UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM 10-K

 

ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the fiscal year ended: December 31, 2021

 

OR

 

TRANSITION REPORT PURSUANT TO 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)

(I.R.S. Employer

Identification Number)

 

15915 Katy Freeway, Suite 450

Houston, TX 77094

 (Address of principal executive offices)

 

(281) 404-4387

(Registrant’s telephone number, including area code)

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Not applicable.

Note applicable.

Not applicable.

 

Securities registered pursuant to Section 12(g) of the Act: Common Stock, par value $0.001 

 

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☐ No

 

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No

 

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 if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.

 

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

 

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 Act). Yes No ☒

 

As of June 30, 2021, the aggregate market value of the shares of the registrant’s common equity held by non-affiliates was approximately $20,005,941, using the June 30, 2021 closing price of the registrant’s common stock of $0.615/share. Shares of the registrant’s common stock held by each executive officer and director and by each person who beneficially owns 10 percent or more of the registrant’s outstanding common stock have been excluded in that such persons may be deemed to be “affiliates” of the registrant for purposes of the above calculation. This determination of affiliate status is not a conclusive determination for other purposes.

 

The number of shares of the Registrant’s common stock outstanding as of April 15, 2022, was 114,780,965.

  

 

 

 

NOTE REGARDING FORWARD LOOKING STATEMENTS

 

This Annual Report on Form 10-K contains statements that constitute “forward-looking statements.” These forward-looking statements can be identified by the use of predictive, future-tense or forward-looking terminology like “believes,” “anticipates,” “expects,” “estimates,” “may,” or similar terms. These statements appear in a number of places in this annual report and include statements regarding the Company’s intent, belief or current expectations and those of its directors or officers with respect to, among other things:(i) trends affecting its financial condition or results of operations, (ii) its business and growth strategies, and (iii) its financing plans. You are cautioned that forward-looking statements are not guarantees of future performance and involve significant risks and uncertainties, and that actual results may differ materially from those projected in the forward-looking statements as a result of various factors. Factors that could adversely affect actual results and performance include, among others, the Company’s need for additional capital, its history of losses, the intense competition the Company faces in its business, the fact that its stock is a “penny stock” and the other material risks described under “Risk Factors”. The accompanying information contained in this annual report, including, without limitation, the information set forth under the heading “Item 1. Business” identifies important additional factors that could materially adversely affect actual results and performance. You are urged to carefully consider these factors. All forward-looking statements attributable to us are expressly qualified in their entirety by the foregoing cautionary statement.

 

 
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Table of Contents

 

PART I

 

 

 

 

 

 

 

 

 

Item 1.

Business

 

4

 

 

 

 

 

 

Item 1A.

Risk Factors

 

7

 

 

 

 

 

 

Item 1B.

Unresolved Staff Comments

 

24

 

 

 

 

 

 

Item 2.

Properties

 

24

 

 

 

 

 

 

Item 3.

Legal Proceedings

 

28

 

 

 

 

 

 

Item 4.

Mine Safety Disclosures

 

28

 

 

 

 

 

 

PART II

 

 

 

 

 

 

 

 

 

Item 5.

Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

29

 

 

 

 

 

 

Item 6.

Selected Financial Data

 

32

 

 

 

 

 

 

Item 7.

Management's Discussion and Analysis of Financial Condition and Results of Operations.

 

32

 

 

 

 

 

 

Item 7A.

Quantitative and Qualitative Disclosures About Market Risk.

 

42

 

 

 

 

 

 

Item 8.

Financial Statements and Supplementary Data

 

43

 

 

 

 

 

 

Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

 

44

 

 

 

 

 

 

Item 9A.

Controls and Procedures.

 

44

 

 

 

 

 

 

Item 9B.

Other Information.

 

46

 

 

 

 

 

 

PART III

 

 

 

 

 

 

 

 

 

Item 10.

Directors, Executive Officers and Corporate Governance.

 

47

 

 

 

 

 

 

Item 11.

Executive Compensation

 

49

 

 

 

 

 

 

Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

 

51

 

 

 

 

 

 

Item 13.

Certain Relationships and Related Transactions

 

52

 

 

 

 

 

 

Item 14.

Principal Accounting Fees and Services

 

53

 

 

 

 

 

 

PART IV

 

 

 

 

 

 

 

 

 

Item 15.

Exhibits, Financial Statement Schedules.

 

54

 

 

 

 

 

 

SIGNATURES

 

 

59

 

  

 
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PART I

 

Item 1. Business

 

Viking Energy Group, Inc. (“Viking”, the “Company”, “we”, “us” or “our”) 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 the United States. The company also holds an exclusive license in Canada to a patented carbon-capture system, and owns a majority interest in entities with intellectual property rights to a fully developed, patent pending, proprietary medical and 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.

 

Custom Energy & Power Solutions:

 

The Company’s 60.5% majority-owned subsidiary, Simson-Maxwell Ltd. (“Simson-Maxwell”), is a manufacturer and supplier of 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.

 

 
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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.

 

Medical Waste Disposal System Using Ozone Technology

 

In January 2022, the Company acquired a 51% interest in Viking Ozone Technology, LLC, which owns the intellectual property rights to a fully developed, patent pending, medical and biohazard waste treatment system using Ozone Technology. Simson-Maxwell, another majority-owned subsidiary of the Company, 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 that own the intellectual property rights to fully developed, patent pending, 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 Assets

 

Existing Assets

 

The Company, through its wholly-owned subsidiary, Petrodome Energy, LLC (“Petrodome”), owns working interests in oil and gas fields in Texas, Louisiana and Mississippi, which include approximately 7 producing wells, 8 non-producing wells and 1 Salt Water Disposal Well (SWD). Further details regarding the Company’s acquisition of Petrodome in 2017, or properties acquired by Petrodome subsequent thereto, are set out in the “Oil & Gas Properties” section of this report.

 

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. Further details regarding properties acquired in Kansas from 2016 through 2019 are set out in the “Oil & Gas Properties” section of this report.

 

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 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 salt water 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 associated with Elysium Energy Holdings. 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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Potential Merger with Camber Energy, Inc.

 

On February 15, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Camber Energy, Inc. (“Camber” or “Camber Energy”), the majority owner of the Company’s issued common stock. 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 Viking (the “Merger”), with Viking 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 Viking (the “Viking Common Stock”) issued and outstanding immediately prior to the Effective Time, other than shares owned by Camber, Viking and the 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 Viking (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 Viking 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 Viking 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 Viking 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.

 

The Merger Agreement also provides that, during the period from the date of the Merger Agreement until the Effective Time, each of Camber and Viking 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. Viking 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.

 

 
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The Merger Agreement can be terminated (i) at any time with the mutual consent of the parties; (ii) by either Camber or Viking 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 Viking or Camber if the Merger shall not have been consummated on or before August 1, 2021; (iv) by Camber or Viking, 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 Viking is unable to obtain the affirmative vote of its stockholders for approval of the Merger; (vi) by Viking if Camber is unable to obtain the affirmative vote of its stockholders required pursuant to the terms of the Merger Agreement; and (vii) by Viking or Camber if there is a willful breach of the Merger Agreement by the other party thereto.

 

The Merger deadline of August 1, 2021 has passed, but the Merger Agreement has not been terminated by either party. There is no assurance that the Merger will occur.

 

Other Information

 

Neither the Company nor any of its subsidiaries engaged in any research and development activities during 2021. The Company does not manufacture any products or engage in any activity that requires compliance with environmental laws except as described elsewhere herein.

 

Employees

 

The Company now has 9 fulltime employees working at the Company’s office in Houston, Texas. Outside of the Houston operation, the Company continues to retain outside consultants as needed, involved in business development, business analysis, financial consulting, web programming and designing, execution and support of the Company’s business.

 

Through Simson-Maxwell, the Company has approximately 118 employees in 7 branch locations in western Canada

 

Reports to Securities Holders

 

The Company provides its annual report that includes its audited financial information to its shareholders upon written request. The Company also makes its financial information equally available to any interested parties or investors through compliance with the disclosure rules of the Exchange Act. The Company is subject to disclosure filing requirements including filing Form 10-K’s annually and Form 10-Q’s quarterly. In addition, the Company files Form 8-K and other proxy and information statements from time to time as required.

 

The public may read and copy any materials that the Company files with the SEC at the SEC’s Public Reference Room at 100 F Street NE, Washington, DC 20549. The public may obtain information on the operation of the Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC maintains a website (http://www.sec.gov) that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC.

 

Item 1A. Risk Factors

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item. However, the following important factors among others, could cause our actual operating results to differ materially from those indicated or suggested by forward-looking statements made in this Form 10-K or presented elsewhere by management from time to time.

 

 
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There are numerous and varied risks, known and unknown, that may prevent us from achieving our goals. If any of these risks actually occur, our business, financial condition or results of operation may be materially adversely affected. In such case, the trading price of our common stock could decline and investors could lose all or part of their investment.

 

Risk Factors Related to the Power Generation Industry

 

Decreases in the availability and quality, or increases in the cost, of raw materials, key components and labor we use to make our products could materially reduce our earnings.

 

The principal raw materials that we use to produce our products are steel, copper and aluminum as well as batteries and advanced electronic components. We also source a significant number of component parts from third parties that we utilize to manufacture our products. The prices of those raw materials and components are susceptible to significant fluctuations due to trends in supply and demand, commodity prices, currencies, transportation costs, government regulations and tariffs, price controls, economic conditions and other unforeseen circumstances beyond our control. In fact, we have recently seen such trends significantly impact our business resulting in higher costs and shortages in materials, components and labor, and such impacts may continue for the foreseeable future. We typically do not have long-term supply contracts in place to ensure the raw materials and components we use are available in necessary amounts or at fixed prices. In the short term, we have been unable to fully mitigate raw material or component price increases through product design improvements, price increases to our customers, manufacturing productivity improvements, or hedging transactions, and if our mitigation efforts continue to not be fully effective in the short or long term, our profitability could be adversely affected. We have implemented multiple rounds of price increases in 2021 to combat rising input costs. However, these price increases will be fully realized throughout 2022 as the higher pricing works through backlog. Also, our ability to continue to obtain quality materials and components is subject to the continued reliability and viability of our suppliers, including in some cases, suppliers who are the sole source of certain important components. It has been challenging to consistently obtain adequate, cost efficient or timely deliveries of certain required raw materials and components, or sufficient labor resources while we ramp up production to meet higher levels of demand, and if this trend continues, we may be unable to manufacture sufficient quantities of products on a timely basis. This could cause us to lose additional sales, incur additional costs, delay new product introductions or suffer harm to our reputation.

 

Our business could be negatively impacted if we fail to adequately protect our intellectual property rights or if third parties claim that we are in violation of their intellectual property rights.

 

We consider our intellectual property rights to be important assets, and seek to protect them through a combination of patent, trademark, copyright and trade secret laws, as well as licensing and confidentiality agreements. These protections may not be adequate to prevent third parties from using our intellectual property without our authorization, breaching any confidentiality agreements with us, copying or reverse engineering our products, or developing and marketing products that are substantially equivalent to or superior to our own. The unauthorized use of our intellectual property by others could reduce our competitive advantage and harm our business. Not only are intellectual property-related proceedings burdensome and costly, but they could span years to resolve and we might not ultimately prevail. We cannot guarantee that any patents, issued or pending, will provide us with any competitive advantage or will not be challenged by third parties. Moreover, the expiration of our patents may lead to increased competition with respect to certain products.

 

In addition, we cannot be certain that we do not or will not infringe third parties’ intellectual property rights. We currently are, and have previously been, subject to such third-party infringement claims, and may continue to be in the future. Any such claim, even if it is believed to be without merit, may be expensive and time-consuming to defend, subject us to damages, cause us to cease making, using or selling certain products that incorporate the disputed intellectual property, require us to redesign our products, divert management time and attention, and/or require us to enter into costly royalty or licensing arrangements.

 

We may incur costs and liabilities as a result of product liability claims.

 

We face a risk of exposure to current and future product liability claims alleging to arise from the use of our products and that may purportedly result in injury or other damage. Although we currently maintain product liability insurance coverage, we may not be able to obtain such insurance on acceptable terms in the future, if at all, or obtain insurance that will provide adequate coverage against potential claims. Product liability claims can be expensive to defend and can divert the attention of management and other personnel for long periods of time, regardless of the ultimate outcome. A significant unsuccessful product liability defense could have a material adverse effect on our financial condition and results of operations. In addition, we believe our business depends on the strong brand reputation we have developed. If our reputation is damaged, we may face difficulty in maintaining our market share and pricing with respect to some of our products, which could reduce our sales and profitability.

 

 
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Demand for the majority of our products is significantly affected by unpredictable power outage activity that can lead to substantial variations in, and uncertainties regarding, our financial results from period to period.

 

Sales of our products are subject to consumer buying patterns, and demand for the majority of our products is affected by power outage events caused by thunderstorms, hurricanes, ice storms, blackouts, public safety power shutoffs, and other power grid reliability issues. The impact of these outage events on our sales can vary depending on the location, frequency and severity of the outages. Sustained periods without major power disruptions can lead, and in the past have led, to reduced consumer awareness of the benefits of standby and portable generator products and can result and have previously resulted in reduced sales growth rates and excess inventory. There are smaller, more localized power outages that occur frequently that drive a baseline level of demand for back-up power solutions. The lack of major power outage events and fluctuations to the baseline levels of power outage activity are part of managing our business, and these fluctuations could have, and previously have had, an adverse effect on our net sales and profits. Despite their unpredictable nature, we believe power disruptions create awareness and accelerate adoption for our home standby products.

 

Demand for our products is significantly affected by durable goods spending by consumers and businesses, and other macroeconomic conditions.

 

Our business is affected by general economic conditions, and uncertainty or adverse changes, such as the prolonged downturn in U.S. residential investment and the impact of more stringent credit standards, have previously led and could lead again to a decline in demand for our products and pressure to reduce our prices. Our sales of light-commercial and industrial generators are affected by conditions in the non-residential construction sector and by the capital investment trends for small and large businesses and municipalities. If these businesses and municipalities cannot access credit markets or do not utilize discretionary funds to purchase our products as a result of the economy or other factors, our business could suffer and our ability to realize benefits from our strategy of increasing sales in the light-commercial and industrial sectors through, among other things, our focus on innovation and product development, including natural gas engine and modular technology, could be adversely affected. In addition, consumer confidence and home remodeling expenditures have a significant impact on sales of our residential products, and prolonged periods of weakness in consumer durable goods spending has previously had, and could again have a material impact on our business. We currently do not have any material contracts with our customers which call for committed volume, and we cannot guarantee that our current customers will continue to purchase our products at the same level, if at all. If general economic conditions or consumer confidence were to worsen, or if the non-residential construction sector or rate of capital investments were to decline, our net sales and profits would likely be adversely affected. Changes in government monetary or fiscal policies may negatively impact our results, including increases in interest rates which could negatively affect overall growth and impact sales of our products. Additionally, timing of capital spending by our national account customers can vary from quarter-to-quarter based on capital availability and internal capital spending budgets. Also, the availability of renewable energy mandates and investment tax credits and other subsidies can have an impact on the demand for energy storage systems. Our global operations are exposed to political and economic risks, commercial instability and events beyond our control in the countries in which we operate. Such risks or events may disrupt our supply chain and not enable us to produce products to meet customer demand.

