Camber Energy(CEI)

Search documents
Camber Energy(CEI) - 2022 Q3 - Quarterly Report
2022-11-14 20:02
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______. Commission file number: 000-29219 CAMBER ENERGY, INC. (Exact name of registrant as specified in its charter) Nevada 20-2660243 (State or other jurisdiction ...
Camber Energy(CEI) - 2022 Q2 - Quarterly Report
2022-08-12 20:31
UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______. Commission file number: 000-29219 CAMBER ENERGY, INC. (Exact name of registrant as specified in its charter) Nevada 20-2660243 (State or other jurisdiction of i ...
Camber Energy(CEI) - 2022 Q1 - Quarterly Report
2022-05-20 18:43
10-Q 1 cei_10q.htm FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q ☒ QUARTERLY REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2022 OR ☐ TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______. Commission file number: 000-29219 CAMBER ENERGY, INC. (Exact name of registrant as specified in its charter) Nevada 20-2660243 (St ...
Camber Energy(CEI) - 2021 Q4 - Annual Report
2022-05-20 00:53
10-K 1 cei_10k.htm FORM 10-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended: December 31, 2021 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the Transition Period from _______ to ___________ Commission File Number:001-32508 CAMBER ENERGY, INC. (Exact name of registrant as specified in its charter) | ...
Camber Energy(CEI) - 2021 Q3 - Quarterly Report
2022-05-20 00:52
[PART I – FINANCIAL INFORMATION](index=2&type=section&id=PART%20I%E2%80%94FINANCIAL%20INFORMATION) This part presents Camber Energy, Inc.'s unaudited consolidated financial statements and management's discussion and analysis for the periods presented [ITEM 1. FINANCIAL STATEMENTS](index=2&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents Camber Energy, Inc.'s unaudited consolidated financial statements, including balance sheets, statements of operations, cash flows, and changes in stockholders' equity, along with detailed notes explaining significant accounting policies, investments, debt, derivative liabilities, and subsequent events [Consolidated Balance Sheets](index=2&type=section&id=Consolidated%20Balance%20Sheets) Provides a snapshot of the company's assets, liabilities, and stockholders' deficit at specific reporting dates **Consolidated Balance Sheet Highlights (Unaudited):** | Metric | September 30, 2021 | December 31, 2020 | | :----------------------- | :----------------- | :------------------ | | Total Assets | $32,779,361 | $16,815,251 | | Total Liabilities | $198,311,310 | $113,094,761 | | Derivative Liability | $174,864,402 | $93,981,234 | | Stockholders' Deficit | $(165,531,949) | $(102,225,562) | [Consolidated Statements of Operations](index=2&type=section&id=Consolidated%20Statements%20of%20Operations) Details the company's revenues, expenses, and net income or loss over specific reporting periods **Consolidated Statements of Operations Highlights (Unaudited):** | Metric | 3 Months Ended Sep 30, 2021 | 3 Months Ended Sep 30, 2020 | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------------------ | :-------------------------- | :-------------------------- | :-------------------------- | :-------------------------- | | Oil and Gas Sales | $103,191 | $57,458 | $266,082 | $180,046 | | Total Operating Expenses | $1,023,497 | $885,100 | $4,271,528 | $3,239,340 | | Loss from Operations | $(920,306) | $(827,642) | $(4,005,446) | $(3,059,294) | | Loss on Derivative Liability | $(256,855,721) | $(17,930,335) | $(222,688,936) | $(37,516,652) | | Net Income (Loss) | $(264,555,523) | $(19,986,843) | $(246,495,102) | $(41,625,851) | | Net Income (Loss) Attributable to Common Stockholders | $(264,555,523) | $(19,986,843) | $(253,172,096) | $(45,497,700) | | Income (Loss) per Share - Basic and Diluted | $(1.63) | $(1.01) | $(3.10) | $(7.46) | [Consolidated Statements of Cash Flows](index=3&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Summarizes the cash inflows and outflows from operating, investing, and financing activities **Consolidated Statements of Cash Flows Highlights (Unaudited):** | Metric | 9 Months Ended Sep 30, 2021 | 9 Months Ended Sep 30, 2020 | | :------------------------------------ | :-------------------------- | :-------------------------- | | Net Loss | $(246,495,102) | $(41,625,851) | | Change in Fair Value of Derivative Liability | $222,688,936 | $37,516,652 | | Net Cash Provided (Used) in Operating Activities | $(2,203,759) | $(2,940,774) | | Net Cash Provided (Used) in Investing Activities | $(11,000,000) | $(9,200,000) | | Net Cash Provided (Used) in Financing Activities | $17,500,000 | $11,000,000 | | Net Increase (Decrease) in Cash | $4,296,241 | $(1,140,774) | | Cash, End of Period | $5,164,789 | $1,112,965 | [Consolidated Statements of Changes in Stockholders' Equity](index=3&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Outlines the changes in common stock, additional paid-in capital, and accumulated deficit over time **Consolidated Statements of Changes in Stockholders' Equity Highlights (Unaudited):** | Metric | December 31, 2020 | September 30, 2021 | | :------------------------------------ | :---------------- | :----------------- | | Common Stock (Shares Outstanding) | 25,000,000 | 249,563,410 | | Common Stock (Value) | $25,000 | $249,563 | | Additional Paid In Capital | $209,362,384 | $392,326,532 | | Accumulated Deficit | $(311,612,946) | $(558,531,949) | [Notes to Consolidated Financial Statements](index=4&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Provides detailed explanations and additional information supporting the consolidated financial statements [NOTE 1 RELATIONSHIP WITH AND OWNERSHIP OF VIKING ENERGY GROUP, INC.](index=4&type=section&id=NOTE%201%20RELATIONSHIP%20WITH%20AND%20OWNERSHIP%20OF%20VIKING%20ENERGY%20GROUP,%20INC.) Details Camber's acquisition and investment in Viking Energy Group, Inc., and the planned merger - Camber acquired a **51% interest** in Viking Energy Group, Inc. on December 23, 2020, for **$10.9 million cash** and cancellation of **$9.2 million** in promissory notes. This led to the appointment of Viking's CEO and CFO to Camber's leadership[16](index=16&type=chunk) - An additional **16,153,846 Viking shares** were acquired on January 8, 2021, by issuing **1,890 shares of Camber's Series C Preferred Stock**, which satisfied a **$20.8 million** secured promissory note from Viking to EMC Capital Partners, LLC[17](index=17&type=chunk)[18](index=18&type=chunk) - A merger agreement was entered into on February 15, 2021, for Viking to become a wholly-owned subsidiary of Camber, with Viking common stock converting to Camber common stock and Viking Preferred Stock converting to Camber Series A Preferred Stock[19](index=19&type=chunk) - On July 29, 2021, Camber acquired an additional **27,500,000 Viking common shares** for **$11.0 million**, which Viking used to acquire a **60.5% interest** in Simson-Maxwell, Ltd., a carbon-capture system license, and for general working capital[26](index=26&type=chunk) - Camber accounts for its investment in Viking under the **equity method**, as it exercises significant influence but not control, partly due to the voting rights associated with Mr. Doris' Series C Preferred Stock being suspended until July 1, 2022[16](index=16&type=chunk)[27](index=27&type=chunk) [NOTE 2 – ORGANIZATION AND OPERATIONS OF THE COMPANY](index=6&type=section&id=NOTE%202%20%E2%80%93%20ORGANIZATION%20AND%20OPERATIONS%20OF%20THE%20COMPANY) Describes Camber's primary business as an independent oil and natural gas company and the impact of COVID-19 - Camber is an independent oil and natural gas company focused on the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids in Louisiana and Texas[28](index=28&type=chunk) - The company's operations have not experienced a significant adverse impact from COVID-19 due to limited production and non-operated properties, but a prolonged disruption could materially affect financial results and operations[29](index=29&type=chunk) [NOTE 3 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS](index=6&type=section&id=NOTE%203%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN%20CONSIDERATIONS) Addresses the company's financial viability, highlighting significant losses and liabilities that raise going concern doubts **Liquidity and Going Concern Metrics:** | Metric | September 30, 2021 | September 30, 2020 | | :------------------------------------ | :----------------- | :----------------- | | Net Loss (9 months) | $(246,495,102) | $(41,625,851) | | Stockholders' Deficit | $(165,531,949) | N/A | | Total Long-Term Debt | $20,500,000 | N/A | | Working Capital Deficiency | ~$172.4 million | N/A | | Derivative Liability (Current) | $174.9 million | N/A | - These conditions raise substantial doubt about the Company's ability to continue as a going concern, dependent on generating future profitable operations, developing acquisition opportunities, and obtaining necessary financing[30](index=30&type=chunk) [NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=6&type=section&id=NOTE%204%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Outlines the key accounting principles and estimates used in preparing the financial statements, including fiscal year change, valuation hierarchy, and derivative liabilities - The Company changed its fiscal year from March 31 to December 31, with fiscal year 2021 commencing on January 1, 2021[31](index=31&type=chunk) - The Company uses a three-level valuation hierarchy for financial instruments, with significant inputs to its derivative liability relative to Series C Preferred Stock classified as **Level 3 (unobservable inputs)**[35](index=35&type=chunk) - The **full cost method** of accounting is used for oil and natural gas properties, capitalizing all acquisition, exploration, and development costs, and performing a quarterly 'Ceiling' test for impairment. No impairment expense was recorded for the periods presented[37](index=37&type=chunk)[38](index=38&type=chunk) - Revenue from oil and gas sales is recognized when production is sold to a customer and control of the product has been transferred, fulfilling performance obligations under contracts[41](index=41&type=chunk) - The Series C Preferred Stock contains an embedded derivative liability related to the Conversion Premium and potential True-Up Shares, which are required to be recorded at fair value[44](index=44&type=chunk) [NOTE 5 – OIL AND GAS PROPERTIES](index=9&type=section&id=NOTE%205%20%E2%80%93%20OIL%20AND%20GAS%20PROPERTIES) Details the accounting treatment and net carrying amounts of the company's oil and natural gas properties - Camber uses the **full cost method** for oil and natural gas producing activities, capitalizing all acquisition, exploration, and development costs[46](index=46&type=chunk) **Proved Developed Producing Oil and Gas Properties, Net:** | Date | Amount | | :----------------- | :------- | | December 31, 2020 | $74,877 | | September 30, 2021 | $71,272 | - No impairment expense was recorded for oil and gas properties for the three and nine months ended September 30, 2021 or 2020[46](index=46&type=chunk) [NOTE 6 – INVESTMENT IN UNCONSOLIDATED ENTITIES](index=9&type=section&id=NOTE%206%20%E2%80%93%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITIES) Explains the company's equity method accounting for its investment in Viking Energy Group, Inc - The Company accounts for its investment in Viking Energy Group, Inc. under the **equity method**[46](index=46&type=chunk) **Investment in Unconsolidated Entities (Viking):** | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------ | :----------------- | :------------------ | | Carrying amount – beginning of period | $15,830,538 | $957,169 | | Investment in Viking | $29,900,000 | $20,274,909 | | Proportionate Share of (losses) | $(18,339,293) | $(5,401,540) | | Carrying amount - ending | $27,391,246 | $15,830,538 | [NOTE 7 – ASSET RETIREMENT OBLIGATIONS](index=10&type=section&id=NOTE%207%20%E2%80%93%20ASSET%20RETIREMENT%20OBLIGATIONS) Presents the carrying amounts and changes in the company's asset retirement obligations **Asset Retirement Obligations:** | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------ | :----------------- | :------------------ | | Carrying amount at beginning of period | $46,748 | $71,150 | | Accretion | $5,854 | $5,825 | | Carrying amount at end of period | $52,602 | $46,748 | [NOTE 8 – LONG TERM DEBT](index=10&type=section&id=NOTE%208%20%E2%80%93%20LONG%20TERM%20DEBT) Details the company's long-term debt obligations, primarily with Discover Growth Fund, and related default conditions **Long-Term Debt Obligations:** | Lender/Note | September 30, 2021 | December 31, 2020 | | :------------------------------------ | :----------------- | :------------------ | | Discover Growth Fund (Dec 11, 2020) | $6,000,000 | $6,000,000 | | Discover Growth Fund (Dec 22, 2020) | $12,000,000 | $12,000,000 | | Discover Growth Fund (Apr 23, 2021) | $2,500,000 | - | | **Total Long-Term Debt** | **$20,500,000** | **$18,000,000** | - All long-term debt notes are subject to cross defaults of the Company's Series C Preferred stock, but all instances of default have been settled as of the filing date[49](index=49&type=chunk) [NOTE 9 – DERIVATIVE LIABILITIES](index=10&type=section&id=NOTE%209%20%E2%80%93%20DERIVATIVE%20LIABILITIES) Discusses the accounting for derivative liabilities embedded in the Series C Preferred Stock, including fair value changes and settlement - The Series C Preferred Stock contains an embedded derivative liability due to its potential conversion into a variable number of common shares, including a Conversion Premium and potential True-Up obligation[50](index=50&type=chunk)[55](index=55&type=chunk) - On April 20, 2021, the Series C Stock Certificate of Designation was amended to require all conversions and dividends to be settled in common shares, removing the cash option and impacting the accounting treatment for the derivative liability[57](index=57&type=chunk)[58](index=58&type=chunk) **Derivative Liabilities (Series C Preferred Stock):** | Metric | September 30, 2021 | December 31, 2020 | | :------------------------------------ | :----------------- | :------------------ | | Carrying amount at beginning of period | $93,981,234 | $77,636,666 | | Issued Series C preferred shares | $46,238,850 | $15,412,950 | | Change in Fair value | $222,688,936 | $41,878,821 | | Settlement of Obligation | $(188,044,268) | $(40,947,203) | | Carrying amount at end of period | $174,864,402 | $93,981,234 | [NOTE 10 – RELATED PARTY TRANSACTIONS](index=11&type=section&id=NOTE%2010%20%E2%80%93%20RELATED%20PARTY%20TRANSACTIONS) Discloses compensation arrangements with the company's CEO and CFO through their affiliated entities - The Company's CEO, James Doris, and CFO, Frank W. Barker, Jr., provide professional services through their affiliates (AGD Advisory Group, Inc. and FWB Consulting, Inc., respectively) at a rate of **$20,000 per month each**, commencing April 2021[60](index=60&type=chunk) [NOTE 11 – COMMITMENTS AND CONTINGENCIES](index=11&type=section&id=NOTE%2011%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) Outlines ongoing legal proceedings and potential liabilities faced by the company - The Company is involved in a lawsuit with Maranatha Oil Co. (filed November 2015) alleging breach of contract and fraud, seeking approximately **$100,000**, which the Company intends to defend[63](index=63&type=chunk) - A lawsuit with PetroGlobe and Signal Drilling (filed March 2019) alleging negligent misrepresentation and breach of contract, seeking over **$600,000**, was settled on January 31, 2020, with a **$250,000 payment** and transfer of C E Energy LLC[64](index=64&type=chunk) - Following a 'short report' in October 2021, a class action lawsuit was commenced against the Company, James Doris, and Frank Barker by shareholders alleging losses, which the defendants deny and are defending[65](index=65&type=chunk) [NOTE 12 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=12&type=section&id=NOTE%2012%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) Provides a breakdown of oil and gas revenue and the primary drivers for changes in revenue **Total Oil and Gas Revenue from Customers:** | Period | 2021 (USD) | 2020 (USD) | | :------------------------------------ | :--------- | :--------- | | Three months ended September 30 | $103,191 | $57,458 | | Nine months ended September 30 | $266,082 | $180,046 | - The increase in revenue is primarily a result of an increase in oil and gas realized prices in 2021[106](index=106&type=chunk)[109](index=109&type=chunk) [NOTE 13 – STOCKHOLDERS' EQUITY](index=12&type=section&id=NOTE%2013%20%E2%80%93%20STOCKHOLDERS'%20EQUITY) Details changes in the company's equity, including common and preferred stock issuances, designations, and warrants - During the nine months ended September 30, 2021, the Company issued **1,500,094 shares of restricted common stock** for investor relations and marketing services, recognizing **$1,494,858** in share-based compensation expense[67](index=67&type=chunk) - The Series A Convertible Preferred Stock is designated for future conversion of Viking Series C Preferred Stock upon the merger; no shares were issued or outstanding as of September 30, 2021[68](index=68&type=chunk) - The designations for Series B, Series E, and Series F Preferred Stock were terminated as no shares were outstanding[69](index=69&type=chunk)[70](index=70&type=chunk)[78](index=78&type=chunk) - The Series C Preferred Stock, initially sold in February 2020, was classified as temporary equity due to redemption features outside the Company's control and contains embedded derivatives[71](index=71&type=chunk) - Multiple amendments to the Series C Preferred Stock designation in 2021 clarified terms, mandated all dividends and conversion premiums be paid in common shares, and increased the number of designated shares[73](index=73&type=chunk)[74](index=74&type=chunk) **Estimated Common Shares Issuable for Series C Preferred Stock Conversion:** | Date | Estimated Shares | | :----------------- | :--------------- | | September 30, 2021 | 470,776,764 | | December 31, 2020 | 109,666,626 | - Warrants were issued to Regal Consulting, LLC on April 26, 2021, entitling them to purchase **100,000 common shares** at **$0.705**, expiring April 25, 2022[78](index=78&type=chunk) [NOTE 14 – STOCK-BASED COMPENSATION](index=14&type=section&id=NOTE%2014%20%E2%80%93%20STOCK-BASED%20COMPENSATION) Describes the company's stock incentive plans and the accounting treatment for stock-based compensation - The Company has three stock incentive plans (2010, 2012, 2014) to grant equity instruments to employees, consultants, and contractors[78](index=78&type=chunk) - Stock-based compensation cost is measured at the grant-date fair value using the Black-Scholes option pricing model and expensed over the vesting period[43](index=43&type=chunk)[80](index=80&type=chunk) - The number of