Document and Entity Information
Document and Entity Information - shares | 6 Months Ended | |
Jun. 30, 2017 | Aug. 10, 2017 | |
Document And Entity Information | ||
Entity Registrant Name | INFINITY ENERGY RESOURCES, INC | |
Entity Central Index Key | 822,746 | |
Document Type | 10-Q | |
Document Period End Date | Jun. 30, 2017 | |
Amendment Flag | false | |
Current Fiscal Year End Date | --12-31 | |
Entity Filer Category | Smaller Reporting Company | |
Entity Common Stock, Shares Outstanding | 7,712,569 | |
Trading Symbol | IFNY | |
Document Fiscal Period Focus | Q2 | |
Document Fiscal Year Focus | 2,017 |
Condensed Balance Sheets
Condensed Balance Sheets - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Current assets: | ||
Cash and cash equivalents | $ 8,802 | $ 12,339 |
Total current assets | 8,802 | 12,339 |
Total assets | 8,802 | 12,339 |
Current liabilities: | ||
Accounts payable | 5,996,113 | 5,965,329 |
Accrued liabilities (including $788,520 due to related party at June 30, 2017 and December 31, 2016) | 3,349,344 | 3,161,290 |
Income tax liability | 150,000 | 150,000 |
Accrued interest | 335,056 | 277,369 |
Asset retirement obligations | 1,716,003 | 1,716,003 |
Secured convertible note payable-current | 1,822,791 | 91,736 |
Convertible notes payable-short term | 1,325,000 | 1,285,000 |
Total current liabilities | 14,694,307 | 12,646,727 |
Secured convertible note payable-long term | 49,592 | |
Derivative liabilities | 145,265 | 183,430 |
Total long-term liabilities | 145,265 | 233,022 |
Commitments and contingencies (Note 8) | ||
Stockholders' deficit: | ||
Preferred stock; par value $.0001 per share, 10,000,000 shares authorized; No shares issued or outstanding as of June 30, 2017 and December 31, 2016 | ||
Common stock, par value $.0001 per share, authorized 75,000,000 shares, issued and outstanding 7,712,569 shares at June 30, 2017 and December 31, 2016 | 771 | 771 |
Additional paid-in capital | 109,080,273 | 109,080,273 |
Accumulated deficit | (123,911,814) | (121,948,454) |
Total stockholders' deficit | (14,830,770) | (12,867,410) |
Total liabilities and stockholders’ deficit | $ 8,802 | $ 12,339 |
Condensed Balance Sheets (Paren
Condensed Balance Sheets (Parenthetical) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Statement of Financial Position [Abstract] | ||
Due to related party | $ 788,520 | $ 788,520 |
Preferred stock, par value | $ 0.0001 | $ .0001 |
Preferred stock, shares authorized | 10,000,000 | 10,000,000 |
Preferred stock, shares issued | ||
Preferred stock, shares outstanding | ||
Common stock, par value | $ 0.0001 | $ 0.0001 |
Common stock, shares authorized | 75,000,000 | 75,000,000 |
Common stock, shares issued | 7,712,569 | 7,712,569 |
Common stock, shares outstanding | 7,712,569 | 7,712,569 |
Statement of Operations (Unaudi
Statement of Operations (Unaudited) - USD ($) | 3 Months Ended | 6 Months Ended | ||
Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | |
Operating expenses: | ||||
General and administrative expenses | $ 132,512 | $ 148,925 | $ 262,375 | $ 231,496 |
Stock-based compensation | 7,598 | |||
Total operating expenses | 132,512 | 148,925 | 262,375 | 239,094 |
Operating loss | (132,512) | (148,925) | (262,375) | (239,094) |
Other income (expense): | ||||
Interest expense | (29,493) | (29,349) | (57,687) | (107,518) |
Change in fair value of secured convertible note payable | (1,678,807) | (11,578) | (1,681,463) | (64,784) |
Change in derivative fair value | 38,808 | (743) | 38,165 | 117,768 |
Total other income (expense) | (1,669,492) | (41,670) | (1,700,985) | (54,534) |
Loss before income taxes | (1,802,004) | (190,595) | (1,963,360) | (293,628) |
Income tax expense (benefit) | ||||
Net loss | $ (1,802,004) | $ (190,595) | $ (1,963,360) | $ (293,628) |
Basic and diluted net loss per share: | ||||
Basic | $ (0.23) | $ (0.03) | $ (0.25) | $ (0.06) |
Diluted | $ (0.23) | $ (0.03) | $ (0.25) | $ (0.06) |
Weighted average shares outstanding – basic and diluted | 7,712,569 | 6,557,185 | 7,712,569 | 5,276,071 |
Condensed Statements of Changes
Condensed Statements of Changes in Stockholders' Deficit (Unaudited) - 6 months ended Jun. 30, 2017 - USD ($) | Common Stock [Member] | Additional Paid-in Capital [Member] | Accumulated Deficit [Member] | Total |
Balance at Dec. 31, 2016 | $ 771 | $ 109,080,273 | $ (121,948,454) | $ (12,867,410) |
Balance, shares at Dec. 31, 2016 | 7,712,569 | |||
Net loss | (1,963,360) | (1,963,360) | ||
Balance at Jun. 30, 2017 | $ 771 | $ 109,080,273 | $ (123,911,814) | $ (14,830,770) |
Balance, shares at Jun. 30, 2017 | 7,712,569 |
Condensed Statements of Cash Fl
Condensed Statements of Cash Flows (Unaudited) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Cash flows from operating activities: | ||
Net loss | $ (1,963,360) | $ (293,628) |
Adjustments to reconcile net loss to net cash used in operating activities: | ||
Stock-based compensation | 7,598 | |
Change in fair value of derivative liability | (38,165) | (117,768) |
Change in fair value of senior convertible note | 1,681,463 | 64,784 |
Amortization of debt discount | 52,981 | |
Change in operations assets and liabilities: | ||
Increase in accounts payable and accrued liabilities | 276,525 | 252,821 |
Net cash used in operating activities | (43,537) | (33,212) |
Cash flows from investing activities: | ||
Net cash provided by (used in) investing activities | ||
Cash flows from financing activities: | ||
Proceeds from issuance of senior convertible note payable | 40,000 | 35,000 |
Net cash provided by financing activities | 40,000 | 35,000 |
Net (decrease) increase in cash and cash equivalents | (3,537) | 1,788 |
Cash and cash equivalents: | ||
Beginning | 12,339 | 3,734 |
Ending | 8,802 | 5,522 |
Supplemental cash flow information: | ||
Cash paid for interest | ||
Cash paid for taxes | ||
Supplemental noncash disclosures: | ||
Issuance of common stock for principal and interest payments on senior convertible note payable | 229,186 | |
Warrant derivatives issued in connection with notes payable and extensions | 851 | |
Issuance of common stock purchase warrants for debt issuance costs | $ 904 |
Nature of Operations, Basis of
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies | 6 Months Ended |
Jun. 30, 2017 | |
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 condensed 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 2017 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 condensed 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 pursuing 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 2-D seismic data that was acquired for the Nicaraguan Concessions. The Company has identified multiple sites for exploratory drilling and intends to plan 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 had to drill its initial exploratory well during 2016, which did not occur. As a result of this and other defaults, the Company is in default of the Perlas development plan and may lose 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 seeking a waiver of the additional seismic mapping on the Tyra Block and extension of time to complete its initial well from the Nicaraguan government. The Company has not been able to pay the 2016 area fees and training fees for both the Perlas and Tyra blocks as required under the Nicaraguan Concessions and is in technical default. The Company is attempting to negotiate extensions, waivers and/or new Perlas and Tyra Concession agreements with the Nicaraguan government at June 30, 2017 to cure such defaults. There can be no assurance whether it will be able to obtain such extensions, waivers and/or new agreements that will cure its various defaults under the Nicaraguan Concessions. 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 cure its various defaults under the Nicaraguan Concessions and obtain adequate financing to fund the exploration and development of its Nicaraguan Concessions. On May 7, 2015 the Company completed the private placement (the “May 2015 Private Placement”) of a $12.0 million principal amount Secured Convertible Note (the “Note”) and a common stock purchase warrant to purchase 1,800,000 shares of the Company’s 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”). On May 4, 2017, the Investor notified the Company that it elected to effect an Investor Optional Offset under Section 7(a) of the Investor Note of the full $9,490,000 principal amount outstanding under the Investor Note against $9,490,000 in aggregate principal outstanding under the Convertible Note. It did so by surrendering and concurrently cancelling $9,490,000 in aggregate principal of the Convertible Note in exchange for the satisfaction in full and cancellation of the Investor Note. The Convertible Note had an aggregate outstanding principal balance of $11,687,231 as of the date of the exchange. The Investor requested the Company to deliver a new convertible note (the "Replacement Note”) with respect to the remaining principal balance of $2,197,231 to replace the Convertible Note. The Replacement Note provides for a one-year maturity from May 7, 2017, a conversion price of $0.50 per share and is due in monthly installment payments through May 2018 either in cash or stock, among other terms. The Company plans to negotiate with the Investor regarding the issuance of the Replacement Note under the terms of the financing and taking into consideration that the Investor only funded $510,000 in the entire transaction, but there can be no assurance that it will be successful in this regard. The Note was to mature on the three-year anniversary of its issuance, bore interest at 8% per annum, and was convertible at any time at the option of the holder into shares of the Company’s 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 Company’s 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 ranked senior to the Company’s existing and future indebtedness and is secured by all the assets of the Company, excluding the Concessions. The proposed Replacement Note would have the same security interest as the Convertible Note. 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, has notes payable that are in default and is currently experiencing substantial liquidity issues. In addition, the Company’s most significant asset and its primary business plan is the exploration and development of the Nicaraguan Concessions which are now in default and in risk of being terminated. 