CAMBER ENERGY, INC. MANAGEMENT REPORT AND ANALYSIS OF FINANCIAL POSITION AND RESULTS OF OPERATIONS (Form 10-Q/A)

0
You should read the following discussion and analysis in conjunction with the
financial statements and notes thereto appearing elsewhere in this Quarterly
Report on Form 10-Q. In preparing the management's discussion and analysis, the
registrant presumes that you have read or have access to the discussion and
analysis for the preceding fiscal year.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS




This document includes "forward-looking statements" within the meaning of the
Private Securities Litigation Reform Act of 1995 or the Reform Act. All
statements other than statements of historical fact are "forward-looking
statements" for purposes of federal and state securities laws, including, but
not limited to, any projections of earning, revenue or other financial items;
any statements of the plans, strategies and objectives of management for future
operations; any statements concerning proposed new services or developments; any
statements regarding future economic conditions of performance; and statements
of belief; and any statements of assumptions underlying any of the foregoing.
Such forward-looking statements involve known and unknown risks, uncertainties
and other factors which may cause the actual results, performance or
achievements of the Company to be materially different from any future results,
performance or achievements expressed or implied by such forward-looking
statements. Such factors include, among others, the following: our ability to
raise capital and the terms thereof; ability to gain an adequate player base to
generate the expected revenue; competition with established gaming websites;
adverse changes in government regulations or polices; and other factors
referenced in this Form 10-Q.



The use in this Form 10-Q of such words as "believes", "plans", "anticipates",
"expects", "intends", and similar expressions are intended to identify
forward-looking statements, but are not the exclusive means of identifying such
statements. These forward-looking statements present the Company's estimates and
assumptions only as of the date of this Report. Except for the Company's ongoing
obligation to disclose material information as required by the federal
securities laws, the Company does not intend, and undertakes no obligation, to
update any forward-looking statements.



Although the Company believes that the expectations reflected in any of the
forward-looking statements are reasonable, actual results could differ
materially from those projected or assumed or any of the Company's
forward-looking statements. The Company's future financial condition and results
of operations, as well as any forward-looking statements, are subject to change
and inherent risks and uncertainties.



PLAN OF OPERATIONS



Overview



Camber is an independent oil and natural gas company engaged in the acquisition,
development, and sale of crude oil, natural gas, and natural gas liquids from
various known productive geological formations in Louisiana and Texas. Through
the recent investment in Viking and through the Company's subsequent investments
and planned merger with Viking, the Company will continue to be engaged in the
acquisition, exploration, development and production of oil and natural gas
properties, both individually and through unconsolidated subsidiaries or
collaborative partnerships with other companies in this field of endeavor.



The Company's business plan is to engage in the acquisition, exploration,
development of and production from oil and natural gas properties, both
individually and through collaborative partnerships with other companies in this
field of endeavor. The Company has relationships with industry experts and
formulated an acquisition strategy, with emphasis on acquiring under-valued,
producing properties from distressed vendors or those deemed as non-core assets
by larger sector participants. The Company does not focus on speculative
exploration programs, but rather targets oil and gas properties with current
production and untapped reserves. The Company's growth strategy includes the
following key initiatives:



  • Acquisition of under-valued producing oil and gas assets
  • Employ enhanced recovery techniques to maximize production: and

• Implement responsible and lower-risk drilling programs on existing assets

  • Aggressively pursue cost-efficiencies
  • Opportunistically explore strategic mergers and/or acquisitions
  • Actively hedge to mitigate commodity risk





         36

  Table of Contents




Pending Merger



On February 15, 2021, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement") with Viking. The Merger Agreement provides that, upon
the terms and subject to the conditions set forth therein, Viking will merge
with and into a newly-formed wholly-owned subsidiary of Camber ("Merger Sub"),
with Viking surviving the Merger as a wholly-owned subsidiary of Camber.



