Document and Entity Information
Document and Entity Information - shares | 3 Months Ended | |
Mar. 31, 2016 | May 13, 2016 | |
Document And Entity Information | ||
Entity Registrant Name | INFINITY ENERGY RESOURCES, INC | |
Entity Central Index Key | 822,746 | |
Document Type | 10-Q/A | |
Document Period End Date | Mar. 31, 2016 | |
Amendment Flag | true | |
Amendment Description | We are filing this Amendment No. 1 on Form 10-Q/A to amend and restate in their entirety the following items of our Quarterly Report on Form 10-Q for the quarter ended March 31, 2016 as originally filed with the Securities and Exchange Commission on May 13, 2016 (the Original Form 10-Q): (i) Item 1 of Part I Financial Information, (ii) Item 2 of Part I, Managements Discussion and Analysis of Financial Condition and Results of Operations, (iii) Item 4 of Part I, Controls and Procedures, and (iv) Item 6 of Part II, Exhibits, and we have also updated the signature page, the certifications of our Chief Executive Officer and Chief Financial Officer in Exhibits 31.1, 31.2, 32.1 and 32.2, and our financial statements formatted in Extensible Business Reporting Language (XBRL) in Exhibits 101. No other sections were affected, but for the convenience of the reader, this report on Form 10-Q/A restates in its entirety, as amended, our Original Form 10-Q. This report on Form 10-Q/A is presented as of the filing date of the Original Form 10-Q and does not reflect events occurring after that date, or modify or update disclosures in any way other than as required to reflect the restatement described below. We have determined that our previously reported results for the quarter ended March 31, 2016 included non-operating income from the derecognition of liabilities recognized upon the expiration date of their respective statute of limitations for collection purposes. Management has reconsidered this position and has determined that it should wait until a court has confirmed the extinguishment of the obligation to pay such liabilities through a judicial decree. The condensed statement of operations for the quarter ended March 31, 2016 included in this Form 10-Q/A have been restated to remove the effects of derecognizing liabilities totaling $1,134,082 previously recognized as non-operating income. The condensed balance sheet as of March 31, 2016 included in this Form 10-Q/A have been restated to remove the effects of derecognizing liabilities totaling $1,134,082 which decreased accounts payable and accrued expenses as previously reported. The condensed statement of cash flows for the quarter ended March 31, 2016 included in this Form 10-Q/A includes certain adjustments to correspond to the income statement adjustment as described in Note 12 of the notes to our condensed consolidated financial statements included in this filing. We have made necessary conforming changes in Managements Discussion and Analysis of Financial Condition and Results of Operations resulting from the correction of this error. Amendment This Form 10-Q/A sets forth the Original Filing, as modified and superseded where necessary to reflect the Restatement and related matters. Specifically, the following items of the Original Quarterly Report on Form 10-Q are amended by this Form 10-Q/A to reflect the Restatement and related matters: Part I - Item 1. Financial Statements, note describing the Restatement (Note 12) and updates to selected notes impacted by the Restatement in the Notes to the Condensed Consolidated Financial Statements. Part I - Item 2. Managements Discussion and Analysis of Financial Condition and Results of Operations Part I - Item 4. Controls and Procedures | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 6,729,375 | |
Trading Symbol | IFNY | |
Document Fiscal Period Focus | Q1 | |
Document Fiscal Year Focus | 2,016 |
Condensed Balance Sheets (Unaud
Condensed Balance Sheets (Unaudited) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Current assets: | ||
Cash and cash equivalents | $ 14,248 | $ 3,734 |
Prepaid expenses | 505 | 420 |
Total current assets | 14,753 | 4,154 |
Total assets | 14,753 | 4,154 |
Current liabilities: | ||
Accounts payable | 5,955,200 | 5,975,682 |
Accrued liabilities (including $788,520 due to related party at March 31, 2016 and December 31, 2015) | 2,925,211 | 2,642,227 |
Income tax liability | 150,000 | 150,000 |
Accrued interest (including $9,952 and $8,446 due to related party at March 31, 2016 and December 31, 2015, respectively) | 221,898 | 403,205 |
Asset retirement obligations | 1,716,003 | 1,716,003 |
Senior convertible note payable-current | 112,154 | 130,345 |
Line-of-credit with related party | 68,303 | 68,303 |
Notes payable-short term, net of discounts of $3,309 and $51,027 at March 31, 2016 and December 31, 2015, respectively | 1,081,691 | 1,033,973 |
Total current liabilities | 12,230,460 | 12,119,738 |
Senior convertible note payable-long term | 134,981 | 135,584 |
Derivative liabilities | 92,518 | 210,383 |
Total long-term liabilities | 227,499 | 345,967 |
Commitments and contingencies (Note 9) | ||
Stockholders' deficit: | ||
Preferred stock; par value $.0001 per share, 10,000,000 shares authorized; No shares issued or outstanding as of March 31, 2016 and December 31, 2015 | ||
Common stock, par value $.0001 per share, authorized 75,000,000 shares, issued and outstanding 5,221,405 and 3,125,570 shares at March 31, 2016 and December 31, 2015, respectively | 522 | 313 |
Additional paid-in capital | 108,961,271 | 108,840,102 |
Accumulated deficit | (121,404,999) | (121,301,966) |
Total stockholders' deficit | (12,443,206) | (12,461,551) |
Total liabilities and stockholders' deficit | $ 14,753 | $ 4,154 |
Condensed Balance Sheets (Unau3
Condensed Balance Sheets (Unaudited) (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Statement of Financial Position [Abstract] | ||
Due to related party | $ 788,520 | $ 788,520 |
Due to related parties interest | 9,952 | 8,446 |
Short term note payable, discount | $ 3,309 | $ 51,027 |
Preferred stock par value | $ .0001 | $ .0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, share issued | ||
Preferred stock, share outstanding | ||
Common stock, par value | $ .0001 | $ .0001 |
Common stock, share authorized | 75,000,000 | 75,000,000 |
Common stock, share issued | 5,221,405 | 3,125,570 |
Common stock, share outstanding | 5,221,405 | 3,125,570 |
Condensed Statements of Operati
Condensed Statements of Operations (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Operating expenses (income): | ||
Stock-based compensation | $ 7,598 | $ 58,360 |
General and administrative expenses | 82,570 | 105,869 |
Total operating expenses, net | 90,168 | 164,229 |
Operating loss | (90,168) | (164,229) |
Other income (expense): | ||
Interest expense | (78,170) | (573,083) |
Change in derivative fair value | 118,511 | 265,267 |
Change in fair value of senior convertible note payable | (53,206) | |
Other income (expense) | 171,017 | |
Total other expense | (12,865) | (136,799) |
Loss before income taxes | (103,033) | (301,028) |
Income tax benefit (expense) | ||
Net loss | $ (103,033) | $ (301,028) |
Net loss per share - basic and diluted | $ (0.03) | $ (0.12) |
Weighted average shares outstanding - basic and diluted | 3,901,727 | 2,591,052 |
Condensed Statements of Changes
Condensed Statements of Changes in Stockholders' Deficit (Unaudited) - 3 months ended Mar. 31, 2016 - USD ($) | Common Stock [Member] | Additional Paid-In Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2015 | $ 313 | $ 108,840,102 | $ (121,301,966) | $ (12,461,551) |
Balance, shares at Dec. 31, 2015 | 3,125,570 | |||
Stock based compensation | 7,598 | 7,598 | ||
Common stock purchase warrants issued for debt issuance costs | 774 | 774 | ||
Common stock issued for principal payments on senior convertible note payable | $ 198 | 106,802 | 107,000 | |
Common stock issued for principal payments on senior convertible note payable, shares | 1,984,446 | |||
Common stock issued for interest payments on senior convertible note payable | $ 11 | 5,995 | 6,006 | |
Common stock issued for interest payments on senior convertible note payable, shares | 111,389 | |||
Net loss | (103,033) | (103,033) | ||
Balance at Mar. 31, 2016 | $ 522 | $ 108,961,271 | $ (121,404,999) | $ (12,443,206) |
Balance, shares at Mar. 31, 2016 | 5,221,405 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Cash flows from operating activities: | ||
Net loss | $ (103,033) | $ (301,028) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation | 7,598 | 58,360 |
Change in fair value of derivative liability | (118,511) | (265,267) |
Change in fair value of senior convertible note | 53,206 | |
Amortization of debt discount | 49,053 | 523,784 |
Change in operations assets and liabilities: | ||
Increase in prepaid expenses | (30,000) | |
Increase in accounts payable and accrued liabilities | 87,201 | (44,952) |
Net cash used in operating activities | (24,486) | (59,103) |
Cash flows from investing activities: | ||
Investment in oil and gas properties | (13,893) | |
Net cash used in investing activities | (13,893) | |
Cash flows from financing activities: | ||
Net borrowings under line-of-credit with related party | 62,418 | |
Proceeds from issuance of senior convertible note payable | 35,000 | |
Net cash provided by financing activities | 35,000 | 62,418 |
Net (decrease) increase in cash and cash equivalents | 10,514 | (10,578) |
Cash and cash equivalents: | ||
Beginning | 3,734 | 13,664 |
Ending | 14,248 | 3,086 |
Supplemental cash flow information: | ||
Cash paid for interest | ||
Cash paid for taxes | ||
Supplemental noncash disclosures: | ||
Conversion of note payables and accrued interest to common stock | 503,630 | |
Conversion of line-of-credit to common stock | 50,000 | |
Issuance of common stock for principal and interest payments on senior convertible note payable | 113,006 | |
Warrant derivatives issued in connection with notes payable and extensions | 646 | 57,961 |
Issuance of common stock purchase warrants for debt issuance costs | 774 | 207,952 |
Transition of derivative liability to equity | $ 329,849 |
Nature of Operations, Basis of
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies | Note 1 Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies Unaudited Interim Financial Information Infinity Energy Resources, Inc. (collectively, we, ours, us, Infinity or the Company) has prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, statements of operations, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2016 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the audited financial statements and accompanying notes in Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K, filed with the SEC. Nature of Operations The Company is engaged in the exploration of potential oil and gas resources 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 sold its 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. The Company has been pursuing exploration and development of the Nicaraguan Concessions, which represents its principal asset and only exploration and development project. On March 5, 2009 Infinity signed the contracts relating to its Nicaraguan Concessions. Infinity has conducted activities to develop geological information from the processing and evaluation of newly acquired and existing 2-D seismic data that was acquired for the Nicaraguan Concessions. Infinity has conducted activities to develop geological information from the processing and evaluation of 2-D seismic data that was acquired for the Nicaraguan Concessions. The Company has identified multiple sites for exploratory drilling and is planning the initial exploratory well on the Perlas Block in order to determine the existence of commercial hydrocarbon reserves, subject to receipt from the Nicaraguan government of authorizations for the drilling of up to five wells, financing and satisfaction of other conditions. In order to meet its obligations under the Perlas Block of the Nicaraguan Concession, the Company has to drill its initial exploratory well during 2016 or risk being in default and losing its rights under the Nicaraguan Concessions. The work plan on the Tyra block now requires the Company to shoot additional seismic prior to the commencement of exploratory drilling. The Company is attempting to negotiate with the Nicaraguan government to seek the waiver of the additional seismic mapping on the Tyra Block and extension of time to complete its initial well. There can be no assurance whether it will be able to obtain such waiver of the requirement. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. There can be no assurance whether the Company will be able to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. On May 7, 2015 the Company completed the private placement (the May 2015 Private Placement) of a $12.0 million principal amount Senior Convertible Note (the Note) and a common stock purchase warrant to purchase 1,800,000 shares of the Companys common stock (the Warrant) with an institutional investor (the Investor). At the closing, the Investor acquired the Note by paying $450,000 in cash and issuing a promissory note, secured by cash, with a principal amount of $9,550,000 (the Investor Note). Assuming all amounts payable to the Company under the Investor Note are paid, the May 2015 Private Placement will result in gross proceeds of $10.0 million before placement agent fees and other expenses associated with the transaction, subject to the satisfaction of certain conditions. The Company will receive the remaining cash proceeds upon each voluntary or mandatory prepayment of the Investor Note. The Investor may, at its option and at any time, voluntarily prepay the Investor Note, in whole or in part. As of March 31, 2016 an additional $60,000 was funded under the Investor Note for a total of $510,000 advanced to the Company. The Investor must prepay the Investor Note, in whole or in part, upon the occurrence of one or more mandatory prepayment events. These include (i) the Investors conversion of the Note into shares of common stock upon which the Investor will be required to prepay the Investor Note, on a dollar-for-dollar basis, for each subsequent conversion of the Note and (ii) the Companys delivering a mandatory prepayment notice to the Investor after it has received governmental authorizations from the Nicaraguan authorities necessary to commence drilling on at least five sites within the Concessions and the receipt of forbearance or similar agreements relative to its general creditors, among other conditions. The Note matures on the three-year anniversary of its issuance, bears interest at 8% per annum, and is convertible at any time at the option of the holder into shares of the Companys common stock at $5.00 per share (the Conversion Price). As a part of the May 2015 Private Placement, the Company issued a Warrant to the Investor giving it the right to purchase up to an aggregate of 1,800,000 shares of the Companys common stock at an exercise price of $5.00 per share. The Warrant is exercisable commencing six months from the date of issuance for a period of seven years from the date of issuance. The Note ranks senior to the Companys existing and future indebtedness and is secured by all of the assets of the Company, excluding the Concessions. In addition, the Company continues to seek offers from industry operators and other third parties for interests in the acreage in the Nicaraguan Concessions in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. Going Concern As reflected in the accompanying statements of operations, the Company has had a history of losses. In addition, the Company has a significant working capital deficit and is currently experiencing substantial liquidity issues. The Company has relied on raising debt and equity capital in recent years in order to fund its ongoing maintenance/expenditure obligations under the Nicaraguan Concession, for its day-to-day operations and its corporate overhead since it has generated no operating revenues or cash flows in recent history. The Company is in Sub-Period 3 of the exploration phase of the 30-year Concession for both Perlas and Tyra as of March 31, 2016. Sub-Period 3 of the Nicaraguan Concessions requires the drilling of at least one exploratory well on the Perlas Block during 2016 and the shooting of additional seismic on the Tyra Block. The Company is in process of identifying at least one potential drilling site on the Perlas Block as required in Sub-Period 3 and will have to perform supplemental EIA work prior to requesting and receiving the permit to drill from the Nicaraguan government. The work plan on the Tyra block for Sub-Period 3 requires the Company to shoot additional seismic, which is estimated to cost approximately $2,500,000 prior to the commencement of exploratory drilling. The Company is attempting to negotiate with the Nicaraguan government to seek a waiver of the additional seismic mapping on the Tyra Block so that it can proceed with exploratory drilling. There can be no assurance whether it will be able to obtain a waiver of the requirement. In accordance with the Nicaraguan Concession agreements, the Company has previously provided the Ministry of Energy with the required letters of credit in the amounts of $443,100 for Perlas (expired March 2014) and $408,450 for Tyra (expired September 2014). The Company has also made all required expenditures related to the Nicaraguan Concessions for training programs and as area fees, for each respective year for 2010 through 2015. In accordance with the Nicaraguan Concession agreements, the Company must provide the Ministry of Energy with the required letters of credit in the amounts which total $1,356,227 for the Perlas block and $278,450 for the Tyra block for exploration requirements on the leases as required by the Nicaraguan Concessions, to replace the expired letters of credit. The minimum cash requirements to maintain and comply with the minimum work program as defined in the Nicaraguan Concessions for the next twelve-month period will be approximately $5,500,000 for the Perlas Block, which includes all costs to prepare for and drill the initial exploratory well, and $280,000 for the Tyra Block, assuming the waiver is granted regarding the seismic mapping. If such waiver is not granted, the Company estimates it will require approximately $2,500,000 for the seismic mapping. Finally, the Company estimates it will need approximately $300,000 to prepare and submit an environmental supplement to the Nicaraguan government to identify and receive authorization to drill up to five wells in the Concessions. If the Company does not receive the funding anticipated under its May 2015 Private Placement, it must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the required letters of credit to the Nicaraguan Government; (2) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2016; (3) the shooting of additional seismic on the Tyra Block of the Nicaraguan Concessions should it be unable to negotiate a waiver of such requirement from the Nicaraguan government; (4) the payment of normal day-to-day operations and corporate overhead; and (5) the payment of outstanding debt and other financial obligations as they become due. These are substantial operational and financial issues that must be successfully addressed during 2016 or the Companys ability to satisfy the conditions necessary to maintain its Nicaragua Concessions will be in significant doubt. The Company is actively seeking new outside sources of debt and equity capital in addition to the May 2015 Private Placement in order to fund the substantial needs enumerated above; however, there can be no assurance that we will be able to obtain such capital or obtain it on favorable terms or within the timeframe necessary to cure the technical defaults existing on the Nicaraguan Concessions or to meet its ongoing requirements relative to drilling the exploratory wells. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products, and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. These may provide substantial impediments for the Company and its ability to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. Due to the uncertainties related to these matters, there exists substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. 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 unproved properties, the estimated fair value of derivative liabilities, senior convertible note payable, stock-based awards and overriding royalty interests, and the realization of deferred tax assets. Oil and Gas Properties Unproved properties are assessed periodically (at least annually) to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are 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. All unproved property costs as of March 31, 2016 and December 31, 2015 relate to the Nicaraguan Concessions. In assessing the unproved property costs for impairment, the Company takes into consideration various information including: i) the terms of the government concessions, ii) the status of the Companys 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. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. These may provide substantial impediments for the Company and its ability to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. The Company has performed its impairment tests as of December 31, 2015 and has concluded that a full impairment reserve should be provided on the costs capitalized for the Nicaraguan Concessions oil and gas properties. All costs related to the Nicaraguan Concessions from December 31, 2015 through March 31, 2016 have been charged to operating expenses as incurred. Concentrations The Companys business plan consists of developing the Nicaraguan Concessions and it expects to be active in Nicaragua for the foreseeable future, given sufficient capital. The political climate in Nicaragua could become unstable and subject to radical change over a short period of time. In the event of a significant negative change in political and economic stability in the vicinity of the Nicaraguan Concessions or of the inability of the Company to obtain sufficient financing, the Company might be forced to abandon or suspend its efforts and its rights under its Nicaraguan Concessions. Derivative Instruments The Company accounts for derivative instruments or hedging activities under the provisions of ASC 815 Derivatives and Hedging The purpose of hedging is to provide a measure of stability to the Companys cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. As of March 31, 2016 and December 31, 2015 and during the periods 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 (Notes 2, 3 and 6), those warrants are required to be accounted for as derivatives at estimated fair value, with changes in fair value recognized in operations. 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 Companys 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 March 31, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015. 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 Companys 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 March 31, 2016, 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 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. Fair Value of Financial Instruments The carrying values of the Companys accounts receivable, accounts payable and accrued liabilities and short term notes represent the estimated fair value due to the short-term nature of the accounts. The carrying value of the Companys debt under its line-of-credit with related party represents its estimated fair value due to its short-term nature, its rate of interest, associated fees and expenses and initially recorded discount. In accordance with ASC Topic 820 Fair Value Measurements and Disclosures 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 Companys own assumptions in determining the fair value. The estimated fair value of the Companys Note and 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 Companys common stock, interest rates, the probability of both the downward adjustment of the exercise price and the upward adjustment to the number of warrants as provided by the warrant agreement terms and non-performance risk factors, among other items. The fair values for the warrant derivatives as of and March 31, 2016 and December 31, 2015 were classified under the fair value hierarchy as Level 3. The following table represents the Companys hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015: March 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ $ $ 247,135 $ 247,135 Derivative liabilities 92,518 92,518 $ $ $ 339,653 $ 339,653 December 31, 2015 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ $ $ 265,929 $ 265,929 Derivative liabilities 210,383 210,383 $ $ $ 476,312 $ 476,312 There were no changes in valuation techniques or reclassifications of fair value measurements between Levels 1, 2 or 3 during the periods ended March 31, 2016 and December 31, 2015. Net Income (Loss) per Share Pursuant to FASB ASC Topic 260, Earnings per Share, Reclassifications Certain amounts in the prior period were reclassified to conform to the current periods financial statement presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Senior Convertible Note Payable
Senior Convertible Note Payable | 3 Months Ended |
Mar. 31, 2016 | |
Senior Convertible Note Payable | |
Senior Convertible Note Payable | Note 2 Senior Convertible Note Payable Senior Convertible Note (the Note) payable consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Senior convertible note payable, at fair value $ 247,135 $ 265,929 Less: Current maturities (112,154 ) (130,345 ) Senior convertible note payable, long-term $ 134,981 $ 135,584 Following is an analysis of the activity in the senior convertible note during the three months ended March 31, 2016: Amount Balance at December 31, 2015 $ 265,929 Funding under the Investor Note during the period 35,000 Principal repaid during the period by issuance of common stock (107,000 ) Change in fair value of senior convertible note during the period 53,206 Balance at March 31, 2016 $ 247,135 The funded and unfunded portion of the Investor Note consists of the following at March 31, 2016: March 31, 2016 Investor notes - Available funding (subject to limitations) $ 10,000,000 Unfunded amount of investor notes (9,490,000 ) Investor notes - funded (prior to any repayments) $ 510,000 On May 7, 2015, the Company completed the May 2015 Private Placement of a $12.0 million principal amount senior secured convertible note (the Note) and Warrant to purchase 1,800,000 shares of the Companys common stock, $0.0001 par value. The placement agent for the Company in the transaction will receive a fee of 6% of 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 was granted a warrant to purchase 240,000 shares of common stock at $5.00 per share, which warrant is immediately exercisable. The Note and Warrant were issued pursuant to a Securities Purchase Agreement, dated May 7, 2015, by and between the Company and the Investor. The May 2015 Private Placement was made pursuant to an exemption from registration under such Act. At the closing, the Investor acquired the senior convertible note by paying $450,000 in cash and issuing a senior promissory note, secured by cash, with an aggregate initial principal amount of $9,550,000 (the Investor Note). Assuming all amounts payable to the Company under the Investor Note are paid without any offset or default, the May 2015 Private Placement will result in gross proceeds of $10.0 million before placement agent fees and other expenses associated with the transaction, subject to the satisfaction of certain conditions. The Company used the proceeds from this offering to retire certain outstanding obligations, including the 2015 area and training fees relating to its Nicaraguan Concessions, and to provide working capital. As of March 31, 2016, an additional $60,000 was funded under the Investor Note for a total of $510,000 advanced to the Company prior to any repayments. The Company is to receive the remaining cash proceeds upon each voluntary or mandatory prepayment of the Investor Note. An Investor may, at its option and at any time, voluntarily prepay the Investor Note, in whole or in part. The Investor Note is also subject to mandatory prepayment, in whole or in part, upon the occurrence of one or more of the following mandatory prepayment events: (1) Mandatory Prepayment upon Conversion (2) Mandatory Prepayment upon Mandatory Prepayment Notices The Investor Note also contains certain offset rights, which if executed, would reduce the amount outstanding under the Note and the Investor Note and the cash proceeds received by the Company. Description of the Senior Convertible Note The Note is senior to the Companys existing and future indebtedness and is secured by all of the assets of the Company, excluding the Nicaraguan Concessions, and to the extent and as provided in the related security documents. The Note is convertible at any time at the option of the holder into shares of the Companys common stock at $5.00 per share (the Conversion Price). The Note matures on the three-year anniversary of the issuance date thereof. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the Conversion Price then in effect, the then current Conversion Price will be decreased to equal such lower price. The foregoing adjustments to the Conversion Price for future stock issues will not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the Conversion Price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. On the first business day of each month beginning on the earlier of the (i) effectiveness of a registration statement the Company files to register the shares of common stock issuable upon conversion of the Note or exercise of the Warrant, as defined below, or (ii) sixth month following the date of the Note through and including the maturity date (the Installment Dates), the Company will pay to the Note holder an amount equal to (i) one-thirtieth (1/30th) of the original principal amount of the Note (or the principal outstanding on the Installment Date, if less) plus (ii) the accrued and unpaid interest with respect to such principal plus (iii) the accrued and unpaid late charges (if any) with respect to such principal and interest. The Investor has the ability to defer or accelerate such monthly payments in its sole discretion. Prior to the maturity date, the Note will bear interest at 8% per annum (or 18% per annum during an event of default) with interest payable in cash or in shares of Common Stock monthly in arrears on the first business day of each calendar month following the issuance date. Each monthly payment may be made in cash, in shares of the Companys common stock, or in a combination of cash and shares of its common stock. The Companys ability to make such payments with shares of its common stock will be subject to various equity conditions, including the existence of an effective registration statement covering the resale of the shares issued in payment (or, in the alternative, the eligibility of the shares issuable pursuant to the Note and the Warrant, as defined below, for sale without restriction under Rule 144 and without the need for the Company to remain current with its public filing obligations) and certain minimum trading price and trading volume. Such shares will be valued, as of the date on which notice is given by the Company that payment will be made in shares, at the lower of (1) the then applicable Conversion Price and (2) a price that is 80.0% of the arithmetic average of the three lowest weighted average prices of the Companys common stock during the twenty-trading day period ending two trading days before the applicable determination date (the Measurement Period). If the Company elects to pay such monthly payment in shares of the Companys stock it is required to pre-deliver shares of the Companys common stock and is required to deliver additional shares, if any, to a true-up such number of shares to the number of shares required to be delivered on the applicable Installment Date pursuant to the calculation above. At any time after the issuance date, the Company will have the right to redeem all or any portion of the outstanding principal balance of the Note plus all accrued but unpaid interest and any other charges at a price equal to 125% of such amount provided that (i) the arithmetic average of the closing sale price of the common stock for any twenty (20) consecutive Trading Days equals or exceeds 200% of the Conversion Price and (ii) among other conditions, there is an effective registration statement covering the resale of the shares issued in payment or, in the alternative, the eligibility of the shares issuable pursuant to the Note and the Warrant for sale without restriction under Rule 144 and without the need for the Company to remain current with its public filing obligations. The Investor has the right to convert any or all of the amount to be redeemed into common stock prior to redemption. Upon the occurrence of an event of default under the Note, the Investor may, so long as the event of default is continuing, require the Company to redeem all or a portion of its Note. Each portion of the Note subject to such redemption must be redeemed by the Company, in cash, at a price equal to the greater of (1) 125% of the amount being redeemed, including principal, accrued and unpaid interest, and accrued and unpaid late charges, and (2) the product of (I) the amount being redeemed and (II) the quotient determined by dividing (A) the greatest closing sale price of the shares of common stock during the period beginning on the date immediately preceding the event of default and ending on the date the holder delivers a redemption notice to the Company, by (B) the lowest Conversion Price in effect during such period. Subject to certain conditions, the Investor may also require the Company to redeem all or a portion of its Note in connection with a transaction that results in a Change of Control, as defined in the Note. The Company must redeem each portion of the Note subject to such redemption in cash at a price equal to the greater of (1) 125% of the amount being redeemed (including principal, accrued and unpaid interest, and accrued and unpaid late charges), and (2) the product of (I) the amount being redeemed and (II) the quotient determined by dividing (A) the greatest closing sale price of the shares of common stock during the period beginning on the date immediately preceding the earlier to occur of (i) the consummation of the Change of Control and (ii) the public announcement of such Change of Control and ending on the date the holder delivers a redemption notice to the Company, by (B) the lowest Conversion Price in effect during such period. Description of the Warrant As a part of the May 2015 Private Placement, the Company issued a Warrant to the Investor giving it the right to purchase up to an aggregate of 1,800,000 shares of the Companys common stock at an exercise price of $5.00 per share. The Warrant is exercisable commencing six months from the date of issuance and the exercise prices for the Warrant is subject to adjustment for certain events, such as stock splits and stock dividends. If the Company issues or sells shares of its common stock, rights to purchase shares of its common stock, or securities convertible into shares of its common stock for a price per share that is less than the exercise price then in effect, the exercise price of the Warrant will be decreased to equal such lesser price. Upon each such adjustment, the number of the shares of the Companys common stock issuable upon exercise of the Warrant will increase proportionately. The foregoing adjustments to the exercise price for future stock issues will not apply to certain exempt issuances, including issuances pursuant to certain employee benefit plans. In addition, the Conversion Price is subject to adjustment upon stock splits, reverse stock splits, and similar capital changes. The Warrant will expire on the seventh (7th) anniversary of the date of issuance. 9.99% Restriction on Conversion of Note and Exercise of Warrant The Investor has no right to convert the Note or exercise the Warrant to the extent that such conversion or exercise would result in the Investor being the beneficial owner in excess of 9.99% of the Companys common stock. The Company was required to hold a meeting of its shareholders to approve increase the number of its authorized shares to meet its obligations under the Purchase Agreement to have reserved 200% of the shares issuable upon conversion of the Note and exercise of the Warrant. The Company held its Annual Meeting of Shareholders on September 25, 2015 and the shareholders approved the reverse split of the Companys common stock issued and outstanding shares, which satisfied this requirement. Registration Rights Agreement In connection with the May 2015 Private Placement, the Company and the Investor entered into a Registration Rights Agreement under which the Company is required, on or before 45 days after the closing of the May 2015 Private Placement, to file a registration statement with the Securities and Exchange Commission (the SEC) covering the resale of 130% of the shares of the Companys common stock issuable pursuant to the Note and Warrant and to use its best efforts to have the registration declared effective as soon as practicable. The Company will be subject to certain monetary penalties, as set forth in the Registration Rights Agreement, if the registration statement is not filed or does not remain available for the resale (subject to certain allowable grace periods) of the Registrable Securities, as such term is defined in the Registration Rights Agreement. The Company filed the required registration statement on Form S-1 on June 19, 2015 and the Securities and Exchange Commission declared the Form S-1 effective on October 9, 2015 and has thereby satisfied this requirement. Participation Rights If, during the period beginning on the closing date and ending on the four (4) year anniversary of the closing date, the Company offers, sells, grants any option to purchase, or otherwise disposes of any of its or its subsidiaries equity or equity equivalent securities (a Subsequent Placement), the Investor will have the right to participate for 50% of any such future Subsequent Placement. Description of the Financial Accounting and Reporting The Company elected to account for the Note on its fair value basis, therefore, the fair value of the Note, including its embedded conversion feature, were estimated together utilizing a binomial lattice model on its origination date and the Black-Sholes model at March 31, 2016. Such assumptions included the following: Upon Issuance As of March 31, 2016 Volatility range 102.6 % 156.5 % Risk-free rate 1.00 % 0.87 % Contractual term 3.0 years 2.08 years Conversion price $ 5.00 $ 5.00 Par value of note $ 540,000 $ 291,600 The Company received $450,000 of proceeds at the date of issuance and after repayments and additional funding the net principal balance was $243,000 as of March 31, 2016. The fair market value of the Note was estimated to be $682,400 as of the issuance date, $265,929 at December 31, 2015 and $247,135 as of March 31, 2016. The net $53,206 change in fair market value of the Note is included in change in fair value of senior notes payable in the accompanying statement of operations for the three months ended March 31, 2016. The Warrant issued to purchase 1,800,000 common shares in connection with the Note was treated as a derivative liability for accounting purposes due to its ratchet and anti-dilution provisions. Accordingly, the Company has estimated the fair value of the warrant derivative as of the issuance date of the Note was issued at $8,034,007, which has been charged to non-operating expense during the year ended December 31, 2015. The estimated fair value of the warrant derivative as of March 31, 2016 was $79,953 representing a change of $102,564 from December 31, 2015 which is included in changes in derivative fair value in the accompanying statement of operations for the three months ended March 31, 2016. The warrant issued to purchase 240,000 shares issued as part of the placement fee in connection with the Note was treated as a derivative liability for accounting purposes due to its ratchet and anti-dilution provisions. Changes in the fair value of the warrant derivative liability totaled $13,675 (reduction in the derivative liability) through March 31, 2016, which is included in changes in derivative fair value in the accompanying statement of operations for the three months ended March 31, 2016. The warrant derivative liability balance related to such warrants was $10,660 and $24,336 as of March 31, 2016 and December 31, 2015, respectively. The Company is required to make monthly installment payments in the form of cash, common stock or a combination of both. Elected to make such monthly payments in the form of common stock and has delivered a total of 1,984,446 shares of common stock representing required principal repayments ($107,000 principal balances) and 111,389 representing interest payments ($6,006 interest payments) during the three months ended March 31, 2016. A total of 317,154 common shares were issued to true-up previous installments which were included in the shares delivered during the three months ended March 31, 2016. |
Debt
Debt | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Debt | Note 3 Debt Debt consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Line-of-credit with related party $ 68,303 $ 68,303 Notes payable, short term: Note payable, net of unamortized discount of $3,094 and $50,527, of March 31, 2016 and December 31, 2015, respectively $ 996,906 $ 949,473 Note payable, net of unamortized discount of $116 and $262, as of March 31, 2016 and December 31, 2015, respectively 49,884 49,738 Note payable, net of unamortized discount of $99 and $238, as of March 31, 2016 and December 31, 2015, respectively 34,901 34,762 Total notes payable, short-term $ 1,081,691 $ 1,033,973 Line-of-Credit with Related Party The Company entered into a line-of-credit facility on September 23, 2013 that provides it with borrowing capacity on a revolving basis up to a maximum of $50,000, which was increased to $75,000 at August 28, 2015 and an initial maturity of November 28, 2013. The line of credit is convertible to common stock at a rate of $5.00 per share. The entity providing the credit facility is owned by an officer of another corporation for which Infinitys president and chairman of the board serves as president and chairman of the board. The facility is unsecured, bears interest at 8% per annum, and was renewed at its maturity several times with its current maturity date as May 28, 2016. In consideration for the origination of the line of credit facility and the various renewals, the Company granted the lender common stock purchase warrants. On February 28, 2016 the Company extended the line-of-credit expiration date to May 28, 2016 and issued a warrant to purchase 10,000 common shares at an exercise price of $5.00 per share, which warrants were immediately exercisable and expire on February 28, 2021. The Company estimated the fair value of the warrants at $774 as of the grant date, which amount was recorded as debt issuance costs and will be amortized to interest expense over the extended term of the line-of-credit. During the three months ended March 31, 2016 and 2015, respectively, $689 and $184,537 of debt issuance costs amortized (including amounts immediately expensed) to interest expense, respectively and the remaining unamortized balance was $505 as of December 31, 2015, which is included in prepaid expenses. 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 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 parties amended the date for exercise of the 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 Note to the New Maturity Date. If the Company fails to pay the Note on or before its New Maturity Date, the number of shares issuable under the Warrant increases to 1,333,333 and the exercise price drops to $0.75 per share. All other terms of the Warrant remain the same. The Warrant has been treated as a derivative liability whereby the value of 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 income (loss) reflected in the statement of operations as change in derivative liability. The discount is amortized ratably through the original maturity date and each of the extended maturity dates. In connection with an extensions of the December 2013 Note to April 7, 2016, the Company agreed to enter into a definitive revenue sharing agreement with the lender 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 percent 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 renewed note payable and amortized ratably over the extended term of the note. 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 warrant to $5.00 per share and extended the term of the 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 Note to the New Maturity Date. If the Company fails to pay the December 2013 Note on or before its New Maturity Date, the number of shares issuable under the Warrant increases to 1,333,333 and the exercise price drops to $0.75 per share. All other terms of the warrant remain the same. The December 2013 Note may be prepaid without penalty at any time. The Note is subordinated to all existing and future senior indebtedness, as such terms are defined in the Note. The Company and the holder are currently negotiating to extend the maturity date of this note (See Note 11), therefore the December 2013 Note is in technical default, however there can be no assurances such negotiations will be successful. The Warrant has been treated as a derivative liability whereby the value of 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 income (loss) reflected in the statement of operations as change in derivative liability. The discount is 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 note payable to be amortized ratably over the extended term of the underlying note. The discount recorded as of the December 27, 2013 origination date of the note and as a result of the amendments to the Note terms and extensions of the maturity date has been amortized ratably over the term and extended terms of the note. Discount amortization expense aggregated $47,432 and $38,052 for the three months ended March 31, 2016 and 2015, respectively, and the remaining unamortized discount was $3,094 as of March 31, 2016. The related warrant derivative liability balance was $1,176 at fair value as of March 31, 2016. Other than the Note described above, during the three months ended March 31, 2016 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 the 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 5,000 shares of common stock at $5.60 per share for a period of five years from the date of the note. The terms of the note and warrant provide that should the note and 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 the stock purchase warrant requires that the warrant be accounted for as derivative liability. The Company recorded the estimated fair value of the warrant totaling $22,314 as a discount on note payable and as a derivative liability in the same amount, as of the origination date. On October 7, 2015, the note was extended for an additional 90 days or until January 7, 2016 and later to May 7, 2016. In consideration, the Company granted the lender 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 were immediately exercisable and expire in 5 years. The total value of the 5,000 newly issued warrants issued on January 7, 2016 totaled $379, and is being amortized over the extension period (through May 7, 2016). Discount amortization totaled $525 for the three months ended March 31, 2016 and the remaining unamortized discount was $116 as of March 31, 2016. The related warrant derivative liability balance was $429 at fair value as of March 31, 2016. ● 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 the 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 the note. The terms of the note and warrant provide that should the note and 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 the stock purchase warrant requires that the warrant be accounted for as a derivative liability. The Company recorded the estimated fair value of the warrant totaling $11,827 as a discount on note payable and as a derivative liability in the same amount, as of the origination date. On October 15, 2015, the note was extended for an additional 90 days or until January 15, 2016 and later to May 15, 2016. 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 were immediately exercisable and expire in 5 years. The total value of the 3,500 newly issued warrants on January 15, 2016 totaled $267, and is being amortized over the extension period (through May 15, 2016). Discount amortization totaled $406 for the three months ended March 31, 2016 and the remaining unamortized discount was $99 as of March 31, 2016. The related warrant derivative liability balance was $300 at fair value as of March 31, 2016. |
Common Stock
Common Stock | 3 Months Ended |
Mar. 31, 2016 | |
Equity [Abstract] | |
Common Stock | Note 4 Common Stock The Company has delivered a total of 1,984,446 shares of common stock representing required principal repayments ($107,000 principal balances) and 111,389 representing interest payments ($6,006 interest payments) during the three months ended March 31, 2016. A total of 317,154 common shares were issued to true-up previous installments which were included in the shares delivered during the three months ended March 31, 2016. See Note 2 Senior Convertible Note Payable |
Stock Options
Stock Options | 3 Months Ended |
