American Noble Gas, Inc.

Equities

IFNY

US45663L5021

Oil & Gas Exploration and Production

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2023	American Noble Gas, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	CI
2023	American Noble Gas, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	CI

AMERICAN NOBLE GAS, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-Q)

November 17, 2022 at 09:44 am EST

Note Regarding Forward Looking Statements

This quarterly report on Form 10-Q 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. These statements include statements relating to trends in or expectations relating to the effects of our existing and any future initiatives, strategies, investments, outlooks and plans.

Actual results or events may differ materially from those anticipated and as reflected in forward-looking statements included in this report. Therefore, you should not rely on any of these forward-looking statements. Important factors that could cause our actual results and financial condition to differ materially from those indicated in the forward-looking statements include, among others: our ability to successfully develop and operate our properties; changes in the competitive environment in our industry and the markets we serve, and our ability to compete effectively; our cash needs and the adequacy of our cash flows and earnings; our ability to service our debt obligations; our ability to attract and retain qualified personnel; changes in applicable laws or regulations; litigation; public health epidemics or outbreaks (such as the novel strain of COVID-19 and related variants); accidents, equipment failures or mechanical problems; and other risks.

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.

As used in this quarterly report, "AMGAS," the "Company," "we," "us" and "our" refer collectively to American Noble Gas Inc, its predecessors and subsidiaries or one or more of them as the context may require.





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Overview

The Company has assessed various opportunities and strategic alternatives involving the acquisition, exploration and development of oil and gas oil producing 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 are now involved with the following oil and gas producing properties:

Central Kansas Uplift - On April 1, 2021, we completed the acquisition of the Central Kansas Uplift Properties, for a purchase price of $900,000. The Central Kansas Uplift Properties include 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"). 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 commenced rework of the existing production wells after completion of 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/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.

Hugoton Gas Field Farm-Out - On April 4, 2022, the Company acquired a 40% participation in a Farmout Agreement by and between Sunflower Exploration, LLC as the Farmee and Scout Energy Partners as Farmor with regards to its oil and gas interests in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas. The Company has joined three other parties to explore for and develop potential oil, natural gas, noble gases and brine minerals on the properties underlying the Farmout Agreement (collectively the "Hugoton JV").

The Farmout Agreement covers drilling and completion of up to 50 wells, with the first exploratory well spudded on May 7, 2022. The Hugoton JV will utilize Scout's existing infrastructure assets including water disposal, gas gathering and helium processing. The Farmout Agreement provides the Hugoton JV with rights to take in-kind and market its share of helium at the tailgate of Jayhawk Gas Plant, which will enable the Hugoton JV to market and sell the helium produced at prevailing market prices.

The Hugoton 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 Hugoton JV plans to target brine minerals with commercial quantities of bromine and iodine. The Company through the Hugoton 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 Hugoton JV believes that its unconventional theory has not previously been targeted for exploration by historical operations in the field. The initial exploratory well was spud on May 7, 2022 near Garden City, Kansas, with production casing set after testing and completion logs identified at least two potential zones with substantial gas and helium reserves. The initial well was completed upon the successful perforation across two lower intervals of the Chase group of formations. The fracture stimulation was completed in two stages during June 2022. The well was connected to the pipeline and commenced commercial production on August 17, 2022. The Company is evaluating the initial flows of both natural gas and helium.

Investment in GMDOC, LLC - On May 3, 2022, the Company entered into an operating agreement (the "Operating Agreement") pursuant to which the Company acquired 17 (or 60.7143%) of 28 limited liability membership interests (the "Interests") in GMDOC, LLC, a Kansas limited liability company ("GMDOC"), for an aggregate purchase price of $4,037,500, and was subsequently admitted as a member of GMDOC.

With respect to its cash capital contribution, the Company paid a non-refundable cash deposit for the membership interests in the amount of $50,000 on May 3, 2022. The Company paid the remainder of the cash contribution for the membership interests, or $800,000, on May 16, 2022. The remainder of the Company's capital contribution, or $3,187,500, was financed by the Bank Loan (as defined below).

GMDOC had previously acquired 70% of the working interests (the "Acquisition") in certain oil and gas leases (the "GMDOC Leases") from Castelli Energy, L.L.C., an Oklahoma limited liability company. The GMDOC Leases cover approximately 10,000 acres located in Southern Kansas near the Oklahoma border. The GMDOC Leases currently produce approximately 100 barrels of oil per day and 1.5 million cubic feet of natural gas per day on a gross basis.

GMDOC is managed by two members: Darrah Oil Company, LLC, and Grand Mesa Operating Company, (collectively the "Managing Members"), which also serve as the operating companies under the GMDOC Leases.

Name Change and Reincorporation Matters

At the Company's 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 Stock Option and Restricted Stock Plan (the "2021 Plan") and we reserved 5,000,000 shares of the Company's Common Stock, par value $0.0001 per share (the "Common Stock") for issuance under the 2021 Plan.





Reincorporation in Nevada

On December 7, 2021, pursuant to the Agreement and Plan of Merger, American Noble Gas, Inc., a Delaware corporation, 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 Delaware corporation 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, and/or Series A Convertible Preferred Stock, par value $0.0001 per share, 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 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 (the "Series A Convertible Preferred Stock"), and (iii) each outstanding option, right or warrant to acquire shares of 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 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 Convertible Preferred Stock automatically represents, without any action of the predecessor's stockholders, the same number of shares of Common Stock or Series A Convertible 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, as amended, and its bylaws. As of 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 as filed in the State of Nevada and the Company's Bylaws.

All references to the Company in this Quarterly Report on Form 10-Q refer to the predecessor prior to the merger, and AMGAS-Nevada subsequent to the merger.

