UNITED
STATES

SECURITIES
AND EXCHANGE COMMISSION

Washington,
D.C. 20549








FORM
10-Q










|[X] |  | QUARTERLY
                                                                                                                                                          REPORT
                                                                                                                                                          PURSUANT
                                                                                                                                                          TO
                                                                                                                                                          SECTION
                                                                                                                                                          13
                                                                                                                                                          OR
                                                                                                                                                          15(d)
                                                                                                                                                          OF
                                                                                                                                                          THE
                                                                                                                                                          SECURITIES
                                                                                                                                                          EXCHANGE
                                                                                                                                                          ACT
                                                                                                                                                          OF
                                                                                                                                                          1934
|--- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For
the quarterly period ended March 31, 2013.



|[  ] |  | TRANSITION
                                                                                                                                                              REPORT
                                                                                                                                                              PURSUANT
                                                                                                                                                              TO
                                                                                                                                                              SECTION
                                                                                                                                                              13
                                                                                                                                                              OR
                                                                                                                                                              15(d)
                                                                                                                                                              OF
                                                                                                                                                              THE
                                                                                                                                                              SECURITIES
                                                                                                                                                              EXCHANGE
                                                                                                                                                              ACT
                                                                                                                                                              OF
                                                                                                                                                              1934
|---- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



For
the transition period from __________ to __________.



Commission
File Number: 0-17204










INFINITY
ENERGY RESOURCES, INC.

(Exact
name of registrant as specified in its charter)










|Delaware                                                           |  | 20-3126427                              
|------------------------------------------------------------------ |  | ----------------------------------------
|(State
    or other jurisdiction of incorporation or organization) |  | (I.R.S.
    Employer Identification No.)



11900
College Blvd, Suite 310, Overland Park, KS 66210

(Address
of principal executive offices) (Zip Code)



(913)
948-9512

(Registrant’s
telephone number, including area code)



Indicate
by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for 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 [X] No [  ]



Indicate
by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive
Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter)
during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).
Yes [X] No [  ]



Indicate
by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller
reporting company. See the definitions of “large accelerated filer” “accelerated filer” and “smaller
reporting company” in Rule 12b-2
of Exchange Act.



|Large
    accelerated filer [  ]                                             | Accelerated
    filer [  ]       
|---------------------------------------------------------------------------- | ---------------------------------
|Non-accelerated
    filer [  ] (Do not check if a smaller reporting company) | Smaller
    reporting company [X]



Indicate
by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes [  ] No
[X]



Indicate
the number of shares outstanding of each of the issuer’s classes of  common stock, as of the latest practicable date:



|Class                               |  | Outstanding
    at May 17, 2013
|----------------------------------- |  | -------------------------------
|Common
    Stock, $0.0001 par value |  | 21,256,075                     


















TABLE
OF CONTENTS



|PART
    I Financial Information                                                                             |    
|------------------------------------------------------------------------------------------------------------ | ---
|Item
    1. Financial Statements                                                                             |    
|Consolidated
    Balance Sheets: March 31, 2013 and December 31, 2012(Unaudited)                             | F-1
|Consolidated
    Statements of Operations: Three Months Ended March 31, 2013 and 2012 (Unaudited)            | F-2
|Consolidated
    Statement of Changes in Stockholders’ Equity: Three Months Ended March 31, 2013 (Unaudited) | F-3
|Consolidated
    Statements of Cash Flows: Three Months Ended March 31, 2013 and 2012 (Unaudited)            | F-4
|Notes
    to Consolidated Financial Statements                                                               | F-5
|Item
    2. Management’s Discussion and Analysis of Financial Condition and Results of Operations            | 3  
|Item
    3. Quantitative and Qualitative Disclosures About Market Risk                                       | 6  
|Item
    4. Controls and Procedures                                                                          | 6  
|                                                                                                             |    
|PART
    II Other Information                                                                                | 7  
|Item
    1. Legal Proceedings                                                                                | 7  
|Item
    2. Unregistered Sales of Equity Securities and Use of Proceeds                                      | 7  
|Item
    3. Defaults Upon Senior Securities                                                                  | 7  
|Item
    4. Mine Safety Disclosures                                                                          | 7  
|Item
    5. Other Information                                                                                | 7  
|Item
    6. Exhibits                                                                                         | 7  
|Signatures                                                                                                   | 8  



2







PART
I Financial Information



Item
1. Financial Statements



INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Consolidated
Balance Sheets

(Unaudited)



|                                                                                                                                                                                                                                           |  | March 31, 2013 |              |   | December 31, 2012 |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------------ | - | ----------------- | -
|ASSETS                                                                                                                                                                                                                                     |  |                |              |   |                   |  
|Current assets                                                                                                                                                                                                                             |  |                |              |   |                   |  
|Cash and cash equivalents                                                                                                                                                                                                                  |  | $              | 27,809       |   |                   | $
|Prepaid expenses                                                                                                                                                                                                                           |  |                | 1,475        |   |                   |  
|Total current assets                                                                                                                                                                                                                       |  |                | 29,284       |   |                   |  
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|Oil and gas properties, using full cost accounting, net of accumulated
    depreciation, depletion, amortization and ceiling write-down                                                                                                    |  |                |              |   |                   |  
|Unproved                                                                                                                                                                                                                                   |  |                | 4,465,568    |   |                   |  
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|Other asset – deposit                                                                                                                                                                                                                      |  |                | 5,000        |   |                   |  
|Total assets                                                                                                                                                                                                                               |  | $              | 4,499,852    |   |                   | $
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|LIABILITIES AND STOCKHOLDERS’ DEFICIT                                                                                                                                                                                                      |  |                |              |   |                   |  
|Current liabilities                                                                                                                                                                                                                        |  |                |              |   |                   |  
|Accounts payable                                                                                                                                                                                                                           |  | $              | 928,056      |   |                   | $
|Accrued liabilities (including $767,407 due to related party
    at both dates)                                                                                                                                                            |  |                | 3,420,584    |   |                   |  
|Income tax liability                                                                                                                                                                                                                       |  |                | 150,000      |   |                   |  
|Accrued interest and fees – bank and other                                                                                                                                                                                                 |  |                | 174,862      |   |                   |  
|Officer indemnification                                                                                                                                                                                                                    |  |                | 734,897      |   |                   |  
|Derivative liabilities                                                                                                                                                                                                                     |  |                | 406,409      |   |                   |  
|Current portion of asset retirement obligations                                                                                                                                                                                            |  |                | 432,027      |   |                   |  
|Notes payable-short term, net of discounts of $238,891 at March 31, 2013                                                                                                                                                                   |  |                | 548,509      |   |                   |  
|Note payable to related party, net of discount of $15,686
    at December 31, 2012                                                                                                                                                         |  |                | -            |   |                   |  
|Total current liabilities                                                                                                                                                                                                                  |  |                | 6,795,344    |   |                   |  
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|Long-term liabilities                                                                                                                                                                                                                      |  |                |              |   |                   |  
|Note payable, net of discount of $36,109                                                                                                                                                                                                   |  |                | -            |   |                   |  
|Asset retirement obligations, less current portion                                                                                                                                                                                         |  |                | 571,153      |   |                   |  
|Total long-term liabilities                                                                                                                                                                                                                |  |                | 571,153      |   |                   |  
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|Total liabilities                                                                                                                                                                                                                          |  |                | 7,366,497    |   |                   |  
|                                                                                                                                                                                                                                           |  |                |              |   |                   |  
|Redeemable, convertible preferred stock, par value $.0001, 6% cumulative
    dividend, authorized 10,000,000 shares:                                                                                                                       |  |                |              |   |                   |  
|Series A, 130,000 shares issued and outstanding at March
    31, 2013 and December 31, 2012, liquidation preference $13,000,000 plus undeclared dividends of $754,000 and $559,000 at March
    31, 2013 and December 31, 2012             |  |                | 12,208,058   |   |                   |  
|Series B (related party), 15,016 shares issued and outstanding
    at March 31, 2013 and December 31, 2012, liquidation preference $1,501,600 plus undeclared dividends of $87,093 and $64,569
    at March 31, 2013 and December 31, 2012 |  |                | 1,400,381    |   |                   |  
|Commitments and contingencies (Note 6)                                                                                                                                                                                                     |  |                |              |   |                   |  
|Stockholders’ deficit                                                                                                                                                                                                                      |  |                |              |   |                   |  
|Common stock, par value $.0001, authorized 75,000,000 shares, issued and outstanding
    20,668,575 shares at March 31, 2013 and December 31, 2012                                                                                         |  |                | 2,066        |   |                   |  
|Additional paid-in capital                                                                                                                                                                                                                 |  |                | 89,119,948   |   |                   |  
|Accumulated deficit                                                                                                                                                                                                                        |  |                | (105,597,098 | ) |                   |  
|Total stockholders’ deficit                                                                                                                                                                                                                |  |                | (16,475,084  | ) |                   |  
|Total liabilities and stockholders’ deficit                                                                                                                                                                                                |  | $              | 4,499,852    |   |                   | $



See
notes to unaudited consolidated financial statements.



F-1







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Consolidated
Statements of Operations

(Unaudited)



|                                                                                             |  | For the Three Months Ended |           
|-------------------------------------------------------------------------------------------- |  | -------------------------- | ----------
|                                                                                             |  | March 31,                  |           
|                                                                                             |  | 2013                       |           
|Operating expenses                                                                           |  |                            |           
|General and administrative expenses                                                          |  | $                          | 989,102   
|Accretion expense                                                                            |  |                            | 22,074    
|Total operating expenses                                                                     |  |                            | 1,011,176 
|                                                                                             |  |                            |           
|Operating loss                                                                               |  |                            | (1,011,176
|                                                                                             |  |                            |           
|Other income (expense)                                                                       |  |                            |           
|Interest expense, net of capitalization                                                      |  |                            | (358,297  
|Change in derivative fair value                                                              |  |                            | (30,293   
|                                                                                             |  |                            |           
|Total other income (expense)                                                                 |  |                            | (388,590  
|                                                                                             |  |                            |           
|Loss from continuing operations                                                              |  |                            | (1,399,766
|Loss of discontinued operation                                                               |  |                            | -         
|                                                                                             |  |                            |           
|Net loss                                                                                     |  | $                          | (1,399,766
|                                                                                             |  |                            |           
|Accrual of 6% dividend payable on Series A and B redeemable, convertible
    preferred stock |  |                            | (217,524  
|                                                                                             |  |                            |           
|Accretion of Series A and B redeemable, convertible preferred stock                          |  |                            | (530,692  
|                                                                                             |  |                            |           
|Loss applicable to common shareholders                                                       |  | $                          | (2,147,982
|                                                                                             |  |                            |           
|Basic and diluted net loss
    per share:                                                    |  |                            |           
|Loss from continuing operations                                                              |  | $                          | (0.10     
|Loss from discontinued operation                                                             |  |                            | -         
|                                                                                             |  |                            |           
|Basic and diluted net loss per share                                                         |  | $                          | (0.10     
|                                                                                             |  |                            |           
|Weighted average shares outstanding – basic and diluted                                      |  |                            | 20,668,575



See
notes to unaudited consolidated financial statements.



