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 __________
☒ | Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 |
For the quarterly period ended March 31, 2021 | |
☐ | 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)
| Colorado | 90-1020566 | ||
(State of other jurisdiction of | (I.R.S. Employer | |||
incorporation or organization) | Identification Number) |
| 4162 Meyerwood Drive, Houston TX 77025 | |
|
| |
(Address of principal executive offices) (Zip Code) | ||
|
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.
Large accelerated filer ☐ |
| Accelerated filer |
| |
|
| Smaller reporting |
| |
Non-accelerated filer ☐ | company | |||
Emerging Growth | ||||
| Company |
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:
Title of each class | Trading Symbol(s) | Name of each exchange on which registered |
Common | APHE | Other OTC |
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.
1
TABLE OF CONTENTS
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| Page | |
PART I – FINANCIAL INFORMATION | |||
Item 1. | Financial Statements | 3 | |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation | 12 | |
Item 3. | Quantitative and Qualitative Disclosures about Market Risk | 14 | |
Item 4. | Controls and Procedures | 14 | |
PART II – OTHER INFORMATION | |||
Item 1. | Legal Proceedings | 15 |
Item 1A. | Risk Factors | 15 |
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds | 15 |
Item 3. | Defaults Upon Senior Securities | 15 |
Item 4. |
| 15 |
Item 5. | Other Information | 15 |
Item 6. | Exhibits | 16 |
2
ITEM 1. FINANCIAL STATEMENTS
ALPHA ENERGY, INC.
Unaudited
Page(s) | |
Consolidated Balance Sheets (unaudited) | 4 |
Consolidated Statements of Operations (unaudited) | 5 |
Consolidated Statements of Changes in Stockholders' Deficit (unaudited) | 6 |
Consolidated Statements of Cash Flows (unaudited) | 7 |
Notes to the Consolidated Financial Statements (unaudited) | 8 |
ALPHA ENERGY, INC. | ||||
CONSOLIDATED BALANCE SHEETS | ||||
(Unaudited) |
September 30, 2017
March 31, 2021 | December 31, 2020 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 308 | $ | - | ||||
Prepaid assets and other current assets | 5,000 | 30,000 | ||||||
Total current assets | 5,308 | 30,000 | ||||||
Noncurrent assets: | ||||||||
Oil and gas property, unproved, full cost | 60,000 | 70,000 | ||||||
Total assets | $ | 65,308 | $ | 100,000 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable and accrued expenses | $ | 359,949 | $ | 585,732 | ||||
Accounts payable and accrued expenses - related parties | 152,818 | 120,568 | ||||||
Interest payable | 34,703 | 31,295 | ||||||
Short term advances from related parties | 388,744 | 181,000 | ||||||
Short term note payable | 1,210,000 | 1,160,000 | ||||||
Derivative liability | 83,065 | 96,369 | ||||||
Total current liabilities | 2,229,279 | 2,174,964 | ||||||
Convertible credit line payable – related party, net of discount of $0 and $2,754, respectively | 148,328 | 145,574 | ||||||
Asset retirement obligation | 881 | 862 | ||||||
Total liabilities | 2,378,488 | 2,321,400 | ||||||
Commitments and contingencies | ||||||||
�� | ||||||||
Stockholders' deficit: | ||||||||
Preferred stock, 10,000,000 shares authorized: | ||||||||
Series A convertible preferred stock, $0.001 par value, 2,000,000 shares authorized and 0 shares issued and outstanding | - | - | ||||||
Common stock, $0.001 par value, 65,000,000 shares authorized and 18,283,428 and 18,145,428 shares issued and outstanding, respectively | 18,283 | 18,145 | ||||||
Additional paid-in capital | 2,199,497 | 2,061,635 | ||||||
Accumulated deficit | (4,530,960 | ) | (4,301,180 | ) | ||||
Total stockholders' deficit | (2,313,180 | ) | (2,221,400 | ) | ||||
Total liabilities and stockholders' deficit | $ | 65,308 | $ | 100,000 |
See accompanying notes to the unaudited consolidated financial statements. |
3
ALPHA ENERGY, INC | ||||
CONSOLIDATED STATEMENTS OF OPERATIONS | ||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 | ||||
(Unaudited) |
March 31, 2021 | March 31, 2020 | |||||||
Oil and gas sales | $ | - | $ | 346 | ||||
Lease operating expenses | - | 928 | ||||||
Gross loss | - | (582 | ) | |||||
Operating expenses: | ||||||||
Professional services | 11,919 | - | ||||||
Board of director fees | 48,000 | 48,000 | ||||||