authorized common shares was increased from **25,000,000 to 250,000,000** on February 23, 2021[80](index=80&type=chunk) [NOTE 15 – INCOME (LOSS) PER COMMON SHARE](index=14&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20(LOSS)%20PER%20COMMON%20SHARE) Presents the calculation of basic and diluted income or loss per common share for the reporting periods **Income (Loss) Per Common Share (9 Months Ended September 30):** | Metric | 2021 (USD) | 2020 (USD) | | :------------------------------------ | :--------- | :--------- | | Net Income (Loss) Attributable to Common Stockholders | $(253,172,096) | $(45,497,700) | | Weighted Average Common Shares Outstanding (Basic and Diluted) | 81,599,069 | 6,102,942 | | Income (Loss) Per Share - Basic and Diluted | $(3.10) | $(7.46) | [NOTE 16 – SUBSEQUENT EVENTS](index=15&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) Reports significant events occurring after the balance sheet date, including stock issuances, debt amendments, and new financing - On December 30, 2021, the Company increased its authorized common stock from **250,000,000 to 1,000,000,000 shares**[82](index=82&type=chunk) - Between October 2021 and May 2022, the Company issued millions of common shares for Series C Preferred Stock conversions, including **38,185,136 'true-up' shares** to Discover, and redeemed **1,664 Series C shares** from EMC for **$18.85 million**[82](index=82&type=chunk)[83](index=83&type=chunk) - On December 24, 2021, existing **$20.5 million** promissory notes with Discover Growth Fund were amended, extending maturity to January 1, 2027, increasing the conversion price to **$1.50**, and decreasing the interest rate to the WSJ Prime Rate[84](index=84&type=chunk) - The Company secured new financing, including a **$1 million loan** (paid in full January 2022) and a **$25 million loan** (received January 3, 2022) with warrants for **50 million common shares**, and sold **10,544 shares of newly designated Series G Preferred Stock** for **$100 million** (mostly via promissory notes from the investor) with warrants for **100 million common shares**[85](index=85&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - Following non-compliance with filing requirements, Discover and Antilles filed a Verified Complaint in March 2022, which was settled via an agreement approved by the Court on May 12, 2022, requiring the issuance of 'free-trading' common shares upon conversion[94](index=94&type=chunk)[95](index=95&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS](index=18&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) This section provides management's perspective on the company's financial condition and operational results, including an overview of its business plan, the status of the pending merger with Viking, a discussion of its going concern status, and a detailed comparison of financial performance for the three and nine months ended September 30, 2021 and 2020, highlighting critical accounting policies [SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=18&type=section&id=SPECIAL%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) Warns readers that the document contains forward-looking statements subject to risks and uncertainties, with no obligation to update - The document contains forward-looking statements subject to known and unknown risks, uncertainties, and other factors that may cause actual results to differ materially from projections[98](index=98&type=chunk) - The Company does not intend, and undertakes no obligation, to update any forward-looking statements, except as required by federal securities laws[98](index=98&type=chunk) [PLAN OF OPERATIONS](index=18&type=section&id=PLAN%20OF%20OPERATIONS) Outlines Camber's business strategy, focusing on oil and gas asset acquisition, enhanced recovery, and the pending merger with Viking - Camber is an independent oil and natural gas company engaged in the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids in Louisiana and Texas[99](index=99&type=chunk) - The Company's growth strategy includes acquiring undervalued producing oil and gas assets, employing enhanced recovery techniques, implementing lower-risk drilling programs, pursuing cost-efficiencies, exploring strategic M&A, and hedging commodity risk[100](index=100&type=chunk) - A pending merger agreement with Viking Energy Group, Inc. will result in Viking becoming a wholly-owned subsidiary of Camber, with Viking common stock converting to Camber common stock[100](index=100&type=chunk) - Completion of the merger is subject to customary conditions, including stockholder and regulatory approvals, effectiveness of a Form S-4 registration statement, and NYSE American listing qualification[100](index=100&type=chunk)[103](index=103&type=chunk) [Going Concern Qualification](index=19&type=section&id=Going%20Concern%20Qualification) Discusses the financial indicators that raise substantial doubt about the company's ability to continue as a going concern **Going Concern Financial Indicators (September 30, 2021):** | Metric | Amount | | :------------------------------------ | :------------- | | Net Loss (9 months) | $(246,495,102) | | Stockholders' Deficit | $(165,531,949) | | Working Capital Deficiency | ~$172.4 million | | Derivative Liability (Current) | $176 million | - These conditions raise substantial doubt about the Company's ability to continue as a going concern, dependent on generating future profitable operations, developing acquisition opportunities, and obtaining necessary financing[105](index=105&type=chunk) - Oil and gas price volatility due to geopolitical conditions and the global COVID-19 pandemic may continue to negatively impact the Company's financial position and results of operations[104](index=104&type=chunk) [RESULTS OF CONTINUING OPERATIONS](index=19&type=section&id=RESULTS%20OF%20CONTINUING%20OPERATIONS) Compares the company's financial performance for the three and nine months ended September 30, 2021 and 2020 **Financial Performance (3 Months Ended September 30):** | Metric | 2021 (USD) | 2020 (USD) | Change (YoY) | | :------------------------------------ | :--------- | :--------- | :----------- | | Gross Revenues | $103,191 | $57,458 | +$45,733 | | Operating Expenses | $1,023,497 | $885,100 | +$138,397 | | Net Loss | $(264,555,523) | $(19,986,843) | $(244,568,680) | **Financial Performance (9 Months Ended September 30):** | Metric | 2021 (USD) | 2020 (USD) | Change (YoY) | | :------------------------------------ | :--------- | :--------- | :----------- | | Gross Revenues | $266,082 | $180,046 | +$86,036 | | Operating Expenses | $4,271,528 | $3,239,340 | +$1,032,188 | | Net Loss | $(246,495,102) | $(41,625,851) | $(204,869,251) | - The significant increase in net loss for both periods is primarily a result of the Company's stock price and its impact on derivative liabilities[106](index=106&type=chunk)[110](index=110&type=chunk) [CRITICAL ACCOUNTING POLICIES AND ESTIMATES](index=20&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Highlights the key accounting policies and estimates that require significant judgment and can materially affect financial reporting - The Company uses the **full cost method** for oil and natural gas properties, capitalizing all acquisition, exploration, and development costs, and performing a quarterly 'ceiling' test for impairment[112](index=112&type=chunk)[113](index=113&type=chunk) - Estimates of proved reserves are subjective and materially impact depreciation, depletion, amortization, and accretion (DD&A) expense, based on SEC guidelines and 12-month average commodity prices[113](index=113&type=chunk) - Asset retirement obligations (ARO) are recorded as a liability at their estimated present value, representing future costs to plug, abandon, and remediate producing properties[114](index=114&type=chunk) - Derivative liabilities related to Series C Preferred Stock, including the Conversion Premium and potential True-Up shares, are valued at fair value using complex binomial pricing models due to variable conversion terms[115](index=115&type=chunk)[118](index=118&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK](index=21&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) As a smaller reporting company, Camber Energy, Inc. is exempt from providing quantitative and qualitative disclosures about market risk under Rule 12b-2 of the Securities Exchange Act of 1934 - The Company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[119](index=119&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES](index=21&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) The company's disclosure controls and procedures were deemed ineffective as of September 30, 2021, due to material weaknesses including insufficient staff for segregation of duties, lack of internal resources for complex accounting issues, and inadequate senior management oversight. Management is actively addressing these weaknesses - The Company's disclosure controls and procedures were not effective as of September 30, 2021[120](index=120&type=chunk) - Material weaknesses identified include insufficient staff for segregation of duties, lack of internal resources for complex accounting issues (e.g., Series C Preferred shares), and inadequate competent accounting staff and senior management oversight[120](index=120&type=chunk) - Management is addressing these material weaknesses by hiring additional staff and seeking assistance from subject matter experts for complex accounting advice[120](index=120&type=chunk) - There were no changes in Internal Control Over Financial Reporting during the quarter ended September 30, 2021[120](index=120&type=chunk) [PART II – OTHER INFORMATION](index=22&type=section&id=PART%20II%E2%80%93OTHER%20INFORMATION) This part includes disclosures on legal proceedings, risk factors, equity sales, defaults, and exhibits [ITEM 1. LEGAL PROCEEDINGS](index=22&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) As of September 30, 2021, the company reported no pending or threatened lawsuits expected to have a material effect on operations. However, subsequent to this date, a class action lawsuit was initiated against the company and its executives following a 'short report,' which the company intends to defend - As of September 30, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the results of operations[123](index=123&type=chunk) - In early October 2021, the Company became the target of a 'short' report, resulting in a class action lawsuit against the Company, James Doris, and Frank Barker by shareholders alleging losses, which the defendants deny and are defending[123](index=123&type=chunk) [ITEM 1A. RISK FACTORS](index=22&type=section&id=ITEM%201A.%20RISK%20FACTORS) As a smaller reporting company, Camber Energy, Inc. is exempt from providing risk factor disclosures under Rule 12b-2 of the Securities Exchange Act of 1934 - The Company is a smaller reporting company and is not required to provide risk factor information under Rule 12b-2 of the Securities Exchange Act of 1934[124](index=124&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=22&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) During the three months ended September 30, 2021, Camber Energy, Inc. issued a substantial number of unregistered common shares, primarily for the conversion of Series C Preferred Stock and for consulting services, relying on exemptions from registration under the Securities Act of 1933 - The Company issued **10,360,076 shares of common stock** to a preferred stockholder for prior conversions of Series C Preferred Stock[125](index=125&type=chunk) - The Company issued **148,922,664 shares of common stock** to another preferred stockholder for conversions of Series C Preferred Stock[125](index=125&type=chunk) - The Company issued **4,874,703 shares of common stock** to a third preferred stockholder for conversions of Series C Preferred Stock[125](index=125&type=chunk) - The Company issued **450,000 shares of common stock** to a consultant for services provided[125](index=125&type=chunk) - These issuances were made in reliance on exemptions from registration provided by Sections 3(a)(9), 4(a)(1), and 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 144[125](index=125&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES](index=22&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon senior securities during the period - No defaults upon senior securities were reported[125](index=125&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES](index=22&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) The company reported no mine safety disclosures - No mine safety disclosures were reported[125](index=125&type=chunk) [ITEM 5. OTHER INFORMATION](index=22&type=section&id=ITEM%205.%20OTHER%20INFORMATION) This section serves as a general placeholder for other information, with no specific details provided in the report content for this item - No specific other information was provided under this item[125](index=125&type=chunk) [ITEM 6. EXHIBITS](index=22&type=section&id=ITEM%206.%20EXHIBITS) This section lists the exhibits accompanying the 10-Q report, including required certifications from the Principal Executive Officer and Principal Financial and Accounting Officer, as well as XBRL (Extensible Business Reporting Language) information - Exhibits include certifications of the Principal Executive Officer and Principal Financial and Accounting Officer as required by the Sarbanes-Oxley Act of 2002 (Rules 13a-14(1) or 15d-14(a) and Section 906)[126](index=126&type=chunk)[127](index=127&type=chunk) - XBRL (Extensible Business Reporting Language) information, including instance document and taxonomy extensions, is furnished[127](index=127&type=chunk) [ITEM 7. OFF BALANCE-SHEET ARRANGEMENTS](index=22&type=section&id=ITEM%207.%20OFF%20BALANCE-SHEET%20ARRANGEMENTS) The company reported that it had no off-balance-sheet arrangements during the period - No off-balance-sheet arrangements were reported[126](index=126&type=chunk) [SIGNATURES](index=22&type=section&id=SIGNATURES) The report is officially signed by Camber Energy, Inc.'s Principal Executive Officer, James Doris, and Principal Financial and Accounting Officer, Frank W. Barker, Jr., both dated May 19, 2022 - The report was signed by James Doris, Principal Executive Officer, and Frank W. Barker, Jr., Principal Financial and Accounting Officer, on May 19, 2022[130](index=130&type=chunk)
Camber Energy(CEI) - 2021 Q2 - Quarterly Report
2022-05-20 00:47
[Part I – Financial Information](index=2&type=section&id=Part%20I%20%E2%80%93%20Financial%20Information) This section covers the company's financial statements, management's discussion and analysis, market risk disclosures, and internal controls [Financial Statements](index=2&type=section&id=Item%201.%20Financial%20Statements) Unaudited financials for June 30, 2021, show increased assets and net income, but significant deficits raise going concern doubts [Note 1: Relationship with and Ownership of Viking Energy Group, Inc.](index=5&type=section&id=NOTE%201%20RELATIONSHIP%20WITH%20AND%20OWNERSHIP%20OF%20VIKING%20ENERGY%20GROUP%2C%20INC.) Camber accounts for its increasing investment in Viking Energy Group under the equity method, with a pending merger to make Viking a wholly-owned subsidiary - Camber acquired a **51% interest** in Viking in December 2020 and increased it to **~63%** in January 2021, accounted for under the equity method due to significant influence but not control[14](index=14&type=chunk) - A new merger agreement was established in February 2021 for Viking to merge with a Camber subsidiary, becoming wholly-owned by Camber, with each Viking common stock share converting into one Camber common stock share[17](index=17&type=chunk) - In July 2021, Camber acquired an additional **27.5 million shares** of Viking for **$11 million**, with proceeds used by Viking for acquisitions and working capital[22](index=22&type=chunk) [Note 3: Liquidity and Going Concern Considerations](index=6&type=section&id=NOTE%203%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN%20CONSIDERATIONS) Significant stockholders' deficit and working capital deficiency raise substantial doubt about the company's ability to continue as a going concern - The company reported net income of **$18.1 million** for the six months ended June 30, 2021, primarily due to a non-cash gain on derivative liability of **$34.2 million**[25](index=25&type=chunk) - As of June 30, 2021, the company had a stockholders' deficit of **$(30.4 million)** and a working capital deficiency of approximately **$32.6 million**, with a derivative liability of **$32.3 million** being a major component[25](index=25&type=chunk) - These conditions raise substantial doubt regarding the Company's ability to continue as a going concern, dependent on future profitable operations and obtaining necessary financing[26](index=26&type=chunk) [Note 4: Summary of Significant Accounting Policies](index=7&type=section&id=NOTE%204%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) Key accounting policies include full cost for oil and gas, equity method for Viking, and complex fair value measurement of Series C derivative liabilities using Level 3 inputs - The company changed its fiscal year-end from March 31 to December 31, effective February 4, 2021[27](index=27&type=chunk) - The derivative liability related to the Series C Preferred Stock is measured at fair value using Level 3 inputs (unobservable inputs)[30](index=30&type=chunk)[31](index=31&type=chunk) - The Series C Preferred Stock contains an embedded derivative liability due to a variable conversion premium feature, with its fair value estimated based on cash required to settle the premium or, after an April 2021 amendment, the fair value of shares issuable[48](index=48&type=chunk)[61](index=61&type=chunk) [Note 8: Long Term Debt](index=10&type=section&id=NOTE%208%20%E2%80%93%20LONG%20TERM%20DEBT) Total long-term debt increased to $20.5 million as of June 30, 2021, consisting of secured promissory notes maturing in January 2027 Long-Term Debt Obligations | Debt Holder | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Discover Growth Fund | $20,500,000 | $18,000,000 | | **Total Long-Term Debt** | **$20,500,000** | **$18,000,000** | - The entire **$20.5 million** in long-term debt matures after 2026, specifically on January 1, 2027[53](index=53&type=chunk) [Note 9: Derivative Liabilities](index=10&type=section&id=NOTE%209%20%E2%80%93%20DERIVATIVE%20LIABILITIES) The Series C Preferred Stock contains a complex embedded derivative liability, which decreased to $32.3 million by June 30, 2021, following an amendment requiring common share settlement - The Series C Preferred Stock contains an embedded derivative due to the potential conversion into a variable number of common shares to satisfy the Conversion Premium and True-Up obligation[53](index=53&type=chunk)[55](index=55&type=chunk) - On April 20, 2021, the Series C COD was amended to require all conversions to be settled in common shares, removing the cash option and changing the accounting for the derivative[61](index=61&type=chunk) Derivative Liability Activity (Six Months Ended June 30) | Activity | 2021 | 2020 | | :--- | :--- | :--- | | Beginning Balance | $93,981,234 | $77,636,666 | | Issued Series C shares | $46,238,850 | $15,412,950 | | Change in Fair value | $(34,166,784) | $41,878,821 | | Settlement of Obligation | $(73,780,539) | $(40,947,203) | | **Ending Balance** | **$32,272,761** | **$93,981,234** | [Note 11: Commitments and Contingencies](index=12&type=section&id=NOTE%2011%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) The company faces ongoing legal proceedings, including a royalty dispute and a new shareholder action initiated after a 'short' report, with all allegations denied - The company is being sued by Maranatha Oil Co for approximately **$100,000** related to alleged unpaid royalty interests[65](index=65&type=chunk) - A lawsuit with PetroGlobe Energy Holdings was settled on January 31, 2020, with the company paying **$250,000** and transferring its subsidiary C E Energy LLC to PetroGlobe[66](index=66&type=chunk) - Following a 'short' report by Kerrisdale Capital in October 2021, a shareholder action was commenced against the company, its CEO, and CFO, who deny the allegations[67](index=67&type=chunk) [Note 13: Stockholders' Deficit](index=12&type=section&id=NOTE%2013%20%E2%80%93%20STOCKHOLDERS%27%20DEFICIT) The stockholders' deficit is heavily influenced by Series C Preferred Stock, with potential dilution from 241.6 million common shares upon conversion and recent covenant breaches - On January 8, 2021, the Company issued **1,890 shares** of Series C Preferred Stock to satisfy approximately **$18.9 million** of Viking's debt, recorded as an additional investment in Viking[74](index=74&type=chunk) - In October 2021, the company received notice of breaching covenants related to its Series C Preferred Stock for failing to timely file SEC reports and maintain sufficient common stock reserves for conversion[76](index=76&type=chunk) Estimated Common Shares for Series C Conversion | Conversion Component | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | Shares for conversion at $3.25/share | 11,710,769 | 6,440,000 | | Shares for Conversion Premium | 229,938,443 | 103,226,626 | | **Total Estimated Shares** | **241,649,212** | **109,666,626** | [Note 16: Subsequent Events](index=15&type=section&id=NOTE%2016%20%E2%80%93%20SUBSEQUENT%20EVENTS) Subsequent events include significant financing activities, increased investment in Viking, authorization of 1 billion common shares, new loans, and ongoing Series C conversions - On July 29, 2021, the company acquired an additional **27.5 million shares** of Viking for **$11 million**, increasing its ownership to approximately **73%**[88](index=88&type=chunk) - In December 2021, the company increased its authorized common stock from **250 million** to **1 billion shares**[88](index=88&type=chunk) - The company secured new financing, including a **$25 million** loan in December 2021 and a stock purchase agreement for **$100 million** of new Series G Preferred Stock[97](index=97&type=chunk)[98](index=98&type=chunk) Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | June 30, 2021 | December 31, 2020 | | :--- | :--- | :--- | | **Assets** | | | | Cash | $2,053,074 | $868,548 | | Investment in unconsolidated entity | $22,652,026 | $15,830,538 | | **Total Assets** | **$25,004,945** | **$16,815,251** | | **Liabilities & Equity** | | | | Derivative liability | $32,272,761 | $93,981,234 | | Long-term debt | $20,500,000 | $18,000,000 | | **Total Liabilities** | **$55,454,342** | **$113,094,761** | | **Total Stockholders' Deficit** | **$(30,449,397)** | **$(102,225,562)** | Consolidated Statement of Operations Highlights (Unaudited) | Income Statement Items | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Oil and gas sales | $162,891 | $122,588 | | Loss from operations | $(3,085,140) | $(2,231,652) | | Gain (loss) on derivative liability | $34,166,784 | $(19,586,317) | | **Net income (loss)** | **$18,060,420** | **$(21,639,008)** | | **Net income (loss) per share (basic & diluted)** | **$0.28** | **$(4.04)** | Consolidated Statement of Cash Flows Highlights (Unaudited) | Cash Flow Items | Six Months Ended June 30, 2021 | Six Months Ended June 30, 2020 | | :--- | :--- | :--- | | Net cash used in operating activities | $(1,315,474) | $(2,348,365) | | Net cash used in investing activities | $0 | $(9,200,000) | | Net cash provided by financing activities | $2,500,000 | $11,000,000 | | **Net increase (decrease) in cash** | **$1,184,526** | **$(548,365)** | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses oil and gas strategy, reiterates going concern doubts, and highlights revenue increases driven by non-cash derivative gains and critical accounting policies [Plan of Operations](index=18&type=section&id=PLAN%20OF%20OPERATIONS) Camber's business plan focuses on acquiring and developing oil and gas properties, primarily through its investment in and pending merger with Viking Energy Group - The company's business plan is to acquire, explore, and develop oil and gas properties, with a strategy focused on acquiring undervalued producing assets rather than speculative exploration[110](index=110&type=chunk)[111](index=111&type=chunk) - A merger with Viking Energy Group, Inc is pending, which would result in Viking becoming a wholly-owned subsidiary of Camber[112](index=112&type=chunk) [Results of Continuing Operations](index=20&type=section&id=RESULTS%20OF%20CONTINUING%20OPERATIONS) Revenue increased for the three and six months ended June 30, 2021, but operating losses widened, with net income primarily driven by significant non-cash gains on derivative liabilities Three-Month Operational Comparison (Ended June 30) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $97,238 | $33,689 | | Operating Expenses | $1,321,493 | $759,598 | | Loss from Operations | $(1,224,255) | $(725,909) | | Other Income (Expense) | $64,062,368 | $(12,908,153) | | **Net Income (Loss)** | **$62,838,113** | **$(13,634,062)** | Six-Month Operational Comparison (Ended June 30) | Metric | 2021 | 2020 | | :--- | :--- | :--- | | Revenue | $162,891 | $122,588 | | Operating Expenses | $3,248,031 | $2,354,240 | | Loss from Operations | $(3,085,140) | $(2,231,652) | | Other Income (Expense) | $21,145,560 | $(19,407,356) | | **Net Income (Loss)** | **$18,060,420** | **$(21,639,008)** | [Critical Accounting Policies and Estimates](index=20&type=section&id=CRITICAL%20ACCOUNTING%20POLICIES%20AND%20ESTIMATES) Critical accounting policies involve significant estimates for oil and gas properties, proved reserves, asset retirement obligations, and complex derivative liabilities sensitive to stock price volatility - The company uses the full cost method of accounting for oil and gas properties, which requires a quarterly 'ceiling' test to assess for impairment[122](index=122&type=chunk)[123](index=123&type=chunk) - Estimates of proved reserves are crucial as they impact DD&A expense and are based on volatile commodity prices and other assumptions[124](index=124&type=chunk) - The accounting for derivative liabilities associated with Series C Preferred Stock is a critical policy, with fair value determined by complex models sensitive to stock price changes, showing potential share issuance ranging from **136 million** to **488 million shares** depending on the stock's VWAP[126](index=126&type=chunk)[127](index=127&type=chunk)[128](index=128&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company - The company is not required to provide quantitative and qualitative disclosures about market risk because it qualifies as a smaller reporting company[128](index=128&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls were ineffective as of June 30, 2021, due to material weaknesses including insufficient staff, lack of resources for complex accounting, and inadequate oversight - The CEO concluded that the company's disclosure controls and procedures were not effective as of June 30, 2021[128](index=128&type=chunk) - Material weaknesses identified include: (1) lack of segregation of duties, (2) insufficient resources for complex accounting, and (3) inadequate oversight and error detection[129](index=129&type=chunk) [Part II – Other Information](index=22&type=section&id=Part%20II%20%E2%80%93%20Other%20Information) This section details legal proceedings, unregistered equity sales, and required exhibits [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) While no material lawsuits were pending as of June 30, 2021, a new shareholder action was commenced in October 2021 following a 'short' report, with allegations denied - Following a 'short' report by Kerrisdale Capital in October 2021, a lawsuit was filed against the company and its executives, with the company denying the allegations[131](index=131&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company issued a significant number of unregistered common shares during the three months ended June 30, 2021, primarily for Series C Preferred Stock conversions and consultant services - The company issued a total of **46.1 million shares** of common stock to a preferred stockholder for conversions of Series C Preferred Stock[133](index=133&type=chunk) - **360,000 shares** of common stock were issued to a consultant for services[133](index=133&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including SOX certifications from the Principal Executive Officer and Principal Financial Officer, and XBRL data files - The report includes certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act[136](index=136&type=chunk)
Camber Energy(CEI) - 2021 Q1 - Quarterly Report
2022-05-20 00:45
Part I – Financial Information [Financial Statements](index=1&type=section&id=Item%201.%20Financial%20Statements) Camber Energy's Q1 2021 saw total assets increase to **$29.6 million**, total liabilities to **$152.3 million**, and a net loss of **$44.8 million** Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Items | March 31, 2021 (USD) | December 31, 2020 (USD) | | :--- | :--- | :--- | | **Total Assets** | **$29,587,391** | **$16,815,251** | | Equity method investment | $28,858,631 | $15,830,538 | | **Total Liabilities** | **$152,303,495** | **$113,094,761** | | Derivative liability | $132,161,991 | $93,981,234 | | Long-term debt | $18,000,000 | $18,000,000 | | **Total Stockholders' Deficit** | **($135,339,150)** | **($102,225,562)** | Consolidated Statement of Operations Highlights (Unaudited, Three Months Ended March 31) | Income Statement Items | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | | Oil and gas sales | $65,653 | $88,899 | | Loss from operations | ($1,860,885) | ($1,505,743) | | Gain (loss) on derivative liability | ($36,601,064) | ($7,546,887) | | Equity (deficit) in earnings of unconsolidated entity | ($5,871,908) | $957,169 | | **Net loss** | **($44,777,693)** | **($8,004,946)** | | **Net loss per share (basic and diluted)** | **($1.80)** | **($2.34)** | Consolidated Statement of Cash Flows Highlights (Unaudited, Three Months Ended March 31) | Cash Flow Items | 2021 (USD) | 2020 (USD) | | :--- | :--- | :--- | | Net cash used in operating activities | ($526,175) | ($1,597,124) | | Net cash used in investing activities | $0 | ($5,000,000) | | Net cash provided by financing activities | $0 | $5,000,000 | | **Net decrease in cash** | **($526,175)** | **($1,597,124)** | | **Cash, end of period** | **$342,373** | **$656,615** | [Notes to Consolidated Financial Statements](index=4&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) Notes detail investment in Viking Energy, a pending merger, significant derivative liability, material internal control weaknesses, and going concern doubts [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=18&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses growth strategy, reiterates going concern doubts due to a **$44.8 million** net loss, **$135.3 million** stockholders' deficit, and **$133.6 million** working capital deficiency - The company's growth strategy focuses on acquiring undervalued, producing oil and gas assets, employing enhanced recovery techniques, and pursuing strategic mergers, such as the pending merger with Viking Energy Group[99](index=99&type=chunk)[100](index=100&type=chunk) - There is substantial doubt about the company's ability to continue as a going concern due to a net loss of **$44.8 million**, a stockholders' deficit of **$135.3 million**, and a working capital deficiency of approximately **$133.6 million** as of March 31, 2021[103](index=103&type=chunk) Comparison of Results for Three Months Ended March 31 | Metric | 2021 (USD) | 2020 (USD) | Change (USD) | | :--- | :--- | :--- | :--- | | **Revenue** | **$65,653** | **$88,899** | **($23,246)** | | **Operating Expenses** | **$1,926,538** | **$1,594,642** | **$331,896** | | **Loss from Operations** | **($1,860,885)** | **($1,505,743)** | **($355,142)** | | **Other Expense** | **($42,916,808)** | **($6,499,203)** | **($36,417,605)** | | **Net Loss** | **($44,777,693)** | **($8,004,946)** | **($36,772,747)** | - The significant increase in 'Other Expense' and 'Net Loss' for Q1 2021 compared to Q1 2020 was primarily driven by the non-cash impact of the company's stock price on its derivative liabilities[105](index=105&type=chunk) [Quantitative and Qualitative Disclosures about Market Risk](index=22&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, Camber Energy is exempt from providing quantitative and qualitative disclosures about market risk - The company is not required to provide quantitative and qualitative disclosures about market risk as it qualifies as a smaller reporting company under Rule 12b-2 of the Securities Exchange Act of 1934[114](index=114&type=chunk) [Controls and Procedures](index=22&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were ineffective as of March 31, 2021, citing material weaknesses in staffing, complex accounting, and oversight - The CEO concluded that as of March 31, 2021, the company's disclosure controls and procedures were not effective in providing reasonable assurance of compliance[115](index=115&type=chunk) - Material weaknesses identified include insufficient staff for segregation of duties, lack of internal resources for complex accounting, and inadequate oversight for error detection[115](index=115&type=chunk) Part II – Other Information [Legal Proceedings](index=22&type=section&id=Item%201.%20Legal%20Proceedings) As of March 31, 2021, no material lawsuits were pending, but a subsequent 'short' report led to a shareholder action against the company and its executives - A 'short' report by Kerrisdale Capital in October 2021 prompted a shareholder lawsuit against the company and its executives, with the company denying allegations[117](index=117&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=22&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) During Q1 2021, the company issued **12.8 million** unregistered common shares for Series C Preferred Stock conversion and **690,094** shares to consultants - Issued **12,799,645** unregistered common shares to a preferred stockholder for Series C Preferred Stock conversion[119](index=119&type=chunk) - Issued **690,094** unregistered common shares to two consultants for services rendered[119](index=119&type=chunk) [Defaults Upon Senior Securities](index=22&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) No defaults upon senior securities occurred during the reporting period - None[120](index=120&type=chunk) [Mine Safety Disclosures](index=23&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) The company had no mine safety disclosures, rendering this item not applicable - None[120](index=120&type=chunk) [Exhibits](index=23&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including officer certifications and XBRL data files - The report includes certifications from the Principal Executive Officer and Principal Financial and Accounting Officer as required by Sections 302 and 906 of the Sarbanes-Oxley Act[122](index=122&type=chunk)
Camber Energy(CEI) - 2020 Q3 - Quarterly Report
2020-12-18 22:09
