EDGAR 10-K Filing

Company CIK: 822746
Filing Year: 2021
Filename: 822746_10-K_2021_0001493152-21-007173.json

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ITEM 1. BUSINESS
Item 1. Business.
DESCRIPTION OF BUSINESS
COVID - 19 Pandemic
The financial statements contained in this Report as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2020. Since early 2020, economies throughout the world have been severely disrupted by the effects of the quarantines, business closures and the reluctance of individuals to leave their homes as a result of the outbreak of the coronavirus (Covid-19) and this may limit access to our management, support staff and professional advisors. In particular, the oil and gas market has been severely impacted by the negative effects of the coronavirus because of the substantial and abrupt decrease in the demand for oil and gas globally. In addition, the capital markets have been disrupted and our efforts to raise necessary capital will likely be adversely impacted by the outbreak of the virus and we cannot forecast with any certainty when the disruptions caused by it will cease to impact our business and the results of our operations. In reading this report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties caused by the outbreak of Covid-19. These factors may not only impact our operations, financial condition and our ability to raise capital to support our operations but our overall ability to react timely to mitigate the impact of this event. Furthermore, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission.
Overview
Since 2009 we had planned to pursue the exploration of potential oil and gas resources in the United States and in the Perlas and Tyra concession blocks offshore Nicaragua in the Caribbean Sea (the “Nicaraguan Concessions” or “Concessions”), which contain a total of approximately 1.4 million acres. We sold our wholly-owned subsidiary Infinity Oil and Gas of Texas, Inc. in 2012 and its wholly-owned subsidiary, Infinity Oil and Gas of Wyoming, Inc., was administratively dissolved in 2009. We have abandoned our efforts relating to the Concessions, as explained below.
We also began assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of natural gas and oil properties in the United States, including the possibility of acquiring businesses or assets that provide support services for the production of oil and gas in the United States. As a result, on July 31, 2019 we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold for oil & gas properties, subject to overriding royalties to third parties, in the Central Kansas Uplift geological formation covering over 11,000 contiguous acres (the “Properties”). We paid a nonrefundable deposit of $50,000 to bind the purchase option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2020 and the parties agreed on an extension of such option and a lower purchase price as described below in more detail under “Business Strategy and Recent Development.”
If we are able to complete the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable. Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
We must continue to raise substantial amounts of debt and equity capital from available sources in the immediate future in order to fund the (i) the acquisition and development of the Properties under the Option; (ii) normal day-to-day operations and corporate overhead; and (iii) outstanding debt and other financial obligations as they become due, as described below. These are substantial operational and financial issues that must be successfully addressed during 2021.
We are actively pursuing new sources of debt and equity capital to fund the needs enumerated above. We intend to obtain extensions of the maturity dates for its debt and other obligations including compromises of the debt obligations. In addition, we will seek offers from industry operators and other third parties for interests in the Properties in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. We have also restructured certain obligations that were in default during 2020. However, there can be no assurance that it will be able to obtain such funding, extensions or additional restructurings or on what terms.
Nicaragua
We began pursuing an oil and gas exploration opportunity offshore Nicaragua in the Caribbean Sea in 1999. Since such time, we built relationships with the Instituto Nicaraguense de Energia (“INE”) and undertook the geological and geophysical research that helped us to become one of only six companies qualified to bid on offshore blocks in the first international bidding round held by INE in January 2003.
On March 5, 2009, we signed the contracts granting us the Perlas and Tyra concession blocks offshore Nicaragua (the “Nicaraguan Concessions” or “Concessions”). Since our acquisition of the Nicaraguan Concessions, we have conducted an environmental study and developed geological information from the reprocessing and additional evaluation of existing 2-D seismic data acquired over our Perlas and Tyra concession blocks. In April 2013, the Nicaraguan government formally approved our Environmental Impact Assessment, at which time we commenced significant activity under the initial work plan involving the acquisition of new seismic data on the two Nicaraguan Concessions. We undertook seismic shoots during late 2013 that resulted in the acquisition of new 2-D and 3-D seismic data and have reviewed it to select initial drilling sites for exploratory wells.
We were in default of various provisions of the 30-year Concession for both Perlas and Tyra blocks for several years and the Nicaraguan Government has terminated the Concessions. We had been seeking a resolution of these defaults including the ability to extend, renew and/or renegotiate the terms of the Nicaraguan Concessions with the Nicaraguan government to cure the defaults; however, the political climate and domestic issues, as well other factors, caused the Company to abandon such efforts and the Concessions in 2020. As a result, the Nicaraguan Concession agreement has been terminated and the Company has abandoned all of its efforts to extend, renew and/or renegotiate the terms of the Nicaraguan Concessions with the Nicaraguan government to cure the defaults as of December 31, 2020.
Business Strategy and Recent Development
Our 2020 operating objectives have focused on the resolution of obligations in default and to acquire the Properties.
Recent financings -
Issuance of Convertible Preferred Stock - On March 26, 2021, the Company issued Convertible Preferred Stock (the “Preferred Stock”), with an aggregate principal face amount of up to $2,500,000 subject to a 10% original issue discount. The Preferred Stock is, subject to certain conditions, convertible into common stock at a rate of $0.32 per share and will be subject to a 10% dividend rate per annum, payable quarterly in cash or registered common stock, subject to equity conditions. The Holders were also granted demand registration rights. The Company issued warrants in addition to the Preferred Stock investors to purchase up to 6,410,250 shares (assuming the $2.5 million offering is fully subscribed) of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments. The common stock purchase warrants are exercisable commencing six months after issuance on a cashless basis at the Holders discretion with a term of five years. On March 26, 2021 investors purchased Preferred Stock with an aggregate cash purchase price of $2,050,000 together with warrants to purchase a total of 5,256,410 shares of common stock. The Company will allow additional investor purchases to complete the entire offering of an aggregate principal face amount of up to $2,500,000 before closing such offering.
The Company intends to use the proceeds of the Convertible Preferred Stock Offering to complete the acquisition and development of the Properties, to pay-off all outstanding convertible notes payable and for general working capital.
Issuance of Convertible Notes Payable - On August 19, 2020, we entered into a securities purchase agreement with an accredited investor (the “August Investor”) for our senior unsecured convertible note payable due August 19, 2021 (the “August Note”), with an aggregate principal face amount of approximately $365,169. The August Note is, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share (the “Fixed Conversion Price”). We also issued a five-year common stock purchase warrant (the “August Warrant”) to purchase up to 800,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments. The August Warrant is immediately exercisable and on a cashless basis if the shares underlying such warrant have not been registered within 180 days after the date of issuance. The August Investor purchased such securities from the Company for an aggregate purchase price of $325,000. We also granted the August Investor certain automatic and piggy-back registration rights whereby we agreed to register the resale by the August Investor of the shares underlying the August Warrant and the conversion of the August Note.
The August Note bears interest at a rate of eight percent (8%) per annum, may be voluntarily repaid in cash in full or in part by us at any time in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest in the event of the consummation by us of any public or private offering or other financing pursuant to which we receive gross proceeds of at least $2,500,000. The August Note is convertible at any time by the August Investor and we shall have the right to request that the August Investor convert the August Note in full or in part at the Fixed Conversion Price in the event that the VWAP (as defined in the August Note) of the Common Stock exceeds $0.75 for twenty consecutive trading days. In addition, pursuant to the August Note, so long as the August Note remains outstanding, we shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the Fixed Conversion Price, without written consent of the August Investor.
The conversion of the August Note and the exercise of the August Warrant are each subject to beneficial ownership limitations such that the August Investor may not convert the August Note or exercise the August Warrant to the extent that such conversion or exercise would result in the August Investor being the beneficial owner in excess of 4.99% (or, upon election of the August Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to us, provided that any increase in such limitation will not be effective until 61 days following notice to us.
We used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the Exchange Agreement (as defined and described below) and for general working capital.
Extinguishment of liabilities - On September 24, 2020, the Company entered into an Exchange and Settlement Agreement (the “Exchange Agreement”) with a note holder (the “Holder”), pursuant to which the Holder agreed to exchange its 8% promissory note in the original principal amount of $1,050,000, representing outstanding principal balance of $1,000,000 and accrued and unpaid interest thereon (which totaled $542,762 as of September 24, 2020), for (i) a cash payment in the amount of $100,000 and (ii) 737,532 newly issued shares of Common Stock (the “Exchange”).
In connection with the Exchange Agreement, we and the Holder agreed to terminate the following agreements: (i) the preemptive rights agreement, dated as of December 27, 2013, between the Company and the Holder, (ii) the revenue sharing agreement, dated as of May 30, 2014, between the Company and the Holder and (iii) the indemnity agreement, dated as of December 27, 2013, between the Company and the Holder. Additionally, pursuant to the Exchange Agreement, the Holder acknowledged the expiration on March 12, 2017, by its terms, of a common stock purchase warrant, issued to the Holder, for the purchase of up to 100,000 shares of Common Stock. We and the Holder also agreed to provide mutual limited releases, releasing each of them from all liabilities and obligations to the other, as between them with respect to claims relating to the Note, such preemptive rights agreement, the Holder’s warrant and all other agreements relating thereto.
The closing of the Exchange occurred concurrently with the execution of the Exchange Agreement. At the closing, we made the $100,000 cash payment and issued 737,532 shares of Common Stock (valued at $132,756 based on the closing market price of the shares on the date of the Exchange) to the Holder and the underlying documents and obligations summarized above were surrendered and/or cancelled.
Option to Acquire Oil and Gas Properties - On July 31, 2019, we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold for the Properties (the “Acquisition”). We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. We were not able to exercise the Option prior to December 31, 2019. On September 2, 2020, we acquired a new option from Core under similar terms as the previous Option (the “New Option”). The New Option grants us the right to acquire 100% of the working and leasehold interests in the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and we agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the New Option to January 11, 2021 which the parties are currently finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the Acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the Acquisition during the second quarter 2021.
Competition
We compete in virtually all facets of our businesses with numerous other companies in the oil and gas industry, including many that have significantly greater financial and other resources. Such competitors will be able to pay more for desirable oil and gas leases and to evaluate, bid for, and purchase a greater number of properties than our financial or personnel resources permit.
Our business strategy includes highly competitive oil and natural gas exploration, development and production. We face intense competition from a large number of independent exploration and development companies as well as major oil and gas companies in a number of areas such as obtaining the capital necessary to pursue our Nicaraguan Concessions and seeking to acquire the services, equipment, labor and materials necessary to explore, operate and develop those properties. Most of our competitors have financial and technological resources substantially exceeding those available to us. We cannot be sure that we will be successful in developing and operating profitable the Concessions in the face of this competition.
Government Regulation of the Oil and Gas Industry
General
Our business is affected by numerous laws and regulations, including, among others, laws and regulations relating to energy, environment, conservation and tax. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and/or criminal penalties, the imposition of injunctive relief or both. Moreover, changes in any of these laws and regulations could have a material adverse effect on our business. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot predict the overall effect of such laws and regulations on our future operations.
The following discussion contains summaries of certain laws and regulations and is qualified as mentioned above.
Environmental and Land Use Regulation
Various federal, state and local laws and regulations relating to the protection of the environment affect our operations and costs. The areas affected include:
● unit production expenses primarily related to the control and limitation of air emissions, spill prevention and the disposal of produced water;
● capital costs to drill development wells resulting from expenses primarily related to the management and disposal of drilling fluids and other oil and natural gas exploration wastes;
● capital costs to construct, maintain and upgrade equipment and facilities;
● operational costs associated with ongoing compliance and monitoring activities; and
● exit costs for operations that we are responsible for closing, including costs for dismantling and abandoning wells and remediating environmental impacts.
The environmental and land use laws and regulations affecting oil and natural gas operations have been changed frequently in the past, and in general, these changes have imposed more stringent requirements that increase operating costs and/or require capital expenditures to remain in compliance. Failure to comply with these requirements can result in civil and/or criminal fines and liability for non-compliance, clean-up costs and other environmental damages. It is also possible that unanticipated developments or changes in law could cause us to make environmental expenditures significantly greater than those we currently expect.
The following is a summary discussion of the framework of key environmental and land use regulations and requirements affecting oil and natural gas exploration, development, production and transportation operations.
Operating Hazards and Insurance
The oil and natural gas business involves a variety of operating risks. We were unable to maintain insurance against such potential risks and losses.
In addition, pollution and environmental risks are not insured. If a significant accident or other event occurs not covered by insurance, it could adversely affect us.
Employees
We have three employees, our CEO, COO and CFO, whose compensation has primarily been in the form of restricted stock grants. All cash salaries were suspended effective January 1, 2018. We also use outside contractors to perform services.

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ITEM 1A. RISK FACTORS
Item 1A. Risk Factors.
Not applicable.

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ITEM 1B. UNRESOLVED STAFF COMMENTS
Item 1B. Unresolved Staff Comments.
None.

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ITEM 2. PROPERTIES
Item 2. Properties.
This section contains an explanation and detail of some of the relevant project groupings from our overall inventory of projects and prospects. Our sole focus in previous years has been our Nicaraguan Concessions, which were located in the Caribbean Sea, offshore Nicaragua, which we have abandoned all of our efforts during 2020. During 2019 and 2020 we began implementing our strategy to acquire and develop oil producing properties in the continental United States. In that regard, we acquired an option to acquire oil and gas leases in central Kansas on approximately 11,000 acres (the “Properties”).
Kansas Properties
On July 31, 2019 we acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. We paid a nonrefundable deposit of $50,000 to bind the purchase option which gives it the right to acquire the Properties for $2.5 million prior to December 31, 2019. We were not able to exercise the option prior to December 31, 2019. On September 2, 2020, as described above, we acquired a New Option from which grants us the right to acquire 100% of the working and leasehold interests in the Properties at a reduced price of $900,000 prior to January 11, 2021, which the parties are finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the acquisition of the Properties during the second quarter 2021.
Proved Reserves Reporting
We had no proved reserves as of December 31, 2020 and 2019.
Production, Prices and Production Costs
We had no production during the years ended December 31, 2020 or 2019.
Development, Exploration and Acquisition Capital Expenditures
The following table sets forth certain information regarding the costs we incurred in the purchase of proved and unproved properties and in development and exploration activities:
Property acquisition costs:
Proved $ - $ -
Unproved
-
Total property acquisition costs - -
Development costs - -
Exploration costs - -
Total costs $ - $ -
We have capitalized the $75,000 value of common shares issued in consideration for the extension of the option to acquire the Kansas Oil & Gas option as a prepaid expense as of December 31, 2020. We expensed all of the costs related to the option to purchase the Kansas oil and gas properties totaling $76,415 during the year ended December 31, 2019 which expired on December 31, 2019.
There were no development, exploration or acquisition costs incurred during 2020 and 2019 on our domestic properties.
Drilling Activity
We had no drilling activity during the years ended December 31, 2020 or 2019.
Acreage Data
The following table sets forth the gross and net acres of developed and undeveloped oil and gas leases we held as of December 31, 2020.
Developed Acreage Undeveloped Acreage
Gross Net Gross Net
Onshore U.S. - - - -
Offshore Nicaragua - - - -
Total - - - -

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings.
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:
●
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 engaged in negotiations with the State of Texas in late 2012 and early 2013 and 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 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 have potential liability regarding the above matter, and the officers are held personally harmless by indemnification provisions of the Company. Therefore, to the extent they might actually occur, these liabilities are the obligations of the Company. Management estimates that the liabilities associated with this matter will 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 included in the asset retirement obligation on the accompanying balance sheets.
● Cambrian Consultants America, Inc. (“Cambrian”) filed an action in the District Court of Harris County, Texas, number CV2014-55719, on September 26, 2014 against Infinity Energy Resources, Inc. resulting from certain professional consulting services provided for quality control and management of seismic operations during November and December 2013 on the Nicaraguan Concessions. Cambrian provided these services pursuant to a Master Consulting Agreement with Infinity, dated November 20, 2013, and has claimed breach of contract for failure to pay amounts due. On December 8, 2014, a default judgment was entered against the Company in the amount of $96,877 plus interest and attorney fees. The Company has included the impact of this litigation as a liability in its accounts payable. The Company will seek to settle the default judgment when it has the financial resources to do so.
● Torrey Hills Capital, Inc. (“Torrey”) notified the Company by letter, dated August 15, 2014, of its demand for the payment of $56,000, which it alleged was unpaid and owed under a consulting agreement dated October 18, 2013. The parties entered into a consulting agreement under which Torrey agreed to provide investor relations services in exchange for payment of $7,000 per month and the issuance of 15,000 shares of common stock. The agreement was for an initial three month-term with automatic renewals unless terminated upon 30 days’ written notice by either party. The Company made payments totaling $14,000 and issued 15,000 shares of common stock during 2013. The Company contends that Torrey breached the agreement by not performing the required services and that it had provided proper notice of termination to Torrey. Furthermore, the Company contends that the parties agreed to settle the dispute on or about June 19, 2014 under which it would issue 2,800 shares of common stock in full settlement of any balance then owed and final termination of the agreement. Torrey disputed the Company’s contentions and submitted the dispute to binding arbitration. The Company was unable to defend itself and the arbitration panel awarded Torrey a total of $79,594 in damages. The Company has accrued this amount in accounts payable as of December 31, 2020 and 2019, which management believes is sufficient to provide for the ultimate resolution of this dispute.
● Joseph Ryan (“Ryan”) filed an action in the District Court of Johnson County, Kansas, number 20CV01493, on March 20, 2020 against Infinity Energy Resources, Inc. resulting from certain professional consulting services Ryan alleges he performed for Social, Environmental and Economic Impact Assessments during July 2012 through September 2015 on the Nicaraguan Concessions. Ryan alleges that such services were provided pursuant to oral agreements with Infinity. Ryan claims breach of contract for failure to pay $12,000 amounts invoiced and due. On December 23, 2020, Ryan filed a Motion for Default Judgment for $12,000 in unpaid invoices plus legal, fees, statutory interest and any expert testimony fees. The Company has filed a Motion to Dismiss the Lawsuit because plaintiff’s claims are barred by the statute of Limitations and defective service. The Company has included the expected impact of this litigation as a liability in its accounts payable as of December 31, 2020.

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ITEM 4. MINE SAFETY DISCLOSURE
Item 4. Mine Safety Disclosures.
Not applicable.
PART II

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ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.
Principal Market and Price Range of Common Stock
Infinity’s common stock trades on the Over-the-Counter QB Tier Market (OTCQB) under the symbol “IFNY” The following table sets forth the high and low closing bid prices for Infinity’s common stock as reported by the OTCQB. The closing price of the common stock on March 26, 2021 was $0.275 per share. The quotations reflect interdealer bid prices without retail markup, markdown or commission and may not represent actual transactions.
Year Ended December 31, 2020 High Low
1st Quarter $ 0.18 $ 0.03
2nd Quarter $ 0.44 $ 0.02
3rd Quarter $ 0.23 $ 0.11
4th Quarter $ 0.18 $ 0.11
Year Ended December 31, 2019 High Low
1st Quarter $ 0.19 $ 0.08
2nd Quarter $ 0.19 $ 0.05
3rd Quarter $ 0.20 $ 0.07
4th Quarter $ 0.08 $ 0.04
Holders of Common Stock
At December 31, 2020, there were approximately 157 stockholders of record of our common stock.
Dividend Policy
Holders of common stock are entitled to receive such dividends as may be declared by our Board of Directors. We have not declared or paid and do not anticipate declaring or paying any dividends on our common stock in the near future. Any future determination as to the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the board deems relevant.
Securities Authorized for Issuance under Equity Compensation Plans
In May 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,000 shares of the Company’s common stock are reserved for issuance under the 2006 Plan. In June 2005, the Company’s stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,500 shares of the Company’s common stock were reserved for issuance under the 2005 and 2006 Plans; however, such 2005 and 2006 Plans have now expired and no further issuances can be made. Options granted under the 2005 Plan and 2006 Plan allow for the purchase of common stock at prices not less than the fair market value of such stock at the date of grant, become exercisable immediately or as directed by the Company’s Board of Directors and generally expire ten years after the date of grant. The Company also has issued other stock options not pursuant to a formal plan with terms similar to the 2005 and 2006 Plans.
At the Annual Meeting of Stockholders held on September 25, 2015 the stockholders approved the Infinity Energy Resources, Inc. 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”) and reserved 500,000 shares for issuance under the Plan. No stock options or restricted stock has been issued under the 2015 Plan as of December 31, 2020.
As of December 31, 2020, 500,000 shares were available for future grants under the 2015 Plan as all other Plans have now expired.
The following table sets forth certain information regarding our stock option plans as of December 31, 2020:
Number of securities
to be issued upon
exercise of
outstanding options,
warrants and rights
Weighted-average
exercise price of
outstanding options,
warrants and rights
Number of
securities
remaining
available for future
issuance under
equity
compensation
plans
(excluding
securities
reflected
in column (a))
Plan category (a) (b) (c)
Equity compensation plans approved by stockholders - $ - 500,000
Option grants not issued under a plan approved by stockholders 332,000 41.86 n/a
Total 332,000 $ 41.86 500,000
Recent Issuances of Unregistered Securities
None

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ITEM 6. SELECTED FINANCIAL DATA
Item 6. Selected Financial Data.
Not applicable.

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ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.
