What changed in this filing

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Item 1. Financial Statements

2022-11-14 compared with 2022-08-12 · 135 added, 121 removed, 709 unchanged (27% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets (unaudited)

September 30,

Current assets

19 unchanged sentences

STOCKHOLDERS' DEFICIT

Preferred Stock Series C, 5,200 shares authorized of $ 0.001 par value, 695 and 3,886 shares issued and outstanding as of June 30, 2022 and December 31, 2021, liquidation preference of $ 23,953,175 and $ 133,930,990 at June 30, 2022 and December 31, 2021, respectively.

Preferred Stock Series G, 25,000 authorized, $ 0.001 par value, 5,272 and 10,544 issued and outstanding as of June 30, 2022 and December 31, 2021, respectively, liquidation preference of $ 0 as of June 30, 2022 and December 31, 2021, respectively

Common stock, 1,000,000,000 shares authorized of $ 0.001 par value, 457,291,794 and 257,132,026 shares issued and outstanding as of June 30, 2022 and December 31, 2021

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.

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

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

Additional paid-in-capital

10 unchanged sentences

Three months ended

Six months ended

Nine months ended

September 30,

Oil and gas sales

12 unchanged sentences

( 1,554,604 )

( 3,520,736 )

( 1,461,427 )

Equity (deficit) in earnings of unconsolidated entities

5 unchanged sentences

( 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)

1 unchanged sentence

( 23,280,727 )

( 264,555,523 )

( 86,841,169 )

( 246,495,102 )

Less preferred dividends

2 unchanged sentences

$ ( 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

4 unchanged sentences

Consolidated Statements of Cash Flows (Unaudited)

Six months ended

Nine months ended

September 30,

Cash flows from operating activities:

Net income (loss)

$ ( 86,841,169 )

$ ( 246,495,102 )

Adjustments to reconcile net loss to cash provided (used) by operating activities

2 unchanged sentences

Change in fair value of derivative liability

( 34,166,784 )

Amortization of debt discount

Deficit in earnings of unconsolidated entity

(Equity) deficit in earnings of unconsolidated entity

Changes in operating assets and liabilities

Accounts receivable

Prepaid expenses and other assets

Prepaid expenses

Accounts payable and accrued expenses

3 unchanged sentences

Cash flows from investing activities:

Loan to Viking

Cash paid for Viking investment

( 11,000,000 )

Loans to Viking

( 3,922,300 )

Repayments received from Viking

Net cash used in investing activities

( 2,722,300 )

( 11,000,000 )

Cash flows from financing activities:

5 unchanged sentences

( 18,850,000 )

Proceeds from issuance of Series C Preferred Stock

Proceeds from long-term debt

Net cash provided in financing activities

Net cash provided by financing activities

Net increase (decrease) in cash

9 unchanged sentences

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Six Months Ended June 30, 2022 and 2021

Nine Months Ended September 30, 2022 and 2021

Preferred Stock

2 unchanged sentences

Stockholders'

For the six months ended June 30, 2022

(Deficit) Equity

For the nine months ended September 30, 2022

Balances, December 31, 2021

12 unchanged sentences

( 2,750,000 )

Series C fair value adjustment

Warrants issued for debt discount

1 unchanged sentence

( 86,841,169 )

Balances June 30, 2022

Balances September 30, 2022

$ 534,503,335

1 unchanged sentence

$ ( 33,079,090 )

For the six months ended June 30, 2021

Balances, December 31, 2020

12 unchanged sentences

( 6,164,308 )

Issuance of Series C Preferred Shares for Cash Proceeds

Change in fair value of Series C shares

1 unchanged sentence

( 1,414,206 )

Balances June 30, 2021

( 246,495,102 )

Balances September 30, 2021

$ 392,326,532

$ ( 558,108,048 )

$ ( 165,531,949 )

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

57 unchanged sentences

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

As of August 12, 2022, neither Viking nor Camber has advised of its intention to terminate the Merger Agreement.

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.

25 unchanged sentences

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 $ 63,560,442 for the six months ended June 30, 2022 as compared to a net income of $ 18,060,420 for the six months ended June 30, 2021.

