AMERICAN NOBLE GAS, INC. - Annual Report: 2021 (Form 10-K)

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 2021

Or

For the transition period from __________ to __________.

Commission File Number: 000-17204

AMERICAN NOBLE GAS INC

(Exact name of registrant as specified in its charter)

15612 College Blvd, Lenexa, KS 66219

(Address of principal executive offices) (Zip Code)

(913) 948-9512

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Securities registered pursuant to Section 12(g) of the Act:

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No ☒

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer”, “accelerated filer”, “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act). Yes ☐ No ☒

As of June 30, 2021, the aggregate market value of the Registrant’s common equity held by non-affiliates, computed by reference to the closing price on June 30, 2021 ($0.24 per share) was $1,686,535.

The number of shares of our common stock issued and outstanding as of April 4, 2022 was 19,262,015.

Documents incorporated by reference:

Certain information required by Items 10, 11, 12, 13 and 14 of Part III of this Annual Report on Form 10-K is incorporated by reference to our definitive Proxy Statement for the 2022 Annual Meeting of Shareholders, to be filed with the Securities and Exchange Commission within 120 days after the fiscal year ended December 31, 2021.

Table of Contents

Note Regarding Forward Looking Statements

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

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

Readers are cautioned not to place undue reliance on the forward-looking statements contained herein, which speak only as of the date hereof. We believe the information contained in this Annual Report on Form 10-K to be accurate as of the date hereof. Changes may occur after that date, and we will not update that information except as required by law.

As used in this Annual Report on Form 10-K, “AMGAS,” the “Company,” “we,” “us” and “our” refer collectively to American Noble Gas Inc (f/k/a Infinity Energy Resources, Inc.), its predecessors and subsidiaries or one or more of them as the context may require.

Part I

Item 1. Business.

DESCRIPTION OF BUSINESS

The financial statements contained in this Annual Report on Form 10-K as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2021.

COVID–19 Pandemic

Since early 2020, economies throughout the world have been and continue to be disrupted by the continuing effects of the COVID-19 pandemic, which may limit access to our management, support staff and professional advisors. In addition, the capital markets have experienced disruptions and our efforts to raise necessary capital may be adversely impacted by the continuing effects of the COVID-19 pandemic. We cannot forecast with any certainty when the disruptions caused by the COVID-19 pandemic will cease to impact our business and the results of our operations. In reading this Annual Report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties caused by the COVID-19 pandemic. These factors may not only impact our operations, financial condition and our ability to raise capital to support our operations but our overall ability to react timely to mitigate the impact of this event. Furthermore, it may hamper our efforts to comply with our filing obligations with the Securities and Exchange Commission (the “SEC”).

Overview

Historically, the Company has been an oil and natural gas exploration, development and production company, which was primarily in the business of drilling and operating oil and gas wells. From 2009 to 2020, the Company had pursued the exploration of potential oil and gas resources in the United States and in the Perlas and Tyra concession blocks in offshore Nicaragua in the Caribbean Sea (the “Concessions”), which contain a total of approximately 1.4 million acres. In January 2020, the Company decided to cease its activities, exploration and production in the Concessions.

Recently, the Company has changed its focus to include the exploration and development of noble gas and rare earth minerals. Noble gases and rare earth minerals are generally present in either the natural gas or brine water produced by conventional oil and gas wells. Therefore, we are now focusing on exploration and development of areas that may contain noble gas and rare earth mineral reserves in addition to exploration and development of traditional oil and gas.

The Company is assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of natural gas and oil properties in the United States that may include noble gases and rare earth minerals, including the possibility of acquiring businesses or assets that provide support services for the production of oil, gas, noble gas and rare earth minerals in the United States.

Acquisition of Kansas Oil and Gas Properties

On April 1, 2021, we completed the acquisition of the production and mineral rights/leasehold for oil and gas properties, subject to overriding royalties to third parties, in the Central Kansas Uplift geological formation covering over 11,000 contiguous acres (the “Properties”). In addition to the Properties, the assets purchased included existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce oil from the Reagan Sand zone (a Cambrian age formation producing heavy oil) at an approximate depth of 3,600 feet.

We have commenced with certain rework to the existing production wells subsequent to the acquisition of the Properties and intend to continue doing so during 2022. We plan to develop the Properties’ existing oil and gas reserves, including the exploration for the existence of new oil and gas zones and other mineral reserves, in particular the Noble gases, that the Properties may hold.

Farmout Agreement to Explore and Develop Unconventional Gas and Brine Materials in the Hugoton Gas Field

On April 4, 2022, the Company acquired a 40% interest in a joint venture (the “AMGAS JV”) that has a farmout agreement (the “Farmout Agreement”) with Scout Energy Management, LLC (“Scout”) with regards to the oil and gas interests of Scout in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas. The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well scheduled to begin in April 2022. The AMGAS JV will utilize Scout’s existing infrastructure assets, including water disposal, gas gathering and helium processing. In addition, the Farmout Agreement provides the AMGAS JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, located in Grant County, Kansas, which will enable the AMGAS JV to market and sell the helium produced at prevailing market prices.

The AMGAS JV also acquired the right to all brine minerals, subject to a ten percent (10%) royalty to Scout, across Finney and Haskell Counties. Brine minerals are harvested from the formation water produced from active, and to be drilled, oil and gas wells and may include a variety of dissolved minerals, including bromine and iodine. The AMGAS JV plans to target brine minerals with commercial quantities of bromine and iodine. The AMGAS JV is currently developing proprietary technology to recover brine minerals, particularly with respect to bromine, which is well underway and has demonstrated recovery efficiency and is expected to be available for use in existing and future development wells. The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well scheduled to be spudded in April 2022. The AMGAS JV will utilize Scout’s existing infrastructure assets including water disposal, gas gathering and helium processing as part of the Farmout Agreement. The Farmout Agreement provides our JV with rights to take in-kind, and market its share of helium at the tailgate of Jayhawk Gas Plant. AMGAS JV will be able to market and sell the helium produced at prevailing market prices by taking its helium in-kind.

Nicaraguan Concessions

We began pursuing an oil and gas exploration opportunity in offshore Nicaragua in the Caribbean Sea in 1999. Since then, we have built relationships with the Instituto Nicaraguense de Energia (“INE”) and undertook the geological and geophysical research that helped us to become one of only six companies qualified to bid on offshore blocks in the first international bidding round held by INE in January 2003.

On March 5, 2009, we acquired the Concessions. After the acquisition of the Concessions, we conducted an environmental study and developed geological information from the reprocessing and additional evaluation of existing 2-D seismic data of the Concessions. In April 2013, the Nicaraguan government formally approved our environmental impact assessment, at which time we had commenced significant activity under an initial work plan involving the acquisition of new seismic data on the Concessions. We undertook seismic shoots during late 2013 that resulted in the acquisition of new 2-D and 3-D seismic data and had reviewed it to select initial drilling sites for exploratory wells.

We were in default of various provisions of the Concessions agreements for several years and the Nicaraguan government subsequently terminated the Concessions agreements. We had been seeking a resolution of these defaults, including the ability to renew and/or renegotiate the terms of the Concessions contracts, with the Nicaraguan government to permit us to cure such defaults. However, the Nicaraguan political climate and domestic issues, as well other factors, caused the Company to abandon such efforts and the Concessions in 2020. As a result, as of the date of this Annual Report on Form 10-K, the Concessions agreements are no longer in effect and the Company has abandoned all of its efforts to renew and/or renegotiate the terms of the Concessions agreements with the Nicaraguan government to cure such defaults.

Recent Developments

Name change

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved an amendment to the Company’s Certificate of Incorporation, changing the Company’s name to American Noble Gas, Inc.

Stockholder Written Consent Amendment

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved an amendment to the Company’s Certificate of Incorporation, removing the provision providing that any action taken by the stockholders by written consent in lieu of a meeting requires that all of the Company’s stockholders entitled to vote on such action consent in writing thereto.

Securities Authorized for Issuance under Equity Compensation Plans

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved the American Noble Gas, Inc. 2021 Stock Option and Restricted Stock Plan (the “2021 Plan”) and we reserved 5,000,000 shares of Common Stock for issuance under the 2021 Plan.

Reincorporation in Nevada

On December 7, 2021, pursuant to an agreement and plan of merger (the “Agreement and Plan of Merger”), American Noble Gas, Inc., a Delaware corporation (the “Predecessor”), merged with and into its wholly owned subsidiary, American Noble Gas Inc, a Nevada corporation (“AMGAS-Nevada” and/or the “Company”) with AMGAS-Nevada continuing as the surviving corporation. In conjunction with the merger, AMGAS-Nevada succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor existing immediately prior to the merger. The merger was consummated by the filing of a Certificate of Merger on December 7, 2021 with the Secretary of State of the State of Delaware and Articles of Merger with the Secretary of State of the State of Nevada. The Agreement and Plan of Merger and transactions contemplated thereby were adopted by the holders of a majority of the outstanding shares of the Predecessor’s common stock, par value $0.0001 per share (“Common Stock”), and/or Series A Convertible Preferred Stock, par value $0.0001 per share (“Series A Convertible Preferred Stock”), on an as-converted common stock basis, by written consent in lieu of a special meeting of stockholders, in accordance with the Delaware General Corporation Law.

Pursuant to the Agreement and Plan of Merger, (i) each outstanding share of the Predecessor’s common stock automatically converted into one share of common stock, par value $0.0001 per share, of AMGAS-Nevada, (ii) each outstanding share of the Predecessor’s Series A Convertible Preferred Stock automatically converted into one share of Series A Convertible Preferred Stock, par value $0.0001 per share, of AMGAS-Nevada, and (iii) each outstanding option, right or warrant to acquire shares of the Predecessor common stock converted into an option, right or warrant to acquire an equal number of shares of AMGAS-Nevada common stock under the same terms and conditions as the original options, rights or warrants.

Similar to the shares of common stock of the Predecessor prior to the merger, the shares of AMGAS-Nevada common stock are quoted on the OTCQB tier operated by the OTC Markets Group Inc. under the symbol “IFNY”. In accordance with the Agreement and Plan of Merger, each outstanding certificate previously representing shares of the Predecessor’s common stock or Series A Preferred Stock automatically represents, without any action of the Predecessor’s stockholders, the same number of shares of AMGAS-Nevada common stock or Series A Preferred Stock, as applicable.

Pursuant to the Agreement and Plan of Merger, the directors and officers of the Predecessor immediately prior to the merger became the directors and officers of AMGAS-Nevada and continued their respective directorship or services with the Company on the same terms as their respective directorship or services with the Predecessor immediately prior to the merger.

As a result of the merger, the internal affairs of the Company ceased to be subject to the Delaware General Corporation Law or governed by the Predecessor’s Certificate of Incorporation and bylaws. As of the December 7, 2021, effective date of the merger, the Company is now subject to the Nevada Revised Statutes and is governed by the Company’s articles of incorporation (the “Articles of Incorporation”).

All references to the Company in this Annual Report on Form 10-K refer to the Predecessor prior to the merger, and AMGAS-Nevada subsequent to the merger.

Common Stock

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved an amendment to the Company’s Certificate of Incorporation, increasing the Company’s authorized shares of Common Stock, from 75,000,000 shares to 500,000,000 shares.

Issuance of Series A Convertible Preferred Stock

On March 16, 2021, the Company approved and filed a Certificate of Designation of Preferences, Rights and Limitations of the Series A Convertible Preferred Stock (“COD”). The COD provides for the issuance of up to 27,778 shares of Series A Convertible Preferred Stock with a stated/liquidation value of $100 per share. Pursuant to the provisions of the COD, the Series A Convertible Preferred Stock is convertible, at the option of the holders thereof, at any time, subject to certain beneficial ownership limitations, into shares of Common Stock determined on a per share basis by dividing the $100 stated/liquidation value of such share of the Series A Convertible Preferred Stock by the $0.32 per share conversion price, which conversion price is subject to certain adjustments. In addition, the COD provides for the payment of 10% per annum cumulative dividends, in (i) cash, or (ii) shares of Common Stock, to the holders of the Series A Convertible Preferred Stock based on the stated/liquidation value, until the earlier of (i) the date on which the shares of Series A Convertible Preferred Stock are converted to common stock or (ii) date the Company’s obligations under the COD have been satisfied in full. The shares of Series A Convertible Preferred Stock also (i) vote on an as-converted to Common Stock basis, subject to certain beneficial ownership limitations, (ii) are subject to mandatory conversion into Common Stock upon the closing of any equity financing transaction consummated after the original issue date, pursuant to which the Company raises gross proceeds of not less than $5,000,000, (iii) rank senior to the Common Stock and any class or series of capital stock created after the Series A Convertible Preferred Stock and (iv) have a special preference upon the liquidation of the Company.

