NOTE

– 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

-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

and

six

months ended

June 30, 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 the 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 (

) recorded transactions are valid; (

) all valid transactions are recorded and (

) 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 Loss per share

Net loss per share is provided in accordance with FASB ASC

260

10,

" Loss per Share". Basic loss per share is computed by dividing net loss attributable to common stockholders by the weighted average number of common shares outstanding during the period. Diluted loss per share gives effect to all dilutive potential common shares outstanding during the period. Dilutive loss per share excludes all potential common shares if their effect is anti-dilutive. For the

three

and

six

months ended

June 30, 2020

and

2019,

there were

129,328

and

132,696

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:

	Three months ended						Six months ended
	June 30, 2020			June 30, 2019			June 30, 2020			June 30, 2019

Basic net loss	$	(132,070	)	$	(252,667	)	$	(237,385	)	$	(45,531	)
Add back: Gain on change in fair value of derivative liabilities		(10,825	)		(21,056	)		(49,874	)		(470,189	)
Diluted net loss	$	(142,895	)	$	(273,723	)	$	(287,259	)	$	(515,720	)

Basic and dilutive shares:
Weighted average basic shares outstanding		17,910,296			17,616,516			17,881,087			17,457,826
Shares issuable from convertible credit line payable		129,328			132,696			129,328			132,696
Dilutive shares		18,039,624			17,749,212			18,010,415			17,590,522

Loss per share:
Basic	$	(0.01	)	$	(0.01	)	$	(0.01	)	$	(0.00	)
Diluted	$	(0.01	)	$	(0.02	)	$	(0.02	)	$	(0.03	)

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

– Quoted prices in active markets for identical assets or liabilities.

Level

– 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

– 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

other pronouncements will have a significant effect on its financial statements.

Revision of

Prior Period Financial Statement

2020,

the Company identified errors in account balances in the Form

10Q

filed for the

six

months period ended

June 30, 2019.

The following accounts were deemed to contain errors: accounts payable, derivative liability, common stock, additional paid in capital, operating expenses, interest expense and loss on derivative liabilities. The errors resulted from incorrect recording of stock-based compensation and overstatements of derivative liability and amortization of debt discount.

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

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

June 30, 2019

and the consolidated statements of operations for the

three

and

six

months ended

June 30, 2019

and cash flows for the

six

months ended

June 30, 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 periods:

ALPHA ENERGY, INC.
CONSOLIDATED BALANCE SHEET
(Unaudited)

	June 30, 2019
	As Reported			Adjustment			As Revised
Current assets
Cash	$	1,044		$	-		$	1,044
Prepaid expenses		50,000			-			50,000
Total current assets		51,044			-			51,044

Oil and gas property, unproved, full cost		12,500			(2,500	)		10,000
Total assets	$	63,544		$	(2,500	)	$	61,044

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable	$	180,162			(48,000	)	$	132,162
Interest payable		19,912			-			19,912
Short term advance from related party		397			-			397
Short term note payable		50,000			-			50,000
Derivative liability		132,696			(52,966	)		79,730
Total current liabilities		383,167			(100,966	)		282,201

Convertible credit line payable - related party, net of discount of $29,586		132,696			(29,586	)		103,110
Asset retirement obligation		748			-			748
Total liabilities		516,611			(130,552	)		386,059

Stockholders' deficit
Preferred stock, $0.0001 par value; 10,000,000 shares authorized; none issued or outstanding		-			-			-
Common stock, $0.0001 par value; 65,000,000 shares authorized; 17,667,428 issued and outstanding at June 30, 2019		1,762			5			1,767
Additional paid in capital		1,498,459			101,555			1,600,014
Accumulated deficit		(1,953,288	)		26,492			(1,926,796	)
Total stockholder deficit		(453,067	)		128,052			(325,015	)

Total liabilities and stockholders' deficit	$	63,544		$	(2,500	)	$	61,044

ALPHA ENERGY, INC.

