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Item 7. Management’s Discussion and Analysis

2024-08-26 compared with 2022-06-08 · 325 added, 319 removed, 21 unchanged (97% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

The following is a discussion by management of its view of the Company’s business, financial condition, and corporate performance for the past year.

The purpose of this information is to give management’s recap of the past year, and to give an understanding of management’s current outlook for the near future.

This section is meant to be read in conjunction with “Item 8.

Financial Statements and Supplementary Data“ of this Annual Report on Form 10-K.

Our fiscal year ends on the last day of March of the calendar year.

We refer to the years ended March 31, 2020 and 2019 as our 2020 and 2019 fiscal years, respectively.

A summary of our financing transactions, funding agreements, lending transactions and other material funding transactions can be found under “Part II - Item 8 Financial Statements and Supplementary Data – Note 2 – Liquidity and Going Concern Considerations“, “Note 6 – Plan of Merger and Investment in Unconsolidated Entity“, “Note 7 – Long-Term Notes Receivable“, “Note 9 – Note Payables and Debenture“, “Note 13 - Merger Agreement and Divestiture“, “Note 15 – Stockholders’ Equity (Deficit)“ and “Note 21 – Subsequent Events“.

The Company believes that it will not have sufficient liquidity to meet its operating costs unless it raises funding, which may be through the sale of equity or debt, which may be more likely if it can close the Viking Merger, which is the Company’s current plan, which Merger is anticipated to close in the third calendar quarter of 2020, and which required closing date is currently September 30, 2020, but can be extended until up to December 31, 2020, pursuant to certain conditions in the Merger Agreement.

There is no guarantee though that the Viking merger will be completed or other sources of funding be available.

The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

The Company is delinquent on its required filings with the SEC and has been working diligently to satisfy all of its filing requirements.

The cause for the delinquent filings is primarily due to the restatements described in Note 4.

As a result of the delinquent filings, the Company has been unable to complete its merger with Viking and obtain financing.

There can be no assurance that financing and other opportunities will be available to the Company once the Company is current on all of its filings.

Restatements of previously issued Financial Statements

On October 31, 2020, the Company received an SEC Comment Letter with respect to Amendment No.

2 to the Registration Statement on Form S-4 filed on October 14, 2020.

Among other things, the SEC Comment Letter questioned the Company’s historical accounting treatment regarding the sale of our Series C Stock.

The Company recorded such sales as permanent equity and the SEC Comment Letter suggested the appropriate accounting classification was something other than permanent equity given certain provisions within the Certificate of Designation for the Series C Stock (“COD”).

After considering the SEC Comment letter and reviewing the COD, the Company and the holder of the Series C Stock determined there were several errors made in the drafting of the COD that could result in unintended consequences.

Both parties agreed to subsequently correct the Certificate of Designation, and Certificates of Correction to the COD were filed on December 9, 2020 and on April 20, 2021 to correct the errors.

Both parties agreed the corrections would be applied retroactive to the original filing date of the COD, being August 25, 2016.

However, US GAAP requires a transaction to be accounted for in accordance with the terms of an agreement in effect during the period of the financial statements and, consequently, the Company determined that in accordance with the terms of the original COD, the Series C Stock should have been recorded as temporary equity instead of permanent equity.

In addition, certain provisions of the original COD required the Company to recognize a derivative liability for certain conversions of the Series C Stock into common stock.

As a result of the errors described above, we restated our financial statements to reclassify the Series C Stock from permanent equity to temporary equity and to recognize a derivative liability for the potential obligation to issue additional shares after the Series C shares have been converted to common shares with Amendment No.

1 to our Annual Report on Form 10-K/A (“First Amendment”).

We estimated the fair value of the derivative liability at March 31, 2020 and 2019 using a binomial pricing model, the actual conversion rate and the historical volatility rate for the Company’s common stock.

After additional consultations with the SEC staff and review of the applicable accounting requirements, the Company determined that the accounting for the Series C Stock required further adjustment from the accounting treatment applied in the First Amendment.

The Series C Stock were initially issued in September 2016 and should have been recorded with a deemed dividend to recognize the required conversion premium upon issuance and a loss on derivative liability to recognize the variability if the shares were converted to common shares.

Subsequent measurement should have included adjustments to the carrying value of the Series C Stock to recognize changes in fair value due to changes in the Company’s stock price and recognition of gains or losses on conversion of the Series C Stock into common stock.

Our restatements, accounting treatment and calculations are more fully described in notes 4 and 10.

Camber’s objective for our current producing wells is to operate as efficiently as possible, look for technological advancements to increase the life of the wells, evaluate the economic viability of these wells and consider adding to or working over our low producing assets, provided that we do not currently have any plans to resume production activities on our Glasscock County, Texas wells.

Costs associated with producing oil, natural gas and NGLs are substantial.

Some of these costs vary with commodity prices, some trend with the type and volume of production, and others are a function of the number of wells we own and operate.

Production expenses are the costs incurred in the operation of productive properties and workover costs.

Expenses for utilities, direct labor, water transportation, injection and disposal, materials and supplies comprise the most significant portion of our production expenses.

Certain items, such as direct labor and materials and supplies, generally remain relatively fixed across broad production volume ranges, but can fluctuate depending on the activities performed during a given period.

We monitor our operations to ensure that we are incurring production expenses at an acceptable level.

For example, we monitor our production expenses per Boe to determine if any wells or properties should be shut in, recompleted or sold.

This unit rate also allows us to monitor these costs to identify trends and to benchmark against other producers.

Although we strive to reduce our production expenses, these expenses can increase or decrease on a per unit basis as a result of various factors as we operate our properties or make acquisitions and dispositions of properties.

Moving forward, Camber plans to complete the Merger with Viking and then focus on growing through the development of Viking’s properties while also seeking new acquisitions to grow its oil and gas production and revenues through the combined entity.

Camber anticipates raising additional financing to complete acquisitions following the closing of the merger, which may be accomplished through the sale of debt or equity.

The Merger is subject to various closing conditions which may not be met pursuant to the contemplated timeline, if at all.

For the year ended March 31, 2020, the Company produced oil, natural gas and NGLs at an average of approximately 36 Boepd from wells in two Texas counties.

The Company serves as operator of 35 gross wells (all of which are shut-in and non-producing), which wells are in the process of being transferred pursuant to the terms of the Settlement Agreement discussed below under “Item 3.

Legal Proceedings“.

The total number of gross wells is 81, with the active producers being 36.

The ratio between the gross and net production differs due to varied working interests and net revenue interests in each well.

As we develop our properties, we may see the opportunity to increase our natural gas and natural gas liquids production.

Separately, the price Camber receives for its oil heavily influences its revenue and cash flows, and the present value and quality of its reserves.

Oil, NGL and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand.

The price of crude oil has experienced significant volatility over the last five years, with the price per barrel of West Texas Intermediate (“WTI”) crude rising from a low of $27 in February 2016 to a high of $76 in October 2018, then, in 2020, most recently dropping below $20 per barrel due in part to reduced global demand stemming from the recent global COVID-19 outbreak.

A prolonged period of low market prices for oil and natural gas, or further declines in the market prices for oil and natural gas, due to the COVID-19 outbreak, governmental responses thereto, decreased demand in connection therewith, or other factors will likely adversely affect Camber’s business, financial condition and liquidity and its ability to meet obligations, targets or financial commitments and could ultimately lead to restructuring or filing for bankruptcy.

