UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2017September 30, 2018

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

Commission File Number: 001-32508

CAMBER ENERGY, INC.

(Exact name of registrant as specified in its charter)

4040 Broadway,1415 Louisiana, Suite 425, San Antonio,3500, Houston, Texas 78209

77002

(Address of principal executive offices) (Zip Code)

(713)-528-1881

(Registrant’s telephone number, including area code)

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes ☒  No ☐

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

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 ☒

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

CAMBER ENERGY, INC.

TABLE OF CONTENTS

PART 1. FINANCIAL INFORMATION

ITEM 1.  FINANCIAL STATEMENTS

CAMBER ENERGY, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

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

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

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

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

CAMBER ENERGY, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

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

CAMBER ENERGY, INC.

 NOTES TO FINANCIAL STATEMENTS

 (Unaudited)

NOTE 1 – GENERAL

Incorporated Camber Energy Inc. (“Camber” or the “Company”) is an independent oil and gas company engaged in Nevadathe development and acquisition of onshore properties in December 2003 underTexas. Subsequent to the name Panorama Investments Corp.sale of its assets in Oklahoma to N&B Energy, LLC (“N&B Energy”) effective August 1, 2018 (see further discussion in Note 2), Camber retained its assets in Glasscock County and operates in Hutchinson Counties, Texas. Additionally, as part of the N&B transaction, the Company changedalso retained a 12.5% production payment (effective until a total of $2.5 million has been received); a 3% overriding royalty interest in its nameexisting Okfuskee County, Oklahoma asset; andan overriding royalty interest on certain other undeveloped leasehold interests, pursuant to Lucas Energy, Inc. effective June 9, 2006an Assignment of Production Payment and effective January 4, 2017, the Company changed its name to Camber Energy, Inc.Assignments of Overriding Royalty Interests.

The accompanying unaudited interim consolidated financial statements of Camber Energy, Inc. (“Camber” or the “Company”) have been prepared in accordance with accounting principles generally accepted in the United States and the rules of the Securities and Exchange Commission, and should be read in conjunction with the audited financial statements and notes thereto contained in Camber’s annual report filed with the SEC on Form 10-K for the year ended March 31, 2017.2018. In the opinion of management, all adjustments, consisting of normal recurring adjustments, necessary for a fair presentation of 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. Notes to the consolidated financial statements which would substantially duplicate the disclosures contained in the audited financial statements for the most recent fiscal year 20172018 as reported in the Form 10-K have been omitted.

During August 2017,Effective on January 10, 2018, the Company relocated its corporate headquartersfiled with the Secretary of State of Nevada, a Certificate of Amendment to the Company’s Articles of Incorporation to increase the number of the Company’s authorized shares of common stock, $0.001 per value per share, from Houston, Texas200,000,000 shares to San Antonio, Texas.500,000,000 shares (the “Amendment”). The Amendment was previously approved by the Company’s stockholders at the 2018 annual meeting of stockholders held on January 9, 2018.

The Company received notice on August 22, 2017, by the NYSE American (the “Exchange”) thatOn March 1, 2018, the Company was not in compliancefiled a Certificate of Amendment to its Articles of Incorporation with certainthe Secretary of State of Nevada to effect a 1-for-25 reverse stock split of all outstanding common stock shares of the Exchange’s continued listing standards as set forth in Section 1007Company. The reverse stock split was effective on March 5, 2018. The effect of the NYSE American Company Guide (the “Company Guide”) for failingreverse stock split was to timely file its Form 10-Q forcombine each 25 shares of outstanding common stock into one new share, with no change in authorized shares or par value per share, and to reduce the period ended June 30, 2017, which filing was subsequentlynumber of common stock shares outstanding from approximately 103.5 million shares to approximately 4.1 million shares (prior to rounding). Proportional adjustments were made to the conversion and which delinquency was cured, on November 6, 2017.

