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, 2019
[ ] 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 September 30, 2020 |
For the quarterly period ended September 30, 2020 | |
☐ | Transition Report under Section 13 or 15(d) of the Exchange Act |
Transition Period fromto |
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 TX77025
(Address of principal executive offices) (Zip Code)
4162 Meyerwood Drive, Houston TX 77025 |
(Address of principal executive offices) (Zip Code) |
Registrant's Phone: 713-316-0061 |
Registrant's Phone:713-316-0061
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 [X]☒ No [ ]☐
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 | ☐ |
|
|
|
|
|
| |
Non-accelerated filer | ☐ |
| ☒ | |
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 12, 2019,18, 2020, the issuer had 17,638,42818,056,428 shares of common stock issued and outstanding.
TABLE OF CONTENTS | Page | |
PART I – FINANCIAL INFORMATION |
| |
Item 1. | Financial Statements | 3 |
Item 2. | Management’s Discussion and Analysis of Financial Condition and Results of Operation |
|
Item 3. | Quantitative and Qualitative Disclosures about Market Risk |
|
Item 4. | Controls and Procedures |
|
PART II – OTHER INFORMATION |
Item 1. | Legal Proceedings |
|
Item 1A. | Risk Factors |
|
Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds |
|
Item 3. | Defaults Upon Senior Securities |
|
Item 4. | Mine Safety Disclosures |
|
Item 5. | Other Information |
|
Item 6. | Exhibits |
|
ITEM 1.FINANCIAL STATEMENTS
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, 2020 | December 31, 2019 | |||||||
Assets | ||||||||
Current assets: | ||||||||
Cash and cash equivalents | $ | 470 | $ | - | ||||
Prepaid assets | 5,000 | - | ||||||
Total current assets | 5,470 | - | ||||||
Noncurrent assets: | ||||||||
Oil and gas property, unproved, full cost | 1,030,000 | 10,000 | ||||||
Total assets | $ | 1,035,470 | $ | 10,000 | ||||
Liabilities and Stockholders' Deficit | ||||||||
Current liabilities: | ||||||||
Accounts payable | $ | 507,385 | $ | 300,428 | ||||
Accounts payable and accrued expenses - related party | 52,088 | 3,687 | ||||||
Interest payable | 28,698 | 33,653 | ||||||
Short term advance from related party | 1,000 | 397 | ||||||
Short term note payable | 1,160,000 | 50,000 | ||||||
Derivative liability | 48,888 | 65,289 | ||||||
Current portion of convertible credit line payable – related party, net of discount of $8,321 and $0, respectively | 140,007 | - | ||||||
Total current liabilities | 1,938,066 | 453,454 | ||||||
Convertible credit line payable – related party, net of discount of $0 and $17,396, respectively | - | 113,182 | ||||||
Asset retirement obligation | 843 | 786 | ||||||
Total liabilities | 1,938,909 | 567,422 | ||||||
Commitments and contingencies | ||||||||
Stockholders' deficit: | ||||||||
Preferred stock, $0.0001 par value, 10,000,000 shares authorized and 0 shares issued and outstanding | - | - | ||||||
Common stock, $0.0001 par value, 65,000,000 shares authorized and 18,051,428 and 17,822,428 shares issued and outstanding, respectively | 1,807 | 1,783 | ||||||
Additional paid-in capital | 1,983,973 | 1,754,997 | ||||||
Accumulated deficit | (2,889,219 | ) | (2,314,202 | ) | ||||
Total stockholders' deficit | (903,439 | ) | (557,422 | ) | ||||
Total liabilities and stockholders' deficit | $ | 1,035,470 | $ | 10,000 |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC | |||||||
CONSOLIDATED STATEMENTS OF OPERATIONS | |||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 | |||||||
(Unaudited) |
Three months ended | Nine months ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
As Revised | As Revised | |||||||||||||||
Oil and gas sales | $ | - | $ | 873 | $ | 1,217 | $ | 3,857 | ||||||||
Lease operating expenses | 621 | 254 | 2,839 | 5,069 | ||||||||||||
Gross loss | (621 | ) | 619 | (1,622 | ) | (1,212 | ) | |||||||||
Operating expenses: | ||||||||||||||||
Professional services | 14,875 | 5,004 | 30,508 | 29,874 | ||||||||||||
Board of director fees | 48,000 | 48,000 | 144,000 | 144,000 | ||||||||||||
General and administrative | 139,172 | 142,232 | 301,168 | 457,061 | ||||||||||||
Impairment loss | - | - | - | 50,000 | ||||||||||||
Total operating expenses | 202,047 | 195,236 | 475,676 | 680,935 | ||||||||||||
Loss from operations | (202,668 | ) | (194,617 | ) | (477,298 | ) | (682,147 | ) | ||||||||
Other income (expense): | ||||||||||||||||
Interest expense | (107,342 | ) | (16,832 | ) | (130,721 | ) | (45,022 | ) | ||||||||
Gain on extinguishment of debt | - | - | 10,750 | - | ||||||||||||
Gain (loss) on change in fair value of derivative liabilities | (27,622 | ) | (4,614 | ) | 22,252 | 465,575 | ||||||||||
Total other income (expense) | (134,964 | ) | (21,446 | ) | (97,719 | ) | 420,553 | |||||||||
Net loss | $ | (337,632 | ) | $ | (216,063 | ) | $ | (575,017 | ) | $ | (261,594 | ) | ||||
Loss per share: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | ||||
Diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | ||||
Weighted average shares outstanding: | ||||||||||||||||
Basic | 18,014,580 | 17,689,993 | 17,925,910 | 17,536,065 | ||||||||||||
Diluted | 18,014,580 | 17,689,993 | 18,074,238 | 17,678,511 |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC. | ||||||||||
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT | ||||||||||
FOR THE THREE AND NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 | ||||||||||
(Unaudited) |
Common Stock | Additional | Accumulated | Total Stockholders' | |||||||||||||||||
Shares | Amount | Paid-in Capital | Deficit | Deficit | ||||||||||||||||
Balance, December 31, 2018 | 17,217,428 | $ | 1,722 | $ | 1,150,059 | $ | (1,881,265 | ) | $ | (729,484 | ) | |||||||||
Stock issued for cash | 131,000 | 13 | 130,987 | - | 131,000 | |||||||||||||||
Stock-based compensation | 108,000 | 11 | 107,989 | - | 108,000 | |||||||||||||||
Net income | - | - | - | 207,136 | 207,136 | |||||||||||||||
Balance, March 31, 2019 | 17,456,428 | 1,746 | 1,389,035 | (1,674,129 | ) | (283,348 | ) | |||||||||||||
Stock issued for cash | 63,000 | 6 | 62,994 | - | 63,000 | |||||||||||||||
