Company Quick10K Filing
Quick10K
Alpha Energy
10-Q 2019-06-30 Quarter: 2019-06-30
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
8-K 2019-03-14 Enter Agreement, Regulation FD, Exhibits
8-K 2018-10-29 Exhibits
8-K 2018-09-28 Accountant, Exhibits
8-K 2018-09-24
8-K 2018-06-07
8-K 2018-05-21 Other Events
8-K 2018-03-26 Other Events
XRM Xerium Technologies 219
VIBI Vilacto Bio 55
HICKA Hickok 27
LRDC Laredo Oil 6
UBLI Yinghong Guangda Technology 2
TNTY True Nature Holding 1
NCAP Northsight Capital 0
CHWY Chewy 0
QVC QVC 0
DIRV Directview Holdings 0
ALPHA 2019-06-30
Item 1. Financial Statements
Note 1 - Basis of Presentation
Note 2 - Going Concern
Note 3 - Related Party Transactions
Note 4 - Derivative Liability
Note 5 - Equity
Note 6 - Note Payable
Note 7 - Oil and Gas Properties
Note 8 - Commitments
Note 9 - Subsequent Events
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3. Quantitative and Qualitative Disclosures About Market Risk
Item 4. Controls and Procedures
Part II Other Information
Item 1. Legal Proceedings
Item 1A. Risk Factors
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
Item 3. Defaults Upon Senior Securities
Item 4. Mine Safety Disclosures
Item 5. Other Information
Item 6. Exhibits
EX-31.1 f10q063019_ex31z1.htm
EX-31.2 f10q063019_ex31z2.htm
EX-32.1 f10q063019_ex32z1.htm
EX-32.2 f10q063019_ex32z2.htm

Alpha Energy Earnings 2019-06-30

ALPHA 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 f10q063019_10q.htm FORM 10-Q QUARTERLY REPORT Form 10-Q Quarterly Report

U.S. SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

(Mark One)

 

[X] Quarterly Report under Section 13 or 15(d) of the Securities Exchange Act of 1934 For the quarterly period ended

 

June 30, 2019

 

[   ] Transition Report under Section 13 or 15(d) of the Exchange Act For the Transition Period from _____to_____

 

Commission File Number: 333-197642

 

Alpha Energy, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

Colorado

 

90-1020566

(State of other jurisdiction of

incorporation or organization)

 

(I.R.S. Employer Identification Number)

 

 

 

4162 Meyerwood Drive, Houston TX

 

77025

(Address of principal executive offices)

 

(Zip Code)

 

Registrant's Phone: 713-316-0061

 

Indicate by check mark whether the issuer (1) filed all reports required to be filed by Section13 or 15(d) of the Exchange Act of 1934 during the past 12 months (or such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [   ]

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company.

 

[   ]

Large accelerated filer

[   ]

Accelerated Filer

[   ]

Non-accelerated filer

[X]

Smaller reporting company

 

 

[X]

Emerging Growth Company

 

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

 

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

 

As of September 11, 2019, the issuer had 17,385,428 shares of common stock issued and outstanding.


1



TABLE OF CONTENTS

 

 

PART I – FINANCIAL INFORMATION

Page

Item 1.

Financial Statements

3

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operation

12

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

14

Item 4.

Controls and Procedures

14

 

 

 

 

PART II – OTHER INFORMATION

 

Item 1.

Legal Proceedings

15

Item 1A.

Risk Factors

15

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

15

Item 3.

Defaults Upon Senior Securities

15

Item 4.

Mine Safety Disclosures

15

Item 5.

Other Information

15

Item 6.

Exhibits

15


2



ITEM 1. FINANCIAL STATEMENTS

 

ALPHA ENERGY, INC.

Unaudited Financial Statements June 30, 2019

 

 

 

PART I – FINANCIAL INFORMATION

Page(s)

 

 

Unaudited Balance Sheets as of June 30, 2019 and December 31, 2018

4

Unaudited Statements of Operations for the six months ended June 30, 2019 and 2018

5

Unaudited Statements of Changes in Stockholders’ Deficit for the six months ended June 30, 2019 and 2018

6

Unaudited Statements of Cash Flows for the six months ended June 30, 2019 and 2018

7

Notes to the Unaudited Financial Statements

8


3



ALPHA ENERGY, INC.