Camber’s estimated total net reserves as of March 31, 2020 were 98,805 Bbls of crude oil and NGL combined and 207,823 Mcf of natural gas which translates to an equivalent of 133,442 Boe.

There were no probable reserves as of March 31, 2020.

These reserves are based on the Oil and Gas Benchmark Prices to Estimate Year-End Petroleum Reserves and Values Using U.S.

Securities and Exchange Commission Guidelines from the Modernization of Oil and Gas Reporting and on the quantities of oil, natural gas and NGLs, which, by analysis of geoscience and engineering data, can be estimated with reasonable certainty to be economically producible from a given date forward from known reservoirs under existing economic conditions, operating methods and government regulations prior to the time at which contracts providing the rights to operate expire, unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are used for the estimation.

Reserves and economic evaluation of all of our properties are prepared on a well-by-well basis.

The accuracy of the reserve estimates is a function of the quality and quantity of available data;

interpretation of that data;

accuracy of various mandated economic assumptions;

and judgement of the independent reserve engineer.

Using the average monthly crude oil price of $55.80 per Bbl and natural gas price of $2.30 per Mcf for the twelve months ended March 31, 2020, our estimated discounted future net cash flow (“ PV-10 ”) before tax expenses for our total proved reserves was approximately $0.964 million.

Total reserve value at March 31, 2020 represents a decrease of approximately $1.11 million or 54% from a year earlier using the same SEC pricing and reserves methodology.

The decrease is primarily due to the September 2018 closing and natural declines in the production of our oil and gas properties.

Oil, natural gas and NGL prices are market driven and have been historically volatile, and we expect that future prices will continue to fluctuate due to supply and demand factors, seasonality, and geopolitical and economic factors, and such volatility can have a significant impact on our estimates of proved reserves and the related PV-10 value.

The reserves as of March 31, 2020 were determined in accordance with standard industry practices and SEC regulations by the licensed independent petroleum engineering firm of Graves & Co.

Consulting LLC.

Oil, natural gas and NGL reserve estimates require significant judgments in the evaluation of all available geological, geophysical, engineering and economic data.

The data for a given field may change substantially over time as a result of numerous factors including, but not limited to, additional development activity, production history, projected future production, economic assumptions relating to commodity prices, operating expenses, severance and other taxes, capital expenditures and remediation costs and these estimates are inherently uncertain.

If estimates of proved reserves decline, our depreciation, depletion and amortization (“ DD&A ”) rate will increase, resulting in a decrease in net income.

A decline in estimates of proved reserves could also cause us to perform an impairment analysis to determine if the carrying amount of oil and natural gas properties exceeds fair value and could result in an impairment charge, which would reduce earnings.

Although these hydrocarbon quantities have been determined in accordance with industry standards, they are prepared using the subjective judgments of the independent engineers, and may actually be more or less.

Oil and Gas Revenue

During the year ended March 31, 2020, our net crude oil sales volumes decreased to 5,399 Bbls from 8,846 Bbls, a 39% decrease over the previous fiscal year.

The production decrease is primarily related to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Major Expenditures

The table below sets out the major components of our operating and corporate expenditures for the years ended March 31, 2020 and 2019:

Additions to Oil and Gas Properties (Capitalized)

Acquisitions Using Cash

Other Capitalized Costs (a)

Total Additions (Deductions) to Oil and Gas Properties

Lease Operating Expenditures (Expensed)

Severance and Property Taxes (Expensed)

General and Administrative Expense (Cash-based)

Share-Based Compensation (Non-Cash)

Total General and Administrative Expense

Other capitalized costs include title related expenses and tangible and intangible drilling costs.

Market Conditions and Commodity Prices

Our financial results depend on many factors, particularly the price of natural gas and related natural gas liquids, and crude oil and our ability to market our production on economically attractive terms.

Commodity prices are affected by many factors outside of our control, including changes in market supply and demand, which are impacted by weather conditions, inventory storage levels, basis differentials and other factors.

As a result, we cannot accurately predict future commodity prices and, therefore, we cannot determine with any degree of certainty what effect increases or decreases in these prices will have on our production volumes or revenues.

In addition to production volumes and commodity prices, finding and developing sufficient amounts of natural gas and crude oil reserves at economical costs are critical to our long-term success.

We expect prices to remain volatile for the remainder of the year.

For information about the impact of realized commodity prices on our natural gas and crude oil and condensate revenues, refer to “ Results of Operations ” below.

Results of Operations

The following discussion and analysis of the results of operations for each of the two fiscal years in the period ended March 31, 2020 should be read in conjunction with the consolidated financial statements of Camber Energy, Inc.

and notes thereto (see “Part II - Item 8.

Financial Statements and Supplementary Data“).

We reported a net loss for the year ended March 31, 2020 of $27.96 million (net loss attributable to common shareholders of $35.1 million), or $16.64 per common share.

For the year ended March 31, 2019, we reported a net loss of $42 million (net loss attributable to common shareholders of $42.6 million), or $10,794.66 per common share.

The decrease in net loss was primarily due to a loss on derivative liability of $24.1 million for the year ended March 31, 2020 as compared to a loss on derivative liability of $58.7 million for the year ended March 31, 2019.

The loss on derivative liability relates to the conversion premium for the conversion of the Series C Preferred Stock, as well as adjustments to the carrying value of the Series C Stock to recognize changes in fair value due to changes in the Company’s stock price and recognition of gains or losses on conversion of the Series C Stock into common stock more fully described in notes 4 and 10.

The increase in the net loss was partially offset by the one-time gain on the sale of assets to N&B Energy that closed in September 2018, and resulted in a gain on sale of property and equipment of $25.8 million for the year ended March 31, 2019, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Net Operating Revenues

The following table sets forth the revenue and production data for the years ended March 31, 2020 and 2019.

Sale Volumes:

Crude Oil (Bbls)

Natural Gas (Mcf)

NGL (Gallons)

Crude Oil (Bbls per day)

Natural Gas (Mcf per day)

NGL (Gallons per day)

Total (Boe per day)

Average Sale Price:

Crude Oil ($/Bbl)

Natural Gas($/Mcf)

NGL ($/Gallon)

Net Operating Revenues:

Total Revenues

You should read the following discussion and analysis in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K.

In preparing the management’s discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended or the Reform Act.

All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items;

any statements of the plans, strategies and objectives of management for future operations;

any statements concerning proposed new services or developments;

any statements regarding future economic conditions of performance;

and statements of belief;

and any statements of assumptions underlying any of the foregoing.

Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements.

Such factors include, among others, the following:

The Company’s ability to raise capital and the terms thereof;

and other factors referenced in this Form 10-K.

The use in this Form 10-K of such words as “believes”, “plans”, “anticipates”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements.

These forward-looking statements present the Company’s estimates and assumptions only as of the date of this report.

Except for the Company’s ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.

Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company’s forward-looking statements.

The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

PLAN OF OPERATIONS

Camber Energy, Inc.

(“Camber”, the “Company”, “we”, “us” or “our”) is a growth-oriented diversified energy company.

Through our majority-owned subsidiaries we provide custom energy and power solutions to commercial and industrial clients in North America, and have a majority interest in:

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

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

Also, we hold a license to a patented clean energy and carbon-capture system with exclusivity in Canada and for multiple locations in the United States.

