What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-11 compared with 2023-05-15 · 79 added, 52 removed, 105 unchanged (56% of the section changed)

28 unchanged sentences

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.

Pending Merger

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;

Merger with Viking

On August 1, 2023, pursuant to that certain Agreement and Plan of Merger, dated as of February 15, 2021, by and between the Company and Viking Energy Group, Inc.

(“Viking”), as amended on April 18, 2023 (as amended, the “Merger Agreement”), a wholly owned subsidiary of the Company (“Merger Sub”) merged with and into Viking (the “Merger”), with Viking surviving the Merger as a wholly owned subsidiary of the Company.

Although this Quarterly Report on Form 10-Q is filed after completion of the Merger, given that the Merger closed after June 30, 2023, the financial statements herein do not include a consolidation of Viking's financial statements at the Camber level.

Rather, the financial statements herein account for Camber's previous investments in Viking under the equity method of accounting, consistent with previously filed financial reports.

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time on August 1, 2023 as set forth in the Certificate of Merger duly filed with the Nevada Secretary of State (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 Camber, Viking and Merger Sub, was converted into the right to receive one share of common stock of Camber (the “Camber Common Stock”);

(ii) of Series C Preferred Stock of Viking (the “Viking Series C Preferred Stock”) issued and outstanding immediately prior to the Effective Time was converted into the right to receive one share of Series A Convertible Preferred Stock of Camber (the “New 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 was converted into the right to receive one share of Series H Preferred Stock of Camber (the “New Camber Series H Preferred Stock,” and, together with the New Camber Series A Preferred Stock, the “New Camber Preferred”).

Pursuant to the Certificate of Designations for the New Camber Series A Preferred Stock, dated as of August 1, 2023 (the “Series A COD”), each share of New Camber Series A Preferred Stock is 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), is treated equally with Camber Common Stock with respect to dividends and liquidation, and only has voting rights with respect to voting:

(a) on a proposal to increase or reduce Camber’s share capital;

(b) on a resolution to approve the terms of a buy-back agreement;

(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 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 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 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:

(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 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 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.

(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.

Pursuant to the Certificate of Designations for the New Camber Series H Preferred Stock, dated as of August 1, 2023 (the “Series H COD”), each share of New Camber Series H Preferred Stock has a face value of $10,000 per share, is 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), is 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 has 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 had any fractional shares of Camber Common Stock or New Camber Preferred 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”), to the extent unvested, automatically became fully vested and was 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, except that (i) instead of being exercisable into Viking Common Stock, such Adjusted Option is exercisable into Camber Common Stock, and (ii) all references to the “Company” in the Viking Option agreements are 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, is outstanding and unconverted, was 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 (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 is convertible into Camber Common Stock, and (ii) all references to the “Company” in the Viking Convertible Note agreements are references to Camber in the Adjusted Convertible Note agreements.

In connection with the Merger, Camber issued approximately 49,290,152 shares of Camber Common Stock, which represents approximately 59.99% of the outstanding Camber Common Stock after giving effect to such issuance.

In addition, Camber reserved for issuance approximately 88,647,137 additional shares of Camber Common Stock in connection with the potential (1) conversion of the New Camber Series A Preferred Stock, (2) conversion of the New Camber Series H Preferred Stock, (3) exercise of the Adjusted Options and (4) conversion of the Adjusted Convertible Notes.

In connection with the closing of the Merger, on August 1, 2023, Camber filed each of the Series A COD and the Series H COD with the Nevada Secretary of State.

Doris will continue to serve as President and Chief Executive Officer of the combined company, and the combined company will continue to have its headquarters in Houston, Texas.

Certificate of Designation for New Camber Series A Preferred Stock

The Series A COD designated up to 28,092 shares of the authorized but unissued shares of its preferred stock as New Camber Series A Preferred Stock.

The following is a summary of the principal terms of the New Camber Series A Preferred Stock.

The holders of the New Camber Series A Preferred Stock (the “Series A Holders”) are entitled to receive, and Camber shall pay, dividends on shares of the New Camber Series A Preferred Stock equal to the amount of the dividend or distribution per share of Camber Common Stock payable at such time multiplied by the number of shares of Camber Common Stock the shares of New Camber Series A Preferred Stock held by such Holder are convertible into.

Voting Rights

Except as required by applicable law the Series A Holders have no right to vote on any matters, questions or proceedings of Camber except:

(a) on a proposal to increase or reduce Camber’s share capital;

(b) on a resolution to approve the terms of a buy-back agreement;

(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.