On March 26, 2021, the Company entered into a Securities Purchase Agreement with five (5) accredited investors providing for an aggregate investment of $2,050,000 by the investors for the issuance by the Company to them of (i) 22,776 shares of Series A Convertible Preferred Stock with a stated/liquidation value of $100 per share; and (ii) warrants, with a term of five and a half (5.5) years, exercisable six (6) months after issuance, to purchase an aggregate of up to 5,256,410 shares of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments thereunder. The Series A Convertible Preferred Stock is convertible into an aggregate of up to 7,117,500 shares of Common Stock. Holders of the warrants may exercise them by paying the applicable cash exercise price or, if there is not an effective registration statement for the sale of the warrant shares within six (6) months following the Closing Date, as defined in the warrants, by exercising on a cashless basis pursuant to the formula provided in the warrants. Net proceeds from the issuance of Series A Convertible Preferred Stock totaled $1,929,089 after deducting the placement agent fee and other expenses of the offering. The Company used the proceeds of the Series A Convertible Preferred Stock offering to complete the acquisition and development of the Properties, to pay-off the 8% convertible note payable issued in August 2020 and for general working capital purposes. On July 21, 2021, the Company filed a registration statement on Form S-1 to register the shares of Common Stock upon conversion of the Series A Convertible Preferred Stock and the shares of Common Stock underlying such warrants.

The holders of the Series A Convertible Preferred Stock agreed to a 4.99% beneficial ownership cap that limits the investors’ ability to convert its Series A Convertible Preferred Stock and/or exercise its common stock purchase warrants. Such limitation can be raised to 9.99% upon 60 days advance notice to the Company.

8% Convertible Note Issuances

On August 30, 2021 and October 29, 2021, the Company entered into two Securities Purchase Agreements with one and three, respectively, accredited investors for the Company’s Senior Unsecured Convertible Promissory Notes due October 29, 2022 (the “8% Notes”), with an aggregate principal face amount of approximately $650,000. The 8% Notes are, subject to certain conditions, convertible into an aggregate of 1,300,000 shares of Common Stock, at a price of $0.50 per share. The Company also issued five and one half-year Common Stock purchase warrants to purchase up to 1,850,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments which are immediately exercisable. The investors purchased the 8% Notes and the warrants from the Company for an aggregate purchase price of $650,000 and the proceeds were used for general working capital purposes. The 8% Notes bear interest at a rate of 8% per annum. A discount was recorded for the estimated fair value of the detachable warrants issued, which will be amortized to interest expense over the term of the 8% Notes using the interest method.

Debt Settlement Agreements and Issuance of 3% Convertible Promissory Notes Payable

On March 31, 2021, the Company entered into debt settlement agreements (the “Debt Settlement Agreements”) with six creditors (five of which were related parties), which extinguished accounts payable and accrued liabilities totaling $2,866,497 in exchange for the issuance of $28,665 in principal balance of 3% Convertible Promissory Notes (the “3% Notes”) with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share. The 3% Notes allow for prepayment at any time with all principal and accrued interest becoming due and payable at maturity on March 30, 2026 (“3% Notes Maturity Date”). The 3% Notes are convertible as to principal and any accrued interest, at the option of the holder, into shares of the Company’s Common Stock at any time after the issue date and prior to the close of business on the business day preceding the 3% Notes Maturity Date at the rate of fifty cents ($0.50) per share, subject to normal and customary adjustment.

An aggregate of $2,577,727 of the total accounts payable and accrued liabilities that were extinguished were with the five related parties. Such related parties were issued $25,777 principal balance of the 3% Notes and warrants to purchase 5,155,454 shares of Common Stock in exchange for the extinguishment of their respective debt obligations.

Issuance of Shares of Common Stock in April 2021

On April 1, 2021, the Company and the holder of a $50,000 outstanding convertible note entered into a settlement agreement, pursuant to which the Company issued to such holder 145,000 shares of Common Stock in consideration for the extinguishment of the outstanding principal and accrued interest on such note and the cancellation of common stock purchase warrants of the Company issued in connection with the issuance of such note. The 145,000 shares of Common Stock issued to such holder pursuant to such settlement agreement were valued at $40,600, based on the closing market price of the Common Stock on the date of such extinguishment and cancellation.

Also on April 1, 2021, the Company and the holder of a $35,000 outstanding convertible note entered into a settlement agreement pursuant to which the Company issued to such holder 100,000 shares of Common stock in consideration for the extinguishment of the outstanding principal and accrued interest on such note and the cancellation of common stock purchase warrants of the Company issued in connection with the issuance of such note. The 100,000 shares of Common Stock issued to such holder pursuant to such settlement agreement were valued at $28,000, based on the closing market price of the Common Stock on the date of such extinguishment and cancellation.

Additional Compensation Paid to Company’s President, Chief Executive Officer and Chairman

On April 1, 2021, the Company’s board of directors (the “Board”) authorized the cash payment of $30,000 to Stanton E. Ross, the Company’s President, Chief Executive Officer and Chairman of the Board, in consideration for the time Mr. Ross devoted to assisting the acquisition of the Properties and its drilling program.

Additional Stock Option Grants to Company’s Board of Directors and Officers

On June 4, 2021, the Board authorized the grant of stock options to purchase up to (i) 500,000 shares of Common Stock to Mr. Ross, (ii) 100,000 shares of Common Stock to Leroy C. Richie, a member of the Board, (iii) 100,000 shares of Common Stock to Daniel F. Hutchins, the Company’s Chief Financial Officer, Treasurer, Corporate Secretary and member of the Board, (iv) 350,000 shares of Common Stock to John L. Loeffelbein, the Company’s Chief Operating Officer and (v) a total of 750,000 shares of Common Stock to three Company consultants. All such stock options were granted outside the Company’s 2015 Stock Option and Restricted Stock Plan, vest on June 4, 2022, contingent upon the holder of such options continuing to serve the Company on such date, have 10-year terms and are exercisable at $0.50 per share. Such individuals were granted such stock options in consideration for the time and efforts such individuals devoted to assisting the acquisition of the Properties and its drilling program.

Acquisition of Kansas Oil and Gas Properties

On July 31, 2019, we acquired an option (the “Option”) from Core Energy, LLC, a closely held company (“Core”), to purchase the production and mineral rights/leasehold of the Properties. We paid a non-refundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019, which right was not exercised. On September 2, 2020, the Company acquired a new option from Core under similar terms as the previous Option, which permitted the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020, the parties executed an asset purchase and sale agreement (the “Asset Purchase Agreement”) which extended the new option to January 11, 2021.

We and Core, as well as all of the members of Core, Mandalay LLC and Coal Creek Energy, LLC (entered into a side letter agreement on September 2, 2020 and a second side letter on March 31, 2021 (collectively, the “Side Letters”), pursuant to which we and Core agreed to set the closing date of the acquisition of the Properties under the Asset Purchase Agreement, to April 1, 2021. Pursuant to the Side Letters, the Company is responsible for reimbursing Core, Mandalay LLC and Coal Creek Energy, LLC for certain prorated revenues and expenses from January 1, 2021 through April 1, 2021.

On April 1, 2021, we completed the acquisition of the Properties, under the same terms of the Asset Purchase Agreement. The purchase of the Properties included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

Following the acquisition, we commenced rework of the existing production wells of the Properties and have performed testing and evaluation of the existence of noble gas reserves on the Properties including helium, argon and other rare earth minerals/gases. Testing of the Properties for noble gas reserves has provided encouraging but not conclusive results and the Company has yet to determine the possibility of commercializing the noble gas reserves on the Properties. The Company plans to assess the Properties existing oil and gas reserves while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves and specifically the noble gas reserves that the Properties may hold.

Farmout Agreement to Explore and Develop Unconventional Gas and Brine Materials in the Hugoton Gas Field

On April 4, 2022, the Company acquired a 40% interest in the AMGAS JV that holds the Farmout Agreement with Scout with regards to its oil and gas interests in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas.

The Farmout Agreement covers drilling and completion of up to 50 wells. The AMGAS JV will utilize Scout’s existing infrastructure assets, including water disposal, gas gathering and helium processing. In addition, the Farmout Agreement provides the AMGAS JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, located in Grant County, Kansas, which will enable the AMGAS JV to market and sell the helium produced at prevailing market prices.

The AMGAS JV also acquired the right to all brine minerals subject to a ten percent (10%) royalty to Scout, across Finney and Haskell Counties. Brine minerals are harvested from the formation water produced from active, and to be drilled, oil and gas wells and may include a variety of dissolved minerals including bromine and iodine. The AMGAS JV plans to target brine minerals with commercial quantities of bromine and iodine. AMGAS, pursuant to the terms of the USNG Letter Agreement (as defined below), is currently developing proprietary technology to recover brine minerals, particularly with respect to bromine, which is well underway and has demonstrated recovery efficiency and is expected to be available for use in existing and future development wells.

The first exploratory well is scheduled to commence in April 2022 near Garden City, Kansas with a goal to evaluate the first of two separate silty shale members of the Chase group of formations – the Gage Shale and the Holmesville Shale. These two shale members have not previously been targeted for exploration by historical operations in the field.

The exploration and development activities will be directed and coordinated under the terms of the USNG Letter Agreement (as defined below) entered in November 2021 with input from the Board of Advisors (as defined below).

USNG Letter Agreement

On November 9, 2021, the Company entered into a letter agreement (the “USNG Letter Agreement”) with U.S. Noble Gas, LLC (“USNG”), pursuant to which USNG would provide consulting services to the Company for exploration, testing, refining, production, marketing and distribution of various potential reserves of noble gases and rare earth element/minerals on the Properties. The USNG Letter Agreement would cover all of the noble gas, specifically helium, and rare earth elements/minerals potentially existing on the Properties and the future acquisitions of the Company, if any, including the Hugoton Gas Field.

The USNG Letter Agreement also provided that USNG would supply a large vessel designed for flows up to 5,000 barrels of water per day at low pressures, known as a gas extraction/separator unit. The gas extraction/separator unit is a dewatering vessel that the Company may use for multiple wells in the future.

The USNG Letter Agreement required the Company to establish a four-member board of advisors (the “Board of Advisors”) comprised of various experts in noble gas and rare earth elements/minerals. The Board of Advisors will help attract both industry partners and financial partners for developing a large helium, noble gas and/or rare earth element/mineral resources that may exist in the region where the Company currently operates. The industry partners would include helium, noble gas and/or rare earth element/mineral purchasers and exploration and development companies from the energy industry. The financial partners may include large family offices or small institutions.

The Company is required to pay USNG a $8,000 monthly cash fee beginning at the onset of commercial helium or minerals production and sales, subject to certain thresholds. Such monthly fees will become due and payable for any month that AMGAS receives cash receipts in excess of $25,000 derived from the sale of noble gases and/or rare earth elements/minerals. The Company has not yet achieved the $25,000 cash receipts threshold, therefore there has been no payment or accrual liability relative to this cash fee provision as of December 31, 2021.

[The USNG Letter Agreement has an initial term of 5 years, which shall thereafter continue for successive one-year periods, provided that there is no uncured breach, unless otherwise terminated by either party upon a written notice of intent to non-renew.]

In consideration for the consulting services to be rendered and pursuant to the terms of the USNG Letter Agreement, the Company issued warrants to purchase, in the aggregate, 2,060,000 shares of Common Stock, at an exercise price of $0.50 to three of USNG’s principal consultants and four third-party service providers. The Company also issued warrants to purchase, in the aggregate, 1,200,000 shares of Common Stock at $0.50 per share exercise price to three members of the Board of Advisors. The Company granted a total of 3,260,000 warrants to purchase its Common Stock with an exercise price of $0.50 per share in connection with the USNG Letter Agreement and the arrangements described therein. The warrants expire five years after the date of the USNG Letter Agreement.

Letter of Engagement

On April 1, 2022, the Company engaged Univest Securities, LLC (“Univest”) to act as the exclusive financial advisor, and the lead underwriter in a public offering (the “Offering”), of the Company. The size of the Offering is expected to be between $10,000,000 to $15,000,000, priced at a per share in order to up-list the Company onto the Nasdaq market (the “Public Offering Price”) upon closing of the Offering. The price will be determined by mutual agreement of the Company and Univest and will be determined at the signing of the final underwriting agreement (the “Underwriting Agreement”), which will based on, among other things, market conditions at the time of the Offering.

Pursuant to the Underwriting Agreement, Univest will act as principal, or the representative of a number of broker-dealers, that will offer the securities in a public offering. The letter of engagement between the Company and Univest (the “Letter of Engagement”) anticipates that Univest will receive a gross discount equal to eight percent (8%) of the Public Offering Price on each share of the securities being offered. Univest has agreed to negotiate in good faith with other underwriters who, acting severally, could contract to act as an underwriter in connection with the sale of the securities being offered. Univest will also have the right to re-offer all or any part of the securities being offered to other broker-dealers. Univest will be entitled to warrants to purchase common stock representing five percent (5%) of the amount of securities sold in the Offering with an exercise price determined to be 110% of the Public Offering Price.

The Company also agreed to reimburse Univest, at and out of the proceeds of the Offering closings, for all of its reasonable, out-of-pocket expenses (including, but not limited to, travel, due diligence expenses, reasonable fees and expenses of its legal counsel, roadshow and background check on the Company’s principals) in connection with the performance of its services thereunder not to exceed an aggregate of $150,000. In addition, at the closing of the Offering, the Company agreed to reimburse Univest one percent (1%) of the actual amount of the Offering as nonaccountable expense of the offering.

The term of the Letter of Engagement expires upon the earlier to occur of (i) six (6) months from the date of execution or (ii) the mutual written agreement of the Company and Univest.

Quotation of Common Stock on OTCQB

Effective July 13, 2021, the Company’s Common Stock was approved for quotation on the OTCQB^® Venture Market under the symbol “IFNY.”

