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)

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

[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)

[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)

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, 2019 ☐ TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 001-32508 CAMBER ENERGY, INC. (Exact name of registrant as specified in its charter) Nevada 20-2660243 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Iden ...

[PART I. FINANCIAL INFORMATION](index=4&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and related notes for Camber Energy, Inc [ITEM 1. Financial Statements](index=4&type=section&id=ITEM%201.%20Financial%20Statements) This section presents the unaudited consolidated financial statements for Camber Energy, Inc., including balance sheets, statements of operations, changes in stockholders' equity, and cash flows for the periods ended June 30, 2019, and March 31, 2019 (or June 30, 2018 for income statement and cash flow) It also includes detailed notes explaining significant accounting policies, liquidity, asset dispositions, and recent corporate actions like reverse stock splits and the Lineal acquisition [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This section presents the company's financial position, detailing assets, liabilities, and equity at specific points in time Consolidated Balance Sheet Summary (Unaudited) | Metric | June 30, 2019 | March 31, 2019 | | :--------------------------------------- | :-------------- | :--------------- | | **ASSETS** | | | | Total Current Assets | $6,675,287 | $8,170,965 | | Total Property and Equipment, Net | $217,205 | $213,188 | | Total Assets | $7,166,011 | $8,582,672 | | **LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)** | | | | Total Current Liabilities | $1,663,144 | $2,103,802 | | Total Liabilities | $1,975,213 | $2,407,616 | | Total Stockholders' Equity | $5,190,798 | $6,175,056 | - Total assets decreased from **$8.58 million** at March 31, 2019, to **$7.17 million** at June 30, 2019, primarily driven by a decrease in cash and other current assets[13](index=13&type=chunk) - Total liabilities decreased from **$2.41 million** to **$1.98 million**, mainly due to a reduction in common stock payable and accounts payable[13](index=13&type=chunk) [Consolidated Statements of Operations](index=5&type=section&id=Consolidated%20Statements%20of%20Operations) This section outlines the company's revenues, expenses, and net loss over specific reporting periods Consolidated Statements of Operations Summary (Unaudited) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------- | :------------- | | Total Revenues | $121,351 | $1,694,696 | $(1,573,345) | (93)% | | Total Operating Expenses | $1,462,364 | $4,236,333 | $(2,773,969) | (65)% | | Operating Loss | $(1,341,013) | $(2,541,637) | $1,200,624 | (47)% | | Net Loss | $(1,287,598) | $(3,512,097) | $2,224,499 | (63)% | | Net Loss Per Common Share (Basic and Diluted) | $(4.13) | $(277.10) | $272.97 | (98.5)% | | Weighted Average Number of Common Shares Outstanding | 767,389 | 15,202 | 752,187 | 4948% | - The company significantly reduced its net loss by **63%** year-over-year, from **$(3.51) million** in Q2 2018 to **$(1.29) million** in Q2 2019, primarily due to lower operating expenses and interest expense[16](index=16&type=chunk) - Total revenues decreased by **93%** year-over-year, from **$1.69 million** in Q2 2018 to **$0.12 million** in Q2 2019, largely due to the disposition of assets[16](index=16&type=chunk) [Consolidated Statements of Changes in Stockholders' Equity (Deficit)](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20%28Deficit%29) This section details changes in the company's equity, including net loss, stock issuances, and dividends - Total stockholders' equity decreased from **$6.18 million** at March 31, 2019, to **$5.19 million** at June 30, 2019, primarily due to the net loss incurred during the quarter and stock dividends distributable[20](index=20&type=chunk) - Common shares issued and outstanding increased significantly from **672,103** at March 31, 2019, to **1,952,679** at June 30, 2019, mainly due to conversions of Series B Preferred Stock and payments for consulting fees[20](index=20&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This section summarizes the cash inflows and outflows from operating, investing, and financing activities Consolidated Statements of Cash Flows Summary (Unaudited) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | Change (YoY) | | :--------------------------------------- | :------------------------------- | :------------------------------- | :----------- | | Net Cash Used in Operating Activities | $(1,298,906) | $(1,246,307) | $(52,599) | | Net Cash Used in Investing Activities | $(75,000) | $(904,275) | $829,275 | | Net Cash Provided by Financing Activities | $0 | $2,000,000 | $(2,000,000) | | Decrease in Cash and Restricted Cash | $(1,373,906) | $(150,582) | $(1,223,324) | | Cash and Restricted Cash at End of Period | $6,404,817 | $638,569 | $5,766,248 | - Net cash used in operating activities slightly increased by **$52,599** year-over-year, reaching **$(1.30) million** in Q2 2019[23](index=23&type=chunk) - Net cash used in investing activities significantly decreased by **$0.83 million**, from **$(0.90) million** in Q2 2018 to **$(0.08) million** in Q2 2019, primarily due to reduced oil and gas property development costs[23](index=23&type=chunk) - Net cash provided by financing activities decreased by **$2.0 million** year-over-year, as there were no sales of Series C Preferred Stock in Q2 2019 compared to **$2.0 million** in Q2 2018[23](index=23&type=chunk) [Notes to the Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20the%20Consolidated%20Financial%20Statements) This section provides detailed explanations and disclosures supporting the consolidated financial statements [NOTE 1 – GENERAL](index=8&type=section&id=NOTE%201%20%E2%80%93%20GENERAL) Camber Energy, Inc. acquired Lineal Star Holdings, LLC on July 9, 2019, transitioning its primary focus from an oil and gas company to an oil and gas services enterprise The company retained certain assets in Texas and royalty interests in Oklahoma after selling a substantial portion of its assets to N&B Energy, LLC in August 2018 Multiple reverse stock splits were effected between March 2018 and July 2019, retroactively adjusted in financial statements - Camber Energy, Inc. acquired Lineal Star Holdings, LLC on July 9, 2019, shifting its primary business from oil and gas production to providing oil and gas services[25](index=25&type=chunk) - The company completed multiple reverse stock splits (**1-for-25** each) in March 2018, December 2018, and July 2019, retroactively adjusting all per-share amounts[28](index=28&type=chunk) - Following the sale of assets to N&B Energy, LLC in August 2018, Camber retained assets in Glasscock and Hutchinson Counties, Texas, and a **12.5%** production payment and **3%** overriding royalty interest in Oklahoma assets[26](index=26&type=chunk) [NOTE 2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS](index=9&type=section&id=NOTE%202%20%E2%80%93%20LIQUIDITY%20AND%20GOING%20CONCERN%20CONSIDERATIONS) The company's working capital decreased by $1.1 million to $5.0 million at June 30, 2019, primarily due to general and administrative costs related to the Lineal acquisition Management believes current capital, equity funds, and