F-2







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Consolidated
Statement of Changes in Stockholders’ Deficit

For
the Three Months Ended March 31, 2013(Unaudited)



|                                                                                             |  | Common
    Stock |            |  | Additional
    Paid-in |   |       | Accumulated |  |   | Stockholders’ |  
|-------------------------------------------------------------------------------------------- |  | ---------------- | ---------- |  | ---------------------- | - | ----- | ----------- |  | - | ------------- | -
|                                                                                             |  | Shares           |            |  | Amount                 |   |       | Capital     |  |   | Deficit       |  
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Balance, December 31, 2012                                                                   |  |                  | 20,668,575 |  |                        | $ | 2,066 |             |  | $ | 88,843,628    |  
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Stock based compensation                                                                     |  |                  | -          |  |                        |   | -     |             |  |   | 831,932       |  
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Transition of
    derivative liability to equity                                             |  |                  | -          |  |                        |   | -     |             |  |   | 192,604       |  
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Accretion of Series
    A and B redeemable, convertible preferred stock                      |  |                  | -          |  |                        |   | -     |             |  |   | (530,692      | )
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Accrual of 6%
    dividend payable on Series A and B redeemable, convertible preferred stock |  |                  | -          |  |                        |   | -     |             |  |   | (217,524      | )
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Net loss                                                                                     |  |                  | -          |  |                        |   | -     |             |  |   | -             |  
|                                                                                             |  |                  |            |  |                        |   |       |             |  |   |               |  
|Balance, March 31, 2013                                                                      |  |                  | 20,668,575 |  |                        | $ | 2,066 |             |  | $ | 89,119,948    |  



See
notes to unaudited consolidated financial statements.



F-3







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Consolidated
Statements of Cash Flows

(Unaudited)



|                                                                                 |  | For the Three Months Ended |           
|-------------------------------------------------------------------------------- |  | -------------------------- | ----------
|                                                                                 |  | March 31,                  |           
|                                                                                 |  | 2013                       |           
|Cash flows from operating activities                                             |  |                            |           
|Net loss                                                                         |  | $                          | (1,399,766
|Adjustments to reconcile net loss to net cash used in operating
    activities   |  |                            |           
|Accretion of asset retirement obligations                                        |  |                            | 22,074    
|Stock-based compensation                                                         |  |                            | 831,932   
|Change in fair value of derivative liability                                     |  |                            | 30,293    
|Amortization of debt discount, net of capitalized amounts
    of $62,316 in 2012 |  |                            | 339,116   
|Change in operating assets and liabilities                                       |  |                            |           
|Decrease in prepaid expenses                                                     |  |                            | 1,656     
|Increase (decrease) in accounts payable and accrued liabilities                  |  |                            | (127,952  
|Net cash used in operating activities                                            |  |                            | (302,647  
|                                                                                 |  |                            |           
|Cash flows from investing activities                                             |  |                            |           
|Investment in oil and gas properties                                             |  |                            | (27,265   
|Net cash used in investing activities                                            |  |                            | (27,265   
|                                                                                 |  |                            |           
|Cash flows from financing activities                                             |  |                            |           
|Proceeds from debt and subordinated note payable                                 |  |                            | 575,000   
|Repayment of note payable to related party                                       |  |                            | (250,000  
|Net cash provided by financing activities                                        |  |                            | 325,000   
|                                                                                 |  |                            |           
|Net decrease in cash and cash equivalents                                        |  |                            | (4,912    
|                                                                                 |  |                            |           
|Cash and cash equivalents                                                        |  |                            |           
|Beginning                                                                        |  |                            | 32,721    
|End                                                                              |  | $                          | 27,809    
|                                                                                 |  |                            |           
|Supplemental cash flow information                                               |  |                            |           
|Cash paid for interest                                                           |  | $                          | 11,775    
|Cash paid for taxes                                                              |  |                            | -         
|                                                                                 |  |                            |           
|Supplemental noncash disclosures                                                 |  |                            |           
|Noncash capitalized overhead and interest                                        |  | $                          | 12,500    
|Discount from warrant derivative                                                 |  |                            | 526,212   
|Transition of derivative liability to equity                                     |  |                            | 192,604   
|Accretion in fair value of redeemable preferred stock                            |  |                            | 530,692   
|Preferred dividends accrued                                                      |  |                            | 217,524   



See
notes to unaudited consolidated financial statements.



F-4







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)





Note
1 — Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies



Unaudited
Interim Financial Information



Infinity
Energy Resources, Inc. and its subsidiaries (collectively, “we,” “ours,” “us,” “Infinity”
or the “Company”) has prepared the accompanying consolidated financial statements pursuant to the rules and regulations
of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial
statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals
necessary for a fair presentation of our consolidated balance sheets, statements of operations, and cash flows for the periods
presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for
2012 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in
accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance
with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited
consolidated financial statements and accompanying notes in Item 8, “Financial Statements and Supplementary Data,”
of our Annual Report on Form 10-K, filed with the SEC.



Nature
of Operations



We
are engaged in the exploration of the Perlas and Tyra concession blocks offshore Nicaragua in the Caribbean Sea (the “Nicaraguan
Concessions”).



Going
Concern



As
reflected in the accompanying Consolidated Statements of Operations, the Company has had a history of losses. In addition, the
Company has a significant working capital deficit and is currently experiencing substantial liquidity issues.



On
February 28, 2012, we signed definitive agreements with Amegy and Off-Shore relating to outstanding debt and other obligations
we owed to them (see Note 3). Although the cash outflow necessary to pay Amegy has been eliminated under terms of the Stock Purchase
Agreement, the Company is still in need of additional capital to meet its obligations under the Nicaraguan Concessions, and is
searching for sources of additional equity or debt financing. There can be no assurance that the Company will be able to obtain
such capital or obtain it on favorable terms.



The
Company conducted an environmental study and developed geological information from the reprocessing and additional evaluation
of existing 2-D seismic data acquired over its Nicaraguan Concessions. It issued letters of credit totaling $851,550 for this
and additional work on the leases. The Company has completed certain activity under the initial work plan.. The Company intends
to seek joint venture or working interest partners prior to the commencement of any exploration or drilling operations on the
Nicaraguan Concessions.



Due
to the uncertainties related to these matters, there exists substantial doubt about the Company’s ability to continue as
a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of
asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue
as a going concern.



Fair
Value of Financial Instruments



As
defined in ASC 820, fair value is the price that would be received in the sale of an asset or paid to transfer a liability in
an orderly transaction between market participants at the measurement date. The Company utilizes market data or assumptions that
market participants would use in pricing the asset or liability, including assumptions about risk and the risks inherent in the
inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable. The
Company classifies fair value balances based upon observability of those inputs. ASC 820 establishes a fair value hierarchy that
prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active
markets for identical assets or liabilities (level 1 measurement), pricing inputs are other than quoted prices in active markets,
but are either directly or indirectly observable and are valued using models or other valuation methodologies (level 2 measurement),
and the lowest priority to unobservable inputs (level 3 measurement). There were no changes in valuation techniques or reclassifications
of fair value measurements between levels 1, 2 or 3 during the quarter ended March 31, 2013.



F-5







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



The
carrying values of the Company’s accounts receivable, accounts payable and accrued liabilities represent the estimated fair
value due to the short-term nature of the accounts.



The
estimated fair value of the Company’s non-current derivative liabilities, all of which related to warrants, were estimated
using a closed-ended option pricing model utilizing assumptions related to the contractual term of the instruments, estimated
volatility of the price of the Company’s common stock, interest rates, the probability of both the downward adjustment of
the exercise price and the upward adjustment to the number of warrants as provided by the warrant agreement terms (Note 2) and
non-performance risk factors, among other items (ASC 820, Fair Value Measurements (“ASC 820”) fair value hierarchy
Level 3). A comparison of the assumptions used in calculating estimated fair value of derivative liabilities at the issue date
and outstanding at March 31, 2013 is as follows:



|                                |  | Upon
    Issuance |                                                                                                         |   | At
    March 31, 2013 |  
|------------------------------- |  | ----------------- | ------------------------------------------------------------------------------------------------------- | - | --------------------- | -
|                                |  |                   |                                                                                                         |   |                       |  
|Volatility – range              |  |                   | 91.67%
                                                                                          - 94.5 | % |                       |  
|Contractual term                |  |                   | 2
                                                                               years                  |   |                       |  
|Exercise price                  |  | $                 | 2.50                                                                                                    |   |                       | $
|Number of warrants in aggregate |  |                   | 575,000                                                                                                 |   |                       |  



The
following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial
instruments, measured at fair value on a recurring basis using significant unobservable inputs:



|Balance at December 31, 2012                             |  | $ | 42,508   |  
|-------------------------------------------------------- |  | - | -------- | -
|Fair value of warrant derivative liabilities at issuance |  |   | 526,212  |  
|Unrealized derivative losses included in other expense   |  |   | 30,293   |  
|Transition of derivative liability to equity             |  |   | (192,604 | )
|Balance at March 31, 2013                                |  | $ | 406,409  |  



The
estimated initial fair value of the Company’s Series A and B redeemable convertible preferred stock was determined based
upon estimates of the expected occurrence and timing of certain future events, such as the date such shares might be redeemed
or converted (assumed to be December 31, 2013); an estimate of discount rates to be utilized in determining net present value
of the preferred stock, based upon rates observed in similar or analogous, but not identical, market transactions, upon past Company-specific
effective borrowing rates, and the assessment of each instrument’s specific rights and obligations. (ASC 820, Fair Value
Measurements (“ASC 820”) fair value hierarchy Level 3.