This Annual Report on Form 10-K 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 (the “Exchange Act”), which are intended to be covered by the safe harbors created thereby. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “intends,” and other variations of these words or comparable words. In addition, any statements that refer to expectations, projections or other characterizations of events, circumstances or trends and that do not relate to historical matters are forward-looking statements. 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 in this report.
Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.
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 Annual Report on Form 10-K 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.
As used in this Annual Report, “Infinity,” the “Company,” “we,” “us” and “our” refer collectively to Infinity Energy Resources, Inc., its predecessors and subsidiaries or one or more of them as the context may require.
The following information should be read in conjunction with the Financial Statements and Notes presented elsewhere in this Annual Report on Form 10-K. See Note 1 - “Summary of Significant Accounting Policies,” to the Financial Statements for the Years Ended December 31, 2020 and 2019.
Operational and Financial Objectives
COVID-19 PANDEMIC
The financial statements contained in this Annual Report on Form 10-K as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2020. Economies throughout the world continue to be severely disrupted by the effects of the quarantines, business closures and the reluctance of individuals to leave their homes as a result of the outbreak of the coronavirus (Covid-19). In particular, the oil and gas market has been severely impacted by the negative effects of the coronavirus because of the substantial and abrupt decrease in the demand for oil and gas globally. In addition, the capital markets have been disrupted and our efforts to raise necessary capital will likely be adversely impacted by the outbreak of the virus and we cannot forecast with any certainty when the disruptions caused by it will cease to impact our business and the results of our operations. In reading this Annual Report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties caused by the outbreak of Covid-19.
Corporate Activities
The Company’s 2020 operating objectives have focused on the resolution of obligations in default and to acquire the Properties.
Recent financings -
Issuance of Convertible Preferred Stock - On March 26, 2021, the Company issued Convertible Preferred Stock (the “Preferred Stock”), with an aggregate principal face amount of up to $2,500,000 subject to a 10% original issue discount. The Preferred Stock is, subject to certain conditions, convertible into common stock at a rate of $0.32 per share and will be subject to a 10% dividend rate per annum, payable quarterly in cash or registered common stock, subject to equity conditions. The Holders were also granted demand registration rights. The Company issued warrants in addition to the Preferred Stock investors to purchase up to 6,410,250 shares (assuming the $2.5 million offering is fully subscribed) of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments. The common stock purchase warrants are exercisable commencing six months after issuance on a cashless basis at the Holders discretion with a term of five years. On March 26, 2021 investors purchased Preferred Stock with an aggregate cash purchase price of $2,050,000 together with warrants to purchase a total of 5,256,410 shares of common stock. The Company will allow additional investor purchases to complete the entire offering of an aggregate principal face amount of up to $2,500,000 before closing such offering.
The Company intends to use the proceeds of the Convertible Preferred Stock Offering to complete the acquisition and development of the Properties, to pay-off all outstanding convertible notes payable and for general working capital.
Issuance of Convertible Notes Payable - On August 19, 2020, we entered into a securities purchase agreement with an accredited investor (the “August Investor”) for our senior unsecured convertible note payable due August 19, 2021 (the “August Note”), with an aggregate principal face amount of approximately $365,169. The August Note is, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share (the “Fixed Conversion Price”). We also issued a five-year common stock purchase warrant (the “August Warrant”) to purchase up to 800,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments. The August Warrant is immediately exercisable and on a cashless basis if the shares underlying such warrant have not been registered within 180 days after the date of issuance. The August Investor purchased such securities from the Company for an aggregate purchase price of $325,000. We also granted the August Investor certain automatic and piggy-back registration rights whereby we agreed to register the resale by the August Investor of the shares underlying the August Warrant and the conversion of the August Note.
The August Note bears interest at a rate of eight percent (8%) per annum, may be voluntarily repaid in cash in full or in part by us at any time in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest in the event of the consummation by us of any public or private offering or other financing pursuant to which we receive gross proceeds of at least $2,500,000. The August Note is convertible at any time by the August Investor and we shall have the right to request that the August Investor convert the August Note in full or in part at the Fixed Conversion Price in the event that the VWAP (as defined in the August Note) of the Common Stock exceeds $0.75 for twenty consecutive trading days. In addition, pursuant to the August Note, so long as the August Note remains outstanding, we shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the Fixed Conversion Price, without written consent of the August Investor.
The conversion of the August Note and the exercise of the August Warrant are each subject to beneficial ownership limitations such that the August Investor may not convert the August Note or exercise the August Warrant to the extent that such conversion or exercise would result in the August Investor being the beneficial owner in excess of 4.99% (or, upon election of the August Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to us, provided that any increase in such limitation will not be effective until 61 days following notice to us.
We used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the Exchange Agreement (as defined and described below) and for general working capital.
Extinguishment of liabilities - On September 24, 2020, the Company entered into an Exchange and Settlement Agreement (the “Exchange Agreement”) with a note holder (the “Holder”), pursuant to which the Holder agreed to exchange its 8% promissory note in the original principal amount of $1,050,000, representing outstanding principal balance of $1,000,000 and accrued and unpaid interest thereon (which totaled $542,762 as of September 24, 2020), for (i) a cash payment in the amount of $100,000 and (ii) 737,532 newly issued shares of Common Stock (the “Exchange”).
In connection with the Exchange Agreement, the Company and the Holder agreed to terminate the following agreements: (i) the preemptive rights agreement, dated as of December 27, 2013, between the Company and the Holder, (ii) the revenue sharing agreement, dated as of May 30, 2014, between the Company and the Holder and (iii) the indemnity agreement, dated as of December 27, 2013, between the Company and the Holder. Additionally, pursuant to the Exchange Agreement, the Holder acknowledged the expiration on March 12, 2017, by its terms, of a common stock purchase warrant, issued to the Holder, for the purchase of up to 100,000 shares of Common Stock. The Company and the Holder also agreed to provide mutual limited releases, releasing each of them from all liabilities and obligations to the other, as between them with respect to claims relating to the Note, such preemptive rights agreement, the Holder’s warrant and all other agreements relating thereto.
The closing of the Exchange occurred concurrently with the execution of the Exchange Agreement. At the closing, the Company made the $100,000 cash payment and issued 737,532 shares of Common Stock (valued at $132,756 based on the closing market price of the shares on the date of the Exchange) to the Holder and the underlying documents and obligations summarized above were surrendered and/or cancelled.
Option to Acquire Oil and Gas Properties - On July 31, 2019, we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold for the Properties. We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021 which the parties are finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the acquisition of the Properties during the second quarter 2021.
Off-Balance Sheet Arrangements
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 a material current or future effect on our financial conditions, changes in our financial conditions, or our results of operations, liquidity, capital expenditures, capital resources, or significant components of revenue or expenses.
For the Years Ended December 31, 2020 and 2019
Results of Operations
Revenue
The Company had no revenues in either 2020 or 2019 because it focused on the acquisition of domestic oil and gas properties, resulting in its Option for the Properties on July 31, 2019.
Production and Other Operating Expenses (income)
The Company had no production related operating expenses in either 2020 or 2019. The Company sold its investment in Infinity-Texas in July 2012 and held no developed or undeveloped oil and gas properties in the United States in 2020 and 2019. The Company has been pursuing the acquisition of oil producing properties in the Central Kansas Uplift region containing existing production on approximately11,000 contiguous acres. The Company expects the acquisition to be closed in the first quarter of 2021 assuming the Company obtains adequate financing.
The Company has no current domestic exploration and development activities other than the pursuit of the above-mentioned Central Kansas Uplift Project.
General and Administrative Expenses
General and administrative expenses were $316,299 for the year ended December 31, 2020, a decrease of $102,460, or 24%, from our general and administrative expenses of $418,759 in the same period in 2019. The decrease in general and administrative expenses is primarily attributable to several expenses including the $76,415 charge-off of the expired Option and the $77,784 related to our abandoned Nicaraguan Concessions which both occurred in 2019 and did not re-occur in 2020. These decreases in expenses were offset by an increase of $49,951 related to the restricted stock granted to our officers, directors and certain consultants during 2020. The restricted stock granted to our officers, directors and certain consultants will continue be amortized through June 2021.
Interest Expense
Interest expense increased to $210,931 for the year ended December 31, 2020, compared to $92,452 for the year ended December 31, 2019, an increase of $118,479, or 128%. The Company issued the August Note, which has a stated principal balance of $365,169 and bears interest at an 8% rate. The Company used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the Exchange Agreement and for general working capital. The August Note resulted in cash interest accrued of $10,725 and the amortization to interest expense of the related discount totaling $133,563 during the year ended December 31, 2020.
The Company’s current financial condition has made traditional bank loans and customary financing terms unattainable; therefore, the Company will need to continue to pursue short-term borrowings with high interest rates especially in light of the Company trying to close on the Option to acquire the Central Kansas Uplift project in early 2021.
Gain on Extinguishment of Liabilities
The gain on extinguishment of liabilities is attributable to two transactions that extinguished outstanding liabilities during the year ended December 31, 2020; (i) the Exchange Agreement which extinguished a promissory note with an outstanding principal balance of $1,000,000, $542,762 in accrued interest and other obligations previously outstanding and resulting in a total gain of $1,310,006, and (ii) the extinguishment of trade payable obligations totaling $4,840,136 that arose during 2013 which were extinguished in 2020 pursuant to the relevant statute of limitations.
The gain on extinguishment of liabilities during the 2019 period was attributable to the extinguishment of a senior secured convertible note in the principal amount of $12 million issued by the Company in May 2015 (the “May 2015 Note”), which had an approximate principal balance of $2.2 million, short term notes payable with a principal balance totaling $240,000 and a warrant to purchase 240,000 shares of Common Stock issued to the placement agent for the Company’s May 2015 private placement transaction during the year ended December 31, 2019. The Company and the holders of these obligations agreed to extinguish the existing obligations (which were in default) in exchange for the issuance of shares of Common Stock or new warrants to purchase shares of Common Stock with no price or dilution protection. Upon exchange of such securities, the existing obligations were cancelled, and such note holders signed agreements which released the Company of all obligations related to such securities. As a result, the Company extinguished such original securities/obligations and recorded the issuance of the new obligations at their fair value on the date of exchange, resulting in a total gain of $2,445,700 during the year ended December 31, 2019.
Change in Derivative Fair Value
The conversion feature in certain outstanding promissory notes and common stock purchase warrants issued in connection with short-term notes outstanding during 2020 and 2019 are treated as derivative instruments because such notes and warrants contain ratchet and anti-dilution provisions. The mark-to-market process resulted in a gain of $795 during the year ended December 31, 2020, compared to a loss of $89,714 during the year ended December 31, 2019.
Income Tax
The Company recorded no income tax benefit (expense) in the year ended December 31, 2020. The Company has been in a cumulative tax loss position and has substantial net operating loss carryforwards available for its utilization at December 31, 2020. The Company has continued to carry a 100% reserve on its net deferred tax assets and therefore recorded no income tax expense on its income before income taxes during the year ended December 31, 2020 and 2019.
Net earnings
The Company reported net earnings of $5,623,707 for the year ended December 31, 2020, compared to net earnings of $1,844,775 for the same period in 2019. This represents an improvement of $3,778,932 which was primarily attributable to the extinguishment of liabilities during 2020 that will not likely reoccur.
Basic and Diluted earnings per Share
Basic earnings per share is computed by dividing the net earnings by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net earnings per share is computed by dividing the net earnings by the weighted-average number of shares of Common Stock and Common Stock equivalents outstanding during the period. Common Stock equivalents included in the diluted computation represent shares of Common Stock issuable upon the assumed conversion of convertible debt and assumed exercise of stock options and warrants using the treasury stock and “if converted” method. For periods in which net losses are incurred, weighted average shares outstanding is the same for basic and diluted loss per share calculations, as the inclusion of Common Stock equivalents would have an anti-dilutive effect. In addition, in periods in which there is net earnings and the effect of including Common Stock equivalents in the diluted per share calculations would be anti-dilutive (such as when the conversion or exercise price of the Common Stock equivalents are higher than the average closing market price per share) such anti-dilutive Common Stock equivalents would also be excluded from the calculation of basic and diluted weighted average shares outstanding.
During the year ended December 31, 2020, the shares of Common Stock issuable upon conversion of the August Note were considered Common Stock equivalents and therefore its dilutive effect was included in the computation of diluted income per share. All shares of Common Stock issuable upon conversion of convertible debt (other than the August Note) and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted earnings per share for the year ended December 31, 2020.
During the year ended December 31, 2019, all of the Common Stock equivalents outstanding were anti-dilutive because of their respective conversion or exercise prices were higher than the average closing market price per share during such period. Therefore, all of the Common Stock equivalents outstanding during the year ended December 31, 2019 were excluded from the diluted weighted average shares outstanding and diluted earnings per share calculations.
The Basic and Diluted earnings per Share were $0.39 and $0.36 for the year ended December 31, 2020, respectively. The Basic and Diluted earnings per Share were both $0.20 for the year ended December 31, 2019.
Potential equivalent shares of Common Stock as of December 31, 2020 totaled 5,804,200 shares of Common Stock, which included 3,943,820 shares of Common Stock underlying the conversion of debt, 1,528,380 shares of Common Stock underlying outstanding warrants and 332,000 shares of Common Stock underlying outstanding stock options.
Liquidity and Capital Resources; Going Concern
We have had a history of losses and have generated little or no operating revenues for a number of years, as we concentrated on development of our Nicaraguan Concessions, which was a long-term, high-risk/reward exploration project in an otherwise unproven part of the world. We abandoned the Nicaragua development project in early 2020 due to the challenging economic and political issues in Nicaragua and the oil and gas industry in general. We are now assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of natural gas and oil properties in the United States, including the possibility of acquiring businesses or assets that provide support services for the production of oil and gas in the United States. As a result, we have acquired the Option to purchase the Properties. We intend to acquire, develop and commence operations on the Properties during 2021. The exercise of the Option will require us to raise substantial capital to accomplish our operating plan, which cannot be assured. Historically, we financed our operations through the issuance of equity and various short and long-term debt financing that contained some level of detachable warrants to provide the holders with a level of equity participation.
Issuance of Convertible Preferred Stock
On March 26, 2021, the Company issued Convertible Preferred Stock (the “Preferred Stock”), with an aggregate principal face amount of up to $2,500,000 subject to a 10% original issue discount. The Preferred Stock is, subject to certain conditions, convertible into common stock at a rate of $0.32 per share and will be subject to a 10% dividend rate per annum, payable quarterly in cash or registered common stock, subject to equity conditions. The Holders were also granted demand registration rights. The Company issued warrants in addition to the Preferred Stock investors to purchase up to 6,410,250 shares (assuming the $2.5 million offering is fully subscribed) of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments. The common stock purchase warrants are exercisable commencing six months after issuance on a cashless basis at the Holders discretion with a term of five years. On March 26, 2021 investors purchased Preferred Stock with an aggregate cash purchase price of $2,050,000 together with warrants to purchase a total of 5,256,410 shares of common stock. The Company will allow additional investor purchases to complete the entire offering of an aggregate principal face amount of up to $2,500,000 before closing such offering.
Issuance of Convertible Notes Payable
On August 19, 2020, the Company issued the August Note, with an aggregate principal face amount of approximately $365,169. The August Note is, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share. The Company also issued the August Warrant to purchase up to 800,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments. The August Warrant is immediately exercisable and on a cashless basis if the shares of Common Stock underlying such warrant have not been registered within 180 days after the date of issuance. The August Investor purchased such securities from the Company for an aggregate purchase price of $325,000. The Company also granted the August Investor certain automatic and piggy-back registration rights whereby the Company has agreed to register the resale by the August Investor of the shares underlying the August Warrant and the August Note.
The Company used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the Exchange Agreement and for general working capital.
The convertible note payable is further described in Note 3 of the Notes to the Financial Statements, entitled “Debt.”
Related Party Debt Obligation
On May 13, 2020, the Company borrowed $41,000 from its Chairman, Chief Executive Officer and President in the form of an unsecured promissory note bearing 6% interest and due on demand. This note was paid off in full on August 19, 2020. The proceeds from such issuance were used for general working capital purposes.
Senior Secured Convertible Note
On May 7, 2015, the Company completed the private placement (the “May 2015 Private Placement”) of the May 2015 Note and a common stock purchase warrant to purchase 1,800,000 shares of Common Stock with an institutional investor. At the closing, such investor acquired the May 2015 Note by paying $450,000 in cash and issuing a promissory note, secured by cash, with a principal amount of $9,550,000.
On May 23, 2019, and as amended on May 30, 2019, the Company and such investor agreed to an omnibus resolution to these outstanding matters and entered into an exchange agreement and side-letter agreement, which are described in Note 2 of the Notes to the Condensed Financial Statements, entitled “Debt.”
Extinguishment of Liabilities
On September 24, 2020, the Company entered into the Exchange Agreement with the Holder, pursuant to which the Holder agreed to exchange its 8% promissory note in the original principal amount of $1,050,000, representing outstanding principal balance of $1,000,000 and accrued and unpaid interest thereon (which totaled $542,762 as of September 24, 2020), for (i) a cash payment in the amount of $100,000 and (ii) 737,532 newly issued shares of Common Stock. The closing of the Exchange occurred concurrently with the execution of the Exchange Agreement. At the closing, the Company made the $100,000 cash payment and issued 737,532 shares of Common Stock (valued at $132,756 based on the closing market price of the Common Stock on the date of the Exchange) to the Holder and the underlying documents and obligations summarized above were surrendered and/or cancelled.
The Company incurred trade payable obligations totaling $4,840,136 during 2013 which were extinguished during the year ended December 31, 2020 pursuant to the relevant statute of limitations.
Short-Term Notes Outstanding
On July 7, 2015 and July 15, 2015, the Company borrowed a total of $85,000 from two individuals under convertible notes payable with the conversion rate of $5.60 per share. The original terms of such notes were for a period of 90 days and such notes bears interest at 8% per annum. In connection with the issuance of such notes, the Company issued warrants for the purchase of a total of 34,000 shares of Common Stock with exercise prices of $5.60 per share, which are exercisable for a period of five years from the date of their issuance. Such notes were not paid at maturity and are in default as of December 31, 2020. The Company is attempting to negotiate a resolution to the defaults, which may be completed in conjunction with closing on the Properties but there can be no assurance that it will be successful in that regard.
In summary, as of December 31, 2020, the following debts were outstanding: (i) two promissory notes issued in July 2015 in the total principal amount of $85,000, which had matured and are now in default; (ii) and the unsecured convertible note payable in the stated principal amount of $365,169 and due August 19, 2021.
Capital Expenditures
On July 31, 2019, we acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021, which the parties are currently finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the acquisition of the Properties during the second quarter of 2021. We must obtain new sources of debt and/or equity capital to fund the full development and operations of the Properties.
Due to the uncertainties related to these matters, there exists substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financials are issued. 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.
Contractual Obligations
As a “smaller reporting company”, we are not required to provide tabular disclosure obligations.
Inflation and Seasonality
Inflation has not materially affected us during the past fiscal year. We do not believe that our business is seasonal in nature.
Critical Accounting Policies
Our financial statements have been prepared in accordance with GAAP and fairly present our financial position and results of operations. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its accounting estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances and evaluates its estimates on an ongoing basis. The following section identifies and summarizes those accounting policies considered by management to be the most critical to understanding the judgments that are involved in the preparation of our financial statements and the uncertainties that could impact our results of operations, financial position and cash flows. The application of these accounting policies requires judgment and use of assumptions as to future events and outcomes that are uncertain and, as a result, actual results could differ from these estimates. Refer to Note 1 - Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies for all relevant accounting policies.
Accounting for Income Taxes. Accounting for income taxes requires significant estimates and judgments on the part of management. Such estimates and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.
During the year ended December 31, 2020, the Company reduced its valuation allowance on net deferred tax assets by $1,431,000 while the valuation allowance remained at 100% of all net deferred tax assets as of December 31, 2020. The Company has incurred net taxable losses for in 10 of the last 13 years and continues to be in a cumulative loss position at December 31, 2020. In addition, there exists substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financials are issued due to the operational and financing uncertainties. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined to continue to provide a 100% valuation allowance on its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.
For income tax purposes, the Company has net operating loss carry-forwards of approximately $61,325,000 as of December 31, 2020, which expire from 2025 through 2040.
The Company has recently completed the filing of tax returns for the tax years 2012 through 2019. Therefore, all such tax returns are open to examination by the Internal Revenue Service.
The Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards in the event that it has experienced a more than 50% change in ownership over a three-year period. Management has completed its review of whether such ownership changes have occurred, and based upon such review, management believes that the Company is not currently subject to an annual limitation or the possibility of the complete elimination of the net operating loss carry- forwards. In addition, the Company may be limited by additional ownership changes which may occur in the future
Determination of Fair Value for Financial Instruments and Derivatives.
The estimated fair value of the Company’s derivative liabilities, all of which are related to the detachable warrants issued in connection with various notes payable, 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 detachable warrants issued in connection with the two short-term notes payable (See Note 3) contain ratchet and anti-dilution provisions that remain in effect during the term of the warrants while the ratchet and anti-dilution provisions of the other notes payable cease when the related note payable is extinguished. When the related notes payable containing such ratchet and anti-dilution provisions is extinguished, the derivative liability will be adjusted to fair value and the resulting derivative liability will be transitioned from a liability to equity as of such date.