Mar. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | Note 5 Stock Options The Company applies ASC 718, Stock Compensation In May 2006, the Companys 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 Companys common stock are reserved for issuance under the 2006 Plan. In June 2005, the Companys 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 Companys common stock were reserved for issuance under the 2005 Plan however such 2005 Plan has 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 Companys 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. The Annual Meeting of Stockholders was 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 March 31, 2016, 515,650 shares were available for future grants under all plans. 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 that would be used by an independent market participant in the valuation of certain of the Companys warrants. 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 Companys 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 three months ended March 31, 2016. The following table summarizes stock option activity for the three months ended March 31, 2016: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2015 411,450 $ 38.04 5.4 years $ Granted Exercised Forfeited Outstanding at March 31, 2016 411,450 $ 38.04 5.1 years $ Outstanding and exercisable at March 31, 2016 411,450 $ 38.04 5.1 years $ The Company recorded stock-based compensation expense in connection with the vesting of options granted aggregating $7,598 and $58,360 during the three months ended March 31, 2016 and 2015, respectively. The unrecognized compensation cost as of March 31, 2016 related to the unvested stock options as of that date was $-0-. |
Derivative Instruments
Derivative Instruments | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 6 Derivative Instruments Derivatives Warrants Issued Relative to Note Payables The estimated fair value of the Companys derivative liabilities, all of which are related to the detachable warrants issued in connection with various notes payable and the senior convertible note, 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 Companys common stock, interest rates, the probability of both the downward adjustment of the exercise price and the upward adjustment to the number of warrants as provided by the note payable and warrant agreement terms (Note 2 and 3) and non-performance risk factors, among other items (ASC 820, Fair Value Measurements The Company has issued warrants to purchase an aggregate of 2,165,500 common shares in connection with various outstanding debt instruments which require derivative accounting treatment as of March 31, 2016. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of March 31, 2016 is as follows: As of March 31, 2016 Volatility range 134.0% - 156.5 % Risk-free rate 0.87% - 1.54 % Contractual term 2.08 - 6.83 years Exercise price $5.00 - $5.60 Number of warrants in aggregate 2,165,500 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, 2015 $ 210,383 Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 646 Unrealized derivative gains included in other expense for the period (118,511 ) Transition of derivative liability to equity Balance at March 31, 2016 $ 92,518 The warrant derivative liability consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Warrant issued to holder of Senior convertible note $ 79,953 $ 182,517 Warrant issued to placement agent 10,660 24,336 Warrant issued to holder of December 2013 Note 1,176 2,540 Warrants issued to holders of notes payable - short term 729 990 Total warrant derivative liability $ 92,518 $ 210,383 |
Warrants
Warrants | 3 Months Ended |
Mar. 31, 2016 | |
Warrants | |
Warrants | Note 7 Warrants The following table summarizes warrant activity for the three months ended March 31, 2016: Number of Warrants Weighted Average Exercise Price Per Share Outstanding and exercisable at December 31, 2015 2,475,771 $ 5.34 Issued for origination or extension of notes payable (Note 3) 8,500 5.60 Issued for extension of line-of-credit (Note 3) 10,000 5.00 Exercised (5,000 ) (15.00 ) Outstanding and exercisable at March 31, 2016 2,489,271 $ 5.35 The weighted average term of all outstanding common stock purchase warrants was 5.6 years as of March 31, 2016. 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 March 31, 2016. |
Income Taxes
Income Taxes | 3 Months Ended |
Mar. 31, 2016 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 8 – Income Taxes For income tax purposes, the Company has net operating loss carry-forwards of approximately $67,415,000 as of December 31, 2015, which expire from 2025 through 2030. The Company has provided a 100% valuation allowance due to the uncertainty of realizing the tax benefits from its net deferred tax asset. The Company has not completed the filing of tax returns for the tax years 2012 through 2015. 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. Current estimates prepared by the Company on a preliminary basis indicate that no ownership changes have occurred, and are currently not subject to an annual limitation, but may be further limited by additional ownership changes which may occur in the future. |
Commitments and Contingencies
Commitments and Contingencies | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 9 – Commitments and Contingencies The Company has not maintained insurance coverage on its U.S domestic oil and gas properties for several 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. Nicaraguan Concessions In April 2011, we filed with the Nicaraguan government an Environmental Impact Assessment (“EIA”) covering proposed seismic activities on our Nicaraguan Concessions. The filing of the EIA was followed by a comment period during which there was interaction between us the Ministerio del Ambiente y los Recursos Naturales de Nicaragua, an agency of the Nicaraguan government; and the autonomous regions of Nicaragua that are nearest to the Nicaraguan Concessions. In April 2013 the EIA was formally approved by the Nicaraguan government and we were cleared to commence 2-D and 3-D seismic mapping activities in the area. In late 2013 and early 2014, we contracted with a fully integrated Geoscience company that provides geological, geophysical and reservoir services to the global oil and gas industry, to conduct 2-D and 3-D seismic data covering selected areas within the boundaries of the Nicaraguan Concessions. The final approval of the EIA by the Nicaraguan government of our environment impact study on April 13, 2013, began Sub-Period 2 for both the Tyra and Perlas Blocks as defined in the Nicaraguan Concessions. The Company believes it has satisfied the acquisition, processing and interpretation of Seismic data required in Sub-Period 2 for both the Perlas and Tyra Blocks. Therefore, it is now in Sub-Period 3 of the exploration phase of the 30-year Concession for both Perlas and Tyra as of June 30, 2015. Sub-Period 3 of the Nicaraguan Concessions requires the drilling of at least one exploratory well on the Perlas Block during 2016 and the shooting of additional seismic on the Tyra Block. The Company is in process of identifying at least one potential drilling site on the Perlas block as required in Sub-Period 3 and will have to perform supplemental EIA work prior to requesting and receiving the permit to drill from the Nicaraguan government. The work plan on the Tyra block for Sub-Period 3 requires the Company to shoot additional seismic, which is estimated to cost approximately $2,500,000 prior to the commencement of exploratory drilling. The Company is negotiating with the Nicaraguan government to seek a waiver of the additional seismic mapping on the Tyra Block so that it can proceed with exploratory drilling. There can be no assurance that it will be able to obtain such waiver of the requirement. During late December 2013, we completed the 2-D seismic survey activities in the area as required under both of the Nicaraguan Concessions at that point. We believe that the newly acquired 2-D seismic data, together with the previously acquired reprocessed 2-D seismic, has helped us further evaluate the structures that were previously identified with 2-D seismic in the Eocene Zone. Our geological consultants have estimated that these Eocene structures may contain recoverable hydrocarbons (principally oil) in place. In addition, the new 2-D seismic acquired in 2013 provided our first geological information regarding the potential for oil resources in the Cretaceous Zone, which we could not evaluate using less precise older 2-D seismic mapping. We have identified multiple promising sites on the Perlas Block for exploratory drilling and are planning the drilling of initial exploratory wells in order to determine the existence of commercial hydrocarbon reserves, given sufficient financing. We believe that we have performed all work necessary as of June 30, 2015 to proceed to Sub-Period 3 for the Perlas Block as defined in the Nicaraguan Concessions, which requires the drilling of at least one exploratory well on the Perlas Block within the following one-year period. We must first prepare and submit a supplemental EIA to the Nicaraguan government before the drilling permit can be issued on the Perlas Block, which had not been completed as of March 31, 2016. The Company has not yet submitted the EIA supplement to the Nicaraguan Government and therefore has not received a drilling permit; however, assuming that Government does accept the supplemental EIA and grant the drilling permit, the Company will be required to drill at least one exploratory well on the Perlas Block during 2016 or risk being in default and losing our rights under the Nicaraguan Concessions. The Company is in technical default of the Nicaraguan Concession because it has not provided the required letters of credit to the Nicaraguan Government. In accordance with the Nicaraguan Concession agreements, the Company had previously provided the Ministry of Energy with the required letters of credit in the amounts of $443,100 for Perlas (expired March 2014) and $408,450 for Tyra (expired September 2014). The Company had also made all required expenditures related to the Nicaraguan Concessions for training programs and as “area fees,” for each respective year for 2010 through 2015. The Company is attempting to negotiate the renewal and increase of the required letters of credit which total $1,356,227 for the Perlas block and $278,450 for the Tyra block with the Nicaraguan Government and its lenders; however, there can be no assurance that the Company will be successful in the regard. The Company considers it is fully in compliance with the terms of the Nicaraguan Concessions agreements, except for the renewal of the expired letters of credit. The Company must raise substantial amounts of debt and equity capital in the immediate future in order to fund: (1) the required letters of credit to the Nicaraguan Government; (2) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2016; (3) the shooting of additional seismic on the Tyra Block of the Nicaraguan Concessions if it is unable to negotiate a waiver of such requirement from the Nicaraguan government; (4) the payment of normal day-to-day operations and corporate overhead; and (5) the payment of outstanding debt and financial obligations as they become due. These are substantial operational and financial issues that must be successfully mitigated during 2016 or the Company’s ability to satisfy the conditions necessary to maintain its Nicaragua Concessions will be in significant doubt. The Company completed the May 2015 Private Placement in May 2015 in an effort to obtain its required capital. See Note 2 to the Financial Statements. The Company is also seeking offers from industry operators and other third parties for interests in the acreage in the Nicaraguan Concessions in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. Accordingly, it intends to finance our business strategy through external financing, which may include debt and equity capital raised in public and private offerings, joint ventures, sale of working or other interests, employment of working capital and cash flow from operations, if any, and net proceeds from the sales of assets. The following charts set forth the minimum work programs required under for the Perlas and Tyra blocks comprising the Concessions in order for the Company to retain them. Minimum Work Program – Perlas Block Perlas – Exploration Minimum Work Commitment and Relinquishments Exploration Period (6 Years) Duration (Years) Work Commitment Relinquishment Irrevocable Guarantee Sub-Period1 2 - Environmental Impact Study - Acquisition & interpretation of 333km of new 2D seismic - Acquisition, processing & interpretation of 667km of new 2D seismic (or equivalent in 3D) 26km2 $ 443,100 Sub-Period 2 Optional 1 - Acquisition, processing & interpretation of 200km 2 53km2 $ 1,356,227 Sub-Period 3 Optional 1 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is Shallower 80km2 $ 10,220,168 Sub-Period 4 Optional 2 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis All acreage except areas with discoveries $ 10,397,335 Minimum Work Program – Tyra Block Tyra – Exploration Minimum Work Commitment and Relinquishments Exploration Period (6 Years) Duration (Years) Work Commitment Relinquishment Irrevocable Guarantee Sub-Period1 1.5 - Environmental Impact Study - Acquisition & interpretation of 667km of existing 2D seismic - Acquisition of 667km of new 2D seismic (or equivalent in 3D) 26km2 $ 408,450 Sub-Period 2 Optional 0.5 - Processing & interpretation of the 667km 2D seismic (or equivalent in 3D) acquired in the previous sub-period 40km2 $ 278,450 Sub-Period 3 Optional 2 - Acquisition, processing & interpretation of 250km 2 160km2 $ 1,818,667 Sub-Period 4 Optional 2 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis All acreage except areas with discoveries $ 10,418,667 Contractual and Fiscal Terms Training Program US $50,000 per year, per block Area Fee Years 1-3 $0.05/hectare Years 4-7 $0.10/hectare Years 8 & forward $0.15/hectare Royalties Recovery Factor 0 – 1.5 Percentage 5% 1.5 – 3.0 10% >3.0 15% Natural Gas Royalties Market value at production 5% Corporate Tax Rate no higher than 30% Social Contribution 3% of the net profit (1.5% for each autonomous region) Investment Protection ICSID arbitration OPIC insurance Revenue Sharing Commitments On March 23, 2009, the Company entered into a Securities Purchase Agreement, dated effective as of March 23, 2009, with Off-Shore, an accredited investor, to issue a subordinated promissory note in the aggregate principal amount of up to $1,275,000 and a one percent (1%) revenue sharing interest in the Nicaraguan Concessions. Off-Shore funded a total of $1,275,000 and subsequently converted the subordinated promissory note to common stock. Under the Revenue Sharing Agreement (the “Revenue Agreement”), Infinity assigned to Off-Shore a monthly payment (the “RSP”) equal to the revenue derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP will bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP will be paid to Off-Shore by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for Off-Shore. In connection with its dissolution Off-Shore assigned its RSP to its individual members. On June 6, 2009 the Company entered into a Revenue Sharing Agreement with the officers and directors for services provided. Infinity assigned to officers and directors a monthly payment equal to the revenue derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP will bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for officers and directors. The Company intends to seek joint venture or working interest partners (the “Farmout”) prior to the commencement of any exploratory drilling operations on the Nicaraguan Concessions. On September 8, 2009 the Company entered into a Revenue Sharing Agreement with Jeff Roberts to assist the Company with its technical studies of gas and oil holdings in Nicaragua and managing and assisting in the Farmout. Infinity assigned to Jeff Roberts a monthly payment equal to the revenue derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP will bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid to Jeff Roberts by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions, and does not create any rights in the Nicaraguan Concessions for Jeff Roberts. In connection with the extension of the December 2013 Note with a $1,050,000 principal balance issued in December 2013, the Company entered into a Revenue Sharing Agreement in May 2014. Infinity assigned to the note holder a monthly payment equal to the revenue derived from one percent (1%) of 8/8ths of Infinity’s share of the 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. The RSP will bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan Concessions. The Revenue Sharing Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions. Letter of Intent to enter Exploration Services Agreement On October 13, 2014 the Company announced that it had entered into a Letter of Intent (“LOI”) with Granada Exploration, LLC, which has agreed to join with the Company to explore for potential hydrocarbons beneath Infinity’s 1.4 million-acre oil and gas concessions in the Caribbean Sea offshore Nicaragua. Under the terms of the LOI, Granada Exploration will provide its services in exchange for a working interest in the Nicaraguan Concessions. The scope of such services will be more specifically described in a mutually acceptable Exploration Services Agreement (“ESA”), which is currently being negotiated. The ESA is anticipated to provide that Granada will earn an assignment from Infinity of an undivided 30% working interest in the Concessions, based on an 80% net revenue interest. Granada and Infinity are also anticipated to enter into a Joint Operating Agreement. Granada may, at its discretion, participate in an initial exploratory well for up to an additional undivided 20% working interest, on a prospect-by-prospect basis, with such additional interest to be based on an 80% net revenue interest. The LOI is subject to Granada’s normal and customary due diligence, including the evaluation of the Company’s Form 10-K and 10-Q filings, documents showing that the Company is in good standing regarding the Nicaraguan Concessions and with the Nicaraguan government; negotiation and approval of mutually acceptable formal agreements; and final approval by a majority of the partners that comprise Granada Exploration, LLC. The parties continue to negotiate the terms of the ESA, but have not entered into definitive agreements. Granada has not completed its normal and customary due diligence with progress being delayed due to the current environment affecting oil and gas exploration projects and uncertainties involving the status of the Nicaraguan Concessions. 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 prior to March 31, 2016; 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 March 31, 2016 and December 31, 2015 are sufficient to cover any potential noncompliance liabilities relative to the 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. 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 amounts in accounts payable as of March 31, 2016 and December 31, 2015, which management believes is sufficient to provide for the ultimate resolution of this dispute. |
