10-Q

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 September 30, 2017

[   ] 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	(I.R.S. Employer
incorporation or organization)	Identification Number)

600 17th Street, 2800 South
Denver, CO	80202
(Address of principal executive offices)	(Zip Code)

Registrant's Phone: 970-568-6862

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

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	[   ]	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 November 10, 2017, the issuer had 17,016,428 shares of common stock issued and outstanding.

1

	TABLE OF CONTENTS	Page
PART I – FINANCIAL INFORMATION
Item 1.	Financial Statements	3
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operation	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.	Submission of Matters to a Vote of Security Holders	15
Item 5.	Other Information	15
Item 6.	Exhibits	16

2

ITEM 1. FINANCIAL STATEMENTS

ALPHA ENERGY, INC.

Unaudited Financial Statements

September 30, 2017

3

ALPHA ENERGY, INC.

Unaudited Financial Statements

September 30, 2017

	Page(s)
Unaudited Balance Sheets as of September 30, 2017 and December 31, 2016	5
Unaudited Statements of Operations for the three and nine months ended September 30, 2017 and 2016	6
Unaudited Statements of Cash Flows for the nine months ended September 30, 2017 and 2016	7
Notes to the Unaudited Financial Statements	8

4

ALPHA ENERGY, INC.
BALANCE SHEETS
(UNAUDITED)
		September 30, 2017		December 31, 2016
ASSETS
Current assets
	Cash	$	17,117	$	453
	Other current asset		943		-
Total current assets			18,060		453
	Oil and gas lease, unproved, full cost		-		2,924
	Oil and gas lease, proved		-		8,326
Total assets		$	18,060	$	11,703
LIABILITIES AND STOCKHOLDER'S DEFICIT
Current liabilities
	Accounts payable	$	16,119	$	17,571
	Interest payable		1,686		-
	Derivative liability		156,504		-
	Notes payable, related party		9,780		17,855
Total current liabilities			184,089		35,426
	Convertible credit line payable – related party, net of discount of $82,726 and $0, respectively		2,640		-
	Asset retirement obligation		617		567
Total liabilities			187,346		35,993
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; 17,016,428 issued and outstanding at September 30, 2017 and December 31, 2016, respectively		1,702		1,702
	Additional paid in capital		92,278		92,278
	Accumulated deficit		(263,266)		(118,270)
Total stockholders' deficit			(169,286)		(24,290)
Total liabilities and stockholders' deficit		$	18,060	$	11,703
See accompanying notes to unaudited financial statements.

5

ALPHA ENERGY, INC.
STATEMENTS OF OPERATIONS
(UNAUDITED)
		Three months ended September 30,				Nine months ended September 30,
		2017		2016		2017		2016
Revenues		$	955	$	-	$	2,383	$	-
Lease operating expenses			1,034		-		2,480		-
Gross margin			(79)		-		(97)		-
Operating expenses
	Professional services		20,910		7,465		53,320		15,915
	General and administrative		550		2,200		4,225		2,315
	Impairment loss		-		-		11,250		-
Total operating expenses			21,460		9,665		68,795		18,230
Loss from operations			(21,539)		(9,665)		(68,892)		(18,230)
Other expense
	Interest expense		(5,727)		(300)		(6,966)		(921)
	Loss on initial measurement of derivative liability		(2,912)		-		(2,912)		-
	Loss on fair market value of derivative liability		(66,226)		-		(66,226)		-
Total other expense			(74,865)		(300)		(76,104)		(921)
	Provision for income taxes		-		-		-		-
Net loss		$	(96,404)	$	(9,965)	$	(144,996)	$	(19,151)
Net loss per common share, basic and diluted		$	(0.01)	$	(0.00)	$	(0.01)	$	(0.00)
Weighted average common shares outstanding, basic and diluted			17,016,428		16,866,428		17,016,428		16,866,428
See accompanying notes to unaudited financial statements.

6

ALPHA ENERGY, INC.
STATEMENTS OF CASH FLOWS
(UNAUDITED)
			Nine months ended September 30,
			2017		2016
Cash flows from operating activities
		Net loss	$	(144,996)	$	(19,151)
	Adjustments to reconcile net loss to net cash used in operating activities:
		Debt discount amortization		4,640		-
		Excess fair market value of initial measurement of derivative liability		2,912		-
		Loss on fair market value of derivative liability		66,226		-
		Impairment loss		11,250		-
		Asset retirement obligation expense		50		-
	Changes in operating assets and liabilities:
		Prepaid expenses and other current assets		(943)		-
		Accounts payable		1,178		4,962
		Interest payable		1,686		-
Net cash used in operating activities				(57,997)		(14,189)
Cash flows from investing activities
Advance to related party				(445)		-
Repayment from related party				445		-
Net cash used in investing activities				-		-
Cash flows from financing activities
		Proceeds from notes payable		87,366		-
		Payments on convertible credit line payable – related party		(2,000)		-
		Proceeds from related party loans		8,031		14,300
		Repayments of related party loans		(18,736)		-
Net cash provided by financing activities				74,661		14,300
		Net change in cash		16,664		111
		Cash, beginning of period		453		116
		Cash, end of period	$	17,117	$	227
Supplemental cash flow information
	Cash paid for interest		$	-	$	-
	Cash paid for income taxes		$	-	$	-
Supplemental disclosure of non-cash financing activities
	Payment of expenses by related party on behalf of the Company		$	2,630	$	-
	Debt discount on convertible credit line payable – related party		$	87,366	$	-
See accompanying notes to unaudited financial statements.

