cei_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

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

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022

☐	TRANSITION REPORT UNDER SECTION 13 OR 15 (D) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______.

Commission file number: 000-29219

CAMBER ENERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-2660243
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

15915 Katy Freeway, Suite 450

Houston, TX 77094

(Address of principal executive offices)

(281) 404 4387

(Registrant’s telephone number, including area code)

___________________________________________________________

(Former name, former address and former fiscal year, if changed since last report)

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, 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 Company	☐

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 ☒

APPLICABLE ONLY TO CORPORATE ISSUERS

As of November 14, 2022, the registrant had 719,145,888 shares of common stock outstanding.

CAMBER ENERGY, INC.

	Part I – Financial Information

Item 1	Financial Statements	3
	Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)	3
	Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)	4
	Consolidated Statements of Cash Flows for the three and nine months ended September 30, 2022 and 2021 (unaudited)	5
	Consolidated Statements of Changes in Stockholders’ Equity for the nine months ended September 30, 2022 and 2021 (unaudited)	6
	Notes to Consolidated Financial Statements (unaudited)	7
Item 2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	31
Item 3	Quantitative and Qualitative Disclosures about Market Risk	38
Item 4	Controls and Procedures	38

	Part II – Other Information

Item 1	Legal Proceedings	39
Item 2	Unregistered Sales of Equity Securities and Use of Proceeds	39
Item 3	Defaults Upon Senior Securities	39
Item 4	Mine Safety Disclosures	39
Item 5	Other Information	39
Item 6	Exhibits	40

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PART I—FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CAMBER ENERGY, INC.

Consolidated Balance Sheets (unaudited)

	September 30,			December 31,
	2022			2021

ASSETS

Current assets
Cash	$	2,455,688		$	5,854,382
Accounts receivable - oil and gas - net		-			24,389
Prepaid expenses		142,083			56,833
Total current assets		2,597,771			5,935,604

Oil and gas properties, full cost method
Proved developed producing oil and gas properties, net		64,346			68,884
Total oil and gas properties, net		64,346			68,884

Due from Viking Energy Group, Inc.		6,822,300			4,100,000
Equity method investment		28,034,336			36,299,592

TOTAL ASSETS	$	37,518,753		$	46,404,080

LIABILITIES AND STOCKHOLDERS’ DEFICIT

Current liabilities
Accounts payable	$	1,490,650		$	1,449,335
Accrued expenses and other current liabilities		3,263,705			2,103,674
Current taxes payable		3,000			3,000
Derivative liability		32,666,761			93,108,568
Total current liabilities		37,424,116			96,664,577

Long-term debt		33,116,749			21,500,000
Asset retirement obligation		56,978			53,055

TOTAL LIABILITIES		70,597,843			118,217,632

Commitments and contingencies (Note 11)
		-			-
STOCKHOLDERS' DEFICIT
Preferred Stock Series C, 5,200 shares authorized of $0.001 par value, 270 and 3,886 shares issued and outstanding as of September 30, 2022 and December 31, 2021, liquidation preference of $9,305,550 and $133,930,990 at September 30, 2022 and December 31, 2021, respectively.		1			4
Preferred Stock Series G, 25,000 authorized, $0.001 par value, 5,272 and 10,544 issued and outstanding as of September 30, 2022 and December 31, 2021, respectively, liquidation preference of $0 as of September 30, 2022 and December 31, 2021, respectively		5			10
Common stock, 1,000,000,000 shares authorized of $0.001 par value, 546,852,286 and 257,132,026 shares issued and outstanding as of September 30, 2022 and December 31, 2021		546,853			257,132
Additional paid-in-capital		534,503,335			409,217,417
Accumulated deficit		(568,129,284	)		(481,288,115	)

TOTAL STOCKHOLDERS' DEFICIT		(33,079,090	)		(71,813,552	)

TOTAL LIABILITIES AND STOCKHOLDERS' DEFICIT	$	37,518,753		$	46,404,080

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

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CAMBER ENERGY, INC.

