The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 – GENERAL
Camber Energy Inc.
(“Camber” or the “Company”) is an independent oil and gas company engaged in the development and acquisition
of onshore properties in Texas. Subsequent to the sale of its assets in Oklahoma to N&B Energy, LLC (“N&B Energy”)
effective August 1, 2018 (see further discussion in Note 2), Camber retained its assets in Glasscock County and operates in Hutchinson
Counties, Texas. Additionally, as part of the N&B transaction, the Company also retained a 12.5% production payment (effective
until a total of $2.5 million has been received); a 3% overriding royalty interest in its existing Okfuskee County, Oklahoma asset;
and
an overriding royalty interest on certain other undeveloped leasehold interests, pursuant to
an
Assignment of Production Payment and Assignments of Overriding Royalty Interests.
The accompanying unaudited
interim consolidated financial statements of Camber Energy, Inc. (“Camber” or the “Company”) have been
prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange
Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Camber’s
annual report filed with the SEC on Form 10-K for the year ended March 31, 2018. In the opinion of management, all adjustments,
consisting of normal recurring adjustments, necessary for a fair presentation of financial position and the results of operations
for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year. Notes to the consolidated financial statements which would substantially
duplicate the disclosures contained in the audited financial statements for the most recent fiscal year 2018 as reported in the
Form 10-K have been omitted.
Effective on January
10, 2018, the Company filed with the Secretary of State of Nevada, a Certificate of Amendment to the Company’s Articles
of Incorporation to increase the number of the Company’s authorized shares of common stock, $0.001 per value per share,
from 200,000,000 shares to 500,000,000 shares (the “Amendment”). The Amendment was previously approved by the Company’s
stockholders at the 2018 annual meeting of stockholders held on January 9, 2018.
On March 1, 2018, the Company filed a Certificate
of Amendment to its Articles of Incorporation with the Secretary of State of Nevada to effect a 1-for-25 reverse stock split of
all outstanding common stock shares of the Company. The reverse stock split was effective on March 5, 2018. The effect of the
reverse stock split was to combine each 25 shares of outstanding common stock into one new share, with no change in authorized
shares or par value per share, and to reduce the number of common stock shares outstanding from approximately 103.5 million shares
to approximately 4.1 million shares (prior to rounding). Proportional adjustments were made to the conversion and exercise prices
of the Company’s outstanding convertible preferred stock, warrants and stock options, and to the number of shares issued
and issuable under the Company’s stock incentive plans. The reverse stock split did not affect any shareholder’s ownership
percentage of the Company’s common stock, except to the limited extent that the reverse stock split resulted in any shareholder
owning a fractional share. Fractional shares of common stock were rounded up to the nearest whole share based on each holder’s
aggregate ownership of the Company. All issued and outstanding shares of common stock, conversion terms of preferred stock, options
and warrants to purchase common stock and per share amounts contained in the financial statements, in accordance with Staff Accounting
Bulletin (“SAB”) TOPIC 4C, have been retroactively adjusted to reflect the reverse split for all periods presented.
NOTE 2 – LIQUIDITY AND GOING
CONCERN CONSIDERATIONS
At September 30, 2018, the Company's total current assets of $5.5 million exceeded its total current liabilities of $4.4 million, resulting in working capital of $1.1 million, while at March 31, 2018, the Company’s total current liabilities of $40.3 million exceeded its total current assets of $1.7 million, resulting in a working capital deficit of $38.6 million. The $39.7 million increase in the working capital is primarily due to the assignment of the liabilities owed under the IBC Loan Agreement to N&B Energy in September 2018, as discussed below under “Note 2 - Liquidity and Going Concern Considerations - Assumption Agreement”.
The Company has entered
into the following transactions to address liquidity and going concern issues:
On December 30, 2015,
the Company entered into an Asset Purchase Agreement (as amended from time to time, the “Asset Purchase Agreement”)
to acquire, from twenty-three different entities and individuals (the “Sellers”), working interests in producing properties
and undeveloped acreage (the “Acquisition”), which acquisition transaction was completed on August 25, 2016. The assets
acquired include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region. In connection
with the closing of the acquisition, the Company assumed approximately $30.6 million of commercial bank debt, issued 520,387 shares
of common stock to certain of the Sellers, issued 552,000 shares of Series B Preferred Stock to one of the Sellers and its affiliate,
and paid $4,975,000 in cash to certain of the Sellers. The effective date of the Acquisition was April 1, 2016.
Pursuant to a Letter
Agreement the Company entered into, at the closing of the Acquisition, with RAD2 Minerals, Ltd. (“RAD2”), one of the
Sellers, which is owned and controlled by Richard N. Azar II, the Company’s former Chief Executive Officer and former director.
RAD2 agreed to accept full financial liability for any and all deficiencies between the “Agreed Assets Value” set forth
in the Asset Purchase Agreement of $80,697,710, and the mutually agreed upon value of the assets delivered by the Sellers at the
closing of the Acquisition, up to an aggregate of $1,030,941 (as applicable, the “Deficiency”). The Company accepted
additional oil and gas producing properties and two salt water disposal facilities from the Sellers with an approximate value of
$1.0 million to resolve this Deficiency.
The Asset Purchase
Agreement between the Sellers and the Company relating to the Acquisition included the requirement that, following the closing,
the parties undertake an accounting/true-up of expenses attributable to the assets acquired by the Company and revenue generated
from such assets. A dispute arose between the Sellers and the Company as to the time period which the Company was to be responsible
for the payment of expenses and was to receive the revenue from such assets prior to the closing of the transaction. Specifically,
the Company believed that the agreements provided for it to be responsible for all expenses associated with the assets, and to
receive all revenue generated from the assets, from April 1, 2016, the effective date of the Asset Purchase Agreement, through
the closing date, August 25, 2016. The Sellers on the other hand, which include entities owned by Richard N. Azar, II, the Company’s
then interim Chief Executive Officer, argued that the Company was only responsible for expenses, and was only due to receive revenue
from the assets, beginning on the closing date, August 25, 2016. The difference in the amounts claimed due to the Company from
the parties varied from a high of $1,121,718, which the Company alleged was due, to a low of $342,298, which the Sellers alleged
was due. On July 12, 2018, the Company entered into a Compromise Settlement Agreement and Mutual Release with Segundo Resources,
LLC”), which is owned and controlled by Mr. Azar (“Segundo” and the “Segundo Settlement”), in partial
consideration for N&B Energy agreeing to enter into the Sale Agreement (discussed below). Pursuant to the Segundo Settlement,
Segundo surrendered 15,237 shares of common stock valued at $76.25 per share as of the effective date of the closing of the acquisition
contemplated by the December 31, 2015 Asset Purchase Agreement (which closing effective date was April 1, 2016) for cancellation
(which cancellation occurred in October 2018), and released the Company from any and all claims which Segundo previously alleged
were owed under the terms of the December 31, 2015 Asset Purchase Agreement. The Company and Segundo also provided each other
full releases in connection with the December 31, 2015 Asset Purchase Agreement and Segundo agreed to indemnify the Company and
hold it harmless against any claims made by the other sellers under the December 31, 2015 Asset Purchase Agreement.
As discussed
in “Note 6 – Notes Payable and Debenture”, the Company borrowed $40 million from International Bank of Commerce
(“IBC” or “IBC Bank”) effective August 25, 2016. The proceeds of the loan were used to repay and refinance
approximately $30.6 million of indebtedness owed by certain of the Sellers to IBC as part of the closing of the Acquisition. As
of June 30, 2018 and March 31, 2018, the Company was not in compliance with certain covenants of the loan agreement, including
requiring the Company to maintain a net worth of $30 million, the Company was in default of the terms of the loan, and the balance
of the loan due to IBC of $36.9 million (less unamortized debt issuance costs of approximately $1.3 million), was recognized as
a short-term liability on the Company’s balance sheet as of June 30, 2018 and March 31, 2018. The Company also recognized
approximately $0 and $39,000 in accrued interest as of September 30, 2018 and March 31, 2018, respectively related to this note.
As discussed below, in September 2018, the Company assigned all of the obligations and liability under the IBC Bank documents to
N&B Energy.
On April 6, 2016, the
Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an accredited institutional
investor (the “Investor”), pursuant to which the Company sold and issued a redeemable convertible subordinated debenture,
with a face amount of $530,000, initially convertible into 6,523 shares of common stock (subject to certain conversion premiums)
at a conversion price equal to $3.25 per share and a warrant to initially purchase 55,385 shares of common stock (subject to adjustment
thereunder) at an exercise price equal to $81.25 per share (the “First Warrant”). The Investor purchased the debenture
at a 5.0% original issue discount in the amount of $500,000 and has exercised the First Warrant in full as described below for
the sum of $4.5 million. Additionally, the Investor has fully converted the debenture as of the date of this filing.
Also on April 6, 2016,
the Company entered into a Stock Purchase Agreement with the Investor, pursuant to which the Company agreed, subject to certain
conditions, to issue up to 527 shares of Series C redeemable convertible preferred stock (the “Series C Preferred Stock”)
at a 5% original issue discount, convertible into 1,621,539 shares of common stock (subject to certain conversion premiums) at
a conversion price of $3.25 per share, and a warrant to initially purchase 44,444 shares of common stock at an exercise price of
$112.50 per share (the “Second Warrant”). Under the terms of the Stock Purchase Agreement, the Second Warrant and 53
shares of Series C Preferred Stock were sold and issued for $500,000 on September 2, 2016, and the remaining 474 shares of Series
C Preferred Stock were sold and issued for $4.5 million on November 17, 2016.
