UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q

 

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

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2022 

OR

 

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

 

For the transition period from _______ to _______.

 

Commission file number: 000-29219

 

VIKING ENERGY GROUP, INC.

(Formerly Viking Investments Group, Inc.)

(Exact name of registrant as specified in its charter)

 

Nevada

 

98-0199508

(State or other jurisdiction of

incorporation or organization)

 

(IRS Employer

Identification No.)

 

15915 Katy Freeway, Suite 450

Houston, TX 77094

(Address of principal executive offices)

 

(281) 404 4387

(Registrant’s telephone number, including area code)

 

______________________________________________

(Former name, former address and former fiscal year, if changed since last report)

 

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

 

Title of each class

Trading

Symbol(s) 

Name of each exchange

on which registered 

Not applicable. 

Not applicable. 

Not applicable.

 

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, 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 Company

 

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 ☒

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of November 14, 2022, the registrant had 114,780,967 shares of common stock outstanding.

 

 

 

 

VIKING ENERGY GROUP, INC.

 

 

Part I – Financial Information

 

 

Item 1

Financial Statements

 

3

 

 

Consolidated Balance Sheets as of September 30, 2022 and December 31, 2021 (unaudited)

 

3

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2022 and 2021 (unaudited)

 

4

 

 

Consolidated Statements of Comprehensive Loss for the three and nine months ended September 30, 2022 and 2021 (unaudited)

 

5

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2022, and 2021 (unaudited)

 

6

 

 

Consolidated Statements of Changes in Stockholders’ Equity (Deficit) for the nine months ended September 30, 2022 and 2021 (unaudited)

 

7

 

 

Notes to Consolidated Financial Statements (unaudited)

 

9

 

Item 2

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

43

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

 

54

 

Item 4

Controls and Procedures

 

54

 

 

 

 

 

 

 

Part II – Other Information

 

 

 

 

 

 

 

 

Item 1

Legal Proceedings

 

55

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

55

 

Item 3

Defaults Upon Senior Securities

 

55

 

Item 4

Mine Safety Disclosures

 

55

 

Item 5

Other Information

 

55

 

Item 6

Exhibits

 

56

 

 

 
2

Table of Contents

 

PART I—FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VIKING ENERGY GROUP, INC.

Consolidated Balance Sheets

 

 

 

September 30,

2022

 

 

December 31,

2021

 

 

 

(unaudited)

 

 

(unaudited)

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$4,902,157

 

 

$3,467,938

 

Accounts receivable, net

 

 

5,274,223

 

 

 

8,781,086

 

Inventory

 

 

8,438,164

 

 

 

5,490,435

 

Notes receivable

 

 

-

 

 

 

3,000,000

 

Prepaids and other current assets

 

 

316,937

 

 

 

1,065,967

 

Total current assets

 

 

18,931,481

 

 

 

21,805,426

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, full cost method

 

 

 

 

 

 

 

 

Proved developed producing oil and gas properties, net

 

 

725,607

 

 

 

6,609,198

 

Proved undeveloped and non-producing oil and gas properties, net

 

 

552,638

 

 

 

8,216,373

 

Total oil and gas properties, net

 

 

1,278,245

 

 

 

14,825,571

 

 

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

1,787,350

 

 

 

1,487,012

 

Right of use assets, net

 

 

4,680,942

 

 

 

5,790,147

 

ESG Clean Energy license, net

 

 

4,654,939

 

 

 

4,885,825

 

Other intangibles – Simson Maxwell, net

 

 

3,748,653

 

 

 

3,874,117

 

Other intangibles – Variable Interest Entities

 

 

15,433,340

 

 

 

-

 

Due from related parties

 

 

456,068

 

 

 

4,835,153

 

Goodwill

 

 

-

 

 

 

252,290

 

Deposits and other assets

 

 

10,300

 

 

 

395,315

 

TOTAL ASSETS

 

$50,981,318

 

 

$58,150,856

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$3,602,329

 

 

$8,325,469

 

Accrued expenses and other current liabilities

 

 

549,129

 

 

 

1,600,209

 

Customer deposits

 

 

3,799,585

 

 

 

23,015

 

Due to Camber Energy, Inc.

 

 

6,822,300

 

 

 

4,100,000

 

Undistributed revenues and royalties

 

 

2,809,138

 

 

 

1,332,282

 

Current portion of operating lease liability

 

 

1,342,762

 

 

 

1,324,722

 

Due to related parties

 

 

634,566

 

 

 

4,870,020

 

Current portion of notes payable – related parties

 

 

54,173

 

 

 

64,418

 

Bank indebtedness – credit facility

 

 

2,995,017

 

 

 

-

 

Current portion of long-term debt – net of discount

 

 

624,790

 

 

 

8,430,318

 

Total current liabilities

 

 

23,233,789

 

 

 

30,070,453

 

Long term debt – net of current portion and debt discount

 

 

2,268,350

 

 

 

2,741,190

 

Notes payable – related parties – net of current portion

 

 

632,747

 

 

 

724,502

 

Operating lease liability, net of current portion

 

 

3,462,407

 

 

 

4,474,832

 

Contingent obligations

 

 

1,435,757

 

 

 

-

 

Asset retirement obligation

 

 

1,979,544

 

 

 

2,111,650

 

TOTAL LIABILITIES

 

 

33,012,594

 

 

 

40,122,627

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ EQUITY

 

 

 

 

 

 

 

 

Preferred Stock Series C, $0.001 par value, 50,000 shares authorized, 28,092 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

28

 

 

 

28

 

Preferred Stock Series E, $0.001 par value, 2,075 shares authorized, 475 and 0 shares issued and outstanding as of September 30, 2022 and December 31, 2021, respectively

 

 

5

 

 

 

-

 

 

 

 

 

 

 

 

 

 

Common stock, $0.001 par value, 500,000,000 shares authorized, 114,780,967 and 111,030,965 shares issued and outstanding as of September 30, 2022, and December 31, 2021, respectively.

 

 

114,781

 

 

 

111,031

 

Additional paid-in capital

 

 

127,687,341

 

 

 

120,246,224

 

Accumulated other comprehensive loss

 

 

(484,816)

 

 

(177,981 )

Accumulated deficit

 

 

(120,323,427 )

 

 

(106,760,344 )

Parent’s Stockholders’ Equity in Viking

 

 

6,993,912

 

 

 

13,418,958

 

Non-controlling interest

 

 

10,974,812

 

 

 

4,609,271

 

TOTAL STOCKHOLDERS’ EQUITY

 

 

17,968,724

 

 

 

18,028,229

 

TOTAL LIABILITIES AND STOCKHOLDERS’ EQUITY

 

$50,981,318

 

 

$58,150,856

 

 

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

 

 
3

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Operations (Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Power generation units and parts

 

$3,278,966

 

 

$-

 

 

$6,913,093

 

 

$-

 

Service and repairs

 

 

2,763,886

 

 

 

-

 

 

 

8,086,449

 

 

 

-

 

Oil and gas sales

 

 

117,854

 

 

 

9,680,661

 

 

 

3,666,726

 

 

 

30,871,373

 

 

 

 

6,160,706

 

 

 

9,680,661

 

 

 

18,666,268

 

 

 

30,871,373

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

4,817,640

 

 

 

-

 

 

 

9,871,239

 

 

 

-

 

Lease operating costs

 

 

243,679

 

 

 

4,888,546

 

 

 

1,429,847

 

 

 

14,863,294

 

General and administrative

 

 

2,727,655

 

 

 

1,966,519

 

 

 

11,208,417

 

 

 

4,287,453

 

Stock based compensation

 

 

1,025,464

 

 

 

82,055

 

 

 

1,614,334

 

 

 

470,598

 

Depreciation, depletion and amortization

 

 

313,191

 

 

 

2,181,326

 

 

 

1,326,661

 

 

 

6,844,553

 

Accretion – Asset Retirement Obligation

 

 

26,238

 

 

 

148,551

 

 

 

107,869

 

 

 

438,225

 

Total operating expenses

 

 

9,153,867

 

 

 

9,266,997

 

 

 

25,558,367

 

 

 

26,904,123

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

 

(2,993,161 )

 

 

413,664

 

 

 

(6,892,099)

 

 

3,967,250

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(154,022 )

 

 

(3,180,460 )

 

 

(507,067 )

 

 

(9,612,335 )

Amortization of debt discount

 

 

(2,400 )

 

 

(1,261,618 )

 

 

(97,296 )

 

 

(3,406,654 )

Change in fair value of derivatives

 

 

-

 

 

 

(3,425,097 )

 

 

-

 

 

 

(16,401,270 )

Net loss on sale of oil & gas and fixed assets

 

 

(7,744,680 )

 

 

-

 

 

 

(7,744,680 )

 

 

-

 

Equity in earnings of unconsolidated entity

 

 

-

 

 

 

47,772

 

 

 

-

 

 

 

47,772

 

Loss on financing settlements

 

 

-

 

 

 

(1,847,810 )

 

 

-

 

 

 

(2,774,341 )

Other income

 

 

33,576

 

 

 

174,234

 

 

 

545,431

 

 

 

196,236

 

Total other expense, net

 

 

(7,867,526)

 

 

(9,492,979 )

 

 

(7,803,612 )

 

 

(31,950,592 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(10,860,687 )

 

 

(9,079,315 )

 

 

(14,695,711 )

 

 

(27,983,342 )

Income tax benefit (expense)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Net loss

 

 

(10,860,687 )

 

 

(9,079,315 )

 

 

(14,695,711 )

 

 

(27,983,342 )

Net loss attributable to non-controlling interest

 

 

(583,774)

 

 

-

 

 

 

(1,132,628 )

 

 

-

 

Net loss attributable to Viking Energy Group, Inc.