PART 1. FINANCIAL INFORMATION [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) Unaudited consolidated financial statements for Camber Energy, Inc. as of September 30, 2020, including balance sheets, statements of operations, equity, cash flows, and detailed accounting notes [CONSOLIDATED BALANCE SHEETS (UNAUDITED)](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS%20(UNAUDITED)) Consolidated balance sheets as of September 30, 2020, show increased total assets, driven by notes receivable and cash, alongside decreased current liabilities | Metric | Sep 30, 2020 | Mar 31, 2020 | Change | |:---|:---|:---|:---| | **Assets** | | | | | Cash | $1,112,965 | $656,615 | +$456,350 | | Accounts Receivable, Net | $145,362 | $255,363 | -$110,001 | | Total Current Assets | $1,479,009 | $1,132,660 | +$346,349 | | Total Property and Equipment, Net | $75,394 | $110,617 | -$35,223 | | Equity Method Investment – Elysium Energy, LLC | $0 | $957,169 | -$957,169 | | Notes Receivable | $10,241,048 | $7,339,719 | +$2,901,329 | | Total Assets | $11,795,451 | $9,695,218 | +$2,100,233 | | **Liabilities** | | | | | Total Current Liabilities | $1,592,285 | $2,028,908 | -$436,623 | | Total Liabilities | $1,612,302 | $2,070,431 | -$458,129 | | **Equity** | | | | | Temporary Equity (Preferred Stock Series C) | $6,000,000 | $5,000,000 | +$1,000,000 | | Total Stockholders' Equity | $4,183,149 | $2,624,787 | +$1,558,362 | | Total Liabilities and Stockholders' Equity | $11,795,451 | $9,695,218 | +$2,100,233 | [CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS%20(UNAUDITED)) Significant increase in net loss for Q3 and H1 2020, driven by Elysium losses and declining oil and gas revenues, partially offset by reduced operating expenses | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|:---|:---|\ | Total Revenues | $57,458 | $92,753 | $91,147 | $214,104 | | Total Operating Expenses | $885,100 | $1,136,589 | $1,644,698 | $2,598,953 | | Operating Loss | $(827,642) | $(1,043,846) | $(1,553,551) | $(2,384,849) | | Loss from Unconsolidated Entity | $1,056,766 | $0 | $2,140,121 | $0 | | Net Loss Before Discontinued Operations | $(2,056,508) | $(1,038,732) | $(3,651,140) | $(2,326,330) | | Income from Discontinued Operations | $0 | $761,768 | $0 | $761,768 | | Net Loss | $(2,056,508) | $(276,964) | $(3,651,140) | $(1,564,562) | | Net Loss Per Common Share (Basic) | $(0.19) | $(4.40) | $(0.51) | $(20.57) | | Weighted Average Number of Common Shares Outstanding (Basic) | 19,815,872 | 493,300 | 13,705,461 | 259,432 | [CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY (DEFICIT) (UNAUDITED)](index=7&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CHANGES%20IN%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)%20(UNAUDITED)) Stockholders' equity increased from March 31 to September 30, 2020, mainly due to Series C Preferred Stock and common share issuances, despite accumulated deficit | Metric | March 31, 2020 | September 30, 2020 | |:---|:---|:---|\ | Preferred Stock Series C (Temporary Equity) | $5,000,000 | $6,000,000 | | Common Stock | $5,000 | $25,000 | | Additional Paid-in Capital | $144,815,627 | $146,673,154 | | Stock Dividends Distributable | $15,878,926 | $19,210,901 | | Accumulated Deficit | $(158,074,768) | $(161,725,908) | | Total Stockholders' Equity | $2,624,787 | $4,183,149 | - During the six months ended September 30, 2020, the company issued **630** shares of Series C Preferred Stock for **$6 million** and converted **756** shares of Series C Preferred Stock into **19,823,486** common shares[133](index=133&type=chunk)[135](index=135&type=chunk) [CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)](index=9&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS%20(UNAUDITED)) Net cash increased for H1 2020, primarily from financing activities (preferred stock issuance), offsetting cash used in operating and investing activities | Metric | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Net Cash Used in Operating Activities | $(1,343,650) | $(2,837,903) | | Net Cash Used in Investing Activities | $(4,200,000) | $(1,151,974) | | Net Cash Provided by Financing Activities | $6,000,000 | $429,210 | | Increase (Decrease) in Cash | $456,350 | $(3,560,667) | | Cash at End of Period | $1,112,965 | $4,218,056 | - The increase in cash from financing activities was primarily due to the sale of **630** shares of Series C Preferred Stock for **$6 million** in June 2020[272](index=272&type=chunk) - Net cash used in investing activities increased significantly due to a **$4.2 million** loan made to Viking during the six months ended September 30, 2020[271](index=271&type=chunk) [NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)](index=10&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS%20(UNAUDITED)) Detailed explanations and disclosures for consolidated financial statements, covering business, accounting policies, transactions, and financial instruments [NOTE 1 – GENERAL](index=10&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) Camber Energy, Inc. is an independent oil and gas company, with this note detailing corporate events, including Lineal divestiture, Texas asset settlement, and the pending Viking merger - Camber Energy is primarily engaged in the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids in Louisiana and Texas[26](index=26&type=chunk) - The company acquired Lineal Star Holdings, LLC on July 8, 2019, and subsequently divested **100%** ownership of Lineal on December 31, 2019, redeeming Series E and F Preferred Stock[27](index=27&type=chunk)[28](index=28&type=chunk) - On January 31, 2020, Camber entered into a Compromise Settlement Agreement, transferring all wells and partnership interests of its subsidiary CE in Hutchinson County, Texas, to PetroGlobe Energy Holdings, LLC, completed on July 16, 2020[31](index=31&type=chunk)[102](index=102&type=chunk) - A merger agreement with Viking Energy Group, Inc. was entered into on February 3, 2020, and amended on August 31, 2020, requiring Camber to acquire **30%** of Viking's subsidiary Elysium Energy Holdings, LLC through a **$9.2 million** investment[33](index=33&type=chunk)[34](index=34&type=chunk) - The company underwent multiple reverse stock splits (**1-for-25** in March 2018, **1-for-25** in December 2018, **1-for-25** in July 2019, and **1-for-50** in October 2019) and increased authorized common stock to **25 million** shares in April 2020[35](index=35&type=chunk) - The COVID-19 pandemic has adversely impacted the market for oil and gas, but Camber's limited and non-operated production has mitigated significant direct adverse impact on its operations to date[38](index=38&type=chunk) [NOTE 2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS](index=12&type=section&id=NOTE%202%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN%20CONSIDERATIONS) Camber Energy faces significant liquidity challenges with a **$0.1 million** working capital deficit, relying on new funding or the Viking Merger to continue as a going concern | Metric | Sep 30, 2020 | Mar 31, 2020 | Change | |:---|:---|:---|:---|\ | Total Current Assets | $1.5 million | $1.1 million | +$0.4 million | | Total Current Liabilities | $1.6 million | $2.0 million | -$0.4 million | | Working Capital Deficit | $0.1 million | $0.9 million | -$0.8 million | - The decrease in working capital deficit is primarily due to the sale of Series C Preferred Stock shares in June 2020[39](index=39&type=chunk) - The company's ability to continue as a going concern is uncertain and relies on raising new funding (debt or equity) or closing the Viking Merger, which is expected in Q1 2021[41](index=41&type=chunk) [NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=12&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) This note outlines significant accounting policies, estimates, and judgments for consolidated financial statements, including consolidation, revenue, and fair value measurements, with no material changes since March 31, 2020 - The consolidated financial statements include Camber and its wholly-owned and majority-owned subsidiaries, with all material intercompany accounts eliminated[44](index=44&type=chunk) - Accounts receivable include oil and gas revenues, accrued interest on notes from Lineal and Viking, and amounts from N&B Energy, with an allowance for doubtful accounts of approximately **$171,000** recorded at September 30, 2020[45](index=45&type=chunk) - Notes receivable include **$9.2 million** from Viking and **$2.3 million** from Lineal, net of reserves[46](index=46&type=chunk) - Property and equipment are recorded at cost and depreciated/amortized using the straight-line method; long-lived assets are evaluated for impairment based on estimated future undiscounted cash flows[47](index=47&type=chunk)[48](index=48&type=chunk) - Investment in unconsolidated entities (**30%** interest in Elysium Energy Holdings, LLC) is accounted for using the equity method, adjusting for proportionate share of earnings or losses[49](index=49&type=chunk) - Revenue from oil, natural gas, and NGLs is recognized when control transfers to the customer, based on contract price, and only for the company's net share of production volumes[51](index=51&type=chunk)[52](index=52&type=chunk)[53](index=53&type=chunk) - Fair value measurements are categorized into a three-level hierarchy, with significant inputs to derivative liability and mezzanine equity calculations classified as Level 3 (unobservable inputs)[54](index=54&type=chunk)[56](index=56&type=chunk)[57](index=57&type=chunk) - No recently issued accounting pronouncements are expected to have a material effect on the financial statements[58](index=58&type=chunk) - Subsequent events have been evaluated through the financial statement issuance date[59](index=59&type=chunk) [NOTE 4 – PROPERTY AND EQUIPMENT](index=15&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) This note details the company's full cost method accounting for oil and gas properties, including capitalization, depletion, depreciation, amortization, and impairment - Camber uses the full cost method for oil and natural gas producing activities, capitalizing costs related to mineral interests, exploratory wells, and development wells[60](index=60&type=chunk) | Metric | Sep 30, 2020 | Mar 31, 2020 | |:---|:---|:---|\ | Oil and gas properties subject to amortization | $50,413,792 | $50,443,883 | | Oil and gas properties not subject to amortization | $28,016,989 | $28,016,989 | | Capitalized asset retirement costs | $1,570 | $1,570 | | Total oil & natural gas properties | $78,432,351 | $78,462,442 | | Accumulated depletion, depreciation, and impairment | $(78,356,957) | $(78,351,825) | | Net Capitalized Costs | $75,394 | $110,617 | - No impairment was recorded for the three and six months ended September 30, 2020, and 2019[65](index=65&type=chunk) - Depletion expense was **$4,871** for the six months ended September 30, 2020, and **$2,164** for the three months ended September 30, 2020[66](index=66&type=chunk) - The company no longer owns operating and finance leases acquired through the Lineal Acquisition due to the Redemption Agreement[67](index=67&type=chunk) [NOTE 5 – PLAN OF MERGER AND INVESTMENT IN UNCONSOLIDATED ENTITY](index=16&type=section&id=NOTE%205%20%E2%80%93%20PLAN%20OF%20MERGER%20AND%20INVESTMENT%20IN%20UNCONSOLIDATED%20ENTITY) This note details the Viking Merger Agreement, including stock conversion, Camber's **$9.2 million** investment for a **30%** interest in Elysium, termination conditions, and secured note treatment - Camber entered into a Merger Agreement with Viking Energy Group, Inc. on February 3, 2020 (amended August 31, 2020), where Viking common stock will convert into **80%** of Camber's post-closing capitalization (excluding Series C Preferred Stock conversion shares)[69](index=69&type=chunk) - A condition for the merger closing was Camber's acquisition of **30%** of Elysium Energy Holdings, LLC, completed through a **$5 million** investment (**25%**) on February 3, 2020, and a **$4.2 million** investment (**5%**) on June 25, 2020[71](index=71&type=chunk) - The Merger Agreement outlines conditions for termination, including mutual consent, failure to obtain governmental approvals, or non-consummation by December 31, 2020[69](index=69&type=chunk) - Secured Notes totaling **$9.2 million** (from **$5 million** and **$4.2 million** loans to Viking) accrue **10.5%** interest, are due February 3, 2022, and are secured by Viking's ownership in Elysium and Ichor Energy Holdings, LLC; these notes will be forgiven if the merger closes[73](index=73&type=chunk)[75](index=75&type=chunk) - Camber sold **630** shares of Series C Preferred Stock for **$6 million** in June 2020, with a repurchase requirement of **110%** of face value if the merger did not close, which was later terminated in December 2020[77](index=77&type=chunk)[78](index=78&type=chunk) - Camber accounts for its **30%** investment in Elysium under the equity method, recognizing its proportionate share of losses; Elysium reported a net loss of **$7.5 million** for the six months ended September 30, 2020[80](index=80&type=chunk) - The carrying value of notes receivable was reduced by **$1,182,952** due to Camber's share of Elysium's losses, as losses exceeded the equity investment[82](index=82&type=chunk) [NOTE 6 – LONG-TERM NOTES RECEIVABLE](index=19&type=section&id=NOTE%206%20%E2%80%93%20LONG-TERM%20NOTES%20RECEIVABLE) This note details long-term notes receivable from Viking (**$9.2 million**) and Lineal (**$2.3 million**), highlighting Lineal's liquidity issues and restructuring negotiations | Metric | Sep 30, 2020 | Mar 31, 2020 | |:---|:---|:---|\ | Notes receivable from Viking Energy Group, Inc. | $9,200,000 | $5,000,000 | | Note receivable from Lineal Star Holdings, LLC (Promissory Note) | $1,539,719 | $1,539,719 | | Note receivable from Lineal Star Holdings, LLC (Promissory Note No. 2) | $800,000 | $800,000 | | Equity loss of unconsolidated entity applied to notes receivable | $(1,182,952) | $0 | | Less allowance for notes receivable | $(115,719) | $0 | | Total Long-Term Notes Receivable | $10,241,048 | $7,339,719 | - Lineal Star Holdings, LLC has notified the Company of insufficient liquidity to make scheduled interest payments on its unsecured notes, leading to restructuring negotiations[86](index=86&type=chunk) - An allowance of **$170,660** was recorded to reduce the reported value of Lineal notes and accrued interest, fully reserving current interest due (**$54,941**) and applying the remainder (**$115,719**) to principal[87](index=87&type=chunk) [NOTE 7 – ASSET RETIREMENT OBLIGATIONS](index=20&type=section&id=NOTE%207%20%E2%80%93%20ASSET%20RETIREMENT%20OBLIGATIONS) This note reconciles asset retirement obligations, showing a decrease due to settlement, partially offset by revisions of previous estimates | Metric | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Carrying amount at beginning of period | $71,750 | $303,809 | | Panhandle Settlement | $(30,227) | $0 | | Revisions of previous estimates | $4,260 | $8,258 | | Carrying amount at end of period | $45,783 | $312,069 | - Short-term asset retirement obligations were **$25,766** at September 30, 2020[89](index=89&type=chunk) [NOTE 8 – DERIVATIVE LIABILITY](index=20&type=section&id=NOTE%208%20%E2%80%93%20DERIVATIVE%20LIABILITY) No derivative liability was recorded for warrants (expired) or Series C Preferred Stock (structured to avoid cash settlement) for H1 2020, despite potential provisions - Derivative warrant instruments had a carrying amount of **$0** at September 30, 2020, as the warrants expired on April 21, 2019[90](index=90&type=chunk)[92](index=92&type=chunk) - The Series C Preferred Stock, convertible into common stock, is not classified as a tainted derivative instrument because its designation requires best efforts to obtain shareholder approval for sufficient authorized shares and does not mandate cash settlement[92](index=92&type=chunk) - As of September 30, 2020, **2** outstanding stock options and warrants to purchase **36** shares were considered tainted derivative instruments due to insufficient authorized common stock, but their fair values were de minimis[93](index=93&type=chunk) [NOTE 9 – COMMITMENTS AND CONTINGENCIES](index=21&type=section&id=NOTE%209%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) This note outlines commitments and contingencies, including an office lease, Lineal liabilities, and legal proceedings such as Maranatha Oil, settled PetroGlobe, Apache, and N&B Energy disputes - The company has a month-to-month office lease with an affiliated entity providing space without charge[94](index=94&type=chunk)[68](index=68&type=chunk) - Legal proceedings include a 2015 lawsuit by Maranatha Oil Co. for alleged unpaid royalties and working interest (seeking **$100,000+**)[97](index=97&type=chunk) - The lawsuit with PetroGlobe and Signal Drilling, LLC, seeking over **$600,000**, was settled on January 31, 2020, with Camber paying **$250,000** and transferring Hutchinson County, Texas assets, finalizing on July 16, 2020[99](index=99&type=chunk)[101](index=101&type=chunk)[102](index=102&type=chunk) - The Apache Corporation lawsuit, seeking **$656,908**, was settled on October 26, 2020, for **$20,000** with mutual releases[107](index=107&type=chunk) - The N&B Energy arbitration, claiming **$706,000**, resulted in an award of approximately **$52,000** in favor of N&B Energy on October 21, 2020[108](index=108&type=chunk) - Merger Compensation Agreements were entered into on August 31, 2020, for non-executive directors and officers, contingent on the Viking Merger closing, including **$100,000** for past services and **$50,000** as a success bonus[109](index=109&type=chunk) [NOTE 10 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=24&type=section&id=NOTE%2010%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) This note disaggregates revenue by product type for Q3 and H1 2020 and 2019, showing a decline across all categories | Product Type | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|:---|:---|\ | Oil sales | $45,846 | $66,786 | $67,635 | $160,485 | | Natural gas sales | $4,643 | $12,343 | $8,807 | $19,547 | | Natural gas liquids sales | $6,969 | $13,624 | $14,705 | $34,072 | | Total oil and gas revenue | $57,458 | $92,753 | $91,147 | $214,104 | [NOTE 11 – LINEAL MERGER AGREEMENT AND DIVESTITURE](index=24&type=section&id=NOTE%2011%20%E2%80%93%20LINEAL%20MERGER%20AGREEMENT%20AND%20DIVESTITURE) This note details the acquisition of Lineal Star Holdings, LLC on July 8, 2019, and its divestiture on December 31, 2019, resulting in preferred stock redemption and unsecured promissory notes - Camber acquired **100%** of Lineal Star Holdings, LLC on July 8, 2019, in exchange for Series E and F Redeemable Convertible Preferred Stock[113](index=113&type=chunk) - On December 31, 2019, Camber divested its entire interest in Lineal, redeeming the Series E and F Preferred Stock and transferring Lineal back to its original owners[114](index=114&type=chunk) - As part of the divestiture, Lineal issued two unsecured promissory notes to Camber totaling **$2,339,719**, accruing interest at **8%** and **10%** per annum, due December 31, 2021[115](index=115&type=chunk) - The divestiture was accounted for as a discontinued operation, with a gain on change in fair value of Series E and F Preferred Shares of **$3,018,000** and a loss on disposal of Lineal operations of **$2,706,628**[117](index=117&type=chunk)[118](index=118&type=chunk)[119](index=119&type=chunk) | Metric | Three Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Contract revenue | $6,285,535 | $6,285,535 | | Net income from discontinued operations | $761,768 | $761,768 | [NOTE 12 - INCOME TAXES](index=26&type=section&id=NOTE%2012%20-%20INCOME%20TAXES) The company reported a **zero percent** effective tax rate for fiscal years 2020 and 2019 due to net losses and a full valuation allowance - Camber recorded no provision or benefit for income taxes for the three and six months ended September 30, 2020, and 2019, due to net losses and a full valuation allowance[123](index=123&type=chunk) - The **$3,000** tax liability on the balance sheet relates to potential Oklahoma franchise tax, not income tax[123](index=123&type=chunk) [NOTE 13 – STOCKHOLDERS' EQUITY (DEFICIT)](index=26&type=section&id=NOTE%2013%20%E2%80%93%20STOCKHOLDERS'%20EQUITY%20(DEFICIT)) This note details changes in stockholders' equity, including common stock issuance, Series A Preferred Stock designation for the Viking merger, and Series C Preferred Stock transactions - During the six months ended September 30, 2020, Camber issued **176,514** shares of restricted common stock for investor relations and marketing services, recognizing **$36,502** in share-based compensation expense[124](index=124&type=chunk) - The Board approved the designation of **28,092** shares of Series A Convertible Preferred Stock on August 31, 2020, with voting and conversion rights tied to the Viking Merger exchange ratio; no shares will be issued until the merger closes[126](index=126&type=chunk)[128](index=128&type=chunk)[131](index=131&type=chunk) - On February 3, 2020, **525** shares of Series C Preferred Stock were sold for **$5 million**; an obligation to redeem these shares at a **110%** premium if the Viking Merger terminated was later removed on June 22, 2020[132](index=132&type=chunk) - On June 22, 2020, **630** shares of Series C Preferred Stock were sold for **$6 million**; these shares were classified as temporary equity due to a repurchase requirement if the merger failed, which was terminated in December 2020[132](index=132&type=chunk)[133](index=133&type=chunk) - During the six months ended September 30, 2020, **756** shares of Series C Preferred Stock were converted, resulting