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Item 1. Financial Statements

2023-05-15 compared with 2022-11-14 · 186 added, 248 removed, 596 unchanged (42% of the section changed)

2 unchanged sentences

Consolidated Balance Sheets (unaudited)

September 30,

Current assets

Accounts receivable - oil and gas - net

Prepaid expenses

10 unchanged sentences

Current taxes payable

Warrant liability

Derivative liability

5 unchanged sentences

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.

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

Preferred Stock Series C, 5,200 shares authorized of $ 0.001 par value, 238 and 270 shares issued and outstanding as of March 31, 2023 and December 31, 2022, liquidation preference of $ 2,380,000 and $ 2,700,000 at March 31, 2023 and December 31, 2022, respectively.

Preferred Stock Series G, 25,000 authorized, $ 0.001 par value, 5,272 issued and outstanding as of March 31, 2023 and December 31, 2022, respectively, liquidation preference of $ 0 as of March 31, 2023 and December 31, 2022, respectively

Common stock, 20,000,000 shares authorized of $ 0.001 par value, 20,000,000 and 18,092,663 shares issued and outstanding as of March 31, 2023 and December 31, 2022, respectively.

Additional paid-in-capital

10 unchanged sentences

Three Months Ended

Nine months ended

September 30,

Oil and gas sales

8 unchanged sentences

( 1,017,569 )

( 4,005,446 )

Other income (expense)

2 unchanged sentences

( 1,161,275 )

( 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 )

Equity (deficit) in earnings of unconsolidated entity

( 1,097,839 )

Gain (loss) on derivative and warrant liability

( 65,010,723 )

1 unchanged sentence

( 67,137,908 )

( 263,635,217 )

( 83,632,669 )

( 242,489,656 )

Net income (loss) before income taxes

( 23,280,727 )

( 264,555,523 )

Net loss before income taxes

( 2,346,076 )

1 unchanged sentence

Income tax benefit (expense)

Net income (loss) attributable to Camber Energy, Inc.

$ ( 2,346,076 )

$ ( 68,155,477 )

( 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

Net loss per Share - basic and diluted

Weighted average number of common shares outstanding

3 unchanged sentences

Consolidated Statements of Cash Flows (Unaudited)

Nine months ended

September 30,

Three Months Ended

Cash flows from operating activities:

1 unchanged sentence

$ ( 68,155,477 )

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

Adjustments to reconcile net loss to cash used by operating activities

Stock-based compensation

Depreciation, depletion, amortization and accretion

Change in fair value of derivative liability

Change in fair value of derivative and warrant liability

( 1,281,706 )

Amortization of debt discount

2 unchanged sentences

Accounts receivable

Prepaid expenses

Prepaid expenses and other assets

Accounts payable and accrued expenses

3 unchanged sentences

Cash flows from investing activities:

Cash paid for Viking investment

( 11,000,000 )

Loans to Viking

1 unchanged sentence

Repayments received from Viking

Net cash used in investing activities

( 2,722,300 )

Net cash provided (used) in investing activities

( 4,297,300 )

Cash flows from financing activities:

Repayment of long-term debt

Redemption of Series C Preferred Stock

( 18,850,000 )

1 unchanged sentence

( 1,375,000 )

Redemption of Series C preferred stock

( 18,850,000 )

Proceeds from issuance of Series C Preferred Stock

Proceeds from long-term debt

Net cash provided by financing activities

Net increase (decrease) in cash

Repayment of long-term debt

( 1,000,000 )

Net cash provided in financing activities

Net decrease in cash

( 1,647,364 )

Cash, beginning of period

2 unchanged sentences

Cash paid for:

Supplemental disclosure of Non-Cash Investing and Financing Activities:

Issuance of series C Preferred Stock as investment in Viking

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

CAMBER ENERGY, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

Nine Months Ended September 30, 2022 and 2021

Preferred Stock

Consolidated Statements of Changes in Stockholders’ Deficit (Unaudited)