anticipated Lineal revenues are sufficient through August 2020 The company eliminated $37.9 million in liabilities, including a $36.9 million loan from IBC Bank, through an asset disposition to N&B Energy in September 2018, resulting in a $25.8 million gain on sale Working Capital Trend | Metric | June 30, 2019 | March 31, 2019 | | :---------------- | :-------------- | :--------------- | | Total Current Assets | $6.7 million | $8.2 million | | Total Current Liabilities | $1.7 million | $2.1 million | | Working Capital | $5.0 million | $6.1 million | | Decrease in Working Capital | | $(1.1) million | - Management projects sufficient capital to fund operations and capital expenditures through August 2020, supported by equity transactions and anticipated revenues from Lineal[31](index=31&type=chunk) - The company reduced liabilities by **$37.9 million** and assets by **$12.1 million** through the N&B Energy asset disposition and assumption agreement, resulting in a **$25.8 million** gain on sale[32](index=32&type=chunk)[41](index=41&type=chunk) [NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES](index=11&type=section&id=NOTE%203%20%E2%80%93%20SUMMARY%20OF%20SIGNIFICANT%20ACCOUNTING%20POLICIES) The company's significant accounting policies remain consistent with its March 31, 2019, annual report, with no material changes expected Recent accounting pronouncements adopted include ASC 2014-09 (Revenue from Contracts with Customers), ASU 2016-15 (Statement of Cash Flows), ASU 2017-01 (Business Combinations), ASU 2017-09 (Stock Compensation), and Topic 842 (Leases), none of which had a significant material impact on the financial statements - The company adopted ASC 2014-09, 'Revenue from Contracts with Customers (Topic 606)', on April 1, 2018, using the modified retrospective method, with no significant changes to opening balances[44](index=44&type=chunk) - ASU 2016-02 'Leases (Topic 842)' was adopted on April 1, 2019, using the alternative modified transition method, and did not result in material impact on consolidated earnings or cash flows due to the short-term lease expedient election[50](index=50&type=chunk)[51](index=51&type=chunk) - Other recently adopted ASUs (2016-15, 2017-01, 2017-09, 2018-13) had no significant material impact on the consolidated financial statements[46](index=46&type=chunk)[47](index=47&type=chunk)[49](index=49&type=chunk)[52](index=52&type=chunk) [NOTE 4 – PROPERTY AND EQUIPMENT](index=12&type=section&id=NOTE%204%20%E2%80%93%20PROPERTY%20AND%20EQUIPMENT) Camber uses the full cost method for oil and natural gas producing activities, capitalizing acquisition, exploration, and development costs Net capitalized costs for oil and gas properties were $216,463 at June 30, 2019, with no impairments recorded in Q2 2019, compared to $531,657 in Q2 2018 due to lease expirations The company incurred no capital enhancements in Q2 2019, a significant decrease from $0.8 million in Q2 2018 All capital lease obligations were assumed by N&B Energy in September 2018 - Camber uses the full cost method of accounting for oil and natural gas producing activities, capitalizing acquisition, exploration, and development costs[55](index=55&type=chunk) Net Capitalized Oil & Natural Gas Properties | Metric | June 30, 2019 | March 31, 2019 | | :--------------------------------------- | :-------------- | :--------------- | | Total oil & natural gas properties | $78,554,202 | $78,545,944 | | Accumulated depreciation, depletion, and impairment | $(78,337,739) | $(78,333,628) | | Net Capitalized Costs | $216,463 | $212,316 | - No impairments were recorded for the three months ended June 30, 2019, a decrease from **$531,657** in the prior year due to lease expirations[60](index=60&type=chunk) - Capital expenditures for technical enhancements decreased from approximately **$0.8 million** in Q2 2018 to **$0** in Q2 2019[61](index=61&type=chunk) [NOTE 5 – ASSET RETIREMENT OBLIGATIONS](index=15&type=section&id=NOTE%205%20%E2%80%93%20ASSET%20RETIREMENT%20OBLIGATIONS) The company's asset retirement obligation increased to $312,069 at June 30, 2019, from $303,809 at the beginning of the year, primarily due to revisions of previous estimates Asset Retirement Obligations | Metric | 2019 | 2018 | | :--------------------------------------- | :----- | :----- | | Carrying amount at beginning of year | $303,809 | $979,159 | | Accretion | $2 | $2,264 | | Revisions of previous estimates | $8,258 | $3,942 | | Carrying amount at end of year | $312,069 | $985,365 | [NOTE 6 – NOTES PAYABLE AND DEBENTURE](index=15&type=section&id=NOTE%206%20%E2%80%93%20NOTES%20PAYABLE%20AND%20DEBENTURE) Camber Energy had no notes payable or debenture outstanding as of June 30, 2019, or March 31, 2019 The $495,000 convertible debenture held by Discover was fully converted into common stock by October 31, 2018 The $36.9 million loan from IBC Bank was assumed by N&B Energy as part of an asset disposition in September 2018, releasing Camber from all related obligations - The company had no outstanding notes payable or debenture as of June 30, 2019, or March 31, 2019[73](index=73&type=chunk) - The **$495,000** convertible debenture held by Discover was fully converted into common stock by October 31, 2018, with additional shares issued for true-ups through June 30, 2019[74](index=74&type=chunk) - The **$36.9 million** loan from IBC Bank was assumed by N&B Energy on September 26, 2018, as part of an asset disposition, releasing Camber from all related liabilities[75](index=75&type=chunk)[76](index=76&type=chunk) [NOTE 7 – DERIVATIVE LIABILITY](index=16&type=section&id=NOTE%207%20%E2%80%93%20DERIVATIVE%20LIABILITY) The company's derivative liability, related to warrants with anti-dilution provisions, decreased from $5 at the beginning of the period to $0 at June 30, 2019, as the warrants expired on April 21, 2019 Derivative Warrant Instruments Activity | Metric | 2019 | 2018 | | :--------------------------------------- | :--- | :--- | | Carrying amount at beginning of period | $5 | $5 | | Change in fair value | $(5) | $0 | | Carrying amount at end of period | $0 | $5 | - The derivative liability became **zero** at June 30, 2019, as the related warrants expired on April 21, 2019[79](index=79&type=chunk)[80](index=80&type=chunk) [NOTE 8 – COMMITMENTS AND CONTINGENCIES](index=16&type=section&id=NOTE%208%20%E2%80%93%20COMMITMENTS%20AND%20CONTINGENCIES) Camber is involved in several legal proceedings, including disputes with Maranatha Oil Co. (alleged unpaid royalties), Petroglobe Energy Holdings, LLC and Signal Drilling, LLC (negligent misrepresentation, fraud, breach of contract), Apache Corporation (breach of contract, money owed), and N&B Energy (breach of contract, unjust enrichment) The company settled a lawsuit with Aaron Rubenstein in December 2018 and a prior office lease dispute with MidFirst Bank in October 2018 The company intends to vehemently defend itself against ongoing claims and seek counterclaims where applicable - Ongoing legal proceedings include disputes with Maranatha Oil Co. (alleged unpaid royalties and working interest), Petroglobe Energy Holdings, LLC and Signal Drilling, LLC (negligent misrepresentation, fraud, breach of contract related to asset purchase), Apache Corporation (breach of contract for joint operating agreement), and N&B Energy (breach of contract, unjust enrichment related to asset sale true-ups)[83](index=83&type=chunk)[86](index=86&type=chunk)[87](index=87&type=chunk)[88](index=88&type=chunk) - The