Upon the terms and subject to the conditions set forth in the Merger Agreement,
at the effective time of the Merger (the "Effective Time"), each share: (i) of
common stock, par value $0.001 per share, of the Viking (the "Viking Common
Stock") issued and outstanding immediately prior to the Effective Time, other
than shares owned by Camber, Viking and Merger Sub, will be converted into the
right to receive one share of common stock of Camber; and (ii) of Series C
Convertible Preferred Stock of Viking (the "Viking Preferred Stock") issued and
outstanding immediately prior to the Effective Time will be converted into the
right to receive one share of Series A Convertible Preferred Stock of Camber
(the "Camber Series A Preferred Stock"). Each share of Camber Series A Preferred
Stock will convert into 890 shares of common stock of Camber (subject to a
beneficial ownership limitation preventing conversion into Camber common stock
if the holder would be deemed to beneficially own more than 9.99% of Camber's
common stock), will be treated equally with Camber's common stock with respect
to dividends and liquidation, and will only have voting rights with respect to
voting: (a) on a proposal to increase or reduce Camber's share capital; (b) on a
resolution to approve the terms of a buy-back agreement; (c) on a proposal to
wind up Camber; (d) on a proposal for the disposal of all or substantially all
of Camber's property, business and undertaking; (f) during the winding-up of
Camber; and/or (g) with respect to a proposed merger or consolidation in which
Camber is a party or a subsidiary of Camber is a party. Holders of Viking Common
Stock and Viking Preferred Stock will have any fractional shares of Camber
common stock or preferred stock after the Merger rounded up to the nearest
whole
share.



At the Effective Time, each outstanding Viking equity award, will be converted
into the right to receive the merger consideration in respect of each share of
Viking Common Stock underlying such equity award and, in the case of Company
stock options, be converted into vested Camber stock options based on the merger
exchange ratio calculated as provided above (the "Exchange Ratio").



The Merger Agreement provides, among other things, that effective as of the
Effective Time, James A. Doris, the current Chief Executive Officer of both the
Company and Viking, shall serve as President and Chief Executive Officer of the
Combined Company following the Effective Time. The Merger Agreement provides
that, as of the Effective Time, the Combined Company will have its headquarters
in Houston, Texas.


The Merger Agreement also provides that, during the period from the date of the
Merger Agreement until the Effective Time, each of Camber and Viking will be
subject to certain restrictions on its ability to solicit alternative
acquisition proposals from third parties, to provide non-public information to
third parties and to engage in discussions with third parties regarding
alternative acquisition proposals, subject to customary exceptions. Viking is
required to hold a meeting of its stockholders to vote upon the adoption of the
Merger Agreement and, subject to certain exceptions, to recommend that its
stockholders vote to adopt the Merger Agreement. Camber is required to hold a
meeting of its stockholders to approve the issuance of Viking Common Stock and
Viking Preferred Stock in connection with the Merger (the "Share Issuance").



The completion of the Merger is subject to customary conditions, including (i)
adoption of the Merger Agreement by Camber's stockholders and approval of the
Share Issuance by Camber's stockholders, (ii) receipt of required regulatory
approvals, (iii) effectiveness of a registration statement on Form S-4 for the
Camber common stock to be issued in the Merger (the "Form S-4"), and (iv) the
absence of any law, order, injunction, decree or other legal restraint
preventing the completion of the Merger or making the completion of the Merger
illegal. Each party's obligation to complete the Merger is also subject to
certain additional customary conditions, including (i) subject to certain
exceptions, the accuracy of the representations and warranties of the other
party, (ii) subject to certain exceptions, performance by the other party of its
obligations under the Merger Agreement and (iii) the absence of any material
adverse effect on the other party, as defined in the Merger Agreement.



Additional closing conditions to the Merger include that in the event the NYSE
American determines that the Merger constitutes, or will constitute, a
"back-door listing"https://www.marketscreener.com/"reverse merger", Camber (and its common stock) is
required to qualify for initial listing on the NYSE American, pursuant to the
applicable guidance and requirements of the NYSE as of the Effective Time.



         37

  Table of Contents




The Merger Agreement can be terminated (i) at any time with the mutual consent
of the parties; (ii) by either Camber or Viking if any governmental consent or
approval required for closing is not obtained, or any governmental entity issues
a final non-appealable order or similar decree preventing the Merger; (iii) by
either Company or Viking if the Merger shall not have been consummated on or
before August 1, 2021; (iv) by Company of Viking, upon the breach by the other
of a term of the Merger, which is not cured within 30 days of the date of
written notice thereof by the other; (v) by Camber if Viking is unable to obtain
the affirmative vote of its stockholders for approval of the Merger; (vi) by
Viking if Camber is unable to obtain the affirmative vote of its stockholders
required pursuant to the terms of the Merger Agreement; and (vii) by Company or
Viking if there is a willful breach of the Merger Agreement by the other party
thereto.