7

ALPHA ENERGY, INC.

Notes to Unaudited Financial Statements

September 30, 2017

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 September 30, 2017, and for all periods presented herein, 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, 2016 audited financial statements. The results of operations for the three and nine months ended September 30, 2017 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 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 September 30, 2017 or December 31, 2016.

Impairment

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period. During the year ended December 31, 2016, the Company evaluated the future production of its leases through the termination of each lease. Through its analysis, the Company determined the present value of future production was less than the carrying value of the leases on the balance sheet. The Company recorded an impairment loss of $35,432 during the years ended December 31, 2016. The Company performed an additional analysis during the nine months ended September 30, 2017 and determined its proved and unproved properties were fully impaired and recorded an impairment loss of $11,250 during the nine months ended September 30, 2017.

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.

8

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 – COMMON STOCK WARRANTS

Through the year ended December 31, 2014, the Company issued warrants in connection with common stock issued for cash. The following table summarizes all stock warrant activity for the nine months ended September 30, 2017:

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, December 31, 2016		240,000	$	0.125
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		(240,000)		0.125
Outstanding, September 30, 2017		-	$	-

The weighted average remaining contractual life of options outstanding as of September 30, 2017 and December 31, 2016, was approximately 0.00 and 0.20 years, respectively. The exercise price of these options was $0.125 and the intrinsic value of the options as of September 30, 2017 and December 31, 2016 is $0.00, respectively.

NOTE 4 – RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2017, the Company borrowed $8,031 and made repayments on short term related party loans payable of $18,736. During the nine months ended September 30, 2017, a significant shareholder made payment of $2,630 for expenses on behalf of the Company. The advances are non-interest bearing and due on demand. There was $9,780 and $17,855 due to related parties as of September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017, the Company made advances to related parties of $445 which were repaid during the same period. The advances are non-interest bearing and due on demand. There was $0 due from related parties as of September 30, 2017 and December 31, 2016, respectively.

Fred Ziegler, who is the spouse of our President, Karen Ziegler, is an unpaid consultant for the Company. Although uncompensated and not having direct ownership of stock, he has the ability to exercise significant influence over the Company given the personal relationship with one of our officers.

9

During the nine months ended September 30, 2017, the majority owners of the Company sold their stock in a private transaction to AEI Acquisition Company, LLC. Immediately after the close of the transaction, AEI Acquisition Company owned 85% of the issued and outstanding shares of the Company.

During the nine months ended September 30, 2017, the Company converted existing notes payable due to AEI Acquisition Company of $87,366 to a convertible credit line. See Note 6 – Convertible Credit Line Payable – Related Party.

NOTE 5 – NOTES PAYABLE

On February 1, 2017, the Company executed a promissory note for $56,216. The note bears simple interest at a rate of 3.75%, is not convertible to equity of the Company and is due on February 1, 2018. During the three months ended June 30, 2017, the Company received additional advances of $7,600. During the three months ended September 30, 2017, the Company made repayments of $2,000 and received additional advances of $23,550. On September 1, 2017, the outstanding balance of $87,366 on the note payable was converted to a convertible credit line payable as discussed in Note 6 – Convertible Credit Line Payable – Related Party.

NOTE 6 – CONVERTIBLE CREDIT LINE PAYABLE – RELATED PARTY

On September 1, 2017, the Company entered into a convertible credit line agreement to borrow up to $500,000. On the same date, the outstanding balance on a note payable of $87,366 was exchanged as a draw on the credit line. The loan modification is considered substantial under ASC 470-50. The outstanding balance accrues interest at a rate of 7% per annum and the outstanding balance is convertible to common stock of the Company at the lesser of the close price of the common stock as quoted on the OTCBB on the day interest is due and payable immediately preceding the conversion or $1.50. The Company analyzed the conversion options in the convertible line of credit for derivative accounting consideration under ASC 815, Derivative and Hedging, and determined that the transaction does qualify for derivative treatment. The Company measured the derivative liability and recorded a debt discount of $87,366 upon initial measurement. During the nine months ended September 30, 2017, the Company amortized $4,640 of the discount as interest expense leaving an unamortized discount of $82,726 as of September 30, 2017. See discussion of derivative liability in Note 7 – Derivative Liability

The Company made payments of $2,000 on the credit line at September 30, 2017. There was $85,366 of principal and $1,686 of accrued interest outstanding as of September 30, 2017. As of September 30, 2017 there was an unamortized debt discount of $82,726 resulting in a net balance represented on the balance sheet of $2,640.

