Quarterly Report (10-q)

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)

☒	Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended June 30, 2020

☐	Transition Report under Section 13 or 15(d) of the Exchange Act For the Transition Period from ________________ to ________________

Commission File Number: 333-197642

Alpha Energy, Inc.

(Exact Name of Registrant as Specified in its Charter)

Colorado

90-1020566

(State of other jurisdiction of

incorporation or organization)

(I.R.S. Employer

Identification Number)

4162 Meyerwood Drive, Houston TX 77025

(Address of principal executive offices) (Zip Code)

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 ☒ 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 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.

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☐

Smaller reporting

company

☒

Emerging Growth

Company

☒

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

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

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common	APHE	Other OTC

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

As of November 11, 2020, the issuer had 18,056,428 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	17
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	20
Item 4.	Controls and Procedures	20

	PART II – OTHER INFORMATION

Item 1.	Legal Proceedings	21
Item 1A.	Risk Factors	21
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	21
Item 3.	Defaults Upon Senior Securities	21
Item 4.	Mine Safety Disclosures	21
Item 5.	Other Information	21
Item 6.	Exhibits	22

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)

	June 30, 2020			December 31, 2019

Assets
Current assets:
Cash and cash equivalents	$	5,287		$	-
Total current assets		5,287			-

Noncurrent assets:
Oil and gas property, unproved, full cost		1,020,000			10,000

Total assets	$	1,025,287		$	10,000

Liabilities and Stockholders' Deficit

Current liabilities:
Accounts payable	$	416,446		$	300,428
Accounts payable and accrued expenses - related party		13,195			3,687
Interest payable		26,103			33,653
Short term advance from related party		-			397
Short term note payable		1,060,000			50,000
Derivative liability		15,780			65,289
Current portion of convertible credit line payable – related party, net of discount of $7,582 and $0, respectively		121,746			-
Total current liabilities		1,653,270			453,454

Convertible credit line payable – related party, net of discount of $0 and $17,396, respectively		-			113,182
Asset retirement obligation		824			786
Total liabilities		1,654,094			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 17,988,428 and 17,822,428 shares issued and outstanding, respectively		1,800			1,783
Additional paid-in capital		1,920,980			1,754,997
Accumulated deficit		(2,551,587	)		(2,314,202	)
Total stockholders' deficit		(628,807	)		(557,422	)

Total liabilities and stockholders' deficit	$	1,025,287		$	10,000

See accompanying notes to the unaudited consolidated financial statements.

ALPHA ENERGY, INC
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE THREE AND SIX MONTHS ENDED JUNE 30, 2020 AND 2019
(Unaudited)

	Three months ended						Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019
				As Revised						As Revised

Oil and gas sales	$	871		$	714		$	1,217		$	2,984
Lease operating expenses		1,290			1,913			2,218			4,815
Gross loss		(419	)		(1,199	)		(1,001	)		(1,831	)

Operating expenses:
Professional services		15,633			10,962			15,633			24,870
Board of director fees		48,000			48,000			96,000			96,000
General and administrative		78,695			147,980			161,996			314,829
Impairment loss		-			50,000			-			50,000
Total operating expenses		142,328			256,942			273,629			485,699
Loss from operations		(142,747	)		(258,141	)		(274,630	)		(487,530	)

Other income (expense):
Interest expense		(10,898	)		(15,582	)		(23,379	)		(28,190	)
Gain on extinguishment of debt		10,750			-			10,750			-
Gain on change in fair value of derivative liabilities		10,825			21,056			49,874			470,189
Total other income		10,677			5,474			37,245			441,999

Net loss	$	(132,070	)	$	(252,667	)	$	(237,385	)	$	(45,531	)

Loss per share:
Basic	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.00	)
Diluted	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)

Weighted average shares outstanding:
Basic		17,910,296			17,616,516			17,881,087			17,457,826
Diluted		18,039,624			17,749,212			18,010,415			17,590,522

See accompanying notes to the unaudited consolidated financial statements.