Various of our other subsidiaries own interests in oil properties in the United States.

The Company is also exploring other renewable energy-related opportunities and/or technologies, which are currently generating revenue, or have a reasonable prospect of generating revenue within a reasonable period of time.

Custom Energy and Power Solutions:

Simson-Maxwell Acquisition

On August 6, 2021, Viking acquired approximately 60.5% of the issued and outstanding shares of Simson-Maxwell Ltd.

(“Simson-Maxwell”), a Canadian federal corporation, for $7,958,159 in cash.

Simson-Maxwell manufactures and supplies power generation products, services and custom energy solutions.

Simson-Maxwell provides commercial and industrial clients with efficient, flexible, environmentally responsible and clean-tech energy systems involving a wide variety of products, including CHP (combined heat and power), tier 4 final diesel and natural gas industrial engines, solar, wind and storage.

Simson-Maxwell also designs and assembles a complete line of electrical control equipment including switch gear, synchronization and paralleling gear, distribution, Bi-Fuel and complete power generation production controls.

Operating for over 80 years, Simson-Maxwell’s seven branches assist with servicing a large number of existing maintenance arrangements and meeting the energy and power-solution demands of the Company’s other customers.

Clean Energy and Carbon-Capture System:

In August 2021, Viking entered into a license agreement with ESG Clean Energy, LLC (“ESG”), to utilize ESG’s patent rights and know-how related to stationary electric power generation and heat and carbon dioxide capture (the “ESG Clean Energy System”).

The intellectual property licensed by Viking includes certain patents and/or patent applications, including:

10,774,733, File date:

October 24, 2018, Issue date:

September 15, 2020, Titled:

“Bottoming Cycle Power System”;

17/661,382, Issue date:

August 8, 2023, Titled:

‘Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power, Capturing Carbon Dioxide and Producing Products’ ;

11624307, Issue date:

April 22, 2023, Titled:

‘Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power and Capturing Carbon Dioxide ’ (iv) European (validated in the United Kingdom, France and Germany) Patent No.:

EP3728891, Issue date:

April 12, 2023, Titled:

“Bottoming Cycle Power System”;

Patent Application No.:

17/224,200, File date:

April 7, 2021, Titled:

“Bottoming Cycle Power System” (which was subsequently approved by the U.S.

Patent & Trademark Office in March, 2022 (No.

Patent Application No.:

17/358,197, File date:

June 25, 2021, Titled:

“Bottoming Cycle Power System”;

Patent Application No.:

17/448,943, File date:

September 27, 2021, Titled:

“Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power and Capturing Carbon Dioxide”;

and (viii) U.S.

Patent Application No.:

17/448,938, File date:

September 27, 2021, Titled:

“Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power, Capturing Carbon Dioxide and Producing Products.

The ESG Clean Energy System is designed to, among other things, generate clean electricity from internal combustion engines and utilize waste heat to capture approximately 100% of the carbon dioxide (CO2) emitted from the engine without loss of efficiency, and in a manner to facilitate the production of certain commodities.

11,286,832, for example, covers the invention of an “exhaust-gas-to-exhaust-gas heat exchanger” that efficiently cools – and then reheats – exhaust from a primary power generator so greater energy output can be achieved by a secondary power source with safe ventilation.

Another key aspect of this patent is the development of a carbon dioxide capture system that utilizes the waste heat of the carbon dioxide pump to heat and regenerate the adsorber that enables carbon dioxide to be safely contained and packaged.

The Company intends to sell, lease and/or sub-license the ESG Clean Energy System to third parties using, among other things, Simson-Maxwell’s existing distribution channels.

The Company may also utilize the ESG Clean Energy System for its own account, whether in connection with its petroleum operations, Simson-Maxwell’s power generation operations, or otherwise.

Medical Waste Disposal System Using Ozone Technology:

In January 2022, Viking acquired a 51% interest in Viking Ozone Technology, LLC (“Viking Ozone”), which owns the intellectual property rights to a patented (i.e., US Utility Patent No.

11,565,289), proprietary medical and biohazard waste treatment system using ozone technology.

Simson-Maxwell has been designated the exclusive worldwide manufacturer and vendor of this system.

The technology is designed to be a sustainable alternative to incineration, chemical, autoclave and heat treatment of bio-hazardous waste, and for the treated waste to be classified as renewable fuel for waste-to-energy (“WTE”) facilities in many locations around the world.

Open Conductor Detection Technologies:

In February 2022, Viking acquired a 51% interest in two entities, Viking Sentinel Technology, LLC (“Viking Sentinel”) and Viking Protection Systems, LLC (“Viking Protection”), that own the intellectual property rights to patented (i.e.

utility patent 11,769,998 titled “ Electric Transmission Line Ground Fault Prevention Systems Using Dual, High Sensitivity Monitoring Devices’) and patent pending (i.e., US Applications 16/974,086, and 17/693,504), proprietary electric transmission and distribution open conductor detection systems.

The systems are designed to detect a break in a transmission line, distribution line, or coupling failure, and to immediately terminate the power to the line before it reaches the ground.

The technology is intended to increase public safety and reduce the risk of causing an incendiary event, and to be an integral component within grid hardening and stability initiatives by electric utilities to improve the resiliency and reliability of existing infrastructure.

Oil and Gas Properties

Existing Assets:

As of December 31, 2023, the Company owns leasehold interests (working interests) in properties producing from the Cline and Wolfberry formations in Texas.

Divestitures in 2023:

On November 5, 2023, Mid-Con Petroleum, LLC and Mid-Con Drilling, LLC, wholly owned subsidiaries of Viking, sold 100% of their interest in oil and gas assets in Kansas, consisting of 168 producing wells, 90 injector wells and 34 non-producing wells, for gross proceeds of $515,000.

On December 1, 2023, a subsidiary of Petrodome Energy, LLC (“Petrodome”), a wholly owned subsidiary of Viking, sold its non-operated working interest in a producing oil well in Texas for proceeds of $250,000.

The Company recorded a net gain on these two transactions in the amount of $854,465, as follows:

Proceeds from sale (net of transaction costs)

Reduction in oil and gas full cost pool (based on % of reserves disposed)

ARO recovered

Cash bond recoverable (net of fees)

Gain on disposal

Following these transactions, Petrodome ceased to be the operator of any oil and gas properties and applied for the refund of a cash performance bond of $50,000.

The refund, net of fees, is included in prepaids and other current assets at December 31, 2023 and was included in the determination of the gain on disposal.

Divestitures in 2022:

On July 8, 2022, four of the wholly owned subsidiaries of Petrodome Energy, LLC (“Petrodome”), a wholly owned subsidiary of the Company, entered into Purchase and Sale Agreements to sell all of their interests in the oil and gas assets owned by those Petrodome subsidiaries, including in the aggregate, interests in 8 producing wells, 8 shut-in wells, 2 saltwater disposal wells and 1 inactive well, to third parties for $3,590,000 in cash.

The proceeds from the sale were used to fully repay Petrodome’s indebtedness to CrossFirst Bank under the June 13, 2018 revolving line of credit loan.

This transaction resulted in the disposition of most of the Company’s total oil and gas reserves (see Note 6).