2022 Operational and Financial Objectives





COVID-19 PANDEMIC

The financial statements contained in this Quarterly Report on Form 10-Q 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 and for the three and nine months ended September 30, 2022. Economies throughout the world have been and continue to suffer disruptions by the effects of the quarantines, business closures and the reluctance of individuals to leave their homes as a result of the COVID-19 pandemic. 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 Quarterly Report on Form 10-Q, 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 2022 operating objectives are focused on: 1) raising the necessary funds to finance exploration and development of the Hugoton Gas Field Farm-Out Venture, 2) raising the necessary funds to purchase our membership interest in GMDOC, 3) raising the funds necessary to explore and develop the Properties, including testing and evaluation of noble gas reserves in additional to the oil and gas producing zones, 4) raising the funds necessary to allow the Company to compete for new oil and gas properties that become available for acquisition purposes, and 5) funding our daily operations and the repayment of obligations that become due, or are in default and/or past due.





Recent financings -

Issuances of Series A Convertible Preferred Stock

March 2021 Issuance - 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 (the "March 2021 Series A Convertible Preferred Stock"); 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 thirty-nine cents ($0.39) per share, subject to customary adjustments thereunder. The March 2021 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 shares of Common Stock underlying the warrants 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 March 2021 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 March 2021 Series A Convertible Preferred Stock offering to complete the acquisition and development of the Properties, to pay-off certain outstanding convertible notes payable and for general working capital purposes.

The Company also entered into that certain registration rights agreement, pursuant to which the Company agreed to file a registration statement within forty-five (45) days following the closing of the acquisition of the Properties, which occurred on April 1, 2021, to register shares of Common Stock underlying the warrants. The Company is to use its best efforts to cause such registration statement to be declared effective within forty-five (45) days after the filing thereof, but in any event no later than the ninetieth (90th) calendar day following the closing of the acquisition of the Properties, which occurred on April 1, 2021. The Company completed the required registration of these shares on Form S-1, which the U.S. Securities and Exchange Commission (the "SEC") declared effective on August 4, 2021.

The holders of the March 2021 Series A Convertible Preferred Stock agreed to a 4.99% beneficial ownership cap that limits the investors' ability to convert its March 2021 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.

The holders of March 2022 Series A Convertible Preferred Stock exercised their rights to convert a total of 3,000 shares of March 2021 Series A Convertible Preferred Stock into 937,500 shares of Common Stock during the nine months ended September 30, 2022. There were no conversions during the nine months ended September 30, 2021.

On March 26, 2021, Ozark Capital, LLC acquired 1,111 shares of March 2021 Series A Convertible Preferred Stock (convertible into 347,188 shares of Common Stock), together with warrants to acquire 256,410 common shares of Common Stock at fifty cents ($0.50) per share for a total cash of $100,000. Ozark Capital, LLC and its affiliates hold over 10% of the shares of the Company's Common Stock as of September 30, 2022. Dividends paid to Ozark Capital, LLC were $2,800 and $2,800 for the three months ended September 30, 2022 and 2021, respectively and $8,279 and $5,753 for the nine months ended September 30, 2022 and 2021, respectively.

All holders of the March 2021 Series A Convertible Preferred Stock, including Ozark Capital, LLC, have 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.

June 2022 Issuance - On June 15, 2022 the Company entered into a securities purchase agreement with an accredited investor providing for an aggregate investment of $500,000 by the investor for the issuance by the Company of (i) 5,000 shares of Series A Convertible Preferred Stock with a stated/liquidation value of $100 per share (the "June 2022 Series A Convertible Preferred Stock"); 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 1,666,667 shares of Common Stock at an exercise price of thirty cents ($0.30) per share, subject to customary adjustments thereunder. The June 2022 Series A Convertible Preferred stock is convertible into an aggregate of up to 1,562,500 shares of Common Stock. The holder 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 shares of Common Stock underlying the warrants 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 warrant. Net proceeds from the issuance of the June 2022 Series A Convertible Preferred Stock totaled $500,000. The Company used the proceeds of the June 2022 Series A Convertible Preferred Stock offering to pay-off certain outstanding convertible notes payable and for general working capital purposes.

The Company also entered into that certain registration rights agreement, pursuant to which the Company agreed to file a registration statement within forty-five (45) days following the closing of the offering of the June 2022 Series A Convertible Preferred Stock, which occurred on June 15, 2022, to register the shares of Common Stock underlying the warrants. The Company is to use its best efforts to cause such registration statement to be declared effective within forty-five (45) days after the filing thereof, but in any event no later than the ninetieth (90th) calendar day following the closing of the offering, which occurred on June 15, 2022.

The holder of the June 2022 Series A Convertible Preferred Stock agreed to a 4.99% beneficial ownership cap that limits the investors' ability to convert its June 2022 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.

There were no conversions during the nine months ended September 30, 2022 and 2021.

August/September 2022 Issuances - During August and September 2022, the Company entered into a securities purchase agreements with three accredited investors providing for an aggregate investment of $145,000 by the investors for the issuance by the Company of (i) 1,450 shares of Series A Convertible Preferred Stock with a stated/liquidation value of $100 per share (the "August/September 2022 Series A Convertible Preferred Stock"); 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 483,332 shares of Common Stock at an exercise price of thirty cents ($0.30) per share, subject to customary adjustments thereunder. The August/September 2022 Series A Convertible Preferred Stock is convertible into an aggregate of up to 453,125 shares of Common Stock. The 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 shares of Common Stock underlying the warrants 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 warrant. Net proceeds from the issuance of the August/September 2022 Series A Convertible Preferred Stock totaled $145,000. The Company used the proceeds of the August/September 2022 Series A Convertible Preferred Stock offering to pay-off certain outstanding convertible notes payable and for general working capital purposes.

