UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 2)

 

☒     QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2020

 

☐     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
Identification No.) 

 

15915 Katy Freeway, Suite 450, Houston, Texas 77094

(Address of principal executive offices) (Zip Code)

 

(210) 998-4035

(Registrant’s telephone number, including area code)

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Common Stock, $0.001 Par Value Per Share

CEI

NYSE American

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐     No ☒

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐     No ☒

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

Emerging growth

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐     No ☒

 

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

 

 Title of each class

 

Number of Shares

Common Stock, par value
$0.001 per share

 

 

250,000,000
(as of November 19, 2021)

  

 

 

   

Explanatory Note

    

Camber Energy, Inc (the “Company”) is filing this Quarterly Report on Form 10-Q/A, amendment No. 2 (“Form 10-Q/A”) to amend our Quarterly Report on Form 10-Q for the quarter ended September 30, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on December 18, 2020 (“Original Report”) to restate our financial statements and related notes (collectively, the “financial statements” or “Financial Statements”) for the three and six month periods ended September 30, 2020 and 2019.  This Form 10-Q/A also amends certain other Items in the Original Report, as listed in “Items Amended in this Form 10-Q/A” below.

 

Restatement Background

 

On October 31, 2020, the Company received a comment letter from the SEC ("SEC Comment Letter") with respect to Amendment No. 2 to the Registration Statement on Form S-4 filed on October 14, 2020. Among other things, the SEC Comment Letter questioned the Company’s historical accounting treatment regarding the sale of our Series C Redeemable Convertible Preferred Stock (the “Series C Stock”).  The Company recorded such sales as “permanent equity” and the SEC Comment Letter suggested the appropriate accounting classification was something other than permanent equity given certain provisions within the Certificate of Designation for the Series C Stock  (“COD”). After considering the SEC Comment Letter and reviewing the COD, the Company and the holder of the Series C Stock determined there were several errors made in the drafting of the COD that could result in unintended consequences. Both parties agreed to subsequently correct the COD, and Certificates of Correction to the COD were filed on December 9, 2020 and on April 20, 2021 to correct the errors.  Both parties agreed the corrections would be applied retroactive to the original filing date of the COD, being August 25, 2016; however, US GAAP requires a transaction to be accounted for in accordance with the terms of an agreement in effect during the period of the financial statements and, consequently, the Company determined that in accordance with the terms of the original COD, the Series C Stock should have been recorded as temporary equity instead of permanent equity. In addition, certain provisions of the original COD required the Company to recognize a derivative liability for certain conversions of the Series C Stock into common stock. After consultations with the SEC staff and the Company’s accounting advisors, the Company determined: (i) the impact of the error(s) is material for the fiscal years ended March 31, 2019 and 2020;  and (ii) to restate its Annual Report on Form 10-K for the year ended March 31, 2020, inclusive of comparative financial statements for the year ended March 31, 2019, the previously filed quarterly report on From 10-Q for the three months ended June 30, 2020, and the previously filed quarterly report  on Form 10-Q for the three and six month periods ended September 30, 2020.   See Note 4 to the Consolidated Financial Statements included in Item 1 for additional information and a reconciliation of the previously reported amounts to the restated amounts.

     

Items Amended in this Form 10-Q/A

 

This Form 10-Q/A presents the Original Report in its entirety, as amended and restated with modifications as necessary to reflect the restatements. The following items have been amended to reflect the restatements:

 

Part I, Item 1 . Financial Statements

 

Part II, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

In addition, the Company’s Chief Executive Officers and Principal Accounting Officer have provided new certifications dated as of the date of this filing in connection with this Form

     

 
2

 

   

CAMBER ENERGY, INC.

 

TABLE OF CONTENTS

 

PART 1. FINANCIAL INFORMATION

 

ITEM 1.

FINANCIAL STATEMENTS

 

 

4

 

 

 

 

 

 

 

 

CONSOLIDATED BALANCE SHEETS (UNAUDITED)

 

 

4

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)

 

 

5

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)

 

 

6

 

 

 

 

 

 

 

 

CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)

 

 

7

 

 

 

 

 

 

 

 

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)

 

 

8

 

 

 

 

 

 

 

ITEM 2.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

 

 

41

 

 

 

 

 

 

 

ITEM 3.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

 

 

60

 

 

 

 

 

 

 

ITEM 4.

CONTROLS AND PROCEDURES.

 

 

60

 

 

 

 

 

 

 

PART II – OTHER INFORMATION

 

ITEM 1.

LEGAL PROCEEDINGS.

 

 

61

 

 

 

 

 

 

 

ITEM 1A.

RISK FACTORS.

 

 

61

 

 

 

 

 

 

 

ITEM 2.

UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

 

 

68

 

 

 

 

 

 

 

ITEM 3.

DEFAULTS UPON SENIOR SECURITIES.

 

 

69

 

 

 

 

 

 

 

ITEM 4.

MINE SAFETY DISCLOSURES.

 

 

69

 

 

 

 

 

 

 

ITEM 5.

OTHER INFORMATION.

 

 

69

 

 

 

 

 

 

 

ITEM 6.

EXHIBITS.

 

 

72

 

  

 
3

 

   

PART 1. FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

CAMBER ENERGY, INC.

CONSOLIDATED BALANCE SHEETS (RESTATED)

(Unaudited)

 

 

 

September 30,
2020

 

 

March 31,
2020

 

ASSETS

 

Current Assets

 

 

 

 

 

 

Cash

 

$ 1,112,965

 

 

$ 656,615

 

Accounts Receivable, Net of Allowance

 

 

145,362

 

 

 

255,363

 

Other Current Assets

 

 

220,682

 

 

 

220,682

 

Total Current Assets

 

 

1,479,009

 

 

 

1,132,660

 

 

 

 

 

 

 

 

 

 

Property and Equipment

 

 

 

 

 

 

 

 

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

 

Other Property and Equipment

 

 

1,570

 

 

 

1,570

 

Total Property and Equipment

 

 

78,432,351

 

 

 

78,462,442

 

Accumulated Depletion, Depreciation, Amortization and Impairment

 

 

(78,356,957 )

 

 

(78,351,825 )

Total Property and Equipment, Net

 

 

75,394

 

 

 

110,617

 

Equity Method Investment – Elysium Energy, LLC

 

 

 

 

 

957,169

 

Notes Receivable

 

 

10,241,048

 

 

 

7,339,719

 

Other Assets

 

 

 

 

 

155,053

 

Total Assets

 

$ 11,795,451

 

 

$ 9,695,218

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

Current Liabilities

 

 

 

 

 

 

 

 

Accounts Payable

 

$ 1,455,898

 

 

$ 1,474,221

 

Common Stock Payable

 

 

 

 

 

173,000

 

Accrued Expenses

 

 

107,621

 

 

 

348,460

 

Current Asset Retirement Obligation

 

 

25,766

 

 

 

30,227

 

Current Income Taxes Payable

 

 

3,000

 

 

 

3,000

 

Derivative Liability

 

 

30,866,933

 

 

 

8,669,831

 

Total Current Liabilities

 

 

32,459,218

 

 

 

10,698,739

 

 

 

 

 

 

 

 

 

 

Asset Retirement Obligation

 

 

20,017

 

 

 

41,523

 

Total Liabilities

 

 

32,479,235

 

 

 

10,740,262

 

 

 

 

 

 

 

 

 

 

Commitments and Contingencies (see Note 10)

 

 

 

 

 

 

 

 

Temporary Equity

 

 

 

 

 

 

 

 

Preferred Stock Series C, 2,693 and 2,819 Issued and Outstanding Respectively, Liquidation Preference of $73,963,245 and $77,423,835, respectively

 

 

38,002,002

 

 

 

39,389,202

 

 

 

 

 

 

 

 

 

 

Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

Preferred Stock Series A, 2,000 Shares Authorized of $0.001 Par Value, -0- Shares issued and Outstanding

 

 

 

 

 

 

Preferred Stock Series B, 600,000 Shares Authorized of $0.001 Par Value, 0 and 0 Shares issued and Outstanding, respectively

 

 

 

 

 

 

Common Stock, 25,000,000 shares Authorized of $0.001 Par Value, 25,000,000 and 5,000,000 Shares Issued and Outstanding, respectively

 

 

25,000

 

 

 

5,000

 

Additional Paid-in Capital

 

 

161,157,247

 

 

 

149,825,528

 

Accumulated Deficit

 

 

(219,868,033 )

 

 

(190,264,774 )

Total Stockholders’ Deficit

 

 

(58,685,786 )

 

 

(40,434,246

)  

Total Liabilities and Stockholders’ Deficit

 

$ 11,795,451

 

 

$ 9,695,218

 

 

The accompanying notes are an integral part of these consolidated financial statements.

 

 
4

Table of Contents

   

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (RESTATED)

(Unaudited)

 

 

 

Three Months Ended

September 30,

 

 

Six Months Ended

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Operating Revenues

 

 

 

 

 

 

 

 

 

 

 

 

Crude Oil

 

$ 45,846

 

 

$ 66,786

 

 

$ 67,635

 

 

$ 160,485

 

Natural Gas

 

 

4,643

 

 

 

12,343

 

 

 

8,807

 

 

 

19,547

 

Natural Gas Liquids

 

 

6,969

 

 

 

13,624

 

 

 

14,705

 

 

 

34,072

 

Total Revenues

 

 

57,458

 

 

 

92,753

 

 

 

91,147

 

 

 

214,104

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease Operating Expenses

 

 

27,222

 

 

 

188,483

 

 

 

96,513

 

 

 

312,040

 

Severance and Property Taxes

 

 

2,126

 

 

 

4,031

 

 

 

3,475

 

 

 

6,605

 

Depreciation, Depletion, Amortization, and Accretion

 

 

2,837

 

 

 

3,592

 

 

 

5,132

 

 

 

7,834

 

General and Administrative

 

 

852,915

 

 

 

940,483

 

 

 

1,539,578

 

 

 

2,272,474

 

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 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

4,174

 

 

 

 

 

 

5,021

 

Loss from Unconsolidated Entity

 

 

1,056,766

 

 

 

 

 

 

2,140,121

 

 

 

 

Loss on Derivative Liability

 

 

20,251,123

 

 

 

2,767,878

 

 

 

25,952,119

 

 

 

4,931,769

 

Other Expense (Income), Net

 

 

172,100

 

 

 

(9,278 )

 

 

(42,532 )

 

 

(63,540 )

Total Other Expenses

 

 

21,479,989

 

 

 

2,762,774

 

 

 

28,049,708

 

 

 

4,873,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Before Discontinued Operations

 

 

(22,307,631 )

 

 

(3,806,610 )

 

 

(29,603,259 )

 

 

(7,258,099 )

Income from Discontinued Operations

 

 

 

 

 

761,768

 

 

 

 

 

 

761,768

 

Net Loss

 

$ (22,307,631 )

 

$ (3,044,842 )

 

$ (29,603,259 )

 

$ (6,496,331 )

Less Preferred Dividends

 

 

1,651,219

 

 

 

1,468,328

 

 

 

3,331,975

 

 

 

2,922,049

 

Net Loss Attributable to Common Shareholders

 

 

(23,958,850 )

 

 

(4,513,170 )

 

 

(32,935,234 )

 

 

(9,418,380

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (1.21 )

 

$ (10.69 )

 

$ (2.40 )

 

$ (39.24 )

Discontinued Operations

 

 

 

 

 

1.54

 

 

 

 

 

 

2.94

 

Total

 

$ (1.21 )

 

$ (9.15 )

 

$ (2.40 )

 

$ (36.30 )

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (1.21 )

 

$ (10.69 )

 

$ (2.40 )

 

$ (39.24 )

Discontinued Operations

 

 

 

 

 

1.54

 

 

 

 

 

 

2.94

 

Total

 

$ (1.21 )

 

$ (9.15 )

 

$ (2.40 )

 

$ (36.30 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Weighted Average Number of Common Shares Outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

19,815,872

 

 

 

493,300

 

 

 

13,705,461

 

 

 

259,432

 

Diluted

 

 

19,815,872

 

 

 

493,300

 

 

 

13,705,461

 

 

 

259,432

 

    

The accompanying notes are an integral part of these consolidated financial statements.