Stock-based compensation | 148,000 | 15 | 147,985 | - | 148,000 | |||||||||||||||
Net loss | - | - | - | (252,667 | ) | (252,667 | ) | |||||||||||||
Balance, June 30, 2019 | 17,667,428 | 1,767 | 1,600,014 | (1,926,796 | ) | (325,015 | ) | |||||||||||||
Stock issued for cash | 19,000 | 3 | 18,997 | - | 19,000 | |||||||||||||||
Stock-based compensation | 48,000 | 5 | 47,995 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (216,063 | ) | (216,063 | ) | |||||||||||||
Balance, September 30, 2019 - As Revised | 17,734,428 | $ | 1,775 | $ | 1,667,006 | $ | (2,142,859 | ) | $ | (474,078 | ) | |||||||||
Balance, December 31, 2019 | 17,822,428 | $ | 1,783 | $ | 1,754,997 | $ | (2,314,202 | ) | $ | (557,422 | ) | |||||||||
Stock issued for cash | 18,000 | 2 | 17,998 | - | 18,000 | |||||||||||||||
Stock-based compensation | 48,000 | 5 | 47,995 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (105,315 | ) | (105,315 | ) | |||||||||||||
Balance, March 31, 2020 | 17,888,428 | 1,790 | 1,820,990 | (2,419,517 | ) | (596,737 | ) | |||||||||||||
Stock issued for cash | 52,000 | 5 | 51,995 | - | 52,000 | |||||||||||||||
Stock-based compensation | 48,000 | 5 | 47,995 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (132,070 | ) | (132,070 | ) | |||||||||||||
Balance, June 30, 2020 | 17,988,428 | 1,800 | 1,920,980 | (2,551,587 | ) | (628,807 | ) | |||||||||||||
Stock issued for settlement of accounts payable | 5,000 | 1 | 4,999 | - | 5,000 | |||||||||||||||
Stock issued as lease acquisition cost for unproved properties | 10,000 | 1 | 9,999 | - | 10,000 | |||||||||||||||
Stock-based compensation | 48,000 | 5 | 47,995 | - | 48,000 | |||||||||||||||
Net loss | - | - | - | (337,632 | ) | (337,632 | ) | |||||||||||||
Balance, September 30, 2020 | 18,051,428 | $ | 1,807 | $ | 1,983,973 | $ | (2,889,219 | ) | $ | (903,439 | ) |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC. | |||||||
CONSOLIDATED STATEMENTS OF CASH FLOWS | |||||||
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 | |||||||
(Unaudited) |
September 30, 2020 | September 30, 2019 | |||||||
As Revised | ||||||||
Cash flows from operating activities: | ||||||||
Net loss | $ | (575,017 | ) | $ | (261,594 | ) | ||
Adjustments to reconcile net loss to net cash used in operating activities: | ||||||||
Stock-based compensation | 144,000 | 304,000 | ||||||
Amortization of debt discount | 14,926 | 29,636 | ||||||
Gain on change in fair value of derivative liabilities | (22,252 | ) | (465,575 | ) | ||||
Gain on extinguishment of debt | (10,750 | ) | - | |||||
Impairment loss | - | 50,000 | ||||||
Asset retirement obligation expense | 57 | 57 | ||||||
Default interest added to note payable | 100,000 | - | ||||||
Changes in operating assets and liabilities: | ||||||||
Prepaid expenses | (5,000 | ) | - | |||||
Accounts payable | 215,916 | 191,154 | ||||||
Accounts payable-related party | 48,401 | (6,579 | ) | |||||
Interest payable | 15,795 | 15,386 | ||||||
Net cash used in operating activities | (73,924 | ) | (143,515 | ) | ||||
Cash flows from financing activities: | ||||||||
Payment on convertible credit line payable - related party | (4,250 | ) | (11,000 | ) | ||||
Proceeds from convertible credit line payable - related party | 8,500 | - | ||||||
Advances from related party | 1,000 | - | ||||||
Payments on short term advances - related party | (856 | ) | (53,375 | ) | ||||
Proceeds from sale of common stock | 70,000 | 213,000 | ||||||
Net cash provided by financing activities | 74,394 | 148,625 | ||||||
Net change in cash and cash equivalents | 470 | 5,110 | ||||||
Cash and cash equivalents, at beginning of period | - | 240 | ||||||
Cash and cash equivalents, at end of period | $ | 470 | $ | 5,350 | ||||
Supplemental disclosures of cash flow information: | ||||||||
Cash paid for interest | $ | - | $ | - | ||||
Cash paid for income taxes | $ | - | $ | - | ||||
Supplemental disclosure of non-cash investing and financing activities: | ||||||||
Expenses paid on behalf of the Company by related party | $ | 3,959 | $ | 42,406 | ||||
Non cash short term loan payable | $ | - | $ | 50,000 | ||||
Unpaid oil and gas assets acquired | $ | 1,010,000 | $ | - | ||||
Accrued interest added to note principal | $ | 10,000 | $ | - | ||||
Debt discount from derivative liability | $ | 5,851 | $ | 7,568 | ||||
Stock issued for settlement of accounts payable | $ | 5,000 | $ | - | ||||
Stock issued as lease acquisition cost for unproved properties | $ | 10,000 | $ | - |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Unaudited Financial Statements September 30, 2019
| |
|
|
|
|
|
|
|
|
|
|
ALPHA ENERGY, INC.
BALANCE SHEETS (UNAUDITED)
|
| September 30, 2019 |
| December 31, 2018 |
ASSETS |
|
|
|
|
Current assets |
|
|
|
|
Cash | $ | 5,350 | $ | 240 |
Prepaid expenses |
| - |
| - |
Total current assets |
| 5,350 |
| 240 |
|
|
|
|
|
Oil and gas property, unproved, full cost |
| 37,591 |
| 10,000 |
|
|
|
|
|
Total assets | $ | 42,941 | $ | 10,240 |
LIABILITIES AND STOCKHOLDERS’ DEFICIT |
|
|
|
|
Current liabilities |
|
|
|
|
Accounts payable | $ | 327,907 |
| 550,848 |
Interest payable |
| 26,865 |
| 11,479 |
Short term advances related party |
| 397 |
| 24,366 |
Short term note payable |
| 50,000 |
| - |
Derivative liability |
| 142,446 |
| 608,598 |
Total current liabilities |
| 547,615 |
| 1,195,291 |
Convertible Credit line payable – related party, net of discount of $9,133 and $29,494, respectively |
|
|
|
|
133,314 | 110,952 | |||
Asset retirement obligation |
| 767 |
| 710 |
Total liabilities |
| 681,696 |
| 1,306,953 |
Stockholders’ deficit |
|
|
|
|
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued or outstanding |
|
|
|
|
- | - | |||
Common stock, $0.0001 par value; 65,000,000 shares authorized; 17,638,428 and 17,132,428 issued and outstanding at September 30, 2019 and December 31, 2018, respectively |
|
|
|
|
1,764 | 1,714 | |||
Additional paid in capital |
| 1,517,457 |
| 607,806 |
Accumulated deficit |
| (2,157,976) |
| (1,906,233) |
Total stockholders’ deficit |
| (638,755) |
| (1,296,713) |
Total liabilities and stockholders’ deficit | $ | 42,941 | $ | 10,240 |
See accompanying notes to unaudited financial statements.