Three Months Ended March 31, 2023 and 2022

Preferred Stock

1 unchanged sentence

Stockholders'

(Deficit) Equity

For the nine months ended September 30, 2022

For the three months ended March 31, 2023

Balances, December 31, 2022

5 unchanged sentences

True-Up Shares

Issuance of Common Shares for Consulting Fees

Redemption of Series C preferred stock for cash

( 18,849,998 )

( 18,850,000 )

Redemption of Series G preferred stock

( 2,749,995 )

( 2,750,000 )

Series C fair value adjustment

Warrants issued for debt discount

Adjustment for rounding

( 2,346,076 )

Balances September 30, 2022

Balances March 31, 2023

$ 571,886,440

1 unchanged sentence

$ ( 19,469,710 )

For the three months ended March 31, 2022

Balances, December 31, 2021

6 unchanged sentences

Issuance of Common Shares for Consulting Fees

Equity contribution

Redemption of Series C preferred stock for cash

( 18,849,998 )

Warrants issued for compensation

Issuance of Series C Preferred Shares for Cash Proceeds

( 18,850,000 )

Redemption of Series G preferred stock

( 1,374,998 )

Issuance of Series C Preferred Shares for Cash Proceeds

Change in fair value of Series C shares

Transfer of Series C Preferred Stock to Permanent Equity

( 1,375,000 )

Warrants issued for debt discount

( 68,155,477 )

Balances September 30, 2021

Balances March 31, 2022

$ 481,250,549

3 unchanged sentences

CAMBER ENERGY, INC.

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements (Unaudited)

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

1 unchanged sentence

(“Camber”, the “Company”) acquired a 51 % interest in Viking Energy Group, Inc.

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.

On January 8, 2021 and on July 29, 2021 the Company acquired additional interests in Viking resulting in the Company owning approximately 60.9 % of the outstanding common shares of Viking at March 31, 2023.

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.

18 unchanged sentences

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:

Merger Agreement with Viking

On February 15, 2021, the Company entered into an Agreement and Plan of Merger with Viking, which was amended on April 18, 2023 (as amended, the “Merger Agreement”).

The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, a wholly owned subsidiary of the Company (“Merger Sub”) will merge with and into Viking (the “Merger”), with Viking surviving the Merger as a wholly owned subsidiary of the Company.

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 Viking (the “Viking Common Stock”) issued and outstanding immediately prior to the Effective Time, other than shares owned by the Company, Viking and Merger Sub, will be converted into the right to receive one share of common stock of the Company (the “Camber Common Stock”);

(ii) of Series C Convertible Preferred Stock of Viking (the “Viking Series C 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”), and (iii) of Series E Convertible Preferred Stock of Viking (the “Viking Series E Preferred Stock,” and, together with the Viking Series C Preferred Stock, 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 H Preferred Stock of the Company (the “Camber Series H Preferred Stock,” and, together with the Camber Series A Preferred Stock, the “New Camber Preferred Stock”).

Each share of Camber Series A Preferred Stock will be convertible into 890 shares of Camber Common Stock (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 Common Stock), will be treated equally with Camber 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;

(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”).

(d) on a proposal for the disposal of all or substantially all of the Company’s property, business and undertaking;

(f) during the winding-up of the Company;

and/or (g) with respect to a proposed merger or consolidation in which the Company is a party or a subsidiary of the Company is a party.

Each share of Camber Series H Preferred Stock will have a face value of $10,000 per share, will be convertible into a certain number of shares of Camber Common Stock, with the conversion ratio based upon achievement of certain milestones by Viking’s subsidiary, Viking Protection Systems, LLC (provided the holder has not elected to receive the applicable portion of the purchase price in cash pursuant to that certain Purchase Agreement, dated as of February 9, 2022, by and between Viking and Jedda Holdings, LLC), will be subject to a beneficial ownership limitation of 4.99 % of Camber Common Stock (but may be increased up to a maximum of 9.99% at the sole election of a holder by the provision of at least 61 days’ advance written notice) and will have voting rights equal to one vote per share of Camber Series H Preferred Stock held on a non-cumulative basis.