General and administrative | 229,503 | 83,301 | ||||||
Gain on settlement of accounts payable | (120,250 | ) | - | |||||
Total operating expenses | 169,172 | 131,301 | ||||||
Loss from operations | (169,172 | ) | (131,883 | ) | ||||
Other income (expense): | ||||||||
Interest expense | (73,912 | ) | (12,481 | ) | ||||
Gain on change in fair value of derivative liabilities | 13,304 | 39,049 | ||||||
Total other income (expense) | (60,608 | ) | 26,568 | |||||
Net loss | $ | (229,780 | ) | $ | (105,315 | ) | ||
Loss per share: | ||||||||
Basic | $ | (0.01 | ) | $ | (0.01 | ) | ||
Diluted | $ | (0.01 | ) | $ | (0.01 | ) | ||
Weighted average shares outstanding: | ||||||||
Basic | 18,187,900 | 17,851,879 | ||||||
Diluted | 18,336,228 | 17,980,457 |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC. | ||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT | ||||||||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 | ||||||||||
(Unaudited) |
Common Stock | Additional | Accumulated | Total Stockholders' | |||||||||||||||||
Shares | Amount | Paid-in Capital | Deficit | Deficit | ||||||||||||||||
Balance, December 31, 2019 | 17,822,428 | $ | 17,822 | $ | 1,738,958 | $ | (2,314,202 | ) | $ | (557,422 | ) | |||||||||
Stock issued for cash | 18,000 | 18 | 17,982 | - | 18,000 | |||||||||||||||
Stock-based compensation | 48,000 | 48 | 47,952 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (105,315 | ) | (105,315 | ) | |||||||||||||
Balance, March 31, 2020 | 17,888,428 | $ | 17,888 | $ | 1,804,892 | $ | (2,419,517 | ) | $ | (596,737 | ) | |||||||||
Balance, December 31, 2020 | 18,145,428 | $ | 18,145 | $ | 2,061,635 | $ | (4,301,180 | ) | $ | (2,221,400 | ) | |||||||||
Stock issued for settlement of accounts payable | 90,000 | 90 | 89,910 | - | 90,000 | |||||||||||||||
Stock-based compensation | 48,000 | 48 | 47,952 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (229,780 | ) | (229,780 | ) | |||||||||||||
Balance, March 31, 2021 | 18,283,428 | $ | 18,283 | $ | 2,199,497 | $ | (4,530,960 | ) | $ | (2,313,180 | ) |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC. | |||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||
FOR THE THREE MONTHS ENDED MARCH 31, 2021 AND 2020 |
March 31,2021 | March 31,2020 | |||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (229,780 | ) | $ | (105,315 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | 48,000 | 48,000 | ||||||
Amortization of debt discount | 2,754 | 5,731 | ||||||
Gain on change in fair value of derivative liabilities | (13,304 | ) | (39,049 | ) | ||||
Gain on settlement of accounts payable | (120,250 | ) | - | |||||
Write off of option contract associated with oil and gas properties | 85,500 | - | ||||||
Asset retirement obligation expense | 19 | 19 | ||||||
Default interest added to note payable | 50,000 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses and other current assets | 25,000 | - | ||||||
Accounts payable | (2,289 | ) | 66,090 | |||||
Accounts payable-related party | 32,250 | 1,774 | ||||||
Interest payable | 3,408 | 6,750 | ||||||
Net cash used in operating activities | (118,692 | ) | (16,000 | ) | ||||
Cash flows from investing activities: | ||||||||
Deposit for purchase of oil and gas properties | (10,000 | ) | - | |||||
Net cash used in investing activities | (10,000 | ) | - | |||||
Cash flows from financing activities: | ||||||||
Payment on convertible credit line payable - related party | - | (2,000 | ) | |||||
Advances from related parties | 129,000 | - | ||||||
Proceeds from sale of common stock | - | 18,000 | ||||||
Net cash provided by financing activities | 129,000 | 16,000 | ||||||
Net change in cash and cash equivalents | 308 | - | ||||||
Cash and cash equivalents, at beginning of period | - | - | ||||||
Cash and cash equivalents, at end of period | $ | 308 | $ | - | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | 17,750 | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Expenses paid on behalf of the Company by related party | $ | 13,244 | $ | 459 | ||||
Oil and gas assets acquired through payments made by related party on behalf of the Company | $ | 65,500 | $ | - | ||||
Stock issued for settlement of accounts payable | $ | 90,000 | $ | - |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC.
