Minimum Work Program – Tyra

Contractual and Fiscal Terms

The Company is in default of the current minimum work plan and is attempting to extend or renegotiate the requirements in order to cure the defaults and maintain the Concessions. There can be no assurance that we will be successful in negotiating such extensions and/or renegotiate the Concessions.

Competition

We compete in virtually all facets of our businesses with numerous other companies in the oil and gas industry, including many that have significantly greater financial and other resources. Such competitors will be able to pay more for desirable oil and gas leases and to evaluate, bid for, and purchase a greater number of properties than our financial or personnel resources permit.

Our business strategy includes highly competitive oil and natural gas exploration, development and production. We face intense competition from a large number of independent exploration and development companies as well as major oil and gas companies in a number of areas such as obtaining the capital necessary to pursue our Nicaraguan Concessions and seeking to acquire the services, equipment, labor and materials necessary to explore, operate and develop those properties. Most of our competitors have financial and technological resources substantially exceeding those available to us. We cannot be sure that we will be successful in developing and operating profitable the Concessions in the face of this competition.

Government Regulation of the Oil and Gas Industry

General

Our business is affected by numerous laws and regulations, including, among others, laws and regulations relating to energy, environment, conservation and tax. Failure to comply with these laws and regulations may result in the assessment of administrative, civil and/or criminal penalties, the imposition of injunctive relief or both. Moreover, changes in any of these laws and regulations could have a material adverse effect on our business. In view of the many uncertainties with respect to current and future laws and regulations, including their applicability to us, we cannot predict the overall effect of such laws and regulations on our future operations.

If we commence operations in Nicaragua we will be subject to legal and regulatory oversight by its energy-related agencies, such as the Nicaraguan Energy Institute, with respect to its energy or hydrocarbons laws. In such case, from time to time, in varying degrees, political developments and federal and state laws and regulations affect our operations in Nicaragua. In particular, price controls, taxes and other laws relating to the crude oil and natural gas industry, changes in these laws and changes in administrative regulations have affected and in the future could affect crude oil and natural gas production, operations and economics. We cannot predict how Nicaraguan agencies or courts will interpret existing laws and regulations or the effect these adoptions and interpretations may have on our business or financial condition at that point.

Our business will also be subject to laws and regulations promulgated by federal and local authorities, including the Ministry of Energy and Mines, relating to the exploration for, and the development, production and marketing of, crude oil and natural gas, as well as safety matters. Legal requirements may be frequently changed and subject to interpretation and we are unable to predict the ultimate cost of compliance with these requirements or their effect on our future operations in Nicaragua. In such event, we may be required to make significant expenditures to comply with governmental laws and regulations.

Further, future operations in Nicaragua will be subject to complex federal and local environmental laws and regulations. The discharge of natural gas, crude oil, or other pollutants into the air, soil or water may give rise to significant liabilities on our part to government agencies and third parties and may require us to incur substantial costs of remediation. In addition, in the future we may incur costs and penalties in addressing regulatory agency procedures involving instances of possible non-compliance.

The following discussion contains summaries of certain laws and regulations and is qualified as mentioned above.

Environmental and Land Use Regulation

Various federal, state and local laws and regulations relating to the protection of the environment affect our operations and costs. The areas affected include:

The environmental and land use laws and regulations affecting oil and natural gas operations have been changed frequently in the past, and in general, these changes have imposed more stringent requirements that increase operating costs and/or require capital expenditures in order to remain in compliance. Failure to comply with these requirements can result in civil and/or criminal fines and liability for non-compliance, clean-up costs and other environmental damages. It is also possible that unanticipated developments or changes in law could cause us to make environmental expenditures significantly greater than those we currently expect.

The following is a summary discussion of the framework of key environmental and land use regulations and requirements affecting oil and natural gas exploration, development, production and transportation operations.

Operating Hazards and Insurance

The oil and natural gas business involves a variety of operating risks. We were unable to maintain insurance against such potential risks and losses.

In addition, pollution and environmental risks are not insured. If a significant accident or other event occurs not covered by insurance, it could adversely affect us.

Employees

We have twothree employees, our CEO, COO and CFO, whose salaries have been primarily deferred. We also use outside contractors to perform services.

Item 1A. Risk Factors.

Not applicable.

Item 1B. Unresolved Staff Comments.

None.

Item 2. Properties.

This section contains an explanation and detail of some of the relevant project groupings from our overall inventory of projects and prospects. Our sole focus isin previous years has been our Nicaraguan Concessions, which are located in the Caribbean Sea, offshore Nicaragua.Nicaragua, which project we have abandoned. During 2019 we began implementing our strategy to acquire and develop oil producing properties in the continental United States. In that regard, we acquired an option to acquire oil and gas leases in central Kansas on approximately 11,000 acres (the “Properties”).

NicaraguaKansas Properties

We own

On July 31, 2019 the Company acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. The Company paid a 100% interest innonrefundable deposit of $50,000 to bind the Perlas Block (560,000 acres/2,268 km)purchase option which gives it the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the option prior to December 31, 2019 and Tyra Block (826,000 acres/3,342 km) located in shallow waters offshore Nicaragua. Within 15 days of enteringthe parties are currently negotiating an exploration sub-period, we are required to provide an irrevocable guarantee (“Irrevocable Guarantee”) in favorextension and repricing of the Nicaraguan Ministrypurchase price under such Option. There can be no assurance that the parties will negotiate an extension particularly in light of Energy, payable in Nicaragua, in an amount equalrecent events including the coronavirus pandemic and its impact on the oil and gas industry.

The Company intends to the estimated cost of such exploration sub-period, subject to an accumulated credit carry forward for the excess of work performed in the preceding exploration sub-period, as provided in the Nicaraguan Concession agreements.

Subsequent to the initial award of the Nicaraguan Concessions in 2003, we negotiated a number of key terms and conditions of an exploration and production contract covering the approximate 1.4 million acre Tyra (approximately 826,000 acres in the north) and Perlas (approximately 560,000 acres in the south) concession areas offshore Nicaragua. The contract, which was finalized in 2009, contemplates an exploration period of up to six years with four sub-phases and a production period of up to 30 additional years (with a potential five-year extension). We submitted an environmental study in 2011, which was approved in April 2013 by the Nicaraguan government which allowed us to commence our exploration activities. We have acquired new specific geological information fromcomplete the acquisition of new 2-D and 3-D seismic studies during 2013 and 2014 along with the reprocessing and additional evaluationProperties prior to the end of existing 2-D seismic data over the Perlas and Tyra Concession blocks. We are currently in default of several requirements of the minimum work programs under of the Nicaraguan Concession and may not be able2020, subject to retain the Concessions unless we are successful in obtaining extensions, renewals or the renegotiationsuccessfully renegotiating of the terms, obtaining adequate financing and the continuing impact of Covid-19. The Option includes a provision permitting Core to exercise a buy-out clause and sell the Properties to a third-party purchaser prior to its exercise of the Concession AgreementsOption. If such a sale occurs, the Company would be entitled to 10% of the proceeds of the sale on the closing date. In such event, Core will for a period of nine months following the Perlasbuy-out find a project of like kind and Tyra blocks. Theprovide the Company is currently pursuing meetings with Nicaraguan Government officials in ordera first right of refusal to address the pending defaults.acquire such asset.

