding balance is convertible to common stock of the Company at the lesser of the close price of the common stock as quoted on the OTCBB on the day interest is due and payable immediately preceding the conversion or $1.50. The Company analyzed the conversion options in the convertible line of credit for derivative accounting consideration under ASC 815, Derivative and Hedging, and determined that the transaction does qualify for derivative treatment. The Company measured the derivative liability and recorded a debt discount of $87,366 upon initial measurement. In 2019, the Company recognized an additional debt discount of $7,568. During the ninethree months ended September 30, 2017,March 31, 2021 and 2020, the Company amortized $4,640$2,754 and $5,731 of the discount as interest expense, leaving anrespectively. As of March 31, 2021 and December 31, 2020, the unamortized discount of $82,726 as of September 30, 2017.was $0 and $2,754, respectively. See discussion of derivative liability inNote 78 – Derivative LiabilityLiability.

TheDuring the three months ended March 31, 2021 and 2020, the Company made payments ofrecorded $0 and $2,000 in cash payment to the outstanding balance on the credit line, at September 30, 2017. There was $85,366 of principal and $1,686 of accrued interest outstanding as of September 30, 2017. As of September 30, 2017 there was an unamortized debt discount of $82,726 resulting in a net balance represented on the balance sheet of $2,640.respectively.

NOTE 7 8 – DERIVATIVE LIABILITY

As discussed in Note 1, on a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy. The following table presents information about the Company’s liabilities measured at fair value as of September 30, 2017March 31, 2021 and December 31, 2016:2020:

As of September 30, 2017, the Company had a $156,504 derivative liability balance on the balance sheet and recorded a loss from derivative liability fair value adjustment of $66,226 during the three and nine months, respectively ended September 30, 2017. The Company assessed its outstanding convertible credit line payable as summarized inNote 6 – Convertible Credit Line Payable- Related Partyand determined certain convertible credit lines payable with variable conversion features contain embedded derivatives and are therefore accounted for at fair value underASC 920, Fair Value Measurements and DisclosuresandASC 825, Financial Instruments.

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Utilizing Level 3 Inputs, the Company recorded fair market value adjustments related to convertible notescredit line payable for the three months ended September 30, 2017March 31, 2021 and 2020 of $66,226$13,304 and $39,049, respectively. The fair market value adjustments related toas of March 31, 2021 and 2020 were calculated utilizing the convertible notes payable for the nine months ended September 30, 2017 of $66,226, respectively. The derivative liability was initially measured at $90,278, resulting in a loss on initial measurement of $2,912, on September 1, 2017Black-Scholes option pricing model using the following assumptions: exercise price of $1.50, 58,244 common shares the balance can be converted into shares$1.00, computed volatility of 111% and a stock price at measurement date54% and discount rate of $1.55. The fair market value adjustments as of September 30, 2017 were calculated utilizing a max valuation method using the following assumptions: exercise price of $1.50, 56,911 common shares the balance can be converted into and a stock price at measurement date of $2.75.0.17% respectively.

A summary of the activity of the derivative liability is shown below:below at March 31, 2021:

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