 

The industry in which we compete is highly competitive, and our failure to compete successfully could adversely affect our results of operations and financial condition.

 

We operate in markets that are highly competitive. Some of our competitors have established brands and are larger in size or are divisions of large diversified companies which have substantially greater financial resources than we do. Some of our competitors may be willing to reduce prices and accept lower margins in order to compete with us. In addition, we could face new competition from large international or domestic companies with established brands that enter our end markets. Demand for our products may also be affected by our ability to respond to changes in design and functionality, to respond to downward pricing pressure, and to provide shorter lead times for our products than our competitors. If we are unable to respond successfully to these competitive pressures, we could lose market share, which could have an adverse impact on our results. For further information, see “Item 1—Business—Competition”.

 

 
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Our industry is subject to technological change, and our failure to continue developing new and improved products and to bring these products rapidly to market could have an adverse impact on our business.

 

New products, or refinements and improvements to our existing products, may have technical failures, delayed introductions, higher than expected production costs or may not be well accepted by our customers. If we are not able to anticipate, identify, develop and market high quality products in line with technological advancements that respond to changes in customer preferences, demand for our products could decline and our operating results could be adversely affected.

 

We rely on independent dealers and distribution partners, and the loss of these dealers and distribution partners, or of any of our sales arrangements with significant private label, national, retail or equipment rental customers, would adversely affect our business.

 

We depend on the services of independent distributors and dealers to sell our products and provide service and aftermarket support to our end customers. We also rely on our distribution channels to drive awareness for our product categories and our brands. In addition, we sell our products to end users through private label arrangements with leading home equipment, electrical equipment and construction machinery companies; arrangements with top retailers and equipment rental companies; and our direct national accounts with telecommunications and industrial customers. Our distribution agreements and any contracts we have with large national, retail and other customers are typically not exclusive, and many of the distributors with whom we do business offer competitors’ products and services. Impairment of our relationships with our distributors, dealers or large customers, loss of a substantial number of these distributors or dealers or of one or more large customers, or an increase in our distributors’ or dealers’ sales of our competitors’ products to our customers or of our large customers’ purchases of our competitors’ products could materially reduce our sales and profits. Also, our ability to successfully realize our growth strategy is dependent in part on our ability to identify, attract and retain new distributors at all layers of our distribution platform, including increasing the number of energy storage distributors, and we cannot be certain that we will be successful in these efforts. For further information, see “Item 1—Business—Distribution Channels and Customers”.

 

We are unable to determine the specific impact of changes in selling prices or changes in volumes or mix of our products on our net sales.

 

Because of the wide range of products that we sell, the level of customization for many of our products, the frequent rollout of new products, the different accounting systems utilized, and the fact that we do not apply pricing changes uniformly across our entire portfolio of products, we are unable to determine with specificity the effect of volume or mix changes or changes in selling prices on our net sales.

 

Policy changes affecting international trade could adversely impact the demand for our products and our competitive position.

 

Changes in government policies on foreign trade and investment can affect the demand for our products, impact the competitive position of our products or prevent us from being able to sell products in certain countries. Our business benefits from free trade agreements, and efforts to withdraw from, or substantially modify such agreements, in addition to the implementation of more restrictive trade policies, such as more detailed inspections, higher tariffs, import or export licensing requirements, exchange controls or new barriers to entry, could have a material adverse effect on our results of operations, financial condition or cash flows. For example, we are experiencing increased tariffs on certain of our products and product components. However, these tariffs have not ultimately had a material adverse effect on our results due to the implementation of various mitigation efforts in conjunction with our supply chain and end market partners.

 

 
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Risk Factors Related to the Oil and Gas Industry 

 

Oil and gas price fluctuations in the market may adversely affect the results of our operations.

 

Our profitability, cash flows and the carrying value of our oil and natural gas properties are highly dependent upon the market prices of oil and natural gas. A significant portion of our sales of oil and natural gas, if any, are made in the spot market, or pursuant to contracts based on spot market prices, and not pursuant to long-term, fixed-price contracts. Accordingly, the prices received for our oil and natural gas production are dependent upon numerous factors beyond our control. These factors include the level of consumer product demand, governmental regulations and taxes, the price and availability of alternative fuels, the level of foreign imports of oil and natural gas and the overall economic environment.

 

Historically, the oil and natural gas markets have proven cyclical and volatile as a result of factors that are beyond our control. Any additional declines in oil and natural gas prices or any other unfavorable market conditions could have a material adverse effect on our financial condition.

 

Actual quantities of recoverable oil and gas reserves and future cash flows from those reserves most likely will vary from our estimates.

 

Estimating accumulations of oil and gas is complex. The process relies on interpretations of available geological, geophysical, engineering and production data. The extent, quality and reliability of this data can vary. The process also requires certain economic assumptions, some of which are mandated by the SEC, such as oil and gas prices, drilling and operating expenses, capital expenditures, taxes and availability of funds. The accuracy of a reserve estimate is a function of:

 

·

the quality and quantity of available data;

 

 

 

·

the interpretation of that data;

 

 

 

·

the accuracy of various mandated economic assumptions; and

 

 

 

·

the judgment of the persons preparing the estimate.

 

Estimates of proved reserves prepared by others might differ materially from our estimates. Actual quantities of recoverable oil and gas reserves, future production, oil and gas prices, revenues, taxes, development expenditures and operating expenses most likely will vary from our estimates. Any significant variance could materially affect the quantities and net present value of our reserves. In addition, we may adjust estimates of proved reserves to reflect production history, results of exploration and development and prevailing oil and gas prices. Our reserves also may be susceptible to drainage by operators on adjacent properties.

 

Our operations will require significant expenditures of capital that may not be recovered.

 

We require significant expenditures of capital to locate and develop producing properties and to drill exploratory and exploitation wells. In conducting exploration, exploitation and development activities for a particular well, the presence of unanticipated pressure or irregularities in formations, miscalculations or accidents may cause our exploration, exploitation, development and production activities to be unsuccessful, potentially resulting in abandonment of the well. This could result in a total loss of our investment. In addition, the cost and timing of drilling, completing and operating wells is difficult to predict.

 

Compliance with, or breach of, environmental laws can be costly and could limit our operations.

 

Our operations will be subject to numerous and frequently changing laws and regulations governing the discharge of materials into the environment or otherwise relating to environmental protection. Any properties we might own for the exploration and production of oil and gas and the wastes disposed on these properties may be subject to the Comprehensive Environmental Response, Compensation and Liability Act, the Oil Pollution Act of 1990, the Resource Conservation and Recovery Act, the Federal Water Pollution Control Act, similar state laws, and similar Canadian laws. Under such laws, we could be required to remove or remediate previously released wastes or property contamination. Laws and regulations protecting the environment have generally become more stringent and may, in some cases, impose “strict liability” for environmental damage. Strict liability means that we may be held liable for damage without regard to whether we were negligent or otherwise at fault. Environmental laws and regulations may expose us to liability for the conduct of or conditions caused by others or for acts that were in compliance with all applicable laws at the time they were performed. Failure to comply with these laws and regulations may result in the imposition of administrative, civil and criminal penalties.

 

 
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Although we believe that our operations are in substantial compliance with existing requirements of governmental bodies, our ability to conduct continued operations is subject to satisfying applicable regulatory and permitting controls. Our current permits and authorizations and ability to get future permits and authorizations may be susceptible on a going forward basis, to increased scrutiny, greater complexity resulting in increased costs, or delays in receiving appropriate authorizations.

 

We are subject to changing laws and regulations and other governmental actions that can significantly and adversely affect our business.

 

Federal, state, local, territorial and foreign laws and regulations relating to tax increases and retroactive tax claims, disallowance of tax credits and deductions, expropriation or nationalization of property, mandatory government participation, cancellation or amendment of contract rights, and changes in import and export regulations, limitations on access to exploration and development opportunities, as well as other political developments may adversely affect our operations.

 

The oil and gas we produce may not be readily marketable at the time of production.

 

Crude oil, natural gas, condensate and other oil and gas products are generally sold to other oil and gas companies, government agencies and other industries. The availability of ready markets for oil and gas that we might discover and the prices obtained for such oil and gas depend on many factors beyond our control, including:

 

 

·

the extent of local production and imports of oil and gas,

 

 

 

 

·

the proximity and capacity of pipelines and other transportation facilities,

 

 

 

 

·

fluctuating demand for oil and gas,

 

 

 

 

·

the marketing of competitive fuels, and

 

 

 

 

·

the effects of governmental regulation of oil and gas production and sales.

 

Natural gas associated with oil production is often not marketable due to demand or transportation limitations and is often flared at the producing well site. Pipeline facilities do not exist in certain areas of exploration and, therefore, we intend on utilizing trucks to transport any oil that is discovered.

 

The price of oil and natural gas has historically been volatile. If it were to decrease substantially, our projections, budgets and revenues would be adversely affected, potentially forcing us to make changes in our operations.

 

Our future financial condition, results of operations and the carrying value of any oil and natural gas interests we acquire will depend primarily upon the prices paid for oil and natural gas production. Oil and natural gas prices historically have been volatile, during calendar 2021 have significantly decreased, and likely will continue to be volatile in the future, especially given current world geopolitical conditions. Our cash flows from operations are highly dependent on the prices that we receive for oil and natural gas. This price volatility also affects the amount of our cash flows available for capital expenditures and our ability to borrow money or raise additional capital. The prices for oil and natural gas are subject to a variety of additional factors that are beyond our control. These factors include:

 

 

·

the level of consumer demand for oil and natural gas;

 

 

 

 

·

the domestic and foreign supply of oil and natural gas;

 

 

 

 

·

the ability of the members of the Organization of Petroleum Exporting Countries (“OPEC”) to agree to and maintain oil price and production controls;

 

 

 

 

·

the price of foreign oil and natural gas;

 

 

 

 

·

domestic governmental regulations and taxes;

 

 

 

 

·

the price and availability of alternative fuel sources;

 

 

 

 

·

weather conditions;

 

 

 

 

·

market uncertainty due to political conditions in oil and natural gas producing regions, including the Middle East; and

 

 

 

 

·

worldwide economic conditions.

 

 
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These factors as well as the volatility of the energy markets generally make it extremely difficult to predict future oil and natural gas price movements with any certainty. Declines in oil and natural gas prices affect our revenues, and could reduce the amount of oil and natural gas that we can produce economically. Accordingly, such declines could have a material adverse effect on our financial condition, results of operations, oil and natural gas reserves and the carrying values of our oil and natural gas properties. If the oil and natural gas industry experiences significant price declines, we may be unable to make planned expenditures, among other things. If this were to happen, we may be forced to abandon or curtail our business operations, which would cause the value of an investment in us to decline in value, or become worthless.

 

Downturns and volatility in global economies and commodity and credit markets may materially adversely affect our business, results of operations and financial condition.

 

Viking’s results of operations are materially adversely affected by the conditions of the global economies and the credit, commodities and stock markets. Among other things, Viking has recently been adversely impacted, and anticipates continuing to be adversely impacted, due to a global reduction in consumer demand for oil and gas, and consumer lack of access to sufficient capital to continue to operate their businesses or to operate them at prior levels. In addition, a decline in consumer confidence or changing patterns in the availability and use of disposable income by consumers can negatively affect the demand for oil and gas and as a result Viking’s results of operations.

 

Because of the inherent dangers involved in oil and gas operations, there is a risk that we may incur liability or damages as we conduct our business operations, which could force us to expend a substantial amount of money in connection with litigation and/or a settlement.

 

The oil and natural gas business involve a variety of operating hazards and risks such as well blowouts, pipe failures, casing collapse, explosions, uncontrollable flows of oil, natural gas or well fluids, fires, spills, pollution, releases of toxic gas and other environmental hazards and risks. These hazards and risks could result in substantial losses to us from, among other things, injury or loss of life, severe damage to or destruction of property, natural resources and equipment, pollution or other environmental damage, cleanup responsibilities, regulatory investigation and penalties and suspension of operations. In addition, we may be liable for environmental damages caused by previous owners of property purchased and leased by us. As a result, substantial liabilities to third parties or governmental entities may be incurred, the payment of which could reduce or eliminate the funds available for exploration, development or acquisitions or result in the loss of our properties and/or force us to expend substantial monies in connection with litigation or settlements. We currently have no insurance to cover such losses and liabilities, and even if insurance is obtained, there can be no assurance that it will be adequate to cover any losses or liabilities. We cannot predict the availability of insurance or the availability of insurance at premium levels that justify our purchase. The occurrence of a significant event not fully insured or indemnified against could materially and adversely affect our financial condition and operations. We may elect to self-insure if management believes that the cost of insurance, although available, is excessive relative to the risks presented. In addition, pollution and environmental risks generally are not fully insurable. The occurrence of an event not fully covered by insurance could have a material adverse effect on our financial condition and results of operations, which could lead to any investment in us becoming worthless.

 

We may encounter operating hazards that may result in substantial losses.

 

We will be subject to operating hazards normally associated with the exploration and production of oil and gas, including hurricanes, blowouts, explosions, oil spills, cratering, pollution, earthquakes, labor disruptions and fires. The occurrence of any such operating hazards could result in substantial losses to us due to injury or loss of life and damage to or destruction of oil and gas wells, formations, production facilities or other properties. We do not maintain insurance coverage for matters that may adversely affect our operations, including war, terrorism, nuclear reactions, government fines, treatment of waste, blowout expenses, wind damage and business interruptions. Losses and liabilities arising from uninsured or underinsured events could reduce our revenues or increase our costs. There can be no assurance that any insurance we do obtain will be adequate to cover losses or liabilities associated with operational hazards. We cannot predict the continued availability of insurance, or its availability at premium levels that justify its purchase.

 

 
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We face strong competition from larger oil and gas companies, which could result in adverse effects on our business.

 

The petroleum exploration and production business is highly competitive. Many of our competitors have substantially larger financial resources, staffs and facilities. Our competitors in the United States and Canada include numerous major oil and gas exploration and production companies. Additionally, other companies engaged in our line of business may compete with us from time to time in obtaining capital from investors. Competitors include larger companies which, in particular, may have access to greater resources, may be more successful in the recruitment and retention of qualified employees and may conduct their own refining and petroleum marketing operations, which may give them a competitive advantage. Actual or potential competitors may be strengthened through the acquisition of additional assets and interests. Additionally, there are numerous companies focusing their resources on creating fuels and/or materials which serve the same purpose as oil and gas, but are manufactured from renewable resources.

 

Our estimates of the volume of reserves could have flaws, or such reserves could turn out not to be commercially extractable. as a result, our future revenues and projections could be incorrect.