Principal Executive Offices

Our principal executive offices are located at 15612 College Boulevard, Lenexa, Kansas 66215. Our telephone number is (913) 948-9512. Our website is https://www.ifnyoil.com/. Information on our website is not incorporated by reference into this Annual Report on Form 10-K.

Business Strategy

Our 2021 and 2020 operating objectives have been focused on the resolution of outstanding and older obligations, some of which were in default, and the acquisition of mineral rights to properties primarily in Kansas that may hold commercial reserves of oil, gas, noble gas and rare earth minerals.

Resolution of outstanding and older obligations

The Company has spent considerable time and resources negotiating and settling older outstanding obligations during 2020 and 2021. During the years ended December 31, 2021 and 2020, the Company recorded gains on the extinguishment of liabilities through negotiation of settlements with certain creditors and through the operation of law as follows:

Gain on exchange and extinguishment of liabilities - On March 31, 2021, the Company entered into Debt Settlement Agreements with six creditors (five of which were related parties), which extinguished accounts payable and accrued liabilities totaling $2,866,497 in exchange for the issuance of $28,665 in principal balance of the 3% Notes with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share. The 3% Notes allow for prepayment at any time with all principal and accrued interest becoming due and payable at maturity on March 30, 2026, the 3% Notes Maturity Date. The 3% Notes are convertible as to principal and any accrued interest, at the option of holder, into shares of the company’s Common Stock at any time after the issue date and prior to the close of business on the business day preceding the 3% Notes Maturity Date at the rate of fifty cents ($0.50) per share, subject to normal and customary adjustment.

The warrants to purchase 5,732,994 shares of Common Stock issued pursuant to the Debt Settlement Agreements were valued at $1,605,178 using the Black-Scholes methodology.

An aggregate of $2,577,727 of the total accounts payable and accrued liabilities that were extinguished were with the five related parties. Such related parties were issued $25,777 principal balance of the 3% Notes and warrants to purchase 5,155,454 shares of Common Stock in exchange for the extinguishment of their respective debt obligations. The Company recognized a gain on extinguishment of liabilities for the portion of the extinguishment with non-related parties. Furthermore, it recognized the portion of the gain on extinguishment of liabilities with related parties as a contribution of capital.

The gain on extinguishment of liabilities from the Debt Settlement Agreements was determined as follows:

Gain on extinguishment of trade payables - The Company incurred trade payable obligations totaling $4,840,136 during 2013, which were extinguished in 2020 pursuant to the relevant statute of limitations.

Acquisition of mineral rights to properties

Acquisition of Kansas Oil and Gas Properties - On April 1, 2021, we completed the acquisition of the Properties in the Central Kansas Uplift geological formation covering over 11,000 contiguous acres, subject to overriding royalties to third parties. The acquisition price aggregated $900,000 in cash and included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

We have commenced with certain rework to the existing production wells subsequent to the acquisition and have performed testing and evaluation of the existence of noble gas reserves on the Properties, including helium, argon and other rare earth minerals/gases. Testing for noble gas reserves has provided encouraging but not conclusive results, and we have yet to determine the possibility of commercializing the noble gas reserves on the Properties. We plan to assess existing oil and gas reserves while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves, specifically the noble gas reserves, that the Properties may hold.

Hugoton Gas Field Farmout Agreement - On April 4, 2022, the Company acquired a 40% interest in the AMGAS JV that holds a Farmout Agreement with Scout with regards to its oil and gas interests in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas. The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well scheduled to be spudded in April 2022. The AMGAS JV will utilize Scout’s existing infrastructure assets including water disposal, gas gathering and helium processing. The Farmout Agreement provides the JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, which will enable the AMGAS JV to market and sell the helium produced at prevailing market prices. The AMGAS JV also acquired the rights to all brine minerals subject to a ten percent (10%) royalty to Scout, across Finney and Haskell Counties.

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 and the exploration and development of noble gas and rare earth minerals. 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 the development of our recently acquired Kansas Oil and Gas Properties and the Hugoton Gas Field. We may find it difficult to acquire the services, equipment, labor and materials necessary to explore, operate and develop those properties with the intense competition in our industry. 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 profitably the Kansas Oil and Gas Properties and the Hugoton Gas Field in the face of this competition.

Government Regulation of the Oil and Gas Industry

General

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

The following 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 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 may affect our operations and costs. The areas affected include:

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

Operating Hazards and Insurance

The oil and natural gas business involves a variety of operating risks. Historically, we were unable to maintain insurance against such potential risks and losses. The Company has relevant liability insurance coverage on its Kansas Oil and Gas Properties which is maintained by the licensed operator of the lease.

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

Employees

We have three employees, our Chief Executive Officer, Chief Operating Officer and Chief Financial Officer, whose compensations have primarily been in the form of restricted stock grants. Recurring cash salaries for our employees were suspended effective January 1, 2018. During 2021, our Chief Executive Officer was awarded a cash bonus of $30,000. 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 in previous years has been the Concessions, located in the Caribbean Sea, offshore Nicaragua, which we have abandoned all of our efforts in 2020. In 2021 and 2020, we began implementing our strategy to acquire and develop oil producing properties in the continental United States. In that regard, we acquired oil and gas leases the Properties of approximately 11,000 acres located in central Kansas.

Kansas Properties

On April 1, 2021, we completed the acquisition of the production and mineral rights/leasehold for oil and gas properties, subject to overriding royalties to third parties, in the Properties, located in Central Kansas Uplift geological formation covering over 11,000 contiguous acres. The acquisition price aggregated $900,000 in cash and included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

We have commenced with certain rework to the existing production wells subsequent to the acquisition and have performed testing and evaluation of the existence of noble gas reserves on the Properties including helium, argon and other rare earth minerals/gases. Testing for noble gas reserves has provided encouraging but not conclusive results, and we have yet to determine the possibility of commercializing the noble gas reserves on the Properties. We plan to assess the Properties existing oil and gas reserves while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves, specifically the noble gas reserves, that the Properties may hold.

Proved Reserves Reporting

The following tables summarize the net ownership interest in the proved oil and gas reserves and the standardized measure of discounted future net cash flows related to the proved oil and gas reserves of the Properties. The estimates were prepared by the Company based on the reserve reports prepared for the Company for the year ended December 31, 2021. The standardized measure presented here excludes income taxes as the tax basis for the Properties is not applicable due to the substantial net operating loss carryforwards available to the Company on a go-forward basis. The proved oil and gas reserve estimates and other components of the standardized measure were determined in accordance with the authoritative guidance of the Financial Accounting Standards Board and the SEC.

Proved Oil and Gas Reserve Quantities

Proved reserves are those quantities of oil and gas, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward, from known reservoirs, and under existing economic conditions, operating methods, and government regulations. Proved developed reserves are proved reserves that can be expected to be recovered through existing wells with existing equipment and operating methods or in which the cost of the required equipment is relatively minor compared to the cost of a new well. Proved undeveloped reserves are proved reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells where a relatively major expenditure is required for recompletion. The net proved oil and gas reserves and changes in net proved oil and gas reserves attributable to the Properties, all of which are located in the state of Kansas, are summarized below:

Standardized Measure

The standardized measure of discounted future net cash flows before income taxes related to the proved oil and gas reserves of the Properties is as follows:

Requirements for oil and gas reserve estimation and disclosure require that reserve estimates and future cash flows be based on the average market prices for sales of oil and gas on the first calendar day of each month during the year. The average prices used for the year ended December 31, 2021 under these rules were $66.34 for crude oil.

Future operating expenses and development costs are computed primarily by the Company’s petroleum engineers by estimating the expenditures to be incurred in developing and producing the proved oil and gas reserves at the end of the year, based on year end costs and assuming continuation of existing economic conditions. As mentioned above, the standardized measure presented here does not include the effects of income taxes as the tax basis for the Properties due to the substantial tax net operating loss carryforwards available to the Company which makes its use non-applicable on a go-forward basis. A discount factor of 10% was used to reflect the timing of future net cash flows. The standardized measure of discounted future net cash flows is not intended to represent the replacement cost or fair value of the Properties of the Company. An estimate of fair value would also take into account, among other things, the recovery of reserves not presently classified as proved, anticipated future changes in prices and costs, and a discount factor more representative of the time value of money and the risks inherent in oil and gas reserve estimates.

Production, Prices and Production Costs

We had no production during the year ended December 31, 2020. We began production in April 2021 following the acquisition of the Properties.

Significant Fields

Oil and natural gas production for fields containing more than 15% of the Company’s total proved reserves at each year end are presented in the table below. The Properties represents our only producing filed which produces primarily crude oil in the Otis Albert Field from the Reagan Sand Zone at a depth of 3,600 feet.

Production and Price History

The Company produced approximately 1,165 barrels of crude oil during 2021 from the Properties which had a total of 3 producing wells. We received an average price per barrel of crude oil sold of $67.84 per barrel for 2021.

Production wells

The following table sets forth the number of production wells in which the Company owned a working interest as of December 31, 2021. We utilize a third-party licensed operator to operate all of our wells. Productive wells consist of producing wells and wells capable of producing, including oil wells awaiting connection to production facilities to commence deliveries. The Company owns 100% of the working interest in all production wells as of December 31, 2021.

Drilling activity

The Company did not drill any new wells during the years ended December 31, 2021 and 2020.

Costs Incurred in Oil and Gas Activities

Costs incurred during the year ended December 31, 2021 in connection with the Company’s oil and gas acquisition, exploration and development activities are shown below.

The Company incurred $272,799 in exploration costs on the Properties primarily to assess the potential of noble gas, including helium and argon, and rare earth mineral reserves, including bromine, lithium and iodine. The Company is assessing the results of such tests to determine whether commercial amounts of reserves exist that can be profitably extracted on the Properties.

Aggregate capitalized costs relating to the Company’s oil and gas producing activities, and related accumulated depreciation, depletion, impairment and amortization are as follows:

The $900,000 acquisition price of the Properties was allocated to tangible equipment and seismic data acquired as part of the acquisition. None of the acquisition costs was allocated to proved or unproved oil and gas reserves present on the Properties.

Costs Not Being Amortized

Oil and gas property costs not being amortized at December 31, 2021 and 2020, costs by year that the costs were incurred, are as follows:

Acreage Data

The following table sets forth the approximate gross and net acres of developed and undeveloped oil and gas leases we held as of December 31, 2021.

Item 3. Legal Proceedings.

The Company is subject to numerous claims and legal actions in which vendors are claiming breach of contract due to the Company’s failure to pay amounts due. The Company believes that it has made adequate provision for these claims in the accompanying financial statements.

The Company is currently involved in litigation as follows:

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

Shares of our Common Stock are traded on the OTCQB Venture Tier Market (OTCQB) under the symbol “IFNY”. The following table sets forth the high and low closing bid prices for AMGAS’s Common Stock as reported by the OTCQB. The closing price of our Common Stock on April 5, 2022 was $0.38 per share. The quotations reflect interdealer bid prices without retail markup, markdown or commission and may not represent actual transactions.

Holders of Common Stock

At December 31, 2021, there were approximately 159 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. 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 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.

Holders of Series A Convertible Preferred Stock are entitled to receive the payment of 10% per annum cumulative dividends, in (i) cash, or (ii) shares of Common Stock, based on the stated/liquidation value of the Series A Convertible Preferred Stock. The holders of such Series A Convertible Preferred Stock were paid dividends in 2021 of $174,449 and $-0- in 2020.

Securities Authorized for Issuance under Equity Compensation Plans

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved the 2021 Plan and we reserved 5,000,000 shares of Common Stock for issuance under the 2021 Plan. At the Annual Meeting of Stockholders held on September 25, 2015, the stockholders approved the 2015 Stock Option and Restricted Stock Plan (the “2015 Plan”) and we reserved 500,000 shares of Common Stock for issuance under the 2015 Plan.

Under the 2021 Plan and the 2015 Plan, both incentive and non-statutory stock options may be granted to employees, officers, non-employee directors and consultants. Options granted under the 2021 Plan and 2015 Plan allow for the purchase of shares 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 and expire ten years after the date of grant. The Company has issued stock options and restricted stock awards that are outside of a formal plan with terms similar to the 2021 Plan and 2015 Plan as described in this Annual Report on Form 10-K.

As of December 31, 2021, an aggregate 5,500,000 shares were available for future grants under the 2021 Plan and the 2015 Plan. All other Plans have now expired.

The following table sets forth certain information regarding our stock option plans as of December 31, 2021:

Recent Issuances of Unregistered Securities

During the last three (3) years, we have sold the following unregistered securities:

On May 23, 2019, we and an investor (“May 2019 Investor”) entered into an exchange agreement (“May 2019 Exchange Agreement”) and a side-letter agreement (“Side-Letter Agreement”) related to the private placement of a $12.0 million principal amount secured convertible note and a warrant to purchase 1,800,000 shares of Common Stock in May 2015 (the “May 2015 Private Placement”). Under the May 19 Exchange Agreement, the May 2019 Investor exchanged all of its rights under the original securities issued in the May 2015 Private Placement for 770,485 shares of Common Stock (which was amended to 605,816 shares of Common Stock pursuant to Amendment No.1 to the May 2019 Exchange Agreement, dated May 30, 2019) and certain rights to acquire additional securities in the future, which may be exercised for additional shares of Common Stock. Pursuant to the provisions of the Side-Letter Agreement, dated November 23, 2019, the parties agreed to the issuance of 567,348 shares of Common Stock and a warrant to purchase up to 61,380 shares of Common Stock at an exercise price of $0.50 per share, which expires on June 19, 2026. Pursuant to the Side-Letter Agreement, we also agreed that from the execution date of the May 2019 Exchange Agreement until twelve (12) months from such date, we will not raise capital at a price that is below $0.10 per share of Common Stock (as adjusted for stock splits, stock dividends, stock combinations, recapitalizations and similar events) without the consent of the May 2019 Investor. Such shares of Common Stock and rights to acquire additional securities were issued in reliance on Section 3(a)(9) of the Securities Act.

On June 4, 2019, we and WestPark Capital, Inc. (“WestPark”) executed an exchange agreement, pursuant to which WestPark received a new warrant to purchase up to 50,000 shares of Common Stock (post-split basis) with an exercise price of $0.50 per share and a seven-year term in exchange for its original warrant in connection with the May 2015 Private Placement. The new warrant does not contain any price protection provisions. Such new warrant was issued in reliance on Section 3(a)(9) of the Securities Act.

On June 19, 2019, we and a private, third-party lender entered into an exchange agreement whereby such lender received a warrant to purchase up to 570,000 shares of Common Stock (post-split basis) with an exercise price of $0.50 per share and a seven-year term in exchange for its two convertible notes payable issued on November 8, 2016 and November 7, 2017, respectively, and accrued interest thereon. The warrant does not contain any price protection provisions. Such warrant was issued in reliance on Section 3(a)(9) of the Securities Act.

During August 2019 through October 2019, we issued a total of 1,425,000 shares of Common Stock at $0.10 per share for a total of $142,500 pursuant to a private placement memorandum to certain accredited investors. We used the proceeds to pay the $50,000 nonrefundable deposit required for the Option from Core, to purchase the production and mineral rights/leasehold on the Properties and for general working capital purposes. We relied on the exemption provided by Section 4(a)(2) of the Securities Act and Regulation D thereunder in issuing the shares of Common Stock in the private placement. We paid no commission or other similar compensation in connection with the transactions.

On August 19, 2020, we entered into a securities purchase agreement (the “August Purchase Agreement”) with one investor (the “August Investor”), pursuant to which we issued to the August Investor, in consideration for an aggregate of $325,000, (i) a senior unsecured convertible note payable due August 19, 2021 (the “August Note”), which was, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share; and (ii) a common stock purchase warrant (the “August Warrant”), which is immediately exercisable upon issuance and on a cashless basis if the August Warrant has not been registered 180 days after the date of issuance for up to 800,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments. Pursuant to the August Purchase Agreement, the August Note and August Warrant were issued to the August Investor in a private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder. Pursuant to the August Purchase Agreement, the August Investor was also granted certain piggy-back registration rights, whereby we agreed to register the resale of the shares of Common Stock underlying the August Warrant and the August Note. We repaid the August Note on March 26, 2021. On August 5, 2021, the Company has filed a registration statement on Form 424B4 to register for resale all of the shares of Common Stock issuable upon exercise of the August Warrant issued to the August Investor.

The exercise of the August Warrant is subject to a beneficial ownership limitation such that the August Investor may not exercise the August Warrant to the extent that such exercise would result in the August Investor being the beneficial owner in excess of 4.99% (or, upon election of the August Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to us, provided that any increase in such limitation will not be effective until 61 days following notice to us.

Additionally, pursuant to the August Purchase Agreement, for so long as the August Note or August Warrant is outstanding, the August Investor has a right to participate in any issuance of the Common Stock, Common Stock Equivalents (as defined in the August Purchase Agreement), conventional debt, or a combination of such securities and/or debt (a “Subsequent Financing”), up to an amount equal to 35% of the Subsequent Financing.

We used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the SKM Exchange Agreement (as defined below) and for general working capital.

On August 19, 2020, we granted certain of our executive officers, directors and affiliate thereof and consultant, outside of our existing equity compensation plans, and pursuant to the August 2020 Restricted Stock Agreements, an aggregate of 5,000,000 shares of Common Stock, subject to the restrictions contained therein, as compensation for their services to the Company. Such individuals were granted such shares pursuant to the exemption provided by Section 4(a)(2) of the Securities Act.

On September 24, 2020, we entered into an exchange and settlement agreement (the “SKM Exchange Agreement”) with SKM Partnership, Ltd. (“SKM”), pursuant to which SKM agreed to exchange an 8% promissory note issued by us to SKM, dated as of December 27, 2013, in the original principal amount of $1,050,000, representing outstanding principal balance of $1,000,000 and accrued and unpaid interest thereon of $481,000, for (i) a cash payment in the amount of $100,000 and (ii) 737,532 newly issued shares of Common Stock. The issuance of the 737,532 shares is being made without any restrictive legends upon reliance on the exemptions from the registration requirements of the Securities Act afforded by Section 3(a)(9) of the Securities Act and Rule 144 promulgated thereunder. The closing of the exchange occurred on September 24, 2020.

On March 26, 2021, we entered into securities purchase agreements (collectively, the “March Purchase Agreements”) with certain investors (the “March Investors”), pursuant to which, in consideration for an aggregate of $2,050,000, we issued an aggregate of 22,776 shares of Series A Preferred Stock and common stock purchase warrants (the “March Warrants”) exercisable for up to 5,256,410 shares of Common Stock six (6) months following issuance and for five (5) years after such date. Holders of the March Warrants may exercise them on a cashless basis pursuant to the formula provided in the March Warrants if there is not an effective registration statement for the sale of the shares of Common Stock underlying the March Warrants within six (6) months following the Closing Date, as defined in the March Warrants. Such securities were issued to March Investors in a private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act and/or Regulation D promulgated thereunder.

In connection with the March Purchase Agreement, we and the March Investors entered into that certain registration rights agreement (the “Registration Rights Agreement”), pursuant to which we agreed to file a registration statement to register such shares of Common Stock issuable upon conversion of the Series A Preferred Stock and such shares of Common Stock underlying the March Warrants. In order to satisfy such obligations, on August 5, 2021, the Company filed a registration statement to register for resale all of the Preferred Shares and Warrant Shares issuable upon conversion of the shares of Series A Preferred Stock and upon exercise of the March Warrants issued to the March Investors.

The closing of the private placement in connection with the March Purchase Agreements took place on March 26, 2021.

We used the proceeds of the offering of the Series A Preferred Stock to complete the acquisition of the Properties and intend to use the remaining proceeds to complete development of the Properties, to pay-off all outstanding convertible notes payable and for general working capital.

On March 31, 2021, we entered into entered into the Debt Settlement Agreements with six creditors of the Company (collectively, the “Creditors”), pursuant to which the Creditors agreed to extinguish an aggregate of $2,866,497 of debt and liabilities of the Company owed to such Creditors in consideration for the issuance to each Creditor of (i) an aggregate of approximately $28,665 in the 3% Notes , which are, subject to certain conditions, convertible at any time at the option of the Creditors into an aggregate of 65,930 shares of Common Stock (including accruable interest), at a price of $0.50 per share and (ii) common stock purchase warrants (the “Creditor Warrants”) which are immediately exercisable for up to an aggregate of 5,732,994 shares of Common Stock and for five (5) years thereafter. We also granted the Creditors certain piggy-back registration rights pursuant to the Notes and the Creditor Warrants, which were satisfied by the Company filing the registration statement on Form 424B4 on August 5, 2021. Such securities were issued to the Creditors in a private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 4(a)(2) of the Securities Act.

The 3% Notes bear interest at a rate of 3% per annum, may be voluntarily repaid in cash in full or in part by us at any time in an amount equal to the face amount plus any accrued and unpaid interest on the 3% Notes (or portion thereof) being prepaid, and mature on March 30, 2026.

On April 1, 2021, the Company and the holder of a $50,000 outstanding convertible note (the “April 2021 Creditor #1”) entered into a settlement agreement pursuant to which the Company issued to such holder 145,000 shares of Common Stock in consideration for the extinguishment of the outstanding principal and accrued interest on such note and the cancellation of common stock purchase warrants of the Company issued in connection with the issuance of such note. The 145,000 shares of Common Stock issued to such holder pursuant to such settlement agreement were valued at $40,600 based on the closing market price of the Common Stock on the date of such extinguishment and cancellation. Such securities were issued to the April 2021 Creditor #1 in a private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 3(a)(9) of the Securities Act.

Also on April 1, 2021, the Company and the holder of a $35,000 outstanding convertible note (the “April 2021 Creditor #2”) entered into a settlement agreement pursuant to which the Company issued to such holder 100,000 shares of Common Stock in consideration for the extinguishment of the outstanding principal and accrued interest on such note and the cancellation of common stock purchase warrants of the Company issued in connection with the issuance of such note. The 100,000 shares of Common Stock issued to such holder pursuant to such settlement agreement were valued at $28,000 based on the closing market price of the Common Stock on the date of such extinguishment and cancellation. Such securities were issued to the April 2021 Creditor #2 in a private placement transaction pursuant to an exemption from the registration requirements of the Securities Act provided in Section 3(a)(9) of the Securities Act.

On June 4, 2021, our Board authorized the grant of stock options to purchase up to (i) 500,000 shares of Common Stock to Mr. Ross, (ii) 100,000 shares of Common Stock to Mr. Richie, (iii) 100,000 shares of Common Stock to Mr. Hutchins, (iv) 350,000 shares of Common Stock to Mr. Loeffelbein, and (v) a total of 750,000 shares of Common Stock to three Company consultants. All such stock options vest on June 4, 2022, contingent upon the holder of such options continuing to serve the Company on such date, have 10-year terms and are exercisable at $0.50 per share. Such individuals were granted such stock options pursuant to the exemption provided by Section 4(a)(2) of the Securities Act in consideration for the time and efforts such individuals devoted to assisting the acquisition of the Properties and its drilling program.

On August 30, 2021, the Company entered into an agreement with an accredited investor (the “8% Note Investor”) for the Company’s 8% Note, with an aggregate principal face amount of $100,000. The 8% Note is, subject to certain conditions, convertible into an aggregate of 200,000 shares of Common Stock, at a price of $0.50 per share. The Company also issued a five-and-one-half-year common stock purchase warrant to purchase up to 200,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments (the “8% Note Warrant”), which is immediately exercisable. The 8% Note Investor purchased the 8% Note and 8% Note Warrant from the Company for an aggregate purchase price of $100,000. The Company also granted the 8% Note Investor certain piggy-back registration rights whereby the Company has agreed to register for resale the shares underlying the 8% Note Warrant and the conversion of the 8% Note unless the shares of the Company commences trading on the NYSE American; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; or the New York Stock Exchange, within 120 days after the closing date of such transaction.

The 8% Note bears interest at a rate of 8% per annum, may be voluntarily repaid in cash in full or in part by the Company at any time in an amount equal to 120% of the principal amount of the 8% Note and any accrued and unpaid interest. 50% of the 8% Note shall be mandatorily repaid in cash in an amount equal to 120% of the principal amount of the 8% Note and any accrued and unpaid interest in the event of the consummation by the Company of any public or private offering or other financing pursuant to which the Company receives gross proceeds of at least $2,000,000 and 100% of the 8% Note, plus accrued interest shall be mandatorily repaid in an amount equal to 120% of outstanding principal and interest in cases in which the Company receives gross proceeds of at least $3,000,000. In addition, pursuant to the 8% Note, so long as the 8% Note remains outstanding, the Company cannot enter into any financing transactions pursuant to which the Company sells its securities at a price lower than $0.50 per share without written consent of the 8% Note Investor.

The conversion of the 8% Note and the exercise of the 8% Note Warrant are each subject to its applicable beneficial ownership limitation.

The 8% Note and the 8% Note Warrant were issued to the 8% Note Investor pursuant to Section 4(a)(2) of the Securities Act, because the 8% Note Investor represented that it had sufficient sophistication and knowledge of the Company, and the issuance did not involve any form of general solicitation or general advertising. Furthermore, the 8% Note Investor made representations that the securities issued to extinguish the obligations were taken for investment purposes and not with a view to resale.

On October 29, 2021, the Company entered into a securities purchase agreement (the “November Purchase Agreement”) with three additional accredited investors (the “November Investors”) for the Company’s Senior Unsecured Convertible Promissory Notes due October 29, 2022 (the “November Notes”), with an aggregate principal face amount of $550,000. The November Notes are, subject to certain conditions, convertible into 1,100,000 shares (the “November Conversion Shares”) of Common Stock, at a price per share of $0.50 (“November Conversion Price”). Pursuant to the November Purchase Agreement, the Company also issued a five-and-one-half-year common stock purchase warrant (the “November Warrant”) to purchase up to 1,650,000 shares of Common Stock (the “November Warrant Shares” and collectively with the November Notes, the November Conversion Shares, and the November Warrant, the “November Securities”) at an exercise price of $0.50 per share, subject to customary adjustments. The November Investors purchased the November Securities for an aggregate purchase price of $850,000. The Company has also granted the November Investors certain piggy-back registration rights whereby the Company has agreed to register the resale by the November Investors of the November Warrant Shares and November Conversion Shares. The Company relied on the exemption from the registration requirements of the Securities Act, provided in Section 4(a)(2) of the Securities Act.