Reclassifications



Certain
amounts in the prior period were reclassified to conform with the current period’s financial statement presentation. These
reclassifications had no effect on previously reported net loss or accumulated deficit.



Note
2 — Debt



Debt
consists of the following at March 31, 2013 and December 31, 2012:



|                                                           |  | March
    31, 2013 |         |  | December
    31, 2012 |  
|---------------------------------------------------------- |  | ------------------ | ------- |  | --------------------- | -
|                                                           |  |                    |         |  |                       |  
|Notes payable- short term, net of discount                 |  | $                  | 548,509 |  |                       | $
|Note payable to related party, net of discount, short-term |  | $                  | -       |  |                       | $
|Notes payable, net of discount, long-term                  |  | $                  | -       |  |                       | $



Interest
Bearing Liabilities to Vendors



At
March 31, 2013 and December 31, 2012, the Company had agreed to pay interest of 8% on certain accrued liabilities aggregating
$410,500. The total amount of interest accrued relating to these liabilities for the three months ended March 31, 2013 was $8,277.



F-6









INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Notes
Payable – Short-term



In
November 2012 the Company entered into an agreement with its law firm to issue the firm a 3% note payable in satisfaction of $212,400
in fees. The note is due with all accrued interest on March 14, 2014. The note and accrued interest are convertible to shares
of the Company’s common stock at $3 per share at any time prior to and including maturity date. The note was discounted
to its estimated fair value and the amount of the discount at issue date, $40,435, was recorded as a reduction in legal expense
in 2012. Interest expense for the three months ended March 31, 2013 includes interest at the stated rate of 3% in the amount of
$1,593 and amortization of discount in the amount of $6,693.



During
the three months ended March 31, 2013, the Company borrowed an aggregate of $575,000 from four entities or individuals. Each note
is for a term of 60 days and bears interest at 8% per annum. At the date of borrowing, each entity or individual was also issued
a warrant for the purchase of shares of common stock at $2.50 per share, for a total of 575,000 shares. The warrants are exercisable
for a period of two years from the date of the note. The warrants provide that should the notes and interest not be paid in full
by their respective maturity dates (ranging from April 13 to May 29, 2013) the warrants’ exercise prices would be reduced
to $0.10 per share and the number of shares issuable under the warrants would be increased to an aggregate of 5,750,000 shares.
The ratchet provision in the warrants’ exercise prices required that these be accounted as derivative liabilities. The Company
recorded the estimated fair value of the warrants as discounts on note payable in the aggregate amount of $526,212 and as a derivative
liability in the same amount, each as of the date of the respective note. The discounts are being amortized on a straight line
basis over the terms of the notes and interest expense for the three months ended March 31, 2013 includes discount amortization
in the amount of $316,737. The Company used the loan proceeds from these notes to retire short-term promissory notes
it had previously issued and to provide working capital. An officer of the Company sold the notes issued in the quarter ended
March 31, 2013, and the Company paid no compensation to any party in connection with such sales.



Note
Payable to Related Party



On
August 28, 2012, the Company borrowed $250,000 from an entity that is 49% owned by a board member of another corporation for which
Infinity’s CEO serves as CEO and chairman of the board. The Company issued a short-term note payable to the entity in this
amount, bearing interest at 8% per annum, maturing February 28, 2013. At the same time, the Company issued the same entity a warrant
exercisable to purchase 120,000 shares of the Company’s common stock at a price of $2.50 per share, expiring August 2017.
The Company has recorded the estimated fair value of the warrant as of August 28, 2012 as a discount on note payable in the amount
of $48,654 and a derivative liability in the same amount at that date. The discount of $48,654 is being amortized on a straight
line basis over the expected outstanding period of the note (August 28, 2012 through February 28, 2013) and interest expense for
the three months ended March 31, 2013 includes discount amortization in the amount of $15,686. The estimated current value of
the warrant derivative liability was increased to $192,604 as of the date the note was repaid, February 28, 2013, and at that
date the derivative liability was terminated and the balance was recorded as an addition to additional paid-in capital as a transition
back to equity.



Note
3 — Cancellation of Debt and Related Obligations and Issuance of Securities in Exchange for Debt



On
February 28, 2012, the Company signed definitive agreements with Amegy and Off-Shore relating to outstanding debt and other obligations
owed them. In accordance with these agreements, on April 13, 2012, the Company issued Amegy 2,000,000 shares of common stock and
130,000 shares of Series A redeemable convertible preferred stock, and issued Off-Shore 15,016 shares of Series B redeemable convertible
preferred stock. Amegy also agreed to cancel the Amegy Warrant (that had originally been issued in February 2011), exercisable
to purchase 931,561 shares of common stock. In aggregate, the Company cancelled debt, accrued interest and fees and the derivative
liability that had been recorded relative to the Amegy Warrant in the aggregate amount of $21,883,393.



The
Series A and Series B redeemable convertible preferred stock have a 6% annual dividend and are convertible into common stock at
a price of $6.50 per share. Both series of preferred stock automatically convert into common stock if the average of the closing
prices of the common stock for 30 consecutive trading days equals at least $7.50 per share. The Company has the right to redeem
both series of preferred stock at any point for an amount equal to their issue price of $100 per share plus all accrued and unpaid
dividends; however the Series A preferred stock has a higher liquidation preference and must be redeemed prior to any redemption
of Series B preferred stock. Commencing January 1, 2013, the Series A preferred stock will vote with the common stock on all matters
presented to the holders of the common stock. Beginning January 1, 2014, the Series A preferred shareholders will have a majority
vote on all such matters and the right to elect a majority of the Board of Directors, if the Series A preferred stock has not
been redeemed or converted into common stock. Series B preferred stock has no voting privileges. Neither series of preferred stock
is transferrable for 180 days after issuance.





F-7







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



The
common stock issued to Amegy has been recorded at a value equal to the closing price of the shares of the Company’s common
stock on April 13, 2012, the date the agreement was effective, a total of $2,980,000. Taking into consideration the rights and
preferences accruing to the preferred stock issued, as summarized above, the Company has classified both Series A and B preferred
stock as temporary equity on the accompanying consolidated balance sheet at March 31, 2013 and accordingly has recorded such stock
at their estimated fair values. That estimated fair value was $9,743,210 for Series A preferred and $1,106,625 for Series B preferred
at the date of issuance, April 13, 2012. The recorded fair value of Series A and B preferred shares increased in calculated present
value to $11,454,058 and $1,313,288, respectively, as of March 31, 2013 ($530,692 was accreted in the three months ended March
31, 2013). Both Series A and B preferred are being accreted to their face values over a period commencing April 14, 2012 through
December 31, 2013. Accrued dividends payable on the preferred shares in the amount of $841,093 have been recorded as of March
31, 2013 ($217,524 was accrued in the three months ended March 31, 2013).



Note
4 — Stock Options



The
Company applies ASC 718, Stock Compensation, which requires companies to recognize compensation expense for share-based payments
based on the estimated fair value of the awards. ASC 718 also requires tax benefits relating to the deductibility of increases
in the value of equity instruments issued under share-based compensation arrangements to be presented as financing cash inflows
in the statement of cash flows. Compensation cost is recognized based on the grant-date fair value for all share-based payments
granted, and is estimated in accordance with the provisions of ASC 718.



During
the three months ended March 31, 2013, no stock options were granted or forfeited.



The
following table summarizes stock option activity for the three months ended March 31, 2013:





|                                                 |  | Number
    of Options |           |  | Weighted
    Average Exercise Price Per Share |   |      | Weighted
    Average Remaining Contractual Term |  |  | Aggregate
    Intrinsic Value                                                                       | 
|------------------------------------------------ |  | --------------------- | --------- |  | --------------------------------------------- | - | ---- | ----------------------------------------------- |  |  | --------------------------------------------------------------------------------------------------- | 
|Outstanding and exercisable at December 31, 2012 |  |                       | 3,303,500 |  |                                               | $ | 4.17 |                                                 |  |  | 7.3
                                                                                          years | 
|Outstanding and exercisable at March 31, 2013    |  |                       | 3,303,500 |  |                                               | $ | 4.17 |                                                 |  |  | 7.0
                                                                               years            | 



The
Company recognized compensation and legal expense in connection with the vesting of options granted in 2012 in the amount of $831,932
during the three months ended March 31, 2013 (none in the three months ended March 31, 2012).



Note
5 — Warrants



The
following table summarizes warrant option activity for the three months ended March 31, 2013:



|                                                 |  | Number
    of Warrants |         |  | Weighted
    Average Exercise Price Per Share |   |      | Weighted
    Average Remaining Contractual Term |  |  | Aggregate
    Intrinsic Value                                                                       | 
|------------------------------------------------ |  | ---------------------- | ------- |  | --------------------------------------------- | - | ---- | ----------------------------------------------- |  |  | --------------------------------------------------------------------------------------------------- | 
|Outstanding and exercisable at December 31, 2012 |  |                        | 120,000 |  |                                               | $ | 2.50 |                                                 |  |  | 4.7
                                                                                          years | 
|Granted                                          |  |                        | 575,000 |  |                                               |   | 2.50 |                                                 |  |  |                                                                                                     | 
|Outstanding and exercisable at March 31, 2013    |  |                        | 695,000 |  |                                               | $ | 2.50 |                                                 |  |  | 2.3
                                                                               years            | 







F-8









INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Note
6 — Commitments and Contingencies



The
Company has no insurance coverage on its U.S domestic oil and gas properties. The Company is not in compliance with Federal and
State laws regarding the U.S. domestic oil and gas properties. The Company’s known compliance issues relate to the Texas
Railroad Commission regarding administrative filings and renewal permits. The ultimate resolution of these compliance issues could
have a significant adverse impact on the Company’s financial statements.