Holders of Viking Common Stock and Viking Preferred Stock will have any fractional shares of Camber Common Stock or New Camber Preferred Stock after the Merger rounded up to the nearest whole share.

At the Effective Time, each then outstanding option or warrant to purchase Viking Common Stock (a “Viking Option”) will, to the extent unvested, automatically become fully vested and will be converted automatically into an option or warrant (an “Adjusted Option”) to purchase, on substantially the same terms and conditions as were applicable to such Viking Option immediately prior to the effective time of the Merger, except that (i) instead of being exercisable into Viking Common Stock, such Adjusted Option will be exercisable into Camber Common Stock, and (ii) all references to the “Company” in the Viking Option agreements will be references to Camber in the Adjusted Option agreements.

At the Effective Time, each promissory note issued by Viking that is convertible into Viking Common Stock (a “Viking Convertible Note”) that, as of immediately prior to the effective time of the Merger, is outstanding and unconverted shall be converted into a promissory note convertible into Camber Common Stock (an “Adjusted Convertible Note”) having substantially the same terms and conditions as applied to the corresponding Viking Convertible Note as of immediately prior to the effective time of the Merger (including, for the avoidance of doubt, any extended post-termination conversion period that applies following consummation of the Merger), except that (i) instead of being convertible into Viking Common Stock, such Adjusted Convertible Note will be convertible into Camber Common Stock, and (ii) all references to the “Company” in the Viking Convertible Note agreements will be references to Camber in the Adjusted Convertible Note agreements..

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.

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 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.

The Merger Agreement also provides that, during the period from the date of the Merger Agreement until the Effective Time, each of the Company 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.

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.

The Company is required to hold a meeting of its stockholders to approve the issuance of Camber Common Stock and New Camber Preferred Stock (including the shares of Camber Common Stock issuable upon conversion thereof) in connection with the Merger (the “Share Issuances”) and, subject to certain exceptions, to recommend that its stockholders approve such proposals.

The completion of the Merger is subject to customary conditions, including (i) adoption of the Merger Agreement by Viking’s stockholders and approval of the Share Issuances 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”/”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.

Additional closing conditions to the Merger include:

(i) receipt of fairness opinions from financial advisors of both the Company and Viking that the Merger is fair from a financial point of view to the holders of each company’s common stock, (ii) confirmation from the Company that it is not in default of its outstanding agreements with a certain preferred equity holder and lender, (iii) written agreement from the Company’s warrant holders regarding the number and exercise price of the Company’s outstanding warrants and that the Merger will not trigger any price adjustments in certain outstanding warrant agreements, and (iv) 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;

(iii) by either Viking or the Company if the Merger shall not have been consummated on or before September 30, 2023;

(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.

(v) by the Company if Viking is unable to obtain the affirmative vote of its stockholders for approval of the Merger;

(vi) by Viking if the Company is unable to obtain the affirmative vote of its stockholders for approval of the Share Issuances;

and (vii) by Viking or the Company 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

17 unchanged sentences

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.

(i) an entity with intellectual property rights to a fully developed, patented, proprietary Medical & Bio-Hazard Waste Treatment system using Ozone Technology;

and (ii) entities with the intellectual property rights to fully developed, patent pending, proprietary Electric Transmission and Distribution Open Conductor Detection Systems.

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 Company generated a net loss of $ 2,346,076 for the three months ended March 31, 2023 as compared to a net loss of $ 68,155,477 for the three months ended March 31, 2022.

The 2023 loss was comprised of, among other things, certain non-cash items with a total net impact of $ 612,336 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 ;

(i) a gain on derivative and warrant liability of $ 1,281,706 (ii) loss in earnings of unconsolidated entity of $ 1,097,839 ;

(iii) amortization of debt discount of $ 793,380 ;

and (iv) depreciation, depletion and accretion of $ 2,823 .