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:

1 unchanged sentence

and (iv) depreciation, depletion and accretion of $ 8,461 .

As of June 30, 2022, the Company has a stockholders’ deficit of $ 28,444,596 and total long-term debt of $ 32,305,737 , net of debt discount.

As of June 30, 2022, the Company has a working capital deficiency of approximately $ 38.5 million.

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.

24 unchanged sentences

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 six-month periods ended June 30, 2022 and 2021 have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S.

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.

19 unchanged sentences

inputs to the valuation methodology are unobservable inputs to measure 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 June 30, 2022 and December 31, 2021, the significant inputs to the Company’s derivative liability relative to the Series C Preferred Stock were Level 3 inputs.

Assets and liabilities measured at fair value as of and for the six months ended June 30, 2022 are classified below based on the three fair value hierarchy described above:

As of September 30, 2022 and December 31, 2021, the significant inputs to the Company’s derivative liability relative to the Series C Preferred Stock were Level 3 inputs.

Assets and liabilities measured at fair value as of and for the nine months ended September 30, 2022 are classified below based on the three fair value hierarchy described above:

Identical Assets

Significant Unobservable

(six months ended June 30, 2022)

(nine months ended September 30, 2022)

Financial liabilities:

Derivative liability- Series C Preferred Stock

( 57,602,973 )

Assets and liabilities measured at fair value as of December 31, 2021 and losses for the six months ended June 30, 2021 are classified below based on the three fair value hierarchy described above:

Assets and liabilities measured at fair value as of December 31, 2021 and losses for the nine months ended September 30, 2021 are classified below based on the three fair value hierarchy described above:

Identical Assets

1 unchanged sentence

Inputs- December 31, 2021

Total (gains) (six months ended June 30, 2021

Total (gains) (nine months ended September 30, 2021

Financial liabilities:

3 unchanged sentences

The Company maintains cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits of $ 250,000 .

At June 30, 2022 and December 31, 2021, the Company’s cash in excess of the federally insured limit was $ 1,949,578 and $ 5,604,382 , respectively.

At September 30, 2022 and December 31, 2021, the Company’s cash in excess of the federally insured limit was $ 2,205,688 and $ 5,604,382 , respectively.

Historically, the Company has not experienced any losses in such accounts.

The Company had no cash equivalents at June 30, 2022 and December 31, 2021, respectively

The Company had no cash equivalents at September 30, 2022 and December 31, 2021.

Accounts Receivable

1 unchanged sentence

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 June 30, 2022 and December 31, 2021 there were no allowances for doubtful accounts.

At September 30, 2022 and December 31, 2021 there were no allowances for doubtful accounts.

Investment in Unconsolidated Entities

15 unchanged sentences

the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.

No impairment expense was recorded for the six months ended June 30, 2022.

No impairment expense was recorded for the nine months ended September 30, 2022.

Oil and Gas Properties

17 unchanged sentences

Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would be anti-dilutive.

At June 30, 2022 and December 31, 2021 there were 220,287,923 and 262,224,956 common stock equivalents that were anti-dilutive, respectively.

At September 30, 2022 and December 31, 2021 there were 250,509,284 and 262,224,956 common stock equivalents that were anti-dilutive, respectively.

Revenue Recognition

39 unchanged sentences

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 Measurement Period is 30 trading days (or 60 trading days if there is a Triggering Event) prior to the conversion date and 30 trading days (or 60 trading 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.

1 unchanged sentence

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.

At the conversion date, the number of shares due for the Conversion Premium is estimated based on the previous 30-day VWAP (or 60 trading days if there is a Triggering Event).

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.

3 unchanged sentences

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 lowest closing price of the Company’s stock subsequent to the conversion date.

and the historical volatility of the Company’s common stock.

The Series G Convertible Preferred stock is redeemable or convertible into a variable number of common shares, at the option of the Company.

1 unchanged sentence

As a result, the Series G Preferred Stock contains an embedded derivative that is required to be recorded at fair value.

The Company has determined that the fair value of the embedded derivative as of June 30, 2022 and December 31, 2021 is negligible due to the restrictions on conversion.