Nicaraguan
Concessions



The
significant terms and work commitments associated with the Nicaraguan Concessions by area (Perlas and Tyra blocks) are summarized
below. Within 15 days of entering an exploration sub-period, the Company is required to provide an irrevocable guarantee (“Irrevocable
Guarantee”) in favor of the Nicaraguan Ministry of Energy, payable in Nicaragua, in an amount equal to the estimated cost
of such exploration sub-period, subject to an accumulated credit carry forward for the excess of work performed in the preceding
exploration sub-period, as provided in the agreements relating to the Nicaraguan Concessions.



As
of December 31, 2012 and March 31, 2013, the Company was in Sub-Period 1 for both Perlas and Tyra. On April 11, 2013, the Company
received its Environmental Permit, permitting it to proceed to Phase II of Sub-Period 1. In accordance with the concession agreements,
the Company has provided the Ministry of Energy with the required letters of credit in the amounts of $443,100 for Perlas (expiring
March 2014) and $408,450 for Tyra (expiring September 2013). The Company has also made all required expenditures related to the
concessions for training programs and as “area fees,” for 2011, 2010 and, in early 2012, for that year. The Company
considers it is fully in compliance with the terms of the Nicaraguan Concession agreements.



Minimum
Work Program – Perlas



|Block Perlas –
    Exploration Minimum Work Commitment and Relinquishments
|--------------------------------------------------------------------------
|Exploration
    Period (6 Years)                                          
|Sub-Period1                                                               
|                                                                          
|                                                                          
|Sub-Period 2 Optional                                                     
|Sub-Period 3 Optional                                                     
|Sub-Period 4 Optional                                                     
|                                                                          







F-9







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Minimum
Work Program - Tyra



|Block Tyra –
    Exploration Minimum Work Commitment and Relinquishments
|------------------------------------------------------------------------
|Exploration
    Period (6 Years)                                        
|Sub-Period1                                                             
|                                                                        
|                                                                        
|Sub-Period 2 Optional                                                   
|Sub-Period 3 Optional                                                   
|Sub-Period 4Optional                                                    
|                                                                        



Contractual
and Fiscal Terms



|Training Program      |  | US $50,000 per year, per block                        
|--------------------- |  | ------------------------------------------------------
|Area Fee              |  | Yr 1-3 Yr 4-7 Yr 8 fwd                                
|Royalties             |  | Recovery Factor0 – 1.5 1.5 – 3.0 >3.0                 
|Natural Gas Royalties |  | Market value at production                            
|Corporate Tax         |  | Rate no higher than 30%                               
|Social Contribution   |  | 3% of the net profit (1.5% for each autonomous region)
|Investment Protection |  | ICSID arbitration OPIC insurance                      



Phase
II of Sub Period 1 started April 13, 2013, when the Nicaraguan Government approved the environmental impact study. The minimum
cash requirements for the next twelve month period will be $1,894,000 of which $1,634,677 is related to seismic and $259,300 is
related to the training and area fees under the concession. See Note 1 for discussion of Going Concern. The Company estimates
that the actual cost of seismic for the acreage will be $4,000,000 over the next 18 month period.



F-10







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Revenue
Sharing Commitments



On
March 23, 2009, the Company entered into a Securities Purchase Agreement, dated effective as of March 23, 2009, with Off-Shore,
an accredited investor, to issue a subordinated secured promissory note in the aggregate principal amount of up to $1,275,000
and a one percent (1%) revenue sharing interest in the Nicaraguan Concessions. As of December 31, 2009, Off-Shore had funded $1,275,000
(the “Funding Amount”).



Under
the Revenue Sharing Agreement (the “Revenue Agreement”), Infinity assigned to Off-Shore a monthly payment (the “RSP”)
equal to the revenue derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from
the Nicaraguan Concessions. The RSP shall bear its proportionate share of all costs incurred to deliver the hydrocarbons to the
point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional
costs. The RSP shall be paid to Off-Shore by the last day of each month based on the revenue received by Infinity from the purchaser
of the production during the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation
for Infinity to maintain or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for
Off-Shore. At any time within three (3) years from the date of the Revenue Agreement, Infinity has the right to redeem the RSP
by paying Off-Shore an amount as follows: (i) until March 22, 2010, a sum equal to three (3) times the Funding Amount, or $3,825,000;
(ii) until March 22, 2011, a sum equal to five (5) times the Funding Amount, $6,375,000; or (iii) until March 22, 2012, a sum
equal to ten (10) times the Funding Amount, or $12,750,000. Upon the redemption of the RSP by Infinity, the Revenue Agreement
shall terminate. As of March 23, 2012, the Company had not exercised its right to redeem and such redemption right expired.



On
June 6, 2009 the Company entered into a Revenue Sharing Agreement with the officers and directors for services provided. Infinity
assigned to officers and directors a monthly payment (the “RSP”) equal to the revenue derived from one percent (1%)
of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP shall bear its
proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including
its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid by the last day of each
month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan
Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions,
and does not create any rights in the Nicaraguan Concessions for officers and directors.



The
Company intends to seek joint venture or working interest partners (the “Farmout”) prior to the commencement of any
exploratory drilling operations on these Nicaraguan Concessions. On September 8, 2009 the Company entered into a Revenue Sharing
Agreement with Jeff Roberts to assist the Company with its technical studies of gas and oil holdings in Nicaragua and managing
and assisting in the Farmout. Infinity assigned to Jeff Roberts a monthly payment (the “RSP”) equal to the revenue
derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions.
The RSP shall bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated
purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid
to Jeff Roberts by the last day of each month based on the revenue received by Infinity from the purchaser of the production during
the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain
or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for Jeff Roberts.



On
September 8, 2009 the Company entered into a Revenue Sharing Agreement with Thompson Knight Global Energy Services (“Thompson
Knight”) to assist the Company with its technical studies of gas and oil holdings in Nicaragua and managing and assisting
in the Farmout. Infinity assigned to Thompson Knight a monthly payment (the “RSP”) equal to the revenue derived from
one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP
shall bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser,
including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid to Thompson
Knight by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the
previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain
or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for Thompson Knight.



F-11







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Lack
of Compliance with Law Regarding Domestic Properties



Infinity
is not in compliance with existing federal, state and local laws, rules and regulations for its domestic properties and this could
have a material or significantly adverse effect upon the liquidity, capital expenditures, earnings or competitive position of
Infinity. For the year ended December 31, 2008 the remaining values of Infinity-Texas and Infinity-Wyoming were written down to
zero as the Company focused solely on the development of the Nicaraguan Concessions. Management believes the estimate of the Company’s
asset retirement obligations consisting of costs related to the plugging of wells, the removal of facilities and equipment, and
site restoration on oil and gas properties is sufficient to cover any noncompliance liabilities. The Company no longer carries
insurance on the domestic properties.



Contingent
Fees



In
addition to the Revenue Sharing Agreement with Thompson Knight to assist the Company with its technical studies of gas and oil
holdings in Nicaragua and managing and assisting in the Farmout, the Company agreed to compensate Thompson Knight a success fee
of 5% of the upfront cash fee paid to Infinity by a third party earning an interest in the Nicaragua asset up to $20 million and
10% of any amount exceeding the $20 million. A 2% success fee would be paid to Thompson Knight of the remaining cash investment
in subsequent years.



Litigation



The
Company is subject to numerous claims and legal actions in which vendors are claiming breach of contract due to the Company’s
failure to pay amounts due. The Company believes that it has made adequate provision for these claims in the accompanying financial
statements.



The
Company is currently involved in litigation as follows:



| | ● | Exterran
                                                                                                                                                                                                                                Energy
                                                                                                                                                                                                                                Solutions,
                                                                                                                                                                                                                                L.P.,
                                                                                                                                                                                                                                f/k/a
                                                                                                                                                                                                                                Hanover
                                                                                                                                                                                                                                Compression
                                                                                                                                                                                                                                Limited
                                                                                                                                                                                                                                Partnership,
                                                                                                                                                                                                                                who
                                                                                                                                                                                                                                filed
                                                                                                                                                                                                                                an
                                                                                                                                                                                                                                action
                                                                                                                                                                                                                                in
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                District
                                                                                                                                                                                                                                Court
                                                                                                                                                                                                                                of
                                                                                                                                                                                                                                Erath
                                                                                                                                                                                                                                County,
                                                                                                                                                                                                                                Texas,
                                                                                                                                                                                                                                number
                                                                                                                                                                                                                                CV30512,
                                                                                                                                                                                                                                on
                                                                                                                                                                                                                                March
                                                                                                                                                                                                                                31,
                                                                                                                                                                                                                                2010
                                                                                                                                                                                                                                against
                                                                                                                                                                                                                                Infinity
                                                                                                                                                                                                                                Oil
                                                                                                                                                                                                                                and
                                                                                                                                                                                                                                Gas
                                                                                                                                                                                                                                of
                                                                                                                                                                                                                                Texas,
                                                                                                                                                                                                                                Inc.,
                                                                                                                                                                                                                                Infinity
                                                                                                                                                                                                                                Energy
                                                                                                                                                                                                                                Resources,
                                                                                                                                                                                                                                Inc.,
                                                                                                                                                                                                                                Longhorn
                                                                                                                                                                                                                                Properties,
                                                                                                                                                                                                                                LLC,
                                                                                                                                                                                                                                and
                                                                                                                                                                                                                                Forest
                                                                                                                                                                                                                                Oil
                                                                                                                                                                                                                                Corporation.
                                                                                                                                                                                                                                Exterran
                                                                                                                                                                                                                                Energy
                                                                                                                                                                                                                                Solutions,
                                                                                                                                                                                                                                L.P.
                                                                                                                                                                                                                                provided
                                                                                                                                                                                                                                certain
                                                                                                                                                                                                                                gas
                                                                                                                                                                                                                                compressor
                                                                                                                                                                                                                                and
                                                                                                                                                                                                                                related
                                                                                                                                                                                                                                equipment
                                                                                                                                                                                                                                pursuant
                                                                                                                                                                                                                                to
                                                                                                                                                                                                                                a
                                                                                                                                                                                                                                Gas
                                                                                                                                                                                                                                Compressor/Production
                                                                                                                                                                                                                                Equipment
                                                                                                                                                                                                                                Master
                                                                                                                                                                                                                                Rental
                                                                                                                                                                                                                                &
                                                                                                                                                                                                                                Servicing
                                                                                                                                                                                                                                Agreement
                                                                                                                                                                                                                                with
                                                                                                                                                                                                                                Infinity
                                                                                                                                                                                                                                dated
                                                                                                                                                                                                                                January
                                                                                                                                                                                                                                3,
                                                                                                                                                                                                                                2005
                                                                                                                                                                                                                                in
                                                                                                                                                                                                                                Erath
                                                                                                                                                                                                                                County,
                                                                                                                                                                                                                                Texas
                                                                                                                                                                                                                                and
                                                                                                                                                                                                                                is
                                                                                                                                                                                                                                claiming
                                                                                                                                                                                                                                breach
                                                                                                                                                                                                                                of
                                                                                                                                                                                                                                contract
                                                                                                                                                                                                                                for
                                                                                                                                                                                                                                failure
                                                                                                                                                                                                                                to
                                                                                                                                                                                                                                pay
                                                                                                                                                                                                                                amounts
                                                                                                                                                                                                                                due.
                                                                                                                                                                                                                                The
                                                                                                                                                                                                                                Company
                                                                                                                                                                                                                                has
                                                                                                                                                                                                                                included
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                impact
                                                                                                                                                                                                                                of
                                                                                                                                                                                                                                this
                                                                                                                                                                                                                                litigation
                                                                                                                                                                                                                                as
                                                                                                                                                                                                                                liabilities
                                                                                                                                                                                                                                in
                                                                                                                                                                                                                                its
                                                                                                                                                                                                                                accounts
                                                                                                                                                                                                                                payable
                                                                                                                                                                                                                                because
                                                                                                                                                                                                                                it
                                                                                                                                                                                                                                does
                                                                                                                                                                                                                                not
                                                                                                                                                                                                                                dispute
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                amount
                                                                                                                                                                                                                                owed.
                                                                                                                                                                                                                                In
                                                                                                                                                                                                                                2009,
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                Company
                                                                                                                                                                                                                                recorded
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                amount
                                                                                                                                                                                                                                claimed.
                                                                                                                                                                                                                                The
                                                                                                                                                                                                                                Company
                                                                                                                                                                                                                                will
                                                                                                                                                                                                                                seek
                                                                                                                                                                                                                                to
                                                                                                                                                                                                                                settle
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                lawsuit
                                                                                                                                                                                                                                when
                                                                                                                                                                                                                                it
                                                                                                                                                                                                                                has
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                financial
                                                                                                                                                                                                                                resources
                                                                                                                                                                                                                                to
                                                                                                                                                                                                                                do
                                                                                                                                                                                                                                so.
                                                                                                                                                                                                                                The
                                                                                                                                                                                                                                suit
                                                                                                                                                                                                                                is
                                                                                                                                                                                                                                in
                                                                                                                                                                                                                                the
                                                                                                                                                                                                                                discovery
                                                                                                                                                                                                                                stage.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | In
                                                                                                                                                                October
                                                                                                                                                                2012
                                                                                                                                                                the
                                                                                                                                                                State
                                                                                                                                                                of
                                                                                                                                                                Texas
                                                                                                                                                                filed
                                                                                                                                                                a
                                                                                                                                                                lawsuit
                                                                                                                                                                naming
                                                                                                                                                                Infinity-Texas,
                                                                                                                                                                the
                                                                                                                                                                Company
                                                                                                                                                                and
                                                                                                                                                                the
                                                                                                                                                                corporate
                                                                                                                                                                officers
                                                                                                                                                                of
                                                                                                                                                                Infinity-Texas,
                                                                                                                                                                seeking
                                                                                                                                                                $30,000
                                                                                                                                                                of
                                                                                                                                                                reclamation
                                                                                                                                                                costs
                                                                                                                                                                associated
                                                                                                                                                                with
                                                                                                                                                                a
                                                                                                                                                                single
                                                                                                                                                                well,
                                                                                                                                                                in
                                                                                                                                                                addition
                                                                                                                                                                to
                                                                                                                                                                administrative
                                                                                                                                                                expenses
                                                                                                                                                                and
                                                                                                                                                                penalties.
                                                                                                                                                                The
                                                                                                                                                                Company
                                                                                                                                                                has
                                                                                                                                                                engaged
                                                                                                                                                                in
                                                                                                                                                                negotiations
                                                                                                                                                                with
                                                                                                                                                                the
                                                                                                                                                                State
                                                                                                                                                                of
                                                                                                                                                                Texas
                                                                                                                                                                in
                                                                                                                                                                late
                                                                                                                                                                2012
                                                                                                                                                                and
                                                                                                                                                                early
                                                                                                                                                                2013
                                                                                                                                                                and
                                                                                                                                                                has
                                                                                                                                                                reached
                                                                                                                                                                a
                                                                                                                                                                settlement
                                                                                                                                                                agreement
                                                                                                                                                                that
                                                                                                                                                                would
                                                                                                                                                                reduce
                                                                                                                                                                the
                                                                                                                                                                aggregate
                                                                                                                                                                liability,
                                                                                                                                                                in
                                                                                                                                                                this
                                                                                                                                                                action
                                                                                                                                                                and
                                                                                                                                                                any
                                                                                                                                                                extension
                                                                                                                                                                of
                                                                                                                                                                this
                                                                                                                                                                to
                                                                                                                                                                other
                                                                                                                                                                Texas
                                                                                                                                                                wells,
                                                                                                                                                                to
                                                                                                                                                                $45,103,
                                                                                                                                                                which
                                                                                                                                                                amount
                                                                                                                                                                has
                                                                                                                                                                been
                                                                                                                                                                paid.
                                                                                                                                                                Certain
                                                                                                                                                                performance
                                                                                                                                                                obligations
                                                                                                                                                                remain
                                                                                                                                                                which
                                                                                                                                                                must
                                                                                                                                                                be
                                                                                                                                                                satisfied
                                                                                                                                                                before
                                                                                                                                                                August
                                                                                                                                                                1,
                                                                                                                                                                2013
                                                                                                                                                                in
                                                                                                                                                                order
                                                                                                                                                                to
                                                                                                                                                                finally
                                                                                                                                                                settle
                                                                                                                                                                and
                                                                                                                                                                dismiss
                                                                                                                                                                the
                                                                                                                                                                matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                      
| | - | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
| |   | Pending
                                                                                                                                                                                                                        satisfactory
                                                                                                                                                                                                                        performance
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        performance
                                                                                                                                                                                                                        obligations
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        their
                                                                                                                                                                                                                        acceptance
                                                                                                                                                                                                                        by
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        State
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Texas,
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        officers
                                                                                                                                                                                                                        retain
                                                                                                                                                                                                                        potential
                                                                                                                                                                                                                        liability
                                                                                                                                                                                                                        on
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        above
                                                                                                                                                                                                                        matter,
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        officers
                                                                                                                                                                                                                        are
                                                                                                                                                                                                                        held
                                                                                                                                                                                                                        personally
                                                                                                                                                                                                                        harmless
                                                                                                                                                                                                                        by
                                                                                                                                                                                                                        indemnification
                                                                                                                                                                                                                        provisions
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        Company.
                                                                                                                                                                                                                        Therefore
                                                                                                                                                                                                                        these
                                                                                                                                                                                                                        liabilities,
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        extent
                                                                                                                                                                                                                        they
                                                                                                                                                                                                                        might
                                                                                                                                                                                                                        become
                                                                                                                                                                                                                        actual,
                                                                                                                                                                                                                        are
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        obligations
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        Company.
                                                                                                                                                                                                                        The
                                                                                                                                                                                                                        extent
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        liabilities
                                                                                                                                                                                                                        associated
                                                                                                                                                                                                                        with
                                                                                                                                                                                                                        this
                                                                                                                                                                                                                        matter
                                                                                                                                                                                                                        was
                                                                                                                                                                                                                        estimated
                                                                                                                                                                                                                        by
                                                                                                                                                                                                                        Management
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        not
                                                                                                                                                                                                                        exceed
                                                                                                                                                                                                                        $780,000,
                                                                                                                                                                                                                        calculated
                                                                                                                                                                                                                        as
                                                                                                                                                                                                                        $30,000
                                                                                                                                                                                                                        for
                                                                                                                                                                                                                        each
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        26
                                                                                                                                                                                                                        Infinity-Texas
                                                                                                                                                                                                                        operated
                                                                                                                                                                                                                        wells.
                                                                                                                                                                                                                        This
                                                                                                                                                                                                                        related
                                                                                                                                                                                                                        liability,
                                                                                                                                                                                                                        less
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        payment
                                                                                                                                                                                                                        made
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        State
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Texas
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        2012
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        amount
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        $45,103,
                                                                                                                                                                                                                        is
                                                                                                                                                                                                                        classified
                                                                                                                                                                                                                        as
                                                                                                                                                                                                                        officer
                                                                                                                                                                                                                        indemnification
                                                                                                                                                                                                                        liability
                                                                                                                                                                                                                        on
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        consolidated
                                                                                                                                                                                                                        balance
                                                                                                                                                                                                                        sheets.



F-12







INFINITY
ENERGY RESOURCES, INC. AND SUBSIDIARIES

Notes
to Consolidated Financial Statements

(Unaudited)



Note
7 — Related Party Transactions



The
corporate office was located in Denver, Colorado until November 2008 when the Denver office was closed. The corporate office moved
to the business office of the CFO of the Company. The Company currently does not have any employees and the staff of the CFO provides
the office services. These services are billed at the CFO firm’s standard billing rate plus out-of-pocket expenses. For
the quarters ended March 31, 2013 and 2012, the Company was billed $0 and $86,715, respectively. The amount due to the CFO’s
firm for services provided was $767,407 at March 31, 2013 and December 31, 2012, included in accrued liabilities at both dates.



The
Company entered into a subordinated loan with Off-Shore in the aggregate amount of $1,275,000 for funds for the Nicaraguan Concessions.
This note was satisfied by the Company’s issuance of shares of Series B redeemable convertible preferred stock effective
April 13, 2012 to Off-Shore (see Note 3). The managing partner of Off-Shore and the CFO are partners in the accounting firm which
the Company uses for its corporate office. The Series B preferred stock continues to be held by Off-Shore.