The November Notes bear interest at a rate of 8% per annum, may be voluntarily repaid in cash in full or in part by the Company at any time (subject to the occurrence of an event of default) in an amount equal to 120% of the principal amount of each November Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to a) 50% of the then outstanding principal amount equal to 120% of the principal amount of each November Note and any accrued and unpaid interest in the event of the consummation by the Company of any public or private offering or other financing pursuant to which the Company receives gross proceeds of at least $2,000,000 but not greater than $3,000,000; or b) 100% of the then outstanding principal amount equal to 120% of the principal amount of a November Note and any accrued and unpaid interest in the event of the consummation by the Company of any public or private offering or other financing pursuant to which the Company receives gross proceeds of in excess of $3,000,000. In addition, pursuant to the November Notes, so long as a November Note remains outstanding, the Company shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the November Conversion Price, subject to certain adjustments, without written consent of the November Investors.

The conversion of the November Notes and the exercise of the November Warrants are each subject to Beneficial Ownership Limitation.

Pursuant to the November Purchase Agreement, for a period of twelve (12) months after the Closing Date (as defined in the November Purchase Agreement), the November Investors have a right to participate in Subsequent Financing, up to an amount equal to thirty-five percent (35%) of the Subsequent Financing. The transaction completed by the November Purchase Agreement closed on November 1, 2021.

On November 9, 2021, the Company entered into a USNG Letter Agreement, pursuant to which USNG will provide consulting services to the Company for exploration, testing, refining, production, marketing and distribution of various potential reserves of noble gases and rare earth element/minerals on the Properties. The USNG Letter Agreement would cover all of the noble gas, specifically helium, and rare earth elements/minerals potentially existing on the Properties and the future acquisitions of the Company, if any.

The USNG Letter Agreement required the Company to establish a four-member Board of Advisors, which will help attract both industry partners and financial partners for developing a large helium, noble gas and/or rare earth element/mineral resources that may exist in the region where the Company currently operates. The industry partners would include helium, noble gas and/or rare earth element/mineral purchasers and exploration and development companies from the energy industry. The financial partners may include large family offices or small institutions.

The Company also is required to pay USNG a $8,000 monthly cash fee beginning at the onset of commercial helium or minerals production and sales, subject to certain thresholds. Such monthly fees will become due and payable for any month that AMGAS receives cash receipts in excess of $25,000 derived from the sale of noble gases and/or rare earth elements/minerals.

In consideration of the foregoing and pursuant to the terms of the USNG Letter Agreement, on November 9, 2021, the Company also issued warrants (the “November 9 Warrants”), exercisable for five (5) years, to purchase, in the aggregate, 2,000,000 shares of Common Stock, at an exercise price of $0.50 per share, subject to customary adjustments (the “November 9 Exercise Price”) to three of USNG’s principal consultants. The Company also issued November 9 Warrants to purchase, in the aggregate, 1,200,000 shares of Common Stock at the November 9 Exercise Price to the four members of the Board of Advisors and options to acquire 60,000 shares of Common Stock to various support personnel at the November 9 Exercise Price. The Company therefore granted a total of 3,260,000 November 9 Warrants to purchase its Common Stock for a price of approximately $1.6 million in connection with the USNG Letter Agreement and the arrangements described therein. In issuing the November 9 Warrants, the Company relied on an exemption from registration under Section 4(a)(2) of the Securities Act. Each holder of the November 9 Warrants has advised the Company that they are sophisticated and can bear the risks associated with the November 9 Warrants, and the Company has not engaged in general solicitation in connection with the offer or sale of the November 9 Warrants.

Item 6. [Reserved.]

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

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, 2021 and 2020.

Overview

The Company is an oil and gas exploration, development and production company, which is primarily in the business of drilling and operating oil and gas wells. From 2009 to 2020, the Company had pursued the exploration of potential oil and gas resources in the Concession – Perlas and Tyra concession blocks offshore Nicaragua in the Caribbean Sea, containing a total of approximately 1.4 million acres. However, in January 2020, the Company abandoned the Concessions.

On April 1, 2021, we completed the acquisition of the Properties, under the same terms of the Asset Purchase Agreement which provided a purchase price of $900,000. The Company raised approximately $2.05 million on March 26, 2021 through the issuance of Series A Convertible Preferred Stock with detachable common stock purchase warrants.

The purchase of the Properties included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

We have commenced rework of the existing production wells immediately after the acquisition of the Properties and have performed testing and evaluation of the existence of noble gas reserves on the Properties, including helium, argon and other rare earth minerals and gases. Testing of the Properties for noble gas reserves has provided encouraging but not yet conclusive results and the Company has yet to determine the possibility of commercializing the noble gas reserves on the Properties. The Company plans to assess the existing oil and gas reserves on the Properties, while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves and specifically the noble gas reserves that the Properties may hold.

We may find it necessary to obtain new sources of debt and/or equity capital to fund the exploration and development of the Properties enumerated above, as well as to satisfy our existing debt obligations. We can provide no assurance that we will be able to obtain sufficient new debt/equity capital to fund our planned development of the Properties.

Name Change and Reincorporation Matters

At the Annual Meeting of Stockholders held on October 13, 2021, the stockholders approved an amendment to the Company’s Certificate of Incorporation, changing the Company’s name to American Noble Gas, Inc. The stockholders also approved an amendment to the Company’s Certificate of Incorporation, removing the provision providing that any action taken by the stockholders by written consent in lieu of a meeting requires that all of the Company’s stockholders entitled to vote on such action consent in writing thereto. Finally, the stockholders approved the 2021 Plan and we reserved 5,000,000 shares of Common Stock for issuance under the 2021 Plan.

Reincorporation in Nevada

On December 7, 2021, pursuant to the Agreement and Plan of Merger, the Predecessor merged with and into its wholly owned subsidiary, AMGAS-Nevada with AMGAS-Nevada continuing as the surviving corporation. In conjunction with the merger, AMGAS-Nevada succeeded to the assets, continued the business and assumed the rights and obligations of the Predecessor existing immediately prior to the merger. The merger was consummated by the filing of a Certificate of Merger on December 7, 2021 with the Secretary of State of the State of Delaware and Articles of Merger with the Secretary of State of the State of Nevada. The Agreement and Plan of Merger and transactions contemplated thereby were adopted by the holders of a majority of the outstanding shares of the Predecessor’s Common Stock and/or Series A Convertible Preferred Stock on an as-converted common stock basis, by written consent in lieu of a special meeting of stockholders, in accordance with the Delaware General Corporation Law.

Pursuant to the Agreement and Plan of Merger, (i) each outstanding share of the Predecessor’s common stock automatically converted into one share of common stock, par value $0.0001 per share, of AMGAS-Nevada, (ii) each outstanding share of the Predecessor’s Series A Convertible Preferred Stock automatically converted into one share of Series A Convertible Preferred Stock, par value $0.0001 per share, of AMGAS-Nevada, and (iii) each outstanding option, right or warrant to acquire shares of the Predecessor common stock converted into an option, right or warrant to acquire an equal number of shares of AMGAS-Nevada common stock under the same terms and conditions as the original options, rights or warrants.

Similar to the shares of common stock of the Predecessor prior to the merger, the shares of AMGAS-Nevada common stock are quoted on the OTCQB tier operated by the OTC Markets Group Inc. under the symbol “IFNY”. In accordance with the Agreement and Plan of Merger, each outstanding certificate previously representing shares of the Predecessor’s common stock or Series A Preferred Stock automatically represents, without any action of the Predecessor’s stockholders, the same number of shares of AMGAS-Nevada common stock or Series A Preferred Stock, as applicable.

Pursuant to the Agreement and Plan of Merger, the directors and officers of the Predecessor immediately prior to the merger became the directors and officers of AMGAS-Nevada and continued their respective directorship or services with the Company on the same terms as their respective directorship or services with the Predecessor immediately prior to the merger.

As a result of the merger, the internal affairs of the Company ceased to be subject to the Delaware General Corporation Law or governed by the Predecessor’s Certificate of Incorporation and bylaws. As of the December 7, 2021, effective date of the merger, the Company is now subject to the Nevada Revised Statutes and is governed by the Company’s Articles of Incorporation.

All references to the Company in this Annual Report on Form 10-K refer to the Predecessor prior to the merger, and AMGAS-Nevada subsequent to the merger.

2021 Operational and Financial Objectives

COVID–19 PANDEMIC

The financial statements contained in this Annual Report on Form 10-K as well as the description of our business contained herein, unless otherwise indicated, principally reflect the status of our business and the results of our operations as of December 31, 2021. Economies throughout the world have been and continue to be disrupted by the continuing effects of the COVID-19 pandemic, including the recent rise of the new Omicron variant. In particular, the oil and gas market has been severely adversely impacted by the effects of the COVID-19 pandemic because of the substantial and abrupt decrease in the demand for oil and gas globally followed by the recent resurgence in oil and natural gas prices. In addition, the capital markets have experienced periods of disruption and our efforts to raise necessary capital in the future may be adversely impacted by the continuing effects of the COVID-19 pandemic and investor sentiment and we cannot forecast with any certainty when the lingering uncertainty caused by the COVID-19 pandemic will cease to impact our business and the results of our operations. In reading this Annual Report on Form 10-K, including our discussion of our ability to continue as a going concern set forth herein, in each case, consider the additional uncertainties caused by the COVID-19 pandemic.

Corporate Activities

The Company’s 2021 operating objectives have focused on: 1) raising the necessary funds to complete the acquisition of the Properties, 2) completing the acquisition of the Properties, 3) commencing rework on the Properties, including testing and evaluation of noble gas reserves in additional to the oil and gas producing zones and 4) resolving obligations in default and/or past due.

Recent financings –

Issuance of Series A Convertible Preferred Stock - On March 26, 2021, the Company issued Series A Convertible Preferred Stock, with an aggregate principal face amount of up to approximately $2,500,000 subject to a 10% original issue discount. The Series A Convertible Preferred Stock is, subject to certain conditions, convertible into shares of Common Stock at a rate of $0.32 per share and will be subject to a 10% dividend rate per annum, payable quarterly in cash or registered Common Stock, subject to equity conditions. The holders were also granted demand registration rights. The Company also issued warrants along-side of the Convertible Preferred Stock investors to purchase up to 6,410,250 shares (assuming the $2.5 million offering is fully subscribed) of Common Stock at an exercise price of $0.39 per share, subject to customary adjustments. The common stock purchase warrants are exercisable commencing six (6) months after issuance on a cashless basis at the holders’ discretion with a term of five (5) years. On March 26, 2021, investors purchased Series A Convertible Preferred Stock with an aggregate cash purchase price of $2,050,000 together with warrants to purchase a total of 5,256,410 shares of Common Stock.

Net proceeds from the issuance of Series A Convertible Preferred Stock was $1,929,089 after deducting the placement agent fee and other expenses of the offering. The Company used the proceeds of the Series A Convertible Preferred Stock offering to complete the acquisition and development of the Properties, to pay-off all outstanding convertible notes payable and for general working capital.

Issuance of 8% Note with Detachable Warrants – On August 30, 2021, the Company entered into a securities purchase agreement with the 8% Note Investor for the Company’s 8% Note, with an aggregate principal face amount of approximately $100,000. The 8% Note is, subject to certain conditions, convertible into an aggregate of 200,000 shares of Common Stock, at a price of $0.50 per share. The Company also issued a 8% Note Warrant to purchase up to 200,000 shares of Common Stock at an exercise price of $0.50 per share. 8% Note Investor purchased the 8% Note and 8% Note Warrant from the Company for an aggregate purchase price of $100,000. The Company also granted the 8% Note Investor certain piggy-back registration rights whereby the Company has agreed to register the resale by the 8% Note Investor of the shares underlying the 8% Note Warrant and the conversion of the 8% Note unless the Company commences to trade on the NYSE American; the Nasdaq Capital Market; the Nasdaq Global Market; the Nasdaq Global Select Market; or the New York Stock Exchange, within one hundred twenty (120) days after the Closing Date, as defined in the 8% Note and 8% Note Warrant.

Issuance of 3% Notes with Detachable Warrants - On March 31, 2021, the Company entered into Debt Settlement Agreements with six creditors (five of which were related parties) which extinguished accounts payable and accrued liabilities totaling $2,866,497 in exchange for the issuance of $28,665 in principal balance of the 3% Notes with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share. The 3% Notes allows for prepayment at any time with all principal and accrued interest becoming due and payable at maturity on March 30, 2026. The 3% Notes are convertible as to principal and any accrued interest, at the option of holder, into shares of the Common Stock at any time after the issue date and prior to the close of business on the business day preceding March 30, 2026 at the rate of fifty cents ($0.50) per share, subject to normal and customary adjustments. The warrants to purchase 5,732,994 shares of Common Stock issued pursuant to the Debt Settlement Agreements were valued at $1,605,178 using the Black-Scholes methodology.

Issuance of August Notes - On August 19, 2020, we entered into the August Purchase Agreement with the August Investor for August Note, with an aggregate principal face amount of approximately $365,169. The August Note is, subject to certain conditions, convertible into an aggregate of 3,943,820 shares of Common Stock, at a price of $0.10 per share (the “Fixed Conversion Price”). We also issued the five-year August Warrant to purchase up to 800,000 shares of Common Stock at an exercise price of $0.50 per share. The August Investor purchased such securities from the Company for an aggregate purchase price of $325,000. We also granted the August Investor certain automatic and piggy-back registration rights whereby we agreed to register the resale by the August Investor of the shares underlying the August Warrant and the conversion of the August Note, which was satisfied on August 5, 2021 by filing a registration statement on Form 424B4 to register for resale all of the shares of Common Stock issuable upon exercise of the August Warrant issued to the August Investor

The August Note bears interest at a rate of eight percent (8%) per annum with 12 months guaranteed, may be voluntarily repaid in cash in full or in part by us at any time in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to 115% of the principal amount of the August Note and any accrued and unpaid interest in the event of the consummation by us of any public or private offering or other financing pursuant to which we receive gross proceeds of at least $2,500,000. The August Note is convertible at any time by the August Investor and we shall have the right to request that the August Investor convert the August Note in full or in part at the Fixed Conversion Price in the event that the VWAP (as defined in the August Note) of the Common Stock exceeds $0.75 for twenty consecutive trading days. In addition, pursuant to the August Note, so long as the August Note remains outstanding, we shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the Fixed Conversion Price, without written consent of the August Investor.

The conversion of the August Note and the exercise of the August Warrant are each subject to beneficial ownership limitations such that the August Investor may not convert the August Note or exercise the August Warrant to the extent that such conversion or exercise would result in the August Investor being the beneficial owner in excess of 4.99% (or, upon election of the August Investor, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to us, provided that any increase in such limitation will not be effective until 61 days following notice to us.

We used the proceeds of the August Note to pay off $60,125 in principal balance of notes payable that were in default, to pay the $100,000 required by the SKM Exchange Agreement and for general working capital.

On March 26, 2021, the Company exercised its right to retire the August Note in conjunction with the issuance of Series A Convertible Preferred Stock. In accordance with the prepayment provisions contained in the August Note, the Company paid all principal, accrued interest and the 15% prepayment premium which totaled $453,539.

Extinguishment of liabilities –

Debt Settlement Agreements - On March 31, 2021, the Company entered into Debt Settlement Agreements with six creditors (five of which were related parties) which extinguished accounts payable and accrued liabilities totaling $2,866,497 in exchange for the issuance of $28,665 in principal balance of 3% Notes with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share. The 3% Notes allow for prepayment at any time with all principal and accrued interest becoming due and payable at maturity on March 30, 2026. The 3% Notes are convertible as to principal and any accrued interest, at the option of holder of the 3% Notes, into shares of the Common Stock at any time after the issue date and prior to the close of business on the business day preceding March 30, 2026 at the rate of fifty cents ($0.50) per share, subject to normal and customary adjustment. The warrants to purchase 5,732,994 shares of Common Stock issued pursuant to the Debt Settlement Agreements were valued at $1,605,178 using the Black-Scholes methodology.

Extinguishment of Convertible Note Payable - On March 26, 2021, the Company exercised its right to retire the August Note issued in August 2020 in conjunction with the issuance of the Series A Convertible Preferred Stock. In accordance with the prepayment provisions contained in the August Note, the Company paid $453,539 to retire all principal, accrued interest and the 15% prepayment premium.

Extinguishment of Notes Payable – On April 1, 2021, the Company and the holder of a $50,000 outstanding convertible note reached a settlement, pursuant to which the Company issued to such holder a total of 145,000 shares of Common Stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants, which totaled $72,874 as of April 1, 2021. The 145,000 shares of Common Stock issued to extinguish the debt obligations were valued at $40,600 based on the closing market price on the date of the extinguishment. The extinguishment of the debt obligations resulted in a gain of $32,274, which was recorded in the year ended December 31, 2021.

On April 1, 2021, the Company and the holder of the $35,000 outstanding convertible note reached a settlement, pursuant to which the Company issued a total of 100,000 shares of Common Stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants, which totaled $50,956 as of April 1, 2021. The 100,000 shares issued to extinguish the debt obligations were valued at $28,000 based on the closing market price on the date of the extinguishment. The extinguishment of the debt obligations resulted in a gain of $22,956, which was recorded in the year ended December 31, 2021.

Acquisition of Oil and Gas Properties –

On July 31, 2019, we acquired the Option from Core to purchase the production and mineral rights/leasehold for the Properties. We paid a non-refundable deposit of $50,000 to bind the Option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the Option prior to December 31, 2019. On September 2, 2020, the Company acquired a new option from Core under similar terms as the Option. The newly acquired option, however, now permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company has agreed to immediately conduct a capital raise of between approximately $2 to $10 million to fund its acquisition and development of the Properties. On December 14, 2020, the parties executed the Asset Purchase and Sale Agreement, which extended the new option to January 11, 2021, which has expired.

We, Core, and Seller entered into the Side Letters on September 2, 2020 and March 31, 2021, pursuant to which we and Core agreed to set the closing date of the acquisition of the Properties under the Asset Purchase Agreement to April 1, 2021. Pursuant to the Side Letters, the Company is responsible for reimbursing Core for certain prorated revenues and expenses from January 1, 2021 through April 1, 2021.

On April 1, 2021, we completed the acquisition of the Properties, under the same terms of the Asset Purchase Agreement, which provided a purchase price of $900,000.

The acquisition included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

Following the acquisition, we have commenced rework of the existing production wells and have performed testing and evaluation of the existence of noble gas reserves on the Properties, including helium, argon and other rare earth minerals/gases. Testing of the Properties for noble gas reserves has provided encouraging but not conclusive results and the Company has yet to determine the possibility of commercializing the noble gas reserves on the Properties. The Company plans to assess the existing oil and gas reserves on the Properties while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves and specifically the noble gas reserves that the Properties may hold.

Off-Balance Sheet Arrangements

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

For the Years Ended December 31, 2021 and 2020

Results of Operations

Revenue

The Company began generating revenues from the production and sale of crude oil since the acquisition of the Properties on April 1, 2021. Revenues totaled $79,002 for the year ended December 31, 2021. The Company had no revenues in 2020 as it focused on identification of acquisition targets of domestic oil and gas producing properties.

On April 1, 2021, we completed the acquisition of the Properties, under the terms of the Asset Purchase Agreement which provided a purchase price of $900,000. The purchase of the Properties included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

Following the acquisition, we have commenced rework of the existing production wells and have performed testing and evaluation of the existence of noble gas reserves on the Properties including helium, argon and other rare earth minerals/gases. Testing of the Properties for noble gas reserves has provided encouraging but not conclusive results and the Company has yet to determine the possibility of commercializing the noble gas reserves on the Properties. The Company plans to assess the existing oil and gas reserves on the Properties while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves and specifically the noble gas reserves that the Properties may hold.

Oil and Gas Lease Operating Expenses

The Company began generating revenues from the production and sale of crude oil since the acquisition of the Properties on April 1, 2021. Total oil and gas lease operating expenses totaled $530,118 for the year ended December 31, 2021.

We commenced rework of the existing production wells on the Properties in order to restore the three producing wells to full operational condition. All such rework costs were expensed as routine maintenance instead of capitalized to oil and gas properties and equipment under the full-cost method. In addition, we have performed certain exploration, including testing and evaluation for the existence of noble gas reserves on the Properties, including helium, argon and other rare earth minerals/gases. Testing of the Properties for noble gas reserves has provided encouraging but not conclusive results and the Company has yet to determine the possibility of commercializing the noble gas reserves on the Properties. The Company plans to assess the existing oil and gas reserves on the Properties while continuing the evaluation of the existence of new oil and gas zones and other mineral reserves and specifically the noble gas reserves that the Properties may hold.

The Company had no oil and gas lease operating expenses in 2020 as it held no oil and gas producing properties.

Depreciation, Depletion and Amortization

The Company began generating revenues from the production and sale of crude oil resulting since the acquisition of the Properties on April 1, 2021, which was acquired for $900,000 cash plus the assumption of asset retirement obligations of $13,425. The Company allocated the purchase price of $913,425 to oil and gas properties and equipment, which is subject to depreciation, depletion and amortization as the acquisition qualified as an asset acquisition. Total depreciation, depletion and amortization was $92,502 for the year ended December 31, 2021. There was no depreciation, depletion and amortization for the year ended December 31, 2020 as the Company held no properties for the year ended December 31, 2020.

Capitalized costs to acquire oil and natural gas properties are depreciated and depleted on a units-of-production basis based on estimated proved reserves. Capitalized costs of exploratory wells and development costs are depreciated and depleted on a units-of-production basis based on estimated proved developed reserves. Under this method, the sum of the full cost pool, excluding the book value of unproved properties, and all estimated future development costs are divided by the total estimated quantities of proved reserves. This rate is applied to our total production for the year ended December 31, 2021, and the appropriate expense is recorded. Support equipment and other property, plant and equipment related to oil and gas producing activities, as well as property, plant and equipment unrelated to oil and gas producing activities, are recorded at cost and depreciated on a straight-line basis over the estimated useful lives of the assets.

Accretion of Asset Retirement Obligation

Total expense for the accretion of asset retirement obligations was $836 and $-0- for the year ended December 31, 2021 and 2020, respectively. The Company determined the amount of the asset retirement obligation assumed to be $13,425 as of April 1, 2021, the date of the acquisition of the Properties. The obligation relates to legal requirements associated with the retirement of long-lived assets that result from the acquisitions, construction, development, or normal use of the asset. The obligation relates primarily to the requirement to plug and abandon oil and natural gas wells and support wells at the conclusion of their useful lives.

Oil and Gas Production Related Taxes

The Company began generating revenues from the production and sale of crude oil since the acquisition of the Properties on April 1, 2021. Oil and gas production related taxes totaled $1,060 and $-0- for the year ended December 31, 2021 and 2020, respectively. Such taxes are deducted from gross oil and gas revenue by the crude oil purchaser upon payment to the Company and include primarily severance taxes imposed by the State of Kansas and Kansas conservation assessment fees. Revenues totaled $79,002 for the year ended December 31, 2021, which resulted in the deduction of $1,060 in production related taxes. The Company has received notice of an exemption from the State of Kansas, which exempted the Company form paying severance taxes due to the existing wells production levels. Therefore, production related taxes should decline as a percentage of revenue in 2022 and beyond. The Company had no revenues in 2020 and therefore there was no deduction for production related taxes in Kansas.

Other General and Administrative Expenses

Other general and administrative expenses were $1,036,996 for the year ended December 31, 2021, an increase of $720,697, or 228%, from other general and administrative expenses of $316,299 for the year ended 2020. The increase in other general and administrative expenses is primarily attributable to an increase of $314,643 in stock-based compensation due to the noncash compensation for its executives and Board members in 2021. The increase in other general and administrative expenses is also attributable to an increase $193,834 for legal fees, $37,705 for geological services and a $34,500 increase in auditor fees as the Company began operating the Properties, which required various capital raises and other filings with the SEC. In addition, the increase in other general and administrative expenses were attributable to the $75,000 charge-off of the option to acquire the Properties which expired, a $30,000 bonus paid to the Company’s Chief Executive Officer attributable to his efforts in the acquisition of the Properties. The $314,643 increase in stock-based compensation was related to the amortization of the stock option grants in June 2021, the warrants issued to USNG and the Advisory Board, and the restricted stock grants in August 2020.

Interest Expense

Interest expense decreased to $108,052 for the year ended December 31, 2021, compared to $210,931 for the in the year ended December 31, 2020, a decline of $102,879, or 49%. Interest expense declined during the year ended December 31, 2021 primarily due to the pay-off of the convertible note payable issued in August 2019, which had a stated principal balance of $365,169 and bore interest at an 8% rate until it was retired on March 26, 2021. The retirement of the two notes payable totaled $85,000 on April 1, 2021 and the August Note on March 31, 2021 resulted in less interest expense being reported during the year ended December 31, 2021 as compared to the year ended December 31, 2020.

On March 31, 2021, the Company issued $28,665 principal balance of 3% Notes in connection with the Debt Settlement Agreements, which bear interest at 3%. Interest expense totaled $643 related to these 3% Notes during the year ended December 31, 2021 and will continue to affect interest expense in future quarters.

On April 1, 2021, the Company and the holder of the $50,000 outstanding convertible note reached a settlement, pursuant to which the Company issued a total of 145,000 shares of Common Stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants, which totaled $72,874 as of April 1, 2021. In addition, on April 1, 2021, the Company and the holder of the $35,000 outstanding convertible note reached a settlement, pursuant to which the Company issued a total of 100,000 shares of Common Stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants, which totaled $50,956 as of April 1, 2021. The 100,000 shares issued to extinguish the debt obligations were valued at $28,000 based on the closing market price on the date of the extinguishment. Accordingly, there was less interest related to these notes in the year ended December 31, 2021 as compared to in the year ended December 31, 2020.

On August 30, 2021 and October 29, 2021, the Company entered into two Securities Purchase Agreements with one and three, respectively, accredited investors agreed for the 8% Notes, with an aggregate principal face amount of approximately $650,000. The 8% Notes are, subject to certain conditions, convertible into an aggregate of 1,300,000 shares of Common Stock, at a price of $0.50 per share. The Company also issued five and one half-year common stock purchase warrants to purchase up to 1,850,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments which are immediately exercisable. The investors purchased the 8% Notes and the warrants from the Company for an aggregate purchase price of $650,000 and the proceeds were used for general working capital purposes. The 8% Notes bear interest at 8%, however a discount was recorded for the on the relative estimated fair value of the detachable warrants issued, which will be amortized to interest expense over the term of the 8% Notes using the interest method. Total interest expense was $62,170 during the year ended December 31, 2021 and will continue to affect interest expense in future quarters.