The Company is also currently not in compliance with certain otherexercise prices of the NYSE American’s Listing Standards.Company’s outstanding convertible preferred stock, warrants and stock options, and to the number of shares issued and issuable under the Company’s stock incentive plans. The reverse stock split did not affect any shareholder’s ownership percentage of the Company’s common stock, will continue to be listed on the NYSE American while it attempts to regain compliance with the Listing Standards, subjectexcept to the Company’s compliance with other continued listing requirements, as describedlimited extent that the reverse stock split resulted in prior filings. The NYSE American notification does not affectany shareholder owning a fractional share. Fractional shares of common stock were rounded up to the Company’s business operations or its reporting obligations under the Securities and Exchange Commission regulations and rules and does not conflict with or cause an event of default under anynearest whole share based on each holder’s aggregate ownership of the Company’s material agreements.Company. All issued and outstanding shares of common stock, conversion terms of preferred stock, options and warrants to purchase common stock and per share amounts contained in the financial statements, in accordance with Staff Accounting Bulletin (“SAB”) TOPIC 4C, have been retroactively adjusted to reflect the reverse split for all periods presented.

NOTE 2 – LIQUIDITY AND GOING CONCERN CONSIDERATIONS

At DecemberSeptember 30, 2018, the Company's total current assets of $5.5 million exceeded its total current liabilities of $4.4 million, resulting in working capital of $1.1 million, while at March 31, 2017,2018, the Company’s total current liabilities of $40.8$40.3 million exceeded its total current assets of $3.2$1.7 million, resulting in a working capital deficit of $37.6 million, while at March 31, 2017, the Company’s total current liabilities of $48.2 million exceeded its total current assets of $3.9 million, resulting in a working capital deficit of $44.3$38.6 million. The $6.7$39.7 million decreaseincrease in the working capital deficit is primarily due to the settlementassignment of $9.4 million outstandingthe liabilities owed under the Rogers noteIBC Loan Agreement to N&B Energy in September 2018, as discussed below under “Note 2 - Liquidity and related accrued interest (as described below)Going Concern Considerations - Assumption Agreement”.

The Company has entered into the following transactions to address liquidity and going concern issues:

Vantage Agreement

On August 2, 2017, and effective June 13, 2017, the Company entered into an agreement with Vantage Fund, LLC (“Vantage” and the “Vantage Agreement”), pursuant to which Vantage agreed to provide up to $6 million of funding to the Company, in the sole discretion of Vantage, with $400,000 provided in the initial tranche (the “Initial Tranche”). The consideration for the Initial Tranche of funding was the assignment to Vantage of all of the Company’s rights and ownership in its wholly-owned subsidiary Camber Permian II, LLC (“Camber Permian”) which included leaseholds and potential participation rights. The Vantage Agreement contained customary indemnification requirements.

Vantage also had the right pursuant to the Vantage Agreement to fund up to $300,000 of additional funding in the form of a convertible promissory note, secured by a second lien on the Company’s Jackrabbit project (the “Vantage Note”). The Vantage Note was to be subject to mutually acceptable terms, provided that such note would have a term of no more than 2 years, an annual interest rate of no less than 6% per annum, and a conversion price equal to the closing price of the Company’s common stock on the day prior to funding. If funded, an additional condition to the Vantage Note was that Vantage or its assigns would have the right to acquire the Jackrabbit project at market price and a right of first refusal to purchase the Jackrabbit project upon any sale thereof.

The Company agreed to grant Vantage three-year warrants to purchase shares of common stock in connection with any funding, equal to the equivalent value of warrants (i.e., equal to the amount of funding provided), plus 20%, with an exercise price equal to the closing price of the Company’s common stock on the day immediately prior to funding. In connection with the funding of the Initial Tranche, which occurred on August 2, 2017, the Company granted Vantage warrants to purchase 1,600,000 shares of common stock with an exercise price of $0.25 per share (the “Vantage Warrants”). The Company also agreed to register any of the shares issued upon exercise of the Vantage Warrants under the Securities Act of 1933, as amended, within 30 days from the date of exercise thereof.

On August 2, 2017, and effective June 13, 2017, Vantage provided the Company the Initial Tranche funding, in exchange, the Company assigned all of our rights in Camber Permian to Vantage pursuant to an Assignment and granted Vantage the warrants to purchase 1,600,000 shares of common stock effective June 13, 2017.

