| Page(s) | Consolidated Balance Sheets (unaudited) | 4 | | | Consolidated Statements of OperationsBalance Sheets (unaudited) | 54 | | | 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 | CONSOLIDATED BALANCE SHEETS
| (Unaudited) |
| | | June 30, 2021 | | | December 31, 2020 | | | | June 30, 2020 | | | December 31, 2019 | | | | | | | | | | | | | Assets | | | | | | | | | | | | | | | | | Current assets: | | | | | | | | | | Cash and cash equivalents | | $ | 5,287 | | | $ | - | | | $ | 124 | | | $ | 0 | | Prepaid assets and other current assets | | | | 5,000 | | | | 30,000 | | Total current assets | | | 5,287 | | | | - | | | 5,124 | | | 30,000 | | | | | | | | | | | | Noncurrent assets: | | | | | | | | | | Oil and gas property, unproved, full cost | | | 1,020,000 | | | | 10,000 | | | | 90,000 | | | | 70,000 | | | | | | | | | | | | Total assets | | $ | 1,025,287 | | | $ | 10,000 | | | $ | 95,124 | | | $ | 100,000 | | | | | | | | | | | | Liabilities and Stockholders' Deficit | | | | | | | | | | | | | | | | | | | | | | | | | | | Current liabilities: | | | | | | | | | | Accounts payable | | $ | 416,446 | | | $ | 300,428 | | | Accounts payable and accrued expenses - related party | | | 13,195 | | | | 3,687 | | | Accounts payable and accrued expenses | | | $ | 425,930 | | | $ | 585,732 | | Accounts payable and accrued expenses - related parties | | | 176,079 | | | 120,568 | | Interest payable | | | 26,103 | | | | 33,653 | | | 60,294 | | | 31,295 | | Short term advance from related party | | | - | | | | 397 | | | Short term advances from related parties | | | 484,344 | | | 181,000 | | Short term note payable | | | 1,060,000 | | | | 50,000 | | | 1,210,000 | | | 1,160,000 | | Derivative liability | | | 15,780 | | | | 65,289 | | | | 101,468 | | | | 96,369 | | 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 | | | 2,458,115 | | | 2,174,964 | | | | | | | | | | | | Convertible credit line payable – related party, net of discount of $0 and $17,396, respectively | | | - | | | | 113,182 | | | Convertible credit line payable – related party, net of discount of $0 and $2,754, respectively | | | 148,328 | | | 145,574 | | Asset retirement obligation | | | 824 | | | | 786 | | | | 900 | | | | 862 | | Total liabilities | | | 1,654,094 | | | | 567,422 | | | | 2,607,343 | | | | 2,321,400 | | | | | | | | | | | | 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 | | | Preferred stock, 10,000,000 shares authorized: | | | Series A convertible preferred stock, $0.001 par value, 2,000,000 shares authorized and 0 shares issued and outstanding | | | 0 | | | 0 | | Common stock, $0.001 par value, 65,000,000 shares authorized and 18,351,428 and 18,145,428 shares issued and outstanding, respectively | | | 18,351 | | | 18,145 | | Additional paid-in capital | | | 1,920,980 | | | | 1,754,997 | | | 2,267,429 | | | 2,061,635 | | Accumulated deficit | | | (2,551,587 | ) | | | (2,314,202 | ) | | | (4,797,999 | ) | | | (4,301,180 | ) | Total stockholders' deficit | | | (628,807 | ) | | | (557,422 | ) | | | (2,512,219 | ) | | | (2,221,400 | ) | | | | | | | | | | | Total liabilities and stockholders' deficit | | $ | 1,025,287 | | | $ | 10,000 | | | $ | 95,124 | | | $ | 100,000 | |
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, 20202021 AND 20192020 | (Unaudited) |
