Quarterly report pursuant to Section 13 or 15(d)

Going Concern

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Going Concern
9 Months Ended
Sep. 30, 2021
Company Overview and Operations  
Note 3. Going Concern

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 $27,983,342 for the nine months ended September 30, 2021, as compared to a net loss of $14,275,646 for the nine months ended September 30, 2020. The loss for the nine months ended September 30, 2021 was comprised of, among other things, certain non-cash items, including: (i) stock-based compensation of $470,598; (ii) accretion of asset retirement obligation of $438,225; (iii) depreciation, depletion & amortization of $6,844,553; (iv) amortization of debt discount of $3,406,654; (v) change in fair value of derivatives of $(16,401,270); and (vi) loss on financing settlements of $2,774,341.

 

As of September 30, 2021, the Company has a stockholders’ deficit of $8,115,975 and total long-term debt of $93,007,847. As of September 30, 2021, the Company has a working capital deficiency of approximately $60,000,000. The largest components of current liabilities creating this working capital deficiency are (i) notes payable with a face value aggregating approximately $4.7 million as of September 30, 2021 due in February of 2022; (ii) a revolving credit facility with a balance of $5,665,000 as of September 30, 2021 due in January of 2022; (iii) a derivative liability of $16,074,519; and (iv) Elysium Energy Holdings’ term loan agreement with a face value of approximately $30.7 million as of September 30, 2021, with a maturity date of August 3, 2022.

 

As described in Note 2, in October 2021 the Company transferred its interest in each of Ichor Energy Holdings and Elysium Energy Holdings to third parties. As a result, the Company no longer has the assets and liabilities (including debt and derivatives mentioned in the above paragraph) within such entities.

 

Further, oil and gas price volatility and the impact of 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 its products and services, reduction in the selling price of the Company’s products and services, 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.

Management believes it will be able 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 operations.

 

Nonetheless, 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.