The Company has determined that the fair value of the embedded derivative as of September 30, 2022 and December 31, 2021 is negligible due to the restrictions on conversion.

The embedded derivative associated with the Series G Stock is marked to market at each reporting date with changes in fair value recorded in income.

6 unchanged sentences

Subsequent events

The Company has evaluated all subsequent events from June 30, 2022 through the date of filing of this report.

The Company has evaluated all subsequent events from September 30, 2022 through the date of filing of this report.

NOTE 5 – OIL AND GAS PROPERTIES

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the six months ended June 30, 2022.

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the nine months ended September 30, 2022.

The allocation between the classifications is based on the relationships summarized in the Company’s annual analysis of reserves as of December 31, 2021.

The Adjustments column reflects depletion and all other increases or decreases that occurred during the six months ended June 30, 2022:

The Adjustments column reflects depletion and all other increases or decreases that occurred during the nine months ended September 30, 2022:

Depletion and Adjustments

September 30,

Proved developed producing oil and gas properties

1 unchanged sentence

Accumulated depreciation, depletion and amortization

( 78,364,432 )

( 78,367,599 )

Proved developed producing oil and gas properties, net

9 unchanged sentences

If it is determined that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.

For the six months ended June 30, 2022 and 2021, the Company recorded $ 0 and $ 0 impairments, respectively.

For the nine months ended September 30, 2022 and 2021, the Company did not record any impairments.

NOTE 6 – INVESTMENT IN UNCONSOLIDATED ENTITIES

The Company accounts for its investment in Viking under the equity method.

The Company owns approximately 63 % of the outstanding common shares of Viking at June 30, 2022 and December 31, 2021.

Table below shows the changes in the investments in unconsolidated entities for the six-month period ended June 30, 2022 and the year ended December 31, 2021.

The Company owns approximately 60.9 % of the outstanding common shares of Viking at September 30, 2022 and December 31, 2021.

Table below shows the changes in the investments in unconsolidated entities for the nine-month period ended September 30, 2022 and the year ended December 31, 2021.

September 30,

Carrying amount – beginning of period

1 unchanged sentence

Proportionate share of (losses)

( 2,004,560 )

( 9,430,946 )

Carrying amount - ending

NOTE 7 – 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 months ended June 30, 2022 and the year ended December 31, 2021.

Six months ended June 30,

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 nine months ended September 30, 2022 and the year ended December 31, 2021.

Nine months ended September 30,

Year ended December 31,

4 unchanged sentences

Long-term debt obligations of Camber Energy, Inc.:

September 30,

Note payable to Discover Growth Fund, pursuant to a Secured Promissory Note dated December 24, 2021 and funded on January 3, 2022 in the original amount of $26,315,789 with interest and principal due at maturity on January 1, 2027.

11 unchanged sentences

unamortized debt discount

( 14,510,052 )

Total long-term debt, net

Less current portion

The Company entered into a Loan Agreement on December 24, 2021 with the Discover pursuant to which the 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.

The Company entered into a Loan Agreement on December 24, 2021 with Discover Growth Fund, LLC (“Discover”) pursuant to which the 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 representing a 5 % original issue discount of the loan face value of $ 26,315,790 .

11 unchanged sentences

Principal maturities of long-term debt for the next five years and thereafter are as follows:

Twelve-month period ended June 30,

Twelve-month period ended September 30,

The above notes were in default at various times, but have been resolved through settlement (see Note 13 Stockholders Deficit)

60 unchanged sentences

In cases where the number of common shares required to satisfy a conversion of the Series C shares into common stock was significant in relation to the total number of shares outstanding (approximately 30% or greater) fair value of the embedded features was determined based on the historical market capitalization of the Company.

Activities for derivative Series C Preferred Stock derivative liability during the six months ended June 30, 2022 and the year ended December 31, 2021 were as follows:

Activities for derivative Series C Preferred Stock derivative liability during the nine months ended September 30, 2022 and the year ended December 31, 2021 were as follows:

September 30, 2022

Carrying amount at beginning of period

11 unchanged sentences

Barker, Jr., renders professional services to the Company through FWB Consulting, Inc., an affiliate of Mr.

Barker’s, at a rate of $ 20,000 per month commencing April 2021.