The holders of the August/September 2022 Series A Convertible Preferred Stock agreed to a 4.99% beneficial ownership cap that limits the investors' ability to convert its August/September 2022 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.

There were no conversions during the nine months ended September 30, 2022 and 2021.

Issuances of Convertible Notes Payable

8% Convertible Notes Payable due September 15, 2022 (in default) - On June 8, 2022, the Company issued to an accredited investor an unsecured convertible note payable due September 15, 2022 (the "June 2022 Note"), with an aggregate principal face amount of approximately $350,000. The June 2022 Note is, subject to certain conditions, convertible into an aggregate of 700,000 shares of Common Stock, at a price of fifty cents ($0.50) per share. The Company also issued a five-year Common Stock purchase warrant to purchase up to 700,000 shares of Common Stock at an exercise price of fifty cents ($0.50) per share, subject to customary adjustments (the "June 2022 Warrants") which are immediately exercisable. The investor purchased the June 2022 Note and June 2022 Warrant from the Company for an aggregate purchase price of $350,000 and the proceeds were used for drilling and completion costs on the initial well drilled under the Hugoton Gas Field participation agreement and general working capital purposes. The Company also granted the investor certain piggy-back registration rights whereby the Company has agreed to register for resale the shares of Common Stock underlying the June 2022 Warrant and the conversion of the June 2022 Note unless the shares of the Company commence 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.

The June 2022 Note bears interest at a rate of eight percent (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 the remaining principal amount of the underlying note and any accrued and unpaid interest.

The underlying notes and warrants contain customary events of default, representations, warranties, agreements of the Company and the investors and customary indemnification rights and obligations of the parties thereto, as applicable.

The Company did not pay the principal balance due on the June 2022 Note upon its maturity on September 15, 2022 and the remaining balance remains due and payable and is therefore in technical default. The parties are negotiating a resolution to such technical default including an extension and a roll-over of the principal into other Company securities, although there can be no assurance that the parties will reach a mutually agreeable resolution.

8% Convertible Notes Payable due June 29, 2022 (in default) - The Company entered into a securities purchase agreement with two accredited investors (the "Investors") for the Company's 8% convertible notes payable due June 29, 2022 (the "May 2022 Notes"), with an aggregate principal amount of $850,000. The May 2022 Notes are, subject to certain conditions, convertible into an aggregate of 2,125,000 shares of Common Stock, at a price of forty cents ($0.40) per share. The Company also issued an aggregate of 425,000 shares of Common Stock as commitment shares ("Commitment Shares" and, together with the May 2022 Notes and Conversion Shares, the "Securities") to the Investors as additional consideration for the purchase of the May 2022 Notes. The closing of the offering of the Securities occurred on May 13, 2022, when the Investors purchased the Securities for an aggregate purchase price of $850,000. The Company has also granted the Investors certain automatic and piggy-back registration rights whereby the Company has agreed to register the resale by the Investors of the Conversion Shares. The proceeds of this offering of Securities was used to purchase the Company's membership interests in GMDOC.

The May 2022 Notes bear interest at a rate of eight percent (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 May 2022 Note and any accrued and unpaid interest, and shall be mandatorily repaid in cash in an amount equal to a) fifty percent (50%) of the then outstanding principal amount equal to 120% of the principal amount of each May 2022 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) one hundred percent (100%) of the then outstanding principal amount equal to 120% of the principal amount of a May 2022 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 May 2022 Notes, so long as such May 2022 Notes remain outstanding, the Company shall not enter into any financing transactions pursuant to which the Company sells its securities at a price lower than the $0.40 per share conversion price, subject to certain adjustments, without the written consent of the Investors.

The conversion of the May 2022 Notes are each subject to beneficial ownership limitations such that the Investors may not convert the May 2022 Notes to the extent that such conversion or exercise would result in an Investor being the beneficial owner in excess of 4.99% (or, upon election of the 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, 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.

Pursuant to the purchase agreement for the Securities, for a period of twelve (12) months after the closing date, the Investors have a right to participate in any issuance of the Company's Common Stock, Common Stock equivalents, conventional debt, or a combination of such securities and/or debt, up to an amount equal to thirty-five percent (35%) of the subsequent financing.

The Company also entered into that certain registration rights side letter, pursuant to which, in the event the Company's shares of Common Stock have not commenced 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 one hundred twenty (120) days after the closing date, and, thereafter, the Company agreed to file a registration statement under the Securities Act to register the offer and sale, by the Company, of Common Stock underlying the May 2022 Notes in the event that such notes are not repaid prior to such 120-day period.

The Company paid half of the May 2022 Notes principal balance upon its maturity on June 29, 2022 and an additional $112,500 in September 2022 the remaining balance remains due and payable and is therefore in technical default. The parties are negotiating a resolution to such technical default including an extension and a roll-over of the principal into other Company securities, although there can be no assurance that the parties will reach a mutually agreeable resolution.

8% Convertible Notes Payable due October 29, 2022 (in default) - On August 30, 2021, 2021, the Company issued to an accredited investor (the "8% Note Investor") an unsecured convertible note payable due October 29, 2022 (the "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 fifty cents ($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 fifty cents ($0.50) per share, subject to customary adjustments (the "8% Note Warrant") which are 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 and the proceeds were used for general working capital purposes. 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 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.