ALPHA ENERGY, INC.
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' DEFICIT
FOR THE THREE AND SIX MONTHS ENDED JUNE 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 - As Revised		17,667,428	$	1,767	$	1,600,014	$	(1,926,796	)	$	(325,015	)


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	)

See accompanying notes to the unaudited consolidated financial statements.

ALPHA ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

FOR THE SIX MONTHS ENDED JUNE 30, 2020 AND 2019

(Unaudited)

	June 30, 2020			June 30, 2019
				As Revised

Cash flows from operating activities:
Net loss	$	(237,385	)	$	(45,531	)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		96,000			256,000
Amortization of debt discount		10,179			19,757
Gain on change in fair value of derivative liabilities		(49,874	)		(470,189	)
Gain on extinguishment of debt		(10,750	)		-
Impairment loss		-			50,000
Asset retirement obligation expense		38			38
Changes in operating assets and liabilities:
Prepaid expenses		-			(50,000	)
Accounts payable		106,477			76,594
Accounts payable-related party		9,508			22,827
Interest payable		13,200			8,433
Net cash used in operating activities		(62,607	)		(132,071	)

Cash flows from financing activities:
Payment on convertible credit line payable - related party		(4,250	)		(7,750	)
Proceeds from convertible credit line payable - related party		3,000			-
Payments on short term advances - related party		(856	)		(53,375	)
Proceeds from sale of common stock		70,000			194,000
Net cash provided by financing activities		67,894			132,875

Net change in cash and cash equivalents		5,287			804

Cash and cash equivalents, at beginning of period		-			240

Cash and cash equivalents, at end of period	$	5,287		$	1,044

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	$	459		$	29,406
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	$	365		$	-

See accompanying notes to the unaudited consolidated financial statements.

ALPHA ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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 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 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 and six months ended June 30, 2020 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 financial statements for the years 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 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) recorded transactions are valid; (2) all valid transactions are recorded and (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, " Loss per 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 and six months ended June 30, 2020 and 2019, there were 129,328 and 132,696 shares issuable from convertible credit line payable which were considered for their dilutive effects, respectively.

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

	Three months ended						Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019

Basic net loss	$	(132,070	)	$	(252,667	)	$	(237,385	)	$	(45,531	)
Add back: Gain on change in fair value of derivative liabilities		(10,825	)		(21,056	)		(49,874	)		(470,189	)
Diluted net loss	$	(142,895	)	$	(273,723	)	$	(287,259	)	$	(515,720	)

Basic and dilutive shares:
Weighted average basic shares outstanding		17,910,296			17,616,516			17,881,087			17,457,826
Shares issuable from convertible credit line payable		129,328			132,696			129,328			132,696
Dilutive shares		18,039,624			17,749,212			18,010,415			17,590,522

Loss per share:
Basic	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.00	)
Diluted	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)

Fair Value of Financial Instruments

The Company applies 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 recurring 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 fair 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 are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.

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

The carrying amount of the Company’s financial instruments consisting of cash and cash equivalents, accounts payable, notes payable and convertible notes approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.

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.

Revision of Prior Period Financial Statements

In 2020, the Company identified errors in account balances in the Form 10Q filed for the six months period ended June 30, 2019. The following accounts were deemed to contain 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” (“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 June 30, 2019 and the consolidated statements of operations for the three and six months ended June 30, 2019 and cash flows for the six months ended June 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)

	June 30, 2019
	As Reported			Adjustment			As Revised
Current assets
Cash	$	1,044		$	-		$	1,044
Prepaid expenses		50,000			-			50,000
Total current assets		51,044			-			51,044

Oil and gas property, unproved, full cost		12,500			(2,500	)		10,000
Total assets	$	63,544		$	(2,500	)	$	61,044

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable	$	180,162			(48,000	)	$	132,162
Interest payable		19,912			-			19,912
Short term advance from related party		397			-			397
Short term note payable		50,000			-			50,000
Derivative liability		132,696			(52,966	)		79,730
Total current liabilities		383,167			(100,966	)		282,201