In July and August
2016, RAD2 advanced the Company an aggregate of $350,000. Also, in August 2016, two other Sellers advanced the Company an aggregate
of $200,000 ($100,000 each). These advances did not accrue interest and had no stated maturity date. Additionally, in August 2016,
RAD2 loaned the Company $1.5 million pursuant to a promissory note. The promissory note did not accrue interest for the first month
it was outstanding and accrued interest at the rate of 5% per annum thereafter until paid in full. The Company repaid the promissory
note in full and all amounts advanced by RAD2 and the two other Sellers in October 2016.
On October 7, 2016,
the Investor exercised the First Warrant in full and was due 55,385 shares of common stock upon exercise thereof and an additional
101,709 shares of common stock in consideration for the conversion premium due thereon. A total of 32,400 shares were issued to
the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in the
Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock), provided that all
of such shares due to the Investor upon the exercise of the First Warrant have been issued to date. The Company received gross
proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services rendered in
connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due in consideration for the
conversion premium increased as the annual rate of return under the First Warrant increased, including by 10% upon the occurrence
of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per annum upon the exercise of
the First Warrant.
An aggregate of 4,417,911
shares of common stock were issued to the Investor in connection with the exercise of the Warrant during fiscal 2017 (200,000),
fiscal 2018 (3,909,500), and 308,411 shares were issued in April 2018. The First Warrant has been fully-exercised and extinguished
to date.
N&B Energy Asset Disposition
Agreement
On July 12, 2018,
the Company entered into an Asset Purchase Agreement (the “Sale Agreement”), as seller, with N&B Energy, as purchaser,
which entity is affiliated with Richard N. Azar II, the Company’s former Chief Executive Officer and former director, and
Donnie B. Seay, the Company’s former director. Pursuant to the Sale Agreement, the Company agreed to sell to N&B Energy
a substantial portion of its assets, including all of the assets acquired pursuant to the terms of the December 31, 2015 Asset
Purchase Agreement with Segundo and certain other more recent acquisitions, other than the production payment and overriding royalty
interests discussed below (the “Assets”). In consideration for the Assets, N&B Energy agreed to pay the Company
$100 in cash, to assume all of the Company’s obligations and debt owed under its outstanding loan agreement with IBC Bank,
which had a then outstanding principal balance of approximately $36.9 million and Segundo agreed to enter into the Segundo Settlement,
described below.
IBC Bank Standstill Agreement
On August 3, 2018, the
Company entered into an agreement in connection with the loan (the “Standstill Agreement”) with IBC Bank, which was
effective August 1, 2018. Among other terms, described below, the Standstill Agreement was entered into to provide the Company
sufficient time to close the transactions contemplated by the Sale Agreement. Pursuant to the Standstill Agreement:
|
(a)
|
The Company confirmed that certain defaults had occurred under the terms of the Real Estate Lien Note dated August 25, 2016 (the “Note”) in the original principal amount of $40,000,000 (which had an outstanding principal balance of approximately $36.9 million), entered into pursuant to the Loan Agreement dated August 25, 2016 (the “Loan Agreement” and together with the Note, and the other documents entered into evidencing, documenting and securing the Loan, the “Loan Documents”);
|
|
(b)
|
The Company, on behalf of it and its representatives, provided IBC Bank a release of all claims which it and such parties may have had as of the date of the Standstill Agreement;
|
|
(c)
|
The Company agreed to certain venue requirements in connection with any bankruptcy proceeding the Company may file or have filed against it in the future, agreed to waive certain automatic stays provided under applicable bankruptcy law and confirmed IBC Bank’s security interests;
|
|
(d)
|
IBC Bank agreed to stand still and not take any action to collect the indebtedness evidenced by the Loan Documents, prior to the earlier of (i) September 30, 2018, unless the closing date of the Sale Agreement is required to be extended due to no fault of the Company, due to the regulatory requirements of the Securities and Exchange Commission and/or NYSE American, in which case such date shall be automatically extended to no later than October 31, 2018, unless extended by both parties; or (ii) a default of the conditions of the stand still as set forth in the Standstill Agreement (collectively, the “Standstill Date”);
|
|
(e)
|
The Company agreed to certain conditions to the standstill, including:
|
|
(i)
|
Depositing all funds in excess of $5,000 with IBC Bank by 5:00 p.m. on Tuesday, August 7, 2018 (the “Deadline”);
|
|
(ii)
|
The Company pledging to IBC Bank prior to the Deadline, 87.5% of all of the Company’s right, title and interest to its assets located in Okfuskee County, Oklahoma and all wells, leasehold, mineral and surface interest, personal property, and all other property or assets located on or associated with said field owned by the Company that were recently purchased from Orion Energy (with the remaining 12.5% to be pledged to IBC Bank prior to the closing date of the Sale Agreement);
|
|
(iii)
|
Paying all of IBC Bank’s expenses and reasonable attorney fees in connection with the Note prior to the Deadline;
|
|
(iv)
|
Paying the June 2018 interest on the Note prior to the Deadline;
|
|
(v)
|
Paying the July 2018 interest on the Note prior to the Deadline;
|
|
(vi)
|
Agreeing to certain covenants and restrictions regarding the assets securing the Loan Documents during the stand still period; and
|
|
(vii)
|
Confirming that during the stand still period, the per annum interest rate of the Note will be 3% above the New York Prime Rate, subject to a floor of 5.5% per annum, with a beginning interest rate of 8% per annum.
|
|
(f)
|
IBC Bank agreed to allow the Company to undertake the transactions contemplated by the Sale Agreement, subject to the terms of the Standstill Agreement;
|
|
(g)
|
IBC Bank agreed, that if the Company was ready, willing and able to close the transactions contemplated by the Sale Agreement, but N&B Energy was not ready to close such transaction, on or before the Standstill Date (as extended), that it could surrender the assets planned to be sold pursuant to the Sale Agreement to IBC Bank (which may be undertaken pursuant to a foreclosure of such assets); and
|
|
(h)
|
That upon the closing of the transactions contemplated by the Sale Agreement or the surrender of such assets proposed to be sold pursuant to such Sale Agreement to IBC Bank (as discussed in (g) above), IBC Bank would pursue only the assets sold/surrendered, N&B Energy (if applicable) and the guarantors of the debt; enter into a novation and release in favor of the Company; and not pursue the Company for any deficiency in the amounts due under the Loan Documents, in each case subject to the terms and conditions of the Standstill Agreement.
|
First Amendment to Sale Agreement
Also on August 3, 2018,
the Company and N&B Energy entered into a First Amendment to Asset Purchase Agreement (the “First Amendment”),
which amended the terms of the Sale Agreement to (a) modify, clarify and replace certain of the exhibits to the original Sale Agreement,
including the terms of the overriding royalty interests and production payment agreed to be granted to the Company as part of such
Sale Agreement; (b) amend the Sale Agreement to remove the requirement that the Company obtain shareholder approval prior to the
closing of such Sale Agreement; and (c) include a deadline of August 31, 2018 for N&B Energy’s due diligence under the
Sale Agreement.
Additionally, in order
to avoid the significant time required to file a proxy statement with the Securities and Exchange Commission, clear comments with
the Securities and Exchange Commission, hold a meeting and obtain shareholder approval, and because such shareholder approval was
not required pursuant to applicable law or the rules of the NYSE American, the Company’s management determined to not seek
shareholder approval, but to instead seek a third-party opinion as to the fairness of the transaction to the Company’s shareholders.
Second Amendment to Sale Agreement
On September 24, 2018,
the Company, N&B Energy and CE Operating, LLC, the Company’s wholly-owned subsidiary (“CE Operating”),
entered into a Second Amendment to Asset Purchase Agreement (the “Second Amendment”), which amended the terms
of the Sale Agreement. Pursuant to the Second Amendment, the Company, N&B Energy and CE Operating agreed (a) to clarify that
all of the representations of the Company made in the Sale Agreement relating to portions of the Assets held in the name of CE
Operating shall be deemed made by CE Operating and not the Company and that CE Operating shall be deemed a party to the Sale Agreement,
solely in order to make such representations; and (b) to extend the deadline for closing the transactions contemplated by the Sale
Agreement to September 26, 2018, or such other date as the Company and N&B shall agree upon in writing.
Assumption Agreement
On September 26, 2018,
the Company entered into an Assumption Agreement (the “Assumption Agreement”) with IBC Bank; CE Operating; N&B
Energy, which entity is affiliated with Richard N. Azar, II, the Company’s former Chief Executive Officer and former director
(“Azar”), and Donnie B. Seay, the Company’s former director (“Seay”); Azar; RAD2 Minerals, Ltd.,
an entity owned and controlled by Azar (“RAD2”); Seay; and DBS Investments, Ltd., an entity owned and controlled by
Seay. Azar, Seay, RAD2, and DBS are collectively referred to as the “Guarantors”.