| | Three months ended | | | Six months ended | | | | | June 30, 2020 | | | June 30, 2019 | | | June 30, 2020 | | | June 30, 2019 | | | Three months ended | | | Six months ended | | | | | | | | As Revised | | | | | | | As Revised | | | June 30, 2021 | | | June 30, 2020 | | | June 30, 2021 | | | June 30, 2020 | | | | | | | | | | | | | | | | | | | | Oil and gas sales | | $ | 871 | | | $ | 714 | | | $ | 1,217 | | | $ | 2,984 | | | $ | 0 | | | $ | 871 | | | $ | 0 | | | $ | 1,217 | | | | | Lease operating expenses | | | 1,290 | | | | 1,913 | | | | 2,218 | | | | 4,815 | | | | 0 | | | | 1,290 | | | | 0 | | | | 2,218 | | Gross loss | | | (419 | ) | | | (1,199 | ) | | | (1,001 | ) | | | (1,831 | ) | | | 0 | | | | (419 | ) | | | 0 | | | | (1,001 | ) | | | | | | | | | | | | | | | | | | | Operating expenses: | | | | | | | | | | | | | | | | | | Professional services | | | 15,633 | | | | 10,962 | | | | 15,633 | | | | 24,870 | | | 35,643 | | | 15,633 | | | 47,562 | | | 15,633 | | Board of director fees | | | 48,000 | | | | 48,000 | | | | 96,000 | | | | 96,000 | | | 48,000 | | | 48,000 | | | 96,000 | | | 96,000 | | General and administrative | | | 78,695 | | | | 147,980 | | | | 161,996 | | | | 314,829 | | | 129,318 | | | 78,695 | | | 358,821 | | | 161,996 | | Impairment loss | | | - | | | | 50,000 | | | | - | | | | 50,000 | | | Gain on settlement of accounts payable | | | | 0 | | | | 0 | | | | (120,250 | ) | | | 0 | | Total operating expenses | | | 142,328 | | | | 256,942 | | | | 273,629 | | | | 485,699 | | | | 212,961 | | | | 142,328 | | | | 382,133 | | | | 273,629 | | Loss from operations | | | (142,747 | ) | | | (258,141 | ) | | | (274,630 | ) | | | (487,530 | ) | | | (212,961 | ) | | | (142,747 | ) | | | (382,133 | ) | | | (274,630 | ) | | | | | | | | | | | | | | | | | | | Other income (expense): | | | | | | | | | | | | | | | | | | Interest expense | | | (10,898 | ) | | | (15,582 | ) | | | (23,379 | ) | | | (28,190 | ) | | (35,675 | ) | | (10,898 | ) | | (109,587 | ) | | (23,379 | ) | Gain on extinguishment of debt | | | 10,750 | | | | - | | | | 10,750 | | | | - | | | 0 | | | 10,750 | | | 0 | | | 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 | | | Gain (loss) on change in fair value of derivative liabilities | | | | (18,403 | ) | | | 10,825 | | | | (5,099 | ) | | | 49,874 | | Total other income (expense) | | | | (54,078 | ) | | | 10,677 | | | | (114,686 | ) | | | 37,245 | | | | | | | | | | | | | | | | | | | | Net loss | | $ | (132,070 | ) | | $ | (252,667 | ) | | $ | (237,385 | ) | | $ | (45,531 | ) | | $ | (267,039 | ) | | $ | (132,070 | ) | | $ | (496,819 | ) | | $ | (237,385 | ) | | | | | | | | | | | | | | | | | | | Loss per share: | | | | | | | | | | | | | | | | | | Basic | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.00 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | Diluted | | $ | (0.01 | ) | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) | | | | | | | | | | | | | | | | | | | Weighted average shares outstanding: | | | | | | | | | | | | | | | | | | Basic | | | 17,910,296 | | | | 17,616,516 | | | | 17,881,087 | | | | 17,457,826 | | | | 18,309,939 | | | | 17,910,296 | | | | 18,249,450 | | | | 17,881,087 | | Diluted | | | 18,039,624 | | | | 17,749,212 | | | | 18,010,415 | | | | 17,590,522 | | | | 18,309,939 | | | | 18,039,624 | | | | 18,249,450 | | | | 18,010,415 | |
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, 20202021 AND 20192020 | (Unaudited) |