Convertible credit line payable - related party, net of discount of $29,586		132,696			(29,586	)		103,110
Asset retirement obligation		748			-			748
Total liabilities		516,611			(130,552	)		386,059

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; 17,667,428 issued and outstanding at June 30, 2019		1,762			5			1,767
Additional paid in capital		1,498,459			101,555			1,600,014
Accumulated deficit		(1,953,288	)		26,492			(1,926,796	)
Total stockholder deficit		(453,067	)		128,052			(325,015	)

Total liabilities and stockholders' deficit	$	63,544		$	(2,500	)	$	61,044

ALPHA ENERGY, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	For the six months ended June 30, 2019
	As Reported			Adjustment			As Revised

Oil & Gas Sales	$	2,984		$	-		$	2,984
Lease operating expenses		4,815			-			4,815
Gross loss		(1,831	)		-			(1,831	)

Operating expenses:
Professional services		24,870			-			24,870
Board of directors fees		96,000			-			96,000
General and administrative		292,329			22,500			314,829
Impairment loss		70,000			(20,000	)		50,000
Total operating expenses		483,199			2,500			485,699

Loss from operations		(485,030	)		(2,500	)		(487,530	)

Other income (expense):
Interest expense		(37,927	)		9,737			(28,190	)
Gain (loss) on change in fair value of derivative liabilities		475,902			(5,713	)		470,189
Total other income		437,975			4,024			441,999

Net loss	$	(47,055	)	$	1,524		$	(45,531	)

Loss per share:
Basic	$	(0.00	)	$	-		$	(0.00	)
Diluted	$	(0.00	)	$	(0.03	)	$	(0.03	)

Weight average shares common share outstanding: basic and diluted
Basic		17,023,058			434,768			17,457,826
Diluted		17,023,058			567,464			17,590,522

ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

	For the three months ended June 30, 2019
	As Reported			Adjustment			As Revised

Oil & Gas Sales	$	714		$	-		$	714
Lease operating expenses		1,913			-			1,913
Gross loss		(1,199	)		-			(1,199	)

Operating expenses:
Professional services		10,962			-			10,962
Board of directors fees		145,299			(97,299	)		48,000
General and administrative		48,000			99,980			147,980
Impairment loss		70,000			(20,000	)		50,000
Total operating expenses		274,261			(17,319	)		256,942

Loss from operations		(275,460	)		17,319			(258,141	)

Other income (expense):
Interest expense		(14,595	)		(987	)		(15,582	)
Gain on change in fair value of derivative liabilities		3,750			17,306			21,056
Total other income (expense)		(10,845	)		16,319			5,474

Net loss	$	(286,305	)	$	33,638		$	(252,667	)

Loss per share:
Basic	$	(0.02	)	$	0.01		$	(0.01	)
Diluted	$	(0.02	)	$	-		$	(0.02	)

Weight average shares common share outstanding: basic and diluted
Basic		17,489,125			127,391			17,616,516
Diluted		17,489,125			260,087			17,749,212

ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

	For the six months ended June 30, 2019
	As Reported			Adjustments			As Revised
Cash flows from operation activities
Net loss	$	(47,055	)	$	1,524		$	(45,531	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		110,000			146,000			256,000
Amortization of debt discount		29,494			(9,737	)		19,757
(Gain) loss on change in fair value of derivative liabilities		(475,902	)		5,713			(470,189	)
Impairment loss		70,000			(20,000	)		50,000
Asset retirement obligation expense		38			-			38
Change in operating assets and liabilities:
Prepaid expenses and other current assets		-			(50,000	)		(50,000	)
Accounts payable		171,580			(94,986	)		76,594
Accounts payable related party		-			22,827			22,827
Interest payable		8,433			-			8,433
Net cash used in operating activities		(133,412	)		1,341			(132,071	)

Cash flows from investing activities
Deposit for purchase of oil and gas properties		(22,500	)		22,500			-
Net cash used in investing activities		(22,500	)		22,500			-