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 because it has generated no operating revenues or cash flows in recent history. The $1.0 million December 2013 Note (See Note 3) matured in April 2016 and is currently in technical default and two other notes payable with principal balances of $85,000 as of June 30, 2017 are now in default. The Company is seeking extensions of the maturity date for these notes payable; however, there can be no assurance that it will be able to obtain such extensions or what the final terms will be if the lenders agree to such extensions. The Company and its lenders are assessing the status of the Nicaraguan Concessions and what effect that may have on the extension or renewal of these notes. The Company is in default of various provisions of the 30-year Concession for both Perlas and Tyra blocks as of June 30, 2017, including (1) the drilling of at least one exploratory well on the Perlas Block during 2016; (2) the shooting of additional seismic on the Tyra Block during 2016; (3) the provision of the Ministry of Energy with the required letters of credit in the amounts totaling $1,356,227 for the Perlas block and $278,450 for the Tyra block for exploration requirements on the leases; (4) payment of the 2016 and 2017 area fees required for both the Perlas and Tyra which total $83,351; and (5) payment of the 2016 and 2017 training fees required for both the Perlas and Tyra totaling $150,000. The Company is seeking to extend, renew and/or renegotiate the terms of the Nicaraguan Concessions with the Nicaraguan government to cure the defaults. There can be no assurance whether it will be able to extend, renew and/or renegotiate the Nicaraguan Concessions and whether any new terms will be favorable to the Company. The Company is pursuing meetings with Nicaraguan Government officials in order to address the pending defaults. The Company must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the annual training program and area fees for 2016 and 2017; (2) required letters of credit to the Nicaraguan Government; (3) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2017; (4) 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; (5) normal day-to-day operations and corporate overhead; and (6) outstanding debt and other financial obligations as they become due, including the $1.0 million December 2013 Note, and the two notes payable totaling $85,000, which are in technical default and the Replacement Note, if issued. These are substantial operational and financial issues that must be successfully addressed during 2017 or the Company’s ability to satisfy the conditions necessary to maintain and/or renegotiate its Nicaragua Concessions will be in significant doubt. The Company is seeking new outside sources of debt and equity capital in order to fund the substantial needs enumerated above; however, there can be no assurance that it 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 are substantial impediments for the Company 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 Company’s ability to continue as a going concern within one year after the date the financials are issued. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. 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, secured convertible note payable, stock-based awards and overriding royalty interests, and the realization of deferred tax assets. Concentrations The Company’s business plan consists of developing the Nicaraguan Concessions and it expects to be active in Nicaragua for the foreseeable future, given sufficient capital and curing the defaults under the Nicaraguan Concessions. 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. Foreign Currency The United States dollar is the functional currency for the Company’s operations. Although the Company’s acquisition and exploration activities have been conducted in Nicaragua, a significant portion of the payments incurred for exploration activities are denominated in United States dollars. The Company expects that a significant portion of its required and discretionary expenditures in the foreseeable future will also be denominated in United States dollars. Any foreign currency gains and losses are included in the results of operations in the period in which they occur. The Company does not have any cash accounts denominated in foreign currencies. Cash and Cash Equivalents For purposes of reporting cash flows, cash consists of cash on hand and demand deposits with financial institutions. Although the Company had minimal cash as of June 30, 2017 and December 31, 2016, it is the Company’s policy that all highly liquid investments with a maturity of three months or less when purchased would be cash equivalents and would be included along with cash as cash and equivalents. Oil and Gas Properties The Company follows the full cost method of accounting for exploration and development activities. Accordingly, all costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and seismic costs) and the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities are capitalized. Overhead related to development activities is also capitalized during the acquisition phase. Depletion of proved oil and gas properties is computed on the units-of-production method, with oil and gas being converted to a common unit of measure based on relative energy content, whereby capitalized costs, as adjusted for estimated future development costs and estimated asset retirement costs, are amortized over the total estimated proved reserve quantities. Investments in unproved properties, including capitalized interest and internal costs, are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically (at least annually) to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant 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 June 30, 2017 and December 31, 2016 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 Concessions, (ii) the status of the Company’s compliance with the Nicaraguan Concessions’ requirements, (iii) the ongoing evaluation of the seismic data, (iv) the commodity prices for oil and gas products, (v) the overall environment related to oil and gas exploration and development projects for unproven targets in unproven regions of the world, (vi) the availability of financing for financial and strategic partners, and (vii) other factors that would impact the viability of a significant long-term oil and gas exploration and development project. 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 are substantial impediments for the Company to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. The Company has performed its impairment tests as of June 30, 2017 and December 31, 2016 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 January 1, 2016 through June 30, 2017 have been charged to operating expenses as incurred. Pursuant to full cost accounting rules, the Company must perform a “ceiling test” each quarter. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using prices based on the arithmetic mean of the previous 12 months’ first-of month prices and current costs, including the effects of derivative instruments accounted for as cash flow hedges, but excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, and a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. If capitalized costs exceed the ceiling, the excess must be charged to expense and may not be reversed in future periods. As of June 30, 2017 and December 31, 2016, the Company did not have any proved oil and gas properties, and all unproved property costs relate to its Nicaraguan Concessions. Proceeds from the sales of oil and gas properties are accounted for as adjustments to capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss would be recognized in the determination of the Company’s net earnings/loss. Asset Retirement Obligations The Company records estimated future asset retirement obligations pursuant to the provisions of ASC 410. ASC 410 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the asset retirement liability is required to be accreted each period. The Company’s asset retirement obligations consist of costs related to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. Capitalized costs are depleted as a component of the full cost pool using the units of production method. Although the Company had divested all of its domestic oil properties that contain operating and abandoned wells as of December 31, 2012, the Company may have obligations related to the divestiture of certain abandoned non-producing domestic leasehold properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. Management believes the Company has been relieved from asset retirement obligation related to Infinity-Texas because of the sale of its Texas oil and gas properties in 2011 and its sale of 100% of the stock in Infinity-Texas in 2012. The Company has recognized an additional liability of $734,897 related to its former Texas oil and gas producing properties (included in asset retirement obligations) to recognize the potential personal liability of the Company and its officers for the Infinity-Texas oil and gas properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. In addition, management believes the Company has been relieved from asset retirement obligations related to Infinity-Wyoming because of the sale of its Wyoming and Colorado oil and gas properties in 2008; however, the Company has recognized since 2012 an additional liability of $981,106 related to its former Wyoming and Colorado oil and gas producing properties (included in asset retirement obligations) to recognize the potential liability of the Company and its officers should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. 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 Company’s cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. As of June 30, 2017 and December 31, 2016 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. Fair Value of Financial Instruments The carrying values of the Company’s 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 Company’s 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 Company’s own assumptions in determining the fair value. The estimated fair value of the Company’s 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 Company’s common stock, interest rates, the probability of both of 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 June 30, 2017 and December 31, 2016 were classified under the fair value hierarchy as Level 3. The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016: June 30, 2017 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 1,822,791 $ 1,822,791 Derivative liabilities — — 145,265 145,265 $ — $ — $ 1,968,056 $ 1,968,056 December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 141,328 $ 141,328 Derivative liabilities — — 183,430 183,430 $ — $ — $ 324,758 $ 324,758 There were no changes in valuation techniques or reclassifications of fair value measurements between Levels 1, 2 or 3 during the periods ended June 30, 2017 and December 31, 2016. 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 period’s financial statement presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Secured Convertible Note Payabl