On July 17, 2017, Vantage provided $120,000 to the Company under the Vantage Note and on July 20, 2017, Vantage provided $30,000 to the Company under the Vantage Note. Vantage was granted a second lien on the Jackrabbit property in connection with the financing.

On November 9, 2017, in connection with the sale of the Jackrabbit Acreage, the Company paid Vantage the full amount due on the Vantage Note of $150,000.

Stock and Securities Purchase Agreements with Institutional Investor

On April 6, 2016, the Company entered into a Securities Purchase Agreement (the “Securities Purchase Agreement”) with an accredited institutional investor (the “Investor”), pursuant to which we sold and issued a redeemable convertible subordinated debenture, with a face amount of $530,000, initially convertible into 163,077 shares of common stock (subject to certain conversion premiums) at a conversion price equal to $3.25 per share and a warrant to initially purchase 1,384,616 shares of common stock (subject to adjustment thereunder) at an exercise price equal to $3.25 per share (the “First Warrant”). The Investor purchased the debenture at a 5.0% original issue discount in the amount of $500,000 and has exercised the First Warrant in full as described below for the sum of $4.5 million.

Also on April 6, 2016, the Company entered into a Stock Purchase Agreement with the Investor, pursuant to which the Company agreed, subject to certain conditions, to issue up to 527 shares of Series C redeemable convertible preferred stock (the “Series C Preferred Stock”) at a 5% original issue discount, convertible into 1,618,462 shares of common stock (subject to certain conversion premiums) at a conversion price of $3.25 per share, and a warrant to initially purchase 1,111,112 shares of common stock at an exercise price of $4.50 per share (the “Second Warrant”). Under the terms of the Stock Purchase Agreement, the Second Warrant and 53 shares of Series C Preferred Stock were sold and issued for $500,000 on September 2, 2016, and the remaining 474 shares of Series C Preferred Stock were sold and issued for $4.5 million on November 17, 2016.

On October 7, 2016, the Investor exercised the First Warrant in full and was due 1,384,616 shares of common stock upon exercise thereof and an additional 2,542,735 shares of common stock in consideration for the conversion premium due thereon. A total of 810,000 shares were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due in consideration for the conversion premium increases as the annual rate of return under the First Warrant increases, including by 10% upon the occurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per annum upon the exercise of the First Warrant. Additionally, as the conversion rate for the conversion premium is currently 85% of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed 85% of the lowest sales prices on the last day of such period less $0.10 per share, the number of shares issuable in connection with the conversion premium increases as the trading price of our common stock decreases, and the trading price of our common stock has decreased since the date the First Warrant was exercised, triggering a further reduction in the conversion price of the conversion premium and an increase in the number of shares due to the Investor in connection with the conversion of the amount owed in connection with the conversion premium. Additionally, pursuant to the interpretation of the Investor, the measurement period for the calculation of the lowest daily volume weighted average price currently continues indefinitely.

On October 5, 2017, the Company and the Investor entered into a Stock Purchase Agreement (the “October 2017 Purchase Agreement”), pursuant to which the Company may receive aggregate consideration of $16 million, subject to certain conditions set forth therein.

