U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

Commission File Number: 333-197642000-55586

Alpha Energy, Inc.

(Exact Name of Registrant as Specified in its Charter)

14143 Denver West Parkway, Suite 100,

Golden, CO 80401

(Address of principal executive offices) (Zip Code)

Registrant's Phone: 800-819-0604

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 ☐

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, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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

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

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

As of May 14, 2021 the issuer had 18,299,42818,824,106 shares of common stock issued and outstanding.

NOTE 1 – BASIS OF PRESENTATION

The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and should be read in conjunction with the audited consolidated financial statements and notes thereto for the years ended December 31, 2020 2021 and 20192020 which are included on athe Form 10-K10-K filed on April 29, 2021. 4, 2022. In the opinion of management, all adjustments which include normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows for the periods shown have been reflected herein. The results of operations for the three months ended March 31, 2021 2022 are not necessarily indicative of the operating results for the full year. Certain information and footnote disclosures which would substantially duplicate the disclosures contained in the audited consolidated financial statements for the years ended December 31, 2020 2021, and 20192020 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 United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the 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)(1) recorded transactions are valid; (2)(2) all valid transactions are recorded and (3)(3) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the company for the respective periods being presented.

Basic and Diluted Loss per share

Net loss per share is provided in accordance with FASB ASC 260-10, "Earnings260-10, “Earnings (Loss) per Share"Share”. Basic 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 March 31, 2021 2022 and 2020,2021, there were 148,328263,992 and 128,5780 shares issuable from the senior secured convertible notes payable and 168,328 and 148,328 shares issuable from the convertible credit line payable which were considered for their dilutive effects but were determined to be anti-dilutive due to the Company’s net loss, respectively.

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

NOTE 2 – GOING CONCERN

The Company’s interim unaudited consolidated 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 does not have anyhas minimal cash or other current assets norand does itnot have an established ongoing source of revenues sufficient to cover its operating costs and to allow it to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going 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 – OIL AND GAS PROPERTIES

On September 8,June 30, 2020, the Company entered into an Optionoption Agreement with Kadence Petroleum, LLC.Progressive Well Service, LLC (“Kadence”Progressive”) to acquire oil and gas assets in Lincoln and Logan CountyCounties in Central Oklahoma, called Oklahoma. On March 9, 2022, the “Logan 2 Project” inCompany closed on the Agreement). During due diligence it was discovered that Kadence did not have titleacquisition of 34 well bores and related assets under the PSA with cash payments of $507,814. The Company is entitled to receive the proceeds of production from January 1, 2022 under the terms of the PSA and Progressive is required to operate the properties inand transfer ownership and royalty decks to Company following a one-month transition period. Under the agreement. The Company had advanced $85,500 in option payments through March 31, 2021. The agreement is cancelled andPSA we are obligated to make a further payment of three (3%) percent of the Company wrote off the $85,500 as of March 31, 2021.

NOTE 4 – RELATED PARTY TRANSACTIONS

Advances from Related Party

The Company received advances from related partiesAEI Management, Inc., a Company owned by a significant shareholder, totaling $129,000$88,956 and $0$58,244 during the three months ended March 31, 2021 2022 and 2020,2021, respectively. The advances from related parties are not convertible, bear no interestunsecured, non-interest bearing and are duepayable on demand. During the three months ended March 31, 2022, the Company repaid $10,000 of the advances and converted $413,206 of advances to a senior secured convertible note due February 24, 2024.

The Company received advances from Jay Leaver, President of the Company, totaling $31,280 and $149,500 during the three months ended March 31, 2022 and 2021, respectively. The advances are unsecured, non-interest bearing and is payable on demand. During the three months ended March 31, 2022, the Company converted $325,580 of advances to a senior secured convertible note due February 24, 2024.

As of March 31, 2021 2022 and December 31, 2020, 2021, there was $388,744$0 and $181,000$628,550 of short termshort-term advances due to related parties, respectively.