NOTE 7 – 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 September 30, 2017 and December 31, 2016:

	Level 1		Level 2		Level 3		Fair Value at September 30, 2017
Liabilities
Derivative Liability	$	-	$	-	$	156,504	$	156,504

	Level 1		Level 2		Level 3		Fair Value at December 31, 2016
Liabilities
Derivative Liability	$	-	$	-	$	-	$	-

As of September 30, 2017, the Company had a $156,504 derivative liability balance on the balance sheet and recorded a loss from derivative liability fair value adjustment of $66,226 during the three and nine months, respectively ended September 30, 2017. The Company assessed its outstanding convertible credit line payable as summarized in Note 6 – Convertible Credit Line Payable- Related Party and determined certain convertible credit lines payable with variable conversion features contain embedded derivatives and are therefore accounted for at fair value under ASC 920, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments.

10

Utilizing Level 3 Inputs, the Company recorded fair market value adjustments related to convertible notes payable for the three months ended September 30, 2017 of $66,226 and fair value adjustments related to the convertible notes payable for the nine months ended September 30, 2017 of $66,226, respectively. The derivative liability was initially measured at $90,278, resulting in a loss on initial measurement of $2,912, on September 1, 2017 using the following assumptions: exercise price of $1.50, 58,244 common shares the balance can be converted into shares and a stock price at measurement date of $1.55. The fair market value adjustments as of September 30, 2017 were calculated utilizing a max valuation method using the following assumptions: exercise price of $1.50, 56,911 common shares the balance can be converted into and a stock price at measurement date of $2.75.

A summary of the activity of the derivative liability is shown below:

Balance at December 31, 2016	$	-
Derivative liabilities recorded		87,366
Day one loss		2,912
Change due to note conversion		-
Loss on change in derivative fair value adjustment		66,226
Balance at September 30, 2017	$	156,504

11

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 the number one producer 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.

12

In the first phase we intend on concentrating on prospects in eastern Colorado, western Kansas and southern Wyoming. The depth of the wells in the target areas average from 1500 ft. for the Niobrara formation to a total depth of 5800 ft. for the Topeka, Heebner, Lansing-Kansas City, Marmaton, Cherokee, Atoka, Morrow, Mississippian, Spergen, and Osage formations. By concentrating our initial efforts on shallower prospects we minimize drilling and operating costs. As we grow we plan to expand into the Front Range (Northern Front Range Outcrop) and Denver Basin Province (D-J Basin, Wattenberg) of Colorado and into western Kansas (Hugoton Embayment Anadarko Basin – Central Kansas Uplift). The wells in these areas range from 4,000 ft. to 10,000 ft. Such wells are more expensive to drill and operate, but also offer bigger returns. Some of the formations in these areas are the Sussex, Niobrara, Codell, J Sand and the D Sand formations. The Company intends to develop prospects and intends to obtain partners to participate in the costs of drilling or acquisitions with the Company serving as the designated Operator. The Company intends to also retain a royalty or working interest in the wells drilled or acquired.

The Company has engaged in verbal negotiations for acquisition of oil and gas leases located in Northern and eastern Colorado basin and intends to engage in additional negotiations in the future.

In the second phase of operations, we intend to expand into Oklahoma, Texas, and eastern Kansas. We intend to place a great deal of emphasis on natural gas production and the transportation of natural gas. We believe natural gas will be the fuel of the future for automobiles, trucks and buses because of the clean-air standards that are proposed and will soon be going into effect, and now is an ideal time to acquire natural gas assets due to the current pricing matrix. The Company also plans on acquiring field transportation and short haul lines as part of our future business plan expansion. Acquiring these types of company lines, specifically in the areas where the company will have production located, will be advantageous due to savings in internal transportation costs, and the profitability margins of operating the lines and marketing natural gas. Managing the transportation system, in conjunction with field operations, will enhance cash flow. After obtaining the transportation lines, we hope to then develop our own end-users for natural gas. This will further enhance the profit margin of the company.

In December of 2016 alpha energy purchased the following lease from McCartney engineering:

The lease is located in Yuma county Colorado and consists of 480 acres, we have a 100% WI and 80% NRI the formation which the wells are in is the Niabrara formation at a depth of 2800 ft. There is one producing well and one cased well. The producing well will need to have some smaller tubing ran in and possibly a small pump to increase the gas production. This well has produced for over 15 years. The cased well will need to be fracked and tubing run in it and put on line.

With the lease we also obtained the seismic work that has been done which indicates that there should be 3 possibly four new sites that we intend to produce at about the rate between 40 and 50 mcfpd. These wells have a life expectancycy of over 30 years. All these wells would be at about the 2800 ft in depth range and all will have to be fracked.

The cost of the wells should be less than $90,000 per well.

On April 20, 2016, the Company entered into a lease extension agreement with a related party to extend the term of the lease for a period of three years for consideration of $10 cash. The original lease was entered into on October 1, 2013 and set to expire on October 1, 2016. The extension is under the same terms as the original lease agreement and will expire on October 1, 2019.