The Company has outstanding warrants to purchase an aggregate of 17,000 shares of Common Stock, in connection with various outstanding debt instruments which require derivative accounting treatment as of December 31, 2020 and 34,000 shares as of December 31, 2019. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of December 31, 2020 and 2019 is as follows:
As of
December 31, 2020
As of
December 31, 2019
Volatility - range
379.4 %
316.2 %
Risk-free rate
0.38 %
1.69 %
Contractual term
0.5 - 0.8 years
0.5 - 1.3 years
Exercise price
$ 5.60
$ 5.60
Number of warrants in aggregate
17,000
34,000
ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
● Level 1 - Quoted prices in active markets for identical assets and liabilities
● Level 2 - Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities)
● Level 3 - Significant unobservable inputs (including the Company’s own assumptions in determining the fair value)
The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019:
December 31, 2020 Level Level Level Total
Liabilities:
Derivative liabilities $ - $ - $ 321 $ 321
$ - $ - $ 321 $ 321
December 31, 2019 Level Level Level Total
Liabilities:
Derivative liabilities $ - $ - $ 1,116 $ 1,116
Going Concern Analysis.
In accordance with ASU 2014-15, Presentation of Financial Statements- Going Concern (Subtopic 205-40) - Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that our financials are issued. When management identifies conditions or events that raise substantial doubt about their ability to continue as a going concern it should consider whether its plans to mitigate those relevant conditions or events will alleviate the substantial doubt. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of management’s plans, the entity should disclose information that enables user of financial statements to understand the principal events that raised the substantial doubt, management’s evaluation of the significance of those conditions or events, and management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.
We performed the analysis and our overall assessment was there were conditions or events, considered in the aggregate, which raised substantial doubt about our ability to continue as a going concern within the next year, but such doubt was not adequately mitigated by our plans to address the substantial doubt as disclosed in Note 1: Going Concern.
Share-based compensation
We grant share-based compensation awards in exchange for employee, director and consultant services, including a stock option plan and grants of restricted stock that vest over future periods considering the grantee remains as an employee or service provider to the Company. The fair value of awards granted under the plans are recognized in the Statements of Earnings over the related service period. The fair values of stock options are estimated at the time of each grant using a Black-Scholes option pricing model, and the fair values of restricted stock grants are measured at each grant date using the closing market price on the day of grant. The fair value estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers. Refer to Note 4 - Stock Based Compensation for further information regarding our outstanding stock options and restricted stock grants.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures about Market Risk.
Not applicable.

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data.
Infinity Energy Resources, Inc.
Financial Statements and Accompanying Notes
December 31, 2020 and 2019
Page
Report of Independent Registered Public Accounting Firm
Balance Sheets
Statements of Earnings
Statements of Stockholders’ Deficit
Statements of Cash Flows
Notes to Financial Statements
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Directors and Stockholders of
Infinity Energy Resources, Inc.
Opinion on the Financial Statements
We have audited the accompanying balance sheets of Infinity Energy Resources, Inc. (the “Company”) as of December 31, 2020 and 2019, and the related statements of earnings, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2020, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2020 and 2019, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2020, in conformity with accounting principles generally accepted in the United States of America.
Substantial doubt about the Company’s Ability to Continue as a Going Concern
The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company has no on-going operations, must raise significant funds in order to pay its outstanding debt and meet its other obligations, has a stockholders’ deficit and has a significant working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.
Basis for Opinion
These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the Company’s auditor since 2014.
New York, New York
March 30, 2021
INFINITY ENERGY RESOURCES, INC.
Balance Sheets
December 31,
December 31,
ASSETS
Current assets:
Cash and cash equivalents $ 11,042 $ 1,785
Deposit to acquire oil and gas property 75,000 -
Total current assets 86,042 1,785
Total assets $ 86,042 $ 1,785
LIABILITIES AND STOCKHOLDERS’ DEFICIT
Current liabilities:
Accounts payable $ 1,190,309 $ 6,091,453
Accrued liabilities (including $788,520 due to related party at December 31, 2020 and 2019) 3,737,580 3,777,580
Accrued interest 47,754 528,684
Asset retirement obligations 1,716,003 1,716,003
Convertible notes payable, net 218,563 1,104,125
Total current liabilities 6,910,209 13,217,845
Derivative liabilities 1,116
Total liabilities 6,910,530 13,218,961
Commitments and contingencies (Note 11)
Stockholders’ deficit:
Preferred stock; par value $.0001 per share, 10,000,000 shares authorized; no shares issued or outstanding as of December 31, 2020 and 2019 - -
Common stock, par value $.0001 per share, 75,000,000 shares authorized, 18,548,265 and 12,310,733 shares issued and outstanding at December 31, 2020 and 2019, respectively 1,855 1,231
Additional paid-in capital 110,352,302 109,583,945
Accumulated deficit (117,178,645 ) (122,802,352 )
Total stockholders’ deficit (6,824,488 ) (13,217,176 )
Total liabilities and stockholders’ deficit $ 86,042 $ 1,785
The accompanying notes are an integral part of these financial statements.
INFINITY ENERGY RESOURCES, INC.
Statements of Earnings
Year ended
December 31,
Operating expenses:
General and administrative expenses $ 316,299 $ 418,759
Total operating expenses 316,299 418,759
Operating loss (316,299 ) (418,759 )
Other income (expense):
Interest expense (210,931 ) (92,452 )
Gain on extinguishment of liabilities 6,150,142 2,445,700
Change in derivative fair value (89,714 )
Total other income 5,940,006 2,263,534
Income before income taxes 5,623,707 1,844,775
Income tax (expense) benefit - -
Net earnings $ 5,623,707 $ 1,844,775
Basic and diluted earnings per share:
Basic $ 0.39 $ 0.20
Diluted $ 0.36 $ 0.20
Weighted average shares outstanding - basic 14,508,755 9,086,265
Weighted average shares outstanding - diluted 15,956,623 9,086,265
The accompanying notes are an integral part of these financial statements.
INFINITY ENERGY RESOURCES, INC.
Statements of Stockholders’ Deficit
Common Stock Additional
Paid-in Accumulated Stockholders’
Shares Amount Capital Deficit Deficit
Balance, December 31, 2018 7,712,569 $ 771 $ 109,080,273 $ (124,647,127 ) $ (15,566,083 )
Stock-based compensation - - 186,274 - 186,274
Issuance of restricted stock 2,000,000 (200 ) - -
Issuance of common shares pursuant to exchange agreements 605,816 29,308 - 29,369
Issuance of common stock purchase warrants pursuant to exchange agreements - - 70,549 - 70,549
Issuance of common shares pursuant to side-letter agreement 567,348 68,025 - 68,082
Issuance of warrants pursuant to side-letter agreement - - 7,358 - 7,358
Issuance of common stock pursuant Private Placement 1,425,000 142,358 - 142,500
Net earnings - - - 1,844,775 1,844,775
Balance, December 31, 2019 12,310,733 1,231 109,583,945 (122,802,352 ) (13,217,176 )
Stock-based compensation - - 236,225 - 236,225
Issuance of restricted stock 5,000,000 (500 ) - -
Issuance of common shares pursuant
to exchange agreements 737,532 132,682 - 132,756
Issuance of common shares in
consideration for deposit to acquire
oil and gas property 500,000 74,950 - 75,000
Beneficial conversion feature on
issuance of convertible note with
detachable warrants to purchase
common stock - - 325,000 - 325,000
Net earnings - - - 5,623,707 5,623,707
Balance, December 31, 2020 18,548,265 $ 1,855 $ 110,352,302 $ (117,178,645 ) $ (6,824,488 )
See accompanying notes are an integral part of these financial statements.
INFINITY ENERGY RESOURCES, INC.
Statements of Cash Flows
For the Year Ended
December 31,
Cash flows from operating activities:
Net earnings $ 5,623,707 $ 1,844,775
Adjustments to reconcile net earnings to net cash used in operating activities:
Change in fair value of derivative liability (795 ) 89,714
Stock-based compensation 236,225 186,274
Gain on exchange of debt and warrant obligations (1,310,006 ) (2,445,700 )
Gain on extinguishment of liabilities (4,840,136 ) -
Amortization of discount on convertible note payable 133,563 -
Write-off of oil and gas property purchase option costs - 76,415
Change in operations assets and liabilities:
(Decrease) increase in accounts payable (61,008 ) 6,569
(Decrease) increase in accrued liabilities (40,000 ) 77,833
Increase in accrued interest 61,832 92,453
Net cash used in operating activities (196,618 ) (71,667 )
Cash flows from investing activities
Deposit to acquire oil and gas property - (76,415 )
Net cash used in investing activities - (76,415 )
Cash flows from financing activities:
Repayment of notes payable pursuant to exchange agreement (100,000 ) -
Repayment of notes payable - related party (41,000 ) -
Repayment of convertible notes payable (19,125 ) (50,000 )
Proceeds from convertible note payable 325,000 56,000
Proceeds from private placement of common stock - 142,500
Proceeds from issuance of note payable - related party 41,000 -
Net cash provided by financing activities 205,875 148,500
Net increase in cash and cash equivalents 9,257
Cash and cash equivalents:
Beginning 1,785 1,367
Ending $ 11,042 $ 1,785
Supplemental cash flow information:
Cash paid for interest $ 15,536 $ -
Cash paid for taxes $ - $ -
Supplemental disclosure of non-cash investing and financing activities:
Beneficial conversion feature on issuance of convertible note payable with detachable warrants to purchase common stock $ 325,000 $ -
Issuance of common shares for deposit to acquire oil and gas property $ 75,000 $ -
Issuance of restricted common stock $ 500 $ 200
Exchange of secured convertible note payable $ - $ 2,197,231
Exchange of convertible notes payable - short term $ - $ 240,000
Issuance of common shares pursuant to exchange agreements $ 132,756 $ 97,451
Issuance of common stock purchase warrants pursuant to exchange agreements $ - $ 77,907
The accompanying notes are an integral part of these financial statements.
INFINITY ENERGY RESOURCES, INC.
Notes to Financial Statements
December 31, 2020
Note 1 - Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies
Nature of Operations
“Infinity,” the “Company,” “we,” “us” and “our” refer collectively to Infinity Energy Resources, Inc., its predecessors and subsidiaries or one or more of them as the context may require. Since 2009, we had planned to pursue the exploration of potential oil and gas resources in the United States and in the Perlas and Tyra concession blocks offshore Nicaragua in the Caribbean Sea (the “Nicaraguan Concessions” or “Concessions”), which contain a total of approximately 1.4 million acres. The Company was in technical default of the certain terms of the Nicaraguan Concession and the Nicaraguan government terminated both of the underlying Concessions. We sold our wholly-owned subsidiary, Infinity Oil and Gas of Texas, Inc. (“Infinity Texas”) in 2012 and its wholly-owned subsidiary, Infinity Oil and Gas of Wyoming, Inc. (“Infinity Wyoming”), was administratively dissolved in 2009.
Subsequent to the termination of the Nicaraguan Concessions, we began assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of natural gas and oil properties in the United States, including the possibility of acquiring businesses or assets that provide support services for the production of oil and gas in the United States. As a result, on July 31, 2019, we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold for oil & gas properties, subject to overriding royalties to third parties, in the Central Kansas Uplift geological formation covering over 11,000 contiguous acres (the “Properties”). We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021 which the parties are currently finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
We intend to complete the acquisition of the Properties during the second quarter of 2021.
We must obtain new sources of debt and/or equity capital to fund the substantial needs enumerated above, as well as satisfying our existing debt obligations. We are attempting to obtain extensions of the maturity date for our outstanding debt; however, there can be no assurance that we will be able to do so or what the final terms will be if the lenders agree to such extensions. Further, we can provide no assurance that we will be able to obtain sufficient new debt/equity capital to exercise the Option.
COVID-19 PANDEMIC
The financial statements contained in this Annual Report on Form 10-K as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2020. Economies throughout the world have been and continue to be severely disrupted by the effects of the quarantines, business closures and the reluctance of individuals to leave their homes as a result of the outbreak of the coronavirus (Covid-19). In particular, the oil and gas market has been severely impacted by the negative effects of the coronavirus because of the substantial and abrupt decrease in the demand for oil and gas globally. In addition, the capital markets have been disrupted and our efforts to raise necessary capital will likely be adversely impacted by the outbreak of the virus and we cannot forecast with any certainty when the disruptions caused by it will cease to impact our business and the results of our operations. In reading this Annual Report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties caused by the outbreak of Covid-19.
Nicaragua
We began pursuing an oil and gas exploration opportunity offshore Nicaragua in the Caribbean Sea in 1999. Since such time, we built relationships with the Instituto Nicaraguense de Energia (“INE”) and undertook the geological and geophysical research that helped us to become one of only six companies qualified to bid on offshore blocks in the first international bidding round held by INE in January 2003.
On March 5, 2009, we signed the contracts granting us the Nicaraguan Concessions. Since our acquisition of the Nicaraguan Concessions, we have conducted an environmental study and developed geological information from the reprocessing and additional evaluation of existing 2-D seismic data acquired over our Concessions. In April 2013, the Nicaraguan government formally approved our Environmental Impact Assessment, at which time we commenced significant activity under the initial work plan involving the acquisition of new seismic data on the two Nicaraguan Concessions. We undertook seismic shoots during late 2013 that resulted in the acquisition of new 2-D and 3-D seismic data and have reviewed it to select initial drilling sites for exploratory wells.
The Company was in technical default of certain requirements contained in the Nicaraguan Concessions including the payment of area and training fees and the commencement of drilling and other developmental requirements. The Nicaraguan Government terminated the Concessions however the Company continued negotiations and other attempts to extend, renew or otherwise maintain the Concessions.
We relied on raising debt and equity capital to fund our ongoing maintenance/expenditure obligations under the Nicaraguan Concession, our day-to-day operations and corporate overhead because we have generated no operating revenues or cash flows in recent years. The $1.0 million December 2013 Note (See Note 3) matured in April 2016 and was in default was paid off on September 24, 2020. The Company has two other notes payable with principal balances of $85,000 as of December 31, 2020 are now in default.
In January 2020, we abandoned all attempts to extend, renew or otherwise maintain the Concessions. The Company is now assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of natural gas and oil properties in the United States, including the possibility of acquiring businesses or assets that provide support services for the production of oil and gas in the United States.
Going Concern
The Company must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund the (i) acquisition of the Properties under the Option; (ii) normal day-to-day operations and corporate overhead; and (iii) outstanding debt and other financial obligations as they become due, as described below. These are substantial operational and financial issues that must be successfully addressed during 2021. In addition, the Covid-19 pandemic is ongoing which may also impact our ability to raise debt or equity capital and otherwise meet our operating and financial objectives.
The Company is seeking new sources of debt and equity capital to fund the needs enumerated above. The Company is attempting to obtain extensions of the maturity dates for its debt or compromises regarding its debt. In addition, the Company will seek offers from industry operators and other third parties for interests in the Properties in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. The Company has extinguished and/or restructured certain obligations that were in default during 2019 and 2020; however, there can be no assurance that it will be able to obtain such new funding, extensions or additional restructurings or on what terms.
Due to the uncertainties related to the foregoing matters, there exists substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financials are issued. 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.
Emerging Growth Company
We are an “emerging growth company” under the JOBS Act. For as long as we are an “emerging growth company,” we are not required to: (i) comply with any new or revised financial accounting standards that have different effective dates for public and private companies until those standards would otherwise apply to private companies, (ii) provide an auditor’s attestation report on management’s assessment of the effectiveness of internal control over financial reporting pursuant to Section 404 of the Sarbanes-Oxley Act, (iii) comply with any new requirements adopted by the Public Company Accounting Oversight Board (“PCAOB”) requiring mandatory audit firm rotation or a supplement to the auditor’s report in which the auditor would be required to provide additional information about the audit and the financial statements of the issuer or (iv) comply with any new audit rules adopted by the PCAOB after April 5, 2012, unless the SEC determines otherwise. However, we have elected to “opt out” of the extended transition period discussed in (i) and will therefore comply with new or revised accounting standards on the applicable dates on which the adoption of such standards are required for non-emerging growth companies. Section 107 of the JOBS Act provides that our decision to opt out of such extended transition period for compliance with new or revised accounting standards is irrevocable.
Management Estimates
The preparation of financial statements in conformity with generally accepted accounting principles in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Significant estimates with regard to the financial statements include the estimated carrying value of the estimated fair value of derivative liabilities, stock-based awards and the realization of deferred tax assets.
Recent Accounting Pronouncements
In June 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments. The standard’s main goal is to improve financial reporting by requiring earlier recognition of credit losses on financing receivables and other financial assets in scope, including trade receivables. The amendments in this update broaden the information that an entity must consider in developing its expected credit loss estimate for assets measured either collectively or individually. The guidance in ASU 2016-13 is effective for public companies for fiscal years and for interim periods within those fiscal years beginning after December 15, 2019. The Company adopted ASU 2019-12 for fiscal year ending December 31, 2020 and the adoption resulted in no impact on the Company’s financial position, cash flows or results of operations.
In December 2019, the FASB issued ASU 2019-12, “Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes,” which is intended to simplify various aspects related to accounting for income taxes. ASU 2019-12 removes certain exceptions to the general principles in Topic 740 and also clarifies and amends existing guidance to improve consistent application. The amendments in ASU 2019-12 are effective for public business entities for fiscal years beginning after December 15, 2020, including interim periods therein. Early adoption of the standard is permitted, including adoption in interim or annual periods for which financial statements have yet been issued. If an entity early adopts these amendments in an interim period, it should reflect any adjustments as of the beginning of the annual period that includes that interim period. In addition, an entity that elects to early adopt the standard is required to adopt all of the amendments in the same period (i.e., an entity cannot select which amendments to early adopt). The Company is still evaluating the specific effect of this change. The Company will adopt ASU 2019-12 for fiscal year ending December 31, 2021.
In August 2020, the FASB issued ASU 2020-06, “Debt - Debt with Conversion and Other Options (Subtopic 470- 20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40)” which is intended to reduce complexity in applying GAAP to certain financial instruments with characteristics of liabilities and equity. The guidance in ASU 2020-06 simplifies the accounting for convertible debt instruments and convertible preferred stock by removing the existing guidance in ASC 470-20, Debt: Debt with Conversion and Other Options, that requires entities to account for beneficial conversion features and cash conversion features in equity, separately from the host convertible debt or preferred stock. The guidance in ASC 470-20 applies to convertible instruments for which the embedded conversion features are not required to be bifurcated from the host contract and accounted for as derivatives. In addition, the amendments revise the scope exception from derivative accounting in ASC 815-40 for freestanding financial instruments and embedded features that are both indexed to the issuer’s own stock and classified in stockholders’ equity, by removing certain criteria required for equity classification. These amendments are expected to result in more freestanding financial instruments qualifying for equity classification (and, therefore, not accounted for as derivatives), as well as fewer embedded features requiring separate accounting from the host contract. The amendments in ASU 2020-06 further revise the guidance in ASC 260, Earnings Per Share, to require entities to calculate diluted earnings per share (EPS) for convertible instruments by using the if-converted method. In addition, entities must presume share settlement for purposes of calculating diluted EPS when an instrument may be settled in cash or shares.
The amendments in ASU 2020-06 are effective for public entities that meet the definition of an SEC filer, excluding smaller reporting companies as defined by the SEC, for fiscal years beginning after December 15, 2021. For all other entities, the amendments are effective for fiscal years beginning after December 15, 2023. Early adoption is permitted, but no earlier than fiscal years beginning after December 15, 2020. The Company is assessing the potential impact that adoption of ASU 2020-06 will have on the Company’s financial statements and whether it will early adopt ASU 2020-06.
Management does not believe that there are any other recently issued and effective or not yet effective pronouncements that would have or are expected to have any significant effect on the Company’s financial position, cash flows or results of operations.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash consists of cash on hand and demand deposits with financial institutions. Although the Company had minimal cash as of December 31, 2020 and 2019, its policy is that all highly liquid investments with a maturity of three months or less when purchased would be cash equivalents and would be included along with cash as cash and equivalents.
Oil and Gas Properties
The Company will follow the full cost method of accounting for exploration and development activities. Accordingly, all costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and seismic costs) and the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities will be capitalized. Overhead related to development activities will also be capitalized during the acquisition phase.
Depletion of proved oil and gas properties will be computed on the units-of-production method, with oil and gas being converted to a common unit of measure based on relative energy content, whereby capitalized costs, as adjusted for estimated future development costs and estimated asset retirement costs, are amortized over the total estimated proved reserve quantities. Investments in unproved properties, including capitalized interest and internal costs, are not depleted pending determination of the existence of proved reserves.