 

$(10,276,913 )

 

$(9,079,315 )

 

$(13,563,083 )

 

$(27,983,342 )

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$(0.09 )

 

$(0.10 )

 

$(0.12 )

 

$(0.38 )

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

114,780,965

 

 

 

87,741,024

 

 

 

114,503,698

 

 

 

74,222,359

 

 

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

 

 
4

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Comprehensive Loss (Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net loss

 

$(10,860,687 )

 

$(9,079,315 )

 

$(14,695,711 )

 

$(27,983,342 )

Foreign currency translation adjustment

 

 

(372,130 )

 

 

-

 

 

 

(306,835 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

(11,232,817 )

 

 

(9,079,315 )

 

 

(15,002,546 )

 

 

(27,983,342 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less comprehensive loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loss attributable to non-controlling interest

 

 

(583,774 )

 

 

-

 

 

 

(1,132,628 )

 

 

-

 

Foreign currency translation adjustment attributable to non-controlling interest

 

 

(146,991 )

 

 

-

 

 

 

(121,200 )

 

 

-

 

 

 

 

 

 

 

 

-

 

 

 

 

 

 

 

-

 

Comprehensive loss attributable to non-controlling interest

 

 

(730,765 )

 

 

-

 

 

 

(1,253,828 )

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to Viking

 

$(10,502,052 )

 

$(9,079,315 )

 

$(13,748,718 )

 

$(27,983,342 )

 

 
5

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net loss

 

$(14,695,711 )

 

$(27,983,342 )

Adjustments to reconcile net loss to cash provided by (used in) operating activities:

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

-

 

 

 

16,401,270

 

Stock based compensation

 

 

1,614,334

 

 

 

470,598

 

Depreciation, depletion and amortization

 

 

1,326,661

 

 

 

6,844,553

 

Amortization of operational right-of-use assets

 

 

16,443

 

 

 

(113)

Accretion – asset retirement obligation

 

 

107,869

 

 

 

438,225

 

Amortization of debt discount

 

 

97,296

 

 

 

3,406,654

 

Loss on debt settlement

 

 

-

 

 

 

2,774,341

 

Net loss on sale of oil & gas and fixed assets

 

 

8,944,680

 

 

 

-

 

PPP loan forgiveness

 

 

-

 

 

 

(149,600)

Equity in earnings of unconsolidated entity

 

 

-

 

 

 

(47,772)

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

3,506,863

 

 

 

(3,657,592 )

Prepaids and other current assets

 

 

297,915

 

 

 

-

 

Inventory

 

 

(2,947,729 )

 

 

-

 

Accounts payable

 

 

(4,723,140 )

 

 

3,015,379

 

Accrued expenses and other current liabilities

 

 

(1,051,080 )

 

 

(313,058 )

Related party payables

 

 

143,631

 

 

 

-

 

Customer deposits

 

 

3,776,570

 

 

 

-

 

Undistributed revenues and royalties

 

 

1,476,856

 

 

 

1,721,496

 

Net cash provided by (used in) operating activities

 

 

(2,108,542 )

 

 

2,921,039

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Proceeds from sale of oil and gas properties

 

 

3,590,000

 

 

 

906,613

 

Investment in and acquisition of oil and gas properties

 

 

(9,813 )

 

 

(1,709,253 )

Proceeds from sale of fixed assets

 

 

76,310

 

 

 

-

 

Acquisition of fixed assets

 

 

(46,554 )

 

 

-

 

Payments for ESG Clean Energy licence

 

 

-

 

 

 

(1,500,000 )

Investment in consolidated entity

 

 

-

 

 

 

(7,958,159 )

Collection of notes receivable

 

 

3,000,000

 

 

 

-

 

Net cash provided by (used in) investing activities

 

 

6,609,943

 

 

 

(10,260,799 )

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

-

 

 

 

510,000

 

Repayment of long-term debt

 

 

(8,477,664 )

 

 

(5,333,066 )

Proceeds from sale of stock to Camber Energy Inc.

 

 

-

 

 

 

11,000,000

 

Proceeds from non-interest-bearing advances from Camber

 

 

2,722,300

 

 

 

-

 

Advances from bank credit facility

 

 

2,995,017

 

 

 

-

 

Repayment of amount due to director

 

 

-

 

 

 

(60,843 )

Net cash provided by (used in) financing activities

 

 

(2,760,347)

 

 

6,116,091

 

 

 

 

 

 

 

 

 

 

Effect of exchange rates on cash

 

 

(306,835)

 

 

-

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

1,434,219

 

 

 

(1,223,669 )

Cash, beginning of period

 

 

3,467,938

 

 

 

7,839,539

 

 

 

 

 

 

 

 

 

 

Cash, end of period

 

$4,902,157

 

 

$6,615,870

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$494,862

 

 

$9,755,850

 

Income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Equity in earnings of unconsolidated entity

 

 

-

 

 

$47,772

 

Amortization of right-of-use asset and lease liability

 

$948,870

 

 

$36,872

 

Issuance of shares for purchase of VIE interests

 

$2,250,000

 

 

$-

 

Issuance of preferred shares for purchase of VIE interest

 

$4,750,000

 

 

$-

 

Contingent obligation associated with acquisition of VIE interests

 

$1,435,757

 

 

 

 

 

Issuance of shares for services

 

 

-

 

 

$388,662

 

Issuance of warrants for services

 

 

778,204

 

 

$29,881

 

Issuance of shares in debt conversion

 

 

-

 

 

$3,800,164

 

Issuance of shares as discount on debt

 

$-

 

 

$141,321

 

Issuance of shares for prepaid services

 

 

-

 

 

$1,187,500

 

PPP loan forgiveness

 

 

-

 

 

$149,600

 

Issuance of shares to parent for reduction of debt and accrued expenses

 

$-

 

 

$18,900,000

 

 

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

 

 
6

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

 

For the nine months ended September 30, 2022

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

 

 

 

 

 

Total

 

 

 

Series C

 

 

Series E

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

(Accumulated

 

 

Noncontrolling

 

 

Stockholders'

 

 

 

Number 

 

 

Amount

 

 

Number 

 

 

Amount

 

 

Number

 

 

Amount

 

 

Capital

 

 

(Loss)

 

 

Deficit)

 

 

Interest

 

 

Equity (Deficit) 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2021

 

 

28,092

 

 

$28

 

 

 

-

 

 

$-

 

 

 

111,030,965

 

 

$111,031

 

 

$120,246,224

 

 

$(177,981)

 

$(106,760,344)

 

$4,609,271

 

 

$18,028,229

 

Rounding difference

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued in acquisition of membership interests of Viking Ozone LLC

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,333,333

 

 

 

3,333

 

 

 

1,996,667

 

 

 

-

 

 

 

-

 

 

 

2,420,189

 

 

 

4,420,189

 

Shares issued in acquisition of membership interests of Viking Sentinel LLC

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

416,667

 

 

 

417

 

 

 

232,917

 

 

 

-

 

 

 

-

 

 

 

224,184

 

 

 

457,518

 

Shares issued in acquisition of membership interests of Viking Protection LLC

 

 

-

 

 

 

-

 

 

 

475

 

 

 

5

 

 

 

-

 

 

 

-

 

 

 

4,433,329

 

 

 

-

 

 

 

-

 

 

 

4,686,542

 

 

 

9,119,876

 

Adjustment to acquisition of Simson-Maxwell

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

167,254

 

 

 

167,254

 

Warrants issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

778,204

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

778,204

 

Foreign currency translation adjustment

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(306,835)

 

 

 

 

 

 

 

 

 

 

(306,835)

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(13,563,083)

 

 

(1,132,628)

 

 

(14,695,711)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2022

 

 

28,092

 

 

$28

 

 

 

475

 

 

$5

 

 

 

114,780,967

 

 

$114,781

 

 

$127,687,341

 

 

$(484,816)

 

$(120,323,427)

 

$10,974,812

 

 

$17,968,724

 

 

 
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For the nine months ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Retained

 

 

 

 

 

 

 

Preferred Stock

 

 

Preferred Stock

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Other

 

 

Earnings

 

 

 

 

Total

 

 

 

Series C

 

 

Series E

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

(Accumulated

 

 

Noncontrolling

 

 

Stockholders'

 

 

 

Number 

 

 

Amount

 

 

Number 

 

 

Amount

 

 

Number

 

 

 

Amount

 

 

Capital

 

 

Income (Loss)

 

 

Deficit)

 

 

Interest

 

 

Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

28,092

 

 

$28

 

 

 

-

 

 

$-

 

 

 

51,494,956

 

 

 

 

$51,495

 

 

$75,920,811

 

 

$-

 

 

$(92,274,497)

 

$-

 

 

$(16,302,163)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rounding due to reverse split

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,770

 

 

 

 

 

2

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

490,689

 

 

 

 

 

490

 

 

 

388,172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

388,662

 

Shares issued as debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

169,336

 

 

 

 

 

169

 

 

 

141,152

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

141,321

 

Warrants issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,881

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,881

 

Shares issued to parent for reduction of debt and accrued expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

16,153,846

 

 

 

 

 

16,154

 

 

 

19,605,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

19,622,000

 

Shares issued for sale of stock to Camber Energy Inc.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

27,500,000

 

 

 

 

 

27,500

 

 

 

10,972,500

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

11,000,000

 

Shares issued in conversion of debt

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2,609,139

 

 

 

 

 

2,603

 

 

 

3,797,561

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3,800,164

 

Shares issued for prepaid services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

950,000

 

 

#

 

 

950

 

 

 

1,186,550

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,187,500

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,983,342)

 

 

-

 

 

 

(27,983,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2021

 

 

28,092

 

 

$28

 

 

 

-

 

 

$-

 

 

 

99,369,736

 

 

 

 

$99,363

 

 

$112,042,473

 

 

$-

 

 

$(120,257,839)

 

$-

 

 

$(8,115,975)

 

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

 

 
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VIKING ENERGY GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)

 

Note 1 Relationship with and Ownership by Camber Energy, Inc.

 

On December 23, 2020 Camber Energy, Inc. (“Camber”) acquired a 51% interest in Viking Energy Group, Inc. (“Viking” or the “Company”). On January 8, 2021 and July 29, 2021, Camber acquired additional interests in the Company resulting in Camber owning approximately 62% of the outstanding common shares of the Company after the January transaction and approximately 73% of the outstanding common shares of the Company after the July transaction. As a result of subsequent issuances of the Company’s common shares, Camber’s ownership interest is approximately 61% as of September 30, 2022. The December 2020, January 2021 and July 2021 transactions, along with a new merger agreement executed by Viking and Camber in February 2021 are described further below.

 

December 23, 2020 Transaction

 

On December 23, 2020, the Company entered into a Securities Purchase Agreement with Camber, pursuant to which Camber acquired (“Camber’s Acquisition”) 26,274,510 shares of Viking common stock (“Camber’s Viking Shares”), constituting 51% of the common stock of Viking, in consideration of (i) Camber’s payment of $10,900,000 to Viking (the “Cash Purchase Price”), and (ii) cancelation of $9,200,000 in promissory notes issued by Viking to Camber (“Camber’s Viking Notes”). Pursuant to the Securities Purchase Agreement, if at any time between December 23, 2020 and July 2, 2022 Viking issued shares of its common stock to one or more persons such that Camber’s percentage ownership of Viking’s common stock is less than 51%, Viking was obligated to issue additional shares to Camber to ensure that Camber owns at least 51% of the common stock of Viking (the “Adjustment Entitlement”). The Adjustment Entitlement expired on July 1, 2022.

 

On December 23, 2020, Viking and Camber closed on the Camber Acquisition, with Camber paying the Cash Purchase Price to Viking and cancelling Camber’s Viking Notes, and Viking issuing Camber’s Viking Shares. At the closing, James Doris and Frank Barker, Jr., Viking’s CEO and CFO, were appointed the CEO and CFO of Camber, and Mr. Doris was appointed a member of the Board of Directors of Camber.