company settled a lawsuit with Aaron Rubenstein regarding alleged short-swing profits in December 2018[85](index=85&type=chunk) - A settlement agreement was reached with MidFirst Bank in October 2018 regarding a prior office space lease[82](index=82&type=chunk) [NOTE 9 – REVENUE FROM CONTRACTS WITH CUSTOMERS](index=18&type=section&id=NOTE%209%20%E2%80%93%20REVENUE%20FROM%20CONTRACTS%20WITH%20CUSTOMERS) The company adopted ASU 2014-09, 'Revenue from Contracts with Customers (Topic 606)', on April 1, 2018, with no significant changes to revenue recognition timing or valuation for exploration and production activities Total revenue from customers for the three months ended June 30, 2019, was $121,351, a 93% decrease from $1,694,696 in the same period of 2018, primarily due to reduced sales of natural gas and natural gas liquids - The company adopted ASU 2014-09, 'Revenue from Contracts with Customers (Topic 606)', on April 1, 2018, with no significant changes to revenue recognition for exploration and production[91](index=91&type=chunk)[92](index=92&type=chunk) Disaggregation of Revenue from Customers | Product Type | June 30, 2019 | June 30, 2018 | Change (YoY) | % Change (YoY) | | :----------------------- | :-------------- | :-------------- | :----------- | :------------- | | Oil sales | $93,699 | $200,069 | $(106,370) | (53)% | | Natural gas sales | $7,204 | $473,513 | $(466,309) | (98)% | | Natural gas liquids sales | $20,448 | $1,012,114 | $(991,666) | (98)% | | Total revenue from customers | $121,351 | $1,694,696 | $(1,573,345) | (93)% | [NOTE 10 – INCOME TAXES](index=18&type=section&id=NOTE%2010%20%E2%80%93%20INCOME%20TAXES) The company estimated a zero percent effective tax rate for fiscal years 2019 and 2020 due to net losses and a full valuation allowance against net deferred tax assets, resulting in no provision or benefit for income taxes - The effective tax rate for U.S. purposes is estimated at **zero percent** for fiscal years 2019 and 2020 due to net losses and a full valuation allowance against net deferred tax assets[94](index=94&type=chunk) [NOTE 11 – STOCKHOLDERS' EQUITY (DEFICIT)](index=18&type=section&id=NOTE%2011%20%E2%80%93%20STOCKHOLDERS%27%20EQUITY%20%28DEFICIT%29) Common stock outstanding increased significantly due to conversions of debentures and preferred stock, and issuances for consulting services All Series B Preferred Stock was converted into common stock in May 2019 Series C Preferred Stock outstanding increased, and the company accrued substantial stock dividends distributable The company has various warrants outstanding with different exercise prices and expiration dates - Common stock shares increased due to debenture true-ups, Series B Preferred Stock dividends, and issuances for consulting services (Regal Consulting and SylvaCap Media)[95](index=95&type=chunk)[96](index=96&type=chunk)[98](index=98&type=chunk)[99](index=99&type=chunk) - All **44,000** shares of Series B Preferred Stock were converted into **20** shares of common stock on May 15, 2019, in exchange for **$25,000** cash and a release of rights[103](index=103&type=chunk) - Series C Preferred Stock outstanding increased from **1,091** shares at June 30, 2018, to **2,305** shares at June 30, 2019, with **$1,878,055** accrued for stock dividends distributable in Q2 2019[105](index=105&type=chunk)[107](index=107&type=chunk) Outstanding Warrants at June 30, 2019 | Warrants Outstanding | Exercise Price ($) | Expiration Date | | :------------------- | :----------------- | :-------------- | | 8 | 23,437.50 | April 26, 2021 | | 102 | 3,906.25 | June 12, 2022 | | 1,600 | 243.75 | May 24, 2023 | | Total: 1,710 | | | [NOTE 12 – SHARE-BASED COMPENSATION](index=20&type=section&id=NOTE%2012%20%E2%80%93%20SHARE-BASED%20COMPENSATION) Camber measures share-based compensation based on grant-date fair value As of June 30, 2019, the company had 2 stock options outstanding with a weighted average exercise price of $808,594, none of which were exercised, forfeited, or granted during the quarter No unrecognized share-based compensation expense remained for non-vested options - The company had **2** stock options outstanding at June 30, 2019, with a weighted average exercise price of **$808,594**[110](index=110&type=chunk)[113](index=113&type=chunk) - No stock options were exercised, forfeited, or granted during the three months ended June 30, 2019[110](index=110&type=chunk) - There was no remaining unrecognized share-based compensation expense related to non-vested stock options as of June 30, 2019[112](index=112&type=chunk) [NOTE 13 – LOSS PER COMMON SHARE](index=21&type=section&id=NOTE%2013%20%E2%80%93%20LOSS%20PER%20COMMON%20SHARE) For the three months ended June 30, 2019, the basic and diluted loss per common share was $(4.13), significantly lower than $(277.10) for the same period in 2018 This improvement is primarily due to a reduced net loss and a substantial increase in weighted average common shares outstanding Loss Per Common Share (Basic and Diluted) | Metric | Three Months Ended June 30, 2019 | Three Months Ended June 30, 2018 | | :--------------------------------------- | :------------------------------- | :------------------------------- | | Net Loss | $(1,287,598) | $(3,512,097) | | Less Preferred Dividends | $(1,878,055) | $(700,344) | | Loss Attributable to Common Stockholders | $(3,165,653) | $(4,212,441) | | Weighted Average Common Shares – Basic and Diluted | 767,389 | 15,202 | | Loss per Common Share – Basic and Diluted | $(4.13) | $(277.10) | - All stock options and warrants were considered anti-dilutive for both periods[114](index=114&type=chunk) [NOTE 14 – SUPPLEMENTAL CASH FLOW INFORMATION](index=21&type=section&id=NOTE%2014%20%E2%80%93%20SUPPLEMENTAL%20CASH%20FLOW%20INFORMATION) Net cash paid for interest and income taxes was $0 for both periods Non-cash investing and financing activities for Q2 2019 included $1,250 for common stock issuance from prior convertible notes, $8,260 change in asset retirement obligations, $303,340 for common stock payable, and $1,878,055 for stock dividends distributable - Net cash paid for interest and income taxes was **$0** for the three months ended June 30, 2019, and 2018[115](index=115&type=chunk) Non-Cash Investing and Financing Activities (Q2 2019) | Activity | Amount (2019) | | :---------------------------------------------------- | :------------ | | Issuance of Common Stock of Prior Conversion of Convertible Notes | $1,250 | | Change in Estimate for Asset Retirement Obligations | $8,260 | | Issuance of Common Stock for Common Stock Payable | $303,340 | | Stock Dividends Distributable but not Issued | $1,878,055 | | Issuance of Stock Dividends | $3 | | Conversion of Preferred Stock B to Common Stock | $44 | | Conversion of Preferred Stock C to Common Stock | $0 | [NOTE 15 – SUBSEQUENT EVENTS](index=22&type=section&id=NOTE%2015%20%E2%80%93%20SUBSEQUENT%20EVENTS) Subsequent to June 30, 2019, Camber Energy completed the acquisition of Lineal Star Holdings, LLC on July 8, 2019, transitioning to an oil and gas services company This merger involved issuing new Series E and F Preferred Stock to Lineal Members and amending Series C Preferred Stock The company also received a NYSE American non-compliance notification regarding low stock price, which it addressed with a 1-for-25 reverse stock split on July 8, 2019 The Lineal acquisition included a $1.05 million loan to Lineal and a $4 million deposit for future acquisitions - On July 9, 2019, Camber Energy acquired Lineal Star Holdings, LLC, a specialty construction and oil and gas services enterprise, in an all-stock transaction[25](index=25&type=chunk)[120](index=120&type=chunk) - The acquisition involved the designation of new Series D, E, and F Preferred Stock and an amendment to the Series C Preferred Stock, significantly altering the company's capital structure and voting control[123](index=123&type=chunk)[124](index=124&type=chunk) - The company received a NYSE American non-compliance notification on July 2, 2019, due to low stock price, and subsequently effected a **1-for-25** reverse stock split on July 8, 2019, to address this[119](index=119&type=chunk) - As part of the Lineal merger, Camber loaned **$1.05 million** to Lineal and deposited **$4 million** into a dedicated account for future acquisitions[126](index=126&type=chunk)[127](index=127&type=chunk) [ITEM 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=24&type=section&id=ITEM%202.