    

 
5

Table of Contents

   

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT 

FOR THE THREE AND SIX MONTHS ENDED SEPTEMBER 30, 2020 AND 2019 (RESTATED)

(Unaudited)

   

 

 

Series C
Preferred Stock

 

 

Series E
Preferred Stock

 

 

Series F
Preferred Stock

 

 

Series B
Preferred Stock

 

 

Common Stock

 

 

 

 

 

 

 

 

 

Total

 

 

 

Number of Shares

 

 

Amount

 

 

Number
of Shares

 

 

Amount

 

 

Number
of Shares

 

 

Amount

 

 

Number
of Shares

 

 

 Amount

 

 

 Number
of Shares

 

 

Amount

 

 

 Additional

Paid-In

Capital

 

 

Stock

Divided

Distributable

 

 

Accumulated Deficit

 

 

Stockholders’

(Deficit)

Equity

 

Balances, March 31, 2019 (as restated)

 

 

2,305

 

 

$ 28,248,946

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

44,000

 

 

$ 44

 

 

 

13,441

 

 

$ 13

 

 

$ 155,664,694

 

 

$ 3

 

 

$ (181,650,293. )

 

$ (25,985,539

 

Common Shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series B Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(44,000 )

 

 

(44 )

 

 

 

 

 

 

 

 

44

 

 

 

 

 

 

 

 

 

 

Payment of Series B Dividend

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3

 

 

 

(3 )

 

 

 

 

 

 

Conversion of Debenture - Abeyance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,008

 

 

 

25

 

 

 

(25 )

 

 

 

 

 

 

 

 

 

Payment for Consulting Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

600

 

 

 

1

 

 

 

303,339

 

 

 

 

 

 

 

 

 

303,340

 

Rounding Adjustment for Split

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Dividends to be Issued

 

 

 

 

 

1,453,718

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,453,718 )

 

 

 

 

 

 

 

 

(1,453,718 )

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,451,489 )

 

 

(3,451,489 )

Balances, June 30, 2019

 

 

2,305

 

 

$ 29,702,664

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

39,059

 

 

$ 39

 

 

$ 154,514,337

 

 

$ --

 

 

$ (185,101,782 )

 

$ (30,587,406 )

Common Shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series C Preferred Stock

 

 

(3 )

 

 

(39,789 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,004,450

 

 

 

1,005

 

 

 

38,784

 

 

 

 

 

 

 

 

 

39,789

 

Stock Compensation

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

884

 

 

 

1

 

 

 

(1 )

 

 

 

 

 

 

 

 

 

Payment for Consulting Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

80

 

 

 

 

 

 

 

27,690

 

 

 

 

 

 

 

 

 

27,690

 

Warrant Obeyance

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

4,065

 

 

 

4

 

 

 

(4 )

 

 

 

 

 

 

 

 

 

Cash Paid for Settlement of series B Preferred Stock

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(25,000 )

 

 

 

 

 

 

 

 

(25,000 )

Issuance of Series E and F Preferred Stock

 

 

 

 

 

 

 

 

1,000,000

 

 

 

18,701,000

 

 

 

16,750

 

 

 

1,417,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Stock Dividends to be Issued

 

 

 

 

 

1,468,328

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,468,328 )

 

 

 

 

 

 

 

 

(1,468,328 )

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(3,044,842 )

 

 

(3,044,842 )

Balances, September 30, 2019

 

 

2,32

 

 

$ 31,131,203

 

 

 

1,000,000

 

 

$ 18,701,000

 

 

 

16,750

 

 

$ 1,417,000

 

 

 

 

 

$

 

 

 

1,048,532

 

 

 

1,049

 

 

$ 153,087,478

 

 

$

 

 

$ (188,146,624 )

 

$ (35,058,096 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances, March 31, 2020 (as restated)

 

2819

 

 

$ 39,389,202

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

5,000,000

 

 

$ 5,000

 

 

$ 149,825,528

 

 

$ --

 

 

$ (190,264,774 )

 

$ (40,434,246 )

Common Shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series C Preferred Stock

 

 

(498 )

 

 

(7,289,387 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

8,059,016

 

 

 

8,059

 

 

 

7,281,328

 

 

 

 

 

 

 

 

 

7,289,387

 

Payment of Consulting Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

101,514

 

 

 

102

 

 

 

172,898

 

 

 

 

 

 

 

 

 

173,000

 

Issuance of Series C Preferred Stock

 

 

630

 

 

 

6,300,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(300,000 )

 

 

 

 

 

 

 

 

(300,000 )

Stock Dividends to be Issued

 

 

 

 

 

1,680,756

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,680,756 )

 

 

 

 

 

 

 

 

 

(1,680,756 )

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(7,295,628 )

 

 

(7,295,628 )

Balances, June 30, 2020

 

 

2,951

 

 

$ 40,080,571

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

 

 

$

 

 

 

13,160,530

 

 

$ 13,161

 

 

$ 155,298,998

 

 

$

 

 

$ (197,560,402 )

 

$ 42,248,243

 

Common Shares issued for:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Conversion of Series C Preferred Stock

 

 

(258 )

 

 

(3,729,788 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,764,470

 

 

 

11,764

 

 

 

7,473,041

 

 

 

 

 

 

 

 

 

7,484,805

 

Payment for Consulting Fees

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

75,000

 

 

 

75

 

 

 

36,427

 

 

 

 

 

 

 

 

 

36,502

 

Stock Dividends to be Issued

 

 

 

 

 

 

1,651,219

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(1,651,219 )

 

 

 

 

 

 

 

 

 

 

(1,651,219 )

Net Loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(22,307,631 )

 

 

(22,307,631 )

Balances, September 30, 2020

 

 

2,693

 

 

 

38,002,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

25,000,000

 

 

 

25,000

 

 

 

1,161,157,247

 

 

 

 

 

 

 

(219,868,033 )

 

 

(58,685,786 )

    

The accompanying notes are an integral part of these consolidated financial statements.

   

 
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CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (RESTATED)

(Unaudited)

 

 

 

Six Months Ended
September 30,

 

 

 

2020

 

 

2019

 

Cash Flows from Operating Activities

 

 

 

 

 

 

Net Loss

 

$ (29,603,259 )

 

$ (6,496,331 )

Net Income from Discontinued Operations

 

 

 

 

 

761,768

 

Net Loss from Continuing Operations

 

 

(29,603,259 )

 

 

(7,258,099 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

Depreciation, Depletion, Amortization, and Accretion

 

 

5,132

 

 

 

7,834

 

Bad debt Expense

 

 

170,660

 

 

 

17,694

 

Share-Based Compensation

 

 

36,502

 

 

 

29,425

 

Loss from Equity Method Investment

 

 

2,140,121

 

 

 

 

Change in Fair Value of Derivative Liability

 

 

25,952,119

 

 

 

4,931,764

 

Changes in Components of Working Capital and Other Assets:

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

55,060

 

 

 

(7,213 )

Other Current Assets

 

 

155,053

 

 

 

234,145

 

Accounts Payable and Accrued Expenses

 

 

(255,038 )

 

 

(409,683 )

Net Cash Used in Operating Activities from Continuing Operations

 

 

(1,343,650 )

 

 

(2,454,133 )

Net Cash Used in Operating Activities from Discontinued Operations

 

 

 

 

 

(383,770 )

Net Cash Used in Operating Activities

 

 

(1,343,650 )

 

 

(2,837,903 )

 

 

 

 

 

 

 

 

 

Investing Cash Flows

 

 

 

 

 

 

 

 

Cash Paid for Subsidiary

 

 

 

 

 

(1,050,000 )

Cash Paid for Issuance of Notes Receivable

 

 

(4,200,000 )

 

 

 

Cash Received for Deposits

 

 

 

 

 

(31,534 )

Net Cash Used in Investing Activities from Continuing Operations

 

 

(4,200,000 )

 

 

(1,081,534 )

Net Cash Used in Investing Activities from Discontinued Operations

 

 

 

 

 

(70,440 )

Net Cash Used in Investing Activities

 

 

(4,200,000 )

 

 

(1,151,974 )

 

 

 

 

 

 

 

 

 

Financing Cash Flows

 

 

 

 

 

 

 

 

Cash Paid for Settlement of Series B Preferred Stock Warrants

 

 

 

 

 

(25,000 )

Proceeds from Issuance of Series C Preferred Stock

 

 

6,000,000

 

 

 

 

Net Cash Provided by (Used in) Financing Activities from Continuing Operations

 

 

6,000,000

 

 

 

(25,000 )

Net Cash Provided by Financing Activities from Discontinued Operations

 

 

 

 

 

454,210

 

Net Cash Provided by Financing Activities

 

 

6,000,000

 

 

 

429,210

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash

 

 

456,350

 

 

 

(3,560,667 )

Cash at Beginning of the Period

 

 

656,615

 

 

 

7,778,723

 

Cash at End of the Period

 

$ 1,112,965

 

 

$ 4,218,056

 

 

The accompanying notes are an integral part of these consolidated financial statements.

  

 
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CAMBER ENERGY, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 – GENERAL

 

Camber Energy, Inc. (“Camber” or the “Company”) is an independent oil and natural gas company engaged in the acquisition, development, and sale of crude oil, natural gas, and natural gas liquids from various known productive geological formations in Louisiana and Texas. Additionally, from the July 8, 2019 acquisition of Lineal Star Holdings, LLC (“Lineal”), until the divestiture of Lineal effective on December 31, 2019, each as discussed below, the Company, through Lineal, was involved in the oil and gas services industry.

       

On February 3, 2020, the Company entered into an Agreement and Plan of Merger with Viking Energy Group, Inc. (“Viking”), which was amended and restated by an Amended and Restated Agreement and Plan of Merger entered into with Viking on August 31, 2020 (as amended to date, the “Merger Agreement”, and the merger contemplated therein, the “Merger”). Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), (a) each share of common stock of Viking (the “Viking Common Stock”) issued and outstanding, other than certain shares owned by the Company, Viking and the subsidiary of the Company formed as part of the Merger (“Merger Sub”), will be converted into the right to receive the pro rata share (when including the Viking preferred stock conversion rights (defined below)) of 80% of the Company’s post-closing (excluding shares issuable upon conversion of the Series C Preferred Stock of the Company)(the “exchange ratio”); and (b) each share of Viking preferred stock outstanding immediately prior to the effective time will be converted into one share of Camber Series A Preferred Stock, which preferred stock will have the right to vote, and convert into, that number of shares of Camber common stock that its holder would have received in the Merger, had such holder fully converted the Viking preferred stock into Viking common stock immediately prior to the Effective Time (the “Viking preferred stock conversion rights”).

 

Holders of Viking Common Stock will have any fractional shares of Company common stock after the Merger rounded up to the nearest whole share. The completion of the Merger is subject to certain closing conditions. A further requirement to the closing of the Merger was that the Company was required to have acquired 30% of Viking’s subsidiary Elysium Energy Holdings, LLC (“Elysium”) as part of a $9,200,000 investment in Viking’s Rule 506(c) offering, which transaction was completed on February 3, 2020 (25% and a $5 million investment) and June 22, 2020 (5% and a $4.2 million investment). See also “Note 6 – Plan of Merger and Investment In Unconsolidated Entity”.

    

 
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A novel strain of coronavirus (“COVID-19”) was first identified in December 2019, and subsequently declared a global pandemic by the World Health Organization on March 11, 2020. As a result of the outbreak, many companies have experienced disruptions in their operations, workforce and markets served, including a significant reduction in the demand for petroleum-based products. The market for the Company’s oil and gas assets began being adversely impacted by the effects of COVID-19 in March of 2020 when circumstances surrounding, and responses to, the pandemic, including stay-at-home orders, began to materialize in North America. Due to the Company’s limited oil and gas production and the fact that all of the Company’s current properties are non-operated, the Company has yet to experience a significant adverse impact from COVID-19. However, the full extent of the COVID-19 outbreak and changes in demand for oil and the impact on the Company’s operations is uncertain. A prolonged disruption could have a material adverse impact on the financial results, assets (including requiring write-downs or impairments), and business operations of the Company.

 

NOTE 2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS

 

At September 30, 2020, the Company’s total current assets of $1.5 million were less than its total current liabilities of approximately $32.5 million, resulting in a working capital deficit of $31.0 million, while at March 31, 2020, the Company’s total current assets of $1.1 million were less than its total current liabilities of approximately $10.7 million, resulting in a working capital deficit of $9.6 million. The increase in working capital deficit of $21.4 million is due primarily to an increase in the recognized loss on the Series C Derivative Liability.

  

Recent oil and gas price volatility as a result of geopolitical conditions and the global COVID-19 pandemic may have a negative impact on the Company’s financial position and results of operations. Negative impacts could include, but are not limited to, the Company’s inability to sell its oil and gas production, reduction in the selling price of the Company’s oil and gas, failure of a counterparty to make required payments, possible disruption of production as a result of worker illness or mandated production shutdowns or ‘stay-at-home’ orders, and access to new capital and financing.

 

The factors above raise substantial doubt about the Company’s ability to continue to operate as a going concern for the twelve months following the issuance of these financial statements. The Company believes that it may not have sufficient liquidity to meet its operating costs unless it can raise new funding, which may be through the sale of debt or equity

  

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

 

The Company has provided a discussion of significant accounting policies, estimates, and judgments in its March 31, 2020, Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies since March 31, 2020, which are expected to have a material impact on the Company’s financial position, operations, or cash flows.

   

Amounts presented in the consolidated balance sheet as of March 31, 2020 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of and for the three and six month periods ended September 30, 2020 and 2019 have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) for interim financial information on a basis consistent with the annual audited consolidated financial statements and with the instructions to Form 10-Q. The consolidated financial statements presented herein reflect all adjustments which, in the opinion of management, are necessary for a fair presentation of the financial position of the Company as of September 30, 2020 and March 31, 2020, and the results of operations for the three and six month periods ended September 30, 2020 and 2019, the consolidated statements of changes in equity for the three and six month periods ended September 30, 2020 and 2019 and cash flows for the six month periods ended June 30, 2020 and 2019. All of these adjustments are of a normal recurring nature. The results of operations for the interim periods are not necessarily indicative of the results expected for a full year. The statements should be read in conjunction with the audited consolidated financial statements and the notes thereto which are included in our Annual Report on Form 10-K/A (amendment No. 1) for the year ended March 31, 2020.

