Nature of Business and Going Concern
|3 Months Ended|
Mar. 31, 2021
|Nature of Business and Going Concern|
|Note 2. Nature of Business and Going Concern||
Viking Energy Group, Inc. (“Viking” or the “Company”) is engaged in the acquisition, exploration, development and production of oil and natural gas properties, both individually and through collaborative partnerships with other companies in this field of endeavor. Since the beginning of 2020, the Company has had the following related activities:
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 $9,052,273 for the three months ended March 31, 2021 as compared to a net income of $20,249,159 for the three months ended March 31, 2020. The loss for the three months ended March 31, 2021 was comprised of, among other things, certain non-cash items, including: (i) Stock Based Compensation of $273,750; (ii) Accretion of Asset Retirement Obligation of $142,366; (iii) Depreciation, Depletion & Amortization of $2,357,002; (iv) Amortization of Debt Discount of $1,058,356;(v) Loss on debt settlement; and (vi) Change in Fair Value of Derivatives of ($5,668,606).
As of March 31, 2021, the Company has a stockholders’ deficit of $5,324,736 and total Long-Term Debt of $96,020,621. As of March 31, 2021, the Company has a working capital deficiency of approximately $48,000,000. The largest components of current liabilities creating this working capital deficiency are (a) notes payable with a face value aggregating approximately $6.6 million as of March 31, 2021 due in February of 2022, (b) a revolving credit facility with a balance of $6,290,000 as of March 31, 2021 due in January of 2022, and (c) a term loan agreement with a face value of approximately $32.6 million as of March 31, 2021, which, although it has a maturity date of August 3, 2022, has been included as a current liability in the accompanying balance sheets due to the uncertainty as to whether the Company’s subsidiary, Elysium Energy, LLC and other parties to the term loan agreement, will be able to satisfy certain covenants under the term loan agreement going forward, specifically regarding the following requirements: (i) collateral coverage ratio; (ii) maximum leverage ratio; and (iii) minimum liquidity.
Management believes it will be able to continue to leverage the expertise and relationships of its operational and technical teams to enhance existing assets and identify new development and acquisition opportunities in order to improve the Company’s financial position. The Company may have the ability, if it can raise additional capital, to acquire new assets in a separate division from existing subsidiaries. Also, as a majority-owned subsidiary of Camber, the Company might be able to benefit from Camber’s national stock exchange platform to access additional capital sources.
None the less, recent oil and gas price volatility as a result of geopolitical conditions and the global COVID-19 pandemic have already had and may continue to have a negative impact on the Company’s financial position and results of operations. Negative impacts could include but are not limited to: The Company’s ability to sell our oil and gas production, reduction in the selling price of the Company’s oil and gas, failure of a counterparty to make required hedge payments, possible disruption of production as a result of worker illness or mandated production shutdowns, the Company’s ability to maintain compliance with loan covenants and/or refinance existing indebtedness, and access to new capital and financing.
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 development 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.
The entire disclosure for organization, consolidation and basis of presentation of financial statements disclosure.
Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef