Our consolidated financial statements as
of and for the fiscal year ended March 31, 2019 have been audited by Marcum LLP, independent registered public accounting firm.
Our consolidated financial statements as of and for the fiscal year ended March 31, 2018 have been audited by GBH CPAs, PC, independent
registered public accounting firm, and have been prepared in accordance with generally accepted accounting principles pursuant
to Regulation S-X.
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.
The accompanying notes are an integral part
of these consolidated financial statements.
NOTES
TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE
1 – ORGANIZATION AND OPERATIONS OF THE COMPANY
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 – Liquidation
and Going Concern Considerations
”), Camber retained its assets in Glasscock County and operates in Hutchinson County,
Texas. Additionally, as part of the sale of its assets to N&B Energy, 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.
Effective
August 1, 2018, the Company relocated its corporate headquarters from San Antonio, Texas to Houston, Texas.
On
March 1, 2018, the Company filed a Certificate of Amendment to the Company’s 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 “
Amendment
”).
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 stockholder’s ownership percentage of the Company’s common stock, except
to the limited extent that the reverse stock split resulted in any stockholder 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 SAB TOPIC 4C, have been retroactively adjusted to
reflect the reverse split for all periods presented.
On
December 20, 2018, the Company filed a Certificate of Change with the Secretary of State of Nevada to effect another 1-for-25
reverse stock split of the Company’s (a) authorized shares of common stock (from 500,000,000 shares to 20,000,000 shares);
and (b) issued and outstanding shares of common stock. The reverse stock split was effective on December 24, 2018. The effect
of the reverse stock split was to combine each 25 shares of outstanding common stock into one new share, with a proportionate
1-for-25 reduction in the Company’s authorized shares of common stock, but no change in the par value per share of the common
stock. Proportional adjustments were made to the conversion and exercise prices of the Company’s outstanding convertible
preferred stock (subject to the terms thereof), warrants and stock options, and to the number of shares issued and issuable under
the Company’s stock incentive plans. 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 (subject to the terms thereof), options and warrants to purchase common stock and per share amounts contained
in the financial statements, have been retroactively adjusted to reflect the reverse split for all periods presented.
Effective
on April 10, 2019, 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 20,000,000 shares to 250,000,000 shares. The amendment was previously approved by the Company’s stockholders
at the 2019 annual meeting of stockholders held on February 19, 2019, as reported in the Current Report on Form 8-K filed
with the Securities and Exchange Commission on February 20, 2019.
NOTE
2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS
At March 31, 2019, the Company’s total current
assets of $8.2 million exceeded its total current liabilities of approximately $2.1 million, resulting in working capital of $6.1
million, while at March 31, 2018, the Company’s total current liabilities of $40.0 million exceeded its total current assets of
$1.7 million, resulting in a working capital deficit of $38.3 million. The $44.4 million increase in the working capital is primarily
related to the settlement of the debt related to the sale closing in September 2018.
Management believes that with
the elimination of its outstanding debt and the funds raised through equity transactions during the current fiscal year,
the Company has sufficient capital to fund operating costs and planned capital expenditures on existing wells through the end
of June 2020. In May 2019, the Company entered into a non-binding LOI to acquire Lineal Star Holdings, LLC
(“
Lineal
”), a specialty construction and oil and gas services enterprise providing services to the energy
industry. In the event the Lineal transaction does not occur, management intends to use a portion of its working
capital to facilitate other targeted acquisitions and mergers. If additional financing is required to consummate
transactions, management intends to seek additional equity and debt financing, as needed, of which no financing arrangements
are currently in place.
As discussed in “
Note 6 – Notes
Payable and Debenture
”, the Company borrowed $40 million from IBC 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 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 is 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 March 31, 2018. The Company also recognized approximately
$39,000 in accrued interest as of March 31, 2018 related to this note. In conjunction with the “
Assumption Agreement
”,
the Company reduced its liabilities by $37.9 million, including all of the outstanding amounts due to IBC, and its assets by approximately
$12.1 million, and currently has no secured debt outstanding.
During
the years ended March 31, 2019 and 2018, the Company sold 1,577 and 738 shares of Series C Preferred Stock pursuant to the terms
of an October 2017 Stock Purchase Agreement, October 2018 Stock Purchase Agreement and November 2018 Stock Purchase Agreement,
for total consideration of $15 million and $7 million, respectively.
In September 2017, a note holder of the Company foreclosed
on the assets of CATI Operating, LLC (“
CATI
”), the Company’s then wholly-owned subsidiary, which assets
secured the note. On October 3, 2017, the trustee of those assets, for the benefit of the lender, sold these assets in public
auction foreclosure sales which took place in Gonzales County and Karnes County, Texas. The proceeds from the foreclosure sales
of approximately $3.5 million were applied against the outstanding indebtedness. In December 2017, the remaining indebtedness
owed was released by the note holder (approximately $5.8 million in principal and interest). Additionally, the remaining leasehold
and ownership of CATI was assigned to Arkose Lease Partners, LLC, a third party (“
Arkose
”), in November 1,
2017, in exchange for Arkose’s assumption of all plugging and abandonment liabilities of CATI of approximately $1.8 million.
Effective
January 31, 2017, the Company borrowed $1,000,000 from one of the Company’s then directors. As additional consideration
for the director agreeing to make the loan, we issued the director 64 shares of restricted common stock. On November 9, 2017,
the Company repaid the director the full amount due on the short-term promissory note of $1,050,000.
On
March 9, 2017, the Company borrowed $250,000 from a non-related individual pursuant to a short-term promissory note. As additional
consideration for agreeing to make the loan, the Company agreed to issue the lender 16 restricted shares of common stock. On November
9, 2017, the Company paid the non-related individual the full amount due on the short-term promissory note of $263,158.
On
August 2, 2017, and effective June 13, 2017, the Company entered into an agreement with Vantage Fund, LLC (“
Vantage
”
and the “
Vantage Agreement
”), pursuant to which Vantage agreed to provide up to $6 million of funding to the
Company, in the sole discretion of Vantage. On July 17, 2017, Vantage provided $120,000 to the Company under the agreement and
on July 20, 2017, Vantage provided $30,000 to the Company under the agreement. On November 9, 2017, the Company paid Vantage the
full amount due to Vantage.
N&B
Energy Asset Disposition Agreement
On
July 12, 2018, the Company entered into an Asset Purchase Agreement (as amended by the First Amendment to the Sale Agreement dated
August 3, 2018 and the Second Amendment to Sale Agreement dated September 24, 2018, the “
Sale Agreement
”),
as seller, with N&B Energy, LLC as purchaser, which entity is affiliated with Richard N. Azar II, the Company’s former
Chief Executive Officer and former director (“
N&B Energy
”), 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 and certain other more recent
acquisitions, other than the production payment and overriding royalty interests discussed below (the “
Disposed Assets
”).
In consideration for the Disposed Assets, N&B Energy agreed to pay the Company $100 in cash to assume the Company’s
liabilities and contractual obligations in connection with the Disposed Assets (including lease and bonus payments), 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 the other parties agreed to enter into the Segundo Settlement as described
in “
Note 8 – Commitments and Contingencies
”.
Assumption
Agreement
On
September 26, 2018, the Company entered into an Assumption Agreement (the “
Assumption Agreement
”) with IBC
Bank; CE Operating, LLC, the Company’s wholly-owned subsidiary (“
CE Operating
”), which became a party
to the Sale Agreement pursuant to the second amendment thereto; 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 and 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
”). 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 stockholders, 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 certain of the Company’s properties located in west Texas.
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
Principles
of Consolidation
The financial statements of Camber Energy include
the accounts of its wholly-owned subsidiaries, CATI Operating, LLC, a Texas limited liability company, which was wholly-owned
(“
CATI
”) until it was divested on November 9, 2017, CEI Operating LLC, a Texas limited liability company, which
was wholly-owned until it was divested on November 1, 2017, Camber Permian LLC, a Texas limited liability company, which is wholly-owned,
Camber Permian II LLC, a Texas limited liability company, until it was divested on November 9, 2017, CE Operating, LLC, an Oklahoma
limited liability company, which is wholly-owned, and C E Energy LLC, a Texas limited liability company which is wholly-owned.
Use
of Estimates
The
preparation of financial statements in conformity with accounting principles generally accepted in the United States of America
requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those estimates.
Camber’s
financial statements are based on a number of significant estimates, including oil and natural gas reserve quantities which are
the basis for the calculation of depreciation, depletion and impairment of oil and natural gas properties, and timing and costs
associated with its asset retirement obligations, as well as those related to the fair value of stock options, stock warrants
and stock issued for services. While the Company believes that its estimates and assumptions used in preparation of the financial
statements are appropriate, actual results could differ from those estimates.
Cash
and Cash Equivalents
Cash
and cash equivalents include cash in banks and financial instruments which mature within three months of the date of purchase.
The Company maintains cash and cash equivalents in bank deposit accounts, which at times may exceed federally insured limits of
$250,000. At March 31, 2019 and 2018, the Company’s cash in excess of the federally insured limit were $7,463,944 and $490,460,
respectively. Historically, the Company has not experienced any losses in such accounts. The Company had no cash equivalents at
March 31, 2019 or 2018, respectively.
Accounts
Receivable
Accounts
receivable consist of uncollateralized oil and natural gas revenues due under normal trade terms. Management reviews receivables
periodically and reduces the carrying amount by a valuation allowance that reflects management’s best estimate of the amount
that may not be collectible. At March 31, 2019 and 2018, the Company’s allowance for doubtful accounts was $190,365 and
$1,038,015, respectively.