Gain on Extinguishment of Liabilities

The Company reported a gain on exchange and extinguishment of liabilities of $86,602 and $6,150,142 in the years ended December 31, 2021 and 2020, respectively.

On April 1, 2021, the Company and the holder of the $50,000 outstanding convertible note reached a settlement, pursuant to which the Company issued a total of 145,000 shares of Common stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants, which totaled $72,874 as of April 1, 2021. The 145,000 shares issued to extinguish the debt obligations were valued at $40,600 based on the closing market price on the date of the extinguishment. The extinguishment of the debt obligations resulted in a gain of $32,274, which was recorded in the year ended December 31, 2021.

On April 1, 2021, the Company and the holder of the $35,000 outstanding convertible note reached a settlement, pursuant to which the Company issued a total of 100,000 shares of Common stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants which totaled $50,956 as of April 1, 2021. The 100,000 shares issued to extinguish the debt obligations were valued at $28,000 based on the closing market price on the date of the extinguishment. The extinguishment of the debt obligations resulted in a gain of $22,956, which was recorded in the year ended December 31, 2021.

On March 31, 2021, the Company recorded a net gain on extinguishment of liabilities totaling $31,372, which was attributable to six transactions that extinguished outstanding liabilities during the year ended December 31, 2021. The Debt Settlement Agreements extinguished accounts payable and accrued liabilities with a total outstanding balance of $2,866,497, for the issuance of $28,665 in principal balance of the 3% Notes with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share, which was valued at $1,605,178, which resulted in a total gain of $1,232,654 of which $124,177 was reported as a gain on extinguishment of liabilities and $1,108,477 was reported as a capital contribution. The $23,000 gain from settlement of litigation extinguished $33,000 of trade payables for a cash payment of $10,000. The loss of $115,805 is related to the early retirement of $365,169 principal balance of August 2020 Note.

For the year ended December 31, 2020, the gain on extinguishment of liabilities was attributable to two transactions that extinguished outstanding liabilities; (i) the SKM Exchange Agreement, which extinguished a promissory note with an outstanding principal balance of $1,000,000, $542,762 in accrued interest and other obligations previously outstanding and resulting in a total gain of $1,310,006, and (ii) the extinguishment of trade payable obligations totaling $4,840,136 that arose during 2013, which were extinguished in 2020 pursuant to the relevant statute of limitations.

Change in Derivative Fair Value

The conversion feature in certain outstanding promissory notes and common stock purchase warrants issued in connection with short-term notes outstanding during the years ended December 31, 2021 and 2020 were treated as derivative instruments because such notes and warrants contained ratchet and anti-dilution provisions. The mark-to-market process resulted in a gain of $199 during the year ended December 31, 2021, compared to a gain of $795 during the year ended December 31, 2020. All short-term notes and their related derivative warrants have been terminated as of December 31, 2021.

Income Tax

The Company recorded no income tax benefit (expense) in the years ended December 31, 2021 and 2020. The Company has been in a cumulative tax loss position and has substantial net operating loss carryforwards available for its utilization at December 31, 2021. The Company has continued to carry a 100% reserve on its net deferred tax assets and therefore recorded no income tax expense or benefit on its income (loss) before income taxes during the years ended December 31, 2021 and 2020.

Net Income (Loss)

The Company reported a net loss of $1,603,761 for the year ended December 31, 2021, compared to net income of $5,623,707 for the year ended December 31, 2020. This represents a decrease of $7,227,468 for the year ended December 31, 2021 compared to the year ended December 31, 2020.

Series A Convertible Preferred Stock Dividends

The Company recorded $174,449 and $-0- in convertible preferred stock dividends in the years ended December 31, 2021 and 2020, respectively. On March 26, 2021, the Company issued and classified its Series A Convertible Preferred Stock as equity securities in the balance sheet. Series A Convertible Preferred Stock bears a cumulative dividend at a 10% rate based on its stated/liquidation value. There were no outstanding Series A Convertible Preferred Stock during the year ended December 31, 2020.

Net Income (Loss) Applicable to Common Stockholders

The Series A Convertible Preferred Stock issued on March 26, 2021 has a preference over Common Stock and therefore such accrued dividend amounts have been deducted from net income (loss) to report net income (loss) applicable to common stockholders of $(1,778,210) and $5,623,707 for the years ended December 31, 2021 and 2020, respectively.

Basic and Diluted Net Income (Loss) Attributable to Common Stockholders per Share

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

The Company incurred a net loss attributable to common stockholders during the year ended December 31, 2021, therefore all Common Stock Equivalents were considered anti-dilutive and excluded from diluted net income (loss) attributable to common stockholders per share computations. The basic and diluted net income (loss) attributable to common stockholders per share were $(0.09) for the year ended December 31, 2021.

During the year ended December 31, 2020, the shares of Common Stock issuable upon conversion of the August Note were considered Common Stock equivalents and therefore the dilutive effect of such issuance was included in the computation of diluted income (loss) per share. All shares of Common Stock issuable upon conversion of convertible debt (other than the August Note) and the exercise of outstanding stock options and warrants were antidilutive, and, therefore, not included in the computation of diluted income (loss) per share for the year ended December 31, 2020. The basic net income (loss) attributable to common stockholders per share was $0.39 and the diluted net income (loss) attributable to common stockholders per share was $0.36 for the year ended December 31, 2020.

Potential Common Stock Equivalents as of December 31, 2021 totaled 27,728,864 shares of Common Stock, which included 1,357,330 shares of Common Stock underlying the Convertible Promissory Notes, 6,898,750 shares of Common Stock underlying the conversion of Series A Convertible Preferred Stock, 17,580,784 shares of Common Stock underlying outstanding warrants and 1,892,000 shares of Common Stock underlying outstanding stock options.

Liquidity and Capital Resources; Going Concern–

We have had a history of losses and have generated little or no operating revenues for a number of years, as we concentrated on the development of our Concessions, which was a long-term, high-risk/reward exploration project in an otherwise unproven part of the world. We abandoned the Concessions in early 2020 due to the challenging economic and political issues in Nicaragua and the oil and gas industry in general. We have been assessing various opportunities and strategic alternatives involving the acquisition, exploration and development of gas and oil properties in the United States, including the possibility of acquiring businesses or assets that provide support services for the production of oil and gas in the United States. As a result, we completed the purchase of the Properties on April 1, 2021 and have commenced certain rework to the existing producing wells and intend to perform workovers and other develop activities on the Properties during 2022. We plan to evaluate the Properties for additional reserves of noble gases, which may change our development plans should we determine that reserves of noble gases exist on the Properties at commercial quantities. The planned development of the Properties will require us to raise additional capital to accomplish our operating plan, which cannot be assured. Historically, we financed our operations through the issuance of equity and various short and long-term debt financing that contained some level of detachable warrants to provide the holders with a level of equity participation.

Capital Raised

Historically, we have raised funds through various equity and debt instruments through private transactions. The following summarizes the sources of significant liquidity raised during the years ended December 31, 2021 and 2020:

The Company has been able to raise the liquidity during 2021 and 2020 through the issuance of debt and equity in private transactions with accredited investors. These financial instruments generally require the Company to register the Common Stock underlying the conversion of the Series A Convertible Preferred Stock, the convertible notes, provide the holders with a right to participate in future capital raises and require their approval for the future issuance of securities at rates less than $0.50 per share. The holders have also agreed that the conversion of the Series A Convertible Preferred Stock, the convertible promissory notes and the exercise of the underlying warrants are generally subject to beneficial ownership limitations such that each holder of the financial instruments individually may not convert the underlying Series A Convertible Preferred Stock, convertible notes or exercise the underlying warrants to the extent that such conversion or exercise would result in any of the holders individually being the beneficial owner in excess of 4.99% (or, upon election of the holders, 9.99%) of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock issuable upon such conversion or exercise, which beneficial ownership limitation may be increased or decreased up to 9.99% upon notice to the Company, provided that any increase in such limitation will not be effective until 61 days following notice to the Company.

We will likely continue to issue such convertible instruments with detachable warrants to acquire Common Stock to fund our operational and capital expenditure plans for 2022.

Letter of Engagement

On April 1, 2022, the Company engaged Univest to act as the exclusive financial advisor, and the lead underwriter in the Offering. The size of the Offering is expected to be between $10,000,000 to $15,000,000 upon closing of the Offering. The Public Offering Price will be determined by mutual agreement of the Company and Univest and will be determined at the signing of the final Underwriting Agreement, which will based on, among other things, market conditions at the time of the Offering.

Pursuant to the Underwriting Agreement, Univest will act as principal, or the representative of a number of broker-dealers that will offer the securities in a public offering. The Letter Of Engagement anticipates that Univest will receive a gross discount equal to eight percent (8%) of the Public Offering Price on each share of the securities being offered. Univest has agreed to negotiate in good faith with other underwriters who, acting severally, could contract to act as an underwriter in connection with the sale of the securities being offered. Univest will also have the right to re-offer all or any part of the securities being offered to other broker-dealers. Univest will be entitled to warrants to purchase common stock representing five percent (5%) of the amount of securities sold in the Offering with an exercise price determined to be 110% of the Public Offering Price.

The Company also agreed to reimburse Univest, at and out of the proceeds of the Offering closings, for all of its reasonable, out-of-pocket expenses (including, but not limited to, travel, due diligence expenses, reasonable fees and expenses of its legal counsel, roadshow and background check on the Company’s principals) in connection with the performance of its services hereunder not to exceed an aggregate of $150,000. In addition, at the closing of the Offering, the Company agreed to reimburse Univest one percent (1%) of the actual amount of the Offering as nonaccountable expense of the offering.

The term of the Letter of Engagement expires upon the earlier to occur of (i) six (6) months from the date of execution or (ii) the mutual written agreement of the Company and Univest.

Capital Expenditures

Acquisition of the Oil and Gas Properties in Central Kansas Uplift - On July 31, 2019, we acquired the option from Core to purchase the production and mineral rights/leasehold for the Properties. We paid a non-refundable deposit of $50,000 to bind the option, which provided us the right to acquire the Properties for $2.5 million prior to December 31, 2019. The Company was not able to exercise the option prior to December 31, 2019. On September 2, 2020, the Company acquired a new option from Core under similar terms as the previous option. the newly acquired option, however, permits the Company to purchase the Properties at a reduced price of $900,000 at any time prior to November 1, 2020 and the Company agreed to immediately conduct a capital raise of between approximately $2-10 million to fund its acquisition and development of the Properties. On December 14, 2020 the parties executed the Asset Purchase Agreement which extended the new option to January 11, 2021, which has expired.

We, Core, and Seller entered into the Side Letters on September 2, 2020 and March 31, 2021, pursuant to which we and Core agreed to set the closing date of the acquisition of the Properties under the Asset Purchase Agreement to April 1, 2021. Pursuant to the Side Letters, the Company is responsible for reimbursing Core for certain prorated revenues and expenses from January 1, 2021 through April 1, 2021.

On April 1, 2021, we completed the acquisition of the Properties, under the same terms of the Asset Purchase Agreement for $900,000.

The purchase of the Properties included the existing production equipment, infrastructure and ownership of 11 square miles of existing 3-D seismic data on the acreage. The Properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well and two conventional vertical producing wells, which currently produce from the Reagan Sand Zone with an approximate depth of 3,600 feet.

Farmout Agreement to Explore and Develop Unconventional Gas and Brine Materials in the Hugoton Gas Field- On April 4, 2022, the Company acquired a 40% joint venture interest in the AMGAS JV that holds a Farmout Agreement with Scout with regards to its oil and gas interests in the Hugoton Gas Field, located in Haskell and Finney counties, Kansas.

The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well scheduled to begin in April 2022. The AMGAS JV will utilize Scout’s existing infrastructure assets including water disposal, gas gathering and helium processing. The Farmout Agreement provides the JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, which will enable the AMGAS JV to market and sell the helium produced at prevailing market prices.

The AMGAS JV also acquired the right to all brine minerals subject to a ten percent (10%) royalty to Scout, across Finney and Haskell Counties. Brine minerals are harvested from the formation water produced from active, and to be drilled, oil and gas wells and may include a variety of dissolved minerals including bromine and iodine. The AMGAS JV plans to target brine with commercial quantities of bromine and iodine. AMGAS is currently developing proprietary technology to recover brine minerals, particularly with respect to bromine, which is well underway and has demonstrated recovery efficiency and is expected to be available for use in existing and future development wells.

We will likely find it necessary to obtain new sources of debt and/or equity capital to fund the exploration and development of the Properties and the Hugoton Gas Field, as well as to satisfy our existing debt obligations. We can provide no assurance that we will be able to obtain sufficient new debt/equity capital to fund our planned development of the Properties or the Hugoton Gas Field.

Going Concern

The Company must raise substantial amounts of debt and equity capital from other sources in the future in order to fund the (i) development of the Properties acquired on April 1, 2021; (ii) to fund our exploration and development obligations under the Farmout Agreement in the Hugoton Gas Field; (iii) normal day-to-day operations and corporate overhead; and (iv) outstanding debt and other financial obligations including the payment of Series A Convertible Preferred Stock dividends and the repayment of the convertible notes payable as they become due. These are substantial operational and financial concerns that must be successfully addressed during 2022.

