cei_10qa.htm

10-Q/A 1 cei_10qa.htm FORM 10-Q/A cei_10qa.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q/A

(Amendment No. 2)

☒	QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2020

☐	TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

Commission File Number: 001-32508

CAMBER ENERGY, INC.

(Exact name of registrant as specified in its charter)

Nevada		20-2660243
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

15915 Katy Freeway, Suite 450, Houston, Texas 77094

(Address of principal executive offices) (Zip Code)

(210) 998-4035

(Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 Par Value Per Share	CEI	NYSE American

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☐ No ☒

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☐ No ☒

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer	☐	Accelerated filer	☐
Non-accelerated filer	☒	Smaller reporting company	☒
Emerging growth	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Title of each class

Number of Shares

Common Stock, par value

$0.001 per share

414,290,116

(as of May 16 , 2022)

Explanatory Note

Camber Energy, Inc (the “Company”) filed its Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, originally filed with the Securities and Exchange Commission (the “SEC”) on August 24, 2020 (“Original 10-Q”) We then amended the Original 10-Q by filing Amendment No. 1 on For m 10-Q/A (the “First Amendment”) with the SEC on November 22, 2021 which amended the Original 10-Q. This Amendment No. 2 on Form 10-Q/A (the “Second Amendment”) further amends the First Amendment.

Restatement Background

First Amendment

On October 31, 2020, the Company received a comment letter from the SEC ("SEC Comment Letter") with respect to Amendment No. 2 to the Registration Statement on Form S-4 filed on October 14, 2020. Among other things, the SEC Comment Letter questioned the Company’s historical accounting treatment regarding the sale of our Series C Redeemable Convertible Preferred Stock (the “Series C Stock”). The Company recorded such sales as “permanent equity,” and the SEC Comment Letter suggested the appropriate accounting classification was something other than permanent equity given certain provisions within the Certificate of Designation for the Series C Stock (“COD”). After considering the SEC Comment Letter and reviewing the COD, the Company and the holder of the Series C Stock determined there were several errors made in the drafting of the COD that could result in unintended consequences. Both parties agreed to subsequently correct the COD, and Certificates of Correction to the COD were filed on December 9, 2020, and on April 20, 2021, to correct the errors. Both parties agreed the corrections would be applied retroactive to the original filing date of the COD, being August 25, 2016; however, US GAAP requires a transaction to be accounted for in accordance with the terms of an agreement in effect during the period of the financial statements, and, consequently, the Company determined that in accordance with the terms of the original COD, the Series C Stock should have been recorded as temporary equity instead of permanent equity. In addition, certain provisions of the original COD required the Company to recognize a derivative liability for certain conversions of the Series C Stock into common stock. After consultations with the SEC staff and the Company’s accounting advisors, the Company determined: (i) the impact of the error(s) is material for the fiscal years ended March 31, 2019 and 2020; and (ii) to restate its Annual Report on Form 10-K for the year ended March 31, 2020, inclusive of comparative financial statements for the year ended March 31, 2019, the previously filed quarterly report on Form 10-Q for the three months ended June 30, 2020, and the previously filed quarterly report on Form 10-Q for the three and six month periods ended September 30, 2020. The Company filed the First Amendment to correct the Accounting for the Series C Stock.

Second Amendment

After filing the First Amendment, we had additional consultations with the SEC staff and determined that the accounting for the Series C Stock in the First Amendment required further adjustment from our previously determined accounting treatment. The Series C Stock are temporary equity and include an embedded derivative due to the potential conversion into a variable number of common shares. The Series C Stock are redeemable or convertible, at the company’s option, upon issuance. The face value of the Series C Stock is convertible into common shares at a fixed rate. As a result, upon issuance a portion of the Series C Stock is recorded as temporary equity with a corresponding amount recorded as a deemed dividend. The carrying value of the portion of the Series C Stock recorded in temporary equity is required to be adjusted based on the fair value of the Company’s common shares required to satisfy a conversion with a corresponding recognition of an additional deemed dividend or an equity contribution. If the Series C Stock are redeemed or converted prior to the stated term, the dividends are required to be paid as if the shares were held to maturity.