Barker, at a rate of $ 20,000 per month commencing April 2021.

NOTE 11 – COMMITMENTS AND CONTINGENCIES

2 unchanged sentences

Camber records reserves for contingencies when information available indicates that a loss is probable, and the amount of the loss can be reasonably estimated.

On or about April 18, 2022, the Company was made aware of a Shareholder Derivative Complaint filed with the District Court in Clark County, Nevada (Case No.:

A-22-848486-B) against the Company and its directors, and on or about May 4, 2022 the Company was made aware of a second Shareholder Derivative Complaint filed with the District Court in Clark County, Nevada (Case No.

A-22-852069-B) against the Company and its directors.

On July 18, 2022, the shareholder plaintiff in Case No.

A-22-848486-B voluntarily dismissed his lawsuit, leaving only Case No.

A-22-852069-B currently pending in Clark County, Nevada (the “Nevada Derivative Complaint”) to the Company’s knowledge.

The allegations contained in the Nevada Derivative Complaint involve state-law claims for breach of fiduciary duty and unjust enrichment and are based on allegations similar to those in the above-noted Class Action Complaint.

On or about June 30, 2022, the Company was made aware of a Shareholder Derivative Complaint filed in the U.S.

District Court for the Southern District of Texas, Houston Division (Case No.

4:22-cv-2167) against the Company, its current directors, and certain of its former directors (the “Houston Derivative Complaint” and, together with the Nevada Derivative Complaint, the “Derivative Complaints”).

The allegations contained in the Houston Derivative Complaint involve state-law claims for breach of fiduciary duty and unjust enrichment and a federal securities claim under Section 14(a) of the Securities Exchange Act of 1934.

The defendants deny the allegations contained in the Derivative Complaints and have engaged Baker Botts L.L.P.

to defend the actions.

Maranatha Oil Matter

12 unchanged sentences

Oil and Gas Contracts

The following table disaggregates revenue by significant product type for the six months ended June 30, 2022 and 2021 respectively:

Six months ended June 30,

The following table disaggregates revenue by significant product type for the nine months ended September 30, 2022 and 2021 respectively:

Nine months ended September 30,

Natural gas sales and liquids

1 unchanged sentence

NOTE 13 – STOCKHOLDERS’ DEFICIT

During the six months ended June 30, 2022, the Company issued 140,000 shares of restricted common stock to service providers in consideration for investor relations and marketing services.

During the nine months ended September 30, 2022, the Company issued 140,000 shares of restricted common stock to service providers in consideration for investor relations and marketing services.

The Company recognized $ 123,754 , based on the grant date fair value of the Company’s common stock, in share-based compensation expense.

11 unchanged sentences

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.

As of June 30, 2022 and December 31, 2021, the Company had no Series A Convertible Preferred Stock issued or outstanding.

As of September 30, 2022 and December 31, 2021, the Company had no Series A Convertible Preferred Stock issued or outstanding.

Series B Redeemable Convertible Preferred Stock

As of June 30, 2022 and December 31, 2021, the Company had no Series B Redeemable Convertible Preferred Stock issue and outstanding.

As of September 30, 2022 and December 31, 2021, the Company had no Series B Redeemable Convertible Preferred Stock issue and outstanding.

Effective on May 15, 2020, due to the fact that no shares of Series B Preferred Stock were outstanding, the Board of Directors approved, and the Company filed, a Certificate of Withdrawal of Certificate of Designation relating to such series of preferred stock with the Secretary of State of Nevada and terminated the designation of its Series B Preferred Stock effective as of the same date.

7 unchanged sentences

The issuance was recorded as an additional investment by the Company in Viking

As of June 30, 2022, Discover was not owed any common shares in connection with previous conversion notices as a result of the extension of the Measurement Period.

The Company has not declared any dividends on the Series C Preferred stock, but recognized cumulative dividends as an adjustment to income available to common stockholders and an increase in the carrying value of the Series C Preferred Stock.

