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Warrants

3 Months Ended

Mar. 31, 2022

Note 7 – Warrants

The following table summarizes warrant activity for the three months ended March 31, 2022 and 2021:

Summary of Warrant Activity

	Number of Warrants			Weighted Average Exercise Price Per Share
Outstanding and exercisable at December 31, 2020		1,528,380		$	0.65
Issued in connection with issuance of Series A convertible preferred stock (See Note 3)		5,256,410			0.39
Issued in connection with issuance of 3% convertible promissory notes (see Note 3 and 13)		5,732,994			0.50
Forfeited/expired		(18,500	)		(5.28	)
Outstanding and exercisable at March 31, 2021		12,499,284		$	0.46

Outstanding and exercisable at December 31, 2021		17,580,784		$	0.47
Forfeited/expired		—			—

Outstanding and exercisable at March 31, 2022		17,580,784		$	0.47

The weighted average term of all outstanding common stock purchase warrants was 4.3 years and 4.6 years as of March 31, 2022 and December 31, 2021, respectively. The intrinsic value of all outstanding common stock purchase warrants and the intrinsic value of all vested common stock purchase warrants was zero as of March 31, 2022 and December 31, 2021.

The following table summarizes the range of exercise prices and weighted average remaining contractual life for outstanding and exercisable warrants to purchase common shares as of March 31, 2022:

		Outstanding and exercisable warrants
	Exercise price per share	Number of warrants	Weighted average remaining contractual life
$	0.39	5,256,410	4.5 years
$	0.50	12,324,374	4.2 years

	Total	17,580,784	4.3 years

Warrants issued pursuant to 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 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 Company’s recently acquired 11,000-acre oil and gas properties in the Otis Albert Field located on the Central Kansas Properties. The USNG Letter Agreement would cover all of the noble gas, specifically including helium, and rare earth elements/minerals potentially existing on the Central Kansas Properties and the Company’s future acquisitions, if any.

The USNG Letter Agreement also provides that USNG will 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 requires the Company to establish a four-member board of advisors (the “Board of Advisors”) comprised of various experts involved 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 will pay USNG a monthly cash fee equal to $8,000 per month 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 March 31, 2022.

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 its common stock, par value $0.0001 per share (the “Common Stock”), at an exercise price of $0.50 (the “Exercise Price”) to three of USNG’s principal consultants and four third-party service providers. The Company was also required to issue 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.

The fair value of the warrants to purchase common stock in consideration for services to be rendered under the USNG Letter Agreement with USNG is estimated on the date of grant using the Black-Scholes option-pricing model, which requires the input of subjective assumptions, including the expected term of the warrant, expected stock price volatility and expected dividends. These estimates involve inherent uncertainties and the application of management judgment. For purposes of estimating the expected term of warrants granted, the Company considered the historical pattern of warrant exercises behavioral traits and determined that the expected term should be 5 years. Expected volatilities used in the valuation model are based on the expected volatility based on historical volatility. The risk-free rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of grant. The Company’s forfeiture rate assumption used in determining its stock-based compensation expense is estimated based on historical data. The actual forfeiture rate could differ from these estimates.

The following is the assumptions used in calculating the estimated grant-date fair value of the warrants issued pursuant to the USNG Letter Agreement granted on November 9, 2021:

	As of November 9, 2021 (issuance date)

Volatility – range		359.3	%
Risk-free rate		1.08	%
Expected term		5.0 years
Exercise price	$	0.50
Number of warrants in aggregate		3,260,000

The Company recognized $72,156 and $-0- of compensation expense relative to the 3,260,000 warrants to purchase common stock issued pursuant to the USNG Letter Agreement during the three months ended March 31, 2022 and 2021, respectively. There have been no exercises or forfeitures of the warrants to purchase common stock relative to the USNG Letter during the three months ended March 31, 2022 and 2021.

The total grant date fair value of the 3,260,000 warrants to purchase common stock issued pursuant to the USNG Letter Agreement on November 9, 2021 was $1,434,313 in total or $0.44 per share. Total unrecognized compensation cost related to the 3,260,000 warrants to purchase common stock issued pursuant to the USNG Letter Agreement, as of March 31, 2022 was $1,314,786 which will be amortized over the next fifty-five months.