BALANCE SHEETS

(UNAUDITED)

 

 

 

 

 

 

 

June 30,

2019

 

December 31,

2018

ASSETS

 

 

 

 

Current assets

 

 

 

 

Cash

$

1,044

$

240

Prepaid expenses

 

50,000

 

-

 

 

 

 

 

Total current assets

 

51,044

 

240

Oil and gas property, unproved, full cost

 

12,500

 

10,000

Total assets

$

63,544

$

10,240

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

Current liabilities

 

 

 

 

Accounts payable

$

180,162

 

550,848

Interest payable

 

19,912

 

11,479

Short term advances related party

 

397

 

24,366

Short term note payable

 

50,000

 

-

Derivative liability

 

132,696

 

608,598

Total current liabilities

 

383,167

 

1,195,291

Convertible Credit line payable – related party,

net of discount of $0 and $29,494, respectively

 

132,696

 

110,952

Asset retirement obligation

 

748

 

710

Total liabilities

 

516,611

 

1,306,953

Stockholders’ deficit

 

 

 

 

Preferred stock, $0.0001 par value; 10,000,000 shares authorized;

  none issued or outstanding

 

-

 

-

Common stock, $0.0001 par value; 65,000,000 shares authorized;

  17,619,428 and 17,132,428 issued and outstanding at June 30, 2019

  and December 31, 2018, respectively

 

1,762

 

1,714

Additional paid in capital

 

1,498,459

 

607,806

Accumulated deficit

 

(1,953,288)

 

(1,906,233)

Total stockholders’ deficit

 

(453,067)

 

(1,296,713)

Total liabilities and stockholders’ deficit

$

63,544

$

10,240

 

See accompanying notes to unaudited financial statements.


4



ALPHA ENERGY, INC.

STATEMENTS OF OPERATIONS

(UNAUDITED)

 

 

 

 

 

 

 

Three months ended June 30,

 

Six months ended June 30,

 

 

2019

 

2018

 

2019

 

2018

Revenues

$

714

$

3

$

2,984

$

1,543

Lease operating expenses

 

1,913

 

537

 

4,815

 

1,379

Gross margin

 

(1,199)

 

(534)

 

(1,831)

 

164

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Professional services

 

10,962

 

359,631

 

24,870

 

381,814

General and administrative

 

145,299

 

19,084

 

292,329

 

38,055

Board of Director fees

 

48,000

 

-

 

96,000

 

-

Impairment of oil and gas properties

 

70,000

 

-

 

70,000

 

-

 

 

 

 

 

 

 

 

 

Total operating expenses

 

274,261

 

378,715

 

483,199

 

419,869

 

 

 

 

 

 

 

 

 

Loss from operations

 

(275,460)

 

(379,249)

 

(485,030)

 

(419,705)

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

Interest expense

 

(14,595)

 

(25,590)

 

(37,927)

 

(42,997)

Loss on initial measurement of derivative liability

 

-

 

(23,301)

 

-

 

(61,829)

Gain (loss) on fair market value of derivative liability

 

3,750

 

(2,853)

 

475,902

 

(22,667)

Total other income (expense)

 

(10,845)

 

(51,744)

 

437,975

 

(127,493)

 

 

-

 

-

 

-

 

-

 

 

 

 

 

 

 

 

 

Net loss

$

(286,305)

$

(430,993)

$

(47,055)

$

(547,198)

 

 

 

 

 

 

 

 

 

Net loss per common share,

basic and diluted

$

(0.02)

$

(0.03)

$

(0.00)

$

(0.03)

 

 

 

 

 

 

 

 

 

Weighted average common shares outstanding,

basic and diluted

 

17,489,125

 

17,029,615

 

17,439,947

 

17,023,058

 

 

 

 

 

 

 

 

 

 

See accompanying notes to unaudited financial statements.


5



ALPHA ENERGY, INC.

STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE SIX-MONTH PERIODS ENDED

June 30, 2019 and 2018

(UNAUDITED)

 

 

 

 

 

 

 

Conv. Preferred Stock

Common Stock

 

 

 

 

 

 

Paid in

Accumulated

Stockholders’

 

Shares

Amount

Shares

Amount

Capital

Deficit

Deficit

Balance at December 31, 2017

-

$ -

17,016,428

$ 1,702

$ 101,378

$ (380,855)

$ (277,775)

Stock issued for director fees

-

-

84,000

9

380,391

-

380,400

Net loss for the period ending

June 30, 2018

-

-

-

-

-

(547,198)

(547,198)

Balance at June 30, 2018

-

$ -

17,100,428

$ 1,711

$481,769

$ (928,053)

$ (444,573)

 

 

 

 

 

 

 

 

Balance at December 31, 2018

-

$ -

17,132,428

$ 1,714

$ 607,806

$ (1,906,233)

$ (1,296,713)

Common stock subscribed

-

-

194,000

19

193,981

-

194,000

Stock issued for accrued compensation and director fees

 

 

133,000

13

536,688

-

536,701

Stock issued for services

-

-

160,000

16

159,984

-

160,000

Net loss for the period ending

June 30, 2019

-

-

-

-

-

(47,055)

(47,055)

Balance at June 30, 2019

-

$ -

17,619,428

$ 1,762

$1,498,459

$ (1,953,288)

$ (453,067)

 

See accompanying notes to financial statements.


6



ALPHA ENERGY, INC.

STATEMENTS OF CASH FLOWS

(UNAUDITED)

 

 

 

 

 

Six months ended June 30,

 

 

2019

 

2018

Cash flows from operating activities

 

 

 

 

Net income (loss)

$

(47,055)

$

(547,198)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

 

 

 

 

Debt discount amortization

 

29,494

 

39,522

Excess fair market value of initial measurement of derivative liability

 

-

 

61,829

Stock issued for consulting

 

110,000

 

380,400

(Gain) loss on fair market value of derivative liability

 

(475,902)

 

22,667

Impairment loss

 

70,000

 

-

Asset retirement obligation expense

 

38

 

37

Changes in operating assets and liabilities:

 

 

 

 

Prepaid expenses and other current assets

 

-

 

-

Account receivable

 

-

 

935

Accounts payable

 

171,580

 

1,537

Interest payable

 

8,433

 

3,476

Net cash used in operating activities

 

(133,412)

 

(36,795)

 

 

 

 

 

Cash flows from investing activities

 

 

 

 

Capital expenditures

 

(22,500)

 

-

Net cash used in investing activities

 

(22,500)

 

-

 

 

 

 

 

Cash flows from financing activities

 

 

 

 

Proceeds from related party advances

 

19,841

 

-

Proceeds from sale of stock

 

194,000

 

-

Proceeds from convertible credit line payable – related party

 

-

 

35,846

Repayments of related party advances

 

(53,375)

 

-

Payments on convertible debt

 

(3,750)

 

-

Net cash provided by financing activities

 

156,716

 

35,846

Net change in cash

 

804

 

(949)

Cash, beginning of period

 

240

 

1,061

Cash, end of period

$

1,044

$

112

 

 

 

 

 

Supplemental cash flow information

 

 

 

 

Cash paid for interest

$

-

$

-

Cash paid for income taxes

$

-

$

-

 

 

 

 

 

Supplemental disclosure of non-cash financing activities

 

 

 

 

Debt discount on convertible credit line payable – related party

$

-

$

35,846

Note Payable for oil and gas property

$

50,000

$

-

Stock issued for accrued compensation and director fees

$

536,701

$

-

 

See accompanying notes to unaudited financial statements.


7



ALPHA ENERGY, INC.

Notes to Unaudited Financial Statements June 30, 2019

 

NOTE 1 – BASIS OF PRESENTATION

 

The accompanying unaudited interim financial statements have been prepared by the Company without audit. In the opinion of management, all adjustments (which include only normal recurring adjustments) necessary to present fairly the financial position, results of operations, and cash flows as of June 30, 2019 and 2018, have been made.

 

Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States of America have been omitted. Notes to the financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal period, as reported in the Form 10-K, have been omitted. It is suggested that these unaudited interim financial statements be read in conjunction with the financial statements and notes thereto included in the Company’s December 31, 2018 audited financial statements. The results of operations for the three and six months ended June 30, 2019 are not necessarily indicative of the operating results for the full year.

 

Related party policy

 

In accordance with ASC 850, the Company discloses: the nature of the related party relationship(s) involved; a description of the transactions, including transactions to which no amounts or nominal amounts were ascribed, for each of the periods for which income statements are presented, and such other information deemed necessary to an understanding of the effects of the transactions on the financial statements; the dollar amounts of transactions for each of the periods for which income statements are presented and the effects of any change in the method of establishing the terms from that used in the preceding period; and amounts due from or to related parties as of the date of each balance sheet presented and, if not otherwise apparent, the terms and manner of settlement.

 

Revenue and Cost Recognition

 

The Company records revenues from the sales of natural gas and crude oil when the production is produced and sold, and also when collectability is ensured. The Company may in the future have an interest with other producers in certain properties, in which case the Company will use the sales method to account for gas imbalances. Under this method, revenue will be recorded on the basis of natural gas actually sold by the Company. The Company also reduces revenue for other owners’ natural gas sold by the Company that cannot be volumetrically balanced in the future due to insufficient remaining reserves. The Company’s remaining over- and under-produced gas balancing positions are considered in the Company’s proved oil and natural gas reserves. The Company had no gas imbalances at June 30, 2019 or December 31, 2018. The Company recorded revenues of $2,984 and $1,543 and costs of revenues totaling $4,815 and $1,379 during the six months ended June 30, 2019 and 2018. There were no accounts receivable at June 30, 2019 and December 31, 2018.

 

Derivative Liabilities

 

The Company records a debt discount related to the issuance of convertible debts that have conversion features at adjustable rates. The debt discount for the convertible instruments is recognized and measured by allocating a portion of the proceeds as an increase in additional paid-in capital and as a reduction to the carrying amount of the convertible instrument equal to the intrinsic value of the conversion features. The debt discount will be accreted by recording additional non-cash gains and losses related to the change in fair market values of derivative liabilities over the life of the convertible notes.

 

Accounting Standards Adopted During the Quarter Ended June 30, 2019 

 

The Company adopted Accounting Standards Update (“ASU”) No. 2016-02, Leases (Topic 842), as of January 1, 2019, using the modified retrospective approach. The modified retrospective approach provides a method for recording existing leases at the application date. In addition, the Company elected the available practical expedients permitted under the transaction guidance within the new standard. There was no impact from the adoption of the new standard as the Company does not currently have any operating leases.

 

Recently Issued Accounting Standards Not Yet Adopted

 

The Company has reviewed all recently issued, but not yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that no other pronouncements will have a significant effect on its financial statements.


8



ALPHA ENERGY, INC.

Notes to Unaudited Financial Statements June 30, 2019

 

NOTE 2 – GOING CONCERN

 

The Company’s interim unaudited financial statements are prepared using generally accepted accounting principles in the United States of America applicable to a going concern which contemplates the realization of assets and liquidation of liabilities in the normal course of business. The Company has not yet established an ongoing source of revenues sufficient to cover its operating costs and allow it to continue as a going concern. These conditions raise substantial doubt about the Company’s ability to continue as a going concern for a period of twelve months from the date of issuance of this report. The ability of the Company to continue as a going concern is dependent on the Company obtaining adequate capital to fund operating losses until it becomes profitable. If the Company is unable to obtain adequate capital, it could be forced to cease operations.

 

In order to continue as a going concern, the Company will need, among other things, additional capital resources. Management’s plan is to obtain such resources for the Company by obtaining capital from management and significant shareholders sufficient to meet its minimal operating expenses and seeking equity and/or debt financing. However, management cannot provide any assurances that the Company will be successful in accomplishing any of its plans.

 

The ability of the Company to continue as a going concern is dependent upon its ability to successfully accomplish the plans described in the preceding paragraph and eventually secure other sources of financing and attain profitable operations. The accompanying financial statements do not include any adjustments that might be necessary if the Company is unable to continue as a going concern.

 

NOTE 3 – RELATED PARTY TRANSACTIONS

 

The Company neither owns nor leases any real or personal property. The officers and directors for the Company are involved in other business activities and may, in the future, become involved in other business opportunities. If a specific business opportunity becomes available, such persons may face a conflict in selecting between the Company and their other business interest. The Company has not formulated a policy for the resolution of such conflicts. The Chief Financial Officer allows the use of his residence as an office for the Company at no charge.

 

During the three months ended June 30, 2019, the Company received no advances from AEI Acquisition Company, a majority shareholder, from its convertible credit line.

 

During the period ending December 31, 2018 the Company received $24,366 in short -term loans from Fidare Consulting Group, LLC. During the three months ended March 31, 2019, the Company received $23,841 in short-term advances from Fidare Consulting Group, LLC. During the three months ended June 30, 2019 the Company repaid in full the short-term loan in the amount of $48,207.

 

On March 27, 2019 the Company entered into a short-term Promissory Note with ZHQ Holdings (75%), LLP and Pure Oil & Gas, Inc. (25%) for $50,000. The note was due April 30, 2019 and has not been repaid. The note is secured by 50,000 shares of the Company’s common stock at $1.00 per share. The funds were used to pay Escrow Deposit on the Rogers County Project. The note is in default as of June 30, 2019 and therefore, is accruing interest at the rate of $50 per day from April 30, 2019.

 

NOTE 4 – DERIVATIVE LIABILITY

 

As discussed in Note 1, on a recurring basis, we measure certain financial assets and liabilities based upon the fair value hierarchy. The following table presents information about the Company’s liabilities measured at fair value as of June 30, 2019 and December 31, 2018:

 

Liabilities

 

 

 

 

 

 

 

 

Level 1

 

Level 2

 

Level 3

Fair Value at June 30, 2019

 

 

 

 

 

 

Derivative Liability

$

-

$

-

$

132,696

 

 

 

 

 

 

 

Fair Value at December 31, 2018

 

 

 

 

 

 

Derivative Liability

$

-

$

-

$

608,598


9



ALPHA ENERGY, INC.

Notes to Unaudited Financial Statements June 30, 2019

 

NOTE 4 – DERIVATIVE LIABILITY (CONTINUED)

 

As of June 30, 2019, the Company had a $132,696 derivative liability balance on the balance sheet and recorded a gain from derivative liability fair value adjustment of $475,902 during the six months ended June 30, 2019.

 

The fair market value adjustments as of June 30, 2019 were calculated utilizing a max valuation method using the following assumptions: exercise price of $1.00, 132,696 common shares the balance can be converted into and a stock price at measurement date of $1.00.

 

A summary of the activity of the derivative liability for the year ended December 31, 2018 is shown below:

 

Balance at December 31, 2017

$

238,674

Derivative liabilities recorded

 

49,580

Day one loss

 

122,362

Change due to note conversion

 

-

Loss on change in derivative fair value adjustment

 

197,982

 

 

 

Balance at December 31, 2018

$

608,598

 

A summary of the activity of the derivative liability for the three months ended June 30, 2019 is shown below:

 

Balance at December 31, 2018

$

608,598

Derivative liabilities recorded

 

-

Day one loss

 

-

Change due to note conversion

 

-

Gain on change in derivative fair value adjustment

 

(475,902)

Balance at June 30, 2019

$

132,696

 

NOTE 5 – EQUITY

 

The Company is authorized to issue up to 10,000,000 shares of $0.0001 par value preferred stock and 65,000,000 shares of $0.0001 par value common stock.

 

For the six months ended June 30, 2019, 133,000 shares with a fair value of $536,701 were issued for stock compensation for directors and the CEO.

 

During the six months ended June 30, 2019, the Company issued 60,000 shares of common stock with a fair value of $60,000 for consulting services.

 

During the six months ending June 30, 2019, the Company sold 194,000 shares of common stock for $1.00 per share in a private placement. These shares have not yet been issued. The shares are considered issued and outstanding as of June 30, 2019 as the issuance of the shares is considered an administrative act.

 

On April 2, 2019 the Company entered into a six month Corporate Finance Representation Agreement with Rebus Capital Group, LLC as the Company’s corporate finance advisor. Rebus was issued 100,000 shares of common stock for services valued at $1 per share or $100,000. $50,000 of this amount was recorded as a prepaid expense and is included in current assets on the 2018 balance sheet and will be expensed in the quarter ended September 30, 2019.