 

January 8, 2021 Transactions

 

On January 8, 2021, the Company entered into another purchase agreement with Camber pursuant to which Camber agreed to acquire an additional 16,153,846 shares of Company common stock (the “Shares”) in consideration of (i) Camber issuing 1,890 shares of Camber’s Series C Redeemable Convertible Preferred Stock to EMC Capital Partners, LLC (“EMC”), one of the Company’s lenders which held a secured promissory note issued by the Company to EMC in the original principal amount of $20,869,218 in connection with the purchase of oil and gas assets on or about February 3, 2020 (the “EMC Note”); and (ii) EMC considering the EMC Note paid in full and cancelled pursuant to the Cancellation Agreement described below. The fair value of the 1,890 shares of Camber’s Series C Redeemable Convertible Preferred Stock was determined to be $19,622,000 at the date of the transaction; as a result, the Company recognized a loss on debt settlement in the amount of $926,531.

 

 
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February 2021 Merger Agreement with Camber

 

On February 15, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Camber. The Merger Agreement provides that, upon the terms and subject to the conditions set forth therein, a newly formed wholly owned subsidiary of Camber (“Merger Sub”) will merge with and into the Company (the “Merger”), with the Company surviving the Merger as a wholly owned subsidiary of Camber.

 

Upon the terms and subject to the conditions set forth in the Merger Agreement, at the effective time of the Merger (the “Effective Time”), each share: (i) of common stock, par value $0.001 per share, of the Company (the “Viking Common Stock”) issued and outstanding immediately prior to the Effective Time, other than shares owned by Camber, the Company and Merger Sub, will be converted into the right to receive one share of common stock of Camber; and (ii) of Series C Convertible Preferred Stock of the Company (the “Viking Preferred Stock”) issued and outstanding immediately prior to the Effective Time will be converted into the right to receive one share of Series A Convertible Preferred Stock of Camber (the “Camber Series A Preferred Stock”). Each share of Camber Series A Preferred Stock will convert into 890 shares of common stock of Camber (subject to a beneficial ownership limitation preventing conversion into Camber common stock if the holder would be deemed to beneficially own more than 9.99% of Camber’s common stock), will be treated equally with Camber’s common stock with respect to dividends and liquidation, and will only have voting rights with respect to voting: (a) on a proposal to increase or reduce Camber’s share capital; (b) on a resolution to approve the terms of a buy-back agreement; (c) on a proposal to wind up Camber; (d) on a proposal for the disposal of all or substantially all of Camber’s property, business and undertaking; (f) during the winding-up of Camber; and/or (g) with respect to a proposed merger or consolidation in which Camber is a party or a subsidiary of Camber is a party. Holders of Viking common stock and Viking Preferred Stock will have any fractional shares of Camber common stock or preferred stock after the Merger rounded up to the nearest whole share.

 

At the Effective Time, each outstanding Company equity award, will be converted into the right to receive the merger consideration in respect of each share of Viking Common Stock underlying such equity award and, in the case of Company stock options, be converted into vested Camber stock options based on the merger exchange ratio calculated as provided above (the “Exchange Ratio”).

 

The Merger Agreement provides, among other things, that effective as of the Effective Time, James A. Doris, the current Chief Executive Officer of both the Company and Camber, shall serve as President and Chief Executive Officer of the Combined Company following the Effective Time. The Merger Agreement provides that, as of the Effective Time, the Combined Company will have its headquarters in Houston, Texas.

 

 
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Table of Contents

 

The Merger Agreement also provides that, during the period from the date of the Merger Agreement until the Effective Time, each of Camber and Company will be subject to certain restrictions on its ability to solicit alternative acquisition proposals from third parties, to provide non-public information to third parties and to engage in discussions with third parties regarding alternative acquisition proposals, subject to customary exceptions. Company is required to hold a meeting of its stockholders to vote upon the adoption of the Merger Agreement and, subject to certain exceptions, to recommend that its stockholders vote to adopt the Merger Agreement. Camber is required to hold a meeting of its stockholders to approve the issuance of Viking Common Stock and Viking Preferred Stock in connection with the Merger (the “Share Issuance”).

 

The completion of the Merger is subject to customary conditions, including (i) adoption of the Merger Agreement by Camber’s stockholders and approval of the Share Issuance by Camber’s stockholders, (ii) receipt of required regulatory approvals, (iii) effectiveness of a registration statement on Form S-4 for the Camber common stock to be issued in the Merger (the “Form S-4”), and (iv) the absence of any law, order, injunction, decree or other legal restraint preventing the completion of the Merger or making the completion of the Merger illegal. Each party’s obligation to complete the Merger is also subject to certain additional customary conditions, including (i) subject to certain exceptions, the accuracy of the representations and warranties of the other party, (ii) subject to certain exceptions, performance by the other party of its obligations under the Merger Agreement and (iii) the absence of any material adverse effect on the other party, as defined in the Merger Agreement.

 

Additional closing conditions to the Merger include that in the event the NYSE American determines that the Merger constitutes, or will constitute, a “back-door listing”/”reverse merger”, Camber (and its common stock) is required to qualify for initial listing on the NYSE American, pursuant to the applicable guidance and requirements of the NYSE as of the Effective Time.

 

The Merger Agreement can be terminated (i) at any time with the mutual consent of the parties; (ii) by either Camber or Company if any governmental consent or approval required for closing is not obtained, or any governmental entity issues a final non-appealable order or similar decree preventing the Merger; (iii) by either Company or Camber if the Merger shall not have been consummated on or before August 1, 2021; (iv) by Camber or Company, upon the breach by the other of a term of the Merger, which is not cured within 30 days of the date of written notice thereof by the other; (v) by Camber if Company is unable to obtain the affirmative vote of its stockholders for approval of the Merger; (vi) by Company if Camber is unable to obtain the affirmative vote of its stockholders required pursuant to the terms of the Merger Agreement; and (vii) by Company or Camber if there is a willful breach of the Merger Agreement by the other party thereto. The Merger Agreement contains customary indemnification obligations of the parties and representations and warranties.

 

As of November 14, 2022, neither Viking nor Camber has advised of its intention to terminate the Merger Agreement. However, given the lapse of time since the date of the Merger Agreement and the lack of progress during that period toward completing certain of the transaction requirements and satisfying certain of the conditions to the merger, we believe it is reasonably likely that certain terms, including economic terms of the merger, would need to be modified by the parties in order for the parties to proceed with the merger. While the parties have discussed this likelihood, neither party has determined the revised terms, if any, upon which it would be prepared to proceed with a revised merger agreement. Any revisions to the terms and conditions of the merger agreement would be subject to the written agreement of the parties, and there is no assurance Viking and Camber will agree on any such proposed modifications or conditions. Moreover, the satisfaction of conditions, whether existing or new, may be outside of Viking’s control.

 

July 29, 2021 Equity Transaction by Camber in Viking:

 

On July 29, 2021, the Company entered into a Securities Purchase Agreement with Camber, pursuant to which Camber acquired an additional 27,500,000 shares of Viking common stock for an aggregate purchase price of $11,000,000. As a result, Camber’s ownership increased as of such date to approximately 73% of the issued and outstanding shares of Viking common stock.

 

 
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Loan Transactions at Camber (Guaranteed by Viking):

 

Camber executed and delivered the following promissory notes (each a “Note” and collectively, the “Notes”) in favor of Discover Growth Fund, LLC:

 

 

a.

Promissory Note dated December 11, 2020 in the principal amount of $6,000,000;

 

 

 

 

b.

Promissory Note dated December 18, 2020 in the principal amount of $12,000,000;

 

 

 

 

c.

Promissory Note dated April 23, 2021 in the principal amount of $2,500,000; and

 

 

 

 

d.

Promissory Note dated December 31, 2021 in the principal amount of $26,315,789.

 

The Notes have the following terms: (i) Maturity Date of January 1, 2027; (ii) interest rate equal to the WSJ Prime Rate, per annum, payable at Maturity, except if Camber is noted in default in which case, at the option of the lender, the principal and interest are due immediately and the interest rate increases to the maximum rate allowed under the laws of Texas; and (iii) all or a portion of the amount owing under the Notes may, at the lender’s option, be converted into shares of common stock of Camber at price of $1.50 per share.

 

Camber granted Discover a first-priority security interest in Camber’s Viking Shares and Camber’s other assets pursuant to various pledge agreements and general security agreements, respectively. Viking entered into Guaranty Agreements, guaranteeing repayment of the Notes (see Note 3). Viking also entered into a Security Agreement in favor of Discover granting Discover a first-priority security interest in any assets purchased by Viking with funds advanced to Viking by Camber that were loaned by Discover.

 

Camber’s Series C Preferred Share Designation

 

The Certificate of Designation(s) (the “COD”) regarding Camber’s Series C Convertible Preferred Shares requires, among other things, Camber to timely file with the Securities and Exchange Commission all reports required to pursuant to the Exchange Act. Any breach under the COD is also a default under the Notes. Camber is currently in compliance with the requirements under the COD.

 

Note 2 Company Overview and Operations 

 

Viking is a growth-oriented diversified energy company. Through various majority-owned subsidiaries, Viking provides custom energy and power solutions to commercial and industrial clients in North America and owns interests in oil and natural gas assets in Kansas and Texas. The Company also (i) holds an exclusive license in Canada to a patented carbon-capture system, and: (ii) owns a majority interest in entities with intellectual property rights to a patent pending, proprietary medical & biohazard waste treatment system using ozone technology; and electric transmission and open conductor detection systems. The Company is also exploring other renewable energy-related opportunities and/or technologies, which are currently generating revenue, or have a reasonable prospect of generating revenue within a reasonable period of time.

 

 
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Custom Energy & Power Solutions:

 

Simson-Maxwell Acquisition

 

On August 6, 2021, the Company acquired approximately 60.5% of the issued and outstanding shares of Simson-Maxwell Ltd. (“Simson-Maxwell”), a Canadian federal corporation, for $7,958,159 in cash. Simson-Maxwell manufactures and supplies power generation products, services and custom energy solutions. Simson-Maxwell provides commercial and industrial clients with efficient, flexible, environmentally responsible and clean-tech energy systems involving a wide variety of products, including CHP (combined heat and power), tier 4 final diesel and natural gas industrial engines, solar, wind and storage. Simson-Maxwell also designs and assembles a complete line of electrical control equipment including switch gear, synchronization and paralleling gear, distribution, Bi-Fuel and complete power generation production controls. Operating for over 80 years, Simson-Maxwell’s seven branches assist with servicing a large number of existing maintenance arrangements and meeting the energy and power-solution demands of the company’s other customers.