On October 29, 2021, the Company issued to three accredited investors (the "October 8% Note Investors") unsecured convertible notes payable due October 29, 2022 (the "October 8% Notes"), with an aggregate principal face amount of approximately $550,000. The October 8% Notes are, subject to certain conditions, convertible into an aggregate of 1,100,000 shares of Common Stock, at a price of fifty cents ($0.50) per share. The Company also issued five and one half-year Common Stock purchase warrants to purchase up to 1,650,000 shares of Common Stock at an exercise price of $0.50 per share, subject to customary adjustments (the "October 8% Note Warrants") which are immediately exercisable. The October 8% Note Investors purchased the October 8% Notes and October 8% Note Warrants from the Company for an aggregate purchase price of $550,000 and the proceeds were used for general working capital purposes. The Company also granted the October 8% Note Investors certain piggy-back registration rights whereby the Company has agreed to register for resale the shares underlying the October 8% Note Warrants and the conversion of the October 8% Notes unless the shares of 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.

The 8% Note and the October 8% Notes all bear interest at a rate of eight percent (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 underlying notes and any accrued and unpaid interest. Fifty percent (50%) of the 8% Note and the October 8% Notes shall be mandatorily repaid in cash in an amount equal to 120% of the principal amount of the underlying notes 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 one-hundred percent (100%) of the underlying notes 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% Notes Note and the October 8% Notes, so long as the underlying notes remain outstanding, the Company cannot enter into any financing transactions pursuant to which the Company sells its securities at a price lower than $0.50 cents per share without the written consent of the 8% Note Investor.

The conversion of the 8% Note and the October 8% Notes and the exercise of the underlying warrants are each subject to beneficial ownership limitations such that the 8% Note Investor and the October 8% Note Investors may not convert the underlying notes or exercise the underlying warrants to the extent that such conversion or exercise would result in any of the investors being the beneficial owner in excess of 4.99% (or, upon election of the investors, 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.

The Company, the 8% Note Investor and the October 8% Note Investors have agreed that for so long as the underlying warrants remain outstanding, the investors have the right to participate in any issuance of Common Stock, conventional debt, or a combination of such securities and/or debt, up to an amount equal to thirty-five percent (35%) of such subsequent financing.

The Company did not pay the principal balance due on the 8% Notes and the October 8% Notes upon their maturity on October 29, 2022 and the remaining balance remains due and payable and is therefore in technical default. The parties are negotiating a resolution to such technical default including an extension and a roll-over of the principal into other Company securities, although there can be no assurance that the parties will reach a mutually agreeable resolution.

3% Convertible Notes Payable due March 31, 2026 - 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% convertible notes payable (the "3% Notes") with detachable warrants to purchase 5,732,994 shares of Common Stock for fifty cents ($0.50) per share (the 3% Note Warrants"). 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 "Maturity Date"). 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 the Maturity Date at the rate of fifty cents ($0.50) per share, subject to normal and customary adjustments. The 3% Note Warrants were valued at $1,605,178 using the Black-Scholes methodology.

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 the 3% Notes with detachable warrants to purchase the 3% Note Warrants. The 3% Notes allow for prepayment at any time with all principal and accrued interest becoming due and payable at maturity on the Maturity Date. 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 3% Note Warrants 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 a convertible note payable originally issued in August 2020 (the "August 2020 Note") in conjunction with the issuance of the March 2021 Series A Convertible Preferred Stock. In accordance with the prepayment provisions contained in the August 2020 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 holders of two notes payable aggregating $85,000 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 extinguishment of the debt obligations resulted in a gain of $55,230, which was recorded in the year ended December 31, 2021.





47






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 provides 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 Company's recently acquired 11,000-care oil and gas properties in the Otis Albert Field located on the Properties. The USNG Letter Agreement would cover all of the noble gases, specifically helium, and rare earth elements/minerals potentially existing on the Properties and the Company's future acquisitions, 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.

Pursuant to the USNG Letter Agreement, the Company will 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 the Company 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 through September 30, 2022.

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 fifty ($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 fifty cents ($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 fifty cents ($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.

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 except as follows:

Investment in Unconsolidated Subsidiary - GMDOC - On May 3, 2022, the Company entered into the Operating Agreement pursuant to which the Company acquired 17 (or 60.7143%) of 28 limited liability membership Interests in GMDOC, for an aggregate purchase price of $4,037,500, and was subsequently admitted as a member of GMDOC.

GMDOC had previously acquired 70% of the working interests in the GMDOC Leases from Castelli Energy, L.L.C, an Oklahoma limited liability company. The GMDOC Leases cover approximately 10,000 acres located in Southern Kansas near the Oklahoma border. The GMDOC Leases currently produce approximately 100 barrels of oil per day and 1.5 million cubic feet of natural gas per day on a gross basis.

Pursuant to the terms of the Operating Agreement, each member agreed to pay GMDOC, as its capital contribution, $50,000 in cash per Interest, with the remainder to be financed, in part, by a loan to GMDOC from a commercial bank, secured by GMDOC's property, in the aggregate amount of $6,045,000 (the "Bank Loan"). The principal of the Bank Loan is to be repaid in 84 varying monthly installments, ranging from $170,000 at the beginning to $40,500 at the end of the loan term, with the first installment on July 1, 2022. The Bank Loan bears a variable interest beginning at an initial rate of 6% per annum with one rate adjustment after 36 months subject to a 6% minimum interest rate.

For the Three Months Ended September 30, 2022 and 2021





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 $43,034 and $35,392 for the three months ended September 30, 2022 and 2021, respectively. The $7,642 or 22% increase in revenues during the three months ended September 30, 2022 as compared to the same period in 2021 reflects the commencement of natural gas and helium sales from the initial Hugoton Gas Field which was connected to the pipeline on August 17, 2022. The Company expects its revenues to continue to improve as the market price of West Texas Intermediate ("WTI") oil, which is the benchmark price the Company receives for the sale of its crude oil, remains strong and the Company increases the volume of natural gas and helium gas sold as it continues its drill and complete wells pursuant to its Hugoton Gas Field participation agreement.