 

 
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Principles of Consolidation

 

The consolidated financial statements include the accounts of Camber and all of its wholly-owned and majority-owned subsidiaries. All material intercompany accounts and transactions have been eliminated in consolidation.

 

Accounts Receivable

 

Accounts receivable, net, include amounts due for oil and gas revenues from prior month production, accrued interest on the notes receivable due from Lineal and Viking and an estimate of amounts due from N&B Energy related to the September 2018 Asset Purchase Agreement entered into with N&B Energy. The allowance for doubtful accounts is the Company’s best estimate of the probable amount of credit losses in the Company’s existing accounts receivable. At September 30, 2020, and March 31, 2020, there were allowances for doubtful accounts of approximately $171,000 and $208,000, included in accounts receivable, and there were bad debts of $170,660 and $17,694, recognized for the six months ended September 30, 2020, and 2019, respectively.

 

Notes Receivable

 

Notes receivable includes the $9,200,000, excluding adjustment for excess loss from equity method investment of $1,182,952, of notes from Viking as described in ”Note 7 – Long-Term Notes Receivable” and “Note 6 – Plan of Merger and Investment In Unconsolidated Entity”, and two notes due from Lineal in the amounts of $1,539,719 and $800,000, respectively, net of reserves of $115,719 as more fully discussed in ”Note 7 – Long-Term Notes Receivable” and “Note 12 – Lineal Merger Agreement and Divestiture”.

 

Property and Equipment

 

Property and equipment are recorded at cost and depreciated using the straight-line method over their useful lives. Amortization of the equipment under capital leases related to the Lineal operations was computed using the straight-line method over lives ranging from 3 to 5 years and is included in depreciation expense. Costs of maintenance and repairs were charged to expense when incurred.

 

Long-lived assets including intangible assets are evaluated for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If an evaluation is required, the estimated future undiscounted cash flows associated with the asset are compared to the assets carrying amount to determine if an impairment of such asset is necessary. This evaluation, as well as an evaluation of our intangible assets, requires the Company to make long-term forecasts of the future revenues and costs related to the assets subject to review. Forecasts require assumptions about demand for the Company’s services and future market conditions. Estimating future cash flows requires significant judgment, and the Company’s projections may vary from the cash flows eventually realized. Future events and unanticipated changes to assumptions could require a provision for impairment in a future period. The effect of any impairment would be to expense the difference between the fair value (less selling costs) of such asset and its carrying value. Such an expense would be reflected in earnings. No impairments were deemed necessary for the three and six months ended September 30, 2020, and 2019, respectively.

 

Investment in Unconsolidated Entities

 

The Company accounts for its investment in unconsolidated entities under the equity method of accounting when it owns less than 50% of a controlling interest and cannot exercise significant influence over the operating and financial policies of the entity. The investment is adjusted accordingly for dividends or distributions it receives and its proportionate share of earnings or losses of the entity. The current investment in unconsolidated entities is a 30% (25% from February 3, 2020, to June 25, 2020) interest in Elysium Energy Holdings, LLC, which, through its wholly-owned subsidiary, Elysium Energy, LLC, is involved in oil and gas exploration and production in the United States. The balance sheet of Elysium Holdings, LLC at September 30, 2020, included current assets of $2.3 million, total assets of $30.8 million, total liabilities of $34.9 million, and net liabilities of $(4.1) million. The balance sheet of Elysium Energy Holdings, LLC at March 31, 2020, included current assets of $4.0 million, total assets of $37.7 million, total liabilities of $34.0 million, and net assets of $3.7 million. The income statement of Elysium Energy Holdings, LLC for the three and six months ended September 30, 2020, included total revenues of $4.0 million and $7.8 million and a net loss of $3.2 million and $7.5 million, respectively. See also “Note 6 – Plan of Merger and Investment In Unconsolidated Entity”.

  

 
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Table of Contents

   

Revenue Recognition

 

Exploration and Production Revenue

 

The Company’s revenue for its exploration and production operations are comprised entirely of revenue from exploration and production activities. The Company’s oil is sold primarily to marketers, gatherers, and refiners. Natural gas is sold primarily to interstate and intrastate natural gas pipelines, direct end-users, industrial users, local distribution companies, and natural gas marketers. Natural gas liquids (“NGLs”) are sold primarily to direct end-users, refiners, and marketers. Payment is generally received from the customer in the month following delivery.

 

Contracts with customers have varying terms, including month-to-month contracts, and contracts with a finite term. The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer. Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed. Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.

 

Revenues are recognized for the sale of the Company’s net share of production volumes. Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues.

 

Fair Value of Financial Instruments

 

Accounting Standards Codification (“ASC”) 820 defines fair value, establishes a framework for measuring fair value, and enhances disclosures about fair value measurements. It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

 

 

Level 1 – Quoted prices in active markets for identical assets or liabilities.

  

 
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Level 2 – Inputs other than quoted prices that are observable for the asset or liability, either directly or indirectly. These include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; and model-driven valuations whose inputs are observable or whose significant value drivers are observable. Valuations may be obtained from or corroborated by, third-party pricing services.

 

 

 

 

Level 3 – Unobservable inputs to measure the fair value of assets and liabilities for which there is little, if any market activity at the measurement date, using reasonable inputs and assumptions based upon the best information at the time, to the extent that inputs are available without undue cost and effort.

 

As of September 30, 2020, and March 31, 2020, the significant inputs to the Company’s derivative liability were Level 3 inputs.

 

Recently Issued Accounting Pronouncements

 

The Company does not believe that any recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying consolidated financial statements.

 

Subsequent Events

 

The Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event disclosure consideration.

 

NOTE 4 – Restatement of previously issued financial statements

 

On October 31, 2020, the Company received a SEC Comment Letter with respect to Amendment No. 2 to the Registration Statement on Form S-4 filed on October 14, 2020. Among other things, the SEC Comment Letter questioned the Company’s historical accounting treatment regarding the accounting treatment for our Series C Stock. The Company recorded such sales as permanent equity and the SEC Comment Letter suggested the appropriate accounting classification was something other than permanent equity given certain provisions within the Certificate of Designation for the Series C Stock (“COD”). After considering the SEC Comment letter and reviewing the COD, the Company and the holder of the Series C Stock determined there were several errors made in the drafting of the COD that could result in unintended consequences.

 

Both parties agreed to subsequently correct the COD , and Certificates of Correction to the COD were filed on December 9, 2020 and on April 20, 2021 to correct the errors.  Both parties agreed the corrections would be applied retroactive to the original filing date of the COD, being August 25, 2016. However, US GAAP requires a transaction to be accounted for in accordance with the terms of an agreement in effect during the period of the financial statements and, consequently, the Company determined that in accordance with the terms of the original COD, the Series C Stock should have been recorded as temporary equity instead of permanent equity. In addition, certain provisions of the original COD required the Company to recognize a derivative liability for certain conversions of the Series C Stock into common stock. After consultations with the SEC staff and the Company’s accounting advisors, the Company determined: (i) the impact of the error(s) is material for the three and six months ended September 30, 2020; and (ii) to restate its Quarterly Report on Form 10-Q for the period ended September 30, 2020, inclusive of comparative financial statements for the period ended June 30, 2019.

  

As a result of the errors described above, we are restating our financial statements to reclassify the Series C Stock from permanent equity to temporary equity and to recognize a derivative liability for the potential obligation to issue additional shares after the Series C shares have been converted to common shares. We have estimated the fair value of the derivative liability at September 30, 2020 and March 31, 2020 using a binomial pricing model and applying the conversion price (or the lowest trading price for the Company’s common stock subsequent to the conversion, if lower than the conversion price) and the historical volatility of the Company’s common stock.  The impact of the restatement on our financial statements is as follows:

   

 
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Table of Contents

 

The table below sets forth changes to the consolidated balance sheet as of September 30, 2020:

 

 

 

 As Previously Reported

 

 

 Adjustments

 

 

 As Restated

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

11,795,451

 

 

 

-

 

 

 

11,795,451

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES  AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

1,455,898

 

 

 

 

 

 

 

1,455,898

 

Accrued expenses

 

 

107,621

 

 

 

 

 

 

 

107,621

 

Derivative liability - Series C

 

 

-

 

 

 

30,866,933

 

 

 

30,866,933

 

Current ARO

 

 

25,766

 

 

 

 

 

 

 

25,766

 

Current income taxes payable

 

 

3,000

 

 

 

 

 

 

 

3,000

 

Total current liabilities

 

 

1,592,285

 

 

 

30,866,933

 

 

 

32,459,218

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

20,017

 

 

 

 

 

 

 

20,017

 

TOTAL LIABILITIES

 

 

1,612,302

 

 

 

30,866,933

 

 

 

32,479,235

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEMPORARY EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock Series C

 

 

6,000,000

 

 

 

32,002,002

 

 

 

38,002,002

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock Series C

 

 

2

 

 

 

(2 )

 

 

-

 

Common Stock

 

 

25,000

 

 

 

 

 

 

 

25,000

 

Additional paid in capital

 

 

146,673,154

 

 

 

14,484,093

 

 

 

161,157,247

 

Stock dividends distributable

 

 

19,210,901

 

 

 

(19,210,901 )

 

 

-

 

Retained earnings (deficit)

 

 

(161,725,908 )

 

 

(58,142,125 )

 

 

(219,868,033 )

Total stockholders equity (deficit)

 

e4,183,149

 

 

 

(62,868,935 )

 

 

(58,685,786 )

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

 

11,795,451

 

 

 

-

 

 

 

11,795,451

 

    

 
13

Table of Contents

 

The table below sets forth changes to the consolidated balance sheet as of March 31, 2020:

 

 

 

As Previously

 

 

 

 

 

 

 

 

Reported

 

 

Adjustments

 

 

As Restated

 

 

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

 

9,695,218

 

 

 

 

 

 

9,695,218

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Current liabilities

 

 

 

 

 

 

 

 

 

 

 

Accounts payable

 

 

1,474,221

 

 

 

-

 

 

 

1,474,221

 

Common stock payable

 

 

173,000

 

 

 

-

 

 

 

173,000

 

Accrued expenses

 

 

348,460

 

 

 

-

 

 

 

348,460

 

Derivative liability - Series C

 

 

-

 

 

 

8,669,831

 

 

 

8,669,831

 

Current ARO

 

 

30,227

 

 

 

-

 

 

 

30,227

 

Current income taxes payable

 

 

3,000

 

 

 

-

 

 

 

3,000

 

Total current liabilities

 

 

2,028,908

 

 

 

8,669,831

 

 

 

10,698,739

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Asset retirement obligations

 

 

41,523

 

 

 

-

 

 

 

41,523

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES

 

 

2,070,431

 

 

 

8,669,831

 

 

 

10,740,262

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

TEMPORARY EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock Series C

 

 

5,000,000

 

 

 

34,389,202

 

 

 

39,389,202

 

STOCKHOLDERS EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

Preferred Stock Series C

 

 

2

 

 

 

(2 )

 

 

-

 

Common Stock

 

 

5,000

 

 

 

-

 

 

 

5,000

 

Additional paid in capital

 

 

144,815,627

 

 

 

5,009,901

 

 

 

149,825,528

 

Stock dividends distributable

 

 

15,878,926

 

 

 

(15,878,926 )

 

 

--

 

Retained earnings (deficit)

 

 

(158,074,768 )

 

 

(32,190,006 )

 

 

(190,264,774 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Total stockholders equity (Deficit)

 

 

2,624,787

 

 

 

(43,059,033 )

 

 

(40,434,481 )

 

 

 

 

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND EQUITY

 

 

9,695,218

 

 

 

--

 

 

 

9,695,218

 

  

 
14

Table of Contents

 

The table below sets forth changes to the consolidated statement of operations for the three month period ended September 30, 2020:

  

Three Months Ended September 30, 2020

 

As reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

 

57,458

 

 

 

 

 

 

57,458

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Lease Operating Expenses

 

 

27,222

 

 

 

 

 

 

27,222

 

Severance and Property Taxes

 

 

2,126

 

 

 

 

 

 

2,126

 

Depreciation, Depletion, Amortization, and Accretion

 

 

2,837

 

 

 

 

 

 

2,837

 

General and Administrative

 

 

852,915

 

 

 

 

 

 

852,915

 

Total Operating Expenses

 

 

885,100

 

 

 

 

 

 

885,100

 

Operating Loss

 

 

(827,642 )

 

 

 

 

 

(827,642 )

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

Loss from Unconsolidated Entity

 

 

1,056,766

 

 

 

 

 

 

1,056,766

 

Loss on Derivative Liability

 

 

-

 

 

 

20,251,123

 

 

 

20,251,123

 

Other Expense (Income), Net

 

 

172,100

 

 

 

 

 

 

 

172,100

Total Other Expenses

 

 

1,228,866

 

 

 

20,251,123

 

 

 