Proved Reserves Reporting

We had no proved reserves as of December 31, 20162019 and 2015.2018.

Production, Prices and Production Costs

We had no production during the years ended December 31, 20162019 or 2015.2018.

Development, Exploration and Acquisition Capital Expenditures

The following table sets forth certain information regarding the costs we incurred in the purchase of proved and unproved properties and in development and exploration activities in Nicaragua:

Exploration costs during the yearsyear ended December 31, 2016 and 2015 are2019 primarily attributablerelated to area feesconcession and training costs requiredfees to be paid to the Nicaraguan government.Government for 2019. In addition to the $77,784 expenses described above, the Company expensed all of the costs related to the option to purchase the Kansas oil and gas properties totaling $76,415 which expired on December 31, 2019. The Company expensed all costs related to the Kansas Oil and Gas option upon its expiration although the Company continues to negotiate an extension and revision of the option to acquire the Kansas oil and gas. All costs related to the Nicaraguan Concessions have been expensed as incurred during the year ended December 31, 2019 as the Concessions were in default status and the Nicaraguan Concession assets were considered to be impaired and fully reserved as of December 31, 2019 and 2018.

There were no development, exploration or acquisition costs incurred during 20162019 and 20152018 on our domestic properties.

Drilling Activity

We had no drilling activity during the years ended December 31, 20162019 or 2015.2018.

Acreage Data

The following table sets forth the gross and net acres of developed and undeveloped oil and gas leases we held as of December 31, 2016.2019.

Item 3. Legal Proceedings.

The Company is currently involved in litigation as follows:

Item 4. Mine Safety Disclosures.

Not applicable.

PART II

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Principal Market and Price Range of Common Stock

Infinity’s common stock trades on the Over-the-Counter QB Tier Market (OTCQB) under the symbol “IFNY” The following table sets forth the high and low closing bid prices for Infinity’s common stock as reported by the OTCQB. The closing price of the common stock on April 12, 2017May 13, 2020 was $0.05$0.0286 per share. The quotations reflect interdealer bid prices without retail markup, markdown or commission and may not represent actual transactions.

Reverse Stock Split

In November 2015, the Company filed an amendment to its Certificate of Incorporation to effect a one-for-ten reverse stock split of its issued and outstanding shares of common stock. Its authorized shares and par value per share remain unchanged. All common stock share and per share information in this Annual Report, including the above table reflecting the range of closing prices for the Company’s common stock, have been adjusted to reflect retroactive application of the reverse split, unless otherwise indicated.

Holders of Common Stock

At December 31, 2016,2019, there were approximately 144153 stockholders of record of our common stock.

Dividend Policy

Holders of common stock are entitled to receive such dividends as may be declared by our Board of Directors. We have not declared or paid and do not anticipate declaring or paying any dividends on our common stock in the near future. Any future determination as to the declaration and payment of dividends will be at the discretion of our board of directors and will depend on then-existing conditions, including our financial condition, results of operations, contractual restrictions, capital requirements, business prospects and such other factors as the board deems relevant.

Securities Authorized for Issuance under Equity Compensation Plans

In May 2006, the Company’s stockholders approved the 2006 Equity Incentive Plan (the “2006 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,000 shares of the Company’s common stock are reserved for issuance under the 2006 Plan. In June 2005, the Company’s stockholders approved the 2005 Equity Incentive Plan (the “2005 Plan”), under which both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. An aggregate of 47,500 shares of the Company’s common stock were reserved for issuance under the 2005 and 2006 PlansPlans; however, such 2005 and 2006 Plans have now expired and no further issuances can be made. Options granted under the 2005 Plan and 2006 Plan allow for the purchase of common stock at prices not less than the fair market value of such stock at the date of grant, become exercisable immediately or as directed by the Company’s Board of Directors and generally expire ten years after the date of grant. The Company also has issued other stock options not pursuant to a formal plan with terms similar to the 2005 and 2006 Plans.

The

At 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. No stock options or restricted stock has been issued under the 2015 Plan as of December 31, 2019.

As of December 31, 2016,2019, 500,000 shares were available for future grants under the 2015 Plan as all other Plans have now expired.

The following table sets forth certain information regarding our stock option plans as of December 31, 2016:2019:

Recent Issuances of Unregistered Securities

During the three monthsyear ended December 31, 2016,2019, the Company entered intoconducted the following unregistered sales of equity securities:

On May 30, 2019, the Company and the Investor entered into Amendment No. 1 to Exchange Agreement (the “Amendment”). Following execution of the Exchange Agreement on May 23, 2019, the Company and the Investor became aware of an inadvertent error regarding the number of shares of Common Stock to be issued to the Investor pursuant to the Exchange Agreement. The Company and the Investor agreed to amend the Exchange Agreement so it reflects the correct number of shares of Common Stock to be issued and to ensure that the Investor does not beneficially own in excess of 9.99% of the shares of Common Stock outstanding immediately following the effective date of the Exchange Agreement. Pursuant to the Amendment, the Company and the Investor agreed that the number of shares of Common Stock to be issued to the Investor would be an aggregate of 605,816 shares, instead of the 770,485 shares stated in the Exchange Agreement.

Consistent with the developments above, effective November 23, 2019 the parties finalized the reconciliation pursuant to the Side-Letter Agreement described above and the related issuance of the True-Up Shares. Pursuant to the provisions of the Side-letter Agreement the parties agreed to the issuance of an additional 567,348 common shares, par value $0.0001 per share and the issuance of a warrant to purchase 61,380 common shares at an exercise price of $0.50 per share and an expiration date of June 19, 2026.

In addition, the Company issued a warrant in May 2015 to purchase 240,000 shares issued as part of the placement fee in connection with the Note. The warrant contained an expiration date of May 7, 2022 and an exercise price of $5.00 per share and is subject to certain price protection and dilution provisions. Such warrant was treated as a derivative liability for accounting purposes due to its ratchet and anti-dilution provisions.