During the three months ended September 30, 2022, our revenue was substantially impacted by inflation, the COVID-19 pandemic and the Russian war in Ukraine, which has restricted the world supply of oil and gas and thereby increased the average WTI crude oil price. We expect this trend to continue during the remainder of 2022 and perhaps beyond.

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 $55,288 and $220,767 for the three months ended September 30, 2022 and 2021, respectively. The decrease in oil and gas lease operating expenses during the three months ended September 30, 2022 as compared to the same period in 2021 is attributable to significant repairs and rework performed in the three months ended September 30, 2021 that did not recur in the 2022 period.

Upon completion of our acquisition of the Properties on April 1, 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.

During the three months ended September 30, 2022, our oil and gas lease operating expenses have been substantially impacted by inflation, the COVID-19 pandemic and the Russian war in Ukraine, which has restricted the supply of production pipe and other materials used in the drilling and rework of oil and gas wells. In addition, experienced oil and gas service professionals have been in high demand in the oil and gas service sector and thereby increasing the cost of oil and gas well services. We expect this trend to continue during the remainder of 2022 and perhaps beyond.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization expense totaled $34,292 and $30,834 during the three months ended September 30, 2022 and 2021, respectively. The Company began generating revenues from the production and sale of natural gas and helium from its Hugoton property on August 17, 2022 and 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. The Company began generating revenues from the production and sale of natural gas and helium from its Hugoton property on August 17, 2022, which also marked the beginning of the related depreciation, depletion and amortization.

Accretion of Asset Retirement Obligation

Total expense for the accretion of asset retirement obligations was $424 and $279 for the three months ended September 30, 2022 and 2021, 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. In addition, the Company commenced production from its initial Hugoton Gas Field well which began the accretion of its related asset retirement obligations. 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

Oil and gas production related taxes totaled $55 and $1,626 for the three months ended September 30, 2022 and 2021, 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 $43,034 for the three months ended September 30, 2022, which resulted in the deduction of $55 in production related taxes. Revenues totaled $35,392 for the three months ended September 30, 2021, which resulted in the deduction of $1,626 in production related taxes primarily due to severance taxes paid in 2021. During the three months ended September 30, 2021, the Company received a notice from the State of Kansas that exempted the Company from paying severance taxes due to the existing wells' production levels. Therefore, production related taxes declined as a percentage of revenue during the three months ended September 30, 2022 as compared to the same period in 2021.

Other General and Administrative Expenses

Other general and administrative expenses were $283,312 for the three months ended September 30, 2022, a decrease of $11,128, or 4%, from other general and administrative expenses of $294,440 for the three months ended September 30, 2021. The decrease in other general and administrative expenses is primarily attributable to a decrease of $20,570 in geologist fees related to work performed in the three months ended September 30, 2021 on the Properties that did not recur in the three months ended September 30, 2022.

Equity in earnings of unconsolidated subsidiary - GMDOC

The Company reported equity in earnings of unconsolidated subsidiary of $209,297 for the three months ended September 30, 2022, compared to $-0- for the three months ended September 30, 2021. Such income resulted from the Company acquiring a 60.7143% membership interest in GMDOC in May 2022. The Company uses the equity method of accounting for equity investments if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee, GMDOC. Management's judgment regarding its level of influence over the operations of GMDOC included considering key factors such as the Company's ownership interest, legal form of the investee, its lack of participation in policy-making decisions and its lack of control over the day-to-day operations of GMDOC.

GMDOC had previously acquired 70% of the working interests in in the GMDOC Leases from Castelli Energy, L.L.C., an Oklahoma limited liability company. The GMDOC Leases cover approximately 10,000 acres located in Southern Kansas near the Oklahoma border. The GMDOC leases currently produce approximately 100 barrels of oil per day and 1.5 million cubic feet of natural gas per day on a gross basis. GMDOC, LLC generated $209,297 of net income on approximately $929,000 of oil and gas revenues during the three months ended September 30, 2022. The Company owns a 60.7143% membership interest in such net income or $209,297 which it has reported as equity in earnings of unconsolidated subsidiary - GMDOC during the three months ended September 30, 2022.





50






Interest Expense

Interest expense increased to $217,872 for the three months ended September 30, 2022, compared to $5,724 for the three months ended September 30, 2021. The increase in interest expense during the three months ended September 30, 2022 was attributable to the issuance of the various convertible notes payable issued 2022 and in 2021 that were outstanding during the three months ended September 30, 2022 and not during the three months ended September 30, 2021.





Income Tax

The Company recorded no income tax benefit (expense) in the three months ended September 30, 2022 and 2021. The Company has been in a cumulative tax loss position and has substantial net operating loss carryforwards available for its utilization at September 30, 2022. 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 three months ended September 30, 2022 and 2021.





Net Loss

The Company reported a net loss of $338,912 for the three months ended September 30, 2022, compared to a net loss of $518,278 for the three months ended September 30, 2021. This represents a decrease in net loss of $179,366 for the three months ended September 30, 2022 compared to the three months ended September 30, 2021.

Series A Convertible Preferred Stock Dividends

The Company recorded $65,406 and $57,408 for convertible preferred stock dividends in the three months ended September 30, 2022 and 2021, respectively. On March 26, 2021, the Company issued and classified its Series A Convertible Preferred Stock as equity securities on its balance sheet. During 2022, the Company issued additional shares of Series A Convertible Preferred Stock, therefore, there were more shares of Series A Convertible Preferred Stock outstanding during the three months ended September 30, 2022 as compared to the same period in 2021. All shares of Series A Convertible Preferred Stock bear a cumulative dividend at a 10% rate based on its stated/liquidation value.