Consolidated Statements of Operations (Unaudited)

	Three months ended						Nine months ended
	September 30,						September 30,
	2022			2021			2022			2021

Revenue
Oil and gas sales	$	158,508		$	103,191		$	466,566		$	266,082

Operating expenses
Lease operating costs		51,078			38,661			141,807			98,140
General and administrative		1,326,430			774,040			3,401,044			2,627,035
Stock based compensation		-			208,890			123,754			1,536,895
Depreciation, depletion, amortization and accretion		2,724			1,906			8,461			9,458

Total operating expenses		1,380,232			1,023,497			3,675,066			4,271,528

Loss from operations		(1,221,724	)		(920,306	)		(3,208,500	)		(4,005,446	)

Other income (expense)
Interest expense		(1,554,604	)		(518,716	)		(3,520,736	)		(1,461,427	)
Equity (deficit) in earnings of unconsolidated entities		(6,260,695	)		(6,260,780	)		(8,265,256	)		(18,339,293	)
Gain (loss) on derivative liability		(14,243,704	)		(256,855,721	)		(71,846,677	)		(222,688,936	)

Total other income (expense)		(22,059,003	)		(263,635,217	)		(83,632,669	)		(242,489,656	)

Net income (loss) before income taxes		(23,280,727	)		(264,555,523	)		(86,841,169	)		(246,495,102	)
Income tax benefit (expense)		-			-			-			-

Net income (loss) attributable to Camber Energy, Inc.		(23,280,727	)		(264,555,523	)		(86,841,169	)		(246,495,102	)
Less preferred dividends		-			-			-			(6,676,994	)

Net income (loss) attributable to common stockholders	$	(23,280,727	)	$	(264,555,523	)	$	(86,841,169	)	$	(253,172,096	)

Income (loss) per weighted average number of common shares outstanding - basic and diluted	$	(0.05	)	$	(1.63	)	$	(0.22	)	$	(3.10	)

Weighted average number of common shares outstanding
Basic and Diluted		487,692,319			161,892,534			401,147,671			81,599,069

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

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CAMBER ENERGY, INC.

Consolidated Statements of Cash Flows (Unaudited)

	Nine months ended
	September 30,
	2022			2021

Cash flows from operating activities:

Net loss	$	(86,841,169	)	$	(246,495,102	)

Adjustments to reconcile net loss to cash provided (used) by operating activities
Stock-based compensation		123,754			1,536,895
Depreciation, depletion, amortization and accretion		8,461			9,458
Change in fair value of derivative liability		71,846,677			222,688,936
Amortization of debt discount		2,380,143			-
(Equity) deficit in earnings of unconsolidated entity		8,265,256			18,339,293
Changes in operating assets and liabilities
Accounts receivable		24,389			(2,894	)
Prepaid expenses		(85,250	)		(107,872	)
Accounts payable and accrued expenses		1,201,345			1,827,527

Net cash used in operating activities		(3,076,394	)		(2,203,759	)

Cash flows from investing activities:
Cash paid for Viking investment		-			(11,000,000	)
Loans to Viking		(3,922,300	)		-
Repayments received from Viking		1,200,000			-

Net cash used in investing activities		(2,722,300	)		(11,000,000	)

Cash flows from financing activities:
Repayment of long-term debt		(1,000,000	)		-
Redemption of Series G preferred stock		(2,750,000	)		-
Redemption of Series C preferred stock		(18,850,000	)		-
Proceeds from issuance of Series C Preferred Stock		-			15,000,000
Proceeds from long-term debt		25,000,000			2,500,000

Net cash provided by financing activities		2,400,000			17,500,000

Net increase (decrease) in cash		(3,398,694	)		4,296,241
Cash, beginning of period		5,854,382			868,548

Cash, end of period	$	2,455,688		$	5,164,789

Supplemental Cash Flow Information
Cash paid for:
Interest	$	65,559		$	-
Taxes	$	-		$	-

Supplemental disclosure of Non-Cash Investing and Financing Activities:
Issuance of series C Preferred Stock as investment in Viking	$	-		$	18,900,000