| | Common Stock | | | Additional | | | Accumulated | | | Total Stockholders' | | | Common Stock | | Additional | | Accumulated | | Total Stockholders' | | | | Shares | | | Amount | | | Paid-in Capital | | | Deficit | | | Deficit | | | Shares | | | Amount | | | Paid-in Capital | | | Deficit | | | Deficit | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2018 | | | 17,217,428 | | | $ | 1,722 | | | $ | 1,150,059 | | | $ | (1,881,265 | ) | | $ | (729,484 | ) | | Balance, December 31, 2019 | | | 17,822,428 | | | $ | 17,822 | | | $ | 1,738,958 | | | $ | (2,314,202 | ) | | $ | (557,422 | ) | | | | Stock issued for cash | | | 131,000 | | | | 13 | | | | 130,987 | | | | - | | | | 131,000 | | | 18,000 | | | 18 | | | 17,982 | | | 0 | | | 18,000 | | | | | Stock-based compensation | | | 108,000 | | | | 11 | | | | 107,989 | | | | - | | | | 108,000 | | | 48,000 | | | 48 | | | 47,952 | | | 0 | | | 48,000 | | Net income | | | - | | | | - | | | | - | | | | 207,136 | | | | 207,136 | | | Balance, March 31, 2019 | | | 17,456,428 | | | | 1,746 | | | | 1,389,035 | | | | (1,674,129 | ) | | | (283,348 | ) | | | | | Net loss | | | | - | | | | 0 | | | | 0 | | | | (105,315 | ) | | | (105,315 | ) | | | | Balance, March 31, 2020 | | | 17,888,428 | | | 17,888 | | | 1,804,892 | | | (2,419,517 | ) | | (596,737 | ) | | | | Stock issued for cash | | | 63,000 | | | | 6 | | | | 62,994 | | | | - | | | | 63,000 | | | 52,000 | | | 52 | | | 51,948 | | | 0 | | | 52,000 | | | | | Stock-based compensation | | | 148,000 | | | | 15 | | | | 147,985 | | | | - | | | | 148,000 | | | 48,000 | | | 48 | | | 47,952 | | | 0 | | | 48,000 | | | | | Net loss | | | - | | | | - | | | | - | | | | (252,667 | ) | | | (252,667 | ) | | | - | | | | 0 | | | | 0 | | | | (132,070 | ) | | | (132,070 | ) | Balance, June 30, 2019 - As Revised | | | 17,667,428 | | | $ | 1,767 | | | $ | 1,600,014 | | | $ | (1,926,796 | ) | | $ | (325,015 | ) | | | | | Balance, June 30, 2020 | | | | 17,988,428 | | | $ | 17,988 | | | $ | 1,904,792 | | | $ | (2,551,587 | ) | | $ | (628,807 | ) | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | Balance, December 31, 2019 | | | 17,822,428 | | | $ | 1,783 | | | $ | 1,754,997 | | | $ | (2,314,202 | ) | | $ | (557,422 | ) | | Balance, December 31, 2020 | | | 18,145,428 | | | $ | 18,145 | | | $ | 2,061,635 | | | $ | (4,301,180 | ) | | $ | (2,221,400 | ) | | | | Stock issued for settlement of accounts payable | | | 90,000 | | | 90 | | | 89,910 | | | 0 | | | 90,000 | | | | | Stock-based compensation | | | 48,000 | | | 48 | | | 47,952 | | | 0 | | | 48,000 | | | | | Net loss | | | | - | | | | 0 | | | | 0 | | | | (229,780 | ) | | | (229,780 | ) | | | | Balance, March 31, 2021 | | | 18,283,428 | | | 18,283 | | | 2,199,497 | | | (4,530,960 | ) | | (2,313,180 | ) | | | | Stock issued for cash | | | 18,000 | | | | 2 | | | | 17,998 | | | | - | | | | 18,000 | | | 5,000 | | | 5 | | | 4,995 | | | 0 | | | 5,000 | | | | | Stock-based compensation | | | 48,000 | | | | 5 | | | | 47,995 | | | | - | | | | 48,000 | | | 63,000 | | | 63 | | | 62,937 | | | 0 | | | 63,000 | | | | | Net loss | | | - | | | | - | | | | - | | | | (105,315 | ) | | | (105,315 | ) | | | - | | | | 0 | | | | 0 | | | | (267,039 | ) | | | (267,039 | ) | 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 | ) | | | | | Balance, June 30, 2021 | | | | 18,351,428 | | | $ | 18,351 | | | $ | 2,267,429 | | | $ | (4,797,999 | ) | | $ | (2,512,219 | ) |
See accompanying notes to the unaudited consolidated financial statements. |
ALPHA ENERGY, INC. | CONSOLIDATED STATEMENTS OF CASH FLOWS | FOR THE SIX MONTHS ENDED JUNE 30,31, 2021 AND 2020 AND 2019 | (Unaudited)
|
