EDGAR 10-K Filing

Company CIK: 1096339
Filing Year: 2022
Filename: 1096339_10-K_2022_0001515971-22-000072.json

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ITEM 1. BUSINESS
Item 1. Business
General
Saratoga Resources, Inc. is a development stage company focused on commercial exploitation of its portfolio of seismic licenses to participate in the acquisition and development of leases to support (i) oil and gas exploration and development and (ii) sequestration and storage of carbon dioxide.
History
We were incorporated under the laws of the State of Texas in 1990. From inception through 2016, we were engaged in the development and operation of various oil and gas assets which, at its peak, covered more than 50,000 acres across the transitional coastline and protected in-bay environment on parish and states leases of south Louisiana and in the shallow Gulf of Mexico shelf.
Following a steep decline in energy prices, in mid-2015, we, and our subsidiaries, filed a voluntary petition under Chapter 11 in the United States Bankruptcy Court to restructure our obligations and capital structure. In May 2016, the bankruptcy court approved, and in June 2016 we completed, the sale of substantially all of our assets. On November 2, 2016, our plan of reorganization became effective, our debts were discharged and we exited bankruptcy.
Following our exit from bankruptcy, we conducted nominal operations with respect to oil and gas assets retained under our Plan of Reorganization, selling certain retained oil and gas interests and rights in 2016 and 2017 to support ongoing operations. Ultimately, all remaining leases expired. From 2016 till implementation of our current business plan in late 2021, we conducted nominal operations.
Prior to our bankruptcy filing, we were subject to the reporting requirements of the Exchange Act and our common stock was listed on the NYSE Mkt (now known as the NYSE American). We were delisted from the NYSE Mkt as a result of our bankruptcy filing. With our lack of financial resources to support ongoing reporting obligations under the Exchange Act, we ceased filing reports under the Exchange and, as result, our Exchange Act registration was revoked in 2019.
In 2021, we filed a Form 10 Registration Statement (the “Form 10”) with the Securities and Exchange Commission which became effective in September 2021, after which date we again became subject to the reporting requirements of the Exchange Act and resumed reporting thereunder.
Our initial focus as discussed in our Form 10 was to seek opportunities in the “green” energy space with the potential to advance the de-carbonization of the atmosphere and, secondarily, in traditional oil and gas development to meet energy demands pending transition to a carbon-neutral economy.
After conducting discussions with potential sources for acquisition candidates and evaluating developing market opportunities, our board of directors determined that our existing seismic licenses presented attractive opportunities to support commercial operations in both our “green” and traditional energy target markets without the anticipated dilution associated the acquisition of other businesses.
Seismic License Portfolio
In our pre-bankruptcy oil and gas operations, we acquired multiple seismic data licenses to support our then oil and gas drilling and development. Each of those licenses were non-transferrable and were retained by Saratoga following its bankruptcy.
The seismic licenses cover more than 430 square miles in the transitional coastline and protected in-bay environment of south Louisiana and the Gulf of Mexico. Those licenses were originally acquired for cash consideration of more than $1,200,000.
Previously, we drilled six productive oil and gas wells on acreage covered by the 400 square mile Breton Sound 3D seismic license.
We have commenced efforts to exploit our seismic license portfolio to identify attractive acreage that may be available for lease both for oil and gas exploration and for sequestration of CO2.
Oil and Gas Opportunity
With the resumption of global economic growth following the sharp drop in economic activity in the initial months of the COVID-19 pandemic, energy demand and energy prices have strengthened markedly during 2021, with U.S. benchmark West Texas Intermediate oil prices rising from $47.62 on the first trading day of 2021 to $73.79 as of December 24, 2021, up 54%, and Henry Hub natural gas prices rising from a January 2021 opening price of $2.60 per mcf to $3.96 per mcf as of December 21, 2021, up 52%.
While we do not presently hold any oil and gas leases or operate any wells and have no oil and gas reserves, with global crude oil production down at year-end 2021 from pre-pandemic levels and demand returning to pre-pandemic levels and projected to continue to grow through 2050[1], we believe that our seismic license portfolio and track record operating in Louisiana state waters position us to successfully resume oil and gas exploration and development operations to meet continuing energy demands pending a more broad-based transition to non-carbon based energy sources.
We have commenced discussions with Crescent Drilling & Production, Inc. regarding potential joint efforts to identify and lease attractive acreage to resume oil and gas drilling and development operations utilizing our seismic license portfolio. Crescent previously served as our engineering partner and was responsible for engineering, drilling and well management on 14 new well drills and 12 workovers. While discussions with Crescent have not yet resulted in a definitive agreement, we anticipate that Crescent will be contracted to provide substantially all essential engineering services to commence identification of prospects based on our seismic library and drilling and well operations on wells that we may drill.
We intend to contract with land services providers, geologists and other service providers to seek and secure leasehold acreage, evaluate geological characteristics of prospects and provide other necessary service to support all aspects of oil and gas operations.
Carbon Capture and Storage (CCS) Opportunity
Overview[2] Carbon capture and storage, also known as sequestration or CCS, is a process involving capturing man-made carbon dioxide (CO2) at its source and storing it permanently underground. Direct air capture of CO2 is an emerging technology which, if proven, would also fall under the umbrella of CCS. Governmental bodies and private industry have identified CCS as an important tool in the reduction of greenhouse gas emitted into the atmosphere.
Since 2010, Congress has provided $7.3 billion in appropriations for Department of Energy CCS-related activities.
According to the Global CCS Institute, in 2020 there were 24 facilities worldwide capturing and injecting CO2 of which 12 are in the United States. Within the U.S., those facilities presently operate in five industrial sectors: chemical production, hydrogen production, fertilizer production, natural gas processing and power generation. Each of those facilities captures and injects CO2 in underground geologic formation or use the CO2 to increase oil production from aging fields, or enhanced oil recovery (EOR).
Congress has incentivized development of CCS projects through creation of the Internal Revenue Code Section 45Q tax credit of $50 per ton for carbon sequestration or its use as a tertiary injectant for EOR or other designated purposes. Recent Internal Revenue Service guidance and regulations on this tax credit are intended to provide increased certainty for industry by establishing processes and standards for “secure geologic storage of CO2,” among other requirements.
CCS Process. CCS involves three main steps: (1) capturing and separating CO2 from other gases; (2) compressing and transporting the captured CO2 to the sequestration site; and (3) injecting the CO2 in subsurface geological reservoirs.
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1 U.S. Energy Information Administration, International Energy Outlook 2021.
2 Congressional Research Service: Carbon Capture and Sequestration (CCS) in the United States; October 18, 2021.
Each step in the CCS process entails challenges of a technical, economic, practical and other natures. Large scale implementation of CCS will require technological and other advances to bring costs down and, pending improved costs, substantial governmental support.
The first phase of CCS, CO2 capture and separation, is the most technically challenging and costly step in the CCS process with multiple approaches presently in use or under evaluation.
The second phase of CCS, compressing and transporting CO2, involves less technical challenges and most commonly entails use of pipelines. While there is an established pipeline network in the U.S. transporting CO2 to oil fields for use in EOR, expansion of that pipeline network to support CCS would entail substantial challenges in terms of regulatory clearances, rights-of-way acquisition, safety issues, operating issues, financial issues and other challenges.
The third phase of CCS, CO2 injection and sequestration, involves injection of CO2 in a fluid, or supercritical, state into geological formations typically being either (1) depleted oil and gas reservoirs, (2) deep saline reservoirs, or (3) unmineable coal seams. The pressure in those formations would typically be sufficient to assure that the injected CO2 remains supercritical reducing the likelihood of the CO2 from migrating out of the geological formation. In each instance, the geological formation would require an overlying caprock to assure that the CO2 remains trapped underground.
Existing technologies utilized in the oil and gas industry are expected to be readily adaptable for the long-term storage and monitoring of CO2.
According to estimates by the U.S. Department of Energy (DOE), U.S. storage capacity for CO2 ranges from 2.6 trillion to 22 trillion tons of CO2.
Gulf Coast CCS Market. With substantial industry located along, and substantial CO2 emissions from industry along, the U.S. Gulf coast, and a large base of depleted offshore oil and gas reservoirs, a variety of state governments and governmental, quasi-governmental and private entities have committed substantial time, funding and resources to the study the feasibility and development of CCS as both a means of addressing reduction in atmospheric CO2 and the development of CCS-based industry.
In 2021, ExxonMobil announced plans to develop a $100+ billion CCS project in and around the Houston Ship Channel with a view to partnering with the largest CO2 emitters in the area to capture 100 million tons per year of CO2 by 2040. ExxonMobil, in turn, engaged in discussions with the Biden administration to facilitate the commercial viability of CCS projects and the infrastructure bill advocated by the Biden administration and enacted into law included amendments to the Outer Continental Shelf Lands Act of 1953 to allow leasing and permitting specifically for CCS. To further ExxonMobil’s CCS plan, in November 2021, ExxonMobil reinterred the U.S. Gulf of Mexico Continental Shelf lease market and was the high bidder on 94 tracts, spending $14.9 million.[3]
In Louisiana, the Southeast Regional Carbon Sequestration Partnership (SECARB), a program at the Southern States Energy Board, and the Gulf of Mexico Partnership for Offshore Carbon Storage (GoMCarb) are actively evaluating CCS potential in Louisiana state waters with a focus on depleted oil and gas fields as well as use of CO2 in EOR in active oil and gas fields.
GoMCarb has identified a number of advantages associated with Offshore CCS in the Gulf of Mexico, including the existence of one of the most studied geological basins in the worlds, a high concentration of industrial CO2 emission sources, one of the country’s largest volume, lowest risk geology sinks, CO2 industrial sources close to large offshore sinks, existing CO2 capture and transportation facilities are in place and commercial EOR is available to offset cost.
According to the EPA, in 2016, Louisiana ranked 5th among U.S. states in CO2 emissions at approximately 220 million tons.
Focused on preserving the viability of local industry in a low-carbon environment, Louisiana officials and investors have followed the long-term studies of CCS viability in Louisiana and existing CCS projects in other industrialized regions with a view to creating a carbon storage hub along the Louisiana gulf coast. To that end, the Louisiana Legislature passed a bill to lower bureaucratic hurdles to CCS and the state has applied to the EPA for authority to permit carbon storage sites.[4]
Market Approach. Our plan to enter the Louisiana CCS market is centered around utilization of our existing 3D seismic data portfolio. We plan to utilize our seismic data to evaluate and identify optimal geological structures for use in the long-term storage of CO2. We will seek to monetize that information through direct acquisition of acreage positions or through partnering with third parties through joint ownership and operation of such acreage or through fee for service arrangements.
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3 Energy Intelligence; Exxon Eyes CCS in Active US Gulf Lease Sale; November 17, 2021.
4 Houston Chronicle.com; On Gulf Coast, is Carbon Storage the Next Big Thing? October 29, 2020.
We believe that the availability of 3D seismic data will be essential to properly identifying and evaluating appropriate CCS geological structures. Evidencing such belief, GoMCarb notes on its website that it is utilizing 3D seismic data to study how multiple reservoir storage projects interact within one basin system, focusing on pressure influences on stratigraphy and overall structure. Further SECARB-USA participants note that the use of 3D seismic is considered industry best practice in evaluating the drilling for reservoirs targeted for use in CCS although the EPA has not yet weighed in on the use, extent and quality of seismic or alternative methods to evaluate reservoirs.[5]
In order to implement our CCS strategy, we intend to retain experienced engineers and professionals to evaluate acreage for CCS use utilizing our 3D seismic portfolio. We have commenced discussions with Crescent Drilling, our oil and gas drilling service provider, and GeoX Energy, regarding establishment of a contractual relationship to implement all technical aspects of our CCS strategy.
There can be no assurance that we will be successful in securing any financing required to carry out our planned oil and gas and CCS operations or that we will be able to successfully operate either or both of the operating segments.
Competition
We expect to encounter intense competition from other entities engaged in the oil and gas exploration and production business in areas covered by our seismic license portfolio or engaged in the storage phase of the CCS business in the state waters of the coast of Louisiana. Many of these entities may be well established and have extensive experience in the markets in which we compete. Many if not most of these competitors possess far greater financial, human and other resources compared to our resources. While we believe that our seismic data portfolio will be advantageous in our efforts to compete in our target markets, our ability to compete will be limited by our limited financial and human resources.
The CCS market is a relatively new market. Numerous global companies have entered, or announced plans to enter, the CCS market and we expect many additional companies to enter the CCS market and that such new entrants will result in intense competition.
Additionally, CCS is one of many approaches focused on minimizing CO2 in the atmosphere. Other approaches to reduction in atmospheric CO2 levels may enjoy greater public acceptance or superior economic opportunities. If competing approaches are more favorably received, we may be unable to successfully capitalize on the perceived value of our seismic data to support carbon sequestration, or we may realize lower levels of revenue than would be the case in the absence of such alternatives.
Even if CCS is determined to be a financial viable approach to CO2 reduction, our success will be dependent upon our ability to secure necessary capital to support our operations and attract and retain employees and consultants with the requisite expertise to support our planned operations. Competition for such personnel is expected to be intense. If we are unable to secure necessary capital to support operations or to attract and retain such personnel, we may be unable to successfully compete in our target markets.
Employees
We presently have one employee, our Chief Executive Officer, who devotes substantially all of his time to our affairs. With the commencement of our efforts in the oil and gas and CCS markets, we anticipate that we will require additional personnel to support our operations. We anticipate that such personnel will be a mix of employees and outside contract personnel.
Regulation
Oil and Gas Industry. The oil and gas industry is subject to regulation by numerous national, state and local governmental agencies and departments. Compliance with these regulations is often difficult and costly and noncompliance could result in substantial penalties and risks. Most jurisdictions in which we expect to operate also have statutes, rules, regulations or guidelines governing the conservation of natural resources, including the unitization or pooling of oil and gas properties and the establishment of maximum rates of production from oil and gas wells. Some jurisdictions also require the filing of drilling and operating permits, bonds and reports. The failure to comply with these statutes, rules and regulations could result in the imposition of fines and penalties and the suspension or cessation of operations in affected areas.
CCS Industry. The CCS industry is a new and developing industry. Federal, state and local regulation of the CCS industry is still developing and subject to potential change. The storage of CO2 phase of the industry is expected to be regulated in a manner similar to the oil and gas industry wherein drilling and operating permits are required, bonds, reporting and similar requirements where failure to comply with such regulations are subject to fines and penalties and potential suspension or cessation of operations. Because the applicable regulatory regime to support CCS is new and evolving there can be no assurance that such regime will be conducive to successful operations or will not result in the incurrence of high costs.
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5 Carbon Capture in the Southeast; SECARB-USA Webinar; August 25, 2021.