in **19,823,486** common shares issued[135](index=135&type=chunk) - The company accrued **$3,331,975** in common stock dividends on Series C Preferred Stock for the six months ended September 30, 2020[136](index=136&type=chunk) - On December 14, 2020, corrections and a second amended and restated designation for Series C Preferred Stock were filed to clarify conversion terms, redemption requirements, and update references to the Viking Merger, ensuring the stock is classified as permanent equity[138](index=138&type=chunk)[140](index=140&type=chunk) [NOTE 14 – SHARE-BASED COMPENSATION](index=30&type=section&id=NOTE%2014%20%E2%80%93%20SHARE-BASED%20COMPENSATION) This note details share-based compensation, primarily stock options, with **2** outstanding options as of September 30, 2020, having no intrinsic value or recognized compensation expense - As of September 30, 2020, and March 31, 2020, Camber had **2** stock options outstanding with a weighted average exercise price of **$40,429,700**, expiring in October 2020[145](index=145&type=chunk) - No stock options were exercised, forfeited, or granted during the six months ended September 30, 2020, and no compensation expense related to stock options was recognized[146](index=146&type=chunk) - The outstanding and exercisable options had no intrinsic value as of September 30, 2020, and March 31, 2020[147](index=147&type=chunk) [NOTE 15 – INCOME (LOSS) PER COMMON SHARE](index=31&type=section&id=NOTE%2015%20%E2%80%93%20INCOME%20(LOSS)%20PER%20COMMON%20SHARE) This note calculates basic and diluted income (loss) per common share for Q3 and H1 2020 and 2019, showing significant net losses and increased weighted average shares | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|:---|:---|\ | Net (Loss) | $(2,056,508) | $(276,964) | $(3,651,140) | $(1,564,562) | | Less preferred dividends | $(1,651,219) | $(1,893,886) | $(3,331,975) | $(3,771,941) | | Net loss attributable to common stockholders | $(3,707,727) | $(2,170,850) | $(6,983,115) | $(5,336,503) | | Weighted average share – basic | 19,815,872 | 493,300 | 13,705,461 | 259,432 | | Income (loss) per share – basic (Total) | $(0.19) | $(4.40) | $(0.51) | $(20.57) | - Common share equivalents from convertible debt, options, warrants, and Series C Preferred Shares were excluded from diluted EPS calculation as their inclusion would be anti-dilutive[151](index=151&type=chunk) | Common Shares Issuable for: | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|:---|:---|\ | Convertible Debt | 276 | 276 | 276 | 276 | | Options and Warrants | 38 | 38 | 38 | 38 | | Series C Preferred Shares | 47,033,410,723 | 1,130,378,205 | 47,033,410,723 | 1,130,378,205 | | Total | 47,033,411,037 | 1,130,378,519 | 47,033,411,037 | 1,130,378,519 | [NOTE 16 – SUPPLEMENTAL CASH FLOW INFORMATION](index=32&type=section&id=NOTE%2016%20%E2%80%93%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) This note provides supplemental cash flow information, including net cash paid for interest and taxes, and details non-cash investing and financing activities for H1 2020 and 2019 | Non-Cash Activity | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Settlement of Common Stock Payable | $173,000 | $331,060 | | Change in Estimate for Asset Retirement Obligations | $4,260 | $41,017 | | Stock Dividends Distributable but not Issued | $3,331,975 | $3,771,941 | | Conversion of Preferred C Stock to Common Stock | $19,823 | $1,049 | | Reclassification of Preferred C Stock to Permanent Equity | $5,000,000 | $0 | - Net cash paid for interest was **$0** for the six months ended September 30, 2020, compared to **$5,021** in the prior year; net cash paid for income taxes was **$0** for both periods[153](index=153&type=chunk) [NOTE 17 – FAIR VALUE MEASUREMENTS](index=32&type=section&id=NOTE%2017%20%E2%80%93%20FAIR%20VALUE%20MEASUREMENTS) This note explains fair value measurements, emphasizing observable inputs and management judgment for Level 3 instruments, with no recurring or non-recurring fair value liabilities or assets - The company maximizes the use of quoted market prices and minimizes unobservable inputs for fair value measurements, using industry-standard valuation models for non-active markets[154](index=154&type=chunk)[155](index=155&type=chunk) - Significant inputs for Level 3 instruments are estimated as the net present value of expected future cash flows based on internal and external inputs[155](index=155&type=chunk) - No liabilities were carried at fair value as of September 30, 2020, and March 31, 2020, on a recurring basis[157](index=157&type=chunk) - No assets or liabilities were recorded at fair value on a non-recurring basis due to impairment charges or business combinations during the periods presented[158](index=158&type=chunk) [NOTE 18 – SUBSEQUENT EVENTS](index=33&type=section&id=NOTE%2018%20%E2%80%93%20SUBSEQUENT%20EVENTS) This note details significant post-September 30, 2020, events, including Viking Merger amendments, an Exchange Agreement with Discover for Series C Preferred Stock, and designation corrections - On October 9, 2020, the Viking Merger Agreement was amended to fix Camber's post-Merger capitalization at **20%**, extend the termination date to December 31, 2020, and remove the requirement for Viking to obtain lender consent[159](index=159&type=chunk) - On December 11, 2020, Camber entered into an Exchange Agreement with Discover, converting **600** shares of Series C Preferred Stock (**$6 million** face value) into a **$6 million** secured Promissory Note (Investor Note) to reduce dilution[160](index=160&type=chunk) - The Exchange Agreement included waivers of prior breaches, commitments to SEC filings, indemnification, and Discover's agreement to vote in favor of the Viking Merger and waive certain rights[161](index=161&type=chunk) - The Investor Note accrues **10%** annual interest, due on the earlier of December 11, 2022, or March 11, 2021, if the Merger doesn't close, and is secured by a first priority interest in substantially all of Camber's assets[164](index=164&type=chunk)[166](index=166&type=chunk) - On December 14, 2020, corrections and a second amended and restated designation for Series C Preferred Stock were filed to clarify conversion terms, redemption requirements, and update references to the Viking Merger[138](index=138&type=chunk)[140](index=140&type=chunk) [ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.](index=35&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS.) Management's discussion and analysis of Camber Energy's financial condition and operations for Q3 and H1 2020, covering business, Viking merger, Series C Preferred Stock, COVID-19 impact, and liquidity [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=35&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns about forward-looking statements, highlighting risks like funding, merger completion, dilution, commodity price volatility, and COVID-19 impact - The report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially[169](index=169&type=chunk)[170](index=170&type=chunk) - Key risks include funding availability, ability to integrate acquisitions (Viking Merger), costs associated with the merger, collection of notes receivable, significant dilution from Series C Preferred Stock conversion, and market conditions in the oil and gas industry[170](index=170&type=chunk)[172](index=172&type=chunk)[173](index=173&type=chunk)[175](index=175&type=chunk)[176](index=176&type=chunk) - The impact of global pandemics like COVID-19 on operations, properties, and demand for oil and gas is also a significant risk factor[172](index=172&type=chunk) [REVIEW OF INFORMATION AND DEFINITIONS](index=37&type=section&id=REVIEW%20OF%20INFORMATION%20AND%20DEFINITIONS) This section provides context for the report, directing readers to relevant financial statements and defining capitalized terms and industry abbreviations - Readers should review this information in conjunction with the interim unaudited financial statements and the Annual Report on Form 10-K for the fiscal year ended March 31, 2020[178](index=178&type=chunk) - Defines key terms such as "Exchange Act," "Bbl," "SEC," "Boe," "Mcf," and "Securities Act"[181](index=181&type=chunk) [OVERVIEW](index=38&type=section&id=OVERVIEW) Camber Energy, Inc. is a Houston-based oil and gas company, with this overview detailing its corporate history, Lineal divestiture, and strategic focus on the Viking merger and growth - Camber Energy, Inc. is a Nevada corporation based in Houston, Texas, primarily engaged in oil and natural gas acquisition, development, and sale in Louisiana and Texas[182](index=182&type=chunk) - The company acquired Lineal Star Holdings, LLC on July 8, 2019, and divested it on December 31, 2019, returning to its core oil and gas operations[183](index=183&type=chunk)[184](index=184&type=chunk) - Camber plans to complete a merger with Viking Energy Group, Inc. and then focus on developing Viking's properties and seeking new acquisitions, anticipating additional financing for growth[186](index=186&type=chunk) [RECENT EVENTS](index=39&type=section&id=RECENT%20EVENTS) This section details recent corporate events, including the Viking Plan of Merger, Series C Preferred Stock amendments, and the Discover Exchange Agreement, streamlining the merger and capital structure [Viking Plan of Merger](index=39&type=section&id=Viking%20Plan%20of%20Merger) The Viking Plan of Merger, amended in August 2020, involves Viking stockholders receiving **80%** of Camber's post-closing capitalization, contingent on Camber's **30%** Elysium investment - The Merger Agreement with Viking Energy Group, Inc. (February 3, 2020, amended August 31, 2020) stipulates Viking common stock holders will receive **80%** of Camber's post-closing capitalization (excluding Series C Preferred Stock conversion shares)[187](index=187&type=chunk) - A key closing condition was Camber's acquisition of a **30%** interest in Elysium Energy Holdings, LLC, through a **$9.2 million** investment[190](index=190&type=chunk) - Secured Notes provided to Viking will be forgiven upon merger closing; if terminated, an additional payment (**115.5%** of original principal minus repayment amount) is due from Viking[191](index=191&type=chunk) - Camber's **30%** interest in Elysium (acquired through the Viking investment) includes working and overriding royalty interests in approximately **123** oil and gas wells in Texas and Louisiana, producing ~**2,200 Boe/day** for Q3 2020[193](index=193&type=chunk) [Series C Preferred Stock Corrections and Amendments](index=40&type=section&id=Series%20C%20Preferred%20Stock%20Corrections%20and%20Amendments) Camber filed corrections and amendments to Series C Preferred Stock on December 14, 2020, clarifying "deemed liquidation events," cash redemption requirements, conversion prices, and Viking Merger references - On December 14, 2020, Camber filed corrections to Series C Preferred Stock designations to clarify that certain events (e.g., failure to issue common stock upon conversion, trading halts) are not "deemed liquidation events" unless solely within Camber's control[194](index=194&type=chunk) - The corrections also clarified that Camber is not required to redeem Series C Preferred Stock for cash solely due to insufficient authorized common shares for conversion[194](index=194&type=chunk) - A second amended and restated designation was filed to include Camber's option to redeem Series C Preferred Stock at **110%** of face value, update conversion prices for a prior reverse stock split, and amend the measurement period for conversion premiums[196](index=196&type=chunk) - References to the Lineal merger were updated to refer to the planned Viking merger, ensuring the Viking merger is not considered a 'deemed liquidation event'[197](index=197&type=chunk) [Discover Exchange Agreement, Promissory Note and Security Agreement](index=41&type=section&id=Discover%20Exchange%20Agreement%2C%20Promissory%20Note%20and%20Security%20Agreement) On December 11, 2020, Camber and Discover exchanged **600** Series C Preferred Stock shares (**$6 million** face value) for a **$6 million** secured Promissory Note, waiving breaches and securing the note - On December 11, 2020, Discover exchanged **600** shares of Series C Preferred Stock (**$6 million** face value) for a **$6 million** secured Promissory Note (Investor Note) to reduce potential dilution[198](index=198&type=chunk) - The Exchange Agreement included Discover waiving prior breaches, Camber agreeing to timely SEC filings, and Discover agreeing to vote in favor of the Viking Merger[200](index=200&type=chunk) - The Investor Note accrues **10%** annual interest, due on the earlier of December 11, 2022, or March 11, 2021, if the Merger does not close, and is secured by a first priority interest in substantially all of Camber's assets[202](index=202&type=chunk)[204](index=204&type=chunk) - The agreement also removed the repurchase obligation for **630** shares of Series C Preferred Stock sold in June 2020, reclassifying the remaining **30** shares as permanent equity[201](index=201&type=chunk)[163](index=163&type=chunk) [CORPORATE INFORMATION AND SUMMARY OF CURRENT OPERATIONS](index=42&type=section&id=CORPORATE%20INFORMATION%20AND%20SUMMARY%20OF%20CURRENT%20OPERATIONS) Camber Energy, Inc. is an oil and gas company with Texas leasehold interests, divested Hutchinson County properties, no employees, and a future strategy focused on the Viking Merger and acquisitions - As of September 30, 2020, Camber had leasehold interests covering approximately **221** net acres, producing from the Cline and Wolfberry formations in Texas[206](index=206&type=chunk) - The company divested its Hutchinson County, Texas properties in July 2020 as part of the PetroGlobe settlement, eliminating those interests and liabilities[206](index=206&type=chunk)[207](index=207&type=chunk) - Camber was producing approximately **28.1** net barrels of oil equivalent per day (Boepd) from **25** active wellbores as of September 30, 2020[209](index=209&type=chunk) - Total estimated proved producing reserves were **133,442 Boe** at September 30, 2020, with no reserves related to the divested Panhandle properties[209](index=209&type=chunk) - Camber has no employees and utilizes independent contractors; its future plan is to complete the Viking Merger and grow through Viking's properties and new acquisitions, requiring additional financing[212](index=212&type=chunk)[213](index=213&type=chunk) [INDUSTRY SEGMENTS](index=45&type=section&id=INDUSTRY%20SEGMENTS) For Q3 and H1 2020, Camber's operations were solely crude oil and natural gas E&P, while prior year included Lineal's oil and gas services until divestiture - Camber's operations for the three and six months ended September 30, 2020, were entirely crude oil and natural gas exploration and production[217](index=217&type=chunk) - For the same periods in 2019, operations included oil and gas services through Lineal until its divestiture on December 31, 2019, with Lineal's contract revenue reported in "Loss from Discontinued Operations"[217](index=217&type=chunk) [OPERATIONS](index=45&type=section&id=OPERATIONS) Camber operates and invests in productive oil and gas areas in Louisiana and Texas to minimize geological risk, having divested Lineal on December 31, 2019 - Camber operates and invests in known productive oil and natural gas areas in Louisiana and Texas to reduce geological and exploratory risk[218](index=218&type=chunk) - The company divested its entire interest in Lineal, an oil and gas service company, on December 31, 2019[219](index=219&type=chunk) [FINANCING](index=45&type=section&id=FINANCING) Camber's financing activities are detailed in notes, with significant liquidity concerns requiring the Viking Merger or new funding to continue as a going concern - Camber's financing transactions are detailed in Notes 1, 5, 6, 11, and 13 of the financial statements[220](index=220&type=chunk) - The company believes it lacks sufficient liquidity to operate as a going concern for the next twelve months without closing the Viking Merger, expected in Q4 2020 or Q1 2021[221](index=221&type=chunk) [MARKET CONDITIONS AND COMMODITY PRICES](index=45&type=section&id=MARKET%20CONDITIONS%20AND%20COMMODITY%20PRICES) Camber's financial results are highly dependent on volatile crude oil, natural gas, and NGL prices, influenced by external supply and demand, with no current hedging activities - Camber's financial results are highly dependent on the volatile prices of natural gas, natural gas liquids, and crude oil[222](index=222&type=chunk) - Commodity prices are affected by external factors like market supply and demand, weather, and inventory levels, leading to unpredictable future prices[222](index=222&type=chunk) - The company expects continued price volatility and does not currently engage in commodity price hedging activities[222](index=222&type=chunk)[276](index=276&type=chunk) [NOVEL CORONAVIRUS ("COVID-19")](index=46&type=section&id=NOVEL%20CORONAVIRUS%20(%22COVID-19%22)) COVID-19 significantly impacted global oil and gas demand and prices, affecting Lineal's debt payments to Camber, with the full impact uncertain but cash sufficient contingent on the merger - The COVID-19 pandemic, declared in March 2020, has lowered global demand and prices for hydrocarbons due to social distancing and travel restrictions[224](index=224&type=chunk)[225](index=225&type=chunk) - Camber's non-operated properties have not been materially affected by COVID-19 to date, but the full extent of the impact on operations and demand is uncertain[224](index=224&type=chunk)[227](index=227&type=chunk) - COVID-19 has impacted Lineal Holdings, LLC, which owes Camber **$2,339,719** and has insufficient liquidity to make scheduled interest payments, leading to restructuring negotiations[226](index=226&type=chunk) - The company believes it has sufficient cash to support operations through the closing of the Merger Agreement, but will continue to evaluate its business based on new information[228](index=228&type=chunk) [RESULTS OF OPERATIONS](index=46&type=section&id=RESULTS%20OF%20OPERATIONS) Detailed analysis of Camber Energy's financial performance for Q3 and H1 2020 vs. 2019, highlighting drivers of changes in net loss, revenues, and expenses [Three Months Ended September 30, 2020, vs. Three Months Ended September 30, 2019](index=46&type=section&id=Three%20Months%20Ended%20September%2030%2C%202020%2C%20vs.