As
of March 31, 2013 and December 31, 2012, the Company had accrued compensation to its officers and directors of $755,208 and $705,208,
respectively.



As
discussed in Note 2, on August 28, 2012, the Company borrowed $250,000 from an entity that is 49% owned by a board member of another
corporation for which Infinity’s CEO serves as CEO and chairman of the board. The Company issued a short-term note to bearing
interest at 8% per annum and maturing February 28, 2013 to such party. The note and all accrued interest was repaid on its maturity
date in accordance with the terms of the note. In connection with the transaction, the Company issued the lender a warrant exercisable
to purchase 120,000 shares of the Company’s common stock at a price of $2.50 per share, expiring August 2017.



Note
8 — Subsequent Events



In
April 2013, the Company issued two 60-day 8% notes in the amount of $100,000 each, accompanied by warrants to purchase 200,000
shares of the Company’s common stock at $2.50 per share. The exercise price of the warrants would be reduced to $.10
per share and the number of warrants will increase to 2,000,000 if the notes and related interest thereon are not paid timely
at their maturity dates.



Subsequent
to March 31, 2013 and through May 16, 2013, the Company sold 635,420 units, each consisting of one share of common stock and one
half of a common stock purchase warrant, at $1.60 per unit, for total proceeds of $1,016,672. For every two units purchased the
Company issued one full warrant. Each warrant has an exercise price of $2.50 per share and a term of five years. One holder of
a promissory note issued by the Company in February 2013 in the amount of $125,000, exchanged such note and accrued interest for
units as payment in full. This exchange is included in the total number of units sold and proceeds indicated above.



F-13







ITEM 2.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The
following information should be read in conjunction with the Unaudited Consolidated Financial Statements and Notes presented elsewhere
in this Quarterly Report on Form 10-Q. Infinity follows the full-cost method of accounting for oil and gas properties. See “Summary
of Significant Accounting Policies,” included in Note 1 to the Consolidated Financial Statements for the Three Months
Ended March 31, 2013 and the Year Ended December 31, 2012.



Infinity
Energy Resources, Inc. and its subsidiaries, (collectively, “Infinity,” “Company,” “we,” “us”
and “our”) are engaged in the acquisition and exploration of oil and gas properties offshore Nicaragua in the Caribbean
Sea.



On
March 5, 2009 Infinity signed the contracts relating to its Nicaraguan Concessions. Infinity has submitted an environmental study
and the development of geological information from reprocessing and additional evaluation of existing 2-D seismic data that was
acquired over the Nicaraguan Concessions located offshore. Infinity is currently seeking offers from other industry operators
for interests in the acreage in exchange for cash and a carried interest in exploration and development operations. The funds
raised through the subordinated note transaction and Forbearance advances from the bank were used to fund these expenses. No assurance
can be given that these funds will be sufficient to cover the exploration and development cost until a partner is found.



We
do not have any off-balance sheet debt nor did we have any transactions, arrangements, obligations (including contingent obligations)
or other relationships with any unconsolidated entities or other persons that may have material current or future effect on financial
conditions, changes in the financial conditions, results of operations, liquidity, capital expenditures, capital resources, or
significant components of revenue or expenses.



FORWARD-LOOKING
STATEMENTS



This
Report on Form 10-Q for the three months ended March 31, 2013, contains certain 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,
which are intended to be covered by the safe harbors created thereby. To the extent that there are statements that are not recitations
of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties.
In any forward-looking statement, where we express an expectation or belief as to future results or events, such expectation or
belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of
expectation or belief will be achieved or accomplished.



The
actual results or events may differ materially from those anticipated and as reflected in forward-looking statements included
herein. Factors that may cause actual results or events to differ from those anticipated in the forward-looking statements included
herein include the Risk Factors described in Item 1A of our Registration Statement on Form 10 filed on May 13, 2011, as amended
on July 1, 2011and April 4, 2012.



Factors
that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to
be adversely affected include, but are not limited to: (i) we have a history of losses and are experiencing substantial liquidity
problems; (ii) we have been unable to satisfy most of our current liabilities; (iii) we require working capital for our operations
for the next 12 months and capital to continue our exploration and development efforts on the Nicaraguan Concessions and there
can be no assurances we will be able to obtain it or do so on terms favorable to us; (iv) we and our independent registered public
accounting firm have concluded that there exists substantial doubt about our ability to continue as a going concern; (v) our Nicaraguan
Concessions and planned future exploration activities are in a country with a developing economy and are subject to the risks
of political and economic instability associated with such economies; (vi) exploration and development of our Nicaraguan Concessions
will require large amounts of capital or a commercial relationship with an industry operator which we may not be able to obtain;
(vii) we may not have sufficient resources to conduct seismic mapping on our Nicaraguan Concessions; (viii) the oil and gas exploration
business involves a high degree of business and financial risk; (ix) we will be subject to regulations affecting our activities
with the Nicaraguan Concessions; (x) our operations may be adversely affected by changes in the fiscal regime of Nicaragua; (xi)
we are continuing to negotiate with our creditors and may face additional claims in the future; (xii) oil prices may be affected
by regional factors; (xiii) any future production will be contingent on successful exploration, development and acquisitions to
establish reserves and revenue in the future; (xiv) the oil and gas industry is highly competitive; (xv) exploratory drilling
is an uncertain process with many risks; (xvi) oil and gas prices are volatile, and declines in prices would hurt our revenues
and ability to achieve profitable operations; (xvii) our common stock is traded on the Over the Counter QB Tier Market (OTCQB);
(xviii) we depend on key personnel; (xix) sufficient voting power by coalitions of a few of our larger stockholders to make corporate
governance decisions that could have significant effect on us and the other stockholders; (xx) sale of substantial amounts of
our common stock that may have a depressive effect on the market price of the outstanding shares of our common stock; (xxi) our
issuance of common and Series A redeemable convertible preferred stock to Amegy and Series B redeemable convertible preferred
stock to Off-Shore diluted the ownership interests of our existing stockholders and the possible issuance of additional common
stock subject to options and warrants that may dilute the interest of stockholders; (xxii) our ability to comply with Sarbanes-Oxley
Act of 2002 Section 404; (xxiii) our nonpayment of dividends and lack of plans to pay dividends in the future; (xxiv) future sale
of a substantial number of shares of our common stock that could depress the trading price of our common stock, lower our value
and make it more difficult for us to raise capital; (xxv) our additional securities available for issuance, which, if issued,
could adversely affect the rights of the holders of our common stock; (xxvi) our stock price is likely to be highly volatile due
to a number of factors, including a relatively limited public float; and (xxvii) indemnification of our officers and directors.



3







Readers
are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date
hereof. We believe the information contained in this Form 10-Q to be accurate as of the date hereof. Changes may occur after that
date, and we will not update that information except as required by law in the normal course of our public disclosure practices.



2012
Operational and Financial Objectives



Corporate
Activities



On
April 14, 2011, we announced that we had completed and filed with the Nicaraguan government the Environmental Impact Assessment
(“EIA”) covering proposed seismic activities on the 1.4 million-acres in our Nicaraguan Concessions. The filing of
the EIA will be followed by a “comment period” during which there will be interaction among Infinity; the Ministerio
del Ambiente y los Recursos Naturales de Nicaragua, an agency of the Nicaraguan government; and the autonomous regions of Nicaragua
that are nearest the Nicaraguan Concessions. During this process, we will continue to maintain our relationship with the autonomous
regions. After the EIA has been formally approved, Infinity expects to be cleared to commence 3-D seismic mapping activities in
the area, although no assurances can be offered in this regard. See Liquidity and Capital Resources below.



Subject
to obtaining sufficient capital, we plan to commence our seismic mapping activities. The 3-D seismic program will seek to further
evaluate the structures that were previously identified with 2-D seismic in the Eocene Zone. Our geological consultants have estimated
that these Eocene structures may contain recoverable oil in place. In addition, 3-D seismic should provide our first look at the
potential for oil resources in the Cretaceous Zone, which we could not evaluate using less precise 2-D seismic mapping.



We
intend to finance our business strategy through external financing, which may include debt and equity capital raised in public
and private offerings, joint ventures, sale of working or other interests, employment of working capital and cash flow from operations,
if any, net proceeds from the sales of assets.



Our
ability to complete these activities is dependent on a number of factors, including, but not limited to:



| | ● | The
    availability of the capital resources required to fund the activity;
| | - | ----------------------------------------------------------------------------
| |   |                                                                             
| | ● | The
    availability of third party contractors for completion services; and



Results
of operations for the three months ended March 31, 2013 compared to the three months ended March 31, 2012



Infinity
incurred a net loss applicable to common shareholders of $(2,147,982), or $(0.10) per diluted share, for the three months ended
March 31, 2013 compared to a net loss of $(460,733), or $(0.02) per diluted share, for the three months ended March 31, 2012.
The Company’s Series A and Series B redeemable convertible preferred stock, issued April 13, 2012, were therefore not outstanding
for the entire three months ended March 31, 2012, but were outstanding for the entire three months ended March 31, 2013. In 2013,
the 6% cumulative dividend accrued relative to the period, as well as the accretion in the value ascribed to the preferred shares
between those dates (which represent value attributable to holders of the preferred rather than common shares) increase the Company’s
actual net loss of $(1,399,766) to arrive at the loss applicable to common shareholders in the determination of basic and diluted
net loss per share.



4







The
Company’s consolidated statement of operations for the three months ended March 31, 2012 segregate the operating expenses
of the company’s formerly 100% owned subsidiary, Infinity-Texas, which was sold in its entirety effective July 31, 2012,
as “Loss of discontinued operation.”



Revenue



The
Company had no revenues in either the three months ending March 31, 2013 or 2012. The Company focused solely on the exploration,
development and financing of the Nicaraguan Concessions.