Secured Convertible Note Payable | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Secured Convertible Note Payable | Note 2 – Secured Convertible Note Payable Secured Convertible Note (the “Note) payable consists of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Secured convertible note payable, at fair value $ 1,822,791 $ 141,328 Less: Current maturities (1,822,791 ) (91,736 ) Secured convertible note payable, long-term $ — $ 49,592 Following is an analysis of the activity in the secured convertible note during the six months ended June 30, 2017: Amount Balance at December 31, 2016 $ 141,328 Funding under the Investor Note during the period — Principal repaid during the period by issuance of common stock — Change in fair value of secured convertible note during the period 1,681,463 Balance at June 30, 2017 $ 1,822,791 On May 7, 2015, the Company completed the May 2015 Private Placement of a $12.0 million principal amount secured convertible note (the “Note”) and Warrant to purchase 1,800,000 shares of the Company’s 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 secured convertible note by paying $450,000 in cash and issuing a secured promissory note, secured by cash, with an aggregate initial principal amount of $9,550,000 (the “Investor Note”). On May 4, 2017, the Investor notified the Company that it elected to effect an Investor Optional Offset under Section 7(a) of the Investor Note of the full $9,490,000 principal amount outstanding under the Investor Note against $9,490,000 in aggregate principal outstanding under the Convertible Note. It did so by surrendering and concurrently cancelling $9,490,000 in aggregate principal of the Convertible Note in exchange for the satisfaction in full and cancellation of the Investor Note. The Convertible Note had an aggregate outstanding principal balance of $11,687,231 as of the date of the exchange. The Investor requested the Company to deliver a new convertible note (the “Replacement Note”) with respect to the remaining principal balance of $2,197,231 to replace the Convertible Note. The aggregate outstanding principal balance of $11,687,231 of the Convertible Note included an approximate $2.0 million original issue discount; however, the Investor funded only $510,000 under the Investor Note. The Company has recorded the fair value of the Convertible Note assuming that the remaining par value is $2,197,231 as asserted by the Investor, resulting in a change in the estimated fair value of $1,681,463 during the six months ended June 30, 2017. The Replacement Note provides for a one-year maturity from May 7, 2017, a conversion price of $0.50 per share and is due in monthly installment payments through May 2018 either in cash or stock, among other terms. It is to be secured to the same extent as the Convertible Note. The Company plans to negotiate with the Investor regarding the issuance of the Replacement Note under the terms of the financing and taking into consideration the Investor’s minimal funding in the entire transaction, but there can be no assurance that it will be successful in this regard. Description of the Secured Convertible Note The Note was secured to the Company’s existing and future indebtedness and is secured by all the assets of the Company, excluding the Nicaraguan Concessions, and to the extent and as provided in the related security documents. The Note was convertible at any time at the option of the holder into shares of the Company’s common stock at $5.00 per share (the “Conversion Price”). The Note was to mature 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 bore 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 Company’s common stock, or in a combination of cash and shares of its common stock. The Company’s 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 Company’s 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 Company’s stock it is required to pre-deliver shares of the Company’s 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 had 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 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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 Company’s 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-Scholes model at June 30, 2017. Such assumptions included the following: Upon Issuance As of June 30, 2017 Volatility – range 102.6 % 288.6 % Risk-free rate 1.00 % 1.55 % Contractual term 3.0 years 0.8 years Conversion price $ 5.00 $ 5.00 Par value of note $ 540,000 $ 2,197,231 The Company received $450,000 of proceeds at the date of issuance and after repayments and additional funding the net principal balance was $129,960 as of June 30, 2017. The fair market value of the Note was estimated to be $682,400 as of the issuance date, $141,328 at December 31, 2016 and $1,822,791 as of June 30, 2017. The net change in fair market value of the Note of $1,681,463 and $64,784 is included in change in fair value of senior secured convertible note payable in the accompanying statement of operations for the six months ended June 30, 2017 and 2016, respectively. On May 4, 2017, the Investor notified the Company that it elected to effect an Investor Optional Offset under Section 7(a) of the Investor Note of the full $9,490,000 principal amount outstanding under the Investor Note against $9,490,000 in aggregate principal outstanding under the Convertible Note. It did so by surrendering and concurrently cancelling $9,490,000 in aggregate principal of the Convertible Note in exchange for the satisfaction in full and cancellation of the Investor Note. The Convertible Note had an aggregate outstanding principal balance of $11,687,231 as of the date of the exchange. The Investor requested the Company to deliver the Replacement Note with respect to the remaining principal balance of $2,197,231 to replace the Convertible Note. The aggregate outstanding principal balance of $11,687,231 of the Convertible Note included an approximate $2.0 million original issue discount; however, the Investor funded only $510,000 under the Investor Note. The Company has recorded the fair value of the Convertible Notes assuming that the remaining par value is $2,197,231 as asserted by the Investor, resulting in a change in the estimated fair value of $1,681,463 during the six months ended June 30, 2017. The Company plans to negotiate with the Investor regarding the issuance of the Replacement Note under the terms of the financing and taking into consideration the Investor’s minimal funding in the entire transaction, but there can be no assurance that it will be successful in this regard. 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. The estimated fair value of the warrant derivative as of June 30, 2017 was $124,584, representing a change of $30,877 from December 31, 2016, which is included in changes in derivative fair value in the accompanying statement of operations for the six months ended June 30, 2017. See Note 5. 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 $4,117 (decrease in the derivative liability) through June 30, 2017, which is included in changes in derivative fair value in the accompanying statement of operations for the six months ended June 30, 2017. The warrant derivative liability balance related to such warrants was $16,611 and $20,728 as of June 30, 2017 and December 31, 2016, respectively. See Note 5. The Company is required to make monthly installment payments in the form of cash, common stock or a combination of both. The Holder has suspended such installments during the third and fourth quarters of 2016 and the first and second quarters of 2017. |
Debt
Debt | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Debt | Note 3 – Debt Debt consists of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Convertible notes payable, short term: Note payable, (in default) $ 1,000,000 $ 1,000,000 Note payable 200,000 200,000 Note payable 40,000 200,000 Note payable, (in default) 50,000 50,000 Note payable (in default) 35,000 35,000 Total notes payable, short-term $ 1,325,000 $ 1,285,000 Line-of-Credit with Related Party The Company entered into a line-of-credit facility on September 23, 2013 that provided 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 was 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 was unsecured, bore interest at 8% per annum, and was paid off at its maturity in November 2016. 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 extension 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 December 2013 Note is in technical default and the Company is seeking an extension of the maturity date of this Note (See Note 10) from the holder; however, there can be no assurances such efforts will be successful. The Company and its lender are assessing the status of the Nicaraguan Concessions and what effect that may have on the extension or renewal of these notes. 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 and the remaining unamortized discount was $-0- as of June 30, 2017 and December 31, 2016. The related warrant derivative liability balance was $1,834 and $4,429 as of June 30, 2017 and December 31, 2016, respectively. See Note 5. Other than the Note described above, during the six months ended June 30, 2017 the Company had short-term notes outstanding with entities or individuals as follows: ● On November 8, 2016 the Company borrowed a total of $200,000 from an individual under a convertible note payable with the conversion rate of $5.00 per share. The note requires no principal or interest payments until its maturity date of November 7, 2017 and bears interest at 8% per annum. ● On April 20, 2017, the Company borrowed $40,000 under an unsecured credit facility with a private, third-party lender which is convertible at a rate of $5.00 per share. The note requires no principal or interest payments until its maturity date of April 19, 2018 and bears interest at 8% per annum. ● 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 and ultimately to October 7, 2016. The Company is currently pursuing an additional extension from the Holder. The Company and its lender are assessing the status of the Nicaraguan Concessions and what effect that may have on the extension or renewal of these notes. 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 five years. The value of the 5,000 newly issued warrants issued on January 7, 2016 totaled $379 and $131 on May 7, 2016 both of which are being amortized over the extension period (through October 7, 2016). The related warrant derivative liability balance was $1,316 and $1,654 as of June 30, 2017 and December 31, 2016, respectively. See Note 5. ● On July 15, 2015, the Company borrowed a total of $35,000 from an individual under a convertible note payable with the conversion rate of $5.60 per share. The term of 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 October 15, 2016. The Company is currently pursuing an additional extension from the Holder. The Company and its lender are assessing the status of the Nicaraguan Concessions and what effect that may have on the extension or renewal of these notes. 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 five years. The value of the 3,500 newly issued warrants on January 15, 2016 totaled $267 and $74 on May 15, 2016, both of which are being amortized over the extension period (through October 15, 2016). The related warrant derivative liability balance was $920 and $1,158 as of June 30, 2017 and December 31, 2016, respectively. See Note 5. |
Stock Options
Stock Options | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Stock Options | Note 4 – Stock Options The Company applies ASC 718, Stock Compensation In May 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,000 shares of the Company’s common stock are reserved for issuance under the 2006 Plan. In June 2005, the Company’s stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,500 shares of the Company’s common stock were reserved for issuance under the 2005 and 2006 Plans however such Plans have now expired and no further issuances can be made. Options granted under the 2005 Plan and 2006 Plan allow for the purchase of common stock at prices not less than the fair market value of such stock at the date of grant, become exercisable immediately or as directed by the Company’s Board of Directors and generally expire ten years after the date of grant. The Company also has issued other stock options not pursuant to a formal plan with terms similar to the 2005 and 2006 Plans. 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 June 30, 2017, 500,000 shares were available for future grants under the 2015 Plan as all other Plans have now expired. The fair value of each option award is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the expected term of the option award, expected stock price volatility and expected dividends. These estimates involve inherent uncertainties and the application of management judgment. For purposes of estimating the expected term of options granted, the Company aggregates option recipients into groups that have similar option exercise behavioral traits. Expected volatilities used in the valuation model are based on the expected volatility that would be used by an independent market participant in the valuation of certain of the Company’s 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 Company’s forfeiture rate assumption used in determining its stock-based compensation expense is estimated based on historical data. The actual forfeiture rate could differ from these estimates. There were no stock options granted during the six months ended June 30, 2017. The following table summarizes stock option activity for the six months ended June 30, 2017: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2016 393,450 $ 37.46 4.6 years $ — Granted — — Exercised — — Forfeited (14,000 ) (30.60 ) Outstanding at June 30, 2017 379,450 $ 37.71 4.3 years $ — Outstanding and exercisable at June 30, 2017 379,450 $ 37.71 4.3 years $ — The Company recorded stock-based compensation expense in connection with the vesting of options granted aggregating $-0- and $7,598 during the six months ended June 30, 2017 and 2016, respectively. The intrinsic value as of June 30, 2017 related to the vested and unvested stock options as of that date was $-0-. The unrecognized compensation cost as of June 30, 2017 related to the unvested stock options as of that date was $-0-. |