Under the terms of the October 2017 Purchase Agreement, (1) the Investor purchased 212 shares of Series C Preferred Stock on the closing date of the agreement, October 4, 2017 (the “Initial Closing”), for $2 million, and agreed, subject to certain closing conditions set forth in the agreement, to purchase (2) 106 shares of Series C Preferred Stock for $1,000,000, 10 days after the Initial Closing (which closing occurred on November 21, 2017); (3) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the second closing (which closing occurred on December 27, 2017); (4) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the third closing (which closing occurred on January 30, 2018); (5) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the fourth closing; (6) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the fifth closing; and (7) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the sixth Closing. Conditions to closing the sale of the additional shares of Series C Preferred Stock described above include, that except with regard to the first four closings described above, the Company’s common stock is required to be listed for and currently trading on the NYSE American market or a higher trading market; the Company is required to be in compliance with all requirements to maintain such listing and there cannot be any notice of any suspension or delisting with respect to the trading of the shares of common stock on such trading market; except with regard to the first four closings only, the Company is required to have duly authorized shares of common stock reserved for issuance to Investor in an amount equal to three times the number of shares sufficient to immediately issue all shares of common stock potentially issuable upon conversion of the Series C Preferred Stock sold to Investor under the October 2017 Purchase Agreement (collectively, the “Conversion Shares”) and any other agreements with Investor; except with regard to the initial closing only, the Company is required to obtain approval and listing of all Conversion Shares on the NYSE American; for the second through fifth closings only, (i) an aggregate dollar trading volume of at least $10 million must have traded on NYSE American during regular trading hours, from the trading day after the immediately prior closing until the trading day immediately before the relevant closing, but expressly excluding all volume traded on any days that the Investor is prevented or delayed from reselling shares of common stock (“Excluded Days”); and (ii) the Company’s common stock is required to have a volume weighted average price on the NYSE American for the prior trading day of at least $0.15 per share of common stock; and with respect to the final two closings, an aggregate dollar trading volume of at least $50 million must have traded on NYSE American during regular trading hours, from the trading day after the immediately prior to each of the closings from the prior funding until the trading day immediately before the relevant closing, but expressly excluding all volume traded on any Excluded Days, and if any such conditions are not met on the date initially set for such closing, each closing will occur as soon thereafter as they are met, if ever. The closing of the additional sales of Series C Preferred Stock as described above are subject to closing conditions which may not be met timely, if at all, and as such, we may not ever sell any additional shares of Series C Preferred Stock under the October 2017 Purchase Agreement.

The Company used and plans to use the proceeds from the sale of the Series C Preferred Stock for working capital, workovers on existing wells, acquisition of additional workovers, drilling and completion of additional wells, repayment of vendor balances and payments to International Bank of Commerce (“IBC”), in anticipation of regaining compliance.

Pursuant to the October 2017 Purchase Agreement, as long as the Investor holds any shares of Series C Preferred Stock, the Company agreed that it would not issue or enter into or amend an agreement pursuant to which it may issue any shares of common stock, other than (a) for restricted securities with no registration rights, (b) in connection with a strategic acquisition, (c) in an underwritten public offering, or (d) at a fixed price; or issue or amend any debt or equity securities convertible into, exchangeable or exercisable for, or including the right to receive, shares of common stock (i) at a conversion price, exercise price or exchange rate or other price that is based upon or varies with, the trading prices of or quotations for the shares of common stock at any time after the initial issuance of the security or (ii) with a conversion, exercise or exchange price that is subject to being reset at some future date after the initial issuance of the security or upon the occurrence of specified or contingent events directly or indirectly related to the business of the Company or the market for the common stock.

Additionally, provided that the Company has not materially breached the terms of the October 2017 Purchase Agreement, it may at any time, in its sole and absolute discretion, repurchase from Investor all, but not less than all, of the then outstanding shares of Series C Preferred Stock sold pursuant to the agreement by paying to Investor 110% of the aggregate face value of all such shares.

The Company also agreed to provide the Investor a right of first offer to match any offer for financing we receive from any person while the shares of Series C Preferred Stock sold pursuant to the October 2017 Purchase Agreement are outstanding, except for debt financings not convertible into common stock, which are excluded from such right to match.

The conversion premium under the Series C Preferred Stock is payable and the dividend rate under the Series C Preferred Stock is adjustable. Specifically, the conversion rate of such premiums and dividends equals 95% of the average of the lowest 5 individual daily volume weighted average prices during the Measuring Period, not to exceed 100% of the lowest sales prices on the last day of the Measuring Period, less $0.05 per share of common stock, unless a triggering event has occurred, in which case the conversion rate equals 85% of the lowest daily volume weighted average price during the Measuring Period, less $0.10 per share of common stock not to exceed 85% of the lowest sales prices on the last day of such the Measuring Period, less $0.10 per share. The “Measuring Period” is the period beginning, if no trigger event has occurred, 30 trading days, and if a trigger event has occurred, 60 trading days, before the applicable notice has been provided regarding the exercise or conversion of the applicable security, and ending, if no trigger event has occurred, 30 trading days, and if a trigger event has occurred, 60 trading days, after the applicable number of shares stated in the initial exercise/conversion notice have actually been received into the Investor’s designated brokerage account in electronic form and fully cleared for trading (subject to certain extensions described in the applicable securities, which have been triggered to date). Triggering events are described in the designation of the Series C Preferred Stock, but include items which would typically be events of default under a debt security, including filing of reports late with the Commission.