Unproved properties are assessed periodically (at least annually) to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant will be assessed individually by considering the primary lease terms of the properties, the holding period of the properties, geographic and geologic data obtained relating to the properties, and estimated discounted future net cash flows from the properties. Estimated discounted future net cash flows are based on discounted future net revenues associated with probable and possible reserves, risk adjusted as appropriate. Where it is not practicable to assess individually the amount of impairment of properties for which costs are not individually significant, such properties are grouped for purposes of assessing impairment. The amount of impairment assessed is deducted from the costs to be amortized and reported as a period expense when the impairment is recognized. In assessing the unproved property costs for impairment, the Company takes into consideration various information including: (i) the terms of the Concessions, (ii) the status of the Company’s compliance with the Nicaraguan Concessions’ requirements, (iii) the ongoing evaluation of the seismic data, (iv) the commodity prices for oil and gas products, (v) the overall environment related to oil and gas exploration and development projects for unproven targets in unproven regions of the world, (vi) the availability of financing for financial and strategic partners, and (vii) other factors that would impact the viability of a significant long-term oil and gas exploration and development project.
Pursuant to full cost accounting rules, the Company must perform a “ceiling test” each quarter. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using prices based on the arithmetic mean of the previous 12 months’ first-of month prices and current costs, including the effects of derivative instruments accounted for as cash flow hedges, but excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, and a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. If capitalized costs exceed the ceiling, the excess must be charged to expense and may not be reversed in future periods. As of December 31, 2020 and 2019, the Company did not have any proved oil and gas properties.
Proceeds from the sales of oil and gas properties are accounted for as adjustments to capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss would be recognized in the determination of the Company’s net earnings/loss.
Asset Retirement Obligations
The Company records estimated future asset retirement obligations pursuant to the provisions of ASC 410. ASC 410 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the asset retirement liability is required to be accreted each period. The Company’s asset retirement obligations consist of costs related to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. Capitalized costs are depleted as a component of the full cost pool using the units of production method. Although the Company had divested all of its domestic oil properties that contain operating and abandoned wells as of December 31, 2012, the Company may have obligations related to the divestiture of certain abandoned non-producing domestic leasehold properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. Management believes the Company has been relieved from asset retirement obligation related to Infinity-Texas because of the sale of its Texas oil and gas properties in 2011 and its sale of 100% of the stock in Infinity-Texas in 2012. The Company has recognized an additional liability of $734,897 related to its former Texas oil and gas producing properties (included in asset retirement obligations) to recognize the potential personal liability of the Company and its officers for the Infinity-Texas oil and gas properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. In addition, management believes the Company has been relieved from asset retirement obligations related to Infinity-Wyoming because of the sale of its Wyoming and Colorado oil and gas properties in 2008; however, the Company has recognized since 2012 an additional liability of $981,106 related to its former Wyoming and Colorado oil and gas producing properties (included in asset retirement obligations) to recognize the potential liability of the Company and its officers should the new owner not perform its obligations to reclaim abandoned wells in a timely manner.
Beneficial Conversion Feature of Convertible Notes Payable
The Company accounts for convertible notes payable in accordance with the guidelines established by the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) Topic 470-20, Debt with Conversion and Other Options, Emerging Issues Task Force (“EITF”) 98-5, Accounting for Convertible Securities with Beneficial Conversion Features or Contingently Adjustable Conversion Ratios, and EITF 00-27, Application of Issue No 98-5 To Certain Convertible Instruments. The Beneficial Conversion Feature (“BCF”) of a convertible note is normally characterized as the convertible portion or feature of certain notes payable that provide a rate of conversion that is below market value or in-the-money when issued. The Company records a BCF related to the issuance of a convertible note when issued and also records the estimated fair value of any warrants issued with those convertible notes. Beneficial conversion features that are contingent upon the occurrence of a future event are recorded when the contingency is resolved.
The BCF of a convertible note is measured by allocating a portion of the note’s proceeds to the warrants, if applicable, and as a reduction of the carrying amount of the convertible note equal to the intrinsic value of the conversion feature, both of which are credited to additional paid-in-capital. The value of the proceeds received from a convertible note is then allocated between the conversion features and warrants on an allocated relative fair value basis. The allocated relative fair value is recorded in the financial statements as a debt discount (premium) from the face amount of the note and such discount is amortized over the expected term of the convertible note (or to the conversion date of the note, if sooner) and is charged to interest expense using interest method.
Derivative Instruments
The Company accounts for derivative instruments or hedging activities under the provisions of ASC 815 Derivatives and Hedging. ASC 815 requires the Company to record derivative instruments at their fair value. If the derivative is designated as a fair value hedge, the changes in the fair value of the derivative and of the hedged item attributable to the hedged risk are recognized in earnings. If the derivative is designated as a cash flow hedge, the effective portions of changes in the fair value of the derivative are recorded in other comprehensive earnings (loss) and are recognized in the statement of earnings when the hedged item affects earnings. Ineffective portions of changes in the fair value of cash flow hedges, if any, are recognized in earnings. Changes in the fair value of derivatives that do not qualify for hedge treatment are recognized in earnings.
The purpose of hedging is to provide a measure of stability to the Company’s cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. As of December 31, 2020 and 2019 and during the years then ended, the Company had no oil and natural gas derivative arrangements outstanding.
As a result of certain terms, conditions and features included in certain common stock purchase warrants issued by the Company (Note 3), those warrants are required to be accounted for as derivatives at estimated fair value, with changes in fair value recognized in operations.
Fair Value of Financial Instruments
The carrying values of the Company’s accounts payable, accrued liabilities and short-term notes represent the estimated fair value due to the short-term nature of the accounts.
In accordance with ASC Topic 820 - Fair Value Measurements and Disclosures (“ASC 820”), the Company utilizes the market approach to measure fair value for its financial assets and liabilities. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets, liabilities or a group of assets or liabilities, such as a business.
ASC 820 utilizes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. The following is a brief description of those three levels:
● Level 1 - Quoted prices in active markets for identical assets and liabilities.
● Level 2 - Other significant observable inputs (including quoted prices in active markets for similar assets or liabilities).
● Level 3 - Significant unobservable inputs (including the Company’s own assumptions in determining the fair value.
The estimated fair value of various derivative liabilities, which are related to detachable warrants issued in connection with various notes payable, 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, and current interest rates. The fair values for the warrant derivatives as of December 31, 2020 and 2019 were classified under the fair value hierarchy as Level 3.
The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2020 and 2019:
December 31, 2020 Level Level Level Total
Liabilities:
Derivative liabilities $ - $ - $ 321 $ 321
$ - $ - $ 321 $ 321
December 31, 2019 Level Level Level Total
Liabilities:
Derivative liabilities $ - $ - $ 1,116 $ 1,116
$ - $ - $ 1,116 $ 1,116
There were no changes in valuation techniques or reclassifications of fair value measurements between Levels 1, 2 or 3 during the years ended December 31, 2020 and 2019.
Income Taxes
The Company uses the asset and liability method of accounting for income taxes. This method requires the recognition of deferred tax liabilities and assets for the expected future tax consequences of temporary differences between financial accounting bases and tax bases of assets and liabilities. The tax benefits of tax loss carryforwards and other deferred taxes are recorded as an asset to the extent that management assesses the utilization of such assets to be more likely than not. Management routinely assesses the realizability of the Company’s deferred income tax assets, and a valuation allowance is recognized if it is determined that deferred income tax assets may not be fully utilized in future periods. Management considers future taxable earnings in making such assessments. Numerous judgments and assumptions are inherent in the determination of future taxable earnings, including such factors as future operating conditions. When the future utilization of some portion of the deferred tax asset is determined not to be more likely than not, a valuation allowance is provided to reduce the recorded deferred tax asset. When the Company can project that a portion of the deferred tax asset can be realized through application of a portion of tax loss carryforward, the Company will record that utilization as a deferred tax benefit and recognize a deferred tax asset in the same amount. There can be no assurance that facts and circumstances will not materially change and require the Company to adjust its deferred income tax asset valuation allowance in a future period. The Company recognized a deferred tax asset, net of valuation allowance, of $-0- at December 31, 2020 and 2019.
The Company is potentially subject to taxation in many jurisdictions, and the calculation of income tax liabilities (if any) involves dealing with uncertainties in the application of complex income tax laws and regulations in various taxing jurisdictions. It recognizes certain income tax positions that meet a more-likely-than not recognition threshold. If the Company ultimately determines that the payment of these liabilities will be unnecessary, it will reverse the liability and recognize an income tax benefit. No liability for unrecognized tax benefit was recorded as of December 31, 2020. During the year ended December 31, 2019 the Company determined that the payment of the certain liabilities related to the alternative minimum tax from prior years will be unnecessary, and therefore it reversed the liability and recognized an income tax benefit as described in the following section.
On December 22, 2017, the U.S. enacted the Tax Cuts and Jobs Act (the “Act”),which significantly changes U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in 2018.
Under the Act, corporations are no longer subject to the AMT, effective for taxable years beginning after December 31, 2017. However, where a corporation has an AMT Credit from a prior taxable year, the corporation still carries it forward and may use a portion of it as a refundable credit in any taxable year beginning after 2017 but before 2022. Generally, 50% of the corporation’s AMT Credit carried forward to one of these years will be claimable and refundable for that year. In tax years beginning in 2021, however, the entire remaining carryforward generally will be refundable. The Company has generated an AMT credit carryforward during prior years totaling $150,000 which previously was reported as income taxes payable on the Company’s balance sheet and the corresponding deferred tax asset was fully reserved based on all available evidence, the Company considered it more likely than not that all of the AMT tax credit carryforward would not be realized. Based on the provisions of the new Act, the Company now considers it more likely than not that all the AMT tax credit carryforward will be realized. Accordingly, the Company has recognized an income benefit of $150,000 during the year ended December 31, 2019 as it reduced the corresponding income taxes payable to zero as of December 31, 2019. The Company will receive no cash from the elimination of this AMT tax credit carryforward because the Company had not previously paid the AMT tax but rather it recorded the income tax liability on the accompanying balance sheet.
Earnings per Share
Earnings per share is calculated in accordance with FASB ASC 260, Earnings Per Share, for the periods presented. Basic earnings per share is based upon the weighted average number of shares of Common Stock outstanding. Diluted earnings per share is based on the assumption that all dilutive convertible shares, warrants and stock options were converted or exercised or excluded from the calculations if their inclusion would be antidilutive. Dilution is computed by applying the treasury stock method. Under this method, options and warrants are assumed exercised at the beginning of the period (or at the time of issuance, if later), and as if funds obtained thereby were used to purchase Common Stock at the average market price during the period. The Company has a convertible notes payable which is potentially dilutive, and their potential dilutive effect is included in diluted earnings per share is included at the beginning of the period (or at the time of issuance, if later) if they have a dilutive effect or excluded from the calculations if their inclusion would be antidilutive.
Gain on Extinguishment of Liabilities / Troubled Debt Restructuring:
In accordance with ASC 470, the Company assesses restructuring of debt as troubled debt restructuring if the creditor for economic or legal reasons related to the debtor’s financial difficulties grant a concession to the debtor that it would not otherwise consider. The Company records a gain on restructuring of payables when it transfers its assets to a creditor to fully settle a payable. The gain is measured by the excess of the carrying amount of the payable over the fair value of the assets transferred or fair value of equity interest granted.
Gain on Extinguishment of Payables:
In accordance with ASC 405, a debtor shall derecognize a liability if and only if it has been extinguished. A liability has been extinguished if either of the following conditions is met:
a. The debtor pays the creditor and is relieved of its obligation for the liability. Paying the creditor includes the following:
1. Delivery of cash
2. Delivery of other financial assets
3. Delivery of goods or services
4. Reacquisition by the debtor of its outstanding debt securities whether the securities are cancelled or held as so-called treasury bonds.
b. The debtor is legally released from being the primary obligor under the liability, either judicially or by the creditor. For purposes of applying this Subtopic, a sale and related assumption effectively accomplish a legal release if nonrecourse debt (such as certain mortgage loans) is assumed by a third party in conjunction with the sale of an asset that serves as sole collateral for that debt.”
Related Parties:
We follow ASC 850, “Related Party Disclosures,” for the identification of related parties and disclosure of related party transactions.
Note 2 - Secured Convertible Note Payable
The Company’s Senior Secured Convertible Note Payable in the principal amount of $12.0 million, issued in May 2015 (the “Note”), was paid off and all related liabilities extinguished in 2019, therefore there was no balance outstanding as of December 31, 2020 and 2019.
Following is an analysis of the activity in the Note during the year ended December 31, 2019:
Amount
Balance at December 31, 2018 $ 2,197,231
Funding under the Investor Note (as defined below) during the period -
Principal repaid during the period by issuance of Common Stock -
Change in fair value of Note during the period -
Exchange of Note payable for Common Stock (2,197,231 )
Balance at December 31, 2019 $ -
On May 7, 2015, the Company completed a private placement in May 2015 (the “May 2015 Private Placement”) of the Note and a warrant to purchase 1,800,000 shares of Common Stock (the “Warrant”). The placement agent for the Company in the transaction received a fee of 6% of the cash proceeds, or $600,000, if and when the Company receives the full cash proceeds. It received $27,000 of such amount at the closing. In addition, the placement agent (the “Placement Agent”) was granted a warrant to purchase 240,000 shares of Common Stock at $5.00 per share, which warrant is immediately exercisable (the “Placement Agent Warrant”).
The Note and Warrant were issued pursuant to a Securities Purchase Agreement, dated May 7, 2015, by and between the Company and an institutional investor (the “Investor”). The May 2015 Private Placement was made pursuant to an exemption from registration under the Securities Act of 1933, as amended (the “33 Act”). At the closing, the Investor acquired the Note by paying $450,000 in cash and issuing a secured promissory note, secured by cash, with an aggregate initial principal amount of $9,550,000 (the “Investor Note”).
On May 4, 2017, the Investor notified the Company that it elected to affect an Investor Optional Offset under Section 7(a) of the Investor Note of the full $9,490,000 principal amount outstanding under the Investor Note against $9,490,000 in aggregate principal outstanding under the Note. It did so by surrendering and concurrently cancelling $9,490,000 in aggregate principal of the Note in exchange for the satisfaction in full and cancellation of the Investor Note. The Note had an aggregate outstanding principal balance of $11,687,231 as of the date of the exchange. The Investor requested that the Company to deliver a new convertible note (the “Replacement Note”) with respect to the remaining principal balance of $2,197,231 to replace the Note. The aggregate outstanding principal balance of $11,687,231 of the Note included an approximate $2.0 million original issue discount; however, the Investor funded only $510,000 under the Investor Note. The Company had recorded the fair value of the Replacement Note assuming that the remaining par value was $2,197,231, as asserted by the Investor. The Replacement Note provided for a maturity date of May 7, 2018, a conversion price of $0.50 per share and was due in monthly installment payments through May 2018 either in cash or Common Stock, among other terms. The Company did not repay the Replacement Note at its maturity and it was therefore in technical default. The Replacement Note was to be secured to the same extent as the Note. The Company and the Investor have negotiated a resolution of these outstanding matters regarding the default status and the issuance of the Replacement Note under the terms of the financing.
On May 23, 2019, the Company and the Investor agreed to an omnibus resolution to these outstanding matters and entered into an exchange agreement (the “Exchange Agreement”) and a side-letter agreement (the “Side-Letter Agreement”), as described below:
Exchange Agreement: Under the Exchange Agreement, the Investor exchanged all of its rights under the original securities issued in the May 2015 Private Placement (the “Original Securities”), including: (i) the Note, subject to the Optional Offset (as defined in the Investor Note), with a current balance of $2,197,231; (ii) the related accrued interest under the Note, with a balance of $28,643; (iii) the Warrant; (iv) the Security and Pledge Agreement entered into by the Company and the Investor in connection with the May 2015 Private Placement; (v) the Guaranty made in favor of the Investor in connection with the May 2015 Private Placement; and (vi) the Registration Rights Agreement entered into by the Company and the Investor in connection with the May 2015 Private Placement, for 770,485 fully paid and nonassessable shares of Common Stock and certain rights (the “Rights”) to acquire additional securities in the future, which may be exercised for additional shares of Common Stock.
As a result of the exchange transactions described above, the Investor no longer owns any of the Original Securities, including any rights thereunder, and the Company cancelled the certificate(s) and other physical documentation evidencing the Investor’s ownership of the Original Securities.
Side-Letter Agreement: Concurrent with the Exchange Agreement, the Company and the Investor also entered into the Side-Letter Agreement, which provides that on November 23, 2019, the Company will, if required under the Side-Letter Agreement, issue additional shares of Common Stock to the Investor based on an increase in the Number of Fully-Diluted Shares Outstanding (as defined below) of the Company from the execution date of the Exchange Agreement to the six-month anniversary of the Exchange Agreement (the “True-Up Shares”). The issuance of the True-Up Shares, if any, shall provide the Investor with Rights to acquire additional Right Shares (as defined in the Exchange Agreement) to be calculated according to the following formula:
● A-B= aggregate number of Right Shares
● A = 9.99% of shares of Common Stock outstanding on November 23, 2019 (calculated based on the Number of Fully-Diluted Shares Outstanding (as defined below))
● B = The shares of Common Stock Issued to the Investor contemporaneously with the Exchange Agreement
For the purposes of the Side-Letter Agreement, “Number of Fully-Diluted Shares Outstanding” means, as of any time of determination, the sum of (i) the aggregate number of issued and outstanding shares of Common Stock as of such time of determination; (ii) the aggregate maximum number of shares of Common Stock issuable on an as-converted and as-exchanged basis, as applicable (excluding any exercise of warrants to purchase Common Stock), pursuant to all capital stock and all other securities of the Company or any of its subsidiaries (excluding any warrants to purchase Common Stock and all Rights issued pursuant to the Exchange Agreement) outstanding as of such time of determination (or issuable pursuant to agreements in effect as of such time) that are at any time and under any circumstances (after issuance thereof, if applicable), directly or indirectly, convertible into or exchangeable for, or which otherwise entitles the holder thereof to acquire, Common Stock (assuming, for such purpose, that each such security is convertible or exchangeable, as applicable, at the lowest price per share for which one share of Common Stock is at any time, directly or indirectly, issuable upon the conversion or exchange, as applicable, of any such security and without regards to any limitations on conversion or exchange applicable thereto); and (iii) without duplication with clause (ii) above, the aggregate maximum number of shares of Common Stock issuable pursuant to any agreement (excluding any warrants to purchase Common Stock and all Rights issued pursuant to the Exchange Agreement) of any person with the Company or any of its subsidiaries in effect as of such time of determination (assuming, for such purpose, that the shares of Common Stock, directly or indirectly, issued pursuant to such agreement is issued at the lowest price per share for which one share of Common Stock is at any time, directly or indirectly, issuable pursuant to such agreement).
Notwithstanding the foregoing, if any warrants to purchase Common Stock are outstanding (or issuable upon conversion or exchange of securities outstanding) as of such six-month anniversary (each, an “Outstanding Warrant”), on such six-month anniversary, the Company shall issue the Investor an additional Right to acquire a warrant (the “New Warrant”) exercisable for up to 9.99% of the shares of Common Stock issuable upon exercise of all Outstanding Warrants as of such six-month anniversary (the “New Warrant Shares”). The New Warrant Shares shall be of like tenor to the Outstanding Warrants.
Pursuant to the Side-Letter Agreement, the Company also agreed that from the execution date of the Exchange Agreement until twelve (12) months from such date, the Company will not raise capital at a price that is below $0.10 per share of Common Stock (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) without the Investor’s consent.
On May 30, 2019, the Company and the Investor entered into Amendment No. 1 to Exchange Agreement (the “Amendment”). Following execution of the Exchange Agreement on May 23, 2019, the Company and the Investor became aware of an inadvertent error regarding the number of shares of Common Stock to be issued to the Investor pursuant to the Exchange Agreement. The Company and the Investor agreed to amend the Exchange Agreement, so it reflects the correct number of shares of Common Stock to be issued and to ensure that the Investor does not beneficially own in excess of 9.99% of the shares of Common Stock outstanding immediately following the effective date of the Exchange Agreement. Pursuant to the Amendment, the Company and the Investor agreed that the number of shares of Common Stock to be issued to the Investor would be an aggregate of 605,816 shares, instead of the 770,485 shares stated in the Exchange Agreement.
Consistent with the developments above, effective November 23, 2019, the parties finalized the reconciliation pursuant to the Side-Letter Agreement described above and the related issuance of the True-Up Shares. Pursuant to the provisions of the Side-Letter Agreement, the parties agreed to the issuance of an additional 567,348 shares of Common Stock and the issuance of a warrant to purchase 61,380 shares of Common Stock at an exercise price of $0.50 per share, with an expiration date of June 19, 2026. Following is an analysis of gain on exchange of the debt and warrant obligations pursuant to the Exchange Agreement, which was finalized on November 23, 2019:
Amount
Obligations extinguished on the date of exchange, May 23, 2019:
Note balance at the date of exchange, May 23, 2019 $ 2,197,231
Accrued interest on the Note at the date of exchange, May 23, 2019 28,643
Fair value of Warrant Derivative at the date of exchange, May 23, 2019 116,731
Securities issued in exchange for the obligations extinguished on the date of exchange, May 23, 2019 and the finalization of the Side-Letter Agreement at November 23, 2019:
605,816 shares of Common Stock issued on the date of exchange May 23, 2019 valued at $0.121 per share, the closing market price on May 23, 2019 (73,304 )
567,348 shares of Common Stock issued pursuant to the finalization of the Side-Letter agreement on November 23, 2019 (68,082 )
Issuance of warrants to purchase 61,380 shares of Common Stock issued pursuant to the finalization of the Side-Letter agreement on November 23, 2019 (7,358 )
Gain on exchange of debt and warrant obligations - Year ended December 31, 2019 $ 2,193,861
In addition, the Company issued the Placement Agent Warrant in May 2015 to purchase 240,000 shares of Common Stock issued as part of the placement fee in connection with the Note. The Placement Agent Warrant contained an expiration date of May 7, 2022 and an exercise price of $5.00 per share and is subject to certain price protection and dilution provisions. Such warrant was treated as a derivative liability for accounting purposes due to its ratchet and anti-dilution provisions.