Derivative Instruments
Derivative Instruments | 6 Months Ended |
Jun. 30, 2017 | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Derivative Instruments | Note 5 – Derivative Instruments Derivatives – Warrants Issued Relative to Notes Payable The estimated fair value of the Company’s derivative liabilities, all of which are related to the detachable warrants issued in connection with various notes payable and the secured 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 Company’s common stock, interest rates, the probability of both the downward adjustment of the exercise price and the upward adjustment to the number of warrants as provided by the 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 2,174,000 common shares in connection with various outstanding debt instruments which require derivative accounting treatment as of June 30, 2017. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of June 30, 2017 is as follows: As of June 30, 2017 Volatility – range 204.6% - 288.6% Risk-free rate 1.55% - 2.14 % Contractual term 0.75 - 4.8 years Exercise price $5.00 - $5.60 Number of warrants in aggregate 2,174,000 The following table provides a summary of the changes in fair value, including net transfers in and/or out, of the derivative financial instruments, measured at fair value on a recurring basis using significant unobservable inputs for both open and closed derivatives: Amount Balance at December 31, 2016 $ 183,430 Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 — Unrealized derivative gains included in other expense for the period (38,165 ) Transition of derivative liability to equity — Balance at June 30, 2017 $ 145,265 The warrant derivative liability consists of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Warrant issued to holder of Secured convertible note (Note 2) $ 124,584 $ 155,461 Warrant issued to placement agent (Note 2) 16,611 20,728 Warrant issued to holder of December 2013 Note (Note 3) 1,834 4,429 Warrants issued to holders of notes payable - short term (Note 3) 2,236 2,812 Total warrant derivative liability $ 145,265 $ 183,430 |
Warrants
Warrants | 6 Months Ended |
Jun. 30, 2017 | |
Warrants | |
Warrants | Note 6 – Warrants The following table summarizes warrant activity for the six months ended June 30, 2017: Number of Warrants Weighted Average Exercise Price Per Share Outstanding and exercisable at December 31, 2016 2,517,771 $ 5.34 Issued for extension of notes payable (Note 3) — — Issued for extension of line-of-credit (Note 3) — — Exercised/forfeited — — Outstanding and exercisable at June 30, 2017 2,517,771 $ 5.34 The weighted average term of all outstanding common stock purchase warrants was 4.4 years as of June 30, 2017. 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 June 30, 2017. |
Income Taxes
Income Taxes | 6 Months Ended |
Jun. 30, 2017 | |
Income Tax Disclosure [Abstract] | |
Income Taxes | Note 7 – Income Taxes For income tax purposes, the Company has net operating loss carry-forwards of approximately $66,270,000, 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 2016. 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 | 6 Months Ended |
Jun. 30, 2017 | |
Commitments and Contingencies Disclosure [Abstract] | |
Commitments and Contingencies | Note 8 – 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 The Company is in default of various provisions of the 30-year Concession for both Perlas and Tyra blocks as of June 30, 2017. Specifically, the Company is in default of the following requirements: 1) the drilling of at least one exploratory well on the Perlas Block during 2016; 2) the shooting of additional seismic on the Tyra Block during 2016; 3) the provision of the Ministry of Energy with the required letters of credit in the amounts totaling $1,356,227 for the Perlas block and $278,450 for the Tyra block for exploration requirements on the leases; 3) payment of the 2016 and 2017 area fees required for both the Perlas and Tyra which total $83,351; and 4) payment of the 2016 and 2017 training fees required for both the Perlas and Tyra totaling $150,000. The Company is seeking to extend, renew and/or renegotiate the Nicaraguan Concessions with the Nicaraguan government at June 30, 2017 in order to cure the defaults. There can be no assurance whether it will be able to extend, renew and/or renegotiate the Nicaraguan Concessions and the ultimate terms of if the Company is successful. The Company is currently pursuing meetings with Nicaraguan Government officials in order to address the pending defaults. The Company must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the annual training program and area fees for 2016 and 2017; (2) required letters of credit to the Nicaraguan Government; (3) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2017; (4) 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; (5) normal day-to-day operations and corporate overhead; and (6) outstanding debt and other financial obligations as they become due including the $1.0 million December 2013 Note, and the two notes payable totaling $85,000, which currently are in technical default and resolution of the Replacement Note matter. These are substantial operational and financial issues that must be successfully addressed during 2017 or the Company’s ability to satisfy the conditions necessary to maintain and/or renegotiate its Nicaragua Concessions will be in significant doubt. The Company is seeking new outside sources of debt and equity capital in order to fund the substantial needs enumerated above; however, there can be no assurance that it 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 are substantial impediments for the Company to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. 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 unless it is successful in obtaining extensions, renewals or the renegotiation of the entire Concessions Agreements for the Perlas and Tyra blocks. 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 equivatlent 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 Offshore Finance, LLC, 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. 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 June 30, 2017; 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 June 30, 2017 and December 31, 2016 are sufficient to cover any potential noncompliance liabilities relative to the plugging of abandoned wells, the removal of facilities and equipment, and site restoration on oil and gas properties for its former oil and gas properties. The Company has not maintained insurance on the domestic properties for a number of years nor has it owned/produced any oil & gas properties for a number of years. Litigation The Company is subject to numerous claims and legal actions in which vendors are claiming breach of contract due to the Company’s failure to pay amounts due. The Company believes that it has made adequate provision for these claims in the accompanying financial statements. The Company is currently involved in litigation as follows: ● In October 2012 the State of Texas filed a lawsuit naming Infinity-Texas, the Company and the corporate officers of Infinity-Texas, seeking $30,000 of reclamation costs associated with a single well, in addition to administrative expenses and penalties. The Company engaged in negotiations with the State of Texas in late 2012 and early 2013 and reached a settlement agreement that would reduce the aggregate liability, in this action and any extension of this to other Texas wells, to $45,103, which amount has been paid. Certain performance obligations remain which must be satisfied in order to finally settle and dismiss the matter. Pending satisfactory performance of the performance obligations and their acceptance by the State of Texas, the officers have potential liability regarding the above matter, and the officers are held personally harmless by indemnification provisions of the Company. Therefore, to the extent they might actually occur, these liabilities are the obligations of the Company. Management estimates that the liabilities associated with this matter will not exceed $780,000, calculated as $30,000 for each of the 26 Infinity-Texas operated wells. This related liability, less the payment made to the State of Texas in 2012 in the amount of $45,103, is included in the asset retirement obligation on the accompanying balance sheets. ● Cambrian Consultants America, Inc. (“Cambrian”) filed an action in the District Court of Harris County, Texas, number CV2014-55719, on September 26, 2014 against Infinity Energy Resources, Inc. resulting from certain professional consulting services provided for quality control and management of seismic operations during November and December 2013 on the Nicaraguan Concessions. Cambrian provided these services pursuant to a Master Consulting Agreement with Infinity, dated November 20, 2013, and has claimed breach of contract for failure to pay amounts due. On December 8, 2014, a default judgment was entered against the Company in the amount of $96,877 plus interest and attorney fees. The Company has included the impact of this litigation as a liability in its accounts payable. The Company will seek to settle the default judgment when it has the financial resources to do so. ● Torrey Hills Capital, Inc. (“Torrey”) notified the Company by letter, dated August 15, 2014, of its demand for the payment of $56,000, which it alleged was unpaid and owed under a consulting agreement, dated October 18, 2013. The parties entered into a consulting agreement under which Torrey agreed to provide investor relations services in exchange for payment of $7,000 per month and the issuance of 15,000 shares of common stock. The agreement was for an initial three month-term with automatic renewals unless terminated upon 30 days’ written notice by either party. The Company made payments totaling $14,000 and issued 15,000 shares of common stock during 2013. The Company contends that Torrey breached the agreement by not performing the required services and that it had provided proper notice of termination to Torrey. Furthermore, the Company contends that the parties agreed to settle the dispute on or about June 19, 2014 under which it would issue 2,800 shares of common stock in full settlement of any balance then owed and final termination of the agreement. Torrey disputed the Company’s contentions and submitted the dispute to binding arbitration. The Company was unable to defend itself and the arbitration panel awarded Torrey a total of $79,594 in damages. The Company has accrued this amount in accounts payable as of June 30, 2017 and December 31, 2016, which management believes is sufficient to provide for the ultimate resolution of this dispute. |