Unaudited Financial StatementsNOTES TO CONSOLIDATED FINANCIAL STATEMENTS
September 30, 2017(Unaudited)
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4
BALANCE SHEETS | ||||||
(UNAUDITED) | ||||||
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| September 30, 2017 |
| December 31, 2016 | ||
ASSETS | ||||||
Current assets |
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| |
| Cash | $ | 17,117 |
| $ | 453 |
| Other current asset |
| 943 |
|
| - |
Total current assets |
| 18,060 |
|
| 453 | |
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| Oil and gas lease, unproved, full cost |
| - |
|
| 2,924 |
| Oil and gas lease, proved |
| - |
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| 8,326 |
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Total assets | $ | 18,060 |
| $ | 11,703 | |
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LIABILITIES AND STOCKHOLDER'S DEFICIT | ||||||
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Current liabilities |
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| Accounts payable | $ | 16,119 |
| $ | 17,571 |
| Interest payable |
| 1,686 |
|
| - |
| Derivative liability |
| 156,504 |
|
| - |
| Notes payable, related party |
| 9,780 |
|
| 17,855 |
Total current liabilities |
| 184,089 |
|
| 35,426 | |
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| Convertible credit line payable – related party, net of discount of $82,726 and $0, respectively |
| 2,640 |
|
| - |
| Asset retirement obligation |
| 617 |
|
| 567 |
Total liabilities |
| 187,346 |
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| 35,993 | |
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Stockholders' deficit |
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| Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued or outstanding |
| - |
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| - |
| Common stock, $0.0001 par value; 65,000,000 shares authorized; 17,016,428 issued and outstanding at September 30, 2017 and December 31, 2016, respectively |
| 1,702 |
|
| 1,702 |
| Additional paid in capital |
| 92,278 |
|
| 92,278 |
| Accumulated deficit |
| (263,266) |
|
| (118,270) |
Total stockholders' deficit |
| (169,286) |
|
| (24,290) | |
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Total liabilities and stockholders' deficit | $ | 18,060 |
| $ | 11,703 | |
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See accompanying notes to unaudited financial statements. |
5
STATEMENTS OF OPERATIONS | ||||||||||||
(UNAUDITED) | ||||||||||||
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| Three months ended September 30, |
| Nine months ended September 30, | ||||||||
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| 2017 |
| 2016 |
| 2017 |
| 2016 | ||||
Revenues | $ | 955 |
| $ | - |
| $ | 2,383 |
| $ | - | |
Lease operating expenses |
| 1,034 |
|
| - |
|
| 2,480 |
|
| - | |
Gross margin |
| (79) |
|
| - |
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| (97) |
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| - | |
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Operating expenses |
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| Professional services |
| 20,910 |
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| 7,465 |
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| 53,320 |
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| 15,915 |
| General and administrative |
| 550 |
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| 2,200 |
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| 4,225 |
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| 2,315 |
| Impairment loss |
| - |
|
| - |
|
| 11,250 |
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| - |
Total operating expenses |
| 21,460 |
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| 9,665 |
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| 68,795 |
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| 18,230 | |
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Loss from operations |
| (21,539) |
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| (9,665) |
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| (68,892) |
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| (18,230) | |
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Other expense |
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| Interest expense |
| (5,727) |
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| (300) |
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| (6,966) |
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| (921) |
| Loss on initial measurement of derivative liability |
| (2,912) |
|
| - |
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| (2,912) |
|
| - |
| Loss on fair market value of derivative liability | (66,226) |
|
| - |
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| (66,226) |
|
| - | |
Total other expense |
| (74,865) |
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| (300) |
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| (76,104) |
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| (921) | |
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| Provision for income taxes |
| - |
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| - |
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| - |
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| - |