On June 4, 2019, the Company entered into an exchange agreement with the warrant holder to extinguish the original warrant including its certain price protection and dilution provisions, for a new warrant to purchase up to 50,000 common shares with a termination date of June 4, 2026 at an exercise price of $0.50 per share without any price protection or dilution provisions.

The Company relied on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder in issuing the shares of Common Stock, the Rights and the warrants. It paid no commission or other similar compensation in connection with the transactions.

In April 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 required no principal or interest payments until its maturity date of April 19, 2018 and bears interest at 8% per annum. This note was not retired at its maturity and therefore was in default.

On June 19, 2019, the Company and the holders of these two convertible notes entered into an exchange agreement whereby the two convertible notes with an unpaid principal balance of $240,000 and related accrued interest totaling $45,020 were extinguished. The exchange agreement required the Company to issue the individual a new warrant to purchase up to 570,000 shares of common stock with a termination date of June 19, 2026 at an exercise price of $0.50 per share without any price protection or dilution provisions in exchange for the extinguishment of the two convertible notes and related accrued interest. The Black-Scholes valuation of the warrant issued to the holder on June 19, 2019 totaled $62,564.

The Company relied on the exemption provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and Regulation D thereunder in issuing the shares of Common Stock, the Rights and the warrants. It paid no commission or other similar compensation in connection with the transactions.

During the year ended December 31, 2018, the Company conducted the following unregistered sales of securities:

Item 6. Selected Financial Data.

Not applicable.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

This annual report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are intended to be covered by the safe harbors created thereby. In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue,” “intends,” and other variations of these words or comparable words. In addition, any statements that refer to expectations, projections or other characterizations of events, circumstances or trends and that do not relate to historical matters are forward-looking statements. To the extent that there are statements that are not recitations of historical fact, such statements constitute forward-looking statements that, by definition, involve risks and uncertainties. In any forward-looking statement, where we express an expectation or belief as to future results or events, such expectation or belief is expressed in good faith and believed to have a reasonable basis, but there can be no assurance that the statement of expectation or belief will be achieved or accomplished. The actual results or events may differ materially from those anticipated and as reflected in forward-looking statements included herein. Factors that may cause actual results or events to differ from those anticipated in the forward-looking statements included herein include the risk factors described below.

Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee future results, levels of activity, performance or achievements. You should not place undue reliance on these forward-looking statements, which speak only as of the date of this report. Except as required by law, we do not undertake to update or revise any of the forward-looking statements to conform these statements to actual results, whether as a result of new information, future events or otherwise.

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

Factors that could cause or contribute to our actual results differing materially from those discussed herein or for our stock price to be adversely affected include, but are not limited to: (i) we have a history of losses and are experiencing substantial liquidity problems; (ii) we have substantial obligations to a number of third parties, including but not limited to, our December 2013 promissory note in the original principal amount of $1,050,000 due in April 2016, which is in technical default, and the $12.0 million Convertible Note due May 2018, which began amortizing in October 2015, and there can be no assurance that we will be able to meet them; (iii) we require working capital for our operations and obligations for the next 12 months and capital to meet our obligations underpurchase the Nicaraguan Concessions,Properties, and there can be no assurances we will be able to obtain it or do so on terms favorable to us; (iv) we and our independent registered public accounting firm have concluded that there exists substantial doubt about our ability to continue as a going concern; (v) our Nicaraguan Concessions and planned future exploration activities are in a country with a developing economy and are subject to the risks of political and economic instability associated with such economies; (vi) explorationpurchase and development of our Nicaraguan Concessionsthe Properties will require large amounts of capital or a commercial relationship with an industry operator that we may not be able to obtain; (vii) we do not have sufficient resources to conduct required seismic mapping or drilling on our Nicaraguan Concessions, are in technical default on various requirements(vi) the oil and gas market has been severely impacted by the negative effects of the Concessions, may forfeit our rights tocoronavirus because of the Concessions unless we can renegotiate their requirementssubstantial and terms; (viii)abrupt decrease in the demand for oil and gas globally; (vii) the oil and gas exploration business involves a high degree of business and financial risk; (ix) we will be subject to regulations affecting our activities with the Nicaraguan Concessions; (x) our operations may be adversely affected by changes in the fiscal regime of Nicaragua; (xi)(viii) we are continuing to negotiate with our creditors and may face additional claims in the future; (xii) oil prices may be affected by regional factors; (xiii)(viii)) any future production will be contingent on successful exploration, development and acquisitions to establish reserves and revenue in the future; (xv)(ix) the oil and gas industry is highly competitive; (xvi) exploratory(x) drilling is an uncertain process with many risks; (xvii)(xi) oil and gas prices are volatile, and declines in prices would hurt our revenues and ability to achieve profitable operations; (xviii)(xii) our common stock is traded on the OTCQB, which may not have the visibility or liquidity that we seek for our common stock; (xix)(xiii) we depend on key personnel; (xx)(xiv) sufficient voting power by coalitions of a few of our larger stockholders to make corporate governance decisions that could have a significant effect on us and the other stockholders, including Hudson Bay Master Fund LP and Amegy Bank, NA; (xxi)(xv) sale of substantial amounts of our common stock that may have a depressive effect on the market price of the outstanding shares of our common stock, including sales of shares of common stock issued to the holder of the Convertible Note upon its conversion of portions of the outstanding principal amount of the Convertible Note; (xxii)stock; (xvi) possible issuance of common stock subject to options and warrants may dilute the interest of stockholders; (xxiii) our ability to comply with Sarbanes-Oxley Act of 2002 Section 404 as it may be required; (xxiv)(xvii) our nonpayment of dividends and lack of plans to pay dividends in the future; (xxv)(xviii) future sale or issuance of a substantial number of shares of our common stock that could depress the trading price of our common stock, lower our value and make it more difficult for us to raise capital; (xxvi)(xix) our additional securities available for issuance, which, if issued, could adversely affect the rights of the holders of our common stock; (xxvii)(xx) our stock price is likely to be highly volatile due to a number of factors, including a relatively limited public float; (xxviii)(xxi) indemnification of our officers and directors; (xxix)(xxii) whether we will be able to renegotiate or extend the terms of the Nicaraguan Concessions,Option, and on terms favorable to us, or otherwise maintain our interest in the Concessions; and (xxx)Option; (xxiii) whether we will obtain an industry or other financial partner to enable us to explore and develop our Nicaraguan Concessionsthe Properties if we do obtain extensions or renegotiation of the terms of the Concessions.Concessions and (xxiv) the ultimate impact of the coronavirus to our business and our ability to raise necessary capital to fund operations and our business plan.