The Company recorded a loss on the transaction in the amount of $8,961,705, as follows:

Proceeds from sale

Reduction in oil and gas full cost pool (based on % of reserves disposed)

(12,791,680 )

Total crude oil and natural gas revenues for the year ended March 31, 2020 decreased $2.3 million, or 86%, to approximately $0.4 million, compared to $2.7 million for the same period a year ago due primarily to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Operating and Other Expenses

The following table sets forth operating and other expenses for the years ended March 31, 2020 and 2019:

Direct lease operating expense

Workovers expense

Total Lease Operating Expenses

Severance and Property Taxes

Depreciation, Depletion, Amortization and Accretion

Impairment of Oil and Gas Properties

(Gain) Loss on Sale of Property and Equipment

General and Administrative (Cash-based)

Share-Based Compensation (Non-Cash)

Total General and Administrative Expense

Interest Expense

Equity in Earnings of Unconsolidated Entity

Loss on Derivative Liability

Other (Income) Expense, Net

Lease Operating Expenses.

Lease operating expenses can be divided into the following categories:

costs to operate and maintain Camber’s crude oil and natural gas wells, the cost of workovers and lease and well administrative expenses.

Operating and maintenance expenses include, among other things, pumping services, salt-water disposal, equipment repair and maintenance, compression expense, lease upkeep and fuel and power.

Workovers are operations to restore or maintain production from existing wells.

Each of these categories of costs individually fluctuates from time to time as Camber attempts to maintain and increase production while maintaining efficient, safe and environmentally responsible operations.

The costs of services charged to Camber by vendors, fluctuate over time.

In total, the overall lease operating expenses decreased $2.4 million or 83% for the current period, compared to the prior year’s period due primarily to the sale of a significant amount of our assets which closed in September 2018, as described above under “Part I – Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Severance and Property Taxes.

Severance and Property Taxes decreased by $0.1 million or 89% for the current period, compared to the prior year’s period due primarily to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Depreciation, Depletion, Amortization and Accretion (“ DD&A ”).

DD&A related to proved oil and gas properties is calculated using the unit-of-production method.

Under full cost accounting, the amortization base is comprised of the total capitalized costs and total future investment costs associated with all proved reserves.

DD&A decreased for the current year as compared to the prior year period by $0.5 million or 96% primarily related to the decrease in total depreciable assets due to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Costs of oil and natural gas properties are amortized using the units of production method.

Amortization expense calculated per equivalent physical unit of production amounted to $0.84 and $4.17 per barrel of oil equivalent for the years ended March 31, 2020 and 2019, respectively.

Impairment of Oil and Gas Properties.

During the year ended March 31, 2020, the Company recorded no impairments.

During the year ended March 31, 2019, the Company recorded impairments totaling $1.3 million related to unproved properties which were associated with expirations of leaseholds.

Gain/(Loss) on Sale of Property and Equipment.

During the year ended March 31, 2020, the Company had no gain or loss on sales of property .

During the year ended March 31, 2019, the Company recorded a gain on sale of property and equipment of $25.8 million due primarily to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

General and Administrative Expenses (“ G&A ”) (excluding share-based compensation).

G&A expenses for the current period decreased by approximately $0.1 million or 2% primarily related to decreased professional fees due to the reduction in size of operations due to the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Share-Based Compensation.

Share-based compensation, which is included in General and Administrative expenses in the Statements of Operations decreased approximately $0.1 million or 42% for the year ended March 31, 2020, compared to the prior year, primarily due to the reduction in shares granted to consultants as compensation for services rendered.

Share-based compensation is utilized for the purpose of conserving cash resources for use in field development activities and operations.

Interest Expense.

Interest expense for the year ended March 31, 2020 decreased by $2.4 million or 99% when compared to the prior year’s period, primarily related to the assignment of the IBC Obligations to N&B Energy in connection with the sale of a significant amount of our assets which closed in September 2018, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“.

Equity in Earnings of Unconsolidated Entity.

Equity in earnings of unconsolidated entities increased to $957,169 for the year ended March 31, 2020 from $0 for the year ended March 31, 2019, due to the February 3, 2020 acquisition of a 25% interest in Elysium Energy, LLC, as discussed above under “Item 1.

Business - General – Viking Plan of Merger”.

Loss on derivative liability.

Loss on derivative liability decreased by $34.6 million or 59% as compared to the prior period.

During the year ended March 31, 2020, the Company experienced a significant decline in its stock price and had an additional 514 Series C Preferred Shares outstanding at March 31, 2020 as compared to March 31, 2019 that were subject to adjustment subsequent to year end.

The decrease in the loss on derivative liabilities is due primarily to the stock price changes.

Other (Income) Expense.

Other (income)/expense for the year ended March 31, 2020 decreased by approximately $0.2 million, or 52%, when compared to the prior period, due in part, to the reduction in interest earned on overnight investments due to the significant use of cash for operations in the current year.

ARO recovered

Loss on disposal

$ (8,961,705 )

Additionally, in July 2022, the Company received an unanticipated refund of a $1,200,000 performance bond as a result of Petrodome ceasing to operate certain assets in the State of Louisiana.

The gain from this refund was included in the “loss from the sale of oil and gas properties and fixed assets’ in the Consolidated Statement of Operations.

Merger with Viking Energy Group, Inc.

On August 1, 2023, Camber completed the previously announced merger (the “Merger”) with Viking pursuant to the terms and conditions of the Agreement and Plan of Merger between Camber and Viking dated February 15, 2021, which was amended on April 18, 2023 (as amended, the “Merger Agreement”), with Viking surviving the Merger as a wholly owned subsidiary of Camber.

Upon the terms and conditions in the Merger Agreement, each share:

(i) of common stock, par value $0.001 per share, of Viking (the “Viking Common Stock”) issued and outstanding, other than shares owned by Camber, 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 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 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”).

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 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 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.

Each 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, except that instead of being exercisable into Viking Common Stock, such Adjusted Option is exercisable into Camber Common Stock.

Each outstanding promissory note issued by Viking that is convertible into Viking Common Stock (a “Viking Convertible Note”) 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 (including, for the avoidance of doubt, any extended post-termination conversion period that applies following consummation of the Merger), except that instead of being convertible into Viking Common Stock, such Adjusted Convertible Note is convertible into Camber Common Stock.

In connection with the Merger, Camber issued approximately 49,290,152 shares of Camber Common Stock, which represented 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.

For accounting purposes, the Merger is deemed a reverse acquisition.

Consequently, Viking (the legal subsidiary) was treated as the acquiror of Camber (the legal parent).

Accordingly, these consolidated financial statements reflect the financial position, operating results, and cash flow of Viking up to the date of the Merger, and the combined financial position, operating results and cash flow of Viking and Camber from August 1, 2023 to September 30, 2023.

The prior year comparative financial information is that of Viking.

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

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 $(18,535,067) for the year ended December 31, 2023, as compared to a net loss of $(17,358,259) for the year ended December 31, 2022.

The loss for the year ended December 31, 2023, was comprised of, among other things, certain non-cash items, including:

(i) change in fair value of derivative liability of $9,150,459;

(ii) loss on extinguishment of debt of $605,507;

(iii) amortization of debt discount of $1,711,518;

(iv) depreciation, depletion and amortization of $1,002,562;

(v) impairment of oil and gas and intangible assets of $1,016,760;

and (vi) accretion of asset retirement obligation of $155,463.

As of December 31, 2023, the Company had a stockholders’ equity of $6,187,659, long-term debt, net of current portion, of $39,971,927 and a working capital deficiency of $12,142,644.