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Net loss | $ | (96,404) |
| $ | (9,965) |
| $ | (144,996) |
| $ | (19,151) | |
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Net loss per common share, basic and diluted | $ | (0.01) |
| $ | (0.00) |
| $ | (0.01) |
| $ | (0.00) | |
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Weighted average common shares outstanding, basic and diluted |
| 17,016,428 |
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| 16,866,428 |
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| 17,016,428 |
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| 16,866,428 | |
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See accompanying notes to unaudited financial statements. |
6
STATEMENTS OF CASH FLOWS | |||||||
(UNAUDITED) | |||||||
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| Nine months ended September 30, | ||||
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| 2017 |
| 2016 | ||
Cash flows from operating activities |
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| Net loss | $ | (144,996) |
| $ | (19,151) |
| Adjustments to reconcile net loss to net cash used in operating activities: |
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| Debt discount amortization |
| 4,640 |
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| - |
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| Excess fair market value of initial measurement of derivative liability |
| 2,912 |
|
| - |
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| Loss on fair market value of derivative liability |
| 66,226 |
|
| - |
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| Impairment loss |
| 11,250 |
|
| - |
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| Asset retirement obligation expense |
| 50 |
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| - |
| Changes in operating assets and liabilities: |
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| |
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| Prepaid expenses and other current assets |
| (943) |
|
| - |
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| Accounts payable |
| 1,178 |
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| 4,962 |
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| Interest payable |
| 1,686 |
|
| - |
Net cash used in operating activities |
| (57,997) |
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| (14,189) | ||
Cash flows from investing activities |
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Advance to related party |
| (445) |
|
| - | ||
Repayment from related party |
| 445 |
|
| - | ||
Net cash used in investing activities |
| - |
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| - | ||
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Cash flows from financing activities |
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| Proceeds from notes payable |
| 87,366 |
|
| - |
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| Payments on convertible credit line payable – related party |
| (2,000) |
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| - |
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| Proceeds from related party loans |
| 8,031 |
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| 14,300 |
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| Repayments of related party loans |
| (18,736) |
|
| - |
Net cash provided by financing activities |
| 74,661 |
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| 14,300 | ||
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| Net change in cash |
| 16,664 |
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| 111 |
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| Cash, beginning of period |
| 453 |
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| 116 |
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| Cash, end of period | $ | 17,117 |
| $ | 227 |
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Supplemental cash flow information |
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| Cash paid for interest | $ | - |
| $ | - | |
| Cash paid for income taxes | $ | - |
| $ | - | |
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Supplemental disclosure of non-cash financing activities |
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| Payment of expenses by related party on behalf of the Company | $ | 2,630 |
| $ | - | |
| Debt discount on convertible credit line payable – related party | $ | 87,366 |
| $ | - | |
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See accompanying notes to unaudited financial statements. |
7
ALPHA ENERGY, INC.
Notes to Unaudited Financial Statements
September 30, 2017
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:
Three months ended | ||||||||
March 31, 2021 | March 31, 2020 | |||||||
Basic net loss | $ | (229,780 | ) | $ | (105,315 | ) | ||
Add back: Gain on change in fair value of derivative liabilities | (13,304 | ) | (39,049 | ) | ||||
Diluted net loss | $ | (243,084 | ) | $ | (144,364 | ) | ||
Basic and dilutive shares: | ||||||||
Weighted average basic shares outstanding | 18,187,900 | 17,851,879 | ||||||
Shares issuable from convertible credit line payable | 148,328 | 128,578 | ||||||
Dilutive shares | 18,336,228 | 17,980,457 | ||||||
Loss per share: | ||||||||
Basic | $ | (0.01 | ) | $ | (0.01 | ) | ||
Diluted | $ | (0.01 | ) | $ | (0.01 | ) |
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.