Concentration
of Credit Risk
The
Company generally sells a significant portion of its oil and gas production to a relatively small number of customers. For the
year ended March 31, 2019, the Company’s consolidated revenues were from the sale of oil, gas and natural gas liquids under
marketing contracts primarily with Superior Pipeline Company, Scissortail Energy, LLC and Apache Corporation. The Company is not
dependent upon any one purchaser and has alternative purchasers available at competitive market prices if there is disruption
in services or other events that cause the Company to search for other ways to sell the Company’s production.
During
the year ended March 31, 2019, three customers accounted for 84% of total revenues. During the year ended March 31, 2018,
two customers accounted for 72% of the Company’s total revenues. The Company does not believe the loss of any customer will
have a material effect on the Company because alternative customers are readily available.
Oil
and Natural Gas Properties, Full Cost Method
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.
Ceiling
Test
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.
During
the year ended March 31, 2019, the Company recorded impairments totaling $1.3 million that were primarily related to unproved
properties due to expirations of leaseholds. During the year ended March 31, 2018, the Company recorded impairments totaling $8.1
million, which were primarily related to unproved properties due to expirations of leaseholds.
Asset
Retirement Obligations
The
Company records the fair value of a liability for asset retirement obligations (“
ARO
”) in the period in which
it is incurred and a corresponding increase in the carrying amount of the related long-lived asset. The present value of the estimated
asset retirement cost is capitalized as part of the carrying amount of the long-lived asset and is depreciated over the useful
life of the asset. Camber accrues an abandonment liability associated with its oil and natural gas wells when those assets are
placed in service. The ARO is recorded at its estimated fair value and accretion is recognized over time as the discounted liability
is accreted to its expected settlement value. Fair value is determined by using the expected future cash outflows discounted at
Camber’s credit-adjusted risk-free interest rate. No market risk premium has been included in Camber’s calculation
of the ARO balance.
Other
Property and Equipment
Other
property and equipment are stated at cost and consist primarily of furniture and computer equipment. Depreciation is computed
on a straight-line basis over the estimated useful lives.
Income
Taxes
Deferred
income taxes are provided on the liability method whereby deferred tax assets are recognized for deductible temporary differences
and operating losses and tax credit carry-forwards and deferred tax liabilities are recognized for taxable temporary differences.
Temporary differences are the differences between the reported amounts of assets and liabilities and their tax bases. Deferred
tax assets are reduced by a valuation allowance when, in the opinion of management, it is more likely than not that some portion
or all of the deferred tax assets will not be realized. Deferred tax assets and accrued tax liabilities are adjusted for the effects
of changes in tax laws and rates on the date of enactment.
Camber
has evaluated and concluded that there are no significant uncertain tax positions requiring recognition in the Company’s
financial statements as of March 31, 2019 and 2018. The Company’s policy is to classify assessments, if any, for tax related
interest expense and penalties as interest expense.
Earnings
per Common Share
Basic
and diluted net income per share calculations are calculated on the basis of the weighted average number of shares of the Company’s
common stock outstanding during the year. Purchases of treasury stock reduce the outstanding shares commencing on the date that
the stock is purchased. Common stock equivalents are excluded from the calculation when a loss is incurred as their effect would
be anti-dilutive.
Fair
Value of Financial Instruments
ASC
820 defines fair value, establishes a framework for measuring fair value and enhances disclosures about fair value measurements.
It defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price)
in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants
on the measurement date. ASC 820 also establishes a fair value hierarchy which requires an entity to maximize the use of observable
inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that
may be used to measure fair value:
|
●
|
Level
1 – Quoted prices in active markets for identical assets or liabilities.
|
|
●
|
Level
2 – Inputs other than quoted prices that are observable for the asset or liability,
either directly or indirectly. These include quoted prices for similar assets or liabilities
in active markets; quoted prices for identical or similar assets or liabilities that
are not active; and model-driven valuations whose inputs are observable or whose significant
value drivers are observable. Valuations may be obtained from, or corroborated by, third-party
pricing services.
|
|
●
|
Level
3 – Unobservable inputs to measure fair value of assets and liabilities for which
there is little, if any market activity at the measurement date, using reasonable inputs
and assumptions based upon the best information at the time, to the extent that inputs
are available without undue cost and effort.
|
As
of March 31, 2019, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.
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.
Revenue
and Cost 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.
Reclassifications
Certain
reclassifications have been made to the prior year financial statements to conform 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 the Company’s consolidated statements of cash
flows for the year ended March 31, 2018:
|
|
Previously
Reported
|
|
|
Adjustment
|
|
|
As
Revised
|
|
Net
cash provided by financing activities
|
|
$
|
5,944,299
|
|
|
$
|
(1,655,693
|
)
|
|
$
|
4,288,606
|
|
As
of March 31, 2019 and 2018, respectively, 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:
|
|
March
31,
2019
|
|
|
March 31,
2018
|
|
Cash
|
|
$
|
7,778,723
|
|
|
$
|
760,317
|
|
Restricted
cash – current
|
|
|
—
|
|
|
|
28,834
|
|
Cash,
cash equivalents and restricted cash
|
|
$
|
7,778,723
|
|
|
$
|
789,151
|
|
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
In
August 2018, the FASB issued ASU 2018-13, “
Disclosure Framework: Changes to the Disclosure Requirements for Fair Value
Measurement,
” which changes the disclosure requirements for fair value measurements by removing, adding, and modifying
certain disclosures. ASU 2018-13 is effective for financial statements issued for annual periods beginning after December 15,
2019, and interim periods within those annual periods. Early adoption is permitted. The Company is currently evaluating the impact
of adoption of this ASU on its related disclosures and does not expect it to have a material impact on its consolidated financial
statements.
In
July 2018, the FASB issued ASU 2018-11, “
Leases (Topic 842): Target Improvements
”. The amendments in this update
also clarify which Topic (Topic 842 or Topic 606) applies for the combined component. Specifically, if the non-lease component
or components associated with the lease component are the predominant component of the combined component, an entity should account
for the combined component in accordance with Topic 606. Otherwise, the entity should account for the combined component as an
operating lease in accordance with Topic 842. An entity that elects the lessor practical expedient also should provide certain
disclosures. The Company is currently evaluating the adoption of this guidance and does not expect that this guidance will have
a material impact on its consolidated financial statements. The Company has not adopted this standard and will do so when specified
by the FASB.
In
July 2018, the FASB issued ASU 2018-10, “
Codification Improvements to Topic 842, Leases
”. The amendments in
this update affect narrow aspects of the guidance issued in the amendments in update 2016-02 as described in the table below.
The amendments in this update related to transition do not include amendments from proposed Accounting Standards Update, Leases
(Topic 842): Targeted Improvements, specific to a new and optional transition method to adopt the new lease requirements in Update
2016-02. That additional transition method will be issued as part of a forthcoming and separate update that will result in additional
amendments to transition paragraphs included in this Update to conform with the additional transition method. The Company is currently
evaluating the adoption of this guidance and does not expect that this guidance will have a material impact on its consolidated
financial statements. The Company has not adopted this Standard and will do so when specified by the FASB.
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.
Subsequent
Events
The
Company has evaluated all transactions through the date the consolidated financial statements were issued for subsequent event
disclosure consideration.
NOTE
4 – PROPERTY AND EQUIPMENT
Oil
and Natural Gas Properties
All
of Camber’s oil and natural gas properties are located in the United States. Costs being amortized at March 31, 2019
and 2018 are as follows:
|
|
At
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Oil
and gas properties subject to amortization
|
|
$
|
50,352,306
|
|
|
$
|
60,760,056
|
|
Oil
and gas properties not subject to amortization
|
|
|
28,016,989
|
|
|
|
28,016,989
|
|
Capitalized
asset retirement costs
|
|
|
176,649
|
|
|
|
322,470
|
|
Total
oil & natural gas properties
|
|
|
78,545,944
|
|
|
|
89,099,515
|
|
Accumulated
depreciation, depletion, and impairment
|
|
|
(78,333,628
|
)
|
|
|
(76,555,320
|
)
|
Net
Capitalized Costs
|
|
$
|
212,316
|
|
|
$
|
12,544,195
|
|
Impairments
During the year ended March 31, 2019, the Company
recorded impairments totaling $1.3 million that were primarily related to unproved properties due to expirations of leaseholds.
During the year ended March 31, 2018, the Company recorded impairments totaling $8.1 million that were primarily related to unproved
properties due to expirations of leaseholds.
Additions and Depletion
During the years ended March 31, 2019
and 2018, the Company incurred costs of approximately, $2.1 million and $2.0 million, respectively, for technical and
other capital enhancements to extend the lives of the Company’s wells. Additionally, the Company recorded approximately
$0.5 million and $1.5 million for depletion for the years ended March 31, 2019 and 2018, respectively.
Disposition of Oil and Natural Gas Properties
On August 2, 2017, the Company entered into
an agreement with Vantage pursuant to which Vantage agreed to provide up to $6 million of funding to the Company. On June 12,
2017, the Company received the initial tranche of $400,000 in consideration for the assignment, by the Company, of its interest
in the undeveloped Arrowhead oil and gas property, with a book value of $114,500 and warrants to purchase 2,560 shares of the
Company's common stock (see further discussion of these warrants in Note 10). The Company recorded a gain of $1,195 as a result
of this assignment that was recorded in loss on sale of property and equipment for the year ended March 31, 2018.
In September 2017, a note holder of the Company
foreclosed on the assets of CATI, which assets secured the note. On October 3, 2017, the trustee of those assets, for the benefit
of the lender, sold these assets in public auction foreclosure sales which took place in Gonzales County and Karnes County, Texas.
The proceeds from the foreclosure sales of approximately $3.5 million were applied against the outstanding indebtedness. In December
2017, the remaining indebtedness owed was released by the note holder (approximately $5.8 million in principal and interest).