The largest components of current liabilities creating this working capital deficiency is drawings by Simson-Maxwell against its bank credit facility of $3,365,995, accrued interest on notes payable to Discover of $5,052,487 and a derivative liability of $3,863,321.

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern.

The Company’s ability to continue as a going concern is dependent upon its ability to utilize the resources in place to generate future profitable operations, to develop additional acquisition opportunities, and to obtain the necessary financing to meet its obligations and repay its liabilities arising from business operations when they come due.

Management believes the Company may be able to continue to develop new opportunities and may be able to obtain additional funds through debt and / or equity financings to facilitate its business strategy;

however, there is no assurance of additional funding being available.

These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

RESULTS OF OPERATIONS

The following discussion of the consolidated financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and the related Notes included elsewhere in this Report.

Liquidity and Capital Resources

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business.

Accordingly, the consolidated financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Additionally, recent oil and gas price volatility as a result of geopolitical conditions and the global COVID-19 pandemic have already had, and are expected to continue to have a negative impact on the Company’s financial position and results of operations.

Negative impacts could include but are not limited to:

the Company’s ability to sell its oil and gas production, reduction in the selling price of the Company’s oil and gas, failure of a counterparty to make required payments, possible disruption of production as a result of worker illness or mandated production shutdowns or ‘stay-at-home’ orders, and access to new capital and financing.

Our primary sources of cash for year ended March 31, 2020 were from funds generated from the sale of preferred stock during fiscal 2019, the sale of natural gas and crude oil production and revenue generated from Lineal which was acquired in July 2019 and divested effective December 31, 2019.

The primary uses of cash were funds used in operations, funds invested in connection with Viking’s Rule 506(c) convertible note offering, as described above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“ and funds loaned to Lineal as described above under “Item 1.

Business - General - Lineal Acquisition and Divestiture“.

As of March 31, 2020, the Company had a working capital deficit of approximately $0.9 million.

The Company believes that it will not have sufficient liquidity to operate as a going concern for the next twelve months following the issuance of the financial statements included herein unless it can close the Viking Merger, which is the Company’s current plan, which Merger is anticipated to close in the third calendar quarter of 2020, and which required closing date is currently September 30, 2020, but can be extended until up to December 31, 2020, pursuant to certain conditions in the Merger Agreement.

Pursuant to the December 31, 2019 Redemption Agreement, we entered into a new unsecured promissory note in the amount of $1,539,719 with Lineal, evidencing the repayment of the prior July 2019 Lineal Note, together with additional amounts loaned by Camber to Lineal through December 31, 2019;

and loaned Lineal an additional $800,000, which was evidenced by an unsecured promissory note in the amount of $800,000, entered into by Lineal in favor of the Company on December 31, 2019.

The December 2019 Lineal Note and Lineal Note No.

2, accrue interest, payable quarterly in arrears, beginning on March 31, 2020 and continuing until December 31, 2021, when all interest and principal is due, at 8% and 10% per annum (18% upon the occurrence of an event of default), respectively.

The December 2019 Lineal Note and Lineal Note No.

2 are unsecured.

Such loans are described in greater detail above under “Item 1.

Business - General - Lineal Acquisition and Divestiture“.

On February 3, 2020, the Company and Discover entered into a Stock Purchase Agreement pursuant to which Discover purchased 525 shares of Series C Preferred Stock (described in greater detail below under “Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities – Description of Capital Stock- Preferred Stock - Series C Redeemable Convertible Preferred Stock“) for $5 million, at a 5% original issue discount to the $10,000 face value of such preferred stock.

On February 3, 2020, we advanced the $5.0 million raised from the sale of Series C Preferred Stock to Discover to Viking, and Viking provided us, among other things, a $5 million, 10.5% Secured Promissory Note.

On June 25, 2020, we advanced an additional $4.2 million to Viking in consideration for, among other things, an additional 10.5% Secured Promissory Note in the principal amount of $4.2 million.

The Secured Notes accrue interest at the rate of 10.5% per annum, payable quarterly and are due and payable on February 3, 2022.

The notes include standard events of default, including certain defaults relating to the trading status of Viking’s common stock and change of control transactions involving Viking.

The Secured Notes can be prepaid at any time with prior notice as provided therein, and together with a pre-payment penalty equal to 10.5% of the original amount of the Secured Notes.

The Secured Notes are secured by a security interest, para passu with the other investors in Viking’s Secured Note offering (subject to certain pre-requisites) in Viking’s 70% ownership of Elysium and 100% of Ichor Energy Holdings, LLC.

Additionally, pursuant to a separate Security and Pledge Agreement, Viking provided the Company a security interest in the membership, common stock and/or ownership interests of all of Viking’s existing and future, directly owned or majority owned subsidiaries, to secure the repayment of the Secured Notes.

As additional consideration for providing the Secured Notes, Viking assigned us 30% of Elysium, which is fully or partially assignable back to Viking upon termination of the Merger, under certain circumstances as discussed in greater detail above under “Item 1.

Business - General – Viking Plan of Merger“.

On June 22, 2020, the Company and Discover entered into a Stock Purchase Agreement pursuant to which Discover purchased 630 shares of Series C Preferred Stock for $6 million (of which $4.2 million of such funds were subsequently loaned to Viking as discussed above).

Plan of Operations

As described in greater detail above under “Item 1.

Business – General - Viking Plan of Merger“, on February 3, 2020, the Company entered into a Merger Agreement with Viking, which contemplates Viking merging with and into a newly-formed wholly-owned subsidiary of the Company, with Viking surviving the Merger as a wholly-owned subsidiary of the Company.

The Merger Agreement also contemplates that, upon the terms and subject to the conditions set forth in the Merger Agreement, at the Effective Time of the Merger, each share of common stock, of Viking issued and outstanding immediately prior to the Effective Time, other than certain shares owned by the Company, Viking and Merger Sub, will be converted into the right to receive the pro rata share of 80% of the Company’s post-Effective Time capitalization, taking into account the number of shares of common stock of Camber outstanding on a fully-diluted basis and without taking into account any shares of common stock which the holder of the Company’s Series C Preferred Stock can receive upon conversion of the Series C Preferred Stock, or a separate series of preferred stock issued in exchange for such Series C Preferred Stock, which has fixed conversion provisions, subject to certain adjustments described in the Merger Agreement.

Holders of Viking Common Stock will have any fractional shares of Company common stock after the Merger rounded up to the nearest whole share.

Moving forward, the Company plans to complete the Merger with Viking and then focus on growing through the development of Viking’s properties while also seeking new acquisitions to grow its oil and gas production and revenues through the combined entity.

The Company anticipates raising additional financing to complete acquisitions following the closing of the Merger, which may through the sale of debt or equity.

As described above, the Merger is subject to various closing conditions which may not be met pursuant to the contemplated timeline, if at all.

Separately, the price Camber receives for its oil heavily influences its revenue and cash flows, and the present value and quality of its reserves.

Oil, NGL and natural gas are commodities and, therefore, their prices are subject to wide fluctuations in response to relatively minor changes in supply and demand.

Years Ended December 31,

Working Capital:

At March 31, 2020, the Company’s total current assets of $1.1 million were less than its total current liabilities of approximately $10.7 million, resulting in a working capital deficit of $9.6 million, while at March 31, 2019, the Company’s total current assets of $8.2 million exceeded its total current liabilities of approximately $6.0 million, resulting in working capital of $2.2 million.