8
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.
|
| Shares |
|
| Weighted- Average Exercise Price Per Share | ||
Outstanding, December 31, 2016 |
|
| 240,000 |
|
| $ | 0.125 |
Granted |
|
| - |
|
|
| - |
Exercised |
|
| - |
|
|
| - |
Forfeited |
|
| - |
|
|
| - |
Expired |
|
| (240,000) |
|
|
| 0.125 |
|
|
|
|
|
|
|
|
Outstanding, September 30, 2017 |
|
| - |
|
| $ | - |
The weighted average remaining contractual life of options outstanding as of September 30, 2017 and December 31, 2016, was approximately 0.00 and 0.20 years, respectively. The exercise price of these options was $0.125 and the intrinsic value of the options as of September 30, 2017 and December 31, 2016 is $0.00, respectively.
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.
9
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:
| Level 1 |
| Level 2 |
| Level 3 |
| Fair Value at September 30, 2017 | ||||
Liabilities |
|
|
|
|
|
|
|
|
|
|
|
Derivative Liability | $ | - |
| $ | - |
| $ | 156,504 |
| $ | 156,504 |
|
|
|
| ||||||||
| |||||||||||
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|
|
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|
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.
Level 1 | Level 2 | Level 3 | Fair Value at March 31, 2021 | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability | $ | - | $ | - | $ | 83,065 | $ | 83,065 |
Level 1 | Level 2 | Level 3 | Fair Value at December 31, 2020 | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability | $ | - | $ | - | $ | 96,369 | $ | 96,369 |
10
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:
Balance at December 31, 2016 | $ | - |
Derivative liabilities recorded |
| 87,366 |
Day one loss |
| 2,912 |
Change due to note conversion |
| - |
Loss on change in derivative fair value adjustment |
| 66,226 |
Balance at September 30, 2017 | $ | 156,504 |
Balance at December 31, 2020 | $ | 96,369 | ||
Gain on change in derivative fair value adjustment | (13,304 | ) | ||
Balance at March 31, 2021 | $ | 83,065 |
11
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
FORWARD-LOOKING STATEMENTS
This Form 10-Q includes "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. All statements, other than statements of historical facts, included or incorporated by reference in this Form 10-Q which address activities, events or developments which the Company expects or anticipates will or may occur in the future, including such things as future capital expenditures (including the amount and nature thereof); finding suitable merger or acquisition candidates; expansion and growth of the Company's business and operations; and other such matters are forward-looking statements. These statements are based on certain assumptions and analyses made by the Company in light of its experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. However, whether actual results or developments will conform with the Company's expectations and predictions is subject to a number of risks and uncertainties, including general economic, market and business conditions; the business opportunities (or lack thereof) that may be presented to and pursued by the Company; changes in laws or regulation; and other factors, most of which are beyond the control of the Company.
These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology, such as "believes," "anticipates," "expects," "estimates," "plans," "may," "will," or similar terms. These statements appear in a number of places in this Filing and include statements regarding the intent, belief or current expectations of the Company, and its directors or its officers with respect to, among other things: (i) trends affecting the Company's financial condition or results of operations for its limited history; (ii) the Company's business and growth strategies; and, (iii) the Company's financing plans. Investors are cautioned that any such forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Such factors that could adversely affect actual results and performance include, but are not limited to, the Company's limited operating history, potential fluctuations in quarterly operating results and expenses, government regulation, technological change and competition.
Consequently, all of the forward-looking statements made in this Form 10-Q are qualified by these cautionary statements and there can be no assurance that the actual results or developments anticipated by the Company will be realized or, even if substantially realized, that they will have the expected consequence to or effects on the Company or its business or operations. The Company assumes no obligations to update any such forward-looking statements.
General Business Development
The Company was formed on September 26, 2013 in the State of Colorado.