Environmental Regulation. Various federal, state and local laws and regulations relating to the protection of the environment, including the discharge of materials into the environment, may affect both our planned oil and gas operations and our planned CCS operations. These laws and regulations, among other things, govern the amounts and types of substances that may be released into the environment, the issuance of permits to conduct exploration, drilling and production operations, the discharge and disposition of generated waste materials and waste management, the reclamation and abandonment of wells, sites and facilities, financial assurance under the Oil Pollution Act of 1990 and the remediation of contaminated sites. These laws and regulations may impose substantial liabilities for noncompliance and for any contamination resulting from our operations and may require the suspension or cessation of operations in affected areas.
We expect to routinely obtain permits for our facilities and operations in accordance with applicable laws and regulations on an ongoing basis. There can be no assurance that we will not incur issues that have a significant adverse effect on the permitting process or permit compliance status of any of our facilities or operations.
The ultimate financial impact of environmental laws and regulations is neither clearly known nor easily determined as new standards are enacted and new interpretations of existing standards are rendered. Environmental laws and regulations are expected to have an increasing impact on our operations. In addition, any non-compliance with such laws could subject us to material administrative, civil or criminal penalties, or other liabilities. Potential permitting costs are variable and directly associated with the type of facility and its geographic location. Costs, for example, may be incurred for air emission permits, spill contingency requirements, and discharge or injection permits. These costs are considered a normal, recurring cost of our planned operations and not an extraordinary cost of compliance with government regulations.
We are committed to the protection of the environment throughout our operations and believe our operations will be in substantial compliance with applicable environmental laws and regulations. We believe environmental stewardship is an important part of our daily business and will continue to make expenditures on a regular basis relating to environmental compliance. We do not presently maintain insurance coverage for spills, pollution and certain other environmental risks, but may seek such coverage in the future but do not expect to be fully insured against all such risks. Since environmental costs and liabilities are inherent in our operations and in the operations of companies engaged in similar businesses and since regulatory requirements frequently change and may become more stringent, there can be no assurance that material costs and liabilities will not be incurred in the future.
Corporate Information
Our offices are located at 1304 Alta Vista, Austin, Texas 78704 and our telephone number is (512) 940-1948. Our offices are provided on a rent free basis by our Chief Executive Officer. We expect that our offices will be relocated in the future to a suitable location to support our operations in Louisiana.
Smaller Reporting Company Status. We are a “smaller reporting company” as defined in Item 10(f)(1) of Regulation S-K. Smaller reporting companies may take advantage of certain reduced disclosure obligations, including, among other things, providing only two years of audited financial statements. We will remain a smaller reporting company until the last day of the fiscal year in which (1) the aggregate worldwide market value of our common stock held by non-affiliates equaled or exceeded $250 million as of the prior June 30th, or (2) our annual revenues equaled or exceeded $100 million during such completed fiscal year and the aggregate worldwide market value of our common stock held by non-affiliates equaled or exceeded $700 million as of the prior June 30th.
Development Stage Company Status. We are a development stage company and have not yet generated operating revenues since adopting our current business plan.
Shell Company Status. Prior to adoption of our current business plan, we had no or nominal operations and no or nominal assets. As such, we were a “shell company” as defined in Rule 405 under the Securities Act. “Restricted securities”, as defined in Rule 144 under the Securities Act, that we sold while we were a “shell company”, including securities sold pursuant to the resale restrictions of Rule 502(d) under Regulation D promulgated under the Securities, will not be eligible for resale in reliance on Rule 144 until one year after the filing of this Form 8-K providing the “Form 10 Information” reflecting termination of our shell company status.
Penny Stock Status. Our common stock is a “penny stock,” as defined in Rule 3a51-1 promulgated by the SEC under the Securities Exchange Act of 1934. The penny stock rules require a broker-dealer, prior to a transaction in penny stock not otherwise exempt from the rules, to deliver a standardized risk disclosure document that provides information about penny stocks and the nature and level of risks in the penny stock market. The broker-dealer also must provide the customer with current bid and offer quotations for the penny stock, the compensation of the broker-dealer and its sales person in the transaction, and monthly account statements showing the market value of each penny stock held in the customer’s account. In addition, the penny stock rules require that the broker-dealer, not otherwise exempt from such rules, must make a special written determination that the penny stock is suitable for the purchaser and receive the purchaser’s written agreement to the transaction. These disclosure rules have the effect of reducing the level of trading activity in the secondary market for a stock that becomes subject to the penny stock rules. So long as our common stock is subject to the penny stock rules, it may be more difficult to sell our common stock.
Web Site Access to Reports
Our Web site address is www.saratogaresourcesinc.com. We make available, free of charge on our Web site, our annual report on Form 10-K, quarterly reports on Form 10-Q and current reports on Form 8-K, and all amendments to these reports as soon as reasonably practicable after such material is electronically filed with, or furnished to, the United States Securities and Exchange Commission. Information contained on our website is not incorporated by reference into this report and you should not consider information contained on our website as part of this report.