The following information should be read in conjunction with the Financial Statements and Notes presented elsewhere in this annual report on Form 10-K. See Note 1 –“Summary of Significant Accounting Policies,” to the Financial Statements for the Years Ended December 31, 20162019 and 2015.2018.

20172020 Operational and Financial Objectives

Corporate Activities

The Nicaraguan Concessions represent our most substantial assetDuring the year ended December 31, 2019, the Company raised $142,500 in cash through a private placement of 1,425,000 shares of common stock. It used the proceeds to pay the $50,000 nonrefundable deposit Option to acquire the Properties and is the focal point of our business plan.for general working capital purposes. The Company is in default of various provisions of the 30-year Concession for both the Perlas and Tyra blocks as of December 31, 2016, as noted above.

If the Company does not receive the funding anticipated under its May 2015 Private Placement, it mustplans to continue to raise substantial amounts of debt and equity capital from other sources in the immediate future to fund its obligations under the Concessions. The most immediate funding needs include the following: (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. These are substantial operational and financial issues that the Company must successfully address during 2017 or its ability to satisfy the conditions necessary to remain viable and maintain its Nicaragua Concessions will be in significant doubt. The Company is seeking new outside sources of debt and equity capital in additionorder to meet its contractual obligations, in particular to acquire the Properties and to resolve the December 2013 Note.

The Company has focused on resolving its outstanding obligations that are in default in 2019 and in that regard has entered into exchange agreements with several holders of such obligations. The Company completed exchange agreements with the holders of the: (i) Senior Secured Convertible Note with a principal balance of $2,197,231 and related warrant to purchase 1,800,000 shares of common stock; (ii) notes payable with a principal balance of $240,000; and (iii) the warrants to purchase 240,000 shares of common stock issued to the May 2015 Private Placementplacement agent of the Senior Secured Convertible Note. These obligations were extinguished and exchanged for the issuance of common stock and new warrants to purchase common stock. These were important developments which resolved obligations that were in orderdefault without involving the payment of cash. In addition, the Company recorded a gain of $2,445,700 during the year ended December 31, 2019 as a result of the exchange transactions.

In addition, the Company entered into term sheets with two entities that further the Company’s 2019 objectives to fundresolve obligations in default and to acquire the substantial needs enumerated above;Properties.

On July 29, 2019 the Company entered into a non-binding term sheet with the holder of the December 2013 Note which has an unpaid principal balance of $1.0 million as of December 31, 2019. The term sheet, if consummated, will resolve the default contingencies regarding the December 2013 Note through an exchange agreement.

On July 31, 2019 the Company acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. The Company paid a nonrefundable deposit of $50,000 to bind the purchase option which gives it the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019 and the parties are negotiating an extension and repricing of the purchase price under such Option. There can be no assurance that the parties will negotiate an extension particularly in light of recent events including the coronavirus pandemic and its impact on the oil and gas industry.

The Option includes a provision permitting Core to exercise a buy-out clause and sell the Properties to a third-party purchaser prior to its exercise of the Option. If such a sale occurs, the Company would be entitled to 10% of the proceeds of the sale on the closing date. In such event, Core will for a period of nine months following the buy-out find a project of like kind and provide the Company a first right of refusal to acquire such asset.

The Company has not resolved the contingencies regarding its various notes payable with an outstanding principal balance of $1,104,125 as of December 31, 2019 related to their default status. The Company continues to pursue resolutions of these defaults including to negotiate extensions, waivers or new note agreements; however, there can be no assurance that itthe Company will be ablesuccessful in that regard.

Due to obtain such capitalthe 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 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 working capital requirements. The current environment for oilamount and gas development projects, especially discoveries in otherwise undeveloped regionsclassification 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 forliabilities that might result should the Company be unable to obtain adequate financing to fund the exploration and development of its Nicaraguan projects.continue as a going concern.

During 2017 we will also 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. Accordingly, we intend to finance our business strategy through external financing, which may include debt and equity capital raised in public and private offerings, joint ventures, sale of working or other interests, employment of working capital and cash flow from operations, if any, and net proceeds from the sales of assets.

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

We are considering the acquisition of domestic oil and gas properties with both proven and unproven reserves. We believe that the current distressed state for oil and gas properties and the resulting decline in valuations may yield an opportunity for us to accumulate undervalued domestic oil and gas assets at attractive prices and terms with the objective of achieving positive cash flows despite the decline in natural gas and crude oil commodity prices. We are seeking financing for such cash generating oil and gas properties at reasonable cost of capital. This initiative is intended to provide us with positive cash flows to address immediate working capital needs until the environment improves for exploration projects such as the Nicaraguan Concessions. No assurances can be given regarding our ability to identify, acquire and finance such domestic properties or whether such properties would provide positive cash flow.

Off-Balance Sheet Arrangements

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

For the Years Ended December 31, 20162019 and 20152018

Results of Operations

Revenue

The Company had no revenues in either 20162019 or 2015 as2018 because it focused solely on the pursuitacquisition of domestic oil and gas properties, resulting in its Option for the exploration, development, financing and maintenance of the Nicaraguan Concessions.Properties on July 31, 2019.

Production and Other Operating Expenses (income)

The Company had no production related operating expenses in either 20162019 or 2015.2018. The Company sold its investment in Infinity-Texas in July 2012 and held no developed or undeveloped oil and gas properties in the United States in 20162019 and 2015.2018.

The Company has no current or planned domestic exploration and development activities at this time. It is not actively working on any domestic property, focusing instead on the exploration, development and financing of the Nicaraguan Concessions.activities.

General and Administrative Expenses

General and administrative expenses of $443,724$418,759 for the year ended December 31, 2016 decreased $35,002,2019 increased $209,818, or 5.7%100%, from $478,726$208,941 in the same period in 2015.2018. The decreaseincrease in general and administrative expenses is primarily attributable to a reductionstock based compensation expense totaling $186,274 related to the restricted stock granted to our newly appointed COO in 2019, $76,415 in expenses associated with the December 31, 2019 expiration of $52,530the Option to acquire the Properties and an increase in Delaware franchise taxesaudit and legal fees associated with the Company’s regulatory filings with the Securities and Exchange Commission and the exchange agreements finalized in 2019 offset by an increase of $23,952 in Nicaraguan Concession costs incurred. The Delaware franchise tax is based on our total assets, which decreased substantially due to the impairment of our Nicaraguan oil and gas properties during 2016 and 2015. The Company is no longer capitalizing Nicaraguan Concession expenditures due to the decision to fully impair the Nicaraguan Project at December 31, 2015 because of the difficult oil and gas economy and noncompliance with the requirements of the Concessions. Thea $77,798 decrease in general and administrative costs was also attributableNicaragua Concession related expenses. The restricted stock granted to a reduction in expenses relating to the Company attending fewer investor conferences or similar forums during the year ended December 31, 2016 compared to 2015. The Company did not have the funding needed pay additional costs related to capital raising and investor relations activities during the 2016 period coupled with the poor investment climate for oil and gas companies during 2016 and 2015.

our new COO will continue be amortized through October 2020.