The reduction from working capital of $2.2 million to a working capital deficit of $10.7 million is due to losses on the Series C Preferred Stock derivative liability, losses from continuing operations, costs incurred with the Lineal merger and ultimate divestiture with Lineal as discussed above under “Item 1.

Business – General – Lineal Acquisition and Divestiture“, and $7.3 million of advances on long-term notes receivable relating to amounts loaned to Lineal and advanced to Viking, as discussed in greater detail above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“ and “Item 1.

Business – General – Viking Plan of Merger“, respectively.

At March 31, 2020, the Company’s total current assets of $1.1 million were less than its total current liabilities of approximately $79.7 million, resulting in a working capital deficit of $78.5 million, while at March 31, 2019, the Company’s total current assets of $8.2 million exceeded its total current liabilities of approximately $62.4 million, resulting in working capital deficit of $54.2 million.

The reduction from aworking capital deficit of $54.2 million to a working capital deficit of $79.7 million is due to losses on the Series C Preferred Stock derivative liability, losses from continuing operations, costs incurred with the Lineal merger and ultimate divestiture with Lineal as discussed above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“ and “Item 1.

Business – General – Viking Plan of Merger“, respectively.

Cash flows used in operating activities

Current assets

Current liabilities

Working capital deficit

$ (12,142,644 )

$ (6,339,593 )

Cash flows used in investing activities

Cash flows provided by financing activities

Net (decrease) increase in cash

Years Ended December 31,

Net Cash Used in Operating Activities

$ (5,342,265 )

Net cash used in operating activities was $3.6 million for the year ended March 31, 2020, compared to $5.8 million for the same period a year ago.

Net cash used in operating activities decreased due to a reduction in payments of accounts payable, a reduction in gain on sale of oil and gas properties in the prior period and $1.2 million of cash provided by Lineal during the current period (which is shown under net cash provided by operating activities from discounted operations).

Net cash used in investing activities was $9.6 million for the year ended March 31, 2020, compared to $2.3 million for the same period a year ago.

The increase in net cash used in investing activities was primarily due to the loans made to Lineal and Viking during the year ended March 31, 2020 as discussed above under “Item 1.

Business – General – Lineal Acquisition and Divestiture“, and above under “Item 1.

Business - General - Mid-Continent Acquisition and Divestiture“ and “Item 1.

Business – General – Viking Plan of Merger“, respectively.

Net cash provided by financing activities was $6.1 million for the year ended March 31, 2020, and cash provided by financing activities was $15.0 million for the year ended March 31, 2019.

The decrease in net cash provided by financing activities was due to fewer sales of Series C Preferred Stock shares in the current period (sales of $5 million of Series C Preferred Stock in the current period, compared to sales of $15 million of Series C Preferred Stock in the prior period).

$ (3,760,376 )

Net Cash Provided by Investing Activities

Net Cash Provided by (Used in) Financing Activities

$ (3,048,788 )

Decrease in Cash during the Period

$ (2,333,289 )

Cash and Cash Equivalents, end of Period

Net cash used in operating activities increased to $(5,342,265) during the fiscal year ended December 31, 2023, as compared to $(3,760,376) in the comparable period in 2022.

This increase is primarily the result of a lower overall increase in net operating assets as compared to the prior year.

Net cash flows from investing activities decreased to $661,147 during the fiscal year ended December 31, 2023, as compared to $6,580,575 in the comparable period in 2022.

This decrease is due to higher proceeds from the sale of oil and gas properties and the sale of notes receivable in 2022.

Net cash used in financing activities increased to $2,347,829 during the fiscal year ended December 31, 2023, as compared to $(3,048,788) in the comparable period in 2022.

This increase is mainly due to the impact of the issuance of debt during 2023 as compared to the repayment of debt in 2022.

Segment and Consolidated Results

The Company has two reportable segments:

Oil and Gas Production and Power Generation.

The power generation segment provides custom energy and power solutions to commercial and industrial clients in North America and the oil and gas segment is involved in exploration and production with properties in central and southern United States.

We evaluate segment performance based on revenue and operating income (loss).

Information related to our reportable segments and our consolidated results for the years ended December 31, 2023 and 2022 is presented below.

Year Ended December 31, 2023

Power Generation

Loss from Operations is as follows:

Operating expenses

Cost of goods

Lease operating costs

General and administrative

Impairment of oil & gas and intangible assets

Depreciation, depletion and amortization

Accretion - ARO

Total operating expenses

Loss from operations

Year Ended December 31, 2022

Power Generation

Loss from Operations is as follows:

Operating expenses

Cost of goods

Lease operating costs

General and administrative

Stock based compensation

Impairment of intangible assets

Depreciation, depletion and amortization

Accretion - ARO

Total operating expenses

Loss from operations

$ (4,669,172 )

$ (5,005,000 )

$ (9,674,172 )

The Company had gross revenues of $32,054,323 for the year ended December 31, 2023 as compared to $24,038,160 for the year ended December 31, 2022, an increase of 33%.

Power revenues grew by almost 55% driven by significantly stronger unit sales.

Oil and gas revenues declined by almost 74% reflecting the impact of oil and gas divestitures in the second half of 2022 and in 2023.

The Company’s operating expenses increased by 16% to $39,048,688 for the year ended December 31, 2023 from $33,712,232 for the year ended December 31, 2022.

Lease operating costs, depreciation depletion and amortization decreased as a result of dispositions of oil and gas interests.

Cost of sales increased significantly as compared to the prior year, consistent with the increase in power segment revenues.

Income (Loss) from Operations

The Company generated a loss from operations of $(6,994,365) for the year ended December 31, 2023, as compared to $(9,674,172) for the year ended December 31, 2022, due to the reasons explained above.

Other Income and Expense

The Company recorded other expense of $11,540,702 for the year ended December 31, 2023 as compared to $7,684,087 for the year ended December 31, 2022, an increase of $3,856,615.

This increase was driven by (i) higher interest expense due to the assumption of debt following the Merger;

(ii) change in the fair value of derivative liabilities acquired at the Merger date, and;

(iii) higher debt discount amortization.

Off Balance Sheet Arrangements

Camber does not participate in financial transactions that generate relationships with unconsolidated entities or financial partnerships, other than the Company’s 25% interest in Elysium which it held as of March 31, 2020 (30% as of the filing of this Report) as discussed herein.

As of March 31, 2020, we did not have any off-balance sheet arrangements.

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in the Company’s securities.

The Company’s operating results are not affected by seasonality.

The Company’s business and operating results are not currently affected in any material way by inflation although they could be adversely affected in the future were inflation to increase, resulting in cost increases.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES

Camber prepares its financial statements and the accompanying notes in conformity with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions about future events that affect the reported amounts in the financial statements and the accompanying notes.

Camber identifies certain accounting policies as critical based on, among other things, their impact on the portrayal of Camber’s financial condition, results of operations or liquidity, and the degree of difficulty, subjectivity and complexity in their deployment.

Critical accounting policies cover accounting matters that are inherently uncertain because the future resolution of such matters is unknown.

Management routinely discusses the development, selection and disclosure of each of the critical accounting policies.

Following is a discussion of Camber’s most critical accounting policies:

Proved Oil and Natural Gas Reserves

Camber’s independent petroleum consultants estimate proved oil and gas reserves, which directly impact financial accounting estimates, including depreciation, depletion and amortization.