Additionally, the remaining leasehold and ownership of CATI was assigned to Arkose in November 2017, in exchange for Arkose’s
assumption of all plugging and abandonment liabilities of CATI of approximately $1.8 million. The Company recorded an approximate
loss on sale of property of approximately $4.1 million in conjunction with the settlement of the approximate $9.4 million of debt
and accrued interest and the removal of approximately $1.3 million of remaining ARO. See Note 6 “
Notes Payable and Debenture
”
for further details. Effective November 1, 2017, the Company and NFP Energy LLC (“
NFP
”) its joint venture partner,
sold its 90% ownership position in oil and gas properties totaling approximately 2,452 acres in Gaines County, Texas, to
Fortuna Resources Permian (“
Fortuna
”), for $1,000 per acre or an aggregate of $2,206,718 payable to the Company.
The transaction resulted in a $727,732 gain, which is included in Loss on Sale of Property and Equipment on the statement of operations
for the year ended March 31, 2018.
On
July 12, 2018, the Company entered into an Asset Purchase Agreement (as amended by the First Amendment to the Sale Agreement dated
August 3, 2018 and the Second Amendment to Sale Agreement dated September 24, 2018, 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 and certain other more recent acquisitions, other than the production
payment and overriding royalty interests discussed below (the “
Disposed Assets
”). In consideration for the
Disposed 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 the other parties agreed to enter into the Segundo Settlement as described in “
Note 8 – Commitments
and Contingencies
”. The transaction closed in September 2018.
Acquisition
of Oil and Natural Gas Properties
On
August 25, 2016, the Company completed the Acquisition and acquired working interests in producing properties and undeveloped
acreage from the Sellers (see “
Note 2 – Liquidity and Going Concern Considerations
”). The assets acquired
include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region.
As
consideration for the Acquisition of the acquired assets, the Company assumed approximately $30.6 million of commercial bank debt,
issued 20,816 shares of common stock to certain of the Sellers valued at the grant date fair value, issued 552,000 shares of Series
B Preferred Stock to one of the Sellers and its affiliate (see “
Note 11 – Stockholders’ Equity (Deficit)
”)
valued at the grant date fair value, and paid $4,975,000 in cash to certain of the Sellers. The effective date of the Acquisition
was April 1, 2016.
In
January 2018, the Company acquired approximately 3,000 leasehold acres in Okfuskee County, Oklahoma, including two producing wells
and 7 non-producing well bores, in consideration for cash paid of $210,000. The acquisition included three salt water disposal
wells, to support existing and potential future hydrocarbon production.
In
March 2018, the Company completed an acquisition of working interest in certain leases, wells and equipment located in the Texas
panhandle, for a purchase price of $250,000, payable in three tranches. A payment of $85,000 was due at closing; $85,000 was due
thirty days after closing and $80,000 was due sixty days after closing these remaining payments have been accrued as of March
31, 2018 and are included in accrued expenses on the balance sheet. Camber earned 25% of the working interest at the closing and
earned an additional 25% of the working interest at each of the two subsequent closings. The seller retained a 25% carried working
interest in the assets. The acquisition includes interests in 48 gross non-producing well bores, 5 saltwater disposal wells and
the required infrastructure and equipment necessary to support future hydrocarbon production, as well as approximately
555
net
leasehold acres in Hutchinson County, Texas.
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 which was included in accrued expenses as of June 30, 2018. The effective borrowing rate was approximately 35%, and all
obligations were due by December 2018. In conjunction with the assignment of the liabilities owed under the IBC Bank loan agreements
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.
Office
Lease
In
August 2017, the Company ceased its use of its prior office space in Houston, Texas, and moved its headquarters to San Antonio,
Texas. The Company was committed to the remaining lease payments for the Houston lease for approximately $346,000 after vacating
the property. The Company recorded monthly rent expense through its occupancy date and, 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 March 31, 2019 and
March 31, 2018, the carrying amount of the liability of $0 and $302,289, respectively, is included in Current Liabilities in the
consolidated balance sheets. In addition, the Company wrote-off $189,533 of abandoned property and equipment, recognizing a loss
of $3,368 during the fiscal year ended March 31, 2018. In October 2018, the Company entered into a settlement with its prior landlord
to pay $100,000 plus $10,000 per month for each of the next 20 months. In the event that an aggregate of $150,000 is paid by April
15, 2019, in addition to the $100,000 payment made in October 2018, the remaining $50,000 of payments would be forgiven and waived.
The Company made the payments prior to March 31, 2019, resulting in no remaining unpaid amounts at March 31, 2019. See also “
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 from
RAD2 Minerals, Ltd., an entity owned and controlled by Mr. Azar, the Company’s former Interim Chief Executive Officer and
former Director. Monthly rent through December 2017 was $5,000 per month, increasing to $7,500 per month effective January 2018.
The lease agreement was terminated effective June 30, 2018. The Company agreed under a verbal contract to lease the same space
on a month-to-month basis for $2,500 per month beginning effective July 1, 2018, which was terminated July 31, 2018.
Effective
August 1, 2018 entered into a month-to-month lease at 1415 Louisiana, Suite 3500 Houston, Texas 77002. The entity providing use
of the space without charge is affiliated with the Company’s Chief Financial Officer.
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 future retirement of oil and natural gas properties for the years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Carrying
amount at beginning of year
|
|
$
|
979,159
|
|
|
$
|
2,045,847
|
|
Acquisition
of oil and gas properties
|
|
|
—
|
|
|
|
437,071
|
|
Accretion
|
|
|
4,725
|
|
|
|
92,620
|
|
Dispositions
|
|
|
(699,536
|
)
|
|
|
(1,328,260
|
)
|
Revisions
of previous estimates
|
|
|
19,461
|
|
|
|
(268,119
|
)
|
Carrying
amount at end of year
|
|
$
|
303,809
|
|
|
$
|
979,159
|
|
NOTE
6 – NOTES PAYABLE AND DEBENTURE
The
Company’s notes payable and debenture consisted of the following:
|
|
March
31,
2019
|
|
|
March
31,
2018
|
|
Debenture
|
|
$
|
—
|
|
|
|
495,000
|
|
Note
Payable - IBC
|
|
|
—
|
|
|
|
36,943,617
|
|
|
|
|
—
|
|
|
|
37,438,617
|
|
Unamortized
debt discount
|
|
|
—
|
|
|
|
(1,499,647
|
)
|
Total
Notes Payable and Debenture
|
|
|
—
|
|
|
|
35,938,970
|
|
Less
current portion
|
|
|
—
|
|
|
|
(35,691,567
|
)
|
Long-term
portion
|
|
$
|
—
|
|
|
$
|
247,403
|
|
Rogers
Loan and Promissory Note
Letter
Loan Agreement
At
March 31, 2017, the Company had $6,883,697 due under a letter loan agreement, which amount was settled in December 2017 as discussed
above under Note 2 “
Liquidity and Going Concern Considerations
.”
Dreeben
Note
Effective
January 31, 2017, the Company borrowed $1,000,000 from Alan Dreeben, then one of the Company’s directors. As additional
consideration for Mr. Dreeben agreeing to make the loan, the Company issued Mr. Dreeben 64 shares of restricted common stock.
On November 9, 2017, the Company repaid Mr. Dreeben the full amount due on the short-term promissory note of $1,050,000.
Non-Related
Individual Note
On
March 9, 2017, the Company borrowed $250,000 from a non-related individual pursuant to a short-term promissory note. As additional
consideration for agreeing to make the loan, the Company agreed to issue the lender 16 restricted shares of common stock. On November
9, 2017, the Company paid the non-related individual the full amount due on the short-term promissory note of $263,158.
Debenture
On
August 23, 2017, the Investor converted $35,000 of the principal amount of a convertible Debenture with a face value of
$530,000, into an aggregate of 2,808 shares of common stock, which included 17 shares for conversion of principal (at
$2,031.25 per share) and 2,791 shares for premiums and on April 20, 2018, the Investor was issued 5,679 shares of common
stock as a result of true-ups in connection with the August 23, 2017 conversion of the Debenture.
As
of March 31, 2018, the convertible subordinated debenture, with a face value of $495,000 and a balance of $247,403, respectively
(net of unamortized discount $247,597, respectively), which was recognized as a short-term liability on the Company’s balance
sheet at March 31, 2018. The Company had accrued interest of $388,183 related to the obligation outstanding at March 31, 2018.
On
October 31, 2018, the Investor converted the entire $495,000 of principal and accrued interest of $422,103 owed under the
terms of the debenture,
into an aggregate of 801,507 shares of common stock, including 6,092 shares of common stock
issuable upon conversion of the principal amount thereof (at a conversion price of $81.25 per share), and 795,414 shares in
connection with conversion premiums due thereon (at an initial conversion price, as calculated as provided in such debenture,
of $1.53 per share). A total of 100,000 of such shares were issued to the Investor in connection with the initial conversion
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. Subsequent to the October 31, 2018 conversion date, the Investor was due an
additional 47,645,285 shares of common stock in connection with true ups associated with the original issuance, as a result
of the conversion price of the conversion premiums falling to $0.025 per share pursuant to the terms of the convertible
debenture. Through March 31, 2019, a total of 11,761,418 of the conversion shares had been issued and the remainder of the
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”)
As
of March 31, 2018, the Company was not in compliance with certain covenants of its $40 million loan agreement with IBC. Since
the Company was in default of the terms of the loan, 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 March 31, 2018. The Company also recognized approximately $39,000 in accrued interest as of March 31, 2018 related to this
note.
On
September 26, 2018, the Company entered into an Assumption Agreement (the “
Assumption Agreement
”) with IBC;
CE Operating, LLC, the Company’s wholly-owned subsidiary (“
CE Operating
”), which became a party to the
Sale Agreement pursuant to the second amendment thereto; 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.
Pursuant
to the Assumption Agreement, N&B Energy agreed to assume all of the Company’s liabilities and obligations owed to IBC
Bank and 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
”). 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 stockholders, 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 certain of the Company’s properties located in west Texas.