The Merger Agreement contains customary indemnification obligations of the parties and representations and warranties.

The Fusion is not complete. As of the date of filing of this report, neither Viking nor Camber have indicated their intention to terminate the merger agreement.




Going Concern Qualification



The Company's consolidated financial statements included herein have been
prepared on a going concern basis, which contemplates the realization of assets
and the satisfaction of liabilities in the normal course of business. The
Company generated a net loss of $(44,777,693) for the three months ended March
31, 2021 as compared to a net loss of $8,004,946 for the three months ended
March 31, 2020. The 2021 loss was comprised of, among other things, certain
non-cash items with a total net impact of ($43,498,807) including: (i) Loss on
derivative liability of $36,601,064 (ii) Loss in earnings of unconsolidated
entity of $5,871,908 (iii) stock-based compensation of $1,120,792; and (iv)
Depreciation, depletion and accretion of $5,043.



From March 31, 2021the Company has a shareholder deficit of ($135,339,150)
and total long-term debt of $18,000,000.

From March 31, 2021the Company has a working capital deficit of approximately $133.6 million. The most significant items of current liabilities creating this working capital deficit include: (i) a term loan agreement with a face value of approximately $18.0 million of the March 31, 2021 and a liability derived from $132.2 million.




Management believes it will be able to continue to leverage the expertise and
relationships of its operational and technical teams to enhance existing assets
and identify new development and acquisition opportunities in order to improve
the Company's financial position. The Company may have the ability, if it can
raise additional capital, to acquire new assets in a separate division from
existing subsidiaries.



None the less, recent oil and gas price volatility as a result of geopolitical
conditions and the global COVID-19 pandemic have already had and may continue to
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
ability to sell our oil and gas production, reduction in the selling price of
the Company's oil and gas, failure of a counterparty to make required hedge
payments, possible disruption of production as a result of worker illness or
mandated production shutdowns, the Company's ability to maintain compliance with
loan covenants and/or refinance existing indebtedness, and access to new capital
and financing.


These conditions raise substantial doubt regarding the Company's ability to
continue as a going concern. The Company's ability to continue as a going
concern is dependent upon its ability to utilize the resources in place to
generate future profitable operations, to develop additional acquisition
opportunities, and to obtain the necessary financing to meet its obligations and
repay its liabilities arising from business operations when they come due.
Management believes the Company will be able to continue to develop new
opportunities and will be able to obtain additional funds through debt and / or
equity financings to facilitate its development strategy; however, there is no
assurance of additional funding being available. These consolidated financial
statements do not include any adjustments to the recorded assets or liabilities
that might be necessary should the Company have to curtail operations or be
unable to continue in existence.



In April 2021, the Company borrowed $2.5 million from an institutional investor
at 10% per annum maturing December 11, 2022, and in July 2021 the Company sold
1,575 shares of Series C Preferred Stock to an institutional investor in the
amount of $15 million, both to facilitate working capital and new acquisitions.




         38

  Table of Contents



RESULTS OF CONTINUING ACTIVITIES




The following discussion of the financial condition and results of operation of
the Company for the three months ended March 31, 2021 and 2020, should be read
in conjunction with the audited consolidated financial statements and the notes
thereto in the Company's Annual Report on Form 10-KT for the  ended December 31,
2020.


Cash and capital resources

From March 31, 2021and December 31, 2020the company had $342,373 and
$868,548 in cash, respectively.

Three months completed March 31, 2021 compared to the three months ended March 31, 2020




Revenue



The Company earned gross revenues of $65,653 for the three months ended March 31, 2021compared to $88,899 for the three months ended March 31, 2020reflecting a decrease in $23,246. This drop in revenue is the result of a drop in production realized by the Company in 2021



Expenses



The Company's operating expenses increased to $1,926,538 for the three-month
period ended March 31, 2021, from $1,594,642 in the corresponding prior period.
Lease operating costs decreased by $70,311 to $28,104 for the three-month period
ended March 31, 2021 as compared to $98,415 for the three-month period ended
March 31, 2020, due to lower realized production levels. DD&A expense was
relatively unchanged at $5,043 for the three months ended March 31, 2021 as
compared to $5,205 for the three months ended March 31, 2020. General and
administrative expenses and stock-based compensation combined reflected an
increase of $402,369 to $1,893,391, when compared to $1,491,022 in the
corresponding prior period.