Proved reserves represent estimated quantities of crude oil and condensate, natural gas liquids and natural gas that geological and engineering data demonstrate, with reasonable certainty, to be recoverable in future years from known reservoirs under economic and operating conditions existing at the time the estimates were made.

The process of estimating quantities of proved oil and gas reserves is very complex, requiring significant subjective decisions in the evaluation of all available geological, engineering and economic data for each reservoir.

The data for a given reservoir may also change substantially over time as a result of numerous factors including, but not limited to, additional development activity, evolving production history and continual reassessment of the viability of production under varying economic conditions.

Consequently, material revisions (upward or downward) to existing reserve estimates may occur from time to time.

For related discussion, see “Item 1A.

Risk Factors“.

Full Cost Accounting Method

Camber uses the full cost method of accounting for oil and gas producing activities.

Costs to acquire mineral interests in oil and gas properties, to drill and equip exploratory wells used to find proved reserves, and to drill and equip development wells including directly related overhead costs and related asset retirement costs are capitalized.

Under this method, all costs, including internal costs directly related to acquisition, exploration and development activities are capitalized as oil and gas property costs on a country-by-country basis.

Properties not subject to amortization consist of exploration and development costs, which are evaluated on a property-by-property basis.

Amortization of these unproved property costs begins when the properties become proved or their values become impaired.

Camber assesses overall values of unproved properties, if any, on at least an annual basis or when there has been an indication that impairment in value may have occurred.

Impairment of unproved properties is assessed based on management’s intention with regard to future development of individually significant properties and the ability of Camber to obtain funds to finance their programs.

If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

Costs of oil and gas properties are amortized using the units of production method.

Sales of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves.

Full Cost Ceiling Test Limitation

In applying the full cost method, Camber performs an impairment test (ceiling test) at each reporting date, whereby the carrying value of property and equipment is compared to the “ estimated present value, ” of its proved reserves discounted at a 10% interest rate of future net revenues, based on current economic and operating conditions at the end of the period, plus the cost of properties not being amortized, plus the lower of cost or fair market value of unproved properties included in costs being amortized, less the income tax effects related to book and tax basis differences of the properties.

If capitalized costs exceed this limit, the excess is charged as an impairment expense.

Share-Based Compensation

In accounting for share-based compensation, judgments and estimates are made regarding, among other things, the appropriate valuation methodology to follow in valuing stock compensation awards and the related inputs required by those valuation methodologies.

Assumptions regarding expected volatility of Camber’s common stock, the level of risk-free interest rates, expected dividend yields on Camber’s stock, the expected term of the awards and other valuation inputs are subject to change.

Any such changes could result in different valuations and thus impact the amount of share-based compensation expense recognized in the Statements of Operations.

We prepare our consolidated financial statements in conformity with U.S.

GAAP, which requires management to make certain estimates and assumptions and apply judgments.

We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the consolidated financial statements are prepared and actual results could differ from our estimates and such differences could be material.

Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions.

On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our consolidated financial statements, as well as the sufficiency of the disclosures pertaining to our accounting policies in the footnotes accompanying our consolidated financial statements.

Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under GAAP.

We also describe the most significant estimates and assumptions we make in applying these policies.

See “Note 4 - Summary of Significant Accounting Policies” to our consolidated financial statements.

Consolidation of Variable Interest Entities

The Company consolidates the financial results of its subsidiaries, defined as entities in which the Company holds a controlling financial interest.

Several of the Company’s subsidiaries are considered to be Variable Interest Entities (“VIE’s”) which are defined as an entity for which any of the following conditions exist:

The total equity is not sufficient to permit the entity to finance its activities without additional subordinated financial support.

The equity holders as a group have one of the following four characteristics:

Lack the power to direct activities that most significantly impact the entity’s economic performance.

Possess non-substantive voting rights.

Lack the obligation to absorb the entity’s expected losses.

Lack the right to receive the entity expected residual returns.

The Company consolidates the financial results of a VIE when it is determined that the Company is the primary beneficiary of the VIE.

Oil and Gas Property Accounting

The Company uses the full cost method of accounting for its investment in oil and natural gas properties.

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

The full cost method requires the Company to calculate quarterly, by cost center, a “ceiling,” or limitation on the amount of properties that can be capitalized on the balance sheet.

To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes, exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved not properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.

The Company recorded an impairment charge of $347,050 on the value of its oil and gas assets at December 31 2023.

Proved Reserves

Estimates of our proved reserves included in this report are prepared in accordance with U.S.

SEC guidelines for reporting corporate reserves and future net revenue.

The accuracy of a reserve estimate is a function of:

the quality and quantity of available data;

the interpretation of that data;

the accuracy of various mandated economic assumptions;

the judgment of the persons preparing the estimate.

Our proved reserve information included in this report was predominately based on estimates.

Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered.

In addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate.

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

The estimates of proved reserves materially impact DD&A expense.

If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income.

Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce from higher-cost fields.

Asset Retirement Obligation

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws.

We determined our ARO by calculating the present value of estimated cash flows related to the obligation.

The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties.

Periodic accretion of discount of the estimated liability is recorded as accretion expense in the accompanying consolidated statements of operations.

ARO liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and a risk-adjusted interest rate.

Changes in any of these assumptions can result in significant revisions to the estimated ARO.

Revenue Recognition

The Company’s revenue is comprised entirely of revenue from exploration and production activities.

The Company’s oil is sold primarily to marketers, gatherers, and refiners.

Natural gas is sold primarily to interstate and intrastate natural-gas pipelines, direct end-users, industrial users, local distribution companies, and natural-gas marketers.

NGLs are sold primarily to direct end-users, refiners, and marketers.

Payment is generally received from the customer in the month following delivery.

Contracts with customers have varying terms, including month-to-month contracts, and contracts with a finite term.

The Company recognizes sales revenues for oil, natural gas, and NGLs based on the amount of each product sold to a customer when control transfers to the customer.

Generally, control transfers at the time of delivery to the customer at a pipeline interconnect, the tailgate of a processing facility, or as a tanker lifting is completed.

Revenue is measured based on the contract price, which may be index-based or fixed, and may include adjustments for market differentials and downstream costs incurred by the customer, including gathering, transportation, and fuel costs.

Revenues are recognized for the sale of the Company’s net share of production volumes.

Sales on behalf of other working interest owners and royalty interest owners are not recognized as revenues.

Derivative Liabilities

The Company has determined that certain warrants and certain obligations to issue additional shares relating to conversions of the Series C Preferred Stock contain provisions that could result in modification of the warrants’ exercise price or the Series C Preferred Stock conversion price that is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No.

The warrants contain provisions that protect holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices.

The warrants granted to Ironman PI Fund II, LP contain anti-dilution provisions that provide for a reduction in the exercise price of such warrants in the event that future common stock (or securities convertible into or exercisable for common stock) is issued (or becomes contractually issuable) at a price per share (a “Lower Price”) that is less than the exercise price of such warrant at the time.

The amount of any such adjustment is determined in accordance with the provisions of the warrant agreement and depends upon the number of shares of common stock issued (or deemed issued) at the Lower Price and the extent to which the Lower Price is less than the exercise price of the warrant at the time.

The warrants expired on April 21, 2019.

Oil and Gas Revenues

Sales of crude oil, natural gas, and natural gas liquids (“NGLs”) are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts.