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.

As of March 31, 2023, the Company has a stockholders’ deficit of $ 19,469,710 and total long-term debt of $ 34,721,141 , net of debt discount.

As of March 31, 2023, the Company has a working capital deficiency of approximately $ 16.6 million.

The largest components of current liabilities creating this working capital deficiency are a derivative liability of $ 9.8 million and a warrant liability of $ 2.4 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.

8 unchanged sentences

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.

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

3 unchanged sentences

Amounts presented in the consolidated balance sheet as of December 31, 2022 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.

The unaudited consolidated financial statements as of and for the three-month periods ended March 31, 2023 and 2022 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 consolidated 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.

1 unchanged sentence

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.

The consolidated 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 ” – “ Le g al Proceedin gs.

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.

The Company’s investment in Viking is accounted for under the equity method.

Use of Estimates in the Preparation of Consolidated Financial Statements

The preparation of consolidated financial statements in conformity with U.S.

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.

11 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 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:

As of March 31, 2023 and December 31, 2022, 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 three months ended March 31, 2023 are classified below based on the three fair value hierarchy described above:

Identical Assets

Significant Unobservable

(nine months ended September 30, 2022)

Total Gains (Losses) (three months ended March 31, 2023)

Financial liabilities:

Derivative liability - Series C Preferred Stock

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:

$ ( 2,165,183 )

Assets and liabilities measured at fair value as of December 31, 2022 and losses for the three months ended March 31, 2022 are classified below based on the three fair value hierarchy described above:

Identical Assets

Significant Unobservable

Inputs- December 31, 2021

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

Total Gains (Losses) (three months ended March 31, 2022)

Financial liabilities:

Derivative liability - Series C preferred Stock

$ ( 65,010,723 )

Cash and Cash Equivalents

1 unchanged sentence

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

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.

At March 31, 2023 and December 31, 2022, the Company’s cash in excess of the federally insured limit was $ 324,977 and $ 916,596 , respectively.

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

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

The Company had no cash equivalents at March 31, 2023 and December 31, 2022.

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

At March 31, 2023 and December 31, 2022 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 nine months ended September 30, 2022.

No impairment expense was recorded for the three months ended March 31, 2023.

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 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

34 unchanged sentences

The Series C Preferred Stock and Series G Preferred Stock contain provisions that could result in modification of the 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, “Derivatives and Hedging”.

The Series C Preferred Stock are convertible into shares of common stock at a fixed $ 3.25 conversion rate.

2 unchanged sentences

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.

If the Conversion Premium is paid in shares, the conversion ratio is based on a volume weighted average price (“VWAP”) calculation based on the lowest stock price over the Measurement Period.

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.

12 unchanged sentences

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 September 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 March 31, 2023 and December 31, 2022 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 September 30, 2022 through the date of filing of this report.

The Company has evaluated all subsequent events from March 31, 2023 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 nine months ended September 30, 2022.

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the three months ended March 31, 2023.

The allocation between the classifications is based on the relationships summarized in the Company’s annual analysis of reserves as of December 31, 2022.

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

The Depletion and Adjustments column reflects depletion and all other increases or decreases that occurred during the three months ended March 31, 2023:

Depletion and Adjustments

September 30,

Proved developed producing oil and gas properties

1 unchanged sentence

Accumulated depreciation, depletion and amortization

( 78,370,049 )

( 78,371,409 )

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

For the three months ended March 31, 2023 and 2022, 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 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

Investment in Viking

The Company owns approximately 60.9 % of the outstanding common shares of Viking at March 31, 2023.

Table below shows the changes in the investments in unconsolidated entities for the three months ended March 31, 2023 and the year ended December 31, 2022.