ALPHA ENERGY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
|
| Three months ended September 30, |
| Nine months ended September 30, | ||||
|
| 2019 |
| 2018 |
| 2019 |
| 2018 |
Revenues | $ | 873 | $ | 481 | $ | 3,857 | $ | 2,024 |
Lease operating expenses |
| 254 |
| 1,048 |
| 5,069 |
| 2,427 |
Gross margin |
| 619 |
| (567) |
| (1,212) |
| (403) |
|
|
|
|
|
|
|
|
|
Operating expenses |
|
|
|
|
|
|
|
|
Professional services |
| 5,004 |
| 12,051 |
| 29,874 |
| 33,436 |
General and administrative |
| 144,732 |
| 13,256 |
| 437,061 |
| 31,340 |
Board of Director Fees |
| 48,000 |
| 184,600 |
| 144,000 |
| 565,000 |
Impairment of oil and gas properties |
| - |
| - |
| 70,000 |
| - |
Total operating expenses |
| 197,736 |
| 209,907 |
| 680,935 |
| 629,776 |
|
|
|
|
|
|
|
|
|
Loss from operations |
| (197,117) |
| (210,474) |
| (682,147) |
| (630,179) |
|
|
|
|
|
|
|
|
|
Other income (expense) |
|
|
|
|
|
|
|
|
Interest expense |
| (7,571) |
| (26,645) |
| (45,498) |
| (69,642) |
Loss on initial measurement of derivative liability |
| - |
| (102,350) |
| - |
| (164,179) |
Gain (loss) on fair market value of derivative liability |
| - |
| (379,529) |
| 475,902 |
| (402,196) |
Total other income (expense) |
| (7,571) |
| (508,524) |
| 430,404 |
| (636,017) |
|
|
|
|
|
|
|
|
|
Provision for income taxes |
| - |
| - |
| - |
| - |
|
|
|
|
|
|
|
|
|
Net loss | $ | (204,688) | $ | (718,998) | $ | (251,743) | $ | (1,266,196) |
|
|
|
|
|
|
|
|
|
Net loss per common share, basic and diluted | $ | (0.01) | $ | (0.04) | $ | (0.01) | $ | (0.07) |
|
|
|
|
|
|
|
|
|
Weighted average common shares outstanding, basic and diluted |
| 17,390,224 |
| 17,016,428 |
| 17,500,432 |
| 17,100,428 |
|
|
|
|
|
|
|
|
|
See accompanying notes to unaudited financial statements. |
ALPHA ENERGY, INC.
STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT
FOR THE NINE-MONTH PERIODS ENDED September 30, 2019 and 2018
(UNAUDITED)(Unaudited)
| Preferred Stock |
| Common Stock |
| Paid in |
| Accumulated |
| Stockholders' | |||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |
Balance at December 31, 2017 | - | $ | - |
| 17,016,428 | $ | 1,702 | $ | 101,378 | $ | (380,855) | $ | (277,775) | |
Stock issued for director fees | - |
| - |
| 84,000 |
| 9 |
| 380,391 |
| - |
| 380,400 | |
Net loss for the period ending September 30, 2018 | - |
| - |
| - |
| - |
| - |
| (1,266,196) |
| (1,266,196) | |
Balance at September 30, 2018 | - | $ | - |
| 17,100,428 | $ | 1,711 | $ | 481,769 | $ | (1,647,051) | $ | (1,163,571) |
| Preferred Stock |
| Common Stock |
| Paid in |
| Accumulated |
| Stockholders' | |||||
| Shares |
| Amount |
| Shares |
| Amount |
| Capital |
| Deficit |
| Deficit | |
Balance at December 31, 2018 | - | $ | - |
| 17,132,428 | $ | 1,714 | $ | 607,806 | $ | (1,906,233) | $ | (1,296,713) | |
Common stock subscribed | - |
| - |
| 213,000 |
| 21 |
| 212,979 |
| - |
| 213,000 | |
Stock issued for accrued compensation and director fees | - |
| - |
| 133,000 |
| 13 |
| 536,688 |
| - |
| 536,701 | |
Stock issued for services | - |
| - |
| 160,000 |
| 16 |
| 159,984 |
| - |
| 160,000 | |
Net loss for the period ending September 30, 2019 | - |
| - |
| - |
| - |
| - |
| (251,743) |
| (251,743) | |
Balance at September 30, 2019 | - | $ | - |
| 17,638,428 | $ | 1,764 | $ | 1,517,457 | $ | (2,157,976) | $ | (638,755) |
See accompanying notes to financial statements.
ALPHA ENERGY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
|
| Nine months ended September 30, | ||
|
| 2019 |
| 2018 |
Cash flows from operating activities |
|
|
|
|
Net income (loss) | $ | (251,743) | $ | (1,266,196) |
Adjustments to reconcile net income (loss) to net cash used in operating activities: |
|
|
|
|
Debt discount amortization |
| 30,112 |
| 64,622 |
Excess fair market value of initial measurement of derivative liability |
| - |
| 164,179 |
Stock issued for consulting |
| 160,000 |
| 380,400 |
(Gain) loss on fair market value of derivative liability |
| (475,902) |
| 402,196 |
Impairment loss |
| 70,000 |
|
|
Asset retirement obligation expense |
| 57 |
| 56 |
Changes in operating assets and liabilities: |
|
|
|
|
Prepaid expenses and other current assets |
| - |
| - |
Account receivable |
| - |
| 1,285 |
Accounts payable |
| 319,325 |
| 186,252 |
Interest payable |
| 15,386 |
| 5,021 |
Net cash used in operating activities |
| (132,765) |
| (62,185) |
|
|
|
|
|
Cash flows from investing activities |
|
|
|
|
Capital expenditures |
| (47,591) |
| (10,000) |
Net cash used in investing activities |
| (47,591) |
| (10,000) |
|
|
|
|
|
Cash flows from financing activities |
|
|
|
|
Proceeds from sale of stock |
| 213,000 |
| - |
Proceeds from convertible credit line payable – related party |
| 13,000 |
| 73,946 |
Net repayments of related party advances |
| (33,534) |
| - |
Payments on convertible credit line payable – related party |
| (7,000) |
| - |
Net cash provided by financing activities |
| 185,466 |
| 73,946 |
Net change in cash |
| 5,110 |
| 1,761 |
Cash at beginning of period |
| 240 |
| 1,061 |
Cash, end of period | $ | 5,350 | $ | 2,822 |
|
|
|
|
|
Supplemental cash flow information |
|
|
|
|
Cash paid for interest | $ | - | $ | - |
Cash paid for income taxes | $ | - | $ | - |
|
|
|
|
|
Supplemental disclosure of non-cash financing activities |
|
|
|
|
Debt discount on convertible credit line payable – related party | $ | - | $ | 73,946 |
Note Payable for oil and gas property | $ | - | $ | - |
Stock issued for accrued compensation and director fees | $ | 536,701 | $ | - |
See accompanying notes to unaudited financial statements.
ALPHA ENERGY, INC.
Notes to Unaudited Financial Statements
September 30, 2019
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, 2019 and 2018 which are included on a Form 10-K filed on September 24, 2020. 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 asfor the periods shown have been reflected herein. The results of operations for the three and nine months ended September 30, 2019 and 2018, have been made.
2020 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 the most recent fiscal period, as reportedyears ended December 31, 2019 and 2018 have been omitted.
Principles of Consolidation
Our consolidated financial statements include our accounts and the accounts 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, 2018 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 threerespective periods being presented.