Related Party Transactions
Related Party Transactions | 3 Months Ended |
Mar. 31, 2016 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 10 – Related Party Transactions 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 three months ended March 31, 2016 and 2015. The amount due to the CFO’s firm for services previously provided was $762,407 at March 31, 2016 and December 31, 2015, and is included in accrued liabilities at both dates. On June 6, 2009 the Company entered into a Revenue Sharing Agreement with the officers and directors for services provided. Infinity assigned to officers and directors a monthly payment equal to the revenue derived from one percent (1%) of Infinity’s share of the hydrocarbons produced at the wellhead from the Nicaraguan Concessions. The RSP will bear its proportionate share of all costs incurred to deliver the hydrocarbons to the point of sale to an unaffiliated purchaser, including its share of production, severance and similar taxes, and certain additional costs. The RSP shall be paid by the last day of each month based on the revenue received by Infinity from the purchaser of the production during the previous month from the Nicaraguan Concessions. The Revenue Agreement does not create any obligation for Infinity to maintain or develop the Nicaraguan Concessions and does not create any rights in the Nicaraguan Concessions for officers and directors. In connection with its subordinated loan, Offshore Finance, LLC was granted a one percent (1%) revenue sharing interest in the Nicaraguan Concessions in connection with a subordinated loan provided previously which was subsequently converted to common stock. 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. In connection with its dissolution, Offshore assigned its RSP to its individual members, which includes the former managing partner of Offshore. As of March 31, 2016 and December 31, 2015, the Company had accrued compensation to its officers and directors of $1,482,208 and $1,423,208, respectively. The Company entered into a line-of-credit facility on September 23, 2013 that provides it with borrowing capacity on a revolving basis up to a maximum of $50,000, which was increased to $75,000 at August 28, 2015 and an initial maturity of November 28, 2013. The line of credit is convertible to common stock at a rate of $5.00 per share. The entity providing the credit facility is owned by an officer of another corporation for which Infinity’s president and chairman of the board serves as president and chairman of the board. The facility is unsecured, bears interest at 8% per annum, and was renewed at its maturity several times with its current maturity date as May 28, 2016. In consideration for the origination of the line of credit facility and the various renewals, the Company granted the lender common stock purchase warrants. On February 28, 2016 the Company extended the line-of-credit expiration date to May 28, 2016 and issued a warrant to purchase 10,000 common shares at an exercise price of $5.00 per share, which warrants were immediately exercisable and expire on February 28, 2021. The Company estimated the fair value of the warrants at $774 as of the grant date, which amount was recorded as debt issuance costs and will be amortized to interest expense over the extended term of the line-of-credit. |
Subsequent Events
Subsequent Events | 3 Months Ended |
Mar. 31, 2016 | |
Subsequent Events [Abstract] | |
Subsequent Events | Note 11 Subsequent Events From April 1, 2016 through May 13, 2016, the Company issued a total of 1,507,970 shares of common stock to the holder of the senior convertible note payable in the form of principal payments aggregating $83,040 and related accrued interest. See Note 2 Senior Convertible Note Payable. The Company has not resolved the contingency related to the expired letters of credit for its Nicaraguan concessions (See Note 9). The Company continues to negotiate the renewal of the letters of credit with the Nicaraguan Government and its lenders; however, there can be no assurance that the Company will be successful in that regard. During May 2016, the Company extended the maturity date of two promissory notes with principal balances totaling $85,000. The new maturity dates are August 7, 2016 and August 15, 2016. In connection with the extension of the maturity date of these notes Company issued the lenders warrants to purchase a total of 8,500 shares of common stock at an exercise price of $5.60 per share which are immediately exercisable and expire in five years. On December 27, 2013 the Company borrowed $1,050,000 under an unsecured credit facility with a private, third-party lender which has an outstanding principal balance of $1,000,000. The facility is represented by a promissory note (the Note). Effective April 7, 2016 the Company and the lender have agreed in principal to extend the maturity date of the Note from April 7, 2016 to the earlier of (i) April 7, 2017 or (ii) the payment in full of the Investor Note issued to the Company by Hudson Bay Master Fund, Ltd. in the principal amount of $9,490,000 (the New Maturity Date). All other terms of the Note are expected to remain the same. The Note may be prepaid without penalty at any time. The Note is subordinated to all existing and future senior indebtedness, as such terms are defined in the Note. In connection with the proposed extension of the maturity date of the Note to the New Maturity Date, the Company (i) will issue to the lender 20,000 shares of restricted common stock; and (ii) agreed to pay $50,000 toward amounts due under the Note as soon as sufficient funds are available to do so. The Company will issue no additional warrants to the lender in connection with the proposed extension of the Note to the New Maturity Date. If the Company fails to pay the Note on or before its New Maturity Date, the number of shares issuable under the Warrant increases to 1,333,333 and the exercise price drops to $0.75 per share. All other terms of the warrant are expected to remain the same. The parties are negotiating and finalizing the documents relative to this proposed extension, therefore the terms may change as and when such documents are finalized and executed. However, there can be no assurance that such extension will be completed or that the current agreed terms will be the finalized terms of such extension. |
Restatement to Previously Issue
Restatement to Previously Issued Interim Financial Statements | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
Restatement to Previously Issued Interim Financial Statements | Note 12 Restatement to previously issued interim financial statements Subsequent to the issuance of the March 31, 2016 interim financial statements, management determined that the Company should obtain court approval before derecognizing liabilities due to the expiration of their respective statute of limitations. The Company had previously derecognized liabilities during the quarter ended March 31, 2016 which resulted in other income totaling $1,134,082. This amount was reversed in the fourth quarter of 2016 which only affected the interim financial statements previously issued during 2016. As a result, the interim financial statements previously issued for the quarter ended March 31, 2016, were restated. The following tables reflect the corrections to the affected line items in the previously issued financial statements for the three months ended March 31, 2016: Effect on Balance Sheet items: As of March 31, 2016 As previously Effect of reported Restatement As restated Liabilities and stockholders’ deficit: Accounts payable $ 5,436,036 $ 519,164 $ 5,955,200 Accrued liabilities $ 2,310,293 $ 614,918 $ 2,925,211 Accumulated deficit $ (120,270,917 ) $ (1,134,082 ) $ (121,404,999 ) Effect on Statement of Operations: Three months ended March 31, 2016 As previously Effect of reported Restatement As Restated Operating Expenses: Gain on derecognition of liabilities $ 1,134,082 $ (1,134,082 ) $ — Net income (loss) $ 1,031,049 $ (1,134,082 ) $ (103,033 ) Net income (loss) per share $ 0.26 $ (0.29 ) $ (0.03 ) Effect on Statements of Cash Flows: Three months ended March 31, 2016 As previously Effect of reported Restatement As Restated Cash Flows from Operating Activities Net income (loss) $ 1,031,049 $ (1,134,082 ) $ (103,033 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain from derecognition of liabilities $ (1,134,082 ) $ 1,134,082 $ — |
Nature of Operations, Basis o19
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Unaudited Interim Financial Information | Unaudited Interim Financial Information Infinity Energy Resources, Inc. (collectively, we, ours, us, Infinity or the Company) has prepared the accompanying financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the SEC) for interim financial reporting. These financial statements are unaudited and, in our opinion, include all adjustments consisting of normal recurring adjustments and accruals necessary for a fair presentation of our balance sheets, statements of operations, and cash flows for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2016 due to various factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (GAAP) have been omitted in accordance with the rules and regulations of the SEC. These financial statements should be read in conjunction with the audited financial statements and accompanying notes in Item 8, Financial Statements and Supplementary Data, of our Annual Report on Form 10-K, filed with the SEC. |
Nature of Operations | Nature of Operations The Company is engaged in the exploration of potential oil and gas resources 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 sold its 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. The Company has been pursuing exploration and development of the Nicaraguan Concessions, which represents its principal asset and only exploration and development project. On March 5, 2009 Infinity signed the contracts relating to its Nicaraguan Concessions. Infinity has conducted activities to develop geological information from the processing and evaluation of newly acquired and existing 2-D seismic data that was acquired for the Nicaraguan Concessions. Infinity has conducted activities to develop geological information from the processing and evaluation of 2-D seismic data that was acquired for the Nicaraguan Concessions. The Company has identified multiple sites for exploratory drilling and is planning the initial exploratory well on the Perlas Block in order to determine the existence of commercial hydrocarbon reserves, subject to receipt from the Nicaraguan government of authorizations for the drilling of up to five wells, financing and satisfaction of other conditions. In order to meet its obligations under the Perlas Block of the Nicaraguan Concession, the Company has to drill its initial exploratory well during 2016 or risk being in default and losing its rights under the Nicaraguan Concessions. The work plan on the Tyra block now requires the Company to shoot additional seismic prior to the commencement of exploratory drilling. The Company is attempting to negotiate with the Nicaraguan government to seek the waiver of the additional seismic mapping on the Tyra Block and extension of time to complete its initial well. There can be no assurance whether it will be able to obtain such waiver of the requirement. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. There can be no assurance whether the Company will be able to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. On May 7, 2015 the Company completed the private placement (the May 2015 Private Placement) of a $12.0 million principal amount Senior Convertible Note (the Note) and a common stock purchase warrant to purchase 1,800,000 shares of the Companys common stock (the Warrant) with an institutional investor (the Investor). At the closing, the Investor acquired the Note by paying $450,000 in cash and issuing a promissory note, secured by cash, with a principal amount of $9,550,000 (the Investor Note). Assuming all amounts payable to the Company under the Investor Note are paid, the May 2015 Private Placement will result in gross proceeds of $10.0 million before placement agent fees and other expenses associated with the transaction, subject to the satisfaction of certain conditions. The Company will receive the remaining cash proceeds upon each voluntary or mandatory prepayment of the Investor Note. The Investor may, at its option and at any time, voluntarily prepay the Investor Note, in whole or in part. As of March 31, 2016 an additional $60,000 was funded under the Investor Note for a total of $510,000 advanced to the Company. The Investor must prepay the Investor Note, in whole or in part, upon the occurrence of one or more mandatory prepayment events. These include (i) the Investors conversion of the Note into shares of common stock upon which the Investor will be required to prepay the Investor Note, on a dollar-for-dollar basis, for each subsequent conversion of the Note and (ii) the Companys delivering a mandatory prepayment notice to the Investor after it has received governmental authorizations from the Nicaraguan authorities necessary to commence drilling on at least five sites within the Concessions and the receipt of forbearance or similar agreements relative to its general creditors, among other conditions. The Note matures on the three-year anniversary of its issuance, bears interest at 8% per annum, and is convertible at any time at the option of the holder into shares of the Companys common stock at $5.00 per share (the Conversion Price). As a part of the May 2015 Private Placement, the Company issued a Warrant to the Investor giving it the right to purchase up to an aggregate of 1,800,000 shares of the Companys common stock at an exercise price of $5.00 per share. The Warrant is exercisable commencing six months from the date of issuance for a period of seven years from the date of issuance. The Note ranks senior to the Companys existing and future indebtedness and is secured by all of the assets of the Company, excluding the Concessions. In addition, the Company continues to seek offers from industry operators and other third parties for interests in the acreage in the Nicaraguan Concessions in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. |
Going Concern | Going Concern As reflected in the accompanying statements of operations, the Company has had a history of losses. In addition, the Company has a significant working capital deficit and is currently experiencing substantial liquidity issues. The Company has relied on raising debt and equity capital in recent years in order to fund its ongoing maintenance/expenditure obligations under the Nicaraguan Concession, for its day-to-day operations and its corporate overhead since it has generated no operating revenues or cash flows in recent history. The Company is in Sub-Period 3 of the exploration phase of the 30-year Concession for both Perlas and Tyra as of March 31, 2016. Sub-Period 3 of the Nicaraguan Concessions requires the drilling of at least one exploratory well on the Perlas Block during 2016 and the shooting of additional seismic on the Tyra Block. The Company is in process of identifying at least one potential drilling site on the Perlas Block as required in Sub-Period 3 and will have to perform supplemental EIA work prior to requesting and receiving the permit to drill from the Nicaraguan government. The work plan on the Tyra block for Sub-Period 3 requires the Company to shoot additional seismic, which is estimated to cost approximately $2,500,000 prior to the commencement of exploratory drilling. The Company is attempting to negotiate with the Nicaraguan government to seek a waiver of the additional seismic mapping on the Tyra Block so that it can proceed with exploratory drilling. There can be no assurance whether it will be able to obtain a waiver of the requirement. In accordance with the Nicaraguan Concession agreements, the Company has previously provided the Ministry of Energy with the required letters of credit in the amounts of $443,100 for Perlas (expired March 2014) and $408,450 for Tyra (expired September 2014). The Company has also made all required expenditures related to the Nicaraguan Concessions for training programs and as area fees, for each respective year for 2010 through 2015. In accordance with the Nicaraguan Concession agreements, the Company must provide the Ministry of Energy with the required letters of credit in the amounts which total $1,356,227 for the Perlas block and $278,450 for the Tyra block for exploration requirements on the leases as required by the Nicaraguan Concessions, to replace the expired letters of credit. The minimum cash requirements to maintain and comply with the minimum work program as defined in the Nicaraguan Concessions for the next twelve-month period will be approximately $5,500,000 for the Perlas Block, which includes all costs to prepare for and drill the initial exploratory well, and $280,000 for the Tyra Block, assuming the waiver is granted regarding the seismic mapping. If such waiver is not granted, the Company estimates it will require approximately $2,500,000 for the seismic mapping. Finally, the Company estimates it will need approximately $300,000 to prepare and submit an environmental supplement to the Nicaraguan government to identify and receive authorization to drill up to five wells in the Concessions. If the Company does not receive the funding anticipated under its May 2015 Private Placement, it must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the required letters of credit to the Nicaraguan Government; (2) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2016; (3) the shooting of additional seismic on the Tyra Block of the Nicaraguan Concessions should it be unable to negotiate a waiver of such requirement from the Nicaraguan government; (4) the payment of normal day-to-day operations and corporate overhead; and (5) the payment of outstanding debt and other financial obligations as they become due. These are substantial operational and financial issues that must be successfully addressed during 2016 or the Companys ability to satisfy the conditions necessary to maintain its Nicaragua Concessions will be in significant doubt. The Company is actively seeking new outside sources of debt and equity capital in addition to the May 2015 Private Placement in order to fund the substantial needs enumerated above; however, there can be no assurance that we will be able to obtain such capital or obtain it on favorable terms or within the timeframe necessary to cure the technical defaults existing on the Nicaraguan Concessions or to meet its ongoing requirements relative to drilling the exploratory wells. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products, and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. These may provide substantial impediments for the Company and its ability to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. Due to the uncertainties related to these matters, there exists substantial doubt about the Companys ability to continue as a going concern. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. |
Management Estimates | 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 unproved properties, the estimated fair value of derivative liabilities, senior convertible note payable, stock-based awards and overriding royalty interests, and the realization of deferred tax assets. |
Oil and Gas Properties | Oil and Gas Properties Unproved properties are assessed periodically (at least annually) to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant are 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. All unproved property costs as of March 31, 2016 and December 31, 2015 relate to the Nicaraguan Concessions. In assessing the unproved property costs for impairment, the Company takes into consideration various information including: i) the terms of the government concessions, ii) the status of the Companys 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. The current environment for oil and gas development projects, especially discoveries in otherwise undeveloped regions of the world, is very challenging given the depressed commodity prices for oil and gas products and the resulting industry-wide reduction in capital expenditure budgets for exploration and development projects. These may provide substantial impediments for the Company and its ability to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. The Company has performed its impairment tests as of December 31, 2015 and has concluded that a full impairment reserve should be provided on the costs capitalized for the Nicaraguan Concessions oil and gas properties. All costs related to the Nicaraguan Concessions from December 31, 2015 through March 31, 2016 have been charged to operating expenses as incurred. |
Concentrations | Concentrations The Companys business plan consists of developing the Nicaraguan Concessions and it expects to be active in Nicaragua for the foreseeable future, given sufficient capital. The political climate in Nicaragua could become unstable and subject to radical change over a short period of time. In the event of a significant negative change in political and economic stability in the vicinity of the Nicaraguan Concessions or of the inability of the Company to obtain sufficient financing, the Company might be forced to abandon or suspend its efforts and its rights under its Nicaraguan Concessions. |
Derivatives Instruments | Derivative Instruments The Company accounts for derivative instruments or hedging activities under the provisions of ASC 815 Derivatives and Hedging The purpose of hedging is to provide a measure of stability to the Companys cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. As of March 31, 2016 and December 31, 2015 and during the periods 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 (Notes 2, 3 and 6), those warrants are required to be accounted for as derivatives at estimated fair value, with changes in fair value recognized in operations. |
Income Taxes | 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 Companys 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 March 31, 2016 and December 31, 2015. 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 March 31, 2016 and December 31, 2015. |
Asset Retirement Obligations | 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 Companys 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 March 31, 2016, 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 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying values of the Companys accounts receivable, accounts payable and accrued liabilities and short term notes represent the estimated fair value due to the short-term nature of the accounts. The carrying value of the Companys debt under its line-of-credit with related party represents its estimated fair value due to its short-term nature, its rate of interest, associated fees and expenses and initially recorded discount. In accordance with ASC Topic 820 Fair Value Measurements and Disclosures 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 Companys own assumptions in determining the fair value. The estimated fair value of the Companys Note and 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 Companys common stock, interest rates, the probability of both the downward adjustment of the exercise price and the upward adjustment to the number of warrants as provided by the warrant agreement terms and non-performance risk factors, among other items. The fair values for the warrant derivatives as of and March 31, 2016 and December 31, 2015 were classified under the fair value hierarchy as Level 3. The following table represents the Companys hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015: March 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ $ $ 247,135 $ 247,135 Derivative liabilities 92,518 92,518 $ $ $ 339,653 $ 339,653 December 31, 2015 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ $ $ 265,929 $ 265,929 Derivative liabilities 210,383 210,383 $ $ $ 476,312 $ 476,312 There were no changes in valuation techniques or reclassifications of fair value measurements between Levels 1, 2 or 3 during the periods ended March 31, 2016 and December 31, 2015. |
Net Loss Per Share | Net Income (Loss) per Share Pursuant to FASB ASC Topic 260, Earnings per Share, |
Reclassification | Reclassifications Certain amounts in the prior period were reclassified to conform to the current periods financial statement presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Nature of Operations, Basic of
Nature of Operations, Basic of Presentation and Summary of Significant Accounting Policies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Schedule of Assets and Liabilities Measured At Fair Value on Recurring Basisand Liabilities Measured At Fair Value on Recurring Basis | The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of March 31, 2016 and December 31, 2015: March 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 247,135 $ 247,135 Derivative liabilities — — 92,518 92,518 $ — $ — $ 339,653 $ 339,653 December 31, 2015 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 265,929 $ 265,929 Derivative liabilities — — 210,383 210,383 $ — $ — $ 476,312 $ 476,312 |
Senior Convertible Note Payab21
Senior Convertible Note Payable (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Senior Convertible Note Payable | |
Schedule of Senior Secured Convertible Note Payable | Senior Convertible Note (the “Note) payable consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Senior convertible note payable, at fair value $ 247,135 $ 265,929 Less: Current maturities (112,154 ) (130,345 ) Senior convertible note payable, long-term $ 134,981 $ 135,584 |
Schedule of Activity in Senior Convertible Note | Following is an analysis of the activity in the senior convertible note during the three months ended March 31, 2016: Amount Balance at December 31, 2015 $ 265,929 Funding under the Investor Note during the period 35,000 Principal repaid during the period by issuance of common stock (107,000 ) Change in fair value of senior convertible note during the period 53,206 Balance at March 31, 2016 $ 247,135 |
Schedule of Funded and Unfunded Portion of Investor Note Consists | The funded and unfunded portion of the Investor Note consists of the following at March 31, 2016: March 31, 2016 Investor notes - Available funding (subject to limitations) $ 10,000,000 Unfunded amount of investor notes (9,490,000 ) Investor notes - funded (prior to any repayments) $ 510,000 |
Schedule of Fair Value Basis of Note | The Company elected to account for the Note on its fair value basis, therefore, the fair value of the Note, including its embedded conversion feature, were estimated together utilizing a binomial lattice model on its origination date and the Black-Sholes model at March 31, 2016. Such assumptions included the following: Upon Issuance As of March 31, 2016 Volatility – range 102.6 % 156.5 % Risk-free rate 1.00 % 0.87 % Contractual term 3.0 years 2.08 years Conversion price $ 5.00 $ 5.00 Par value of note $ 540,000 $ 291,600 |
Debt (Tables)
Debt (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Debt Disclosure [Abstract] | |
Schedule of Debt Outstanding | Debt consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Line-of-credit with related party $ 68,303 $ 68,303 Notes payable, short term: Note payable, net of unamortized discount of $3,094 and $50,527, of March 31, 2016 and December 31, 2015, respectively $ 996,906 $ 949,473 Note payable, net of unamortized discount of $116 and $262, as of March 31, 2016 and December 31, 2015, respectively 49,884 49,738 Note payable, net of unamortized discount of $99 and $238, as of March 31, 2016 and December 31, 2015, respectively 34,901 34,762 Total notes payable, short-term $ 1,081,691 $ 1,033,973 |
Stock Options (Tables)
Stock Options (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Option Activity | The following table summarizes stock option activity for the three months ended March 31, 2016: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2015 411,450 $ 38.04 5.4 years $ Granted Exercised Forfeited Outstanding at March 31, 2016 411,450 $ 38.04 5.1 years $ Outstanding and exercisable at March 31, 2016 411,450 $ 38.04 5.1 years $ |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Schedule of Estimated Fair Value of Derivative Liabilities | The Company has issued warrants to purchase an aggregate of 2,165,500 common shares in connection with various outstanding debt instruments which require derivative accounting treatment as of March 31, 2016. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of March 31, 2016 is as follows: As of March 31, 2016 Volatility – range 134.0% - 156.5 % Risk-free rate 0.87% - 1.54 % Contractual term 2.08 - 6.83 years Exercise price $5.00 - $5.60 Number of warrants in aggregate 2,165,500 |
Summary of Changes in Fair Value Derivative Financial Instruments | 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, 2015 $ 210,383 Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 646 Unrealized derivative gains included in other expense for the period (118,511 ) Transition of derivative liability to equity — Balance at March 31, 2016 $ 92,518 |
Schedule of Warrant Derivative Liability | The warrant derivative liability consists of the following at March 31, 2016 and December 31, 2015: March 31, 2016 December 31, 2015 Warrant issued to holder of Senior convertible note $ 79,953 $ 182,517 Warrant issued to placement agent 10,660 24,336 Warrant issued to holder of December 2013 Note 1,176 2,540 Warrants issued to holders of notes payable - short term 729 990 Total warrant derivative liability $ 92,518 $ 210,383 |
Warrants (Tables)
Warrants (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Warrants | |
Summary of Warrant Activity | The following table summarizes warrant activity for the three months ended March 31, 2016: Number of Warrants Weighted Average Exercise Price Per Share Outstanding and exercisable at December 31, 2015 2,475,771 $ 5.34 Issued for origination or extension of notes payable (Note 3) 8,500 5.60 Issued for extension of line-of-credit (Note 3) 10,000 5.00 Exercised (5,000 ) (15.00 ) Outstanding and exercisable at March 31, 2016 2,489,271 $ 5.35 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Commitments and Contingencies Disclosure [Abstract] | |