Related Party Transactions
Related Party Transactions | 6 Months Ended |
Jun. 30, 2017 | |
Related Party Transactions [Abstract] | |
Related Party Transactions | Note 9 – 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 six months ended June 30, 2017 and 2016. The amount due to the CFO’s firm for services previously provided was $762,407 at June 30, 2017 and December 31, 2016, 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 June 30, 2017 and December 31, 2016, the Company had accrued compensation to its officers and directors of $1,711,208 and $1,601,208, respectively. The Company entered into a line-of-credit facility on September 23, 2013 that provided 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 was 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 was unsecured, bore interest at 8% per annum, and was renewed at its maturity several times until it was paid in full on its extended maturity date on November 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. On May 28, 2016 the Company extended the line-of-credit expiration date to August 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 May 28, 2021. On August 28, 2016, the Company extended the line-of-credit expiration date to November 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 August 28, 2021. |
Nature of Operations, Basis o16
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Policies) | 6 Months Ended |
Jun. 30, 2017 | |
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 condensed 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 2017 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 condensed 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 pursuing 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 2-D seismic data that was acquired for the Nicaraguan Concessions. The Company has identified multiple sites for exploratory drilling and intends to plan 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 had to drill its initial exploratory well during 2016, which did not occur. As a result of this and other defaults, the Company is in default of the Perlas development plan and may lose 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 seeking a waiver of the additional seismic mapping on the Tyra Block and extension of time to complete its initial well from the Nicaraguan government. The Company has not been able to pay the 2016 area fees and training fees for both the Perlas and Tyra blocks as required under the Nicaraguan Concessions and is in technical default. The Company is attempting to negotiate extensions, waivers and/or new Perlas and Tyra Concession agreements with the Nicaraguan government at June 30, 2017 to cure such defaults. There can be no assurance whether it will be able to obtain such extensions, waivers and/or new agreements that will cure its various defaults under the Nicaraguan Concessions. 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 cure its various defaults under the Nicaraguan Concessions and obtain adequate financing to fund the exploration and development of its Nicaraguan Concessions. On May 7, 2015 the Company completed the private placement (the “May 2015 Private Placement”) of a $12.0 million principal amount Secured Convertible Note (the “Note”) and a common stock purchase warrant to purchase 1,800,000 shares of the Company’s 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”). On May 4, 2017, the Investor notified the Company that it elected to effect an Investor Optional Offset under Section 7(a) of the Investor Note of the full $9,490,000 principal amount outstanding under the Investor Note against $9,490,000 in aggregate principal outstanding under the Convertible Note. It did so by surrendering and concurrently cancelling $9,490,000 in aggregate principal of the Convertible Note in exchange for the satisfaction in full and cancellation of the Investor Note. The Convertible Note had an aggregate outstanding principal balance of $11,687,231 as of the date of the exchange. The Investor requested the Company to deliver a new convertible note (the "Replacement Note”) with respect to the remaining principal balance of $2,197,231 to replace the Convertible Note. The Replacement Note provides for a one-year maturity from May 7, 2017, a conversion price of $0.50 per share and is due in monthly installment payments through May 2018 either in cash or stock, among other terms. The Company plans to negotiate with the Investor regarding the issuance of the Replacement Note under the terms of the financing and taking into consideration that the Investor only funded $510,000 in the entire transaction, but there can be no assurance that it will be successful in this regard. The Note was to mature on the three-year anniversary of its issuance, bore interest at 8% per annum, and was convertible at any time at the option of the holder into shares of the Company’s 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 Company’s 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 ranked senior to the Company’s existing and future indebtedness and is secured by all the assets of the Company, excluding the Concessions. The proposed Replacement Note would have the same security interest as the Convertible Note. 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, has notes payable that are in default and is currently experiencing substantial liquidity issues. In addition, the Company’s most significant asset and its primary business plan is the exploration and development of the Nicaraguan Concessions which are now in default and in risk of being terminated. 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 because it has generated no operating revenues or cash flows in recent history. The $1.0 million December 2013 Note (See Note 3) matured in April 2016 and is currently in technical default and two other notes payable with principal balances of $85,000 as of June 30, 2017 are now in default. The Company is seeking extensions of the maturity date for these notes payable; however, there can be no assurance that it will be able to obtain such extensions or what the final terms will be if the lenders agree to such extensions. The Company and its lenders are assessing the status of the Nicaraguan Concessions and what effect that may have on the extension or renewal of these notes. The Company is in default of various provisions of the 30-year Concession for both Perlas and Tyra blocks as of June 30, 2017, including (1) the drilling of at least one exploratory well on the Perlas Block during 2016; (2) the shooting of additional seismic on the Tyra Block during 2016; (3) the provision of the Ministry of Energy with the required letters of credit in the amounts totaling $1,356,227 for the Perlas block and $278,450 for the Tyra block for exploration requirements on the leases; (4) payment of the 2016 and 2017 area fees required for both the Perlas and Tyra which total $83,351; and (5) payment of the 2016 and 2017 training fees required for both the Perlas and Tyra totaling $150,000. The Company is seeking to extend, renew and/or renegotiate the terms of the Nicaraguan Concessions with the Nicaraguan government to cure the defaults. There can be no assurance whether it will be able to extend, renew and/or renegotiate the Nicaraguan Concessions and whether any new terms will be favorable to the Company. The Company is pursuing meetings with Nicaraguan Government officials in order to address the pending defaults. The Company must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the annual training program and area fees for 2016 and 2017; (2) required letters of credit to the Nicaraguan Government; (3) the drilling of at least one exploratory well on the Perlas Block of the Nicaraguan Concessions during 2017; (4) 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; (5) normal day-to-day operations and corporate overhead; and (6) outstanding debt and other financial obligations as they become due, including the $1.0 million December 2013 Note, and the two notes payable totaling $85,000, which are in technical default and the Replacement Note, if issued. These are substantial operational and financial issues that must be successfully addressed during 2017 or the Company’s ability to satisfy the conditions necessary to maintain and/or renegotiate its Nicaragua Concessions will be in significant doubt. The Company is seeking new outside sources of debt and equity capital in order to fund the substantial needs enumerated above; however, there can be no assurance that it 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 are substantial impediments for the Company 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 Company’s ability to continue as a going concern within one year after the date the financials are issued. The financial statements do not include any adjustments relating to the recoverability and classification of asset carrying amounts or the amount and classification of liabilities that might result should the Company be unable to continue as a going concern. |
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, secured convertible note payable, stock-based awards and overriding royalty interests, and the realization of deferred tax assets. |
Concentrations | Concentrations The Company’s business plan consists of developing the Nicaraguan Concessions and it expects to be active in Nicaragua for the foreseeable future, given sufficient capital and curing the defaults under the Nicaraguan Concessions. 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. |
Foreign Currency | Foreign Currency The United States dollar is the functional currency for the Company’s operations. Although the Company’s acquisition and exploration activities have been conducted in Nicaragua, a significant portion of the payments incurred for exploration activities are denominated in United States dollars. The Company expects that a significant portion of its required and discretionary expenditures in the foreseeable future will also be denominated in United States dollars. Any foreign currency gains and losses are included in the results of operations in the period in which they occur. The Company does not have any cash accounts denominated in foreign currencies. |
Cash and Cash Equivalents | Cash and Cash Equivalents For purposes of reporting cash flows, cash consists of cash on hand and demand deposits with financial institutions. Although the Company had minimal cash as of June 30, 2017 and December 31, 2016, it is the Company’s policy that all highly liquid investments with a maturity of three months or less when purchased would be cash equivalents and would be included along with cash as cash and equivalents. |