Basic and nineDiluted Loss per share
Net loss per share is provided in accordance with FASB ASC 260-10, "Earnings (Loss) per Share". Basic income (loss) per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the three months ended September 30, 2020 and 2019, are not necessarily indicative of the operating resultsthere were 148,328 and 142,446 shares issuable from convertible credit line payable which were considered for the full year.
Related party policy
In accordance with ASC 850, the Company discloses: the nature of the related party relationship(s) involved; a description of the transactions, including transactionstheir dilutive effects but concluded to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the 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.
Revenue and Cost Recognition
The Company records revenues from the sales of natural gas and crude oil when the production is produced and sold, and also when collectability is ensured. The Company may in the future have an interest with other producers in certain properties, in which case the Company will use the sales method to account for gas imbalances. Under this method, revenue will be recorded on the basis of natural gas actually sold by 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, 2019 or December 31, 2018. The Company recorded revenues of $3,857 and $2,024 and costs of revenues totaling $5,069 and $2,427 duringanti-dilutive, respectively. For the nine months ended September 30, 2020 and 2019, there were 148,328 and 2018. There142,446 shares issuable from convertible credit line payable which were no accounts receivable at September 30, 2019 and December 31, 2018.considered for their dilutive effects, respectively.
Derivative LiabilitiesThe reconciliation of basic and diluted loss per share is as follows:
Three months ended | Nine months ended | |||||||||||||||
September 30, 2020 | September 30, 2019 | September 30, 2020 | September 30, 2019 | |||||||||||||
Basic net loss | $ | (337,632 | ) | $ | (216,063 | ) | $ | (575,017 | ) | $ | (261,594 | ) | ||||
Add back: Gain on change in fair value of derivative liabilities | - | - | (22,252 | ) | (465,575 | ) | ||||||||||
Diluted net loss | $ | (337,632 | ) | $ | (216,063 | ) | $ | (597,269 | ) | $ | (727,169 | ) | ||||
Basic and dilutive shares: | ||||||||||||||||
Weighted average basic shares outstanding | 18,014,580 | 17,689,993 | 17,925,910 | 17,536,065 | ||||||||||||
Shares issuable from convertible credit line payable | - | - | 148,328 | 142,446 | ||||||||||||
Dilutive shares | 18,014,580 | 17,689,993 | 18,074,238 | 17,678,511 | ||||||||||||
Loss per share: | ||||||||||||||||
Basic | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.01 | ) | ||||
Diluted | $ | (0.02 | ) | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) |
Fair Value of Financial Instruments
The Company recordsapplies 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 financial statements on a debt discount relatedrecurring basis. The Company defines 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 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 the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset 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 measure fair value into three levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the issuance of convertible debtsfair value measurement:
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 have conversion features at adjustable rates. The debt discountare observable or can be corroborated by observable market data for substantially the convertible instruments is recognized and measured by allocating a portionfull term of the proceeds as an increaseassets or liabilities.
Level 3 – Inputs that are generally unobservable and typically reflect management’s estimate of assumptions that market participants would use in additional paid-in capital and as a reduction topricing the asset or liability.
The carrying amount of the Company’s financial instruments consisting of cash and cash equivalents, accounts payable, notes payable and convertible instrument equalnotes approximates fair value due either to the intrinsic valuelength of the conversion features. The debt discount will be accreted by recording additional non-cash gains and losses related to the changematurity or interest rates that approximate prevailing market rates unless otherwise disclosed in fair market values of derivative liabilities over the life of the convertible notes.these financial statements.
Accounting Standards Adopted During the Quarter Ended September 30, 2019
The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the application date. In addition, the Company elected the available practical expedients permitted under the transaction guidance within the new standard. There was no impact from the adoption of the new standard as the Company does not currently have any operating leases.
Recently Issued Accounting Standards Not Yet Adopted
The Company has 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 significant effect on its financial statements.
ALPHA ENERGY, INC.
NotesRevision of Prior Period Financial Statements
In 2020, the Company identified errors in account balances in the Form 10Q filed for the nine months period ended September 30, 2019. The following accounts were deemed to Unauditedcontain errors: accounts payable, derivative liability, common stock, additional paid in capital, operating expenses, interest expense and loss on derivative liabilities. The errors resulted from incorrect recording of stock-based compensation and overstatements of derivative liability and amortization of debt discount.
Based on an analysis of Accounting Standards Codification (“ASC”) 250 – “Accounting Changes and Error Corrections” (“ASC 250”) and Staff Accounting Bulletin 108 – “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements
Statements” (“SAB 108”), the Company determined that these errors were immaterial to the previously issued financial statements, and as such no restatement was necessary. Correcting prior period financial statements for immaterial errors would not require previously filed reports to be amended. Such correction may be made the next time the registrant files the prior period financial statements. Accordingly, the misstatements were corrected in the consolidated balance sheet as of September 30, 2019 and the consolidated statements of operations for the three and nine months ended September 30, 2019 and cash flows for the nine months ended September 30, 2019.
The tables below summarize previously reported amounts and the adjusted presentation of the consolidated balance sheet and consolidated statements of operations and cash flows for the affected periods:
ALPHA ENERGY, INC. | |||||||
CONSOLIDATED BALANCE SHEET | |||||||
(Unaudited) |
September 30, 2019 | ||||||||||||
As Reported | Adjustment | As Revised | ||||||||||
Current assets | ||||||||||||
Cash | $ | 5,350 | $ | - | $ | 5,350 | ||||||
Total current assets | 5,350 | - | 5,350 | |||||||||
Oil and gas property, unproved, full cost | 37,591 | (27,591 | ) | 10,000 | ||||||||