| | June 30, 2020 | | | June 30, 2019 | | | June 30, 2021 | | | June 30, 2020 | | | | | | | | As Revised | | | | | | | | | | | | | Cash flows from operating activities: | | | | | | | | | | | | | Net loss | | $ | (237,385 | ) | | $ | (45,531 | ) | | $ | (496,819 | ) | | $ | (237,385 | ) | Adjustments to reconcile net loss to net cash used in operating activities: | | | | | | | | | | Stock-based compensation | | | 96,000 | | | | 256,000 | | | 111,000 | | | 96,000 | | Amortization of debt discount | | | 10,179 | | | | 19,757 | | | 2,754 | | | 10,179 | | Gain on change in fair value of derivative liabilities | | | (49,874 | ) | | | (470,189 | ) | | (Gain) loss on change in fair value of derivative liabilities | | | 5,099 | | | (49,874 | ) | Gain on extinguishment of debt | | | (10,750 | ) | | | - | | | 0 | | | (10,750 | ) | Impairment loss | | | - | | | | 50,000 | | | Gain on settlement of accounts payable | | | (120,250 | ) | | 0 | | Write off of option contract associated with oil and gas properties | | | 85,500 | | | 0 | | Asset retirement obligation expense | | | 38 | | | | 38 | | | 38 | | | 38 | | Default interest added to note payable | | | 50,000 | | | 0 | | Changes in operating assets and liabilities: | | | | | | | | | | Prepaid expenses | | | - | | | | (50,000 | ) | | Prepaid expenses and other current assets | | | 25,000 | | | 0 | | Accounts payable | | | 106,477 | | | | 76,594 | | | 63,692 | | | 106,477 | | Accounts payable-related party | | | 9,508 | | | | 22,827 | | | 55,511 | | | 9,508 | | Interest payable | | | 13,200 | | | | 8,433 | | | | 28,999 | | | | 13,200 | | Net cash used in operating activities | | | (62,607 | ) | | | (132,071 | ) | | | (189,476 | ) | | | (62,607 | ) | | | | | | | | | | | Cash flows from investing activities: | | | | | | Deposits for purchase of oil and gas properties | | | | (40,000 | ) | | | 0 | | Net cash used in investing activities | | | | (40,000 | ) | | | 0 | | | | | Cash flows from financing activities: | | | | | | | | | | | | | Payment on convertible credit line payable - related party | | | (4,250 | ) | | | (7,750 | ) | | 0 | | | (4,250 | ) | Proceeds from convertible credit line payable - related party | | | 3,000 | | | | - | | | 0 | | | 3,000 | | Payments on short term advances - related party | | | (856 | ) | | | (53,375 | ) | | Advances from related parties | | | 224,600 | | | 0 | | Payments on short term advances - related parties | | | 0 | | | (856 | ) | Proceeds from sale of common stock | | | 70,000 | | | | 194,000 | | | | 5,000 | | | | 70,000 | | Net cash provided by financing activities | | | 67,894 | | | | 132,875 | | | | 229,600 | | | | 67,894 | | | | | | | | | | | | Net change in cash and cash equivalents | | | 5,287 | | | | 804 | | | 124 | | | 5,287 | | | | | | | | | | | | Cash and cash equivalents, at beginning of period | | | - | | | | 240 | | | | 0 | | | | 0 | | | | | | | | | | | | Cash and cash equivalents, at end of period | | $ | 5,287 | | | $ | 1,044 | | | $ | 124 | | | $ | 5,287 | | | | | | | | | | | | Supplemental disclosures of cash flow information: | | | | | | | | | | Cash paid for interest | | $ | - | | | $ | - | | | $ | 27,834 | | | $ | 0 | | Cash paid for income taxes | | $ | - | | | $ | - | | | $ | 0 | | | $ | 0 | | | | | | | | | | | | Supplemental disclosure of non-cash investing and financing activities: | | | | | | | | | | Expenses paid on behalf of the Company by related party | | $ | 459 | | | $ | 29,406 | | | $ | 13,244 | | | $ | 459 | | Non cash short term loan payable | | $ | - | | | $ | 50,000 | | | Unpaid oil and gas assets acquired | | $ | 1,010,000 | | | $ | - | | | Oil and gas payments made by related party on behalf of the Company | | | $ | 65,500 | | | $ | 1,010,000 | | Stock issued for settlement of accounts payable | | | $ | 90,000 | | | $ | 0 | | Accrued interest added to note principal | | $ | 10,000 | | | $ | - | | | $ | 0 | | | $ | 10,000 | | Debt discount from derivative liability | | $ | 365 | | | $ | - | | | $ | 0 | | | $ | 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 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: | | Three months ended | | | Six months ended | | | Three months ended | | | Six months ended | | | | June 30, 2020 | | | June 30, 2019 | | | June 30, 2020 | | | June 30, 2019 | | | June 30, 2021 | | | June 30, 2020 | | | June 30, 2021 | | | June 30, 2020 | | | | | | | | | | | | | | | | | | | | Basic net loss | | $ | (132,070 | ) | | $ | (252,667 | ) | | $ | (237,385 | ) | | $ | (45,531 | ) | | $ | (267,039 | ) | | $ | (132,070 | ) | | $ | (496,819 | ) | | $ | (237,385 | ) | Add back: Gain on change in fair value of derivative liabilities | | | (10,825 | ) | | | (21,056 | ) | | | (49,874 | ) | | | (470,189 | ) | | | 0 | | | | (10,825 | ) | | | 0 | | | | (49,874 | ) | Diluted net loss | | $ | (142,895 | ) | | $ | (273,723 | ) | | $ | (287,259 | ) | | $ | (515,720 | ) | | $ | (267,039 | ) | | $ | (142,895 | ) | | $ | (496,819 | ) | | $ | (287,259 | ) | | | | | | | | | | | | | | | | | | | Basic and dilutive shares: | | | | | | | | | | | | | | | | | | Weighted average basic shares outstanding | | | 17,910,296 | | | | 17,616,516 | | | | 17,881,087 | | | | 17,457,826 | | | 18,309,939 | | | 17,910,296 | | | 18,249,450 | | | 17,881,087 | | Shares issuable from convertible credit line payable | | | 129,328 | | | | 132,696 | | | | 129,328 | | | | 132,696 | | | | 0 | | | | 129,328 | | | | 0 | | | | 129,328 | | Dilutive shares | | | 18,039,624 | | | | 17,749,212 | | | | 18,010,415 | | | | 17,590,522 | | | | 18,309,939 | | | | 18,039,624 | | | | 18,249,450 | | | | 18,010,415 | | | | | | | | | | | | | | | | | | | | Loss per share: | | | | | | | | | | | | | | | | | | Basic | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.00 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | Diluted | | $ | (0.01 | ) | | $ | (0.02 | ) | | $ | (0.02 | ) | | $ | (0.03 | ) | | $ | (0.01 | ) | | $ | (0.01 | ) | | $ | (0.03 | ) | | $ | (0.02 | ) |
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:
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 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: | | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value at June 30, 2020 | | | Level 1 | | Level 2 | | Level 3 | | Fair Value at June 30, 2021 | | Liabilities: | | | | | | | | | | | | | | | | | | Derivative liability | | $ | - | | | $ | - | | | $ | 15,780 | | | $ | 15,780 | | | $ | 0 | | | $ | 0 | | | $ | 101,468 | | | $ | 101,468 | |
| | Level 1 | | | Level 2 | | | Level 3 | | | Fair Value at December 31, 2019 | | | Level 1 | | Level 2 | | Level 3 | | Fair Value at December 31, 2020 | | Liabilities: | | | | | | | | | | | | | | | | | | Derivative liability | | $ | - | | | $ | - | | | $ | 65,289 | | | $ | 65,289 | | | $ | 0 | | | $ | 0 | | | $ | 96,369 | | | $ | 96,369 | |
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: 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 | |
Balance at December 31, 2020 | | $ | 96,369 | | Loss on change in derivative fair value adjustment | | | 5,099 | | Balance at June 30, 2021 | | $ | 101,468 | |
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 Companycompany is actively pursuing acquisition of additional properties in Oklahoma, Texas and New Mexico.