Business Strategy
The Company was incorporated in September 2013. Our business model is to purchase or trade stock for oil and gas properties to be held as long termlong-term assets. Oil and gas commodity pricing has stabilized under the current economic market conditions bringing the U.S. to become one of the top the number one producerproducers in the world. The momentum to drill using enhanced drilling technology in previously undeveloped areas assures the continued value of these properties. Our lean operating structure positions us well to compete in this very competitive market. Our strategy is to acquire producing properties that the Company can operate which have proven un-drilled locations available for further development. At this time the Company is reviewing several properties but have no contractual commitments to date. Our management’s years of experience and knowledge of the oil and gas industry leads us to believe that there are an abundance of good drilling prospects available that have either been overlooked or are not big enough for the larger companies. In the process of identifying these drilling prospects, the Company will utilize the expertise of existing management and employ the highest caliber contract engineering firms available to further evaluate the properties. To qualify for acquisition, the calculated cash flow after taxes and operating expenses, including ten percent (10%) interest per year, will recover the acquisition cost in 22 to 30 months. The cash flow calculation will be based conservatively on $51 per barrel of oil and $2.89 per MCF of gas. In addition, the selection criteria will require the life of current producing wells to be 7 years or longer and the field must have a minimum total life of 15 years.
12
In the first phase we intend on concentrating on prospects in eastern Colorado, western Kansas and southern Wyoming. The depth of the wells in the target areas average from 1500 ft. for the Niobrara formation to a total depth of 5800 ft. for the Topeka, Heebner, Lansing-Kansas City, Marmaton, Cherokee, Atoka, Morrow, Mississippian, Spergen, and Osage formations. By concentrating our initial efforts on shallower prospects we minimize drilling and operating costs. As we grow we plan to expand into the Front Range (Northern Front Range Outcrop) and Denver Basin Province (D-J Basin, Wattenberg) of Colorado and into western Kansas (Hugoton Embayment Anadarko Basin – Central Kansas Uplift). The wells in these areas range from 4,000 ft. to 10,000 ft. Such wells are more expensive to drill and operate, but also offer bigger returns. Some of the formations in these areas are the Sussex, Niobrara, Codell, J Sand and the D Sand formations. The Company intends to develop prospects and intends to obtain partners to participate in the costs of drilling or acquisitions with the Company serving as the designated Operator. The Company intends to also retain a royalty or working interest in the wells drilled or acquired.
The Company has engaged in verbal negotiations forcompany is actively pursuing acquisition of oil and gas leases locatedadditional properties in Northern and eastern Colorado basin and intends to engage in additional negotiations in the future.
In the second phase of operations, we intend to expand into Oklahoma, Texas and eastern Kansas. We intend to place a great deal of emphasis on natural gas production and the transportation of natural gas. We believe natural gas will be the fuel of the future for automobiles, trucks and buses because of the clean-air standards that are proposed and will soon be going into effect, and now is an ideal time to acquire natural gas assets due to the current pricing matrix. The Company also plans on acquiring field transportation and short haul lines as part of our future business plan expansion. Acquiring these types of company lines, specifically in the areas where the company will have production located, will be advantageous due to savings in internal transportation costs, and the profitability margins of operating the lines and marketing natural gas. Managing the transportation system, in conjunction with field operations, will enhance cash flow. After obtaining the transportation lines, we hope to then develop our own end-users for natural gas. This will further enhance the profit margin of the company.
In December of 2016 alpha energy purchased the following lease from McCartney engineering:
The lease is located in Yuma county Colorado and consists of 480 acres, we have a 100% WI and 80% NRI the formation which the wells are in is the Niabrara formation at a depth of 2800 ft. There is one producing well and one cased well. The producing well will need to have some smaller tubing ran in and possibly a small pump to increase the gas production. This well has produced for over 15 years. The cased well will need to be fracked and tubing run in it and put on line.
With the lease we also obtained the seismic work that has been done which indicates that there should be 3 possibly four new sites that we intend to produce at about the rate between 40 and 50 mcfpd. These wells have a life expectancycy of over 30 years. All these wells would be at about the 2800 ft in depth range and all will have to be fracked.
The cost of the wells should be less than $90,000 per well.