Pursuant to the Assumption
Agreement, N&B Energy agreed to assume all of the Company’s liabilities and obligations owed to IBC Bank under the Loan
Documents, the amount due under and in connection which was secured by (a) an Oil and Gas Mortgage, Security Agreement, Financing
Statement and Assignment of Production (Oklahoma) dated August 25, 2016, covering all of the Company’s right, title and interest
in and to certain oil, gas and mineral leases and/or minerals, mineral interests and estates located in Lincoln, Payne, and Logan
Counties, Oklahoma; (b) an Oil and Gas Mortgage, Security Agreement, Financing Statement and Assignment of Production (Oklahoma)
dated August 1, 2018, covering all of the Company’s right, title, and interest in and to certain oil, gas, and mineral leases
and/or mineral interests and estates located in Okfuskee County, Oklahoma (collectively, the “Orion Interests”); and
(c) the Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement dated as of August 25, 2016, covering the
Company’s mineral interests located in Glasscock County, Texas (collectively, the “West Texas Properties”).
Additionally, pursuant
to the Assumption Agreement, IBC Bank approved the transactions contemplated by the Sale Agreement and the assumption by N&B
Energy of all of the amounts and liabilities which the Company owed to IBC Bank (the “IBC Obligations”) and N&B
Energy agreed to assume all of the IBC Obligations. Finally, pursuant to the Assumption Agreement, IBC Bank released and forever
discharged the Company and CE Operating and each of their current and former officers, directors, and shareholders, from all covenants,
agreements, obligations, claims and demands of any kind, whether in law or at equity, which IBC Bank then had, arising out of or
related to the amounts which the Company owed to IBC Bank under the Note, Loan Agreement or mortgages and/or under such documents
or agreements, and further agreed to release the lien which IBC Bank then held on the West Texas Properties.
N&B Energy Sale Agreement Closing
On September 26, 2018,
the transactions contemplated by the Sale Agreement closed and N&B Energy assumed all of the IBC Obligations (pursuant to the
Assumption Agreement described above) and paid the Company $100 in cash, and the Company transferred ownership of the Assets to
N&B Energy.
Notwithstanding the
sale of the Assets, the Company retained its assets in Glasscock County and Hutchinson Counties, Texas and also retained a 12.5%
production payment (effective until a total of $2.5 million has been received); a 3% overriding royalty interest in its existing
Okfuskee County, Oklahoma asset; and retained
an overriding royalty interest on certain other
undeveloped leasehold interests, pursuant to
an Assignment of Production Payment and Assignment of Overriding Royalty
Interests.
The effective date
of the Sale Agreement is August 1, 2018. The Assets were assigned “as is” with all faults.
As a result of the
Assumption Agreement and the Sale Agreement, the Company reduced its liabilities by $37.9 million and its assets by approximately
$12.1 million.
The following table
summarizes the net assets sold and gain recognized in connection with the Assumption Agreement and Sale Agreement:
|
|
Transaction Summary
|
Assumption of IBC Loan
|
|
$
|
36,943,617
|
|
Assumption of ARO Liability
|
|
|
699,536
|
|
Assumption of Capital Lease Obligations and Other
|
|
|
287,074
|
|
Cash Received at Closing
|
|
|
100
|
|
Oil and Gas Properties Transferred
|
|
|
(12,122,081
|
)
|
Total Gain on Sale
|
|
$
|
25,808,246
|
|
NOTE 3 – SUMMARY OF SIGNIFICANT
ACCOUNTING POLICIES
The Company has
provided a discussion of significant accounting policies, estimates and judgments in its March 31, 2018 Annual Report on Form 10-K.
There have been no changes to the Company’s significant accounting policies since March 31, 2018 which are expected to have
a material impact on the Company’s financial position, operations or cash flows.
Reclassifications
Certain reclassifications
have been made to the prior year financial statements to conform them with the current year presentation.
Recently Adopted Accounting Pronouncements
ASU 2014-09,
“Revenue
from Contracts with Customers (Topic 606)”,
supersedes the revenue recognition requirements and industry-specific guidance
under Revenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenue when it transfers promised goods or services
to customers in an amount that reflects the consideration the entity expects to be entitled to in exchange for those goods or services.
The Company adopted Topic 606 on April 1, 2018, using the modified retrospective method applied to contracts that were not completed
as of April 1, 2018. Under the modified retrospective method, prior period financial positions and results will not be adjusted.
The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption.
While the Company does not expect 2019 net earnings to be materially impacted by revenue recognition timing changes, Topic 606
requires certain changes to the presentation of revenues and related expenses beginning April 1, 2018. Refer to Note 9 –
Revenue from Contracts with Customers for additional information.
In November 2016, the
Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”) amending the
presentation of restricted cash within the consolidated statements of cash flows. The new guidance requires that restricted cash
be added to cash and cash equivalents on the consolidated statements of cash flows. The Company adopted this ASU on April 1,
2018 on a retrospective basis with the following impacts to our consolidated statements of cash flows for the six months ended
September 30, 2017:
|
|
Previously Reported
|
|
|
Adjustment
|
|
|
As Revised
|
|
Net cash provided by (used in) financing activities
|
|
$
|
306,999
|
|
|
$
|
(1,517,086
|
)
|
|
$
|
(1,210,087
|
)
|
As of September 30,
2018 and March 31, 2018, the Company had restricted cash of $0 and $26,834 related to the loan agreement with IBC bank.
Following is a summary
of cash and cash equivalents and restricted cash:
|
|
September 30,
2018
|
|
|
|
March 31,
2018
|
|
|
|
September
30, 2017
|
|
Cash
|
|
$
|
5,331,578
|
|
|
|
$
|
760,317
|
|
|
|
$
|
8
5,983
|
|
Restricted
cash – current
|
|
|
—
|
|
|
|
|
26,834
|
|
|
|
|
167,441
|
|
Cash,
cash equivalents and restricted cash
|
|
$
|
5,331,578
|
|
|
|
$
|
787,151
|
|
|
|
$
|
253,424
|
|
In August 2016, the
FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 seeks to reduce the existing diversity in practice in
how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective
for fiscal years beginning after December 15, 2017. The Company adopted this ASU on April 1, 2018 and the adoption did not have
a significant impact to the Company’s consolidated financial statements.
In January 2017, the
FASB issued ASU 2017-01,
Business Combinations: Clarifying the Definition of a Business
, which amends the current definition
of a business. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive
process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially
all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired
would not represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent
with how it is described in Topic 606,
Revenue from Contracts with Customers
. The changes to the definition of a business
will likely result in more acquisitions being accounted for as asset acquisitions. The guidance is effective for the annual period
beginning after December 15, 2017, with early adoption permitted. The Company adopted this ASU on April 1, 2018 and the adoption
did not have a significant impact to the Company’s consolidated financial statements.
In May 2017, the FASB
issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”, which provides
guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification
accounting in Topic 718. ASU 2017-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted,
including adoption in any interim period for which financial statements have not yet been issued. The Company adopted this ASU
on April 1, 2018 and the adoption did not have a significant impact to the Company’s consolidated financial statements.
Recently Issued Accounting Pronouncements
The
Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective,
if adopted, would have a material effect on the accompanying consolidated financial statements.
NOTE 4 – PROPERTY AND EQUIPMENT
Oil and Gas Properties
Camber uses the full
cost method of accounting for oil and natural gas producing activities. Costs to acquire mineral interests in oil and natural 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 natural gas property costs on a country-by-country basis. Costs not subject to amortization consist of unproved properties
that 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.
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. If it is determined that the relationship
is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.
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 $4.45 and $5.75 per barrel of oil equivalent for the six months ended September 30, 2018 and 2017, respectively.
All of Camber’s
oil and gas properties are located in the United States. Below are the components of Camber’s oil and gas properties recorded
at:
|
|
September 30,
2018
|
|
March 31,
2018
|
Oil and gas properties subject to amortization
|
|
$
|
50,882,371
|
|
|
$
|
60,760,056
|
|
Oil and gas properties not subject to amortization
|
|
|
28,013,365
|
|
|
|
28,016,989
|
|
Capitalized asset retirement costs
|
|
|
161,130
|
|
|
|
322,470
|
|
Total oil and gas properties
|
|
|
79,056,866
|
|
|
|
89,099,515
|
|
Accumulated depreciation, depletion and amortization
|
|
|
(77,770,225
|
)
|
|
|
(76,555,320
|
)
|
Net capitalized costs
|
|
$
|
1,286,641
|
|
|
$
|
12,544,195
|
|
For the six months
ended September 30, 2018, the Company recorded impairments totaling $755,966, all if which were due to lease expirations.
Capital Leases
During March and
April 2018, the Company purchased certain equipment pursuant to capital leases. The effective value of the equipment was approximately
$575,000, and such amount is included in oil and gas properties and the corresponding current liability of approximately $387,000
is included in accrued expenses as of June 30, 2018. The effective borrowing rate is approximately 35%, and all obligations were
due by December 2018. In conjunction with the assignment of the liabilities owed under the IBC Loan Agreement to N&B Energy
in September 2018, as discussed under “Note 2 – Liquidity and Going Concern Considerations – Assumption Agreement”
all of the remaining obligations were assumed by the purchaser.
Other Property and Equipment
In February 2014, the
Company purchased a field office for approximately $50,000 which is used to provide local operational support for its properties
in the Eagleford and Austin Chalk areas. The land upon which the field office resides was initially leased by the Company over
a three-year term beginning in January 2014 through December 2016, for yearly lease amounts of $7,200 and $7,800, and $8,400 over
the three-year term, respectively. In January 2017, the Company renewed the lease on a year-to-year basis for $7,200. The field
office was transferred as a part of the Release with Rogers. See “Note 6 – Notes Payable and Debenture” for further
details.