21,479,989

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (2,056,508 )

 

$ (20,251,123 )

 

$ (22,307,631 )

Less Preferred Dividends

 

 

1,651,219

 

 

 

 

 

 

 

1,651,219

 

Net Loss Attributable to Common Shareholders

 

 

(3,707,727 )

 

 

(20,251,123 )

 

 

(23,958,850 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

   Continuing Operations

 

$ (0.19 )

 

$ (1.02 )

 

$ (1.21 )

   Discontinued Operations

 

 

 

 

 

 

 

 

 

 

   Total

 

$ (0.19 )

 

$ (1.02 )

 

$ (1.21 )

 Diluted

 

 

 

 

 

 

 

 

 

 

 

 

   Continuing Operations

 

$ (0.19 )

 

$ (1.02 )

 

$ (1.21 )

   Discontinued Operations

 

 

 

 

 

 

 

 

 

 

   Total

 

$ (0.19 )

 

$ (1.02 )

 

$ (1.21 )

     

 
15

Table of Contents

 

The table below sets forth changes to the consolidated statement of operations for the six month period ended September 30, 2020:

 

Six Months Ended September 30, 2020

 

As reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

 

91,147

 

 

 

 

 

 

91,147

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Lease Operating Expenses

 

 

96,513

 

 

 

 

 

 

96,513

 

Severance and Property Taxes

 

 

3,475

 

 

 

 

 

 

3,475

 

Depreciation, Depletion, Amortization, and Accretion

 

 

5,132

 

 

 

 

 

 

5,132

 

General and Administrative

 

 

1,539,578

 

 

 

 

 

 

1,539,578

 

Total Operating Expenses

 

 

1,644,698

 

 

 

 

 

 

1,644,698

 

Operating Loss

 

 

(1,553,551 )

 

 

 

 

 

(1,553,551 )

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

 

 

 

 

 

 

 

Loss from Unconsolidated Entity

 

 

2,140,121

 

 

 

 

 

 

2,140,121

 

Loss on Derivative Liability

 

 

--

 

 

 

25,952,119

 

 

 

25,952,119

 

Other Expense (Income), Net

 

 

(42,532

 

 

 

 

 

 

 

(42,532 )

Total Other Expenses

 

 

2,097,589

 

 

 

25,952,119

 

 

 

28,049,708

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Before Discontinued Operations

 

 

(3,651,140 )

 

 

(25,952,119 )

 

 

(29,603,259 )

Income from Discontinued Operations

 

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (3,651,140 )

 

$ (25,952,119 )

 

$ (29,603,259 )

Less Preferred Dividends

 

 

3,331,975

 

 

 

 

 

 

 

3,331,975

 

Net Loss Attributable to Common Shareholders

 

 

(6,983,115 )

 

 

(25,952,119 )

 

 

(32,935,234 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (0.51 )

 

$ (1.89 )

 

$ (2.40 )

Discontinued Operations

 

 

 

 

 

 

 

 

 

 

Total

 

$ (0.51 )

 

$ (1.89 )

 

$ (2.40 )

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (0.51 )

 

$ (1.89 )

 

$ (2.40 )

Discontinued Operations

 

 

 

 

 

 

 

 

 

 

Total

 

$ (0.51 )

 

$ (1.89 )

 

$ (2.40 )

  

 
16

Table of Contents

 

The table below sets forth changes to the consolidated statement of operations for the three month period ended September 30, 2019:

 

Three Months Ended September 30, 2019

 

As reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

 

92,753

 

 

 

 

 

 

92,753

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Lease Operating Expenses

 

 

188,483

 

 

 

 

 

 

188,483

 

Severance and Property Taxes

 

 

4,031

 

 

 

 

 

 

4,031

 

Depreciation, Depletion, Amortization, and Accretion

 

 

3,592

 

 

 

 

 

 

3,592

 

General and Administrative

 

 

940,483

 

 

 

 

 

 

940,483

 

Total Operating Expenses

 

 

1,136,589

 

 

 

 

 

 

1,136,589

 

Operating Loss

 

 

(1,043,836 )

 

 

 

 

 

(1,043,836 )

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

4,174

 

 

 

 

 

 

4,174

 

Loss on Derivative Liability

 

 

-

 

 

 

2,767,878

 

 

 

2,767,878

 

Other Expense (Income), Net

 

 

(9,278 )

 

 

 

 

 

 

(9,278 )

Total Other Expenses (Income)

 

 

(5,104 )

 

 

2,767,878

 

 

 

2,762,774

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Before Discontinued Operations

 

 

(1,038,732 )

 

 

(2,767,878 )

 

 

(3,806,610 )

Income from Discontinued Operations

 

 

761,768

 

 

 

 

 

 

 

761,768

 

Net Loss

 

$ (276,964 )

 

$ (2,767,878 )

 

$ (3,044,842 )

Less Preferred Dividends

 

 

1,893,886

 

 

 

(425,558 )

 

 

1,468,328

 

Net Loss Attributable to Common Shareholders

 

 

(2,170,850 )

 

 

(2,342,320 )

 

 

(4,513,170 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (5.94 )

 

$ (4.75 )

 

$ (10.69 )

Discontinued Operations

 

 

1.54

 

 

 

 

 

 

 

1.54

 

Total

 

$ (4.40 )

 

$ (4.75 )

 

$ (9.15 )

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (5.94 )

 

$ (4.75 )

 

$ (10.69 )

Discontinued Operations

 

 

1.54

 

 

 

 

 

 

 

1.54

 

Total

 

$ (4.40 )

 

$ (4.75 )

 

$ (9.15 )

    

 
17

Table of Contents

 

The table below sets forth changes to the consolidated statement of operations for the six month period ended September 30, 2019:

  

Six Months Ended September 30, 2019

 

As reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Total Revenues

 

 

214,104

 

 

 

 

 

 

214,104

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating Expenses

 

 

 

 

 

 

 

 

 

 

 

Lease Operating Expenses

 

 

312,040

 

 

 

 

 

 

312,040

 

Severance and Property Taxes

 

 

6,605

 

 

 

 

 

 

6,605

 

Depreciation, Depletion, Amortization, and Accretion

 

 

7,834

 

 

 

 

 

 

7,834

 

General and Administrative

 

 

2,272,474

 

 

 

 

 

 

2,272,474

 

Total Operating Expenses

 

 

2,598,953

 

 

 

 

 

 

2,598,953

 

Operating Loss

 

 

(2,384,849 )

 

 

 

 

 

(2,384,849 )

 

 

 

 

 

 

 

 

 

 

 

 

Other Expense (Income)

 

 

 

 

 

 

 

 

 

 

 

Interest Expense

 

 

5,021

 

 

 

 

 

 

5,021

 

Loss from Unconsolidated Entity

 

 

 

 

 

 

 

 

 

Loss on Derivative Liability

 

 

--

 

 

 

4,931,769

 

 

 

4,931,769

 

Other Expense (Income), Net

 

 

(63,540 )

 

 

 

 

 

 

(63,540 )

Total Other Expenses (Income)

 

 

(58,519 )

 

 

4,931,769

 

 

 

4,873,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Before Discontinued Operations

 

 

(2,326,330 )

 

 

(4,931,769 )

 

 

(7,258,099 )

Income from Discontinued Operations

 

 

761,768

 

 

 

 

 

 

 

761,768

 

Net Loss

 

$ (1,564,562, )

 

$ (4,931,769 )

 

$ (6,496,331, )

Less Preferred Dividends

 

 

3,771,941

 

 

 

(849,892 )

 

 

2,922,049

 

Net Loss Attributable to Common Shareholders

 

 

(5,336,503 )

 

 

(4,081,877 )

 

 

(9,418,380 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Loss Per Common Share

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (23.51 )

 

$ (15.73 )

 

$ (39.24 )

Discontinued Operations

 

 

2.94

 

 

 

 

 

 

 

2.94

 

Total

 

$ (20.57 )

 

$ (15.73 )

 

$ (36.30 )

Diluted

 

 

 

 

 

 

 

 

 

 

 

 

Continuing Operations

 

$ (23.51 )

 

$ (15.73 )

 

$ (39.24 )

Discontinued Operations

 

 

2.94

 

 

 

 

 

 

 

2.94

 

Total

 

$ (20.57 )

 

$ (15.73 )

 

$ (36.30 )

    

 
18

Table of Contents

 

The table below sets forth changes to the consolidated statements of cash flows for the six month period ended September 30, 2020:

  

Six Months Ended September 30, 2020

 

As Reported

 

 

Adjustments

 

 

Restated

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (3,651,140 )

 

 

(25,952,119 )

 

$ (29,603,259 )

Net Income from Discontinued Operations

 

 

 

 

 

 

 

 

 

 

Net Loss from Continuing Operations

 

 

(3,651,140 )

 

 

(25,952,119 )

 

 

( 29,603,259 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, Depletion, Amortization, and Accretion

 

 

5,132

 

 

 

 

 

 

 

5,132

 

Bad debt Expense

 

 

170,660

 

 

 

 

 

 

 

170,660

 

Share-Based Compensation

 

 

36,502

 

 

 

 

 

 

 

36,502

 

Loss from Equity Method Investment

 

 

2,140,121

 

 

 

 

 

 

 

2,140,121

 

Change in Fair Value of Derivative Liability

 

 

--

 

 

 

25,952,119

 

 

 

25,952,119

 

Changes in Components of Working Capital and Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

55,060

 

 

 

 

 

 

 

55,060 )

Other Current Assets

 

 

155,053

 

 

 

 

 

 

 

155,053

 

Accounts Payable and Accrued Expenses

 

 

(255,038 )

 

 

 

 

 

 

(255,038 )

Net Cash Used in Operating Activities

 

 

(1,343,650 )

 

 

 

 

 

 

(1,343,650 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Cash Paid for Issuance of Notes Receivable

 

 

(4,200,000 )

 

 

 

 

 

 

(4,200,000

 

Net Cash Used in Investing Activities

 

 

(4,200,000 )

 

 

 

 

 

 

(4,200,000 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Proceeds from Issuance of Series C Preferred Stock

 

 

6,000,000

 

 

 

 

 

 

 

6,000,000

 

Net Cash Provided by Financing Activities

 

 

6,000,000

 

 

 

 

 

 

 

6,000,000

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash

 

 

456,350

 

 

 

 

 

 

 

456,350 )

Cash at Beginning of the Period

 

 

656,615

 

 

 

 

 

 

 

656,615

 

Cash at End of the Period

 

$ 1,112,965

 

 

 

 

 

 

$ 1,112,965

 

    

 
19

Table of Contents

 

The table below sets forth changes to the consolidated statements of cash flows for the six month period ended September 30, 2019:

  

Six Months Ended September 30, 2019

 

As Reported

 

 

Adjustments

 

 

Restated

 

Cash Flows from Operating Activities

 

 

 

 

 

 

 

 

 

Net Loss

 

$ (1,564,562 )

 

 

(4,931,769 )

 

$ (6,496,331 )

Net Income from Discontinued Operations

 

 

761,768

 

 

 

 

 

 

 

761,768

 

Net Loss from Continuing Operations

 

 

(2,326,330 )

 

 

(4,931,769 )

 

 

(7,258,099 )

Adjustments to reconcile net loss to net cash used in operating activities:

 

 

 

 

 

 

 

 

 

 

 

 

Depreciation, Depletion, Amortization, and Accretion

 

 

7,834

 

 

 

 

 

 

 

7,834

 

Bad debt Expense

 

 

17,694

 

 

 

 

 

 

 

17,694

 

Share-Based Compensation

 

 

29,425

 

 

 

 

 

 

 

29,425

 

Loss from Equity Method Investment

 

 

 

 

 

 

 

 

 

 

Change in Fair Value of Derivative Liability

 

 

--

 

 

 

4,931,764

 

 

 

4,931,764

 

Changes in Components of Working Capital and Other Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Accounts Receivable

 

 

(7,213

 

 

 

 

 

 

 

(7,213 )

Other Current Assets

 

 

234,145

 

 

 

 

 

 

 

234,145

 

Accounts Payable and Accrued Expenses

 

 

(409,683 )

 

 

 

 

 

 

(409,683 )

Net Cash Used in Operating Activities from Continuing Operations

 

 

(2,454,133 )

 

 

 

 

 

 

(2,454,133 )

Net Cash Used in Operating Activities from Discontinued Operations

 

 

(383,770

 

 

 

 

 

 

 

(383,770 )

Net Cash Used in Operating Activities

 

 

(2,837,903 )

 

 

 

 

 

 

(2,837,903 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Investing Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Cash Paid for Subsidiary

 

 

(1,050,000

 

 

 

 

 

 

 

(1,050,000 )

Cash Paid for Issuance of Notes Receivable

 

)

 

 

 

 

 

 

 

Cash Received for Deposits

 

 

(31,534

 

 

 

 

 

 

 

(31,534 )

Net Cash Used in Investing Activities from Continuing Operations

 

 

(1,081,534 )

 

 

 

 

 

 

(1,081,534 )

Net Cash Used in Investing Activities from Discontinued Operations

 

 

(70,440

 

 

 

 

 

 

 

(70,440 )

Net Cash Used in Investing Activities

 

 

(1,151,974 )

 

 

 

 

 

 

(1,151,974 )

 

 

 

 

 

 

 

 

 

 

 

 

 

Financing Cash Flows

 

 

 

 

 

 

 

 

 

 

 

 

Cash Paid for Settlement of Series B Preferred Stock Warrants

 

 

(25,000

 

 

 

 

 

 

 

(25,000 )

Proceeds from Issuance of Series C Preferred Stock

 

 

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Financing Activities from Continuing Operations

 

 

(25,000

 

 

 

 

 

 

 

(25,000 )

Net Cash Provided by Financing Activities from Discontinued Operations

 

 

454,210

 

 

 

 

 

 

 

454,210

 

Net Cash Provided by Financing Activities

 

 

429,210

 

 

 

 

 

 

 

429,210

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Increase (Decrease) in Cash

 

 

(3,560,667

 

 

 

 

 

 

 

(3,560,667 )

Cash at Beginning of the Period

 

 

7,778,723

 

 

 

 

 

 

 

7,778,723

 

Cash at End of the Period

 

$ 4,218,056

 

 

 

 

 

 

$ 4,218,056

 

 

 
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NOTE 5 – PROPERTY AND EQUIPMENT

 

Oil and Gas Properties

 

Camber uses the full cost method of accounting for oil and natural gas producing activities. Costs to acquire mineral interests in oil and natural gas properties, to drill and equip exploratory wells used to find proved reserves, and to drill and equip development wells including directly related overhead costs and related asset retirement costs are capitalized.