Total assets | $ | 42,941 | $ | (27,591 | ) | $ | 15,350 | |||||
Liabilities and Stockholders' Deficit | ||||||||||||
Current liabilities | ||||||||||||
Accounts payable | $ | 327,907 | $ | (123,591 | ) | $ | 204,316 | |||||
Interest payable | 26,865 | - | 26,865 | |||||||||
Short term advance from related party | 397 | - | 397 | |||||||||
Short term note payable | 50,000 | - | 50,000 | |||||||||
Derivative liability | 142,446 | (50,534 | ) | 91,912 | ||||||||
Total current liabilities | 547,615 | (174,125 | ) | 373,490 | ||||||||
Convertible credit line payable - related party, net of discount of $27,275 | 133,314 | (18,143 | ) | 115,171 | ||||||||
Asset retirement obligation | 767 | - | 767 | |||||||||
Total liabilities | 681,696 | (192,268 | ) | 489,428 | ||||||||
Stockholders' deficit | ||||||||||||
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued or outstanding | - | - | - | |||||||||
Common stock, $0.0001 par value; 65,000,000 shares authorized; 17,734,428 issued and outstanding at September 30, 2019 | 1,764 | 11 | 1,775 | |||||||||
Additional paid in capital | 1,517,457 | 149,549 | 1,667,006 | |||||||||
Accumulated deficit | (2,157,976 | ) | 15,117 | (2,142,859 | ) | |||||||
Total stockholder deficit | (638,755 | ) | 164,677 | (474,078 | ) | |||||||
Total liabilities and stockholders' deficit | $ | 42,941 | $ | (27,591 | ) | $ | 15,350 |
ALPHA ENERGY, INC. | |||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||
(Unaudited) |
For the nine months ended September 30, 2019 | ||||||||||||
As Reported | Adjustment | As Revised | ||||||||||
Oil & gas sales | $ | 3,857 | $ | - | $ | 3,857 | ||||||
Lease operating expenses | 5,069 | - | 5,069 | |||||||||
Gross loss | (1,212 | ) | - | (1,212 | ) | |||||||
Operating expenses: | ||||||||||||
Professional services | 29,874 | - | 29,874 | |||||||||
Board of directors fees | 144,000 | - | 144,000 | |||||||||
General and administrative | 437,061 | 20,000 | 457,061 | |||||||||
Impairment loss | 70,000 | (20,000 | ) | 50,000 | ||||||||
Total operating expenses | 680,935 | - | 680,935 | |||||||||
Loss from operations | (682,147 | ) | - | (682,147 | ) | |||||||
Other income (expense): | ||||||||||||
Interest expense | (45,498 | ) | 476 | (45,022 | ) | |||||||
Gain (loss) on change in fair value of derivative liabilities | 475,902 | (10,327 | ) | 465,575 | ||||||||
Total other income (expense) | 430,404 | (9,851 | ) | 420,553 | ||||||||
Net loss | $ | (251,743 | ) | $ | (9,851 | ) | $ | (261,594 | ) | |||
Loss per share: | ||||||||||||
Basic | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||
Diluted | $ | (0.01 | ) | $ | (0.03 | ) | $ | (0.04 | ) | |||
Weight average shares common share outstanding: basic and diluted | ||||||||||||
Basic | 17,500,432 | 35,633 | 17,536,065 | |||||||||
Diluted | 17,500,432 | 178,079 | 17,678,511 |
ALPHA ENERGY, INC. | |||||||
CONSOLIDATED STATEMENT OF OPERATIONS | |||||||
(Unaudited) |
For the three months ended September 30, 2019 | ||||||||||||
As Reported | Adjustment | As Revised | ||||||||||
Oil & gas sales | $ | 873 | $ | - | $ | 873 | ||||||
Lease operating expenses | 254 | - | 254 | |||||||||
Gross loss | 619 | - | 619 | |||||||||
Operating expenses: | ||||||||||||
Professional services | 5,004 | - | 5,004 | |||||||||
Board of directors fees | 144,732 | (96,732 | ) | 48,000 | ||||||||
General and administrative | 48,000 | 94,232 | 142,232 | |||||||||
Total operating expenses | 197,736 | (2,500 | ) | 195,236 | ||||||||
Loss from operations | (197,117 | ) | 2,500 | (194,617 | ) | |||||||
Other expense: | ||||||||||||
Interest expense | (7,571 | ) | (9,261 | ) | (16,832 | ) | ||||||
Loss on change in fair value of derivative liabilities | - | (4,614 | ) | (4,614 | ) | |||||||
Total other expense | (7,571 | ) | (13,875 | ) | (21,446 | ) | ||||||
Net loss | $ | (204,688 | ) | $ | (11,375 | ) | $ | (216,063 | ) | |||
Loss per share: | ||||||||||||
Basic | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||
Diluted | $ | (0.01 | ) | $ | - | $ | (0.01 | ) | ||||
Weight average shares common share outstanding: basic and diluted | ||||||||||||
Basic | 17,390,224 | 299,769 | 17,689,993 | |||||||||
Diluted | 17,390,224 | 299,769 | 17,689,993 |
ALPHA ENERGY, INC. | ||||||||
STATEMENT OF CASH FLOWS | ||||||||
(Unaudited) |
For the nine months ended September 30, 2019 | ||||||||||||
As Reported | Adjustments | As Revised | ||||||||||
Cash flows from operation activities | ||||||||||||
Net loss | $ | (251,743 | ) | $ | (9,851 | ) | $ | (261,594 | ) | |||
Adjustments to reconcile net loss to net cash used in operating activities | ||||||||||||
Stock-based compensation | 160,000 | 144,000 | 304,000 | |||||||||
Amortization of debt discount | 30,112 | (476 | ) | 29,636 | ||||||||
(Gain) loss on change in fair value of derivative liabilities | (475,902 | ) | 10,327 | (465,575 | ) | |||||||
Impairment loss | 70,000 | (20,000 | ) | 50,000 | ||||||||
Asset retirement obligation expense | 57 | - | 57 | |||||||||
Change in operating assets and liabilities: | ||||||||||||
Accounts payable | 319,325 | (128,171 | ) | 191,154 | ||||||||
Accounts payable related party | - | (6,579 | ) | (6,579 | ) | |||||||
Interest payable | 15,386 | - | 15,386 | |||||||||
Net cash used in operating activities | (132,765 | ) | (10,750 | ) | (143,515 | ) | ||||||
Cash flows from investing activities | ||||||||||||
Deposit for purchase of oil and gas properties | (47,591 | ) | 47,591 | - | ||||||||
Net cash used in investing activities | (47,591 | ) | 47,591 | - | ||||||||
Cash flows from financing activities | ||||||||||||
Advances from related party | 19,841 | (19,841 | ) | - | ||||||||
Payment on convertible credit line payable - related party | (7,000 | ) | (4,000 | ) | (11,000 | ) | ||||||
Proceeds from convertible credit line payable - related party | 13,000 | (13,000 | ) | - | ||||||||
Proceeds from sale of stock | 213,000 | - | 213,000 | |||||||||
Repayments of related party advances | (53,375 | ) | - | (53,375 | ) | |||||||
Net cash provided by financing activities | 185,466 | (36,841 | ) | 148,625 | ||||||||
Net change in cash and cash equivalents | 5,110 | - | 5,110 | |||||||||
Cash and cash equivalent, beginning of period | 240 | - | 240 | |||||||||
Cash and cash equivalent, end of period | $ | 5,350 | $ | - | $ | 5,350 | ||||||
Supplemental disclosure of non-cash financing activities | ||||||||||||
Stock issued for accrued compensation | $ | 536,701 | $ | (536,701 | ) | $ | - | |||||
Non cash short term loan payable | $ | - | $ | 50,000 | $ | 50,000 | ||||||
Expenses paid on behalf of the Company by related party | $ | - | $ | 42,406 | $ | 42,406 | ||||||
Debt discount on convertible credit line payable - related party | $ | - | $ | 7,568 | $ | 7,568 |
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 yet establishedhave sufficient cash or other current assets, nor does it have 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 – RELATED PARTY TRANSACTIONS
The Company neither owns nor leases any real or personal property. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts. The Chief Financial Officer allows the use of his residence as an office for the Company at no charge.