On April 20, 2016, the Company entered into a lease extension agreement with a related party to extend the term of the lease for a period of three years for consideration of $10 cash. The original lease was entered into on October 1, 2013 and set to expire on October 1, 2016. The extension is under the same terms as the original lease agreement and will expire on October 1, 2019.New Mexico.
Liquidity and Capital Resources
As of September 30, 2017,March 31, 2021, we had $17,117 in cash, total current assets of $18,060$5,308 and total current liabilities of $184,089 creating$2,229,279.
The Company used $118,692 of cash in operating activities during the three months ended March 31, 2021 compared to $16,000 used in operations during the same period in 2020. Net cash used in operating activities during the three months ended March 31, 2021 was mainly comprised of our $229,780 net loss during the period, adjusted by a working capital deficitnon-cash charges of $166,029. Current liabilities consisted primarily of $16,119$120,250 gain on settlement of accounts payable, $13,304 for gain on change in fair value of derivative liabilities, stock-based compensation of $48,000, amortization of debt discounts of $2,754, write off of option contract associated with oil and $156,504gas properties of current$85,500, default interest added to note payable of $50,000, asset retirement obligations expense of $19 and changes in operating assets and liabilities of $58,369. Net cash used in operating activities during the three months ended March 31, 2020 was mainly comprised of our $105,315 net loss during the period, adjusted by a non-cash charges of $39,049 for gain on change in fair value of derivative liability.liabilities, $48,000 of stock compensation, amortization of debt discounts of $5,731, asset retirement obligations expense of $19 and changes in operating assets and liabilities of $74,614.
The Company used cash of $10,000 from investing activities during the three months ended March 31, 2021 which consisted of a $10,000 deposit for oil and gas properties.
The Company generated cash of $129,000 from financing activities during the three months ended March 31, 2021 which consisted of $129,000 in proceeds from advances from related parties. The Company generated cash of $16,000 from financing activities during the three months ended March 31, 2020 which consisted of $18,000 in proceeds from the sale of common stock and $2,000 repayment on convertible credit line payable - related party.
Going Concern
The future of our company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement and public offering of its common stock, if necessary. See noteNote 2 to the unaudited consolidated financial statements for additional information.
13
Results of Operations
We did not generategenerated revenues during the three or nine months ended September 30, 2016. Revenue for the threeof $0 and nine months ended September 30, 2017 were $955 and $2,383. Total operating expenses were $9,665$346 during the three months ended September 30, 2016March 31, 2021 and 2020, respectively. Total operating expenses were $169,172 during the three months ended March 31, 2021 compared to $21,460$131,301 during the same period in 2017.2020. The increase is the result of fees associated with the acquisition and upkeep of our leases. Totalin operating expenses were $18,230 during the nine months ended September 30, 2016 compareddue to $68,795an increase in general and administrative expenses of $146,202, increase in professional fees of $11,919 which were offset by a gain on settlement of accounts payable of $120,250.
Off-Balance sheet arrangements
As of March 31, 2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the same period in 2017. The increase is the resultpurpose of incurring of fees associated with the acquisition and upkeep of our leases that did not exist during the nine months ended September 30, 2016 and due to impairment of our oil and gas properties.facilitating off-balance sheet arrangements or other contractually narrow or limited purposes.
CRITICAL ACCOUNTING POLICIESCritical Accounting Policies
In Financial Reporting release No. 60, "CAUTIONARY ADVICE REGARDING DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES" ("FRR 60"), the Securities and Exchange Commission suggested that companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayalThe preparation of a company's financial condition and operating results, and requirestatements in conformity with U.S. GAAP requires management to make its most difficultestimates and subjective judgments, often as a resultassumptions that affect the reported amount of assets and liabilities, the need to make estimatesdisclosure of matters that are inherently uncertain. Based on this definition, our most criticalcontingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. Our accounting policies include: non-cash compensation valuation that affects the total expenses reportedare described in the current period and the valuation of shares and underlying mineral rights acquired with shares. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we reportNote 1 to our audited financial statements for 2020 appearing in our financial statements.Annual Report on Form 10-K for the year ended December 31, 2020.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company isSmaller reporting companies are not exposedrequired to market risk related to interest rates or foreign currencies.provide information required by this Item.