 

Under this method, all costs, including internal costs directly related to acquisition, exploration, and development activities are capitalized as oil and natural gas property costs on a country-by-country basis. Costs not subject to amortization consist of unproved properties that are evaluated on a property-by-property basis. Amortization of these unproved property costs begins when the properties become proved or their values become impaired. Camber assesses overall values of unproved properties, if any, on at least an annual basis or when there has been an indication that impairment in value may have occurred. Impairment of unproved properties is assessed based on management’s intention with regard to the future development of individually significant properties and the ability of Camber to obtain funds to finance its programs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

 

Sales of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.

 

Costs of oil and natural gas properties are amortized using the units of production method. Amortization expense calculated per equivalent physical unit of production amounted to $0.57 and $0.95 per barrel of oil equivalent for the six months ended September 30, 2020, and 2019, respectively.

  

 
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All of Camber’s oil and natural gas properties are located in the United States. Costs being amortized at September 30, 2020, and March 31, 2020, are as follows:

 

 

 


September 30,

2020

 

 


March 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 depreciation, depletion, and impairment

 

 

(78,356,957 )

 

 

(78,351,825 )

Net Capitalized Costs

 

$ 75,394

 

 

$ 110,617

 

 

Impairments

 

For the three and six month periods ended September 30, 2020, and 2019, the Company recorded no impairment.

 

Additions and Depletion

 

During the six months ended September 30, 2020, and 2019, the Company incurred no costs for technical and other capital enhancements to extend the lives of the Company’s wells. Additionally, the Company recorded $4,871 and $6,572 of depletion for the six months ended September 30, 2020, and 2019, respectively. The Company recorded $2,164 and $2,572 of depletion for the three months ended September 30, 2020, and 2019, respectively.

 

Leases

 

As part of the Lineal Acquisition, the Company acquired various operating and finance leases for sales and administrative offices, motor vehicles, and machinery and equipment. Due to the Redemption Agreement discussed in – “Note 1 – General” and below in “Note 12 – Lineal Merger Agreement and Divestiture”, the Company no longer owns the operating and finance leases that it had acquired in connection with the Lineal Acquisition.

 

Effective August 1, 2018, the Company entered into a month-to-month lease at 1415 Louisiana, Suite 3500, Houston, Texas 77002. The entity providing use of the space without charge is affiliated with the Company’s Chief Financial Officer.

 

NOTE 6 – PLAN OF MERGER AND INVESTMENT IN UNCONSOLIDATED ENTITY

 

Viking Plan of Merger and Related Transactions

 

On February 3, 2020, the Company and Viking entered into a Merger Agreement, which was amended and restated by an Amended and Restated Agreement and Plan of Merger entered into with Viking on August 31, 2020 (the Merger Agreement). Pursuant to the Merger Agreement, at the effective time of the Merger, (a) each share of common stock of Viking issued and outstanding, other than certain shares owned by the Company, Viking and the Company’s merger sub which will be merged with and into Viking, with Viking being the surviving entity in the merger (“Merger Sub”), will be converted into the right to receive the pro-rata share (when including the Viking preferred stock conversion rights) of 80% of the Company’s post-closing capitalization (excluding shares issuable upon conversion of the Series C Preferred Stock of the Company); and (b) each share of Viking preferred stock outstanding immediately prior to the effective time will be converted into one share of Camber Series A Preferred Stock, which preferred stock will have the right to vote, and convert into, that number of shares of Camber common stock that its holder would have received in the Merger, had such holder fully converted the Viking preferred stock into Viking common stock immediately prior to the Effective Time. Holders of Viking common stock will have any fractional shares of Company common stock after the Merger rounded up to the nearest whole share. The Merger Agreement can be terminated under certain circumstances, including by either Viking or the Company if the Merger has not been consummated on or before December 31, 2020, subject to certain exceptions.

  

 
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A further requirement to the closing of the Merger was that the Company was required to have acquired 30% of Elysium as part of a $9,200,000 investment in Viking’s Rule 506(c) offering, which transaction was completed on February 3, 2020 (25% of Elysium and $5 million investment) and June 25, 2020 (5% of Elysium and $4.2 million investment), as discussed below. In the event of termination of the Merger Agreement, Camber is required, under certain circumstances described below, to return a portion of the Elysium interests to Viking:

 

Reason for Termination

 

Percentage of Elysium

Retained by

Camber

 

Termination of the Merger Agreement by mutual agreement of the parties because the conditions to closing the Merger relating to the receipt of exchange listing and regulatory approvals and the Registration Statement on Form S-4, being declared effective, have a reasonable likelihood of not being satisfied through no fault of Camber or Viking

 

 

20 %*

Termination of the Merger Agreement due to either (i) Camber’s determination not to proceed with the Merger even though Viking has substantially performed its obligations pursuant to the Merger Agreement (except as discussed below), or (ii) a matter raised in Camber’s Merger Agreement disclosure schedule which was (A) not disclosed by Camber in its SEC reports, (B) could reasonably result in a material adverse effect on Camber in excess of $500,000, and (c) which Viking objected to within 5 business days of disclosure by Camber to Viking

 

 

0 %*

Termination of the Merger Agreement due to the failure of Camber’s shareholders to approve the terms of the Merger

 

 

15 %*

Termination of the Merger Agreement by either party due to any other reason not set forth above through no fault of Camber

 

 

25 %*

In the event the Secured Notes are not repaid within 90 days of the date of termination and the Additional Payment (defined above) is not made

 

 

30 %

 

*Assumes the payment of Secured Notes (defined below) within 90 days of the date of termination of the Merger Agreement and the Additional Payment (defined below) is made.

 

The Merger Agreement provides that the Secured Notes (defined below) will be forgiven in the event the Merger closes, and the Secured Notes will be due 90 days after the date that the Merger Agreement is terminated by any party for any reason, at which time an additional payment shall also be due to the Company and payable by Viking in an amount equal to (i) 115.5% of the original principal amount of the Secured Notes, minus (ii) the amount due to the Company pursuant to the terms of the Secured Notes upon repayment thereof (the “Additional Payment”) is due.

 

A required condition to the entry into the Merger was that the Company loan Viking $5 million, pursuant to the terms of a Securities Purchase Agreement, which was entered into on February 3, 2020 (the “1st SPA”). On February 3, 2020, the Company and Discover Growth Fund, an institutional investor (“Discover”), entered into a Stock Purchase Agreement pursuant to which Discover purchased 525 shares of Series C Preferred Stock of the Company, for $5 million, at a 5% original issue discount to the $10,000 face value of such preferred stock. Pursuant to the 1st SPA, the Company made a $5 million loan to Viking (using funds raised from the sale of the Series C Preferred Stock shares to Discover), which was evidenced by a 10.5% Secured Promissory Note (the “1st Secured Note”). On June 25, 2020, the Company advanced an additional $4.2 million to Viking in consideration for, among other things, an additional 10.5% Secured Promissory Note in the principal amount of $4.2 million (the “2nd Secured Note” and together with the 1st Secured Note, the “Secured Notes”).

  

 
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The Secured Notes accrue interest at the rate of 10.5% per annum, payable quarterly, and are due and payable on February 3, 2022. The notes include standard events of default, including certain defaults relating to the trading status of Viking’s common stock and change of control transactions involving Viking. The Secured Notes can be prepaid at any time with prior notice as provided therein, and together with a pre-payment penalty equal to 10.5% of the original amount of the Secured Notes. The Secured Notes are secured by a security interest, pari passu with the other investors in Viking’s Secured Note offering (subject to certain pre-requisites) in Viking’s 70% ownership of Elysium and 100% of Ichor Energy Holdings, LLC. Additionally, pursuant to a separate Security and Pledge Agreement, Viking provided Camber a security interest in the membership, common stock, and/or ownership interests of all of Viking’s existing and future, directly owned or majority-owned subsidiaries, to secure the repayment of the Secured Notes.

 

The Secured Notes are convertible into common shares of Viking at a conversion price of $0.24 per share at any time after March 4, 2020, and before the 15th day after Viking’s common stock has traded at an average daily price of at least $0.55 for 15 consecutive business days (at which point the Secured Notes are no longer convertible), provided that the Company is restricted from converting any portion of the Secured Notes into Viking’s common stock if upon such conversion the Company would beneficially own more than 4.99% of Viking’s common stock (which percentage may be increased or decreased, with 61 days prior written notice to Viking, provided that such percentage cannot under any circumstances be increased to greater than 9.99%).

 

On and effective June 22, 2020, the Company and Discover entered into a Stock Purchase Agreement (the “June 2020 Purchase Agreement”), pursuant to which Discover purchased 630 shares of Series C Preferred Stock for $6 million, at a 5% original issue discount to the $10,000 face value of such preferred stock (the “Face Value”). Provided that the Company has not materially breached the terms of the June 2020 Purchase Agreement, the Company may at any time, in its sole and absolute discretion, repurchase from Discover all, but not less than all, of the then outstanding shares of Series C Preferred Stock sold pursuant to the agreement by paying to Discover 110% of the aggregate face value of all such shares.

 

The Company agreed pursuant to the June 2020 Purchase Agreement that if the Merger does not close by the required date approved by the parties thereto (as such may be extended from time to time), the Company is required, at Discover’s option, in its sole and absolute discretion, to immediately repurchase from Discover all then outstanding Series C Preferred Stock shares acquired by Discover pursuant to the June 2020 Purchase Agreement, by paying to Discover 110% of the aggregate Face Value of all such shares (the “Repurchase Requirement”), which totals $6,930,000. The Repurchase Requirement was terminated in connection with the parties’ entry into the Exchange Agreement in December 2020, discussed below under “Note 19—Subsequent Events”.

 

On June 22, 2020, the Company and Discover entered into an Amendment to Stock Purchase Agreement (the “SPA Amendment”), pursuant to which Discover agreed to terminate the obligation set forth in the February 2020 Stock Purchase Agreement previously entered into between the Company and Discover on February 3, 2020, which contained a Repurchase Requirement substantially similar to the one contained in the June 2020 Purchase Agreement (as to the 525 shares of Series C Preferred Stock sold to Discover on February 3, 2020), which would have required that the Company pay Discover an aggregate of $5,775,000 in connection with the redemption of the 525 shares of Series C Preferred Stock the Company sold to Discover in the event the Merger was terminated.

 

Investment in Unconsolidated Entity

 

The Company accounts for its investment in unconsolidated entities under the equity method of accounting when it owns less than 50% of a controlling interest and does not have the ability to exercise significant influence over the operating and financial policies of the entity. The Company owns 30% of Elysium as of September 30, 2020 (25% from February 3, 2020, to June 25, 2020), as discussed above, and accounts for such ownership under the equity method of accounting. The investment is adjusted accordingly for dividends or distributions it receives and its proportionate share of earnings or losses of the entity. Elysium is involved in oil and gas exploration and production in the United States. The balance sheet of Elysium at September 30, 2020, included current assets of $2.3 million, total assets of $30.8 million, total liabilities of $34.9 million, and net liabilities of $(4.1) million. The balance sheet of Elysium at March 31, 2020, included current assets of $4.0 million, total assets of $37.7 million, total liabilities of $34.0 million, and net assets of $3.7 million. Additionally, the income statement for Elysium for the three and six months ended September 30, 2020, included total revenues of $4.0 million and $7.8 million and a net loss of $3.2 million and $7.5 million, respectively.

 

 
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The carrying value of the notes receivable was reduced by $1,182,952, as the Company’s share of losses from Elysium for the six months ended September 30, 2020. In accordance with ASC 323-10-35, the losses from Elysium exceeded the equity investment of the Company which was used to reduce the related notes receivable balance. If the losses were to exceed the notes receivable balance, no additional losses would be recorded for the equity investment.