Oil and Gas Properties | Oil and Gas Properties The Company follows the full cost method of accounting for exploration and development activities. Accordingly, all costs incurred in the acquisition, exploration, and development of properties (including costs of surrendered and abandoned leaseholds, delay lease rentals, dry holes and seismic costs) and the fair value of estimated future costs of site restoration, dismantlement, and abandonment activities are capitalized. Overhead related to development activities is also capitalized during the acquisition phase. Depletion of proved oil and gas properties is computed on the units-of-production method, with oil and gas being converted to a common unit of measure based on relative energy content, whereby capitalized costs, as adjusted for estimated future development costs and estimated asset retirement costs, are amortized over the total estimated proved reserve quantities. Investments in unproved properties, including capitalized interest and internal costs, are not depleted pending determination of the existence of proved reserves. Unproved properties are assessed periodically (at least annually) to ascertain whether impairment has occurred. Unproved properties whose costs are individually significant 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 June 30, 2017 and December 31, 2016 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 Concessions, (ii) the status of the Company’s compliance with the Nicaraguan Concessions’ requirements, (iii) the ongoing evaluation of the seismic data, (iv) the commodity prices for oil and gas products, (v) the overall environment related to oil and gas exploration and development projects for unproven targets in unproven regions of the world, (vi) the availability of financing for financial and strategic partners, and (vii) other factors that would impact the viability of a significant long-term oil and gas exploration and development project. 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 are substantial impediments for the Company to obtain adequate financing to fund the exploration and development of its Nicaraguan projects. The Company has performed its impairment tests as of June 30, 2017 and December 31, 2016 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 January 1, 2016 through June 30, 2017 have been charged to operating expenses as incurred. Pursuant to full cost accounting rules, the Company must perform a “ceiling test” each quarter. The ceiling test provides that capitalized costs less related accumulated depletion and deferred income taxes for each cost center may not exceed the sum of (1) the present value of future net revenue from estimated production of proved oil and gas reserves using prices based on the arithmetic mean of the previous 12 months’ first-of month prices and current costs, including the effects of derivative instruments accounted for as cash flow hedges, but excluding the future cash outflows associated with settling asset retirement obligations that have been accrued on the balance sheet, and a discount factor of 10%; plus (2) the cost of properties not being amortized, if any; plus (3) the lower of cost or estimated fair value of unproved properties included in the costs being amortized, if any; less (4) income tax effects related to differences in the book and tax basis of oil and gas properties. If capitalized costs exceed the ceiling, the excess must be charged to expense and may not be reversed in future periods. As of June 30, 2017 and December 31, 2016, the Company did not have any proved oil and gas properties, and all unproved property costs relate to its Nicaraguan Concessions. Proceeds from the sales of oil and gas properties are accounted for as adjustments to capitalized costs with no gain or loss recognized, unless such adjustments would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss would be recognized in the determination of the Company’s net earnings/loss. |
Asset Retirement Obligations | Asset Retirement Obligations The Company records estimated future asset retirement obligations pursuant to the provisions of ASC 410. ASC 410 requires entities to record the fair value of a liability for an asset retirement obligation in the period in which it is incurred with a corresponding increase in the carrying amount of the related long-lived asset. Subsequent to initial measurement, the asset retirement liability is required to be accreted each period. The Company’s asset retirement obligations consist of costs related to the plugging of wells, the removal of facilities and equipment, and site restoration on oil and gas properties. Capitalized costs are depleted as a component of the full cost pool using the units of production method. Although the Company had divested all of its domestic oil properties that contain operating and abandoned wells as of December 31, 2012, the Company may have obligations related to the divestiture of certain abandoned non-producing domestic leasehold properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. Management believes the Company has been relieved from asset retirement obligation related to Infinity-Texas because of the sale of its Texas oil and gas properties in 2011 and its sale of 100% of the stock in Infinity-Texas in 2012. The Company has recognized an additional liability of $734,897 related to its former Texas oil and gas producing properties (included in asset retirement obligations) to recognize the potential personal liability of the Company and its officers for the Infinity-Texas oil and gas properties should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. In addition, management believes the Company has been relieved from asset retirement obligations related to Infinity-Wyoming because of the sale of its Wyoming and Colorado oil and gas properties in 2008; however, the Company has recognized since 2012 an additional liability of $981,106 related to its former Wyoming and Colorado oil and gas producing properties (included in asset retirement obligations) to recognize the potential liability of the Company and its officers should the new owner not perform its obligations to reclaim abandoned wells in a timely manner. |
Derivative 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 Company’s cash flows in an environment of volatile oil and gas prices and to manage the exposure to commodity price risk. As of June 30, 2017 and December 31, 2016 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. |
Fair Value of Financial Instruments | Fair Value of Financial Instruments The carrying values of the Company’s 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 Company’s 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 Company’s own assumptions in determining the fair value. The estimated fair value of the Company’s 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 Company’s common stock, interest rates, the probability of both of 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 June 30, 2017 and December 31, 2016 were classified under the fair value hierarchy as Level 3. The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2017 and December 31, 2016: June 30, 2017 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 1,822,791 $ 1,822,791 Derivative liabilities — — 145,265 145,265 $ — $ — $ 1,968,056 $ 1,968,056 December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 141,328 $ 141,328 Derivative liabilities — — 183,430 183,430 $ — $ — $ 324,758 $ 324,758 There were no changes in valuation techniques or reclassifications of fair value measurements between Levels 1, 2 or 3 during the periods ended June 30, 2017 and December 31, 2016. |
Net Income (Loss) Per Share | Net Income (Loss) per Share Pursuant to FASB ASC Topic 260, Earnings per Share, |
Reclassifications | Reclassifications Certain amounts in the prior period were reclassified to conform to the current period’s financial statement presentation. These reclassifications had no effect on previously reported net loss or accumulated deficit. |
Nature of Operations, Basis o17
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Organization, Consolidation and Presentation of Financial Statements [Abstract] | |
Schedule of Assets and 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 June 30, 2017 and December 31, 2016: June 30, 2017 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 1,822,791 $ 1,822,791 Derivative liabilities — — 145,265 145,265 $ — $ — $ 1,968,056 $ 1,968,056 December 31, 2016 Level 1 Level 2 Level 3 Total Liabilities: Senior convertible note payable $ — $ — $ 141,328 $ 141,328 Derivative liabilities — — 183,430 183,430 $ — $ — $ 324,758 $ 324,758 |
Secured Convertible Note Paya18
Secured Convertible Note Payable (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Secured Convertible Note Payable | Secured Convertible Note (the “Note) payable consists of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Secured convertible note payable, at fair value $ 1,822,791 $ 141,328 Less: Current maturities (1,822,791 ) (91,736 ) Secured convertible note payable, long-term $ — $ 49,592 |
Schedule of Activity in Secured Convertible Note | Following is an analysis of the activity in the secured convertible note during the six months ended June 30, 2017: Amount Balance at December 31, 2016 $ 141,328 Funding under the Investor Note during the period — Principal repaid during the period by issuance of common stock — Change in fair value of secured convertible note during the period 1,681,463 Balance at June 30, 2017 $ 1,822,791 |
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-Scholes model at June 30, 2017. Such assumptions included the following: Upon Issuance As of June 30, 2017 Volatility – range 102.6 % 288.6 % Risk-free rate 1.00 % 1.55 % Contractual term 3.0 years 0.8 years Conversion price $ 5.00 $ 5.00 Par value of note $ 540,000 $ 2,197,231 |
Debt (Tables)
Debt (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Debt Disclosure [Abstract] | |
Schedule of Debt Outstanding | Debt consists of the following at March 31, 2017 and December 31, 2016: March 31, 2017 December 31, 2016 Convertible notes payable, short term: Note payable, (in default) $ 1,000,000 $ 1,000,000 Note payable 200,000 200,000 Note payable, (in default) 50,000 50,000 Note payable (in default) 35,000 35,000 Total notes payable, short-term $ 1,285,000 $ 1,285,000 |
Stock Options (Tables)
Stock Options (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Summary of Stock Option Activity | The following table summarizes stock option activity for the six months ended June 30, 2017: Number of Options Weighted Average Exercise Price Per Share Weighted Average Remaining Contractual Term Aggregate Intrinsic Value Outstanding at December 31, 2016 393,450 $ 37.46 4.6 years $ — Granted — — Exercised — — Forfeited (14,000 ) (30.60 ) Outstanding at June 30, 2017 379,450 $ 37.71 4.3 years $ — Outstanding and exercisable at June 30, 2017 379,450 $ 37.71 4.3 years $ — |
Derivative Instruments (Tables)
Derivative Instruments (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 2,174,000 common shares in connection with various outstanding debt instruments which require derivative accounting treatment as of June 30, 2017. A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of June 30, 2017 is as follows: As of June 30, 2017 Volatility – range 204.6% - 288.6% Risk-free rate 1.55% - 2.14 % Contractual term 0.75 - 4.8 years Exercise price $5.00 - $5.60 Number of warrants in aggregate 2,174,000 |
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, 2016 $ 183,430 Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 — Unrealized derivative gains included in other expense for the period (38,165 ) Transition of derivative liability to equity — Balance at June 30, 2017 $ 145,265 |
Schedule of Warrant Derivative Liability | The warrant derivative liability consists of the following at June 30, 2017 and December 31, 2016: June 30, 2017 December 31, 2016 Warrant issued to holder of Secured convertible note (Note 2) $ 124,584 $ 155,461 Warrant issued to placement agent (Note 2) 16,611 20,728 Warrant issued to holder of December 2013 Note (Note 3) 1,834 4,429 Warrants issued to holders of notes payable - short term (Note 3) 2,236 2,812 Total warrant derivative liability $ 145,265 $ 183,430 |