Liquidity and Capital Resources

As of September 30, 2017, we had $17,117 in cash, total current assets of $18,060 and total current liabilities of $184,089 creating a working capital deficit of $166,029. Current liabilities consisted primarily of $16,119 of accounts payable and $156,504 of current derivative liability.

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.

13

Results of Operations

We did not generate revenues during the three or nine months ended September 30, 2016. Revenue for the three and nine months ended September 30, 2017 were $955 and $2,383. Total operating expenses were $9,665 during the three months ended September 30, 2016 compared to $21,460 during the same period in 2017. The increase is the result of fees associated with the acquisition and upkeep of our leases. Total operating expenses were $18,230 during the nine months ended September 30, 2016 compared to $68,795 for the same period in 2017. The increase is the result of incurring of fees associated with the acquisition and upkeep of our leases that did not exist during the nine months ended September 30, 2016 and due to impairment of our oil and gas properties.

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

The Company is not exposed to market risk related to interest rates or foreign currencies.

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 March 31, 2015, 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 September 30, 2017.

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 third quarter that have materially affected, or are reasonable likely to materially affect, our internal control over financial reporting.

14

PART II OTHER INFORMATION

ITEM 1. LEGAL PROCEEDINGS

The Company is not a party to any legal proceedings.

ITEM 1A. RISK FACTORS

There has been no material changes in the risk factors set forth in the Company’s Form 10K for the period ended December 31, 2016.

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

There were no sales of unregistered equity securities during the covered time period.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

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.
32.1	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.

(b) REPORTS ON FORM 8-K

None.

15

SIGNATURES

In accordance with Section 13 or 15 (d) of the Exchange Act, the registrant caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Date: November 13, 2017.

Alpha Energy, Inc.

Registrant

By: Karen Zeigler

Karen Ziegler

Chief Executive Officer

16

EX-31.1

EXHIBIT 31.1

CERTIFICATION

I, Karen Ziegler, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Alpha Energy, Inc. (the “Company”); 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented ire this report; 

4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c.Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d.Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 

5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. 

Date: November 13, 2017

/s/ Karen Ziegler     

Karen Ziegler

Principal Executive Officer

EX-31.2

EXHIBIT 31.2

CERTIFICATION

I, Karen Ziegler, certify that:

1.I have reviewed this Quarterly Report on Form 10-Q of Alpha Energy, Inc. (the “Company”); 

2.Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; 

3.Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the Company as of, and for, the periods presented ire this report; 

4.The Company’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the Company and have: 

a.Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the Company, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared; 

b.Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; 

c.Evaluated the effectiveness of the Company’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and 

d.Disclosed in this report any change in the Company’s internal control over financial reporting that occurred during the Company’s most recent fiscal quarter (the Company’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting; and 

5.The Company’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the Company’s auditors and the audit committee of the Company’s board of directors (or persons performing the equivalent functions): 

a.All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the Company’s ability to record, process, summarize and report financial information; and 

b.Any fraud, whether or not material, that involves management or other employees who have a significant role in the Company’s internal control over financial reporting. 

Date: November 13, 2017

/s/ Karen Ziegler     

Karen Ziegler

Principal Financial Officer

EX-32.1

EXHIBIT 32.1

CERTIFICATION PURSUANT TO

18 U.S.C. SECTION 1350,

AS ADOPTED PURSUANT TO

SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002

In connection with the Quarterly Report of Alpha Energy, Inc. (the “Company”) on Form 10-Q for the period ended September 30, 2017, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Karen Ziegler, Principal Executive Officer and Principal Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that:

1. The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and

2. The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

Date: November 13, 2017

/s/ Karen Ziegler     

Karen Ziegler

Principal Financial Officer

Principal Executive Officer

XML

Document and Entity Information - shares	9 Months Ended
	Sep. 30, 2017	Nov. 10, 2017
Details
Registrant Name	ALPHA ENERGY INC
Registrant CIK	0000855787
SEC Form	10-Q
Period End date	Sep. 30, 2017
Fiscal Year End	--12-31
Trading Symbol	alpha
Tax Identification Number (TIN)	901020566
Number of common stock shares outstanding		17,016,428
Filer Category	Smaller Reporting Company
Current with reporting	Yes
Voluntary filer	No
Well-known Seasoned Issuer	No
Amendment Flag	false
Document Fiscal Year Focus	2017
Document Fiscal Period Focus	Q3
Entity Incorporation, State Country Name	Colorado
Entity Address, Address Line One	600 17th Street, 2800 South
Entity Address, City or Town	Denver
Entity Address, State or Province	CO
Entity Address, Postal Zip Code	80202
City Area Code	970
Local Phone Number	568-6862