 

The table below shows the changes in the investment in the unconsolidated entity for the six-month periods ended September 30, 2020 and 2019, respectively.

 

 

 

2020

 

 

2019

 

Carrying amount at beginning of period

 

$ 957,169

 

 

$

 

Investment in Elysium

 

 

 

 

 

 

Equity change in net loss of unconsolidated entity applied to Long-Term Notes Receivable

 

 

1,182,952

 

 

 

 

Proportionate Share of Elysium Loss

 

 

(2,140,121 )

 

 

 

Carrying amount at end of period

 

$

 

 

$

 

 

NOTE 7 – LONG-TERM NOTES RECEIVABLE

 

Long-term notes receivable as of September 30, 2020, and March 31, 2020, are comprised of:

 

 

 

September 30,
2020

 

 

March 31,
2020

 

Notes receivable from Viking Energy Group, Inc. pursuant to 10.5% Secured Promissory Notes dated February 3, 2020 ($5,000,000) and June 25, 2020 ($4,200,000) in the original principal amount of $9,200,000, having an annual interest rate of 10.5%, with interest due quarterly beginning on May 1, 2020, maturing February 3, 2022. Accrued and unpaid interest of $132,329 and $83,425 is included in accounts receivable at September 30, 2020, and March 31, 2020, respectively. The Note is secured by secured interests in six Viking Energy Group, Inc. subsidiaries. See also “Note 6 – Plan of Merger and Investment In Unconsolidated Entity”.

 

$ 9,200,000

 

 

$ 5,000,000

 

Note receivable from Lineal Star Holdings, LLC pursuant to a Promissory Note dated effective December 31, 2019, in the original principal amount of $1,539,719, accruing annual interest of 10.5%, due quarterly beginning on March 31, 2020, maturing December 31, 2021, with accrued and unpaid interest of $16,132 and $37,966 included in accounts receivable at September 30, 2020, and March 31, 2020, respectively. The Company recognized a partial allowance of $76,152 and the related accrued interest has been fully reserved as of September 30, 2020. See also “Note 1 – General” and “Note 12 – Lineal Merger Agreement and Divestiture”.

 

 

1,539,719

 

 

 

1,539,719

 

Note receivable from Lineal Star Holdings, LLC pursuant to a Promissory Note No. 2 dated effective December 31, 2019, in the original principal amount of $800,000, accruing annual interest of 8%, due quarterly beginning on March 31, 2020, maturing December 31, 2021, with accrued and unpaid interest of $38,809 and $15,781 included in accounts receivable at September 30, 2020, and March 31, 2020, respectively. The Company recognized a partial allowance of $39,567 and the related accrued interest has been fully reserved as of September 30, 2020. See also “Note 1 – General” and “Note 12 – Lineal Merger Agreement and Divestiture”.

 

 

800,000

 

 

 

800,000

 

Equity loss of unconsolidated entity applied to notes receivable. See also “Note 6 – Plan of Merger and Investment In Unconsolidated Entity”

 

 

(1,182,952 )

 

 

 

Less allowance for notes receivable

 

 

(115,719 )

 

 

 

Less: current maturities

 

 

 

 

 

 

Total

 

$ 10,241,048

 

 

$ 7,339,719

 

  

 
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As discussed in Note 12, the Lineal notes are unsecured. Due to the impact of COVID-19 on its operations, Lineal notified the Company that it currently has insufficient liquidity to make scheduled interest payments due under the notes. The Company is in negotiations with Lineal to restructure the notes receivable and an allowance has been applied to the principle and accrued interest of these notes (discussed further below) subject to completion of the negotiations. The Company performed an analysis of Lineal notes to estimate their value as of September 30, 2020. The Company analyzed information received from Lineal including Lineal’s financial statements, which calculated the value of the notes and discounted the expected future payments due thereunder using a standard discounted cash flow model for the principal and accrued interest to the maturity date from September 30, 2020. The Company applied a discount of 15% based on factors in the Lineal notes to determine a valuation as of September 30, 2020.

 

Based on this analysis, the Company recorded a total allowance of $170,660 to reduce the reported value of the Lineal notes and accrued interest, fully reserving the current interest due of $54,941 with the remainder of $115,719 applied as an allowance to the principal value of the notes as of September 30, 2020.

 

NOTE 8 – ASSET RETIREMENT OBLIGATIONS

 

The following table presents the reconciliation of the beginning and ending aggregate carrying amounts of long-term legal obligations associated with the future retirement of oil and natural gas properties for the six-month periods ended September 30, 2020, and 2019, respectively.

 

 

 

2020

 

 

2019

 

Carrying amount at beginning of period

 

$ 71,750

 

 

$ 303,809

 

Panhandle Settlement

 

 

(30,227 )

 

 

 

Payments

 

 

 

 

 

 

Accretion

 

 

 

 

 

2

 

Revisions of previous estimates

 

 

4,260

 

 

 

8,258

 

Carrying amount at end of period

 

$ 45,783

 

 

$ 312,069

 

 

Camber has short-term obligations of $25,766 and $30,277 related to the plugging liabilities at September 30, 2020, and March 31, 2020, respectively.

 

NOTE 9 – DERIVATIVE LIABILITY

 

The Company has determined that certain warrants and certain obligations to issue additional shares relating to conversions of the Series C Preferred Stock contain provisions could result in modification of the warrants’ exercise price or the Series C Preferred Stock conversion price that is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 - 40.

 

The warrants granted to Ironman PI Fund II, LP contain anti-dilution provisions that provide for a reduction in the exercise price of such warrants in the event that future common stock (or securities convertible into or exercisable for common stock) is issued (or becomes contractually issuable) at a price per share (a “Lower Price”) that is less than the exercise price of such warrant at the time. The amount of any such adjustment is determined in accordance with the provisions of the warrant agreement and depends upon the number of shares of common stock issued (or deemed issued) at the Lower Price and the extent to which the Lower Price is less than the exercise price of the warrant at the time. The warrants expired on April 21, 2019.

 

The Series C Preferred Stock are convertible into shares of common stock at a fixed $3.25 conversion rate. Upon conversion, the holder is entitled to dividends as if the shares had been held to maturity, which is referred to as the Conversion Premium. The Conversion Premium may be paid in shares or cash, at the option of the Company. If the Conversion Premium is paid in cash, the amount is fixed and not subject to adjustment. If the Conversion Premium is paid in shares, the conversion ratio is based on a VWAP calculation based on the lowest stock price over the Measurement Period. The Measurement Period is 30 days (or 60 days if there is a Triggering Event) prior to the conversion date and 30 days (or 60 days if there is a Triggering Event) after the conversion date. The VWAP calculation is subject to adjustment if there is a Triggering Event and the Measurement Period is subject to adjustment in the event that the Company is in default of one or more Equity Conditions provided in the Certificate of Designation. For example, the Measurement period may be extended one day for every day the Company is not in compliance with one or more of the Equity Conditions.

    

At the conversion date, the number of shares due for the Conversion Premium is estimated based on the previous 30-day VWAP. If the Company does not elect to pay the Conversion Premium in cash, the Company will issue all shares due for the conversion and the estimated shares due for the conversion premium. If the VWAP calculation for the portion of the Measurement Period following the date of conversion is lower than the VWAP for the portion of the Measurement Period prior to the date of conversion, the holder will be issued additional common shares, referred to as “true-up” shares. If the VWAP calculation is higher, no true-up shares are issued.

 

Management has determined that the obligation to issue additional shares under the Conversion Premium creates a derivative liability. The determination of the number of true-up shares due, if any, is based on the lowest VWAP calculation over the Measurement Period that extends beyond the conversion date. In addition, if the Company has not complied with certain provisions of the Certificate of Designation, the Measurement Period does not end until the Company is in compliance. The obligation to issue true-up shares is a derivative liability.

 

The derivative liability for the True-Up Shares at the end of each period represents Series C Preferred Stock conversions in respect of which the Measurement Period had not expired as of the period end.  

    

 
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Activities for derivative warrant instruments during the six months ended September 30, 2020, and 2019 were as follows:

 

 

 

2020

 

 

2019

 

Carrying amount at beginning of period

 

$

 

 

$ 5

 

Change in fair value

 

 

 

 

 

(5 )

Carrying amount at end of period

 

$

 

 

$

 

 

Activities for derivative Series C Preferred Stock derivative liability during the six months ended September 30, 2020 and 2019 were as follows (restated):

 

 

 

2020

 

 

2019

 

Carrying amount at beginning of period

 

$ 8,669,831

 

 

$ 3,911,649

 

Settlements of derivative liabilities (issuance of shares)

 

 

(3,755,017 )

 

 

 

 

Change in fair value

 

 

25,952,119

 

 

 

4,931,769

 

Carrying amount at end of period

 

$ 30,866,933

 

 

$ 8,843,418

 

 

The fair value of the derivative liability has been estimated using a binomial model and applying the conversion price (or the lowest trading price for the Company’s common stock subsequent to the conversion, if lower than the conversion price) and the historical volatility of the Company’s common stock.

 

Additionally, as of September 30, 2020, the Company had 2 outstanding stock options and warrants to purchase 36 shares outstanding which were exercisable for shares of the Company’s commons stock. As of September 30, 2020, the Company did not have sufficient authorized shares of common stock to satisfy any exercise requests and the common stock equivalents are considered to be tainted derivative instruments.

 

NOTE 10 – COMMITMENTS AND CONTINGENCIES

 

Office Lease. Information regarding the Company’s office space is disclosed in greater detail above under “Note 5 – Property and Equipment –Leases”, above.

 

Lineal (which as of December 31, 2019, has been completely divested in connection with the Lineal Divestiture discussed in “Note 1 – General” and “Note 12 – Lineal Merger Agreement and Divestiture”) has the usual liability of contractors for the completion of contracts and the warranty of its work. In addition, Lineal acts as the prime contractor on a majority of the projects it undertakes and is normally responsible for the performance of the entire project, including subcontract work. Management is not aware of any material exposure related thereto which has not been provided for in the accompanying consolidated financial statements.

 

Legal Proceedings. From time to time suits and claims against Camber arise in the ordinary course of Camber’s business, including contract disputes and title disputes. Camber records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated.

 

Maranatha Oil Matter

 

In November 2015, Randy L. Robinson, d/b/a Maranatha Oil Co. sued the Company in Gonzales County, Texas (Cause No. 26160). The plaintiff alleged that it assigned oil and gas leases to the Company in April 2010, retaining a 4% overriding royalty interest and 50% working interest and that the Company failed to pay such overriding royalty interest or royalty interest. The interests relate to certain oil and gas properties which the Company subsequently sold to Nordic Oil USA in April 2013. The petition alleges causes of actions for breach of contract, failure to pay royalties, non-payment of working interest, fraud, fraud in the inducement of contract, money had and received, constructive trust, violation of theft liability act, continuing tort, and fraudulent concealment. The suit seeks approximately $100,000 in amounts alleged owed, plus pre-and post-judgment interest. The Company has filed a denial to the claims and intends to vehemently defend itself against the allegations.

  

 
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PetroGlobe Energy Holdings, LLC and Signal Drilling, LLC

 

In March 2019, PetroGlobe and Signal sued the Company in the 316th Judicial District of Hutchinson County, Texas (Cause No. 43781). The plaintiffs alleged causes of action relating to negligent misrepresentation; fraud and willful misconduct; gross negligence; statutory fraud; breach of contract; and specific performance, in connection with a purchase and sale agreement entered into between the parties in March 2018, relating to the purchase by plaintiffs of certain oil and gas assets from the Company, and a related joint venture agreement. The lawsuit seeks in excess of $600,000 in damages, as well as pre- and post-judgment interest, court costs and attorneys’ fees, and punitive and exemplary damages. Additionally, a portion of the revenues from the properties in contention are being held in suspense as a result of the lawsuit. On October 31, 2019, the Company brought counterclaims against PetroGlobe and Signal, and Petrolia Oil, LLC, and Ian Acrey, including bringing claims for causes of actions including declaratory judgment (that PetroGlobe and certain other plaintiffs represented that a lease and related wells were free of all agreements and rights in favor of third parties and provided a special warranty of title pursuant to the purchase and sale agreement); breach of contract (in connection with the purchase and sale agreement); statutory fraud; common law fraud (against Mr. Acrey and other plaintiffs); fraud by non-disclosure (against Mr. Acrey and other plaintiffs); negligent misrepresentation (against Mr. Acrey and other plaintiffs); breach of fiduciary duty (against Mr. Acrey and other plaintiffs) and seeking attorney’s fees and pre- and post-judgment interest.

 

On May 30, 2019, the Company received a Severance Order from the Texas Railroad Commission (the “TRC”) for noncompliance with TRC rules, suspending the Company’s ability to produce or sell oil and gas from its Panhandle leases in Hutchinson County, Texas, until certain well performance criteria were met. Subsequent to that date, the Company followed TRC procedures in order to regain TRC compliance for the Panhandle wells.