%20Management%27s%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 for the three months ended June 30, 2019, compared to the same period in 2018 It highlights the strategic shift from an oil and gas producer to an oil and gas services company following the Lineal acquisition, discusses recent reverse stock splits, and details the financial impact of asset dispositions and the Lineal merger The company reported a significantly reduced net loss despite a sharp decline in revenues, primarily due to lower operating and interest expenses [CAUTIONARY NOTE REGARDING FORWARD-LOOKING STATEMENTS](index=24&type=section&id=CAUTIONARY%20NOTE%20REGARDING%20FORWARD-LOOKING%20STATEMENTS) This section warns readers about the inherent uncertainties and risks associated with forward-looking statements in the report - This report contains forward-looking statements subject to risks and uncertainties that may cause actual results to differ materially from those expressed or implied[132](index=132&type=chunk)[133](index=133&type=chunk) - Key factors, risks, and uncertainties include funding availability, integration of future acquisitions, significant dilution from preferred stock conversions, growth strategies, ability to repay loans, liquidity, market conditions in oil/gas and pipeline services, government regulation, and legal proceedings[133](index=133&type=chunk)[134](index=134&type=chunk)[135](index=135&type=chunk)[136](index=136&type=chunk) [Review of Information and Definitions](index=26&type=section&id=Review%20of%20Information%20and%20Definitions) This section provides context for the financial statements and defines key terms used throughout the report - This section should be read in conjunction with the interim unaudited financial statements and notes in this 10-Q, and the consolidated financial statements and MD&A in the Annual Report on Form 10-K for March 31, 2019[138](index=138&type=chunk) - Defines key terms such as 'Exchange Act', 'Bbl', 'SEC', 'Boe', 'Mcf', and 'Securities Act' for clarity within the report[140](index=140&type=chunk) [Overview](index=27&type=section&id=Overview) This section introduces the company's strategic shift to oil and gas services and its expansion plans following the Lineal acquisition - Camber Energy, Inc. transitioned from an independent oil and natural gas company to an enterprise primarily focused on providing oil and gas services after acquiring Lineal Star Holdings, LLC on July 9, 2019[143](index=143&type=chunk) - The company's strategy is to expand the Lineal brand by acquiring and developing complementary specialty engineering, procurement, and construction energy infrastructure service businesses, focusing on sectors less affected by commodity price volatility[144](index=144&type=chunk) Production Data and Reserves (as of June 30, 2019) | Metric | Value | | :--------------------------------------- | :------ | | Average Net Barrels of Oil Equivalent per Day (Boepd) | 37.3 | | Total Production Sales (Boe) for Q2 2019 | 3,402 | | Total Estimated Proved Producing Reserves (Boe) | 155,376 | | Crude Oil and NGL Reserves (Bbls) | 120,590 | | Natural Gas Reserves (Mcf) | 208,710 | [Recent Reverse Stock Splits and Amendments to Articles](index=28&type=section&id=Recent%20Reverse%20Stock%20Splits%20and%20Amendments%20to%20Articles) This section details the company's recent capital structure changes, including reverse stock splits and authorized share increases - The company effected multiple **1-for-25** reverse stock splits in March 2018, December 2018, and July 2019, retroactively adjusting all per-share amounts[154](index=154&type=chunk)[155](index=155&type=chunk) - Authorized common stock shares were increased from **20 million** to **250 million** in April 2019[154](index=154&type=chunk) [Industry Segments](index=28&type=section&id=Industry%20Segments) This section describes the company's operational focus, transitioning from oil and gas production to pipeline services - Prior to the Lineal acquisition, operations were solely crude oil and natural gas exploration and production Post-acquisition, the majority of operations will be pipeline services[156](index=156&type=chunk) [Operations and Oil and Gas Properties](index=28&type=section&id=Operations%20and%20Oil%20and%20Gas%20Properties) This section outlines the company's remaining oil and gas exploration and production activities in Texas - The company operates in productive areas of Glasscock County and Hutchinson County, Texas, with interests in wells producing from Wolfberry and Cline formations[157](index=157&type=chunk) - A March 2018 acquisition in the Texas panhandle included working interests in leases, wells, equipment, and a partnership interest, with at least **11** wells now producing[158](index=158&type=chunk) [Recent Events](index=29&type=section&id=Recent%20Events) This section summarizes significant corporate actions and agreements, particularly those related to the Lineal acquisition [Lineal Acquisition](index=29&type=section&id=Lineal%20Acquisition) On July 8, 2019, Camber Energy acquired 100% of Lineal Star Holdings, LLC, a Houston-based company specializing in upstream, midstream, and utilities pipeline maintenance and specialty construction The acquisition involved issuing new Series E and F Redeemable Convertible Preferred Stock to Lineal Members and amending the Series C Preferred Stock designation This transaction is expected to result in Lineal Members holding 66.67% of Camber's fully-diluted capitalization upon stockholder approval - Camber Energy acquired **100%** of Lineal Star Holdings, LLC on July 8, 2019, in an all-stock merger[160](index=160&type=chunk) - Lineal provides upstream, midstream, and utilities pipeline maintenance, specialty construction, and integrity services[161](index=161&type=chunk) - The merger involved designating new Series D, E, and F Preferred Stock and amending Series C Preferred Stock, with Lineal Members potentially holding **66.67%** of Camber's fully-diluted capitalization upon stockholder approval[163](index=163&type=chunk)[164](index=164&type=chunk) [Plan of Merger](index=30&type=section&id=Plan%20of%20Merger) Under the Plan of Merger, Lineal became a wholly-owned subsidiary of Camber Energy Camber issued 1,000,000 shares of Series E Preferred Stock and 16,750 shares of Series F Preferred Stock to Lineal members The conversion rights of the Series E Preferred Stock are contingent upon stockholder approval - Merger Sub merged into Lineal, making Lineal a