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 2020 and 20182019 which are included on athe Form 10-K10-K filed on September 24, 2020. April 29, 2021. 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 2021 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, 2019 2020 and 20182019 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 Companycompany 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, " Loss260-10, "Earnings (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, 2021, there were 129,328 and 132,696148,328 shares issuable from convertible credit line payable which were considered for their dilutive effects respectively.but concluded to be anti-dilutive. For the three and six months ended June 30, 2020, there were 129,328 shares issuable from convertible credit line payable which were considered for their dilutive effect.

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

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.statements. 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 there are no other recently issued accounting pronouncements that 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.

Reclassification

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 immaterialCertain reclassifications may have been made to the previously issuedour prior year’s financial statements and as such to conform to our current year presentation. These reclassifications had no restatement was necessary. Correcting prior period financial statements for immaterial errors would not require effect on our 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 statementsreported results of operations for the three and six months ended June 30, 2019 and cash flows for the six months ended June 30, 2019.or accumulated deficit.

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:

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 sufficientany cash or other currentscurrent assets, nor does it have an established 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,September 8, 2020, the Company entered into a Purchase and Salean Option Agreement with Pure Oil & Gas, Inc.Kadence Petroleum, LLC. (“Pure”) and ZQH Holding, LLC (“ZQH”Kadence”) to acquire oil and gas assets in RogersLogan County in Central Oklahoma, (the “Project”)called the “Logan 2 Project” in consideration of a purchase price of $1,000,000. Pursuantthe Agreement. During due diligence it was discovered that Kadence did not have title to the properties in the agreement. The Company had advanced $85,500 in option payments through June 30, 2021. The agreement is cancelled, and the Company has taken assignment of all of ZQH and Pure's working interest inwrote off the Project and has recognized a note payable to ZQH and Pure$85,500 as of June 30, 2021.

During the six months ended June 30, 2021, the Company paid $70,000 in Option Payments to Progressive Well Services in connection with its Option Agreement dated 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).County, Oklahoma. The Option Agreement gives the Company until Decemberhas been extended to August 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 $50,000.2021.

NOTE 4– RELATED PARTY TRANSACTIONS

The Company repaidreceived advances of $856from related parties totaling $224,600 and $53,375$0 during the six months ended June 30, 2020 2021 and 2019,2020, 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, 2021, a related party paid $459 and $29,406$13,244 of expenses on behalf of the Company respectively. Thereand $65,500 for unpaid oil and gas assets acquired. As of June 30, 2021, and December 31, 2020, there was $0$484,344 and $397$181,000 of short-term advances due to related parties, asrespectively.

As of June 30, 2020 2021 and December 31, 2019,2020, there was $176,079 and $120,568 of accounts payable, $170,985 due Leaverite Exploration for Interim President Jay Leaver, $5,094 due CFO John Lepin in accrued expenses and $110,904 due Leaverite Exploration for Interim President Jay Leaver, $3,884 due CFO John Lepin in accrued expenses, $5,780 Staley Engineering LLC for consulting Services due to related parties, respectively.

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

NOTE 5– COMMON STOCK

The Company is authorized to issue up to 10,000,000 shares of $0.0001$0.001 par value preferred stock and 65,000,000 shares of $0.0001$0.001 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 2021 and 2019,2020, the Company issued 96,000 shares of common stock valued at $96,000.

During the six months ended June 30, 2019, 2021, the Company issued 160,00090,000 shares of common stock with a fair value of $160,000 for consulting services.$90,000 to settle accounts payable of $210,250. The Company recognized a gain of $120,250 on settlement of accounts payable.

NOTE 6 – NOTE PAYABLEDuring the six months ended June 30, 2021 and 2020, the Company sold 5,000 and 70,000 shares of the common stock for total proceeds of $5,000 and $70,000, respectively.

On April 1, 2021, the Company entered into a month-to-month consulting agreement with Kelloff Oil & Gas, LLC for consulting services that includes cash compensation of $10,000 and the issuance of 5,000 shares of common stock per month. The Company may terminate the agreement at any with a ten-day notice. During the six months ended June 30, 2021, the Company issued 15,000 common shares and recognized $15,000 of stock-based compensation related to the agreement.

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.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$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.$1,060,000. During the six monthsyear ended June 30,December 31, 2020, $10,750$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$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 and made payments of $100,000 for a total payable of $1,260,000.$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%. During the six months ended June 30, 2021, the Company recognized $50,000 of default interest that was added to the principal of the note payable. As of June 30, 2021, the note payable balance was $1,210,000 with accrued interest of $60,294. 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. No further Extension Agreement has been entered into.

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 470-50.470-50. 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, In 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.$7,568. During the six months ended June 30, 2021 and 2020, the Company recognized an additional debt discount of $365amortized $2,754 and amortized $10,179 of the discount as interest expense, leaving anrespectively. As of June 30, 2021 and December 31, 2020, the unamortized discount of $7,582 as of June 30, 2020.was $0 and $2,754, respectively. See discussion of derivative liability in Note 8 – Derivative Liability.

On June 1, 2021, the Company entered into a new convertible credit line agreement to borrow up to $1,500,000. The new convertible line agreement supersedes the original note dated September 1, 2017. 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 $4.00. 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.

During the six months ended June 30, 2020 2021 and 2019,2020, the Company recorded $4,250$0 and $7,750$4,250 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 financial liabilities, measured at fair value on a recurring basis, as of June 30, 2020 2021 and December 31, 2019:2020:

Utilizing Level 3 Inputs, the Company recorded a loss on fair market value adjustments related to convertible credit line payable for the six months ended June 30, 2020 and 2019 2021 of $49,874 and $470,189, respectively.$5,099. The fair market value adjustments as of June 30, 2020 and 2019 2021 were calculated utilizing the Black-Scholes option pricing model using the following assumptions: exercise price of $1.00, computed volatility 37%of 145% and 129%37% and discount rate 0.16%of 0.25% and 1.75,0.16%, respectively.

A summary of the activity of the derivative liability is shown below at June 30, 2020:2021:

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.