Income (loss) from Operations



The Company generated a loss from operations for the three months ended March
31, 2021 of $1,860,885, when compared to a loss from operations of $1,505,743
for the three months ended March 31, 2020.



Other Income (Expense)



The Company had other expense of $(42,916,808) for the three months ended March
31, 2021, as compared to other expense of $(6,499,203) for the three months
ended March 31, 2020. This significant difference is primarily a result of the
Company's stock price and its impact on our derivatives.



Net Income (Loss)



The Company had net loss of $(44,777,693) during the three-month period ended
March 31, 2021, compared with a net loss of $(8,004,946) for the three-month
period ended March 31, 2020, a $36,772,747 difference primarily as a result
of
the items discussed above.




         39

  Table of Contents



CRITICAL ACCOUNTING POLICIES AND ESTIMATES

We prepare our financial statements in conformity with GAAP, which requires
management to make certain estimates and assumptions and apply judgments. We
base our estimates and judgments on historical experience, current trends and
other factors that management believes to be important at the time the financial
statements are prepared and actual results could differ from our estimates and
such differences could be material. Due to the need to make estimates about the
effect of matters that are inherently uncertain, materially different amounts
could be reported under different conditions or using different assumptions. On
a regular basis, we review our critical accounting policies and how they are
applied in the preparation of our financial statements, as well as the
sufficiency of the disclosures pertaining to our accounting policies in the
footnotes accompanying our financial statements. Described below are the most
significant policies we apply in preparing our consolidated financial
statements, some of which are subject to alternative treatments under GAAP. We
also describe the most significant estimates and assumptions we make in applying
these policies. See "Note 2 - Summary of Significant Accounting Policies" to our
consolidated financial statements.



Oil and Gas Property Accounting




The Company uses the full cost method of accounting for its investment in oil
and natural gas properties. Under this method of accounting, all costs of
acquisition, exploration and development of oil and natural gas properties
(including such costs as leasehold acquisition costs, geological expenditures,
dry hole costs, tangible and intangible development costs and direct internal
costs) are capitalized as the cost of oil and natural gas properties when
incurred.



The full cost method requires the Company to calculate quarterly, by cost
center, a "ceiling," or limitation on the amount of properties that can be
capitalized on the balance sheet. To the extent capitalized costs of oil and
natural gas properties, less accumulated depletion and related deferred taxes,
exceed the sum of the discounted future net revenues of proved oil and natural
gas reserves, the lower of cost or estimated fair value of unproved not
properties subject to amortization, the cost of properties not being amortized,
and the related tax amounts, such excess capitalized costs are charged to
expense.



Proved Reserves


The estimates of our proved reserves included in this report are prepared in accordance with WE SECOND guidelines for reporting corporate reserves and future net income. The accuracy of a reserve estimate is a function of:

I. the quality and quantity of available data;

ii. the interpretation of these data;

iii. the accuracy of the various mandatory economic assumptions; and

iv. the judgment of those who prepare the estimate.





Our proved reserve information included in this report was predominately based
on estimates. Because these estimates depend on many assumptions, all of which
may substantially differ from future actual results, reserve estimates will be
different from the quantities of oil and gas that are ultimately recovered. In
addition, results of drilling, testing and production after the date of an
estimate may justify material revisions to the estimate.



In accordance with SEC requirements, we based the estimated discounted future
net cash flows from proved reserves on the unweighted arithmetic average of the
prior 12-month commodity prices as of the first day of each of the months
constituting the period and costs on the date of the estimate.



The estimates of proved reserves materially impact depreciation, depletion,
amortization and accretion ("DD&A") expense. If the estimates of proved reserves
decline, the rate at which we record DD&A expense will increase, reducing future
net income. Such a decline may result from lower market prices, which may make
it uneconomic to drill for and produce from higher-cost fields.