Liquidity and Capital Resources As of June 30, 2020,2021, we had total current assets of $5,287$5,124 and total current liabilities of $1,653,270.$2,458,115. The Company used $62,607$189,476 of cash in operating activities during the six months ended June 30, 20202021, compared to $132,071$62,607 used in operations during the same period in 2019.2020. Net cash used in operating activities during the six months ended June 30, 2021 was mainly comprised of our $496,819 net loss during the period, adjusted by a non-cash charges of $120,250 gain on settlement of accounts payable, $5,099 for loss on change in fair value of derivative liabilities, stock-based compensation of $111,000, amortization of debt discounts of $2,754, write off of option contract associated with oil and gas properties of $85,500, default interest added to note payable of $50,000, asset retirement obligations expense of $38 and changes in operating assets and liabilities of $173,202. 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$96,000 of debt, stock-basedstock compensation, of $96,000, amortization of debt discountdiscounts of $10,179, asset retirement obligations expense of $38, gain on extinguishment of debt of $10,750 and changes in operating assets and liabilities of $129,185. Net The Company used cash used in operatingof $40,000 for investing activities during the six months ended June 30, 2019 was mainly comprised2021 which consisted of our $45,531 net lossa $40,000 deposit for oil and gas properties. The Company generated cash of $229,600 from financing activities during the period, adjusted by a non-cash chargessix months ended June 30, 2021 which consisted of $470,189 for gain on change$224,600 in fair valueproceeds from advances from related parties and $5,000 in proceeds from the sale 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. common stock. 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 in proceeds from convertible credit line – related party and payments of $856 on short term advances – related party andwhich was offset by $4,250 repayment on convertible credit line payable - related party. The Company generated cashparty and $856 in repayments 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 onshort term advances related party advances of $53,375 and repayments on convertible credit line payable – related party of $7,750.parties. Going Concern The future of our Companycompany is dependent upon its ability to obtain financing and upon future profitable operations. Management has plans to seek additional capital through a private placement and public offering of its common stock, if necessary. See Note 2 to the unaudited consolidated financial statements for additional information. Results of Operations We generated revenues of $1,217$0 and $2,984$1,217 during the six months ended June 30, 20202021 and 2019,2020, respectively. Total operating expenses were $273,629$382,133 during the six months ended June 30, 20202021 compared to $485,699$273,629 during the same period in 2019.2020. The decreaseincrease in operating expenses were due to a decreasean increase in consultinggeneral and administrative expenses of $196,825, increase in professional fees of $131,356 and $50,000 decrease in impairment loss.$31,929 which were offset by a gain on settlement of accounts payable of $120,250. We generated revenues of $871$0 and $714$871 during the three months ended June 30, 20202021 and 2019,2020, respectively. Total operating expenses were $142,328$212,961 during the three months ended June 30, 2020 compared to $256,942$142,328 during the same period in 2019.2020. The decreaseincrease in operating expenses were due to a decreasean increase in consultinggeneral and administrative expenses of $50,623 and an increase in professional fees of $63,263 and $50,000 decrease in impairment loss.