As a result, the Company should have recorded a deemed dividend upon issuance and a derivative liability. Any differences between the consideration paid for the Series C Stock and the value of the derivative liability less the portion allocated to temporary equity should have been recorded as a loss on derivative liability at issuance. If the shares are converted into common shares with a value in excess of the recorded value of the derivative liability, an additional loss on the derivative is recognized. The Company did not properly apply the accounting requirements and miscalculated the derivative liability, temporary equity, deemed dividends and gain/loss on derivatives relating to the Series C Preferred stock in the First Amendment.

After consultations with the SEC staff and the Company’s accounting advisors, the Company determined that the impact of the errors in the First Amendment: (i)was material for the fiscal years ended March 31, 2019 and 2020; and (ii) to restate the First Amendment, inclusive of comparative financial statements for the year ended March 31, 2019, the previously filed quarterly report on Form 10-Q/A for the three months ended June 30, 2020, and the previously filed quarterly report on Form 10-Q/A for the three and six month periods ended September 30, 2020. See Note 4 to the Consolidated Financial Statements included in Item 1 for additional information and a reconciliation of the previously restated amounts in the First Amendment to the restated amounts.

The Company’s management has concluded that in light of the errors described above and other factors, material weaknesses exist in the Company’s internal control over financial reporting and that the Company’s disclosure controls were not effective. See Item 4 Controls and Procedures.

Items Amended in this Form 10-Q/A

This Form 10-Q/A presents the First Amendment Report in its entirety, as amended and restated with modifications as necessary to reflect the restatements. The following items have been amended to reflect the restatements:

Part I, Item 1. Financial Statements

Part I, Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Part 1, Item 4 Controls and P r ocedures

In addition, the Company’s Chief Executive Officer and Principal Accounting Officer have provided new certifications dated as of the date of this filing in connection with this Form

Table Of Contents

CAMBER ENERGY, INC.

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION

ITEM 1.	FINANCIAL STATEMENTS	4

	CONSOLIDATED BALANCE SHEETS (UNAUDITED)	4
	CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED)	5
	CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT (UNAUDITED)	6
	CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)	7
	NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)	8

ITEM 2.	MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	44

ITEM 3.	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	60

ITEM 4.	CONTROLS AND PROCEDURES	60

PART II – OTHER INFORMATION

ITEM 1.	LEGAL PROCEEDINGS	61

ITEM 1A.	RISK FACTORS	61

ITEM 2.	UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS	67

ITEM 3.	DEFAULTS UPON SENIOR SECURITIES	68

ITEM 4.	MINE SAFETY DISCLOSURES	68

ITEM 5.	OTHER INFORMATION	68

ITEM 6.	EXHIBITS	68

Table Of Contents

PART 1. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

CAMBER ENERGY, INC.

CONSOLIDATED BALANCE SHEETS (Restated)

(Unaudited)

	June 30, 2020			March 31, 2020
ASSETS
Current Assets
Cash	$	1,705,374		$	656,615
Accounts Receivable, Net of Allowance		279,904			255,363
Other Current Assets		247,973			220,682
Total Current Assets		2,233,251			1,132,660

Property and Equipment
Oil and Gas Properties - Subject to Amortization		50,443,883			50,443,883
Oil and Gas Properties - Not Subject to Amortization		28,016,989			28,016,989
Other Property and Equipment		1,570			1,570
Total Property and Equipment		78,462,442			78,462,442
Accumulated Depletion, Depreciation, Amortization and Impairment		(78,354,120	)		(78,351,825	)
Total Property and Equipment, Net		108,322			110,617
Equity Method Investment – Elysium Energy, LLC		—			957,169
Notes Receivable		11,413,533			7,339,719
Other Assets		155,053			155,053
Total Assets	$	13,910,159		$	9,695,218
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current Liabilities
Accounts Payable	$	1,439,641		$	1,474,221
Common Stock Payable		—			173,000
Accrued Expenses		192,613			348,460
Current Asset Retirement Obligation		52,402			30,227
Current Income Taxes Payable		3,000			3,000
Derivative Liability		86,567,042			77,636,666
Total Current Liabilities		88,254,698			79,665,574

Asset Retirement Obligation		19,348			41,523
Total Liabilities		88,274,046			79,707,097

Commitments and Contingencies (see Note 10)
Temporary Equity
Preferred Stock Series C, 2,951 and 2,819 Issued and Outstanding Respectively, Liquidation Preference of $101,706,215 and $97,156,835, respectively		10,805,200			9,801,446