 

NOTE 6 – NOTE PAYABLE

 

On March 27, 2019 the Company entered into a short-term Promissory Note with ZHQ Holdings (75%), LLP and Pure Oil & Gas, Inc (25%) for $50,000. The note is secured by 50,000 shares of the Company’s common stock at $1.00 per share. The funds were used to fund the deposit for the Purchase and Sale Agreement with Premier Gas Company, LLC (see Note 7). The note was due April 30, 2019 and has not been repaid. The note is in default as of June 30, 2019 and therefore, is accruing interest at the rate of $50 per day from April 30, 2019. Accrued interest on the note as of June 30, 2019 was $3,042.


10



ALPHA ENERGY, INC.

Notes to Unaudited Financial Statements June 30, 2019

 

NOTE 7 – OIL AND GAS PROPERTIES

 

The Company entered into a Letter of Intent with Chicorica, LLC on December 13, 2018 and extended the agreement effective August 29, 2019. Chicorica has developed an oil and gas exploration project in northeastern New Mexico (the “Frostback Project”) that includes several prospective areas and Alpha is interested in exploring in these areas and utilizing Chicorica’s seismic and other data and expertise. The agreement is for $95,000 with $10,000 paid on signing the LOI and $85,000 due by October 1, 2019. As of September 6, 2019, the Company has not made the final payment.

 

On March 13th, 2019, Alpha Energy, Inc. (the “Company”) entered into a Purchase and Sale Agreement (the “Agreement”) with Premier Gas Company, LLC. (“Premier”) to acquire oil and gas assets in Oklahoma in consideration of a Purchase Price of One Million Six Hundred Thousand Dollars ($1,600,000) (the “Purchase Price”) that includes a non-refundable deposit in the amount of Fifty Thousand Dollars ($50,000) (the “Deposit) through the Escrow Agent. The Deposit shall be credited against the cash portion of the Purchase Price at Closing. Although the dates on the Purchase and Sale agreements were dated January 29th, 2019, the contracts were not ultimately delivered to the company until March 13th, 2019 and the deposit was advanced to the Escrow Agent. The note payable associated with the escrow deposit is in default and the Company has recorded $70,000 of impairment of this oil and gas property.

 

NOTE 8 – COMMITMENTS

 

On January 1, 2019 the Company entered into a Consulting Services Agreement with 5 Letter J’s, LLC to facilitate a business plan for instituting a $26,500,000 capital raise through the sale of Company Class A Preferred stock. The agreement is for an initial 3-month period and can be extended perpetually. The monthly fee is $5,000 with a grant of 60,000 shares of restricted Company Common stock valued at $60,000 for the period of the agreement.

 

NOTE 9 – SUBSEQUENT EVENTS

 

On July 19, 2019, the Company sold 6,000 shares of common stock for $6,000 in a private placement. These shares have not been issued.

 

On August 26, 2019 AEI Acquisition Company, LLC advanced $13,000 against the Revolving Credit Line to pay professional fees.

 

On September 5, 2019, the Company sold 5,000 shares of common stock for $5,000 in a private placement. These shares have not been issued.


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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.

 

The company is actively pursuing acquisition of additional properties in Oklahoma, Texas and New Mexico.

 

Liquidity and Capital Resources

 

As of June 30, 2019, we had $1,044 in cash, total current assets of $51,044 and total current liabilities of $383,167. Current assets consisted of $1,044 in cash and $50,000 in prepaid consulting fees. Current liabilities consisted mainly of $132,696 of derivative liability, $180,162 in accounts payable and accrued expenses, a short term note payable of $50,397 and $19,912 in interest payable.


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The Company used $133,412 of cash in operating activities during the six months ended June 30, 2019 compared to $36,795 used in operations during the same period in 2018.

 

The Company used $22,500 of cash in investing activities for exploration costs during the six months ended June 30, 2019. There was no cash used in or provided by investing activities during the six months ended June 30, 2018.

 

The Company generated cash of $156,716 from financing activities during the six months ended June 30, 2019 which consisted of $194,000 in proceeds from the sale of common stock and $19,841 of proceeds from related party advances and net of $57,125 of repayments on related party advances and the convertible debt.