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

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CAMBER ENERGY, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Nine Months Ended September 30, 2022 and 2021

	Series C						Series C						Series G
	Preferred Stock						Preferred Stock						Preferred Stock						Common Stock					Additional						Total
	Number						Number						Number						Number					Paid In			Accumulated			Stockholders'
	Of Shares			Amount			Of Shares			Amount			Of Shares			Amount			Of Shares		Amount			Capital			Deficit			(Deficit) Equity

For the nine months ended September 30, 2022

Balances, December 31, 2021		-		$	-			3,886		$	4			10,544		$	10			257,132,026	$	257,132		$	409,217,417		$	(481,288,115	)		(71,813,552	)

Common Shares issued for:
Conversion of Series C preferred stock		-			-			(1,952	)		(1	)		-			-			213,973,981		213,974			51,546,478						51,760,451
True-Up Shares		-			-			-			-			-			-			75,606,279		75,606			35,269,405			-			35,345,011
Issuance of Common Shares for Consulting Fees		-			-			-			-			-			-			140,000		140			123,614			-			123,754
Redemption of Series C preferred stock for cash		-			-			(1,664	)		(2	)		-			-			-		-			(18,849,998	)		-			(18,850,000	)
Redemption of Series G preferred stock		-			-			-			-			(5,272	)		(5	)		-		-			(2,749,995	)		-			(2,750,000	)
Series C fair value adjustment		-			-			-			-			-			-			-		-			45,183,021			-			45,183,021
Warrants issued for debt discount		-			-			-			-			-			-			-		-			14,763,393			-			14,763,393
Other		-			-			-			-			-			-			-		1			-			-			1
		-			-			-			-			-			-			-		-			-			(86,841,169	)		(86,841,169	)
Balances September 30, 2022		-		$	-			270		$	1			5,272		$	5			546,852,286	$	546,853		$	534,503,335		$	(568,129,284	)	$	(33,079,090	)

Balances, December 31, 2020		2,093		$	5,946,052			-		$	-			-		$	-			25,000,000	$	25,000		$	209,362,384		$	(311,612,946	)		(102,225,562	)

Common Shares issued for:
Conversion of Series C Preferred Stock		-			-			(1,613	)		(2	)		-			-			168,733,163		168,733			126,860,841			-			127,029,572
True-Up Shares		-			-			-			-			-			-			54,330,153		54,331			45,740,826			-			45,795,157
Issuance of Common Shares for Consulting Fees		-			-			-			-			-			-			1,500,094		1,500			1,493,358			-			1,494,858
Equity contribution		-			(11,208,840	)		-			-			-			-			-		-			11,208,840			-			11,208,840
Warrants issued for compensation		-			-			-			-			-			-			-		-			42,037			-			42,037
Issuance of Series C Preferred Shares for Cash Proceeds		1,890			6,164,308						-			-			-			-		-			(6,164,308	)		-			(6,164,308	)
Issuance of Series C Preferred Shares for Cash Proceeds		-			-			1,575			2														2,881,038						2,881,040
Change in fair value of Series C shares		-			512,686			-			-			-			-			-		-			(512,686	)		-			(512,686	)
Transfer of Series C Preferred Stock to Permanent Equity		(3,983	)		(1,414,206	)		3,983			4			-			-			-		-			1,414,202			-			1,414,206
Other		-			-			-			-			-			-			-		(1	)		-			-			(1	)
		-			-			-			-			-			-			-		-			-			(246,495,102	)		(246,495,102	)
Balances September 30, 2021		-		$	-			3,945		$	4			-		$	-			249,563,410	$	249,563		$	392,326,532		$	(558,108,048	)	$	(165,531,949	)

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

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CAMBER ENERGY, INC.

Notes to Consolidated Financial Statements

(Unaudited)

NOTE 1 RELATIONSHIP WITH AND OWNERSHIP OF VIKING ENERGY GROUP, INC.