Carrying amount – beginning

Proportionate share of (losses)

( 1,097,839 )

( 9,461,874 )

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

Nine months ended September 30,

Year ended December 31,

Carrying amount at beginning of period

Acquisition of Viking

Carrying amount at end of period

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 three months ended March 31, 2023 and the year ended December 31, 2022.

Carrying amount at beginning of year

Carrying amount at end of year

NOTE 8 – LONG TERM DEBT

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.

6 unchanged sentences

The Note is secured by lien on substantially all of the Company’s assets.

Note payable to Discover Growth Fund, LLC pursuant to a 10.0% Secured Promissory Note dated December 9, 2021 in the original amount of $1,000,000 with interest and principal due at maturity on March 8, 2022.

The Note is secured by lien on substantially all of the Company’s assets.

The note was paid in full on January 4, 2022.

Principal value of debt

unamortized debt discount

( 12,094,648 )

( 12,888,029 )

Total long-term debt, net

Less current portion

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 September 30,

Twelve month period ended March 31,

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 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

Activities for derivative Series C Preferred Stock derivative liability during the three months ended March 31, 2023 and the year ended December 31, 2022 were as follows:

Carrying amount at beginning of year

Issued Series C preferred shares

2 unchanged sentences

( 175,038,915 )

( 199,943,084

Carrying amount at end of period

Carrying amount at end of year

The fair value of the derivative liability has been estimated using a binomial model and the historical volatility of the Company’s common stock as of the date of conversion.

9 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.

The Company was the target of a “short” report issued by Kerrisdale Capital in early October, 2021, and as a result of such short report, on October 29, 2021, a Class Action Complaint (i.e.

C.A.No.4:21-cv-03574) was filed against the Company, its CEO and CFO by Ronald E.

Coggins, Individually and on Behalf of All Others Similarly Situated v.

Camber Energy, Inc., et al .;

District Court for the Southern District of Texas, Houston Division, pursuant to which the Plaintiffs are seeking to recover damages alleged to have been suffered by them as a result of the defendants’ violations of federal securities laws.

The defendants deny the allegations contained in the Class Action Complaint and have engaged Baker Botts L.L.P.

to defend the action.

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

2 unchanged sentences

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.

On January 20, 2023, the U.S.

District Court held that certain claims brought by the plaintiff relating to director actions and statements made in proxy statements prior to June 30, 2019, were time barred, but did not dismiss certain claims brought by plaintiff relating to director actions and statements made in proxy statements after June 30, 2019.

Pursuant to Article 6 of the Amended and Restated Bylaws, on February 15, 2023, the Company’s Board of Directors (the “Board”) formed a Committee of the Board (the “Special Litigation Committee”) to investigate, analyze, and evaluate the remaining allegations in the Houston Derivative Complaint.

The Special Litigation Committee’s investigation and evaluation remains ongoing.

At this time, we are not able to predict the outcome of the Special Litigation Committee investigation or these claims.

The defendants deny the allegations contained in the Class Action Complaint and Houston Derivative Complaint and have engaged Baker Botts L.L.P.

to defend the actions.

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, and on December 12, 2022 the shareholder plaintiff in Case No.

A-22-852069-B voluntarily dismissed his lawsuit.

Maranatha Oil Matter

7 unchanged sentences

The Company has filed a denial to the claims and intends to vehemently defend itself against the allegations.

Litigation as a Result of “Short Report”

The Company was the target of a “short” report issued by Kerrisdale Capital in early October, 2021, and as a result of such short report there were actions (including two derivative actions) and/or complaints commenced or filed, as applicable, against the Company, its officers, directors and certain former directors by or on behalf of certain shareholders of Camber in connection with losses alleged to have been suffered by the shareholders.

The Company and its management, including former directors, have retained the firm of Baker Botts LLP to defend the actions, and deny the allegations contained in the claim(s).

NOTE 12 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Oil and Gas Contracts

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,

The following table disaggregates revenue by significant product type for the three months ended March 31, 2023 and 2022 respectively:

Natural gas sales and liquids

1 unchanged sentence

NOTE 13 – STOCKHOLDERS’ DEFICIT

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.