 

Going Concern

 

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

 

Results of Operations

 

We generated revenues of $714 and $3 during the three months ended June 30, 2019 and 2018. Total operating expenses were $274,261 during the three months ended June 30, 2019 compared to $378,715 during the same period in 2018. The change in operating expenses is the result of a decrease in professional fees of approximately$349,000, board of director fees of $48,000 in 2019, impairment of oil and gas properties of $70,000 in 2019 and an increase in General and Administrative expenses of approximately $126,000 for the three months ended June 30, 2019 and June 30, 2018. Board of Director fees were included in Professional Services in the period ending June 30, 2018.

 

We generated revenues of $2,984 and $1,543 during the six months ended June 30, 2019 and 2018. Total operating expenses were $483,199 during the six months ended June 30, 2019 compared to $419,869 during the same period in 2018. The increase in operating are the result of a decrease in professional fees of approximately $357,000, an increase in board of director fees of $96,000, impairment of oil and gas properties of $70,000 in 2019 and an increase in general and administrative expenses of approximately $254,000 for the six months ended June 30, 2019 and June 30, 2018. Board of Director fees were included in Professional Services in the period ending June 30, 2018.

 

On January 22, 2019, the Board of Directors authorized the sale of $600,000 shares of common stock to fund working capital and escrow deposits on three acquisitions. As of June 30, 2019, 194,000 shares had been sold.


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CRITICAL ACCOUNTING POLICIES

 

In Financial Reporting Release No. 60, "CAUTIONARY ADVICE REGARDING DISCLOSURE ABOUT CRITICAL ACCOUNTING POLICIES" ("FRR 60"), the Securities and Exchange Commission suggested that companies provide additional disclosure and commentary on their most critical accounting policies. In FRR 60, the SEC defined the most critical accounting policies as the ones that are most important to the portrayal of a company's financial condition and operating results, and require management to make its most difficult and subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain. Based on this definition, our most critical accounting policies include: non-cash compensation valuation that affects the total expenses reported in the current period and the valuation of shares and underlying mineral rights acquired with shares. The methods, estimates and judgments we use in applying these most critical accounting policies have a significant impact on the results we report in our financial statements.

 

ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

Smaller reporting companies are not required to provide information required by this Item.

 

CONTROLS AND PROCEDURES

 

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, 2019, we carried out an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures. This evaluation was carried out under the supervision and with the participation of our Chief Executive Officer (our principal executive officer) and our Chief Financial Officer (our principal financial officer), who concluded, that because of the material weakness in our internal control over financial reporting (“ICFR”) described below, our disclosure controls and procedures were not effective as of June 30, 2019.

 

Disclosure controls and procedures are controls and other procedures that are designed to ensure that information required to be disclosed in our reports filed or submitted under the Securities Exchange Act is recorded, processed, summarized and reported within the time periods specified in the Securities and Exchange Commission’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed in our reports filed under the Exchange Act is accumulated and communicated to our management, including our principal executive officer and our principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

 

Changes in Internal Control over Financial Reporting

 

There have been no changes in our internal control over financial reporting identified in connection with the evaluation required by paragraph (d) of Exchange Act Rules 13a-15 or 15d-15 that occurred during our first quarter that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.


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PART II OTHER INFORMATION

 

ITEM 1. LEGAL PROCEEDINGS

 

The Company is not a party to any legal proceedings.

 

ITEM 1A. RISK FACTORS

 

There have been no material changes in the risk factors set forth in the Company’s Form 10K for the period ended December 31, 2018.

 

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

 

During the period ending June 30, 2019 the Company sold 194,000 shares of common stock at $1.00 per share to raise working capital. As of June 30, 2019, the shares have not been distributed.

 

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

 

None.

 

ITEM 4. MINE SAFETY DISCLOSURES

 

None.

 

ITEM 5. OTHER INFORMATION

 

None.

 

ITEM 6. EXHIBITS

 

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

 

Exhibit

Number

 

Description

31.1

 

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

 

 

 

31.2

 

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

 

 

 

32.1

 

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

 

 

 

32.2

 

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


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SIGNATURES

 

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: September 11, 2019

 

 

Alpha Energy, Inc

 

Registrant

 

 

By:

/s/ John Lepin

 

John Lepin

 

President Chief Executive Officer


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