Schedule of Minimum Exploration Work Commitment and Relinquishments by Individual Blocks | The following charts set forth the minimum work programs required under for the Perlas and Tyra blocks comprising the Concessions in order for the Company to retain them. Minimum Work Program – Perlas Block Perlas – Exploration Minimum Work Commitment and Relinquishments Exploration Period (6 Years) Duration (Years) Work Commitment Relinquishment Irrevocable Guarantee Sub-Period1 2 - Environmental Impact Study - Acquisition & interpretation of 333km of new 2D seismic - Acquisition, processing & interpretation of 667km of new 2D seismic (or equivalent in 3D) 26km2 $ 443,100 Sub-Period 2 Optional 1 - Acquisition, processing & interpretation of 200km 2 53km2 $ 1,356,227 Sub-Period 3 Optional 1 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is Shallower 80km2 $ 10,220,168 Sub-Period 4 Optional 2 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis All acreage except areas with discoveries $ 10,397,335 Minimum Work Program – Tyra Block Tyra – Exploration Minimum Work Commitment and Relinquishments Exploration Period (6 Years) Duration (Years) Work Commitment Relinquishment Irrevocable Guarantee Sub-Period1 1.5 - Environmental Impact Study - Acquisition & interpretation of 667km of existing 2D seismic - Acquisition of 667km of new 2D seismic (or equivalent in 3D) 26km2 $ 408,450 Sub-Period 2 Optional 0.5 - Processing & interpretation of the 667km 2D seismic (or equivalent in 3D) acquired in the previous sub-period 40km2 $ 278,450 Sub-Period 3 Optional 2 - Acquisition, processing & interpretation of 250km 2 160km2 $ 1,818,667 Sub-Period 4 Optional 2 - Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis All acreage except areas with discoveries $ 10,418,667 |
Schedule of Contractual and Fiscal Terms | Contractual and Fiscal Terms Training Program US $50,000 per year, per block Area Fee Years 1-3 $0.05/hectare Years 4-7 $0.10/hectare Years 8 & forward $0.15/hectare Royalties Recovery Factor 0 – 1.5 Percentage 5% 1.5 – 3.0 10% >3.0 15% Natural Gas Royalties Market value at production 5% Corporate Tax Rate no higher than 30% Social Contribution 3% of the net profit (1.5% for each autonomous region) Investment Protection ICSID arbitration OPIC insurance |
Restatement to Previously Iss27
Restatement to Previously Issued Interim Financial Statements (Tables) | 3 Months Ended |
Mar. 31, 2016 | |
Accounting Changes and Error Corrections [Abstract] | |
Schedule of Previously Issued Financial Statements | The following tables reflect the corrections to the affected line items in the previously issued financial statements for the three months ended March 31, 2016: Effect on Balance Sheet items: As of March 31, 2016 As previously Effect of reported Restatement As restated Liabilities and stockholders’ deficit: Accounts payable $ 5,436,036 $ 519,164 $ 5,955,200 Accrued liabilities $ 2,310,293 $ 614,918 $ 2,925,211 Accumulated deficit $ (120,270,917 ) $ (1,134,082 ) $ (121,404,999 ) Effect on Statement of Operations: Three months ended March 31, 2016 As previously Effect of reported Restatement As Restated Operating Expenses: Gain on derecognition of liabilities $ 1,134,082 $ (1,134,082 ) $ — Net income (loss) $ 1,031,049 $ (1,134,082 ) $ (103,033 ) Net income (loss) per share $ 0.26 $ (0.29 ) $ (0.03 ) Effect on Statements of Cash Flows: Three months ended March 31, 2016 As previously Effect of reported Restatement As Restated Cash Flows from Operating Activities Net income (loss) $ 1,031,049 $ (1,134,082 ) $ (103,033 ) Adjustments to reconcile net loss to net cash used in operating activities: Gain from derecognition of liabilities $ (1,134,082 ) $ 1,134,082 $ — |
Nature of Operations, Basis o28
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) | May 07, 2015USD ($)shares | May 31, 2015$ / sharesshares | Mar. 31, 2016USD ($)a$ / sharesshares | Dec. 31, 2012 | Feb. 28, 2016$ / shares | Dec. 31, 2015USD ($) | Aug. 28, 2015 | Jul. 15, 2015$ / shares | Jul. 07, 2015$ / shares | Sep. 23, 2013$ / shares |
Principal amount of senior secured convertible notes | $ 510,000 | |||||||||
Warrant to purchase shares of common stock | shares | 1,984,446 | |||||||||
Proceeds from private placement | ||||||||||
Percentage of debt bears interest | 8.00% | 8.00% | 8.00% | |||||||
Conversion price per share | $ / shares | $ 5 | $ 5 | $ 5.60 | $ 5.60 | $ 5 | |||||
Deferred tax asset, net of valuation allowance | $ 0 | $ 0 | ||||||||
Additional liability | 1,716,003 | $ 0 | ||||||||
Former Texas Oil And Gas Producing Properties [Member] | ||||||||||
Additional liability | 734,897 | |||||||||
Former Wyoming And Colorado Oil And Gas Producing Properties [Member] | ||||||||||
Additional liability | 981,106 | |||||||||
Infinity-Texas [Member] | ||||||||||
Percentage of sale of stock | 100.00% | |||||||||
Block Tyra [Member] | ||||||||||
Cost of exploratory drilling | 2,500,000 | |||||||||
Estimates cost to prepare and submit of environmental supplement | 300,000 | |||||||||
Letters of credit | 278,450 | |||||||||
Minimum cash requirements to maintain and comply | 280,000 | |||||||||
Estimates of drilling cost | 2,500,000 | |||||||||
Block Tyra [Member] | Expired September 2014 [Member] | ||||||||||
Letters of credit | 408,450 | |||||||||
Block Perlas [Member] | ||||||||||
Letters of credit | 1,356,227 | |||||||||
Minimum cash requirements to maintain and comply | 5,500,000 | |||||||||
Block Perlas [Member] | Expired March 2014 [Member] | ||||||||||
Letters of credit | 443,100 | |||||||||
Private Placement [Member] | ||||||||||
Principal amount of senior secured convertible notes | $ 12,000,000 | |||||||||
Warrant to purchase shares of common stock | shares | 1,800,000 | |||||||||
Note payments for cash and issuing promissory note | $ 1,800,000 | |||||||||
Proceeds from private placement | 8,034,007 | |||||||||
Percentage of debt bears interest | 8.00% | |||||||||
Conversion price per share | $ / shares | $ 5 | |||||||||
Warrant investor purchase aggregate shares | shares | 1,800,000 | |||||||||
Common stock exercise price per share | $ / shares | $ 5 | |||||||||
Warrants term | 7 years | |||||||||
Senior Secured Convertible Note [Member] | ||||||||||
Principal amount of senior secured convertible notes | 12,000,000 | |||||||||
Proceeds from private placement | 10,000,000 | |||||||||
Investor Promissory Note [Member] | ||||||||||
Principal amount of senior secured convertible notes | $ 9,550,000 | 510,000 | ||||||||
Additional amount funded | $ 60,000 | |||||||||
Warrant to purchase shares of common stock | shares | 1,800,000 | |||||||||
Note payments for cash and issuing promissory note | $ 450,000 | |||||||||
Nicaraguan Concession [Member] | ||||||||||
Nature of operations oil and gas resources acres | a | 1,400,000 |
Nature of Operations, Basis o29
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies - Schedule of Assets and Liabilities Measured at Fair Value on Recurring Basis (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Senior Convertible Note payable | $ 247,135 | $ 265,929 |
Derivative liabilities | 92,518 | 210,383 |
Fair value on liabilities | 339,653 | 476,312 |
Level 1 [Member] | ||
Senior Convertible Note payable | ||
Derivative liabilities | ||
Fair value on liabilities | ||
Level 2 [Member] | ||
Senior Convertible Note payable | ||
Derivative liabilities | ||
Fair value on liabilities | ||
Level 3 [Member] | ||
Senior Convertible Note payable | 247,135 | 265,929 |
Derivative liabilities | 92,518 | 210,383 |
Fair value on liabilities | $ 339,653 | $ 476,312 |
Senior Convertible Note Payab30
Senior Convertible Note Payable (Details Narrative) - USD ($) | Jul. 15, 2015 | Jul. 07, 2015 | May 07, 2015 | Mar. 31, 2016 | Mar. 31, 2015 | Feb. 28, 2016 | Dec. 31, 2015 | Aug. 28, 2015 | May 31, 2015 | Sep. 23, 2013 |
Notes payable principal balance | $ 510,000 | |||||||||
Warrant to purchase shares of common stock | 1,984,446 | |||||||||
Common stock, par value | $ .0001 | $ .0001 | ||||||||
Proceeds from issuance of common stock | $ 107,000 | |||||||||
Proceeds from private placement | ||||||||||
Percentage of debt bears interest | 8.00% | 8.00% | 8.00% | |||||||
Conversion price per share | $ 5.60 | $ 5.60 | $ 5 | $ 5 | $ 5 | |||||
Change in fair value of derivative liability | $ (118,511) | $ (265,267) | ||||||||
Fair market value of secured convertible note | 247,135 | $ 265,929 | ||||||||
Issuance of warrant derivative in connection with secured convertible note | 8,034,007 | |||||||||
Interest payments | 111,389 | |||||||||
Other fees and expenses | 6,006 | |||||||||
Proceeds from convertible debt | $ 35,000 | $ 50,000 | 450,000 | |||||||
Liquidated principal balances | $ 243,000 | |||||||||
Registration Rights Agreement [Member] | ||||||||||
Percentage of resale of shares of issuance of common stock | 130.00% | |||||||||
Investor Promissory Note [Member] | ||||||||||
Notes payable principal balance | $ 9,550,000 | $ 510,000 | ||||||||
Warrant to purchase shares of common stock | 1,800,000 | |||||||||
Additional amount funded | 60,000 | |||||||||
Note payments for cash and issuing promissory note | $ 450,000 | |||||||||
Debt principal amount | 2,000,000 | |||||||||
Prepayment of convertible note | 4,000,000 | |||||||||
Investor Promissory Note [Member] | Minimum [Member] | ||||||||||
Prepayment of convertible note | $ 2,000,000 | |||||||||
Private Placement [Member] | ||||||||||
Notes payable principal balance | $ 12,000,000 | |||||||||
Warrant to purchase shares of common stock | 1,800,000 | |||||||||
Common stock, par value | $ 0.0001 | |||||||||
Percentage of fee received of cash proceeds | 6.00% | |||||||||
Proceeds from issuance of common stock | $ 600,000 | |||||||||
Received amount at closing | 27,000 | |||||||||
Warrants price per share | $ 5 | |||||||||
Note payments for cash and issuing promissory note | 1,800,000 | |||||||||
Proceeds from private placement | 8,034,007 | |||||||||
Percentage of debt bears interest | 8.00% | |||||||||
Conversion price per share | $ 5 | |||||||||
Private Placement [Member] | Securities Purchase Agreement [Member] | ||||||||||
Notes payable principal balance | 9,550,000 | |||||||||
Note payments for cash and issuing promissory note | 450,000 | |||||||||
Proceeds from private placement | $ 10,000,000 | |||||||||
Percentage of debt bears interest | 8.00% | |||||||||
Conversion price per share | $ 5 | |||||||||
Percentage of debt default interest rate | 18.00% | |||||||||
Debt conversion weighted average price common stock rate | 80.00% | 125.00% | ||||||||
Percentage of debt conversion rate | 125.00% | 200.00% | ||||||||
Percentage of beneficial owner of excess | 9.99% | |||||||||
Fair market value of secured convertible note | $ 53,206 | $ 682,400 | ||||||||
Private Agent [Member] | ||||||||||
Warrant to purchase shares of common stock | 240,000 | |||||||||
Warrants price per share | $ 5 | |||||||||
Fair market value of secured convertible note | 265,929 | |||||||||
Senior Convertible Note Payable [Member] | ||||||||||
Change in fair value of derivative liability | 102,564 | |||||||||
Derivative liability | $ 79,953 | |||||||||
Senior Convertible Note Payable One [Member] | ||||||||||
Warrant to purchase shares of common stock | 890,625 | |||||||||
Change in fair value of derivative liability | $ 13,675 | |||||||||
Derivative liability | $ 10,660 | $ 24,336 | ||||||||
True-up [Member] | ||||||||||
Warrant to purchase shares of common stock | 317,154 |
Senior Convertible Note Payab31
Senior Convertible Note Payable - Schedule of Senior Convertible Note Payable (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Senior Convertible Note Payable - Schedule Of Senior Convertible Note Payable Details | ||
Secured convertible note payable, at fair value | $ 247,135 | $ 265,929 |
Less: Current maturities | (112,154) | (130,345) |
Secured convertible note payable, long-term | $ 134,981 | $ 135,584 |
Senior Convertible Note Payab32
Senior Convertible Note Payable - Schedule of Activity in Senior Convertible Note (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Senior Convertible Note Payable | |
Balance at December 31, 2015 | $ 265,929 |
Funding under the Investor Note during the period | 35,000 |
Principal repaid during the period by issuance of common stock | (107,000) |
Change in fair value of senior convertible note during the period | 53,206 |
Balance at March 31, 2016 | $ 247,135 |
Senior Convertible Note Payab33
Senior Convertible Note Payable - Schedule of Funded and Unfunded Portion of Investor Note Consists (Details) | Mar. 31, 2016USD ($) |
Senior Convertible Note Payable - Schedule Of Funded And Unfunded Portion Of Investor Note Consists Details | |
Investor notes - Available funding (subject to limitations) | $ 10,000,000 |
Unfunded amount of investor notes | (9,490,000) |
Investor notes - funded (prior to any repayments) | $ 510,000 |
Senior Convertible Note Payab34
Senior Convertible Note Payable - Schedule of Fair Value Basis of Note (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)$ / shares | |
Volatility - range | 156.50% |
Risk-free rate | 0.87% |
Contractual term | 2 years 29 days |
Conversion price | $ / shares | $ 5 |
Par value of note | $ | $ 291,600 |
Upon Issuance [Member] | |
Volatility - range | 102.60% |
Risk-free rate | 1.00% |
Contractual term | 3 years |
Conversion price | $ / shares | $ 5 |
Par value of note | $ | $ 540,000 |
Debt (Details Narrative)
Debt (Details Narrative) - USD ($) | Feb. 28, 2016 | Jan. 15, 2016 | Jan. 07, 2016 | Oct. 15, 2015 | Oct. 07, 2015 | Jul. 15, 2015 | Jul. 07, 2015 | Dec. 27, 2013 | Sep. 23, 2013 | Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | Aug. 28, 2015 |
Line of credit facility maximum borrowing capacity | $ 50,000 | ||||||||||||
Increase in line of credit | $ 75,000 | ||||||||||||
Percentage of loan agreement, bearing interest rate | 8.00% | ||||||||||||
Debt maturity date | Feb. 28, 2016 | Nov. 28, 2013 | |||||||||||
Line of credit maturity date descriptipn | The facility is unsecured, bears interest at 8% per annum, and was renewed at its maturity several times with its current maturity date as May 28, 2016 | ||||||||||||
Conversion price per share | $ 5 | $ 5.60 | $ 5.60 | $ 5 | $ 5 | ||||||||
Issuance of warrants exercisable to purchase of common stock | 10,000 | 5,000 | 3,500 | 5,000 | 3,500 | 5,000 | |||||||
Fair value of warrants | $ 774 | $ 11,827 | $ 22,314 | ||||||||||
Issuance of warrants common stock purchase price per share | $ 15 | ||||||||||||
Fair value of warrants recorded as debt issuance cost | $ 689 | $ 184,537 | |||||||||||
Unamortized debt discount | $ 505 | ||||||||||||
Common stock at exercise price | $ 5.60 | $ 5.60 | $ 5.60 | $ 5.60 | |||||||||
Increase warrants issuance | 7,000 | 10,000 | |||||||||||
Warrants exercise price drops price per per share | $ 5.60 | $ 5.60 | |||||||||||
Common stock issued | 5,221,405 | 3,125,570 | |||||||||||
Common stock issued value | $ 522 | $ 313 | |||||||||||
Discount amortization expense | 49,053 | 523,784 | |||||||||||
Derivative liability | 92,518 | $ 210,383 | |||||||||||
Proceeds from convertible debt | $ 35,000 | $ 50,000 | 450,000 | ||||||||||
Debt instruments interest rate | 8.00% | 8.00% | 8.00% | ||||||||||
Warrants expiration period | 5 years | 5 years | |||||||||||
Debt maturity extended date | Jan. 15, 2016 | Jan. 7, 2016 | |||||||||||
Debt maturity extended later date | May 15, 2016 | May 7, 2016 | |||||||||||
Amortized over extension period | $ 267 | $ 379 | |||||||||||
May 7, 2016 [Member] | |||||||||||||
Unamortized debt discount | 116 | ||||||||||||
Discount amortization expense | 525 | ||||||||||||
Derivative liability | 429 | ||||||||||||
May 15, 2016 [Member] | |||||||||||||
Unamortized debt discount | 99 | ||||||||||||
Discount amortization expense | 406 | ||||||||||||
Derivative liability | 300 | ||||||||||||
December 2013 Note [Member] | |||||||||||||
Debt maturity date | Mar. 12, 2014 | ||||||||||||
Issuance of warrants exercisable to purchase of common stock | 100,000 | ||||||||||||
Unamortized debt discount | 3,094 | ||||||||||||
Proceeds from unsecured credit facility | $ 1,050,000 | ||||||||||||
Common stock at exercise price | $ 15 | ||||||||||||
Increase warrants issuance | 1,333,333 | ||||||||||||
Warrants exercise price drops price per per share | $ 0.75 | ||||||||||||
Discount amortization expense | 47,432 | $ 38,052 | |||||||||||
Derivative liability | $ 1,176 | ||||||||||||
December 2013 Note to April 7, 2016 One [Member] | |||||||||||||
Percentage of revenue sharing agreement description | In connection with an extensions of the December 2013 Note to April 7, 2016, the Company agreed to enter into a definitive revenue sharing agreement with the lender 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 percent 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. | ||||||||||||
Estimated revenue | $ 964,738 | ||||||||||||
December 2013 Note to April 7, 2016 Two [Member] | |||||||||||||
Increase warrants issuance | 1,333,333 | ||||||||||||
Warrants exercise price drops price per per share | $ 0.75 | ||||||||||||
Restricted common stock issued | 20,000 | ||||||||||||
Warrants exercise price per share | $ 5 | ||||||||||||
Repayment of debt | $ 50,000 | ||||||||||||
Common stock issued | 20,000 | ||||||||||||
Common stock issued value | $ (104,000) | ||||||||||||
Increased value of the outstanding warrants | $ (68,716) |
Debt - Schedule of Debt Outstan
Debt - Schedule of Debt Outstanding (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Line-of-credit with related party | $ 68,303 | $ 68,303 |
Note payable to related party, net of discount, short-term | 1,081,691 | 1,033,973 |