wholly-owned subsidiary of Camber[168](index=168&type=chunk) - Camber issued **1,000,000** shares of Series E Preferred Stock and **16,750** shares of Series F Preferred Stock to Lineal members[169](index=169&type=chunk) - The conversion rights of Series E Preferred Stock are subject to stockholder approval[169](index=169&type=chunk) [Securities Exchange Agreement](index=30&type=section&id=Securities%20Exchange%20Agreement) The Securities Exchange Agreement stipulates that upon stockholder approval, all Series C Preferred Stock held by Discover will be exchanged for Series D Preferred Stock This exchange is contingent on stockholder approval of the Plan of Merger and the listing of Camber's common stock on the NYSE American The agreement terminates if stockholder approval is not received by December 31, 2020 - Discover agreed to exchange all Series C Preferred Stock for Series D Preferred Stock upon the Approval Date, contingent on stockholder approval of the Plan of Merger and NYSE American listing[171](index=171&type=chunk)[172](index=172&type=chunk) - The agreement terminates if stockholder approval is not received by December 31, 2020[173](index=173&type=chunk) [Termination Agreement](index=30&type=section&id=Termination%20Agreement) The Termination Agreement, effective upon the Approval Date, will terminate all of Discover's rights under various prior securities purchase agreements and a convertible debenture, including all rights to true-ups This agreement is subject to the same closing conditions as the Exchange Agreement - Discover agreed to terminate all rights under prior securities purchase agreements and a convertible debenture, including true-ups, effective upon the Approval Date[174](index=174&type=chunk) - The Termination Agreement is subject to the same closing conditions as the Exchange Agreement[175](index=175&type=chunk) [Funding and Loan Agreement](index=30&type=section&id=Funding%20and%20Loan%20Agreement) The Funding Agreement required Camber to deposit $4 million into a dedicated bank account for future acquisitions and to loan $1.05 million to Lineal The $4 million deposit requires approval from both the Series E Preferred Stock holders' designee and the Company for disbursement - Camber was required to deposit **$4 million** into a dedicated bank account for acquisitions, with disbursement requiring approval from both the Series E Preferred Stock holders' designee and the Company[176](index=176&type=chunk) - A **$1.05 million** loan was provided to Lineal on July 9, 2019, as part of the Funding Agreement[176](index=176&type=chunk) [Promissory Note](index=31&type=section&id=Promissory%20Note) Lineal issued a $1.05 million promissory note to Camber, accruing interest at 10% per annum (18% upon default) if Camber no longer owns at least 50% of Lineal's voting securities The note will be automatically forgiven upon stockholder approval of the Lineal merger, otherwise, it is payable in full two years from the interest effective date - Lineal issued a **$1.05 million** promissory note to Camber, accruing interest at **10%** per annum (**18%** upon default) if Camber's ownership in Lineal falls below **50%**[178](index=178&type=chunk) - The note will be automatically forgiven upon stockholder approval of the Lineal merger; otherwise, it is due in full two years from the interest effective date[179](index=179&type=chunk) [Amended and Restated Series C Redeemable Convertible Preferred Stock](index=31&type=section&id=Amended%20and%20Restated%20Series%20C%20Redeemable%20Convertible%20Preferred%20Stock) The Series C Designation was amended to clarify its junior ranking to Series E and F Preferred Stock regarding Lineal assets, but senior to Series E and F Preferred Stock for all other company assets It also specified that the merger was not a deemed liquidation event and granted Series E and F Preferred Stock holders priority rights to Lineal assets upon liquidation - The Series C Preferred Stock was amended to be junior to Series E and F Preferred Stock regarding Lineal assets, but senior for all other company assets[180](index=180&type=chunk) - The amendment clarified that the merger was not a deemed liquidation event and granted Series E and F Preferred Stock holders priority rights to Lineal assets upon liquidation[180](index=180&type=chunk) [Series D Convertible Preferred Stock](index=31&type=section&id=Series%20D%20Convertible%20Preferred%20Stock) The Series D Preferred Stock does not accrue dividends, is senior to common stock, pari passu with Series E and F Preferred Stock, and junior to all existing and future indebtedness (with consent required for senior securities issuance) It has a liquidation value of $10 million (aggregate) and can be converted into 1,000 shares of common stock per share, subject to beneficial ownership limitations The company can redeem Series D Preferred Stock at a redemption value of $12 million (aggregate) - Series D Preferred Stock does not accrue dividends and ranks senior to common stock, pari passu with Series E and F Preferred Stock, and junior to other indebtedness[181](index=181&type=chunk) - It has an aggregate liquidation value of **$10 million** and can be converted into **1,000** shares of common stock per share, subject to beneficial ownership limitations (**4.99%** or **9.99%** with notice)[181](index=181&type=chunk) - The company has the option to redeem Series D Preferred Stock at an aggregate redemption value of **$12 million**[181](index=181&type=chunk) [Series E Redeemable Convertible Preferred Stock](index=32&type=section&id=Series%20E%20Redeemable%20Convertible%20Preferred%20Stock) Series E Preferred Stock does not accrue dividends but participates in common stock dividends It has a liquidation preference of the greater of $2,000 per share or common stock conversion value, ranking junior to Series C for initial distributions but pari passu with Series D thereafter Conversion rights are contingent on stockholder approval and a potential reverse stock split, with a conversion rate of 67% (or 70% under certain conditions) of fully-diluted shares Holders have significant voting rights (76% post-approval) and control over certain company and Lineal board appointments and material transactions - Series E Preferred Stock does not accrue dividends but participates in common stock dividends and has a liquidation preference of the greater of **$2,000** per share or common stock conversion value[183](index=183&type=chunk) - Conversion rights are contingent on stockholder approval and a potential reverse stock split, with a conversion rate of **67%** (or **70%** if certain conditions are met) of fully-diluted shares[183](index=183&type=chunk)[184](index=184&type=chunk) - Holders collectively vote **76.0%** of total voting shares post-approval and have rights to appoint directors to the Company and Lineal boards, and nominate executive officers for Lineal[185](index=185&type=chunk)[186](index=186&type=chunk) - Series E holders can require redemption of their shares after November 22, 2019, or **60** days after a Lineal Transaction if stockholder approval is not received, potentially unwinding the Lineal acquisition[189](index=189&type=chunk) [Series F Redeemable Preferred Stock](index=33&type=section&id=Series%20F%20Redeemable%20Preferred%20Stock) Series F Preferred Stock accrues dividends at 8% per annum on a $100 per share price, compounded monthly at 12% if unpaid It has a liquidation preference of $100 per share, ranking