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.
NOTE
7 – DERIVATIVE LIABILITIES
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 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.
Activities
for derivative warrant instruments during the years ended March 31, 2019 and 2018 were as follows:
|
|
Fair
Value
|
|
Balance,
March 31, 2017
|
|
$
|
21,662
|
|
Change
in fair value
|
|
|
(21,657
|
)
|
Balance,
March 31, 2018
|
|
|
5
|
|
Change
in fair value
|
|
|
—
|
|
Balance,
March 31, 2019
|
|
$
|
5
|
|
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 March 31, 2019 include (1) discount rate of 2.2%, (2) expected term of 0.1 year, (3) expected volatility of
253.77%, and (4) zero expected dividends. Variables used in the Black-Scholes pricing model as of March 31, 2018 include (1) discount
rate of 2.09, (2) expected term of 1 year, (3) expected volatility of 145.70%, and (4) zero expected dividends.
NOTE
8 – COMMITMENTS AND CONTINGENCIES
Office
Lease. Information regarding the Company’s office space is disclosed in greater detail above under Note 4 “
Property
and Equipment
” – “
Office Lease
”, above.
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.
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 stockholder 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 denies the existence of any short-swing profits and filed a denial with the court. The Company also
filed a denial with the court. Subsequently, the parties mediated the dispute in October 2018, and agreed to a confidential settlement
of the plaintiff’s claims in December 2018, which resulted in the dismissal of the claims.
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 3,137 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 for 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 (the “
Segundo
Settlement
”). Pursuant to the agreement, Segundo surrendered 25 shares of common stock valued at $1,906.25 per share
as of the effective date of the closing of the Acquisition, 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.
Petroglobe
Energy Holdings, LLC and Signal Drilling, LLC
In March 2019, Petroglobe Energy Holdings,
LLC and Signal Drilling, LLC sued the Company in the 316
th
Judicial District of Hutchinson County, Texas (Cause No.
43781). The plaintiffs alleged causes of action relating to negligent misrepresentation; fraud and willful misconduct; gross negligence;
statutory fraud; breach of contract; and specific performance, in connection with a purchase and sale agreement entered into between
the parties in March 2018, relating to the purchase by plaintiffs of certain oil and gas assets from the Company, and a related
joint venture agreement. The lawsuit seeks in excess of $600,000 in damages, as well as pre- and post-judgment interest, court
costs and attorneys’ fees, and punitive and exemplary damages. The Company denies the plaintiffs’ claims and intends
to vehemently defend itself against the allegations and file counter claims against the plaintiffs.
Apache
Corporation
In
December 2018, Apache Corporation (“
Apache
”) sued the Company, Sezar Energy, L.P., and Texokcan Energy Management
Inc., in the 129th Judicial District Court of Harris County, Texas (Cause 2018-89515). Apache alleged causes of action for Breach
of Contract, Money Had & Received and Conversion, relating to amounts Apache alleged it was owed under a joint operating agreement.
Apache is seeking $586,438 in actual damages, exemplary damages, pre- and post-judgment interest, court costs and other amounts
which it may be entitled. The Company has filed a general denial to the claims and asserted the affirmative defense of failure
to mitigate. The parties are currently moving towards discovery. The Company denies Apache’s claims and intends to vehemently
defend itself against the allegations.
N&B Energy
On June 12, 2019, N&B Energy filed a petition
in the District Court for the 285
th
Judicial District of Bexar County, Texas (Case #2019CI11816). Pursuant to the petition,
N&B Energy raises claims for breach of contract, unjust enrichment, money had and received and disgorgement, in connection
with $706,000 which it alleges it is owed under the Sale Agreement for true ups and post-closing adjustments associated therewith.
The petition seeks amounts owed, pre- and post-judgment interest and attorney’s fees. The Company denies N&B Energy’s
claims, believes it is owed approximately $400,000 related to the Sale Agreement and intends to vehemently defend itself against
the allegations and claims and seek counterclaims.
Settlement with Prior Chief Executive
Officer.
Effective on June 2, 2017, Mr. Anthony C. Schnur’s employment as Chief Executive Officer of the Company
was terminated. In connection with such termination, the Company entered into a severance agreement with Mr. Schnur, which
provided (as amended) for Mr. Schnur to be issued 192 shares of common stock and the payment of $168,000 in total
compensation (payable over time). The payments owed as of March 31, 2018 of $79,025 were accrued and included in Accrued
Expenses on the balance sheet. The settlement shares were issued in February 2018. During the year ended March 31, 2019, the
Company paid all remaining amounts to Mr. Schnur pursuant to the original settlement. The Company and Mr. Schnur entered into
an amendment to the severance agreement on April 8, 2019, pursuant to which the Company paid Mr. Schnur $10,000 in lieu of
the payment of payroll taxes on amounts previously paid to Mr. Schnur under the original settlement.
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 years ended March 31, 2019 and 2018, respectively:
|
|
March
31,
2019
|
|
|
March
31,
2018
|
|
Oil
sales
|
|
$
|
526,365
|
|
|
$
|
1,198,514
|
|
Natural
gas sales
|
|
|
772,105
|
|
|
|
2,051,846
|
|
Natural
gas liquids sales
|
|
|
1,443,632
|
|
|
|
3,609,407
|
|
Total
revenue from customers
|
|
$
|
2,742,102
|
|
|
$
|
6,859,767
|
|
NOTE
10 – INCOME TAXES
The
Company recorded a provision for income taxes of approximately $3,000 and $0 for the years ended March 31, 2019 and March 31,
2018, respectively.
|
|
2019
|
|
|
2018
|
|
Current
taxes:
|
|
|
|
|
|
|
|
|
Federal
|
|
$
|
—
|
|
|
$
|
—
|
|
State
|
|
|
3,000
|
|
|
|
—
|
|
|
|
|
3,000
|
|
|
|
—
|
|
Deferred
taxes:
|
|
|
|
|
|
|
|
|
Federal
|
|
|
—
|
|
|
|
—
|
|
State
|
|
|
—
|
|
|
|
—
|
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
$
|
3,000
|
|
|
$
|
—
|
|
The
following is a reconciliation between actual tax expense (benefit) and income taxes computed by applying the U.S. federal income
tax rate 21% for 2019 and 31.5% for 2018) to income from continuing operations before income taxes for the years ended March 31,
2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Computed
at expected tax rates
|
|
$
|
3,495,692
|
|
|
$
|
(7,805,048
|
)
|
Nondeductible
expenses
|
|
|
77,473
|
|
|
|
91,439
|
|
State
Taxes net of FIT benefit
|
|
|
2,370
|
|
|
|
—
|
|
Return
to accrual true-up
|
|
|
1,490,624
|
|
|
|
—
|
|
Change
in effective tax rates
|
|
|
—
|
|
|
|
(11,470,220
|
)
|
Change
in valuation allowance
|
|
|
(5,063,159
|
)
|
|
|
19,183,829
|
|
Total
|
|
$
|
3,000
|
|
|
$
|
—
|
|
Tax
effects of temporary differences that give rise to significant portions of the deferred tax assets and deferred liabilities are
presented below:
|
|
At
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Deferred
tax assets:
|
|
|
|
|
|
|
|
|
Net
operating tax loss carryforwards
|
|
$
|
9,396,605
|
|
|
$
|
12,310,895
|
|
Depreciation,
depletion and amortization
|
|
|
643,497
|
|
|
|
2,522,833
|
|
Unrealized
loss in investments
|
|
|
—
|
|
|
|
—
|
|
Share-based
compensation
|
|
|
302,916
|
|
|
|
245,944
|
|
Accrued
compensation
|
|
|
—
|
|
|
|
37,998
|
|
Bad
Debt reserve
|
|
|
39,977
|
|
|
|
217,983
|
|
Other
|
|
|
1
|
|
|
|
110,502
|
|
Total
deferred tax assets (liabilities)
|
|
|
10,382,996
|
|
|
|
15,446,155
|
|
|
|
|
|
|
|
|
|
|
Less:
valuation allowance
|
|
|
(10,382,996
|
)
|
|
|
(15,446,155
|
)
|
Total
|
|
$
|
—
|
|
|
$
|
—
|
|
The above estimates are based on management’s
decisions concerning certain elections which could change the relationship between net income and taxable income. Management decisions
are made annually and could cause the estimates to vary significantly.
The Company experienced an "
ownership
change
" within the meaning of IRC Section 382 during the year ended March 31, 2017. As a result, certain limitations
apply to the annual amount of net operating losses that can be used to offset post ownership change taxable income. The Company
has estimated that $44.5 million of its pre-ownership change net operating loss could potentially be lost due to the IRC Section
382 limitation for the year ending March 31, 2017. This amount may increase if the Company experiences another ownership change(s)
since the last ownership change. However, the income tax effect of those ownership change(s) should be nil as the Company had
recorded a full valuation allowance against its deferred assets.
At March 31, 2019, the Company had estimated
net operating loss carryforwards for federal income tax purposes of approximately $44.8 million, adjusted for the ownership change
limitation discussed above, which will begin to expire, if not previously used, beginning in the fiscal year 2028. A valuation
allowance has been established for the entire amount of the deferred tax assets for years ended March 31, 2019 and March 31, 2018.
On December 22, 2017, the U.S. government enacted
comprehensive tax legislation commonly referred to as the 2017 Tax Cuts and Jobs Act ("
2017 Tax Reform
"). The
2017 Tax Reform significantly revised the future ongoing U.S. corporate income tax by, among other things, lowering U.S. corporate
income tax rates and implementing a territorial tax system. The Company has reasonably estimated the effects of the 2017 Tax Reform
and recorded provisional amounts in the consolidated financial statements as of March 31, 2018. This amount is primarily comprised
of the re-measurement of federal net deferred tax liabilities resulting from the permanent reduction in the U.S. statutory corporate
tax rate to 21%, from 34%. The Company will continue to monitor additional guidance issued by the U.S. Treasury Department, the
IRS, and other standard-setting bodies, so we may make adjustments to the provisional amounts (if any). However, management's
opinion is that future adjustments due to the 2017 Tax Reform should not have a material impact on the Company's provision for
income taxes.
