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Note 1 - Basis of Presentation
 3 Months Ended
Mar. 31, 2020
Notes to Financial Statements  
Organization, Consolidation and Presentation of Financial Statements Disclosure and Significant Accounting Policies [Text Block]
NOTE
1
– BASIS OF PRESENTATION
 
The interim unaudited consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States and should be read in conjunction with the audited financial statements and notes thereto for the years ended
December 31, 2019
and
2018
which are included on a Form
10
-K filed on
September 24, 2020.
In the opinion of management, all adjustments which include normal recurring adjustments, necessary to present fairly the financial position, results of operations, and cash flows for the periods shown have been reflected herein. The results of operations for the
three
months ended
March 31, 2020
are
not
necessarily indicative of the operating results for the full year. Certain information and footnote disclosures which would substantially duplicate the disclosures contained in the audited financial statements for years ended
December 31, 2019
and
2018
have been omitted.
 
Principles of Consolidation
 
Our consolidated financial statements include our accounts and the accounts of our
100%
owned subsidiary, Alpha Energy Texas Operating, LLC. All intercompany transactions and balances have been eliminated.
 
Use of Estimates
 
The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reported period. Actual results could differ from those estimates. Management further acknowledges that it is solely responsible for adopting sound accounting practices, establishing and maintaining a system of internal accounting control and preventing and detecting fraud. The Company's system of internal accounting control is designed to assure, among other items, that (
1
) recorded transactions are valid; (
2
) all valid transactions are recorded and (
3
) transactions are recorded in the period in a timely manner to produce financial statements which present fairly the financial condition, results of operations and cash flows of the company for the respective periods being presented.
 
Basic and Diluted Income (Loss) per share
 
Net income (loss) per share is provided in accordance with FASB ASC
260
-
10,
"Earnings (Loss) per Share". Basic income (loss) per share is computed by dividing net income (loss) attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted income (loss) per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive income (loss) per share excludes all potential common shares if their effect is anti-dilutive. For the
three
months ended
March 31, 2020
and
2019,
there were
128,578
and
136,446
shares issuable from convertible credit line payable which were considered for their dilutive effects, respectively.
 
The reconciliation of basic and diluted loss per share is as follows:
 
   
March 31, 2020
    
March 31, 2019
  
                 
Basic net income (loss)
   $
(105,315
 )   $
207,136
  
Add back: Gain on change in fair value of derivative liabilities
    
(39,049
 )    
(449,133
 )
Diluted net loss
   $
(144,364
 )   $
(241,997
 )
                 
Basic and dilutive shares:
                
Weighted average basic shares outstanding
    
17,851,879
      
17,297,372
  
Shares issuable from convertible credit line payable
    
128,578
      
136,446
  
Dilutive shares
    
17,980,457
      
17,433,818
  
                 
Income (loss) per share:
                
Basic
   $
(0.01
 )   $
0.01
  
Diluted
   $
(0.01
 )   $
(0.01
 )
 
Fair Value of Financial Instruments
 
The Company applies fair value accounting for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. The Company defines fair value as the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining the fair value measurements for assets and liabilities, which are required to be recorded at fair value, the Company considers the principal or most advantageous market in which the Company would transact and the market-based risk measurements or assumptions that market participants would use in pricing the asset or liability, such as risks inherent in valuation techniques, transfer restrictions and credit risk. Fair value is estimated by applying the following hierarchy, which prioritizes the inputs used to measure fair value into
three
levels and bases the categorization within the hierarchy upon the lowest level of input that is available and significant to the fair value measurement:
 
 
Level
1
– Quoted prices in active markets for identical assets or liabilities.
 
Level
2
– Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
Level
3
– Inputs that are generally unobservable and typically reflect management's estimate of assumptions that market participants would use in pricing the asset or liability.
 
The carrying amount of the Company's financial instruments consisting of cash and cash equivalents, accounts payable, notes payable and convertible notes approximates fair value due either to length of maturity or interest rates that approximate prevailing market rates unless otherwise disclosed in these financial statements.
 
 
Recently Issued Accounting Standards
Not
Yet Adopted
 
The Company has reviewed all recently issued, but
not
yet adopted, accounting standards, in order to determine their effects, if any, on its results of operations, financial position or cash flows. Based on that review, the Company believes that
no
other pronouncements will have a significant effect on its financial statements.
 
Revision of
Prior Period Financial Statement
s
 
In
2020,
the Company identified errors in account balances in the Form
10Q
filed for the
three
months ended
March 31, 2019.
The following accounts were deemed to contain errors: accounts payable, derivative liability, common stock, additional paid in capital, operating expenses, interest expense and loss on derivative liabilities. The errors resulted from incorrect recording of stock-based compensation and overstatements of derivative liability and amortization of debt discount.
 
Based on an analysis of Accounting Standards Codification (“ASC”)
250
– “Accounting Changes and Error Corrections” (“ASC
250”
) and Staff Accounting Bulletin
108
– “Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements” (“SAB
108”
), the Company determined that these errors were immaterial to the previously issued financial statements, and as such
no
restatement was necessary. Correcting prior period financial statements for immaterial errors would
not
require previously filed reports to be amended. Such correction
may
be made the next time the registrant files the prior period financial statements. Accordingly, the misstatements were corrected in the consolidated balance sheet as of
March 31, 2019
and consolidated statements of operations and cash flows for the
three
months ended
March 31, 2019.
 