 

On January 31, 2020, the Company entered into a Compromise Settlement Agreement (the “Settlement Agreement”) with PetroGlobe Energy Holdings, LLC (“PetroGlobe”), Signal Drilling, LLC (“Signal”), Petrolia Oil, LLC (“Petrolia”), Prairie Gas Company of Oklahoma, LLC (“PGCO”), and Canadian River Trading Company, LLC (“CRTC”). Pursuant to the Settlement Agreement, the Company agreed to pay PetroGlobe $250,000, of which $100,000 was due upon execution of the Settlement Agreement, which payment has been made, and $150,000 was paid to an escrow account, which release was subject to approval by the Company upon the successful transfer of all wells and partnership interests of the Company’s current wholly-owned subsidiary CE to PetroGlobe, which occurred on July 16, 2020.

 

On July 16, 2020, the Company completed all of the requirements of the Settlement Agreement and assigned PetroGlobe all of its right, title, and interest in all wells, leases, royalties, minerals, equipment, and other tangible assets associated with specified wells and properties, located in Hutchinson County, Texas, the $150,000 held in escrow was released to PetroGlobe and the Settlement Agreement transactions closed. As a result of the transfers, the Company no longer owns CE, and no longer has any interest in or any liabilities related to the Hutchinson County, Texas wells.

 

The Company recognized a net settlement cost of $204,842 included on the statement of operations for the year ended March 31, 2020, in connection with the settlement. All provisions of the settlement were finalized, and the $150,000, held in escrow pending final approvals, was released on July 16, 2020.

 

The Company released the parties to the Settlement Agreement, including Ian Acrey, individually, as well as their officers, directors, or members from any claims asserted in the lawsuit, and the parties to the Settlement Agreement along with Ian Acrey, individually, released the Company, its officers, directors, shareholders and affiliate corporations from any claims asserted in the lawsuit. The Company did not release any claims or causes of action against N&B Energy, LLC, Sezar Energy, LLP related to Richard Azar, or any of their affiliates, or predecessors, or successors.

 

The parties filed a motion and order to dismiss the lawsuit with prejudice shortly after the execution of the Settlement Agreement.

  

 
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Apache Corporation

 

In December 2018, Apache Corporation (“Apache”) sued Camber, Sezar Energy, L.P., and Texokcan Energy Management Inc., in the 129th Judicial District Court of Harris County, Texas (Cause 2018-89515). Apache alleged causes of action for Breach of Contract, Money Had & Received and Conversion, relating to amounts Apache alleged it was owed under a joint operating agreement. Apache is seeking $656,908 in actual damages, exemplary damages, pre- and post-judgment interest, court costs, and other amounts to which it may be entitled. Camber filed a general denial to the claims and asserted the affirmative defense of failure to mitigate. On July 13, 2020, Apache filed a Second Amended Petition against Camber, Sezar, Texokcan, N&B Energy, LLC, and Richard N. Azar, II alleging Breach of Contract, Defaults under a Joint Operating Agreement, Money Had & Received and Conversion, relating to amounts Apache allegedly overpaid Sezar and Azar and Unjust Enrichment. On October 26, 2020, the Company entered into an agreement with Apache to obtain a release of all liability (both parties provided mutual releases) for $20,000 and dismissed the litigation against the Company, which was recorded in accrued liabilities as of September 30, 2020.

 

N&B Energy

 

On September 12, 2019, N&B Energy filed a petition in the District Court for the 285th Judicial District of Bexar County, Texas (Case #2019CI11816). Pursuant to the petition, N&B Energy raises claims against the Company for breach of contract, unjust enrichment, money had and received and disgorgement, in connection with $706,000 which it alleges it is owed under the July 2018 Asset Purchase Agreement between the Company and N&B Energy (the “Sale Agreement”), for true-ups and post-closing adjustments associated therewith. The petition seeks amounts owed, pre- and post-judgment interest, and attorney’s fees. On October 21, 2020, the arbitrator issued an Interim Stage II Order granting an award that acknowledged the claims of both parties that resulted in an arbitration award in favor of N&B Energy of approximately $52,000, which was recorded in accrued liabilities as of September 30, 2020.

 

Service Agreements

 

In connection with the entry into the Amended and Restated Agreement and Plan of Merger with Viking, on August 31, 2020, the Company’s Board of Directors entered into Past Service Payment and Success Bonus Agreements with each non-executive member of the Board of Directors, and each of Louis G. Schott, our Interim Chief Executive Officer and Robert Schleizer, our Chief Financial Officer (collectively, the “Merger Compensation Agreements”). Pursuant to such agreements: each non-executive director, and each officer, of the Company, is to receive, contingent upon closing the Merger, a payment of $100,000 in consideration for past services provided to the Company through the date of the Merger as a member of the Board of Directors/officer, and $50,000 as a success bonus for the Company’s successful completion of the Merger, contingent on such non-executive director/officer’s, continued service to the Company at the same level of service he is currently performing, through the effective date of the Merger.

 

Additionally on August 31, 2020, the Company entered into first amendments to the letter agreements the Company had previously entered into with Fides Energy LLC, an entity owned and controlled by Mr. Schott (“Fides”) and BlackBriar Advisors LLC, an entity owned and controlled by Mr. Schleizer (“BlackBriar”), to provide that (a) Mr. Schott, through Fides, will continue to provide services to the Company for a period of six months following the closing of the Merger, on similar terms as set forth in such original letter agreement, except in a non-executive capacity and that the Company will reimburse Mr. Schott for the costs of his and his family’s health insurance through such six month term; and (b) Mr. Schleizer, through BlackBriar, will continue to provide services to the Company for a period of three months following the closing of the Merger, on similar terms as set forth in such original letter agreement, except in a non-executive capacity and for total consideration of $30,000 per month (compared to $40,000 per month currently).

  

 
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NOTE 11 – REVENUE FROM CONTRACTS WITH CUSTOMERS

 

Disaggregation of Revenue from Contracts with Customers

 

Oil and Gas Contracts

 

The following table disaggregates revenue by significant product type for the three and six months ended September 30, 2020, and 2019, respectively:

 

 

 

Three Months Ended

 

 

Six Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2020

 

 

2019

 

 

2020

 

 

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 from customers

 

$ 57,458

 

 

$ 92,753

 

 

$ 91,147

 

 

$ 214,104

 

 

NOTE 12 – LINEAL MERGER AGREEMENT AND DIVESTITURE

 

Merger Agreement

 

On July 8, 2019 (the “Closing Date”), the Company entered into and closed the transactions contemplated by, the Lineal Plan of Merger, by and between the Company, Camber Energy Merger Sub 2, Inc., the Company’s then newly formed wholly-owned subsidiary, Lineal, and the Lineal Members. Pursuant to the Lineal Plan of Merger, the Company acquired 100% of the ownership of Lineal from the Lineal Members in consideration for newly issued shares of Series E Redeemable Convertible Preferred Stock and Series F Redeemable Preferred Stock.

 

Divestiture

 

On December 31, 2019, the Company entered into and closed the transactions contemplated by the Preferred Stock Redemption Agreement (the “Redemption Agreement”), by and between the Company, Lineal, and the holders of the Company’s Series E Preferred Stock and Series F Preferred Stock (the “Preferred Holders”), pursuant to which, the Company redeemed the Company’s Series E and F Preferred Stock issued in connection with the Lineal Merger and ownership of 100% of Lineal was transferred back to the Preferred Holders, and all of the Series E Preferred Stock and Series F Preferred Stock of the Company outstanding were canceled through the redemption (the “Lineal Divestiture”).

 

The Redemption Agreement also provided for (a) the entry by Lineal and the Company into a new unsecured promissory note in the amount of $1,539,719, the outstanding amount of the July 2019 Lineal Note together with additional amounts loaned by Camber to Lineal through December 31, 2019 (the “December 2019 Lineal Note”); (b) the unsecured loan by the Company to Lineal on December 31, 2019, of an additional $800,000, entered into by Lineal in favor of the Company on December 31, 2019 (“Lineal Note No. 2”); and (c) the termination of the prior Lineal Plan of Merger and Funding Agreement entered into in connection therewith (pursuant to which all funds previously held in a segregated account for future Lineal acquisitions, less amounts loaned pursuant to Lineal Note No. 2, were released back to the Company). The December 2019 Lineal Note and Lineal Note No. 2, accrue interest, payable quarterly in arrears, beginning on March 31, 2020, and continuing until December 31, 2021, when all interest and principal is due, at 8% and 10% per annum (18% upon the occurrence of an event of default), respectively. As of September 30, 2020, and March 31, 2020, $54,941 and $53,747, respectively, of interest related to the December 2019 Lineal Note and Lineal Note No. 2 was accrued and included in the consolidated balance sheets in Accounts Receivable. The $54,941 of accrued interest has been fully reserved as of September 30, 2020.

  

 
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The divestiture resulting from the Redemption Agreement qualified as a discontinued operation in accordance with U.S. generally accepted accounting principles (“GAAP”). As a result, operating results and cash flows related to the Lineal operations have been reflected as discontinued operations in the Company’s consolidated statements of operations and consolidated statements of cash flows for the three and six months ended September 30, 2019.

 

The net consideration received for the divestiture was as follows:

 

Return of Series E Preferred Shares

 

$

 14,666,000

 

Return of Series F Preferred Shares

 

 

2,434,000

 

Total net consideration

 

$

 17,100,000

 

 

The fair value of the instruments immediately prior to the divestiture was determined using an income valuation approach to estimate cash flows of the acquired business, analysis of the terms and rights of each class of equity instrument issued by the Company, and an assessment of the probability of the various scenarios that could occur depending on the outcome of the required stockholder vote to approve the Lineal Merger, which did not move forward, and the impact each scenario would have on the capital structure of the Company. Immediately prior to the Lineal Disposition, the Company recognized a gain on the change in fair value of the Series E and F Preferred Shares of $3,018,000, included within net loss from discontinued operations.

 

The following table summarizes the assets and liabilities of Lineal which were transferred from the Company to the Preferred Holders, together with Lineal, as part of the Redemption agreement:

 

Cash

 

$ 2,101,879

 

Accounts receivable

 

 

1,673,538

 

Deferred tax assets

 

 

34,000

 

Cost in excess of billings

 

 

497,340

 

Property and equipment

 

 

1,996,229

 

Right of use asset – operating leases

 

 

710,898

 

Other current assets and deposits

 

 

49,275

 

Goodwill

 

 

18,314,222

 

Accounts payable – trade

 

 

(260,882 )

Accrued and other liabilities

 

 

(369,448 )

Billings in excess of costs

 

 

(445,759 )

Operating lease liabilities

 

 

(710,898 )

Finance lease liabilities

 

 

(237,925 )

Notes payable

 

 

(3,545,841 )

   Net assets divested

 

$ 19,806,628

 

   

As a result of the above, the Company recognized a loss on the disposal of the Lineal operations of $2,706,628 included within net loss from discontinued operations.

  

 
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Components of amounts reflected in the Company’s consolidated statements of operations related to discontinued operations are presented in the following table for the three and six months ended September 30, 2019.

 

 

 

Three Months

Ended

 

 

Six Months

Ended

 

 

 

September 30,

2019

 

 

September 30,

2019

 

Contract revenue

 

$ 6,285,535

 

 

$ 6,285,535

 

Contract costs

 

 

(4,897,196 )

 

 

(4,897,196 )

Depreciation and amortization

 

 

(64,868 )

 

 

(64,868 )

Selling, general and administrative

 

 

(791,312 )

 

 

(791,312 )

Operating income

 

 

532,159

 

 

 

532,159

 

Other income

 

 

263,113

 

 

 

263,113

 

Interest expense

 

 

(33,504 )

 

 

(33,504 )

Net income from discontinued operations

 

$ 761,768

 

 

$ 761,768

 

 

NOTE 13 – INCOME TAXES

 

The Company has estimated that its effective tax rate for U.S. purposes will be zero percent for the 2020 and 2019 fiscal years as a result of net losses and a full valuation allowance against the net deferred tax assets. Consequently, the Company has recorded no provision or benefit for income taxes for the three and six months ended September 30, 2020, and 2019, respectively. The tax liability of $3,000 as shown on the balance sheet as of September 30, 2020, relates to the Company’s potential Oklahoma franchise tax liability and is not related to income tax.

   

NOTE 14 – STOCKHOLDERS’ DEFICIT

 

Common Stock

 

During the six months ended September 30, 2020, the Company issued 176,514 shares of restricted common stock to service providers in consideration for investor relations and marketing services. The Company recognized $209,502, based on the grant date fair value of the Company’s common stock, in share-based compensation expense in current and prior periods corresponding to the issuance of these shares, of which $36,502, was recognized during the three and six months ended September 30, 2020.