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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
Not applicable.

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ITEM 2. PROPERTIES
Item 2. Properties
We do not presently have any physical facilities. Current operations are conducted from facilities provided by our President free of charge.

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ITEM 3. LEGAL PROCEEDINGS
Item 3. Legal Proceedings
We may from time to time be a party to lawsuits incidental to our business. As of April 13, 2022, we were not aware of any current, pending or threatened litigation or proceedings that could have a material adverse effect on our results of operations, cash flows or financial condition.

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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
Market Information
There is no established public trading market in our common stock. Our common stock is not listed for trading on any national securities exchange nor are bid or asked quotations reported in any over-the-counter quotation service.
Approximately 12.7 million shares of our common stock are restricted securities subject to the resale restrictions of Rule 144 as of the date of this Registration Statement. We cannot estimate the number of shares of our common stock that our existing stockholders will elect to sell under Rule 144.
In connection with our 2021 issuance of common stock for cash, we granted “piggyback” registration rights to two holders of an aggregate of 3,000,000 shares of our common stock. Pursuant to those “piggyback” rights, if we file a registration statement relating to the sale of shares of our stock, with exceptions, we must notify the holders of the shares in question and those shareholders have a right to have said shares included in such registration statement. Otherwise, we have no agreement with any security holder to register under the Securities Act for sale any shares of our common stock.
Holders
As of April 13, 2022, we had approximately 1,500 record holders of our common stock.
Dividends
To date, we have not paid any cash dividends. Payment of cash dividends, if any, in the future will be at the discretion of our board of directors, and will depend on then-existing conditions, including our financial condition, capital requirements and other factors our board of directors may deem relevant.
Securities Authorized for Issuance under Equity Compensation Plans
The following table provides information as of December 31, 2021 with respect to the shares of our common stock that may be issued under our existing equity compensation plans.
Plan Category
Number of securities
to be issued upon
exercise of outstanding
options, warrants
and rights (a)
Weighted-average
exercise price of
outstanding options,
warrants and
rights (b)
Number of securities
remaining available
for future issuance
under equity
compensation plans
(excluding securities
effected in column (a))
Equity compensation plans approved by security holders (1)
635,000
0.20
-
Equity compensation plans not approved by security holders
-
-
-
Total
635,000
0.20
-
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(1) Consists of shares reserved for issuance under the Saratoga Resources, Inc. 2011 Omnibus Incentive Plan (the “2011 Plan”).