25 unchanged sentences

Pursuant to the December 24 th Agreements, 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 parties agreed:

the deadline for the Filing Requirement is extended to January 14, 2022;

the deadline for the Reserve Requirement remains December 31, 2021, meaning the Company is required 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 (to increase the Company’s authorized common stock);

each and every Measurement Period (as defined in the COD) with regard to any share of Preferred converted by Investor or any affiliate of Investor prior to December 24, 2021 will terminate, and the provisions of Section I.G.1.d of the COD shall no longer apply with respect to any shares of Preferred converted prior to December 24, 2021;

the deadline for the Filing Requirement was extended to January 14, 2022;

the deadline for the Reserve Requirement remained December 31, 2021, meaning the Company was required 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 (to increase the Company’s authorized common stock);

each and every Measurement Period (as defined in the COD) with regard to any share of Preferred converted by Investor or any affiliate of Investor prior to December 24, 2021 would terminate, and the provisions of Section I.G.1.d of the COD shall no longer apply with respect to any shares of Preferred converted prior to December 24, 2021 if the Filing Requirement was met by the applicable deadline;

If the Reserve Requirement and the Filing Requirement are not met by the deadlines mentioned above, Company acknowledges and agrees that (A) Company will be in uncured material breach and default under all of the Notes and Agreements, and (B) all Measurement Periods will remain open and continue to run in accordance with the terms of the COD.

The Company satisfied the Reserve Requirement by the required deadline but did not satisfy the Filing Requirement by January 14, 2022, and accordingly, the Measurement Period with regard to shares of Preferred converted by Investor or any affiliate of Investor prior to December 24, 2021 did not end.

As of June 30, 2022 and December 31, 2021, the Series C Preferred shares were convertible into a substantial number of the Company’s common shares which could result in significant dilution of the Company’s existing shareholders.

If the outstanding Series C Preferred were converted as of June 30, 2022 and December 31, 2021, the Company estimates that the following common shares would be required to be issued to satisfy the conversion of the Series C Preferred shares:

As of September 30, 2022 and December 31, 2021, the Series C Preferred shares were convertible into a substantial number of the Company’s common shares which could result in significant dilution of the Company’s existing shareholders.

If the outstanding Series C Preferred were converted as of September 30, 2022 and December 31, 2021, the Company estimates that the following common shares would be required to be issued to satisfy the conversion of the Series C Preferred shares:

September 30,

Estimated number of shares issuable for conversion at $3.25 per share

Estimated number of common shares required to satisfy Conversion Premium using VWAP at period end

*based on 695 shares of Series C Convertible Preferred Stock outstanding as of such date

**based on 3,886 shares of Series C Convertible Preferred Stock outstanding as of such date

*based on 270 shares of Series C Convertible Preferred Stock outstanding as of such date and the estimated low VWAP as at such date

**based on 3,886 shares of Series C Convertible Preferred Stock outstanding as of such date and the estimated low VWAP as at such date

Additionally.

1 unchanged sentence

The Certificates of Designations with respect to the Company’s Series C Preferred Stock and Series G Preferred Stock (collectively, the “CODs”) and/or the Stock Purchase Agreements regarding the sale of such Series C Preferred Stock and Series G Preferred Stock (collectively, the “SPA’s”), contain covenants requiring the Company to timely file all reports required to be filed by the Company pursuant to the Exchange Act (the “Filing Requirement”).

The Company did not satisfy the Filing Requirement and, consequently, on or about March 9, 2022, the preferred stock holders, Discover and Antilles, filed a Verified Complaint against the Company (the “Discover/Antilles Complaint”) as a result of the default by the Company under the CODs.

Throughout 2021 and early 2022, the Company did not satisfy the Filing Requirement and, consequently, on or about March 9, 2022, the preferred stock holders, Discover and Antilles Family Office, LLC (“Antilles”), filed a Verified Complaint against the Company (the “Discover/Antilles Complaint”) as a result of the default by the Company under the CODs.

A default under the CODs and/or SPA’s is also considered an event of default under each of the Promissory Notes executed by the Company in favor of Discover (collectively, the “Discover Notes”) (see subsequent events), and upon an event of default under the Discover Notes, Discover may, at its option, declare the principal and any and all interest then accrued thereon, at once due and payable, and exercise any other rights under applicable agreements.

