UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 10-Q/A

(Amendment No. 1)

 

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

 

FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 2021

 

OR

 

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

 

For the transition period from _______ to _______.

  

Commission file number: 000-29219

 

VIKING ENERGY GROUP, INC.

(Formerly Viking Investments Group, Inc.)

(Exact name of registrant as specified in its charter)

 

Nevada

 

98-0199508

(State or other jurisdiction of incorporation or organization)

(IRS Employer Identification No.)

 

15915 Katy Freeway, Suite 450

Houston, TX 77094

(Address of principal executive offices)

(281) 404 4387

(Registrant’s telephone number, including area code)

 

____________________________________________________________

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

 

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

 

Title of each class

Trading Symbol(s)

Name of each exchange on which registered

Not applicable.

Note applicable.

Not applicable.

 

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

 

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

 

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

 

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

 

 

Emerging Growth Company

 

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

 

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

 

APPLICABLE ONLY TO CORPORATE ISSUERS

 

As of November 5, 2021, the registrant had 101,971,563 shares of common stock outstanding.

 

 EXPLANATORY NOTE - RESTATEMENT OF CERTAIN FINANCIAL INFORMATION PERTAINING TO DEEMED DIVIDENDS

 

This Amendment No. 1 to Quarterly Report on Form 10-Q/A (this “Amendment”) amends the quarterly report of Viking Energy Group, Inc. (the “Company”) for the quarterly period ended September 30, 2021, as filed with the United States Securities and Exchange Commission (the “SEC”) on November 15, 2021 (the “Original 10-Q”), to restate the financial statements for the three and nine months ended September 30, 2020.

 

On August 31, 2020, the Company filed an amended Certificate of Designation (the “August Amendment”) regarding the rights associated with Viking’s shares of Series C Preferred Stock (the “Preferred Shares”) in connection with an Agreement and Plan of Merger (the “2020 Merger Agreement”) in effect at the time between the Company and Camber Energy, Inc. (“Camber”).  The August Amendment modified the conversion and voting entitlements associated with the Preferred Shares in anticipation of a full combination between Viking and Camber.

 

The modification of preferred stock rights that includes adding a substantive conversion option requires the modification to be treated as a redemption of the preferred shares and any difference between the fair value of the modified preferred shares and the carrying amount of the preferred shares be subtracted (or added) to net income to arrive at income available to common shareholders in accordance with FASB ASC 260-10-S99-2.  Consequently, we have recognized a deemed dividend in determining net income or loss attributable to common shareholders as reported in the Statement of Operations and utilized in computing earnings or loss per common share for the three and nine months ended September 30, 2020. The deemed dividend has no impact on the Company’s (i) balance sheet, (ii) reported revenues and expenses, and (iii) statement of cash flows.

 

The Company is amending the Original 10-Q to recognize the fair value of the deemed dividend in the amount of $14,546,677 for the three and nine months ended September 30, 2020; such deemed dividend had not been previously recognized.  This restatement has no impact on financial position and results of operations for the three and nine months ended September 30, 2021.

 

Except as described above and in note 4 to the accompanying consolidated financial statements and in “Item 4.  Controls and Procedures,” no other information included in the Original 10-Q is being amended or updated by this Amendment, and this Amendment does not purport to reflect any information or events subsequent to the Original 10-Q. This Amendment continues to describe the conditions as of the date of the Original 10-Q, and, except as expressly described herein, the Company has not updated, modified or supplemented the disclosures contained in the Original 10-Q. Accordingly, this Amendment should be read in conjunction with the Original 10-Q, the 10-Q for the quarterly period ended September 30, 2020, and with the Company’s filings with the SEC subsequent to the Original 10-Q.

 

  

VIKING ENERGY GROUP, INC.

 

 

Part I - Financial Information

 

 

 

 

 

 

 

 

Item 1

Financial Statements

 

3

 

 

Consolidated Balance Sheets as of September 30, 2021 (unaudited) and December 31, 2020

 

3

 

 

Consolidated Statements of Operations for the three and nine months ended September 30, 2021 and 2020 (unaudited)

 

4

 

 

Consolidated Statements of Cash Flows for the nine months ended September 30, 2021 and 2020 (unaudited)

 

5

 

 

Consolidated Statements of Changes in Stockholders’ Deficit for the nine months ended September 30, 2021 and 2020 (unaudited)

 

6

 

 

Notes to Consolidated Financial Statements (unaudited)

 

7

 

Item 2

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

 

32

 

Item 3

Quantitative and Qualitative Disclosures about Market Risk

 

42

 

Item 4

Controls and Procedures

 

42

 

 

 

 

 

 

 

Part II - Other Information

 

 

 

 

 

 

 

 

Item 1

Legal Proceedings

 

43

 

Item 2

Unregistered Sales of Equity Securities and Use of Proceeds

 

58

 

Item 3

Defaults Upon Senior Securities

 

60

 

Item 4

Mine Safety Disclosures

 

60

 

Item 5

Other Information

 

60

 

Item 6

Exhibits

 

61

 

 

2

Table of Contents

  

PART I-FINANCIAL INFORMATION

 

ITEM 1. FINANCIAL STATEMENTS

 

VIKING ENERGY GROUP, INC.

(A Majority Owned Subsidiary of Camber Energy, Inc.)

Consolidated Balance Sheets

 

 

 

September 30,

2021

 

 

December 31,

2020

 

 

 

(unaudited)

 

 

 

ASSETS

 

 

 

 

 

 

Current assets:

 

 

 

 

 

 

Cash

 

$2,893,877

 

 

$3,976,783

 

Restricted cash

 

 

3,721,993

 

 

 

3,862,756

 

Accounts receivable - oil and gas - net

 

 

7,708,223

 

 

 

4,050,631

 

Prepaid expenses

 

 

1,135,445

 

 

 

-

 

Total current assets

 

 

15,459,538

 

 

 

11,890,170

 

 

 

 

 

 

 

 

 

 

Oil and gas properties, full cost method

 

 

 

 

 

 

 

 

Proved developed producing oil and gas properties, net

 

 

60,749,028

 

 

 

64,703,753

 

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

 

 

35,331,225

 

 

 

37,452,683

 

Total oil and gas properties, net

 

 

96,080,253

 

 

 

102,156,436

 

 

 

 

 

 

 

 

 

 

Fixed assets, net

 

 

319,368

 

 

 

433,168

 

Derivative asset

 

 

-

 

 

 

1,220,209

 

Investment in unconsolidated entity

 

 

8,005,931

 

 

 

-

 

ESG Clean Energy license, net

 

 

4,963,633

 

 

 

-

 

Deposits

 

 

57,896

 

 

 

57,896

 

TOTAL ASSETS

 

$124,886,619

 

 

$115,757,879

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Current liabilities:

 

 

 

 

 

 

 

 

Accounts payable

 

$7,490,898

 

 

$4,475,519

 

Accrued expenses and other current liabilities

 

3,933,036

 

 

 

3,857,655

 

Undistributed revenues and royalties

 

 

5,836,958

 

 

 

4,115,462

 

Derivative liability

 

 

16,074,519

 

 

 

893,458

 

Due to director

 

 

-

 

 

 

559,122

 

Current portion of long-term debt and other short-term borrowings - net of debt discount

 

 

41,945,548

 

 

 

32,977,368

 

Total current liabilities

 

 

75,280,959

 

 

 

46,878,584

 

Long term debt - net of current portion and debt discount

 

 

51,062,299

 

 

 

78,775,796

 

Operating lease liability

 

 

185,308

 

 

 

241,431

 

Asset retirement obligation

 

 

6,474,028

 

 

 

6,164,231

 

TOTAL LIABILITIES

 

 

133,002,594

 

 

 

132,060,042

 

 

 

 

 

 

 

 

 

 

Commitments and contingencies

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

STOCKHOLDERS’ DEFICIT

 

 

 

 

 

 

 

 

Preferred stock, $0.001 par value, 5,000,000 shares authorized, 28,092 shares issued and outstanding as of September 30, 2021 and December 31, 2020

 

 

28

 

 

 

28

 

Common stock, $0.001 par value, 500,000,000 shares authorized,

 

 

 

 

 

 

 

 

99,363,736 and 51,494,956 shares issued and outstanding as of September 30, 2021 and December 31, 2020, respectively.

 

 

99,363

 

 

 

51,495

 

Additional paid-in capital

 

 

112,042,473

 

 

 

75,920,811

 

Accumulated deficit

 

 

(120,257,839 )

 

 

(92,274,497 )

TOTAL STOCKHOLDERS’ DEFICIT

 

 

(8,115,975 )

 

 

(16,302,163 )

TOTAL LIABILITIES AND STOCKHOLDERS’ DEFICIT

 

$124,886,619

 

 

$115,757,879

 

 

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

 

3

Table of Contents

 

VIKING ENERGY GROUP, INC.

(A Majority Owned Subsidiary of Camber Energy, Inc.)