 

Estimates of reserves and of future net revenues prepared by different petroleum engineers may vary substantially depending, in part, on the assumptions made and may be subject to adjustment either up or down in the future. Our actual amounts of production, revenue, taxes, development expenditures, operating expenses, and quantities of recoverable oil and gas reserves may vary substantially from the estimates. Oil and gas reserve estimates are necessarily inexact and involve matters of subjective engineering judgment. In addition, any estimates of our future net revenues and the present value thereof are based on assumptions derived in part from historical price and cost information, which may not reflect current and future values, and/or other assumptions made by us that only represent our best estimates. If these estimates of quantities, prices and costs prove inaccurate, we may be unsuccessful in expanding our oil and gas reserves base with our acquisitions. Additionally, if declines in and instability of oil and gas prices occur, then write downs in the capitalized costs associated with any oil and gas assets we obtain may be required. Because of the nature of the estimates of our reserves and estimates in general, we can provide no assurance that reductions to our estimated proved oil and gas reserves and estimated future net revenues will not be required in the future, and/or that our estimated reserves will be present and/or commercially extractable. If our reserve estimates are incorrect, the value of our common stock could decrease and we may be forced to write down the capitalized costs of our oil and gas properties.

 

Our business will suffer if we cannot obtain or maintain necessary licenses.

 

Our operations will require licenses, permits and in some cases renewals of licenses and permits from various governmental authorities. Our, or our partners’, ability to obtain, sustain or renew such licenses and permits on acceptable terms is subject to change in regulations and policies and to the discretion of the applicable governments, among other factors. Our inability to obtain, or our loss of or denial of extension of, any of these licenses or permits could hamper our ability to produce revenues from our operations.

 

Our operations may be subject to various litigation matters in the future that could have an adverse effect on our business.

 

From time to time, we may become a defendant in various litigation matters. The nature of our operations exposes us to further possible litigation claims, including litigation relating to climate change in the future. There is risk that any matter in litigation could be adversely decided against us regardless of our belief, opinion and position, which could have a material adverse effect on our financial condition and results of operations. Litigation is highly costly and the costs associated with defending litigation could also have a material adverse effect on our financial condition.

 

 
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We may be affected by global climate change or by legal, regulatory, or market responses to such change.

 

The growing political and scientific sentiment is that increased concentrations of carbon dioxide and other greenhouse gases in the atmosphere are influencing global weather patterns. Changing weather patterns, along with the increased frequency or duration of extreme weather conditions, could impact the availability or increase the cost to produce our products. Additionally, the sale of our products can be impacted by weather conditions.

 

Concern over climate change, including global warming, has led to legislative and regulatory initiatives directed at limiting greenhouse gas emissions. For example, proposals that would impose mandatory requirements on greenhouse gas emissions continue to be considered by policy makers in the provinces, states or territories where we operate. Laws enacted that directly or indirectly affect our oil and gas production could impact our business and financial results.

 

If oil or natural gas prices decrease or drilling efforts are unsuccessful, we may be required to record write-downs of our oil and natural gas properties.

 

We could be required to write down the carrying value of certain of our oil and natural gas properties. Write-downs may occur when oil and natural gas prices are low, or if we have downward adjustments to our estimated proved reserves, increases in our estimates of operating or development costs, deterioration in drilling results or mechanical problems with wells where the cost to re-drill or repair is not supported by the expected economics.

 

Accounting rules require that the carrying value of oil and natural gas properties be periodically reviewed for possible impairment. Under the full cost method of accounting, capitalized oil and natural gas property costs less accumulated depletion, net of deferred income taxes, may not exceed a ceiling amount equal to the present value, discounted at 10%, of estimated future net revenues from proved oil and natural gas reserves plus the cost of unproved properties not subject to amortization (without regard to estimates of fair value), or estimated fair value, if lower, of unproved properties that are subject to amortization. Should capitalized costs exceed this ceiling, which is tested on a quarterly basis, an impairment is recognized. While an impairment charge reflects our long-term ability to recover an investment, reduces our reported earnings and increases our leverage ratios, it does not impact cash or cash flow from operating activities.

 

Our future success depends on our ability to replace reserves that are produced.

 

Because the rate of production from oil and natural gas properties generally declines as reserves are depleted, our future success depends upon our ability to economically find or acquire and produce additional oil and natural gas reserves. Except to the extent that we acquire additional properties containing proved reserves, conduct successful exploration and development activities, or, through engineering studies, identify additional behind-pipe zones or secondary recovery reserves, our proved reserves will decline as our reserves are produced. Future oil and natural gas production, therefore, is highly dependent upon our level of success in acquiring or finding additional reserves that are economically recoverable. We cannot assure you that we will be able to find or acquire and develop additional reserves at an acceptable cost.

 

We may acquire significant amounts of unproved property to further our development efforts. Development and exploratory drilling and production activities are subject to many risks, including the risk that no commercially productive reservoirs will be discovered. We may acquire both proved and producing properties as well as undeveloped acreage that we believe will enhance growth potential and increase our earnings over time. However, we cannot assure you that all of these properties will contain economically viable reserves or that we will not abandon our initial investments. Additionally, we cannot assure you that unproved reserves or undeveloped acreage that we acquire will be profitably developed, that new wells drilled on our properties will be productive or that we will recover all or any portion of our investments in our properties and reserves.

 

Our lack of industry and geographical diversification may increase the risk of an investment in our company.

 

We operate in the oil and gas sector and our leases are located in North America in Kansas, Texas, Louisiana, and Mississippi. This lack of geographic diversification may make our holdings more sensitive to economic developments within a regional area, which may result in reduced rates of return or higher rates of default than might be incurred with a company that is more geographically diverse.

 

 
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Our business depends on oil and natural gas transportation and processing facilities and other assets that are owned by third parties.

 

The marketability of our oil and natural gas depends in part on the availability, proximity and capacity of pipeline systems, processing facilities, oil trucking fleets and rail transportation assets owned by third parties. The lack of available capacity on these systems and facilities, whether as a result of proration, physical damage, scheduled maintenance or other reasons, could result in the delay or discontinuance of development plans for our properties. The curtailments arising from these and similar circumstances may last from a few days to several months.

 

Our leasehold acreage is subject to leases that will expire over the next several years unless production is established or maintained or the leases are extended.

 

Some of our acreage is currently held by production or held by operations, but some is not. Unless production in paying quantities is established or operations are commenced on units containing these latter leases during their terms, those leases may expire. Likewise, if we are unable to maintain production on acreage held by production or operations, those leases may expire. If our leases expire and we are unable to renew the leases, we will lose our right to develop or utilize the related properties.

 

Deficiencies of title to our leased interests could significantly affect our financial condition.

 

We, or our partners, often incur the expense of a title examination prior to acquiring oil and natural gas leases or undivided interests in oil and natural gas leases or other developed rights. If an examination of the title history of a property reveals that an oil or natural gas lease or other developed rights have been purchased in error from a person who is not the owner of the mineral interest desired, our interest would substantially decline in value or be eliminated. In such cases, the amount paid for such oil or natural gas lease or leases or other developed rights may be lost.

 

Risk Factors Related to our Operations

 

We have not established an effective system of internal control over our financial reporting, and if we fail to maintain such internal control, we may not be able to accurately report our financial results, and current and potential stockholders may lose confidence in our financial reporting.

 

We have not established and maintained adequate and effective internal control over financial reporting that would provide reasonable assurance regarding the reliability of our financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles. We are, however, required to evaluate the effectiveness of our internal controls and to disclose any changes and material weaknesses in those internal controls.

 

Any failure to maintain adequate internal controls could adversely impact our ability to report our financial results on a timely and accurate basis. If our financial statements are not accurate, investors may not have a complete understanding of our operations. Likewise, if our financial statements are not filed on a timely basis as required by the SEC and the Capital Market, we could face severe consequences from those authorities. In either case, there could result a material adverse effect on our business. Ineffective internal controls could also cause investors to lose confidence in our reported financial information, which could have a negative effect on the trading price of our stock.

 

Need for Additional Financing

 

The Company currently has limited funds and the lack of additional funds may negatively impact the Company’s ability to pursue its business strategy to conduct operations in the oil and gas industry and to acquire, invest in and/or provide professional advisory and consulting services to companies undergoing or anticipating periods of rapid growth. Even if the Company’s funds prove to be sufficient to provide such services or to acquire an interest in, or complete a transaction with, an entity, the Company may not have enough capital to exploit the opportunity. The ultimate success of the Company may depend upon its ability to raise additional capital. The Company may investigate the availability, source, or terms that might govern the acquisition of additional capital but will not do so until it determines a need for additional financing. If additional capital is needed, there is no assurance that funds will be available from any source or, if available, that they can be obtained on terms acceptable to the Company. If not available, the Company’s operations will be limited to those that can be financed with its modest capital.

 

 
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Regulation of Penny Stocks

 

The Company’s securities may be subject to a SEC rule that imposes special sales practice requirements upon broker-dealers who sell such securities to persons other than established customers or accredited investors. For purposes of the rule, the phrase “accredited investors” means, in general terms, institutions with assets in excess of $5,000,000, or individuals having a net worth, or joint net worth with spouse, in excess of $1,000,000 excluding the value of the person’s primary residence or having an annual income that exceeds $200,000 (or that, when combined with a spouse’s income, exceeds $300,000). For transactions covered by the rule, the broker-dealer must make a special suitability determination for the purchaser and receive the purchaser’s written agreement to the transaction prior to the sale. Consequently, the rule may affect the ability of broker-dealers to sell the Company’s securities and also may affect the ability of purchasers in an offering to sell their securities in any market that might develop.

 

In addition, the SEC has adopted a number of rules to regulate “penny stocks.” Such rules include Rules 3a51-1, 15g-1, 15g-2, 15g-3, 15g-4, 15g-5, 15g-6, 15g-7, and 15g-9 under the Securities Exchange Act of 1934, as amended or the Exchange Act. Because the securities of the Company may constitute “penny stocks” within the meaning of the rules, the rules would apply to the Company and to its securities. The rules may further affect the ability of owners of shares to sell the securities of the Company in any market that might develop for them.

 

Shareholders should be aware that, according to SEC, the market for penny stocks has suffered in recent years from patterns of fraud and abuse. Such patterns include (i) control of the market for the security by one or a few broker-dealers that are often related to the promoter or issuer; (ii) manipulation of prices through prearranged matching of purchases and sales and false and misleading press releases; (iii) “boiler room” practices involving high-pressure sales tactics and unrealistic price projections by inexperienced sales persons; (iv) excessive and undisclosed bid-ask differentials and markups by selling broker-dealers; and (v) the wholesale dumping of the same securities by promoters and broker-dealers after prices have been manipulated to a desired level, along with the resulting inevitable collapse of those prices and with consequent investor losses.

 

Lack of Operating History

 

Due to the numerous risks inherent in the implementation of a new business emphasis and plan, the Company must be regarded as a new or start-up venture with all of the unforeseen costs, expenses, problems, and difficulties to which such ventures are subject.

 

No Assurance of Success or Profitability

 

There is no assurance that the Company will be able to successfully implement its business plan and provide the contemplated services to its client companies. Even if the Company is successful in providing its services to its client companies, there is a risk that it will not generate revenues or profits, or that the market price of the Company’s common stock will increase.

 

Impracticality of Exhaustive Investigation

 

The Company has limited operating funds, and this makes it impracticable for the Company to conduct a complete and exhaustive investigation and analysis of its opportunities. Decisions will therefore likely be made without detailed geotechnical reports, feasibility studies, independent analysis, market surveys and the like, which, if the Company had more funds available to it, would be desirable. The Company will be particularly dependent in making decisions upon information provided by third parties with interests in the transaction. A significant portion of the Company’s available funds could be expended for investigative expenses and other preliminary expenses, and potential profits could therefore be lessened.

 

 
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Reliance upon Financial Statements

 

The Company generally will require audited financial statements from companies with which it seeks to enter into a contractual arrangement. In cases where no audited financials are available, the Company will have to rely upon interim period unaudited information received from a prospective client company’s management that has not been verified by outside auditors. The lack of the type of independent verification which audited financial statements would provide increases the risk that the Company, in evaluating a contractual arrangement with such a company, will not have the benefit of full and accurate information about the financial condition and recent interim operating history of that company. This risk increases the prospect that the contractual arrangement with such a company might prove to be an unfavorable one for the Company or the holders of the Company’s securities.

 

Moreover, the Company will be subject to the reporting provisions of the Exchange Act, and thus will be required to furnish certain information about significant contractual arrangements, including audited financial statements for any business with which it enters into a contractual arrangement for control. Consequently, prospects that do not typically have, or are unable to provide reasonable assurances that they will be able to obtain, the required audited statements would not be considered by the Company to be appropriate acquisition targets so long as the reporting requirements of the Exchange Act are applicable. Should the Company, during the time it remains subject to the reporting provisions of the Exchange Act, acquire control of an entity for which audited financial statements prove to be unobtainable, the Company would be exposed to enforcement actions by the SEC and to corresponding administrative sanctions, including permanent injunctions against the Company and its management. The legal and other costs of defending an SEC enforcement action would have material, adverse consequences for the Company and its business. The imposition of administrative sanctions would subject the Company to further adverse consequences. In addition, the lack of audited financial statements would prevent the securities of the Company from becoming eligible for listing on NASDAQ, or on any existing stock exchange.

 

Moreover, the lack of such financial statements is likely to discourage broker-dealers from becoming or continuing to serve as market makers in the securities of the Company. Without audited financial statements, the Company would almost certainly be unable to offer securities under a registration statement pursuant to the Securities Act of 1933 or the Securities Act, and the ability of the Company to raise capital would be significantly limited until such financial statements were to become available.

 

Other Regulation

 

A contractual arrangement for acquisition of equity ownership of or control may be of a company that is subject to rules and regulation by federal, state, local or foreign authorities. Compliance with such rules and regulations can be expected to be a time-consuming, expensive process and may limit other opportunities of the Company.

 

Lack of Continuity in Management

 

The Company does not currently have employment agreements with its Chief Executive Officer and President, Mr. Doris, and its Chief Financial Officer, Mr. Barker. As a result, there is no assurance that Mr. Doris or Mr. Barker will continue to be associated with the Company in the future. In connection with future business opportunities, it is possible that Mr. Doris or Mr. Barker may resign as an officer and director of the Company subject to compliance with Section 14f of the Exchange Act. Any decision to resign would occur without the vote or consent of the stockholders of the Company.

 

The Company is required to indemnify its Officers and Directors

 

Nevada law provides for the indemnification of the Company’s directors, officers, employees, and agents, under certain circumstances, against attorney’s fees and other expenses incurred by them in any litigation to which they become a party arising from their association with or activities on behalf of the Company. If the Company were called upon to indemnify an officer or director, then the portion of its available funds expended for such purpose would reduce the amount otherwise available for the Company’s business. This indemnification obligation and the resultant costs associated with indemnification may also discourage our Company from bringing a lawsuit against directors and officers for breaches of their fiduciary duties and may similarly discourage the filing of derivative litigation by our shareholders against our directors and officers even though such actions, if successful, might otherwise benefit our company and shareholders.

 

 
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The Company would bear the expenses of such litigation for any of its directors, officers, employees, or agents, upon such person’s promise to repay the Company if it is ultimately determined that any such person shall not have been entitled to indemnification. This indemnification policy could result in substantial expenditures by the Company which it may be unable to recoup.

 

We may be dependent upon outside advisors.