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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 Operations
Overview
From our exit from bankruptcy in 2016 till adoption of our current business model in December 2021, we had no material operations and no material operating assets. With the adoption of our business model, our business is focused on utilizing our licensed 3D seismic data portfolio to participate in the acquisition and development of leases to support (i) oil and gas exploration and development and (ii) sequestration and storage of carbon dioxide. We intend to use our limited financial resources, to seek additional funding and to enter into contractual relations to support development of our business.
Results of Operations
We have had no operating revenues during the years ended December 31, 2021 and 2020.
During 2021 and 2020, we reported net losses of $528,636 and $410,257, respectively. The losses during each of those periods arose from corporate maintenance costs, salary accrued to our sole officer and accrued director fees.
In 2021, we incurred one-time expenses associated with preparation and filing of our Form 10 registration statement, including legal, accounting, auditing and other costs of our efforts to resume public trading in our common stock. With the effectiveness of our Form 10 registration statement, in September 2021, our expenses have increased as a result of being a public company (for legal, financial reporting, accounting, auditing and associated costs). Our expenses are expected to further increase as a result of our efforts to resume trading in our common stock and our commencement of operations to commercialize our 3D seismic portfolio.
Liquidity and Capital Resources
As of December 31, 2021, we had a cash balance of $5,689 and a deficit in working capital of $2 million, principally reflecting accrued salary owed to our sole officer ($1.4 million), interest on accrued salary owed to our sole officer ($0.3 million) and accrued director fees payable to our former non-employee directors ($0.2 million).
In early 2021, we sold 3,000,000 shares of common stock to two unaffiliated investors for $120,000. We used the proceeds of that stock issuance principally to support our efforts to resume public trading in our common stock and commence efforts to identify and consummate a transaction with a business combination candidate. Such costs have included, but are not limited to, paying the costs of bringing our financial statements current and auditing the same, payment of legal fees and other costs associated filing our Form 10 registration statement, payment of transfer agent and related fees. Our Form 10 registration statement was completed, filed and became effective in September 2021.
In June 2021, we issued (i) to our Chief Executive Officer 2,358,421 shares of common stock in full settlement of $69,337 of advances and $25,000 of interest on accrued salaries, and (ii) to legal counsel 342,000 shares of common stock in full settlement of $13,680 of accrued legal fees.
Funding provided by our 2021 common stock sale is not sufficient to support our current business plan. We will require additional equity, debt or other financing to support implementation of our business plan as well as our ongoing corporate overhead. There can be no assurance that we will be able to secure additional funding on acceptable terms, or at all, to support our operations.
Our audited consolidated financial statements for the years ended December 31, 2021 and 2020 include a qualification for “going concern,” reflecting a risk that we will not be able to sustain operations for the next twelve months.
Critical Accounting Policies
Our significant accounting policies are described in the notes to our financial statements for the years ended December 31, 2021 and 2020, and are included elsewhere in this registration statement. None of our accounting policies are considered critical accounting policies.

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ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Item 7A. Quantitative and Qualitative Disclosures About Market Risk
None

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ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Item 8. Financial Statements and Supplementary Data
Our financial statements appear immediately after the signature page of this report. See “Index to Financial Statements” on page.

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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
Not applicable.

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ITEM 9A. CONTROLS AND PROCEDURES
Item 9A. Controls and Procedures
Disclosure Controls and Procedures
Under the supervision and with the participation of our management, including our principal executive who also serves as our principal financial officer, we conducted an evaluation as of December 31, 2021 of the effectiveness of the design and operation of our disclosure controls and procedures, as such term is defined under Rule 13a-15(e) promulgated under the Securities Exchange Act of 1934, as amended. Based on this evaluation, our principal executive officer concluded that our disclosure controls and procedures were not effective as of December 31, 2021.
Management’s Annual Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934. Under the supervision and with the participation of management, including our principal executive officer, we conducted an evaluation of the effectiveness of our internal control over financial reporting based on the 2013 framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (the “COSO Framework”). Based on this evaluation under the COSO Framework, management concluded that our internal control over financial reporting was not effective as of December 31, 2021. Such conclusion reflects our chief executive officer’s service as the company’s sole officer, including serving as principal financial officer and the resulting lack of segregation of duties. Until we are able to remedy this material weakness, we are relying on third party consultants to assist with financial reporting.
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 rules of the Securities and Exchange Commission that permit smaller reporting companies to provide only management’s report in this annual report.
Changes in Internal Control Over Financial Reporting
There was no change in our internal control over financial reporting during the fourth quarter of 2021 that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

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ITEM 9B. OTHER INFORMATION
Item 9B. Other Information
Not applicable

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ITEM 10. DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Item 10. Directors, Executive Officers and Corporate Governance
Executive Officers and Directors
Our current executive officers and directors, and their ages and positions, are as follows:
Name
Age
Position
Thomas F. Cooke
Chief Executive Officer, President and Chairman
The following is a biographical summary of the business experience of our executive officers and directors:
Thomas F. Cooke co-founded our company in 1990 and has served as our Chief Executive Officer, President and Chairman since 2017. Mr. Cooke served as our Chief Executive Officer and Chairman from 2007 to 2017 and as our Chief Executive Officer, President and Chairman from 1996 to 2007. In addition, Mr. Cooke has been self-employed as an independent oil and gas producer and investor for more than 40 years.
Rex White and Brad Holmes previously served as directors of the company until their passing in 2021 and 2020, respectively.
There are no family relationships among the executive officers and directors. Except as otherwise provided in employment agreements, each of the executive officers serves at the discretion of the Board.
Involvement in Certain Legal Proceedings
Mr. Cooke was a director and officer of our company at the time of our filing for protection under Chapter 11 of the U.S. Bankruptcy Code in 2015. Pursuant to the terms of the bankruptcy, we transferred substantially all of our assets in settlement of all existing debts. We exited bankruptcy in 2016.