Each share of New Camber Series A Preferred Stock entitles the holder thereof to 890 votes on all matters Series A Holders have the right to vote.

Series A Holders will vote together as one class.

Upon any liquidation, dissolution or winding-up of Camber, whether voluntary or involuntary (a “Liquidation”), Series A Holders will be entitled to receive out of the assets of Camber, whether such assets are capital or surplus, for each share of New Camber Series A Preferred Stock the same amount that a holder of Camber Common Stock would receive if the New Camber Series A Preferred Stock were fully converted to Camber Common Stock, which amounts shall be paid pari passu with all holders of Camber Common Stock.

A Fundamental Transaction, as defined in the Series A COD, shall not be treated as a Liquidation.

Each share of New Camber Series A Preferred Stock is convertible, at the option of the Holder thereof, at any time after the date of issuance of such share, at the office of Camber or any transfer agent for such stock, into eight hundred and ninety (890) shares of fully paid and non-assessable Camber Common Stock (the “Series A Conversion Rate”).

The Series A Conversion Rate is subject to a beneficial ownership limitation of 9.99% as set forth in Section 6(b) of the Series A COD.

Certain Adjustments

If Camber, at any time while the New Camber Series A Preferred Stock is outstanding, issues stock splits, effects a recapitalization of the Camber Common Stock, makes a subsequent rights offerings, or makes any dividend or other distribution of its assets, then the Series A Holders can adjust the Series A Conversion Rate of the New Camber Series A Preferred Stock to account for such transaction.

Certificate of Designation for New Camber Series H Preferred Stock

The Series H COD designated up to 2,075 shares of the authorized but unissued shares of its preferred stock as New Camber Series H Preferred Stock.

The following is a summary of the principal terms of the New Camber Series H Preferred Stock.

Voting Rights

Except as required by applicable law, holders of the New Camber Series H Preferred Stock (“Series H Holders”) have voting rights equal to one vote per share of New Camber Series H Preferred Stock held on a non-cumulative basis.

Each share of New Camber Series H Preferred Stock is convertible into a number of shares of Camber Common Stock as set forth in Section 5(a) of the Series H COD (the “Series H Conversion Rate”).

The Series H Conversion Rate is subject to the beneficial ownership limitation of 4.99% as set forth in Section 5(b) of the Series H COD, provided that such beneficial ownership limitation may be increased up to a maximum of 9.99% at the sole election of a holder of such New Camber Series H Preferred Stock.

Going Concern Qualification

The Company’s consolidated financial statements included herein have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

The Company generated a net loss of $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 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;

The Company generated a net loss of $(425,295) for the six months ended June 30, 2023 as compared to a net loss of $63,560,442 for the six months ended June 30, 2022.

The 2023 income was comprised of, among other things, certain non-cash items with a total net impact of $3,756,060 including:

(i) a gain on derivative and warrant liability of $6,888,313 (ii) loss in earnings of unconsolidated entity of $1,531,132;

(iii) amortization of debt discount of $1,595,577;

and (iv) depreciation, depletion and accretion of $5,544.

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.

As of June 30, 2023, the Company has a stockholders’ deficit of $16,019,471 and total long-term debt of $35,523,337, net of debt discount.

As of June 30, 2023, the Company has a working capital deficiency of approximately $10.6 million.

The largest components of current liabilities creating this working capital deficiency are a derivative liability of $5.1 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.

9 unchanged sentences

RESULTS OF CONTINUING OPERATIONS

The following discussion of the financial condition and results of operation of the Company for the three months ended March 31, 2023 and 2022, should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

The following discussion of the financial condition and results of operation of the Company for the three and six months ended June 30, 2023 and 2022, should be read in conjunction with the audited consolidated financial statements and the notes thereto in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022.

Liquidity and Capital Resources

As of March 31, 2023, and December 31, 2022, the Company had $574,977 and $1,166,596 in cash holdings, respectively.

Three months ended March 31, 2023 compared to the three months ended March 31, 2022

The Company had gross revenues of $93,471 for the three months ended March 31, 2023, as compared to $136,407 for the three months ended March 31, 2022, reflecting a decrease of $42,936.

The Company’s operating expenses increased to $1,465,121 for the three-month period ended March 31, 2023, from $1,153,976 in the corresponding prior period.