On June 4, 2019, the Company entered into an exchange agreement with the Placement Agent to extinguish the Placement Agent Warrant, including its certain price protection and dilution provisions, for a new warrant to purchase up to 50,000 shares of Common Stock with a termination date of June 4, 2026 at an exercise price of $0.50 per share without any price protection or dilution provisions.
The estimated fair value of the Placement Agent Warrant derivative as of May 23, 2019, the date of the exchange agreement with the Placement Agent, was $37,368, representing a change of $29,795 from January 1, 2019.
As a result of the exchange agreement with the Placement Agent, the Company extinguished the derivative liability of $37,368 attributable to the Placement Agent Warrant and recognized the estimated value of the new warrant of $7,985 as of June 4, 2019, the date of such exchange agreement. The resulting $29,383 difference between the estimated fair value of the Placement Agent Warrant extinguished and the new warrant issued to the Placement Agent was recorded as a gain on exchange of debt and warrant obligations, effective June 4, 2019.
A summary of the estimated gain on exchange and extinguishment of debt and warrant obligations as of and for the year ended December 31, 2019 follows:
Amount
Exchange of secured convertible note - (See Note 2 above) $ 2,193,861
Warrant issued to Placement Agent and exchanged on June 4, 2019 (See Note 2 above) 29,383
Convertible note exchanged on June 19, 2019 (See Note 3) 222,456
Gain on exchange of debt and warrant obligations - Year ended December 31, 2019 $ 2,445,700
Note 3 - Debt
Debt consists of the following at December 31, 2020 and 2019:
December 31, 2020 December 31, 2019
Notes payable, short term:
Convertible note payable, (less discount of $231,606 and $-0- as of December 31, 2020 and 2019, respectively) $ 133,563 $ -
Note payable - 1,000,000
Note payable (in default) 50,000 50,000
Note payable (in default) 35,000 35,000
Note payable - 19,125
Total notes payable, short-term $ 218,563 $ 1,104,125
Convertible Note Payable - Short-term
On August 19, 2020, the Company entered into a securities purchase agreement with an accredited investor (the “August Investor”) for the Company’s senior unsecured convertible note due August 19, 2021 (the “August Note”), with an aggregate principal face amount of approximately $365,169. The August Note is, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share. The Company also issued a five-year common stock purchase warrant to purchase up to 800,000 shares of Common Stock at an exercise price of $0.50 per share (the “Fixed Conversion Price”), subject to customary adjustments (the “August Warrant”). The August Warrant is immediately exercisable and on a cashless basis if the shares underlying such warrant have not been registered within 180 days after the date of issuance. The August Investor purchased such securities from the Company for an aggregate purchase price of $325,000. The Company also granted the August Investor certain automatic and piggy-back registration rights whereby the Company has agreed to register the resale by the August Investor of the shares underlying the August Warrant and the conversion of the August Note.
The August Note bears interest at a rate of eight percent (8%) per annum, may be voluntarily repaid in cash in full or in part by the Company at any time in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest in the event of the consummation by the Company of any public or private offering or other financing pursuant to which the Company receives gross proceeds of at least $2,500,000. The August Note is convertible at any time by the August Investor and the Company shall have the right to request that the August Investor convert the August Note in full or in part at the Fixed Conversion Price in the event that the VWAP (as defined in the August Note) of the Common Stock exceeds $0.75 for twenty consecutive trading days. In addition, pursuant to the August Note, so long as the August Note remains outstanding, the Company shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the Fixed Conversion Price without written consent of the August Investor.
The conversion of the August Note and the exercise of the August Warrant are each subject to beneficial ownership limitations such that the August Investor may not convert the August Note or exercise the August Warrant to the extent that such conversion or exercise would result in the August Investor being the beneficial owner in excess of 4.99% (or, upon election of the August Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.
The Company and the August Investor agreed that for so long as the August Note and August Warrant remains outstanding, the August Investor has a right to participate in any issuance of Common Stock, conventional debt, or a combination of such securities and/or debt, up to an amount equal to thirty-five percent (35%) of such subsequent financing.
The August Note and August Warrant each contain customary events of default, representations, warranties, agreements of the Company and the August Investor and customary indemnification rights and obligations of the parties thereto, as applicable.
The Note contains a BCF because the convertible portion or feature of the August Note provides a rate of conversion that is below market value and therefore is “in-the-money” when issued. The Company has recorded the BCF related to the issuance of the August Note when issued and also recorded the estimated fair value of the detachable August Warrant issued with the August Note.
The BCF of the August Note was measured by allocating a portion of the August Note’s proceeds to the detachable August Warrant (utilizing black-scholes methodology), and as a reduction of the carrying amount of the August Note equal to the intrinsic value of the conversion feature, both of which were credited to additional paid-in-capital as of the issuance date. The value of the proceeds received from the August Note was then allocated between the conversion features and August Warrant on an allocated fair value basis. The allocated value of the BCF and August Warrant exceeded the proceeds received from issuance of the August Note which was recorded as a discount from the face amount of the August Note. The discount is amortized over the term of the August Note under the interest method and is charged to interest expense.
Following is an analysis of the August Note as of its issuance date:
Amount
Allocation of August Note:
Amount allocated to beneficial conversion feature $ 221,006
Amount allocated to detachable August Warrants 103,994
Amount allocated to original issue discount 40,169
Par value of August Note 365,169
Less: Discount (365,169 )
August Note balance - Net of discount on date of issuance $ -
Following is a summary of the August Note as of and for the year ended December 31, 2020 follows:
Amount
Balance December 31, 2019 $ -
Issuance of August Note -
Amortization of discount for the year ended December 31, 2020 133,563
Balance December 31, 2020, August Note - Net of discount $ 133,563
Note Payable - Short-term
On December 27, 2013, the Company borrowed $1,050,000 under an unsecured credit facility with a private, third-party lender. The facility is represented by a promissory note (the “December 2013 Note”) with an original maturity date of March 12, 2014.
In connection with the December 2013 Note, the Company granted the lender a warrant (the “December 2013 Warrant”) exercisable to purchase 100,000 shares of its Common Stock at an exercise price of $15.00 per share. In connection with an extension to April 2015, the Company and such lender amended the date for exercise of the December 2013 Warrant to be a period commencing April 7, 2015 and expiring on the third anniversary of such date. The Company issued no additional warrants to the lender in connection with the extension of the December 2013 Note to the new April 2015 maturity date (the “New Maturity Date”). If the Company failed to pay the December 2013 Note on or before the New Maturity Date, the number of shares issuable under the December 2013 Warrant increases to 1,333,333 and the exercise price drops to $0.75 per share. All other terms of the December 2013 Warrant remained the same. The December 2013 Warrant has been treated as a derivative liability whereby the value of December 2013 Warrant is estimated at the date of grant and recorded as a derivative liability and as a discount on the note payable. The warrant liability is revalued to fair value at each reporting date with the corresponding earnings (loss) reflected in the statement of earnings as a change in derivative liability. The discount is amortized ratably through the original maturity date and each of the extended maturity dates. The December 2013 Warrant expired in 2017 and is no longer exercisable as of December 31, 2020 and 2019.
In connection with an additional extension of the December 2013 Note to April 7, 2016, the Company agreed to enter into a definitive revenue sharing agreement with the lender (the “Revenue Sharing Agreement”) to grant the lender under the Revenue Sharing Agreement an irrevocable right to receive a monthly payment equal to one half of one percent (1/2%) of the gross revenue derived from the share of all hydrocarbons produced at the wellhead from the Nicaraguan Concessions and any other oil and gas concessions that the Company and its affiliates may acquire in the future. This percentage increased to one percent (1%) when the Company did not pay the December 2013 Note in full by August 7, 2014. Therefore, the Revenue Sharing Agreement is fixed at one percent (1%). The value of the one percent (1.0%) definitive Revenue Sharing Agreement granted to the lender as consideration for the extension of the maturity date to December 7, 2014 was estimated to be $964,738. Such amount was recorded as a reduction of oil and gas properties and as a discount on the December 2013 Note and amortized ratably over the extended term of such note. Such prospective Revenue Sharing Agreement is void with the abandonment of the Nicaraguan Concessions.
In connection with the extension of the maturity date of the December 2013 Note to April 7, 2016, the Company also (i) issued the lender 20,000 shares of restricted Common Stock; (ii) decreased the exercise price of the December 2013 Warrant to $5.00 per share and extended the term of the December 2013 Warrant to a period commencing on the New Maturity Date and expiring on the third anniversary of such date; and (iii) paid $50,000 toward amounts due under the December 2013 Note. The Company issued no additional warrants to the lender in connection with the extension of the December 2013 Note to the New Maturity Date. If the Company failed to pay the December 2013 Note on or before the New Maturity Date, the number of shares issuable under the December 2013 Warrant increases to 1,333,333 and the exercise price drops to $0.75 per share. All other terms of the warrant remained the same. The Company failed to make the required payment previously described and the reset of the terms of the December 2013 Warrant occurred, however such warrant expired in March 2017 unexercised. The December 2013 Note may be prepaid without penalty at any time. The December 2013 Note is subordinated to all existing and future senior indebtedness, as such terms are defined in the December 2013 Note. The December 2013 Note was in default and the parties agreed to a resolution to this default, including completing the extinguishment of the note balance, accrued interest and revenue sharing agreement through an exchange agreement which is further described below.
The December 2013 Warrant was treated as a derivative liability whereby the value of the December 2013 Warrant is estimated at the date of grant and recorded as a derivative liability and as a discount on the note payable. The warrant liability was revalued to fair value at each reporting date with the corresponding earnings (loss) reflected in the statement of earnings as change in derivative liability. The December 2013 Warrant expired in 2019 and is not deemed outstanding as of December 31, 2020 and 2019. The discount was amortized ratably through the original maturity date and each of the extended maturity dates. The Company recognized the value of the 20,000 shares of Common Stock issued ($104,000) and the increased value of the outstanding warrants due to the decrease in their exercise price ($68,716) as an additional discount on the December 2013 Note to be amortized ratably over the extended term of such note.
On September 24, 2020, the Company entered into an Exchange and Settlement Agreement (the “September Exchange Agreement”) with the December 2013 Note holder (the “Holder”), pursuant to which the Holder agreed to exchange the December 2013 Note in the original principal amount of $1,050,000, representing outstanding principal balance of $1,000,000 and accrued and unpaid interest thereon (which totaled $542,762 as of September 24, 2020), for (i) a cash payment in the amount of $100,000 and (ii) 737,532 newly issued shares of Common Stock (the “Exchange”).
In connection with the September Exchange Agreement, the Company and the Holder agreed to terminate the following agreements: (i) the preemptive rights agreement, dated as of December 27, 2013, between the Company and the Holder, (ii) the revenue sharing agreement, dated as of May 30, 2014, between the Company and the Holder, and (iii) the indemnity agreement, dated as of December 27, 2013, between the Company and the Holder. Additionally, pursuant to the September Exchange Agreement, the Holder acknowledged the expiration on March 12, 2017, by its terms, of a common stock purchase warrant, issued to the Holder, for the purchase of up to 100,000 shares of Common Stock. The Company and the Holder also agreed to provide mutual limited releases, releasing each of them from all liabilities and obligations to the other, as between them with respect to claims relating to the December 2013 Note, such preemptive rights agreement, the Holder’s warrant and all other agreements relating thereto.
The closing of the Exchange occurred concurrently with the execution of the September Exchange Agreement. At the closing, the Company made the $100,000 cash payment and issued 737,532 shares of Common Stock (valued at $132,756 based on the closing market price of the Common Stock on the date of the Exchange) to the Holder and the underlying documents and obligations summarized above were surrendered and/or cancelled.
A summary of the gain on exchange and extinguishment of debt and the related accrued interest as of and for the year ended December 31, 2020 follows:
Amount
Principal balance of December 2013 Note extinguished as a result of the Exchange $ 1,000,000
Accrued interest extinguished as a result of the Exchange 542,762
Total obligations extinguished as a result of the Exchange 1,542,762
Cash payment to Holder as a result of the Exchange (100,000 )
Value of Common Stock issued as a result of the Exchange (132,756 )
Gain on extinguishment of liabilities - Year ended December 31, 2020 $ 1,310,006
Gain on extinguishment of liabilities per basic share - Year ended December 31, 2020 $ 0.09
Gain on extinguishment of liabilities per diluted share - Year ended December 31, 2020 $ 0.08
Other notes payable
The following notes were extinguished on June 19, 2019:
● On November 8, 2016, the Company borrowed a total of $200,000 from an individual under a convertible note payable with a conversion rate of $5.00 per share. The note required no principal or interest payments until its maturity date of November 7, 2017 and bore interest at 8% per annum. The note was not paid on its original maturity date.
● On April 20, 2017, the Company borrowed $40,000 under an unsecured credit facility with a private, third-party lender which was convertible at a rate of $5.00 per share. The note required no principal or interest payments until its maturity date of April 19, 2018 and bore interest at 8% per annum. The note was not paid on its maturity date.
On June 19, 2019, the Company and the holder of these two convertible notes entered into an exchange agreement whereby such notes with an unpaid principal balance of $240,000 and related accrued interest totaling $45,020 were extinguished. Under such exchange agreement, the Company issued the individual a new warrant exercisable to purchase up to 570,000 shares of Common Stock at an exercise price of $0.50 per share, with a termination date of June 19, 2026 and without any price protection or dilution provisions in exchange for the extinguishment of such notes and related accrued interest. The Black-Scholes valuation of the warrant issued to the holder on June 19, 2019 totaled $62,564.
Following is an analysis of gain on extinguishment of the obligations pursuant to such exchange agreement on June 19, 2019:
Amount
Obligations extinguished on the date of exchange, June 19, 2019:
Convertible notes balance at the date of exchange, June 19, 2019 $ 240,000
Accrued interest on the convertible notes at the date of exchange, June 19, 2019 45,020
Securities issued in exchange for the obligations extinguished on the date of the exchange, June 19, 2019:
Value of the stock purchase warrant issued on the date of exchange, June 19, 2019 (62,564 )
Gain on extinguishment of liabilities - Year ended December 31, 2019 $ 222,456
Gain on extinguishment of liabilities per basic share - Year ended December 31, 2019
$ 0.02
Gain on extinguishment of liabilities per diluted share - Year ended December 31, 2019
$ 0.02
Other than the December 2013 Note, at December 31, 2020, the Company had short-term notes outstanding with entities or individuals as follows:
●
On July 7, 2015, the Company borrowed a total of $50,000 from an individual under a convertible note payable with the conversion rate of $5.60 per share. The term of such note was for a period of 90 days and bears interest at 8% per annum. In connection with the loan, the Company issued the individual a warrant for the purchase of 5,000 shares of Common Stock at $5.60 per share for a period of five years from the date of such note. The terms of such note and warrant provide that should such note, and related interest not be paid in full by its maturity date, the number of warrants automatically increases to 10,000 shares and the exercise price remains at $5.60 per share. The ratchet provision in such warrant requires that such warrant be accounted for as derivative liability. The Company recorded the estimated fair value of such warrant totaling $22,314 as a discount on such note payable and as a derivative liability in the same amount, as of the origination date. On October 7, 2015, such note was extended for an additional 90 days, or until January 7, 2016, and later to May 7, 2016 and then to October 7, 2016. The Company did not repay such note by October 7, 2016. The Company and such lender are pursuing a resolution of this default. There can be no assurance that the Company will be successful in this regard. In consideration, the Company granted the holder of such note common stock purchase warrants exercisable to purchase 5,000 shares of Common Stock on each extension date at an exercise price of $5.60 per share, which warrants are immediately exercisable and expire in five years. The value of the 5,000 warrants issued on January 7, 2016 totaled $379 and $131 on May 7, 2016, both of which were amortized over the extension period (through October 7, 2016). The related warrant derivative liability balance was $189 and $662 as of December 31, 2020 and 2019, respectively. See Note 5.
●
On July 15, 2015, the Company borrowed a total of $35,000 from an individual under a convertible note payable with the conversion rate of $5.60 per share. The term of such note was for a period of 90 days and bears interest at 8% per annum. In connection with the loan, the Company issued the entity a warrant for the purchase of 3,500 shares of Common Stock at $5.60 per share for a period of five years from the date of such note. The terms of such note and warrant provide that should such note, and related interest not be paid in full by its maturity date, the number of warrants automatically increases to 7,000 shares and the exercise price remains at $5.60 per share. The ratchet provision in such warrant requires that such warrant be accounted for as a derivative liability. The Company recorded the estimated fair value of such warrant totaling $11,827 as a discount on such note payable and as a derivative liability in the same amount, as of the origination date. On October 15, 2015, such note was extended for an additional 90 days, or until January 15, 2016, and later to October 15, 2016. The Company did not repay such note by October 15, 2016. The Company is pursuing a resolution of this default, including an additional extension from the holder. There can be no assurance that the Company will be successful in this regard. In consideration, the Company granted the lender common stock purchase warrants exercisable to purchase an aggregate of 3,500 shares of Common Stock on each extension date at an exercise price of $5.60 per share, which warrants are immediately exercisable and expire in five years. The value of the 3,500 warrants on January 15, 2016 totaled $267 and $74 on October 2016, both of which were amortized over the extension period (through October 15, 2016). The related warrant derivative liability balance was $132 and $454 as of December 31, 2020 and 2019, respectively. See Note 5.
●
On May 21, 2018, the Company borrowed $13,125 under an unsecured promissory note with a private third-party lender, which is convertible into Common Stock at a rate of $0.50 per share. During June 2019 and August 2019, the Company borrowed an additional $50,500 and $5,500, respectively, from this same third-party lender under the same terms. Such note is due on demand and bears interest at 8% per annum. In October 2019 the Company repaid $50,000 in principal on this demand note and the remaining balance of $19,125 was paid off on August 19, 2020.
● On May 13, 2020, the Company borrowed $41,000 from its Chairman, Chief Executive Officer and President in the form of an unsecured promissory note bearing 6% interest and due on demand. The proceeds were used for general working capital purposes. The outstanding principal on such note totaling $41,000 was paid off in full on August 19, 2020. During the year ended December 31, 2020, the Company accrued and paid a total of $654 of interest on this related party note payable.
Note 4 - Stock Based Compensation
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.
In May 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,000 shares of the Company’s common stock is reserved for issuance under the 2006 Plan. In June 2005, the Company’s stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,500 shares of the Company’s common stock were reserved for issuance under the 2005 and 2006 Plans; however, such Plans have now expired, and no further issuances can be made. Options granted under the 2005 Plan and 2006 Plan allow for the purchase of common stock at prices not less than the fair market value of such stock at the date of grant, become exercisable immediately or as directed by the Company’s Board of Directors and generally expire ten years after the date of grant. The Company also has issued other stock options not pursuant to a formal plan with terms similar to the 2005 and 2006 Plans.
At the Annual Meeting of Stockholders held on September 25, 2015 and the stockholders approved the Infinity Energy Resources, Inc. 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”) and reserved 500,000 shares for issuance under the Plan.
As of December 31, 2020, 500,000 shares were available for future grants under the 2015 Plan. All other Plans have now expired.
The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the expected term of the option award, expected stock price volatility and expected dividends. These estimates involve inherent uncertainties and the application of management judgment. For purposes of estimating the expected term of options granted, the Company aggregates option recipients into groups that have similar option exercise behavioral traits. Expected volatilities used in the valuation model are based on the expected volatility based on historical volatility. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company’s forfeiture rate assumption used in determining its stock-based compensation expense is estimated based on historical data. The actual forfeiture rate could differ from these estimates. There were no stock options granted during the years ended December 31, 2020 and 2019.
The following table summarizes stock option activity for the years ended December 31, 2020 and 2019:
Number of Options Weighted Average Exercise
Price Per
Share Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic
Value
Outstanding at December 31, 338,200 $ 41.24 3.1 years $ -
Granted - -
Exercised - -
Forfeited (6,200 ) (7.80 )
Outstanding at December 31, 2019 332,000 $ 41.86 2.29 years $ -
Outstanding and exercisable at December 31, 2019 332,000 $ 41.86 2.29 years $ -
Outstanding at December 31, 2019 332,000 $ 41.86 2.29 years $ -
Granted - -
Exercised - -
Forfeited - -
Outstanding at December 31, 2020 332,000 $ 41.86 1.28 years $ -
Outstanding and exercisable at December 31, 2020 332,000 $ 41.86 1.28 years $ -
The Company recorded stock-based compensation expense in connection with the vesting of options granted aggregating $-0- and $-0- during the years ended December 31, 2020 and 2019, respectively.
The intrinsic value as of December 31, 2020 related to the vested and unvested stock options as of that date was $-0-. The unrecognized compensation cost as of December 31, 2020 related to the unvested stock options as of that date was $-0-.