During the three months ended Accounts Payable and Accrued Expenses - Related Parties

As of March 31, 2021, a related party paid $13,244 of expenses on behalf of the Company and $65,500 for unpaid oil and gas assets acquired. During the three months ended March 31, 2020, a related party paid $459 of expenses on behalf of the Company. As of March 31, 2021 and December 31, 2020, 2022, there was $152,818 and $120,568$227,332 of accounts payable and accrued expensesrelated parties which consisted of $203,484 due to related parties, respectively.Leaverite Exploration, Inc. d/b/a Leaverite Consulting (“Leaverite Exploration”), a corporation wholly-owned by our President, Jay Leaver pursuant to a consulting agreement, $5,558 due to former CFO John Lepin, $12,500 due to Fidare Consulting Group pursuant to a consulting agreement and $5,790 due to Staley Engineering LLC for consulting services

As of December 31, 2021, there was $228,668 of accounts payable related parties which consisted of $203,484 due to Leaverite Exploration, $4,394 due to former CFO John Lepin, $10,000 due Kelloff Oil &Gas, LLC, a limited liability company and $5,790 due to Staley Engineering LLC for consulting services.

Notes Payable - Related Party

On December 3, 2020, the Company executed a promissory note for $65,000 with the Jay Leaver, our President. The Chief Financial Officer allows unsecured note matured three years from date of issuance and bore interest at a rate of 5% per annum. As of December 31, 2021, the usenote payable had unpaid accrued interest in the amount of $13,003. On February 23, 2022, the promissory note was amended to a principal amount of $406,750, which includes the original $65,000 plus additional advances of $325,580, and accrued interest of $16,170. An additional $110,235 was advanced during the three months ended March 31, 2022 maturing February 23, 2025. In February 2022, Mr. Leaver advanced an additional $500,000 to the Company. On February 25, 2022, Mr. Leaver’s $406,750 promissory note and $500,000 advance were assigned to 20 Shekels, Inc, a corporation wholly-owned by Marshwiggle, LLC, a limited liability company jointly owned by Mr. Leaver and his residence as an officespouse and on February 25, 2022 the Company issued $906,750 of its secured senior secured convertible notes due February 24, 2024, bearing interest at a rate of 7.25% per annum (the “7.25% Note”) in exchange for the Companyprior obligations. The 7.25% Note is convertible into shares of the Company’s Common Stock at no charge.$5.00 per share. See Note 6 - Convertible Credit Line Payable and Senior Securied convertible Notes Payable - Related Party.

NOTE 5 – COMMON STOCK

The Company is authorized to issue up to75,000,000 shares of its capital stock, consisting of 10,000,000 shares of $0.001preferred stock, par value preferred stock$0.001 per share, and 65,000,000 shares of $0.001common stock, par value common stock.$0.001 per share.

The Company compensates each of its directors with 4,000 shares of common stock each month. During the quarterthree months ended March 31, 2021 and 2020, 2022, the Company recorded stock compensation of $48,000 for directors which was recorded in additional paid in capital, but has not recorded the share compensation as issued 48,000 sharesand outstanding as of common stock valued at $48,000.the date hereof

During the three months ended March 31, 2021, 2022, the Company issued 90,000 sharesrecorded stock compensation in the amount of common stock with a fair value of $90,000 to settle accounts payable of $210,250. The Company recognized a gain of $120,250 on settlement of accounts payable.$15,000 for Kelloff Oil & Gas, LLC.

The Board of Directors authorized During the three months ended March 31, 2022, the Company to sell 1,750,000 shares of common stock at $1.00 per share to raise working capital. During the quarter ended March 31, 2021, the Company sold no shares of the common stock. During the quarter ended March 31, 2020, the Company sold 18,000 shares of the common stock for totalreceived cash proceeds of $18,000.