         40

  Table of Contents



Asset retirement obligation




Asset retirement obligations ("ARO") primarily represent the estimated present
value of the amount we will incur to plug, abandon and remediate our producing
properties at the projected end of their productive lives, in accordance with
applicable federal, state and local laws. We determined our ARO by calculating
the present value of estimated cash flows related to the obligation. The
retirement obligation is recorded as a liability at its estimated present value
as of the obligation's inception, with an offsetting increase to proved
properties. Periodic accretion of discount of the estimated liability is
recorded as accretion expense in the accompanying consolidated statements of
operations.



ARO liability is determined using significant assumptions, including current
estimates of plugging and abandonment costs, annual inflation of these costs,
the productive lives of wells and a risk-adjusted interest rate. Changes in any
of these assumptions can result in significant revisions to the estimated ARO.



Derivative liabilities



The Series C Preferred Stock certificate of designation, or COD, contains
provisions that could result in modification of 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 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 COD. 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. Trigger events are
described in the designation of the Series C Preferred Stock, but include items
which would typically be events of default under a debt security, including
filing of reports late with the SEC.



         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.



         The Company has determined that the Series C Preferred Stock contains
an embedded derivative liability relating to the Conversion Premium and, upon
conversion, a derivative liability for the potential obligation to issue True-Up
Shares relating to Series C shares that have been converted and the Measurement
Period has not expired, if applicable.



The fair value of the derivative liability relating to the Conversion Premium
for any outstanding Series C Shares is equal to the cash required to settle the
Conversion Premium.  The fair value of the potential True-Up share obligation
has been estimated using a binomial pricing mode and the lesser of the
conversion price or the low closing price of the Company's stock subsequent to
the conversion date. and the historical volatility of the Company's common
stock.  (See note 19)



The following tables set forth a range of estimates of the number of shares likely to be issued to settle future conversions of Series C Preferred Shares outstanding at March 31, 2021including conversion premiums, reflecting the inclusion of all provisions relating to the calculation of settlements as follows:

Estimated Common Stock Due Series C Pref. Shareholders (assuming dividends/conversion premium are paid in shares rather than cash)

Series C Pref.
Shares
Outstanding -
March 31, 2021            3,983
Assume                  Yes
Triggering Event

Low VWAP during measurement Low VWAP during measurement Low VWAP during measurement period

        Period - $0.3475                      Period - $0.50                           - $1.00

Conversion Price                     Conversion Price                     Conversion Price
for Preferred                        for Preferred                        for Preferred
Stock              $        3.25     Stock              $        3.25     Stock              $          3.25
VWAP during                          VWAP during                          VWAP during
Measurement                          Measurement                          Measurement
Period             $      0.3475     Period             $      0.5000     Period             $        1.0000
Price for                            Price for                            Price for
Calculating                          Calculating                          Calculating
Conversion                           Conversion                           Conversion
Premium (i.e.                        Premium (i.e.                        Premium (i.e.
85% of VWAP less                     85% of VWAP less                     85% of VWAP less
$0.10)             $      0.1954     $0.10)             $      0.3250     $0.10)             $        0.7500
Series C Pref                        Series C Pref                        Series C Pref
Shares             $       3,983     Shares             $       3,983     Shares                       3,983
Face value per                       Face value per                       Face value per
share              $      10,000     share              $      10,000     share              $        10,000
Total value        $  39,830,000     Total value        $  39,830,000     Total value        $    39,830,000
Annual                               Annual                               Annual
Conversion                           Conversion                           Conversion
Premium            $  13,920,585     Premium            $  13,920,585     Premium            $    13,920,585
Total conversion                     Total conversion                     Total conversion
Premium (7 years                     Premium (7 years                     Premium (7 years
worth of                             worth of                             worth of
dividends)         $  97,444,095     dividends)         $  97,444,095     dividends)         $ 97,444,095.00
Underlying                           Underlying                           Underlying
common shares                        common Shares                        common shares
for Face Value                       for Face Value                       for Face Value
Portion               12,255,385     Portion               12,255,385     Portion                 12,255,385
Underlying                           Underlying                           Underlying
common shares                        common shares                        common shares
for Conversion                       for Conversion                       for Conversion
Premium              498,690,353     Premium              299,827,985     Premium                129,925,460
Total Potential                      Total Potential                      Total Potential
Shares               510,945,738     Shares               312,083,369     Shares                 142,180,845





         41

Contents

© Edgar Online, source Previews

Share.

Comments are closed.