Net Loss Applicable to Common Stockholders

The Series A Convertible Preferred Stock issued in 2022 and 2021 have [dividend and distribution] preferences over our Common Stock and, therefore, such accrued dividend amounts have been deducted from net loss to report net loss applicable to common stockholders of $404,318 and $575,686 for the three months ended September 30, 2022 and 2021, respectively.

Basic and Diluted Net Loss Attributable to Common Stockholders per Share

Basic net loss attributable to common stockholders per share is computed by dividing the net loss attributable to common stockholders by the weighted-average number of shares of Common Stock outstanding during the period. Diluted net loss attributable to common stockholders per share is computed by dividing the net 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 loss attributable to common stockholders per share computation represent shares of Common Stock issuable upon the assumed conversion of convertible notes payable, Series A 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.

The Company incurred a net loss attributable to common stockholders during the three months ended September 30, 2022, and 2021, therefore all Common Stock Equivalents were considered anti-dilutive and excluded from diluted net loss attributable to common stockholders per share computations. The basic and diluted net loss attributable to common stockholders per share were $(0.02) and $(0.03) for the three months ended September 30, 2022 and 2021, respectively.

Potential Common Stock Equivalents as of September 30, 2022 totaled 32,688,238 shares of Common Stock, which included 2,838,580 shares of Common Stock underlying the convertible notes payable, 7,976,875 shares of Common Stock underlying the conversion of Series A Convertible Preferred Stock, 20,430,783 shares of Common Stock underlying outstanding warrants and 1,442,000 shares of Common Stock underlying outstanding stock options.

For the Nine Months Ended September 30, 2022 and 2021





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 $111,903 and $56,220 for the nine months ended September 30, 2022 and 2021, respectively. The $55,683 or 99% increase in revenues during the nine months ended September 30, 2002 as compared to the same period in 2021 reflects the commencement of natural gas and helium sales from the initial Hugoton Gas Field which was connected to the pipeline on August 17, 2022 as well as the timing of the purchase of the Properties. The Company expects its revenues to continue to improve as the price of WTI oil remains strong and the Company increases the volume of natural gas and helium gas sold as it continues its drill and complete wells pursuant to its Hugoton Gas Field participation agreement.

During the nine months ended September 30, 2022, our revenue was substantially impacted by inflation, the COVID-19 pandemic and the Russian war in Ukraine, which has restricted the world supply of oil and gas and thereby increased the average WTI crude oil price. We expect this trend to continue during the remainder of 2022 and perhaps beyond.

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 $198,003 and $446,849 for the three months ended September 30, 2022 and 2021, respectively. The decrease in oil and gas lease operating expenses during the nine months ended September 30, 2022 as compared to the same period in 2021 is attributable to significant repairs and rework performed in the nine months ended September 30, 2021 that did not recur in the 2022 period.

During the nine months ended September 30, 2022, our oil and gas lease operating expenses have been substantially impacted by inflation, the COVID-19 pandemic and the Russian war in Ukraine, which has restricted the supply of production pipe and other materials used in the drilling and rework of oil and gas wells. In addition, experienced oil and gas service professionals have been in high demand in the oil and gas service sector and thereby increasing the cost of oil and gas well services. We expect this trend to continue during the remainder of 2022 and perhaps beyond.

Depreciation, Depletion and Amortization

Depreciation, depletion and amortization expense totaled $95,961 and $61,668 during the nine months ended September 30, 2022 and 2021, respectively. The Company began generating revenues from the production and sale of natural gas and helium from its Hugoton property on August 17, 2022 and crude oil 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. The Company began generating revenues from the production and sale of natural gas and helium from its Hugoton property on August 17, 2022, which also marked the beginning of the related depreciation, depletion and amortization.

Accretion of Asset Retirement Obligation

Total expense for the accretion of asset retirement obligations was $1,004 and $558 for the nine months ended September 30, 2022 and 2021, 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. In addition, the Company commenced production from its initial Hugoton Gas Field well which began the accretion of its related asset retirement obligations. 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

Oil and gas production related taxes totaled $164 and $2,592 for the nine months ended September 30, 2022 and 2021, 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 $111,903 for the nine months ended September 30, 2022, which resulted in the deduction of $164 in production related taxes. Revenues totaled $56,220 for the nine months ended September 30, 2021, which resulted in the deduction of $2,592 in production related taxes primarily due to severance taxes paid in 2021. During the nine months ended September 30, 2021, the Company received a notice from the State of Kansas that exempted the Company from paying severance taxes due to the existing wells' production levels. Therefore, production related taxes declined as a percentage of revenue during the nine months ended September 30, 2022 as compared to the same period in 2021.

Other General and Administrative Expenses

Other general and administrative expenses were $1,131,456 for the nine months ended September 30, 2022, an increase of $393,037, or 53%, from other general and administrative expenses of $738,419 for the nine months ended September 30, 2021. The increase in other general and administrative expenses is primarily attributable to an increase of $508,589 in stock-based compensation due to the noncash compensation awarded to the Company's executives, members of the Board of Directors, the USNG Letter Agreement which awarded compensatory warrants to advisory members of the Board of Advisors and other consultants in 2022 and in late 2021. The increase in stock-based compensation was offset by a $75,000 charge-off of one option to acquire a property during the nine months ended September 30, 2021 that did not recur in the comparable period in 2022.

Equity in earnings of unconsolidated subsidiary - GMDOC

The Company reported equity in earnings of unconsolidated subsidiary of $323,633 for the nine months ended September 30, 2022, compared to $-0- for the nine months ended September 30, 2021. Such income resulted from the Company acquiring a 60.7143% membership interest in GMDOC in May 2022. The Company uses the equity method of accounting for equity investments if the investment provides the ability to exercise significant influence, but not control, over operating and financial policies of the investee, GMDOC. Management's judgment regarding its level of influence over the operations of GMDOC included considering key factors such as the Company's ownership interest, legal form of the investee, its' lack of participation in policy-making decisions and its' lack of control over the day-to-day operations of GMDOC.