Office Lease
On
April 1, 2016, the Company entered into a lease agreement pursuant to which the Company agreed to lease 4,439 square feet of office
space at 450 Gears Road, Houston, Harris County, Texas 77067 (Suite 860, versus Suite 780 as was leased previously). The lease
had a 65-month term (through August 2021), and commenced on April 1, 2016. The monthly rental cost under the lease was -$0- for
the month of April 2016, and $7,676 for the months of May 2016 through April 2017, plus as applicable, its pro rata share of operating
expenses and taxes which exceed the total operating expenses and taxes of the property for the first year of the lease. On March
31, 2017, the Company amended its lease at 450 Gears Road to expand to a total of 6,839 square feet, commencing on May 1, 2017.
The amendment extended the lease period to November 2021.
In
August 2017, the Company ceased its use of this office space and moved its headquarters to San Antonio, Texas. The Company was
committed to the remaining lease payments for the Houston office space for approximately $346,000 assuming an early termination
of the lease on July 31, 2019, and has recently settled these amounts pursuant to a settlement agreement discussed below. The Company
recorded monthly rent expense associated with the Houston lease through August 2017. In accordance with the accounting guidance
in ASC 420-10-25-13 regarding exit or disposal cost obligations, as of August 2017, the Company recorded rent expense, within general
and administrative expense, and accrued a liability of $302,289, which represents the fair value of costs that will continue to
be incurred during the remaining term of the Houston lease without economic benefit to the Company. As of September 30, 2018 and
March 31, 2018, the carrying amount of the liability of $302,289 and $302,289, respectively, was included in Current Liabilities
in the Consolidated Balance Sheets. In addition, the Company wrote-off $189,533 of mostly fully depreciated property and equipment
that was not re-located to the San Antonio headquarters, resulting in a loss of $3,368 which was recognized as a loss during the
fiscal year ended March 31, 2018. In October 2018, the Company entered into a settlement with its prior landlord as described below
under “Note 8 – Commitments and Contingencies – Legal Proceedings – MidFirst”.
Effective October 1,
2017, the Company entered into an agreement to sublease space on a month-to-month basis in San Antonio, Texas at
4040
Broadway, Suite 425,
from RAD2 Minerals, Ltd., an entity owned and controlled by Mr. Azar, the Company’s former
Interim Chief Executive Officer, who resigned as Interim CEO effective May 25, 2018 and resigned as a member of the Board of Directors
on June 21, 2018. Monthly rent for October through December 2017 was $5,000 per month, increasing to $7,500 per month effective
January 2018. The agreement was subsequently modified to have a month-to-month term at $2,500 per month, effective July 1, 2018.
Effective August 1,
2018, the Company terminated its month-to-month lease with RAD2 and entered into a month-to-month lease at 1415 Louisiana, Suite
3500 Houston, Texas 77002. The entity which has provided the use of the Company’s Chief Financial Officer is providing this
space without charge to the Company.
NOTE 5 – ASSET RETIREMENT OBLIGATIONS
The following table
presents the reconciliation of the beginning and ending aggregate carrying amounts of long-term legal obligations associated with
the retirement of oil and gas property and equipment for the six-month periods ended September 30, 2018 and 2017, respectively.
|
|
2018
|
|
2017
|
Carrying amount at beginning of period
|
|
$
|
979,159
|
|
|
$
|
2,045,847
|
|
Accretion
|
|
|
4,725
|
|
|
|
70,200
|
|
Dispositions
|
|
|
(699,536
|
)
|
|
|
—
|
|
Change in estimate
|
|
|
48,099
|
|
|
|
(9,945
|
)
|
Carrying amount at end of period
|
|
$
|
332,447
|
|
|
$
|
2,106,102
|
|
Camber does not have any short-term asset
retirement obligations as of September 30, 2018 and March 31, 2018.
NOTE 6 – NOTES PAYABLE AND DEBENTURE
The Company’s notes payable and debenture
consisted of the following:
|
|
September
30,
2018
|
|
|
March
31,
2018
|
|
Debenture
|
|
$
|
495,000
|
|
|
$
|
495,000
|
|
Note Payable – IBC
|
|
|
—
|
|
|
|
36,943,617
|
|
|
|
|
495,000
|
|
|
|
37,438,617
|
|
Unamortized debt discount
|
|
|
(201,372
|
)
|
|
|
(1,499,647
|
)
|
Total Notes Payable and Debenture
|
|
|
293,628
|
|
|
|
35,938,970
|
|
Less current portion
|
|
|
(293,628
|
)
|
|
|
(35,938,970
|
)
|
Long-term portion
|
|
$
|
—
|
|
|
$
|
—
|
|
Debenture
On April 6, 2016, the
Company entered into a Securities Purchase Agreement with the Investor, pursuant to which the Company issued a redeemable convertible
subordinated debenture, with a face value of $530,000, initially convertible into 163,077 shares of common stock at a conversion
price equal to $3.25 per share and warrants to initially purchase 55,385 shares of common stock (subject to adjustment thereunder)
at an exercise price equal to $81.25 per share (the “First Warrant”). The Investor purchased the debenture at a $30,000
original issue discount for the sum of $500,000 and agreed that it would exercise the First Warrant, upon satisfaction of certain
conditions, for the sum of $4.5 million, which warrant was exercised in October 2016. The debenture matures in seven years and
accrues interest at a rate of 6.0% per annum. Due to the decline in the price of the Company’s common stock and that a trigger
event occurred on June 30, 2016 as a result of the delay in filing of its Annual Report on Form 10-K for the year ended March 31,
2016, the premium rate on the debenture increased from 6% to 34% and the conversion discount became 85% of the lowest daily volume
weighted average price during the measuring period (60 days prior to and 60 days after the last date that the Investor receives
the last of the shares due), less $0.10 per share of common stock not to exceed 85% of the lowest sales price on the last day of
such period less $0.10 per share.
As the fair value of
the warrants issued in connection with the debenture exceeded the $530,000 value of the debenture, the Company fully discounted
the entire debenture and will amortize the discount over the term of the debenture. The discount is being amortized through interest
expense using the effective interest method over the term of the debenture.
On August 23, 2017,
the Investor converted $35,000 of the principal amount of the Debenture into an aggregate of 70,189 shares of common stock, which
included 431 shares for conversion of principal (at $81.25 per share) and 69,758 shares for premiums.
On April 20, 2018,
the Investor was issued 141,982 shares of common stock as a result of true-ups in connection with the August 23, 2017 conversion
of the Debenture.
As of September 30,
2018 and March 31, 2018, the Company had a convertible subordinated debenture with a balance of $293,628 and $247,403, respectively
(net of unamortized discount of $201,372 and $247,597, respectively), which is recognized as a short-term liability on the Company’s
balance sheets as of September 30, 2018 and March 31, 2018, respectively. The Company also recognized $422,104 and $388,183 in
accrued interest as of September 30, 2018 and March 31, 2018, respectively.
On October 31, 2018,
the Investor converted the entire $495,000 of principal owed under the terms of the debenture, into an aggregate of 20,037,653
shares of common stock, including 152,308 shares of common stock issuable upon conversion of the principal amount thereof (at a
conversion price of $3.25 per share), and 19,885,345 shares in connection with conversion premiums due thereon (at a conversion
price, as calculated as provided in such debenture, of $0.0609 per share). A total of 2,500,000 of such shares were issued to the
Investor in connection with the conversion (an additional 3,272,000 shares were issued on November 5, 2018) and the remaining shares
were held in abeyance subject to the Investor’s 9.99% ownership limitation, to be issued from time to time, at the request
of the Investor.
Loan Agreement with International Bank
of Commerce (“IBC” or “IBC Bank”)
On August 25, 2016, the
Company, as borrower, and Azar, Seay, Richard E. Menchaca, RAD2, DBS Investments, Ltd. (“DBS”, controlled by Seay)
and Saxum Energy, LLC (“Saxum”, which is controlled by Mr. Menchaca), as guarantors, all of which were directly or
indirectly Sellers), and IBC Bank, as lender, entered into a Loan Agreement.
Pursuant to the Loan Agreement,
IBC Bank loaned the Company $40 million, evidenced by a Real Estate Lien Note in the amount of $40 million. The Company was required
to make monthly payments under the note equal to the greater of (i) $425,000; and (ii) fifty percent (50%) of the Company’s
monthly net income. The note accrued annual interest at 2% above the prime rate then in effect, subject to a minimum interest rate
of 5.5% per annum. The note was due and payable on August 25, 2019. Payments under the note were subject to change as the interest
rate changes in order to sufficiently amortize the note in 120 monthly installments. The Company had the right, from time to time
and without penalty to prepay the note in whole or in part, subject to the terms thereof.
The proceeds of the loan
were used to repay and refinance approximately $30.6 million of indebtedness owed by certain of the Sellers, to IBC Bank (including
an aggregate of $18.3 million owed by RAD2 and another entity controlled by Azar, $9.8 million owed by DBS, and $2.1 million owed
by Mr. Menchaca), as well as to pay the $4.975 million due to the Sellers at closing. Another $3.36 million was used to fund a
sinking fund required by IBC Bank, as discussed below, to pay principal on the note.