Warrants (Tables)
Warrants (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
Warrants | |
Summary of Warrant Activity | The following table summarizes warrant activity for the six months ended June 30, 2017: Number of Warrants Weighted Average Exercise Price Per Share Outstanding and exercisable at December 31, 2016 2,517,771 $ 5.34 Issued for extension of notes payable (Note 3) — — Issued for extension of line-of-credit (Note 3) — — Exercised/forfeited — — Outstanding and exercisable at June 30, 2017 2,517,771 $ 5.34 |
Commitments and Contingencies (
Commitments and Contingencies (Tables) | 6 Months Ended |
Jun. 30, 2017 | |
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 unless it is successful in obtaining extensions, renewals or the renegotiation of the entire Concessions Agreements for the Perlas and Tyra blocks. 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 equivatlent 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 |
Nature of Operations, Basis o24
Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies (Details Narrative) | Apr. 20, 2017$ / shares | Nov. 08, 2016$ / shares | Aug. 28, 2015 | May 31, 2015$ / sharesshares | May 07, 2015USD ($)$ / sharesshares | Dec. 27, 2013 | May 31, 2015$ / sharesshares | Jun. 30, 2017USD ($)a | May 04, 2017USD ($) | Dec. 31, 2016USD ($) | Jul. 15, 2015$ / shares | Jul. 07, 2015$ / shares | Sep. 23, 2013$ / shares |
Principal amount of senior secured convertible notes | $ 510,000 | ||||||||||||
Percentage of debt bears interest | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | ||||||||
Conversion price per share | $ / shares | $ 5 | $ 5 | $ 5.60 | $ 5.60 | $ 5 | ||||||||
Debt maturity date | Apr. 19, 2018 | Nov. 7, 2017 | Nov. 28, 2013 | ||||||||||
Note payable | $ 1,325,000 | $ 1,285,000 | |||||||||||
Discount percentage | 10.00% | ||||||||||||
Additional liability | $ 1,716,003 | $ 1,716,003 | |||||||||||
Infinity-Texas [Member] | |||||||||||||
Percentage of sale of stock | 100.00% | ||||||||||||
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 | ||||||||||||
Block Perlas [Member] | |||||||||||||
Letters of credit | 1,356,227 | ||||||||||||
Payments of area fees | 83,351 | ||||||||||||
Payments of training fees | 150,000 | ||||||||||||
Tyra Block [Member] | |||||||||||||
Letters of credit | 278,450 | ||||||||||||
Payments of area fees | 83,351 | ||||||||||||
Payments of training fees | 150,000 | ||||||||||||
Private Placement [Member] | |||||||||||||
Principal amount of senior secured convertible notes | $ 12,000,000 | ||||||||||||
Warrant to purchase shares of common stock | shares | 1,800,000 | 1,800,000 | |||||||||||
Note payments for cash and issuing promissory note | $ 1,800,000 | ||||||||||||
Debt instrument, term | 3 years | ||||||||||||
Percentage of debt bears interest | 8.00% | 8.00% | |||||||||||
Conversion price per share | $ / shares | $ 5 | $ 5 | |||||||||||
Warrant investor purchase aggregate shares | shares | 1,800,000 | ||||||||||||
Common stock exercise price per share | $ / shares | $ 5 | $ 5 | |||||||||||
Warrants term | 7 years | ||||||||||||
Senior Secured Convertible Note [Member] | |||||||||||||
Principal amount of senior secured convertible notes | 12,000,000 | ||||||||||||
Note payments for cash and issuing promissory note | $ 450,000 | ||||||||||||
Conversion price per share | $ / shares | $ 5 | ||||||||||||
Investor Promissory Note [Member] | |||||||||||||
Principal amount of senior secured convertible notes | $ 9,550,000 | ||||||||||||
Warrant to purchase shares of common stock | shares | 1,800,000 | ||||||||||||
Convertible debt outstanding | 1,681,463 | ||||||||||||
Additional amount funded | $ 510,000 | ||||||||||||
Convertible Note [Member] | |||||||||||||
Notes principal | $ 9,490,000 | ||||||||||||
Convertible debt outstanding | 11,687,231 | 9,490,000 | |||||||||||
Replacement Note [Member] | |||||||||||||
Convertible debt outstanding | $ 2,197,231 | ||||||||||||
December 2013 Note [Member] | |||||||||||||
Principal amount of senior secured convertible notes | $ 1,000,000 | ||||||||||||
Debt maturity date | Mar. 12, 2014 | Apr. 30, 2016 | |||||||||||
Two Other Notes Payable [Member] | |||||||||||||
Note payable | $ 85,000 | ||||||||||||
December 2013 Note [Member] | Tyra Block [Member] | |||||||||||||
Principal amount of senior secured convertible notes | 1,000,000 | ||||||||||||
Note payable | $ 85,000 | ||||||||||||
Nicaraguan Concession [Member] | |||||||||||||
Nature of operations oil and gas resources acres | a | 1,400,000 |
Nature of Operations, Basis o25
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 ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Senior convertible note payable | $ 1,822,791 | $ 141,328 |
Derivative liabilities | 145,265 | 183,430 |
Fair value on liabilities | 1,968,056 | 324,758 |
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 | 1,822,791 | 141,328 |
Derivative liabilities | 145,265 | 183,430 |
Fair value on liabilities | $ 1,968,056 | $ 324,758 |
Secured Convertible Note Paya26
Secured Convertible Note Payable (Details Narrative) - USD ($) | May 31, 2015 | May 07, 2015 | Jun. 30, 2017 | Jun. 30, 2016 | Jun. 30, 2017 | Jun. 30, 2016 | May 04, 2017 | Apr. 20, 2017 | Dec. 31, 2016 | Nov. 08, 2016 | Aug. 28, 2015 | Jul. 15, 2015 | Jul. 07, 2015 | Sep. 23, 2013 |
Notes payable principal balance | $ 510,000 | $ 510,000 | ||||||||||||
Common stock, par value | $ 0.0001 | $ 0.0001 | $ 0.0001 | |||||||||||
Conversion price per share | $ 5 | $ 5 | $ 5.60 | $ 5.60 | $ 5 | |||||||||
Percentage of debt bears interest | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | |||||||||
Proceeds from issuance of secured convertible debt | $ 450,000 | |||||||||||||
Liquidated principal balances | $ 129,960 | 129,960 | ||||||||||||
Fair market value of secured convertible note | 1,822,791 | 1,822,791 | $ 141,328 | |||||||||||
Fair market value of note estimated of issuance date | 682,400 | |||||||||||||
Change in fair value of senior secured convertible note payable | 1,681,463 | $ 64,784 | ||||||||||||
Change in fair value of derivative liability | (38,808) | $ 743 | (38,165) | (117,768) | ||||||||||
Convertible Note [Member] | ||||||||||||||
Notes principal | $ 9,490,000 | |||||||||||||
Convertible debt outstanding | 11,687,231 | 11,687,231 | 9,490,000 | |||||||||||
Replacement Note [Member] | ||||||||||||||
Convertible debt outstanding | $ 2,197,231 | |||||||||||||
Investor Promissory Note [Member] | ||||||||||||||
Notes payable principal balance | $ 9,550,000 | |||||||||||||
Warrant to purchase shares of common stock | 1,800,000 | |||||||||||||
Convertible debt outstanding | $ 1,681,463 | $ 1,681,463 | ||||||||||||
Registration Rights Agreement [Member] | ||||||||||||||
Percentage of resale of shares of issuance of common stock | 130.00% | 130.00% | ||||||||||||
Participation Rights [Member] | ||||||||||||||
Percentage of participation rights | 50.00% | 50.00% | ||||||||||||
Private Placement [Member] | ||||||||||||||
Notes payable principal balance | $ 12,000,000 | |||||||||||||
Warrant to purchase shares of common stock | 1,800,000 | 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 | |||||||||||||
Note payments for cash and issuing promissory note | 1,800,000 | |||||||||||||
Conversion price per share | $ 5 | |||||||||||||
Percentage of debt bears interest | 8.00% | |||||||||||||
Private Placement [Member] | Securities Purchase Agreement [Member] | ||||||||||||||
Note payments for cash and issuing promissory note | $ 450,000 | |||||||||||||
Conversion price per share | $ 5 | |||||||||||||
Percentage of debt bears interest | 8.00% | |||||||||||||
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% | |||||||||||||
Private Agent [Member] | ||||||||||||||
Notes payable principal balance | $ 9,550,000 | |||||||||||||
Warrant to purchase shares of common stock | 240,000 | |||||||||||||
Warrants price per share | $ 5 | |||||||||||||
Secured Convertible Note Payable [Member] | ||||||||||||||
Warrant to purchase shares of common stock | 1,800,000 | |||||||||||||
Secured Convertible Note Payable [Member] | Warrant [Member] | ||||||||||||||
Derivative liability | $ 124,584 | $ 30,877 | $ 124,584 | $ 30,877 | ||||||||||
Secured Convertible Note Payable One [Member] | ||||||||||||||
Warrant to purchase shares of common stock | 240,000 | |||||||||||||
Derivative liability | $ 16,611 | $ 16,611 | $ 20,728 | |||||||||||
Change in fair value of derivative liability | $ 4,117 |
Secured Convertible Note Paya27
Secured Convertible Note Payable - Schedule of Secured Convertible Note Payable (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Debt Disclosure [Abstract] | ||
Secured convertible note payable, at fair value | $ 1,822,791 | $ 141,328 |
Less: Current maturities | (1,822,791) | (91,736) |
Secured convertible note payable, long-term | $ 49,592 |
Secured Convertible Note Paya28
Secured Convertible Note Payable - Schedule of Activity in Secured Convertible Note (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Debt Disclosure [Abstract] | |
Balance, beginning | $ 141,328 |
Funding under the Investor Note during the period | |
Principal repaid during the period by issuance of common stock | |
Change in fair value of senior convertible note during the period | 1,681,463 |
Balance, ending | $ 1,822,791 |
Secured Convertible Note Paya29
Secured Convertible Note Payable - Schedule of Fair Value Basis of Note (Details) | 6 Months Ended |
Jun. 30, 2017USD ($)$ / shares | |
Volatility - range | 288.60% |
Risk-free rate | 1.55% |
Contractual term | 9 months 18 days |
Conversion price | $ / shares | $ 5 |
Par value of note | $ | $ 2,197,231 |
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 ($) | Apr. 20, 2017 | Nov. 08, 2016 | May 15, 2016 | May 07, 2016 | Jan. 15, 2016 | Jan. 07, 2016 | Oct. 15, 2015 | Oct. 07, 2015 | Aug. 28, 2015 | Jul. 15, 2015 | Jul. 07, 2015 | Dec. 27, 2013 | Jun. 30, 2017 | Jun. 30, 2016 | Dec. 31, 2016 | Sep. 23, 2013 |
Line of credit facility maximum borrowing capacity | $ 50,000 | |||||||||||||||
Increase in line of credit | $ 75,000 | |||||||||||||||
Debt maturity date | Apr. 19, 2018 | Nov. 7, 2017 | Nov. 28, 2013 | |||||||||||||
Conversion price per share | $ 5 | $ 5 | $ 5.60 | $ 5.60 | $ 5 | |||||||||||
Percentage of loan agreement, bearing interest rate | 8.00% | |||||||||||||||
Issuance of warrants exercisable to purchase of common stock | 5,000 | 5,000 | 3,500 | 5,000 | ||||||||||||
Estimated fair value of conversion feature and warrants | $ 11,827 | $ 22,314 | ||||||||||||||
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 share | $ 5.60 | $ 5.60 | ||||||||||||||
Common stock issued | 7,712,569 | 7,712,569 | ||||||||||||||
Common stock issued value | $ 771 | $ 771 | ||||||||||||||
Discount amortization expense | $ 52,981 | |||||||||||||||
Derivative liability | $ 145,265 | 183,430 | ||||||||||||||
Proceeds from convertible debt | $ 40,000 | $ 200,000 | $ 35,000 | $ 50,000 | ||||||||||||
Debt instruments interest rate | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | |||||||||||
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 | $ 74 | $ 131 | $ 267 | $ 379 | ||||||||||||
Number of warrants issued newly during the period | 3,500 | |||||||||||||||
Warrants expiration period | 5 years | 5 years | ||||||||||||||
December 2013 Note [Member] | ||||||||||||||||
Debt maturity date | Mar. 12, 2014 | Apr. 30, 2016 | ||||||||||||||
Issuance of warrants exercisable to purchase of common stock | 100,000 | |||||||||||||||