Consolidated Statements of Operations (Unaudited)

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

(restated) 

 

 

 

 

 

(restated) 

 

Revenue

 

 

 

 

 

 

 

 

 

 

 

 

Oil and gas sales

 

$9,680,661

 

 

$10,149,387

 

 

$30,871,373

 

 

$31,487,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating costs

 

 

4,888,546

 

 

 

4,991,648

 

 

 

14,863,294

 

 

 

13,147,640

 

General and administrative

 

 

1,966,519

 

 

 

1,190,145

 

 

 

4,287,453

 

 

 

3,391,982

 

Stock based compensation

 

 

82,055

 

 

 

3,235,200

 

 

 

470,598

 

 

 

3,686,582

 

Depreciation, depletion and   amortization

 

 

2,181,326

 

 

 

2,573,183

 

 

 

6,844,553

 

 

 

8,671,593

 

Impairment of oil and gas properties

 

 

-

 

 

 

2,500,000

 

 

 

-

 

 

 

2,500,000

 

Accretion - ARO

 

 

148,551

 

 

 

119,659

 

 

 

438,225

 

 

 

360,937

 

Total operating expenses

 

 

9,266,997

 

 

 

14,609,835

 

 

 

26,904,123

 

 

 

31,758,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

413,664

 

 

 

(4,460,448 )

 

 

3,967,250

 

 

 

(271,532 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(3,180,460 )

 

 

(5,327,925 )

 

 

(9,612,335 )

 

 

(16,821,040 )

Amortization of debt discount

 

 

(1,261,618 )

 

 

(3,228,124 )

 

 

(3,406,654 )

 

 

(6,005,728

 

Change in fair value of derivatives

 

 

(3,425,097 )

 

 

(5,018,338 )

 

 

(16,401,270 )

 

 

8,569,093

 

Equity in earnings of unconsolidated entity

 

 

47,772

 

 

 

-

 

 

 

47,772

 

 

 

-

 

Loss on financing settlements

 

 

(1,847,810 )

 

 

-

 

 

 

(2,774,341 )

 

 

(931,894 )

Interest and other income

 

 

174,234

 

 

 

28

 

 

 

196,236

 

 

 

2,503

 

Total other income (expense)

 

 

(9,492,979 )

 

 

(13,574,359 )

 

 

(31,950,592 )

 

 

(15,187,066 )

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

 

(9,079,315 )

 

 

(18,034,807 )

 

 

(27,983,342 )

 

 

(15,458,598 )

Income tax benefit (expense)

 

 

 

 

 

 

-

 

 

 

-

 

 

 

-

 

Net income (loss)

 

 

(9,079,315 )

 

 

(18,034,807 )

 

 

(27,983,342 )

 

 

(15,458,598 )

Net (income) loss attributable to noncontrolling interest

 

 

-

 

 

 

1,028,313

 

 

 

-

 

 

 

1,182,952

 

Net income (loss) attributable to Viking Energy Group, Inc.

 

 

(9,079,315 )

 

 

(17,006,494 )

 

 

(27,983,342 )

 

 

(14,275,646 )

Preferred stock deemed dividend

 

 

-

 

 

 

(14,546,677)

 

 

-

 

 

 

(14,546,677)

Net income (loss) attributable to common stockholders

 

$(9,079,315)

 

$(31,553,171)

 

$(27,983,342)

 

$(28,822,323)

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$(0.10 )

 

$(1.39 )

 

$(0.38 )

 

$(1.68 )

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

87,741,024

 

 

 

22,649,319

 

 

 

74,222,359

 

 

 

17,164,033

 

 

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

 

4

Table of Contents

 

VIKING ENERGY GROUP, INC.

(A Majority Owned Subsidiary of Camber Energy, Inc.)

Consolidated Statements of Cash Flows (Unaudited)

 

 

 

Nine Months Ended

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income (loss)

 

$(27,983,342)

 

$(15,458,598)

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

 

 

 

 

 

 

 

 

Change in fair value of derivative liability

 

 

16,401,270

 

 

 

(8,569,093)

Stock based compensation

 

 

470,598

 

 

 

3,686,582

 

Depreciation, depletion and amortization

 

 

6,844,553

 

 

 

8,671,593

 

Amortization of operational right-of-use assets

 

 

(113)

 

 

1,442

 

Accretion - asset retirement obligation

 

 

438,225

 

 

 

360,937

 

Impairment of oil and gas properties

 

 

-

 

 

 

2,500,000

 

Amortization of debt discount

 

 

3,406,654

 

 

 

6,005,728

 

Loss on debt settlement

 

 

2,774,341

 

 

 

931,894

 

Stock based interest expense

 

 

-

 

 

 

2,178,356

 

PPP loan forgiveness

 

 

(149,600)

 

 

-

 

Equity in earnings of unconsolidated entity

 

 

(47,772)

 

 

-

 

Changes in operating assets and liabilities

 

 

 

 

 

 

 

 

Accounts receivable

 

 

(3,657,592)

 

 

(942,632)

Prepaid expenses and other assets

 

 

-

 

 

 

86,214

 

Accounts payable

 

 

3,015,379

 

 

 

(1,440,401)

Accrued expenses and other current liabilities

 

 

(313,058)

 

 

2,058,495

 

Undistributed revenues and royalties

 

 

1,721,496

 

 

 

1,168,312

 

Net cash provided by operating activities

 

 

2,921,039

 

 

 

1,238,829

 

 

 

 

 

 

 

 

 

 

Cash flows from investing activities:

 

 

 

 

 

 

 

 

Investment in and acquisition of oil and gas properties

 

 

(1,709,253)

 

 

(1,527,473)

Acquisition of fixed assets

 

 

-

 

 

 

(34,075)

Payments for ESG Clean Energy license

 

 

(1,500,000)

 

 

-

 

Investment in unconsolidated entity

 

 

(7,958,159)

 

 

-

 

Proceeds from sale of oil and gas properties

 

 

906,613

 

 

 

84,816

 

Net cash used in investing activities

 

 

(10,260,799)

 

 

(1476,732)

 

 

 

 

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

 

 

 

 

Proceeds from long-term debt

 

 

510,000

 

 

 

11,467,688

 

Repayment of long-term debt

 

 

(5,333,066)

 

 

(10,946,169)

Proceeds from sale of stock to Camber Energy, Inc.

 

 

11,000,000

 

 

 

-

 

Proceeds from sale of stock

 

 

-

 

 

 

7,925

 

Proceeds from exercise of warrants

 

 

-

 

 

 

38,000

 

Repayment of amount due director

 

 

(60,843)

 

 

(16,993)

Net cash provided by financing activities

 

 

6,116,091

 

 

 

550,451

 

 

 

 

 

 

 

 

 

 

Net decrease in cash

 

 

(1,223,669)

 

 

312,548

 

Cash and Restricted Cash, beginning of period

 

 

7,839,539

 

 

 

5,638,724

 

 

 

 

 

 

 

 

 

 

Cash and Restricted Cash, end of period

 

$6,615,870

 

 

$5,951,272

 

Supplemental Cash Flow Information:

 

 

 

 

 

 

 

 

Cash paid for:

 

 

 

 

 

 

 

 

Interest

 

$9,755,850

 

 

$12,683,119

 

Income taxes

 

$-

 

 

$-

 

 

 

 

 

 

 

 

 

 

Supplemental disclosure of Non-Cash Investing and Financing Activities:

 

 

 

 

 

 

 

 

Recognition of asset retirement obligation

 

$-

 

 

$1,514,328

 

Equity in earnings of unconsolidated entity

 

$47,772

 

 

$-

 

Amortization of right-of-use asset and lease liability

 

$36,872

 

 

$49,331

 

Issuance of shares as payment of interest on debt

 

$-

 

 

$115,958

 

Issuance of shares for services

 

$388,662

 

 

$2,986,763

 

Issuance of warrants for services

 

$29,881

 

 

$699,819

 

Issuance of warrants as discount on debt

 

$-

 

 

$183,214

 

Issuance of warrant shares as reduction of debt

 

$-

 

 

$15,000

 

Issuance of shares in debt conversion

 

$3,800,164

 

 

$4,350,146

 

Issuance of shares as discount on debt

 

$141,321

 

 

$2,375,501

 

Private placement debt exchanged for new private placement debt

 

$-

 

 

$6,839,345

 

Purchase of working interest through new debt

 

$-

 

 

$29,496,356

 

Recognition of beneficial conversion feature as discount on debt

 

$-

 

 

$1,929,978

 

Accrued interest rolled into new private placement

 

$-

 

 

$141,985

 

Issuance of shares as reduction of debt and accrued expenses

 

$-

 

 

$4,110,250

 

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

 

$18,900,000

 

 

$-

 

Issuance of shares for prepaid services

 

$1,187,500

 

 

$-

 

PPP loan forgiveness

 

$149,600

 

 

$-

 

 

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

 

5

Table of Contents

 

VIKING ENERGY GROUP, INC.

(A Majority Owned Subsidiary of Camber Energy, Inc.)

Consolidated Statements of Changes in Stockholders’ Equity (Unaudited)

  

For the nine months ended September 30, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Earnings (Accumulated

 

 

Noncontrolling

 

 

Total

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Number 

 

 

Amount

 

 

Capital

 

 

Deficit)

 

 

Interest

 

 

Equity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at December 31, 2020

 

 

28,092

 

 

$28

 

 

 

51,494,956

 

 

$51,495

 

 

$75,920,811

 

 

$(92,274,497)

 

$-

 

 

$(16,302,163)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Rounding due to reverse split

 

 

 

 

 

 

 

 

 

 

1,770

 

 

 

2

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

2

 

Shares issued for services

 

 

 

 

 

 

 

 

 

 

490,689

 

 

 

490

 

 

 

388,172

 

 

 

 

 

 

 

 

 

 

 

388,662

 

Shares issued as debt discount

 

 

 

 

 

 

 

 

 

 

169,336

 

 

 

169

 

 

 

141,152

 

 

 

 

 

 

 

 

 

 

 

141,321

 

Warrants issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

29,881

 

 

 

 

 

 

 

 

 

 

 

29,881

 

Shares issued to parent for reduction of debt and accrued expenses

 

 

 

 

 

 

 

 

 

 

16,153,846

 

 

 

16,154

 

 

 

19,605,846

 

 

 

 

 

 

 

 

 

 

 

19,622,000

 

Shares issued for sale of stock to Camber Energy, Inc.