The tables below summarize previously reported amounts and the adjusted presentation of the consolidated balance sheet and consolidated statements of operations and cash flows for the affected period:
 
ALPHA ENERGY, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)
 
 
   
March 31, 2019
  
   
As Reported
   
Adjustment
   
As Revised
 
Current assets
                        
Cash
   $
8,375
     $
-
     $
8,375
  
Total current assets
    
8,375
      
-
      
8,375
  
                         
Oil and gas property, unproved, full cost
    
80,000
      
(20,000
 )    
60,000
  
Total assets
   $
88,375
     $
(20,000
 )   $
68,375
  
                         
Liabilities and Stockholders' Deficit
    
 
 
 
  
 
 
 
                         
Current liabilities
                        
Accounts payable
   $
71,868
      
(181
 )   $
71,687
  
Interest payable
    
14,208
      
-
      
14,208
  
Short term advance from related party
    
17,332
      
-
      
17,332
  
Short term note payable
    
50,000
      
-
      
50,000
  
Derivative liability
    
136,446
      
(35,660
 )    
100,786
  
Total current liabilities
    
289,854
      
(35,841
 )    
254,013
  
                         
Convertible credit line payable - related party
    
127,555
      
(30,574
 )    
96,981
  
Asset retirement obligation
    
729
      
-
      
729
  
Total liabilities
    
418,138
      
(66,415
 )    
351,723
  
                         
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; 17,456,428 issued and outstanding at March 31, 2019
    
1,746
      
-
      
1,746
  
Additional paid in capital
    
1,335,475
      
53,560
      
1,389,035
  
Accumulated deficit
    
(1,666,984
 )    
(7,145
 )    
(1,674,129
 )
Total stockholder deficit
    
(329,763
 )    
46,415
      
(283,348
 )
                         
Total liabilities and stockholders' deficit
   $
88,375
     $
(20,000
 )   $
68,375
  
 
ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)
 
 
   
For the three months ended March 31, 2019
  
   
As Reported
   
Adjustment
   
As Revised
 
                         
Oil & Gas Sales
   $
2,270
     $
-
     $
2,270
  
Lease operating expenses
    
2,902
      
-
      
2,902
  
Gross margin
    
(632
 )    
-
      
(632
 )
                         
Operating expenses:
                        
Professional services
    
118,908
      
(105,000
 )    
13,908
  
Board of directors fees
    
48,000
      
-
      
48,000
  
General and administrative
    
42,031
      
124,818
      
166,849
  
Total operating expenses
    
208,939
      
19,818
      
228,757
  
                         
Loss from operations
    
(209,571
 )    
(19,818
 )    
(229,389
 )
                         
Other income (expense):
                        
Interest expense
    
(23,332
 )    
10,724
      
(12,608
 )
Gain (loss) on change in fair value of derivative liabilities
    
472,152
      
(23,019
 )    
449,133
  
Total other income (expense)
    
448,820
      
(12,295
 )    
436,525
  
                         
Net income (loss)
   $
239,249
     $
(32,113
 )   $
207,136
  
                         
                         
Income per share:
                        
Basic
   $
0.01
     $
-
     $
0.01
  
Diluted
   $
0.01
     $
-
     $
0.01
  
                         
                         
Weight average shares common share outstanding: basic and diluted
                        
Basic
    
17,323,284
      
(25,912
 )    
17,297,372
  
Diluted
    
17,459,730
      
(25,912
 )    
17,433,818
  
 
ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
 
 
   
For the three months ended March 31, 2019
  
   
As Reported
    
Adjustments
    
As Revised
 
Cash flows from operation activities
                        
Net income
   $
239,249
     $
(32,113
 )   $
207,136
  
Adjustments to reconcile net loss to net cash used in operating activities
                        
Stock-based compensation
    
60,000
      
48,000
      
108,000
  
Amortization of debt discount
    
20,603
      
(10,724
 )    
9,879
  
(Gain) loss on change in fair value of derivative liabilities
    
(472,152
 )    
23,019
      
(449,133
 )
Asset retirement obligation expense
    
19
      
-
      
19
  
Change in operating assets and liabilities:
                        
Accounts payable
    
57,721
      
(41,603
 )    
16,118
  
Accounts payable related party
    
-
      
(6,579
 )    
(6,579
 )
Interest payable
    
2,729
      
-
      
2,729
  
Net cash used in operating activities
    
(91,831
 )    
(20,000
 )    
(111,831
 )
                         
Cash flows from investing activities
                        
Deposit for purchase of oil and gas properties
    
(70,000
 )    
70,000
      
-
  
Net cash used in investing activities
    
(70,000
 )    
70,000
      
-
  
                         
Cash flows from financing activities
                        
Advances from related party
    
19,841
      
4,000
      
23,841
  
Payment on convertible credit line payable - related party
    
-
      
(4,000
 )    
(4,000
 )
Proceeds from notes payable
    
50,000
      
(50,000
 )    
-
  
Proceeds from sale of stock
    
131,000
      
-
      
131,000
  
Repayments of related party advances
    
(30,875
 )    
-
      
(30,875
 )
Net cash provided by financing activities
    
169,966
      
(50,000
 )    
119,966
  
                         
Net change in cash and cash equivalents
    
8,135
      
-
      
8,135
  
Cash and cash equivalent, beginning of period
    
240
      
-
      
240
  
Cash and cash equivalent, end of period
   $
8,375
     $
-
     $
8,375
  
                         
Supplemental disclosure of non-cash financing activities
                        
Stock issued for accrued compensation and directors fees
   $
536,701
     $
(536,701
 )   $
-
  
Non cash short term loan payable
   $
50,000
     $
50,000
     $
50,000