Stock-based compensation

Stock-based compensation expenses of $7,598 for the year ended December 31, 2016 decreased $184,550, or 96.1%, from the $192,148 of expense incurred during the same period in 2015. The Company has had minimal resources to pay employees, consultants and other service providers. Therefore, it has issued stock options to compensate and motivate its officers, directors and other service providers in previous years that vest generally over a two-year period. The Company did not grant any stock options in 2016 and 2015. The significant decrease in stock-based compensation expense in 2016 compared to 2015 is attributable to the full vesting of the January 2014 stock option grant in January 2016, which reduced the related amortization during the year ended December 31, 2016 compared to 2015. All outstanding stock options are fully vested as of December 31, 2016.

Interest expense

Interest expense decreased $24,292, or 20.8%, from $933,456$116,744 for the year ended December 31, 20152018 to $159,907$92,452 for the year ended December 31, 2016. This significant2019. The decrease is attributable to the Company converting approximately $555,000 of its interest-bearing debt to common stock during early 2015. The Company received loan proceeds of $450,000 fromexchange transactions which extinguished the Senior Secured Convertible Note issued in the May 2015 Private Placement, $85,000 from two convertible notes issued in July 2015,with an approximate principal balance of $2.2 million and $200,000 from a convertible note issued in November 2016, all of which bear interest at 8% per annum and remained outstanding at December 31, 2016. In previous years the Company issued short-term notes payable at various dates and extended their maturities by paying additional compensation to the lenders chiefly in the form of warrants. The fair value of the warrants issued to the note holders at the origination and extension dates of the short-term promissory notes was recorded aswith a discount on the related debt. Amortization of the value of the warrants and revenue sharing interests granted to the holders resulted in a substantial increase in the overall effective borrowing costsprincipal balance totaling $240,000 during the year ended December 31, 2016 compared to the same period in 2015. Discount amortization represents a non-cash expense and totaled $53,510 and $778,279 of total2019. Remaining interest expense recognized duringis related to various short-term notes outstanding in both periods which have matured and for which the year endedCompany was seeking extensions as of December 31, 2016 and 2015, respectively.2019.

The Company’s current financial condition has made traditional bank loans and customary financing terms unattainable; therefore, the Company may find it necessarywill need to continue with these types of short-term borrowings with high effective interest rates.

Secured Convertible Note Payable Issuance CostsGain on exchange and extinguishment of debt and warrant obligations

On May 7, 2015, we completedThe gain on exchange and extinguishment of debt and warrant obligations is attributable to exchange transactions which extinguished the May 2015 Private Placement of a $12.0 million principal amountSenior Secured Convertible Note andwith an approximate principal balance of $2.2 million, short term notes payable with a Warrant exercisable to purchase 1,800,000 shares of our common stock, $0.0001 par value. We elected to account forprincipal balance totaling $240,000 and record such note on a fair value basis. Accordingly, all related debt issuance expenses, which totaled $1,302,629 (including $1,071,201 representing the value of the warrant to purchase 240,000 shares of common stock issued to a placement agent and $231,428 of other fees and expenses), was charged to non-operating expenses during the year ended December 31, 2015. No similar transaction occurred during 2016.2019.

The Company and the holders of these obligations agreed to extinguish the existing obligations (which were in default) in exchange for the issuance of shares of common stock or new warrants to purchase common stock with no price or dilution protection. Upon exchange of the securities the existing obligations were cancelled and both holders signed agreements which released the Company of all obligations related to the old securities. As a result, the Company extinguished such original securities/obligations and recorded the issuance of the new obligations at their fair value on the date of exchange resulting in a total gain of $2,445,700 during the year ended December 31, 2019.

In addition, on July 25, 2019 the Company entered into a non-binding term sheet to enter into an exchange agreement with respect to a note payable with a principal balance of $1.0 million, accrued interest approximating $481,000, a warrant to purchase 100,000 shares of common stock and a revenue sharing agreement for 1% of hydrocarbons produced on the Nicaraguan Concession. If the parties agree to the term sheet, these obligations will be exchanged for the issuance of 740,500 shares of common stock and a cash payment of $100,000. See Note 3, “Debt.”

Change in Fair Value of Secured Convertible Note

WeThe Company issued the Secured Convertible Note in the May 2015 Private Placement and elected to account for and record such Note on a fair value basis. We received $450,000On May 4, 2017, the Investor notified the Company that it elected to affect an Investor Optional Offset under Section 7(a) of proceeds atthe 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 issuance andthe exchange. The Investor requested the Company to deliver the Replacement Note representing the remaining principal balance of $2,197,231 to replace the Convertible Note. The Company has recorded the fair market value of the Secured Convertible Note assuming that the remaining par value is $2,197,231 as asserted by the Investor at its maturity date in May 2018. The resulting change in the estimated fair value was estimated to be $265,929 as of$150,794 during the year ended December 31, 2015 and $141,328 at December 30, 2016. After considering principal repayments and additional funding received the net $63,063 and $49,0712018. There was no change in fair market value of such Note is included induring the accompanying statement of operations for the yearsyear ended December 31, 20162019 as the Convertible Note matured in May 2018.

On May 23, 2019 and 2015, respectively.as amended on May 30, 2019, the Company and the Investor agreed to an omnibus resolution to these outstanding matters and entered into the Exchange Agreement and Side-Letter Agreement as described below:

IssuanceExchange Agreement: Under the Exchange Agreement, the Investor exchanged all of Warrant Derivative in Connection with Secured Convertible Note

The Warrantits rights under the original securities issued in the May 2015 Private Placement, contains various provisions that grantincluding: (i) the holder ratchet and anti-dilution rights. Consequently, such Warrant is requiredConvertible Note, subject to be treated on a liability basis at its estimated fair value and classified as a derivative liabilitythe Optional Offset (as defined in the accompanying financial statements. We recorded its origination date estimated fair value at $8,034,007 asInvestor Note), with a non-operating expensecurrent balance of $2,197,231; (ii) the related accrued interest under the Convertible Note, with a balance of $28,643; (iii) the Warrant; (iv) the Security and Pledge Agreement entered into by the Company and the Investor in connection with the year ended December 31, 2015. The valueMay 2015 Private Placement; (v) the Guaranty made in favor of the Warrant to purchase 240,000 shares granted toInvestor in connection with the placement agentMay 2015 Private Placement; and (vi) the Registration Rights Agreement entered into by the Company and the Investor in connection with the May 2015 Private Placement, was included in Secured Convertible Note issuance costsfor 605,816 fully paid and nonassessable shares of Common Stock and certain rights (the “Rights”) to acquire additional securities in the statementfuture, which may be exercised for additional shares of operations as previously described.Common Stock.