 

 

 

 

 

 

 

 

 

 

27,500,000

 

 

 

27,500

 

 

 

10,972,500

 

 

 

 

 

 

 

 

 

 

 

11,000,000

 

Shares issued in conversion of debt

 

 

 

 

 

 

 

 

 

 

2,603,139

 

 

 

2,603

 

 

 

3,797,561

 

 

 

 

 

 

 

 

 

 

 

3,800,164

 

Shares issued for prepaid services

 

 

 

 

 

 

 

 

 

 

950,000

 

 

 

950

 

 

 

1,186,550

 

 

 

 

 

 

 

 

 

 

 

1,187,500

 

Net loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(27,983,342)

 

 

 

 

 

 

(27,983,342)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2021

 

 

28,092

 

 

$28

 

 

 

99,363,736

 

 

$99,363

 

 

$112,042,473

 

 

$(120,257,839)

 

$-

 

 

$(8,115,975)

 

For the nine months ended September 30, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Retained

 

 

 

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Additional

Paid-in

 

 

Earnings (Accumulated

 

 

Noncontrolling

 

 

Total

Stockholders'

 

 

 

Number

 

 

Amount

 

 

Number 

 

 

Amount

 

 

Capital

 

 

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

 

 

 

 

 

 

 

 

 

 

2,327,712

 

 

 

2,327

 

 

 

2,984,436

 

 

 

 

 

 

 

 

 

 

 

2,986,763

 

Warrant exercise

 

 

 

 

 

 

 

 

 

 

47,026

 

 

 

47

 

 

 

37,953

 

 

 

 

 

 

 

 

 

 

 

38,000

 

Warrants issued for services

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

699,819

 

 

 

 

 

 

 

 

 

 

 

699,819

 

Warrants exercised to reduce debt

 

 

 

 

 

 

 

 

 

 

16,667

 

 

 

17

 

 

 

14,983

 

 

 

 

 

 

 

 

 

 

 

15,000

 

Warrants issued as debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

183,214

 

 

 

 

 

 

 

 

 

 

 

183,214

 

Shares issued for sale of stock

 

 

 

 

 

 

 

 

 

 

11,007

 

 

 

11

 

 

 

7,914

 

 

 

 

 

 

 

 

 

 

 

7,925

 

Shares issued as debt discount

 

 

 

 

 

 

 

 

 

 

2,261,768

 

 

 

2,262

 

 

 

2,373,239

 

 

 

 

 

 

 

 

 

 

 

2,375,501

 

Shares issued for interest payments

 

 

 

 

 

 

 

 

 

 

84,446

 

 

 

84

 

 

 

115,874

 

 

 

 

 

 

 

 

 

 

 

115,958

 

Shares issued in conversion of debt

 

 

 

 

 

 

 

 

 

 

3,572,870

 

 

 

3,573

 

 

 

4,346,573

 

 

 

 

 

 

 

 

 

 

 

4,350,146

 

Beneficial conversion features as debt discount

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1,929,978

 

 

 

 

 

 

 

 

 

 

 

1,929,978

 

Shares issued as payment on debt

 

 

 

 

 

 

 

 

 

 

2,905,699

 

 

 

2,906

 

 

 

4,107,344

 

 

 

 

 

 

 

 

 

 

 

4,110,250

 

Net income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(14,275,646)

 

 

(1,182,952)

 

 

(15,458,598)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balances at September 30, 2020

 

 

28,092

 

 

$28

 

 

 

25,027,007

 

 

$25,027

 

 

$55,737,117

 

 

$(44,558,409)

 

$(1,182,952)

 

$10,020,811

 

 

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

 

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VIKING ENERGY GROUP, INC.

Notes to Consolidated Financial Statements

(Unaudited)

  

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

 

On December 23, 2020 Camber Energy, Inc. (“Camber”) acquired a 51% interest in Viking Energy Group, Inc. (“Viking” or the “Company”). On January 8, 2021 and July 29, 2021, Camber acquired additional interests in the Company resulting in Camber owning approximately 62% of the outstanding common shares of the Company after the January transaction and approximately 73% of the outstanding common shares of the Company after the July transaction. As a result, since December 23, 2020 Viking has been a majority-owned subsidiary of Camber. The December 2020, January 2021 and July 2021 transactions, along with a new merger agreement executed by Viking and Camber in February 2021 are described further below. References below to the Company’s various debt arrangements are described further in Note 8.

 

December 23, 2020 Transaction

 

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

 

In connection with Camber’s Acquisition, the Company and Camber terminated their previous merger agreement, dated August 31, 2020, as amended, and Camber assigned its membership interests in one of Viking’s subsidiaries, Elysium Energy Holdings, LLC, back to Viking. Also in connection with Camber’s Acquisition, effective December 23, 2020, Camber (i) borrowed $12,000,000 from an institutional investor; (ii) issued the investor a promissory note in the principal amount of $12,000,000, accruing interest at the rate of 10% per annum and maturing December 11, 2022 (the “First Camber Investor Note”); (iii) granted the Investor a first-priority security interest in Camber’s Viking Shares and Camber’s other assets pursuant to a pledge agreement and a general security agreement, respectively; and (iv) entered into an amendment to Camber’s $6,000,000 promissory note previously issued to the investor dated December 11, 2020 (the “Second Camber Investor Note”), amending the acceleration provision of the note to provide that the note repayment obligations would also not accelerate if Camber has increased its authorized capital stock by March 11, 2021 (and Camber increased its authorized capital stock in February 2021 as required). In order to close Camber’s Acquisition, effective December 23, 2020, Viking entered into a Guaranty Agreement, guaranteeing repayment of the First Camber Investor Note and the Second Camber Investor Note.

 

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

 

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January 8, 2021 Transactions

 

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

 

Simultaneously, on January 8, 2021, the Company entered into a Cancellation Agreement with EMC (the “Cancellation Agreement”) pursuant to which the Company agreed to pay $325,000 to EMC, and EMC agreed to cancel and terminate in the EMC Note and all other liabilities, claims, amounts owing and other obligations under the Note. At the same time, Camber entered into a purchase agreement with EMC pursuant to which (i) Camber agreed to issue 1,890 shares of Camber’s Series C Redeemable Convertible Preferred Stock to EMC, and (ii) EMC agreed to enter into the Cancellation Agreement with the Company to cancel the EMC Note.

 

February 2021 Merger Agreement with Camber

 

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

 

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

 

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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 Agreement contains customary indemnification obligations of the parties and representations and warranties.

 

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The Merger has not been completed. As of the date of filing this report, neither Viking or Camber has advised of its intention to terminate the Merger Agreement.

 

April 23, 2021 Transaction

 

On or about April 23, 2021, Camber (i) borrowed $2,500,000 from an institutional investor; (ii) issued the investor a promissory note in the principal amount of $2,500,000, accruing interest at the rate of 10% per annum and maturing December 11, 2022 (the “Third Camber Investor Note”); (iii) granted the Investor a first-priority security interest in Camber’s Viking Shares and Camber’s other assets pursuant to a pledge agreement and a general security agreement, respectively. Viking entered into a Guaranty Agreement, guaranteeing repayment of the Third Camber Investor Note.

 

July 9, 2021 Transaction:

 

Effective July 9, 2021, Camber and the institutional investor executed amendments to each of the First Camber Investor Note, the Second Camber Investor Note and the Third Camber Investor Note (collectively, the “Notes”), pursuant to which (i) the Maturity Date of each of the Notes was extended from December 11, 2022, to January 1, 2024; and (ii) the Investor is permitted to convert amounts owing under the Notes into shares of common stock of Camber at a fixed price of $1.25 per share, subject to beneficial ownership limitations.

 

July 29, 2021 Transaction:

 

On July 29, 2021, the Company entered into a Securities Purchase Agreement with Camber, pursuant to which Camber acquired an additional 27,500,00 shares of Viking common stock for an aggregate purchase price of $11,000,000. As a result, Camber’s ownership increased as of such date to approximately 73% of the issued and outstanding shares of Viking common stock.

 

Camber’s Series C Preferred Share Designation

 

The Certificate of Designation(s) (the “COD”) regarding Camber’s Series C Convertible Preferred Shares requires, among other things, Camber to: (i) timely file with the Securities and Exchange Commission all reports required to pursuant to the Exchange Act (the “Reporting Requirement”); and (ii) maintain a sufficient share reserve with respect to the common shares to which the preferred shares may be converted (“Share Reserve Requirement”). Any breach under the COD is also a default under the Notes. Camber is not currently in compliance with the Reporting Requirement or the Share Reserve Requirement. The institutional investor has agreed not to claim against Camber for any breaches or defaults provided the Reporting Requirement and the Share Reserve Requirement are satisfied by November 19, 2021 and December 31, 2021, respectively. If Camber fails to satisfy such requirements Viking may be called upon to honor its obligations under the Guaranty and Security Agreements executed by Viking in favor of the institutional investor with respect to the Notes.