 

Clean Energy and Carbon-Capture System:

 

In August 2021, the Company entered into a license agreement with ESG Clean Energy, LLC (“ESG”), to utilize ESG’s patent rights and know-how related to stationary electric power generation and heat and carbon dioxide capture (the “ESG Clean Energy System”). The intellectual property licensed by Viking includes certain patents and/or patent applications, including: (i) U.S. Patent No.: 10,774,733, File date: October 24, 2018, Issue date: September 15, 2020, Titled: “Bottoming Cycle Power System”; (ii) European Patent Application No.: EP18870699.8, International File date: October 24, 2018, Titled: “Bottoming Cycle Power System”; (iii) U.S. Patent Application No.: 17/224,200, File date: April 7, 2021, Titled: “Bottoming Cycle Power System” (which was subsequently approved by the U.S. Patent & Trademark Office in March, 2022 (No. 11,286,832); (iv) U.S. Patent Application No.: 17/358,197, File date: June 25, 2021, Titled: “Bottoming Cycle Power System”; (v) U.S. Patent Application No.: 17/448,943, File date: September 27, 2021, Titled: “Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power and Capturing Carbon Dioxide”; and (vi) U.S. Patent Application No.: 17/448,938, File date: September 27, 2021, Titled: “Systems and Methods Associated With Bottoming Cycle Power Systems for Generating Power, Capturing Carbon Dioxide and Producing Products.

 

The ESG Clean Energy System is designed to, among other things, generate clean electricity from internal combustion engines and utilize waste heat to capture approximately 100% of the carbon dioxide (CO2) emitted from the engine without loss of efficiency, and in a manner to facilitate the production of certain commodities. Patent No. 11,286,832, for example, covers the invention of an “exhaust-gas-to-exhaust-gas heat exchanger” that efficiently cools - and then reheats - exhaust from a primary power generator so greater energy output can be achieved by a secondary power source with safe ventilation. Another key aspect of this patent is the development of a carbon dioxide capture system that utilizes the waste heat of the carbon dioxide pump to heat and regenerate the adsorber that enables carbon dioxide to be safely contained and packaged.

 

The Company intends to sell, lease and/or sub-license the ESG Clean Energy System to third parties using, among other things, Simson-Maxwell’s existing distribution channels. The Company may also utilize the ESG Clean Energy System for its own account, whether in connection with its petroleum operations, Simson-Maxwell’s power generation operations, or otherwise.

 

 
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Table of Contents

 

Medical Waste Disposal System Using Ozone Technology:

 

In January 2022, the Company acquired a 51% interest in Viking Ozone Technology, LLC (“Viking Ozone”), which owns the intellectual property rights to a patent pending (i.e.US Application 17/576,801), proprietary medical and biohazard waste treatment system using ozone technology. Simson-Maxwell has been designated the exclusive worldwide manufacturer and vendor of this system. The technology is designed to be a sustainable alternative to incineration, chemical, autoclave and heat treatment of bio-hazardous waste, and for the treated waste to be classified as renewable fuel for waste-to-energy (“WTE”) facilities in many locations around the world.

 

Open Conductor Detection Technologies:

 

In February 2022, the Company acquired a 51% interest in two entities, Viking Sentinel Technology, LLC (“Viking Sentinel”) and Viking Protection Systems, LLC (“Viking Protection”), that own the intellectual property rights to patent pending (i.e., US Applications 16/974,086, 17/672,422 and 17/693,504), proprietary electric transmission and distribution open conductor detection systems. The systems are designed to detect a break in a transmission line, distribution line, or coupling failure, and to immediately terminate the power to the line before it reaches the ground. The technology is intended to increase public safety and reduce the risk of causing an incendiary event, and to be an integral component within grid hardening and stability initiatives by electric utilities to improve the resiliency and reliability of existing infrastructure.

 

Oil & Gas Properties

 

Existing Assets:

 

As of September 30, 2022, the Company, through its wholly owned subsidiary, Petrodome Energy, LLC (“Petrodome”), owns working interests in one oil well in Texas.

 

Additionally, the Company, through its wholly owned subsidiaries, Mid-Con Petroleum, LLC and Mid-Con Drilling, LLC (collectively, the “Mid-Con Entities”), owns working interests in oil fields in Kansas, which include a combination of producing wells, non-producing wells and water injection wells.

 

Divestitures in 2022:

 

On July 8, 2022, four of the wholly owned subsidiaries of Petrodome, a wholly owned subsidiary of Viking, entered into Purchase and Sale Agreements to sell all of their interests in the oil and gas assets owned by those Petrodome subsidiaries, including in the aggregate, interests in 8 producing wells, 8 shut-in wells, 2 salt water disposal wells and 1 inactive well, to third parties for $3,590,000 in cash. The proceeds from the sale were used to fully repay Petrodome’s indebtedness to CrossFirst Bank under the June 13, 2018 revolving line of credit loan.

 

This transaction resulted in the disposition of most of the Company’s total oil and gas reserves (see Note 6). The Company recorded a loss on the transaction in the amount of $8,961,705, as follows:

 

Proceeds from sale

 

$3,590,000

 

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

 

 

(12,791,680 )

ARO recovered

 

 

239,975

 

Loss on disposal

 

$(8,961,705 )

 

Additionally, in July 2022, the Company received an unanticipated refund of a $1,200,000 performance bond as a result of Petrodome ceasing to operate certain assets in the State of Louisiana. The gain from this refund has been included in the “loss from the sale of oil and gas properties and fixed assets’ in the accompanying Consolidated Statement of Operations for the three months ended September 30, 2022.

   

Divestitures in 2021:

 

On October 5, 2021, the Company disposed of all of membership interests of Ichor Energy Holdings, LLC (“Ichor”). The third-party purchaser assumed all of the rights and obligations associated with such membership interests, including the debt and derivatives associated with Ichor and/or its subsidiaries. The Company originally acquired the assets owned by Ichor on December 28, 2018, which at the time included interests in approximately 58 producing wells and approximately 31 saltwater disposal wells in Texas and Louisiana.

 

On October 12, 2021, the Company disposed of all of the membership interests of Elysium Energy Holdings, LLC (“Elysium”). The third-party purchaser assumed all of the rights and obligations associated with such membership interests, including the debt and derivatives associated with Elysium Energy Holdings and/or its subsidiaries. The Company originally acquired the assets owned by Elysium on February 3, 2020, which included interests in approximately 127 wells, along with associated equipment in Texas and Louisiana.

 

 
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Note 3 Going Concern

 

The Company’s consolidated financial statements included herein have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss of $(14,695,711) for the nine months ended September 30, 2022, as compared to a net loss of $(27,983,342) for the nine months ended September 30, 2021. The loss for the nine months ended September 30, 2022, was comprised of, among other things, certain non-cash items, including: (i) stock-based compensation of $1,614,334; (ii) accretion of asset retirement obligation of $107,869; (iii) depreciation, depletion & amortization of $1,326,661; (iv) bad debt expense of $1,302,659; (v) amortization of debt discount of $97,296; and; (vi) loss on sale of oil and gas assets of $8,961,705.

 

As of September 30, 2022, the Company has a stockholders’ equity of $17,968,724, long-term debt of $2,901,097 and a working capital deficiency of $4,302,308. The largest components of current liabilities creating this working capital deficiency is a $6,822,300 million non-interest-bearing loan from Camber Energy, Inc. with no stipulated repayment terms, and drawings against the bank credit facility of $2,995,017.

 

As further described in Note 1, Viking has guaranteed Camber Energy’s indebtedness to Discover, as well as entered into a Security Agreement in favor of Discover granting Discover a first-priority security interest in any assets purchased by Viking with funds advanced to Viking by Camber that were loaned by Discover. In the event of a default by Camber, Viking may be called upon to honor its obligations under the Guaranty and Security Agreements executed by Viking in favor of Discover. The Company believes the likelihood that it will be required to perform under the guarantee to be remote and has not recognized a liability associated with any performance obligations of the guarantee.

 

These conditions raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company’s ability to continue as a going concern is dependent upon its ability to utilize the resources in place to generate future profitable operations, to develop additional acquisition opportunities, and to obtain the necessary financing to meet its obligations and repay its liabilities arising from business operations when they come due. Management believes the Company may be able to continue to develop new opportunities and may be able to obtain additional funds through debt and / or equity financings to facilitate its business strategy; however, there is no assurance of additional funding being available. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence.

 

Note 4 Summary of Significant Accounting Policies

 

a) Basis of Presentation

 

The accompanying unaudited consolidated financial statements of the Company have been prepared in accordance with generally accepted accounting principles in the United States of America (“U.S. GAAP”) and the interim reporting rules of the Securities and Exchange Commission (“SEC”) and should be read in conjunction with the audited financial statements and notes thereto contained in Viking’s latest Annual Report filed with the SEC on Form 10-K. In the opinion of management, all adjustments, consisting of normal recurring adjustments (unless otherwise indicated), necessary for a fair presentation of the financial position and the results of operations for the interim periods presented have been reflected herein. The results of operations for interim periods are not necessarily indicative of the results to be expected for the full year.

 

 
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b) Basis of Consolidation

 

The financial statements presented herein reflect the consolidated financial results of the Company, its wholly owned subsidiaries, Mid-Con Petroleum, LLC, Mid-Con Drilling, LLC, and Mid-Con Development, LLC, which were all formed to provide a base of operations for properties in the Central United States, and Petrodome Energy, LLC, based in Houston, Texas which provides a base of operations to facilitate property acquisitions in Texas, Louisiana and Mississippi. Additionally, these consolidated financial statements also include financial results of Simson-Maxwell using the equity method from August 6, 2021 through October 18, 2021, and consolidated results subsequent to October 18, 2021.

 

In January 2022, the Company acquired a 51% ownership interest Viking Ozone, and in February 2022, the Company acquired a 51% ownership interest in both Viking Sentinel and Viking Protection. These entities were formed to facilitate the monetization of acquired intellectual properties (see Note 8). These entities are variable interest entities in which the Company owns a controlling financial interest; consequently, these entities are also consolidated.

 

All significant intercompany transactions and balances have been eliminated.

 

c) Foreign Currency

 

Foreign currency denominated assets and liabilities are translated into U.S. dollars using the exchange rates in effect at the balance sheet date. Results of operations and cash flows of businesses conducted in foreign currency are translated using the average exchange rates throughout the period. The effect of exchange rate fluctuations on translation of assets and liabilities is included as a component of stockholders’ equity in accumulated other comprehensive income (loss). Gains and losses from foreign currency transactions have been insignificant.

 

d) Use of Estimates in the Preparation of Financial Statements

 

The preparation of consolidated financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts and timing of revenues and expenses, the reported amounts and classification of assets and liabilities, and disclosure of contingent assets and liabilities. Significant areas requiring the use of management estimates relate to impairment of long-lived assets, goodwill, fair value of commodity derivatives, stock-based compensation, asset retirement obligations, and the determination of expected tax rates for future income tax recoveries.