The Series C Preferred Stock has a maturity date that is seven years after the date of issuance and, if the Series C Preferred Stock has not been wholly converted into shares of common stock prior to such date, we may redeem the Series C Preferred Stock on such date by repaying to the investor in cash 100% of the Face Value plus an amount equal to any accrued but unpaid dividends thereon. 100% of the Face Value, plus an amount equal to any accrued but unpaid dividends thereon, automatically becomes payable in the event of a liquidation, dissolution or winding up by us.

The Company is currently restricted from issuing any other preferred stock (other than the Series B Preferred Stock) that is pari passu or senior to the Series C Preferred Stock with respect to any rights for a period of one year after the earlier of such date (i) a registration statement is effective and available for the resale of all shares of common stock issuable upon conversion of the Series C Preferred Stock, or (ii) Rule 144 under the Securities Act is available for the immediate unrestricted resale of all shares of common stock issuable upon conversion of the Series C Preferred Stock.

Even with the Company entering into the October 2017 Purchase Agreement, the Company’s current financial situation raises substantial doubt about the Company’s ability to continue as a going concern for the next twelve months following the issuance of these financial statements. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. Accordingly, the financial statements do not include any adjustments relating to the recoverability of assets and classification of liabilities that might be necessary should the Company be unable to continue as a going concern.

Asset Purchase Agreement

On December 30, 2015, the Company entered into an Asset Purchase Agreement (as amended from time to time, the “Asset Purchase Agreement”) to acquire, from twenty-three different entities and individuals (the “Sellers”), working interests in producing properties and undeveloped acreage (the “Acquisition”), which acquisition transaction was completed on August 25, 2016. The assets acquired include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region. In connection with the closing of the acquisition, the Company assumed approximately $30.6 million of commercial bank debt, issued 13,009,664520,387 shares of common stock to certain of the Sellers, issued 552,000 shares of Series B Preferred Stock to one of the Sellers and its affiliate, and paid $4,975,000 in cash to certain of the Sellers. The effective date of the Acquisition was April 1, 2016.

Pursuant to a Letter Agreement the Company entered into, at the closing of the Acquisition, with RAD2 Minerals, Ltd. (“RAD2”), one of the Sellers, which is owned and controlled by Richard N. Azar II, who was appointed as the Company’s Chairman on August 26, 2016, serving as the Company’s Chairman until May 16, 2017, provided that Mr. Azar continues to serve as a member of the Board of Directors and was appointed asformer Chief Executive Officer of the Company on June 2, 2017,and former director. RAD2 agreed to accept full financial liability for any and all deficiencies between the “Agreed Assets Value” set forth in the Asset Purchase Agreement of $80,697,710, and the mutually agreed upon value of the assets delivered by the Sellers at the closing of the Acquisition, up to an aggregate of $1,030,941 (as applicable, the “Deficiency”). The Company accepted additional oil and gas producing properties and two salt water disposal facilities from the Sellers with an approximate value of $1.0 million to resolve this Deficiency. RAD2 is one of the Sellers, which is owned and controlled by Richard N. Azar II, who was appointed as our Chairman on August 26, 2016, serving as Chairman until May 16, 2017, provided that Mr. Azar continues to serve as a member of the Board of Directors and was appointed as Chief Executive Officer of the Company on June 2, 2017.