 

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Note 2. Company Overview and Operations 

 

Viking Energy Group, Inc. and subsidiaries is an energy company, targeting opportunities in the power generation, clean energy and resource sectors. Through its 60.5 % majority-owned subsidiary, Simson-Maxwell Ltd. (“Simson-Maxwell”), the Company provides power generation products, services and custom energy solutions to commercial and industrial clients. Through other wholly-owned subsidiaries, the Company is engaged in petroleum exploration and production and the sale of crude oil, natural gas and natural gas liquids. Additionally, the Company recently 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 Company intends to sell, lease, and sub-license the ESG Clean Energy System to third parties using, among others, Simson-Maxwell’s existing distribution channels, and 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.

 

The following overview provides a background related to various operations and acquisition efforts over the last several years:

 

Oil & Gas Acquisitions

 

On December 22, 2017, the Company completed an acquisition of 100% of the membership interests of Petrodome Energy, LLC (“Petrodome”), a privately-owned company, with working interests in multiple oil and gas fields across Texas, Louisiana and Mississippi, comprising approximately 11,700 acres.

 

As a part of this acquisition, the Company retained an operational office and staff in Houston, Texas, which provided the Company the capability of operating many of its own wells internally. This expertise has since been utilized to evaluate potential oil and gas acquisitions, evaluate the management of the Company’s oil and gas assets, and evaluate possible drilling prospects.

 

On May 10, 2019, Petrodome Louisiana Pipeline LLC (“Petrodome LA”), a subsidiary of Petrodome, 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.

 

Viking’s petroleum operations are focused on the acquisition and development of oil and natural gas properties in the Gulf Coast and Mid-Continent regions of the United States, with the Company’s petroleum-focused subsidiaries owning oil and gas leases in Texas, Louisiana, Mississippi and Kansas.

 

Oil and Gas Acquisitions & Disposals

 

On December 28, 2018, the Company, through its newly formed Ichor Energy Holdings, LLC subsidiary (“Ichor Energy Holdings”), completed an acquisition of working interests in oil and gas leases in Texas (primarily in Orange and Jefferson Counties) and Louisiana (primarily in Calcasieu Parish), which included 58 producing wells and 31 salt water disposal wells. On October 5, 2021, the Company transferred all of the membership interests of Ichor Energy Holdings to a third party, and the third party assumed all of the rights and obligations associated with such membership interests, including the debt and derivatives associated with Ichor Energy Holdings and all of its entities. The consideration for the conveyance of the membership interests of Ichor Energy Holdings was the assumption by the third party of all of the rights and obligations associated with Ichor Energy Holdings and all of its entities. The assignment agreement contains a right of first refusal, and provides that if the third party receives an arms-length bona fide offer from any third party to purchase any of the membership interests in Holdings, such interests shall first be offered to the Company, who shall have the right, exercisable within thirty (30) calendar days, to elect to purchase such membership interests upon substantially the same terms and conditions as are contained in the offer.

 

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On February 3, 2020, the Company, through its newly formed majority-owned Elysium Energy Holdings, LLC subsidiary (“Elysium Energy 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 transferred all of the membership interests of Elysium Energy Holdings to a third party, and the third party assumed all of the rights and obligations associated with such membership interests, including the debt and derivatives associated with Elysium Energy Holdings and all of its entities. The consideration for the conveyance of the membership interests of Elysium Energy Holdings was the assumption by the third party of all of the rights and obligations associated with Elysium Energy Holdings and all of its entities.

 

The following table provides condensed aggregate financial information as of and for the nine months ended September 30, 2021 and 2020, regarding the entities transferred to third parties during October 2021:

 

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

Total assets

 

$91,008,735

 

 

$120,501,052

 

Total liabilities

 

$110,681,581

 

 

$88,917,536

 

 

 

 

Nine months ended

September 30,

 

 

 

2021

 

 

2020

 

 

Revenue

 

$27,756,694

 

 

$28,555,823

 

Operating expenses

 

$(21,935,805)

 

$(22,337,966)

Interest expenses

 

$(8,587,349)

 

$(8,456,370)

Amortization of debt discount

 

$(2,138,508)

 

$(1,778,540)

Gain (loss) on change in fair value of derivatives

 

$(16,401,270)

 

$8,312,386

 

 

Simson-Maxwell Acquisition

 

On August 6, 2021, the Company acquired approximately 60.5% of the issued and outstanding shares of Simson-Maxwell Ltd., a Canadian federal corporation, for $7,958,159 in cash. Simson-Maxwell is a leading manufacturer and supplier of industrial engines, power generation products, services and custom energy solutions. The company integrates innovative technology with superior products to contribute to global energy sustainability. Operating for over 80 years, Simson-Maxwell’s diverse group of employees at seven branch locations service over 4,000 maintenance contracts and assist with satisfying the energy and power-solution demands of the company’s entire customer-base.

 

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ESG Clean Energy License

 

On August 18, 2021, the Company entered into a license agreement with ESG, a Delaware limited liability company, pursuant to which the Company received (i) an exclusive license to ESG Clean Energy’s patent rights and know-how related to stationary electric power generation (not in connection with vehicles), including methods to utilize heat and capture carbon dioxide in Canada, and (ii) a non-exclusive license to the Intellectual Property in up to 25 sites in the United States that are operated by the Company or its affiliates. See Note 5 for further information regarding this license agreement.

 

The Company intends to sell, lease, and sub-license the intellectual property to third parties using, among others, Simson-Maxwell’s existing distribution channels, and 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.

 

Note 3. Going Concern

 

The Company’s consolidated financial statements included herein have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss of $27,983,342 for the nine months ended September 30, 2021, as compared to a net loss of $14,275,646 for the nine months ended September 30, 2020. The loss for the nine months ended September 30, 2021 was comprised of, among other things, certain non-cash items, including: (i) stock-based compensation of $470,598; (ii) accretion of asset retirement obligation of $438,225; (iii) depreciation, depletion & amortization of $6,844,553; (iv) amortization of debt discount of $3,406,654; (v) change in fair value of derivatives of $(16,401,270); and (vi) loss on financing settlements of $2,774,341.

 

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

 

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

 

Further, oil and gas price volatility and the impact of the global COVID-19 pandemic have already had and may continue to have a negative impact on the Company’s financial position and results of operations. Negative impacts could include but are not limited to: the Company’s ability to sell its products and services, reduction in the selling price of the Company’s products and services, possible disruption of production as a result of worker illness or mandated production shutdowns, the Company’s ability to maintain compliance with loan covenants and/or refinance existing indebtedness, and access to new capital and financing.

 

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Management believes it will be able to leverage the expertise and relationships of its operational and technical teams to enhance existing assets and identify new development and acquisition opportunities in order to improve operations.

 

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

 

Note 4. Restatement of previously issued financial statements

 

On August 31, 2020, the Company filed an amended Certificate of Designation (the “August Amendment”) regarding the rights associated with Viking’s shares of Series C Preferred Stock (the “Preferred Shares”) in connection with an Agreement and Plan of Merger (the “2020 Merger Agreement”) in effect at the time between the Company and Camber Energy, Inc. (“Camber”).  The August Amendment modified the conversion and voting entitlements associated with the Preferred Shares in anticipation of a full combination between Viking and Camber. The voting entitlements were reduced from 37,500 votes per share to 4,900 votes per share, and the conversion entitlements were increased from 1 share of common for 1 share of preferred to 4,900 shares of common for 1 share of preferred, increasing the number of common shares issuable upon conversion from 28,092 to 137,650,800.  The conversion ratio was modified to give value to the holder in exchange for ceding voting control of Viking.

 

The modification of preferred stock rights that includes adding a substantive conversion option requires the modification to be treated as a redemption of the preferred shares and any difference between the fair value of the modified preferred shares and the carrying amount of the preferred shares be subtracted (or added) to net income to arrive at income available to common shareholders in accordance with ASC 260-10-S99-2.  Consequently, the Company has recognized a deemed dividend in determining net income or loss attributable to common shareholders as reported in the Statement of Operations and utilized in computing earnings or loss per common share for the three and nine months ended September 30, 2020. The recognition of the deemed dividend had no impact on the Company’s (i) balance sheet, (ii) reported revenues and expenses, and (iii) statement of cash flows.

 

 

The Company is restating the Statement of Operations for the three and nine months ended September 30, 2020 to recognize the fair value of the deemed dividend in the amount of $14,546,677.