The Company files income tax returns for federal
and state purposes. Management believes that with few exceptions, the Company is not subject to examination by United States tax
authorities for periods prior to 2015.
NOTE
11 – STOCKHOLDERS’ EQUITY (DEFICIT)
Common
Stock
On
April 4, 2017, the Company paid the required quarterly dividend on the Series B Preferred Stock by way of the issuance of 95 shares
of common stock to the preferred stockholders at a fair market value of $34,896, based on the closing price of the Company’s
common stock ($368.75 per share) on March 31, 2017.
On
June 19, 2017, a holder of the Company’s Series B Convertible Preferred Stock converted 143,492 shares of Series B Convertible
Preferred Stock into 1,640 shares of common stock of the Company.
On
August 23, 2017, the Investor converted $35,000 of the principal amount of the Debenture into an aggregate of 2,808 shares of
common stock, which included 17 shares for conversion of principal and 2,791 shares for premiums.
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) 6,000 shares of restricted common stock, with 4,000 shares payable within
15 days of the parties’ entry into the agreement and the remainder due on May 1, 2018.
On
October 4, 2017, the Company entered into a consulting agreement with a third party consultant which consultant agreed to provide
investor relations and public relations services to the Company. As consideration pursuant to the agreement, the Company agreed
to issue the consultant 1,600 shares of restricted common stock, with piggy-back registration rights.
In
November 2017, the Company reimbursed entities owned in part by Alan Dreeben, a former director of the Company, for legal fees
expended by such entities. Total legal fees expended by such entities totaled $392,043, and the Company reimbursed such fees by
issuing Mr. Dreeben 3,137 shares of common stock with an agreed value of $125 per share in November 2017.
As
of December 31, 2017, the 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $453,573 in quarterly
dividends ($153,191 each for the quarters ended June 30, 2017, September 30, 2017 and December 30, 2017). The Company paid the
accrued dividends on February 5, 2018, by way of the issuance of an aggregate of 210 shares of the Company’s common stock
to the preferred stockholders pursuant to the terms of the designation (which provides that the shares shall be based on a value
of $2,187.50 per share).
In
June 2017, the Company entered into a settlement agreement with Mr. Anthony C. Schnur, its former Chief Executive Officer and
director as described in greater detail above under Note 8 “
Commitments and Contingencies
” - “
Settlement
with Prior Chief Executive Officer
”.
During
the year ended March 31, 2018, the Investor received 156,380 shares of common stock in connection with the exercise of a warrant
and adjustments thereon.
On
April 20, 2018, the Investor was issued 5,679 shares of common stock as a result of true-ups in connection with the August 23,
2017 conversion of the Debenture.
During
the year ended March 31, 2019, the outstanding shares of Series B Preferred Stock accrued quarterly dividends in
the aggregate of $522,813. The Company paid the accrued dividends by way of the issuance of an aggregate of 231 shares of
the Company’s common stock to the preferred stockholders pursuant to the terms of the designation (which provides that
the shares shall be based on a value of $2,187.50 per share), including 8 shares issued after March 31, 2019. Also during
the year ended March 31, 2019, a total of 364,508 shares of Series B Preferred Stock were converted into an aggregate of
4,153 shares of common stock, of which 497 of such shares, along with 113 shares of common stock originally owned by one of
the converting holders, were cancelled pursuant to the terms of a settlement agreement.
On November 15, 2018, the Company entered into
a consulting agreement with Regal Consulting, an investor relations firm, pursuant to which the firm agreed to provide the Company
investor relations and consulting services for a period of six months, for monthly consideration of $28,000 and 8,000 restricted
shares of the Company’s common stock. In January 2019, the Company issued 16,000 shares of restricted common stock to Regal
Consulting for the months of November and December 2018, which shares were issued during the year ended March 31, 2019.
On February 13, 2019, and effective on January 31, 2019, the Company entered into a First Amendment to the Consulting Agreement
previously entered into with Regal Consulting. Pursuant to the First Amendment, the parties agreed to expand the investor relations
services required to be provided by Regal Consulting under the agreement in consideration for $50,000 per month and 50,000 restricted
shares of common stock per month (the “
Regal Shares
”)(which are fully-earned upon issuance) during the term
of the agreement, and agreed to extend the term of the agreement until October 1, 2019 (unless the Company completes an acquisition
or combination prior to such date). A total of 150,000 of the Regal Shares have been issued as of the date of this filing for
shares due for services between January and March 2019, and 300,000 shares remain to be issued pursuant to the terms of the agreement.
As of March 31, 2019, the 104,000 shares had not been issued and a total of $41,800 had been accrued in common stock payable as
of March 31, 2019. The shares were issued in May 2019.
On February 13, 2019, the Company entered into a letter agreement with
SylvaCap Media (“
SylvaCap
”), pursuant to which SylvaCap agreed to act as the Company’s non-exclusive
digital marketing service provider in consideration for an aggregate of 600,000 shares of restricted common stock (the “
SylvaCap
Shares
”), which are fully-earned upon their issuance, and $50,000 per month during the term of the agreement, which
ends on November 12, 2019 (unless the Company completes an acquisition or combination prior to such date) or upon termination
by either party for cause. The Company also agreed to provide SylvaCap piggy-back registration rights in connection with the SylvaCap
Shares and to pay SylvaCap $6,250 every three months as an expense reimbursement. The total value of the restricted shares of
common stock due of $261,540 has been accrued in common stock payable as of March 31, 2019. The SylvaCap shares were issued in
May 2019.
Series
A Convertible Preferred Stock
As
of March 31, 2019 and 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.
As
of March 31, 2019 and 2018, there were 44,000 and 408,508 shares of Series B Preferred Stock outstanding, respectively, 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 vote.
|
During
the year ended March 31, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 210 shares 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 $143, based on the par value of the common stock issued. As of March 31, 2018, the Company
recognized additional stock dividends on the Series B Preferred Stock consisting of 24 shares of our common stock, which was recognized
as a charge to additional paid in-capital and stock dividends distributable but not issued of $449, based on the closing price
of the Company’s common stock of $19.25 per share on March 31, 2018.
During the year ended March 31, 2019, the
Company issued a stock dividend on the Series B Preferred Stock consisting of 231 shares 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 $2,782, based on the par value of the common stock issued paid in-capital and stock dividends distributable but
not issued of $3, based on the closing price of the Company’s common stock of $0.3822 per share on March 31,
2019. In April 2019, the Company issued 8 shares of common stock in lieu of cash dividends which had accrued on
the Series B Preferred Stock for the quarter ended March 31, 2019.
Also during the year ended March 31, 2019, a total of 364,508 shares of Series B Preferred Stock were converted
into an aggregate of 4,166 shares of common stock, of which 497 of such shares, along with 113 shares of common stock originally
owned by one of the converting holders, were cancelled pursuant to the terms of a settlement agreement.
Series C Redeemable Convertible Preferred Stock
During the year ended March 31, 2019, the Company
sold and issued 1,577 shares of Series C Preferred Stock pursuant to the terms of a October 2017 Stock Purchase Agreement, October
2018 Stock Purchase Agreement and November 2018 Stock Purchase Agreement, for total consideration of $15 million. During the year
ended March 31, 2018, the Company sold and issued 738 shares of Series C Preferred Stock pursuant to the terms of a October 2017
Stock Purchase Agreement, for total consideration of $7 million. As of March 31, 2019 and 2018, there were 2,305 and 1,132 shares
of Series C Preferred Stock outstanding, respectively.
During the year ended March 31, 2019, the
Investor converted 404 shares of the Series C Preferred Stock with a face value of $4.04 million into a total of 49,724
shares of common stock and was issued an additional 4,741,986 shares for conversion premiums and true ups in connection with
those conversions. During the year ended March 31, 2018, the Investor converted 10 shares of Series C Preferred Stock
with a face value of $100,000 into a total of 49 shares of common stock and was issued an additional 16,341 shares for
true ups in connection with that conversion.
As of March 31, 2019 and 2018, the Company accrued common stock dividends on the Series C Preferred Stock based on
the then 34.95% premium dividend rate described above. The Company recognized a total charge to additional paid-in capital and
stock dividends distributable but not issued of $5,676,715 and $1,928,084 related to the stock dividend declared but not issued
for the years ended March 31, 2019 and 2018, respectively.
Warrants
The
following summarizes Camber’s warrant activity for each of the years ended March 31, 2019 and 2018:
|
|
2019
|
|
2018
|
|
|
|
|
Weighted
|
|
|
|
Weighted
|
|
|
|
|
Average
|
|
|
|
Average
|
|
|
Number of
|
|
Exercise
|
|
Number of
|
|
Exercise
|
|
|
Warrants
|
|
Price
|
|
Warrants
|
|
Price
|
Outstanding
at Beginning of Year
|
|
|
2,904
|
|
|
$
|
453.75
|
|
|
|
410
|
|
|
$
|
8,025.25
|
|
Issued
|
|
|
40,000
|
|
|
|
9.75
|
|
|
|
2,560
|
|
|
|
156.25
|
|
Expired
|
|
|
(37
|
)
|
|
|
13,150.61
|
|
|
|
(66
|
)
|
|
|
35,937.50
|
|
Exercised
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Outstanding
at End of Year
|
|
|
42,867
|
|
|
$
|
26.74
|
|
|
|
2,904
|
|
|
$
|
453.75
|
|
In
June 2017, the Company granted 2,560 warrants to purchase shares of the Company’s common stock which were valued at the
grant date under the Black-Scholes Option pricing model at $288,592. The exercise price of the warrants is $156.25 per share of
common stock. The warrants expire five years from the grant date. The volatility utilized in the model was 135.42%. The discount
rate was 1.78%.