38 unchanged sentences

The warrants expired on April 25, 2022 .

The following is a summary of the Company’s outstanding warrants at June 30, 2022:

The following is a summary of the Company’s outstanding warrants at September 30, 2022:

lntrinsic Value at

June 30, 2022

September 30, 2022

4 unchanged sentences

December 31, 2026

Warrants issued in connection with funding.

The warrants were exercisable on the grant date (September 12, 2017) and remain exercisable until September 12, 2022.

Warrants issued in connection with a Severance Agreement with Richard N.

31 unchanged sentences

On February 23, 2021, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of our authorized shares of common stock from 25,000,000 to 250,000,000 , which amendment was filed with the State of Nevada on February 23, 2021.

On December 30, 2021, the Company’s stockholders approved an amendment to the Company’s Articles of Incorporation to increase the number of our authorized shares of common stock from 250,000,000 to 1,000,000,000 , which amendment was filed with the State of Nevada on December 30, 2021.

NOTE 15 – INCOME (LOSS) PER COMMON SHARE

The calculation of earnings (loss) per share for the three and six months ended June 30, 2022 and 2021, was as follows:

The calculation of earnings (loss) per share for the three and nine months ended September 30, 2022 and 2021, was as follows:

Three months ended

Six months ended

Nine months ended

September 30,

Income (loss)

( 23,280,727 )

( 264,555,523 )

( 246,495,102 )

Less preferred dividends

2 unchanged sentences

( 23,280,727 )

( 264,555,523 )

( 253,172,096 )

Denominator - weighted average shares – basic

5 unchanged sentences

NOTE 16 – SUBSEQUENT EVENTS

Share Issuances & Consulting Arrangements

On or about July 1, 2022 the Company signed a second amendment to an agreement with Sylva International LLC (“Sylva”), which extended the term of Sylva’s engagement with the Company to December 31, 2022.

Pursuant to the terms of the second amendment, the Company agreed to pay Sylva a cash fee of $ 50,000 per month and issue the consultant 175,000 shares of the Company’s common stock.

Series C Preferred Stock

Conversions of Series C Stock in 2022:

From July 1, 2022 through August 8, 2022, Antilles Family Office, LLC (“Antilles”) converted 280 shares of Series C Preferred Stock into approximately 33,938,315 shares of common stock.

Outstanding Series C Stock

As of August 8, 2022, Discover holds 0 shares of Series C Preferred Stock and Antilles holds 415 shares of Series C Preferred Stock.

NYSE Approval Requirement

The Company agreed to use its best efforts to obtain an exception to any shareholder approval requirement from NYSE American or to obtain such approval regarding the issuance of the Conversion Shares and Warrant Shares as soon as possible and in any event no later than the Company’s next annual meeting of stockholders.

Registration Statement

The Company agreed use its best efforts to file with the Securities and Exchange Commission as promptly as practicable, and in any event within 30 days after the date on which the Company files all reports required to be filed pursuant to the Securities Exchange Act of 1934 (the “ Act ”), a Registration Statement registering the delayed and continuous resale of all Conversion Shares and Warrant Shares pursuant to Rule 415 under the Act, subject to any limitations imposed by applicable securities laws as to the number of Conversion Shares and/or Warrant Shares that are eligible for registration, and to use best efforts to cause such Registration Statement to be declared effective under the Act as promptly as practicable and in any event within 60 days after filing.

In connection with the foregoing, the Company filed on June 17, 2022 a draft S-1 Registration Statement with the Securities and Exchange Commission and it is the Company’s objective to have the Registration Statement declared effective on or before August 15, 2022.

Terms of Series G Stock

The rights, entitlements and other characteristics of the Series G Preferred Stock are set out in the Certificate of Designations of Preferences, Powers, Rights and Limitations of Series G Redeemable Convertible Preferred Stock filed by the Company with the State of Nevada on December 30, 2021 (the “ COD ”).

Pursuant to the COD, the Series G Preferred Stock may be converted into shares of common stock at any time at the option of the holder at a price per share of common stock equal to one cent above the closing price of the Company’s common stock on the date of the issuance of such shares of Series G Preferred Stock, or as otherwise specified in the Stock Purchase Agreement, subject to adjustment as otherwise provided in the COD.