NOTE 6 – NOTE PAYABLE

On March 30, 2019, the Company executed a promissory note for $50,000$1,281,600 from investor subscriptions 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. 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 conversionpurchase price of $1.00 per share and the note will also be subject torecorded as a monthly interest of 1%. During the three months ended March 31, 2021, the Company recognized $50,000 of default interest that was added to the principal of the note payable. As of March 31, 2021, the note payable balance was $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 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 76 – CONVERTIBLE CREDIT LINE PAYABLE AND SENIOR SECURED CONVERTIBLE NOTES PAYABLE – RELATED PARTY

Convertible Credit Line Payable

On SeptemberJune 1, 2017, 2021, the Company entered into a new convertible credit line agreement to borrow up to $500,000. On the same date, the outstanding balance$1,500,000 and matures 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. June 1, 2023. 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.$4.00. The Company analyzed the conversion optionsoption 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 measuredevaluated the derivative liabilitynew convertible credit line for debt modification in accordance with ASC 470-50 and recorded aconcluded that the debt discount of $87,366 upon initial measurement. In 2019, qualified for debt modification as the borrowing capacity under the new credit line is greater than the borrowing capacity under the original credit line. There were no fees paid to the creditor and no unamortized deferred costs on the original credit line. Accordingly, no expense was recognized in connection with the transaction. On August 8, 2021, the Company recognized an additional debt discount of $7,568.received $20,000 in cash proceeds from the credit line. During the three months ended March 31, 2021 and 2020, 2022, the Company amortized $2,754 and $5,731$1,116 of the discount as interest expense, respectively.expense. As of March 31, 2021 2022, and December 31, 2020, 2021, the unamortized discount was $0$9,984 and $2,754,$11,100, respectively. The outstanding principal balance on the convertible credit line as of March 31, 2022 and December 31, 2021 amounted to $168,328. See discussion of derivative liability in Note 87 – Derivative Liability.

Senior Secured Convertible Notes Payable

On February 25, 2022, the Company entered into secured senior secured convertible note for the purchase and sale of convertible promissory notes (“Convertible Note”) in the principal amount of $5,000,000. The Senior Convertible Note is convertible at any time after the date of issuance into shares of the Company’s common stock at a fixed conversion price of $5.00 per share. Upon conversion of the convertible note into the Company’s common stock, the noteholder would be issued 1,000,000 shares of the Company’s common stock. Interest on the Convertible Note shall be paid to the investors at a rate of 7.25% per annum, paid on a quarterly basis, and the maturity date of the Convertible Note is two years after the issuance date. The Convertible Note purports to be secured by certain oil and gas leases, lands, minerals and other properties of the Company, subject to prior liens and security interests. See Note 4 – Related Party Transactions. $413,206 from a related party were exchanged for a Convertible Note. Due to the variable conversion price in the convertible credit line, this fixed senior secured convertible note is treated as derivatives due to possibility of insufficient shares available at conversion to settle the notes. The day one derivative liability was $65,262, which was recorded as a discount on the senior secured convertible notes payable. During the three months ended March 31, 2021 and 2020, 2022, the Company recorded $0 and $2,000 in cash payment toamortized $3,040 of the discount as interest expense. As of March 31, 2022, the unamortized discount was $62,222. The outstanding principal balance on the convertible credit line respectively.as of March 31, 2022 amounted to $413,206. See discussion of derivative liability in Note 7 – Derivative Liability.

NOTE 87 – 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 financial liabilities, measured at fair value on a recurring basis, as of March 31, 2021 2022 and December 31, 2020:2021:

Utilizing Level 3 Inputs, the Company recorded a loss on fair market value adjustments related to convertible credit line payable and senior secured notes payable for the three months ended March 31, 2021 and 2020 2022 of $13,304 and $39,049, respectively.$2,758. The fair market value adjustments as of March 31, 2021 and 2020 2022 were calculated utilizing the Black-Scholes option pricing model using the following assumptions: exercise price of $1.00 - $5.00, computed volatility of 111% and 54%300% - 329% and discount rate of 0.17% respectively.1.63% - 1.72%.

A summary of the activity of the derivative liability is shown below at March 31, 2021:2022:

NOTE 8– SUBSEQUENT EVENT

On April 8, 2022, John Lepin resigned as director, officer and employee of the Company.

Subsequent to March 31, 2022, the Company received cash proceeds of $479,970 from investor subscriptions to purchase common stock at a purchase price of $1.00 per share recorded as a current liability.