The amount owed under the
note was secured by a Security Interest in substantially all of the Company’s assets and properties, pursuant to three Security
Agreements. Also, each of the guarantors guaranteed the repayment of a portion of the Loan Agreement pursuant to a Limited Guaranty
Agreement. Additionally, in connection with the parties’ entry into the Loan Agreement and to further secure amounts due
thereunder, certain of the guarantors pledged shares of common stock which they received at the closing of the Acquisition to IBC
Bank, with RAD2 pledging 124,824 shares of common stock; DBS pledging 37,437 shares of common stock; and Saxum pledging 26,936
shares of common stock.
The Company agreed
to pay IBC Bank a loan finance charge of $400,000 in connection with its entry into the Loan Agreement, with half due on the date
the Company entered into the Loan Agreement and half due on or before the 180
th
day following the date of the Loan Agreement.
As further consideration for agreeing to the terms of the Loan, the Company agreed to issue IBC Bank 15,612 shares of common stock.
The Company recognized a $2.8 million note discount related to these transactions and other debt issuance costs and will amortize
the discount and debt issuance costs over the term of the note.
On September 8, 2017,
the Company received a Notice of Default and Opportunity to Cure (the “Notice”) from IBC, stating that the Company
was in default under its loan due to failing to make a required $425,000 loan payment on August 25, 2017 (the “Payment Default”).
The Notice was also sent to the guarantors under the Loan Agreement. The Notice also cited the Company for several covenant defaults
including exceeding a cap on monthly general and administrative expenses; falling below $30 million of net worth; failing to comply
with certain post-closing covenants regarding the assignment of certain oil and gas interests, the execution of certain supplemental
mortgages and the completion of certain curative title requirements; failing to pay costs and expenses required pursuant to the
terms of the Loan Agreement; failing to meet the requirements of a cash flow test as described in greater detail in the Loan Agreement;
and exceeding the loan to value determination provided for in the Loan Agreement. In order to cure the Payment Default described
in the Notice, the Company was required to pay $425,000, as well as any attorney’s fees and/or late fees as determined by
IBC, on or before September 18, 2017, which amount was not paid and to cure the covenant defaults, which covenant defaults were
not cured.
Pursuant to extension
agreements entered into with IBC, in or around December 2017 and January 2018, (a) IBC agreed to waive the Company’s obligation
to make the August 30, 2017, $425,000 monthly principal payment originally due under the IBC loan; (b) the Company confirmed the
amount outstanding under the IBC loan ($37,443,308 as of each extension); (c) IBC agreed that interest only payments would be due
on September 30, 2017, October 30, 2017, November 30, 2017 and December 31, 2017, with principal payments of $425,000 per month
to begin thereafter, which principal payments were not made; (d) the parties agreed that the amounts owed to IBC were payable on
demand, provided that if no demand was made, such amounts would be payable by way of monthly payments of $425,000 of principal,
plus accrued interest, with the remaining amount owed to IBC due at maturity (August 25, 2019); (e) that the amount owed to IBC
will accrue interest at the rate of 2% per annum above the prime rate, subject to a floor of 5.5% (currently 6.25% per annum);
(f) if the Company fails to make any payment due to IBC within 10 days of its due date, IBC is due a late payment of 5% of the
amount past due (subject to a minimum of $10 and a maximum of $1,500 per late payment); and (g) the Company and the guarantors
of the IBC loan released IBC from any claims against IBC as of the date of each of such extensions.
As of September 30, 2018,
the amounts owed to IBC Bank were assumed by N&B Energy pursuant to the Assumption Agreement, described above under “Note
2 – Liquidity and Going Concern Considerations – Assumption Agreement”.
NOTE 7 – DERIVATIVE LIABILITY
The Company has determined
that certain warrants the Company has issued contain provisions that protect holders from future issuances of the Company’s
common stock at prices below such warrants’ respective exercise prices and these provisions could result in modification
of the warrants’ exercise price based on a variable that is not an input to the fair value of a “fixed-for-fixed”
option as defined under FASB ASC Topic No. 815 – 40. The warrants granted in April 2014 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.
Activities for derivative
warrant instruments during the six months ended September 30, 2018 and 2017 were as follows:
|
|
2018
|
|
|
2017
|
|
Carrying amount at beginning of period
|
|
$
|
5
|
|
|
$
|
21,662
|
|
Change in fair value
|
|
|
—
|
|
|
|
(20,891
|
)
|
Carrying amount at end of period
|
|
$
|
5
|
|
|
$
|
771
|
|
The fair value of the
derivative warrants was calculated using the Black-Scholes pricing model. Variables used in the Black Scholes pricing model as
of September 30, 2018 include (1) discount rate of 2.59%, (2) expected term of 0.56 years, (3) expected volatility of 227.10%,
and (4) zero expected dividends. Variables used in the Black-Scholes pricing model as of September 30, 2017 include (1) discount
rate of 1.47%, (2) expected term of 2 years, (3) expected volatility of 162.52%, and (4) zero expected dividends.
As of September
30, 2018, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.
NOTE 8 – COMMITMENTS AND CONTINGENCIES
The Company entered
into multiple office lease agreements, see detail under “Note 4 – Property and Equipment – Office Leases”.
The Company’s
oil and gas lease acreage is subject to expiration if the Company does not drill and hold such acreage by production or exercise
options to extend such leases. At March 31, 2018, the Company had 423 acres of unproved lease acreage that is set to expire during
fiscal year 2019 unless drilled or otherwise extended by the Company. During the six months ended September 30, 2018, leases for
245 unproved acres expired and a resulting impairment of approximately $755,966 was recognized, leaving 178 acres remaining.
Legal Proceedings.
From time to time suits and claims against Camber arise in the ordinary course of Camber’s business, including contract
disputes and title disputes. Camber records reserves for contingencies when information available indicates that a loss is probable
and the amount of the loss can be reasonably estimated.
MidFirst
In
October 2018, the Company entered into a confidential settlement agreement with MidFirst Bank, its prior landlord and
settled all claims relating to the Company’s prior office space lease. See also “Note 4 – Property and
Equipment” for further discussion.
Maranatha
Oil Matter
In
November 2015, Randy L. Robinson, d/b/a Maranatha Oil Co. sued the Company in Gonzales County, Texas (Cause No. 26160). The plaintiff
alleged that it assigned oil and gas leases to the Company in April 2010, retaining a 4% overriding royalty interest and 50% working
interest and that the Company failed to pay such overriding royalty interest or royalty interest. The interests relate to certain
oil and gas properties which the Company subsequently sold to Nordic Oil USA in April 2013. The petition alleges causes of actions
for breach of contract, failure to pay royalties, non-payment of working interest, fraud, fraud in the inducement of contract,
money had and received, constructive trust, violation of theft liability act, continuing tort and fraudulent concealment. The
suit seeks approximately $100,000 in amounts alleged owed, plus pre-and post-judgment interest. The Company has filed a denial
to the claims.
Rubenstein
Matter
On
September 28, 2017, Aaron Rubenstein, a purported shareholder of the Company’s common stock, filed a lawsuit against the
Company (as nominal defendant) and Richard N. Azar II, it’s then Chief Executive Officer and director (who has since resigned
from both positions), RAD2 Management, LLC, RAD2 Minerals, Ltd. and Segundo Resources, LLC, each an entity owned and controlled
by Mr. Azar, in the United States District Court, Western District of Texas (Case No. 5:17-cv-962-FB). The suit seeks the
recovery (for the benefit of the Company) of alleged short-swing profits from Mr. Azar and his related entities under Section
16(b) of the Exchange Act relating to various transactions involving Series B Preferred Stock of the Company in November 2016
and January 2017. Mr. Azar denied the existence of any short-swing profits and filed a denial with the court. The Company also
filed a denial with the court.
The
parties are currently in discussions regarding a settlement of the plaintiff’s claims. Following the date of this
filing the Company anticipates entering into a settlement agreement and that the plaintiff will file a dismissal of the
plaintiff’s claims with the court.
Petroflow
Matter
In
October 2017, the Company agreed to pay directly and reimburse entities owned in part by Alan Dreeben, a former director of the
Company, for legal fees and settlement payments expended in connection with the defense of
Petroflow Energy Corporation
v. Sezar Energy, L.P. and Brittany Energy, LLC
, Case No. 16-CV-700-TCK;TLW, In the United States District Court – N.D.
OK. The Company was the beneficiary through the release of interest in disputed lease interests from Petroflow to the Company
that provides the Company with complete control over those properties to renew expired leases and to have 100% of the drilling
rights related to those properties. Sezar Energy and Brittany Energy have assigned any interests they may have had in conjunction
with litigation in exchange for the Company making the agreed settlement payments of $475,000 plus direct payments and reimbursement
of the legal costs paid on behalf of the defendants by Mr. Dreeben. Total legal fees expended by such entities totaled $392,043,
and the Company reimbursed such fees by issuing Mr. Dreeben 78,409 shares of common stock with a value of $0.20 per share in November
2017. In addition, the Company directly paid legal fees and settlement payments totaling $567,633. The total expense related to
the Petroflow matter of $959,676 is included in General and Administrative expense on the statement of operations during the year
ended March 31, 2018.