During the nine months ended September 30, 2019, the Company received $13,000 advances and repaid $11,000 from AEI Acquisition Company, a majority shareholder, from its convertible credit line.OIL AND GAS PROPERTIES
On March 27, 2019June 25, 2020, the Company entered into a short-term Promissory NotePurchase and Sale Agreement with ZHQ Holdings (75%), LLP and Pure Oil & Gas, Inc. (25%(“Pure”) for $50,000. The note was due April 30, 2019and ZQH Holding, LLC (“ZQH”) to acquire oil and gas assets in Rogers County Oklahoma (the “Project”) in consideration of a purchase price of $1,000,000. Pursuant to the agreement, the Company has taken assignment of all of ZQH and Pure's working interest in the Project and has not been repaid. Therecognized a note is secured by 50,000 shares of the Company’s common stock at $1.00 per share. The funds were usedpayable to pay Escrow Deposit on the Rogers County Project. The note is in defaultZQH and Pure as of September 30, 20192020 of $1,060,000 consisting of the purchase price of $1,000,000 and therefore,the principal and accrued interest on an existing note totaling to $60,000. (See Note 6). The Company, ZQH, and Pure agreed that the sellers' combined working interest in the Project is accruing87.5%. The current operator of the Project and owner of the residual working interest is Premier Gas Company, LLC.
On July 6, 2020, Premier filed a mechanic’s lien in Rogers County alleging past unpaid invoices and also claiming incorrectly that Alpha’s ownership is 75% rather than 87.5%. No documentation has been provided Alpha of any past due invoices by Premier, Pure, or ZQH, and we intend to contest the lien vigorously.
The Company notes that the Project is included in the lands in eastern Oklahoma affected by a decision of the U.S. Supreme Court issued on July 9, 2020. In McGirt v. Oklahoma the Supreme Court held that a large portion of eastern Oklahoma reserved for the Creek Nation in the 19th century remains Indian Country for purposes of the federal Major Crimes Act. The impact of this decision on title to the lands and leases included in the Project is uncertain at this point, and the rateCompany will continue to monitor developments concerning the effects of $50this decision.
On June 30, 2020, the Company entered into an option Agreement with Progressive Well Service, LLC to acquire oil and gas assets in Lincoln and Logan Counties in Central Oklahoma (the “Coral Project”, called the “Logan 1 Project” in the Agreement). The agreement gives the Company until December 31, 2020 to exercise its option (the “option Period”). During the option Period, Progressive may not sell the Coral Project to any third party. In return for this exclusivity, the Company issued 10,000 shares of its common stock with a fair value of $10,000, such shares to bear a legend restricting sale during the option Period. At any time during the option Period, the Company may exercise its option with a cash payment of $50,000. At closing the Company shall make a cash payment of $600,000 to Progressive (the “Project Payment”) and guarantee to Progressive a further payment of 3% of the net revenue stream from any new wells drilled in the Coral Project (the “Production Payment”) until Progressive has received an additional $350,000.
On September 8, 2020, the Company entered into an Option Agreement with Kadence Petroleum, LLC. (“Kadence”) to acquire oil and gas assets in Logan County in Central Oklahoma, called the “Logan 2 Project” in the Agreement). The Agreement gives the Company until February 8, 2021 to exercise its option (the “Option Period”). During the option Period, Kadence may not sell the Logan 2 Project to any third party. In return for this exclusivity, the Company will pay $10,000 per daymonth. The Company paid $10,000 to Brian Tribble, Managing Member of Kadence, through AEI Acquisition, LLC revolving credit note, on September 18, 2020. At closing, Alpha shall tender to Kadence a cash payment of $350,000 (the “Project Payment”). Alpha shall agree at Closing to make a monthly payment equal to 3% of the net revenue stream from April 30, 2019.any new wells (not workovers, restarts, or recompletions) drilled in the Project area after the Closing until such time as Kadence shall have accrued $800,000 from such new wells (the “Production Payment”). Together, the Option Payment, Production Payment, and Project Payment shall satisfy the Purchase Price.
NOTE 4 – RELATED PARTY TRANSACTIONS
The Company received advances from related parties totaling $1,000 and $0 and repaid advances from related parties totaling $856 and $53,375 during the nine months ended September 30, 2020 and 2019, respectively. The advances from related parties are not convertible, bear no interest and are due on demand. During the nine months ended September 30, 2020 and 2019, a related party paid $3,959 and $42,406 of expenses on behalf of the Company, respectively. There was $1,000 and $397 due to related parties as of September 30, 2020 and December 31, 2019, respectively. The Chief Financial Officer allows the use of his residence as an office for the Company at no charge.
NOTE 45 – COMMON STOCK
The Company is authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock and 65,000,000 shares of $0.0001par value common stock.
The Board of Directors authorized the Company to sell 1,300,000 shares of common stock at $1.00 per share to raise working capital.
During the nine months ended September 30, 2020 and 2019 , the Company sold 70,000 and 213,000 shares of common stock for total proceeds of $70,000 and $213,000, respectively.
During the nine months ended September 30, 2020, the Company issued 10,000 shares of common stock with a fair value of $10,000 for lease acquisition cost for unproved properties.
During the nine months ended September 30, 2020, the Company issued 5,000 shares of common stock with a fair value of $5,000 to settle outstanding accounts payable balance.
The Company compensates each of its directors with 4,000 shares of common stock each month. During each of the nine months ended September 30, 2020 and 2019, the Company issued 144,000 shares of common stock valued at $144,000.
During the nine months ended September 30,2019, the Company issued 160,000 shares of common stock with a fair value of $160,000 for consulting services.
NOTE 6 – NOTE PAYABLE
On March 30, 2019, the Company executed a promissory note for $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 is 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. (See Note 3). 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 nine months ended September 30, 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 September 30, 2020, the Company recognized $100,000 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 conversion price of $1.00 per share and the note will also be subject to a monthly interest of 1%.
NOTE 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 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. During the year ended December 31, 2019, the Company recognized an additional debt discount of $7,568 and amortized $39,514 of the discount as interest expense leaving an unamortized discount of $17,396 as of December 31, 2019. During the nine months ended September 30, 2020, the Company recognized an additional debt discount of $5,851 nd amortized $14,926 of the discount as interest expense leaving an unamortized discount of $8,321 as of September 30, 2020. See discussion of derivative liability in Note 8 – Derivative Liability.
During the nine months ended September 30, 2020 and 2019, the Company received $8,500 and $0 in cash proceeds from the credit line and made $4,250 and $11,000 in cash payments to the outstanding balance on the credit line, respectively. The outstanding principal balance on the convertible credit line as of September 30, 2020 amounted to $148,328.
NOTE 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 JuneSeptember 30, 20192020 and December 31, 2018:2019:
|
| Level 1 |
| Level 2 |
| Level 3 |
| Fair Value at September 30, 2019 |
Liabilities |
|
|
|
|
|
|
|
|
Derivative Liability | $ | - | $ | - | $ | 142,466 | $ | 142,466 |
Level 1 | Level 2 | Level 3 | Fair Value at September 30, 2020 | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability | $ | - | $ | - | $ | 48,888 | $ | 48,888 |
|
| Level 1 |
| Level 2 |
| Level 3 |
| Fair Value at December 31, 2018 |
Liabilities |
|
|
|
|
|
|
|
|
Derivative Liability | $ | - | $ | - | $ | 608,598 | $ | 608,98 |
Level 1 | Level 2 | Level 3 | Fair Value at December 31, 2019 | |||||||||||||
Liabilities: | ||||||||||||||||
Derivative liability | $ | - | $ | - | $ | 65,289 | $ | 65,289 |
ALPHA ENERGY, INC.