On December 23, 2020 Camber Energy, Inc. (“Camber”, the “Company”) acquired a 51% interest in Viking Energy Group, Inc. (“Viking”). On January 8, 2021 and on July 29, 2021 the Company acquired additional interests in Viking resulting in the Company owning approximately 63% of the outstanding common shares of Viking. The Company accounts for its investment in Viking under the equity method of accounting because the Company has the ability to exercise significant influence over the operating and financial policies of Viking, but not control. The December 2020, January 2021 and July 2021 transactions and a merger agreement signed between Camber and Viking in February 2021 are described further below.

December 23, 2020 Transaction

On December 23, 2020, the Company entered into a Securities Purchase Agreement with Viking, pursuant to which Camber acquired 26,274,510 shares (“Camber’s Investment”) of Viking common stock (“Camber’s Viking Shares”), which constituted 51% of the total outstanding common stock of Viking, in consideration of (i) Camber’s payment of $10,900,000 to Viking (the “Cash Purchase Price”), and (ii) cancellation of $9,200,000 in promissory notes issued by Viking to Camber (“Camber’s Viking Notes”). Pursuant to the purchase agreement, Viking was obligated to issue additional shares of Viking common stock to Camber, if necessary, to ensure Camber owned at least 51% of the common stock of Viking through July 1, 2022.

In connection with Camber’s Investment, the Company and Viking terminated their previous merger agreement, dated August 31, 2020, as amended, and the Company assigned its membership interests in the Company’s unconsolidated subsidiary, Elysium Energy Holdings, LLC (“Elysium”), to Viking. Also in connection with Camber’s Investment, effective December 23, 2020, the Company (i) borrowed $12,000,000 from an institutional investor; (ii) issued the investor a promissory note in the principal amount of $12,000,000, accruing interest at the rate of 10% per annum and maturing December 11, 2022 (the “Camber Investor Note”); (iii) granted the Investor a first-priority security interest in Camber’s Viking Shares and Camber’s other assets pursuant to a pledge agreement and a general security agreement, respectively; and (iv) entered into an amendment to the Company’s $6,000,000 promissory note previously issued to the investor dated December 11, 2020 (the “Additional Camber Investor Note”), amending the acceleration provision of the note to provide that the note repayment obligations would not accelerate if the Company increased its authorized capital stock by March 11, 2021 (and the Company increased its authorized capital stock in February 2021 as required). In order to close Camber’s Investment, effective December 23, 2020, Viking entered into a Guaranty Agreement, guaranteeing repayment of the Camber Investor Note and the Additional Camber Investor Note.

On December 23, 2020, the Camber Investor Note was funded, and the Company and Viking closed Camber’s Investment, with the Company paying the Cash Purchase Price to Viking and cancelling Camber’s Viking Notes, as additional consideration. In exchange, Viking issued 26,274,510 shares of its common stock to Camber, representing 51% of Viking’s total outstanding common shares, the Viking Shares. At the closing, James Doris and Frank Barker, Jr., Viking’s CEO and CFO, respectively, at the time, were appointed the CEO and CFO of Camber, and Mr. Doris was appointed a member of the Board of Directors of Camber.

Acquisition of Additional Viking Shares

On January 8, 2021, the Company entered into another purchase agreement with Viking pursuant to which the Company agreed to acquire an additional 16,153,846 shares of Viking common stock (the “Shares”) in consideration of (i) the Company issuing 1,890 shares of Camber’s Series C Redeemable Convertible Preferred Stock to EMC Capital Partners, LLC (“EMC”), one of the Viking’s lenders which held a secured promissory note issued by Viking to EMC in the original principal amount of $20,869,218 in connection with the purchase of oil and gas assets on or about February 3, 2020 (the “EMC Note”); and (ii) EMC considering the EMC Note paid in full and cancelled pursuant to the Cancellation Agreement described below.