pari passu with Series D Preferred Stock Holders have no conversion rights but collectively vote 4% of total voting shares post-approval They also have protective provisions against material asset transfers or changes of control and can require redemption of their shares under certain conditions, including a pro rata redemption with Series E Preferred Stock - Series F Preferred Stock accrues dividends at **8%** per annum on a **$100** per share price, with unpaid dividends compounding at **12%** monthly[190](index=190&type=chunk) - It has a liquidation preference of **$100** per share, ranking pari passu with Series D Preferred Stock, and no conversion rights[191](index=191&type=chunk) - Holders collectively vote **4%** of total voting shares post-approval and have protective provisions against material asset transfers or changes of control[191](index=191&type=chunk)[192](index=192&type=chunk) - Series F holders can require redemption of their shares under specific conditions, including a pro rata redemption with Series E Preferred Stock, in exchange for Lineal Preferred Stock[194](index=194&type=chunk)[195](index=195&type=chunk) [Letter to Record Shareholders Regarding Ratification](index=34&type=section&id=Letter%20to%20Record%20Shareholders%20Regarding%20Ratification) This section informs shareholders about the Board's ratification of the company's stock status - On or around July 8, 2019, the Board of Directors ratified the validly issued and fully paid and nonassessable status of the company's common and preferred stock as of July 2, 2019, pursuant to Nevada Revised Statutes Section 78.0296[196](index=196&type=chunk) [Financing](index=34&type=section&id=Financing) This section discusses the company's current liquidity and capital resources, affirming its ability to operate as a going concern - Following the Sale Agreement, Assumption Agreement, and Lineal Merger, the company believes it has sufficient liquidity to operate as a going concern for the next twelve months[198](index=198&type=chunk) [Market Conditions and Commodity Prices](index=34&type=section&id=Market%20Conditions%20and%20Commodity%20Prices) This section addresses the impact of volatile commodity prices on the company's financial performance and its hedging strategy - Financial results are highly dependent on volatile natural gas, natural gas liquids, and crude oil prices, which are influenced by market supply/demand, weather, inventory levels, and other external factors[199](index=199&type=chunk) - The company does not currently engage in commodity price hedging activities but may consider them to reduce exposure to volatility[227](index=227&type=chunk) [RESULTS OF OPERATIONS](index=35&type=section&id=RESULTS%20OF%20OPERATIONS) This section analyzes the company's financial performance, comparing revenues and expenses across reporting periods [Three Months Ended June 30, 2019 vs. Three Months Ended June 30, 2018](index=35&type=section&id=Three%20Months%20Ended%20June%2030%2C%202019%20vs.%20Three%20Months%20Ended%20June%2030%2C%202018) The company reported a net loss of $1.3 million for Q2 2019, a significant improvement from a $3.5 million net loss in Q2 2018, primarily due to the N&B Energy Sale Agreement Total revenues decreased by 93% year-over-year, while total operating expenses decreased by 65% Production volumes for crude oil, natural gas, and NGLs all saw substantial declines Key Financial and Production Data (Q2 2019 vs. Q2 2018) | Metric | Q2 2019 | Q2 2018 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :------ | :------ | :----------- | :------------- | | Net Loss | $(1.3) million | $(3.5) million | $2.2 million | (63)% | | Total Revenues | $121,351 | $1,694,696 | $(1,573,345) | (93)% | | Total Operating Expenses | $1,462,364 | $4,236,333 | $(2,773,969) | (65)% | | Total Production (Boe) | 3,402 | 74,480 | (71,078) | (95)% | | Crude Oil Sales ($/Bbl) | $60.04 | $63.45 | $(3.41) | (5)% | | Natural Gas Sales ($/Mcf) | $1.66 | $2.25 | $(0.59) | (26)% | | NGL Sales ($/Bbl) | $18.31 | $28.15 | $(9.84) | (35)% | - The decrease in net loss was primarily attributed to the September 2018 N&B Disposition[202](index=202&type=chunk) [Operating and Other Expenses](index=36&type=section&id=Operating%20and%20Other%20Expenses) Operating expenses saw significant reductions in Q2 2019 compared to Q2 2018, primarily due to the September 2018 N&B Disposition Lease operating expenses decreased by 91%, severance and property taxes by 97%, DD&A by 99%, and impairment of oil and gas properties by 100% General and administrative expenses also decreased by 29%, and interest expense by 100% Operating and Other Expenses (Q2 2019 vs. Q2 2018) | Expense Category | Q2 2019 | Q2 2018 | Change (YoY) | % Change (YoY) | | :--------------------------------------- | :------ | :------ | :----------- | :------------- | | Lease Operating Expenses | $123,557 | $1,411,667 | $(1,288,110) | (91)% | | Severance and Property Taxes | $2,574 | $82,760 | $(80,186) | (97)% | | Depreciation, Depletion, Amortization and Accretion | $4,242 | $327,200 | $(322,958) | (99)% | | Impairment of Oil and Gas Properties | $0 | $531,657 | $(531,657) | (100)% | | Total G&A Expense | $1,331,991 | $1,883,049 | $(551,058) | (29)% | | Interest Expense | $847 | $965,296 | $(964,449) | (100)% | | Other Expense (Income), Net | $(54,262) | $5,164 | $(59,426) | (1,151)% | - The significant decrease across most expense categories is primarily attributable to the September 2018 N&B Disposition[206](index=206&type=chunk)[207](index=207&type=chunk)[208](index=208&type=chunk)[209](index=209&type=chunk)[210](index=210&type=chunk) [LIQUIDITY AND CAPITAL RESOURCES](index=37&type=section&id=LIQUIDITY%20AND%20CAPITAL%20RESOURCES) This section evaluates the company's ability to meet its short-term and long-term financial obligations [Cash Flows](index=37&type=section&id=Cash%20Flows) Net cash used in operating activities was $1.3 million in Q2 2019, slightly higher than $1.2 million in Q2 2018, mainly due to operating expenses exceeding revenues Net cash used in investing activities decreased significantly by $0.8 million to $0.1 million, primarily due to reduced oil and gas property development costs Net cash provided by financing activities was $0 in Q2 2019, down from $2.0 million in Q2 2018 due to no Series C Preferred Stock sales Cash Flow Summary (Q2 2019 vs. Q2 2018) | Cash Flow Category | Q2 2019 | Q2 2018 | Change (YoY) | | :--------------------------------------- | :-------------- | :-------------- | :----------- | | Net cash used in operating activities | $(1,298,906) | $(1,246,307) | $(52,599) | | Net cash used in investing activities | $(75,000) | $(904,275) | $829,275 | | Net cash provided by financing activities | $0 | $2,000,000 | $(2,000,000) | | Net decrease in cash | $(1,373,906) | $(150,582) | $(1,223,324) | - The decrease in net cash provided by financing activities was due to no sales of Series C Preferred Stock shares in the current period[224](index=224&type=chunk) [Plan of Operations](index=37&type=section&id=Plan%20of%20Operations) Following asset divestitures, Camber Energy acquired Lineal Star Holdings, LLC on July 9, 2019, to diversify into oil and gas services Upon shareholder approval, Lineal shareholders will gain voting control (80%) and conversion rights to 67-70% of the company's fully-diluted shares - Camber Energy acquired Lineal Star Holdings, LLC on July 9, 2019, to diversify operations into specialty construction and oil and