Upon conversion, the Company will pay the holders of the Series G Preferred Stock being converted a conversion premium equal to the amount of dividends that such shares would have otherwise earned if they had been held through the maturity date.

The Series G Preferred Stock, with respect to dividend rights and rights upon liquidation, winding-up or dissolution, rank:

(a) senior to the Company’s common stock;

(b) junior to the Series C Redeemable Convertible Preferred Stock, (c) senior to the Series E Redeemable Convertible Preferred Stock and Series F Redeemable Convertible Preferred Stock, as such may be designated as of the date of this Designation, or which may be designated by the Company after the date of this Designation;

(d) senior, pari passu or junior with respect to any other series of Preferred Stock, as set forth in the Certificate of Designations of Preferences, Powers, Rights and Limitations with respect to such Preferred Stock;

and (d) junior to all existing and future indebtedness of the Company.

Except as prohibited by applicable law or as set forth herein, the holders of shares of Series G Preferred Stock will have the right to vote together with holders of common stock and Series C Preferred on all matters other than:

(i) the election of directors;

(ii) and any shareholder proposals, including proposals initiated by any holder of shares of Series G Preferred Stock), in each instance on an as-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 shares of Series G Preferred Stock into common stock.

Commencing on the date of the issuance of any such shares of Series G Preferred Stock, each outstanding share of Series G Preferred Stock will accrue cumulative dividends at a rate equal to 10 .0% per annum, subject to adjustment as provided in the COD, of the Face Value.

Dividends will be payable with respect to any shares of Series G Preferred Stock upon any of the following:

(a) upon redemption of such shares in accordance with the COD;

(b) upon conversion of such shares in accordance with the COD;

and (c) when, as and if otherwise declared by the board of directors of the Corporation.

Dividends, as well as any applicable Conversion Premium payable hereunder, will be paid in shares of common stock valued at (i) if there is no Material Adverse Change (“MAC”) as at the date of payment or issuance of common shares for the Conversion Premium, as applicable, (A) 95.0% of the average of the 5 lowest individual daily volume weighted average prices of the common stock on the Trading Market during the applicable Measurement Period, which may be non-consecutive, less $0.05 per share of common stock, not to exceed (B) 100% of the lowest sales price on the last day of such Measurement Period less $0.05 per share of common stock, or (ii) during the time that any MAC is ongoing, (A) 85.0% of the lowest daily volume weighted average price during any Measurement Period for any conversion by Holder, less $0.10 per share of common stock, not to exceed (B) 85.0% of the lowest sales price on the last day of any Measurement Period, less $0.10 per share of common stock .

On the Dividend Maturity Date, the Corporation may redeem any or all shares of Series G Preferred Stock by paying Holder, in registered or unregistered shares of common stock valued at an amount per share equal to 100% of the Liquidation Value for the shares redeemed, and the Corporation will use its best efforts to register such shares.

Legal Proceedings:

On or about April 18, 2022, the Company was made aware of a Shareholder Derivative Complaint filed with the District Court in Clark County, Nevada (Case No.:

A-22-852069-B) against the Company and its directors.

On July 18, 2022, the shareholder plaintiff in Case No.

A-22-848486-B voluntarily dismissed his lawsuit, leaving only Case No.

A-22-852069-B currently pending in Clark County, Nevada (the “Nevada Derivative Complaint”) to the Company’s knowledge.

On or about June 30, 2022, the Company was made aware of a Shareholder Derivative Complaint filed in the U.S.

District Court for the Southern District of Texas, Houston Division (Case No.

The defendants deny the allegations contained in the Derivative Complaints and have engaged Baker Botts L.L.P.

to defend the actions.

Issuance of True Up Shares for prior Conversions of Series C Preferred Stock:

From October 1, 2022 through November 14, 2022, the Company issued a total of approximately 172,293,602 common shares as True Up shares associated with prior conversions of Series C Preferred Stock as a result of the continuation of the Measurement Period (as defined in the Certificate of Designation with respect to such Series C Preferred Stock) associated with such conversions and a decline in the price of the Company’s common shares within the Measurement Period.