In
May 2018, the Company granted 40,000 warrants to purchase shares of the Company’s common stock which were valued at
the grant date under the Black-Scholes Option pricing model at $343,631 which is included in the March 31, 2019 consolidated
financial statements as share-based compensation. The exercise price of the warrants is $9.75 per share of common stock. The
warrants expire five years from the grant date. The volatility utilized in the model was 145.36%. The discount rate was
2.76%.
The following is
a summary of the Company’s outstanding warrants at March 31, 2019:
Warrants
|
|
Exercise
|
|
Expiration
|
|
Intrinsic Value at
|
Outstanding
|
|
Price ($)
|
|
Date
|
|
March 31, 2019
|
|
108
|
(1)
|
|
|
1,572.44
|
|
|
|
April 21, 2019
|
|
|
$
|
—
|
|
|
199
|
(2)
|
|
|
937.50
|
|
|
|
April 26, 2021
|
|
|
|
—
|
|
|
2,560
|
(3)
|
|
|
156.25
|
|
|
|
June 12, 2022
|
|
|
|
—
|
|
|
40,000
|
(4)
|
|
|
9.75
|
|
|
|
May 24, 2023
|
|
|
|
—
|
|
|
42,867
|
|
|
|
|
|
|
|
|
|
|
$
|
—
|
|
|
(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. These warrants expired
unexercised.
|
|
(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
Common
Stock
The
Company stockholders approved the 2014 Stock Incentive Plan (as amended to date, the “
2014 Plan
”) at the annual
stockholder meeting held on February 13, 2014. The 2014 Plan provides the Company with the ability to offer up to 2.5 million
(i) incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock
awards; (v) shares in performance of services; or (vi) any combination of the foregoing, to employees, consultants and contractors
as provided in the 2014 Plan.
The
Company stockholders approved the Lucas Energy, Inc. 2012 Stock Incentive Plan (“
2012 Incentive Plan
”) at the
annual stockholder meeting held on December 16, 2011. The 2012 Incentive Plan provides the Company with the ability to offer (i)
incentive stock options (to eligible employees only); (ii) nonqualified stock options; (iii) restricted stock; (iv) stock awards;
(v) shares in performance of services; or (vi) any combination of the foregoing, to employees, consultants and contractors as
provided in the 2012 Incentive Plan.
The
Company stockholders approved the Lucas Energy, Inc. 2010 Long Term Incentive Plan (“
2010 Incentive Plan
” or “
2010
Plan
”) at the annual stockholder meeting held on March 30, 2010. The 2010 Incentive Plan provides the Company with the
ability to offer (1) incentive stock options, (2) non-qualified stock options, and (3) restricted shares (i.e., shares subject
to such restrictions, if any, as determined by the Compensation Committee or the Board) to employees, consultants and contractors
as performance incentives.
Under
the 2010 Incentive Plan, 58
shares of the Company’s common stock are authorized for initial issuance or
grant, under the 2012 Incentive Plan, 96 shares of the Company’s common stock are authorized for initial issuance or
grant, and under the 2014 Incentive Plan, as amended, 2,500,000 shares of the Company’s common stock are authorized for
issuance or grant. As of March 31, 2019, there was an aggregate of 1 share available for issuance or grant under
the 2010 Incentive Plan, 5 shares were available for issuance or grant under the 2012 Incentive Plan and an aggregate of
approximately 2,499,996 securities were available for issuance or grant under the 2014 Incentive Plan as amended for future
issuances and grants, respectively. The number of securities available under the 2010, 2012 and 2014 Plans is reduced one for
one for each security delivered pursuant to an award under the Plans. Any issued or granted security that becomes available
due to expiration, forfeiture, surrender, cancellation, termination or settlement in cash of an award under the Incentive
Plans may be requested and used as part of a new award under the Plans.
The
Plans are administered by the Compensation Committee and/or the Board in its discretion (the “
Committee
”).
The Committee interprets the Plans and has broad discretion to select the eligible persons to whom awards will be granted, as
well as the type, size and terms and conditions of each award, including the exercise price of stock options, the number of shares
subject to awards, the expiration date of awards, and the vesting schedule or other restrictions applicable to awards.
For
the year ended March 31, 2018, Camber issued 268 shares of its common stock with an aggregate grant date fair value of $54,533,
which were valued based on the trading value of Camber’s common stock on the date of grant. The shares were awarded according
to the employment agreement with an officer and as additional compensation for other officers and managerial personnel.
On
October 4, 2017, the Company entered into an agreement with a digital marketing and a consulting agreement with a third party
consultant pursuant to which shares of common stock were issued. See Note 11 “
Stockholders’ Equity (Deficit)
”
– “
Common Stock
”, above.
In
May 2018, the Company granted 40,000 warrants to purchase shares of the Company’s common stock which were valued at
the grant date under the Black-Scholes Option pricing model at $343,631 which is included in the March 31, 2019 consolidated
financial statements as share-based compensation.
On November 15, 2018, the Company entered into a consulting agreement with Regal Consulting,
an investor relations firm (as amended on February 13, 2019) and on February 13, 2019, the Company entered into a letter agreement
with SylvaCap, pursuant to which SylvaCap agreed to act as the Company’s non-exclusive digital marketing service provider
pursuant to which shares of common stock were issued and agreed to be issued. See Note 11 “
Stockholders’ Equity
(Deficit)
” – “
Common Stock
”, above.
Stock
Options
The
following summarizes Camber’s stock option activity for each of the years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
|
|
Number
of Stock
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
|
Number
of Stock
Options
|
|
|
Weighted
Average
Exercise
Price
|
|
Outstanding
at Beginning of Year
|
|
|
4
|
|
|
$
|
32,343.75
|
|
|
|
32
|
|
|
$
|
21,130.75
|
|
Expired/Cancelled
|
|
|
—
|
|
|
|
—
|
|
|
|
(28
|
)
|
|
|
21,002.50
|
|
Outstanding
at End of Year
|
|
|
4
|
|
|
$
|
32,343.75
|
|
|
|
4
|
|
|
$
|
32,343.75
|
|
During
the year ended March 31, 2019, the Company granted no stock options, and of the Company’s outstanding options, no options
were exercised, expired or forfeited.
During
the year ended March 31, 2018, the Company granted no stock options, and of the Company’s outstanding options, no options
were exercised or forfeited, while options to purchase 28 shares of common stock expired.
Share-based
compensation expense related to stock options during the years ended March 31, 2019 and 2018 was $0 and $11,238, respectively.
Options
outstanding and exercisable at March 31, 2019 and 2018 had no intrinsic value. The intrinsic value is based upon the difference
between the market price of Camber’s common stock on the date of exercise and the grant price of the stock options.
At
March 31, 2019 and 2018, there was no unrecognized compensation expense related to non-vested stock options.
Options
outstanding and exercisable as of March 31, 2019:
Exercise
|
|
|
Remaining
|
|
|
Options
|
|
|
Options
|
|
Price
($)
|
|
|
Life
(Yrs.)
|
|
|
Outstanding
|
|
|
Exercisable
|
|
|
32,343.75
|
|
|
|
1.5
|
|
|
|
4
|
|
|
|
4
|
|
|
|
|
|
|
Total
|
|
|
|
4
|
|
|
|
4
|
|
NOTE
13 – INCOME (LOSS) PER COMMON SHARE
The
calculation of earnings (loss) per share for the years ended March 31, 2019 and 2018 was as follows:
|
|
Year
Ended
|
|
|
|
March
31,
|
|
|
|
2019
|
|
|
2018
|
|
Numerator:
|
|
|
|
|
|
|
Net
Income (Loss)
|
|
$
|
16,643,153
|
|
|
$
|
(24,771,588
|
)
|
Less
Preferred Dividends
|
|
|
(5,676,715
|
)
|
|
|
(1,928,084
|
)
|
Net
Income (Loss) Attributable to Common Stockholders
|
|
$
|
10,966,438
|
|
|
$
|
(26,699,672
|
)
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Weighted
Average Share – Basic
|
|
|
4,938,259
|
|
|
|
92,753
|
|
Income
(Loss) per Share – Basic
|
|
$
|
2.22
|
|
|
$
|
(287.86
|
)
|
|
|
|
|
|
|
|
|
|
Dilutive
Effect of Common Stock Equivalents
|
|
|
|
|
|
|
|
|
Options
and Warrants
|
|
|
—
|
|
|
|
—
|
|
Series
C Preferred Shares
|
|
|
47,318,473
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Denominator
|
|
|
|
|
|
|
|
|
Total
Weighted average shares – diluted
|
|
|
52,256,732
|
|
|
|
92,753
|
|
Income
(loss) per share – diluted
|
|
$
|
0.21
|
|
|
$
|
(287.86
|
)
|
|
|
|
|
|
|
|
|
|
For
the years ended March 31, 2019 and 2018, the following share equivalents related to convertible debt and warrants
to purchase shares of common stock were excluded from the computation of diluted net income (loss) per share as the inclusion
of such shares would be anti-dilutive.
|
|
Year
Ended
|
|
|
|
March
31,
|
|
|
|
2019
|
|
|
2018
|
|
Common
Shares Issuable for:
|
|
|
|
|
|
|
|
|
Convertible
Debt
|
|
|
—
|
|
|
|
45,386
|
|
Options
and Warrants
|
|
|
42,871
|
|
|
|
2,907
|
|
Series
B and C Preferred Shares
|
|
|
—
|
|
|
|
632,839
|
|
Total
|
|
|
42,871
|
|
|
|
681,132
|
|
|
|
|
|
|
|
|
|
|
NOTE
14 – POSTRETIREMENT BENEFITS
Camber
maintained a matched defined contribution savings plan for its employees. During the years ended March 31, 2019 and 2018,
Camber’s total costs recognized for the savings plan were $0 and $7,234, respectively. The plan was terminated during the
year ended March 31, 2018.