Notes Payable One [Member] | ||
Note payable to related party, net of discount, short-term | 996,906 | 949,473 |
Notes Payable Two [Member] | ||
Note payable to related party, net of discount, short-term | 49,884 | 49,738 |
Notes Payable Three [Member] | ||
Note payable to related party, net of discount, short-term | $ 34,901 | $ 34,762 |
Debt - Schedule of Debt Outst37
Debt - Schedule of Debt Outstanding (Details) (Parenthetical) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Notes Payable One [Member] | ||
Discount unamortized net | $ 3,094 | $ 50,527 |
Notes Payable Two [Member] | ||
Discount unamortized net | 116 | 262 |
Notes Payable Three [Member] | ||
Discount unamortized net | $ 99 | $ 238 |
Common Stock (Details Narrative
Common Stock (Details Narrative) | 3 Months Ended |
Mar. 31, 2016USD ($)shares | |
Equity [Abstract] | |
Number of stock issued for principal balances | 1,984,446 |
Number of stock issued for principal balances, amount | $ | $ 107,000 |
Number of stock issued for interest payments | 111,389 |
Number of stock issued for interest payments, amount | $ | $ 6,006 |
Number of shares issued for previous debt | 317,154 |
Stock Options (Details Narrativ
Stock Options (Details Narrative) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Stock-based compensation expense in connection with vesting of options granted | $ 7,598 | $ 58,360 |
Unrecognized compensation cost related to unvested stock options | $ 0 | |
2006 Equity Incentive Plan [Member] | ||
Issuance of reserved common stock, shares | 47,000 | |
Stock date of granted expiration period | 10 years | |
2005 Equity Incentive Plan [Member] | ||
Issuance of reserved common stock, shares | 47,500 | |
2015 Stock Option and Restricted Stock Plan [Member] | ||
Issuance of reserved common stock, shares | 500,000 | |
All Plan [Member] | ||
Shares available for future grants under all plans | 515,650 |
Stock Options - Summary of Stoc
Stock Options - Summary of Stock Option Activity (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Number of Options Outstanding, Beginning | shares | 411,450 |
Number of Options Outstanding, Granted | shares | |
Number of Options Outstanding, Exercised | shares | |
Number of Options Outstanding, Forfeited | shares | |
Number of Options Outstanding, Ending | shares | 411,450 |
Number of Options Outstanding and exercisable | shares | 411,450 |
Weighted Average Exercise Price Per Share, Outstanding, Beginning | $ / shares | $ 38.04 |
Weighted Average Exercise Price Per Share Granted | $ / shares | |
Weighted Average Exercise Price Per Share Exercised | $ / shares | |
Weighted Average Exercise Price Per Share Forfeited | $ / shares | |
Weighted Average Exercise Price Per Share, Outstanding, Ending | $ / shares | 38.04 |
Weighted Average Exercise Price Per Share, Outstanding and exercisable | $ / shares | $ 38.04 |
Weighted Average Remaining Contractual Term Outstanding, Beginning | 5 years 4 months 24 days |
Weighted Average Remaining Contractual Term Outstanding, Ending | 5 years 1 month 6 days |
Outstanding and exercisable, Weighted Average Remaining Contractual Term | 5 years 1 month 6 days |
Aggregate Intrinsic Value, Outstanding, Beginning | $ | |
Aggregate Intrinsic Value, Outstanding, Ending | $ | |
Outstanding and exercisable, Aggregate Intrinsic Value | $ |
Derivative Instruments (Details
Derivative Instruments (Details Narrative) | 3 Months Ended |
Mar. 31, 2016shares | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Issued warrant to purchase shares of common stock | 2,165,500 |
Derivative Instruments - Schedu
Derivative Instruments - Schedule of Estimated Fair Value of Derivative Liabilities (Details) | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Volatility - range | 156.50% |
Risk-free rate | 0.87% |
Contractual term | 2 years 29 days |
Number of warrants in aggregate | shares | 2,165,500 |
Minimum [Member] | |
Volatility - range | 134.00% |
Risk-free rate | 0.87% |
Contractual term | 2 years 29 days |
Exercise price | $ 5 |
Maximum [Member] | |
Volatility - range | 156.50% |
Risk-free rate | 1.54% |
Contractual term | 6 years 9 months 29 days |
Exercise price | $ 5.60 |
Derivative Instruments - Summar
Derivative Instruments - Summary of Changes In Fair Value Derivative Financial Instruments (Details) - USD ($) | 3 Months Ended | |
Mar. 31, 2016 | Mar. 31, 2015 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Beginning balance | $ 210,383 | |
Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 | 646 | |
Unrealized derivative gains included in other expense for the period | (118,511) | |
Transition of derivative liability to equity | $ (329,849) | |
Ending balance | $ 92,518 |
Derivative Instruments - Sche44
Derivative Instruments - Schedule of Warrant Derivative Liability (Details) - USD ($) | Mar. 31, 2016 | Dec. 31, 2015 |
Derivative Instruments - Schedule Of Warrant Derivative Liability Details | ||
Warrant issued to holder of Senior convertible note | $ 79,953 | $ 182,517 |
Warrant issued to placement agent | 10,660 | 24,336 |
Warrant issued to holder of December 2013 Note | 1,176 | 2,540 |
Warrants issued to holders of notes payable - short term | 729 | 990 |
Total warrant derivative liability | $ 92,518 | $ 210,383 |
Warrants (Details Narrative)
Warrants (Details Narrative) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Weighted average of purchase warrants term | 5 years 7 months 6 days |
Common stock purchase warrants and intrinsic value | $ 0 |
Warrants - Summary of Warrant A
Warrants - Summary of Warrant Activity (Details) - Warrant [Member] | 3 Months Ended |
Mar. 31, 2016$ / sharesshares | |
Number of Warrants, Outstanding and exercisable, Beginning balance | 2,475,771 |
Number of Warrants, Issued for origination or extension of notes payable (Note 3) | 8,500 |
Number of Warrants, Issued for extension of line-of-credit (Note 3) | 10,000 |
Number of Warrants, Exercised | (5,000) |
Number of Warrants, Outstanding and exercisable, Ending balance | 2,489,271 |
Outstanding and exercisable, Weighted Average Exercise Price Per Share | $ / shares | $ 5.34 |
Outstanding and exercisable, Issued for origination or extension of notes payable (Note 3) | 5.60 |
Outstanding and exercisable, Issued for extension of line-of-credit (Note 3) | 5 |
Weighted Average Exercise Price Per Share, Exercised | $ / shares | $ (15) |
Outstanding and exercisable, Weighted Average Exercise Price Per Share | $ / shares | $ 5.35 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) - USD ($) | 3 Months Ended | 12 Months Ended |
Mar. 31, 2016 | Dec. 31, 2015 | |
Income Tax Disclosure [Abstract] | ||
Net operating loss carry-forward | $ 67,415,000 | |
Net operating loss carry-forward balance expires | from 2025 through 2030 | |
Percentage on valuation allowance | 100.00% |
Commitments and Contingencies48
Commitments and Contingencies (Details Narrative) - USD ($) | Feb. 28, 2016 | Aug. 28, 2015 | Oct. 13, 2014 | Aug. 15, 2014 | Jun. 06, 2009 | Mar. 23, 2009 | Mar. 31, 2016 | Dec. 31, 2015 | Dec. 31, 2013 | Oct. 31, 2012 | Dec. 31, 2009 |
Letters of credit expiration date | May 28, 2016 | May 28, 2016 | |||||||||
Secured subordinated promissory notes | $ 1,275,000 | ||||||||||
Percentage of revenue sharing interest | 1.00% | ||||||||||
Amount funded by off-shore | $ 1,275,000 | ||||||||||
Percentage of payment of revenue to off-shore | 1.00% | 1.00% | |||||||||
Percentage of payment of revenue to officers and directors | 1.00% | ||||||||||
Percentage of payment of revenue to jeff roberts | 1.00% | ||||||||||
Percentage of payment of revenue to thompson knight global energy services | 1.00% | ||||||||||
Notes payable principal balance | $ 1,050,000 | ||||||||||
Asset retirement obligations | 1,716,003 | $ 1,716,003 | |||||||||
Estimated liability relating each operating well | $ 45,103 | $ 30,000 | |||||||||
Total estimated liability relating to all operating wells | 780,000 | ||||||||||
Payment for demand | $ 56,000 | ||||||||||
Payment for investor relations services | $ 7,000 | ||||||||||
Number of shares issuance of common stock to investor | 15,000 | ||||||||||
Payments made for new issued common stock | $ 14,000 | ||||||||||
Number of shares issued during period settlement of final termination agreement | 2,800 | ||||||||||
Damages amount | $ 79,594 | ||||||||||
Cambrian Consultants America, Inc [Member] | |||||||||||
Default judgment granted against the company | 96,877 | ||||||||||
Letter of Intent [Member] | |||||||||||
Percentage of payment of revenue to off-shore | 30.00% | ||||||||||
Percentage of payment of revenue to officers and directors | 80.00% | ||||||||||
Percentage of payment of revenue to jeff roberts | 20.00% | ||||||||||
Percentage of payment of revenue to thompson knight global energy services | 80.00% | ||||||||||
Perlas [Member] | |||||||||||
Estimated exploratory dilling | $ 2,500,000 | ||||||||||
Exploration concession term | 30 years | ||||||||||
Letters of credit | $ 443,100 | ||||||||||
Letters of credit expiration date | Mar. 31, 2014 | ||||||||||
Increase letter of credit | $ 1,356,227 | ||||||||||
Tyra [Member] | |||||||||||
Exploration concession term | 30 years | ||||||||||
Letters of credit | $ 408,450 | ||||||||||
Letters of credit expiration date | Sep. 30, 2014 | ||||||||||
Increase letter of credit | $ 278,450 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Minimum Exploration Work Commitment and Relinquishments by Individual Blocks (Details) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Sub-Period1 [Member] | Block Perlas [Member] | |
Duration | 2 years |
Minimum Work Commitment | Environmental Impact Study - Acquisition & interpretation of 333km of new 2D seismic - Acquisition, processing & interpretation of 667km of new 2D seismic (or equivalent in 3D) |
Minimum Relinquishments | 26km2 |
Irrevocable Guarantee | $ 443,100 |
Sub-Period1 [Member] | Block Tyra [Member] | |
Duration | 1 year 6 months |
Minimum Work Commitment | Environmental Impact Study - Acquisition & interpretation of 667km of existing 2D seismic - Acquisition of 667km of new 2D seismic (or equivalent in 3D) |
Minimum Relinquishments | 26km2 |
Irrevocable Guarantee | $ 408,450 |
Sub-Period 2 Optional [Member] | Block Perlas [Member] | |
Duration | 1 year |
Minimum Work Commitment | Acquisition, processing & interpretation of 200km2 of 3D seismic |
Minimum Relinquishments | 53km2 |
Irrevocable Guarantee | $ 1,356,227 |
Sub-Period 2 Optional [Member] | Block Tyra [Member] | |
Duration | 6 months |
Minimum Work Commitment | Processing & interpretation of the 667km 2D seismic (or equivalent in 3D) acquired in the previous sub-period |
Minimum Relinquishments | 40km2 |
Irrevocable Guarantee | $ 278,450 |
Sub-Period 3 Optional [Member] | Block Perlas [Member] | |
Duration | 1 year |
Minimum Work Commitment | Drilling of one exploration well to the Cretaceous or 3,500m, whichever is Shallower |
Minimum Relinquishments | 80km2 |
Irrevocable Guarantee | $ 10,220,168 |
Sub-Period 3 Optional [Member] | Block Tyra [Member] | |
Duration | 2 years |
Minimum Work Commitment | Acquisition, processing & interpretation of 250km2 of new 3D seismic |
Minimum Relinquishments | 160km2 |
Irrevocable Guarantee | $ 1,818,667 |
Sub-Period 4 Optional [Member] | Block Perlas [Member] | |
Duration | 2 years |
Minimum Work Commitment | Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis |
Minimum Relinquishments | All acreage except areas with discoveries |
Irrevocable Guarantee | $ 10,397,335 |
Sub-Period 4 Optional [Member] | Block Tyra [Member] | |
Duration | 2 years |
Minimum Work Commitment | Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis |
Minimum Relinquishments | All acreage except areas with discoveries |
Irrevocable Guarantee | $ 10,418,667 |
Commitments and Contingencies50
Commitments and Contingencies - Schedule of Contractual and Fiscal Terms (Details) | 3 Months Ended |
Mar. 31, 2016USD ($)Factor$ / shares | |
Amount of contract per year, per block | $ | $ 50,000 |
Natural gas royalties | Market value at production |
Percentage of natural gas royalties | 5.00% |
Corporate tax | 30.00% |
Percentage of social contribution of net profit | 3.00% |
Percentage of social contribution of net profit for each autonomous region | 1.50% |
Investment protection | ICSID arbitration OPIC insurance |
Factor One [Member] | |
Royalties recovery factor, minimum | 0 |
Royalties recovery factor, maximum | 1.5 |
Percentage of royalties | 5.00% |
Factor Two [Member] | |
Royalties recovery factor, minimum | 1.5 |
Royalties recovery factor, maximum | 3 |
Percentage of royalties | 10.00% |
Factor Three [Member] | |
Royalties recovery factor, maximum | 3 |
Percentage of royalties | 15.00% |
Period One [Member] | |
Period of area fee per hectare, minimum | 1 year |
Period of area fee per hectare, maximum | 3 years |
Area fee per hectare | $ / shares | $ 0.05 |
Period Two [Member] | |
Period of area fee per hectare, minimum | 4 years |
Period of area fee per hectare, maximum | 7 years |
Area fee per hectare | $ / shares | $ 0.10 |
Period Three [Member] | |
Period of area fee per hectare, maximum | 8 years |
Area fee per hectare | $ / shares | $ 0.15 |
Related Party Transactions (Det
Related Party Transactions (Details Narrative) - USD ($) | Feb. 28, 2016 | Aug. 28, 2015 | Jul. 15, 2015 | Jul. 07, 2015 | Mar. 31, 2016 | Dec. 31, 2015 | Sep. 23, 2013 |
Line of credit facility, borrowing capacity | $ 75,000 | $ 50,000 | |||||
Line of credit maturity date | May 28, 2016 | May 28, 2016 | |||||
Line of credit conversion price per share | $ 5 | $ 5.60 | $ 5.60 | $ 5 | $ 5 | ||
Debt instruments interest rate | 8.00% | 8.00% | 8.00% | ||||
Issuance of warrants to purchase of stock | 10,000 | ||||||
Common shares at exercise price | $ 5 | ||||||
Warrants expiration date | Feb. 28, 2021 | ||||||
Fair value of warrants | $ 774 | $ 11,827 | $ 22,314 | ||||
Officers and Directors [Member] | |||||||
Accrued compensation | $ 1,482,208 | $ 1,423,208 | |||||
CFO's Firm [Member] | |||||||
Due to related party for consideration of services | $ 762,407 | $ 762,407 |
Subsequent Events (Details Narr
Subsequent Events (Details Narrative) - USD ($) | May 13, 2016 | May 13, 2016 | Feb. 28, 2016 | Dec. 27, 2013 | Sep. 23, 2013 | May 13, 2016 | Mar. 31, 2016 |
Principal payments | $ (107,000) | ||||||
Debt maturity date | Feb. 28, 2016 | Nov. 28, 2013 | |||||
Subsequent Event [Member] | |||||||
Number of shares issued to notes payable | 1,050,000 | ||||||
Principal payments | $ 85,000 | $ 1,000,000 | |||||
Debt maturity date | Apr. 7, 2017 | ||||||
Number of issued warrants lender | 8,500 | ||||||
Common stock exercise price per share | $ 5.60 | ||||||
Subsequent Event [Member] | Hudson Bay Master Fund, Ltd [Member] | |||||||
Principal payments | $ 9,490,000 | ||||||
Due to note holders | $ 50,000 | ||||||
Number of issued warrants lender | 1,333,333 | ||||||
Common stock exercise price per share | $ 0.75 | ||||||
Subsequent Event [Member] | Hudson Bay Master Fund, Ltd [Member] | Restricted Stock [Member] | |||||||
Number of shares issued to notes payable | 20,000 | ||||||
Subsequent Event [Member] | Date One [Member] | |||||||
Debt maturity date | Aug. 7, 2016 | ||||||
Subsequent Event [Member] | Date Two [Member] | |||||||
Debt maturity date | Aug. 15, 2016 | ||||||
Subsequent Event [Member] | Senior Convertible Note Payable [Member] | |||||||
Number of shares issued to notes payable | 1,507,970 | ||||||
Principal payments | $ 83,040 |
Restatement to Previously Iss53
Restatement to Previously Issued Interim Financial Statements (Details Narrative) | 3 Months Ended |
Mar. 31, 2016USD ($) | |
Previously Reported [Member] | |
Derecognized liabilities | $ 1,134,082 |
Restatement to Previously Iss54
Restatement to Previously Issued Interim Financial Statements - Schedule of Previously Issued Financial Statements (Details) - USD ($) | 3 Months Ended | ||
Mar. 31, 2016 | Mar. 31, 2015 | Dec. 31, 2015 | |
Accounts payable | $ 5,955,200 | $ 5,975,682 | |
Accrued liabilities | 2,925,211 | 2,642,227 | |
Accumulated deficit | (121,404,999) | $ (121,301,966) | |
Gain on derecognition of liabilities | |||
Net income (loss) | $ (103,033) | $ (301,028) | |
Net income (loss) per share | $ (0.03) | $ (0.12) | |
Previously Reported [Member] | |||
Accounts payable | $ 5,436,036 | ||
Accrued liabilities | 2,310,293 | ||
Accumulated deficit | (120,270,917) | ||
Gain on derecognition of liabilities | 1,134,082 | ||
Net income (loss) | $ 1,031,049 | ||
Net income (loss) per share | $ 0.26 | ||
Restatement Adjustment [Member] | |||
Accounts payable | $ 519,164 | ||
Accrued liabilities | 614,918 | ||
Accumulated deficit | (1,134,082) | ||
Gain on derecognition of liabilities | (1,134,082) | ||
Net income (loss) | $ (1,134,082) | ||
Net income (loss) per share | $ (0.29) |