Outstanding Series C Preferred Stock

As of November 8, 2022, Discover holds 0 shares of Series C Preferred Stock and Antilles holds 270 shares of Series C Preferred Stock.

Antilles may convert such Series C Preferred Stock into common shares of the Company pursuant to the terms of the Fifth Amended and Restated Certificate of Designations of Preferences, Powers, Rights and Limitations of Series C Redeemable Convertible Preferred Stock filed by the Company with the Secretary of State of Nevada on November 8, 2021, as amended on October 28, 2022 (as further described below), and applicable agreements between the Company and Antilles.

Previously Converted Series C Preferred Stock

The majority of the Series C Preferred Stock previously converted into common shares by applicable stockholder(s) in 2021 and/or 2022 were based on the low VWAP of the Company’s common stock being $0.3475 per share.

Since the Measurement Period with respect to such conversions did not end until October 28, 2022 (as further explained below) and because the low VWAP subsequent to the conversions declined to approximately $0.1519 during such period, certain Series C Preferred Stockholders have requested or may request additional true-up shares with respect to the prior conversions .

The majority of the Series C Preferred Stock previously converted into common shares by Antilles in 2022 were based on the low VWAP of the Company’s common stock being $0.4503 per share.

Since the Measurement Period with respect to the Antilles Conversions did not end until October 28, 2022 (as further explained below) and because the low VWAP subsequent to the conversions declined to approximately $0.1519 during such period, Antilles may request additional true-up shares with respect to the prior conversions .

October, 2022 Agreements Regarding the Series C Preferred Stock

On October 28, 2022, the Company entered into two agreements (collectively, the “ Agreements ”) in relation to an amendment to the fifth amended and restated certificate of designations regarding the Company’s Series C Preferred Stock (the “ COD ”) as an accommodation to the Company and in order to help facilitate implementation of the Company’s business plans and continued trading on the NYSE American LLC, and in exchange for the release and indemnity as provided in the Agreements.

On October 31, 2022, the Company filed with the Secretary of State of Nevada an amendment to the COD (the “ Amendment ), dated as of October 28, 2022 (the “ Amendment Date ”), pursuant to the Agreements, which amended the COD such that (i) beginning on the Amendment Date and thereafter, when determining the conversion rate for each share of Series C Preferred Stock based on the trading price of the Company’s common stock (“ Common Stock ”) over a certain number of previous days (“ Measurement Period ”), no day will be added to what would otherwise have been the end of any Measurement Period for the failure of the Equity Condition (as defined in the COD), even if the volume weighted average trading price (“ Measuring Metric ”) is not at least $1.50 and each Investor waived the right to receive any additional shares of Common Stock that might otherwise be due if such Equity Condition were to apply after the Agreement Date, including with respect to any pending Measurement Period;

and (ii) (A) beginning on the Amendment Date and for the period through December 30, 2022, the Measuring Metric will be the higher of the amount provided in Section I.G.7.1(ii) of the COD and $0.20, and (B) beginning at market close on December 30, 2022 and thereafter, the Measuring Metric will be the volume weighted average trading price of the Common Stock on any day of trading following the date of first issuance of the Series C Preferred Stock.

November, 2022 Agreement with Discover Growth Fund, LLC

On November 3, 2022, the Company entered into an agreement (the “ Agreement ”) with Discover, pursuant to which Discover absolutely and unconditionally waived and released any and all rights to receive further or additional shares of the Company’s common stock (the “ Conversion Shares ”) with respect to any and all shares of Series C Preferred Stock previously converted by Discover including, but not limited to, the right to deliver additional notices for more Conversion Shares under the Fifth Amended and Restated Certificate of Designations of Preferences, Powers, Rights and Limitations of Series C Redeemable Convertible Preferred Stock filed by the Company with the Secretary of State of Nevada on November 8, 2021, as amended on October 28, 2022.

Discover also absolutely and unconditionally waived and released any and all rights to convert all or any part of any Promissory Notes previously executed by the Company in favor of Discover into shares of the Company’s common stock, and agreed not to convert or attempt to convert any portion of any Promissory Notes, at any particular price or at all.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 1. Financial Statements