 

The estimates of proved, probable and possible oil and gas reserves are used as significant inputs in determining the depletion of oil and gas properties and the impairment of proved and unproved oil and gas properties. There are numerous uncertainties inherent in the estimation of quantities of proved, probable and possible reserves and in the projection of future rates of production and the timing of development expenditures. Similarly, evaluations for impairment of proved and unproved oil and gas properties are subject to numerous uncertainties including, among others, estimates of future recoverable reserves and commodity price outlooks. Actual results could differ from the estimates and assumptions utilized.

 

e) Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks and highly liquid investment securities that have original maturities of three months or less. Accounts at banks in the United States are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $250,000, while accounts at banks in Canada are insured by the Canada Deposit Insurance Corporation (“CDIC”) up to CAD $100,000. At September 30, 2022 and December 31, 2021, the Company had $4,170,062 and $2,246,407 in excess of the FDIC and CDIC insured limits, respectively.

 

 
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f) Accounts Receivable

 

Accounts receivable for the Company’s oil and gas operations consist of purchaser receivables and joint interest billing receivables. The Company evaluates these accounts receivable for collectability and, when necessary, records allowances for expected unrecoverable amounts. During the nine months ended September 30, 2022, the Company determined that the collectability of certain accounts receivable balances associated with the disposals of Ichor, Elysium and Petrodome, as described in Note 2, were not collectable and should be written off. The amount written off to bad debt expense for the nine months ended September 30, 2022, net of recovery of allowance for doubtful accounts, was $1,302,659. The Company has recorded an allowance for doubtful accounts on oil and gas accounts of $nil at September 30, 2022 and $754,472 at December 31, 2021.

 

The Company extends credit to its power generation customers in the normal course of business. The Company performs ongoing credit evaluations and generally does not require collateral. Payment terms are generally 30 days. The Company carries its trade accounts receivable at invoice amount less an allowance for doubtful accounts. On a periodic basis, the Company evaluates its accounts receivable and establishes an allowance for doubtful accounts based upon management’s estimates that include a review of the history of past write-offs and collections and an analysis of current credit conditions. As of September 30, 2022, the Company established a reserve for doubtful power generation accounts of $nil. The Company does not accrue interest on past due accounts receivable.

 

g) Inventory

 

Inventories are stated at the lower of cost or net realizable value, and consist of parts, equipment and work in process. Work-in-process and finished goods included the cost of materials, direct labor and overhead. At the closing of each reporting period, the Company evaluates its inventory in order to adjust the inventory balance for obsolete and slow-moving items.

 

Inventory consisted of the following at September 30, 2022 and December 31, 2021:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Units and work in process

 

$6,889,350

 

 

$4,125,451

 

Parts

 

 

2,980,009

 

 

 

2,920,045

 

 

 

 

9,869,359

 

 

 

7,045,496

 

Reserve for obsolescence

 

 

(1,431,195 )

 

 

(1,555,061 )

 

 

$8,438,164

 

 

$5,490,435

 

 

h) Notes Receivable

 

Notes receivable consist of secured promissory notes due from New Rise Processing Reno, LLC. The notes are secured by a 20% membership interest in RESC /Renewable Holdings, LLC, and bear interest at a rate of 10% per annum and with a maturity date of June 30, 2022. The Notes were repaid in full in June 2022.

 

 
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i) Prepaid Expenses

 

Prepaid expenses include amounts paid in advance for certain operational expenses, as well as amounts paid through the issuance of restricted shares of stock for future contractual benefits to be received. These advances are amortized over the life of the contract using the straight-line method.

 

j) Oil and Gas Properties

 

The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs associated with acquisition, exploration and development of oil and gas reserves, including directly related overhead costs, are capitalized. General and administrative costs related to production and general overhead are expensed as incurred.

 

All capitalized costs of oil and gas properties, including the estimated future costs to develop proved reserves, are amortized on the unit of production method using estimates of proved reserves. Disposition of oil and gas properties are accounted for as a reduction of capitalized costs, with no gain or loss recognized unless such adjustment would significantly alter the relationship between capitalized costs and proved reserves of oil and gas, in which case the gain or loss is recognized in operations. Unproved properties and major development projects are not amortized until proved reserves associated with the projects can be determined or until impairment occurs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is included in loss from operations before income taxes.

 

k) Limitation on Capitalized Costs

 

Under the full-cost method of accounting, we are required, at the end of each reporting date, to perform a test to determine the limit on the book value of our oil and natural gas properties (the “Ceiling” test). If the capitalized costs of our oil and natural gas properties, net of accumulated amortization and related deferred income taxes, exceed the Ceiling, this excess or impairment is charged to expense. The expense may not be reversed in future periods, even though higher oil and natural gas prices may subsequently increase the Ceiling. The Ceiling is defined as the sum of:

 

 

(a)

the present value, discounted at 10 percent, and assuming continuation of existing economic conditions, of 1) estimated future gross revenues from proved reserves, which is computed using oil and natural gas prices determined as the unweighted arithmetic average of the first-day-of-the-month price for each month within the 12-month hedging arrangements pursuant to SAB 103, less 2) estimated future expenditures (based on current costs) to be incurred in developing and producing the proved reserves, plus

 

 

 

 

(b)

the cost of properties not being amortized; plus

 

 

 

 

(c)

the lower of cost or estimated fair value of unproven properties included in the costs being amortized, net of

 

 

 

 

(d)

the related tax effects related to the difference between the book and tax basis of our oil and natural gas properties.

 

 
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l) Oil and Gas Reserves

 

Reserve engineering is a subjective process that is dependent upon the quality of available data and the interpretation thereof, including evaluations and extrapolations of well flow rates and reservoir pressure. Estimates by different engineers often vary sometimes significantly. In addition, physical factors such as the results of drilling, testing and production subsequent to the date of an estimate, as well as economic factors such as changes in product prices, may justify revision of such estimates. Because proved reserves are required to be estimated using recent prices of the evaluation, estimated reserve quantities can be significantly impacted by changes in product prices.

 

m) Investment in Unconsolidated Entity

 

The Company accounts for its investment in unconsolidated entities under the equity method of accounting when it (i) does not have a controlling financial interest and (ii) has the ability to exercise significant influence over the operating and financial policies of the entity. As described in Note 2, during August 2021 the Company acquired a 60.5% interest in Simson-Maxwell. Pursuant to a shareholder agreement in effect as of September 30, 2021, the Company did not have the ability to control the operating and financial policies of the entity as of such date, and as such has accounted for such ownership under the equity method of accounting. The investment is adjusted for its proportionate share of earnings or losses of the entity.

 

On October 18, 2021, the shareholder agreement was amended, resulting in Viking having control over Simson-Maxwell. As a result, commencing with the date of the amendment, the Company has included Simson-Maxwell in its consolidation.

 

n) Accounting for Leases

 

The Company uses the right-of-use (“ROU”) model to account for leases where the Company is the lessee, which requires an entity to recognize a lease liability and ROU asset on the lease commencement date. A lease liability is measured equal to the present value of the remaining lease payments over the lease term and is discounted using the incremental borrowing rate, as the rate implicit in the Company’s leases is not readily determinable. The incremental borrowing rate is the rate of interest that the Company would have to pay to borrow, on a collateralized basis over a similar term, an amount equal to the lease payments in a similar economic environment. Lease payments include payments made before the commencement date and any residual value guarantees, if applicable. When determining the lease term, the Company includes option periods that it is reasonably certain to exercise as failure to renew the lease would impose a significant economic detriment.

 

 
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For operating leases, minimum lease payments or receipts, including minimum scheduled rent increases, are recognized as rent expense where the Company is a lessee on a straight-line basis (“Straight-Line Rent”) over the applicable lease terms. The excess of the Straight-Line Rent over the minimum rents paid is included in the ROU asset where the Company is a lessee. Short-term lease cost for operating leases includes rental expense for leases with a term of less than 12 months.

 

The Company elected the package of practical expedients permitted under the transition guidance for the revised lease standard, which allowed Viking to carry forward the historical lease classification, retain the initial direct costs for any leases that existed prior to the adoption of the standard and not reassess whether any contracts entered into prior to the adoption are leases. The Company also elected to account for lease and non-lease components in lease agreements as a single lease component in determining lease assets and liabilities. In addition, the Company elected not to recognize the right-of-use assets and liabilities for leases with lease terms of one year or less.

 

o) Business Combinations

 

The Company allocates the fair value of purchase consideration to the tangible assets acquired, liabilities assumed, and intangible assets acquired based on their estimated fair values. The excess of the fair value of purchase consideration over the fair values of these identifiable assets and liabilities is recorded as goodwill. Such valuations require management to make significant estimates and assumptions, especially with respect to intangible assets. Significant estimates in valuing certain intangible assets include, but are not limited to, future expected cash flows from acquired customer lists, acquired technology, and trade names from a market participant perspective, useful lives and discount rates. Management’s estimates of fair value are based upon assumptions believed to be reasonable, but which are inherently uncertain and unpredictable and, as a result, actual results may differ from estimates. During the measurement period, which is one year from the acquisition date, the Company may record adjustments to the assets acquired and liabilities assumed, with the corresponding offset to goodwill. Upon the conclusion of the measurement period, any subsequent adjustments are recorded to earnings.

 

p) Goodwill

 

Goodwill is the excess of cost of an acquired entity over the fair value of amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is subject to impairment testing at least annually and will be tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. An entity has the option to first assess qualitative factors to determine whether the existence of events or circumstances leads to a determination that it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If, after completing the assessment, it is determined that it is more likely than not that the fair value of a reporting unit is less than its carrying value, the Company will proceed to a quantitative test. The Company may also elect to perform a quantitative test instead of a qualitative test for any or all of our reporting units. The test compares the fair value of an entity’s reporting units to the carrying value of those reporting units. This quantitative test requires various judgments and estimates. The Company estimates the fair value of the reporting unit using a market approach in combination with a discounted operating cash flow approach. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit.

 

 
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In 2021, the Company preliminarily recorded goodwill of $252,290 in connection with the October 18, 2021 acquisition of Simson-Maxwell. During the quarter ended September 30, 2022, this amount has been adjusted to nil following the finalization of the acquisition accounting (see Note 5).

 

q) Intangible Assets

 

Intangible assets include amounts capitalized for the Company’s license agreement with ESG as described in Note 2. This asset is amortized on a straight-line basis over the remaining life of the related patents being licensed, which is approximately 16 years.

 

r) Income (Loss) per Share

 

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding and adjusted by any effects of warrants and options outstanding during the period, if dilutive. For the nine months ended September 30, 2022 and 2021, there were approximately 17,204,020 and 48,182,727, respectively, common stock equivalents that were omitted from the calculation of diluted income per share as they were anti-dilutive.