During the three months ended March 31, 2023, the Company issued to Antilles Family Office, LLC, 571,194 shares of common stock for a conversion of 32 shares of Series C Preferred Stock, and 1,336,143 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.

Series A Convertible Preferred Stock

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

As of March 31, 2023 and December 31, 2022, the Company had no Series A Convertible Preferred Stock issued or outstanding.

Series B Redeemable Convertible Preferred Stock

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

As of March 31, 2023 and December 31, 2022, 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.

3 unchanged sentences

Because of the previous redemption requirement and due to certain redemption features, which are outside the control of the Company, the Series C Preferred Stock is classified as temporary equity on the March 31, 2021 and December 31, 2020 balance sheets.

Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable.

Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with U.S.

GAAP, and is not mandatorily redeemable.

In addition, the Series C Preferred Stock contains an embedded derivative and an additional derivative upon conversion.

16 unchanged sentences

On November 8, 2021, the Company filed with the Secretary of State of Nevada a Fifth Amended and Restated Designation regarding its Series C Preferred Stock which amended the Designations to provide voting rights to holders of the Series C Preferred Stock as required by the October 2021 Agreements (as defined herein).

The Securities Purchase Agreements (“SPAs”) between the Company and the Investors regarding the purchase and sale of the Series C Preferred Shares require the Company to, among other things, timely file all reports required to be filed by Company pursuant to requirements of the SEC, and to maintain sufficient reserves from its duly authorized Common Stock for issuance of all Conversion Shares.

On October 6, 2021, the Company received notice from the Investors that they believed the Company breached the SPAs for failing to comply with the foregoing two items, and the Notes contain a provision stating a breach by the Company of any terms within the SPA or COD is also a breach under the Notes, which would result in an immediate acceleration of the Notes at the holder’s option.

On October 9, 2021 the Company entered into agreements (the “October Agreements”) with each of the First Series C Preferred Stock investors, pursuant to which the investors agreed to refrain from declaring defaults or bringing a breach of contract action under the SPAs, and one investor, a noteholder, agreed to refrain from declaring defaults or bringing a breach of contract action under the Notes, in each case provided the Company:

(i) within 30 days of the date of the October Agreements, amended the COD to provide that holders of the Preferred Shares will vote together with holders of common stock on all matters other than election of directors and shareholder proposals (including proposals initiated by any holders of Preferred Shares), on an as-if converted basis, subject to the beneficial ownership limitation in the COD, even if there are insufficient shares of authorized common stock to fully convert the Preferred Shares (the “COD Amendment Requirement”);

(ii) files by November 19, 2021 all reports required to be filed by the Company with the SEC;

and (iii) to implement and maintain, as soon as possible but no later than December 31, 2021, a sufficient reserve from its duly authorized Common Stock for issuance of all Conversion Shares

In November 2021, as a further accommodation to the Company and in order to help facilitate implementation of the Company’s business plans and continued trading on the NYSE American, the investors agreed to extend the deadline for the Filing Requirement to December 6, 2021.

The deadline for the Reserve Requirement remains December 31, 2021, meaning the Company is to obtain on or before such date, approval of the proposals outlined in the preliminary proxy statement filed by the Company with the Securities and Exchange Commission on November 9, 2021.

On December 3, 2021 the Company entered into amending agreements (the “ December Agreements ”) with each of the First Investor and Second Investor (as disclosed by the Company in its Current Report Filed on Form 8-K filed with the Securities and Exchange Commission on December 6, 2021).

Pursuant to the December 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 Investors agreed to extend the deadline for the Filing Requirement to December 17, 2021.

The deadline for the Reserve Requirement remained December 31, 2021.

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 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 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

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.