NOTE
15 – SUPPLEMENTAL CASH FLOW INFORMATION
Net
cash paid for interest and income taxes was as follows for the years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Interest
|
|
$
|
842,520
|
|
|
$
|
2,489,990
|
|
Income
taxes
|
|
$
|
—
|
|
|
$
|
—
|
|
Non-cash
investing and financing activities for the years ended March 31, 2019 and 2018 included the following:
|
|
2019
|
|
2018
|
|
|
|
|
|
Reduction in Accounts Payable for Payments Made on Previously Accrued Capital Expenditures
|
|
$
|
547,033
|
|
|
$
|
4,402
|
|
Cancellation of Debt and Interest on Rogers Foreclosure
|
|
$
|
—
|
|
|
$
|
11,018,385
|
|
Issuance of Common Stock for Payment of Consulting Fees
|
|
$
|
234,430
|
|
|
$
|
—
|
|
Additions to Asset Retirement Obligation
|
|
$
|
—
|
|
|
$
|
437,071
|
|
Change in Estimate for Asset Retirement Obligations
|
|
$
|
19,461
|
|
|
$
|
268,119
|
|
Conversion of Preferred B Shares to Common Stock
|
|
$
|
365
|
|
|
$
|
—
|
|
Stock Dividends Distributable but not Issued
|
|
$
|
5,676,715
|
|
|
$
|
1,928,084
|
|
Conversion of Notes and Accrued Interest to Common Stock
|
|
$
|
917,103
|
|
|
$
|
35,000
|
|
Conversion of Preferred Stock to Common Stock
|
|
$
|
4,742
|
|
|
$
|
553
|
|
Issuance of Lender Shares
|
|
$
|
—
|
|
|
$
|
35,900
|
|
Warrants Issued in Abeyance
|
|
$
|
12
|
|
|
$
|
3,910
|
|
Issuance of Common Stock for Dividends
|
|
$
|
2,782
|
|
|
$
|
58,824
|
|
NOTE
16 – SUBSEQUENT EVENTS
On April 22, 2019, the Company issued 8 shares
of common stock in lieu of cash dividends which had accrued on the Series B Preferred Stock for the quarter ended March 31, 2019.
On May 15, 2019, the Company entered into an
Agreed Conversion Agreement with the then holder of all 44,000 shares of the Company’s then outstanding Series B Preferred
Stock. Pursuant to the Conversion Agreement, all of the Series B Preferred Stock was agreed to be converted into 503 shares of
the Company’s common stock pursuant to the stated terms of such Series B Preferred Stock, in consideration for $25,000 in
cash. The holder also provided the Company a release in connection with certain of his rights under the Series B Preferred Stock
(including any and all accrued and unpaid dividends) and certain other matters.
On May 22, 2019, the 150,000 shares due to
Regal Consulting and the 600,000 shares due to SylvaCap (as described in greater detail under Note 11 “
Stockholders’
Equity (Deficit)
” – “
Common Stock
”) were issued.
Subsequent to March 31, 2019, and through June
25, 2019, the Investor has been issued an aggregate of 28,458,521 shares of common stock in connection with true-ups associated
with the October 2018 conversion, by the Investor, of the Debenture. As of June 25, 2019, the Investor was still due 24,133,311
shares in connection with true ups on the conversion of the Debenture, which shares are being held in abeyance until such time,
as ever, as such shares can be issued to the Investor without the Investor exceeding the 4.99% ownership limitation set forth
in the Debenture.
Supplemental
Oil and Gas Disclosures (Unaudited)
The
following disclosures for the Company are made in accordance with authoritative guidance regarding disclosures about oil and natural
gas producing activities. Users of this information should be aware that the process of estimating quantities of “
proved,
”
“
proved developed,
” and “
proved undeveloped
” crude oil, natural gas liquids and natural
gas reserves is 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. Although reasonable effort is made to ensure that reserve estimates reported represent
the most accurate assessments possible, the significance of the subjective decisions required and variances in available data
for various reservoirs make these estimates generally less precise than other estimates presented in connection with financial
statement disclosures.
Proved
reserves represent estimated quantities of crude oil, natural gas liquids and natural gas that geoscience and engineering data
can estimate, with reasonable certainty, to be economically producible from a given day forward from known reservoirs under economic
conditions, operating methods and government regulation before the time at which contracts providing the right to operate expire,
unless evidence indicates that renewal is reasonably certain, regardless of whether deterministic or probabilistic methods are
used for the estimation.
Proved
developed reserves are proved reserves expected to be recovered under operating methods being utilized at the time the estimates
were made, through wells and equipment in place or if the cost of any required equipment is relatively minor compared to the cost
of a new well.
Proved
undeveloped reserves are reserves that are expected to be recovered from new wells on undrilled acreage, or from existing wells
where a relatively major expenditure is required. Reserves on undrilled acreage are limited to those directly offsetting development
spacing areas that are reasonably certain of production when drilled, unless evidence using reliable technology exists that establishes
reasonable certainty of economic producibility at greater distances. Undrilled locations can be classified as having undeveloped
reserves only if a development plan has been adopted indicating that they are scheduled to be drilled within five years, unless
the specific circumstances justify a longer time. Estimates for proved undeveloped reserves are not attributed to any acreage
for which an application of fluid injection or other improved recovery technique is contemplated, unless such techniques have
been proved effective by actual projects in the same reservoir or an analogous reservoir, or by other evidence using reliable
technology establishing reasonable certainty.
PROVED
RESERVE SUMMARY
All
of the Company’s reserves are located in the United States. The following tables sets forth the changes in Camber’s
net proved reserves (including developed and undeveloped reserves) for the years ended March 31, 2019 and 2018. Reserves estimates
as of March 31, 2019 and 2018, respectively, were estimated by the independent petroleum consulting firm Graves & Co. Consulting
LLC:
|
|
March
31,
|
|
|
|
2019
|
|
|
2018
|
|
Crude
Oil (Bbls)
|
|
|
|
|
|
|
|
|
Net
proved reserves at beginning of year
|
|
|
129,573
|
|
|
|
1,586,750
|
|
Revisions
of previous estimates
|
|
|
3,868
|
|
|
|
(1,430,073
|
)
|
Purchases
in place
|
|
|
—
|
|
|
|
2,010
|
|
Extensions,
discoveries and other additions
|
|
|
—
|
|
|
|
—
|
|
Sales
in place
|
|
|
(75
|
)
|
|
|
(1,410
|
)
|
Production
|
|
|
(8,846
|
)
|
|
|
(27,704
|
)
|
Net
proved reserves at end of year
|
|
|
124,520
|
|
|
|
129,573
|
|
|
|
|
|
|
|
|
|
|
Natural
Gas (Mcf)
|
|
|
|
|
|
|
|
|
Net
proved reserves at beginning of year
|
|
|
8,147,168
|
|
|
|
9,804,010
|
|
Revisions
of previous estimates
|
|
|
(7,609,052
|
)
|
|
|
(1,134,687
|
)
|
Purchases
in place
|
|
|
—
|
|
|
|
274,810
|
|
Extensions,
discoveries and other additions
|
|
|
—
|
|
|
|
—
|
|
Sales
in place
|
|
|
(7,983
|
)
|
|
|
(581
|
)
|
Production
|
|
|
(321,423
|
)
|
|
|
(796,384
|
)
|
Net
proved reserves at end of year
|
|
|
208,710
|
|
|
|
8,147,168
|
|
|
|
|
|
|
|
|
|
|
NGL
(Bbls)
|
|
|
|
|
|
|
|
|
Net
proved reserves at beginning of year
|
|
|
1,435,703
|
|
|
|
2,420,110
|
|
Revisions
of previous estimates
|
|
|
(1,338,916
|
)
|
|
|
(885,224
|
)
|
Purchases
in place
|
|
|
—
|
|
|
|
47,980
|
|
Extensions,
discoveries and other additions
|
|
|
—
|
|
|
|
—
|
|
Sales
in place
|
|
|
(1,418
|
)
|
|
|
(87
|
)
|
Production
|
|
|
(51,269
|
)
|
|
|
(147,076
|
)
|
Net
proved reserves at end of year
|
|
|
44,100
|
|
|
|
1,435,703
|
|
|
|
|
|
|
|
|
|
|
Oil
Equivalents (Boe)
|
|
|
|
|
|
|
|
|
Net
proved reserves at beginning of year
|
|
|
2,923,138
|
|
|
|
5,640,862
|
|
Revisions
of previous estimates
|
|
|
(2,603,224
|
)
|
|
|
(2,504,412
|
)
|
Purchases
in place
|
|
|
—
|
|
|
|
95,792
|
|
Extensions,
discoveries and other additions
|
|
|
—
|
|
|
|
—
|
|
Sales
in place
|
|
|
(2,823
|
)
|
|
|
(1,594
|
)
|
Production
|
|
|
(113,685
|
)
|
|
|
(307,510
|
)
|
Net
proved reserves at end of year
|
|
|
203,406
|
|
|
|
2,923,138
|
|
The
following table sets forth Camber’s proved developed and undeveloped reserves at March 31, 2019 and 2018:
|
|
At March 31,
|
|
|
2019
|
|
2018
|
Proved Developed Producing Reserves
|
|
|
|
|
Crude Oil (Bbls)
|
|
|
76,490
|
|
|
|
129,573
|
|
Natural Gas (Mcf)
|
|
|
208,710
|
|
|
|
8,147,168
|
|
NGL (Bbls)
|
|
|
44,100
|
|
|
|
1,435,703
|
|
Oil Equivalents (Boe)
|
|
|
155,376
|
|
|
|
2,923,138
|
|
|
|
|
|
|
|
|
|
|
Proved Developed Non-Producing Reserves
|
|
|
|
|
|
|
|
|
Crude Oil (Bbls)
|
|
|
48,030
|
|
|
|
—
|
|
Natural Gas (Mcf)
|
|
|
—
|
|
|
|
—
|
|
NGL (Bbls)
|
|
|
—
|
|
|
|
—
|
|
Oil Equivalents (Boe)
|
|
|
48,030
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Proved Undeveloped Reserves
|
|
|
|
|
|
|
|
|
Crude Oil (Bbls)
|
|
|
|
|
|
|
—
|
|
Natural Gas (Mcf)
|
|
|
—
|
|
|
|
—
|
|
NGL (Bbls)
|
|
|
—
|
|
|
|
—
|
|
Oil Equivalents (Boe)
|
|
|
|
|
|
|
—
|
|
|
|
|
|
|
|
|
|
|
Proved Reserves
|
|
|
|
|
|
|
|
|
Crude Oil (Bbls)
|
|
|
124,520
|
|
|
|
129,573
|
|
Natural Gas (Mcf)
|
|
|
208,710
|
|
|
|
8,147,168
|
|
NGL (Bbls)
|
|
|
44,100
|
|
|
|
1,435,703
|
|
Oil Equivalents (Boe)
|
|
|
203,406
|
|
|
|
2,923,138
|
|
*The Company engaged Graves & Co Consulting,
LLC, an independent reserve engineering firm, to provide a reserve report on the Company’s properties as of March 31, 2019.