Segundo
Settlement Agreement
Also on July 12, 2018,
the Company entered into a Compromise Settlement Agreement and Mutual Release with Segundo described in greater detail above under
“Note 2 – Liquidity and Going Concern Considerations – Segundo Settlement Agreement”.
NOTE
9 – REVENUE FROM CONTRACTS WITH CUSTOMERS
Change
in Accounting for Revenue from Oil and Gas Operations
The
Company adopted ASU 2014-09,
“Revenue from Contracts with Customers (Topic 606)”
, on April 1, 2018, using the
modified retrospective method applied to contracts that were not completed as of April 1, 2018. Refer to “Note 3 –
Summary of Significant Accounting Policies” for additional information.
Exploration
and Production
There
were no significant changes to the timing or valuation of revenue recognized for sales of production from exploration and production
activities.
Disaggregation
of Revenue from Contracts with Customers
The
following table disaggregates revenue by significant product type for the three and six months ended September 30, 2018:
|
|
|
Three Months Ended
|
|
|
|
Six Months Ended
|
|
|
|
|
September 30, 2018
|
|
|
|
September 30, 2018
|
|
Oil
sales
|
|
$
|
181,952
|
|
|
$
|
382,021
|
|
Natural gas sales
|
|
|
266,430
|
|
|
|
739,943
|
|
Natural
gas liquids sales
|
|
|
361,084
|
|
|
|
1,382,198
|
|
Total
revenue from customers
|
|
$
|
809,466
|
|
|
$
|
2,504,162
|
|
There
were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of September
30, 2018 or March 31, 2018.
NOTE
10 – INCOME TAXES
The
Company has estimated that its effective tax rate for U.S. purposes will be zero for the 2019 and 2018 fiscal years as a result
of net losses and a full valuation allowance against the net deferred tax assets. Consequently, the Company has recorded no provision
or benefit for income taxes for the six months ended September 30, 2018 and 2017.
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
On
January 10, 2018, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock
from 200,000,000 shares to 500,000,000 shares.
On
August 23, 2017, the Investor converted $35,000 of the principal amount of the Debenture into an aggregate of 70,189 shares of
common stock, which included 431 shares for conversion of principal (at $81.25 per share) and 69,758 shares for premiums.
On
April 20, 2018, the Investor was issued 141,982 shares of common stock as a result of true-ups in connection with the August 23,
2017 conversion of the Debenture.
On
October 4, 2017, the Company entered into an agreement with a digital marketing advisor pursuant to which the advisor agreed to
create original content with the goal of increasing public awareness about the Company and the Company agreed to pay the advisor
(a) $20,000 per month beginning in October 2017 and ending on February 28, 2018, (b) $50,000 per month thereafter through October
4, 2018, the end of the term of the agreement, and (c) 150,000 shares of restricted common stock, with 100,000 shares payable
within 15 days of the parties’ entry into the agreement and the remainder due on May 1, 2018. As of September 30, 2018,
the remaining shares were issued and the obligation was settled in full.
As
of March 31, 2018, the 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $606,764 in dividends.
The Company paid the dividends by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders
in May 2018, pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $87.50 per
share). The beneficial owners of the Series B Preferred Stock as of March 31, 2018, were Richard N. Azar, II, the Company’s
former Chief Executive Officer and former director, and Alan Dreeben, the Company’s former director.
As
of June 30, 2018, the 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $606,764 in dividends.
The Company paid the dividends by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders
in September 2018, pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $87.50
per share). The beneficial owners of the Series B Preferred Stock as of June 30, 2018, were Richard N. Azar, II, the Company’s
former Chief Executive Officer and former director, and Alan Dreeben, the Company’s former director.
As of September 30, 2018,
the 408,508 outstanding shares of Series B Preferred Stock had accrued $153,191 in dividends. The Company plans to pay the dividends
by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders pursuant to the terms
of the designation (which provides that the Shares shall be based on a value of $87.50 per share). The beneficial owners of the
Series B Preferred Stock as of September 30, 2018, were Richard N. Azar, II, the Company’s former Chief Executive Officer
and former director, and Alan Dreeben, the Company’s former director. To date, the accrued dividend outstanding as of September
30, 2018 has not been paid.
On
October 7, 2016, the Investor exercised the First Warrant in full and was due 55,385 shares of common stock upon exercise thereof
and an additional 101,710 shares of common stock in consideration for the conversion premium due thereon. A total of 32,400 shares
were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not
result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock).
The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500
for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due
in consideration for the conversion premium increases as the annual rate of return under the First Warrant increases, including
by 10% upon the occurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per
annum upon the exercise of the First Warrant. Additionally, as the conversion rate for the conversion premium is currently 85%
of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed
85% of the lowest sales prices on the last day of such period less $0.10 per share, the number of shares issuable in connection
with the conversion premium increases as the trading price of the Company’s common stock decreases, and the trading price
of the Company’s common stock has decreased since the date the First Warrant was exercised, triggering a further reduction
in the conversion price of the conversion premium and an increase in the number of shares due to the Investor in connection with
the conversion of the amount owed in connection with the conversion premium. An aggregate of 4,417,911 shares of common stock
were issued to the Investor in connection with the exercise of the Warrant during fiscal 2017 (200,000), fiscal 2018 (3,909,500),
and 308,411 shares were issued in April 2018. The First Warrant has been fully-exercised and extinguished to date.
The
following summarizes the Company’s common stock activity during the six-month period ended September 30, 2018:
|
|
|
|
|
Common
Shares
|
|
|
|
Amount
(a)
|
|
|
Per
Share
|
|
|
Issued
and
Outstanding Shares
|
|
Balance
at March 31, 2018
|
|
|
|
|
|
|
|
|
|
|
5,758,970
|
|
Preferred
Stock Series C Conversion
(b)
|
|
|
—
|
|
|
|
—
|
|
|
|
67,587,868
|
|
Preferred
Stock Series B Dividends
|
|
|
2,183
|
|
|
|
0.62
|
|
|
|
3,502
|
|
Warrants
– Abeyance
(b)
|
|
|
—
|
|
|
|
—
|
|
|
|
308,411
|
|
Issuance of Common Stock for settlement of consulting agreement
|
|
|
—
|
|
|
|
—
|
|
|
|
50,000
|
|
Issuance
of Common Stock of Prior Conversion of Convertible Notes
|
|
|
—
|
|
|
|
—
|
|
|
|
141,982
|
|
Balance
at September 30, 2018
|
|
|
|
|
|
|
|
|
|
|
73,850,733
|
|
|
(a)
|
Net
proceeds or fair value on grant date, as applicable.
|
|
(b)
|
Shares
previously held in abeyance until such time as it would not result in the investor exceeding its beneficial ownership limitation
(4.99% of the Company’s outstanding common stock).
|
Series
A Convertible Preferred Stock
On
April 19, 2016, the holder of the Company’s Series A Convertible Preferred Stock, agreed to convert all 500 shares of their
outstanding Series A Convertible Preferred Stock into 800 shares of the Company’s common stock (a conversion ratio of 1.6:1
as provided in the original designation of the Series A Convertible Preferred Stock adjusted for the Company’s 1:25 reverse
stock split effective on July 25, 2015 and the Company’s 1:25 reverse stock split effective March 5, 2018), which conversion
was completed on April 25, 2016. The Company paid the holder $20,000 in connection with such conversion in order to comply with
the terms of the Asset Purchase Agreement that required that no shares of Series A Convertible Preferred Stock be outstanding
at the closing. As of September 30, 2018, and March 31, 2018, respectively, the Company had no Series A Convertible Preferred
Stock issued or outstanding.
Series
B Redeemable Convertible Preferred Stock
On
September 1, 2016, as consideration for the closing of the Acquisition, the Company issued an aggregate of 552,000 shares of Redeemable
Convertible Preferred Stock, which had a total value of $13,800,000 based on the $25 per Series B Preferred Stock share par value.
The preferred shares were issued to RAD2 (200,000 shares) and Segundo Resources, LLC (an affiliate of RAD2) (352,000 shares) on
behalf of and for the benefit of RAD2.
The
Company’s Series B Preferred Stock has a liquidation preference of $25 per share. The Series B Preferred Stock is convertible,
at the option of the holder at any time following the original issuance date, into common stock at a rate of approximately 0.2857:1
(originally issuable into an aggregate of 157,714 shares of common stock if fully converted), at the option of the holder thereof,
or automatically as to 25% of the Series B Preferred Stock shares if the Company’s common stock trades above $153.13 per
share for at least 20 consecutive trading days, and trades with at least 3,000 shares of average volume per day during such period;
an additional 50% of the Series B Preferred Stock shares if the Company’s common stock trades above $175.00 per share for
at least 20 consecutive trading days, and trades with at least 3,000 shares of average volume per day during such period; and
as to the remaining Series B Preferred Stock shares, if the Company’s common stock trades above $196.88 per share for at
least 20 consecutive trading days, and trades with at least 3,000 shares of average volume per day during such period. Each outstanding
share of Series B Preferred Stock will be entitled to one vote per share on all stockholder matters. The Series B Preferred Stock
is redeemable at any time by the Company upon the payment by the Company of the face amount of the Series B Preferred Stock ($25
per share) plus any and all accrued and unpaid dividends thereon.
The
Company has the option, exercisable from time to time after the original issue date, to redeem all or any portion of the outstanding
shares of Series B Preferred Stock by paying each applicable holder, an amount equal to the original issue price multiplied by
the number of Series B Preferred shares held by each applicable holder plus the accrued dividends.