GMDOC had previously acquired 70% of the working interests in the GMDOC Leases from Castelli Energy, L.L.C., an Oklahoma limited liability company. The GMDOC Leases cover approximately 10,000 acres located in Southern Kansas near the Oklahoma border. The GMDOC leases currently produce approximately 100 barrels of oil per day and 1.5 million cubic feet of natural gas per day on a gross basis. GMDOC, LLC generated $533,043 of net income on approximately $1,718,000 of oil and gas revenues during the nine months ended September 30, 2022. The Company owns a 60.7143% membership interest in such net income or $323,633 which it has reported as equity in earnings of unconsolidated subsidiary - GMDOC during the nine months ended September 30, 2022.





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Interest Expense

Interest expense increased to $643,662 for the nine months ended September 30, 2022, compared to $40,163 for the nine months ended September 30, 2021. The increase in interest expense during the nine months ended September 30, 2022 was attributable to the issuance of the various convertible notes payable issued in 2022 and in 2021 that were outstanding during the nine months ended September 30, 2022 and not during the nine months ended September 30, 2021.

Gain on Extinguishment of Liabilities

The Company reported a gain on exchange and extinguishment of liabilities of $-0- and $86,602 in the nine months ended September 30, 2022 and 2021, respectively.

On April 1, 2021, the Company and the holders of two notes payable aggregating $85,000 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 245,000 shares issued to extinguish the debt obligations resulted in a gain of $55,230 which was recorded in the nine months ended September 30, 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 as of that date. 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. Such 3% Notes were issued with the 3% Warrants, which were valued at $1,605,178. The transaction 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 during the nine months ended September 30, 2021. 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 the August 2020 Note. There were no similar transactions during the nine months ended September 30, 2022.

Change in Derivative Fair Value

The conversion feature in certain outstanding notes payable and Common Stock purchase warrants issued in connection with short-term notes outstanding during the nine months ended September 30, 2021 were treated as derivative instruments because such notes payable and warrants contained ratchet and anti-dilution provisions. The mark-to-market process resulted in a gain of $199 during the nine months ended September 30, 2021. There were no similar derivatives outstanding during the nine months ended September 30, 2022. All short-term notes and their related derivative warrants were terminated on April 1, 2021.





Income Tax

The Company recorded no income tax benefit (expense) in the nine months ended September 30, 2022 and 2021. The Company has been in a cumulative tax loss position and has substantial net operating loss carryforwards available for its utilization at September 30, 2022. 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 nine months ended September 30, 2022 and 2021.





Net Loss

The Company reported a net loss of $1,634,714 for the nine months ended September 30, 2022, compared to a net loss of $1,147,228 for the nine months ended September 30, 2021. This represents a decrease in net loss of $487,486 for the nine months ended September 30, 2022 compared to the nine months ended September 30, 2021.

Series A Convertible Preferred Stock Dividends

The Company recorded $170,556 and $117,936 in convertible preferred stock dividends in the nine months ended September 30, 2022 and 2021, respectively. On March 26, 2021, the Company issued and classified its Series A Convertible Preferred Stock as equity securities on its balance sheet. During 2022, the Company issued additional shares of Series A Convertible Preferred Stock, therefore, there were more shares of Series A Convertible Preferred Stock outstanding during the nine months ended September 30, 2022 as compared to the same period in 2021. All shares of Series A Convertible Preferred Stock bear a cumulative dividend at a 10% rate based on its stated/liquidation value.

Net Loss Applicable to Common Stockholders

The Series A Convertible Preferred Stock issued in 2021 and 2022 have dividend and/or distribution preferences over our Common Stock and, therefore, such accrued dividend amounts have been deducted from net loss to report net loss applicable to common stockholders of $1,805,270 and $1,265,164 for the nine months ended September 30, 2022 and 2021, respectively.

Basic and Diluted Net Loss Attributable to Common Stockholders per Share

The Company incurred a net loss attributable to common stockholders during the nine months ended September 30, 2022, and 2021, therefore all Common Stock Equivalents were considered anti-dilutive and excluded from diluted net loss attributable to common stockholders per share computations. The basic and diluted net loss attributable to common stockholders per share were $(0.09) and $(0.07) for the nine months ended September 30, 2022 and 2021, respectively.

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 Nicaraguan Concessions, which was a long-term, high-risk/reward exploration project in an otherwise unproven part of the world. We abandoned the Nicaraguan Concessions in early 2020 due to the challenging economic and political issues in Nicaragua and in the oil and gas industry in general. Subsequent to the abandoning of the Nicaraguan Concessions, we began 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: 1) acquired the Properties, 2) entered into the Hugoton JV and 3) entered into the GMDOC venture.

The planned development of the development projects previously identified 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.





55






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 nine months ended September 30, 2022 and for the year ended December 31, 2021:





                                                                    Nine months ended
                                                                    September 30, 2022

Capital raised: Issuance of convertible notes payable together with the issuance of 425,000 shares of Common Stock

                                  $            850,000

Issuance of Series A Convertible Preferred Stock with detachable Common Stock purchase warrants

                                                  645,000
Issuance of convertible notes payable with detachable Common
Stock purchase warrants                                                         350,000

Total capital raised                                               $          1,845,000




                                                                      Year ended
                                                                     December 31,
                                                                         2021

Capital raised: Issuance of Series A Convertible Preferred Stock with detachable Common Stock purchase warrants

$      1,929,089
Issuance of convertible notes payable with detachable Common
Stock purchase warrants                                                     650,000

Total capital raised                                               $      2,579,089

The Company was able to raise liquidity during 2022 and 2021 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 Common Stock purchase warrants and the convertible notes payable. These issuances generally 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 their purchase price. The holders have also agreed that the conversion of the Series A Convertible Preferred Stock, the convertible notes payable 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 payable 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 notes payable with detachable warrants to acquire Common Stock to fund our operational and capital expenditure plans for the remainder of 2022.