%20Three%20Months%20Ended%20September%2030%2C%202019) Net loss for Q3 2020 increased to **$2.1 million** from **$0.3 million**, driven by a **$1.1 million** Elysium loss, **$0.2 million** Lineal reserve, and a **38%** decline in oil and gas revenues | Metric | Three Months Ended Sep 30, 2020 | Three Months Ended Sep 30, 2019 | Change | % Change | |:---|:---|:---|:---|:---|\ | Net Loss | $(2.1) million | $(0.3) million | $(1.8) million | +600% | | Net Loss Per Common Share | $(0.19) | $(4.40) | +$4.21 | -95.7% | | Total Oil and Gas Revenues | $57,458 | $92,753 | $(35,295) | -38% | | Lease Operating Expenses | $27,222 | $188,483 | $(161,261) | -86% | | General and Administrative Expenses | $852,915 | $940,483 | $(87,568) | -9% | | Loss from Unconsolidated Entity | $1,056,766 | $0 | +$1,056,766 | N/A | | Other Expense (Income), Net | $172,100 | $(9,278) | +$181,378 | +1955% | - Sales volumes decreased by approximately **30%** due to a significant drop in market prices for oil and gas, primarily from decreased demand due to COVID-19; crude oil average sales price declined by **11%**[233](index=233&type=chunk) - Lease operating expenses decreased by approximately **$161,000**, mainly due to production declines and the divestiture of Panhandle, Texas properties[237](index=237&type=chunk) - G&A expenses decreased by **$0.1 million**, primarily due to the absence of Lineal Merger-related costs from the prior year; share-based compensation increased by **$37,000** due to restricted common shares issued for consulting fees[239](index=239&type=chunk)[240](index=240&type=chunk) - Loss from unconsolidated entity increased by **$1.1 million** due to the equity loss of Elysium Holdings, LLC; other expense, net, increased by **$0.2 million** due to the partial allowance for Lineal loans[242](index=242&type=chunk)[243](index=243&type=chunk) [Six Months Ended September 30, 2020, vs. Six Months Ended September 30, 2019](index=49&type=section&id=Six%20Months%20Ended%20September%2030%2C%202020%2C%20vs.%20Six%20Months%20Ended%20September%2030%2C%202019) Net loss for H1 2020 increased to **$3.7 million** from **$1.6 million**, driven by a **$2.1 million** Elysium loss and **$0.2 million** Lineal allowance, with oil and gas revenues declining **57%** | Metric | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | Change | % Change | |:---|:---|:---|:---|:---|\ | Net Loss | $(3.7) million | $(1.6) million | $(2.1) million | +131% | | Net Loss Per Common Share | $(0.51) | $(20.57) | +$20.06 | -97.5% | | Total Oil and Gas Revenues | $91,147 | $214,104 | $(122,957) | -57% | | Lease Operating Expenses | $96,513 | $312,040 | $(215,527) | -69% | | General and Administrative Expenses | $1,539,578 | $2,272,474 | $(732,896) | -32% | | Loss from Unconsolidated Entity | $2,140,121 | $0 | +$2,140,121 | N/A | | Other Expense (Income), Net | $(42,532) | $(63,540) | +$21,008 | +33% | - Sales volumes decreased by approximately **25%** due to a significant drop in market prices for oil and gas, primarily from decreased demand due to COVID-19; crude oil average sales price declined by **45%**[246](index=246&type=chunk) - Lease operating expenses decreased by approximately **$216,000** due to production declines and the divestiture of Panhandle, Texas properties[250](index=250&type=chunk) - G&A expenses (excluding share-based compensation) decreased by **$740,000**, primarily due to the absence of Lineal Merger-related costs; share-based compensation increased by **$7,000** due to restricted shares for consulting[251](index=251&type=chunk)[252](index=252&type=chunk) - Loss from unconsolidated entity increased by **$2.1 million** due to the equity loss of Elysium Holdings, LLC; other expense, net, decreased by **$21,000** due to partial impairment of Lineal notes and elimination of other income from Lineal[255](index=255&type=chunk)[256](index=256&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=51&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Camber Energy faces significant liquidity challenges with a **$0.1 million** working capital deficit, relying on the Viking Merger or new funding to continue as a going concern, exacerbated by COVID-19 - Camber had a working capital deficit of approximately **$0.1 million** at September 30, 2020[259](index=259&type=chunk) - The company's ability to continue as a going concern depends on closing the Viking Merger (anticipated Q4 2020 or Q1 2021) or raising new funding[259](index=259&type=chunk) - COVID-19 has negatively impacted Lineal's operations, leading to insufficient liquidity for scheduled interest payments on its **$2.3 million** unsecured notes to Camber, prompting restructuring negotiations[260](index=260&type=chunk) - Camber advanced **$9.2 million** to Viking (from Series C Preferred Stock sales) in exchange for **10.5%** Secured Promissory Notes, secured by Viking's subsidiaries and Elysium ownership[262](index=262&type=chunk)[263](index=263&type=chunk) - A **$6 million** Series C Preferred Stock sale in June 2020 had a repurchase obligation if the merger failed, which was terminated in December 2020; Viking has agreed to a break-up fee if the merger terminates, which should cover Camber's Investor Note repayment[264](index=264&type=chunk) [PLAN OF OPERATIONS](index=52&type=section&id=PLAN%20OF%20OPERATIONS) Camber's future plan centers on completing the Viking merger, then developing Viking's properties and pursuing new acquisitions for growth, anticipating additional financing - Camber's plan is to complete the merger with Viking Energy Group, Inc[265](index=265&type=chunk) - Post-merger, the company will focus on developing Viking's properties and seeking new acquisitions to grow oil and gas production and revenues[265](index=265&type=chunk) - Additional financing (debt or equity) is anticipated to fund acquisitions after the merger closes[265](index=265&type=chunk) [CASH FLOWS](index=53&type=section&id=CASH%20FLOWS) Net cash increased for H1 2020, primarily from **$6.0 million** in financing activities, offsetting **$1.3 million** in operating and **$4.2 million** in investing activities | Cash Flow Activity | Six Months Ended Sep 30, 2020 | Six Months Ended Sep 30, 2019 | |:---|:---|:---|\ | Net cash used in operating activities | $(1,343,650) | $(2,837,903) | | Net cash used in investing activities | $(4,200,000) | $(1,151,974) | | Net cash provided by financing activities | $6,000,000 | $429,210 | | Net increase (decrease) in cash | $456,350 | $(3,560,667) | - Net cash used in operating activities decreased due to reduced G&A and operating costs, despite an increased net loss[270](index=270&type=chunk) - Net cash used in investing activities increased significantly due to a **$4.2 million** loan to Viking[271](index=271&type=chunk) - Net cash provided by financing activities increased substantially due to the **$6 million** sale of Series C Preferred Stock[272](index=272&type=chunk) - Oil prices, which have been highly volatile, significantly influence Camber's revenue and cash flows, with prolonged low prices posing a risk to financial condition and ability to meet obligations[268](index=268&type=chunk) [WORKING CAPITAL](index=53&type=section&id=WORKING%20CAPITAL) Working capital deficit improved from **$0.9 million** to **$0.1 million** by September 30, 2020, primarily due to a **$6 million** Series C Preferred Stock sale | Metric | Sep 30, 2020 | Mar 31, 2020 | Change | |:---|:---|:---|:---|\ | Total Current Assets | $1.5 million | $1.1 million | +$0.4 million | | Total Current Liabilities | $1.6 million | $2.0 million | -$0.4 million | | Working Capital Deficit | $0.1 million | $0.9 million | -$0.8 million | - The improvement in working capital deficit was primarily driven by the **$6 million** sale of Series C Preferred Stock in June 2020[269](index=269&type=chunk) [FINANCING](index=53&type=section&id=FINANCING) This section reiterates that Camber's financing transactions, funding agreements, and lending activities are comprehensively disclosed in the financial statement notes - A summary of financing transactions, funding agreements, and lending transactions can be found in Notes 1, 5, 6, 11, and 13 of the financial statements[273](index=273&type=chunk) [OFF-BALANCE SHEET ARRANGEMENTS](index=54&type=section&id=OFF-BALANCE%20SHEET%20ARRANGEMENTS) Camber does not engage in off-balance sheet financial transactions or partnerships, except for its **30%** interest in Elysium Energy Holdings, LLC - Camber does not participate in off-balance sheet financial transactions or partnerships, other than its **30%** interest in Elysium Energy Holdings, LLC[275](index=275&type=chunk) [ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.](index=54&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK.) This section discusses Camber's market risk exposure, primarily commodity price risk, which significantly impacts revenues, with no current hedging activities [COMMODITY PRICE RISK](index=54&type=section&id=COMMODITY%20PRICE%20RISK) Camber's revenues are highly sensitive to volatile crude oil, natural gas, and NGL prices, which significantly impact financial results, and the company does not currently hedge - All of Camber's revenues for the six months ended September 30, 2020, and some for the same period in 2019, were from the sale of crude oil, natural gas, and NGL production[277](index=277&type=chunk) - Changes in commodity prices, influenced by market supply and demand, can significantly impact the company's revenues[277](index=277&type=chunk) - The company does not currently engage in commodity price hedging activities[276](index=276&type=chunk) [ITEM 4. CONTROLS AND PROCEDURES.](index=54&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES.) This section addresses Camber's disclosure controls and internal control over financial reporting, concluding controls were ineffective due to lack of segregation of duties, with no material changes [DISCLOSURE CONTROLS AND PROCEDURES.](index=54&type=section&id=DISCLOSURE%20CONTROLS%20AND%20PROCEDURES.) Camber's disclosure controls and procedures were deemed ineffective as of September 30, 2020, due to a lack of segregation of duties - Camber's disclosure controls and procedures were deemed not effective as of September 30, 2020[279](index=279&type=chunk) - The ineffectiveness was attributed to a lack of segregation of duties[279](index=279&type=chunk) [CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING](index=54&type=section&id=CHANGES%20IN%20INTERNAL%20CONTROL%20OVER%20FINANCIAL%20REPORTING) No material changes occurred in Camber's internal control over financial reporting during the quarter ended September 30, 2020 - No material changes in internal control over financial reporting occurred during the quarter ended September 30, 2020[280](index=280&type=chunk) PART II – OTHER INFORMATION [ITEM 1. LEGAL PROCEEDINGS.](index=55&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS.) Camber is involved in various legal actions, establishing reserves when losses are probable and estimable, with uncertain outcomes that could impact financial condition - Camber is periodically named in legal actions and records reserves when a loss is probable and estimable[283](index=283&type=chunk) - The company is not currently involved in legal proceedings expected to have a material adverse effect, except as detailed in Note 9 of the financial statements[283](index=283&type=chunk) - The outcome of litigation is uncertain, and adverse resolutions could materially affect financial condition and operating results[284](index=284&type=chunk) [ITEM 1A. RISK FACTORS.](index=55&type=section&id=ITEM%201A.%20RISK%20FACTORS.) This section updates significant risks for Camber Energy, Inc., including general business, Viking merger, and Series C Preferred Stock risks, which could materially affect the company [GENERAL BUSINESS AND OTHER RISKS](index=55&type=section&id=GENERAL%20BUSINESS%20AND%20OTHER%20RISKS) Camber faces general business risks including limited oil and gas operations, COVID-19 impacts, potential defaults from Lineal and Viking, volatile commodity prices, and limited authorized common stock - Camber has limited oil and gas operations, with its Hutchinson County, Texas leases (**30%** of historical producing properties) transferred in July 2020, which may adversely affect revenues[286](index=286&type=chunk) - The COVID-19 pandemic has negatively impacted global oil and gas demand and prices, and its continued effects could adversely affect Camber's operations and financial results[287](index=287&type=chunk)[289](index=289&type=chunk)[290](index=290&type=chunk) - Lineal and Viking owe Camber substantial amounts (**$2,339,719** and **$9.2 million**, respectively), and their inability to repay these unsecured/secured notes could materially harm Camber's cash flows and financial stability[291](index=291&type=chunk)[292](index=292&type=chunk)[294](index=294&type=chunk) - Declines in oil, NGL, and natural gas prices have and will continue to adversely affect Camber's business, financial condition, and ability to meet obligations, potentially leading to restructuring or bankruptcy[296](index=296&type=chunk)[297](index=297&type=chunk) - Camber currently has no authorized but unissued shares of common stock, which limits its ability to use common stock for acquisitions, raise funding, or issue share-based compensation, potentially negatively affecting revenues and stock value[299](index=299&type=chunk) [RISKS RELATING TO THE PLANNED MERGER](index=58&type=section&id=RISKS%20RELATING%20TO%20THE%20PLANNED%20MERGER) Risks of the Viking merger include uncertain share issuance, substantial dilution, and negative impacts if terminated, potentially requiring Elysium interest transfer and Investor Note acceleration - The exact number of Camber common shares issued to Viking stockholders in the merger is uncertain, as the exchange ratio depends on factors immediately prior to closing[300](index=300&type=chunk)[301](index=301&type=chunk) - The merger will cause immediate and substantial dilution to existing Camber stockholders and result in a change of control of the company[305](index=305&type=chunk)[306](index=306&type=chunk) - Termination of the Merger Agreement could negatively impact Camber's stock price, business, and financial results, potentially requiring the transfer of the **30%** Elysium interest back to Viking and accelerating the Investor Note's maturity to March 11, 2021[304](index=304&type=chunk)[307](index=307&type=chunk) - If the merger terminates and Viking is unable to pay the agreed-upon break-up fee, Camber may be unable to repay the Investor Note, leading to material adverse effects on cash flows and operations, potentially forcing bankruptcy[304](index=304&type=chunk)[309](index=309&type=chunk) [RISKS RELATING TO THE SERIES C PREFERRED STOCK](index=60&type=section&id=RISKS%20RELATING%20TO%20THE%20SERIES%20C%20PREFERRED%20STOCK) Series C Preferred Stock risks include immediate dilution, stock price pressure from converted share sales, a **$74.0 million** liquidation preference, and exponential conversion discounts at declining stock prices - Conversion of Series C Preferred Stock will cause immediate and substantial dilution to common stockholders and significant downward pressure on the stock price as Discover sells converted shares[311](index=311&type=chunk)[312](index=312&type=chunk) - Discover holds an approximately **$74.0 million** liquidation preference in the company, which would be paid before any distribution to common stockholders in a liquidation, likely leaving common stockholders with no value[313](index=313&type=chunk) - Fixed conversion discounts (**$0.05/$0.10**) on Series C Preferred Stock conversion premiums increase exponentially as the common stock price declines, potentially leading to conversion at the minimum par value of **$0.001** per share[315](index=315&type=chunk)[316](index=316&type=chunk)[318](index=318&type=chunk) - Camber's obligations under the **$6 million** Investor Note are secured by a first priority security interest in substantially all of its assets, meaning a default could lead to the Investor taking control of assets or forcing bankruptcy[320](index=320&type=chunk) [ITEM 2. UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.](index=62&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS.) This section discloses unregistered sales of equity securities, detailing Series C Preferred Stock conversions by Discover and potential future dilution from remaining shares - Since July 1, 2020, Discover converted **258** shares of Series C Preferred Stock into **11,779,818** shares of common stock, with **15,348** shares held in abeyance pending an increase in authorized common stock[321](index=321&type=chunk) - These sales and issuances were exempt from registration under Sections 3(a)(9) and 4(a)(2) of the Securities Act, Rule 506 of Regulation D, and Regulation S[322](index=322&type=chunk) - As of December 17, 2020, the remaining **2,693** outstanding Series C Preferred Stock shares (including **600** shares being cancelled) could convert into up to **118,181,407** common shares (ignoring beneficial ownership limits), with a lowest possible conversion price of **$0.001** per share, potentially resulting in **47,033,410,723** common shares[323](index=323&type=chunk) [USE OF PROCEEDS FROM SALE OF REGISTERED SECURITIES](index=64&type=section&id=USE%20OF%20PROCEEDS%20FROM%20SALE%20OF%20REGISTERED%20SECURITIES) The company reported no use of proceeds from the sale of registered securities - No proceeds were used from the sale of registered securities[325](index=325&type=chunk) [ISSUER PURCHASES OF EQUITY SECURITIES](index=64&type=section&id=ISSUER%20PURCHASES%20OF%20EQUITY%20SECURITIES) The company reported no issuer purchases of equity securities - No issuer purchases of equity securities were made[326](index=326&type=chunk) [ITEM 3. DEFAULTS UPON SENIOR SECURITIES.](index=64&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES.) The company reported no defaults upon senior securities - No defaults upon senior securities were reported[328](index=328&type=chunk) [ITEM 4. MINE SAFETY DISCLOSURES.](index=64&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES.) This item is not applicable to the company - This item is not applicable[330](index=330&type=chunk) [ITEM 5. OTHER INFORMATION.](index=64&type=section&id=ITEM%205.