 

s) Revenue Recognition 

 

Oil and Gas Revenues

 

Sales of crude oil, natural gas, and natural gas liquids (NGLs) are included in revenue when production is sold to a customer in fulfillment of performance obligations under the terms of agreed contracts. Performance obligations primarily comprise delivery of oil, gas, or NGLs at a delivery point, as negotiated within each contract. Each barrel of oil, million BTU (MMBtu) of natural gas, or other unit of measure is separately identifiable and represents a distinct performance obligation to which the transaction price is allocated. Performance obligations are satisfied at a point in time once control of the product has been transferred to the customer. The Company considers a variety of facts and circumstances in assessing the point of control transfer, including but not limited to: whether the purchaser can direct the use of the hydrocarbons, the transfer of significant risks and rewards, the Company’s right to payment, and transfer of legal title. In each case, the time between delivery and when payments are due is not significant.

 

 
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Table of Contents

 

The following table disaggregates the Company’s oil and gas revenue by source for the three and nine months ended September 30, 2022 and 2021:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2022

 

 

2021

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

$337,665

 

 

$9,518,232

 

 

$1,956,461

 

 

$24,460,736

 

Natural gas and natural gas liquids

 

 

(235,479)

 

 

4,206,625

 

 

 

978,971

 

 

 

12,929,513

 

Settlement on hedge contracts

 

 

-

 

 

 

(3,819,148 )

 

 

-

 

 

 

(6,896,901 )

Well operations

 

 

15,668

 

 

 

(225,048 )

 

 

731,294

 

 

 

378,025

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$117,854

 

 

$9,680,661

 

 

$3,666,726

 

 

$30,871,373

 

 

Power Generation Revenues

 

Through its 60.5% ownership in Simson-Maxwell, the Company manufactures and sells power generation products, services and custom energy solutions. Simson-Maxwell provides commercial and industrial clients with emergency power generation capabilities. Simson Maxwell’s derives its revenues as follows:

 

1.

Sale of power generation units. Simson-Maxwell manufactures and assembles power generation solutions. The solutions may consist of one or more units and are generally customized for each customer. Contracts are required to be executed for each customized solution. The contracts generally require customers to submit non-refundable progress payments for measurable milestones delineated in the contract. The Company considers the completed unit or units to be a single performance obligation for purposes of revenue recognition and recognizes revenue when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the customer. Sales, use, value add and other similar taxes assessed by governmental authorities and collected concurrent with revenue-producing activities are excluded from revenue. Progress payments are recognized as contract liabilities until the completed unit is delivered. Revenue is measured as the amount of consideration the Company expects to be entitled in exchange for the transfer of the units, which is generally the price stated in the contract. The Company does not allow returns because of the customized nature of the units and does not offer discounts, rebates, or other promotional incentives or allowances to customers. Simson-Maxwell has elected to recognize the cost for freight activities when control of the product has transferred to the customer as an expense within cost of goods.

 

At the request of certain customers, the Company will warehouse inventory billed to the customer but not delivered. Unless all revenue recognition criteria have been met, the Company does not recognize revenue on these transactions until the customer takes possession of the product.

 

 
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2.

Parts Revenue- Simpson Maxwell sells spare parts and replacement parts to its customers. Simson-Maxwell is an authorized parts distributor for a number of national and international power generation manufacturers. The Company considers the purchase orders for parts, which in some cases are governed by master sales agreements, to be the contracts with the customers. For each contract, the Company considers the commitment to transfer products, each of which is distinct, to be the identified performance obligations. Revenue is measured as the amount of consideration the Company expects to be entitled in exchange for the transfer of product, which is generally the price stated in the contract specific for each item sold, adjusted for the value of expected returns. Sales, use, value add and other similar taxes assessed by governmental authorities and collected concurrent with revenue-producing activities are excluded from revenue. Simson-Maxwell has elected to recognize the cost for freight activities when control of the product has transferred to the customer as an expense within cost of goods sold in the consolidated statements of comprehensive income. Parts revenues are recognized at the point in time when control of the product is transferred to the customer, which typically occurs upon shipment or delivery to the customer.

 

 

3.

Service and repairs- Simson-Maxwell offers service and repair of various types of power generation systems. Service and repairs are generally performed on customer owned equipment and billed based on labor hours incurred. Each repair is considered a performance obligation. As a result of control transferring over time, revenue is recognized based on the extent of progress towards completion of the performance obligation. Simson-Maxwell generally uses the cost-to-cost measure of progress for its service work because the customer controls the asset as it is being serviced. Most service and repairs are completed within one or two days.

 

The following table disaggregates Simson-Maxwell’s revenue by source for the three and nine months ended September 30, 2022:

 

 

 

Three months

ended

 

 

Nine months

ended

 

 

 

September 30, 2022

 

 

September 30, 2022

 

Power generation units

 

$2,082,218

 

 

$3,591,365

 

Parts

 

 

1,196,748

 

 

 

3,321,728

 

Total units and parts

 

 

3,278,966

 

 

 

6,913,093

 

Service and repairs

 

 

2,763,886

 

 

 

8,086,449

 

 

 

$6,042,852

 

 

$14,999,542

 

 

 t) Income Taxes

 

The Company accounts for income taxes under the asset and liability method, which requires the recognition of deferred tax assets and liabilities for the expected future tax consequences of events that have been included in the consolidated financial statements. Under this method, the Company determines deferred tax assets and liabilities on the basis of the differences between the consolidated financial statements and the tax basis of assets and liabilities by using estimated tax rates for the year in which the differences are expected to reverse.

 

The Company recognizes deferred tax assets and liabilities to the extent that we believe that these assets and/or liabilities are more likely than not to be realized. In making such a determination, we consider all available positive and negative evidence, including future reversals of existing taxable temporary differences, projected future taxable income, tax planning strategies, and results of recent operations. If we determine that the Company would be able to realize our deferred tax assets in the future in excess of their net recorded amount, we would make an adjustment to the deferred tax asset valuation allowance, which would reduce the provision for income taxes.

 

 
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In assessing the realizability of its deferred tax assets, management evaluated whether it is more likely than not that some portion, or all of its deferred tax assets, will be realized. The realization of its deferred tax assets relates directly to the Company’s ability to generate taxable income. The valuation allowance is then adjusted accordingly.

 

u) Stock-Based Compensation

 

The Company may issue stock options to employees and stock options or warrants to non-employees in non-capital raising transactions for services and for financing costs. The cost of stock options and warrants issued to employees and non-employees is measured on the grant date based on the fair value. The fair value is determined using the Black-Scholes option pricing model. The resulting amount is charged to expense on the straight-line basis over the period in which the Company expects to receive the benefit, which is generally the vesting period.

 

The fair value of stock options and warrants is determined at the date of grant using the Black-Scholes option pricing model. The Black-Scholes option model requires management to make various estimates and assumptions, including expected term, expected volatility, risk-free rate, and dividend yield. The expected term represents the period of time that stock-based compensation awards granted are expected to be outstanding and is estimated based on considerations including the vesting period, contractual term and anticipated employee exercise patterns. Expected volatility is based on the historical volatility of the Company’s stock. The risk-free rate is based on the U.S. Treasury yield curve in relation to the contractual life of stock-based compensation instrument. The dividend yield assumption is based on historical patterns and future expectations for the Company dividends.

 

The following table represents stock warrant activity as of and for the nine months ended September 30, 2022:

 

 

 

Number

of Shares

 

 

Weighted

Average

Exercise

Price

 

 

Weighted

Average

Remaining

Contractual Life

 

 

Aggregate

Intrinsic

Value

 

Warrants Outstanding – December 31, 2021

 

 

7,306,854

 

 

 

0.81

 

 

4.90 years

 

 

 

-

 

Granted

 

 

2,320,000

 

 

 

0.02

 

 

4.74 years

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/expired/cancelled

 

 

367,593

 

 

 

 

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants Outstanding – September 30, 2022

 

 

9,259,261

 

 

$0.62

 

 

4.28 years

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding Exercisable – September 30, 2022

 

 

9,259,261

 

 

$0.62

 

 

4.28 years

 

 

$-

 

 

 
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v) Impairment of Long-lived Assets 

 

The Company, at least annually, is required to review its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable through the estimated undiscounted cash flows expected to result from the use and eventual disposition of the assets. Whenever any such impairment exists, an impairment loss will be recognized for the amount by which the carrying value exceeds the fair value.

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset’s expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets during the nine months ended September 30, 2022 and 2021.

 

w) Accounting for Asset Retirement Obligations

 

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount the Company will incur to plug, abandon and remediate its producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. The Company determined its ARO by calculating the present value of estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation’s inception, with an offsetting increase to proved properties.

 

The following table describes the changes in the Company’s asset retirement obligations for the nine months ended September 30, 2022 and 2021: 

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2022

 

 

2021

 

Asset retirement obligation – beginning

 

$2,111,650

 

 

$6,164,231

 

Oil and gas purchases

 

 

-

 

 

 

-

 

Revisions

 

 

-

 

 

 

1,800

 

ARO settlements

 

 

-

 

 

 

(130,228 )

ARO recovered on sale of assets

 

 

(239,975 )

 

 

 

 

Accretion expense

 

 

107,869

 

 

 

438,225

 

Asset retirement obligation – ending

 

$1,979,544

 

 

$6,474,028

 

 

x) Undistributed Revenues and Royalties

 

The Company records a liability for cash collected from oil and gas sales that have not been distributed. The amounts get distributed in accordance with the working interests of the respective owners.

 

 
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y) Concentration of Credit Risk

 

The Company maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Company believes it is not exposed to any significant credit risk as a result of any non-performance by the financial institutions.

 

Oil and Gas

 

The Company’s oil and gas customer base is made up of purchasers of oil and natural gas produced from the Company’s properties. The Company attempts to limit the amount of credit exposure to any one company through procedures that include credit approvals, credit limits and terms. The Company believes the credit quality of its customer base is high and has not experienced significant write-offs in its accounts receivable balances.

 

Power Generation

 

The Company uses procedures including credit approvals, credit limits and terms to manage its exposure. Additionally, the Company regularly issues progress billings on longer term orders to mitigate both credit risk and overall working capital requirements. 

 

z) Subsequent events

 

The Company has evaluated all subsequent events from September 30, 2022 through the date of filing of this report. None were identified.

 

Note 5. Acquisition of Simson-Maxwell

 

Effective August 6, 2021, Viking entered into a Share Purchase Agreement with Simmax Corp., (“Simmax”), Remora EQ LP, (“Remora”), and Simson-Maxwell Ltd., (“Simson-Maxwell”), pursuant to which Viking agreed to purchase 419 Class A Common Shares of Simson-Maxwell from Simmax and 555 Class A Common Shares of Simson-Maxwell from Remora for a total purchase price of CA$3,998,045 (approximately US$3,198,936) (the “Purchase Price”).

 

Simultaneously, effective August 6, 2021, Viking entered into a Subscription Agreement with Simson-Maxwell (the “Subscription Agreement”), pursuant to which Viking agreed to purchase from Simson-Maxwell 1,462 Class A Common Shares of Simson-Maxwell for a purchase price of CA$6,001,641.58 (approx. US$4,799,009. (the “Subscription Price”).