Cash flows from financing activities
Advances from related party		19,841			(19,841	)		-
Payment on convertible credit line payable - related party		(3,750	)		(4,000	)		(7,750	)
Proceeds from sale of stock		194,000			-			194,000
Repayments of related party advances		(53,375	)		-			(53,375	)
Net cash provided by financing activities		156,716			(23,841	)		132,875

Net change in cash and cash equivalents		804			-			804
Cash and cash equivalent, beginning of period		240			-			240
Cash and cash equivalent, end of period	$	1,044		$	-		$	1,044

Supplemental disclosure of non-cash financing activities
Debt discount on convertible credit line payable – related party	$	536,701		$	(536,701	)	$	-
Non cash short term loan payable	$	50,000		$	-		$	50,000
Expenses paid on behalf of the Company by related party	$	-		$	29,406		$	29,406

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 does not have sufficient cash or other currents 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. 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 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”) 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 recognized a note payable to ZQH and Pure as of June 30, 2020 of $1,060,000 consisting of the purchase price of $1,000,000 and 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 87.5%. 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 Company will continue to monitor developments concerning the effects of this decision.

On June 30, 2020, the Company entered into an Option Agreement (the “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 subsequently 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.

NOTE 4 – RELATED PARTY TRANSACTIONS

The Company repaid advances of $856 and $53,375 during the six months ended June 30, 2020 and 2019, respectively. The advances from related parties are not convertible, bear no interest and are due on demand. During the six months ended June 30, 2020 and 2019, a related party paid $459 and $29,406 of expenses on behalf of the Company, respectively. There was $0 and $397 due to related parties as of June 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 5 – 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 $0.0001 par value common stock.

The Board of Directors authorized the Company to sell 750,000 shares of common stock at $1.00 per share to raise working capital.

During the six months ended June 30, 2020 and 2019, the Company sold 70,000 and 194,000 shares of common stock for total proceeds of $70,000 and $194,000, respectively.

The Company compensates each of its directors with 4,000 shares of common stock each month. During each of the six months ended June 30, 2020 and 2019, the Company issued 96,000 shares of common stock valued at $96,000.

During the six months ended June 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 as of June 30, 2020. During the six months ended June 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 for a total payable of $1,260,000. 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 six months ended June 30, 2020, the Company recognized an additional debt discount of $365 and amortized $10,179 of the discount as interest expense leaving an unamortized discount of $7,582 as of June 30, 2020. See discussion of derivative liability in Note 8 – Derivative Liability.

During the six months ended June 30, 2020 and 2019, the Company recorded $4,250 and $7,750 in cash payment to the outstanding balance on the credit line, respectively. The outstanding principal balance on the convertible credit line as of June 30, 2020 amounted to $129,328.

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 June 30, 2020 and December 31, 2019:

Level 1

Level 2

Level 3

Fair Value at

June 30, 2020

Liabilities:

Derivative liability

15,780

Level 1

Level 2

Level 3

Fair Value at

December 31, 2019

Liabilities:

Derivative liability

65,289

Utilizing Level 3 Inputs, the Company recorded fair market value adjustments related to convertible credit line payable for the six months ended June 30, 2020 and 2019 of $49,874 and $470,189, respectively. The fair market value adjustments as of June 30, 2020 and 2019 were calculated utilizing the Black-Scholes option pricing model using the following assumptions: exercise price of $1.00, computed volatility 37% and 129% and discount rate 0.16% and 1.75, respectively.

A summary of the activity of the derivative liability is shown below at June 30, 2020:

Balance at December 31, 2019	$	65,289
Debt discount on convertible credit line payable		365
Gain on change in derivative fair value adjustment		(49,874	)
Balance at June 30, 2020	$	15,780

NOTE 9 – SUBSEQUENT EVENTS

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 September 8, 2020, the Company entered into an Option Agreement (the “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 December 31, 2020 to exercise its option (the “Option Period”). During the Option Period, Progressive may not sell the Logan 2 Project to any third party. In return for this exclusivity, the Company paid $10,000 to Brian Tribble, Managing Member of Kadence, through AEI Acquisition, LLC revolving credit note, on September 18, 2020.