 

To supplement the Company’s officers, directors and principal shareholders, the Company may be required to employ accountants, technical experts, appraisers, attorneys, or other outside consultants or advisors. The selection of any such advisors will be made by the Company without any input from stockholders. Furthermore, it is anticipated that such persons may be engaged on an “as needed” basis without a continuing fiduciary or other obligation to the Company. In the event the Company considers it necessary to hire outside advisors, such persons may be affiliates of the Company.

 

We do not anticipate paying any cash dividends to our common shareholders.

 

We presently do not anticipate that we will pay dividends on any of our common stock in the foreseeable future. If payment of dividends does occur at some point in the future, it would be contingent upon our revenues and earnings, if any, capital requirements, and general financial condition. The payment of any common stock dividends will be within the discretion of our Board of Directors. We presently intend to deploy available capital to execute our business plan; accordingly, we do not anticipate the declaration of any dividends for common stock in the foreseeable future.

 

The Company’s CEO, James Doris, holds preferred stock which could afford him enough shareholder votes to control the Company.

 

The Company’s CEO and director, James Doris, holds 28,092 shares of the Company’s Series C Preferred Stock, with each share of preferred stock entitling the holder, after July 1, 2022 (assuming a combination with Camber Energy has not occurred by that date), to 37,500 votes on all matters submitted to the vote of the Company’s security holders. By virtue of such preferred stock ownership, following July 1, 2022, Mr. Doris could control the election of the members of the Company’s Board of Directors and generally exercise control over the affairs of the Company. Such concentration of ownership could have the effect of delaying, deterring or preventing a change in control of the Company that might otherwise be beneficial to stockholders. There can be no assurance that conflicts of interest will not arise with respect to Mr. Doris’s ownership of the preferred stock, or that such conflicts will be resolved in a manner favorable to the Company.

 

Our outstanding securities may become freely tradable pursuant to Rule 144 and may have a depressive effect on the price of the shares of our common stock.

 

We have, outstanding, a large number of shares of common stock. Many of these securities are currently issued with a “restrictive legend” and characterized as “restricted securities” within the meaning of Rule 144 (“Rule 144”) promulgated under the Securities Act of 1933, as amended (the “Securities Act”). As restricted securities, these securities may be resold only pursuant to an effective registration statement or under the requirements of Rule 144 or other applicable exemptions from registration under the Securities Act and as required under applicable state securities laws. Rule 144 provides in essence that once restricted securities have been held for a period of at least six months and the other requirements in the rule have been satisfied, holders of the securities may resell their securities without registration or restriction on transfer. As many of our outstanding shares of common stock have been held by their holders in excess of six months, such holders may be able to resell their shares of common stock into the market without restriction pursuant to Rule 144. Those resales could have a depressive effect upon our stock price.

 

 
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The outbreak of the coronavirus may negatively impact demand for oil and natural gas and our business, results of operations and financial condition.

 

In December 2019, a novel strain of coronavirus was reported to have surfaced in Wuhan, China, which spread in China and is continuing to spread throughout the United States and other parts of the world. On January 30, 2020, the World Health Organization declared the outbreak of the coronavirus disease (COVID-19) a “Public Health Emergency of International Concern.” On January 31, 2020, U.S. Health and Human Services Secretary Alex M. Azar II declared a public health emergency for the United States to aid the U.S. healthcare community in responding to COVID-19, and on March 11, 2020, the World Health Organization characterized the outbreak as a “pandemic”. The significant outbreak of COVID-19 has resulted in a widespread health crisis that could adversely affect the economies and financial markets worldwide, and could adversely affect demand for oil and natural gas and our business, results of operations and financial conditions. The ultimate extent of the impact of any epidemic, pandemic or other health crisis on demand for oil and natural gas and our business, financial condition and results of operations will depend on future developments, which are highly uncertain and cannot be predicted, including new information that may emerge concerning the severity of such epidemic, pandemic or other health crisis and actions taken to contain or prevent their further spread, among others. These and other potential impacts of an epidemic, pandemic or other health crisis, such as COVID-19, could therefore materially and adversely affect demand for oil and natural gas and our business, financial condition and results of operations.

 

The staff of the SEC’s Division of Enforcement notified Viking that the Staff had made a preliminary determination to recommend that the SEC file an enforcement action against Viking, as well as against its CEO and its CFO, for alleged violation so securities laws.

 

In April of 2019, the staff (the “Staff”) of the SEC’s Division of Enforcement notified Viking that the Staff had made a preliminary determination to recommend that the SEC file an enforcement action against Viking, as well as against its CEO and its CFO, for alleged violations of Section 17(a) of the Securities Act and Section 10(b) of the Exchange Act and Rule 10b-5 thereunder during the period from early 2014 through late 2016. The Staff’s notice was not a formal allegation or a finding of wrongdoing by Viking, and Viking has communicated with the Staff regarding its preliminary determination. Viking believes it has adequate defenses and intends to vigorously defend any enforcement action that may be initiated by the SEC. However, the defense of an action filed by the SEC against Viking, its CEO and/or CFO, could take resources away from the operations of Viking, divert management attention, or potential result in penalties, fines or sanctions, which could materially adversely affect Viking or the value of its securities.

 

If we lose the services of our Chief Executive Officer, our operations could be disrupted, and our business could be harmed.

 

We rely heavily on the day-to-day involvement of our CEO, James Doris, in managing the Company’s affairs. Mr. Doris is an integral part of all material elements of our existing operations and immediate growth initiatives. We do not have a long-term employment or other agreement with Mr. Doris. If he ceases to be involved with us for any reason, our operations would likely be disrupted, and our business would likely be harmed.

 

We only own approximately 60.5% of Simson-Maxwell, and other Simson-Maxwell stakeholders are able to exercise some control over its operations.

 

We do not own 100% of Simson-Maxwell, but rather we own approximately 60.5% of Simson-Maxwell’s issued and outstanding shares. We are a party to a Shareholders’ Agreement regarding the ownership and governance of Simson-Maxwell, and although we are entitled to elect the majority of the directors of Simson-Maxwell, we have to obtain approval from at least one other shareholder of Simson-Maxwell in connection with the following matters:

 

 
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·

any fundamental change to the corporate structure of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell if such fundamental change is dilutive to the existing shareholders, including without limitation, in respect of each such entity: any amendment, modification, repeal or other variation to its articles, any amendment to its authorized share capital, or any proposal to create, reclassify, re-designate, subdivide, consolidate, or otherwise change any shares (whether issued or unissued) or partnership units, as the case may be;

 

 

 

 

·

the issuance of any shares in the capital of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell or any securities, warrants, options or rights convertible into, exchangeable for, or carrying the right to subscribe for or purchase, shares in the capital of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell, as the case may be, if such issuance is dilutive to the existing shareholders;

 

 

 

 

·

the redemption or purchase for cancellation of any shares in the capital of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell, or any other return of capital by the Simson-Maxwell and/or any subsidiary of Simson-Maxwell, other than any purchase of shares in accordance with the Shareholders’ Agreement;

 

 

 

 

·

the conversion, exchange, reclassification, re-designation, subdivision, consolidation, or other change of or to any shares in the capital of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell if any such action is dilutive to the existing shareholders;

 

 

 

 

·

the acquisition or commencement of any business other than Simson-Maxwell’s current business or the entering into of any amalgamation, merger, partnership, joint venture, or other combination, or any agreement with respect to any of the foregoing, with any person or business by the Simson-Maxwell and/or any subsidiary of Simson-Maxwell if any such action is dilutive to the existing shareholders;

 

 

 

 

·

any dissolution, liquidation, or winding-up of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell or other distribution of the assets of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell for the purpose of winding-up its affairs, whether voluntary or involuntary, except where such dissolution, liquidation, or winding-up or other distribution is done voluntarily by the Simson-Maxwell and/or any subsidiary of Simson-Maxwell in order to reorganize its corporate structure, provided that the board of directors of Simson-Maxwel determines (without inquiring into or giving effect to the personal circumstances of any individual shareholder) that the interests of no one shareholder shall be disproportionately adversely affected vis-à-vis the interests of any other shareholder by such reorganization;

 

 

 

 

·

any declaration or payment of dividends by the Simson-Maxwell or other similar payment or distribution by the Simson-Maxwell to all of the shareholders, except for payment or distribution to all common shareholders or the payment of dividends on any issued preferred shares as required under their terms;

 

 

 

 

·

any sale, proposed sale, lease, exchange, or other disposition of all or a substantial portion of the property, assets, or business of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell, other than in the ordinary course of business;

 

 

 

 

·

any provision of any guarantee, indemnity, or other financial support by the Simson-Maxwell and/or any subsidiary of Simson-Maxwell;

 

 

 

 

·

any transaction not in the ordinary course of business between the Simson-Maxwell and/or any subsidiary of Simson-Maxwell and any person not dealing at arm’s length with the Simson-Maxwell and/or any subsidiary of Simson-Maxwell or any of the shareholders. For the avoidance of doubt, entering into employment agreements with employees, hiring decisions, and compensation arrangements are excluded from this provision; or

 

 

 

 

·

any change in the registered office of the Simson-Maxwell and/or any subsidiary of Simson-Maxwell.

 

Profitability & Expansion initiatives at Simson-Maxwell are not guaranteed.

 

The Company’s majority-owned subsidiary, Simson-Maxwell, provides power generation products, services and custom energy solutions to commercial and industrial clients, primarily in Canada. Simson-Maxwell is not currently operating at a profit and the Company’s objective is to assist Simson-Maxwell with becoming profitable and expanding Simson-Maxwell’s business throughout North America. There can be no assurance either will occur as both initiatives are subject to a number of risks and influences, including several beyond the Company’s control.

 

The Camber Energy merger may not ever be consummated.

 

There is no guaranty we will complete the Merger with Camber Energy. If the Merger is not consummated, we intend to up-list directly to a national stock exchange, but there is no guaranty any such up-listing will occur.

 

 
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As at the date hereof, Camber Energy owns approximately 60.9% of our outstanding shares of common stock, and as such has significant influence over matters requiring the approval of our stockholders. Further, pursuant to an existing agreement between the Company and Camber Energy, if at any time until July 1, 2022, the Company issues shares of its common stock to one or more persons such that Camber Energy’s percentage ownership of the Company’s issued and outstanding common stock is less than 51%, the Company is obligated to issue additional shares of common stock to Camber Energy to ensure that Camber Energy owns at least 51% of the issued and outstanding common stock of the Company. This adjustment entitlement, which expires on July 1, 2022, may, among other things, limit the Company’s ability to raise capital.

 

Changes to the management, ownership and/or capitalization of Camber Energy may influence how Camber Energy manages or otherwise deals with its ownership of shares of common stock of the Company. Camber Energy’s interests may not always be aligned with the interests of the Company.

 

We have guaranteed Camber Energy’s indebtedness to Camber Energy’s senior secured lender, and we have executed security agreements to secure such guaranty. If there is a default under any of the promissory notes issued by Camber Energy in favor of its senior secured lender, we may be forced to pay amounts due to the lender pursuant to those Camber Energy promissory notes, and we may not have sufficient resources on hand to satisfy those obligations.

 

Because of the unique difficulties and uncertainties inherent in technology development, we face a risk of not being able to capitalize on our license or ownership of intellectual property.

 

Potential investors should be aware of the difficulties normally encountered by companies developing new technology and the high rate of failure of such enterprises. The likelihood of our successful ability to commercialize intellectual property we own or license must be considered in light of the problems, expenses, difficulties, complications and delays encountered in connection with the development of new technology with limited personnel and financial means. These potential problems include, but are not limited to, unanticipated technical problems that extend the time and cost of product development, or unanticipated problems with the operation of the technology.

 

Technology development involves significant time and expense and can be uncertain.

 

The development of technology associated with our licensed or owned intellectual property will be costly, complex and time-consuming. Any investment into technology development and commercialization often involves a long wait until a return, if any, is achieved on such investment. We plan to make investments in research and development relating to our owned and licensed intellectual property and technology. Investments in new technology and processes are inherently speculative.

 

Successful technical development of technologies associated with intellectual property does not guarantee successful commercialization.

 

We may successfully complete the technical development of technologies associated with our owned or licensed intellectual property, but we may still fail to commercialize that technology at scale or at a cost attractive to the target industries. Our success will depend largely on our ability to prove the capabilities and cost-effectiveness of the developed technology. Upon demonstration, the technology may not have the capabilities they were designed to have or that we believed they would have, or they may be more expensive than anticipated. Furthermore, even if we do successfully demonstrate the technology’s capabilities, potential customers may be more comfortable doing business with a larger, more established, more proven company than us. Moreover, competing technologies may prevent us from gaining wide market acceptance of the technology. Significant revenue from new technology investments may not be achieved for a number of years, if at all.

 

 
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If we fail to protect our intellectual property rights, we could lose our ability to compete in the market.

 

Our intellectual property and proprietary rights are important to our ability to remain competitive and for the success of our products and our business. Our intellectual property rights may be challenged, invalidated or circumvented by third parties. We may not be able to prevent the unauthorized disclosure or use of our technical knowledge or other trade secrets by employees or competitors. Furthermore, our competitors may independently develop technologies and products that are substantially equivalent or superior to our technologies and/or products, which could result in decreased revenues. Moreover, the laws of foreign countries may not protect our intellectual property rights to the same extent as the laws of the U.S. Litigation may be necessary to enforce our intellectual property rights which could result in substantial costs to us and substantial diversion of management attention. If we do not adequately protect our intellectual property, our competitors could use it to enhance their products. Our inability to adequately protect our intellectual property rights could adversely affect our business and financial condition, and the value of our brand and other intangible assets.

 

Other companies may claim that we infringe their intellectual property, which could materially increase our costs and harm our ability to generate future revenue and profit.

 

We do not believe that we infringe the proprietary rights of any third party, but claims of infringement are becoming increasingly common, and third parties may assert infringement claims against us. It may be difficult or impossible to identify, prior to receipt of notice from a third party, the trade secrets, patent position or other intellectual property rights of a third party, either in the United States or in foreign jurisdictions. Any such assertion may result in litigation or may require us to obtain a license for the intellectual property rights of third parties. If we are required to obtain licenses to use any third-party technology, we would have to pay royalties, which may significantly reduce any profit on our products. In addition, any such litigation could be expensive and disruptive to our ability to generate revenue or enter into new market opportunities. If any of our products were found to infringe other parties’ proprietary rights and we are unable to come to terms regarding a license with such parties, we may be forced to modify our products to make them non-infringing or to cease production of such products altogether.

 

Renewable energy investments may be linked to government subsidies.

 

Profitability of any investments we make in renewable and/or clean energy opportunities may depend on the availability of government subsidies, tax credits or other types of incentives, and there is no guaranty such subsidies, tax credits or incentives will be available in the future.

 

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by geopolitical instability due to the ongoing military conflict between Russia and Ukraine. Our business may be materially adversely affected by any negative impact on the global economy and capital markets resulting from the conflict in Ukraine or any other geopolitical tensions.