XML

Balance Sheets (Unaudited) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Current Assets
Cash and cash equivalents	$ 17,117	$ 453
Other current asset	943	0
Total current assets	18,060	453
Oil and gas lease, unproved, full cost	0	2,924
Oil and gas lease, proved	0	8,326
Total assets	18,060	11,703
Current liabilities:
Accounts payable	16,119	17,571
Interest payable	1,686	0
Derivative Liability, Current	156,504	0
Notes payable - related parties	9,780	17,855
Total current liabilities	184,089	35,426
Convertible credit line payable - related party, net of discount of $82,726 and $0, respectively	2,640	0
Asset retirement obligation	617	567
Liabilities	187,346	35,993
Shareholders' deficit:
Preferred shares	0	0
Common shares	1,702	1,702
Additional paid-in capital	92,278	92,278
Accumulated deficit	(263,266)	(118,270)
Total shareholders' deficit	(169,286)	(24,290)
Total liabilities and shareholders' deficit	$ 18,060	$ 11,703

XML

Balance Sheets (Unaudited) - Parenthetical - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Details
Debt Instrument, Unamortized Discount, Current	$ 82,726	$ 0
Preferred Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Preferred Stock, Shares Authorized	10,000,000	10,000,000
Preferred Stock, Shares Issued	0	0
Preferred Stock, Shares Outstanding	0	0
Common Stock, Par or Stated Value Per Share	$ 0.0001	$ 0.0001
Common Stock, Shares Authorized	65,000,000	65,000,000
Common Stock, Shares, Issued	17,016,428	17,016,428
Common Stock, Shares, Outstanding	17,016,428	17,016,428

XML

Statements of Operations (Unaudited) - USD ($)	3 Months Ended		9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016	Sep. 30, 2017	Sep. 30, 2016
Details
Revenues	$ 955	$ 0	$ 2,383	$ 0
Lease operating expenses	1,034	0	2,480	0
Gross Profit	(79)	0	(97)	0
Operating expenses:
Professional services	20,910	7,465	53,320	15,915
General and administrative expenses	550	2,200	4,225	2,315
Impairment loss	0	0	11,250	0
Total operating expenses	21,460	9,665	68,795	18,230
Operating loss	(21,539)	(9,665)	(68,892)	(18,230)
Other Nonoperating Income (Expense)
Interest expense	(5,727)	(300)	(6,966)	(921)
Loss on initial measurement of derivative liability	(2,912)	0	(2,912)	0
Loss on fair market value of derivative liability	(66,226)	0	(66,226)	0
Nonoperating Income (Expense)	(74,865)	(300)	(76,104)	(921)
Provision for income taxes	0	0	0	0
Net Income (Loss)	$ (96,404)	$ (9,965)	$ (144,996)	$ (19,151)
Basic and diluted net loss per common share	$ (0.01)	$ (0.00)	$ (0.01)	$ (0.00)
Basic and diluted weighted-average common shares outstanding	17,016,428	16,866,428	17,016,428	16,866,428

XML

Statements of Cash Flows (Unaudited) - USD ($)	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2016
Net Cash Provided by (Used in) Operating Activities
Net Income (Loss), Including Portion Attributable to Noncontrolling Interest	$ (144,996)	$ (19,151)
Adjustments to Reconcile Net Income (Loss) to Cash Provided by (Used in) Operating Activities
Debt discount amortization	4,640	0
Excess fair market value of initial measurement of derivative liability	2,912	0
Loss on fair market value of derivative liability	66,226	0
Impairment loss	11,250	0
Asset retirement obligation expense	50	0
Changes in operating assets and liabilities:
Increase (Decrease) in Prepaid Expense	(943)	0
Increase (Decrease) in Accounts Payable	1,178	4,962
Interest payable	1,686	0
Net Cash Provided by (Used in) Operating Activities, Continuing Operations	(57,997)	(14,189)
Net Cash Provided by (Used in) Investing Activities
Advance to related party	(445)	0
Repayment from related party	445	0
Net Cash Provided by (Used in) Investing Activities	0	0
Net Cash Provided by (Used in) Financing Activities
Proceeds from notes payable	87,366	0
Payments on convertible credit line payable - related party	(2,000)	0
Proceeds from related party loans	8,031	14,300
Repayments of related party loans	(18,736)	0
Net Cash Provided by (Used in) Financing Activities	74,661	14,300
Cash and Cash Equivalents, Period Increase (Decrease)	16,664	111
Cash and Cash Equivalents, at Carrying Value, Beginning Balance	453	116
Cash and Cash Equivalents, at Carrying Value, Ending Balance	17,117	227
Supplemental Cash Flow Information
Interest Paid	0	0
Income Taxes Paid, Net	0	0
Cash Flow, Noncash Investing and Financing Activities Disclosure
Payment of expenses by related party on behalf of the Company	2,630	0
Debt discount on convertible credit line payable - related party	$ 87,366	$ 0

XML

Note 1 - Basis of Presentation

9 Months Ended

Sep. 30, 2017

Notes

Note 1 - Basis of Presentation

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 September 30, 2017, and for all periods presented herein, 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, 2016 audited financial statements. The results of operations for the three and nine months ended September 30, 2017 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 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 September 30, 2017 or December 31, 2016.

