Note 10 Subsequent Events
On December 27, 2013 the Company borrowed $1,050,000 under an unsecured credit facility with a private, third-party lender. The facility is represented by a promissory note (the Note) with an original due date of March 12, 2014. On March 7, 2014 the Company and the lender agreed to extend the maturity date of the Note to May 9, 2014 and on such date the parties agreed to extend the maturity date of the Note from May 9, 2014 to December 7, 2014. On November 19, 2014 the parties agreed to extend the maturity date of the Note to April 7, 2015 (the New Maturity Date). All other terms of the Note remain the same.
In connection with a previous extension of the Note, the Company entered into a definitive revenue sharing agreement with the lender to grant it an irrevocable right to receive a monthly payment equal to one half of one percent (1/2%) of the gross revenue derived from the share of all hydrocarbons produced at the wellhead from the Nicaraguan Concessions and any other oil and gas concessions that the Company and its affiliates may acquire. This percent increased to one percent (1%) when the Company did not pay the Note in full by August 7, 2014. Therefore, the revenue sharing agreement is fixed at 1%. The Company paid no other consideration in connection with the extension of the Note, but paid the legal expenses of the lender related to the extensions of $25,000. The Note may be prepaid without penalty at any time. The Note is subordinated to all existing and future senior indebtedness, as such terms are defined in the Note.
In connection with its loan, the Company granted the lender a Warrant exercisable to purchase 1,000,000 shares of its common stock at an exercise price of $1.50 per share. In connection with the extension of the maturity date of the Note to the New Maturity Date, the parties amended the date for exercise of the Warrant to be a period commencing April 7, 2015 and expiring on the third anniversary of such date. The Company issued no additional warrants to the lender in connection with the extension of the Note to the New Maturity Date. If the Company fails to pay the note on or before its New Maturity Date, the number of shares issuable under the Warrant increases to 13,333,333 and the exercise price drops to $0.075 per share. All other terms of the Warrant remain the same.
Subsequent to June 30, 2014, the Company has issued two new promissory notes for total cash proceeds of $100,000. The promissory notes have maturity dates, as amended, of February 28, 2015. In connection with these loans the Company granted new warrants exercisable to purchase a total of 150,000 shares of common stock at an exercise price of $1.00 per share. All of such warrants are immediately exercisable and terminate five years from the date of issuance.
Subsequent to June 30, 2014, the Company was unable to pay the outstanding principal due on promissory notes representing $450,000 in debt on their respective maturity dates. The Company negotiated extensions of their maturity dates to February 28, 2015 by granting new warrants to purchase 450,000 shares of common stock at an exercise price of $1.00 each with a five-year term, modifying existing warrant agreements covering 450,000 shares providing for an increase in the term of warrants to five years and reducing the exercise price to $1.00 per share.
Subsequent to June 30, 2014, the Company was unable to pay balances due on its line-of-credit with a related party with an outstanding balance of $32,802 as of June 30, 2014. The Company and such party agreed to extend the maturity date to February 28, 2015 and the Company granted new warrants to purchase 200,000 shares of common stock at an exercise price of $1.00 to $1.50 per share with a five-year term.
On October 13, 2014 the Company announced that it had entered into a Letter of Intent (LOI) with Granada Exploration, LLC, which has agreed to join with the Company to explore for potential hydrocarbons beneath Infinitys 1.4 million-acre oil and gas concessions in the Caribbean Sea offshore Nicaragua. Under the terms of the LOI, Granada Exploration will provide its services in exchange for a working interest in the Nicaraguan Concessions. The scope of such services will be more specifically described in a mutually acceptable Exploration Services Agreement (ESA), which is currently being negotiated and finalized. The ESA is anticipated to provide that Granada will earn an assignment from Infinity of an undivided 30% working interest in the Concessions, based on an 80% net revenue interest. Granada and Infinity are also anticipated to enter into a Joint Operating Agreement. Granada may, at its discretion, participate in an initial exploratory well for up to an additional undivided 20% working interest, on a prospect-by-prospect basis, with such additional interest to be based on an 80% net revenue interest.
The LOI is subject to Granadas normal and customary due diligence including the evaluation of the Companys Form 10-K and 10-Q filings, concession documents showing that the Company is in good standing with the Nicaraguan government, negotiation and approval of mutually acceptable formal agreements, and final approval by a majority of the partners that comprise Granada Exploration, LLC.
The Company has not resolved the contingency related to the expired letters of credit for its Nicaraguan Concessions (See Note 8). The Company continues to negotiate the renewal of the letters of credit with the Nicaraguan Government and its lenders; however, there can be no assurance that the Company will be successful in that regard.
Cambrian Consultants America, Inc. (Cambrian) filed an action in the District Court of Harris County, Texas, number CV2014-55719, on September 26, 2014 against Infinity Energy Resources, Inc. resulting from certain professional consulting services provided for quality control and management of seismic operations during November and December 2013 on the Companys offshore Nicaraguan concessions. Cambrian provided these services pursuant to a Master Consulting Agreement with Infinity dated November 20, 2013, and is claiming breach of contract for failure to pay amounts due. On December 8, 2014, a default judgment was entered against the Company in the amount of $96,877 plus interest and attorney fees. The Company has included the impacts of this litigation as liabilities in its accounts payable. The Company will seek to settle the default judgment when it has the financial resources to do so.
The above information was disclosed in a filing to the SEC. To see this filing in its entirety, click here.
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Other recent filings from the company include the following:
INFINITY ENERGY RESOURCES: Securities And Exchange Commission - Nov. 14, 2017