 

U.S. and global markets are experiencing volatility and disruption following the escalation of geopolitical tensions and the start of the military conflict between Russia and Ukraine. On February 24, 2022, a full-scale military invasion of Ukraine by Russian troops was reported. Although the length and impact of the ongoing military conflict is highly unpredictable, the conflict in Ukraine could lead to market disruptions, including significant volatility in commodity prices, credit and capital markets, as well as supply chain interruptions. We are continuing to monitor the situation in Ukraine and globally and assessing its potential impact on our business.

 

Additionally, Russia’s prior annexation of Crimea, recent recognition of two separatist republics in the Donetsk and Luhansk regions of Ukraine and subsequent military interventions in Ukraine have led to sanctions and other penalties being levied by the United States, European Union and other countries against Russia, Belarus, the Crimea Region of Ukraine, the so-called Donetsk People’s Republic, and the so-called Luhansk People’s Republic, including agreement to remove certain Russian financial institutions from the Society for Worldwide Interbank Financial Telecommunication (“SWIFT”) payment system, expansive ban on imports and exports of products to and from Russia and ban on exportation of U.S denominated banknotes to Russia or persons located there. Additional potential sanctions and penalties have also been proposed and/or threatened. Russian military actions and the resulting sanctions could adversely affect the global economy and financial markets and lead to instability and lack of liquidity in capital markets, potentially making it more difficult for us to obtain additional funds. The extent and duration of the military action, sanctions and resulting market disruptions are impossible to predict, but could be substantial. Any such disruptions may also magnify the impact of other risks described in this prospectus.

 

 
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Item 1B. Unresolved Staff Comments

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

 

Item 2. Properties

 

The Company’s headquarters are located at 15915 Katy Freeway, Suite 450, Houston, Texas 77094. Through Simson-Maxwell, the Company has 7 branch locations in Western Canada, consisting of (i) Port Coquitlam, British Columbia; (ii) Edmonton, Alberta; (iii) Calgary, Alberta; (iv) Nanaimo, British Columbia; (v) Prince George, British Columbia; (vi) Fort St. John, British Columbia; and (vii) Terrace, British Columbia.

 

Oil and Natural Gas Properties

 

Kansas:

 

On February 23, 2016, the Company closed on the acquisition of working interests in four leases with access to the mineral rights (oil and gas) concerning approximately 281 acres of property in Miami and Franklin Counties in eastern Kansas. On October 4, 2016, the Company completed an acquisition whereby the Company (i) increased its working interest in three existing oil and gas leases in Miami and Franklin Counties in Eastern Kansas, and (ii) acquired a working interest in four new oil and gas leases in the same region, comprising approximately 660 acres of property. On September 11, 2017, the Company through its wholly owned subsidiary, Mid-Con Drilling, LLC (“Mid-Con Drilling”) acquired a 90% working interest in four new oil and gas leases in Anderson County in Eastern Kansas, comprising approximately 980 acres of property. On October 2, 2017, the Company, through Mid-Con Drilling, closed on an acquisition, effective October 1, 2017, of a 100% working interest in six new oil and gas leases in Miami and Franklin Counties in Eastern Kansas. On October 4, 2017, the Company, through Mid-Con Drilling, closed on an acquisition, effective September 1, 2017, of an 80% working interest in six new oil and gas leases in Riley, Geary and Wabaunsee Counties in Kansas. On December 29, 2017, the Company through its wholly owned subsidiary, Mid-Con Development, LLC (“Mid-Con Development”) completed an acquisition of working interests in approximately 41 oil and gas leases in Ellis and Rooks Counties in Kansas, comprising several thousand acres. On January 12, 2018, the Company, through Mid-Con Drilling, completed an acquisition of a 100% working interest in seven new oil and gas leases in Woodson and Allen Counties in Eastern Kansas. Effective February 1, 2018, the Company, through Mid-Con Drilling, closed on the acquisition of a working interest in a lease with access to the mineral rights (oil and gas) concerning approximately 80 acres of property in Douglas County in eastern Kansas. As of December 31, 2021, these central United States oil and gas properties consist of interests in approximately 377 producing wells and 135 injector wells.

 

On January 12, 2018, the Company, through its subsidiary Mid-Con Drilling, LLC (“Mid-Con Drilling”) completed an acquisition of a 100% working interest in seven new oil and gas leases in Woodson and Allen Counties in Eastern Kansas.

 

Effective February 1, 2018, the Company, through Mid-Con Drilling, closed on the acquisition of a working interest in a lease with access to the mineral rights (oil and gas) concerning approximately 80 acres of property in Douglas County in eastern Kansas.

 

On May 1, 2019, the Company’s subsidiary, Mid-Con Development, LLC sold all of its interests in the oil and gas assets of Mid-Con Development, LLC owned in Ellis and Rooks Counties, Kansas, consisting of working interests in approximately 41 oil leases comprising several thousand acres.

 

Petrodome Energy, LLC & Subsidiaries:

 

On December 22, 2017, the Company closed on the acquisition of 100% of the membership interests in Petrodome Energy, LLC, a Texas limited liability company based in Houston, Texas, with multiple subsidiaries (described in Exhibit 21.1 hereto) having working interests in multiple oil and gas leases in Texas, Louisiana and Mississippi, then comprising approximately 11,700 acres. As of December 31, 2021, these properties consist of interests in 7 producing wells, 17 non-producing wells and two salt water disposal wells.

 

 
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On May 10, 2019, Petrodome Louisiana Pipeline LLC (“Petrodome LA”), a subsidiary of the Company’s subsidiary, Petrodome Energy, LLC, acquired a majority working interest in 6 gas wells (including 2 producing gas wells), 1 producing oil well and 1 salt water disposal well located in the East Mud Lake Field in Cameron Parish, Louisiana, with leases to mineral rights (oil and gas) concerning approximately 765 acres.

 

Ichor:

 

On December 28, 2018, the Company, through its then subsidiary Ichor Energy, LLC (“Ichor Energy”) completed an acquisition (the “Ichor Energy Acquisition”) of working interests in certain oil and gas leases in Texas (primarily in Orange and Jefferson Counties) and Louisiana (primarily in Calcasiue Parish), which include 58 producing wells, 31 salt water disposal wells, 46 shut in wells and 4 non-producing wells. The properties produce hydrocarbons from known reservoirs/sands in the on-shore Gulf Coast region, with an average well depth in excess of 10,600 feet. On October 5, 2021, the Company disposed of all of membership interests of Ichor Energy Holdings, LLC, the owner of Ichor. The third-party purchaser assumed all of the rights and obligations associated with such membership interests, including the debt associated with Ichor and/or its subsidiaries.  

 

Elysium:

 

On February 3, 2020, Elysium Energy, LLC, (“Elysium”), the subsidiary of the Company’s then partially owned subsidiary, Elysium Energy Holdings, LLC (“Elysium Holdings”), acquired interests in oil and gas properties located in Texas and Louisiana, which included leases, working interests, and over-riding royalty interests in oil and gas properties in Texas (approximately 72 wells in 11 counties) and Louisiana (approximately 55 wells in 6 parishes), along with associated equipment. On October 12, 2021, the Company disposed of all of the membership interests of Elysium Holdings. The third-party purchaser assumed all of the rights and obligations associated with such membership interests, including the debt associated with Elysium.

 

Oil and Natural Gas Reserves at Dec. 31, 2021 and 2020

 

As of December 31, 2021, all of our proved oil and natural gas reserves were located in the United States, in the States of Texas, Louisiana, Mississippi and Kansas. 

 

The following tables set forth summary information with respect to our proved reserves as of December 31, 2021 and 2020. For additional information see Supplemental Information “Oil and Natural Gas Producing Activities (Unaudited)” to our consolidated financial statements in “Item 8—Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.  Under SEC reporting requirements, proved undeveloped reserves include only those reserves in which the Company has current plans to develop, generally within five years.  During 2021, the Company made several strategic dispositions and acquisitions which has modified its capital expenditure plans.  The Company currently has no firm commitments to drill or otherwise develop its proved undeveloped reserves.  As of December 31, 2021, the Company has reclassified all of its proved undeveloped properties to unproved reserves. 

 

 

 

Proved Reserves at December 31, 2021

 

Reserves Category

 

Crude Oil

(MBBLs)

 

 

Natural Gas (MMCF)

 

 

Total Proved

(BOE) (1)

 

 

 

 

 

 

 

 

 

 

 

Proved Reserves

 

 

 

 

 

 

 

 

 

Developed

 

 

322,478

 

 

 

5,052,600

 

 

 

1,164,578

 

Developed Non-Producing

 

 

260,802

 

 

 

921,700

 

 

 

414,418

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Proved Reserves

 

 

583,280

 

 

 

5,974,300

 

 

 

1,578,996

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Future Net Cash Flows

 

 

 

 

 

 

 

 

 

$

26,837,237

 

10% annual discount for estimated timing of cash flows

 

 

 

 

 

 

 

 

 

 

(11,822,285

)

Discounted Future Net Cash Flows - (PV10) (2)

 

 

 

 

 

 

 

 

 

$

15,014,952

 

 

 
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Proved Reserves at December 31, 2020

 

Reserves Category

 

Crude Oil

(MBBLs)

 

 

Natural Gas (MMCF)

 

 

Total Proved

(BOE) (1)

 

 

 

 

 

 

 

 

 

 

 

Proved Reserves

 

 

 

 

 

 

 

 

 

Developed

 

 

5,220,180

 

 

 

43,577,750

 

 

 

12,483,138

 

Developed Non-Producing

 

 

1,938,807

 

 

 

9,196,580

 

 

 

3,471,570

 

Undeveloped

 

 

1,734,774

 

 

 

9,632,000

 

 

 

3,340,107

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Proved Reserves

 

 

8,893,761

 

 

 

62,406,330

 

 

 

19,294,815

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Estimated Future Net Cash Flows

 

 

 

 

 

 

 

 

 

$222,292,723

 

10% annual discount for estimated timing of cash flows

 

 

 

 

 

 

 

 

 

 

(102,419,459 )

Discounted Future Net Cash Flows - (PV10) (2)

 

 

 

 

 

 

 

 

 

$119,873,264

 

 

(1) - BOE (barrels of oil equivalent) is calculated by a ratio of 6 MCF to 1 BBL of Oil

(2) - PV-10 represents the discounted future net cash flows attributable to our proved oil and natural gas reserves discounted at 10%. PV-10 of our total year-end proved reserves is considered a non-US GAAP financial measure as defined by the SEC. We believe that the presentation of the PV-10 is relevant and useful to our investors because it presents the discounted future net cash flows attributable to our proved reserves without consideration of income tax affects. We further believe investors and creditors use our PV-10 as a basis for comparison of the relative size and value of our reserves to other companies. 

 

Net Production, Unit Prices and Costs

 

The following table presents certain information with respect to oil and natural gas production attributable to our interests in all of our properties in the United States, the revenue derived from the sale of such production, average sales prices received and average production costs during the years ended December 31, 2021 and 2020. All production and expense data includes the results of Ichor through October 5, 2021 and Elysium through October 12, 2021, the respective dates of disposition.

 

 
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Unit of

 

December 31,

 

 

 

Measure

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

Production

 

 

 

 

 

 

 

 

Oil

 

Barrels

 

 

407,093

 

 

 

624,456

 

Natural Gas

 

Mcf

 

 

3,652,409

 

 

 

5,206,947

 

BOE

 

 

 

 

1,015,828

 

 

 

1,492,281

 

 

 

 

 

 

 

 

 

 

 

 

Sales

 

 

 

 

 

 

 

 

 

 

Oil

 

Barrels

 

 

25,182,558

 

 

 

24,070,203

 

Natural Gas

 

Mcf

 

 

13,494,609

 

 

 

9,360,895

 

 

 

 

 

 

 

 

 

 

 

 

Average Sales Prices

 

 

 

 

 

 

 

 

 

 

Oil

 

Barrels

 

 

61.86

 

 

 

38,55

 

Natural Gas

 

Mcf

 

 

3.69

 

 

 

1.8

 

 

 

 

 

 

 

 

 

 

 

 

Production - Lease operating expenses

 

 

 

 

15,878,437

 

 

 

19,075,749

 

 

 

 

 

 

 

 

 

 

 

 

Average Cost of Production per BOE

 

 

 

 

15.63

 

 

 

12.78

 

  

Drilling and other exploratory and development activities

 

During the year ended December 31, 2021 the Company did not drill any new wells. Rather, due to market conditions associated with the COVID-19 pandemic, geo-political factors and other matters, including the storms that affected the Gulf Coast region, the Company focused primarily on preserving and maintaining existing assets to the extent possible, and selling divisions that contained assets subject to high-interest loans and hedge arrangements that limited the price at which the Company was selling hydrocarbons in such divisions. Maintenance included, among other things, replacing tubing and pumps, replacing heater treaters, changing compressors, repressurizing wells, repairing water line leaks, replacing chokes and other items.

 

Present Activities

 

The Company is not presently drilling any new wells.

 

Delivery Commitments

 

The Company is not currently committed to provide a fixed and determinable quantity of oil or gas in the near future under existing contracts or agreements.

 

Productive Wells

 

The following table sets forth the number wells in our inventory, in which we maintained ownership interests as of December 31, 2021 and 2020. All wells are located in the United States, in the States of Texas, Louisiana, Mississippi and Kansas.

 

 
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December 31, 2021

 

 

December 31, 2020

 

Well Category

 

Oil

 

 

Gas

 

 

Oil

 

 

Gas

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Producers

 

 

203

 

 

 

38

 

 

 

287

 

 

 

73

 

Producer - P&A’d

 

 

6

 

 

 

-

 

 

 

6

 

 

 

-

 

Non-Producing

 

 

9

 

 

 

-

 

 

 

13

 

 

 

-

 

Injector

 

 

89

 

 

 

-

 

 

 

89

 

 

 

-

 

Salt Water Disposal

 

 

5

 

 

 

-

 

 

 

53

 

 

 

-

 

Shut In

 

 

-

 

 

 

-

 

 

 

77

 

 

 

-

 

ORRI

 

 

1

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

313

 

 

 

38

 

 

 

526

 

 

 

73

 

 

Item 3. Legal Proceedings

 

From time to time, we may be involved in litigation relating to claims arising out of our operations in the normal course of business. As of December 31, 2021, there were no pending or threatened lawsuits that could reasonably be expected to have a material effect on the Company’s results of operations. 

 

Item 4. Mine Safety Disclosures

 

Not applicable.

 

 
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PART II

 

Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

 

Market Information

 

There is no “established trading market” for shares of the Company’s common stock. As of December 31, 2021, the Company’s common stock was quoted on the OTC Link LLC alternative trading system operated by OTC Markets Group, Inc. under the symbol “VKIN.” No assurance can be given that any “established trading market” for the Company’s common stock will develop or be maintained.

 

The range of high and low closing bid quotations for the Company’s common stock during each quarter of the calendar years ended December 31, 2021 and 2020 adjusted for the effect of the 1-for-9 reverse split, is shown below, as quoted by http://finance.yahoo.com. Prices are inter-dealer quotations, without retail mark-up, markdown or commissions and may not represent actual transactions.