Upon consummation of the exchange transactions described above, the Investor no longer owns any of the Original Securities, including any rights thereunder, and the Company cancelled the certificate(s) and other physical documentation evidencing the Investor’s ownership of the Original Securities.

Side-letter Agreement: Concurrent with the Exchange Agreement, the Company and the Investor also entered into a letter agreement, dated May 23, 2019 (the “Side-Letter Agreement”). The Side-Letter Agreement provides that on November 23, 2019, the Company will, if required under the Side-letter Agreement, issue additional shares of Common Stock to the Investor based on an increase in the Number of Fully-Diluted Shares Outstanding of the Company from the execution date of the Exchange Agreement to the six-month anniversary of the Exchange Agreement (the “True-Up Shares”). The issuance of the True-Up Shares, if any, shall provide the Investor with Rights to acquire additional Right Shares to adjust their ownership to 9.99% of the common shares and common share equivalents then outstanding. Any common share equivalents then outstanding and to be issued in conjunction with the Side-Letter Agreement will be issued in like tenor.

Consistent with the developments above, effective November 23, 2019 the parties finalized the reconciliation pursuant to the Side-Letter Agreement described above and the related issuance of the True-Up Shares. Pursuant to the provisions of the Side-letter Agreement the parties agreed to the issuance of an additional 567,348 common shares, par value $0.0001 per share and the issuance of a warrant to purchase 61,380 common shares at an exercise price of $0.50 per share and an expiration date of June 19, 2026.

Change in Derivative Fair Value

The conversion feature of thein certain outstanding promissory notes and the common stock purchase warrants issued in connection with short-term notes and the Secured Convertible Note outstanding during 20162019 and 20152018 are treated as derivative instruments because the promissory notes and warrants contain ratchet and anti-dilution provisions. Accordingly, we adjustedIn addition, the valueSide-Letter Agreement with Hudson Bay as a result of the outstandingExchange Agreement was considered a derivative liabilities to their estimated fair value as of December 31, 2016 and 2015.accordingly was marked-to-market until its finalization on November 23, 2019. The mark-to-market process resulted in a gainloss of $27,804$89,714 during the year ended December 31, 20162019 and a gain of $9,431,914$38,681 during the year ended December 31, 2015.2018. The decreaseloss recognized in the gain recognized2019 period is primarily the result of the lesser reduction inSide-Letter Agreement derivative issued pursuant to the closing market price of ourHudson Bay exchange agreement. Such side-letter provides anti-dilution protection to Hudson Bay which will likely require the Company to issue common stock between the December 31, 2015 ($0.16 per share) and December 31, 2016 ($0.10 per share) comparedwarrants to the corresponding period in 2015 ($0.16 at December 31, 2015 versus $5.50 at thepurchase common stock on its expiration date of origination). Generally, the fair value of the derivative liability declines when the market value of the underlying common stock decreases compared to the derivatives exercise price.

Other income (expense)

Other income (expense) decreased from $184,404 for the year ended December 31, 2015 to $-0- in 2016. The Company derecognized certain previously recorded liabilities due to the expiration of the statute of limitations on collection of such obligations for the Company during 2015.November 23, 2019.

Income Tax

The Company recorded no income tax benefit (expense) in the year ended December 31, 2019. The Company has been in a cumulative tax loss position and has substantial net operating loss carryforwards available to it at December 31, 2019. The Company has continued to carry a 100% reserve on its net deferred tax assets and therefore recorded no income tax expense on its income before income taxes during the year ended December 31, 2019.

The Company recorded a tax benefit of $150,000 during the year ended December 31, 2018. The income tax benefit recorded in 2018 is primarily due to the Tax Cuts and Jobs Act (the “Act”) that became law on December 22, 2017. The Act significantly changed U.S. corporate income tax laws by, among other things, reducing the U.S. corporate income tax rate to 21% starting in January 2018.

Under the Act, corporations are no longer subject to the AMT, effective for taxable years beginning after December 31, 2017. However, where a corporation has an AMT Credit from a prior taxable year, the corporation still carries it forward and may use a portion of it as a refundable credit in any taxable year beginning after 2017 but before 2022. Generally, 50% of the corporation’s AMT Credit carried forward to one of these years will be claimable and refundable for that year. In tax years beginning in 2021, however, the entire remaining carryforward generally will be refundable. The Company has generated an AMT credit carryforward during prior years totaling $150,000, which previously was reported as income taxes payable on the Company’s balance sheet and the corresponding deferred tax asset was fully reserved based on all available evidence, because the Company considered it more likely than not that all the AMT tax credit carryforward would not be realized. Based on the provisions of the new Act, the Company now considers it more likely than not that all of the AMT tax credit carryforward will be realized. Accordingly, the Company has recognized an income benefit of $150,000 during the year ended December 31, 2018 as it reduced the corresponding income taxes payable to zero as of December 31, 2018.

For income tax purposes, the Company has net operating loss carry-forwards of approximately $66,270,000$66,950,000 as of December 31, 2016,2019, which expire from 2025 through 2030.2038. The Company has provided a 100% valuation allowance against the resulting deferred tax asset due to the uncertainty of realizing the tax benefits from its net operating loss carry-forwards.

For the years ended December 31, 2016 and 2015, the Company realized net losses and the Company anticipates operating losses and additional tax losses for the foreseeable future and does not believe that utilization of its tax loss carryforward is more likely than not. Therefore, because of the uncertainty as to the ultimate utilization of the Company’s loss carryforwards, any deferred tax asset at December 31, 2016 that resulted from anticipated benefit from future utilization of such carryforward has been fully offset by a valuation allowance.

Net lossincome (loss)

As a result of the above, wethe Company reported a net lossincome of $646,488$1,844,775 for the year ended December 31, 20162019 compared to a net loss of $10,996,243$287,798 for the year ended December 31, 2015.same period in 2018. This represents an improvement of $10,349,755.$2,132,573.