Impairment

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period. During the year ended December 31, 2016, the Company evaluated the future production of its leases through the termination of each lease. Through its analysis, the Company determined the present value of future production was less than the carrying value of the leases on the balance sheet. The Company recorded an impairment loss of $35,432 during the years ended December 31, 2016. The Company performed an additional analysis during the nine months ended September 30, 2017 and determined its proved and unproved properties were fully impaired and recorded an impairment loss of $11,250 during the nine months ended September 30, 2017.

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.

XML

Note 2 - Going Concern

9 Months Ended

Sep. 30, 2017

Notes

Note 2 - Going Concern

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.

XML

Note 3 - Common Stock Warrants

9 Months Ended

Sep. 30, 2017

Notes

Note 3 - Common Stock Warrants

NOTE 3 – COMMON STOCK WARRANTS

Through the year ended December 31, 2014, the Company issued warrants in connection with common stock issued for cash. The following table summarizes all stock warrant activity for the nine months ended September 30, 2017:

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, December 31, 2016		240,000	$	0.125
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		(240,000)		0.125
Outstanding, September 30, 2017		-	$	-

The weighted average remaining contractual life of options outstanding as of September 30, 2017 and December 31, 2016, was approximately 0.00 and 0.20 years, respectively. The exercise price of these options was $0.125 and the intrinsic value of the options as of September 30, 2017 and December 31, 2016 is $0.00, respectively.

XML

Note 4 - Related Party Transactions

9 Months Ended

Sep. 30, 2017

Notes

Note 4 - Related Party Transactions

NOTE 4 – RELATED PARTY TRANSACTIONS

During the nine months ended September 30, 2017, the Company borrowed $8,031 and made repayments on short term related party loans payable of $18,736. During the nine months ended September 30, 2017, a significant shareholder made payment of $2,630 for expenses on behalf of the Company. The advances are non-interest bearing and due on demand. There was $9,780 and $17,855 due to related parties as of September 30, 2017 and December 31, 2016, respectively.

During the nine months ended September 30, 2017, the Company made advances to related parties of $445 which were repaid during the same period. The advances are non-interest bearing and due on demand. There was $0 due from related parties as of September 30, 2017 and December 31, 2016, respectively.

Fred Ziegler, who is the spouse of our President, Karen Ziegler, is an unpaid consultant for the Company. Although uncompensated and not having direct ownership of stock, he has the ability to exercise significant influence over the Company given the personal relationship with one of our officers.

During the nine months ended September 30, 2017, the majority owners of the Company sold their stock in a private transaction to AEI Acquisition Company, LLC. Immediately after the close of the transaction, AEI Acquisition Company owned 85% of the issued and outstanding shares of the Company.

During the nine months ended September 30, 2017, the Company converted existing notes payable due to AEI Acquisition Company of $87,366 to a convertible credit line. See Note 6 – Convertible Credit Line Payable – Related Party.

XML

Note 5 - Notes Payable

9 Months Ended

Sep. 30, 2017

Notes

Note 5 - Notes Payable

NOTE 5 – NOTES PAYABLE

On February 1, 2017, the Company executed a promissory note for $56,216. The note bears simple interest at a rate of 3.75%, is not convertible to equity of the Company and is due on February 1, 2018. During the three months ended June 30, 2017, the Company received additional advances of $7,600. During the three months ended September 30, 2017, the Company made repayments of $2,000 and received additional advances of $23,550. On September 1, 2017, the outstanding balance of $87,366 on the note payable was converted to a convertible credit line payable as discussed in Note 6 – Convertible Credit Line Payable – Related Party.

XML

Note 6 - Convertible Credit Line Payable - Related Party

9 Months Ended

Sep. 30, 2017

Notes

Note 6 - Convertible Credit Line Payable - Related Party

NOTE 6 – CONVERTIBLE CREDIT LINE PAYABLE – RELATED PARTY

On September 1, 2017, the Company entered into a convertible credit line agreement to borrow up to $500,000. On the same date, the outstanding balance on a note payable of $87,366 was exchanged as a draw on the credit line. The loan modification is considered substantial under ASC 470-50. The outstanding balance accrues interest at a rate of 7% per annum and the outstanding balance is convertible to common stock of the Company at the lesser of the close price of the common stock as quoted on the OTCBB on the day interest is due and payable immediately preceding the conversion or $1.50. The Company analyzed the conversion options in the convertible line of credit for derivative accounting consideration under ASC 815, Derivative and Hedging, and determined that the transaction does qualify for derivative treatment. The Company measured the derivative liability and recorded a debt discount of $87,366 upon initial measurement. During the nine months ended September 30, 2017, the Company amortized $4,640 of the discount as interest expense leaving an unamortized discount of $82,726 as of September 30, 2017. See discussion of derivative liability in Note 7 – Derivative Liability

The Company made payments of $2,000 on the credit line at September 30, 2017. There was $85,366 of principal and $1,686 of accrued interest outstanding as of September 30, 2017. As of September 30, 2017 there was an unamortized debt discount of $82,726 resulting in a net balance represented on the balance sheet of $2,640.