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Simultaneously, on January 8, 2021, Viking entered into a Cancellation Agreement with EMC (the “Cancellation Agreement”) pursuant to which Viking agreed to pay $325,000 to EMC, and EMC agreed to cancel and terminate in the EMC Note and all other liabilities, claims, amounts owing and other obligations under the Note. At the same time, the Company entered into a purchase agreement with EMC pursuant to which (i) the Company agreed to issue 1,890 shares of Camber’s Series C Redeemable Convertible Preferred Stock to EMC, and (ii) EMC agreed to enter into the Cancellation Agreement with Viking to cancel the EMC Note.

February 2021 Merger Agreement with Viking

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, a newly formed wholly-owned subsidiary of Camber (“Merger Sub”) would merge with and into Viking (the “Merger”), with Viking surviving the Merger as a wholly-owned subsidiary of the Company.

Pursuant to the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share: (i) of common stock, of 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 the Company; 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 the Company (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 the Company’s common stock), will be treated equally with the Company’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 the Company’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 Viking 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 continue to serve as President and Chief Executive Officer 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 Viking and the Company 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. The Company 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 the Company’s stockholders and approval of the Share Issuance by the Company’s stockholders, (ii) receipt of required regulatory approvals, (iii) effectiveness of a registration statement on Form S-4 for the Company’s 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.

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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”/”reverse merger”, the Company (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.

The Merger Agreement can be terminated (i) at any time with the mutual consent of the parties; (ii) by either the Company 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 the Company or 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 Company or Viking is unable to obtain the affirmative vote of its stockholders for approval of the Merger; (vi) by Viking if Company 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.

As of November 8, 2022, neither Viking nor Camber has advised of its intention to terminate the Merger Agreement. However, given the lapse of time since the date of the Merger Agreement and the lack of progress during that period toward completing certain of the transaction requirements and satisfying certain of the conditions to the merger, we believe it is reasonably likely that certain terms, including economic terms of the merger would need to be modified by the parties in order for the parties to proceed with the merger. While the parties have discussed this likelihood, neither party has determined the revised terms, if any, upon which it would be prepared to proceed with a revised merger agreement. Any revisions to the terms and conditions of the merger agreement would be subject to the written agreement of the parties, and there is no assurance Viking and Camber will agree on any such proposed modifications or conditions. Moreover, the satisfaction of conditions, whether existing or new, may be outside of Camber’s control.

July 2021 Transaction

On July 29, 2021, the Company entered into a Securities Purchase Agreement with Viking to acquire an additional 27,500,000 shares of Viking common stock for an aggregate purchase price of $11,000,000. The proceeds from the transaction were used by Viking to (i) acquire an approximate 60.5% interest Simson-Maxwell, Ltd, a Canadian company engaged in the manufacture and supply of industrial engines, power generation products, services and custom energy solutions; (ii) acquire a license of a patented carbon-capture system for exclusive use in Canada and for a specified number of locations in the United States; and (iii) for general working capital purposes.

Accounting for the Viking Investment

As noted above, in accordance with the terms of the Viking Investment, Mr. James A. Doris became the President and Chief Executive Officer of the Company, resulting in Mr. Doris being the President and Chief Executive Officer of each of the Company and Viking. Mr. Doris does not own any shares of the Company but he owns or controls shares of Series C Preferred Stock of Viking with significant voting rights. Such voting rights were suspended until July 1, 2022 or if Mr. Doris were no longer the Chief Executive Officer of the Company. The Company has determined that it has the ability to exercise significant influence over the operations and policies of Viking, but not control of Viking given the voting rights associated with Mr. Doris’ Series C Preferred Stock. Consequently, the Company accounts for the Viking Investment under the equity method.

NOTE 2 – ORGANIZATION AND OPERATIONS OF THE COMPANY

Camber’s aim is to become a growth-oriented diversified energy company. The Company owns minority, non-operated working interests in certain oil & gas wells in Texas and/or Louisiana, and through its investment in Viking, the organization provides custom energy & power solutions to commercial and industrial clients in North America. Viking also holds an exclusive license in Canada to a patented carbon-capture system, and has a majority interest in: (i) an entity with intellectual property rights to a fully developed, patent pending, ready-for-market proprietary Medical & Bio-Hazard Waste Treatment system using Ozone Technology; and (ii) entities with the intellectual property rights to fully developed, patent pending, ready-for-market proprietary Electric Transmission and Distribution Open Conductor Detection Systems.