 

Stock Quotations

 

Quarter Ended

 

High

 

 

Low

 

March 31, 2020

 

 

2.43

 

 

 

0.81

 

June 30, 2020

 

 

1.80

 

 

 

0.72

 

September 30, 2020

 

 

1.62

 

 

 

0.81

 

December 31, 2020

 

 

1.80

 

 

 

0.81

 

March 31, 2021

 

 

2.85

 

 

 

0.51

 

June 30, 2021

 

 

1.10

 

 

 

0.39

 

September 30, 2021

 

 

3.78

 

 

 

0.24

 

December 31, 2021

 

 

2.48

 

 

 

0.55

 

 

 
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The future sale of the Company’s presently outstanding “unregistered” and “restricted” common stock by present members of management and persons who own more than five percent of the Company’s outstanding voting securities may have an adverse effect on any “established trading market” that may develop in the shares of the Company’s common stock.

 

Holders

 

As of December 31, 2021, the Company had approximately 573 shareholders of record of common stock, including shares held in “street name” by banks, brokerage clearing houses, depositories or otherwise in unregistered form. The Company does not know the beneficial owners of such shares, or the number of beneficial holders of such shares.

 

Dividend Distributions

 

We have not historically distributed dividends to stockholders, nor do we intend to do so in the foreseeable future.

 

Securities authorized for issuance under equity compensation plans

 

The Company does not have any securities authorized for issuance under equity compensation plans.

 

Penny Stock

 

Our common stock is considered “penny stock” under the rules the Securities and Exchange Commission (the “SEC”) under the Securities Exchange Act of 1934. The SEC has adopted rules that regulate broker-dealer practices in connection with transactions in penny stocks. Penny stocks are generally equity securities with a price of less than $5.00, other than securities registered on certain national securities exchanges or quoted on the NASDAQ Stock Market System, provided that current price and volume information with respect to transactions in such securities is provided by the exchange or quotation system. The penny stock rules require a broker-dealer, prior to a transaction in a penny stock, to deliver a standardized risk disclosure document prepared by the Commission, that:

 

·

contains a description of the nature and level of risks in the market for penny stocks in both public offerings and secondary trading;

 

 

·

contains a description of the broker’s or dealer’s duties to the customer and of the rights and remedies available to the customer with respect to a violation to such duties or other requirements of Securities’ laws; contains a brief, clear, narrative description of a dealer market, including bid and ask prices for penny stocks and the significance of the spread between the bid and ask price;

 

 

·

contains a toll-free telephone number for inquiries on disciplinary actions;

 

 

·

defines significant terms in the disclosure document or in the conduct of trading in penny stocks; and

 

 

·

contains such other information and is in such form, including language, type, size and format, as the Commission shall require by rule or regulation.

   

The broker-dealer also must provide, prior to effecting any transaction in a penny stock, the customer with:

 

· 

bid and offer quotations for the penny stock;

·

the compensation of the broker-dealer and its salesperson in the transaction;

·

the number of shares to which such bid and ask prices apply, or other comparable information relating to the depth and liquidity of the marker for such stock; and

·

monthly account statements showing the market value of each penny stock held in the customer’s account.

 

 
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In addition, the penny stock rules that require that prior to a transaction in a penny stock not otherwise exempt from those rules; the broker-dealer must make a special written determination that the penny stock is a suitable investment for the purchaser and receive the purchaser’s written acknowledgement of the receipt of a risk disclosure statement, a written agreement to transactions involving penny stocks, and a signed and dated copy of a written suitably statement.

 

These disclosure requirements may have the effect of reducing the trading activity in the secondary market for our stock.

 

Related Stockholder Matters

 

None.

 

Purchase of Equity Securities

 

None.

 

Recent Sales of Unregistered Securities

 

During October 2021, the Company issued 2,634,732 shares of common stock of the Company to various parties as a conversion of debt in the amount of $1,976,050. The shares of common stock had a fair value of $3,962,834 at the time of the conversion, causing the Company to recognize a loss on debt settlement of $1,986,784. These shares were issued in reliance on the exemption from registration provided by Section 3(a)(9) of the Securities Act of 1933, as amended, as the shares were issued solely in exchange for debt securities of the Company previously issued to the lenders, there was no additional consideration for the exchanges, and there was no renumeration for solicitation of the exchanges.

 

On October 15, 2021, the Company issued a two-year warrant to purchase 200,000 common shares of the Company at an exercise price of $1.00, to a consultant at a fair value of $136,872.

 

On October 15, 2021, the Company issued 5,495 shares of common stock of the Company to a consultant at a fair value of $10,000.

 

On November 1, 2021, the Company issued 857,985 shares of common stock of the Company to acquire notes receivable from Simson-Maxwell Ltd., held by members of the management of Simson-Maxwell Ltd. in the amount of $520,850. The shares of common stock had a fair value of $534,353, causing the Company to recognize a loss on the transaction of $13,503.

 

On November 16, 2021, the Company issued 6,942,691 at the contractual exercise price of $0.396 per share shares in satisfaction of the balance of the license fee of $2,750,000.

 

On November 17, 2021, the Company issued 13,440 shares of common stock of the Company to a consultant at a fair value of $10,000.

 

On December 16, 2021, the Company issued 12,886 shares of common stock of the Company to a consultant at a fair value of $10,000.

 

On December 16, 2021, the Company issued 1,200,000 shares of common stock of the Company to a consultant at a fair value of $801,360.

 

The issuances of these shares were made in reliance on the exemption from registration provided by Section 4(a)(2) of the Securities Act of 1933, as amended, and/or Rule 506(b) promulgated thereunder, as there was no general solicitation to the investors, and the transactions did not involve a public offering.

 

 
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Table of Contents

 

Item 6. Selected Financial Data

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

 

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

You should read the following discussion and analysis in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in this annual report on Form 10-K.

 

In preparing the management’s discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.

 

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

 

This document includes “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995, as amended or the Reform Act. All statements other than statements of historical fact are “forward-looking statements” for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following: The Company’s ability to raise capital and the terms thereof; and other factors referenced in the Form 10-K.

 

The use in this Form 10-K of such words as “believes”, “plans”, “anticipates”, “expects”, “intends”, and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company’s estimates and assumptions only as of the date of this report. Except for the Company’s ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements.

 

Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company’s forward-looking statements. The Company’s future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties.

 

PLAN OF OPERATIONS

 

Company Overview

 

Viking Energy Group, Inc. (“Viking”, the “Company”, “we”, “us” or “our”) is a growth-oriented diversified energy company. Through various majority-owned subsidiaries, Viking provides custom energy & power solutions to commercial and industrial clients in North America and owns interests in oil and natural gas assets in the United States. The company also holds an exclusive license in Canada to a patented carbon-capture system, and owns a majority interest in entities with intellectual property rights to a fully developed, patent pending, proprietary: (i) Medical & Bio-Hazard Waste Treatment system using Ozone Technology; and (ii) 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.

 

Custom Energy & Power Solutions:

 

Through its approximately 60.5% majority-owned subsidiary, Simson-Maxwell Ltd. (“Simson-Maxwell”), a manufacturer and supplier of 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. The company 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.

  

 
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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 ~ 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.

 

Medical Waste Disposal System Using Ozone Technology:

 

In January 2022, the Company acquired a 51% interest in Viking Ozone Technology, LLC, which owns the intellectual property rights to a fully developed, patent pending, proprietary Medical & Bio-Hazard Waste Treatment system using Ozone Technology. Simson-Maxwell, another majority-owned subsidiary of the Company, has been designated the exclusive worldwide manufacturer and vendor of the 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. The company intends to sell units utilizing the system in 2022.

 

Open Conductor Detection Technologies:

 

In February 2022, the Company acquired a 51% interest in two entities that own the intellectual property rights to fully developed, patent pending, 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. The company intends to sell units or licenses utilizing the systems in 2022.

 

 
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Table of Contents

 

Oil & Gas Assets:

 

Existing Assets:

 

The Company, through its wholly-owned subsidiary, Petrodome Energy, LLC (“Petrodome”), owns working interests in oil and gas fields in Texas, Louisiana and Mississippi, which include approximately 7 producing wells, 8 non-producing wells and 1 Salt Water Disposal Well (SWD). Further details regarding the Company’s acquisition of Petrodome in 2017, or properties acquired by Petrodome subsequent thereto, are set out in the “Oil & Gas Properties” section of this report.

 

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. Further details regarding properties acquired in Kansas from 2016 through 2019 are set out in the “Oil & Gas Properties” section of this report.

 

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 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 salt water 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 associated with Elysium Energy Holdings. 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.

 

Potential Merger with Camber Energy, Inc.

 

On February 15, 2021, the Company entered into an Agreement and Plan of Merger (the “Merger Agreement”) with Camber Energy, Inc. (“Camber” or “Camber Energy”), the majority owner of the Company’s common stock. 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.

 

 
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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.

 

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 deadline of August 1, 2021, has passed, but the Merger Agreement has not been terminated by either party.

 

Going Concern Qualification

 

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 $(14,485,847) for the year ended December 31, 2021, as compared to a net loss of $(61,991,734) for the year ended December 31, 2020. The loss for the year ended December 31, 2021 was comprised of, among other things, certain non-cash items, including: (i) stock-based compensation of $1,738,145; (ii) accretion of asset retirement obligation of $608,691; (iii) depreciation, depletion & amortization of $7,307,157; (iv) amortization of debt discount of $3,704,049; (v) change in fair value of derivatives of $(17,338,784); (vi) loss on financing settlements of $(4,774,628); and (vii) gain on disposal of membership interests of $19,457,104.

 

 
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As of December 31, 2021, the Company has a stockholders’ equity of $18,028,229 and total long-term debt of $11,171,508. As of December 31, 2021, the Company has a working capital deficiency of approximately $8,265,027. The largest components of current liabilities creating this working capital deficiency are (i) accounts payable of approximately $8.3 million; (ii) a revolving credit facility with a balance of approximately $5,1 million as of December 31, 2021 due in June of 2022; and (iii) an amount due for non-interest-bearing loans from Camber Energy, Inc. in the amount of $4,1 million with no stipulated repayment terms.

  

As further described in Note 1 to the consolidated financial statements, 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. Camber has not filed with the Securities and Exchange Commission all reports required to pursuant to the Exchange Act, which is a default under the COD in connection with Camber’s Series C Preferred shares. Any breach under the COD is also a default under the promissory notes executed by Camber in favor of Discover. Discover has not asserted that Camber is in default under the promissory notes as a result of Camber failing to satisfy such reporting requirement, but it may do so and, if so, 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.

 

Liquidity and Capital Resources 

 

 

 

Years Ended December 31,

 

Working Capital:

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Current assets

 

$21,805,426

 

 

$11,890,170

 

Current liabilities

 

$30,070,453

 

 

$46,878,584

 

Working capital (deficit)

 

$(8,265,027 )

 

$(34,988,414 )

 

 

 

Years Ended December 31,

 

Cash Flows:

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net Cash Provided by (Used in) Operating Activities

 

$(1,999,477)

 

$1,076,098

 

Net Cash Provided by (Used in) Investing Activities

 

$(7,920,996)

 

$(1,861,006)

Net Cash Provided by (Used in) Financing Activities

 

$5,548,872

 

 

$2,985,723

 

Increase (Decrease) in Cash during the Period

 

$(4,371,601)

 

$2,200,815

 

Cash and Cash Equivalents, end of Period

 

$3,467,938

 

 

$7,839,539

 

 

 
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Net cash provided by operating activities decreased to $(1,999,477) during the fiscal year ended December 31, 2021, as compared to cash provided by operating activities of $1,076,098 in the comparable period in 2020.

 

Net cash flows from financing activities increased to $5,548,872 during the fiscal year ended December 31, 2021, as compared to $2,985,723 in the comparable period in 2020. This increase is mainly the result of additional sales of stock to Camber, and a non-interest-bearing advance from Camber offset by repayments of long-term debt.

 

Net cash used in investing activities increased to $(7,920,996) during the fiscal year ended December 31, 2021, as compared to ($1,861,006) in the comparable period in 2020. The increase is a result of the acquisition of Simson Maxwell during 2021.

 

RESULTS OF OPERATIONS

 

The following discussion of the consolidated financial condition and results of operations of the Company should be read in conjunction with the consolidated financial statements and the related Notes included elsewhere in this Report.

 

Segment and Consolidated Results

 

With the acquisition of a controlling interest in Simson-Maxwell, Oil and Gas exploration and Power Generation now represent our two reportable segments. We evaluate segment performance based on revenue and operating income (loss).

 

Information related to our reportable segments and our consolidated results for the years ended December 31, 2021 and 2020 is presented below. Oil and Gas exploration was our only segment for the year ended December 31, 2020.

 

 
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Table of Contents

 

 

 

 

 Year Ended December 31, 2021

 

 

 

 

 

 

 

 

 

 Oil and Gas

 

 

 Power Generation

 

 

 Total

 

 

 Year Ended December 31, 2020 - Oil and Gas

 

 

 Increase (Decrease)

 

 

Percentage Change

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (Loss) from Operations is as follows:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

$33,679,679

 

 

$4,308,285

 

 

$37,987,964

 

 

$40,266,780

 

 

$(2,278,816 )

 

 

-5.66%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cost of goods

 

 

-

 

 

 

3,003,044

 

 

 

3,003,044

 

 

 

-

 

 

 

3,003,044

 

 

 

-

 

Lease operating costs

 

 

15,878,437

 

 

 

-

 

 

 

15,878,437

 

 

 

19,075,749

 

 

 

(3,197,312 )

 

 

-16.76%

Impairment of goodwill

 

 

-

 

 

 

-

 

 

 

-

 

 

 

37,500,000

 

 

 

(37,500,000 )

 

 

-100.00%

General and administrative

 

 

5,997,211

 

 

 

2,124,308

 

 

 

8,121,519

 

 

 

4,966,059

 

 

 

3,155,460

 

 

 

63.54%

Stock based compensation

 

 

1,738,145

 

 

 

-

 

 

 

1,738,145

 

 

 

5,625,302

 

 

 

(3,887,157 )

 

 

-69.10%

Accretion - ARO

 

 

608,691

 

 

 

-

 

 

 

608,691

 

 

 

1,111,266

 

 

 

(502,575 )

 

 

-45.23%

Depreciation, depletion and amortization

 

 

7,236,809

 

 

 

70,348

 

 

 

7,307,157

 

 

 

13,513,735

 

 

 

(6,206,578 )

 

 

-45.93%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total operating expenses

 

 

31,459,293

 

 

 

5,197,700

 

 

 

36,656,993

 

 

 

81,792,111

 

 

 

(45,135,118 )

 

 

-55.18%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income (loss) from operations

 

$2,220,386

 

 

$(889,415 )

 

$1,330,971

 

 

$(41,525,331 )

 

$42,856,302

 

 

 

-103.21%

  

              

Other Income (Expenses) is as follows:             

   

 

 

 Total

 

 

 Year Ended December 31, 2020 - Oil and Gas

 

 

 Increase (Decrease) to Other Income

 

 

Percentage Change

 

Other income (expenses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

$(10,053,014)

 

$(19,697,942)

 

$9,644,928

 

 

 

-48.96%

Amortization of debt discount

 

 

(3,704,049)

 

 

(7,321,178)

 

 

3,617,129

 

 

 

-49.41%

Change in fair value of derivatives

 

 

(17,338,784)

 

 

5,485,573

 

 

 

(22,824,357)

 

 

-416.08%

Loss on financing settlements

 

 

(4,774,628)

 

 

(931,894)

 

 

(3,842,734)

 

 

412.36%

Equity in loss of unconsolidated entity

 

 

(178,942)

 

 

-

 

 

 

(178,942)

 

 

-

 

Gain on disposal of Ichor and Elysium

 

 

19,457,104

 

 

 

-

 

 

 

19,457,104

 

 

 

-

 

Interest and other income

 

 

470,492

 

 

 

2,527

 

 

 

467,965

 

 

 

18518.60%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other income (expenses)

 

$(16,121,821)

 

$(22,462,914)

 

$(6,341,093)

 

 

28.23%

   

Revenue

 

The Company had gross revenues of $37,987,964 for the year ended December 31, 2021 as compared to $40,266,780 for the year ended December 31, 2020, reflecting the impact of the divestiture of each of Ichor and Elysium in October, 2021, and the acquisition of a majority-interest in Simson-Maxwell. Although the Company acquired the majority-interest in Simson-Maxwell in August, 2021, it did not acquire control of Simson-Maxwell from an accounting perspective until October18, 2021. The acquisition of 60.5% of the issued and outstanding common shares of Simson-Maxwell on August 6, 2021 was accounted for under the equity method from that point through October 18, 2021 and was consolidated from October 18, 2021 to December 31, 2021. (See Note 6 to our financial statements)

 

 
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Table of Contents

 

Expenses

 

The Company’s operating expenses decreased by $45,135,118 to $36,656,993 for the year ended December 31, 2021, from $81,792,111 for the year ended December 31, 2020. The operational side of this decrease is mainly attributable to decreases in lease operating costs and depletion commensurate with the divestiture of Ichor and Elysium in October 2021, and the large impairment expense taken in 2020, primarily a result of the decline in the oil and gas market during that year.

  

Other Income and Expense

 

The Company had other income (expense) of $(16,121,821) for the year ended December 31, 2021 as compared to $(22,462,914) for the year ended December 31, 2020, a decrease of $6,341,093. This decrease is primarily attributable the disposal of Ichor and Elysium during October 2021 and the changes in the market relating to oil and gas prices. The disposal of Ichor and Elysium generated a gain on disposal of $19,457,104. The Company’s interest expenses decreased $9,644,928 to $10,053,014 for the year ended December 31, 2021 as compared to $19,697,942 for the year ended December 31, 2020, primarily due to the disposal of Ichor and Elysium and the amount of debt removed by the transaction. Additionally, the Company had a loss from the change in the fair value of derivatives related to hedge contracts of $17,338,784 for the year ended December 31, 2021 as compared to a gain of $5,485,573 for the year ended December 31, 2020 due to the relatively large increases in oil and gas prices in 2021.

 

Income (Loss) from Operations

 

The Company generated an income from operations of $1,330,971 for the year ended December 31, 2021, as compared to ($41,525,331) for the year ended December 31, 2020, due to the reasons explained above.

 

Off Balance Sheet Arrangements

 

The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in the Company’s securities.

 

Seasonality

 

The Company’s operating results are not affected by seasonality.

 

Inflation

 

The Company’s business and operating results are not currently affected in any material way by inflation although they could be adversely affected in the future were inflation to increase, resulting in cost increases.

 

Critical Accounting Policies

 

We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our financial statements, as well as the sufficiency of the disclosures pertaining to our accounting policies in the footnotes accompanying our financial statements. Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under GAAP. We also describe the most significant estimates and assumptions we make in applying these policies. See “Note 2 - Summary of Significant Accounting Policies” to our consolidated financial statements.

 

 
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Table of Contents

 

Oil and Gas Property Accounting

 

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 of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred.

 

The full cost method requires the Company to calculate quarterly, by cost center, a “ceiling,” or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.

 

Proved Reserves

 

Estimates of our proved reserves included in this report are prepared in accordance with U.S. SEC guidelines for reporting corporate reserves and future net revenue. The accuracy of a reserve estimate is a function of: 

 

i.

the quality and quantity of available data; 

 

ii.

the interpretation of that data; 

 

iii.

the accuracy of various mandated economic assumptions; and 

 

iv.

the judgment of the persons preparing the estimate.

 

Our proved reserve information included in this report was predominately based on estimates. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate. 

 

In accordance with SEC requirements, we based the estimated discounted future net cash flows from proved reserves on the unweighted arithmetic average of the prior 12-month commodity prices as of the first day of each of the months constituting the period and costs on the date of the estimate.

 

The estimates of proved reserves materially impact depreciation, depletion, amortization and accretion (“DD&A”) expense. If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce from higher-cost fields. 

 

Asset Retirement Obligation

 

Asset retirement obligations (“ARO”) primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. We determined our 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. Periodic accretion of discount of the estimated liability is recorded as accretion expense in the accompanying consolidated statements of operations and comprehensive income.

 

ARO liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated ARO.

 

 
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Table of Contents

 

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.

 

Power Generation Revenues

 

Through its 60.5% ownership in Simson-Maxwell, the Company manufactures and sells power generation products, services and custom energy solutions.

 

Sale of Power Generation Units   

 

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. 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.

 

Parts Revenue

 

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.   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.

  

Service and Repairs

 

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 in one or two days.

 

Intangible Assets

 

Intangible assets include assets acquired in the Simson-Maxwell acquisition, (including goodwill, customers relationships and the Simson-Maxwell brand) and the Company’s license agreement with ESG Clean Energy, LLC.

 

 
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The license agreement is amortized on a straight-line basis over the remaining life of the related patents being licensed, which is approximately 16 years. Customer relationships are amortized on a straight-line basis over 10 years.

 

The Company reviews intangible assets that are subject to amortization for possible impairment when events or changes in circumstances that the assets carrying amount may not be recoverable. In evaluating the future benefit of its intangible assets, the Company estimates the anticipated undiscounted future net cash flows of the intangible assets over the remaining estimated useful life. If the carrying amount is not recoverable, an impairment loss is recorded for the excess of the carrying value of the asset over its fair value.

 

Amounts recorded for Goodwill and the Simson-Maxwell brand are not amortized but are reviewed for impairment annually or more frequently if events or changes in circumstances indicate that an impairment has occurred.

 

The Company did not record any impairment of intangible assets during the years ended December 31, 2021 or 2020.

 

Commodity derivatives

 

The Company does not designate its commodities derivative instruments as hedges and therefore does not apply hedge accounting. Changes in fair value of derivative instruments subsequent to the initial measurement are recorded as change in fair value on derivative liability, in other income (expense). The estimated fair value amounts of the Company’s commodity derivative instruments have been determined at discrete points in time based on relevant market information which resulted in the Company classifying such derivatives as Level 2. Although the Company’s commodity derivative instruments are valued using public indices, as well as the Black-Sholes model, the instruments themselves are traded with unrelated counterparties and are not openly traded on an exchange.

 

Item 7A. Quantitative and Qualitative Disclosures About Market Risk.

 

The Company, as a smaller reporting company (as defined by Rule 12b-2 of the Exchange Act), is not required to furnish information required by this item.

 

 
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Item 8. Financial Statements and Supplementary Data

 

Our Consolidated Financial Statements and Notes thereto, for the fiscal years ended December 31, 2021 and 2020 and the report of Turner, Stone & Company, L.L.P. (“Turner”), our independent registered public accounting firm, are set forth on pages F-1 through F-46 of this Annual Report. The PCAOB ID for Turner, Stone & Company, L.L.P. is #76.

 

     

 

Report of Independent Registered Public Accounting Firm

 

F-1

 

Consolidated Balance Sheets as of December 31, 2021 and 2020

F-4

 

Consolidated Statements of Operations for the years ended December 31, 2021 and 2020

F-5

Consolidated Statements of Comprehensive Loss

 

F-6

 

Consolidated Statements of Cash Flows for the years ended December 31, 2021 and 2020

F-7

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

F-8

Notes to Consolidated Financial Statements

F-9

 

 
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

  

To the Board of Directors and Stockholders of Viking Energy Group, Inc.

 

Opinion on the Financial Statements

  

We have audited the accompanying consolidated balance sheets of Viking Energy Group, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020 and the related consolidated statements of operations, comprehensive loss, changes in stockholders’ equity (deficit) and cash flows for the years then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the consolidated financial position of the Company as of December 31, 2021 and 2020, and the results of its consolidated operations and its consolidated cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America.

                     

Explanatory Paragraph – Going Concern

 

The accompanying financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 3 to the financial statements, the Company has suffered recurring losses from operations since inception, has a significant working capital deficiency and has provided guarantees of certain affiliated entities debt all of which raises substantial doubt about its ability to continue as a going concern. Management’s plans in regard to these matters are also described in Note 3. The financial statements do not include any adjustments that might result from the outcome of this uncertainty.

 

Restatement of Previously Issued Financial Statements

 

As discussed in Note 4 to the financial statements, the Company has restated its statement of operations for the year ended December 31, 2020 to account for certain deemed distributions to its preferred stockholder.

 

Basis for Opinion

 

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

F-1

Table of Contents

 

Critical Audit Matters

 

The critical audit matters communicated below are matters arising from the current-period audit of the financial statements that were communicated or required to be communicated to the audit committee and that (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the financial statements, taken as a whole, and we are not, by communicating these critical audit matters below, providing a separate opinion on the critical audit matters or on the accounts or disclosures to which it relates.

 

Proved Oil and Natural Gas Properties, Depletion, and Impairment

 

As described further in Note 2 to the financial statements, the Company uses the full cost method of accounting for oil and natural gas properties. This accounting method requires management to make estimates of proved oil and natural gas reserves and related future cash flows to compute and record depreciation, depletion and amortization expense, as well as to assess potential impairment of oil and natural gas properties (the full cost ceiling test). To estimate the volume of proved oil and natural gas reserves quantities, management makes significant estimates and assumptions including forecasting the production decline rate of producing properties. In addition, the estimation of proved oil and natural gas reserves is also impacted by management’s judgements and estimates regarding the financial performance of wells associated with those proved oil and natural gas reserves to determine if wells are expected to be economical under the appropriate pricing assumptions that are required in the estimation of depreciation, depletion and amortization expense and potential ceiling test impairment assessments. We identified the estimation of proved oil and natural gas reserves as it relates to the recognition of depreciation, depletion and amortization expense and the assessment of potential impairment as a critical audit matter.

 

The principal consideration for our determination that the estimation of proved oil and natural gas reserves is a critical audit matter is that there is significant judgement by management and use of specialist in developing the estimates of proved oil and natural gas reserves and a relatively minor change in certain inputs and assumptions that are necessary to estimate the volume and future cash flows of the Company’s proved oil and natural gas reserves could have a significant impact on the measurement of depreciation, depletion and amortization expense and/or impairment expense. In turn, auditing those inputs and assumptions required subjective and complex auditor judgement.

 

How the Critical Audit Matter Was Addressed in the Audit

 

Our audit procedures to address management’s significant judgments and estimates associated with oil and natural gas reserves quantities and related future cash flows included the following, among others:

 

 

·

We evaluated the independence, objectivity, and professional qualifications of the Company’s independent petroleum engineer specialist and read the report prepared by the Company’s independent petroleum engineer specialist.

 

 

 

 

·

To the extent key, sensitive inputs and assumptions used to determine proved reserve volumes and other cash flow inputs and assumptions are derived from the Company’s accounting records, such as historical pricing differentials, operating costs, estimated capital costs and working and net revenue interests, we tested management’s process for determining the assumptions, including examining the underlying support, on a sample basis. Specifically, our audit procedures involved testing management’s assumptions as follows:

    

F-2

Table of Contents

  

 

·

Compared the estimated pricing differentials used in the reserve report to realized prices related to revenue transactions recorded in the current year;

 

 

 

 

·

Evaluated the inputs used to estimate the operating costs at year-end compared to historical operating costs;

 

 

 

 

·

We tested the accuracy of the Company’s depletion calculations and impairment evaluation and measurement that included these proved reserve reports;

 

 

 

 

·

Evaluated the working and net revenue interests used in the reserve report by inspecting a sample of land and division order records;

 

 

 

 

·

Applied analytical procedures to the forecasted production in the reserve reports by comparing to historical actual results and to the prior year or preceding period reserve reports.

   

Business acquisition of Simson Maxwell

 

 

·

As described in Note 6 to the consolidated financial statements, the Company completed the acquisition of Simson-Maxwell Ltd., and the assets acquired and liabilities assumed were required to be recorded at fair value as of the acquisition date. The Company utilized third-party valuation specialist to assist in the preparation of its valuation for certain of these assets and liabilities. We identified the fair value determination of the acquired assets, liabilities assumed, and residual value of goodwill to be a critical audit matter.

 

 

 

 

·

The principal considerations for our determination that estimation of the fair value of the assets acquired in the acquisition is a critical audit matter are that there was a high estimation uncertainty due to significant judgments with respect to assumptions used to estimate the future revenues and cash flows, including revenue growth rates, operating margins, the discount rate, the valuation methodologies applied by the third-party valuation specialist for the fair value of the intangible assets. This in turn led to a high degree of auditor judgment, subjectivity, and efforts in performing procedures and evaluating audit evidence related to management’s forecasted future revenues and cash flows and valuation methodologies. Specifically, our audit procedures included the following:

 

 

·

Reviewing management’s process for developing the fair value estimates.

 

 

 

 

·

Review the completeness and accuracy of underlying data used in the fair value estimates.

 

 

 

 

·

Evaluating the appropriateness of the discount rate used by recalculating the weighted average cost of capital, and

 

 

 

 

·

The qualification of third-party valuation specialists engaged by the Company based on their credentials and experience.

   

/s/ Turner, Stone & Company, L.L.P. 

We have served as the Company’s auditor since 2016.

 

Dallas, Texas

 

April 19, 2022

 

F-3

Table of Contents

   

VIKING ENERGY GROUP, INC.

Consolidated Balance Sheets

  

 

 

December 31,

 

 

 

 2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$3,467,938

 

 

$3,976,783

 

Restricted cash

 

 

-

 

 

 

3,862,756

 

Accounts receivable

 

 

8,781,086

 

 

 

4,050,631

 

Inventory

 

 

5,490,435

 

 

 

-

 

Notes receivable

 

 

3,000,000

 

 

 

-

 

Prepaids and other current assets

 

 

1,065,966

 

 

 

-

 

Total current assets

 

 

21,805,426

 

 

 

11,890,170

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, full cost method

 

 

 

 

 

 

 

 

Proved developed producing oil and gas properties, net

 

 

6,609,198

 

 

 

64,703,753

 

Undeveloped and non-producing oil and gas properties, net

 

 

8,216,373

 

 

 

37,452,683

 

Total Oil and gas properties, net

 

 

14,825,571

 

 

 

102,156,436

 

 

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

1,487,012

 

 

 

433,168

 

Right of use assets, net

 

 

 5,790,147

 

 

 

 -

 

Derivative asset

 

 

-

 

 

 

1,220,209

 

ESG Clean Energy license, net

 

 

4,885,825

 

 

 

-

 

Due from related parties

 

 

4,835,153

 

 

 

-

 

Other Intangibles

 

 

3,874,117

 

 

 

-

 

Goodwill

 

 

252,290

 

 

 

-

 

Deposits and other assets

 

 

395,315

 

 

 

57,896

 

TOTAL ASSETS

 

$58,150,856

 

 

$115,757,879

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$8,325,469

 

 

$4,475,519

 

Accrued expenses and other current liabilities

 

 

1,600,209

 

 

 

3,857,655

 

     Customer deposits

 

 

 23,015

 

 

 

 

 

Due to Camber Energy, Inc.