The Asset Purchase Agreement between the Sellers and the Company relating to the Acquisition included the requirement that, following the closing, the parties undertake an accounting/true-up of expenses attributable to the assets acquired by the Company and revenue generated from such assets. A dispute has arisenarose between the Sellers and the Company as to the time period which the Company was to be responsible for the payment of expenses and was to receive the revenue from such assets prior to the closing of the transaction. Specifically, the Company believesbelieved that the agreements provideprovided for it to be responsible for all expenses associated with the assets, and to receive all revenue generated from the assets, from April 1, 2016, the effective date of the Asset Purchase Agreement, through the closing date, August 25, 2016. The Sellers on the other hand, which include entities owned by Richard N. Azar, II, the Company’s then interim Chief Executive Officer, have argued that the Company was only responsible for expenses, and was only due to receive revenue from the assets, beginning on the closing date, August 25, 2016. The difference in the amounts claimed due to the Company from the parties currently variesvaried from a high of $1,121,718, which the Company alleges it isalleged was due, to a low of $342,298, which the Sellers allege thatalleged was due. On July 12, 2018, the Company entered into a Compromise Settlement Agreement and Mutual Release with Segundo Resources, LLC”), which is due. The parties continueowned and controlled by Mr. Azar (“Segundo” and the “Segundo Settlement”), in partial consideration for N&B Energy agreeing to discussenter into the issues raised and to work towards a mutually acceptable settlement; however, dueSale Agreement (discussed below). Pursuant to the continuing dispute, for the purposesSegundo Settlement, Segundo surrendered 15,237 shares of common stock valued at $76.25 per share as of the attached financial statements,effective date of the closing of the acquisition contemplated by the December 31, 2015 Asset Purchase Agreement (which closing effective date was April 1, 2016) for cancellation (which cancellation occurred in October 2018), and released the Company has recorded a receivablefrom any and all claims which Segundo previously alleged were owed under the terms of $1,121,718the December 31, 2015 Asset Purchase Agreement. The Company and Segundo also provided each other full releases in connection with an allowance of $779,420 for a net balance of $342,298. It is possible that any settlement may not result in any funds being paidthe December 31, 2015 Asset Purchase Agreement and Segundo agreed to indemnify the Company and hold it harmless against any settlement may result inclaims made by the return of shares toother sellers under the Company for cancellation.

Rogers Loan and Promissory Note

At December 31, 2017, the Company had settled the $7.5 million Letter Loan Agreement originally entered into with Louise H. Rogers (“Rogers”) on August 13, 2013 (the “Rogers Loan”). No amortization of debt discount was recorded during the nine-month periods ending December 31, 2017 and 2016. See Note 6 “Notes Payable and Debenture” for further details.2015 Asset Purchase Agreement. 

Loan Agreement with International Bank of Commerce (“IBC”)

As discussed in “Note 6 – Notes Payable and Debenture”, the Company borrowed $40 million from International Bank of Commerce (“IBC” or “IBC Bank”) effective August 25, 2016. The proceeds of the loan were used to repay and refinance approximately $30.6 million of indebtedness owed by certain of the Sellers to IBC as part of the closing of the Acquisition. As of June 30, 2018 and March 31, 2017 and December 31, 2017,2018, the Company was not in compliance with certain covenants of the loan agreement, including requiring the Company to maintain a net worth of $30 million, the Company was in default of the terms of the loan, and the balance of the loan due to IBC of $37.4$36.9 million (less unamortized debt issuance costs of approximately $1.5$1.3 million), was recognized as a short-term liability on the Company’s balance sheet as of June 30, 2018 and March 31, 20172018. The Company also recognized approximately $0 and December$39,000 in accrued interest as of September 30, 2018 and March 31, 2017.2018, respectively related to this note. As discussed below, in September 2018, the Company assigned all of the obligations and liability under the IBC Bank documents to N&B Energy.