Notes to Unaudited Financial Statements
September 30, 2019
NOTE 4 – DERIVATIVE LIABILITY (CONTINUED)
As of September 30, 2019,
Utilizing Level 3 Inputs, the Company had a $142,466 derivative liability balance on the balance sheet and recorded a gain from derivative liability fair market value adjustment of $475,902 duringadjustments related to convertible credit line payable for the nine months ended September 30, 2019.
2020 and 2019 of $22,252 and $465,575, respectively. The fair market value adjustments as of September 30, 2020 and 2019 were calculated utilizing a max valuation methodthe Black-Scholes option pricing model using the following assumptions: exercise price of $1.00, 142,466 common shares the balance can be converted intocomputed volatility 132% and a stock price at measurement date of $1.00.138% and discount rate 0.11% and 1.63%, respectively.
A summary of the activity of the derivative liability for the year ended December 31, 2018 is shown below:below at September 30, 2020:
Balance at December 31, 2017 | $ | 238,674 |
Derivative liabilities recorded |
| 49,580 |
Day one loss |
| 122,362 |
Change due to note conversion |
| - |
Loss on change in derivative fair value adjustment |
| 197,982 |
Balance at December 31, 2018 | $ | 608,598 |
Balance at December 31, 2019 | $ | 65,289 | ||
Debt discount on convertible credit line payable | 5,851 | |||
Gain on change in derivative fair value adjustment | (22,252 | ) | ||
Balance at September 30, 2020 | $ | 48,888 |
A summary of the activity of the derivative liability for the nine months ended September 30, 2019 is shown below:
Balance at December 31, 2018 | $ | 608,598 |
Derivative liabilities recorded |
| 9,750 |
Day one loss |
| - |
Change due to note conversion |
| - |
Gain on change in derivative fair value adjustment |
| (475,902) |
Balance at September 30, 2019 | $ | 142,466 |
NOTE 5 – EQUITY
The Company is authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock and 65,000,000 shares of $0.0001par value common stock.
For the nine months ended September 30, 2019, 133,000 shares with a fair value of $536,701 were issued for stock compensation for directors and the CEO.
During the nine months ended September 30, 2019, the Company issued 60,000 shares of common stock with a fair value of $60,000 for consulting services.
During the nine months ending September 30, 2019, the Company sold 213,000 shares of common stock for $1.00 per share in a private placement. These shares have not yet been issued. The shares are considered issued and outstanding as of September 30, 2019 as the issuance of the shares is considered an administrative act.
On April 2, 2019 the Company entered into a six-month Corporate Finance Representation Agreement with Rebus Capital Group, LLC as the Company’s corporate finance advisor. Rebus was issued 100,000 shares of common stock for services valued at $1 per share or $100,000.
NOTE 6 – NOTE PAYABLE
On March 27, 2019 the Company entered into a short-term Promissory Note with ZHQ Holdings (75%), LLP and Pure Oil & Gas, Inc (25%) for $50,000. The note is secured by 50,000 shares of the Company’s common stock at $1.00 per share. The funds were used to fund the deposit for the Purchase and Sale Agreement with Premier Gas Company, LLC (see Note 7). The note was due April 30, 2019 and has not been repaid. The note is in default as of September 30, 2019 and therefore, is accruing interest at the rate of $50 per day from April 30, 2019. Accrued interest on the note as of September 30, 2019 was $7,550
ALPHA ENERGY, INC.
Notes to Unaudited Financial Statements
September 30, 2019
NOTE 7 – OIL AND GAS PROPERTIES
The Company entered into a Letter of Intent with Chicorica, LLC on December 13, 2018 and extended the agreement effective August 29, 2019. Chicorica has developed an oil and gas exploration project in northeastern New Mexico (the “Frostback Project”) that includes several prospective areas and Alpha is interested in exploring in these areas and utilizing Chicorica’s seismic and other data and expertise. The agreement is for $95,000 with $10,000 paid on signing the LOI and $85,000 due by November 1, 2019. As of September 30, 2019, the Company has not made the final payment.
On March 13th, 2019, Alpha Energy, Inc. (the “Company”) entered into a Purchase and Sale Agreement (the “Agreement”) with Premier Gas Company, LLC. (“Premier”) to acquire oil and gas assets in Oklahoma in consideration of a Purchase Price of One Million Six Hundred Thousand Dollars ($1,600,000) (the “Purchase Price”) that includes a non-refundable deposit in the amount of Fifty Thousand Dollars ($50,000) (the “Deposit) through the Escrow Agent. The Deposit shall be credited against the cash portion of the Purchase Price at Closing. Although the dates on the Purchase and Sale agreements were dated January 29th, 2019, the contracts were not ultimately delivered to the company until March 13th, 2019 and the deposit was advanced to the Escrow Agent. The note payable associated with the escrow deposit is in default and the Company has recorded $70,000 of impairment of this oil and gas property.
NOTE 89 – SUBSEQUENT EVENTS
On October 9, 2019,Subsequent to September 30, 2020, the Company sold 10,0005,000 shares of the common stock for $10,000 incash proceeds of $5,000.
Subsequent to September 30, 2020, the Company received a private placement. These shares have not been issued.short term related party loan of $40,000 for working capital. The unsecured loan is non-interest bearing, has no specific terms for repayment and payable on demand.
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-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 producers 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.
On June 25, 2020, the Company entered into a Purchase and Sale Agreement with Pure Oil & Gas, Inc. (“Pure”) and ZQH Holding, LLC (“ZQH”) to acquire oil and gas assets in Rogers County Oklahoma (the “Project”). The companyProject consists of approximately 3,429 acres of proven developed and non-developed oil and gas leases. Alpha has acquired through assignment Pure and ZQHs’ 87.5% Working Interest in the Project. The current Operator is Premier Gas Company, LLC, who owns the residual interest. Alpha intends to assert that applicable agreements covering the Project give it the right to remove the current operator and select a new one. On July 6, 2020, Premier filed a mechanic’s lien in Rogers County alleging past unpaid invoices and also claiming incorrectly that Alpha’s ownership is 75% rather than 87.5%. No documentation has been provided Alpha of any past due invoices by Premier, Pure, or ZQH, and we intend to contest the lien vigorously. The leases contain 126 wells either producing or capable of being brought on line, four salt water injection wells, and well production equipment. Included is 20.5 miles of 4" gas gathering lines, four miles of 2" saltwater gathering lines, two delivery connections for natural gas sales and one LTX-LNG natural gas processing equipment. Since the infrastructure currently exists, it will reduce the capital necessary to increase production. Upon completion of the acquisition, the first objective is to recomplete, rework and repair older equipment. Once the first phase is complete and cash flow is established, phase two will be implemented. In phase two, Alpha intends to drill shallow wells in order to test formations from the Bartlesville (600') to the bottom of the Granite Wash (2,520'). Alpha anticipates that these operations increase total production and add reserves.