Stockholders’ Deficit
Preferred Stock Series A, 2,000 Shares Authorized of $0.001 Par Value, -0- Shares issued and Outstanding		—			—
Preferred Stock Series B, 600,000 Shares Authorized of $0.001 Par Value, 0 and 0 Shares issued and Outstanding, respectively		—			—
Common Stock, 25,000,000 shares Authorized of $0.001 Par Value, 13,160,530 and 5,000,000 Shares Issued and Outstanding, respectively		13,161			5,000
Additional Paid-in Capital		188,053,372			179,783,233
Accumulated Deficit		(273,235,620	)		(259,601,558	)
Total Stockholders’ Deficit		(85,169,087	)		(79,813,325	)
Total Liabilities and Stockholders’ Deficit	$	13,910,159		$	9,695,218

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

Table Of Contents

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (Restated)

(Unaudited)

	Three Months Ended
	June 30,
	2020			2019
Operating Revenues
Crude Oil	$	21,789		$	93,699
Natural Gas		4,164			7,204
Natural Gas Liquids		7,736			20,448
Total Revenues		33,689			121,351

Operating Expenses
Lease Operating Expenses		69,291			123,557
Severance and Property Taxes		1,349			2,574
Depreciation, Depletion, Amortization, and Accretion		2,295			4,242
General and Administrative		686,663			1,331,991
Total Operating Expenses		759,598			1,462,364

Operating Loss		(725,909	)		(1,341,013	)

Other Expense (Income)
Interest Expense		—			847
Loss from Equity Method Investment		1,083,355			—
Other Expense (Income), Net		(214,632	)		(54,262	)
Loss on Derivative liability		12,039,430			2,163,891
Total Other Expenses (Income)		12,908,153			2,110,476

Net Loss	$	(13,634,062	)	$	(3,451,489	)

Less Preferred Dividends		2,217,671			-

Net loss attributable to common shareholders
		(15,581,733	)		(3,451,489	)

Net Loss Per Common Share
Basic and Diluted	$	(2.11	)	$	(224.88	)
Weighted Average Number of Common Shares Outstanding
Basic and Diluted		7,527,903			15,348

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

Table Of Contents

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ DEFICIT

FOR THE THREE MONTHS ENDED JUNE 30, 2020 AND 2019 (Restated)

	Series C Preferred Stock						Series E Preferred Stock				Series F Preferred Stock				Series B Preferred Stock						Common Stock
	Number of Shares			Amount			Number of Shares		Amount		Number of Shares		Amount		Number of Shares			Amount			Number of Shares		Amount		Additional Paid-In Capital			Accumulated Deficit			Total Stockholders’ Deficit

Balances, March 31, 2019 (as restated)		2,305		$	2,710,681			—	$	—		—	$	—		44,000		$	44			13,441	$	13	$	174,804,234		$	(231,643,389	)	$	(56,839,098	)
Common Shares issued for:
Conversion of Series B Preferred Stock		—			—			—		—		—		—		(44,000	)		(44	)		—		—		44			—			—
Payment of Series B Dividend		—			—			—		—		—		—		—			—			—		—					—			—
Conversion of Debenture - Abeyance		—			—			—		—		—		—		—			—			25,008		25		(25	)		—			—
Payment for Consulting Fees		—			—			—		—		—		—		—			—			600		1		303,339			—			303,340
True up Shares		—			—			—		—		—		—		—			—			4		—		—			—			—
Series C Fair Value Adjustment		—			(1,637,614	)		—		—		—		—		—			—			—		—		1,637,614			—			1,637,614
Net Loss		—			—			—		—		—		—		—			—			—		—		—			(3,451,489	)		(3,451,489	)
Balances, June 30, 2019		2,305		$	1,073,067			—	$	—		—	$	—		—		$	—			39,053	$	39	$	176,745,206		$	(235,094,878	)	$	(58,349,633	)

Balances, March 31, 2020 (as restated)		2,819		$	9,801,446			—	$	—		—	$	—		—		$	-			5,000,000	$	5,000	$	179,783,233		$	(259,601,558	)	$	(79,813,325	)
Common Shares issued for:
Conversion of Series C Preferred Stock		(498	)		(1,213,917	)		—		—		—		—

SEC Form 10-Q/A filed by Camber Energy Inc. (Amendment)