 

 

4,100,000

 

 

 

-

 

Undistributed revenues and royalties

 

 

1,332,282

 

 

 

4,115,462

 

Derivative liability

 

 

-

 

 

 

893,458

 

Due to director

 

 

-

 

 

 

559,122

 

Current portion of operating lease liability

 

 

1,324,722

 

 

 

-

 

Due to related parties

 

 

4,870,020

 

 

 

-

 

Current portion of notes payable - related parties

 

 

64,418

 

 

 

-

 

Current portion of long-term debt - net of debt discount

 

 

8,430,318

 

 

 

32,977,368

 

Total current liabilities

 

 

30,070,453

 

 

 

46,878,584

 

Notes payable - related parties – net of current portion

 

 

724,502

 

 

 

-

 

Long term debt – net of current portion and debt discount

 

 

2,741,190

 

 

 

78,775,796

 

Operating lease liability, net of current portion

 

 

4,474,832

 

 

 

241,431

 

Asset retirement obligation

 

 

2,111,650

 

 

 

6,164,231

 

TOTAL LIABILITIES

 

 

40,122,627

 

 

 

132,060,042

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies - Note 13

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, 28,092 shares issued and outstanding as of December 31, 2021 and 2020

 

 

28

 

 

 

28

 

Common stock, $0.001 par value, 500,000,000 shares authorized, 111,030,965 and 51,494,956 shares issued and outstanding as of December 31, 2021 and 2020, respectively

 

 

111,031

 

 

 

51,495

 

Additional Paid-In Capital

 

 

120,246,224

 

 

 

75,920,811

 

Accumulated other comprehensive loss

 

 

(177,981)

 

 

-

 

Accumulated deficit

 

 

(106,760,344)

 

 

(92,274,497)

Non-controlling interest

 

 

4,609,271

 

 

 

-

 

TOTAL STOCKHOLDERS' EQUITY (DEFICIT)

 

 

18,028,229

 

 

 

(16,302,163)

TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)

 

$58,150,856

 

 

$115,757,879

 

 

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

  

F-4

Table of Contents

  

VIKING ENERGY GROUP, INC.

Consolidated Statements of Operations

 

 

 

Years Ended December 31,

 

 

 

2021

 

 

2020

 (As Restated)

 

Revenue

 

 

 

 

 

 

 

 

Oil and gas sales

 

$33,679,679

 

 

$40,266,780

 

Power generation units and parts

 

 

1,607,077

 

 

 

-

 

Service and repairs

 

 

2,701,208

 

 

 

-

 

 

 

 

37,987,964

 

 

 

40,266,780

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

Cost of goods sold

 

 

3,003,044

 

 

 

-

 

Lease operating costs

 

 

15,878,437

 

 

 

19,075,749

 

Impairment of oil and gas properties

 

 

-

 

 

 

37,500,000

 

General and administrative

 

 

8,121,519

 

 

 

4,966,059

 

Stock based compensation

 

 

1,738,145

 

 

 

5,625,302

 

Accretion asset retirement obligations

 

 

608,691

 

 

 

1,111,266

 

Depreciation, depletion & amortization

 

 

7,307,157

 

 

 

13,513,735

 

Total operating expenses

 

 

36,656,993

 

 

 

81,792,111

 

 

 

 

 

 

 

 

 

 

Income (Loss) from operations

 

 

1,330,971

 

 

 

(41,525,331)

 

 

 

 

 

 

 

 

 

Other income (expenses)

 

 

 

 

 

 

 

 

Interest expense

 

 

(10,053,014)

 

 

(19,697,942)

Amortization of debt discount

 

 

(3,704,049)

 

 

(7,321,178)

Change in fair value of derivatives

 

 

(17,338,784)

 

 

5,485,573

 

Loss on financing settlements

 

 

(4,774,628)

 

 

(931,894)

Equity in earnings of unconsolidated entity

 

 

(178,942)

 

 

-

 

Gain on disposal of membership interests

 

 

19,457,104

 

 

 

-

 

Interest and other income

 

 

470,492

 

 

 

2,527

 

Total other income (expenses)

 

 

(16,121,821)

 

 

(22,462,914)

 

 

 

 

 

 

 

 

 

Net loss before income taxes

 

 

(14,790,850)

 

 

(63,988,245)

Income tax benefit (expense)

 

 

-

 

 

 

-

 

Net loss

 

 

(14,790,850)

 

 

(63,988,245)

Net loss attributable to noncontrolling interest

 

 

305,003

 

 

 

1,996,511

 

Net loss attributable to Viking Energy Group, Inc.

 

 

(14,485,847)

 

 

(61,991,734)
Preferred stock deemed dividend (see note 4)

 

 

-

 

 

 

(42,002,301)
Net loss attributable to common stockholders

 

 

(14,485,847)

 

$(103,994,035)

 

 

 

 

 

 

 

 

 

Loss per weighted average number of common shares outstanding basic and diluted

 

 

(0.18)

 

$(3.93)

Weighted average number of common shares outstanding  basic and diluted

 

 

82,228,404

 

 

 

26,459,006

 

  

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

 

F-5

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Comprehensive Loss

 

 

 

Years Ended December 31,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Net loss

 

$(14,790,850)

 

$(63,988,245)
Foreign currency translation adjustment

 

 

(177,981)

 

 

-

 

 

 

 

 

 

 

 

 

 

Total comprehensive loss

 

 

(14,968,831)

 

 

(63,988,245)

 

 

 

 

 

 

 

 

 

Less Comprehensive loss attributable to non-controlling interest

 

 

 

 

 

 

 

 

Loss attributable to non-controlling interest

 

 

(305,003)

 

 

-

 

Foreign currency translation adjustment attributable to noncontroling interest

 

 

(70,302)

 

 

-

 

 

 

 

 

 

 

 

 

 

Comprehensive loss attributable to non controlling interest

 

 

(375,305)

 

 

-

 

 

 

 

 

 

 

 

 

 

Comprehensive Loss attributable to Viking

 

$(14,593,526)

 

$(63,988,245)

  

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

 

F-6

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Cash Flows

 

 

 

Years Ended

 

December 31,

 

 

2021

 

 

2020

 

Cash flows from operating activities:

 

 

 

 

 

 

 

 

Net loss

 

$(14,790,850)

 

$(63,988,245)

Adjustments to reconcile net loss to cash provided by operating activities:

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

17,338,784

 

 

 

(5,485,573)

Stock-based compensation

 

 

1,738,145

 

 

 

5,625,302

 

Depreciation, depletion and amortization

 

 

7,307,157

 

 

 

13,513,735

 

Accretion - asset retirement obligation

 

 

608,691

 

 

 

1,111,266

 

Impairment of oil and gas properties

 

 

-

 

 

 

37,500,000

 

Amortization of right-of-use assets

 

 

3,950

 

 

 

1,442

 

Loss on financing settlement

 

 

4,774,628

 

 

 

931,894

 

PPP loan forgiveness

 

 

 (149,600)

 

 

 

 -

 

Equity in earnings of unconsolidated entity

 

 

178,942

 

 

 

-

 

Gain on disposal of membership interests

 

 

(19,457,104)

 

 

-

 

Foreign currency translation adjustment

 

 

(177,981)

 

 

-

 

Amortization of debt discount

 

 

3,704,049

 

 

 

7,321,178

 

Stock-based interest expense

 

 

-

 

 

 

2,178,356

 

Changes in operating assets and liabilities, net of effects of business combination during the year

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(9,892,063)

 

 

(1,186,517)

Prepaid expenses and other assets

 

 

58,196

 

 

 

182,692

 

Inventory

 

 

329,177

 

 

-

 

Accounts payable

 

 

5,202,065

 

 

 

683,625

 

Accrued expenses and other current liabilities

 

 

950,387

 

 

 

1,617,298

 

Related party payables

 

 

(774,983)

 

 

-

 

Undistributed revenues and royalties

 

 

1,048,933

 

 

 

1,069,645

 

Net cash provided by (used in) operating activities

 

 

(1,999,477)

 

 

1,076,098

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Investment in and acquisition of oil and gas properties

 

 

(1,575,810)

 

 

(1,935,328)

Acquisition of fixed assets

 

 

(6,024)

 

 

(59,900)

Payments for ESG Clean Energy license

 

 

(2,000,000)

 

 

-

 

Acquisition of Simson-Maxwell

 

 

(7,958,159)

 

 

-

 

Purchase of notes receivable

 

 

(3,000,000)

 

 

-

 

Cash received in purchase majority interest

 

 

5,668,384

 

 

 

-

 

Proceeds from sale of oil and gas interests

 

 

950,613

 

 

 

134,222

 

Net cash used in investing activities

 

 

(7,920,996)

 

 

(1,861,006)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

-

 

 

 

6,217,688

 

Proceeds from long-term debt - Camber

 

 

-

 

 

 

5,600,000

 

Repayment of Viking long-term debt

 

 

(5,543,157)

 

 

(19,746,457)

Proceeds from sale of stock to Camber Energy, Inc.

 

 

11,000,000

 

 

 

10,900,000

 

Proceeds from sale of stock

 

 

-

 

 

 

7,925

 

Proceeds from non interest bearing advances from Camber

 

 

4,100,000

 

 

 

-

 

Repayments of Simson Maxwell bank credit facility

 

 

(4,007,971)

 

 

-

 

Repayment of amount due to director

 

 

-

 

 

 

(31,433)

Proceeds from exercise of warrants

 

 

-

 

 

 

38,000

 

Net cash provided by financing activities

 

 

5,548,872

 

 

 

2,985,723

 

 

 

 

 

 

 

 

 

 

Net increase (decrease) in cash

 

 

(4,371,601)

 

 

2,200,815

 

Cash, beginning of year

 

 

7,839,539

 

 

 

5,638,724

 

Cash, end of year

 

$3,467,938

 

 

$7,839,539

 

 

 

 

 

 

 

 

 

 

Cash paid for interest

 

$9,559,659

 

 

$15,995,430

 

Cash paid for taxes

 

$-

 

 

$-

 

Supplemental Disclosure of Non-Cash Investing and Financing Activities:

 

 

 

Recognition of asset retirement obligation

 

 

-

 

 

 

1,514,328

 

Recognition of right-of-use asset and lease liability

 

 

5,845,810

 

 

 

-

 

Amortization of right-of-use asset and lease liability

 

 

215,998

 

 

 

66,848

 

Proceeds from sale of oil and gas properties paid directly to reduce debt

 

 

-

 

 

 

250,000

 

Issuance of shares to pay ESG License obligation

 

 

2,750,000

 

 

 

-

 

Issuance of shares as payment of interest on debt

 

 

-

 

 

 

115,958

 

Issuance of shares for services

 

 

1,220,023

 

 

 

3,158,771

 

Issuance of warrants for services

 

 

166,753

 

 

 

2,466,531

 

Issuance of warrants as discount on debt

 

 

-

 

 

 

183,214

 

Issuance of warrants shares as reduction of debt

 

 

-

 

 

 

15,000

 

Issuance of shares in debt conversion

 

 

7,762,997

 

 

 

4,350,146

 

Issuance of shares as discount on debt

 

 

141,321

 

 

 

2,444,244

 

Private placement debt exchanged for new private placement debt

 

 

-

 

 

 

654,000

 

Purchase of working interest through new debt

 

 

-

 

 

 

29,496,356

 

Purchase of working interest through assumption of undistributed revenue

 

 

-

 

 

 

798,139

 

Recognition of beneficial conversion feature as discount on debt

 

 

-

 

 

 

2,029,188

 

Accrued interest rolled into new private placement

 

 

-

 

 

 

103,583

 

Issuance of shares as reduction of debt and accrued expenses

 

 

18,900,000

 

 

 

4,110,250

 

Issuance of shares for prepaid services

 

 

1,187,500

 

 

 

-

 

PPP loan forgiveness

 

 

149,600

 

 

 

-

 

Note payable parent converted to sale of stock

 

 

-

 

 

 

9,200,000

 

 

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

 

F-7

Table of Contents

 

VIKING ENERGY GROUP, INC.

Consolidated Statements of Changes in Stockholders’ Equity (Deficit)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

Accumulated Other

 

 

Retained Earnings

 

 

 

 

Total

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Paid-in

 

 

Comprehensive

 

 

(Accumulated

 

 

Noncontrolling

 

 

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Number

 

 

Amount

 

 

Capital

 

 

Loss

 

 

Deficit)

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2019

 

 

28,092

 

 

$28

 

 

 

13,799,812

 

 

$13,800

 

 

$38,935,790

 

 

$-

 

 

$(30,282,763)

 

$-

 

 

$8,666,855

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares issued for services

 

 

-

 

 

 

-

 

 

 

2,462,818

 

 

 

2,463

 

 

 

3,156,308

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

3,158,771

 

Warrant exercise

 

 

-

 

 

 

-

 

 

 

47,042

 

 

 

47

 

 

 

37,953

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

38,000

 

Warrants exercised to reduce debt

 

 

-

 

 

 

-

 

 

 

16,667

 

 

 

17

 

 

 

14,983

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

15,000

 

Warrants issued for services

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,466,531

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,466,531

 

Warrants issued as debt discount

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

183,214

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

183,214

 

Shares issued as debt discouint

 

 

-

 

 

 

-

 

 

 

2,320,101

 

 

 

2,320

 

 

 

2,441,924

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,444,244

 

Shares issued for sale of stock

 

 

-

 

 

 

-

 

 

 

26,285,517

 

 

 

26,286

 

 

 

20,081,639

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

20,107,925

 

Shares issued for interest

 

 

-

 

 

 

-

 

 

 

84,446

 

 

 

84

 

 

 

115,874

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

115,958

 

Shares isued in conversion of debt

 

 

-

 

 

 

-

 

 

 

3,572,870

 

 

 

3,573

 

 

 

4,346,573

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,350,146

 

Beneficial conversion features as debt discount

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,029,188

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,029,188

 

Other

 

 

-

 

 

 

-

 

 

 

(15)

 

 

(1)

 

 

1

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Shares issued as reduction of debt and accrued expenses

 

 

-

 

 

 

-

 

 

 

2,905,698

 

 

 

2,906

 

 

 

4,107,344

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

4,110,250

 

NCI assigned back to Viking

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1,996,511)

 

 

-

 

 

 

-

 

 

 

1,996,511

 

 

 

-

 

Net loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(61,991,734)

 

 

(1,996,511)

 

 

(63,988,245)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

-

 

 

 

-

 

 

 

1,722,510

 

 

 

1,722

 

 

 

1,218,301

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,220,023

 

Shares issued as payment for ESG Clean Energy license

 

 

-

 

 

 

-

 

 

 

6,942,691