As of March 31, 2023 and December 31, 2022 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 March 31, 2023 and December 31, 2022, the Company estimates that the following common shares would be required to be issued to satisfy the conversion of the Series C Preferred shares:

Estimated number of shares issuable for conversion at $ 162.50 per share at March 31, 2023 and December 31, 2022 respectively

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

1 unchanged sentence

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

Additionally.

even if the Series C preferred shares were converted on the above dates, the Company could, pursuant to terms out in the COD, be required to issue additional common shares (true-up shares).

Additionally, even if the Series C preferred shares were converted on the above dates, the Company could, pursuant to terms out in the COD, be required to issue additional common shares (true-up shares).

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”).

4 unchanged sentences

If the Company fails to satisfy future Filing Requirements, it would be considered a default under the CODs and SPA’s, which in turn would constitute an event of default under the Discover Notes.

Series E Redeemable Convertible Preferred Stock and Series F Convertible Preferred Stock

On July 8, 2019, the Company acquired Lineal Star Holdings, LLC (“Lineal”) pursuant to a Plan of Merger dated as of the same date.

Pursuant to the Lineal Plan of Merger, the Company acquired 100 % of the ownership of Lineal from the Lineal Members in consideration for 1,000,000 of the newly issued shares of Series E Preferred Stock and 16,750 of the newly issued shares of Series F Preferred Stock and effective on December 31, 2019, the Company divested its ownership in Lineal and the Series E Preferred Stock and Series F Preferred Stock were returned to the Company and cancelled.

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

Previously Converted Series C Preferred Stock

EMC converted certain shares of Series C Preferred Stock in 2021 and/or 2022 based on the low VWAP of the Company’s common stock being $ 0.3475 per share for the purpose of calculating the Conversion Premium.

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, EMC received certain true-up shares in 2022.

As of March 31, 2023, EMC held zero shares of Series C Preferred Stock, but was entitled to 730,241 common shares in connection with prior conversions.

These shares were issued to EMC on or about May 1, 2023.

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 during such period, Antilles received certain true-up shares in 2022 based on an agreed upon low VWAP of $0.20 per share.

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.

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.

Series G Redeemable Convertible Preferred Stock

27 unchanged sentences

As mentioned above, the Investor may not convert any of the remaining shares of preferred stock associated with any remaining Note into shares of common stock or sell any of the underlying shares of common stock unless that Note is paid in full by the Investor, and the Company may redeem the shares of Series G Preferred Stock associated with each Note by paying the Investor $ 1,375,000 as full consideration for such redemption.

On April 26, 2021, the Company issued warrants to Regal Consulting, LLC (“Regal”) entitling Regal to purchase 100,000 shares of common stock of the Company at an exercise price of $ 0.705 per share.

The company recognized an expense of $ 42,037 in connection with the warrants.

The warrants expired on April 25, 2022 .

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

The following is a summary of the Company’s outstanding warrants at March 31, 2023:

lntrinsic Value at

September 30, 2022

March 31, 2023

1,000,000 (2)

December 30, 2026

1,000,000 (2)

December 30, 2026

April 25, 2025

December 31, 2026

4 unchanged sentences

Warrants issued in connection with the Series G Preferred Stock and remain exercisable until December 30, 2026

Warrants issued to a consultant for services and are exercisable until April 25, 2022.

Warrants issued in connection with the issuance of a $ 25,000,000 promissory note

27 unchanged sentences

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.

On December 14, 2022, the Company’s Board of Directors approved a 1 for 50 reverse stock split of the Company’s (a) authorized shares of common stock;

and (b) issued and outstanding shares of common stock.

The Company filed a Certificate of Change to decrease the number of our authorized shares of common stock from 1,000,000,000 to 20,000,000 , which certificate was filed with the State of Nevada on December 16, 2022.