General
and Administrative Expenses



General
and administrative expenses in the three months ended March 31, 2013 were $989,102 as compared with $194,313 for the same period
in 2012. This increase is substantially attributable to stock-based compensation cost reflected in the three months ended March
31, 2013 in the aggregate amount of $831,932, which results from the adjustment of the fair value of, and recognition of progressive
vesting of, certain stock options awarded in November 2012 to Company officers and the Company’s legal counsel. This additional
cost is reflected in the three months ended March 31, 2013 as compensation ($766,157) and legal ($65,775) expense.



Other
income (expense)



Interest
expense net of amounts capitalized to oil and gas properties decreased from $337,672 for the three months ended March 31, 2012
to $358,297 for the three months ended March 31, 2013. Although the increase is relatively small at some 6%, the nature of the
interest expense is entirely different in 2013 as compared with 2012. The interest in the 2012 period was related to the debt
to Amegy and Off-Shore which was outstanding for the entire period in 2012 and was satisfied April 13, 212 by the issuance of
Series A and B redeemable convertible preferred stock (see Note 3). The interest expense in 2013 is largely attributable to interest
accrued on, and amortization of debt discount related to, borrowings on various short-term notes payable, which aggregated $348,507
for the period.



The
change in derivative fair value, which can be either an “other expense” or an “other income” item, varied
significantly from the three months ended March 31, 2012, when it was income of $118,685, to the same period in 2013, when it
was an expense of $(30,293). The 2012 income effect resulted from a decrease during the period in the fair value of the derivative
liability related to the Amegy Warrant (see Note 3), which warrant was cancelled in April 2012 and thus was not outstanding during
the three months ended March 31, 2013. During the three months ended March 31, 2013, the Company had warrants and related derivative
liabilities recorded related to short-term notes payable. The combined impact of the changes in fair value of the various derivative
liabilities outstanding during the 2013 period was an increase in such value (an expense item) of $(30,293). The derivative liability
associated with warrants on notes that remained outstanding at March 31, 2013 actually decreased in fair value, but the liability
related to warrants on the note repaid in the three months ended March 31, 2013 increased in fair value, in a larger amount, before
the related note was repaid, at which date derivative liability, in accordance with generally accepted accounting principles,
was effectively terminated and its balance became a contribution to additional paid-in capital. These derivative values, which
are required to be presented in accordance with generally accepted accounting principles, primarily reflect the liability associated
with remaining life of the related warrants with changes in fair value being principally impacted by the volatility of the Company’s
stock price.



Income
Tax



Infinity
reflected no net income tax benefit or expense in the three month periods ended March 31 in either 2013 or 2012. The net operating
losses generated both periods increased Infinity’s gross deferred tax asset related to future ability to utilize net operating
losses to reduce future income tax outlays. Due to uncertainty as to the ultimate ability of the Company to utilize its net deferred
tax asset, the Company has recognized no net deferred tax benefit, and has, as a result, offset its gross deferred tax benefit
with a 100% valuation allowance.



Liquidity
and Capital Resources; Going Concern



The
Company has had a history of losses. The Company continues to have a significant working capital deficit and continues to experience
substantial liquidity issues.



The
Company conducted an environmental study and developed geological information from the reprocessing and additional evaluation
of existing 2-D seismic data acquired over its Nicaraguan Concessions. We issued letters of credit totaling $851,550 for this
and additional work on the leases. The Company has completed certain activity under the initial work plan. The Company intends
to seek joint venture or working interest partners prior to the commencement of any exploration or drilling operations on the
Nicaraguan Concessions.



5







Phase
II of Sub Period 1 started April 13, 2013, when the Nicaraguan Government approved the environmental impact study. The minimum
cash requirements for the next twelve month period will be $1,894,000 of which $1,634,677 is related to seismic and $259,300 is
related to the training and area fees under the concession. See Note 1 for discussion of Going Concern. The Company estimates
that the actual cost of seismic for the acreage will be $4,000,000 over the next 18 month period.



We
plan to raise capital to satisfy the foregoing needs through an offering of our equity or debt securities and/or through a commercial
relationship with other industry operators, which may involve the granting of revenue or other interests in the Nicaraguan Concessions
in exchange for cash and a carried interest in exploration and development operations or the creation of a joint venture or other
strategic partnership. There can be no assurance that we will obtain such funding or obtain it on terms acceptable to us. Further,
if we cannot meet our obligations respecting the Nicaraguan Concessions, we will lose our rights to them.



Due
to the uncertainties related to these matters, there exists substantial doubt about our ability to continue as a going concern.
The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts
or the amount and classification of liabilities that might result should we be unable to continue as a going concern.



ITEM
3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK



(Not
Applicable)



ITEM
4. CONTROLS AND PROCEDURES



Evaluation
of Disclosure Controls and Procedures



Our
Chief Executive Officer, Stanton Ross and Chief Financial Officer, Daniel F. Hutchins evaluated the effectiveness of our disclosure
controls and procedures (as defined in Rule 13a-15(e) under the Exchange Act) as of the end of the period covered by this Report.
Based on the evaluation, Messrs. Ross and Hutchins have concluded that the Company’s disclosure controls and procedures
are not effective in assuring that financial statement presentation and disclosure are in conformity with those which are required
to be included in our periodic SEC filings. The lack of timeliness is a material weakness which Management believes could be relieved
with sufficient working capital to allow full-time accounting staff or the equivalent.



Changes
in Internal Control Over Financial Reporting



There
have been no changes in our internal control over financial reporting that occurred during our most recent fiscal quarter that
have materially affected or are reasonably likely to materially affect our internal control over financial reporting.



Internal
control systems, no matter how well designed and operated, have inherent limitations. Therefore, even a system which is determined
to be effective cannot provide absolute assurance that all control issues have been detected or prevented. Our systems of internal
controls are designed to provide reasonable assurance with respect to financial statement preparation and presentation.



6







PART
II Other Information



ITEM
1. LEGAL PROCEEDINGS



The
Company is currently involved in litigation as follows:



| | ● | Exterran
                                                                                                                                                                                                                        Energy
                                                                                                                                                                                                                        Solutions,
                                                                                                                                                                                                                        L.P.,
                                                                                                                                                                                                                        f/k/a
                                                                                                                                                                                                                        Hanover
                                                                                                                                                                                                                        Compression
                                                                                                                                                                                                                        Limited
                                                                                                                                                                                                                        Partnership,
                                                                                                                                                                                                                        who
                                                                                                                                                                                                                        filed
                                                                                                                                                                                                                        an
                                                                                                                                                                                                                        action
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        District
                                                                                                                                                                                                                        Court
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Erath
                                                                                                                                                                                                                        County,
                                                                                                                                                                                                                        Texas,
                                                                                                                                                                                                                        number
                                                                                                                                                                                                                        CV30512,
                                                                                                                                                                                                                        on
                                                                                                                                                                                                                        March
                                                                                                                                                                                                                        31,
                                                                                                                                                                                                                        2010
                                                                                                                                                                                                                        against
                                                                                                                                                                                                                        Infinity
                                                                                                                                                                                                                        Oil
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        Gas
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Texas,
                                                                                                                                                                                                                        Inc.,
                                                                                                                                                                                                                        Infinity
                                                                                                                                                                                                                        Energy
                                                                                                                                                                                                                        Resources,
                                                                                                                                                                                                                        Inc.,
                                                                                                                                                                                                                        Longhorn
                                                                                                                                                                                                                        Properties,
                                                                                                                                                                                                                        LLC,
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        Forest
                                                                                                                                                                                                                        Oil
                                                                                                                                                                                                                        Corporation.
                                                                                                                                                                                                                        Exterran
                                                                                                                                                                                                                        Energy
                                                                                                                                                                                                                        Solutions,
                                                                                                                                                                                                                        L.P.
                                                                                                                                                                                                                        provided
                                                                                                                                                                                                                        certain
                                                                                                                                                                                                                        gas
                                                                                                                                                                                                                        compressor
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        related
                                                                                                                                                                                                                        equipment
                                                                                                                                                                                                                        pursuant
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        a
                                                                                                                                                                                                                        Gas
                                                                                                                                                                                                                        Compressor/Production
                                                                                                                                                                                                                        Equipment
                                                                                                                                                                                                                        Master
                                                                                                                                                                                                                        Rental
                                                                                                                                                                                                                        &
                                                                                                                                                                                                                        Servicing
                                                                                                                                                                                                                        Agreement
                                                                                                                                                                                                                        with
                                                                                                                                                                                                                        Infinity
                                                                                                                                                                                                                        dated
                                                                                                                                                                                                                        January
                                                                                                                                                                                                                        3,
                                                                                                                                                                                                                        2005
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        Erath
                                                                                                                                                                                                                        County,
                                                                                                                                                                                                                        Texas
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        is
                                                                                                                                                                                                                        claiming
                                                                                                                                                                                                                        breach
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        contract
                                                                                                                                                                                                                        for
                                                                                                                                                                                                                        failure
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        pay
                                                                                                                                                                                                                        amounts
                                                                                                                                                                                                                        due.
                                                                                                                                                                                                                        The
                                                                                                                                                                                                                        Company
                                                                                                                                                                                                                        has
                                                                                                                                                                                                                        included
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        impacts
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        this
                                                                                                                                                                                                                        litigation
                                                                                                                                                                                                                        as
                                                                                                                                                                                                                        liabilities
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        its
                                                                                                                                                                                                                        accounts
                                                                                                                                                                                                                        payable
                                                                                                                                                                                                                        because
                                                                                                                                                                                                                        it
                                                                                                                                                                                                                        does
                                                                                                                                                                                                                        not
                                                                                                                                                                                                                        dispute
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        amount
                                                                                                                                                                                                                        owed.
                                                                                                                                                                                                                        In
                                                                                                                                                                                                                        2009
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        Company
                                                                                                                                                                                                                        recorded
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        amount
                                                                                                                                                                                                                        claimed.
                                                                                                                                                                                                                        The
                                                                                                                                                                                                                        Company
                                                                                                                                                                                                                        will
                                                                                                                                                                                                                        seek
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        settle
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        lawsuit
                                                                                                                                                                                                                        when
                                                                                                                                                                                                                        it
                                                                                                                                                                                                                        has
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        financial
                                                                                                                                                                                                                        resources
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        do
                                                                                                                                                                                                                        so.
                                                                                                                                                                                                                        The
                                                                                                                                                                                                                        suit
                                                                                                                                                                                                                        is
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        discovery
                                                                                                                                                                                                                        stage.
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ● | In
                                                                                                                                                                                                                        October
                                                                                                                                                                                                                        2012
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        State
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Texas
                                                                                                                                                                                                                        filed
                                                                                                                                                                                                                        a
                                                                                                                                                                                                                        lawsuit
                                                                                                                                                                                                                        naming
                                                                                                                                                                                                                        Infinity-Texas,
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        Company
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        corporate
                                                                                                                                                                                                                        officers
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Infinity-Texas,
                                                                                                                                                                                                                        seeking
                                                                                                                                                                                                                        $30,000
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        reclamation
                                                                                                                                                                                                                        costs
                                                                                                                                                                                                                        associated
                                                                                                                                                                                                                        with
                                                                                                                                                                                                                        a
                                                                                                                                                                                                                        single
                                                                                                                                                                                                                        well,
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        addition
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        administrative
                                                                                                                                                                                                                        expenses
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        penalties.
                                                                                                                                                                                                                        The
                                                                                                                                                                                                                        Company
                                                                                                                                                                                                                        has
                                                                                                                                                                                                                        engaged
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        negotiations
                                                                                                                                                                                                                        with
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        State
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        Texas
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        late
                                                                                                                                                                                                                        2012
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        early
                                                                                                                                                                                                                        2013
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        has
                                                                                                                                                                                                                        reached
                                                                                                                                                                                                                        a
                                                                                                                                                                                                                        settlement
                                                                                                                                                                                                                        agreement
                                                                                                                                                                                                                        that
                                                                                                                                                                                                                        would
                                                                                                                                                                                                                        reduce
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        aggregate
                                                                                                                                                                                                                        liability,
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        this
                                                                                                                                                                                                                        action
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        any
                                                                                                                                                                                                                        extension
                                                                                                                                                                                                                        of
                                                                                                                                                                                                                        this
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        other
                                                                                                                                                                                                                        Texas
                                                                                                                                                                                                                        wells,
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        $45,103,
                                                                                                                                                                                                                        which
                                                                                                                                                                                                                        amount
                                                                                                                                                                                                                        has
                                                                                                                                                                                                                        been
                                                                                                                                                                                                                        paid.
                                                                                                                                                                                                                        Certain
                                                                                                                                                                                                                        performance
                                                                                                                                                                                                                        obligations
                                                                                                                                                                                                                        remain
                                                                                                                                                                                                                        which
                                                                                                                                                                                                                        must
                                                                                                                                                                                                                        be
                                                                                                                                                                                                                        satisfied
                                                                                                                                                                                                                        before
                                                                                                                                                                                                                        August
                                                                                                                                                                                                                        1,
                                                                                                                                                                                                                        2013
                                                                                                                                                                                                                        in
                                                                                                                                                                                                                        order
                                                                                                                                                                                                                        to
                                                                                                                                                                                                                        finally
                                                                                                                                                                                                                        settle
                                                                                                                                                                                                                        and
                                                                                                                                                                                                                        dismiss
                                                                                                                                                                                                                        the
                                                                                                                                                                                                                        matter.                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                          
| | - | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
| |   |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                             
| |   | Pending
                                                                                                                                                                                                                                                                                                            satisfactory
                                                                                                                                                                                                                                                                                                            performance
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            performance
                                                                                                                                                                                                                                                                                                            obligations
                                                                                                                                                                                                                                                                                                            and
                                                                                                                                                                                                                                                                                                            their
                                                                                                                                                                                                                                                                                                            acceptance
                                                                                                                                                                                                                                                                                                            by
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            State
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            Texas,
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            officers
                                                                                                                                                                                                                                                                                                            retain
                                                                                                                                                                                                                                                                                                            potential
                                                                                                                                                                                                                                                                                                            liability
                                                                                                                                                                                                                                                                                                            on
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            above
                                                                                                                                                                                                                                                                                                            matter,
                                                                                                                                                                                                                                                                                                            and
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            officers
                                                                                                                                                                                                                                                                                                            are
                                                                                                                                                                                                                                                                                                            held
                                                                                                                                                                                                                                                                                                            personally
                                                                                                                                                                                                                                                                                                            harmless
                                                                                                                                                                                                                                                                                                            by
                                                                                                                                                                                                                                                                                                            indemnification
                                                                                                                                                                                                                                                                                                            provisions
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            Company.
                                                                                                                                                                                                                                                                                                            Therefore
                                                                                                                                                                                                                                                                                                            these
                                                                                                                                                                                                                                                                                                            liabilities,
                                                                                                                                                                                                                                                                                                            to
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            extent
                                                                                                                                                                                                                                                                                                            they
                                                                                                                                                                                                                                                                                                            might
                                                                                                                                                                                                                                                                                                            become
                                                                                                                                                                                                                                                                                                            actual,
                                                                                                                                                                                                                                                                                                            are
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            obligations
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            Company.
                                                                                                                                                                                                                                                                                                            The
                                                                                                                                                                                                                                                                                                            extent
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            liabilities
                                                                                                                                                                                                                                                                                                            associated
                                                                                                                                                                                                                                                                                                            with
                                                                                                                                                                                                                                                                                                            this
                                                                                                                                                                                                                                                                                                            matter
                                                                                                                                                                                                                                                                                                            was
                                                                                                                                                                                                                                                                                                            estimated
                                                                                                                                                                                                                                                                                                            by
                                                                                                                                                                                                                                                                                                            Management
                                                                                                                                                                                                                                                                                                            to
                                                                                                                                                                                                                                                                                                            not
                                                                                                                                                                                                                                                                                                            exceed
                                                                                                                                                                                                                                                                                                            $780,000,
                                                                                                                                                                                                                                                                                                            calculated
                                                                                                                                                                                                                                                                                                            as
                                                                                                                                                                                                                                                                                                            $30,000
                                                                                                                                                                                                                                                                                                            for
                                                                                                                                                                                                                                                                                                            each
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            26
                                                                                                                                                                                                                                                                                                            Infinity-Texas
                                                                                                                                                                                                                                                                                                            operated
                                                                                                                                                                                                                                                                                                            wells.
                                                                                                                                                                                                                                                                                                            This
                                                                                                                                                                                                                                                                                                            related
                                                                                                                                                                                                                                                                                                            liability,
                                                                                                                                                                                                                                                                                                            less
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            payment
                                                                                                                                                                                                                                                                                                            made
                                                                                                                                                                                                                                                                                                            to
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            State
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            Texas
                                                                                                                                                                                                                                                                                                            in
                                                                                                                                                                                                                                                                                                            2012
                                                                                                                                                                                                                                                                                                            in
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            amount
                                                                                                                                                                                                                                                                                                            of
                                                                                                                                                                                                                                                                                                            $45,103,
                                                                                                                                                                                                                                                                                                            is
                                                                                                                                                                                                                                                                                                            classified
                                                                                                                                                                                                                                                                                                            as
                                                                                                                                                                                                                                                                                                            officer
                                                                                                                                                                                                                                                                                                            indemnification
                                                                                                                                                                                                                                                                                                            liability
                                                                                                                                                                                                                                                                                                            on
                                                                                                                                                                                                                                                                                                            the
                                                                                                                                                                                                                                                                                                            consolidated
                                                                                                                                                                                                                                                                                                            balance
                                                                                                                                                                                                                                                                                                            sheet
                                                                                                                                                                                                                                                                                                            dated
                                                                                                                                                                                                                                                                                                            March
                                                                                                                                                                                                                                                                                                            31,
                                                                                                                                                                                                                                                                                                            2013.



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



During the
three months ended March 31, 2013, the Company borrowed an aggregate of $575,000 from four entities or individuals. Each note
is for a term of 60 days and bears interest at 8% per annum. At the date of borrowing, each entity or individual was also issued
a warrant for the purchase of shares of common stock at $2.50 per share, for a total of 575,000 shares. The warrants are for a
period of two years from the date of the note. The warrants provide that should the notes and interest not be paid in full by
their respective maturity dates (ranging from April 13 to May 29, 2013) the warrants’ exercise prices would be reduced to
$0.10 per share and the number of shares issuable under the warrants would be increased to an aggregate of 5,750,000 shares. The
ratchet provision in the warrants’ exercise prices required that these be accounted as derivative liabilities. The Company
recorded the estimated fair value of the warrants as discounts on note payable in the aggregate amount of $526,212 and as a derivative
liability in the same amount, each as of the date of the respective note. The discounts are being amortized on a straight line
basis over the terms of the notes and interest expense for the three months ended March 31, 2013 includes discount amortization
in the amount of $316,737.  The Company used the loan proceeds from these notes to retire short-term promissory notes it
had previously issued and to provide working capital. An officer of the Company sold the notes issued in the quarter ended March
31, 2013, and the Company paid no compensation to any party in connection with such sales.



ITEM
3. DEFAULTS UPON SENIOR SECURITIES



None.



ITEM
4. MINE SAFETY DISCLOSURES



None.



ITEM
5. OTHER INFORMATION



None.



ITEM
6. EXHIBITS



(c)
Exhibits.



|31.1* |  | Certification
    of Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                             
|----- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------
|31.2* |  | Certification
    of Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002                                             
|32*   |  | Certification
    of Principal Executive Officer and Principal Financial Officer pursuant to 18 U.S.C. 1350 (Section 906 of the Sarbanes-Oxley
    Act)





|* |  | Filed herewith.
|- |  | ---------------







7







SIGNATURES



In
accordance with the requirements of the Exchange Act, the Registrant caused this report to be signed on its behalf by the undersigned
thereunto duly authorized.



|Signature                  |  | Capacity                                         |  | Date            
|-------------------------- |  | ------------------------------------------------ |  | ----------------
|                           |  |                                                  |  |                 
|/s/
    Stanton E. Ross    |  | Chief
    Executive Officer                      |  | May
    20, 2013
|Stanton
    E. Ross        |  | (Principal
    Executive Officer)                |  |                 
|                           |  |                                                  |  |                 
|/s/
    Daniel F. Hutchins |  | Chief
    Financial Officer                      |  | May
    20, 2013
|Daniel
    F. Hutchins     |  | (Principal
    Financial and Accounting Officer) |  |                 





8