The Coral Project is approximately 1,100 acres of developed and undeveloped proven production in the Cherokee Uplift in central Oklahoma. This project area is very prolific and has several (up to 12) additional formations in addition to the Mississippi formation that is currently the producing formation in the 28 wells that make up this project. Logs and drilling data indicate many of these units, which are behind pipe in most wells in the Project, have productive characteristics and provide excellent recompletion targets. The engineering reserve report commissioned by Alpha identifies four behind pipe targets for immediate exploitation. The Project has numerous infill drilling opportunities in the Mississippian, three of which rank as Proven Undeveloped in the reserve report. The greatest potential in the Coral Project may be in the Woodford, a prolific producer in the nearby STACK play area. Log analysis indicates the Woodford has excellent productive characteristics; the reserve report identifies ten Probable locations that adds 1.1 million barrels of oil and over 7 billion cubic feet of natural gas in net reserves per the year-end 2019 independent engineer’s reserve report.
The Company notes that the Project is west of the lands in eastern Oklahoma affected by the decision of the U.S. Supreme Court issued on July 9, 2020, McGirt v. Oklahoma, and therefore is unaffected by that decision.
The Logan 2 Project is approximately 6,900 acres of developed and undeveloped proven production in the Cherokee Uplift in central Oklahoma. This prolific area includes thirty-four formerly producing wells, primarily from the Hunton Formation. While none of these wells are currently producing, the engineering reserve report commissioned by Alpha as of December 31, 2019 has identified sixteen that could be returned to production with minimal effort. Logs and drilling data indicate six wells with Probable behind-pipe pay that can be recompleted. Additionally, the reserve report identifies twelve Proved or Probable undeveloped locations for new drilling in the Hunton, Viola, or Layton Formations. As drilling progresses, additional PUD locations are likely to be found on this large acreage block. The reserve report indicates over 340 thousand barrels oil and over 610 million cubic feet gas of net reserves.
The Company is actively pursuing acquisition of additional properties in Oklahoma, Texas and New Mexico.
Liquidity and Capital Resources
As of September 30, 2019,2020, we had $5,350 in cashtotal current assets of $5,470 and total current liabilities of $547,615. Current liabilities consisted mainly of $142,446 of derivative liability, $327,907 in accounts payable and accrued expenses, a short term note payable of $50,397 and $26,865 in interest payable.$1,938,066.
The Company used $132,765$73,924 of cash in operating activities during the nine months ended September 30, 20192020 compared to $62,185$143,515 used in operations during the same period in 2018.
The Company2019. Net cash used $10,000in operating activities during the nine months ended September 30, 2020 was mainly comprised of our $575,017 net loss during the period, adjusted by a non-cash charges of $22,252 for gain on change in fair value of derivative liabilities, $10,750 gain on extinguishment of debt, stock compensation of $144,000, amortization of debt discounts of $14,926, asset retirement obligation expense of $57, default interest added to note payable of $100,000 and changes in operating assets and liabilities of $275,112. Net cash used in investingoperating activities for exploration costs during the nine months ended September 30, 2019 was mainly comprised of our $261,594 net loss during the period, adjusted by a non-cash charges of $465,575 for gain on change in fair value of derivative liabilities, $50,000 impairment loss, stock compensation of $304,000, amortization of debt discounts of $29,636, asset retirement obligation expense of $57 and 2018.changes in operating assets and liabilities of $199,961.
The Company generated cash of $185,466$74,394 from financing activities during the nine months ended September 30, 2020 which consisted of $70,000 in proceeds from the sale of common stock, $8,500 proceeds from convertible credit line – related party, $1,000 advances from related party, $856 payments on short term advances – related party and $4,250 payments on convertible credit line payable - related party. The Company generated cash of $148,625 from financing activities during the nine months ended September 30, 2019 which consisted of $213,000 in proceeds from theof sale of common stock and $13,000 of proceeds from related party advances and net of $40,534 of$213,000, repayments on related party advances of $53,375 and therepayments on convertible debt.credit line payable – related party of $11,000.
Going Concern
The future of our companyCompany 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.
Results of Operations
We generated revenues of $873$1,217 and $481$3,857 during the nine months ended September 30, 2020 and 2019, respectively. Total operating expenses were $475,676 during the nine months ended September 30, 2020 compared to $680,935 during the same period in 2019. The decrease in operating expenses were due to a decrease in consulting fees of $160,456, $50,000 decrease in impairment loss which were offset with a $20,850 increase in legal expenses. The remaining difference in operating expenses were related to other general and administrative expenses.
We generated revenues of $0 and $873 during the three months ended September 30, 2020 and 2019, and 2018.respectively. Total operating expenses were $197,736$202,047 during the three months ended September 30, 20192020 compared to $209,907$195,236 during the same period in 2018.2019. The changeincrease in operating expensesis the result of were due to a decrease$20,850 increase in legal expenses and a $9,871 increase in professional fees of approximately $7,000,which were offset with a decrease of $29,100 in board of director fees of $136,600consulting fees. The remaining difference in 2019 and an increase in General and Administrative expenses of approximately $131,500 for the three months ended September 30, 2019 and September 30, 2018.
We generated revenues of $3,857 and $2,024 during the nine months ended September 30, 2019 and 2018. Total operating expenses were $680,935 during the nine months ended September 30, 2019 comparedrelated to $629,776 during the same period in 2018. The decrease in operating expenses are the result of a decrease in professional fees of approximately $4,000, a decrease in board of director fees of $421,000, and an increase inother general and administrative expenses of approximately $406,000 for the nine months ended September 30, 2019 and September 30, 2018.expenses.
On January 22, 2019, the Board of Directors authorized the sale of $600,000 shares of common stock to fund working capital and escrow deposits on three acquisitions. Off-Balance sheet arrangements
As of September 30, 2019, 213,000 shares had been sold.2020, 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 purpose of 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 2019 appearing in our financial statements.Annual Report on Form 10-K for the year ended December 31, 2019.
ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Smaller reporting companies are not required to provide information required by this Item.
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 JuneSeptember 30, 2019,2020, 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, our disclosure controls and procedures were not effective as of September 30, 2019.2020.
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 firstthe quarter that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.
PART II OTHER INFORMATION
ITEM 1.LEGAL PROCEEDINGS
On July 6, 2020, Premier filed a mechanic’s lien against the interests of Pure, ZQH and the Company in the 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 notwas obligated to spend substantial amounts to re-audit the filings that Lopez, LBB, and Vine handled. Also, the Company was obligated to undertake the re-audit for 2018 since it can no longer trust the work of someone who admittedly “engaged in a party to any legal proceedings.pattern 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 respond or even return the Company’s work papers and property.
ITEM 1A.RISK FACTORS
There have been no material changes in the risk factors set forth in the Company’s Form 10K for the period ended December 31, 2018.2019.
ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
During the period endingended September 30, 20192020, the Company has sold 213,00070,000 shares of common stock at $1.00 per share to raise working capital. As of September 30, 2019, the shares have not been distributed.
ITEM 3.DEFAULTS UPON SENIOR SECURITIES
None.
ITEM 4.MINE SAFETY DISCLOSURES
Not applicable to our operations.
ITEM 5. OTHER INFORMATION
None.
ITEM 5.OTHER INFORMATION
None.
ITEM 6.EXHIBITS
The following documents are included or incorporated by reference as exhibits to this report:
Exhibit
| ||
Number |
| |
101.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. |
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 12, 201920, 2020
Alpha Energy, Inc. | |||
Registrant | |||
|
| ||
By: | /s/ John Lepin | ||
| John Lepin | ||
|
| Chief Financial Officer |
16