As
of September 30, 2018, there were 408,508 shares of Series B Preferred Stock outstanding, which have the following features:
|
●
|
a
liquidation preference senior to all of the Company’s common stock;
|
|
●
|
a
dividend, payable quarterly, at an annual rate of six percent (6%) of the original issue price until such Series B Preferred
Stock is no longer outstanding either due to conversion, redemption or otherwise; and
|
|
●
|
voting
rights on all matters, with each share having 1/25
th
of one vote.
|
As
the Series B Preferred Stock is convertible at any time following the original issuance date into common stock at a rate of approximately
0.2857:1, the Company recognized a fair value measurement of $14,898,038 for the Series B Preferred Stock, which is based on the
552,000 preferred shares originally issued times the conversion rate of approximately 0.2857, times the price of the Company’s
common stock of $94.50 per share at the date of the closing of the Acquisition on August 25, 2016.
During
the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1,751
shares (with fair value $833 based on a share price of $0.50 per share at September 30, 2018) of the Company’s common stock.
Due to the fact that the Company is in a retained deficit position, the Company recognized a charge to additional paid in-capital
of $881 and stock dividends distributable but not issued based on the par value of the common stock issued. During the quarter
ended September 30, 2018, the Company issued 1,751 shares to settle a stock dividend accrued on Series B Preferred Stock.
Series
C Redeemable Convertible Preferred Stock
On
April 6, 2016, the Company entered into a Stock Purchase Agreement with the Investor, pursuant to which it agreed, subject to
certain conditions, to sell 527 shares of Series C redeemable convertible preferred stock (with a face value of $5.26 million)
at a 5% original issue discount of $263,000, convertible into 64,738 shares of common stock at a conversion price of $3.25 per
share, and a warrant to purchase 44,444 shares of common stock at an exercise price of $112.50 per share (the “Second Warrant”).
On
September 2, 2016, the Second Warrant and 53 shares of Series C Preferred Stock were issued for $526,450 ($500,000, net cash proceeds
to Camber) after the Acquisition (as defined and described in “Note 2 – Liquidity and Going Concern Considerations”)
closed. The prorated share of the $263,000 discount ($26,450) was recorded as reduction to additional paid in capital. On November
17, 2016, the remaining 474 shares of Series C Preferred Stock were issued for $4,736,550 ($4,500,000, net cash proceeds to Camber)
and the Company paid placement agent and legal fees of $514,000 for services rendered in connection with the issuance. The Company
also recognized $236,550 of the remaining 5% original issue discount, which was recorded as reduction to additional paid in capital.
On
October 5, 2017, the Company and the Investor entered into the October 2017 Purchase Agreement, pursuant to which (1) the Investor
purchased 212 shares of Series C Preferred Stock on the closing date of the agreement, October 4, 2017 (the “Initial Closing”),
for $2 million, and agreed, subject to certain closing conditions set forth in the agreement, agreed to purchase (2) 106 shares
of Series C Preferred Stock for $1,000,000, 10 days after the Initial Closing (which closing occurred on November 21, 2017); (3)
105 shares of Series C Preferred Stock for $1,000,000, 10 days after the second closing (which closing occurred on December 27,
2017); (4) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the third closing (which closing occurred on January
30, 2018); (5) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the fourth closing; (6) 525 shares of Series
C Preferred Stock for $5,000,000, 30 days after the fifth closing; and (7) 525 shares of Series C Preferred Stock for $5,000,000,
30 days after the sixth Closing.
On October 5, 2017,
the Company and the Investor entered into a Stock Purchase Agreement, amended on March 2, 2018 (as amended, the “October
2017 Purchase Agreement”) pursuant to which the Company agreed to sell, pursuant to the terms thereof, 1,684 shares of our
Series C Redeemable Convertible Preferred Stock (the “Series C Preferred Stock”) for $16 million (a 5% original issue
discount to the face value of such shares), subject to certain conditions set forth therein.
On March 2, 2018,
the Company and the Investor entered into an amendment to the October 2017 Purchase Agreement (the “Amendment”), pursuant
to which the Investor (a) waived any and all Trigger Events (as defined in the certificate of designation of the Series C Preferred
Stock (the “Designation”)) that had occurred prior to March 2, 2018, (b) agreed that all calculations provided for
in the Designation would be made as if no such Trigger Event had occurred, and (c) waived any right to receive any additional shares
of common stock based upon any such Trigger Event, with respect to all shares of Series C Preferred Stock, other than any which
have already been converted.
During the year
ended March 31, 2018, the Company sold the Investor an aggregate of 633 shares of Series C Preferred Stock for $6 million under
the terms of the October 2017 Purchase Agreement.
The
Investor also agreed, pursuant to the amendment, that the conversion rate of conversion premiums pursuant to the Designation would
remain 95% of the average of the lowest 5 individual daily volume weighted average prices during the applicable Measuring Period
(as defined in the Designation), not to exceed 100% of the lowest sales prices on the last day of the Measuring Period, less $0.05
per share of common stock, unless a triggering event has occurred, and that such $0.05 per share discount would not be adjusted
in connection with the Company’s previously reported 1-for-25 reverse stock split affected on March 5, 2018.
The
holder of the Series C Preferred Stock is entitled to cumulative dividends through maturity, which initially totaled 6% per annum,
and are adjustable to up to 34.95% per annum, based on certain triggering events and the trading price of the Company’s
common stock, and which currently total 34.95% per annum, payable in full through maturity upon redemption, conversion, or maturity,
and when, as and if declared by the Company’s Board of Directors in its discretion. The Series C Preferred Stock ranks senior
to the common stock and pari passu with respect to the Company’s Series B Redeemable Convertible Preferred Stock.
The
Series C Preferred Stock may be converted into shares of common stock at any time at the option of the holder, or at the Company’s
option if certain equity conditions (as defined in the Certificate of Designation) are met. Upon conversion, we will pay the holder
of the Series C Preferred Stock being converted an amount, in cash or stock at the Company’s sole discretion, equal to the
dividends that such shares would have otherwise earned if they had been held through the maturity date (7 years), and issue to
the holder such number of shares of common stock equal to $10,000 per share of Series C Preferred Stock (the “Face Value”)
multiplied by the number of such shares of Series C Preferred Stock divided by the conversion rate ($3.25 per share).
The
conversion premium under the Series C Preferred Stock is payable and the dividend rate under the Series C Preferred Stock is adjustable
on the same terms and conditions as accrued interest is payable and adjustable under the Debenture. The Series C Preferred Stock
has a maturity date that is seven years after the date of issuance and, if the Series C Preferred Stock has not been wholly converted
into shares of common stock prior to such date, we may redeem the Series C Preferred Stock on such date by repaying to the holder
in cash 100% of the Face Value plus an amount equal to any accrued but unpaid dividends thereon. 100% of the Face Value, plus
an amount equal to any accrued but unpaid dividends thereon, automatically becomes payable in the event of a liquidation, dissolution
or winding up by us.
During
the three and six-month periods ended September 30, 2018, the Company sold 735 and 945 shares of Series C Preferred Stock pursuant
to the terms of the October 2017 Purchaser Agreement, for total consideration of $7 million and $9 million, respectively. As of
September 30, 2018 and March 31, 2018, there were 1,683 and 1,132 shares of Series C Preferred Stock outstanding, respectively.
During the three and
six-month periods ended September 30, 2018, the Investor converted 143 and 394 shares of the Series C Preferred stock with a face
value of $1.43 million and $3.94 million and was issued 440,002 and 1,212,326 shares of common stock and additional shares of
common stock in dividend premium shares of 8,533,610 and 17,184,686, respectively and true ups on those and prior conversions
for an aggregate of a total of 67,587,868 shares issued during the six months ended September 30, 2018.
As of September 30, 2018
and March 31, 2018, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 34.95% and 24.95%
premium dividend rate per the 2016 and 2017 Stock Purchase Agreement, respectively, as described above. The Company recognized
a total charge to additional paid-in capital and stock dividends distributable but not issued of $1,419,800 and $1,928,084 related
to the stock dividend declared but not issued for the six month period ended September 30, 2018 and the year ended March 31, 2018,
respectively.
Warrants
On
October 7, 2016, the Investor exercised the First Warrant in full and was due 55,385 shares of common stock upon exercise thereof
and an additional 101,709 shares of common stock in consideration for the conversion premium due thereon. A total of 32,400 shares
were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not
result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock).
The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500
for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due
in consideration for the conversion premium increases as the annual rate of return under the First Warrant increases, including
by 10% upon the occurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per
annum upon the exercise of the First Warrant. Additionally, as the conversion rate for the conversion premium is currently 85%
of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed
85% of the lowest sales prices on the last day of such period less $0.10 per share, the number of shares issuable in connection
with the conversion premium increases as the trading price of the Company’s common stock decreases, and the trading price
of the Company’s common stock has decreased since the date the First Warrant was exercised, triggering a further reduction
in the conversion price of the conversion premium and an increase in the number of shares due to the Investor in connection with
the conversion of the amount owed in connection with the conversion premium. Additionally, pursuant to the interpretation of the
Investor, the measurement period for the calculation of the lowest daily volume weighted average price currently continues indefinitely.