Subsequent to June 30, 2020, the Company sold 5,000 shares of the common stock for total proceeds of $5,000, issued 48,000 shares to compensate its directors, issued 10,000 shares of common stock for lease acquisition cost for unproved properties and issued 5,000 shares of common stock to settle accounts payable of $5,000 for services provided. On August 6, 2020, the Board authorized an additional 550,000 shares of common stock for sale at $1.00 per share bringing the total to 1,300,000 shares.

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 Project 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 Company is actively pursuing acquisition of additional properties in Oklahoma, Texas and New Mexico.

Liquidity and Capital Resources

As of June 30, 2020, we had total current assets of $5,287 and total current liabilities of $1,653,270.

The Company used $62,607 of cash in operating activities during the six months ended June 30, 2020 compared to $132,071 used in operations during the same period in 2019. Net cash used in operating activities during the six months ended June 30, 2020 was mainly comprised of our $237,385 net loss during the period, adjusted by a non-cash charges of $49,874 for gain on change in fair value of derivative liabilities, $10,750 gain on extinguishment of debt, stock-based compensation of $96,000, amortization of debt discount of $10,179, asset retirement obligations expense of $38 and changes in operating assets and liabilities of $129,185. Net cash used in operating activities during the six months ended June 30, 2019 was mainly comprised of our $45,531 net loss during the period, adjusted by a non-cash charges of $470,189 for gain on change in fair value of derivative liabilities, $50,000 impairment loss, stock-based compensation of $256,000, amortization of debt discount of $19,757, asset retirement obligations expense of $38 and changes in operating assets and liabilities of $57,854.

The Company generated cash of $67,894 from financing activities during the six months ended June 30, 2020 which consisted of $70,000 in proceeds from the sale of common stock, $3,000 proceeds from convertible credit line – related party and payments of $856 on short term advances – related party and $4,250 on convertible credit line payable - related party. The Company generated cash of $132,875 from financing activities during the six months ended June 30, 2019 which consisted of proceeds of sale of common stock of $194,000, repayments on related party advances of $53,375 and repayments on convertible credit line payable – related party of $7,750.

Going Concern

The future of our Company is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement and public offering of its common stock, if necessary. See Note 2 to the unaudited consolidated financial statements for additional information.

Results of Operations

We generated revenues of $1,217 and $2,984 during the six months ended June 30, 2020 and 2019, respectively. Total operating expenses were $273,629 during the six months ended June 30, 2020 compared to $485,699 during the same period in 2019. The decrease in operating expenses were due to a decrease in consulting fees of $131,356 and $50,000 decrease in impairment loss.

We generated revenues of $871 and $714 during the three months ended June 30, 2020 and 2019, respectively. Total operating expenses were $142,328 during the three months ended June 30, 2020 compared to $256,942 during the same period in 2019. The decrease in operating expenses were due to a decrease in consulting fees of $63,263 and $50,000 decrease in impairment loss.

Off-Balance sheet arrangements

As of June 30, 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 Policies

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities and the reported amounts of revenue and expenses during the reported periods. Our accounting policies are described in Note 1 to our audited financial statements for 2019 appearing in our 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 June 30, 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 June 30, 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 the 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 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 was 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 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, 2019.

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

During the period ended June 30, 2020, the Company has sold 70,000 shares of common stock at $1.00 per share to raise working capital.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. MINE SAFETY DISCLOSURES

Not applicable to our operations.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS

The following documents are included or incorporated by reference as exhibits to this report:

Exhibit

Number

Description

31.1

Certification of Chief Executive Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as a dopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2

Certification of Chief Financial Officer pursuant to Securities Exchange Act Rule 13a-14(a)/15d-14(a), as a dopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1

Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 o f the Sarbanes-Oxley Act of 2002.

32.2

Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 o f the Sarbanes-Oxley Act of 2002.

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 16, 2020