56






Capital Expenditures

As of September 30, 2022, we have: 1) acquired the Properties, 2) entered into the Hugoton JV and 3) entered into the GMDOC venture as more fully described elsewhere in this Quarterly Report on Form 10-Q.





Going Concern

The Company has incurred losses from operations, has a net stockholders' deficit, incurred net cash used in operating activities and has a significant working capital deficit as of and for the nine months ended September 30, 2022 and for the year ended December 31, 2021. The Company must raise substantial amounts of debt and equity capital from other sources in the future in order to fund (i) the development of the Properties acquired on April 1, 2021; (ii) our obligations for exploration and development under the Hugoton Farmout Agreement; (iii) normal day-to-day operations and corporate overhead; and (iv) outstanding debt and other financial obligations as they become due. Some of the Company's outstanding debt and other financial obligations are currently past due and the Company anticipates that other debt and financial obligations will become past due imminently. These are substantial operational and financial issues that must be successfully addressed during 2022 and beyond.

The Company has made substantial progress in resolving many of its existing financial obligations during the nine months ended September 30, 2022 and for the year ended December 31, 2021.

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, there exists substantial doubt about the Company's ability to continue as a going concern within one year after the date the financials are issued. The unaudited condensed 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 September 30, 2022, we had cash and cash equivalents with an aggregate balance of $17,096, a decrease from a balance of $260,590 as of December 31, 2021. Summarized immediately below and discussed in more detail in the subsequent subsections are the main elements of the $243,494 net decrease in cash during the nine months ended September 30, 2022:

Latest news about American Noble Gas, Inc.

American Noble Gas, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2023	Nov. 14	CI
American Noble Gas, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2023	23-08-11	CI
American Noble Gas, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2023	23-06-09	CI
American Noble Gas, Inc. Reports Earnings Results for the Full Year Ended December 31, 2022	23-05-15	CI
American Noble Gas, Inc. Auditor Raises 'Going Concern' Doubt	23-05-14	CI
American Noble Gas, Inc. Announces CEO Changes	23-05-08	CI
American Noble Gas, Inc. Announces CFO Changes	23-05-08	CI
American Noble Gas, Inc. announced that it has received $0.75 million in funding from Ozark Capital Advisors, LLC, Alpha Capital Anstalt and other investors	23-05-04	CI
American Noble Gas, Inc. announced that it expects to receive $0.75 million in funding from Ozark Capital Advisors, LLC, Alpha Capital Anstalt and other investors	23-05-02	CI
American Noble Gas, Inc. has Changed its Ticker to AMNI from IFNY	23-01-20	CI
American Noble Gas, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2022	22-11-17	CI
American Noble Gas Announces Initial Flow Rates and Helium Concentration from Its First Production Well in the Hugoton Field	22-09-22	CI
American Noble Gas, Inc. Reports Earnings Results for the Second Quarter and Six Months Ended June 30, 2022	22-08-12	CI
American Noble Gas Provides Update on Completion of Initial Well to Produce Natural Gas and Helium in the Hugoton Field	22-06-14	CI
American Noble Gas, Inc. announced that it has received $0.35 million in funding	22-06-07	CI
American Noble Gas, Inc. completed the acquisition of a 60.7143% stake in GMDOC, LLC. for $0.85 million.	22-05-18	CI
American Noble Gas, Inc. Provides Drilling Update on Initial Exploratory Well to Explore and Develop Natural Gas, Helium and Brine Minerals in Hugoton Field	22-05-17	CI
American Noble Gas, Inc. announced that it has received $0.85 million in funding	22-05-12	CI
American Noble Gas, Inc. Reports Earnings Results for the First Quarter Ended March 31, 2022	22-05-10	CI
American Noble Gas, Inc. Commences Drilling Operations on Initial Exploratory Well	22-04-28	CI
John Loeffelbein Resigns from His Position as Chief Operating Officer with American Noble Gas, Inc	22-04-22	CI
American Noble Gas, Inc. Enters into Farmout Agreement to Explore and Develop Natural Gas, Helium and Brine Minerals in the Hugoton Gas Field	22-04-13	CI
American Noble Gas, Inc. Reports Earnings Results for the Full Year Ended December 31, 2021	22-04-06	CI
American Noble Gas, Inc. Auditor Raises 'Going Concern' Doubt	22-04-05	CI
American Noble Gas, Inc. Reports Earnings Results for the Third Quarter and Nine Months Ended September 30, 2021	21-11-12	CI

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Company Profile

American Noble Gas, Inc. is engaged in the business of exploring and developing areas that contain noble gas and rare earth mineral reserves, in addition to the exploration and development of traditional oil and gas. The Companyâs Central Kansas Uplift Properties include the production and mineral rights/leasehold for oil and gas properties, subject to overriding royalties to third parties, covering over 11,000 contiguous acres. Its properties include a horizontal producing well, horizontal saltwater injection well, conventional saltwater disposal well, and two conventional vertical producing wells, which produce oil from the Reagan Sand zone at an approximate depth of 3,600 feet. It also has an oil and gas interest in the Hugoton Gas Field, located in Haskell and Finney Counties, Kansas. It also assessed various opportunities and strategic alternatives involving the acquisition, exploration and development of oil and gas oil producing properties in the United States.

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Oil & Gas Exploration and Production

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