 

The table below sets forth changes to the statement of operations for the three months ended September 30, 2020:

 

For the Three Months Ended September 30, 2020 

 

As previously reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Oil and gas sales

 

$10,149,387

 

 

$-

 

 

$10,149,387

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating costs

 

 

4,991,648

 

 

 

 

 

 

 

4,991,648

 

General and administrative

 

 

1,190,145

 

 

 

 

 

 

 

1,190,145

 

Stock based compensation

 

 

3,235,200

 

 

 

 

 

 

 

3,235,200

 

Depreciation, depletion and   amortization

 

 

2,573,183

 

 

 

 

 

 

 

2,573,183

 

Impairment of oil and gas properties

 

 

2,500,000

 

 

 

 

 

 

 

2,500,000

 

Accretion - ARO

 

 

119,659

 

 

 

 

 

 

 

119,659

 

Total operating expenses

 

 

14,609,835

 

 

 

 

 

 

 

14,609,835

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

(4,460,448)

 

 

 

 

 

 

(4,460,448)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(5,327,925)

 

 

 

 

 

 

(5,327,925)

Amortization of debt discount

 

 

(3,228,124)

 

 

 

 

 

 

(3,228,124)

Change in fair value of derivatives

 

 

(5,018,338)

 

 

 

 

 

 

(5,018,338)

Equity in earnings of unconsolidated entity

 

 

-

 

 

 

 

 

 

 

-

 

Loss on financing settlements

 

 

-

 

 

 

 

 

 

 

-

 

Interest and other income

 

 

28

 

 

 

 

 

 

 

28

 

Total other income (expense)

 

 

(13,574,359)

 

 

 

 

 

 

(13,574,359)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

 

(18,034,807)

 

 

 

 

 

 

(18,034,807)

Income tax benefit (expense)

 

 

-

 

 

 

 

 

 

 

-

 

Net income (loss)

 

 

(18,034,807)

 

 

 

 

 

 

(18,034,807)

Net (income) loss attributable to noncontrolling interest

 

 

1,028,313

 

 

 

 

 

 

 

1,028,313

 

Net income (loss) attributable to Viking Energy Group, Inc.

 

 

(17,006,494)

 

 

 

 

 

 

(17,006,494)

Preferred stock deemed dividend

 

 

-

 

 

 

(14,546,677)

 

 

(14,546,677)

Net income (loss) attributable to common stockholders

 

$(17,006,494)

 

$(14,546,677)

 

$(31,553,171)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$(0.75)

 

$(0.64)

 

$(1.39)

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

22,649,319

 

 

 

22,649,319

 

 

 

22,649,319

 

 

 
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The table below sets forth changes to the statement of operations for the nine months ended September 30, 2020:

 

For the Nine Months Ended September 30, 2020 

 

As previously reported

 

 

Adjustments

 

 

Restated

 

 

 

 

 

 

 

 

 

 

 

Revenue

 

 

 

 

 

 

 

 

 

Oil and gas sales

 

$31,487,202

 

 

$-

 

 

$31,487,202

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating expenses

 

 

 

 

 

 

 

 

 

 

 

 

Lease operating costs

 

 

13,147,640

 

 

 

 

 

 

 

13,147,640

 

General and administrative

 

 

3,391,982

 

 

 

 

 

 

 

3,391,982

 

Stock based compensation

 

 

3,686,582

 

 

 

 

 

 

 

3,686,582

 

Depreciation, depletion and   amortization

 

 

8,671,593

 

 

 

 

 

 

 

8,671,593

 

Impairment of oil and gas properties

 

 

2,500,000

 

 

 

 

 

 

 

2,500,000

 

Accretion - ARO

 

 

360,937

 

 

 

 

 

 

 

360,937

 

Total operating expenses

 

 

31,758,734

 

 

 

 

 

 

 

31,758,734

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Income from operations

 

 

(271,532)

 

 

 

 

 

 

(271,532)

 

 

 

 

 

 

 

 

 

 

 

 

 

Other income (expense)

 

 

 

 

 

 

 

 

 

 

 

 

Interest expense

 

 

(16,821,040)

 

 

 

 

 

 

(16,821,040)

Amortization of debt discount

 

 

(6,005,728)

 

 

 

 

 

 

(6,005,728)

Change in fair value of derivatives

 

 

8,569,093

 

 

 

 

 

 

 

8,569,093

 

Equity in earnings of unconsolidated entity

 

 

-

 

 

 

 

 

 

 

-

 

Loss on financing settlements

 

 

(931,894)

 

 

 

 

 

 

(931,894)

Interest and other income

 

 

2,503

 

 

 

 

 

 

 

2,503

 

Total other income (expense)

 

 

(15,187,066)

 

 

 

 

 

 

(15,187,066)

 

 

 

 

 

 

 

 

 

 

 

 

 

Net income (loss) before income taxes

 

 

(15,458,598)

 

 

 

 

 

 

(15,458,598)

Income tax benefit (expense)

 

 

-

 

 

 

 

 

 

 

-

 

Net income (loss)

 

 

(15,458,598)

 

 

 

 

 

 

(15,458,598)

Net (income) loss attributable to noncontrolling interest

 

 

1,182,952

 

 

 

 

 

 

 

1,182,952

 

Net income (loss) attributable to Viking Energy Group, Inc.

 

 

(14,275,646)

 

 

 

 

 

 

(14,275,646)

Preferred stock deemed dividend

 

 

-

 

 

 

(14,546,677)

 

 

(14,546,677)

Net income (loss) attributable to common stockholders

 

$(14,275,646)

 

$(14,546,677)

 

$(28,822,323)

 

 

 

 

 

 

 

 

 

 

 

 

 

Earnings (loss) per common share

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

$(0.83)

 

$(0.85)

 

$(1.75)

Weighted average number of common shares outstanding

 

 

 

 

 

 

 

 

 

 

 

 

Basic and Diluted

 

 

17,164,033

 

 

 

17,164,033

 

 

 

17,164,033

 

 

Note 5. Summary of Significant Accounting Policies

 

a) Basis of Presentation

 

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

 

b) Basis of Consolidation

 

The financial statements presented herein reflect the consolidated financial results of the Company, its wholly owned subsidiaries, Mid-Con Petroleum, LLC, Mid-Con Drilling, LLC, and Mid-Con Development, LLC, which were all formed to provide a base of operations for properties in the Central United States, and Petrodome Energy, LLC, Ichor Holdings, LLC, Ichor Energy, LLC, Ichor Energy (TX), LLC, and Ichor Energy (LA), LLC., Elysium Energy Holdings, LLC, and its wholly owned subsidiaries, Elysium Energy, LLC, Elysium Energy TX, LLC, Elysium Energy LA, LLC, Pointe A La Hache, L.L.C., Potash, L.L.C., Ramos Field, L.L.C., and Turtle Bayou, L.L.C., all based in Houston, Texas which provides a base of operations to facilitate property acquisitions in Texas, Louisiana and Mississippi. All significant intercompany transactions and balances have been eliminated.

 

c) Foreign Currency

 

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

 

 
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d) Use of Estimates in the Preparation of Financial Statements

 

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

 

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

 

e) Financial Instruments

 

The Company discloses the fair value of its financial instruments under a three-level valuation hierarchy. The carrying amounts reported in the consolidated balance sheets for deposits, accrued expenses and other current liabilities, accounts payable, derivative liabilities, amount due to director, and convertible notes each qualify as financial instruments and are a reasonable estimate of their fair values because of the short period of time between the origination of such instruments and their expected realization and their current market rate of interest. The three levels of valuation hierarchy are defined as follows:

 

 

Level 1: inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

 

 

Level 2: inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

 

 

Level 3: inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

Assets and liabilities measured at fair value as of September 30, 2021 are classified below based on the three fair value hierarchy described above:

 

Description

 

Quoted Prices in Active Markets for Identical Assets

(Level 1)

 

 

Significant Other Observable Inputs

(Level 2)

 

 

Significant Unobservable Inputs

(Level 3)

 

 

Total Gains

(Losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivative

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivative

 

 

-

 

 

 

16,074,519

 

 

 

-

 

 

 

(16,401,270)

 

 

$-

 

 

$16,074,519

 

 

$-

 

 

$(16,401,270)

 

 
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Assets and liabilities measured at fair value as of and for the year ended December 31, 2020 are classified below based on the three fair value hierarchy described above:

 

Description

 

Quoted Prices in Active Markets for Identical Assets

(Level 1)

 

 

Significant Other Observable Inputs

(Level 2)

 

 

Significant Unobservable Inputs

(Level 3)

 

 

Total Gains

(Losses)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial Assets

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivative

 

 

-

 

 

 

1,220,209

 

 

 

-

 

 

 

6,227,390

 

 

 

$-

 

 

$1,220,209

 

 

$-

 

 

$6,227,390

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commodity Derivative

 

 

 

 

 

 

893,458

 

 

 

-

 

 

 

(741,818)

 

 

$-

 

 

$893,458

 

 

$-

 

 

$(741,818)

 

The Company has entered into certain commodity derivative instruments containing swaps and collars, which management believes are effective in mitigating commodity price risk associated with a portion of its future monthly natural gas and crude oil production and related cash flows. 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.

 

In a commodities swap agreement, the Company trades the fluctuating market prices of oil or natural gas at specific delivery points over a specified period, for fixed prices. As a producer of oil and natural gas, the Company holds these commodity derivatives to protect the operating revenues and cash flows related to a portion of its future natural gas and crude oil sales from the risk of significant declines in commodity prices, which helps reduce exposure to price risk and improves the likelihood of funding its capital budget. If the price of a commodity rises above what the Company has agreed to receive in the swap agreement, the amount that it agreed to pay the counterparty is expected to be offset by the increased amount it received for its production.

 

The Company has also entered into collar agreements related to oil and gas production with established floors and ceilings. Upon settlement, if the current market price of the commodity is below the floor, the Company receives the difference. Conversely, if the current market price of the commodity is above the ceiling at settlement, the Company pays the excess over the ceiling price.