%20OTHER%20INFORMATION.) This section provides disclosures typically found in Form 8-K, covering material agreements, financial obligations, security holder rights modifications, and corporate document amendments [ITEM 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.](index=64&type=section&id=ITEM%201.01%20ENTRY%20INTO%20A%20MATERIAL%20DEFINITIVE%20AGREEMENT.) On December 11, 2020, Camber and Discover entered an Exchange Agreement, converting **600** Series C Preferred Stock shares (**$6 million** face value) into a **$6 million** secured Promissory Note - On December 11, 2020, Camber entered an Exchange Agreement with Discover, converting **600** shares of Series C Preferred Stock (**$6 million** face value) into a **$6 million** secured Promissory Note (Investor Note)[331](index=331&type=chunk) - The Exchange Agreement amended the June 22, 2020 Stock Purchase Agreement, removing the prohibition on transferring Series C Preferred Stock and the repurchase obligation for **630** shares[333](index=333&type=chunk) - The Investor Note accrues **10%** annual interest, due on the earlier of December 11, 2022, or March 11, 2021, if the Merger doesn't close, and is secured by a first priority interest in substantially all of Camber's assets[334](index=334&type=chunk)[339](index=339&type=chunk) - The Investor Note includes customary events of default, allowing the Investor to accelerate the full amount and enforce security rights[337](index=337&type=chunk) [ITEM 2.03 CREATION OF DIRECT FINANCIAL OBLIGATION OR AN OBLIGATION UNDER AN OFF-BALANCE SHEET ARRANGEMENT OF A REGISTRANT.](index=66&type=section&id=ITEM%202.03%20CREATION%20OF%20DIRECT%20FINANCIAL%20OBLIGATION%20OR%20AN%20OBLIGATION%20UNDER%20AN%20OFF-BALANCE%20SHEET%20ARRANGEMENT%20OF%20A%20REGISTRANT.) This item incorporates by reference information from Item 1.01 regarding the Investor Note and Security Agreement, creating a direct financial obligation for the registrant - Information regarding the Investor Note and Security Agreement, as detailed in Item 1.01, is incorporated by reference, creating a direct financial obligation for the registrant[341](index=341&type=chunk) [ITEM 3.03 MATERIAL MODIFICATION TO RIGHTS OF SECURITY HOLDERS.](index=66&type=section&id=ITEM%203.03%20MATERIAL%20MODIFICATION%20TO%20RIGHTS%20OF%20SECURITY%20HOLDERS.) This item incorporates by reference information from Item 5.03, detailing material modifications to Series C Preferred Stock holder rights via Certificates of Correction and the Second Amended and Restated Designation - Material modifications to the rights of Series C Preferred Stock holders, as described in Item 5.03 (Corrections and Second Amended and Restated Designation), are incorporated by reference[342](index=342&type=chunk) [ITEM 5.03 AMENDMENTS TO ARTICLES OF INCORPORATION OR BYLAWS; CHANGE IN FISCAL YEAR.](index=66&type=section&id=ITEM%205.03%20AMENDMENTS%20TO%20ARTICLES%20OF%20INCORPORATION%20OR%20BYLAWS%3B%20CHANGE%20IN%20FISCAL%20YEAR.) On December 11, 2020, Camber filed Certificates of Correction and a Second Amended and Restated Certificate of Designations for Series C Preferred Stock, clarifying conversion terms, redemption, and Viking Merger references - On December 11, 2020, Certificates of Correction were filed to clarify errors in the original Series C Preferred Stock designations, ensuring certain events are not "deemed liquidation events" unless solely within Camber's control and that cash redemption is not required due to insufficient authorized shares[343](index=343&type=chunk)[345](index=345&type=chunk) - A Second Amended and Restated Designation was filed to allow Camber to redeem Series C Preferred Stock at **110%** of face value, update conversion prices for a prior reverse stock split, amend the measurement period for conversion premiums, and update merger references to Viking Energy Group, Inc[347](index=347&type=chunk) - These corrections and amendments were effective as of the original filing dates of the Series C Preferred Stock designations[346](index=346&type=chunk) [ITEM 5.07 SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.](index=67&type=section&id=ITEM%205.07%20SUBMISSION%20OF%20MATTERS%20TO%20A%20VOTE%20OF%20SECURITY%20HOLDERS.) On December 11, 2020, the sole Series C Preferred Stock shareholder approved the Certificates of Correction and Second Amended and Restated Designation via written consent - The sole shareholder of Series C Preferred Stock approved the filing of Certificates of Correction and the adoption of the Second Amended and Restated Designation on December 11, 2020, via written consent[350](index=350&type=chunk) [ITEM 6. EXHIBITS.](index=68&type=section&id=ITEM%206.%20EXHIBITS.) This section lists all exhibits filed or furnished with the Quarterly Report on Fo
Camber Energy(CEI) - 2020 Q2 - Quarterly Report
2020-08-14 20:17
[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%201.%20FINANCIAL%20INFORMATION) [ITEM 1. FINANCIAL STATEMENTS](index=4&type=section&id=ITEM%201.%20FINANCIAL%20STATEMENTS) This section presents the unaudited consolidated financial statements for Q2 2020, detailing balance sheets, operations, equity changes, and cash flows, with notes on asset growth, increased net loss, and significant equity increase from preferred stock issuance [Consolidated Balance Sheets](index=4&type=section&id=CONSOLIDATED%20BALANCE%20SHEETS) Total assets increased to **$13.9 million** by June 30, 2020, driven by cash and notes receivable, while liabilities decreased and stockholders' equity rose to **$6.2 million** from preferred stock issuance Consolidated Balance Sheet Highlights (Unaudited) | Balance Sheet Item | June 30, 2020 ($) | March 31, 2020 ($) | | :--- | :--- | :--- | | **Assets** | | | | Cash | $1,705,374 | $656,615 | | Total Current Assets | $2,233,251 | $1,132,660 | | Total Assets | $13,910,159 | $9,695,218 | | **Liabilities & Equity** | | | | Total Current Liabilities | $1,687,656 | $2,028,908 | | Total Liabilities | $1,707,004 | $2,070,431 | | Total Stockholders' Equity | $6,203,155 | $2,624,787 | [Consolidated Statements of Operations](index=6&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20OPERATIONS) Net loss widened to **$1.6 million** for Q2 2020, primarily due to a **$1.1 million** equity investment loss, despite reduced operating expenses and a sharp revenue decline Statement of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2020 ($) | Three Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Total Revenues | $33,689 | $121,351 | | Operating Loss | ($725,909) | ($1,341,013) | | Loss from Equity Method Investment | $1,083,355 | $0 | | Net Loss | ($1,594,632) | ($1,287,598) | | Net Loss Per Share (Basic & Diluted) | ($0.44) | ($206.26) | [Consolidated Statements of Cash Flows](index=8&type=section&id=CONSOLIDATED%20STATEMENTS%20OF%20CASH%20FLOWS) Net cash increased by **$1.05 million** in Q2 2020, with **$6.0 million** from financing activities offsetting **$0.75 million** used in operations and **$4.2 million** in investing Cash Flow Summary (Unaudited) | Cash Flow Activity | Three Months Ended June 30, 2020 ($) | Three Months Ended June 30, 2019 ($) | | :--- | :--- | :--- | | Net Cash Used in Operating Activities | ($751,241) | ($1,298,906) | | Net Cash Used in Investing Activities | ($4,200,000) | ($75,000) | | Net Cash Provided by Financing Activities | $6,000,000 | $0 | | **Increase (Decrease) in Cash** | **$1,048,759** | **($1,373,906)** | [Notes to Consolidated Financial Statements](index=9&type=section&id=NOTES%20TO%20CONSOLIDATED%20FINANCIAL%20STATEMENTS) Notes detail the pending Viking merger, a **$9.2 million** investment, substantial doubt about going concern, Lineal divestiture, notes receivable, and **$6 million** Series C Preferred Stock issuance - The company has substantial doubt about its ability to continue as a going concern for the next twelve months unless it can raise new funding or close the pending merger with Viking Energy Group, Inc[42](index=42&type=chunk) - On February 3, 2020, the company entered into a merger agreement with Viking Energy Group, Inc. A condition of the merger required Camber to invest **$9.2 million** in Viking, which was completed by June 22, 2020, giving Camber a **30%** interest in Viking's subsidiary, Elysium Energy Holdings, LLC[35](index=35&type=chunk)[79](index=79&type=chunk) - The company divested its entire interest in Lineal Star Holdings on December 31, 2019. In connection with the divestiture, Camber holds two unsecured promissory notes from Lineal totaling approximately **$2.34 million**[30](index=30&type=chunk)[117](index=117&type=chunk)[118](index=118&type=chunk) - During the quarter, the company sold **630 shares** of Series C Preferred Stock for **$6 million**. These shares are classified as temporary equity due to a redemption feature that is triggered if the Viking merger does not close[122](index=122&type=chunk)[123](index=123&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=28&type=section&id=ITEM%202.%20MANAGEMENT'S%20DISCUSSION%20AND%20ANALYSIS%20OF%20FINANCIAL%20CONDITION%20AND%20RESULTS%20OF%20OPERATIONS) Management discusses financial performance, emphasizing the Viking merger, a **72%** revenue decrease, a **$1.6 million** net loss from an equity investment, and improved liquidity from **$6 million** financing, while reiterating going concern dependency [Results of Operations](index=36&type=section&id=Results%20of%20Operations) Net loss increased to **$1.6 million** in Q2 2020, driven by a **$1.1 million** equity investment loss, while oil and gas revenues fell **72%** due to price and volume declines, and G&A expenses decreased **48%** Revenue and Production Comparison | Metric | Q2 2020 ($) | Q2 2019 ($) | % Change | | :--- | :--- | :--- | :--- | | Total Oil and Gas Revenues | $33,689 | $121,351 | (72)% | | Total Sales Volume (Boe) | 2,707 | 3,402 | (20)% | | Average Crude Oil Price ($/Bbl) | $18.28 | $60.02 | (70)% | - The net loss for Q2 2020 was **$1.6 million**, an increase from **$1.3 million** in Q2 2019. The increase is primarily attributed to a **$1.1 million** loss from the equity method investment in Elysium, which was acquired in February 2020[194](index=194&type=chunk) - General and Administrative (G&A) expenses decreased by approximately **$0.6 million (48%)** compared to the prior year's period, mainly because of costs incurred in 2019 related to the Lineal merger that did not recur[199](index=199&type=chunk)[203](index=203&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) Working capital improved to a **$0.5 million** surplus due to a **$6.0 million** preferred stock sale, but liquidity remains insufficient for going concern without the Viking merger or new financing, with **$0.8 million** used in operations and **$4.2 million** in investing - The company's working capital improved from a deficit of **$0.9 million** at March 31, 2020, to a surplus of **$0.5 million** at June 30, 2020, primarily due to the sale of **$6 million** of Series C Preferred Stock[219](index=219&type=chunk) - Management believes the company will not have sufficient liquidity to operate as a going concern for the next twelve months unless it can close the Viking Merger or secure other financing[209](index=209&type=chunk) Quarterly Cash Flow Summary | Cash Flow Activity | Three Months Ended June 30, 2020 ($) | | :--- | :--- | | Cash flows used in operating activities | ($751,241) | | Cash flows used in investing activities | ($4,200,000) | | Cash flows provided by financing activities | $6,000,000 | | **Net increase in cash** | **$1,048,759** | [Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=ITEM%203.%20QUANTITATIVE%20AND%20QUALITATIVE%20DISCLOSURES%20ABOUT%20MARKET%20RISK) The company's revenues are entirely dependent on crude oil, natural gas, and NGL sales, exposing it to significant commodity price risk, with no current hedging activities in place - The company's revenues are entirely derived from the sale of crude oil, natural gas, and NGLs, making it highly exposed to commodity price risk[227](index=227&type=chunk) - Camber currently does not engage in commodity price hedging activities to manage its exposure to price volatility[226](index=226&type=chunk) [Controls and Procedures](index=42&type=section&id=ITEM%204.%20CONTROLS%20AND%20PROCEDURES) Management concluded that disclosure controls and procedures were ineffective as of June 30, 2020, due to a material weakness from a lack of segregation of duties, with no material changes to internal controls during the quarter - Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2020[232](index=232&type=chunk) - The identified reason for the ineffectiveness of disclosure controls was a lack of segregation of duties[232](index=232&type=chunk) [PART II – OTHER INFORMATION](index=44&type=section&id=PART%20II%20%E2%80%93%20OTHER%20INFORMATION) [Legal Proceedings](index=44&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) The company is involved in various legal proceedings arising from normal business activities, with details on ongoing litigation and a recently settled matter provided in Note 9 of the financial statements - The company is subject to legal proceedings that have arisen in the ordinary course of business, with specific details provided in Note 9 of the financial statements[237](index=237&type=chunk) [Risk Factors](index=44&type=section&id=ITEM%201A.%20RISK%20FACTORS) Updated risk factors include limited oil and gas operations, COVID-19 impact on commodity prices, significant credit risk from Lineal and Viking notes, and merger-related risks like shareholder dilution and a potential **$6.93 million** preferred stock redemption - The COVID-19 pandemic has adversely affected the demand for and price of oil and gas, which has negatively impacted and may continue to negatively impact the company's operating results[242](index=242&type=chunk) - The company faces significant credit risk as Lineal and Viking collectively owe it over **$11.5 million** in promissory notes. A failure to repay these notes could materially harm Camber's financial condition[245](index=245&type=chunk)[246](index=246&type=chunk)[247](index=247&type=chunk) - Termination of the merger agreement could require Camber to redeem **630 shares** of Series C Preferred Stock for **$6,930,000**, potentially causing a severe negative impact on its financial condition if Viking fails to pay its corresponding break-up fee[256](index=256&type=chunk) - If the merger with Viking is completed, it will result in immediate and substantial dilution to existing stockholders and a change of control of the company[257](index=257&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=50&type=section&id=ITEM%202.%20UNREGISTERED%20SALES%20OF%20EQUITY%20SECURITIES%20AND%20USE%20OF%20PROCEEDS) Between April 1 and August 13, 2020, the company issued **6,518,546** unregistered common shares to Discover, resulting from Series C Preferred Stock conversions and settlement of prior conversions, deemed exempt from registration - From April 1, 2020, through August 13, 2020, the company issued **1,544,354 shares** of common stock upon the conversion of **59 shares** of Series C Preferred Stock and an additional **4,974,192 shares** related to prior conversions[273](index=273&type=chunk) - As of August 10, 2020, the **2,892 outstanding shares** of Series C Preferred Stock were convertible into approximately **75.7 million shares** of common stock, subject to adjustments and conversion price calculations[275](index=275&type=chunk) [Defaults Upon Senior Securities](index=51&type=section&id=ITEM%203.%20DEFAULTS%20UPON%20SENIOR%20SECURITIES) The company reported no defaults upon its senior securities during the period - None[280](index=280&type=chunk) [Mine Safety Disclosures](index=51&type=section&id=ITEM%204.%20MINE%20SAFETY%20DISCLOSURES) This section is not applicable to the company's operations - Not Applicable[282](index=282&type=chunk) [Other Information](index=51&type=section&id=ITEM%205.%20OTHER%20INFORMATION) The company reported no other information required to be disclosed in this section - None[284](index=284&type=chunk) [Exhibits](index=51&type=section&id=ITEM%206.%20EXHIBITS) This section provides an index of all exhibits filed or furnished with the Quarterly Report on Form 10-Q, including agreements, amendments, certifications, and corporate governance documents - An index of exhibits filed with the Form 10-Q is provided, including amendments to the Viking merger agreement and officer certifications[285](index=285&type=chunk)[291](index=291&type=chunk)
Camber Energy(CEI) - 2020 Q4 - Annual Report
2020-06-29 22:27
[PART I](index=10&type=section&id=PART%20I) [Business](index=10&type=section&id=ITEM%201.%20Business) Camber Energy, Inc. is an independent oil and gas company focused on acquisition and development, with recent activities dominated by corporate restructuring and a pending merger with Viking Energy Group, Inc. [General Overview](index=10&type=section&id=General) The company's strategy centers on a pending merger with Viking Energy Group, Inc., following significant asset divestitures and a brief acquisition of Lineal Star Holdings - The company's primary strategic focus is the completion of its merger with Viking Energy Group, Inc., after which it plans to develop Viking's properties and seek new acquisitions to grow production and revenue[71](index=71&type=chunk)[125](index=125&type=chunk) - In July 2019, Camber acquired Lineal Star Holdings, an oil and gas services company, but divested it on December 31, 2019, by returning ownership to the original holders in exchange for canceling the preferred stock issued for the acquisition[68](index=68&type=chunk)[69](index=69&type=chunk)[88](index=88&type=chunk) - As a condition of the Viking merger, Camber invested in Viking by loaning it a total of **$9.2 million** ($5M in Feb 2020, $4.2M in June 2020) and in return received secured notes and a **30%** total interest in Viking's subsidiary, Elysium Energy, LLC[96](index=96&type=chunk)[99](index=99&type=chunk)[106](index=106&type=chunk) - In September 2018, the company sold a substantial portion of its assets to N&B Energy, an entity affiliated with former company executives. This transaction reduced liabilities by approximately **$37.9 million** and assets by **$12.1 million**[74](index=74&type=chunk)[79](index=79&type=chunk) [Recent Reverse Stock Splits and Amendments to Articles](index=17&type=section&id=Recent%20Reverse%20Stock%20Splits%20and%20Amendments%20to%20Articles) The company has implemented multiple reverse stock splits and adjusted its authorized common stock to manage share price and capital structure - The company has conducted four reverse stock splits since March 2018: **1-for-25** (March 2018), **1-for-25** (December 2018), **1-for-25** (July 2019), and **1-for-50** (October 2019)[126](index=126&type=chunk)[127](index=127&type=chunk) - In April 2020, stockholders approved an increase in authorized common stock to **25 million shares**[127](index=127&type=chunk) [Operations and Oil and Gas Properties](index=19&type=section&id=Operations%20and%20Oil%20and%20Gas%20Properties) As of March 31, 2020, Camber's operations are limited to 35.8 net Boepd from Glasscock County, with Hutchinson County assets being transferred due to a legal settlement Production and Reserves (as of March 31, 2020) | Metric | Value | | :--- | :--- | | Average Daily Production | 35.8 net Boepd | | Active Well Bores | 25 | | Total Estimated Proved Reserves | 133,442 Boe | | - Crude Oil & NGL | 98,600 Bbls | | - Natural Gas | 207,823 Mcf | - The company's Hutchinson County, Texas wells were subject to a Severance Order from the Texas Railroad Commission (TRC) and are being transferred to PetroGlobe as part of a legal settlement, effectively ending the company's operational role in that area[119](index=119&type=chunk)[122](index=122&type=chunk)[132](index=132&type=chunk) [Marketing, Competition, and Regulation](index=20&type=section&id=Marketing%2C%20Competition%2C%20and%20Regulation) The company relies heavily on one customer for revenue, faces intense competition, and operates under extensive federal, state, and local regulations - For the fiscal year ended March 31, 2020, a single customer, Apache Corporation, accounted for **92%** of the company's total revenues[136](index=136&type=chunk)[137](index=137&type=chunk) - The company competes with numerous oil and gas companies that possess greater financial and personnel resources[138](index=138&type=chunk) - Operations are heavily regulated at federal, state, and local levels, impacting permits, drilling methods, waste disposal, and production rates, which can increase costs and limit activities[139](index=139&type=chunk) [Risk Factors](index=23&type=section&id=ITEM%201A.