Basic and Diluted LossNet Income (Loss) per Share

Basic net lossincome (loss) per share is computed by dividing the net loss by the weighted-average number of common shares outstanding during the period. Diluted net lossincome (loss) per share is computed by dividing the net lossincome (loss) by the weighted-average number of common and common equivalent shares outstanding during the period. Common share equivalents included in the diluted computation represent shares issuable upon assumed exercise of stock options and warrants using the treasury stock and “if converted” method. For periods in which net losses from continuing operations are incurred, weighted average shares outstanding is the same for basic and diluted loss per share calculations, as the inclusion of common share equivalents would have an anti-dilutive effect. In addition, in periods in which there is net income and the effect of including common share equivalents in the diluted per share calculations would be anti-dilutive (such as when the conversion or exercise price of the common share equivalents are higher than the average closing market price per share) such anti-dilutive common share equivalents would also be excluded from the calculation of basic and diluted weighted average shares outstanding.

During the year ended December 31, 2019 all of the common stock equivalents outstanding were anti-dilutive as their respective conversion or exercise prices were higher than the average closing market price per share during the period. Therefore, all of the common stock equivalents outstanding during the year ended December 31, 2019 were excluded from the diluted weighted average shares outstanding and diluted income per share calculations. The basic and diluted net income per share was $0.20 for the year ended December 31, 2019 the basic and diluted loss per share was $0.10$0.04 for the year ended December 31, 2016,2018 for the reasons previously noted. The basic and diluted loss per share was $4.07 for the year ended December 31, 2015. All outstanding stock options and warrants to purchase common stock were considered antidilutive and therefore excluded from the calculation of diluted loss per share for the years ended December 31, 2016 and 2015 because the exercise price of the stock options and warrants were substantially higher than market price in 2016 and the net loss reported for both years. Potential shares of common stock as of December 31, 20162019 that have been excluded from the computation of diluted net lossincome (loss) per share amounted to 2,911,2211,278,943 shares, which included 2,517,771946,943 outstanding warrants and 393,450332,000 outstanding stock options.

Liquidity and Capital Resources; Going Concern

We have had a history of losses and have generated little or no operating revenues for a number of years as we concentrated on development of our Nicaraguan Concessions, which is a long-term, high-risk/reward exploration project in an otherwise unproven part of the world. Historically, we financed our operations through the issuance of redeemable preferred stockequity and various short and long-term debt financing that contained some level of detachable warrants to provide the holders with a level of equity participation should we be successful exploring our Nicaraguan Concessions.participation.

InPrivate Placement of Common Stock

During the first quarter 2015, we were able to increase our line-of-credit toyear December 31, 2019, the Company has raised $142,500 in cash through a maximumprivate placement of $100,000, which provided us some liquidity, but were unable to obtain other sources of capital. On February 28, 2015, the short-term note holders of maturing debt exercised their right to convert principal balances totaling $475,000 and accrued interest totaling $28,630 into 100,7261,425,000 shares of common stock at an exchange rate of $5.00 per share. In addition, on September 30, 2015,stock. It used the lender who providesproceeds to pay the line-of-credit facility converted a partial principal balance totaling $50,000 into 10,000 shares of common stock at a price of $5.00 per share. Such debtnonrefundable deposit for the Option relating to equity conversions helped to reduce our near term cash needs.the Properties and for general working capital purposes.

In JulySenior Secured Convertible Note

On May 7, 2015, the Company issued two promissory notes for total cash proceedscompleted the private placement (the “May 2015 Private Placement”) of $85,000. The promissory notes have maturity dates that have been extended several timesa $12.0 million principal amount Secured Convertible Note (the “Note”) and matured in October 2016 and are currently in default. In connection with the origination and extensiona common stock purchase warrant to purchase 1,800,000 shares of the notes,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 23, 2019 and as amended on May 30, 2019, the Company issued warrants exercisableand the Investor agreed to purchase shares of common stock at an exercise price of $5.60 per share. The warrants are immediately exercisableomnibus resolution to these outstanding matters and terminate five years from their dates of issuance. The Company is seeking an extension ofentered into the maturity date of these notes; 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 CompanyExchange Agreement 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.Side-Letter Agreement as described in Note 3, “Debt.”

Short-Term Notes Extinguished

In November 2016, the Company issued a $200,000 convertible promissory note which requires no principal or interest payments until its November 2017 maturity date and bears 8% interest. The proceeds of this note waswere used to pay offretire the Company’s line-of-credit upon its maturity in November 20172016 and for general working capital purposes. This note was not retired at its maturity and was therefore in default.

On December 27, 2013In April 2017, the Company borrowed $1,050,000$40,000 under the December 2013 Note, which is an unsecured credit facility with a private, third-party lender. Effectivelender which is convertible at a rate of $5.00 per share. The note required no principal or interest payments until its maturity date of April 7, 201519, 2018 and bears interest at 8% per annum. This note was not retired at its maturity and therefore was in default.

On June 19, 2019, the Company and the lender agreedholders of these two convertible notes entered into an exchange agreement whereby the two convertible notes with an unpaid principal balance of $240,000 and related accrued interest totaling $45,020 were extinguished. The exchange agreement required the Company to extendissue the maturityindividual a new warrant to purchase up to 570,000 shares of common stock with a termination date of June 19, 2026 at an exercise price of $0.50 per share without any price protection or dilution provisions in exchange for the December 2013 Note from Aprilextinguishment of the two convertible notes and related accrued interest.

Short-Term Notes Outstanding

On July 7, 2015 toand July 15, 2015, the earlierCompany borrowed a total of (i) April 7, 2016 or (ii)$85,000 from two individuals under convertible notes payable with the payment in fullconversion rate of the Investor Note issued in the May 2015 Private Placement in the principal amount of $9,550,000 (the “New Maturity Date”). All other$5.60 per share. The original terms of the Note remained the samenotes were for a period of 90 days and the remaining principal balance was reduced to $1,000,000 asnotes bore interest at 8% per annum. In connection with the notes, the Company issued warrants for the purchase of September 30, 2016 aftera total of 34,000 shares of common stock at $5.60 per share for a period of five years from the $50,000 principal repayment required by the extension agreement.

date of their issuance. The December 2013 Note may be prepaid without penaltynotes were not paid at any time. The December 2013 Note is subordinated to all existingmaturity and future senior indebtedness, as such termsnow are defined in the December 2013 Note. The December 2013 Note matured in April 2016 and is currently in technical default. The Company is seeking an extension ofattempting to negotiate a resolution to the maturity date; however,default, but there can be no assurance that it will be able to obtain such extension or what the final terms will be if the lender agrees to such an extension. The Company and its lender are assessing the status of the Nicaraguan Concessions and what effectsuccessful in that may have on the extension or renewal of these notes.regard.