CONTROLS AND PROCEDURES
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls and Procedures
As required by Rule 13a-15 under the Securities Exchange Act of 1934 (the “1934 Act”), as of March 31, 2015,2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), who concluded, that because of the material weakness in our internal control over financial reporting (“ICFR”) described below,in our December 31, 2020 Annual Form 10-K, our disclosure controls and procedures were not effective as of September 30, 2017.March 31, 2021.
Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.
Changes in Internal Control over Financial Reporting
There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our thirdthe quarter that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
14
PART II OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
On July 6, 2020, Premier Gas Company, LLC filed a mechanic’s lien against the interests of Pure, ZQH and the Company in the Rogers County Project, alleging past unpaid invoices on the part of ZQH and Pure and also alleging that the Company’s ownership is 75% rather than 87.5%. No documentation has been provided to Alpha by ZQH, Pure, or Premier of any unpaid invoices. The Company intends to contest the lien vigorously.
On July 22, 2020, the Company filed a lawsuit in Texas State Court against its predecessor auditor, LBB & Associates and Vine Advisors, LLP, and their principal, Carlos Lopez, seeking damages up to $1,000,000.
In March 6, 2020, the Company was informed by the United States Securities and Exchange Commission that (a) Lopez and LBB were investigated by the SEC through an Order Instituting Administrative Proceedings; (b) Lopez and LBB ultimately agreed to the imposition of remedial sanctions against them by the SEC; and (c) Lopez had been suspended from appearing or practicing before the SEC for a period of at least two years (the “Suspension Order”) beginning on February 6, 2020. A copy of the Suspension Order can be found on the SEC’s website.
The Suspension Order finds, among other things, that:
● | For three consecutive years, Lopez and LBB “engaged in a pattern of improper professional conduct as auditors”; | |
● | Lopez failed to exercise due professional care in performing his audit work; and | |
● | Lopez and LBB committed “multiple instances of highly unreasonable conduct in circumstances that warranted heightened scrutiny.” |
The Suspension Order and the predecessor auditor’s failure to disclose it or the SEC investigation when it was occurring has had very damaging repercussions for the Company. Due to the misdeeds of Lopez, LBB, and Vine, the Company is notnow obligated to spend substantial amounts to re-audit the filings that Lopez, LBB, and Vine handled. Also, the Company is obligated to undertake this re-audit for 2018 since it can no longer trust the work of someone who admittedly “engaged in a partypattern of improper professional conduct” and committed “multiple instances of highly unreasonable conduct in circumstances that warranted heightened scrutiny.”
Upon discovery of the misdeeds of Lopez, LBB, and Vine, the Company notified the predecessor auditors of their claims. The predecessor auditors have ignored the Company’s communications and failed to any legal proceedings.respond or even return the Company’s work papers and property.
ITEM 1A. RISK FACTORS
There hashave been no material changes in the risk factors set forth in the Company’s Form 10K for the period ended December 31, 2016.2020.
ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
There were no sales of unregistered equity securities during the covered time period.None.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERSMINE SAFETY DISCLOSURES
None.Not applicable to our operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
The following documents are included or incorporated by reference as exhibits to this report:
(b) REPORTS ON FORM 8-K101.INS** XBRL Instance
101.SCH** XBRL Taxonomy Extension Schema
101.CAL** XBRL Taxonomy Extension Calculation
101.DEF** XBRL Taxonomy Extension Definition
101.LAB** XBRL Taxonomy Extension Labels
101.PRE** XBRL Taxonomy Extension Presentation
** XBRL | information is furnished and not filed or a part of a registration statement or prospectus for purposes of sections 11 or 12 of the Securities Act of 1933, as amended, is deemed not filed for purposes of section 18 of the Securities Exchange Act of 1934, as amended, and otherwise is not subject to liability under these sections. |
None.
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SIGNATURES
In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 13, 2017.May 18, 2021
| Alpha Energy, Inc. | ||
Registrant | |||
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| John Lepin, Principal Executive | |
Officer, Principal Financial Officer | |||
and Director |
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