Performance obligations primarily comprise delivery of oil, gas, or NGLs at a delivery point, as negotiated within each contract.

Each barrel of oil, million BTU (“MMBtu”) of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated.

Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer.

The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to:

whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Company’s right to payment, and transfer of legal title.

In each case, the time between delivery and when payments are due is not significant.

Power Generation Revenues

Through its 60.5% ownership in Simson-Maxwell, the Company manufactures and sells power generation products, services and custom energy solutions.

Sale of Power Generation Units

The Company considers the completed unit or units to be a single performance obligation for purposes of revenue recognition and recognizes revenue when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the customer.

Progress payments are recognized as contract liabilities until the completed unit is delivered.

Revenue is measured as the amount of consideration the Company expects to be entitled in exchange for the transfer of the units, which is generally the price stated in the contract.

The Company does not allow returns because of the customized nature of the units and does not offer discounts, rebates, or other promotional incentives or allowances to customers.

Simson-Maxwell has elected to recognize the cost for freight activities when control of the product has transferred to the customer as an expense within cost of goods.

Parts Revenue

The Company considers the purchase orders for parts, which in some cases are governed by master sales agreements, to be the contracts with the customers.

For each contract, the Company considers the commitment to transfer products, each of which is distinct, to be the identified performance obligations.

Revenue is measured as the amount of consideration the Company expects to be entitled in exchange for the transfer of product, which is generally the price stated in the contract specific for each item sold, adjusted for the value of expected returns.

Simson-Maxwell has elected to recognize the cost for freight activities when control of the product has transferred to the customer as an expense within cost of goods sold in the consolidated statements of comprehensive income.

Parts revenues are recognized at the point in time when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the customer.

Service and Repairs

Service and repairs are generally performed on customer owned equipment and billed based on labor hours incurred.

Each repair is considered a performance obligation.

As a result of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation.

Simson-Maxwell generally uses the cost-to-cost measure of progress for its service work because the customer controls the asset as it is being serviced.

Most service and repairs are completed in one or two days.

Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination.

Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired.

An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount.

If, after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company will proceed to a quantitative test.

The Company may also elect to perform a quantitative test instead of a qualitative test for any or all of our reporting units.

The test compares the fair value of an entity’s reporting units to the carrying value of those reporting units.

This quantitative test requires various judgments and estimates.

The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach.

Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit.

Intangible Assets

Intangible assets include amounts capitalized for the Company’s license agreement with ESG as described in Note 2.

This asset is amortized on a straight-line basis over the remaining life of the related patents being licensed, which is approximately 16 years.

Additionally, with the acquisition of Simson-Maxwell, the Company identified other intangible assets consisting of customer relationships (which is being amortized on a straight-line basis over 10 years) and Simson-Maxwell brand (which is not being amortized) with an aggregate appraised fair value $3,908,126.

With the acquisition of a 51% interest in Viking Ozone, Viking Sentinel and Viking Protection, as described in Note 8, the Company has aggregate intangible assets of $15,433,340.

These assets have an indefinite life and are not being amortized.

The Company reviews these intangible assets, at least annually, for possible impairment when events or changes in circumstances that the assets carrying amount may not be recoverable.

In evaluating the future benefit of its intangible assets, the Company estimates the anticipated discounted future net cash flows of the intangible assets over the remaining estimated useful life.

If the carrying amount is not recoverable, an impairment loss is recorded for the excess of the carrying value of the asset over its fair value.

The Company recorded an impairment charge of $669,710 related to Simson-Maxwell’s intangible assets during the year ended December 31, 2023.

Derivative Liability

The Series C Preferred Stock COD contains provisions that could result in modification of the Series C Preferred Stock conversion price that is based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No.

The Series C Preferred Stock are convertible into shares of common stock at a fixed $162.50 conversion rate.

1 unchanged sentence

The Conversion Premium may be paid in shares or cash, at the option of the Company.

If the Conversion Premium is paid in cash, the amount is fixed and generally not subject to adjustment.

If the Conversion Premium is paid in cash, the amount is fixed and not subject to adjustment.

If the Conversion Premium is paid in shares, the conversion ratio is based on a VWAP calculation based on the lowest stock price over the Measurement Period.

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

The VWAP calculation is subject to adjustment if there is a Triggering Event and the Measurement Period is subject to adjustment in the event that the Company is in default of one or more Equity Conditions provided in the Certificate of Designation.

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.

For example, the Measurement period may be extended one day for every day the Company is not in compliance with one or more of the Equity Conditions.

Trigger events are described in the designation of the Series C Preferred Stock, but include items which would typically be events of default under a debt security, including filing of reports late with the SEC.

At the conversion date, the number of shares due for the Conversion Premium is estimated based on the previous 30-day (or 60 day) VWAP.

At the conversion date, the number of shares due for the Conversion Premium is estimated based on the previous 30-day VWAP.

If the Company does not elect to pay the Conversion Premium in cash, the Company will issue all shares due for the conversion and the estimated shares due for the conversion premium.

If the VWAP calculation for the portion of the Measurement Period following the date of conversion is lower than the VWAP for the portion of the Measurement Period prior to the date of conversion, the holder will be issued additional common shares, referred to as “true-up” shares.

If the VWAP calculation for the portion of the Measurement Period following the date of conversion is lower than the VWAP for the portion of the Measurement Period prior to the date of conversion, the holder will be issued additional shares of common stock, referred to as True-Up shares.

If the VWAP calculation is higher, no True-Up shares are issued.

The derivative liability at the end of each period includes a derivative liability for the outstanding Series C shares and a derivative liability for the potential obligation to issue True-Up Shares relating to Series C shares that have been converted and the Measurement Period has not expired, if applicable

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

The fair value of the derivative liability relating to the Conversion Premium for any outstanding Series C Shares is equal to the cash required to settle the Conversion Premium.

The fair value of the potential True-Up share obligation has been estimated using a binomial pricing mode and the lesser of the conversion price or the low closing price of the Company’s stock subsequent to the conversion date.

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

Limitations on using the closing price of the Company’s common stock to determine fair value

The Company is a smaller reporting company and is traded on the NYSE American exchange.

Historically, our stock price has been extremely volatile and subject to large and sometimes unexplained price variations on a daily or weekly basis.

In addition, the Company declared four reverse stock splits in 2018 and 2019 and the Company’s common stock generally trades at less than $1.00 per share.

These factors have exacerbated daily volatility of our stock price.

Consequently, we believe that the closing price of our stock on the reporting date may not, in all cases, represent the fair value of the common share required to satisfy the redemption of the Series C preferred Stock.

Recognizing that the closing share price of our publicly traded stock is an observable input to fair value, we used such price for determining fair value in most cases and only considered an alternative measure of fair value when the closing price of the Company’s common stock varied by more than 20% from the five-day moving average immediately prior to the measurement date.

In such cases, we used an average closing price of the previous 30 day period as an estimate of fair value, adjusted for stock splits if applicable.

and the historical volatility of the Company’s common stock (See Note 12).

Capitalized terms used but not defined in this section have the meaning assigned to them in the Series C COD.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Pursuant to Item 305(e) of Regulation S-K (§ 229.305(e)), the Company is not required to provide the information required by this Item as it is a “ smaller reporting company, ” as defined by Rule 229.10(f)(1).

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

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-K/A

Item 7. Management’s Discussion and Analysis