Restricted stock grants. During the year ended December 31, 2020 the Board of Directors granted 5,000,000 shares of restricted stock awards to our Officers, Directors and a consultant. During the year ended December 31, 2019 the Board of Directors granted 2,000,000 shares of restricted stock awards to our new Chief Operating Officer. Restricted stock awards are valued on the date of grant and have no purchase price for the recipient. Restricted stock awards typically vest over a period of time generally corresponding to yearly anniversaries of the grant date. Unvested shares of restricted stock awards may be forfeited upon the termination of service of employment with the Company, depending upon the circumstances of termination. Except for restrictions placed on the transferability of restricted stock, holders of unvested restricted stock have full stockholder’s rights, including voting rights and the right to receive cash dividends.
A summary of all restricted stock activity under the equity compensation plans for the years ended December 31, 2020 and 2019 is as follows:
Number of
Restricted
shares Weighted
average
grant date
fair
value
Nonvested balance, January 1, 2019 - $ -
Granted 2,000,000 0.13
Vested (1,250,000 ) (0.13 )
Forfeited - -
Nonvested balance, December 31, 2019 750,000 $ 0.13
Granted 5,000,000 0.13
Vested (2,000,000 ) (0.13 )
Forfeited - -
Nonvested balance, December 31, 3,750,000 $ 0.13
The Company recorded stock-based compensation expense in connection with the issuance/vesting of restricted granted aggregating $236,225 and $81,784 during the years ended December 31, 2020 and 2019, respectively.
The Company estimated the fair market value of these restricted stock grants based on the closing market price on the date of grant. As of December 31, 2020, there were $487,500 of total unrecognized compensation costs related to all remaining non-vested restricted stock grants, which will be amortized over the next 18 months in accordance with the respective vesting scale.
The nonvested balance of restricted stock vests as follows:
Years ended Number of
shares
2,500,000
1,250,000
Note 5 - Derivative Instruments
The estimated fair value of the Company’s derivative liabilities, all of which are related to the detachable warrants issued in connection with various notes payable, 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 and current interest rates. The detachable warrants issued in connection with the two other short-term notes payable (See Note 3) contain ratchet and anti-dilution provisions that remain in effect during the term of the warrants while the ratchet and anti-dilution provisions of the other notes payable cease when the related note payable is extinguished. When the related notes payable containing such ratchet and anti-dilution provisions is extinguished, the derivative liability will be adjusted to fair value and the resulting derivative liability will be transitioned from a liability to equity as of such date.
The Company’s outstanding warrants to purchase an aggregate of 17,000 shares of Common Stock, in connection with various outstanding debt instruments which require derivative accounting treatment as of December 31, 2020 and 34,000 shares as December 31, 2019. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of December 31, 2020 and 2019 is as follows:
As of
December 31, 2020 As of
December 31, 2019
Volatility - range 379.4 % 316.2 %
Risk-free rate 0.38 % 1.69 %
Contractual term 0.5 - 0.8 years 0.5 - 1.3 years
Exercise price $ 5.60 $ 5.60
Number of warrants in aggregate 17,000 34,000
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 for both open and closed derivatives:
Amount
Balance at December 31, 2019 $ 1,116
Unrealized derivative gains included in other income/expense for the year (795 )
Balance at December 31, 2020 $ 321
Note 6 - Warrants
The following table summarizes warrant activity for the years ended December 31, 2020 and 2019:
Number of
Warrants Weighted
Average
Exercise Price
Per Share
Outstanding and exercisable at December 31, 2018 2,365,563 $ 5.01
Issued pursuant to exchange agreements 681,380 0.50
Cancelled pursuant to exchange agreements (2,040,000 ) (5.00 )
Forfeited/expired (60,000 ) (5.00 )
Outstanding and exercisable at December 31, 2019 946,943 1.78
Issued pursuant to convertible note agreements 800,000 0.50
Forfeited/expired (218,563 ) (5.05 )
Outstanding and exercisable at December 31, 2020 1,528,380 $ 0.65
The weighted average term of all outstanding common stock purchase warrants was 4.9 years as of December 31, 2020. The intrinsic value of all outstanding common stock purchase warrants and the intrinsic value of all vested common stock purchase warrants was zero as of December 31, 2020.
Note 7 - Supplemental Oil and Gas Information
Estimated Proved Oil and Gas Reserves (Unaudited)
As of December 31, 2020 and 2019, the Company had no proved reserves. As such, there are no estimates of proved reserves to disclose, nor standardized measure of discounted future net cash flows relating to proved reserves.
Costs Incurred in Oil and Gas Activities
Costs incurred during the year ended December 31, 2020 in connection with the Company’s oil and gas acquisition, exploration and development activities are shown below.
Year ended
December 31, 2020
Property acquisition costs:
Proved $ -
Unproved
Total property acquisition costs -
Development costs -
Exploration costs -
Total costs $ --
Aggregate capitalized costs relating to the Company’s oil and gas producing activities, and related accumulated depreciation, depletion, impairment and amortization are as follows:
December 31,
Proved oil and gas properties $ - $ -
Unproved oil and gas properties - -
Total - -
Less accumulated impairment charge on oil and gas properties as of December 31, 2015 - -
Less accumulated depreciation, depletion and amortization - -
Net capitalized costs $ - $ -
Costs Not Being Amortized
Oil and gas property costs not being amortized at December 31, 2020, costs by year that the costs were incurred, are as follows:
Year Ended December 31,
(expensed directly) $ -
(expensed directly) -
Prior -
Total costs not being amortized $ -
Note 8 - Accrued liabilities
Accrued liabilities consists of the following at December 31, 2020 and 2019:
December 31, 2020 December 31, 2019
Accrued compensation (see Note 12) $ 1,425,708 $ 1,465,708
Accrued board of director fees (see Note 12) 363,500 363,500
Accrued accounting services - Related party (see Note 12) 762,407 762,407
Accrued rent 614,917 614,917
Accrued Nicaragua Concession fees 544,485 544,485
Accrued financing costs - Related party (see Note 12) 26,113 26,113
Accrued franchise taxes
Total accrued liabilities $ 3,737,580 $ 3,777,580
The accrued rent balances relate to unpaid rent for the Company’s previous headquarters in Denver Colorado and represents unpaid rents and related costs for the period June 2006 through November 2008. The Company has not had any correspondence with the landlord for several years and will seek to settle and/or negotiate the matter when it has the financial resources to do so.
Note 9 - Income Taxes
The provision for income taxes consists of the following:
For the Year Ended
December 31,
Current income tax expense (benefit) $ - $ -
Deferred income tax benefit - -
Total income tax expense (benefit) $ - $ -
The effective income tax rate on continuing operations varies from the statutory federal income tax rate as follows:
For the Years Ended
December 31,
Federal income tax rate 21.0 % 21.0 %
State income tax rate 4.6 4.7
Stock-based compensation 0.5 (17.7 )
Change in valuation allowance (25.4 ) (12.9 )
Other, net (0.7 ) (4.9 )
Effective tax rate - % - %
The significant temporary differences and carry-forwards and their related deferred tax asset (liability) and deferred tax asset valuation allowance balances are as follows:
For the Years Ended
December 31,
Deferred tax assets:
Accruals and other $ 949,000 $ 980,000
Asset retirement obligations 435,000 435,000
Prepaid expenses 20,000 -
Stock-based compensation 811,000 801,000
Alternative minimum tax credit carry-forward - -
Net operating loss carry-forward 15,576,000 17,006,000
Gross deferred tax assets 17,791,000 19,222,000
Less valuation allowance (17,791,000 ) (19,222,000 )
Deferred tax asset $ - $ -
The effective income tax rate on earnings (loss) before income tax benefit varies from the 21% statutory federal income tax rate primarily due to Company providing a 100% reserve on its net deferred tax assets as of December 31, 2020 and 2019.
During the year ended December 31, 2020, the Company reduced its valuation allowance on net deferred tax assets by $1,431,000 while the valuation allowance remained at 100% of all net deferred tax assets as of December 31, 2020. The Company has incurred net taxable losses for in 10 of the last 13 years and continues to be in a cumulative loss position at December 31, 2020. In addition, there exists substantial doubt about the Company’s ability to continue as a going concern within one year after the date the financials are issued due to the operational and financing uncertainties. Accordingly, the Company determined there was not sufficient positive evidence regarding its potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, it determined to continue to provide a 100% valuation allowance on its net deferred tax assets. The Company expects to continue to maintain a full valuation allowance until it determines that it can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent the Company determines that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.
For income tax purposes, the Company has net operating loss carry-forwards of approximately $61,325,000 as of December 31, 2020, which expire from 2025 through 2040.
The Company has recently completed the filing of tax returns for the tax years 2012 through 2019. Therefore, all such tax returns are open to examination by the Internal Revenue Service.
The Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards in the event that it has experienced a more than 50% change in ownership over a three-year period. Management has completed its review of whether such ownership changes have occurred, and based upon such review, management believes that the Company is not currently subject to an annual limitation or the possibility of the complete elimination of the net operating loss carry- forwards. In addition, the Company may be limited by additional ownership changes which may occur in the future.
Note 10 - Gain on Extinguishment of Liabilities
During the year ended December 31, 2020, the Company recorded gains on the extinguishment of liabilities through the negotiation of settlements with certain creditors and through the operation of law.
A summary of the estimated gain on exchange and extinguishment of trade payables, debt and warrant obligations as of and for the years ended December 31, 2020 and 2019 follows:
December 31, 2020 December 31, 2019
Gain on extinguishment of debt and related accrued interest (See Note 3 above) $ 1,310,006 $ -
Extinguishment of trade payables 4,840,136 -
Exchange of secured convertible note (See Note 2 above) - 2,193,861
Warrant issued to Placement Agent and exchanged on June 4, 2019 (See Note 2 above) - 29,383
Convertible note exchanged on June 19, 2019 (See Note 3) - 222,456
Total $ 6,150,142 $ 2,445,700
The Company incurred trade payable obligations totaling $4,840,136 during 2013 which were extinguished in 2020 pursuant to the relevant Statute of Limitations.
Note 11 - Commitments and Contingencies
The Company has not maintained insurance coverage on its U.S domestic oil and gas properties for a number of years. 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 relative to its Texas oil and gas properties that were sold in 2012. The ultimate resolution of these compliance issues could have a material adverse impact on the Company’s financial statements.
Lack of Compliance with Law Regarding Domestic Properties
Infinity has not been in compliance with existing federal, state and local laws, rules and regulations for its previously owned domestic oil and gas properties and this could have a material or significantly adverse effect upon the liquidity, capital expenditures, earnings or competitive position of Infinity. All domestic oil and gas properties held by Infinity - Wyoming and Infinity-Texas were disposed of well prior to December 31, 2020; however, the Company may remain liable for certain asset retirement costs should the new owners not complete their obligations. Management believes the total asset retirement obligations recorded of $1,716,003 as of December 31, 2020 and 2019 are sufficient to cover any potential noncompliance liabilities relative to the plugging of abandoned wells, the removal of facilities and equipment, and site restoration on oil and gas properties for its former oil and gas properties. The Company has not maintained insurance on the domestic properties for a number of years nor has it owned/produced any oil & gas properties for a number of years.
Binding Term Sheet to Acquire Domestic Oil and Gas Properties
On July 31, 2019, we acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021 which the parties are currently finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
Upon completion of the acquisition, the purchase will include the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand zone with an approximate depth of 3,600 feet.
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:
●
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 engaged in negotiations with the State of Texas in late 2012 and early 2013 and 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 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 have potential liability regarding the above matter, and the officers are held personally harmless by indemnification provisions of the Company. Therefore, to the extent they might actually occur, these liabilities are the obligations of the Company. Management estimates that the liabilities associated with this matter will 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 included in the asset retirement obligation on the accompanying balance sheets.
● Cambrian Consultants America, Inc. (“Cambrian”) filed an action in the District Court of Harris County, Texas, number CV2014-55719, on September 26, 2014 against Infinity Energy Resources, Inc. resulting from certain professional consulting services provided for quality control and management of seismic operations during November and December 2013 on the Nicaraguan Concessions. Cambrian provided these services pursuant to a Master Consulting Agreement with Infinity, dated November 20, 2013, and has claimed breach of contract for failure to pay amounts due. On December 8, 2014, a default judgment was entered against the Company in the amount of $96,877 plus interest and attorney fees. The Company has included the impact of this litigation as a liability in its accounts payable. The Company will seek to settle the default judgment when it has the financial resources to do so.
● Torrey Hills Capital, Inc. (“Torrey”) notified the Company by letter, dated August 15, 2014, of its demand for the payment of $56,000, which it alleged was unpaid and owed under a consulting agreement dated October 18, 2013. The parties entered into a consulting agreement under which Torrey agreed to provide investor relations services in exchange for payment of $7,000 per month and the issuance of 15,000 shares of common stock. The agreement was for an initial three month-term with automatic renewals unless terminated upon 30 days’ written notice by either party. The Company made payments totaling $14,000 and issued 15,000 shares of common stock during 2013. The Company contends that Torrey breached the agreement by not performing the required services and that it had provided proper notice of termination to Torrey. Furthermore, the Company contends that the parties agreed to settle the dispute on or about June 19, 2014 under which it would issue 2,800 shares of common stock in full settlement of any balance then owed and final termination of the agreement. Torrey disputed the Company’s contentions and submitted the dispute to binding arbitration. The Company was unable to defend itself and the arbitration panel awarded Torrey a total of $79,594 in damages. The Company has accrued this amount in accounts payable as of December 31, 2020 and 2019, which management believes is sufficient to provide for the ultimate resolution of this dispute.
● Joseph Ryan (“Ryan”) filed an action in the District Court of Johnson County, Kansas, number 20CV01493, on March 20, 2020 against Infinity Energy Resources, Inc. resulting from certain professional consulting services Ryan alleges he performed for Social, Environmental and Economic Impact Assessments during July 2012 through September 2015 on the Nicaraguan Concessions. Ryan alleges that such services were provided pursuant to oral agreements with Infinity. Ryan claims breach of contract for failure to pay $12,000 amounts invoiced and due. On December 23, 2020, Ryan filed a Motion for Default Judgment for $12,000 in unpaid invoices plus legal, fees, statutory interest and any expert testimony fees. The Company has filed a Motion to Dismiss the Lawsuit because plaintiff’s claims are barred by the statute of Limitations and defective service. The Company has included the expected impact of this litigation as a liability in its accounts payable as of December 31, 2020.
Note 12 - Related Party Transactions
The Company does not have any employees other than its Chief Executive Officer, Chief Operating Officer and Chief Financial Officer. In previous years, certain general and administrative services (for which payment is deferred) had been provided by the Company’s Chief Financial Officer’s accounting firm at its standard billing rates plus out-of-pocket expenses consisting primarily of accounting, tax and other administrative fees. The Company no longer utilizes its Chief Financial Officer’s accounting firm for such support services and was not billed for any such services during the years ended December 31, 2020 and 2019. The amount due to such firm for services previously provided was $762,407 as of December 31, 2020 and 2019 and is included in accrued liabilities at both dates.
Offshore Finance, LLC is owed financing costs totaling $26,113 as of December 31, 2020 and 2019, in connection with its subordinated loan to the Company which was converted to common shares in 2014, The managing partner of Offshore and the Company’s CFO are partners in the accounting firm which the Company used for general corporate purposes in the past.
The Company’s Chief Operating Officer is a non-controlling member of Core. The Company acquired an Option from Core to purchase the production and mineral rights/leasehold for the Properties. The Company paid a nonrefundable deposit of $50,000 in 2019 to bind the original Option, which gave it the right to acquire the Properties for $2.5 million prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021, which the parties are currently finalizing another extension. We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties. Core and the Company are finalizing the final purchase date and terms of the Properties however, it is expected to be in the second quarter 2021.
As of December 31, 2020 and December 31, 2019, the Company had accrued compensation to its officers and directors of $1,789,208 and $1,829,208, respectively. The Board of Directors authorized the Company to cease compensation for its officers and directors, effective January 1, 2018.
On May 13, 2020, the Company borrowed $41,000 from its Chairman, CEO & President in the form of an unsecured promissory note bearing 6% interest and due on demand. The proceeds were used for general working capital purposes. The entire principal balance of the note was retired on August 19, 2020 and there is no remaining balance as of December 31, 2020. During the year ended December 31, 2020, the Company accrued and paid a total of $654 of interest on this related party note payable.
Note 13 -Net Earnings Per Share
The calculation of the weighted average number of shares outstanding and earnings per share outstanding for the years ended December 31, 2020 and 2019 are as follows:
Year Ended
December 31,
Numerator for basic earnings per share - Net earnings $ 5,623,707 $ 1,844,775
Add: Interest expense on convertible debt 144,288 -
Numerator for diluted income per share - Net earnings $ 5,767,995 $ 1,844,775
Denominator for basic earnings per share - weighted average shares outstanding 14,508,755 9,086,265
Dilutive effect of convertible debt outstanding 1,447,868 -
Dilutive effect of shares issuable under stock options and warrants outstanding - -
Denominator for diluted loss per share - adjusted weighted average shares outstanding 15,956,623 9,086,265
Net earnings per share:
Basic $ 0.39 $ 0.20
Diluted $ 0.36 $ 0.20
Basic earnings per share is based upon the weighted average number of shares of Common Stock outstanding during the year. For the year ended December 31, 2020, the shares issuable upon conversion of the convertible debt issued on August 19, 2020 were considered Common Stock equivalents and therefore its dilutive effect was included in the computation of diluted income per share. All shares issuable upon conversion of convertible debt (other than the convertible debt issued on August 19, 2020) and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted earnings per share.
For the year ended December 31, 2019, all shares issuable upon conversion of convertible debt and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted earnings per share.
Note 14 - Subsequent Events
Covid-19 Pandemic -
The financial statements contained in this Annual Report on Form 10-K as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2020. Continuing after such date, we believe that our efforts to raise necessary capital will likely be adversely impacted by the outbreak of the coronavirus (Covid-19) and we cannot forecast with any certainty when the disruptions caused by it will cease to impact our business and the results of our operations in subsequent periods. In reading this Annual Report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties to the results of our operations in such subsequent periods caused by the outbreak of Covid-19.
Issuance of Convertible Preferred Stock -
On March 26, 2021, the Company issued Convertible Preferred Stock (the “Preferred Stock”), with an aggregate principal face amount of up to $2,500,000 subject to a 10% original issue discount. The Preferred Stock is, subject to certain conditions, convertible into common stock at a rate of $0.32 per share and will be subject to a 10% dividend rate per annum, payable quarterly in cash or registered common stock, subject to equity conditions. The Holders were also granted demand registration rights. The Company issued warrants in addition to the Preferred Stock investors to purchase up to 6,410,250 shares (assuming the $2.5 million offering is fully subscribed) of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments. The common stock purchase warrants are exercisable commencing six months after issuance on a cashless basis at the Holders discretion with a term of five years. On March 26, 2021 investors purchased Preferred Stock with an aggregate cash purchase price of $2,050,000 together with warrants to purchase a total of 5,256,410 shares of common stock. The Company will allow additional investor purchases to complete the entire offering of an aggregate principal face amount of up to $2,500,000 before closing such offering.
The Company intends to use the proceeds of the Convertible Preferred Stock Offering to complete the acquisition and development of the Properties, to pay-off all outstanding convertible notes payable and for general working capital.
Oil and Gas Property Acquisition -
On July 31, 2019, we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold for the Properties. We paid a nonrefundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021 which the parties are currently finalizing another extension.
We intend to complete the acquisition of the Properties during the second quarter of 2021, subject to successfully obtaining adequate financing. In that regard, the Company raised approximately $2.05 million on March 26, 2021 through the issuance of Convertible Preferred Stock with detachable common stock purchase warrants. The funds raised pursuant to the Convertible Preferred Stock issuance will be used to complete the acquisition and development of the Properties and to pay-off all outstanding Convertible Notes Payable . Core and the Company are finalizing the final purchase date and terms of the Properties which is expected to occur in the second quarter 2021.
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ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
None

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures.
Under the supervision and with the participation of our management, including our principal executive officer and principal financial officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures to provide reasonable assurance of achieving the control objectives, as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934. Based on their evaluation as of December 31, 2020, the end of the period covered by this annual report on Form 10-K, our principal executive officer and principal financial officer 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.
Management’s Report on Internal Control over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Our internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
● Pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
● Provide reasonable assurance that the transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of our management and directors; and
● Provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our assets that could have a material effect on the financial statements.
All internal control systems, no matter how well designed, have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.
In connection with the filing of this Annual Report on Form 10-K, our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2020. In making this assessment, our management used the criteria set forth by Committee of Sponsoring Organizations of the Treadway Commission in Internal Control-Integrated Framework. Based on our assessment using those criteria, management believes that, as of December 31, 2020, our internal control over financial reporting was not effective due to material weaknesses identified as follows:
(a) Lack of control processes in place that provide multiple levels of review and supervision and
(b) Lack of segregation of duties.
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.
This Annual Report does not include an attestation report of our registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by our registered public accounting firm pursuant to temporary rules of the Securities and Exchange Commission that permit us to provide only management’s report in this Annual Report.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information.
None.
PART III

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance.