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ITEM 11. EXECUTIVE COMPENSATION
Item 11. Executive Compensation
Compensation Paid or Accrued
We paid no cash or other consideration to any officers during the years ended December 31, 2020 or 2019. However, we have accrued salary payable to Thomas Cooke pursuant to an employment contract in the amount of $250,000 in each of those years.
Employment Agreement
Thomas Cooke is party to an employment agreement with the company. Pursuant to the terms of the employment agreement, Mr. Cooke serves as our President and Chief Executive Officer.
The term of Mr. Cooke’s employment agreement commenced May 26, 2016 and continued for three years with automatic one year extensions until notice of termination is given by the company in advance of the then applicable expiration date, or the earlier death or resignation of Mr. Cooke or termination for cause.
The employment agreement provides for an annual salary of $250,000 with salary deferred and accrued with simple interest at 10% until such time as our board determines that we have adequate resources to support operations and pay such accrued salary. The employment agreement also provided for the grant to Mr. Cooke of an option to purchase 500,000 shares of common stock for a five-year term.
Outstanding Equity Awards at December 31,
The following table includes certain information with respect to unexercised options held by named executive officers at December 31, 2021:
Option Awards
Name
Grant Date
Number of Securities
Underlying Unexercised
Options Exercisable
Number of Securities
Underlying Unexercised
Options Unexercisable
Option
Exercise
Price
Option
Expiration
Date
Thomas Cooke
01/25/17
500,000
-
$ 0.214
01/24/22
Director Compensation
In January 2017, we adopted a policy establishing compensation arrangements for our non-employee directors. Under that policy, our non-employee directors are entitled to the following compensation:
● Stock options, granted upon initial appointment as a director, to purchase 50,000 shares of common stock;
● Annual stock options to purchase 20,000 shares of common stock;
● An annual retainer of $16,000, subject to the deferral rights described below;
● Annual fees of $4,000 for each committee on which a director serves, subject to the deferral rights described below; and
● Annual fees of $8,000 for each committee on which a director serves a chairman (in addition to the annual for service as a member of such committees), subject to the deferral rights described below.
All director fees payable in cash are deferred and accrued until such time as the board affirmatively approves payment of both accrued amounts and current amounts, in part or in whole, based on a determination that we have adequate financial resources to support such payment.
During the year ended December 31, 2021, we paid no cash compensation to our non-employee directors but accrued fees payable to Rex White totaling $8,352.
During the year ended December 31, 2021, we granted no stock options to non-employee directors. As of December 31, 2021, a former non-employee director, who is now deceased, held stock options to purchase 110,000 shares of our common stock.