 

 
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Although the Company is exposed to credit risk to the extent of nonperformance by the counterparties to these derivative contracts, the Company does not anticipate such nonperformance and monitors the credit worthiness of its counterparties on an ongoing basis.

 

The derivative assets were $0 and $1,220,209 as of September 30, 2021 and December 31, 2020, respectively, and the derivative liabilities were $16,074,519 and $893,458 as of September 30, 2021 and December 31, 2020, respectively. The change in the fair value of the derivative liabilities for the nine months ended September 30, 2021 consisted of an increase of $12,976,173 associated with commodity derivatives existing at the beginning of 2021.

 

The table below is a summary of the Company’s commodity derivatives as of September 30, 2021:

 

Natural Gas

 

Period

 

Average MMBTU per Month

 

 

Fixed Price per MMBTU

 

 

 

 

 

 

 

 

 

 

Swap

 

Dec-18 to Dec-22

 

 

118,936

 

 

$2.715

 

Collar

 

Mar 20 / Aug 22

 

 

196,078

 

 

$2.00 / $2.43

 

Crude Oil

 

Period

 

Average BBL per Month

 

 

Price per BBL

 

 

 

 

 

 

 

 

 

 

Swap

 

Dec-18 to Dec- 22

 

 

24,600

 

 

$50.85

 

Collar

 

Jan 21 to Dec 21

 

 

10,135

 

 

$45.00 / $56.00

 

Collar

 

Jan 22 to July 22

 

 

6,934

 

 

$45.00 / $52.70

 

  

The derivatives above were all held by Ichor Energy Holdings and Elysium Energy Holdings. As described in Note 2, in October 2021 these derivative contracts were assumed by third parties

 

f) Cash and Cash Equivalents

 

Cash and cash equivalents include cash in banks and highly liquid investment securities that have original maturities of three months or less. At September 30, 2021 and December 31, 2020, the Company has cash deposits in excess of FDIC insured limits in the amounts of $5,343,503 and $3,726,783, respectively.

 

Restricted cash in the amount of $3,721,993 as of September 30, 2021 consists of $2,145,796 held by Ichor Energy, LLC and/or its subsidiaries and $1,576,197 held Elysium Energy, LLC and/or its subsidiaries.

 

Pursuant to the Term Loan Credit Agreement to which Ichor Energy, LLC, and its subsidiaries are parties, following March 31, 2019 the company is required at all times to maintain a minimum cash balance of $2,000,000 (the “MLR”). Within 30 days of the end of each quarter, commencing with the quarter ended June 30, 2019, the company is required to pay the lenders, as an additional principal payment on the debt, any cash in excess of (i) the MLR and (ii) any funds necessary for the capital expenditures contemplated to be expended in the next six-month period by an approved plan of development (“APOD Capex Amount”). At September 30, 2021, the restricted cash did not exceed the MLR and the APOD Capex Amount.

 

 
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Pursuant to the Term Loan Credit Agreement to which Elysium Energy, LLC and its subsidiaries are parties, all receipts are to be deposited to a lockbox account under the control of the administrative agent, and then subsequently transferred for operations to the company’s bank accounts, all of which are subject to deposit account control agreements. The aggregate amount of unencumbered cash held in any Operating Account is not to be less than $2,500,000 for the period commencing June 30, 2021 through and including the Maturity Date. Commencing with the quarter ended September 30, 2020, the company is required to make mandatory prepayments of principal equal to 75% of Excess Cash Flow as defined in the agreement.

 

g) Accounts receivable

 

Accounts receivable consist of oil and gas receivables. The Company evaluates these accounts receivable for collectability and, when necessary, records allowances for expected unrecoverable amounts. The Company has recorded an allowance for doubtful accounts of $217,057 at September 30, 2021 and December 31, 2020.

 

h) Prepaid expenses

 

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

 

i) Oil and Gas Properties

 

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

 

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

 

j) Limitation on Capitalized Costs

 

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

 

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

 

 
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(b) the cost of properties not being amortized; plus

 

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

 

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

 

k) Oil and Gas Reserves

 

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

 

l) Investment in Unconsolidated Entity

 

The Company accounts for its investment in unconsolidated entities under the equity method of accounting when it (i) owns less than 51% of a controlling interest in the entity or (ii) has the ability to exercise significant influence over the operating and financial policies of the entity. As described in Note 2, during August 2021 the Company acquired a 60.5% interest in Simson-Maxwell. Pursuant to a shareholder agreement in effect as of September 30, 2021, the Company did not have the ability to control the operating and financial policies of the entity as of such date, and as such has accounted for such ownership under the equity method of accounting. The investment is adjusted for its proportionate share of earnings or losses of the entity.

 

For the period from August 6, 2021 (the date acquired) through September 30, 2021 Simson-Maxwell had total revenues of approximately $3.5 million and net income of $78,961. The table below shows the changes in the Investment in Unconsolidated Entities for the nine months ended September 30, 2021:

 

Carrying amount - December 31, 2020

 

$-

 

Investment in Simson-Maxwell

 

 

8,058,771

 

Proportionate share of Simson-Maxwell earnings

 

 

47,772

 

 

 

 

 

 

Carrying amount - September 30, 2021

 

$8,106,543

 

 

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

 

 
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m) Intangible assets

 

Intangible assets represent amounts capitalized for the Company’s license agreement with ESG Clean Energy, LLC as described in Notes 2 and 5. This asset is amortized on a straight-line basis over the remaining life of the related patents being licensed, which is approximately 16 years.

 

The Company reviews these intangible assets 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.

 

n) Income (loss) per Share

 

Basic net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding during the period. Diluted net income (loss) per share is computed by dividing the net income (loss) by the weighted-average number of common shares outstanding and adjusted by any effects of warrants and options outstanding during the period, if dilutive. For the nine months ended September 30, 2021 there were approximately 48,182,727 common stock equivalents that were omitted from the calculation of diluted income per share as they were not dilutive

 

o) Revenue Recognition

 

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.

 

The following table disaggregates the Company’s revenue by source for the three and nine months ended September 30, 2021 and 2020:

 

 

 

Three months ended

 

 

Nine months ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2021

 

 

2020

 

 

2021

 

 

2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Oil

 

$9,518,232

 

 

$6,372,765

 

 

$24,460,736

 

 

$18,837,695

 

Natural gas and natural gas liquids

 

 

4,206,625

 

 

 

2,107,471

 

 

 

12,929,513

 

 

 

6,378,731

 

Settlement on Hedge Contracts

 

 

(3,819,148)

 

 

1,134,927

 

 

 

(6,896,901)

 

 

5,547,192

 

Other

 

 

(225,048)

 

 

534,224

 

 

 

378,025

 

 

 

723,584

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

$9,680,661

 

 

$10,149,387

 

 

$30,871,373

 

 

$31,487,202

 

 

 
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p) Income Taxes

 

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

 

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

 

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

 

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

 

q) Stock-Based Compensation

 

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

 

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

 

 
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The following table represents stock warrant activity as of and for the nine months ended September 30, 2021:

 

 

 

Number
of Shares

 

 

Weighted
Average
Exercise
Price

 

 

Weighted
Average
Remaining
Contractual Life

 

 

Aggregate
Intrinsic
Value

 

Warrants Outstanding - December 31, 2020

 

 

7,111,021

 

 

 

0.99

 

 

5.22 years

 

 

 

-

 

Granted

 

 

100,000

 

 

 

.57

 

 

.57 years

 

 

 

-

 

Exercised

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Forfeited/expired/cancelled

 

 

(104,167)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Warrants Outstanding - September 30, 2021

 

 

7,106,854

 

 

$0.76

 

 

4.99 years

 

 

$-

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Outstanding Exercisable - September 30, 2021

 

 

7,106,854

 

 

$0.76

 

 

5.22 years

 

 

$-

 

 

r) Impairment of long-lived assets

 

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

 

Assets are grouped and evaluated at the lowest level for their identifiable cash flows that are largely independent of the cash flows of other groups of assets. The Company considers historical performance and future estimated results in its evaluation of potential impairment and then compares the carrying amount of the asset to the future estimated cash flows expected to result from the use of the asset. If the carrying amount of the asset exceeds estimated expected undiscounted future cash flows, the Company measures the amount of impairment by comparing the carrying amount of the asset to its fair value. The estimation of fair value is generally determined by using the asset's expected future discounted cash flows or market value. The Company estimates fair value of the assets based on certain assumptions such as budgets, internal projections, and other available information as considered necessary. There is no impairment of long-lived assets during the nine months ended September 30, 2021 and 2020.

 

s) Accounting for Asset Retirement Obligations

 

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

 

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

 

 

 

Nine months

ended

September 30, 2021

 

 

 

 

 

Asset retirement obligation - beginning

 

$6,164,231

 

Oil and gas purchases

 

 

-

 

Revisions

 

 

1,800

 

ARO settlements

 

 

(130,228)

Accretion expense

 

 

438,225

 

 

 

 

 

 

Asset retirement obligation - ending

 

$6,474,028

 

 

 
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t) Undistributed Revenues and Royalties

 

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

 

u) Subsequent events

 

The Company has evaluated all subsequent events from September 30, 2021 through the date of filing of this report.