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NOTE 3 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS

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 $86,841,169 for the nine months ended September 30, 2022 as compared to a net loss of $253,172,096 for the nine months ended September 30, 2021. The 2022 loss was comprised of, among other things, certain non-cash items with a total net impact of $80,244,148 including: (i) a loss on derivative liability of $71,846,677 (ii) loss in earnings of unconsolidated entity of $8,265,256 (iii) stock-based compensation of $123,754; and (iv) depreciation, depletion and accretion of $8,461.

As of September 30, 2022, the Company has a stockholders’ deficit of $33,079,090 and total long-term debt of $33,116,749, net of debt discount.

As of September 30, 2022, the Company has a working capital deficiency of approximately $34.8 million. The largest component of current liabilities creating this working capital deficiency is a derivative liability of $32.7 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.

Nonetheless, 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.

The Company entered into a Loan Agreement on December 24, 2021 with the investor named therein (the “Investor”) pursuant to which the Investor agreed to loan the Company $25,000,000 subject to, among other things, the Company having increased its authorized capital of common shares on or before December 31, 2021, which increase occurred on December 30, 2021.

On January 3, 2022 the Company received $25,000,000 (the “Loan Proceeds”) from the Investor, and in connection therewith executed and delivered the following in favor of the Investor: (i) a promissory note dated on or about December 31, 2021 in the principal amount of $26,315,789.47, representing a 5% original issue discount (the “Investor Note”), accruing interest at a rate equal to the Wall Street Journal Prime Rate, payable at maturity, and maturing January 1, 2027; (ii) a Security Agreement-Pledge (the “Pledge Agreement”) granting the Investor a first-priority security interest in Camber’s common shares of Viking Energy Group, Inc.; and (iii) a general security agreement (the “Security Agreement”) granting the Investor a first-priority security interest in Camber’s other assets. The Investor may convert amounts owing under the Investor Note into shares of common stock of Camber at a fixed price of $1.50 per share, subject to beneficial ownership limitations. The obligations under the Investor Note are supported by a Guaranty from Viking Energy Group, Inc.

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The majority of the Loan Proceeds of the loan were used to: (i) redeem shares of Series C Redeemable Convertible Preferred Stock of the Company not owned by the Investor or its affiliates; and (ii) pay in full the secured loan disclosed by the Company in a Current Report Filed on Form 8-K filed with the SEC on December 17, 2021.

NOTE 4 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation

The Company has provided a discussion of significant accounting policies, estimates, and judgments in its December 31, 2021, Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies since December 31, 2021, 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 December 31, 2021 are derived from our audited consolidated financial statements as of that date. The unaudited consolidated financial statements as of and for the three and nine-month periods ended September 30, 2022 and 2021 have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in Camber’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

Basis of Consolidation

The financial statements presented herein reflect the consolidated financial results of the Company, its wholly owned subsidiaries, Camber Permian LLC, a Texas limited liability company, CE Operating, LLC, an Oklahoma limited liability company, C E Energy LLC, a Texas limited liability company, which was assigned to PetroGlobe in July 2020 as discussed below under “Note 11 – Commitments and Contingencies” – “Legal Proceedings. All significant intercompany transactions and balances have been eliminated.

Use of Estimates in the Preparation of Financial Statements

The preparation of consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. Significant areas requiring the use of management estimates relate to the determination of fair value of the Company’s Series C Preferred stock, impairment of long-lived assets, stock-based compensation, asset retirement obligations, and the determination of expected tax rates for future income tax recoveries.

The estimates of proved, probable and possible oil and gas reserves are used as significant inputs in determining the depletion of oil and gas properties and the impairment of proved and unproved oil and gas properties. There are numerous uncertainties inherent in the estimation of quantities of proved, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks. Actual results could differ from the estimates and assumptions utilized.

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Financial Instruments

SEC Form 10-Q filed by Camber Energy Inc.