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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
Unless otherwise indicated, the table below shows the amount of our common stock beneficially owned as of March 25, 2022, by (1) each person known to beneficially own more than 5% of our outstanding common stock, (2) each of our directors and executive officers (collectively, the named executive officers), and (3) all directors and executive officers as a group.
Number of Shares Total Number
Number of Shares Subject to of Shares
Not Subject to Exercisable Warrants Beneficially Percent of
Name of Beneficial Owner Options and Options (1) Owned (1) Class (1)(2)
Thomas F. Cooke 8,500,843 (3) - 8,500,843 23.2 %
GSO Capital Partners (4) 4,800,000 - 4,800,000 13.1 %
Andy Clifford (5) 2,637,164 - 2,637,164 7.2 %
Directors and executive officers as a group (1 person) (3) 8,500,843 - 8,500,843 23.2 %
________________
*
Ownership is less than 1%.
(1)
Reflects our common stock that could be acquired within sixty days of the record date upon the exercise of outstanding warrants and options.
(2)
Based on 36,687,022 shares of our common stock outstanding as of April 13, 2022.
(3)
Includes 104,148 shares held by Mr. Cooke’s spouse, as to which he disclaims beneficial ownership.
(4)
Address is 345 Park Avenue, New York, NY 10154. Based on a Schedule 13G, Amendment No. 1, filed with the SEC on February 14, 2013. Blackstone/GSO Capital Solutions Fund L.P. and Blackstone/GSO Capital Solutions Overseas Master Fund L.P. (collectively, the “GSO Funds”) respectively hold 3,578,781 and 1,221,219 shares of our common stock. Blackstone/GSO Capital Solutions Associates LLC is the general partner of Blackstone/GSO Capital Solutions Fund LP. GSO Holdings I LLC is the managing member of Blackstone/GSO Capital Solutions Associates LLC. GSO Capital Partners LP is the investment manager of Blackstone/GSO Capital Solutions Overseas Master Fund L.P., and in that respect holds discretionary investment authority for, and may be deemed to be the beneficial owner of the shares held by, Blackstone/GSO Capital Solutions Overseas Master Fund L.P. GSO Advisor Holdings L.L.C. is the general partner of GSO Capital Partners LP. Blackstone Holdings I L.P. is the sole member of each of GSO Holdings I LLC and GSO Advisor Holdings L.L.C. Blackstone Holdings I/II GP Inc. is the general partner of Blackstone Holdings I L.P. The Blackstone Group L.P. is the controlling shareholder of Blackstone Holdings I/II GP Inc. Blackstone Group Management L.L.C. is the general partner of The Blackstone Group L.P. Stephen A. Schwarzman is the founding member of Blackstone Group Management L.L.C. In addition, each of Bennett J. Goodman, J. Albert Smith III and Douglas I. Ostrover, each of whom serves as an executive of GSO Holdings I LLC, which is an affiliate of Blackstone/GSO Capital Solutions Associates LLC, may have shared investment control with respect to the common stock held by the GSO Funds.
(5)
Includes (i) 2,500,000 shares held by CPK Resources of which Mr. Clifford is the principal officer and owner, (ii) 5,886 share by Mr. Clifford’s SEP-IRA, and (iii) 4,173 shares held by the SEP-IRA of Mr. Clifford’s spouse, at to which he disclaims beneficial ownership.

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ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 13. Certain Relationships and Related Transactions, and Director Independence
Our Chief Executive Officer, Thomas Cooke, provides office space free of charge and had advanced to us $69,337 as of December 31, 2020 to cover certain routine costs of maintaining our corporate existence, records and other routine items. Advances by Mr. Cooke are repayable on demand and do not bear interest. Additionally, as of December 31, 2021, accrued salary of $1,383,333 and accrued interest on deferred salary totaling $313,187 was owing and payable to Mr. Cooke.
In June 2021, we issued 2,358,421 shares of restricted common stock to Mr. Cooke in full settlement of the $69,337 of advances and $25,000 of interest accrued on deferred salary owing to Mr. Cooke.
Other than the above, during 2021 and 2020 there were no material transactions between us and our officers, directors or principal shareholders.
Our directors, as of December 31, 2020, were Thomas Cooke and Rex White. Mr. Cooke is an officer and is not considered independent under the standards of the NYSE American exchange. Mr. White was independent under those standards. Mr. White has since passed away.

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ITEM 14. PRINCIPAL ACCOUNTING FEES AND SERVICES
Item 14. Principal Accountant Fees and Services
The following table summarizes the fees of MaloneBailey LLP, our registered public accounting firm in 2021 and 2020, respectively, billed to us for each of the last two fiscal years:
Fee Category FY 2021 FY 2020
Audit Fees (1) $ 15,000 $ 15,000
Audit-Related Fees - -
Tax Fees - -
All Other Fees - -
Total Fees $ 15,000 $ 15,000
(1) Audit fees consist of fees for the audit of our financial statements, the review of the interim financial statements included in our Quarterly Reports on Form 10-Q, and other professional services provided in connection with statutory and regulatory filings or engagements.
We do not presently have independent directors and do not have an audit committee.
PART IV

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ITEM 15. EXHIBITS, FINANCIAL STATEMENT SCHEDULES
Item 15. Exhibits and Financial Statement Schedules
1. Financial statements. See “Index to Financial Statements” on page.
2. Exhibits
Incorporated by Reference
Exhibit
Number
Exhibit Description
Form
Date
Number
Filed
Herewith
3.1 Restated Articles of Incorporation of Saratoga Resources, Inc. with amendments, dated May 14, 2010 8-K 05/18/10 3.1
3.2 Amended and Restated Bylaws of Saratoga Resources, Inc. dated May 16, 2011 8-K 05/20/11 3.1
10.1 Employment Agreement, dated January 25, 2017, with Thomas Cooke* 8-K 01/25/17 10.1
10.2 Saratoga Resources, Inc. 2011 Omnibus Incentive Plan* S-8 09/13/11 10.1
21.1 List of subsidiaries 10-12G 07/21/21 21.1
31.1 Section 302 Certification of CEO and CFO
X
32.1 Section 906 Certification of CEO and CFO
X
99.1 Code of Business Ethics 10-KSB 01/25/06 14.1
* Compensatory plan or arrangement.