gas services[217](index=217&type=chunk) - Upon shareholder approval of the Lineal transaction, Lineal shareholders will have **80%** voting control and conversion rights to **67-70%** of the company's fully-diluted shares[218](index=218&type=chunk) [Working Capital](index=37&type=section&id=Working%20Capital) Working capital decreased by $1.1 million from $6.1 million at March 31, 2019, to $5.0 million at June 30, 2019, primarily due to general and administrative costs associated with the Lineal acquisition Working Capital Summary | Metric | June 30, 2019 | March 31, 2019 | | :--------------------------------------- | :-------------- | :--------------- | | Total Current Assets | $6.7 million | $8.2 million | | Total Current Liabilities | $1.7 million | $2.1 million | | Working Capital | $5.0 million | $6.1 million | | Decrease in Working Capital | | $(1.1) million | - The decrease in working capital is mainly attributed to general and administrative costs incurred for the Lineal acquisition[219](index=219&type=chunk) [ITEM 3. Quantitative and Qualitative Disclosures about Market Risk](index=38&type=section&id=ITEM%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) The company is exposed to market risks primarily related to commodity price volatility for crude oil, natural gas, and natural gas liquids, which significantly impact revenues It does not currently use hedging instruments but may consider them in the future The company also faces interest rate risk on variable rate debt, which it may manage through interest rate swap agreements [Commodity Price Risk](index=38&type=section&id=Commodity%20Price%20Risk) This section details the company's exposure to fluctuations in crude oil, natural gas, and natural gas liquids prices - Revenues are highly dependent on the volatile prices of crude oil, natural gas, and natural gas liquids, which are influenced by market supply and demand, weather, and inventory levels[226](index=226&type=chunk) - The company does not currently engage in commodity price hedging but may use derivative instruments in the future to reduce exposure to volatility[227](index=227&type=chunk) [Interest Rate Risk](index=38&type=section&id=Interest%20Rate%20Risk) This section describes the company's exposure to interest rate changes on its debt and potential mitigation strategies - The company may use financial instruments like interest rate swap agreements to manage interest rate volatility on its variable rate debt[229](index=229&type=chunk) [ITEM 4. Controls and Procedures](index=39&type=section&id=ITEM%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2019, due to a lack of segregation of duties There have been no material changes in internal control over financial reporting during the quarter [Disclosure Controls and Procedures](index=39&type=section&id=Disclosure%20Controls%20and%20Procedures) This section assesses the effectiveness of the company's controls for financial reporting and disclosure - Management concluded that the company's disclosure controls and procedures were not effective as of June 30, 2019, primarily due to a lack of segregation of duties[232](index=232&type=chunk) [Changes in Internal Control Over Financial Reporting](index=39&type=section&id=Changes%20in%20Internal%20Control%20Over%20Financial%20Reporting) This section reports on any material changes to the company's internal controls during the quarter - There have been no material changes in internal control over financial reporting during the quarter ended June 30, 2019[233](index=233&type=chunk) [PART II. OTHER INFORMATION](index=40&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section includes legal proceedings, risk factors, unregistered equity sales, and other required disclosures [ITEM 1. LEGAL PROCEEDINGS](index=40&type=section&id=ITEM%201.%20LEGAL%20PROCEEDINGS) Camber Energy is involved in various legal actions arising from normal business activities, as detailed in Note 8 of the financial statements While the company evaluates the merits of these actions and establishes reserves for probable and estimable losses, the outcome of litigation is inherently uncertain and could materially affect financial condition and operating results - Camber is periodically named in legal actions, including contract and title disputes, and establishes reserves when a loss is probable and estimable[236](index=236&type=chunk) - The outcome of litigation is inherently uncertain, and adverse resolutions could materially impact the company's financial condition and operating results[237](index=237&type=chunk) [ITEM 1A. RISK FACTORS](index=40&type=section&id=ITEM%201A.%20RISK%20FACTORS) This section outlines significant risks, including the potential delisting from NYSE American due to non-compliance with listing standards, extreme dilution to common stockholders from Series C Preferred Stock conversions, and the voting control and redemption rights of Series E and F Preferred Stock holders post-Lineal merger Additionally, risks associated with the new pipeline services operations, such as competition, operational hazards, environmental regulations, and dependence on fixed-price contracts, are highlighted [Risks Relating to the Continued Listing of Our Common Stock on the NYSE American](index=40&type=section&id=Risks%20Relating%20to%20the%20Continued%20Listing%20of%20Our%20Common%20Stock%20on%20the%20NYSE%20American) Camber Energy faces a significant risk of delisting from the NYSE American due to non-compliance with continued listing standards, specifically regarding low stock price Despite a 1-for-25 reverse stock split in July 2019, the company must maintain a price above $0.20 per share by January 2, 2020, or face delisting Delisting would negatively impact liquidity, market price, and ability to raise equity financing - The company received a NYSE American non-compliance notification on July 2, 2019, due to its stock selling for a low price per share[119](index=119&type=chunk)[243](index=243&type=chunk) - A **1-for-25** reverse stock split was completed on July 8, 2019, to address the low stock price, but the company must maintain a price above **$0.20** per share by January 2, 2020, to avoid delisting[243](index=243&type=chunk) - Delisting would negatively impact liquidity, market price, investor willingness to hold or acquire common stock, and the ability to raise equity financing[244](index=244&type=chunk) [Risks Relating to the Lineal Merger; Shareholder Approval in Connection Therewith; and Our Securities](index=41&type=section&id=Risks%20Relating%20to%20the%20Lineal%20Merger%3B%20Shareholder%20Approval%20in%20Connection%20Therewith%3B%20and%20Our%20Securities) The Lineal merger and related securities pose substantial risks, including extreme dilution to existing common stockholders due to the conversion of Series C Preferred Stock (approximately 56 billion shares due) Upon stockholder approval, Series E and F Preferred Stock holders will gain 80% voting control and convertibility into 67-70% of fully-diluted shares, significantly reducing common stockholders' ownership to 6-6.67% These preferred shares also carry substantial liquidation preferences and redemption rights that could unwind the acquisition or limit the company's financial flexibility - As of August 14, 2019, Series C Holders are due approximately **56 billion** shares of common stock upon conversion, significantly exceeding the **250 million** authorized shares, which will cause extreme