The

On April 6, 2016, the Company entered into extension agreementsa Securities Purchase Agreement (the “Securities Purchase Agreement”) with IBC, in or around December 2017 and January 2018. Notwithstanding the extensions,an accredited institutional investor (the “Investor”), pursuant to which the Company is stillsold and issued a redeemable convertible subordinated debenture, with a face amount of $530,000, initially convertible into 6,523 shares of common stock (subject to certain conversion premiums) at a conversion price equal to $3.25 per share and a warrant to initially purchase 55,385 shares of common stock (subject to adjustment thereunder) at an exercise price equal to $81.25 per share (the “First Warrant”). The Investor purchased the debenture at a 5.0% original issue discount in defaultthe amount of $500,000 and has exercised the First Warrant in full as described below for the sum of $4.5 million. Additionally, the Investor has fully converted the debenture as of the date of this filing.

Also on April 6, 2016, the Company entered into a Stock Purchase Agreement with the Investor, pursuant to which the Company agreed, subject to certain conditions, to issue up to 527 shares of Series C redeemable convertible preferred stock (the “Series C Preferred Stock”) at a 5% original issue discount, convertible into 1,621,539 shares of common stock (subject to certain conversion premiums) at a conversion price of $3.25 per share, and a warrant to initially purchase 44,444 shares of common stock at an exercise price of $112.50 per share (the “Second Warrant”). Under the terms of the Stock Purchase Agreement, the Second Warrant and 53 shares of Series C Preferred Stock were sold and issued for $500,000 on September 2, 2016, and the remaining 474 shares of Series C Preferred Stock were sold and issued for $4.5 million on November 17, 2016.

In July and August 2016, RAD2 advanced the Company an aggregate of $350,000. Also, in August 2016, two other Sellers advanced the Company an aggregate of $200,000 ($100,000 each). These advances did not accrue interest and had no stated maturity date. Additionally, in August 2016, RAD2 loaned the Company $1.5 million pursuant to a promissory note. The promissory note did not accrue interest for the first month it was outstanding and accrued interest at the rate of 5% per annum thereafter until paid in full. The Company repaid the promissory note in full and all amounts advanced by RAD2 and the two other Sellers in October 2016.

On October 7, 2016, the Investor exercised the First Warrant in full and was due 55,385 shares of common stock upon exercise thereof and an additional 101,709 shares of common stock in consideration for the conversion premium due thereon. A total of 32,400 shares were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock), provided that all of such shares due to the Investor upon the exercise of the First Warrant have been issued to date. The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due in consideration for the conversion premium increased as the annual rate of return under the IBC loan,First Warrant increased, including by 10% upon the entire amountoccurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per annum upon the exercise of the IBC loan may be acceleratedFirst Warrant.

An aggregate of 4,417,911 shares of common stock were issued to the Investor in connection with the exercise of the Warrant during fiscal 2017 (200,000), fiscal 2018 (3,909,500), and IBC may take action308,411 shares were issued in April 2018. The First Warrant has been fully-exercised and extinguished to enforcedate.

N&B Energy Asset Disposition Agreement

On July 12, 2018, the Company entered into an Asset Purchase Agreement (the “Sale Agreement”), as seller, with N&B Energy, as purchaser, which entity is affiliated with Richard N. Azar II, the Company’s former Chief Executive Officer and former director, and Donnie B. Seay, the Company’s former director. Pursuant to the Sale Agreement, the Company agreed to sell to N&B Energy a substantial portion of its remedies underassets, including all of the loan agreement. The IBC loan is secured by substantiallyassets acquired pursuant to the terms of the December 31, 2015 Asset Purchase Agreement with Segundo and certain other more recent acquisitions, other than the production payment and overriding royalty interests discussed below (the “Assets”). In consideration for the Assets, N&B Energy agreed to pay the Company $100 in cash, to assume all of the Company’s assetsobligations and ifdebt owed under its outstanding loan agreement with IBC wereBank, which had a then outstanding principal balance of approximately $36.9 million and Segundo agreed to foreclose on our assets it would have a material adverse effect on our operations and may force us to seek bankruptcy protection. See Note 6 “Notes Payable and Debenture” for further details.enter into the Segundo Settlement, described below.