 

Note 6. Oil and Gas Properties

 

The following table summarizes the Company’s oil and gas activities by classification and geographical cost center for the nine months ended September 30, 2021:

 

 

 

December 31,

2020

 

 

Adjustments

 

 

Impairments

 

 

September 30,

2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Proved developed producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

United States cost center

 

$81,352,074

 

 

$363,833

 

 

$-

 

 

$81,715,907

 

Accumulated depreciation, depletion and amortization

 

 

(16,648,321)

 

 

(4,318,558)

 

 

-

 

 

 

(20,966,879)

Proved developed producing oil and gas properties, net

 

$64,703,753

 

 

$(3,954,725)

 

$-

 

 

$60,749,028

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Undeveloped and non-producing oil and gas properties

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

United States cost center

 

$47,209,269

 

 

$310,379

 

 

$-

 

 

$47,519,648

 

Accumulated depreciation, depletion and amortization

 

 

(9,756,586)

 

 

(2,431,837)

 

 

-

 

 

 

(12,188,423)

Undeveloped and non-producing oil and gas properties, net

 

$37,452,683

 

 

$(2,121,458)

 

$-

 

 

$35,331,225

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Oil and Gas Properties, Net

 

$102,156,436

 

 

$(6,076,183)

 

$-

 

 

$96,080,253

 

 

Note 7. Intangible Assets

 

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

 

 
24

Table of Contents

 

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

 

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

 

Years from the Trigger Date:

 

Minimum Payments for that Year

 

Year two

 

$500,000

 

Year three

 

$750,000

 

Year four

 

$1,250,000

 

Year five

 

$1,750,000

 

Year six

 

$2,250,000

 

Year seven

 

$2,750,000

 

Year eight

 

$3,250,000

 

Year nine and after

 

$3,250,000

 

 

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

 

The Company’s intangible assets consisted of the following at September 30, 2021 and December 31, 2020:

 

 

 

September 30,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

ESG Clean Energy License

 

$5,000,000

 

 

$-

 

Accumulated amortization

 

 

(36,367)

 

 

-

 

 

 

 

 

 

 

 

 

 

 

 

$4,963,633

 

 

$-

 

 

The Company recognized amortization expense of $36,367 for the three and nine months ended September 30. 2021.

 

The estimated future amortization expense for each of the next five years is $304,465 per year.

 

 
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Table of Contents

 

Note 8. Related Party Transactions

 

The Company’s CEO and director, James Doris, renders professional services to the Company through AGD Advisory Group, Inc., an affiliate of Mr. Doris’s. As of September 30, 2021, the total amount due to AGD Advisory Group, Inc. is $180,000 and is included in accounts payable. Additionally, Mr. Doris has made several loans through promissory notes to the Company, all accruing interest at 12%, and payable on demand. During the nine months ended September 30, 2021, the Company made payments totaling $63,319 toward principal and interest associated with these loans, and Mr. Doris in separate transactions sold $506,000 of his loans to independent third parties. As of September 30, 2021, there are no remaining balances due to Mr. Doris for these loans.

 

The Company’s CFO, Frank W. Barker, Jr., renders professional services to the Company through FWB Consulting, Inc., an affiliate of Mr. Barker’s. As of September 30, 2021, the total amount due to FWB Consulting, Inc. is $281,968 and is included in accounts payable.

 

Note 9. Equity

 

(a) Preferred Stock

 

The Company is authorized to issue 5,000,000 shares of Preferred Stock, par value $0.001 per share (the “Preferred Stock”), of which 50,000 have been designated as Series C Preferred Stock (the “Series C Preferred Stock”). As of September 30, 2021 there were 28,092 shares of Series C Preferred Stock issued and outstanding. Pursuant to the amended Certification of Designation of the Series C Preferred Stock filed on December 22, 2020, each share of Series C Preferred Stock entitles the holder thereof to 4,167 votes on all matters submitted to the vote of the stockholders of the Company. Notwithstanding, so long as Camber Energy, Inc. owns or is entitled to own at least 51% of the outstanding shares of common stock of the Company and James Doris remains a director and Chief Executive Officer of Camber, each share of Preferred Stock shall not be entitled to any votes on matters submitted to a vote of the stockholders of the Company. Each share of Series C Preferred Stock is convertible, at the option of the holder, at any time after the date of issuance of such share, at the office of the Company or any transfer agent for such stock, into 4,167 shares of fully paid and non-assessable common stock. However, upon any business combination or merger between Camber and Viking such that Camber acquires substantially all of the outstanding common stock or substantially all of Viking’s assets, the Company shall ensure that the Preferred Stock is convertible into the greater of:(i) 25,000,000 common shares of Camber (or a number of preferred shares of Camber convertible into such number of common shares of Camber); or (ii) that number of common shares of Camber that 25,000,000 shares of common stock would be convertible or exchange into in the Combination (or a number of preferred shares of Camber convertible into such number of common shares of Camber).

 

(b) Common Stock

 

On January 5, 2021 the Company filed a Certificate of Amendment with the Secretary of State of the State of Nevada to effect a reverse split of our common stock at a ratio of 1-for-9 (the “Reverse Stock Split”). As a result of the Reverse Stock Split, each nine (9) pre-split shares of common stock outstanding were automatically combined into one (1) new share of common stock. All share and per shares numbers have been adjusted to reflect the Reverse Stock Split.

 

 
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Table of Contents

 

During the nine months ended September 30, 2021, the Company issued shares of its common stock as follows:

 

 

·

490,689 shares of common stock issued for services valued at fair value on the date of the transactions, totaling $388,662.

 

 

 

 

·

169,336 shares of common stock issued as discount on debt valued at fair value on the date of the transaction totaling $141,321.

 

 

 

 

·

16,153,846 shares of common stock issued pursuant to a subscription agreement for $18,900,000 (see Note 1)

 

 

 

 

·

27,500,000 shares of common stock issued pursuant to a Securities Purchase Agreement for $11,000,000 (see Note 1)

 

 

 

 

·

2,603,139 shares of common stock issued in settlement of debt and short-term borrowings, valued at fair value on the date of the transaction totaling $3,800,164, and resulting in a loss on financing settlements of $1,847,810.

 

 

 

 

·

950,000 shares of common stock issued as prepaid equity-based compensation, totaling $1,187,500.

  

During the nine months ended September 30, 2020, the Company issued shares of its common stock as follows:

 

 

·

2,327,712 shares of common stock issued for services valued at fair value on the date of the transactions, totaling $2,986,763

 

 

 

 

·

47,026 shares of common stock pursuant to the exercise of 703,000 warrants.

 

 

 

 

·

16,667 shares of common stock issued for exercise of warrants as a reduction of debt valued at fair value on the date of the transaction totaling $15,000.

 

 

 

 

·

11,007 shares of common stock issued pursuant to a subscription agreement for $7,925.

 

 

 

 

·

2,261,768 shares of common stock issued as discount on debt valued at fair value on the date of the transaction totaling $2,375,501.

 

 

 

 

·

84,446 shares of common stock issued for payment of interest, totaling $115,958

 

 

 

 

·

3,572,870 shares of common stock issued for various debt conversions totaling $4,350,146.

 

 

 

 

·

2,905,699 shares of common stock issued in settlement of debt and short-term borrowings, valued at fair value on the date of the transaction totaling $4,110,250 and resulting in a loss on financing settlements of $931,894.

  

 
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Table of Contents

 

Note 10. Long-Term Debt

 

Long term debt consisted of the following at September 30, 2021 and December 31, 2020:

 

 

 

September 30,

2021

 

 

December 31,

2020

 

 

 

 

 

 

 

 

Long-term debt:

 

 

 

 

 

 

 

 

 

 

 

 

 

On June 13, 2018, the Company borrowed $12,400,000 pursuant to a revolving line of credit facility with a maximum principal amount of $30,000,000 from Crossfirst Bank, bearing interest 1.5% above a base rate equal to the prime rate of interest published by the Wall Street Journal. Principal is payable at $100,000 monthly through the maturity date of January 5, 2022, at which time all remaining unpaid principal and accrued interest is due. The loan is secured by a mortgage on all of the oil and gas leases of Petrodome Energy, LLC and its subsidiaries, a security agreement covering all of Petrodome Energy, LLC’s assets and a guaranty by Viking Energy Group, Inc. The balance shown is net of unamortized discount of $0 at September 30, 2021 and at December 31, 2020

 

 

5,665,000

 

 

 

6,490,000

 

 

 

 

 

 

 

 

 

 