Proved Developed Not Producing Reserves
At March 31, 2019, the Company had proved
developed not producing reserves of 48,030 Bbls of crude oil and 0 proved developed not producing reserves at March 31, 2018.
Proved Undeveloped Reserves
At March 31, 2019, the Company had no proved
undeveloped reserves. During the year ended March 31, 2018, total proved undeveloped reserves decreased by 2.3 million Boe to
0 Boe, due to expiring leases. The Company’s proved reserves at March 31, 2018 were concentrated mainly in the Hunton formation
and totaled 2.8 million Boe, or 96% of the total proved developed reserves. These reserves were sold as part of the N&B Energy
transaction discussed earlier. As of March 31, 2019, our proved reserves totaled 203,406 Boe and are concentrated mainly
in the Trend and Hutchinson areas.
The following table sets forth Camber’s
net reserves in Boe by reserve category and by formation at March 31, 2019 and 2018:
|
|
Proved
Developed
|
|
|
Proved
Non-Producing
|
|
|
Proved
Undeveloped
|
|
|
Total
Proved
|
|
Hunton
Area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2019
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
At
March 31, 2018
|
|
|
2,803,670
|
|
|
|
—
|
|
|
|
—
|
|
|
|
2,803,670
|
|
Hutchinson
Area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2019
|
|
|
18,200
|
|
|
|
48,030
|
|
|
|
—
|
|
|
|
66,230
|
|
At
March 31, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Trend
Area
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2019
|
|
|
132,361
|
|
|
|
—
|
|
|
|
—
|
|
|
|
132,361
|
|
At
March 31, 2018
|
|
|
119,468
|
|
|
|
—
|
|
|
|
—
|
|
|
|
119,468
|
|
Other
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2019
|
|
|
4,815
|
|
|
|
—
|
|
|
|
—
|
|
|
|
4,815
|
|
At
March 31, 2018
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
|
|
—
|
|
Total
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
At
March 31, 2019
|
|
|
155,376
|
|
|
|
48,030
|
|
|
|
—
|
|
|
|
203,406
|
|
At
March 31, 2018
|
|
|
2,923,138
|
|
|
|
48,030
|
|
|
|
—
|
|
|
|
5,640,862
|
|
Capitalized
Costs Relating to Oil and Natural Gas Producing Activities
. The following table sets forth the capitalized costs relating
to Camber’s crude oil and natural gas producing activities at March 31, 2019 and 2018:
|
|
At March 31,
|
|
|
2019
|
|
2018
|
Oil and gas properties subject to amortization
|
|
$
|
50,352,306
|
|
|
$
|
60,760,056
|
|
Oil and gas properties not subject to amortization
|
|
|
28,016,989
|
|
|
|
28,016,989
|
|
Capitalized asset retirement costs
|
|
|
176,649
|
|
|
|
322,470
|
|
Total oil & natural gas properties
|
|
|
78,545,944
|
|
|
|
89,099,515
|
|
Accumulated depreciation, depletion, and impairment
|
|
|
(78,333,628
|
)
|
|
|
(76,555,320
|
)
|
Net Capitalized Costs
|
|
$
|
212,316
|
|
|
$
|
12,544,195
|
|
Costs
Incurred in Oil and Natural Gas Property Acquisition, Exploration and Development Activities
. The following table sets forth
the costs incurred in Camber’s oil and natural gas property acquisition, exploration and development activities for the
years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Acquisition
of properties
|
|
|
|
|
|
|
|
|
Proved
|
|
$
|
—
|
|
|
$
|
460,000
|
|
Unproved
|
|
|
—
|
|
|
|
—
|
|
Exploration
costs
|
|
|
—
|
|
|
|
—
|
|
Development
costs
|
|
|
1,548,958
|
|
|
|
1,586,057
|
|
Total
|
|
$
|
1,548,958
|
|
|
$
|
2,046,057
|
|
Results
of Operations for Oil and Natural Gas Producing Activities
. The following table sets forth the results of operations for oil
and natural gas producing activities for the years ended March 31, 2019 and 2018: :
|
|
2019
|
|
|
2018
|
|
Crude
oil and natural gas revenues
|
|
$
|
2,742,102
|
|
|
$
|
6,859,767
|
|
Production
costs
|
|
|
(3,003,901
|
)
|
|
|
(5,175,038
|
)
|
Depreciation
and depletion
|
|
|
(473,521
|
)
|
|
|
(1,380,418
|
)
|
Results
of operations for producing activities, excluding corporate overhead and interest costs
|
|
$
|
(735,320
|
)
|
|
$
|
304,311
|
|
Standardized
Measure of Discounted Future Net Cash Flows Relating to Proved Oil and Natural Gas Reserves.
The following information has
been developed utilizing procedures prescribed by ASC Topic 932 and based on crude oil and natural gas reserves and production
volumes estimated by the independent petroleum consultants of Camber. The estimates were based on a 12-month average of first-of-the-month
commodity prices for the years ended March 31, 2019 and 2018. The following information may be useful for certain comparison
purposes, but should not be solely relied upon in evaluating Camber or its performance. Further, information contained in the
following table should not be considered as representative of realistic assessments of future cash flows, nor should the Standardized
Measure of Discounted Future Net Cash Flows be viewed as representative of the current value of Camber.
The
future cash flows presented below are based on cost rates and statutory income tax rates in existence as of the date of the projections
and average prices over the preceding twelve months. It is expected that material revisions to some estimates of crude oil and
natural gas reserves may occur in the future, development and production of the reserves may occur in periods other than those
assumed, and actual prices realized and costs incurred may vary significantly from those used.
Management
does not rely upon the following information in making investment and operating decisions. Such decisions are based upon a wide
range of factors, including estimates of probable and possible as well as proved reserves, and varying price and cost assumptions
considered more representative of a range of possible economic conditions that may be anticipated.
The
following table sets forth the standardized measure of discounted future net cash flows from projected production of Camber’s
oil, NGL, and natural gas reserves as of March 31, 2019 and 2018:
|
|
At
March 31,
|
|
|
|
2019
|
|
|
2018
|
|
Future
cash inflows
|
|
$
|
9,223,561
|
|
|
$
|
54,991,829
|
|
Future
production costs
|
|
|
(4,073,084
|
)
|
|
|
(35,232,113
|
)
|
Future
development costs
|
|
|
(595,000
|
)
|
|
|
—
|
|
Future
income taxes
|
|
|
(956,650
|
)
|
|
|
(6,915,899
|
)
|
Future
net cash flows
|
|
|
3,598,827
|
|
|
|
12,843,817
|
|
Discount
to present value at 10% annual rate
|
|
|
(1,520,346
|
)
|
|
|
(5,375,702
|
)
|
Standardized
measure of discounted future net cash flows relating to proved oil and gas reserves
|
|
$
|
2,078,481
|
|
|
$
|
7,468,115
|
|
Changes
in Standardized Measure of Discounted Future Net Cash Flows.
The following table sets forth the changes in the standardized
measure of discounted future net cash flows for each of the years ended March 31, 2019 and 2018:
|
|
2019
|
|
|
2018
|
|
Standardized
measure, beginning of year
|
|
$
|
7,468,115
|
|
|
$
|
16,012,422
|
|
Crude
oil and natural gas sales, net of production costs
|
|
|
260,928
|
|
|
|
(1,684,075
|
)
|
Net
changes in prices and production costs
|
|
|
1,842,171
|
|
|
|
(4,509,864
|
)
|
Changes
in estimated future development costs
|
|
|
344,759
|
|
|
|
—
|
|
Revisions
of previous quantity estimates
|
|
|
17,112,424
|
|
|
|
(3,689,687
|
)
|
Accretion
of discount
|
|
|
263,955
|
|
|
|
1,148,940
|
|
Net
change in income taxes
|
|
|
3,460,184
|
|
|
|
5,391,659
|
|
Purchases
of reserves in place
|
|
|
—
|
|
|
|
680,200
|
|
Sales
of reserves in place
|
|
|
(10,083
|
)
|
|
|
(9,500
|
)
|
Change
in timing of estimated future production
|
|
|
(28,663,972
|
)
|
|
|
(5,871,980
|
)
|
Standardized
measure, end of year
|
|
$
|
2,078,481
|
|
|
$
|
7,468,115
|
|