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 share | $ 0.75 | |||||||||||||||
December 2013 Note to April 7, 2016 One [Member] | ||||||||||||||||
Percentage of revenue sharing agreement description | In connection with an extension 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 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) | |||||||||||||||
December 2013 Note [Member] | ||||||||||||||||
Unamortized debt discount | 0 | 0 | ||||||||||||||
Derivative liability | 1,834 | 4,429 | ||||||||||||||
Convertible Note Payable One [Member] | ||||||||||||||||
Derivative liability | 1,316 | 1,654 | ||||||||||||||
Convertible Notes Payable Two [Member] | ||||||||||||||||
Unamortized debt discount | 0 | 0 | ||||||||||||||
Derivative liability | $ 920 | $ 1,158 |
Debt - Schedule of Debt Outstan
Debt - Schedule of Debt Outstanding (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Total notes payable, net of unamortized discount, short-term | $ 1,325,000 | $ 1,285,000 |
Notes Payable One [Member] | ||
Total notes payable, net of unamortized discount, short-term | 1,000,000 | 1,000,000 |
Notes Payable Two [Member] | ||
Total notes payable, net of unamortized discount, short-term | 200,000 | 200,000 |
Notes Payable Three [Member] | ||
Total notes payable, net of unamortized discount, short-term | 40,000 | 200,000 |
Notes Payable Four [Member] | ||
Total notes payable, net of unamortized discount, short-term | 50,000 | 50,000 |
Notes Payable Five [Member] | ||
Total notes payable, net of unamortized discount, short-term | $ 35,000 | $ 35,000 |
Stock Options (Details Narrativ
Stock Options (Details Narrative) - USD ($) | 6 Months Ended | |
Jun. 30, 2017 | Jun. 30, 2016 | |
Stock-based compensation expense in connection with vesting of options granted | $ 0 | $ 7,598 |
Share based vested and unvested stock options, intrinsic value | 0 | |
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 | |
Shares available for future grants under all plans | 500,000 |
Stock Options - Summary of Stoc
Stock Options - Summary of Stock Option Activity (Details) | 6 Months Ended |
Jun. 30, 2017USD ($)$ / sharesshares | |
Disclosure of Compensation Related Costs, Share-based Payments [Abstract] | |
Number of Options Outstanding, Beginning | shares | 393,450 |
Number of Options Outstanding, Granted | shares | |
Number of Options Outstanding, Exercised | shares | |
Number of Options Outstanding, Forfeited | shares | (14,000) |
Number of Options Outstanding, Ending | shares | 379,450 |
Number of Options Outstanding and Exercisable | shares | 379,450 |
Weighted Average Exercise Price Per Share, Outstanding, Beginning | $ / shares | $ 37.46 |
Weighted Average Exercise Price Per Share Granted | $ / shares | |
Weighted Average Exercise Price Per Share Exercised | $ / shares | |
Weighted Average Exercise Price Per Share Forfeited | $ / shares | (30.60) |
Weighted Average Exercise Price Per Share, Outstanding, Ending | $ / shares | 37.71 |
Weighted Average Exercise Price Per Share, Outstanding and Exercisable | $ / shares | $ 37.71 |
Weighted Average Remaining Contractual Term Outstanding, Beginning | 4 years 7 months 6 days |
Weighted Average Remaining Contractual Term Outstanding, Ending | 4 years 3 months 19 days |
Outstanding and Exercisable, Weighted Average Remaining Contractual Term | 4 years 3 months 19 days |
Aggregate Intrinsic Value, Outstanding, Beginning | $ | |
Aggregate Intrinsic Value, Outstanding, Ending | $ | |
Outstanding and Exercisable, Aggregate Intrinsic Value | $ |
Derivative Instruments (Details
Derivative Instruments (Details Narrative) | 6 Months Ended |
Jun. 30, 2017shares | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Issued warrant to purchase shares of common stock | 2,174,000 |
Derivative Instruments - Schedu
Derivative Instruments - Schedule of Estimated Fair Value of Derivative Liabilities (Details) | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Volatility - range | 288.60% |
Risk-free rate | 1.55% |
Contractual term | 9 months 18 days |
Number of warrants in aggregate | shares | 2,174,000 |
Minimum [Member] | |
Volatility - range | 204.60% |
Risk-free rate | 1.55% |
Contractual term | 9 months |
Exercise price | $ 5 |
Maximum [Member] | |
Volatility - range | 288.60% |
Risk-free rate | 2.14% |
Contractual term | 4 years 9 months 18 days |
Exercise price | $ 5.60 |
Derivative Instruments - Summar
Derivative Instruments - Summary of Changes In Fair Value Derivative Financial Instruments (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | |
Beginning balance | $ 183,430 |
Warrants issued to originate or extend notes payable (recorded as discount on note payable) -Note 3 | |
Unrealized derivative gains included in other expense for the period | (38,165) |
Transition of derivative liability to equity | |
Ending balance | $ 145,265 |
Derivative Instruments - Sche37
Derivative Instruments - Schedule of Warrant Derivative Liability (Details) - USD ($) | Jun. 30, 2017 | Dec. 31, 2016 |
Derivative Instruments and Hedging Activities Disclosure [Abstract] | ||
Warrant issued to holder of Secured convertible note (Note 2) | $ 124,584 | $ 155,461 |
Warrant issued to placement agent (Note 2) | 16,611 | 20,728 |
Warrant issued to holder of December 2013 Note (Note 3) | 1,834 | 4,429 |
Warrants issued to holders of notes payable - short term (Note 3) | 2,236 | 2,812 |
Total warrant derivative liability | $ 145,265 | $ 183,430 |
Warrants (Details Narrative)
Warrants (Details Narrative) - Warrant [Member] | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Weighted average of purchase warrants term | 4 years 4 months 24 days |
Common stock purchase warrants and intrinsic value | $ 0 |
Warrants - Summary of Warrant A
Warrants - Summary of Warrant Activity (Details) - Warrant [Member] | 6 Months Ended |
Jun. 30, 2017$ / sharesshares | |
Outstanding and exercisable, number of warrants, beginning balance | shares | 2,517,771 |
Number of warrants, issued for extension of notes payable (note 3) | shares | |
Number of warrants, issued for extension of line-of-credit (note 3) | shares | |
Number of warrants, exercised/forfeited | shares | |
Outstanding and exercisable, number of warrants, ending balance | shares | 2,517,771 |
Outstanding and exercisable, Weighted Average Exercise Price Per Share | $ / shares | $ 5.34 |
Outstanding and exercisable, issued for extension of notes payable (note 3) | $ / shares | |
Outstanding and exercisable, issued for extension of line-of-credit (note 3) | $ / shares | |
Weighted average exercise price per share, exercised/forfeited | $ / shares | |
Outstanding and exercisable, weighted average exercise price per share | $ / shares | $ 5.34 |
Income Taxes (Details Narrative
Income Taxes (Details Narrative) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
Income Tax Disclosure [Abstract] | |
Net operating loss carry-forward | $ 66,270,000 |
Net operating loss carry-forward balance expires | from 2025 through 2030 |
Percentage on valuation allowance | 100.00% |
Change in ownership percentage | 50.00% |
Commitments and Contingencies41
Commitments and Contingencies (Details Narrative) - USD ($) | Dec. 08, 2014 | Aug. 15, 2014 | Sep. 08, 2009 | Jun. 06, 2009 | Mar. 23, 2009 | Oct. 31, 2012 | Jun. 30, 2017 | Dec. 31, 2016 | Dec. 31, 2013 |
Principal amount of senior secured convertible notes | $ 510,000 | ||||||||
Note payable | 1,325,000 | $ 1,285,000 | |||||||
Secured subordinated promissory notes | $ 1,275,000 | ||||||||
Percentage of revenue sharing Interest | 1.00% | 1.00% | 1.00% | ||||||
Amount funded by Off-Shore | $ 1,275,000 | ||||||||
Percentage of payment of revenue to Off-Shore | 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% | ||||||||
Asset retirement obligations | 1,716,003 | $ 1,716,003 | |||||||
Seeking of reclamation costs associated with single well | $ 30,000 | ||||||||
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 | 15,000 | 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 | ||||||||
December 2013 Note [Member] | |||||||||
Principal amount of senior secured convertible notes | 1,000,000 | ||||||||
December 2013 Note [Member] | Revenue Sharing Agreement [Member] | |||||||||
Notes payable principal balance | 1,050,000 | ||||||||
Block Perlas [Member] | |||||||||
Letters of credit | 1,356,227 | ||||||||
Payments of area fees | 83,351 | ||||||||
Payments of training fees | 150,000 | ||||||||
Tyra Block [Member] | |||||||||
Letters of credit | 278,450 | ||||||||
Payments of area fees | 83,351 | ||||||||
Payments of training fees | 150,000 | ||||||||
Tyra Block [Member] | December 2013 Note [Member] | |||||||||
Principal amount of senior secured convertible notes | 1,000,000 | ||||||||
Note payable | $ 85,000 |
Commitments and Contingencies -
Commitments and Contingencies - Schedule of Minimum Exploration Work Commitment and Relinquishments by Individual Blocks (Details) | 6 Months Ended |
Jun. 30, 2017USD ($) | |
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) |
Relinquishments | 26km2 |
Irrevocable Guarantee | $ 443,100 |
Sub-Period1 [Member] | Tyra Block [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) |
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 |
Relinquishments | 53km2 |
Irrevocable Guarantee | $ 1,356,227 |
Sub-Period 2 Optional [Member] | Tyra Block [Member] | |
Duration | 6 months |
Minimum Work Commitment | Processing & interpretation of the 667km 2D seismic (or equivalent in 3D) acquired in the previous sub-period |
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 |
Relinquishments | 80km2 |
Irrevocable Guarantee | $ 10,220,168 |
Sub-Period 3 Optional [Member] | Tyra Block [Member] | |
Duration | 2 years |
Minimum Work Commitment | Acquisition, processing & interpretation of 250km2 of new 3D seismic |
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 |
Relinquishments | All acreage except areas with discoveries |
Irrevocable Guarantee | $ 10,397,335 |
Sub-Period 4 Optional [Member] | Tyra Block [Member] | |
Duration | 2 years |
Minimum Work Commitment | Drilling of one exploration well to the Cretaceous or 3,500m, whichever is shallower - Geochemical analysis |
Relinquishments | All acreage except areas with discoveries |
Irrevocable Guarantee | $ 10,418,667 |
Commitments and Contingencies43
Commitments and Contingencies - Schedule of Contractual and Fiscal Terms (Details) | 6 Months Ended |
Jun. 30, 2017USD ($)Factor$ / 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 ($) | Aug. 28, 2016 | May 28, 2016 | Feb. 28, 2016 | Jun. 06, 2009 | Jun. 06, 2009 | Jun. 30, 2017 | Apr. 20, 2017 | Dec. 31, 2016 | Nov. 08, 2016 | Aug. 28, 2015 | Jul. 15, 2015 | Jul. 07, 2015 | Sep. 23, 2013 |
Percentage of payment of revenue | 1.00% | ||||||||||||
Line of credit facility, borrowing capacity | $ 75,000 | $ 50,000 | |||||||||||
Line of credit convertible common stock rate per share | $ 5 | ||||||||||||
Debt instruments interest rate | 8.00% | 8.00% | 8.00% | 8.00% | 8.00% | ||||||||
Line of credit maturity date | Nov. 28, 2016 | Aug. 28, 2016 | May 28, 2016 | Nov. 28, 2013 | |||||||||
Issuance of warrants to purchase of stock | 10,000 | 10,000 | 10,000 | ||||||||||
Common shares at an exercise price | $ 5 | $ 5 | $ 5 | ||||||||||
Warrants expiration date | Aug. 28, 2021 | May 28, 2021 | Feb. 28, 2021 | ||||||||||
Officers and Directors [Member] | |||||||||||||
Percentage of payment of revenue | 1.00% | ||||||||||||
Accrued compensation | $ 1,711,208 | $ 1,601,208 | |||||||||||
Offshore Finance, LLC [Member] | |||||||||||||
Percentage of payment of revenue | 1.00% | ||||||||||||
CFO's Firm [Member] | |||||||||||||
Due to related party for consideration of services | $ 762,407 | $ 762,407 |