The following table sets forth the names, positions and ages of our directors and executive officers. Our directors were elected by the majority written consent of our stockholders in lieu of a meeting. Our directors are typically elected at each annual meeting and serve for one year and until their successors are elected and qualify. Officers are elected by our board of directors and their terms of office are at the discretion of our board.
Name
Age
Positions and Offices Held
Stanton E. Ross
Chairman, President and Chief Executive Officer
Daniel F. Hutchins
Director, Chief Financial Officer, Secretary
Leroy C. Richie
Director
John Loeffelbein
Chief Operating Officer
Stanton E. Ross. From March 1992 to June 2005, Mr. Ross was Infinity’s Chairman and President and served as an officer and director of each of its subsidiaries. He resigned all of these positions with Infinity in June 2005, except Chairman, but was reappointed as Infinity’s President in October 2006. Mr. Ross has served as Chairman, President and Chief Executive Officer of Digital Ally, Inc. (“Digital”) since September 2005. Digital is a publicly held company whose common stock is traded on the Nasdaq Capital Market under the symbol DGLY. From 1991 until March 1992, he founded and served as President of Midwest Financial, a financial services corporation involved in mergers, acquisitions and financing for corporations in the Midwest. From 1990 to 1991, Mr. Ross was employed by Duggan Securities, Inc., an investment banking firm in Overland Park, Kansas, where he primarily worked in corporate finance. From 1989 to 1990, he was employed by Stifel, Nicolaus & Co., a member of the New York Stock Exchange, where he was an investment executive. From 1987 to 1989, Mr. Ross was self-employed as a business consultant. From 1985 to 1987, Mr. Ross was President and founder of Kansas Microwave, Inc., which developed a radar detector product. From 1981 to 1985, he was employed by Birdview Satellite Communications, Inc., which manufactured and marketed home satellite television systems, initially as a salesman and later as National Sales Manager. Mr. Ross allocates his time between Digital and the Company as he deems necessary to discharge his fiduciary duties to each of them. Because of the Company’s reduced level of activity and the needs of Digital, he has devoted most of his time to Digital and the balance to the Company during the last year. Mr. Ross served on the board of directors of Studio One Media, Inc., a publicly held company, from January 2013 to March 2013. Mr. Ross holds no public company directorships other than with Digital and Infinity currently and has not held any others during the previous five years, except for Studio One Media, Inc. The Company believes that Mr. Ross’s broad entrepreneurial, financial and business experience and his experience with micro-cap public companies and role as Chairman, President and CEO gives him the qualifications and skills to serve as a director.
Daniel F. Hutchins. Mr. Hutchins was elected to serve as a Director of Infinity and was also appointed to serve as Chief Financial Officer of Infinity effective as of August 13, 2007. Mr. Hutchins was elected as a Director of Digital Ally, Inc. in December 2007, serves as Chairman of its Audit Committee and is its financial expert. He is also a member of Digital’s Nominating and Governance Committee. Mr. Hutchins, a Certified Public Accountant, is a Principal with the accounting firm of Hutchins & Haake, LLC. He was previously a member of the Advisory Board of Digital Ally. Mr. Hutchins has served as an instructor for the Becker CPA exam with the Keller Graduate School of Management and has over 18 years of teaching experience preparing CPA candidates for the CPA exam. He has over 30 years of public accounting experience, including five years with Deloitte & Touche, LLP. He holds no other public directorships and has not held any others during the previous five years. He has served on the boards of various non-profit groups and is a member of the American Institute of Certified Public Accountants. Mr. Hutchins earned his Bachelor of Business Administration degree in Accounting at Washburn University in Topeka, Kansas. Mr. Hutchins holds no other public company directorships currently and for the previous five years. The Company believes that Mr. Hutchins’ significant experience in finance and accounting gives him the qualifications to serve as a director.
Leroy C. Richie. Mr. Richie has been a director of Infinity since June 1, 1999. Since 2005, Mr. Richie has served as the lead outside director of Digital Ally, Inc. and currently serves as a member of Digital’s Audit Committee and is the Chairman of its Nominating and Governance and Compensation Committees. Additionally, until 2017, Mr. Richie served as a member of the boards of directors of Columbia Mutual Funds, (or mutual fund companies acquired by or merged with Columbia Mutual Funds), a family of investment companies managed by Ameriprise Financial, Inc. From 2004 to 2015, he was of counsel to the Detroit law firm of Lewis & Munday, P.C. He holds no other public directorships and has not held any others during the previous five years, except for OGE Energy Corp. (2007-2014) and Kerr-McGee Corporation (1998-2005). Mr. Richie serves as Vice-Chairman of the Board of Trustees and Chairman of the Compensation Committee for the Henry Ford Health System, in Detroit. Mr. Richie was formerly Vice President of Chrysler Corporation and General Counsel for automotive legal affairs, where he directed all legal affairs for its automotive operations from 1986 until his retirement in 1997. Before joining Chrysler, he was an associate with the New York law firm of White & Case (1973-1978), and served as director of the New York office of the Federal Trade Commission (1978-1983). Mr. Richie received a B.A. from City College of New York, where he was valedictorian, and a J.D. from the New York University School of Law, where he was awarded an Arthur Garfield Hays Civil Liberties Fellowship. The Company believes that Mr. Richie’s extensive experience as a lawyer and as an officer or director of public companies gives him the qualifications and skills to serve as a Director.
John Loeffelbein. Mr. Loeffelbein was appointed Chief Operating Officer of Infinity on September 30, 2019. Mr. Loeffelbein began his oil & gas career in 1998 working for Orion Oil and Gas, Inc., a land, mineral and title company, located in Amarillo, Texas. During his tenure, he was actively involved in title, acquisition of leases and purchase of right-of-way for major companies such as Anadarko Petroleum, K&N Energy and other major oil and gas companies. Since 1998, Loeffelbein has actively purchased and sold millions of dollars’ worth of oil and gas projects and owns interests in wells or mineral rights in most of the major oil and gas basins in the United States. In 2004 Mr. Loeffelbein formed Coal Creek Energy, LLC which leased acreage and acquired existing oil & gas production primarily in Kansas focusing on leases which could be developed and enhanced at a very low risk/high reward. He has been involved in over 1,000 wells in the state. In 2014 Coal Creek Energy provided a variety of services to Viking Energy Group, Inc. in connection with its acquisition of numerous Kansas oil and gas properties. In 2017, Mr. Loeffelbein helped found Vulcan Labs, LLC, which specializes in coating pipe for the oil and gas industry. The coated pipe it supplies reduces corrosion, friction and wear on production equipment thereby reducing maintenance costs and down-time. Vulcan Labs supplies coated pipe to a number of the top 50 oil and gas companies. Mr. Loeffelbein has not served as a director of any other public companies within the last five years. The Company believes that Mr. Loeffelbein’s broad entrepreneurial, financial and business experience gives him the qualifications and skills to serve as the Company’s COO.
Family Relationships
There is no family relationship between any of our directors, director nominees and executive officers.
Board of Directors and Committee Meetings
Our Board of Directors held one meeting during the fiscal year ended December 31, 2020. Our directors attended all the meetings of the Board of Directors. Our directors are expected, absent exceptional circumstances, to attend all Board meetings.
Committees of the Board of Directors
We do not have Audit, Compensation or Nominating and Governance Committees. Our full Board of Directors discharges the duties that such committees would normally have. We do not have such committees because of our stage of operations and because our Board of Directors consists of only three members.
Our full Board is comprised of three Directors, one of whom is independent, as defined by the rules and regulations of the Securities and Exchange Commission. The members of our Board of Directors are Stanton E. Ross, Leroy C. Richie and Daniel F. Hutchins. The Board of Directors determined that Mr. Richie qualifies as an “audit committee financial expert,” as defined under the rules and regulations of the Securities and Exchange Commission and is independent as noted above.
Stanton E. Ross, Leroy C. Richie and Daniel F. Hutchins are the directors of the Company. Messrs. Ross and Hutchins are not considered “independent” in accordance with Rule 5605(a)(2) of the NASDAQ Marketplace Rules. The Board of Directors has determined that Mr. Richie is independent in accordance with the NASDAQ and SEC rules. We are currently traded on the OTC QB, which does not require that a majority of the board be independent. If we ever become an issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.
Under the Sarbanes-Oxley Act of 2002, all audit and non-audit services performed by the Company’s independent accountants must be approved in advance by the Board to assure that such services do not impair the accountants’ independence from the Company. Our full board of directors performs the equivalent functions of an audit committee, therefore, no policies or procedures other than those required by SEC rules on auditor independence, have been implemented.
Report of the Board of Directors Serving the Equivalent Functions of an Audit Committee
Review and Discussion with Management
Our Board has reviewed and discussed with management our audited financial statements for the fiscal year ended December 31, 2020, the process designed to achieve compliance with Section 404 of the Sarbanes-Oxley Act of 2002 and our assessment of internal control over financial reporting.
Review and Discussions with Independent Registered Public Accounting Firm
Our Board has discussed with RBSM, LLP, our independent registered public accounting firm for fiscal year 2020 and 2019, the matters the Board, serving the equivalent functions of an audit committee, is required to discuss. Specifically, the Board has discussed with the independent registered public accounting firm the matters required to be discussed by the Public Company Accounting Oversight Board’s Auditing AS 1301 (Communications With Audit Committees), as modified or supplemented. The discussions occurred with management and the independent public accountants about the quality (and not merely the acceptability) of the Company’s accounting principles, the reasonableness of significant estimates, judgments and the transparency of disclosures in the Company’s financial statements.
The Board of Directors has also received written disclosures in a letter from the independent registered public accounting firm required by applicable requirements of the Public Company Accounting Oversight Board regarding the independent registered public accounting firm’s independence, and has discussed with the independent registered public accounting firm their independence from the Company and its management. This review also includes discussions of audit and non-audit fees as well as evaluation of the Company’s significant financial policies and accounting systems and controls.
The Board of Directors has also reviewed the independence of the independent registered public accounting firm considering the compatibility of non-audit services with maintaining their independence from the Company. Based on the preceding review and discussions contained in this paragraph, the Board of Directors recommended that the audited financial statements be included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020, for filing with the Securities and Exchange Commission.
Conclusion
Based on the review and discussions referred to above, the Board, serving the equivalent functions of the audit committee, approved our audited financial statements for the fiscal year ended December 31, 2020 be included in our Annual Report on Form 10-K for the fiscal year ended December 31, 2020 for filing with the Securities and Exchange Commission.
Board of Directors’ Role in the Oversight of Risk Management
We face a variety of risks, including credit, liquidity and operational risks. In fulfilling its risk oversight role, our Board of Directors focuses on the adequacy of our risk management process and overall risk management system. Our Board of Directors believes that an effective risk management system will (i) adequately identify the material risks that we face in a timely manner; (ii) implement appropriate risk management strategies that are responsive to our risk profile and specific material risk exposures; (iii) integrate consideration of risk and risk management into our business decision-making; and (iv) include policies and procedures that adequately transmit necessary information regarding material risks to senior executives and, as appropriate, to the Board or relevant committee.
Our Board of Directors oversees risk management for us. Accordingly, the Board schedules time for periodic review of risk management, in addition to its other duties. In this role, the Board receives reports from management, certified public accountants, outside legal counsel, and to the extent necessary, from other advisors, and strives to generate serious and thoughtful attention to our risk management process and system, the nature of the material risks we face, and the adequacy of our policies and procedures designed to respond to and mitigate these risks.
Board Leadership Structure
Our Board of Directors has a Chairman of the Board. Our Board of Directors does not have a policy on whether or not the roles of Chief Executive Officer and Chairman of the Board of Directors should be separate and, if they are to be separate, whether the Chairman of the Board should be selected from the non-employee directors or be an employee. Our Board of Directors believes that it should be free to make a choice from time to time in any manner that is in the best interests of us and our shareholders. The Board of Directors believes that Mr. Ross’s service as both Chief Executive Officer and Chairman of the Board is in the best interests of us and our stockholders. Mr. Ross possesses detailed and in-depth knowledge of the issues, opportunities and challenges we face and is thus best positioned to develop agendas, with the input of the other directors that ensure that the Board’s time and attention are focused on the most critical matters. His combined role enables decisive leadership, ensures clear accountability, and enhances our ability to communicate our message and strategy clearly and consistently to our stockholders, employees, customers and suppliers, particularly given the issues and other challenges the Company has faced in recent years. Our Board has determined that our Board leadership structure is appropriate given the size of our Board and the nature of our business.
Stockholder Communications with the Board of Directors
Stockholders may communicate with the Board of Directors by writing to us as follows: Infinity Energy Resources, Inc., attention: Corporate Secretary, 11900 College Blvd., Suite 310, Overland Park, KS 66210. Stockholders who would like their submission directed to a particular member of the Board of Directors may so specify and the communication will be forwarded as appropriate.
Process and Policy for Director Nominations
Our full Board will consider candidates for Board membership suggested by Board members, management and our stockholders. In evaluating the suitability of potential nominees for membership on the Board, the Board members will consider the Board’s current composition, including expertise, diversity, and balance of inside, outside and independent directors. The Board considers the general qualifications of the potential nominees, including integrity and honesty; recognized leadership in business or professional activity; a background and experience that will complement the talents of the other board members; the willingness and capability to take the time to actively participate in board and committee meetings and related activities; the extent to which the candidate possesses pertinent technological, political, business, financial or social/cultural expertise and experience; the absence of realistic possibilities of conflict of interest or legal prohibition; the ability to work well with the other directors; and the extent of the candidate’s familiarity with issues affecting our business.
While the Board considers diversity and variety of experiences and viewpoints to be important factors, it does not believe that a director nominee should be chosen solely or mainly because of race, color, gender, national origin or sexual identity or orientation. Thus, although diversity may be a consideration in the Board’s process, it does not have a formal policy regarding the consideration of diversity in identifying director nominees.
Stockholder Recommendations for Director Nominations. Our Board of Directors does not have a formal policy with respect to consideration of any director candidate recommendation by stockholders. While the Board of Directors may consider candidates recommended by stockholders, it has no requirement to do so. To date, no stockholder has recommended a candidate for nomination to the Board. Given that we have not received director nominations from stockholders in the past and that we do not canvass stockholders for such nominations, we believe it is appropriate not to have a formal policy in that regard. We do not pay a fee to any third party to identify or evaluate or assist in identifying or evaluating potential nominees.
Stockholder recommendations for director nominations may be submitted to the Company at the following address: Infinity Energy Resources, Inc., attention: Corporate Secretary, 11900 College Blvd., Suite 310, Overland Park, KS 66210. Such recommendations will be forwarded to the Board for consideration, provided that they are accompanied by sufficient information to permit the Board to evaluate the qualifications and experience of the nominees, and provided that they are in time for the Board to do an adequate evaluation of the candidate before the annual meeting of stockholders. The submission must be accomplished by a written consent of the individual to stand for election if nominated by the Board of Directors and to serve if elected and to cooperate with a background check.
Stockholder Nominations of Directors. The bylaws of the Company provide that in order for a stockholder to nominate a director at an annual meeting, the stockholder must give timely, written notice to the Secretary of the Company and such notice must be received at the principal executive offices of the Company not less than 90 days nor more than 120 days prior to the date of the meeting. Such stockholder’s notice shall include, with respect to each person whom the stockholder proposes to nominate for election as a director, all information relating to such person, including such person’s written consent to being named in the proxy statement as a nominee, serving as a director, that is required under the Securities Exchange Act of 1934, as amended, and cooperating with a background investigation. In addition, the stockholder must include in such notice his name and address, as they appear on the Company’s records, of the stockholder proposing the nomination of such person, and the name and address of the beneficial owner, if any, on whose behalf the nomination is made, the class or series and number of shares of capital stock of the Company that are owned beneficially and of record by such stockholder of record and by the beneficial owner, if any, on whose behalf the nomination is made, and any material interest, relationship, arrangement or understanding that such stockholder of record and/or the beneficial owner, if any, on whose behalf the nomination is made may respectively have in such business or with such nominee. At the request of the Board of Directors, any person nominated for election as a director shall furnish to the Secretary of the Company the information required to be set forth in a stockholder’s notice of nomination which pertains to the nominee.
If public disclosure of the date of the meeting is made less than 100 days prior to the date of the meeting, a stockholder’s notice must be received not later than the close of business on the tenth day following the day on which such public disclosure of the date of the meeting was made. With respect to a special meeting called at the written request of stockholders, any notice submitted by a stockholder making the request must be provided simultaneously with such request.
Code of Ethics and Conduct
Our Board of Directors has adopted a Code of Ethics and Conduct that is applicable to all our employees, officers and directors. Our Code of Ethics and Conduct is intended to ensure that our employees act in accordance with the highest ethical standards. A copy of our Code of Ethics and Conduct may be obtained by sending a written request to us at 11900 College Blvd., Suite 310, Overland Park, KS 66210; Attn: President and the Code of Ethics and Conduct is filed as an exhibit to this Annual Report on Form 10-K.
Section 16(a) Beneficial Ownership Reporting
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires our executive officers and directors, and persons who own more than ten percent (10%) of our common stock, to file with the Securities and Exchange Commission reports of ownership of, and transactions in, our securities and to provide us with copies of those filings. To our knowledge, based solely on our review of the copies of such forms received by us, or written representations from certain reporting persons, we believe that during the year ended December 31, 2020, all filing requirements applicable to our officers, directors and greater than ten percent beneficial owners were complied with during fiscal year 2020.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation.
The following table shows compensation paid, accrued or awarded with respect to our named executive officers during the years indicated, a significant portion of all compensation after 2008 is accrued but not paid:
- Summary Compensation Table
Name and
Principal
Position Year Salary
($) Bonus
($) Stock
Awards
($) Option
Awards
($) Non-Equity
Incentive
Plan
Compensation Change in
Pension
Value and
Nonqualified
Deferred
Compensation
Earnings
($) All Other
Compensation
($) Total
($)
Stanton Ross (1) $ - $ - $ 260,000 $ - $ - $ - $ - $ 260,000
CEO $ - $ - $ - $ - $ - $ - $ - $ -
Daniel F. Hutchins(2) $ - $ - $ 65,000 $ - $ - $ - $ - $ 65,000
CFO $ - $ - $ - $ - $ - $ - $ - $ -
James Loeffelbein(3) $ - $ - $ - $ - $ - $ - $ - $ -
COO $ - $ - $ 260,000 $ - $ - $ - $ - $ 260,000
(1) The Company’s Board of Directors discontinued compensation for the Company’s officers and directors effective January 1, 2018. In addition, due to the financial condition of the Company, Mr. Ross has deferred the receipt of a portion of his salary since January 2009. Mr. Ross received $40,000 and $-0- of his deferred salary in cash during the years ended December 31, 2020 and 2019, respectively. As of December 31, 2020, a total of $525,708 of his salary has been accrued but was unpaid. The Company’s Board of Directors approved the grant of 2,000,000 restricted shares of common stock effective August 19, 2020 to Mr. Ross. Of the 2,000,000 total restricted shares, a total of 250,000 shares vest at the end of calendar quarter over the following 8 fiscal quarters ending June 30, 2022, assuming that he remains as an employee of the Company at such points in time. The value of the restricted stock awards was determined based on the total number of restricted shares at the closing price on the date of award on August 19, 2020.
(2) The Company’s Board of Directors discontinued compensation for the Company’s officers and directors effective January 1, 2018. Mr. Hutchins began serving the Company as Chief Financial Officer in August 2007. Since January 2009 he has deferred his compensation and a total of $900,000 of direct compensation was accrued but unpaid as of December 31, 2020 and 2019. Previously, Mr. Hutchins received other indirect compensation consisting of services billed at the CFO firm’s normal standard billing rate plus out-of-pocket expenses for general corporate and bookkeeping purposes. For the years ended December 31, 2020 and 2019 the Company was billed $-0- for such services. Total amounts accrued for his indirect compensation was $762,407 as of December 31, 2020 and 2019. The Company’s Board of Directors approved the grant of 500,000 restricted shares of common stock effective August 19, 2020 to Mr. Hutchins. Of the 500,000 total restricted shares, a total of 62,500 shares vest at the end of calendar quarter over the following 8 fiscal quarters ending June 30, 2022, assuming that he remains as an employee of the Company at such points in time. The value of the restricted stock awards was determined based on the total number of restricted shares at the closing price on the date of award on August 19, 2020.
(3) The Company’s Board of Directors appointed John Loeffelbein, as Chief Operating Officer of Infinity Energy Resources, Inc. effective September 30, 2019. In connection with his appointment as Chief Operating Officer the Board of Directors approved the grant of 2,000,000 restricted shares of common stock effective October 2, 2019. Of the 2,000,000 total restricted shares, 1,250,000 vested immediately and the remaining 750,000 vested one year after the date of grant, assuming he remains as an employee of the Company at that point in time. Mr. Loeffelbein received no cash compensation for his services for the remainder of 2019 and calendar year 2020. The value of the restricted stock awards was determined based on the total number of restricted shares at the closing price on the date of award or October 2, 2019.
Compensation Policies and Objectives
We structure compensation for executive officers, including the named executive officers, to drive performance, to accomplish both our short-term and long-term objectives, and to enable us to attract, retain and motivate well qualified executives by offering competitive compensation and by rewarding superior performance. We also seek to link our executives’ total compensation to the interests of our shareholders. To accomplish this, our board of directors relies on the following elements of compensation, each of which is discussed in more detail below:
●
salary;
●
annual performance-based cash awards;
●
equity incentives in the form of stock and/or stock options; and
●
other benefits.