dilution[246](index=246&type=chunk)[250](index=250&type=chunk) - Upon stockholder approval, Series E and F Preferred Stock holders will collectively have **80%** voting control and conversion rights into **67-70%** of the company's fully-diluted shares, reducing common stockholders' ownership to **6-6.67%**[251](index=251&type=chunk)[252](index=252&type=chunk)[254](index=254&type=chunk)[256](index=256&type=chunk) - Series E and F Preferred Stock include redemption rights that, if exercised, could effectively unwind the Lineal acquisition and make the **$1.05 million** loan to Lineal due without security[257](index=257&type=chunk)[258](index=258&type=chunk)[261](index=261&type=chunk)[262](index=262&type=chunk) - The Series C Holders hold an approximately **$56.3 million** liquidation preference, which, along with other preferred stock preferences, makes it likely that common stockholders would receive no amount upon liquidation[275](index=275&type=chunk) - The Funding Agreement requires **$4 million** to be held in a segregated account for acquisitions, limiting its use for other operations and potentially forcing earlier fundraising[276](index=276&type=chunk) [Risks Relating to Our Pipeline Service Operations](index=47&type=section&id=Risks%20Relating%20to%20Our%20Pipeline%20Service%20Operations) The company's new pipeline services operations face intense competition from larger, more resourced companies Operational hazards, natural disasters, and potential climate change legislation could lead to significant losses, increased costs, and decreased demand Stringent environmental, health, and safety regulations may require substantial expenditures The business is subject to unpredictable fluctuations due to project-based work, economic cycles, and reliance on fixed-price contracts, which carry risks of cost overruns and disputes Additionally, dependence on subcontractors, surety bonds, and the inherent dangers of the industry pose further financial and reputational risks - The pipeline services business faces strong competition from major energy and chemical companies with greater financial resources and technology[284](index=284&type=chunk) - Operations are subject to hazards like natural disasters, accidents, and mechanical failures, which could result in significant damage, interruptions, and liabilities not fully covered by insurance[287](index=287&type=chunk)[288](index=288&type=chunk) - Climate change legislation and other regulatory initiatives could decrease demand for services and increase operating costs, while stringent environmental, health, safety, and security laws may require substantial expenditures[290](index=290&type=chunk)[291](index=291&type=chunk)[293](index=293&type=chunk)[294](index=294&type=chunk) - The business is subject to significant quarterly and annual fluctuations due to weather, project timing, economic conditions, and reliance on fixed-price contracts, which carry risks of cost overruns[299](index=299&type=chunk)[303](index=303&type=chunk)[317](index=317&type=chunk)[318](index=318&type=chunk) - The ability to obtain surety bonds is critical for contracts, and any limitation on bonding capacity could hinder the company's ability to compete for projects[328](index=328&type=chunk)[329](index=329&type=chunk)[330](index=330&type=chunk) - The inherent dangers of pipeline services and oil and gas exploration expose the company to substantial liabilities for injury, property damage, and environmental harm, which may not be fully insurable[347](index=347&type=chunk) [ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=53&type=section&id=ITEM%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) The company has made unregistered sales of equity securities, primarily involving the conversion of Series C Preferred Stock by Discover and Discover Growth As of August 14, 2019, 541 shares of Series C Preferred Stock were converted into approximately 49.2 million common shares (including true-ups), with 28.2 million shares held in abeyance An additional 2,303 Series C Preferred Stock shares can convert into approximately 56.3 billion common shares These issuances were exempt from registration under Sections 3(a)(9) and 4(a)(2) of the Securities Act - As of August 14, 2019, **541** shares of Series C Preferred Stock were converted into approximately **49.2 million** common shares (including true-ups), with **28.2 million** shares held in abeyance[359](index=359&type=chunk) - An additional **2,303** remaining Series C Preferred Stock shares can convert into approximately **56.3 billion** common shares, subject to further adjustments, based on a current conversion price of **$0.001** per share[359](index=359&type=chunk) - These sales and issuances were exempt from registration under the Securities Act in reliance on Sections 3(a)(9) and 4(a)(2), Rule 506 of Regulation D, and Regulation S[364](index=364&type=chunk)[369](index=369&type=chunk) - The **$495,000** convertible debenture held by Discover was fully converted into common stock by October 31, 2018, with additional true-up shares issued through June 30, 2019[367](index=367&type=chunk) [Use of Proceeds from Sale of Registered Securities](index=59&type=section&id=Use%20of%20Proceeds%20from%20Sale%20of%20Registered%20Securities) This section reports on the application of funds from registered securities sales - There were no proceeds from the sale of registered securities[370](index=370&type=chunk) [Issuer Purchases of Equity Securities](index=59&type=section&id=Issuer%20Purchases%20of%20Equity%20Securities) This section details any repurchases of the company's own equity securities - The company made no purchases of its equity securities[371](index=371&type=chunk) [ITEM 3. Defaults Upon Senior Securities](index=59&type=section&id=ITEM%203.%20Defaults%20Upon%20Senior%20Securities) There were no defaults upon senior securities during the reporting period - No defaults upon senior securities occurred[372](index=372&type=chunk) [ITEM 4. Mine Safety Disclosures](index=59&type=section&id=ITEM%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Mine safety disclosures are not applicable to the company[374](index=374&type=chunk) [ITEM 5. Other Information](index=59&type=section&id=ITEM%205.%20Other%20Information) No other information is reported in this section - No other information is reported[376](index=376&type=chunk) [ITEM 6. Exhibits](index=59&type=section&id=ITEM%206.%20Exhibits) This section lists all exhibits filed or furnished with this Quarterly Report on Form 10-Q, including the Agreement and Plan of Merger, various Certificates of Amendment and Designations for preferred stock, and other agreements related to the Lineal acquisition and corporate governance - The exhibit index includes the Agreement and Plan of Merger, Certificates of Amendment for common stock, and Certificates of Designations for Series C, D, E, and F Preferred Stock[382](index=382&type=chunk) - Other exhibits include the Security Exchange Agreement, Termination Agreement, Funding and Loan Agreement, Promissory Note, and Indemnification Agreement for officers and directors[382](index=382&type=chunk)[383](index=383&type=chunk)

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 March 31, 2019 or ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 | --- | --- | |------------------------------------------------------------------------------|------------------------------------------| | Commission File Number: | 1-32508 | | CAMBER | ENERGY, IN ...