$20,010. Off-Balance sheet arrangements As of June 30, 2020,2021, we did not have any relationships with unconsolidated entities or financial partnerships, such as entities often referred to as structured finance or special purpose entities, established for the 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 consolidated financial statements for 20192020 appearing in our Annual Report on Form 10-K for the year ended December 31, 2019.2020. 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, 2020,2021, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), who. Based on that evaluation, they have concluded that, becauseas of June 30, 2021, the material weakness in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures wereare not effective as of June 30, 2020. Disclosure controls and procedures are controls and other procedures that are designed to ensureprovide reasonable assurance that information we are required to be discloseddisclose in ourthe reports filedthat we file or submittedsubmit under the Securities Exchange Act is recorded, processed, summarized, and reported within the time periods specified in the Securities and Exchange Commission’sSEC's rules and forms. Disclosure controlsforms, and procedures include, without limitation, controls and procedures designed to ensure that such 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, or persons performing similar functions, 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 6, 2020, Premier Gas Company, LLC filed a mechanic’s lien against the interests of Pure, ZQH and the Company in the Rogers County Project, alleging past unpaid invoices on the part of ZQH and Pure and also alleging that the Company’s ownership is 75% rather than 87.5%. No documentation has been provided to Alpha by ZQH, Pure, or Premier of any unpaid invoices. The Company intends to contest the lien vigorously. On July 22, 2020, the Company filed a lawsuit in Texas State Court against its predecessor auditor, LBB & Associates and Vine Advisors, LLP, and their principal, Carlos Lopez, seeking damages up to $1,000,000. In March 6, 2020, the Company was informed by the United States Securities and Exchange Commission that (a) Lopez and LBB were investigated by the SEC through an Order Instituting Administrative Proceedings; (b) Lopez and LBB ultimately agreed to the imposition of remedial sanctions against them by the SEC; and (c) Lopez had been suspended from appearing or practicing before the SEC for a period of at least two years (the “Suspension Order”) beginning on February 6, 2020. A copy of the Suspension Order can be found on the SEC’s website. The Suspension Order finds, among other things, that: | ● | For three consecutive years, Lopez and LBB “engaged in a pattern of improper professional conduct as auditors”; | | ● | Lopez failed to exercise due professional care in performing his audit work; and | | ● | Lopez and LBB committed “multiple instances of highly unreasonable conduct in circumstances that warranted heightened scrutiny.” |
The Suspension Order and the predecessor auditor’s failure to disclose it or the SEC investigation when it was occurring has had very damaging repercussions for the Company. Due to the misdeeds of Lopez, LBB, and Vine, the Company wasis now obligated to spend substantial amounts to re-audit the filings that Lopez, LBB, and Vine handled. Also, the Company wasis obligated to undertake thethis 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, 2019.2020. ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS During the period3 months ended June 30, 2020,2021, the Company has sold 70,0005,000 shares of its common stock at $1.00 per share to raise working capital.share. The stock is unissued at this date. 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 Ddescription |