 

These acquisitions resulted in Viking owning a total of 2,436 Class A Common Shares of Simson-Maxwell, representing approximately 60.5% of the total issued and outstanding shares of Simson-Maxwell.

 

Also on August 6, 2021, Viking entered into a Unanimous Shareholders Agreement with Simmax, Remora and Simson-Maxwell regarding the ownership and governance of Simson-Maxwell, and pursuant to which Viking shall nominate two members of the Board of Directors of Simson-Maxwell, Simmax shall nominate one member of the Simson-Maxwell Board, Remora shall nominate one member of the Simson-Maxwell Board, and Viking, Remora and Simmax shall jointly nominate the fifth member of the Simson-Maxwell Board.

 

 
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The August 6, 2021 amendment also contained certain provisions that required 2/3rds majority of the Board to vote for changes in the capital budget of the Company, capital expenditures in excess of $250k and other provisions generally considered to be participatory rights, which would preclude Viking from consolidating Simson-Maxwell.

 

On October 18, 2021, the Company amended the Unanimous Shareholders Agreement with Simmax, Remora and Simson-Maxwell to increase the number of board member to five with three board members nominated by Viking and to require two thirds approval of the board of directors only for matters affecting issuance of dilutive shares, dissolution of Simson-Maxwell and other matters that generally would protect non-controlling shareholders. The changes to the Unanimous Shareholders Agreement on October 18, 2021 rescinded the two thirds Board approval requirement for all matters except those that are protective in nature, at which point, Viking obtained control of Simson-Maxwell.

 

As a result, Simson-Maxwell is included in the accompanying consolidated financial statements under the equity method from August 6, 2021 to October 18, 2021 and is consolidated from the effective date (October 18, 2021) of the acquisition. The recorded cost of this acquisition was based upon the fair market value of the assets acquired based on an independent valuation.

 

The total value of the consideration given was determined as follows:

 

Cash consideration – August 6, 2021

 

$7,958,159

 

Equity in earnings (losses) through October 18, 2021

 

 

(178,942 )

 

 

 

 

 

Total value of consideration given – October 18, 2021

 

$7,779,217

 

 

The fair values of assets acquired and liabilities assumed in connection with this acquisition are as follows:

 

Total Purchase Price

 

$7,779,217

 

 

 

 

 

 

Fair Value of Assets and Liabilities including the recognition of a 39.5% noncontrolling interest

 

 

 

 

Cash

 

$5,668,384

 

Accounts receivable

 

 

7,559,748

 

Inventory

 

 

5,819,612

 

Prepaid expenses

 

 

288,032

 

Fixed assets

 

 

1,816,730

 

Identifiable intangible assets

 

 

3,908,126

 

Accounts payable

 

 

(5,475,967 )

Accrued expenses and other liabilities

 

 

(948,669 )

Bank credit facility

 

 

(4,007,971 )

Related party liabilities - net

 

 

(422,682 )

Promissory notes payable

 

 

(1,344,599 )

Noncontrolling interest recognized at fair value acquisition

 

 

(5,081,527 )

Total fair value of acquisition

 

$7,779,217

 

 

 
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During the three months ended September 30, 2022, the Company completed its evaluation of the fair value of the assets and liabilities acquired. Based upon this evaluation, the Company increased the value of fixed assets by $419,543, reduced goodwill from $252,290 to nil, and adjusted noncontrolling interest from $(4,914,274) to $(5,081,527).

 

Proforma financial data is not presented as it was impractical to do so as Simson-Maxwell did not have quarterly information prepared utilizing an acceptable basis of accounting.

 

Note 6. Oil and Gas Properties 

 

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the nine months ended September 30, 2022:

 

 

 

December 31,

 

 

 

 

 

 

September 30,

 

 

 

2021

 

 

Adjustments

 

 

Impairments

 

 

2022

 

Proved developed producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

United States cost center

 

$17,416,106

 

 

$(15,521,128 )

 

$-

 

 

$1,894,978

 

Accumulated depreciation, depletion and amortization

 

 

(10,806,908 )

 

 

9,637,537

 

 

 

-

 

 

 

(1,169,371 )

Proved developed producing oil and gas properties, net

 

$6,609,198

 

 

$(5,883,591 )

 

$-

 

 

$725,607

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undeveloped and non-producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States cost center

 

 

22,082,329

 

 

 

(20,380,112 )

 

 

-

 

 

 

1,702,217

 

Accumulated depreciation, depletion and amortization

 

 

(13,865,956 )

 

 

12,716,377

 

 

 

-

 

 

 

(1,149,579 )

Undeveloped and non-producing oil and gas properties, net

 

$8,216,373

 

 

$(7,663,735 )

 

$-

 

 

$552,638

 

Total Oil and Gas Properties, Net

 

$14,825,571

 

 

$(13,547,326 )

 

$-

 

 

$1,278,245

 

 

The adjustments consist of the impact of the sale of Petrodome’s assets as described in Note 2 plus depletion expense for the nine months ended September 30, 2022.

 

Note 7. Intangible Assets

 

ESG Clean Energy License

 

The Company’s intangible assets include costs associated with securing in August 2021 an Exclusive Intellectual Property License Agreement with ESG, pursuant to which the Company received (i) an exclusive license to ESG’s patent rights and know-how related to stationary electric power generation (not in connection with vehicles), including methods to utilize heat and capture carbon dioxide in Canada, and (ii) a non-exclusive license to the intellectual property in up to 25 sites in the United States that are operated by the Company or its affiliates.

 

In consideration of the licenses, the Company paid an up-front royalty of $1,500,000 and the Company is obligated to make additional royalty payments as follows: (i) an additional $1,500,000 on or before January 31, 2022, which may be paid in whole or in part in the form of Viking’s common stock based on the price of Viking’s common stock on August 18, 2021, at ESG’s election; (ii) an additional $2,000,000 on or before April 20, 2022, which may be paid in whole or in part in the form of Viking’s common stock based on the price of Viking’s common stock on August 18, 2021, at ESG’s election; and (iii) continuing royalties of not more than 15% of the net revenues of Viking generated using the intellectual property, with the continuing royalty percentage to be jointly determined by the parties collaboratively based on the parties’ development of realistic cashflow models resulting from initial projects utilizing the intellectual property, and with the parties utilizing mediation if they cannot jointly agree to the continuing royalty percentage.

 

With respect to the payments noted in (i) and (ii) above, totaling $3,500,000, on or about November 22, 2021, the Company paid $500,000 to or on behalf of ESG and ESG elected to accept $2,750,000 in shares of Viking’s common stock at the applicable conversion price, resulting in 6,942,691 shares, leaving a balance owing by Viking of $250,000 which was paid by Viking in January 2022.

 

 
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Viking’s exclusivity with respect to Canada shall terminate if minimum continuing royalty payments to ESG are not at least equal to the following minimum payments based on the date that ESG first begins capturing carbon dioxide and selling for commercial purposes one or more commodities from a system installed and operated by ESG using the Intellectual Property (the “Trigger Date”):

 

 

 

Minimum Payments

 

Years from the Trigger Date:

 

For Year Ended

 

Year two

 

$500,000

 

Year three

 

 

750,000

 

Year four

 

 

1,250,000

 

Year five

 

 

1,750,000

 

Year six

 

 

2,250,000

 

Year seven

 

 

2,750,000

 

Year eight

 

 

3,250,000

 

Year nine and after

 

 

3,250,000

 

 

If the continuing royalty percentage is adjusted jointly by the parties downward from the maximum of 15%, then the minimum continuing royalty payments for any given year from the Trigger Date shall also be adjusted downward proportionally.

 

The Company recognized amortization expense of $230,886 for the nine months ended September 30, 2022. The estimated future amortization expense for each of the next five years is $304,465 per year.

 

The ESG intangible asset consisted of the following at September 30, 2022 and December 31, 2021:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

ESG Clean Energy License

 

$5,000,000

 

 

$5,000,000

 

Accumulated amortization

 

 

(345,061 )

 

 

(114,175 )

 

 

$4,654,939

 

 

$4,885,825

 

 

Other intangibles – Simson-Maxwell – Customer Relationships and Brand

 

On October 18, 2021, the Company completed the acquisition of Simson-Maxwell, and allocated a portion of the purchase price to Customer Relationships with a fair value of $1,677,453 and an estimated useful life of 10 years, and the Simmax Brand with a fair value of $2,230,673 and an indefinite useful life.

 

 
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The Company recognized amortization expense for the Customer Relationship intangible of $125,464 for the nine months ended September 30, 2022. The estimated future amortization expense for each of the next five years is $167,745 per year.

 

As the Simmax Brand intangible fair value is deemed to have an indefinite life, the Company periodically reviews its fair value to determine if an impairment charge should be recognized. The Company did not recognize any impairment for the nine months ended September 30, 2022.

 

The Other intangibles – Simson-Maxwell consisted of the following at September 30, 2022 and December 31, 2021:

 

 

 

September 30,

2022

 

 

December 31,

2021

 

Simmax Brand

 

$2,230,673

 

 

$2,230,673

 

Customer Relationships

 

 

1,677,453

 

 

 

1,677,453

 

Accumulated amortization

 

 

(159,473 )

 

 

(34,009 )

 

 

$3,748,653

 

 

$3,874,117

 

 

Note 8. Intangible Assets - Variable Interest Entity Acquisitions (VIE’s)

 

Medical Waste Disposal System

 

Choppy:

 

On January 18, 2022, Viking entered into a Securities Purchase Agreement to purchase (the “Purchase”) 51 units, representing 51%, of Viking Ozone , from Choppy Group LLC, a Wyoming limited liability company (“Choppy”), in consideration of the issuance of 8,333,333 shares of Viking common stock to Choppy, 3,333,333 of which shares were issued at closing, 3,333,333 of which shares are to be issued to Choppy after 5 units of the System (as defined below) have been sold, and 1,666,667 of which shares are to be issued to Choppy after 10 units of the System have been sold. Viking Ozone was organized on or about January 14, 2022, for the purpose of developing and distributing a medical and biohazard waste treatment system using ozone technology (the “System”), and on or about January 14, 2022, Choppy was issued all 100 units of Viking Ozone in consideration of Choppy’s assignment to Viking Ozone of all of Choppy’s intellectual property and intangible assets, including patent rights, know-how, procedures, methodologies, and contract rights in connection with the System, and specifically the invention entitled “Multi-Chamber Medical Waste Ozone-Based Treatment Systems and Methods (Docket No. RAS-101A) and related patent application. On January 18, 2022 Viking acquired 51 units (51%) of Viking Ozone from Choppy with Choppy retaining the remaining 49 units (49%) of Viking Ozone, and Viking issued 3,333,333 shares of Viking common stock to Choppy. Viking and Choppy then entered into an Operating Agreement on January 18, 2022 governing the operation of Viking Ozone. Based on the closing price of the Company’s stock on the January 18, 2022, the fair value was approximately $2,000,000. The Company determined the acquisition of a 51% interest in Viking Ozone was the acquisition of and initial consolidation of a VIE that is not a business. The acquisition was recorded as follows:

 

Purchase Price:

 

 

 

Fair value of stock at closing

 

$2,000,000

 

Fair value of contingent consideration

 

 

495,868

 

Total consideration

 

$2,495,868

 

 

 

 

 

 

Purchase Price Allocation:

 

 

 

 

Intangible asset - IP

 

$4,916,057

 

Non-controlling interest

 

 

(2,420,189 )

Viking ownership interest

 

$2,495,868

 

 

 
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Open Conductor Detection Technologies

 

Virga:

 

On February 9, 2022, Viking entered into a Securities Purchase Agreement to purchase (the “Purchase”) 51 units, representing 51% of Viking Sentinel, from Virga Systems LLC, a Wyoming limited liability company (“Virga”), in consideration of the issuance of 416,667 shares of Viking common stock to Virga. Viking Sentinel was formed on or about January 31, 2022, and Virga was issued all 100 units of Viking Sentinel in consideration of Virga’s assignment to Viking Sentinel of all of Virga’s intellectual property and intangible assets, including patent rights, know-how, procedures, methodologies, and contract rights in connection with an end of line protection with trip signal engaging for distribution system, and related patent application(s). On February 9, 2022 Viking acquired 51 units (51%) of Viking Sentinel from Virga with Virga retaining the remaining 49 units (49%) of Viking Sentinel, and Viking issued 416,667 shares of Viking common stock to Virga. Viking and Virga then entered into an Operating Agreement on February 9, 2022 governing the operation of Viking Sentinel. The Company determined the acquisition of a 51% interest in Viking Sentinel was the acquisition and initial consolidation of a VIE that is not a business. The acquisition was recorded as follows:

 

Purchase Price:

 

 

 

Fair value of stock at closing

 

$233,334

 

Total consideration

 

$233,334

 

 

 

 

 

 

Purchase Price Allocation:

 

 

 

 

Intangible asset - IP

 

$457,518

 

Non-controlling interest

 

 

(224,184 )

Viking ownership interest

 

$233,334

 

 

 
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Jedda:

 

On February 9, 2022, Viking entered into a Securities Purchase Agreement to purchase (the “Purchase”) 51 units (the “Units”), representing 51% of Viking Protection Systems, LLC (“Viking Protection”), from Jedda Holdings LLC (“Jedda”). In consideration for the Units, Viking agreed to issue to Jedda, shares of a new class of Convertible Preferred Stock of Viking with a face value of $10,000 per share (the “Preferred Shares”), or pay cash to Jedda, if applicable, as follows:

 

No.

 

 

Purchase Price*

 

 

When Due

 

No. of VKIN Pref. Shares

 

 

Conversion Price

 

 

No. of Underlying VKIN Common Shares

 

 

Estimated Revenues if Sales Target Achieved**

 

1

 

 

$

250,000

 

 

On closing

 

 

N/A

 

 

$

0.60

 

 

 

416,667

 

 

 

N/A

 

2

 

 

$

4,750,000

 

 

On closing

 

 

475

 

 

$

0.60

 

 

 

7,916,667

 

 

 

N/A

 

3

 

 

$

1,000,000

 

 

Upon the sale of 10k units

 

 

100

 

 

$

0.75

 

 

 

1,333,333

 

 

$

50,000,000

 

4

 

 

$

2,000,000

 

 

Upon the sale of 20k units

 

 

200

 

 

$

1.00

 

 

 

2,000,000

 

 

$

100,000,000

 

5

 

 

$

3,000,000

 

 

Upon the sale of 30k units

 

 

300

 

 

$

1.25

 

 

 

2,400,000

 

 

$

150,000,000

 

6

 

 

$

4,000,000

 

 

Upon the sale of 50k units

 

 

400

 

 

$

1.50

 

 

 

2,666,667

 

 

$

250,000,000

 

7

 

 

$

6,000,000

 

 

Upon the sale of 100k units

 

 

600

 

 

$

2.00

 

 

 

3,000,000

 

 

$

500,000,000

 

Total

 

 

$

21,000,000

 

 

 

 

 

2,075

 

 

$

0.94(avg.)

 

 

19,733,334

 

 

$

500,000,000

 

___________ 

*

The $5 million due on closing was payable solely in stock of Viking. All other payments, if the subject sales targets are met, are payable in cash or in shares of convertible preferred stock of Viking, at the seller’s option.

 

 

**

These are estimates only. There is no guarantee any sales targets will be reached.

 

Notwithstanding the above, Viking shall not effect any conversion of any Preferred Shares, and Jedda shall not have the right to convert any Preferred Shares, to the extent that after giving effect to the conversion, Jedda (together with Jedda’s affiliates, and any persons acting as a group together with Jedda or any of Jedda’s affiliates) would beneficially own in excess of 4.99% of the number of shares of the Viking Common Stock outstanding immediately after giving effect to the issuance of shares of Viking Common Stock issuable upon conversion of the Preferred Share(s) by Jedda. Jedda, upon not less than 61 days’ prior notice to Viking, may increase or decrease the beneficial ownership limitation, provided that the beneficial ownership limitation in no event exceeds 9.99% of the number of shares of Viking Common Stock outstanding immediately after giving effect to the issuance of shares of Viking Common Stock upon conversion of the Preferred Share(s) held by Jedda and the beneficial ownership limitation provisions of this Section shall continue to apply. Any such increase or decrease will not be effective until the 61st day after such notice is delivered to Viking.

 

 
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Viking Protection was formed on or about January 31, 2022, and Jedda was issued all 100 units of Viking Protection in consideration of Jedda’s assignment to Viking Protection of all of Jedda’s intellectual property and intangible assets, including patent rights, know-how, procedures, methodologies, and contract rights in connection with an electric transmission ground fault prevention trip signal engaging system, and related patent application(s). On February 9, 2022 Viking acquired 51 units (51%) of Viking Protection from Jedda with Jedda retaining the remaining 49 units (49%) of Viking Protection, and Viking issued the 475 Preferred Shares to Jedda. Viking and Jedda then entered into an Operating Agreement on February 9, 2022 governing the operation of Viking Protection. The Company determined the acquisition of a 51% interest in Viking Protection was the acquisition and initial consolidation of a VIE that is not a business. The acquisition was recorded as follows:

 

Purchase Price:

 

 

 

Fair value of stock at closing

 

$4,433,334

 

Fair value of contingent consideration

 

 

939,889

 

Total consideration

 

$5,373,223

 

 

 

 

 

 

Purchase Price Allocation:

 

 

 

 

Intangible asset - IP

 

$10,059,765

 

Non-controlling interest

 

 

(4,686,542 )

Viking ownership interest

 

$5,373,223

 

 

The Company consolidates any VIEs in which it holds a variable interest and is the primary beneficiary. Generally, a VIE, is an entity with one or more of the following characteristics: (a) the total equity investment at risk is not sufficient to permit the entity to finance its activities without additional subordinated financial support; (b) as a group the holders of the equity investment at risk lack (i) the ability to make decisions about an entity’s activities through voting or similar rights, (ii) the obligation to absorb the expected losses of the entity, or (iii) the right to receive the expected residual returns of the entity; or (c) the equity investors have voting rights that are not proportional to their economic interests and substantially all of the entity’s activities either involve, or are conducted on behalf of, an investor that has disproportionately few voting rights. The primary beneficiary of a VIE is generally the entity that has (a) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance, and (b) the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE.

 

The Company has determined that it is the primary beneficiary of three VIEs, Viking Ozone, Viking Sentinel and Viking Protection, and consolidates the financial results of these entities, as follows:

 

 

 

Viking

 

 

Viking

 

 

Viking

 

 

 

 

 

 

Ozone

 

 

Sentinel

 

 

Protection

 

 

Total

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Intangible asset - IP

 

$4,916,057

 

 

$457,518

 

 

$10,059,765

 

 

$15,433,340

 

Non-controlling interest

 

 

(2,420,189 )

 

 

(224,184 )

 

 

(4,686,542 )

 

 

(7,330,915 )

Viking ownership interest

 

$2,495,868

 

 

$233,334

 

 

$5,373,223

 

 

$8,102,425

 

 

 
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Note 9. Related Party Transactions

 

The Company’s CEO and director, James Doris, renders professional services to the Company through AGD Advisory Group, Inc., an affiliate of Mr. Doris. As of September 30, 2022 and December 31, 2021, the total amount due to AGD Advisory Group, Inc. was $370,000 and $270,000, respectively and is included in accounts payable. Additionally, Mr. Doris has made several loans through promissory notes to the Company, all accruing interest at 12%, and payable on demand. During the year ended December 31, 2021, the Company made payments totaling $63,319 toward principal and interest associated with these loans, and Mr. Doris in separate transactions sold $506,000 of his loans to independent third parties. As of September 30, 2022 and December 31, 2021, there are no remaining balances due to Mr. Doris for these loans.

 

The Company’s former CFO, Frank W. Barker, Jr., renders professional services to the Company through FWB Consulting, Inc., an affiliate of Mr. Barker. As of September 30, 2022 and December 31, 2021, the total amount due to FWB Consulting, Inc. was $nil and $341,968, respectively and is included in accounts payable.

 

Simson-Maxwell

 

Simson-Maxwell was a privately held Canadian company that was formerly a part of a consolidated group, Simmax Corp. At the time of the acquisition, Simson-Maxwell had intercompany balances due to/due from Simmax Corp., a receivable from Adco Power Ltd. and its majority owner and had entered into various note agreements with certain employees, officers, family members and entities owned or controlled by such individuals. As of December 31, 2021, Simmax Corp had a 17% noncontrolling interest in Simson-Maxwell. Viking assumed the intercompany balances and the loan agreements in connection with the acquisition. Simson-Maxwell conducts business with Adco Power Ltd., an entity owned and controlled by an employee and officer of Simson-Maxwell. Adco Power Ltd. is an industrial, electrical and mechanical construction company.

 

 
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The balances of the related party receivables and payables as of September 30, 2022 and December 31, 2021 are as follows:

 

 

 

September 30,

 

 

December 31,

 

 

 

2022

 

 

2021

 

 

 

 

 

 

 

 

Related party receivable

 

 

 

 

 

 

Simmax Corp

 

$-

 

 

$1,913,786

 

Adco Power Ltd. and majority owner

 

 

456,068

 

 

 

2,921,367

 

 

 

 

 

 

 

 

 

 

Total

 

$456,068

 

 

$4,835,153

 

 

 

 

 

 

 

 

 

 

Related party payable

 

 

 

 

 

 

 

 

Simmax Corp

 

$625,348

 

 

$1,858,405

 

Adco Power Ltd. and majority owner

 

 

9,218

 

 

 

3,011,615