XML

NOTE 7 - DERIVATIVE LIABILITY

9 Months Ended

Sep. 30, 2017

Notes

NOTE 7 - DERIVATIVE LIABILITY

NOTE 7 – 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 September 30, 2017 and December 31, 2016:

	Level 1		Level 2		Level 3		Fair Value at September 30, 2017
Liabilities
Derivative Liability	$	-	$	-	$	156,504	$	156,504

	Level 1		Level 2		Level 3		Fair Value at December 31, 2016
Liabilities
Derivative Liability	$	-	$	-	$	-	$	-

As of September 30, 2017, the Company had a $156,504 derivative liability balance on the balance sheet and recorded a loss from derivative liability fair value adjustment of $66,226 during the three and nine months, respectively ended September 30, 2017. The Company assessed its outstanding convertible credit line payable as summarized in Note 6 – Convertible Credit Line Payable- Related Party and determined certain convertible credit lines payable with variable conversion features contain embedded derivatives and are therefore accounted for at fair value under ASC 920, Fair Value Measurements and Disclosures and ASC 825, Financial Instruments.

Utilizing Level 3 Inputs, the Company recorded fair market value adjustments related to convertible notes payable for the three months ended September 30, 2017 of $66,226 and fair value adjustments related to the convertible notes payable for the nine months ended September 30, 2017 of $66,226, respectively. The derivative liability was initially measured at $90,278, resulting in a loss on initial measurement of $2,912, on September 1, 2017 using the following assumptions: exercise price of $1.50, 58,244 common shares the balance can be converted into shares and a stock price at measurement date of $1.55. The fair market value adjustments as of September 30, 2017 were calculated utilizing a max valuation method using the following assumptions: exercise price of $1.50, 56,911 common shares the balance can be converted into and a stock price at measurement date of $2.75.

A summary of the activity of the derivative liability is shown below:

Balance at December 31, 2016	$	-
Derivative liabilities recorded		87,366
Day one loss		2,912
Change due to note conversion		-
Loss on change in derivative fair value adjustment		66,226
Balance at September 30, 2017	$	156,504

XML

Note 1 - Basis of Presentation: Related party policy (Policies)

9 Months Ended

Sep. 30, 2017

Policies

Related party policy

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.

XML

Note 1 - Basis of Presentation: Revenue recognition (Policies)

9 Months Ended

Sep. 30, 2017

Policies

Revenue recognition

Revenue 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 September 30, 2017 or December 31, 2016.

XML

Note 1 - Basis of Presentation: Impairment (Policies)

9 Months Ended

Sep. 30, 2017

Policies

Impairment

Impairment

The net book value of all capitalized oil and natural gas properties within a cost center, less related deferred income taxes, is subject to a full cost ceiling limitation which is calculated quarterly. Under the ceiling limitation, costs may not exceed an aggregate of the present value of future net revenues attributable to proved oil and natural gas reserves discounted at 10 percent using current prices, plus the lower of cost or market value of unproved properties included in the amortization base, plus the cost of unevaluated properties, less any associated tax effects. Any excess of the net book value, less related deferred tax benefits, over the ceiling is written off as expense. Impairment expense recorded in one period may not be reversed in a subsequent period even though higher oil and gas prices may have increased the ceiling applicable to the subsequent period. During the year ended December 31, 2016, the Company evaluated the future production of its leases through the termination of each lease. Through its analysis, the Company determined the present value of future production was less than the carrying value of the leases on the balance sheet. The Company recorded an impairment loss of $35,432 during the years ended December 31, 2016. The Company performed an additional analysis during the nine months ended September 30, 2017 and determined its proved and unproved properties were fully impaired and recorded an impairment loss of $11,250 during the nine months ended September 30, 2017.

XML

Note 1 - Basis of Presentation: Derivatives, Policy (Policies)

9 Months Ended

Sep. 30, 2017

Policies

Derivatives, Policy

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.

XML

Note 3 - Common Stock Warrants: Stock warrant activity (Tables)

9 Months Ended

Sep. 30, 2017

Tables/Schedules

Stock warrant activity

	Shares		Weighted- Average Exercise Price Per Share
Outstanding, December 31, 2016		240,000	$	0.125
Granted		-		-
Exercised		-		-
Forfeited		-		-
Expired		(240,000)		0.125
Outstanding, September 30, 2017		-	$	-

XML

NOTE 7 - DERIVATIVE LIABILITY: Fair Value, Assets and Liabilities measured on recurring basis (Tables)

9 Months Ended

Sep. 30, 2017

Tables/Schedules

Fair Value, Assets and Liabilities measured on recurring basis

	Level 1		Level 2		Level 3		Fair Value at September 30, 2017
Liabilities
Derivative Liability	$	-	$	-	$	156,504	$	156,504

	Level 1		Level 2		Level 3		Fair Value at December 31, 2016
Liabilities
Derivative Liability	$	-	$	-	$	-	$	-