NOTE 15– INCOME (LOSS) PER COMMON SHARE

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

Nine months ended

September 30,

Income (loss)

( 23,280,727 )

The calculation of earnings (loss) per share for the three months ended March 31, 2023 and 2022 was as follows:

$ ( 2,346,076 )

1 unchanged sentence

Less preferred dividends

( 6,676,994 )

Net income (loss) attributable to common shareholders

( 23,280,727 )

Net loss attributable to common stockholders

$ ( 2,346,076 )

$ ( 68,155,477 )

Denominator - weighted average shares – basic

Weighted average share – basic

Dilutive effect of common stock equivalents options/warrants

Dilutive effect Preferred C Shares

Denominator - weighted average shares - diluted

Income (loss) per share - basic

Income (loss) per share - diluted

Preferred C shares

Total weighted average common shares – diluted

Loss per common share - basic

Loss per common share - diluted

NOTE 16 – SUBSEQUENT EVENTS

Termination of Warrants and Early Redemption Entitlement

On April 25, 2023, the Company entered into two warrant termination agreements (the “Warrant Termination Agreements”), one with Discover and one with Antilles (each, an “Investor” and collectively, the “Investors”), pursuant to which each Investor agreed to cancel and terminate, effective as of April 25, 2023 (the “Termination”) all warrants to purchase the Company’s common stock outstanding under (i) that certain Warrant Agreement, dated as of December 30, 2021, by and between the Company and Antilles, and (ii) that certain Warrant Agreement, dated as of December 31, 2021, by and between the Company and Discover.

The Warrant Termination Agreements are identical as to their terms.

The Investors entered into the Warrant Termination Agreements 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 Termination, the Company agreed to the release and indemnity as provided in each Warrant Termination Agreement.

Pursuant to the Warrant Termination Agreement, the Investor also agreed that the Company may make an Early Redemption of any remaining shares of Series C Redeemable Convertible Preferred Stock held by the Investor provided that all Promissory Notes executed by the Company in favor of the Investor or any of its affiliates have been paid in full.

The term “Early Redemption” has the meaning given to it in 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 State of Nevada regarding such class of preferred stock.

Amendment to Articles of Incorporation

On April 26, 2023, an amendment to the Company’s articles of incorporation to increase the number of the Company’s authorized shares of common stock from 20,000,000 to 500,000,000 (the “ Amendment ”) was passed by a majority of the outstanding voting shares of the Company at a Special Meeting of Stockholders.

The Amendment was effected by the Company filing a Certificate of Amendment pursuant to Nevada Revised Statutes Section 78.209 with the Secretary of State of the State of Nevada on April 26, 2023.

Amendment to Merger Agreement

In connection with the previously announced resumption of merger negotiations and further steps to complete a merger, on April 18, 2023, the Company and Viking entered into an amendment to that certain Amended and Restated Agreement and Plan of Merger, dated as of February 15, 2023 (as it may be further amended from time to time, the “Merger Agreement”).

The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, Viking Merger Sub, Inc., a Nevada corporation and wholly owned subsidiary of the Company will merge with and into Viking (the “Merger”), with Viking surviving the Merger as a wholly-owned subsidiary of the Company.

Series C Preferred Stock

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.

On or about May 2, 2023, the Company issued a total of 730,241 common shares to EMC Capital Partners 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.

On or about May 2, 2023, the Company issued 242,640 common shares to Antilles 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.

Issuance of Common Shares for new Conversions of Series C Preferred Stock:

On or about May 5, 2023, the Company issued 1,653,098 common shares to Antilles in connection with Antilles’ conversion of 65 shares of Series C Preferred Stock.

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

November, 2022 Agreement with Discover Growth Fund, LLC

As of May 9, 2023, Antilles holds 173 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 Sixth 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 herein) (collectively, the “COD”), and applicable agreements between the Company and Antilles.

The Company estimates the 173 shares of Series C Preferred Stock would convert into approximately 4.4 million common shares based on a Low VWAP of approximately $ 1.2521 for the purposes of calculating the conversion premium associated with such conversion(s).

If the Low VWAP falls below $1.2521, the underlying common share entitlement(s) would increase in accordance with the terms of the COD.

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