CONSOLIDATED STATEMENT OF OPERATIONS

(Unaudited)

	For the six months ended June 30, 2019
	As Reported			Adjustment			As Revised

Oil & Gas Sales	$	2,984		$	-		$	2,984
Lease operating expenses		4,815			-			4,815
Gross loss		(1,831	)		-			(1,831	)

Operating expenses:
Professional services		24,870			-			24,870
Board of directors fees		96,000			-			96,000
General and administrative		292,329			22,500			314,829
Impairment loss		70,000			(20,000	)		50,000
Total operating expenses		483,199			2,500			485,699

Loss from operations		(485,030	)		(2,500	)		(487,530	)

Other income (expense):
Interest expense		(37,927	)		9,737			(28,190	)
Gain (loss) on change in fair value of derivative liabilities		475,902			(5,713	)		470,189
Total other income		437,975			4,024			441,999

Net loss	$	(47,055	)	$	1,524		$	(45,531	)

Loss per share:
Basic	$	(0.00	)	$	-		$	(0.00	)
Diluted	$	(0.00	)	$	(0.03	)	$	(0.03	)

Weight average shares common share outstanding: basic and diluted
Basic		17,023,058			434,768			17,457,826
Diluted		17,023,058			567,464			17,590,522

ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF OPERATIONS
(Unaudited)

	For the three months ended June 30, 2019
	As Reported			Adjustment			As Revised

Oil & Gas Sales	$	714		$	-		$	714
Lease operating expenses		1,913			-			1,913
Gross loss		(1,199	)		-			(1,199	)

Operating expenses:
Professional services		10,962			-			10,962
Board of directors fees		145,299			(97,299	)		48,000
General and administrative		48,000			99,980			147,980
Impairment loss		70,000			(20,000	)		50,000
Total operating expenses		274,261			(17,319	)		256,942

Loss from operations		(275,460	)		17,319			(258,141	)

Other income (expense):
Interest expense		(14,595	)		(987	)		(15,582	)
Gain on change in fair value of derivative liabilities		3,750			17,306			21,056
Total other income (expense)		(10,845	)		16,319			5,474

Net loss	$	(286,305	)	$	33,638		$	(252,667	)

Loss per share:
Basic	$	(0.02	)	$	0.01		$	(0.01	)
Diluted	$	(0.02	)	$	-		$	(0.02	)

Weight average shares common share outstanding: basic and diluted
Basic		17,489,125			127,391			17,616,516
Diluted		17,489,125			260,087			17,749,212

ALPHA ENERGY, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)

	For the six months ended June 30, 2019
	As Reported			Adjustments			As Revised
Cash flows from operation activities
Net loss	$	(47,055	)	$	1,524		$	(45,531	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		110,000			146,000			256,000
Amortization of debt discount		29,494			(9,737	)		19,757
(Gain) loss on change in fair value of derivative liabilities		(475,902	)		5,713			(470,189	)
Impairment loss		70,000			(20,000	)		50,000
Asset retirement obligation expense		38			-			38
Change in operating assets and liabilities:
Prepaid expenses and other current assets		-			(50,000	)		(50,000	)
Accounts payable		171,580			(94,986	)		76,594
Accounts payable related party		-			22,827			22,827
Interest payable		8,433			-			8,433
Net cash used in operating activities		(133,412	)		1,341			(132,071	)

Cash flows from investing activities
Deposit for purchase of oil and gas properties		(22,500	)		22,500			-
Net cash used in investing activities		(22,500	)		22,500			-

Cash flows from financing activities
Advances from related party		19,841			(19,841	)		-
Payment on convertible credit line payable - related party		(3,750	)		(4,000	)		(7,750	)
Proceeds from sale of stock		194,000			-			194,000
Repayments of related party advances		(53,375	)		-			(53,375	)
Net cash provided by financing activities		156,716			(23,841	)		132,875

Net change in cash and cash equivalents		804			-			804
Cash and cash equivalent, beginning of period		240			-			240
Cash and cash equivalent, end of period	$	1,044		$	-		$	1,044

Supplemental disclosure of non-cash financing activities
Debt discount on convertible credit line payable – related party	$	536,701		$	(536,701	)	$	-
Non cash short term loan payable	$	50,000		$	-		$	50,000
Expenses paid on behalf of the Company by related party	$	-		$	29,406		$	29,406