XML

NOTE 7 - DERIVATIVE LIABILITY: Schedule of Derivative Liability Activity (Tables)

9 Months Ended

Sep. 30, 2017

Tables/Schedules

Schedule of Derivative Liability Activity

Balance at December 31, 2016	$	-
Derivative liabilities recorded		87,366
Day one loss		2,912
Change due to note conversion		-
Loss on change in derivative fair value adjustment		66,226
Balance at September 30, 2017	$	156,504

XML

Note 3 - Common Stock Warrants: Stock warrant activity (Details)	9 Months Ended
	Sep. 30, 2017 $ / shares shares
Details
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Beginning Balance | shares	240,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Beginning Balance | $ / shares	$ 0.125
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Gross | shares	0
Share-based Compensation Arrangements by Share-based Payment Award, Options, Grants in Period, Weighted Average Exercise Price | $ / shares	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercises in Period | shares	0
Share-based Compensation Arrangements by Share-based Payment Award, Options, Exercises in Period, Weighted Average Exercise Price | $ / shares	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Forfeitures in Period | shares	0
Share-based Compensation Arrangements by Share-based Payment Award, Options, Forfeitures in Period, Weighted Average Exercise Price | $ / shares	$ 0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Expirations in Period | shares	(240,000)
Share-based Compensation Arrangements by Share-based Payment Award, Options, Expirations in Period, Weighted Average Exercise Price | $ / shares	$ 0.125
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Number, Ending Balance | shares	0
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price, Ending Balance | $ / shares	$ 0

XML

Note 4 - Related Party Transactions (Details) - USD ($)	9 Months Ended
	Sep. 30, 2017	Dec. 31, 2016
Due to Related Parties, Current	$ 9,780	$ 17,855
Due from Related Parties	0
Debt conversion, Notes payable to Convertible Line of Credit	$ 87,366
Transaction 1
Related Party Transaction, Description of Transaction	Company borrowed $8,031 and made repayments on short term related party loans payable
Related Party Transaction, Amounts of Transaction	$ 18,736
Transaction 2
Related Party Transaction, Description of Transaction	a significant shareholder made payment
Related Party Transaction, Amounts of Transaction	$ 2,630
Related Party Transaction, Terms and Manner of Settlement	advances are non-interest bearing and due on demand
Transaction 3
Related Party Transaction, Description of Transaction	Company made advances to related parties
Related Party Transaction, Amounts of Transaction	$ 445
Related Party Transaction, Terms and Manner of Settlement	advances are non-interest bearing and due on demand

XML

Note 5 - Notes Payable (Details)	3 Months Ended	9 Months Ended
	Sep. 30, 2017 USD ($)	Sep. 30, 2017 USD ($)
Details
Debt Instrument, Issuance Date		Feb. 01, 2017
Long-term Debt, Description		promissory note
Debt Instrument, Face Amount	$ 56,216	$ 56,216
Debt Instrument, Interest Rate, Stated Percentage	3.75%	3.75%
Advances Received	$ 7,600

XML

Note 6 - Convertible Credit Line Payable - Related Party (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)
Details
Amortization of Debt Discount (Premium)	$ 4,640
Debt Instrument, Unamortized Discount	82,726
Debt instrument, Principal outstanding	85,366
Debt instrument, Accrued interest outstanding	$ 1,686

XML

NOTE 7 - DERIVATIVE LIABILITY: Fair Value, Assets and Liabilities measured on recurring basis (Details) - USD ($)	Sep. 30, 2017	Dec. 31, 2016
Fair Value, Inputs, Level 1
Derivative Liability, Fair Value, Gross Asset	$ 0	$ 0
Fair Value, Inputs, Level 2
Derivative Liability, Fair Value, Gross Asset	0	0
Fair Value, Inputs, Level 3
Derivative Liability, Fair Value, Gross Asset	156,504	0
Derivative Liability, Fair Value, Gross Asset	$ 156,504	$ 0

XML

NOTE 7 - DERIVATIVE LIABILITY (Details) - USD ($)	3 Months Ended	9 Months Ended
	Sep. 30, 2017	Sep. 30, 2017	Dec. 31, 2016
Details
Derivative Liability, Fair Value, Gross Asset	$ 156,504	$ 156,504	$ 0
Loss from derivative liability fair value adjustment	66,226	66,226
Fair market value adjustments related to convertible notes payable	$ 66,226	$ 66,226
Fair Value Assumptions, Exercise Price	$ 1.50	$ 1.50

XML

NOTE 7 - DERIVATIVE LIABILITY: Schedule of Derivative Liability Activity (Details)	9 Months Ended
	Sep. 30, 2017 USD ($)
Details
Derivative Liability, Balance, Start of Period	$ 0
Derivative liabilities recorded	87,366
Day one loss	2,912
Change due to note conversion	0
Loss on change in derivative fair value adjustment	66,226
Derivative Liability, Balance, End of Period	$ 156,504