The Company has made substantial progress in resolving many of its existing financial obligations during the year ended December 31, 2021. In that regard, on March 31, 2021, the Company and six creditors entered into Debt Settlement Agreements, which extinguished accounts payable and accrued liabilities totaling $2,866,497 in exchange for the issuance of $28,665 in principal balance of 3% Notes with detachable warrants to purchase 5,732,994 shares of Common Stock for $0.50 per share. On April 1, 2021, the Company and the holders of two notes payable that were in default reached a settlement whereby the Company issued a total of 245,000 shares of Common Stock in exchange for the extinguishment of the outstanding principal, accrued interest and associated common stock purchase warrants which totaled $123,830 as of April 1, 2021. The Company has made substantial progress in resolving its financial obligations; however, there is in excess of $1.9 million of old unpaid accounts payable and accrued liabilities that the Company believes that it may not have to pay based on the relevant Statute of Limitations on repayment.

The Company will have significant financial commitments to execute its planned exploration and development of the Properties and the Hugoton Gas Field. The Company may find it necessary to raise substantial amounts of debt or equity capital to fund such exploration and development activities and may seek offers from industry operators and other third parties for interests in the Properties in exchange for cash and a carried interest in exploration and development operations or other joint venture arrangement. There can be no assurance that it will be able to obtain such new funding or be able to reach agreements with industry operators and other third parties or on what terms.

Due to the uncertainties related to the foregoing matters, our independent registered accounting firm has expressed the option that there exists substantial doubt about the Company’s ability to continue as a going concern within one year after the date these 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.

Cash and cash equivalents balances-

As of December 31, 2021, we had cash and cash equivalents with an aggregate balance of $260,590, an increase from a balance of $11,042 as of December 31, 2020. Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of the $249,548 net increase in cash during the year ended December 31, 2021:

The net result of these activities was a $249,548 increase in cash and cash equivalents from $11,042 as of December 31, 2020 to $260,590 as of December 31, 2021.

Commitments:

Capital Expenditures. We had no material commitments for capital expenditures at December 31, 2021. The Farmout Agreement that we entered into in April 2022 required us to drill at least one production well in 2022. We expect to begin in April 2022 and estimate that the expenses related to the drilling program to be approximately $350,000 for drilling of the initial well.

Repayment of Debt. Debt obligations is comprised of the following at December 31, 2021 and 2020:

Debt obligations become due and payable as follows:

Open Litigation.

The Company is subject to various 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:

Contractual Obligations

USNG Letter Agreement - The Company is required to pay USNG a $8,000 monthly cash fee beginning at the onset of commercial helium or minerals production and sales, subject to certain thresholds. Such monthly fees will become due and payable for any month that AMGAS receives cash receipts in excess of $25,000 derived from the sale of noble gases and/or rare earth elements/minerals. The Company has not yet achieved the $25,000 cash receipts threshold, therefore there has been no payment or accrual liability relative to this cash fee provision as of December 31, 2021. [The USNG Letter Agreement has an initial term of 5 years, which shall thereafter continue for successive one-year periods, provided that there is no uncured breach, unless otherwise terminated by either party upon a written notice of intent to non-renew.]

Farmout Agreement to Explore and Develop Unconventional Gas and Brine Materials in the Hugoton Gas Field - On April 4, 2022, the Company acquired a 40% interest in the AMGAS JV that holds the Farmout Agreement with Scout with regards to its oil and gas interests in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas. The Farmout Agreement covers drilling and completion of up to 50 wells. The AMGAS JV will utilize Scout’s existing infrastructure assets, including water disposal, gas gathering and helium processing. In addition, the Farmout Agreement provides the AMGAS JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, located in Grant County, Kansas, which will enable the AMGAS JV to market and sell the helium produced at prevailing market prices. The first exploratory well is scheduled to commence in April 2022 near Garden City, Kansas with a goal to evaluate the first of two separate silty shale members of the Chase group of formations – the Gage Shale and the Holmesville Shale. These two shale members have not previously been targeted for exploration by historical operations in the field.

Inflation and Seasonality

Inflation has not materially affected us during the past fiscal year; however, we do believe that inflation may significantly impact our business in 2022. We do not believe that our business is seasonal in nature.

Critical Accounting Policies

Our financial statements have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) and fairly present our financial position and results of operations. The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The Company bases its accounting estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances and evaluates its estimates on an ongoing basis. The following section identifies and summarizes those accounting policies considered by management to be the most critical to understanding the judgments that are involved in the preparation of our financial statements and the uncertainties that could impact our results of operations, financial position and cash flows. The application of these accounting policies requires judgment and use of assumptions as to future events and outcomes that are uncertain and, as a result, actual results could differ from these estimates. Refer to Note 1 – Nature of Operations, Basis of Presentation and Summary of Significant Accounting Policies for all relevant accounting policies.

Accounting for Income Taxes. Accounting for income taxes requires significant estimates and judgments on the part of management. Such estimates and judgments include, but are not limited to, the effective tax rate anticipated to apply to tax differences that are expected to reverse in the future, the sufficiency of taxable income in future periods to realize the benefits of net deferred tax assets and net operating losses currently recorded and the likelihood that tax positions taken in tax returns will be sustained on audit.

During the year ended December 31, 2021, we reduced our valuation allowance on net deferred tax assets by $736,000 while the valuation allowance remained at 100% of all net deferred tax assets as of December 31, 2021. We have incurred net taxable losses for 11 of the last 14 years and continue to be in a cumulative loss position at December 31, 2021. In addition, there exists substantial doubt about our ability to continue as a going concern within one year after the date these financials are issued due to operational and financing uncertainties. Accordingly, we have determined there was not sufficient positive evidence regarding our potential for future profits to outweigh the negative evidence of our three-year cumulative loss position under the guidance provided in ASC 740. Therefore, we have determined to continue to provide a 100% valuation allowance on our net deferred tax assets. We expect to continue to maintain a full valuation allowance until we determine that we can sustain a level of profitability that demonstrates its ability to realize these assets. To the extent we determine that the realization of some or all of these benefits is more likely than not based upon expected future taxable income, a portion or all of the valuation allowance will be reversed.

For income tax purposes, hawse have net operating loss carry-forwards of approximately $62,990,000 as of December 31, 2021, which expire beginning in 2025 through 2041.

We have recently completed the filing of tax returns for the tax years 2012 through 2020. Therefore, all such tax returns are open to examination by the Internal Revenue Service.

The Internal Revenue Code contains provisions under Section 382 which limit a company’s ability to utilize net operating loss carry-forwards in the event that it has experienced a more than 50% change in ownership over a three-year period. Management has completed its review of whether such ownership changes have occurred, and based upon such review, management believes that the Company is not currently subject to an annual limitation or the possibility of the complete elimination of the net operating loss carry- forwards. In addition, the Company may be limited by additional ownership changes which may occur in the future

Determination of Fair Value for Financial Instruments and Derivatives.

The estimated fair value of our derivative liabilities, all of which are related to the detachable warrants issued in connection with various notes payable, were estimated using a closed-ended option pricing model utilizing assumptions related to the contractual term of the instruments, estimated volatility of the price of our Common Stock and interest rates. The detachable warrants issued in connection with the two short-term notes payable (See Note 3) contained full-ratchet, anti-dilution provisions that remain in effect during the term of the warrants while the ratchet and anti-dilution provisions of the other notes payable cease when the related note payable is extinguished. When the related notes payable containing such ratchet and anti-dilution provisions is extinguished, the derivative liability will be adjusted to fair value and the resulting derivative liability will be transitioned from a liability to equity as of such date.

On April 1, 2021, the outstanding warrants treated as derivatives and the related notes payable containing such ratchet and anti-dilution provisions were extinguished through an exchange transaction as described in Note 3. Therefore, the derivative liability was adjusted to fair value and extinguished and included in the gain on extinguishment of notes payable as of the termination date (See Note 10).

A comparison of the assumptions used in calculating estimated fair value of such derivative liabilities as of the April 1, 2021 termination date and December 31, 2020 is as follows:

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:

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:

The following table represents the Company’s hierarchy for its financial assets and liabilities measured at fair value on a recurring basis as of December 31, 2021 and 2020:

Determination of Fair Value for Detachable Common Stock Purchase warrants issued in connection with Convertible Notes Payable.

The Company has raised capital through the issuance of convertible debt instruments with detachable warrants to acquire common stock which require an allocation of the proceeds between the debt and equity components of such instruments. The Company has applied ASU-2020-06 to all outstanding financial instruments as of January 1, 2021, (the date of adoption of ASU 2020-06) and those entered into after January 1, 2021 including the 8% Notes issued during the year ended December 31, 2021. As a result, such convertible notes were required to be separated into their debt and equity components because of the issuance of detachable warrants together with the convertible notes. Accordingly, the Company allocated the proceeds of the 8% Notes as follows:

The 8% Notes issued in August 2021 (the “August 8% Notes”) and the 8% Notes issued in October 2021 (the “October 8% Notes” collectively with the August 8% Notes, the “8% Notes”)) were recorded at their par value less the discount established at their respective origination date. The note discount is amortized over the term of the convertible note utilizing the level-interest method. The following is the assumptions used in calculating the estimated grant-date fair value of the detachable warrants to purchase Common Stock granted in connection with the 8% Notes during the year ended December 31, 2021:

Following is a summary of activity relative to the 8% Notes as for the year ended December 31, 2021:

Going Concern Analysis.

In accordance with ASU 2014-15, Presentation of Financial Statements- Going Concern (Subtopic 205-40) – Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern, we are required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about our ability to continue as a going concern within one year after the date that our financials are issued. When management identifies conditions or events that raise substantial doubt about their ability to continue as a going concern it should consider whether its plans to mitigate those relevant conditions or events will alleviate the substantial doubt. If conditions or events raise substantial doubt about an entity’s ability to continue as a going concern, but the substantial doubt is alleviated as a result of management’s plans, the entity should disclose information that enables user of financial statements to understand the principal events that raised the substantial doubt, management’s evaluation of the significance of those conditions or events, and management’s plans that alleviated substantial doubt about the entity’s ability to continue as a going concern.

We performed the analysis and our overall assessment was there were conditions or events, considered in the aggregate, which raised substantial doubt about our ability to continue as a going concern within the next year, but such doubt was not adequately mitigated by our plans to address the substantial doubt as disclosed in Note 1: Going Concern.

Stock-based compensation

We grant share-based compensation awards in exchange for employee, director and consultant services, including a stock option plan, grants of restricted stock and common stock purchase warrants issued for services that vest over future periods considering the grantee remains as an employee or service provider to the Company. The fair value of awards granted under the plans are recognized in the Statements of Income (Loss) over the related service period. The fair values of stock options are estimated at the time of each grant using a Black-Scholes option pricing model, and the fair values of restricted stock grants are measured at each grant date using the closing market price on the day of grant. The fair value estimates may be impacted by certain variables including, but not limited to, stock price volatility, employee stock option exercise behaviors, additional stock option grants, estimates of forfeitures, the Company’s performance, and the Company’s performance in relation to its peers. Refer to Note 4 – Stock Based Compensation for further information regarding our outstanding stock options and restricted stock grants and Note 7 – Warrants for further information regarding our outstanding warrants issued for services.

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

Not applicable.

Item 8. Financial Statements and Supplementary Data.

American Noble Gas Inc (formerly Infinity Energy Resources, Inc.)

Financial Statements and Accompanying Notes

December 31, 2021 and 2020

Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Board of Directors and Stockholders of

American Noble Gas Inc

(formerly Infinity Energy Resources, Inc.)

Opinion on the Financial Statements

We have audited the accompanying balance sheets of American Noble Gas Inc (formerly Infinity Energy Resources, Inc.) (the “Company”) as of December 31, 2021 and 2020, and the related statements of operations, stockholders’ deficit, and cash flows for each of the two years in the period ended December 31, 2021, and the related notes and schedules (collectively referred to as the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the two years in the period ended December 31, 2021, 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 must raise significant funds in order to pay its outstanding debt and meet its other obligations, has a stockholders’ deficit and has a significant working capital deficit. These conditions raise substantial doubt about the Company’s ability to continue as a going concern. Management’s evaluation of the events and conditions and management’s plans regarding these matters are also described in Note 1. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinion

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

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

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

Critical Audit Matters

Critical audit matters are matters arising from the current period audit of the financial statements that were communicated or required to be communicated to the audit committee and that: (1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments.

We determined that there are no critical audit matters.

/s/ RBSM LLP

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

New York, NY

April 6, 2022

PCAOB ID Number 587

AMERICAN NOBLE GAS INC

(formerly Infinity Energy Resources, Inc.)

Balance Sheets

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

AMERICAN NOBLE GAS INC

(formerly Infinity Energy Resources, Inc.)

Statements of Operations

For the Years Ended December 31, 2021 and 2020

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

AMERICAN NOBLE GAS INC

(formerly Infinity Energy Resources, Inc.)

Statements of Changes in Stockholders’ Deficit

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

AMERICAN NOBLE GAS INC

(formerly Infinity Energy Resources, Inc.)

Statements of Cash Flows