FORWARD-LOOKING STATEMENTS
The discussion and analysis below includes certain forward-looking statements
that are subject to risks, uncertainties and other factors, as described in
"Risk Factors" in our Annual Report on Form 10-K for the year ended December 31,
2021, that could cause our actual growth, results of operations, performance,
financial position and business prospects and opportunities for this fiscal year
and periods that follow to differ materially from those expressed in or implied
by those forward-looking statements. Readers are cautioned that forward-looking
statements contained in this Quarterly Report on Form 10-Q should be read in
conjunction with our disclosure under the heading "Disclosure Regarding
Forward-Looking Statements" below.
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General Business Development
The Company was formed on September 26, 2013 in the State of Colorado.
Business Strategy
Our strategy is to acquire producing properties that the Company can operate
which have proven un-drilled locations available for further development. In the
process of identifying drilling prospects, the Company will utilize the
expertise of existing management and employ contract engineering firms available
to further evaluate the properties.
The company is actively pursuing acquisition of additional properties in
Oklahoma, Texas and New Mexico.
Liquidity and Capital Resources
As of September 30, 2022, we had total current assets of $2,190,408 and total
current liabilities of $2,091,465.
The Company used $1,122,354 of cash in operating activities during the nine
months ended September 30, 2022, compared to $281,298 used in operations during
the same period in 2021. Net cash used in operating activities during the nine
months ended September 30, 2022 was mainly comprised of our $1,204,191 net loss
during the period, adjusted by a non-cash charges of $78,397 for gain on change
in fair value of derivative liabilities, stock-based compensation of $237,720,
amortization of debt discounts of $67,368 and changes in operating assets and
liabilities of $145,776. Net cash used in operating activities during the nine
months ended September 30, 2021 was mainly comprised of our $770,004 net loss
during the period, adjusted by a non-cash charges of $120,250 gain on settlement
of accounts payable, $24,299 for loss on change in fair value of derivative
liabilities, stock-based compensation of $174,000, amortization of debt
discounts of $4,215, write off of option contract associated with oil and gas
properties of $85,500, default interest added to note payable of $50,000, asset
retirement obligations expense of $56 and changes in operating assets and
liabilities of $270,886.
The Company used cash of $1,220,512 for investing activities during the nine
months ended September 30, 2022 which consisted of $1,165,212 for the
acquisition of oil and gas property and cash paid for purchase of equipment of
$55,300. The Company used cash of $60,000 for investing activities during the
nine months ended September 30, 2021 related to deposits for oil and gas
properties.
The Company generated cash of $3,084,736 from financing activities during the
nine months ended September 30, 2022 which consisted of $120,236 in proceeds
from advances, related party, $500,000 from senior secured convertible notes
payable from related party and $2,504,500 in proceeds from the sale of common
stock, which were offset by repayments on the convertible credit line of $30,000
and $10,000 repayments of advances, related party. The Company generated cash of
$342,200 from financing activities during the nine months ended September 30,
2021 which consisted of $252,200 advances, related party, $65,00 of proceeds
from note payable, related party, $20,000 in proceeds from convertible credit
line payable, related party and $5,000 in proceeds from the sale of common
stock.
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 unaudited consolidated financial statements for
additional information.
Results of Operations
We generated revenue of $138,900 and $2,369 during the three months ended
September 30, 2022 and 2021, respectively. Lease operating expenses were
$229,099 and $7,303 during the three months ended September 30, 2022 and 2021,
respectively. The increase in oil and gas sales and lease operating expenses was
due to an increase in Alpha Energy Texas operations. Total operating expenses
were $352,634 during the three months ended September 30, 2022 compared to
$243,832 during the same period in 2021. The increase in operating expenses was
due to a $77,982 increase in professional fees and $42,820 increase in general
and administrative expenses which were offset by $12,000 decrease in board of
director fees.
We generated revenues of $144,139 and $2,369 during the nine months ended
September 30, 2022 and 2021. Lease operating expenses were $278,533 and $7,303
during the nine months ended September 30, 2022 and 2021, respectively. The
increase in oil and gas sales and lease operating expenses was due to an
increase in Alpha Energy Texas operations. Total operating expenses were
$1,010,921 during the nine months ended September 30, 2022 compared to $625,965
during the same period in 2021. The increase in operating expenses was due to a
$240,113 increase in professional fees and $48,593 increase in general
administrative expenses which were offset by $24,000 decrease in board of
director fees and a $120,250 gain on settlement of accounts payable in 2021.
Off-Balance sheet arrangements
As of September 30, 2022, we did not have any relationships with unconsolidated
entities or financial partnerships, such as entities often referred to as
structured finance or special purpose entities, established for the purpose of
facilitating off-balance sheet arrangements or other contractually narrow or
limited purposes.
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Critical Accounting Policies
The preparation of financial statements in conformity with U.S. GAAP requires
management to make estimates and assumptions that affect the reported amount of
assets and liabilities, the disclosure of contingent assets and liabilities and
the reported amounts of revenue and expenses during the reported periods. Our
accounting policies are described in Note 1 to our audited consolidated
financial statements for 2021 appearing in our Annual Report on Form 10-K for
the year ended December 31, 2021.
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