Lease operating costs decreased by $6,280 to $43,085 for the three-month period ended March 31, 2023 as compared to $49,365 for the three-month period ended March 31, 2022, due to lower realized production levels.

DD&A expense was relatively unchanged at $2,823 for the three months ended March 31, 2023 as compared to $2,867 for the three months ended March 31, 2022.

General and administrative expenses and stock-based compensation combined reflected an increase of $317,469 to $1,419,213, when compared to $1,101,744 in the corresponding prior period.

As of June 30, 2023, and December 31, 2022, the Company had $137,485 and $1,166,596 in cash holdings, respectively.

Three months ended June 30, 2023 compared to the three months ended June 30, 2022

The Company had gross revenues of $83,648 for the three months ended June 30, 2023, as compared to $171,651 for the three months ended June 30, 2022, reflecting a decrease of $88,003.

The Company’s operating expenses increased to $2,160,367 for the three-month period ended June 30, 2023, from $1,140,859 in the corresponding prior period.

Lease operating costs decreased by $9,350 to $32,015 for the three-month period ended June 30, 2023 as compared to $41,365 for the three-month period ended June 30, 2022, due to lower realized production levels.

DD&A expense was relatively unchanged at $2,722 for the three months ended June 30, 2023 as compared to $2,870 for the three months ended June 30, 2022.

General and administrative expenses reflected an increase of $1,029,006 to $2,125,630, when compared to $1,096,624 in the corresponding prior period, primarily due to non-recurring costs associated with the pending merger.

Income (loss) from Operations

The Company generated a loss from operations for the three months ended March 31, 2023 of $(1,371,650), when compared to a loss from operations of $(1,017,569) for the three months ended March 31, 2022.

The Company generated a loss from operations for the three months ended June 30, 2023 of $(2,076,719), when compared to a loss from operations of $(969,208) for the three months ended June 30, 2022.

Other Income (Expense)

The Company had other (expense) of $(974,426) for the three months ended March 31, 2023, as compared to other (expense) of $(67,137,908) for the three months ended March 31, 2022.

This significant difference is primarily a result of the Company’s stock price and its impact on our derivatives.

The Company had other income of $3,997,500 for the three months ended June 30, 2023, as compared to other income of $5,564,213 for the three months ended June 30, 2022, primarily a result of the Company’s stock price and its impact on our derivatives.

Net Income (Loss)

The Company had net loss of $(2,346,076) during the three-month period ended March 31, 2023, compared with a net loss of $(68,155,477) for the three-month period ended March 31, 2022, primarily as a result of the items discussed above.

The Company had net income of $1,920,781 during the three-month period ended June 30, 2023, compared with a net income of $4,595,005 for the three-month period ended June 30, 2022, primarily as a result of the items discussed above.

Six months ended June 30, 2023 compared to the six months ended June 30, 2022

The Company had gross revenues of $177,119 for the six months ended June 30, 2023, as compared to $308,058 for the six months ended June 30, 2022, reflecting a decrease of $130,939.

The Company’s operating expenses increased to $3,625,488 for the six-month period ended June 30, 2023, from $2,294,835 in the corresponding prior period.

Lease operating costs decreased by $15,630 to $75,100 for the six-month period ended June 30, 2023 as compared to $90,730 for the six-month period ended June 30, 2022, due to lower realized production levels.

DD&A expense was relatively unchanged at $5,544 for the six months ended June 30, 2023 as compared to $5,737 for the six months ended June 30, 2022.

General and administrative expenses and stock-based compensation combined reflected an increase of $1,346,476 to $3,544,844, when compared to $2,198,368 in the corresponding prior period, primarily due to non-recurring costs associated with the pending merger.

Income (loss) from Operations

The Company generated a loss from operations for the six months ended June 30, 2023 of $(3,448,369), when compared to a loss from operations of $(1,986,777) for the six months ended June 30, 2022.

Other Income (Expense)

The Company had other income of $3,023,074 for the six months ended June 30, 2023, as compared to other (expense) of $(61,573,665) for the six months ended June 30, 2022, primarily a result of the Company’s stock price and its impact on our derivatives.

Net Income (Loss)

The Company had a net loss of $(425,295) during the six-month period ended June 30, 2023, compared with a net loss of $(63,560,442) for the six-month period ended June 30, 2022, primarily as a result of the items discussed above.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

56 unchanged sentences

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 2. Management’s Discussion and Analysis