Our board of directors believes that our executive compensation package, consisting of these components, is comparable to the compensation provided in the market in which we compete for executive talent and is critical to accomplishing our recruitment and retention aims.
In setting the amounts of each component of an executive’s compensation and considering the overall compensation package, the Committee generally considers the following factors:
Benchmarking-For executive officers, the board of directors considers the level of compensation paid to individuals in comparable executive positions of other oil and gas exploration and production companies of a similar size. The board of directors believes that these companies are the most appropriate for review because they are representative of the types of companies with which we compete to recruit and retain executive talent. The information reviewed by the board of directors includes data on salary, annual and long-term cash incentive bonuses and equity compensation, as well as total compensation.
Internal Equity-The board of directors considers the salary level for each executive officer and each position in overall management to reflect their relative value to us.
Individual Performance-The board of directors considers the individual responsibilities and performance of each named executive officer, which is based in part on the board of directors’ assessment of that individual’s performance as well as the evaluation of the individual by the Chief Executive Officer.
All executive officers are eligible for annual cash bonuses and equity incentive awards that reinforce the relationship between pay and performance by conditioning compensation on the achievement of the Company’s short- and long-term financial and operating goals, including operating profits, reserve finding costs, and growth in the Company’s daily oil and gas production and estimated proved, probable and possible recoverable oil and gas reserves.
Components of Executive Compensation
The following provides an analysis of each element of compensation, what each element is designed to reward and why the board of directors chose to include it as an element of our executive compensation.
Salaries
Salaries for executive officers are intended to incentivize the officers to focus on executing the Company’s day-to-day business and are reviewed annually. Changes are typically effective in April of each year and are based on the factors discussed above. Compensation arrangements with Mr. Hutchins were determined through arms-length negotiations. The Company’s Board of Directors discontinued compensation for the Company’s officers and directors effective January 1, 2018.
Annual Bonuses
The awarding of annual bonuses to executives is at the Committee’s discretion. The objective of the annual bonus element of compensation is to align the interest of executive officers with the achievement of superior Company performance for the year and also to encourage and reward extraordinary individual performance. In light of the Company’s operating results for 2020 and 2019, the Committee determined that it was appropriate not to grant annual bonuses to the executive officers for 2020 and 2019.
Stock Options
Including an equity component in executive compensation closely aligns the interests of the executives and our shareholders and rewards executives consistent with shareholder gains. Stock options produce value for executives only if our stock price increases over the exercise price, which is set at the market price on the date of grant. Also, through vesting and forfeiture provisions, stock options serve to encourage executive officers to remain with the Company. Awards made other than pursuant to the annual equity grants are typically made to newly hired or recently promoted employees.
In determining the stock option grants for Messrs. Ross and Hutchins, the Board considered the number of options previously granted that remained outstanding, the number and value of shares underlying the options being granted and the related effect on dilution. The Board also took into account the number of shares that remained available for grant under our stock incentive plans. Messrs. Ross and Hutchins were not granted stock options during the year ended December 31, 2020 and 2019. Information regarding all outstanding equity awards as of December 31, 2019 for the named executive officers is set forth below in the “Outstanding Equity Awards at Fiscal Year End” table.
Restricted Stock Grants
Including an equity component in executive compensation closely aligns the interests of the executives and our shareholders and rewards executives consistent with shareholder gains. Restricted stock grants produce value for executives as our stock price increases. The executives generally vest over a long period of time only if they remain as employees of the Company at specified points in time. Executives generally have to recognize taxable income based on the market price of the underlying common stock on such vesting dates. Also, through vesting and forfeiture provisions, restricted stock grants serve to encourage executive officers to remain with the Company. Awards made other than pursuant to the annual equity grants are typically made to newly hired or recently promoted employees.
In determining the restricted stock grants for Messrs. Ross and Hutchins, the Board considered the number of stock options previously granted that remained outstanding, the number and value of restricted common shares being granted and the related effect on dilution. The Board also took into account the number of shares that remained available for grant under our stock incentive plans. Messrs. Ross and Hutchins were granted 2,000,000 and 500,000 restricted shares of common stock during the year ended December 31, 2020, respectively and none in 2019. The restricted stock grants in 2020 vest ratably at the end of the next eight calendar quarters following issuance. Information regarding all outstanding equity awards as of December 31, 2020 for the named executive officers is set forth below in the “Outstanding Equity Awards at Fiscal Year End” table.
Other Elements of Executive Compensation
We have not provided cash perquisites to our executive officers given our limited funds.
OUTSTANDING EQUITY AWARDS AT FISCAL YEAR-END
(As of December 31, 2020)
Option Awards
Stock Awards
Name Number of Securities Underlying Unexercised Options (#) Exercisable Number of Securities Underlying Unexercised Options (#) Unexercisable Equity
Incentive Plan Awards: Number of Securities Underlying Unexercised Unearned Options (#)
Option Exercise Price ($) Option Expiration Date Number of Shares or Units of Stock That Have Not Vested (#) Market Value of Shares or Units of Stock That Have Not Vested ($) Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested (#) Equity Incentive Plan Awards: Market or Payout Value of Unearned Shares, Units or Other Rights That Have Not Vested ($)
Ross 20,000 - - $ 52.50 2/10/2021 - - - -
20,000 - - $ 75.00 8/2/2021 - - - -
50,000 - - $ 30.00 11/6/2021 - - - -
60,000 - - $ 30.00 1/17/2024 - - - -
1,500,000 $ 165,000
Hutchins 17,500 - - $ 52.50 2/10/2021 - - - -
17,500 - - $ 75.00 8/2/2021 - - - -
25,000 - - $ 30.00 11/6/2021 - - - -
15,000 - - $ 30.00 1/17/2024 - - - -
375,000 $ 41,250
Loeffelbein - - - - - - $ - - -
DIRECTOR COMPENSATION
The following table discloses the cash, equity awards and other compensation earned, paid or awarded, as the case may be, to each of the Company’s directors during the fiscal years ended December 31, 2020 and 2019.
Name (2) Year Fees Earned or Paid in Cash ($) Stock Awards ($) Option Awards ($) Non-Equity Incentive Plan Compensation ($) Change in Pension Value and Non-Qualified Deferred Compensation Earnings ($) All Other Compensation ($) Total ($)
Leroy C. Richie (1) $ - $ - $ - $ 65,000 $ - $ - $ 65,000
$ - $ - $ - $ - $ - $ - $ -
(1) The Company’s Board of Directors discontinued compensation for the Company’s officers and directors effective January 1, 2018. Mr. Richie received no cash compensation in 2020 and 2019 and has accrued an aggregate of $363,500 for his services on the Board since January 1, 2008 which remains unpaid as of December 31, 2020. The Company’s Board of Directors approved the grant of 500,000 restricted shares of common stock effective August 19, 2020 to Mr. Richie. Of the 500,000 total restricted shares, a total of 62,500 shares vest at the end of calendar quarter over the following 8 fiscal quarters ending June 30, 2022, assuming that he remains as a member of the Board of Directors of the Company at such points in time. The value of the restricted stock awards was determined based on the total number of restricted shares at the closing price on the date of award on August 19, 2020.
(2) Mr. Ross’ and Mr. Hutchins’ compensation and option awards are noted in the Executive Compensation table because neither of them received compensation or stock options for their services as a director.
Compensation Committee Interlocks and Insider Participation
Leroy C. Richie was the sole member of the Compensation Committee in 2020 and 2019. Mr. Richie is not currently and has not ever been an officer or employee of Infinity or its subsidiaries.
Employment Contracts and Termination of Employment and Change-In-Control Arrangements
We have no employment agreements or similar contracts with Stanton E. Ross, Daniel F. Hutchins or John Loeffelbein.

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ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
The following table sets forth, as of March 26, 2021, the number and percentage of outstanding shares of common stock beneficially owned by each person known by us to beneficially own more than five percent of such stock. We have no other class of capital stock outstanding.
Security Ownership of Certain Beneficial Owners
Name and address of beneficial owner Amount and nature of beneficial ownership Percent of
class
5% Stockholders (excluding executive officers and directors):
Lawrence D. Smith, estate
5805 Friars Rd. Apt. 2305 4,277,790 22.7 %
San Diego, CA 92110
Thomas J. Heckman
2015 Clara Drive 2,000,000 10.6 %
Jefferson City, MO 65101
The following table sets forth, as of March 26, 2021, the number and percentage of outstanding shares of common stock beneficially owned by each director of the Company, each named officer of the Company, and all our directors and executive officers as a group. We have no other class of capital stock outstanding.
Security Ownership of Management
Name and address of beneficial owner Amount and nature of beneficial ownership Percent of
class
Executive Officers & Directors: (1)
Stanton E. Ross (2) 2,177,500 11.6 %
Leroy C. Richie (3) 565,000 3.0 %
John Loeffelbein(4) 2,000,000 10.6 %
Daniel F. Hutchins (5) 593,000 3.1 %
All officers and directors as a group (4 individuals) 5,335,500 28.3 %
(1) The address of these persons is c/o 11900 College Blvd., Suite 310, Overland Park, KS 66210.
(2) Mr. Ross’s shares include vested options exercisable to purchase 150,000 shares of common stock and includes 1,500,000 restricted shares of common stock subject to forfeiture. Mr. Ross has pledged 27,500 shares of common stock and all of his outstanding options to purchase common stock to third parties as collateral for personal loans.
(3) Mr. Richie’s total shares include vested options exercisable to purchase 65,000 shares of common stock and includes 375,000 restricted shares of common stock subject to forfeiture.
(4) Mr. Loeffelbein’s shares are held indirectly by a wholly owned entity, Coal Creek Energy, LLC.
(5) Mr. Hutchins’ total shares include vested options exercisable to purchase 75,000 shares of common stock and includes 375,000 restricted shares of common stock subject to forfeiture.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions and Director Independence.
The charter for the Company’s Audit Committee includes a requirement for the Audit Committee to review and approve any transaction involving the Company and a related party at least once a year or upon any significant change in the transaction or relationship. For these purposes, a “related party transaction” includes any transaction required to be disclosed pursuant to Item 404 of Regulation S-K.
The Company does not have any employees other than the CEO and CFO. In previous years, certain general and administrative services (for which payment is deferred) had been provided by the CFO’s accounting firm at its standard billing rates plus out-of-pocket expenses consisting primarily of accounting, tax and other administrative fees. The Company no longer utilizes the CFO’s accounting for such support services and was not billed for any such services during the year ended December 31, 2020 and 2019. The amount due to the CFO’s firm for services previously provided was $762,407 at December 31, 2020 and 2019, and is included in accrued liabilities at both dates.
Offshore Finance, LLC is owed financing costs totaling $26,113 as of December 31, 2020 and 2019, in connection with its subordinated loan to the Company which was converted to common shares in 2014, The managing partner of Offshore and the Company’s CFO are partners in the accounting firm which the Company used for general corporate purposes in the past.
The Company’s Chief Operating Officer is a non-controlling member of Core. The Company acquired an Option from Core to purchase the production and mineral rights/leasehold for the Properties. The Company paid a nonrefundable deposit of $50,000 in 2019 to bind the original Option, which gave it the right to acquire the Properties for $2.5 million prior to December 31, 2019. On September 2, 2020, the Company acquired a new Option from Core under similar terms as the previous Option, however the Option now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties.. On December 14, 2020 the parties executed an Asset Purchase and Sale Agreement which extended the new Option to January 11, 2021. There can be no assurance that the Company will obtain adequate financing in order to close on the acquisition prior to January 11, 2021 regardless of the reduced price or to enable it to conduct such subsequent capital raise, particularly in light of recent events including the coronavirus pandemic and its impact on the oil and gas industry.
As of December 31, 2020 and December 31, 2019, the Company had accrued compensation to its officers and directors of $1,789,208 and $1,829,208, respectively. The Board of Directors authorized the Company to cease compensation for its officers and directors, effective January 1, 2018.
On May 13, 2020, the Company borrowed $41,000 from its Chairman, CEO & President in the form of an unsecured promissory note bearing 6% interest and due on demand. The proceeds were used for general working capital purposes. The entire principal balance of the note was retired on August 19, 2020 and there is no remaining balance as of December 31, 2020. During the year ended December 31, 2020, the Company accrued and paid a total of $654 of interest on this related party note payable.
Stanton E. Ross, Leroy C. Richie and Daniel F. Hutchins are the directors of the Company. Messrs. Ross and Hutchins are not considered “independent” in accordance with Rule 5605(a)(2) of the NASDAQ Marketplace Rules. The Board of Directors has determined that Mr. Richie is independent in accordance with the NASDAQ and SEC rules. We are currently traded on the OTC QB, which does not require that a majority of the board be independent. If we ever become an issuer whose securities are listed on a national securities exchange or on an automated inter-dealer quotation system of a national securities association, which has independent director requirements, we intend to comply with all applicable requirements relating to director independence.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accounting Fees and Services.
Audit and Related Fees
The Audit Committee of the Company has appointed RBSM, LLP as the Company’s independent registered public accounting firm for the year ended December 31, 2020 and 2019.
The following table is a summary of the fees rendered to us by RBSM, LLP for the years ended December 31, 2020 and 2019:
Fee Category:
Audit Fees $ 58,000 $ 56,500
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
Total Fees $ 58,000 $ 56,500
Audit Fees. Such amount consists of fees billed for professional services rendered in connection with the audit of our annual financial statements and review of the interim financial statements included in our quarterly reports. It also includes services that are normally provided by our independent registered public accounting firms in connection with statutory and regulatory filings or engagements.
Audit-Related Fees. Consists of fees billed for assurance and related services that are reasonably related to the performance of the audit or review of our financial statements and are not reported under “Audit Fees.” These services include employee benefit plan audits, accounting consultations in connection with acquisitions, attest services that are not required by statute or regulation, and consultations concerning financial accounting and reporting standards.
Tax Fees. Tax fees consist of fees billed for professional services related to tax compliance, tax advice and tax planning. These services include assistance regarding federal, state and international tax compliance, tax audit defense, customs and duties, mergers and acquisitions, and international tax planning.
All Other Fees. Consists of fees for products and services other than the services reported above. In fiscal 2020 and 2019, there were no fees related to this category.
The Audit Committee’s practice is to consider and approve in advance all proposed audit and non-audit services to be provided by our independent registered public accounting firm. All of the fees shown above were pre-approved by the Audit Committee.
During our fiscal years ended December 31, 2020 and 2019, there were no reportable events (as described in Item 304(a)(1)(v) of Regulation S-K).
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits, Financial Statement Schedules.
The following documents are filed as part of this Annual Report on Form 10-K:
1. Financial Statements:
All financial statements set forth under Part II, Item 8 of this Annual Report.
2. Financial Statement Schedules:
All schedules are omitted because they are not applicable or are not required, or because the required information is included in the financial statements or notes in this Annual Report.
3. Exhibits:
EXHIBITS
Exhibit Number
Description of Exhibits
2.1
Agreement and Plan of Merger between Infinity Energy Resources, Inc. and Infinity, Inc. (1)
3.1
Certificate of Incorporation (3)
3.2
Bylaws (1)
10.1
Nicaraguan Concession - Perlas Prospect (3)
10.2
Nicaraguan Concession - Tyra Prospect (3)
10.3
Common Stock Purchase Warrant for 250,000 shares, dated February 13, 2013 (6)
10.4
Form of 8% Promissory Note (7)
10.5
Form of Common Stock Purchase Warrant (7)
10.6
8% Note, dated December 27, 2013 (9)
10.7
Common Stock Purchase Warrant (1,000,000 shares), dated December 27, 2013 (9)
10.8
Third Amendment to Promissory Note, dated November 19, 2014 (10)
10.9
Third Amendment to Common Stock Purchase Warrant, dated November 19, 2014 (10)
10.10
First Amendment to Revenue Sharing Agreement, dated November 19, 2014 (10)
10.11
Revenue Sharing Agreement, dated May 17, 2014 (10)
10.12
Loan Extension Agreement, dated November 19, 2014 (10)
10.13
Securities Purchase Agreement (11)
10.14
Registration Rights Agreement (11)
10.15
Senior Secured Convertible Note (11)
10.16
Warrant (11)
10.170
Security and Pledge Agreement (11)
10.18
Second Loan Extension Agreement Effective as of April 7, 2015 (12)
10.19
Fourth Amendment to Promissory Note, effective as of April 7, 2015 (12)
10.20
Fourth Amendment to Common Stock Purchase Warrant, effective as of April 7, 2015 (12)
10.21
8% Convertible Promissory Note and Common Stock Purchase Warrant dated December 31, 2014 (13)
10.22
8% Convertible Promissory Note and Common Stock Purchase Warrant dated November 19, 2014 (13)
10.23
8% Convertible Promissory Note and Common Stock Purchase Warrant dated January 7, 2014(13)
10.24
8% Convertible Promissory Note and Common Stock Purchase Warrant dated October 2, 2014(13)
10.25
8% Line-of-Credit Promissory Note and Common Stock Purchase Warrant dated October 23, 2014(13)
10.26
2015 Stock Option Plan (14)
10.27
8% Convertible Promissory Note and Common Stock Purchase Warrant dated November 8, 2016(15)
10.283
Exchange Agreement dated May 23, 2019.(16)
10.29
Side-letter Agreement dated May 23, 2019 (16)
10.30
Amendment No. 1 to Exchange Agreement, dated May 30, 2019. (17)
10.31
Exchange Agreement dated June 4, 2019. (18)
10.32
Common Stock Purchase Warrant Agreement dated June 4, 2019(18)
10.33
Exchange Agreement dated June 19, 2019. (19)
10.34
Common Stock Purchase Warrant Agreement dated June 19, 2019 (19)
10.35
Form of Senior Unsecured Promissory Note, due August 19, 2021 (23)
10.361
Form of Common Stock Purchase Warrant dated August 19, 2020 (23)
10.37
Form of Securities Purchase Agreement dated August 19, 2020 by and between the Company and the Investor (23)
10.38
Form of Restricted Stock Purchase Agreement (23)
10.39
Form of Option Term Sheet dated September 2, 2020 by and between the Company and Core (22)
10.40
Form of Exchange Agreement by and between the Company and SKM dated September 24, 2020 (21)
10.41
Form of Asset Purchase and Sale Agreement made and entered into as of December 14, 2020 by and between the Company and Core Energy, LLC, Mandalay, LLC and Coal Creek Energy, LLC (20)
14.1
Code of Ethics and Code of Conduct. (4)
21.1
Subsidiaries of Registrant (1)
31.1
Certificate of Principal Executive Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
31.2
Certificate of Principal Financial Officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (filed herewith)
Certificate Pursuant to 18 U.S.C Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (filed herewith)
101.INS*
XBRL Instance Document.
101.SCH*
XBRL Taxonomy Extension Schema Document.
101.CAL*
XBRL Calculation Linkbase Document.
101.LAB*
XBRL Taxonomy Labels Linkbase Document.
101.PRE*
XBRL Taxonomy Presentation Linkbase Document.
(1) Filed as an exhibit to Form 10 by the Company on May 13, 2011.
(2) Filed as an exhibit to Amendment No. 1 to Form 10 by the Company on July 1, 2011.
(3) Filed as an exhibit to Amendment No. 2 to Form 10 by the Company on April 5, 2012.
(4) Filed as an exhibit to Form 10-K by the Company on April 16, 2012.
(5) Filed as an exhibit to Form 8-K by the Company on April 19, 2012.
(6) Filed as an exhibit to Form 8-K by the Company on February 19, 2013.
(7) Filed as an Exhibit to Form 8-K by the Company on March 1, 2013.
(8) Filed as an Exhibit to Form 8-K by the Company on April 29, 2013
(9) Filed as an Exhibit to Form 8-K by the Company on January 3, 2014
(10) Filed as an Exhibit to Form 8-K by the Company on November 20, 2014
(11) Filed as an Exhibit to Form 8-K by the Company on May 8, 2015
(12) Filed as an Exhibit to Form 8-K by the Company on May 11, 2015
(13) Filed as an Exhibit to Form 8-K by the Company on August 12, 2015
(14) Filed as an Exhibit to Definitive Schedule 14A filed by the Company on August 12, 2015
(15) Filed as an Exhibit to Form 10-K by the Company on April 17, 2017
(16) Filed as an Exhibit to Form 8-K by the Company on May 24, 2019
(17) Filed as an Exhibit to Form 8-K by the Company on June 3, 2019
(18) Filed as an Exhibit to Form 8-K by the Company on June 6, 2019
(19) Filed as an Exhibit to Form 8-K by the Company on June 20, 2019
(20) Filed as an Exhibit to Form 8-K by the Company on December 15, 2020
(21) Filed as an Exhibit to Form 8-K by the Company on September 28, 2020
(22) Filed as an Exhibit to Form 8-K by the Company on September 8, 2020
(23) Filed as an Exhibit to Form 8-K by the Company on August 25, 2020
*XBRL related information in Exhibit 101 to this Annual Report on Form 10-K shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended, or otherwise subject to liability of that section and shall not be incorporated by reference into any filing or other document pursuant to the Securities Act of 1933, as amended, except as shall be expressly set forth by specific reference in such filing or document.