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

nine

months ended

September 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,

"Earnings (Loss) per Share". Basic income (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

months ended

September 30, 2020

and

2019,

there were

148,328

and

142,446

shares issuable from convertible credit line payable which were considered for their dilutive effects but concluded to be anti-dilutive, respectively. For the

nine

months ended

September 30, 2020

and

2019,

there were

148,328

and

142,446

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:

	Three months ended						Nine months ended
	September 30, 2020			September 30, 2019			September 30, 2020			September 30, 2019

Basic net loss	$	(337,632	)	$	(216,063	)	$	(575,017	)	$	(261,594	)
Add back: Gain on change in fair value of derivative liabilities		-			-			(22,252	)		(465,575	)
Diluted net loss	$	(337,632	)	$	(216,063	)	$	(597,269	)	$	(727,169	)

Basic and dilutive shares:
Weighted average basic shares outstanding		18,014,580			17,689,993			17,925,910			17,536,065
Shares issuable from convertible credit line payable		-			-			148,328			142,446
Dilutive shares		18,014,580			17,689,993			18,074,238			17,678,511

Loss per share:
Basic	$	(0.02	)	$	(0.01	)	$	(0.03	)	$	(0.01	)
Diluted	$	(0.02	)	$	(0.01	)	$	(0.03	)	$	(0.04	)

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

nine

months period ended

September 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

September 30, 2019

and the consolidated statements of operations for the

three

and

nine

months ended

September 30, 2019

and cash flows for the

nine

months ended

September 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)

	September 30, 2019
	As Reported			Adjustment			As Revised
Current assets
Cash	$	5,350		$	-		$	5,350
Total current assets		5,350			-			5,350

Oil and gas property, unproved, full cost		37,591			(27,591	)		10,000
Total assets	$	42,941		$	(27,591	)	$	15,350

Liabilities and Stockholders' Deficit

Current liabilities
Accounts payable	$	327,907		$	(123,591	)	$	204,316
Interest payable		26,865			-			26,865
Short term advance from related party		397			-			397
Short term note payable		50,000			-			50,000
Derivative liability		142,446			(50,534	)		91,912
Total current liabilities		547,615			(174,125	)		373,490

Convertible credit line payable - related party, net of discount of $27,275		133,314			(18,143	)		115,171
Asset retirement obligation		767			-			767
Total liabilities		681,696			(192,268	)		489,428

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; 17,734,428 issued and outstanding at September 30, 2019		1,764			11			1,775
Additional paid in capital		1,517,457			149,549			1,667,006
Accumulated deficit		(2,157,976	)		15,117			(2,142,859	)
Total stockholder deficit		(638,755	)		164,677			(474,078	)

Total liabilities and stockholders' deficit	$	42,941		$	(27,591	)	$	15,350

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

	For the nine months ended September 30, 2019
	As Reported			Adjustment			As Revised

Oil & gas sales	$	3,857		$	-		$	3,857
Lease operating expenses		5,069			-			5,069
Gross loss		(1,212	)		-			(1,212	)

Operating expenses:
Professional services		29,874			-			29,874
Board of directors fees		144,000			-			144,000
General and administrative		437,061			20,000			457,061
Impairment loss		70,000			(20,000	)		50,000
Total operating expenses		680,935			-			680,935

Loss from operations		(682,147	)		-			(682,147	)

Other income (expense):
Interest expense		(45,498	)		476			(45,022	)
Gain (loss) on change in fair value of derivative liabilities		475,902			(10,327	)		465,575
Total other income (expense)		430,404			(9,851	)		420,553

Net loss	$	(251,743	)	$	(9,851	)	$	(261,594	)

Loss per share:
Basic	$	(0.01	)	$	-		$	(0.01	)
Diluted	$	(0.01	)	$	(0.03	)	$	(0.04	)

Weight average shares common share outstanding: basic and diluted
Basic		17,500,432			35,633			17,536,065
Diluted		17,500,432			178,079			17,678,511

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

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

Oil & gas sales	$	873		$	-		$	873
Lease operating expenses		254			-			254
Gross loss		619			-			619

Operating expenses:
Professional services		5,004			-			5,004
Board of directors fees		144,732			(96,732	)		48,000
General and administrative		48,000			94,232			142,232
Total operating expenses		197,736			(2,500	)		195,236

Loss from operations		(197,117	)		2,500			(194,617	)

Other expense:
Interest expense		(7,571	)		(9,261	)		(16,832	)
Loss on change in fair value of derivative liabilities		-			(4,614	)		(4,614	)
Total other expense		(7,571	)		(13,875	)		(21,446	)

Net loss	$	(204,688	)	$	(11,375	)	$	(216,063	)

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

Weight average shares common share outstanding: basic and diluted
Basic		17,390,224			299,769			17,689,993
Diluted		17,390,224			299,769			17,689,993

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

	For the nine months ended September 30, 2019
	As Reported			Adjustments			As Revised
Cash flows from operation activities
Net loss	$	(251,743	)	$	(9,851	)	$	(261,594	)
Adjustments to reconcile net loss to net cash used in operating activities
Stock-based compensation		160,000			144,000			304,000
Amortization of debt discount		30,112			(476	)		29,636
(Gain) loss on change in fair value of derivative liabilities		(475,902	)		10,327			(465,575	)
Impairment loss		70,000			(20,000	)		50,000
Asset retirement obligation expense		57			-			57
Change in operating assets and liabilities:
Accounts payable		319,325			(128,171	)		191,154
Accounts payable related party		-			(6,579	)		(6,579	)
Interest payable		15,386			-			15,386
Net cash used in operating activities		(132,765	)		(10,750	)		(143,515	)

Cash flows from investing activities
Deposit for purchase of oil and gas properties		(47,591	)		47,591			-
Net cash used in investing activities		(47,591	)		47,591			-

Cash flows from financing activities
Advances from related party		19,841			(19,841	)		-
Payment on convertible credit line payable - related party		(7,000	)		(4,000	)		(11,000	)
Proceeds from convertible credit line payable - related party		13,000			(13,000	)		-
Proceeds from sale of stock		213,000			-			213,000
Repayments of related party advances		(53,375	)		-			(53,375	)
Net cash provided by financing activities		185,466			(36,841	)		148,625

Net change in cash and cash equivalents		5,110			-			5,110
Cash and cash equivalent, beginning of period		240			-			240
Cash and cash equivalent, end of period	$	5,350		$	-		$	5,350

Supplemental disclosure of non-cash financing activities
Stock issued for accrued compensation	$	536,701		$	(536,701	)	$	-
Non cash short term loan payable	$	-		$	50,000		$	50,000
Expenses paid on behalf of the Company by related party	$	-		$	42,406		$	42,406
Debt discount on convertible credit line payable - related party	$	-		$	7,568		$	7,568