An
aggregate of 4,417,911 shares of common stock were issued to the Investor in connection with the exercise of the Warrant during
fiscal 2017 (200,000), 2018 (3,909,500), and 308,411 shares were issued in April 2018. The First Warrant has been fully-exercised
and extinguished to date.
At
September 30, 2018 and March 31, 2018, outstanding warrants had an intrinsic value of $0 and $232, respectively. The intrinsic
value is based upon the difference between the market price of Camber’s common stock on the date of exercise and the grant
price of the stock options.
The
following is a summary of the Company’s outstanding warrants at September 30, 2018:
Warrants
|
|
|
Exercise
|
|
|
Expiration
|
|
|
Intrinsic
Value at
|
|
Outstanding
|
|
|
Price
($)
|
|
|
Date
|
|
|
September
30, 2018
|
|
|
2,667
|
(1)
|
|
|
61.50
|
|
|
|
April
21, 2019
|
|
|
|
—
|
|
|
4,972
|
(2)
|
|
|
37.50
|
|
|
|
April
21, 2021
|
|
|
|
—
|
|
|
64,000
|
(3)
|
|
|
6.25
|
|
|
|
June
12, 2022
|
|
|
|
—
|
|
|
1,000,000
|
(4)
|
|
|
0.39
|
|
|
|
May
24, 2023
|
|
|
|
—
|
|
|
1,071,639
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
(1)
|
Warrants
issued in connection with the sale of units in the Company’s unit offering in April 2014. The Warrants became exercisable
on April 21, 2014 and will remain exercisable thereafter until April 21, 2019.
|
|
(2)
|
Warrants
issued in connection with the sale of convertible notes. The warrants were exercisable on the grant date (April 26, 2016)
and remain exercisable until April 26, 2021.
|
|
(3)
|
Warrants
issued in connection with the Initial Tranche of the funding from Vantage. The warrants were exercisable on the grant date
(June 12, 2017) and remain exercisable until June 12, 2022.
|
|
(4)
|
Warrants
issued in connection with the Severance Agreement with Richard Azar. The warrants were exercisable on the grant date (May
25, 2018) and remain exercisable until May 24, 2023.
|
NOTE
12 – SHARE-BASED COMPENSATION
Camber
measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value
of the award over the vesting period.
Stock
Options
As
of September 30, 2018 and 2017, the Company had 78 and 19,920 stock options outstanding with a weighted average exercise price
of $1,294 and $35.38, respectively.
Of
the Company’s outstanding options, no options were exercised or forfeited during the three months ended September 30, 2018.
Additionally, no stock options were granted during the six months ended September 30, 2018. Compensation expense related to stock
options during the three-month period ended September 30, 2018 and 2017 was $0 and $4,816, respectively.
Options
outstanding and exercisable at September 30, 2018 and 2017 had no intrinsic value, respectively. The intrinsic value is based
upon the difference between the market price of Camber’s common stock on the date of exercise and the grant price of the
stock options.
As
of September 30, 2018, there was no remaining unrecognized share-based compensation expense related to all non-vested stock options.
The
following tabulation summarizes the remaining terms of the options outstanding:
Exercise
|
|
|
Remaining
|
|
|
Options
|
|
|
Options
|
|
Price
($)
|
|
|
Life
(Yrs.)
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
1,294
|
|
|
|
2.0
|
|
|
|
78
|
|
|
|
78
|
|
|
|
|
|
|
Total
|
|
|
|
78
|
|
|
|
78
|
|
NOTE 13 – INCOME (LOSS) PER COMMON SHARE
The calculation of earnings (loss) per share
for the three and six months ended September 30, 2018 and 2017 was as follows:
|
|
Three Months Ended
|
|
Six Months Ended
|
|
|
September 30,
|
|
September 30,
|
|
|
2018
|
|
2017
|
|
2018
|
|
2017
|
Numerator:
|
|
|
|
|
|
|
|
|
Net Income (loss)
|
|
$
|
23,228,366
|
|
|
$
|
(6,246,116
|
)
|
|
$
|
19,716,269
|
|
|
$
|
(9,295,094
|
)
|
Less preferred dividends
|
|
|
(896,182
|
)
|
|
|
(358,723
|
)
|
|
|
(1,595,178
|
)
|
|
|
(717,958
|
)
|
Net income (loss) attributable to common stockholders
|
|
$
|
22,332,184
|
|
|
$
|
(6,604,839
|
)
|
|
$
|
18,121,091
|
|
|
$
|
(10,013,052
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Weighted average share – basic
|
|
|
40,325,026
|
|
|
|
1,543,467
|
|
|
|
24,939,537
|
|
|
|
1,381,147
|
|
Income (loss) per share – basic
|
|
$
|
0.58
|
|
|
$
|
(4.28
|
)
|
|
$
|
0.79
|
|
|
$
|
(7.25
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Dilutive effect of common stock equivalents
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Options/warrants
|
|
|
—
|
|
|
|
—
|
|
|
|
1,399
|
|
|
|
—
|
|
Convertible debenture
|
|
|
20,037,653
|
|
|
|
—
|
|
|
|
20,037,653
|
|
|
|
—
|
|
Preferred C shares
|
|
|
75,538,775
|
|
|
|
—
|
|
|
|
75,538,775
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Total Weighted average shares – diluted
|
|
|
135,901,454
|
|
|
|
1,543,467
|
|
|
|
120,517,364
|
|
|
|
1,381,147
|
|
Income (loss) per share – diluted
|
|
$
|
0.16
|
|
|
$
|
(4.28
|
)
|
|
$
|
0.15
|
|
|
$
|
(7.25
|
)
|
NOTE
14 – SUPPLEMENTAL CASH FLOW INFORMATION
Net
cash paid for interest and income taxes was as follows:
|
|
Six
Months Ended September 30,
|
|
|
|
2018
|
|
|
2017
|
|
Interest
|
|
$
|
842,520
|
|
|
$
|
1,115,528
|
|
Income
taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash
investing and financing activities included the following:
|
|
Six
Months Ended
September
30, 2018
|
|
|
Six
Months Ended
September
30, 2017
|
|
Changes
in Accounts Payable for Payments Made on Previously Accrued Capital Expenditures
|
|
$
|
451,543
|
|
|
$
|
4,395
|
|
Change in Estimate for Asset Retirement Obligation
|
|
|
48,099
|
|
|
|
9,945
|
|
Settlement
of common stock payable
|
|
$
|
200,000
|
|
|
$
|
—
|
|
Debt
discounts on Notes Payable
|
|
$
|
—
|
|
|
$
|
49,529
|
|
Debt
discounts on Notes Payable, Long-Term Notes Payable
|
|
$
|
—
|
|
|
$
|
502,341
|
|
Issuance
of Restricted Common Stock for Dreeben Loan
|
|
$
|
—
|
|
|
$
|
35,900
|
|
Stock
Dividends Distributable but not Issued
|
|
$
|
1,595,178
|
|
|
$
|
717,958
|
|
Conversion
of Convertible Notes to Common Stock
|
|
$
|
142
|
|
|
$
|
35,000
|
|
Conversion
of Preferred Stock to Common Stock
|
|
$
|
67,588
|
|
|
$
|
1,025
|
|
Issuance
of common stock for common stock payable
|
|
$
|
—
|
|
|
$
|
59,473
|
|
Reversal
of oil and gas property
|
|
$
|
—
|
|
|
$
|
412,708
|
|
Issuance
of stock dividends
|
|
$
|
2,231
|
|
|
$
|
34,837
|
|
Issuance
of Common Stock for Dividends
|
|
$
|
—
|
|
|
$
|
358,723
|
|
Warrants Issued in Abeyance
|
|
|
308
|
|
|
|
—
|
|
NOTE
15 – SUBSEQUENT EVENTS
Conversion
of Series C Preferred Stock
From
October 1, 2018 to November 7, 2018, the Investor was issued an aggregate of 50,028,006 shares of common stock in connection with
true ups associated with prior conversions of Series C Preferred Stock; and as of November 7, 2018, was not due any additional
shares in connection with true ups.
October
2018 Stock Purchase Agreement
On October 29, 2018,
the Company and the Investor entered into a Stock Purchase Agreement (the “October 2018 Purchase Agreement”), whereby
the Investor purchased 369 shares of Series C Preferred Stock for $3.5 million. The Series C Preferred Stock
sold pursuant to the October 2018 Purchase Agreement have substantially similar terms as those sold pursuant to the October 2017
Purchase Agreement described in Note 11 above.
Conversion of Series B Preferred
Stock
In October 2018,
Richard N. Azar II, both on his own behalf and on behalf of the entities which he beneficially owned, converted all 364,508 shares
of the Series B Preferred Stock which he beneficially owned into an aggregate of 104,146 shares of common stock, of which 12,419
shares of newly converted common stock (along with a total of 2,818 shares previously beneficially owned by Mr. Azar) were immediately
cancelled pursuant to the terms of the Segundo Settlement, described above under “Part I. Financial Information – Item
1. Financial Statements – Note 2 – Liquidity and Going Concern Considerations – Segundo Settlement”.
Conversion of Debenture
On October 31, 2018,
the Investor converted the entire $495,000 of principal owed under the terms of the debenture, into an aggregate of 20,037,653
shares of common stock, described above under “Part I. Financial Information – Item 1. Financial Statements –
Note 6 – Notes Payable”, which shares have not been issued as of the date of this report.