On May 7, 201521, 2018 the Company completed the May 2015 Private Placement of $12.0 million Secured Convertible Note and a Warrant exercisable to purchase 1,800,000 shares of the Company’s common stock withborrowed $13,125 under an institutional investor. At the closing of the May 2015 Private Placement, the investor acquired the Convertible Note by paying $450,000 in cash and issuing the Investor Note, secured by cash,unsecured promissory note with a principal amountprivate third lender which is convertible at a rate of $9,550,000. Assuming all amounts payable to$0.50 per share. During 2019 the Company borrowed an additional $56,000 from this same third-party lender under the Investor Note are paid, the May 2015 Private Placement will result in gross proceedssame terms. In addition, during October 2019 we repaid $50,000 of $10.0 million before placement agent feesprincipal on this note. The note is due on demand and other expenses associated with the transaction, subject to the satisfaction of certain conditions. The Company used the initial proceeds from the closing to retire certain outstanding obligations, including the 2015 area and training fees of approximately $155,000 owed to the Nicaraguan government relating to its Nicaragua Concessions, and to provide additional working capital.

The Company will receive the remaining cash proceeds upon each voluntary or mandatory prepayment of the Investor Note. The investor may, at its option and at any time, voluntarily prepay the Investor Note, in whole or in part.

The Convertible Note matures on the three-year anniversary of its issuance, bears interest at 8% per annum, and is convertible at any time at the option of the holder into shares of the 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 investor has no right to convert the Convertible Note or exercise the Warrant to the extent that such conversion or exercise would result in the investor being the beneficial owner of in excess of 9.99% of the Company’s common stock. The Convertible Note ranks senior to the Company’s existing and future indebtedness and is secured by all of the assets of the Company, excluding the Nicaraguan Concessions.

WestPark Capital acted as placement agent for the Company in the May 2015 Private Placement and received 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 plus the reimbursement of legal fees totaling $7,500. The Company also issued WestPark a warrant exercisable to purchase 240,000 shares of common stock at a price of $5.00 per share. The warrant was exercisable from the date of issuance for a period of seven years.annum.

In summary, as of December 31, 2016,2019, the following debt was outstanding: (i) $200,000 on our convertible promissory note, which is due November 7, 2017; (ii) the two promissory notes in the total principal amount of $85,000, which matured in October 2016 and are currently in technical default; (iii) the Secured Convertible Note with a fair value of $141,328 which is due in 23 monthly installment payments either in cash or stock; and (iv) and(ii) the December 2013 Note in the principal amount of $1,000,000, which was due in April 2016 and is currently in technical default.default for which the Company has entered into a term sheet to resolve the default and extinguish the obligation; and (iii) $19,125 convertible promissory note, which is due on demand.

Capital Expenditures

On July 31, 2019 the Company acquired the Option to purchase the Properties. The Company paid the required nonrefundable $50,000 deposit which was required to bind the Option to acquire the Properties for $2.5 million by December 31, 2019 to complete the transaction. In addition, the Company funded lease extensions underlying the Option which totaled $26,415. We were unable to close on the Option prior to December 31, 2019 and the parties are seeking to extend the maturity date to cure the technical defaults; however, therenegotiating an extension and repricing. There can be no assurance that weit will be able to do so or obtain such extensionsthe required financing or whatobtain it on terms favorable to the final terms will be ifCompany or its shareholders to acquire the lenders agree to such extensions. We intend to seek additional funding under the Investor Note or other short-term debt financing to provide the funds necessary to pay-off our obligations when they come due and to provide working capital to fund normal operations, although we can provide no assurances that we will be successful in this regard. Our current financial condition has made traditional bank loans and normal financing terms unattainable; therefore, we may find it necessary to continueProperties. Accordingly, all costs associated with the type of short-term borrowings with high effective interest rates that we have used inoption to acquire the past.

The Company is in default of various provisionsProperties was expensed upon expiration of the 30-year Concessions for both Perlas and Tyra blocks as ofoption on December 31, 2016, as noted earlier. The Company is currently pursuing meetings with Nicaraguan Government officials in order to address the pending defaults.2019.

If the Company does not receive the funding anticipated under its May 2015 Private Placement, it must raise substantial amounts of debt and equity capital from other sources in the immediate future in order to fund: (1) the 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. 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. TheThe Company is seeking new outside sources of debt and equity capital in addition to the May 2015 Private Placement in order to fund the substantial needs enumerated above; however,above. The Company is attempting to obtain extensions of the maturity dates for its debt or compromises of the debt. The Company has been successful in restructuring certain obligations that were in default during 2019. However, there can be no assurance that it will be able to obtain such capitaladditional funding, extensions or obtain itrestructurings or 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.what terms.

Due to the uncertainties related to these matters, there exists substantial doubt about the Company’s ability to continue as a going concern.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.

Inflation and Seasonality

Inflation has not materially affected us during the past fiscal year. We do not believe that our business is seasonal in nature.

Item 7A. Quantitative and Qualitative Disclosures about Market Risk.

Not applicable.

Item 8. Financial Statements and Supplementary Data.

Infinity Energy Resources, Inc.

Financial Statements and Accompanying Notes

December 31, 20162019 and 20152018

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors andad Stockholders of

Infinity Energy Resources, Inc.

Overland Park, Kansas

Opinion on the Financial Statements

We have audited the accompanying balance sheets of Infinity Energy Resources, Inc. (the “Company”) as of December 31, 20162019 and 2015,2018, and the related statements of operations, stockholders’ deficit, and cash flows for each of the two years in the two-year period ended December 31, 2016. Infinity Energy Resources, Inc.’s management is responsible for these financial statements. Our responsibility is2019, and the related notes and schedules (collectively referred to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whetheras the financial statements are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audit included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

statements). In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Infinity Energy Resources, Inc.the Company as of December 31, 20162019 and 20152018, and the results of its operations and its cash flows for each of the two years in the two-year period ended December 31, 2016,2019, in conformity with accounting principles generally accepted in the United States of America.

Substantial doubt about the Company’s Ability to Continue as a Going Concern

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the accompanying financial statements, the Company has suffered recurring losses, has no on-going operations, is in default of its obligations under the Nicaraguan oil and gas concessions and has a significant working capital deficit, which raisesdeficit. These conditions raise substantial doubt about itsthe Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans with regard toregarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

/s/ RBSM, LLPBasis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2014.

New York, New York

AprilMay 14, 2017

2020

INFINITY ENERGY RESOURCES, INC.

Balance Sheets

The accompanying notes are an integral part of these financial statements.

INFINITY ENERGY RESOURCES, INC. AND SUBSIDIARY

Statements of Operations