%20Risk%20Factors) The company faces substantial risks including merger uncertainties, limited operations, financial instability, extreme stock dilution from preferred shares, and material weaknesses in internal controls [Risks Relating to the Merger](index=24&type=section&id=Risks%20Relating%20to%20the%20Merger) The pending merger with Viking Energy carries significant risks, including uncertain exchange ratios, integration challenges, potential loss of key personnel, and stringent listing requirements - A critical condition for the merger is that the combined company must qualify for initial listing on the NYSE American, which has more stringent requirements than the continued listing standards Camber currently fails to meet[187](index=187&type=chunk)[188](index=188&type=chunk)[298](index=298&type=chunk) - If the merger is terminated, Camber may be required to transfer back its **30%** interest in Elysium to Viking and redeem **630 shares** of Series C Preferred Stock from Discover for **$6.93 million**[177](index=177&type=chunk)[185](index=185&type=chunk)[192](index=192&type=chunk) - The merger will cause immediate and substantial dilution to existing Camber stockholders and result in a change of control, as Viking shareholders will receive a pro rata share of approximately **80%** of the post-merger company[180](index=180&type=chunk)[181](index=181&type=chunk) [General Business and Other Risks Relating to the Company](index=28&type=section&id=General%20Business%20and%20Other%20Risks%20Relating%20to%20the%20Company) Key business risks include limited operations, reliance on note repayments, COVID-19 impacts on oil prices, and identified material weaknesses in internal financial controls - Management has concluded that as of March 31, 2020, the company's disclosure controls and procedures and its internal control over financial reporting were **not effective**, representing a material weakness[231](index=231&type=chunk)[232](index=232&type=chunk) - The company has significant notes receivable from Lineal (unsecured, ~**$2.34 million**) and Viking (secured, **$9.2 million**). Failure of these parties to repay the notes could materially and adversely affect Camber's financial condition[198](index=198&type=chunk)[200](index=200&type=chunk)[201](index=201&type=chunk) - The COVID-19 pandemic has negatively impacted demand for crude oil and natural gas, contributing to price volatility and adversely affecting the marketability and price of the company's production[202](index=202&type=chunk)[203](index=203&type=chunk) [Risks Relating to Our Oil and Gas Operations and Industry](index=34&type=section&id=Risks%20Relating%20to%20Our%20Oil%20and%20Gas%20Operations%20and%20Industry) Oil and gas operations face inherent risks from volatile prices, intense competition, geographic concentration in Texas, and the speculative nature of reserve replacement - Revenues and the value of reserves are substantially dependent on volatile crude oil and natural gas prices. A prolonged period of low prices could lead to asset write-downs and adversely affect financial condition[238](index=238&type=chunk)[243](index=243&type=chunk)[252](index=252&type=chunk) - All of the company's oil and gas properties are located in Texas, creating geographic concentration risk and vulnerability to regional issues like transportation constraints, natural disasters, and localized regulatory changes[286](index=286&type=chunk) - Future production is highly dependent on successfully and economically replacing depleted reserves, a process which is speculative and involves numerous risks related to drilling and development[277](index=277&type=chunk)[278](index=278&type=chunk) [Risks Relating To An Investment In Our Securities](index=43&type=section&id=Risks%20Relating%20To%20An%20Investment%20In%20Our%20Securities) Investing in the company's securities carries high risk due to potential delisting, stock price volatility, significant dilution from preferred stock, and restrictive financing agreements - The company is not in compliance with NYSE American's continued listing standards due to having stockholders' equity below **$4.0 million** and a history of net losses, creating a risk of delisting[294](index=294&type=chunk)[297](index=297&type=chunk) - Stockholders may be significantly diluted through future financing efforts and the conversion of outstanding preferred stock. The Board can issue additional common and preferred shares without stockholder approval, subject to NYSE rules[312](index=312&type=chunk)[313](index=313&type=chunk) - Financing agreements with Discover restrict the company from issuing variable-priced securities and grant Discover a right of first offer on future financings, which may limit the company's ability to raise capital[293](index=293&type=chunk) [Risks Relating to Our Series C Preferred Stock](index=48&type=section&id=Risks%20Relating%20to%20Our%20Series%20C%20Preferred%20Stock) The Series C Preferred Stock poses extreme dilution risk due to its full-term dividend payment upon conversion, floating conversion price, and an $87.8 million liquidation preference senior to common stock - Upon conversion or redemption, the Series C Preferred Stock requires payment of dividends for the full **seven-year term** of the security, regardless of when it is converted, creating a significant liability that can be paid in highly dilutive shares[328](index=328&type=chunk)[330](index=330&type=chunk) - The Series C Preferred Stock has a liquidation preference of approximately **$87.8 million**, which is senior to common stock and significantly exceeds the company's total assets, implying common stockholders would likely receive no recovery in a liquidation scenario[337](index=337&type=chunk) - The conversion price for dividend payments includes a fixed dollar discount (**$0.05 or $0.10**) applied after a percentage discount to the market price. As the stock price falls, this fixed discount represents an exponentially larger percentage discount, potentially leading to a conversion price of **$0.001 per share** and causing extreme dilution[348](index=348&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk) [Properties](index=52&type=section&id=ITEM%202.%20Properties) As of March 31, 2020, the company's properties include non-operated wells in Glasscock County and transferring assets in Hutchinson County, with significantly reduced production and no drilling activity Production and Financial Metrics (FY 2020 vs. FY 2019) | Metric | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Total Revenues | $397,118 | $2,742,102 | | Total Production (Boe) | 13,084 | 113,685 | | Avg. Crude Oil Price ($/Bbl) | $54.83 | $59.51 | | Avg. Natural Gas Price ($/Mcf) | $1.96 | $2.40 | | Avg. Production Cost ($/Boe) | $37.76 | $26.42 | Proved Reserves (as of March 31, 2020) | Category | Barrels of Oil Equivalent (Boe) | | :--- | :--- | | Crude Oil | 54,850 Bbls | | NGL | 43,955 Bbls | | Natural Gas | 34,637 Boe (207,823 Mcf) | | **Total Proved Reserves** | **133,442 Boe** | - The company had no drilling activity in the fiscal years ended March 31, 2020 and 2019, and had no wells in the process of being drilled at year-end[362](index=362&type=chunk) [Legal Proceedings](index=54&type=section&id=ITEM%203.%20Legal%20Proceedings) The company is involved in multiple legal disputes, including a settled lawsuit with PetroGlobe, and ongoing suits with Maranatha Oil, Apache Corporation, and N&B Energy - The lawsuit with PetroGlobe was settled in January 2020. Camber agreed to pay **$250,000** and transfer all of its Hutchinson County, Texas assets to PetroGlobe[376](index=376&type=chunk)[378](index=378&type=chunk) - N&B Energy, an entity affiliated with former executives, is suing the company for **$706,000** related to post-closing adjustments from the 2018 asset sale. Camber denies the claims and is in negotiations to settle the matter[383](index=383&type=chunk) - Apache Corporation is suing the company for approximately **$586,000** for an alleged breach of a joint operating agreement[382](index=382&type=chunk) [Mine Safety Disclosures](index=56&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[384](index=384&type=chunk) [PART II](index=57&type=section&id=PART%20II) [Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=57&type=section&id=ITEM%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) Camber's common stock trades on NYSE American, but its capital structure is heavily impacted by highly dilutive Series C Preferred Stock with complex conversion terms - The Series C Preferred Stock contains highly dilutive terms. Dividends accrue at **24.95%** per annum (adjustable up to **34.95%**) and are payable for the full **seven-year term** upon conversion. The conversion price for these dividends is based on a floating discount to the market price, which can lead to significant additional share issuances[400](index=400&type=chunk)[402](index=402&type=chunk) - Between April 1, 2020, and June 24, 2020, the holder of the Series C Preferred Stock converted **498 shares**, resulting in the issuance and future obligation to issue over **13 million shares** of common stock[410](index=410&type=chunk) - If converted at the lowest possible price of **$0.001 per share**, the outstanding Series C Preferred Stock could convert into a maximum of **51.5 billion shares** of common stock[413](index=413&type=chunk) [Selected Financial Data](index=61&type=section&id=ITEM%206.%20Selected%20Financial%20Data) As a "smaller reporting company," Camber Energy is not required to provide this information - Not required for smaller reporting companies[414](index=414&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=61&type=section&id=ITEM%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For FY2020, the company reported a $3.9 million net loss and a $0.9 million working capital deficit, raising going concern doubts, with future liquidity dependent on the Viking merger Financial Performance (FY 2020 vs. FY 2019) | Metric | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Net Operating Revenues | $397,118 | $2,742,102 | | Lease Operating Expenses | $479,656 | $2,870,908 | | General & Administrative | $4,909,871 | $5,152,766 | | Gain on Sale of Property | $0 | $25,808,246 | | **Net Income (Loss)** | **($3,856,299)** | **$16,643,153** | Cash Flow Summary (FY 2020 vs. FY 2019) | Cash Flow | FY 2020 | FY 2019 | | :--- | :--- | :--- | | From Operating Activities | ($3,588,464) | ($5,773,428) | | From Investing Activities | ($9,641,019) | ($2,237,000) | | From Financing Activities | $6,107,375 | $15,000,000 | - The company has a working capital deficit of **$0.9 million** as of March 31, 2020, down from a working capital surplus of **$6.1 million** at March 31, 2019, raising substantial doubt about its ability to continue as a going concern[456](index=456&type=chunk)[467](index=467&type=chunk) - The significant decrease in net income from FY2019 to FY2020 is primarily due to the absence of a one-time **$25.8 million** gain on the sale of assets that was recognized in FY2019[434](index=434&type=chunk)[447](index=447&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=71&type=section&id=ITEM%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a "smaller reporting company," Camber Energy is not required to provide this information - Not required for smaller reporting companies[486](index=486&type=chunk) [Financial Statements and Supplementary Data](index=71&type=section&id=ITEM%208.%20Financial%20Statements%20and%20Supplementary%20Data) Audited financial statements for FY2020 and FY2019 include a going concern warning, detail a shift to a working capital deficit, and show decreased proved reserves and PV-10 - The independent auditor's report contains an explanatory paragraph expressing substantial doubt about the Company's ability to continue as a going concern due to significant losses and an accumulated deficit[492](index=492&type=chunk) Consolidated Balance Sheet Highlights (As of March 31) | Account | 2020 | 2019 | | :--- | :--- | :--- | | Total Current Assets | $1,132,660 | $8,170,965 | | Total Current Liabilities | $2,028,908 | $2,103,802 | | **Working Capital (Deficit)** | **($896,248)** | **$6,067,163** | | Total Assets | $9,695,218 | $8,582,672 | | Total Stockholders' Equity | $2,624,787 | $6,175,056 | Standardized Measure of Discounted Future Net Cash Flows (PV-10) | As of | Value | | :--- | :--- | | March 31, 2020 | $963,889 | | March 31, 2019 | $2,078,481 | [Changes in and Disagreements with Accountants on Accounting and Financial Disclosure](index=118&type=section&id=ITEM%209.%20Changes%20in%20and%20Disagreements%20with%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company changed auditors from GBH CPAs, PC to Marcum LLP on July 27, 2018, due to a practice combination, with no reported disagreements - The company's change in accountants from GBH CPAs, PC to Marcum LLP on July 27, 2018, was due to GBH combining its practice with Marcum[755](index=755&type=chunk) - There were no disagreements with the former auditor, GBH, on any accounting or auditing matters[757](index=757&type=chunk) [Controls and Procedures](index=118&type=section&id=ITEM%209A.%20Controls%20and%20Procedures) Management concluded that as of March 31, 2020, the company's disclosure controls and internal control over financial reporting were not effective, indicating a material weakness - Management concluded that as of March 31, 2020, the company's disclosure controls and procedures were **not effective**[760](index=760&type=chunk) - Based on an evaluation using the COSO framework, management concluded that the company's internal controls over financial reporting were **not effective** as of March 31, 2020[764](index=764&type=chunk) [Other Information](index=120&type=section&id=ITEM%209B.%20Other%20Information) There is no other information to report for this item - None[769](index=769&type=chunk) [PART III](index=121&type=section&id=PART%20III) [Directors, Executive Officers and Corporate Governance](index=121&type=section&id=ITEM%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) The company's executive officers are Louis G. Schott (Interim CEO) and Robert Schleizer (CFO), with an independent Board maintaining Audit, Compensation, and Nominating committees Executive Officers and Directors | Name | Position | | :--- | :--- | | Louis G. Schott | Interim Chief Executive Officer | | Robert Schleizer | Chief Financial Officer, Treasurer and Director | | Fred Zeidman | Director | | James G. Miller | Director | - The Board has determined that James G. Miller qualifies as an "audit committee financial expert"[807](index=807&type=chunk) [Executive Compensation](index=128&type=section&id=ITEM%2011.%20Executive%20Compensation) For FY2020, Interim CEO Louis G. Schott and CFO Robert Schleizer received $334,453 and $253,333 respectively, compensated via consulting agreements Summary Compensation Table (FY 2020) | Name and Principal Position | Fees/Salary | All Other Compensation | Total | | :--- | :--- | :--- | :--- | | Louis G. Schott (Interim CEO) | $300,000 | $34,453 | $334,453 | | Robert Schleizer (CFO) | $200,000 | $53,333 | $253,333 | - Both the Interim CEO and CFO are compensated through consulting agreements with their respective firms, Fides Energy LLC and BlackBriar Advisors LLC[836](index=836&type=chunk)[838](index=838&type=chunk) [Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=130&type=section&id=ITEM%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) As of June 24, 2020, Discover Growth Fund is the sole beneficial owner of over 5% of common stock, capped at 9.99%, while current executives and directors hold no shares - Discover Growth Fund is the only beneficial owner of more than **5%** of the company's common stock, holding **9.99%** as of June 24, 2020[854](index=854&type=chunk) - Discover's ownership is limited to **9.99%** due to a blocker provision in the Series C Preferred Stock designation. As of June 24, 2020, an additional ~**5.7 million shares** were due to Discover upon conversion but were held in abeyance due to this limitation[856](index=856&type=chunk) - None of the current executive officers or directors beneficially owned any shares of the company's common stock as of June 24, 2020[854](index=854&type=chunk) [Certain Relationships and Related Transactions, and Director Independence](index=132&type=section&id=ITEM%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) The company has engaged in significant related party transactions, including asset sales to an affiliate of former executives and complex financing agreements with its largest shareholder, Discover - In 2018, the company sold a substantial portion of its assets to N&B Energy, LLC, an entity affiliated with former CEO Richard N. Azar II and former director Donnie B. Seay[861](index=861&type=chunk) - The company has a series of complex financing agreements with Discover, its largest shareholder, involving multiple sales of Series C Preferred Stock and a convertible debenture[874](index=874&type=chunk)[875](index=875&type=chunk) - The Board of Directors has determined that Fred Zeidman and James G. Miller are independent directors, constituting **two-thirds** of the board[930](index=930&type=chunk) [Principal Accounting Fees and Services](index=141&type=section&id=ITEM%2014.%20Principal%20Accounting%20Fees%20and%20Services) The company incurred audit and related fees from Marcum LLP and its predecessor for FY2020 and FY2019, with all services pre-approved by the Audit Committee Audit and Related Fees | Fee Type | FY 2020 | FY 2019 | | :--- | :--- | :--- | | Audit Fees | $323,100 | $150,000 | | Audit-Related Fees | $100,000 | $0 | | Tax Fees | $0 | $0 | | All Other Fees | $30,000 | $0 | [PART IV](index=142&type=section&id=PART%20IV) [Exhibits, Financial Statement Schedules](index=142&type=section&id=ITEM%2015.%20Exhibits%2C%20Financial%20Statement%20Schedules) This section lists all financial statements, schedules, and exhibits filed as part of the Form 10-K report, including merger and financing agreements - The report includes an index of all exhibits filed, such as merger agreements, asset purchase agreements, financing agreements, and corporate governance documents[941](index=941&type=chunk)[948](index=948&type=chunk) [Form 10-K Summary](index=142&type=section&id=ITEM%2016.%20Form%2010%E2%80%93K%20Summary) No summary is provided under this item - None[942](index=942&type=chunk)