 

Included in such 176,514 shares of common stock were 175,000 shares issued to Sylva International LLC d/b/a SylvaCap Media (“SylvaCap”). On February 15, 2020, the Company entered into a letter agreement with SylvaCap, pursuant to which SylvaCap agreed to act as the Company’s non-exclusive digital marketing service provider in consideration for an aggregate of 100,000 shares of restricted common stock, which are fully-earned upon their issuance, and $50,000 per month during the term of the agreement, which was to end on June 15, 2020. On May 19, 2020, the Company entered into a first amendment to the SylvaCap agreement. Pursuant to the amendment, the Company and SylvaCap extended the term of the letter agreement to October 19, 2020. The 100,000 shares were issued on May 15, 2020. On August 31, 2020, the parties entered into a second amendment to the agreement. Pursuant to the amendment, the parties agreed to amend the engagement agreement to increase the stock fee payable thereunder to 175,000 shares of common stock of the Company and to provide for the agreement to remain in place until the earlier of (a) October 19, 2020; and (b) the closing of the Company’s currently contemplated merger with Viking. SylvaCap also made representations regarding its financial condition and investing knowledge pursuant to the amendment in order for the Company to confirm that an exemption from registration exists for the issuance of the shares.

 

Series A Convertible Preferred Stock

 

On August 31, 2020, the Board of Directors approved the designation of 28,092 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), which were designated with the Secretary of State of Nevada on August 31, 2020 (the “Series A Designation”).

 

 
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The Series A Preferred Stock has substantially similar rights as the Series C Preferred Stock of Viking (as amended), as adjusted for the exchange ratio of the Merger. Specifically, each outstanding share of Series A Preferred Stock will vote an aggregate of (a) 4,900 voting shares, multiplied by (b) the exchange ratio of the Merger, on all stockholder matters, voting together with the Company’s common stock as a single class (which voting rights will equal the same voting rights that would have applied had the Series C Preferred Stock of Viking been fully converted into Viking common stock immediately prior to the effective time of the Merger)(described herein as the “voting shares”); will receive, upon the occurrence of a liquidation of the Company, the same amount of consideration that would have been due if such shares of Series A Preferred Stock had been converted into common stock of the Company immediately prior to such liquidation; and provide rights for such shares of Series A Preferred Stock to convert, at the option of the holder thereof, into a number of shares of Company common stock equal to (a) 4,900 shares, multiplied by (b) the exchange ratio of the Merger (which will equal the number of shares of Company common stock which would have been issuable to the holders of the Series C Preferred Stock of Viking in the Merger, had such Series C Preferred Stock been converted into common stock of Viking immediately prior to the effective time of the Merger)(described herein as the “conversion shares”).

 

Such Series A Preferred Stock does not have any redemption rights and shares equally in any dividends authorized by the Board of Directors for distribution to common stockholders, on an as-converted basis.

 

The Series A Designation also provides that such number of voting shares and conversion shares as calculated as discussed above, shall be updated by the Company following the Merger, without any required approval of the holders of such Series A Preferred Stock, to include the actual numerical value of such voting shares and conversion shares, upon closing of the Merger.

 

No shares of Series A Preferred Stock will be issued by the Company until or unless the Merger closes.

 

Series C Redeemable Convertible Preferred Stock

 

On February 3, 2020, the Company sold 525 shares of Series C Preferred Stock for total proceeds of $5 million. In the event the Merger Agreement entered into with Viking in February 2020 is terminated for any reason, we (until June 22, 2020, when such terms were amended) were required to redeem the 525 shares of Series C Preferred Stock at a 110% premium, in an aggregate amount equal to $5,775,000. . In addition, certain provisions of the Series C Preferred Stock may require the Company to redeem the stock, including the requirement to redeem 525 shares of Series C Preferred Stock in the event the Merger Agreement is terminated are termination is outside the control of the Company, I Series C Preferred Stock is classified as temporary equity on the September 30, 2020 and March 31, 2020 balance sheets. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable.

 

During the six months ended September 30, 2020, the Company sold 630 shares of Series C Preferred Stock to Discover in consideration for $6 million. During the six months ended September 30, 2019, the Company sold no shares of Series C Preferred Stock.

  

 
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During the six months ended September 30, 2020, Discover converted 756 shares of the Series C Preferred Stock with a face value of $7,560,000, (recorded value of $11,019,175) and a total of 19,823,486 shares of common stock were issued, which includes additional shares for conversion premiums and true-ups in connection with those conversions through September 30, 2020. During the six months ended September 30, 2019, Discover converted 2 shares of the Series C Preferred Stock and Discover Growth Fund LLC, which purchased shares of Series C Preferred Stock from the Company in December 2018 and subsequently transferred all its remaining shares to Discover who also converted 1 share of Series C Preferred Stock, with an aggregate face value of $30,000, (recorded value of $39,789 )and a total of 1,472,517 shares of common stock were issued, which includes additional shares for conversion premiums and true-ups in connection with those conversions through September 30, 2019.

 

As of September 30, 2020, and March 31, 2020, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 24.95% premium dividend rate. The Company recognized a total charge to additional paid-in capital  of $3,331,975 and $2,922,046 related to the stock dividend declared but not issued for the six months ended September 30, 2020, and 2019, respectively.

 

As of September 30, 2020, a total of 15,348 shares of common stock related to prior conversions of Series C Preferred Stock are held in abeyance subject to the Company increasing its authorized and unissued shares of common stock.

 

On December 14, 2020, the Company, with the approval of the Board of Directors of the Company, and the sole holder of the Company’s Series C Preferred Stock, filed certificate of corrections with the Secretary of State of Nevada to correct the original designation of the Series C Preferred Stock and the first amended and restated designation thereof, to correct certain errors which were identified in such designations, which failed to clarify, in error, that (A) the failure of any holder of Series C Preferred Stock to receive the number of shares of common stock due upon conversion of Series C Preferred Stock within five trading days of any conversion notice, and any halt or suspension of trading of the Company’s common stock on its then applicable trading market or by any U.S. governmental agency, for 10 or more consecutive trading days, should not have been ‘deemed liquidation events’ under the Series C Preferred Stock designation, unless such events were due to the occurrence of an event that is solely within the control of the Company; (B) the Company was not required to redeem any shares of Series C Preferred Stock for cash solely because the Company does not have sufficient authorized but unissued shares of common stock to issue upon receipt of a notice of conversion or upon a maturity conversion (where the remaining shares of Series C Preferred Stock convert into common stock of the Company automatically on the seven year anniversary date of the Series C Preferred Stock)(a “Maturity Conversion”); and (C) that a Maturity Conversion is only required to occur to the extent that the Company has sufficient authorized but unissued shares of common stock available for issuance upon conversion in connection therewith. The corrections were made solely to match the agreements to the original intent of the parties. The parties determined the corrections were needed because without such corrections, under ASC480-10- S99-3A5 and ASC 480-10-S99-3A3(f), the non-corrected designations required the Series C Preferred Stock to be classified as temporary equity due to the foregoing events being outside the Company’s control. However, the corrections failed to remove all redemption provisions that were outside the control of the Company. therefore, the Series C Preferred Stock remained in temporary equity.

 

The corrections were effective as of the original filing dates with the Secretary of State of Nevada of the Company’s original Series C Preferred Stock designation (August 25, 2016) and the Company’s first amended and restated Series C Preferred Stock designation (July 8, 2019), subject to certain exceptions set forth in the Nevada Revised Statutes.

 

Also on December 14, 2020, the Company, with the approval of the Board of Directors of the Company, and the sole holder of the Company’s Series C Preferred Stock, filed a second amended and restated designation of the Series C Preferred Stock with the Secretary of State of Nevada, which was effective upon filing (the “Second Amended and Restated Designation”), which amended the first amended and restated designation of the Series C Preferred Stock (as corrected), to include the right of the Company to redeem all (but not less than all) of the outstanding shares of Series C Preferred Stock at a redemption price equal to 110% of the face value of such preferred stock ($10,000 per share), at the Company’s option, at any time, in the event the Company is not in default of any of the terms of any Stock Purchase Agreement pursuant to which such applicable shares of Series C Preferred Stock were sold; (b) update the conversion price of the face amount ($10,000 per share) of the Series C Preferred Stock in connection with the Company’s prior 1-for-50 reverse stock split (i.e., to confirm the change in such conversion price from $3.25 per share to $165.50 per share), which had no effect on the conversion rate of conversion premiums due under the terms of the Series C Preferred Stock, and which conversion price was already being reflected in prior conversion notices after the date of such reverse split; (c) formally amend the measurement period for the calculation of the conversion of conversion premiums due under the terms of the Series C Preferred Stock to begin on the later of February 3, 2020 or, if no trigger event (as described in the designation of the Series C Preferred Stock) has occurred, 30 trading days, and if a trigger event has occurred 60 trading days, before the date of an applicable conversion notice, which had previously been agreed to contractually by the parties (i.e., the beginning of each future measurement period for conversions made after February 3, 2020, will extend back to February 3, 2020); and (d) update the references in the designation to the “Merger” which had previously referred to the Company’s combination with Lineal Star Holdings, LLC, which transaction was rescinded and terminated effective December 31, 2019, to refer to the planned merger with Viking Energy Group, Inc., which has the effect of the Viking merger being approved by the holder of the Series C Preferred Stock and not being a ‘deemed liquidation event’ under the Second Amended and Restated Designation.

  

The Securities Purchase Agreements (“SPAs”) between the Company and the Investors regarding the purchase and sale of the Series C Preferred Shares require the Company to, among other things, timely file all reports required to be filed by Company pursuant to requirements of the SEC, and to maintain sufficient reserves from its duly authorized Common Stock for issuance of all Conversion Shares. On October 6, 2021, the Company received notice from the Investors that they believed the Company breached the SPAs for failing to comply with the foregoing two items, and the Notes contain a provision stating a breach by the Company of any terms within the SPA or COD is also a breach under the Notes, which would result in an immediate acceleration of the Notes at the holder’s option.  

 

On October 9, 2021 the Company entered into agreements (the “October Agreements”) with each of the First Series C Preferred Stock investors, pursuant to which the investors agreed to refrain from declaring defaults or bringing a breach of contract action under the SPAs, and one investor, a noteholder, agreed to refrain from declaring defaults or bringing a breach of contract action under the Notes, in each case provided the Company: (i) within 30 days of the date of the October Agreements, amended the COD to provide that holders of the Preferred Shares will vote together with holders of common stock on all matters other than election of directors and shareholder proposals (including proposals initiated by any holders of Preferred Shares), on an as-if converted basis, subject to the beneficial ownership limitation in the COD, even if there are insufficient shares of authorized common stock to fully convert the Preferred Shares (the “COD Amendment Requirement”); (ii) files by November 19, 2021 all reports required to be filed by the Company with the SEC; and (iii)  to implement and maintain, as soon as possible but no later than December 31, 2021, a sufficient reserve from its duly authorized Common Stock for issuance of all Conversion Shares

 

In November 2021, as a further accommodation to the Company and in order to help facilitate implementation of the Company’s business plans and continued trading on the NYSE American, the investors agreed to extend the deadline for the Filing Requirement to December 6, 2021.  The deadline for the Reserve Requirement remains December 31, 2021, meaning the Company is to obtain on or before such date, approval of the proposals outlined in the preliminary proxy statement filed by the Company with the Securities and Exchange Commission on November 9, 2021.

 

 
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Warrants

 

The following is a summary of the Company’s outstanding warrants at September 30, 2020:

 

Warrants

 

 

Exercise

 

 

Expiration

 

Intrinsic Value at

 

Outstanding

 

 

Price ($)

 

 

Date

 

September 30, 2020

 

 

1

(1)

 

 

1,171,875.00

 

 

April 26, 2021

 

$

 

 

3

(2)

 

 

195,312.50

 

 

September 12, 2022

 

 

 

 

32

(3)

 

 

12,187.50

 

 

May 24, 2023

 

 

 

 

36

 

 

 

 

 

 

 

 

$

 

 

(1)

 

Warrants issued in connection with the sale of convertible notes. The warrants were exercisable on the grant date (April 26, 2016) and remain exercisable until April 26, 2021.

(2)

 

Warrants issued in connection with funding. The warrants were exercisable on the grant date (September 12, 2017) and remain exercisable until September 12, 2022.

 

(3)

 

Warrants issued in connection with a Severance Agreement with Richard N. Azar II, the Company’s former Chief Executive Officer. The warrants were exercisable on the grant date (May 25, 2018) and remain exercisable until May 24, 2023.

 

NOTE 15 – SHARE-BASED COMPENSATION

 

Camber measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award over the vesting period.

 

Stock Options

 

As of September 30, 2020, and March 31, 2020, the Company had 2 stock options outstanding with a weighted average exercise price of $40,429,700. The options expire in October 2020.

 

Of the Company’s outstanding options, no options were exercised or forfeited during the six months ended September 30, 2020. Additionally, no stock options were granted during the six months ended September 30, 2020. Compensation expense related to stock options during the six-month periods ended September 30, 2020, and 2019 was $0.

 

Options outstanding and exercisable at September 30, 2020, and March 31, 2020, had no intrinsic value. The intrinsic value is based upon the difference between the market price of Camber’s common stock on the date of exercise and the grant price of the stock options.

 

As of September 30, 2020, and March 31, 2020, there was no remaining unrecognized share-based compensation expense related to all non-vested stock options.

 

Options outstanding and exercisable as of September 30, 2020:

 

Exercise

 

 

Remaining

 

 

Options

 

 

Options

 

Price ($)

 

 

Life (Yrs.)

 

 

Outstanding

 

 

Exercisable

 

 

40,429,700

 

 

 

0.02

 

 

 

2

 

 

 

2