On December 28, 2018, to facilitate the acquisition of certain oil and gas assets, the Company, through its subsidiary, Ichor Energy LLC, entered into a Term Loan Credit Agreement with various lenders represented by ABC Funding, LLC as administrative agent. The agreement provided for a total loan amount of $63,592,000, bearing interest at a rate per annum equal to the greater of (i) a floating rate of interest equal to 10% plus LIBOR, and (ii) a fixed rate of interest equal to 12%, payable monthly on the last day of each calendar month, commencing January 31, 2019. Principal payments are made quarterly at 1.25% of the initial loan amount, commencing on the last business day of the fiscal quarter ending June 30, 2019. On June 3, 2020, the Term Loan Credit Agreement was amended to reduce the permitted Asset Coverage Ratio for the fiscal quarters ending March 31, 2020, June 30, 2020 and September 30, 2020 from 1.35:1.00 to 1.15:1.00. Additionally, the First Amendment revises the interest rate under the Term Loan for the period from May 16, 2020 a per annum interest rate (i) if, as of the last day of the immediately preceding fiscal quarter, the Asset Coverage Ratio is less than 1.50:1.00, then the interest rate is the greater of (x) a floating rate of interest equal to 11.00% plus LIBOR, and (y) a fixed rate of interest equal to 13.00%, or (ii) if, as of the last day of the immediately preceding fiscal quarter, the Asset Coverage Ratio is greater than or equal to 1.50:1.00, then the interest rate is the greater of (x) a floating rate of interest equal to 10.50% plus LIBOR and (y) a fixed rate of interest equal to 12.50%. Cash generated from the operation of these assets is restricted to lease operating expenses, the payment of debt service on the Term Loan, approximately $12,000,000 of oil and gas development projects approved by the lender, and distributions to the Company of $65,000 per month for general and administrative expenses, and a quarterly tax distribution at the current statutory rates. Within 30 days of the end of each quarter, commencing with the quarter ended June 30, 2019, Ichor Energy, LLC is required to pay, as an additional principal payment on the debt, any cash in excess of the MLR and the APOD Capex Amount. To the extent not previously paid, all loans under the Loan Agreement shall be due and payable on the December 28, 2023 (the Maturity Date). The loan agreement contains prepayment penalties through December 28, 2021 and “make-whole” obligations through December 28, 2020. In addition, at maturity (or sooner under certain circumstances which include prepayment of the loan or sale of Ichor Energy, LLC) the lenders will receive a payment approximating 7% of the fair value of Ichor Energy, LLC at that time; such amount is not estimable. Obligations under the loan agreement are secured by mortgages on the oil and gas leases of Ichor Energy, LLC and all of its subsidiaries, a security agreement covering all assets of Ichor Energy, LLC, and a pledge by Ichor Holdings of all if the membership interests in Ichor Energy LLC. The balance shown is net of unamortized discount of $1,970,186 at September 30, 2021 and $2,626,915 at December 31, 2020. On October 5, 2021 this debt was transferred to a third party as discussed in Note 2.

 

 

50,467,725

 

 

 

51,400,794

 

 

 
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Table of Contents

 

On February14, 2019, the Company executed a promissory note payable to CrossFirst Bank in the amount of $56,760 for the purchase of transportation equipment, bearing interest at 7.15%, payable in 60 installments of $1,130, secured by a vehicle, with a maturity date of February 14, 2024.

 

 

29,999

 

 

 

38,397

 

 

 

 

 

 

 

 

 

 

On July 24, 2019, the Company through its wholly owned subsidiary, Mid-Con Petroleum, LLC, executed a promissory note payable to Cornerstone Bank in the amount of $2,241,758, bearing interest at 6%, payable interest only through July 24, 2021, then on August 24, 2021, payable in monthly installments of $43,438, with a final payment due on a maturity date of July 24, 2025. The note is secured by a first mortgage on all of the assets of Mid-Con Petroleum, LLC and a guarantee of payment by Viking Energy Group, Inc. The balance shown is net of unamortized discount of $18,192 at September 30, 2021 and $21,758 at December 31, 2020.

 

 

2,223,566

 

 

 

2,220,001

 

 

 

 

 

 

 

 

 

 

On July 24, 2019, the Company through its wholly owned subsidiary, Mid-Con Drilling, LLC, executed a promissory note payable to Cornerstone Bank in the amount of $1,109,341, bearing interest at 6%, payable interest only through July 24, 2021, then on August 24, 2021, payable in monthly installments of $21,495, with a final payment due on a maturity date of July 24, 2025. The note is secured by a first mortgage on all of the assets of Mid-Con Drilling, LLC and a guarantee of payment by Viking Energy Group, Inc. The balance shown is net of unamortized discount of $18,142 at September 30, 2021 and $21,697 at December 31, 2020.

 

 

1,040,537

 

 

 

1,036,982

 

 

 

 

 

 

 

 

 

 

On February 3, 2020, in connection with an acquisition of oil and gas interests, the Company executed a secured promissory note in the amount of $20,869,218, payable to EMC Capital Partners, LLC, subject to revision to the extent of any post-closing adjustment payments in connection with the acquisition. Such payments were to be applied to reduce the balance owing under the promissory note. During April 2020 the Company received post-closing adjustment payments in the amount of $5,277,589 which were applied to the note balance. This note replaced the secured promissory dated December 18, 2018 in favor of RPM Investments. This note bears interest at 10% and is payable along with the full amount of principal on June 11, 2021 and is secured by a pledge of all of the membership interests of Viking’s wholly-owned subsidiary, Ichor Energy Holdings, LLC. On January 8, 2021, as discussed in Note 1, this debt was extinguished by the issuance of equity and was therefore classified as noncurrent on the consolidated balance sheet at December 31, 2020.

 

 

-

 

 

 

15,591,629

 

 

 

 

 

 

 

 

 

 

On February 3, 2020, to facilitate the acquisition of certain oil and gas assets, the Company, through one of its subsidiaries, Elysium Energy LLC, entered into a Term Loan Credit Agreement with various lenders represented by 405 Woodbine, LLC as administrative agent. The agreement provides for a total loan amount of $35,000,000 at a 4.0% original issue discount. bearing interest at the prime rate plus seven and three quarters percent (7.75%) payable monthly. Principal payments are due beginning on May 1, 2020, and on each month thereafter at one percent (1%) of the then-outstanding balance, and to the extent not paid on the maturity date of August 3, 2022. Cash generated from the operation of these assets is restricted to lease operating expenses, the payment of debt service on the Term Loan, oil and gas development projects approved by the lender, and a cost allocation of $150,000 per month for general and administrative expenses of the Company. The Borrower shall have the right at any time to prepay all or a portion of the Loan Balance. The loan agreement contains a prepayment penalty of 5% of any voluntary prepayment of principal through February 3, 2021 and 3% of any voluntary prepayment of principal on or between February 3, 2021 and February 3, 2022. Commencing with the quarter ended September 30, 2020 the Borrower is required to make mandatory prepayments of principal equal to 75% of Excess Cash Flow as defined in the agreement without any prepayment penalty fees. The loans are secured by mortgages on the oil and gas leases of Elysium Energy LLC and its subsidiaries, a security agreement covering all assets of Elysium and its subsidiaries, and a pledge of all of Elysium’s membership interests. The balance shown is net of unamortized discount of $1,666,324 at September 30, 2021 and $3,148,104 at December 31, 2020. On October 12, 2021 this debt was transferred to a third party as discussed in Note 2.

 

 

29,065,540

 

 

 

30,493,630

 

 

 

 

 

 

 

 

 

 

On or about February 18, 2020, the Company commenced an offering of securities consisting of a subordinated, secured, convertible debt instrument with equity features. The notes bear interest at 12%, payable quarterly, contain a conversion entitlement to convert all or a portion of the amount outstanding into common shares of the Company at $1.35 per share, and provide for the issuance of 16,667 common shares of the Company for every $100,000 exchanged or advanced. As security, the holders received, pari passu with all other holders, a pledge of the Company’s membership interest in Elysium Energy Holdings, LLC, and, as soon as the Company’s obligations to EMC Capital Partners, LLC were satisfied, a pledge of the Company’s membership interest in Ichor Energy Holdings, LLC. These security interests were released by the collateral agent at the time of the transfer of the membership interests as described in Note 2. Any unpaid principal and interest are due on the maturity date of February 11, 2022. During September 2021, the Company offered the noteholders an amended conversion price under these notes of $0.75 per share for conversions prior to October 31, 2021; $1.00 per share for conversions prior to November 30, 2021; $1.10 per share for conversions prior to December 31, 2021; $1.20 per share for conversions prior to January 31, 2022; and back to $1.35 for any conversions thereafter. During September 2021, noteholders converted debt aggregating $1,952,354 into 2,603,139 shares of common stock valued at $3,800,164 pursuant to the amended conversion prices. The balance shown is net of unamortized discount of $385,170 as of September 30, 2021 and $1,504,868 as of December 31, 2020.

 

 

4,365,480

 

 

 

4,182,136

 

 

 

 

 

 

 

 

 

 

On April 18, 2020, the Company entered into an unsecured promissory note with Crossfirst Bank in the principal amount of $149,600 related to the CARES Act Payroll Protection Program. This note is fully guaranteed by the Small Business Administration and may be forgivable provided that certain criteria are met. The interest rate on the loan is 1%, and the note has a two-year maturity. The loan was forgiven on August 23, 2021.

 

 

-

 

 

 

149,600

 

 

 

 

 

 

 

 

 

 

On July 1, 2020 the Company received a loan of $150,000 from the U.S. Small Business Administration. The loan bears interest at 3.75%, and is payable in monthly installments of at $731 monthly beginning 12 months from the date of the note, with the remaining principal and accrued interest due 30 years from the date of the note.

 

 

150,000

 

 

 

150,000

 

 

Total long-term debt and other short-term borrowings

 

 

93,007,847

 

 

 

111,753,164

 

Less current portion

 

 

(41,945,548)

 

 

(32,977,368)

 

 

$51,062,299

 

 

$78,775,796

 

 

 
29

Table of Contents

 

Principal maturities of long-term debt for the next five years and thereafter are as follows:

 

Twelve-month period ended September 30,

 

 

 

 

 

 

 

 

Principal

 

 

Unamortized Discount

 

 

Net

 

2022

 

$44,885,099

 

 

$2,939,551

 

 

$41,945,548

 

2023

 

 

3,825,075