Dreeben Loan

IBC Bank Standstill Agreement

On November 9, 2017,August 3, 2018, the Company entered into an agreement in connection with the saleloan (the “Standstill Agreement”) with IBC Bank, which was effective August 1, 2018. Among other terms, described below, the Standstill Agreement was entered into to provide the Company sufficient time to close the transactions contemplated by the Sale Agreement. Pursuant to the Standstill Agreement:

First Amendment to Sale Agreement

Also on August 3, 2018, the Company and N&B Energy entered into a First Amendment to Asset Purchase Agreement (the “First Amendment”), which amended the terms of the Jackrabbit Acreage,Sale Agreement to (a) modify, clarify and replace certain of the exhibits to the original Sale Agreement, including the terms of the overriding royalty interests and production payment agreed to be granted to the Company repaid Mr. Dreebenas part of such Sale Agreement; (b) amend the full amountSale Agreement to remove the requirement that the Company obtain shareholder approval prior to the closing of such Sale Agreement; and (c) include a deadline of August 31, 2018 for N&B Energy’s due ondiligence under the short-term promissory noteSale Agreement.

Additionally, in order to avoid the significant time required to file a proxy statement with the Securities and Exchange Commission, clear comments with the Securities and Exchange Commission, hold a meeting and obtain shareholder approval, and because such shareholder approval was not required pursuant to applicable law or the rules of $1,050,000. See Note 4 “Property and Equipment” and Note 6 “Notes Payable and Debenture” for further details.the NYSE American, the Company’s management determined to not seek shareholder approval, but to instead seek a third-party opinion as to the fairness of the transaction to the Company’s shareholders.

Loan from Non-Related IndividualSecond Amendment to Sale Agreement

On November 9, 2017,September 24, 2018, the Company, N&B Energy and CE Operating, LLC, the Company’s wholly-owned subsidiary (“CE Operating”), entered into a Second Amendment to Asset Purchase Agreement (the “Second Amendment”), which amended the terms of the Sale Agreement. Pursuant to the Second Amendment, the Company, N&B Energy and CE Operating agreed (a) to clarify that all of the representations of the Company made in the Sale Agreement relating to portions of the Assets held in the name of CE Operating shall be deemed made by CE Operating and not the Company and that CE Operating shall be deemed a party to the Sale Agreement, solely in order to make such representations; and (b) to extend the deadline for closing the transactions contemplated by the Sale Agreement to September 26, 2018, or such other date as the Company and N&B shall agree upon in writing.

Assumption Agreement

On September 26, 2018, the Company entered into an Assumption Agreement (the “Assumption Agreement”) with IBC Bank; CE Operating; N&B Energy, which entity is affiliated with Richard N. Azar, II, the Company’s former Chief Executive Officer and former director (“Azar”), and Donnie B. Seay, the Company’s former director (“Seay”); Azar; RAD2 Minerals, Ltd., an entity owned and controlled by Azar (“RAD2”); Seay; and DBS Investments, Ltd., an entity owned and controlled by Seay. Azar, Seay, RAD2, and DBS are collectively referred to as the “Guarantors”.

Pursuant to the Assumption Agreement, N&B Energy agreed to assume all of the Company’s liabilities and obligations owed to IBC Bank under the Loan Documents, the amount due under and in connection which was secured by (a) an Oil and Gas Mortgage, Security Agreement, Financing Statement and Assignment of Production (Oklahoma) dated August 25, 2016, covering all of the Company’s right, title and interest in and to certain oil, gas and mineral leases and/or minerals, mineral interests and estates located in Lincoln, Payne, and Logan Counties, Oklahoma; (b) an Oil and Gas Mortgage, Security Agreement, Financing Statement and Assignment of Production (Oklahoma) dated August 1, 2018, covering all of the Company’s right, title, and interest in and to certain oil, gas, and mineral leases and/or mineral interests and estates located in Okfuskee County, Oklahoma (collectively, the “Orion Interests”); and (c) the Mortgage, Deed of Trust, Assignment, Security Agreement and Financing Statement dated as of August 25, 2016, covering the Company’s mineral interests located in Glasscock County, Texas (collectively, the “West Texas Properties”).

Additionally, pursuant to the Assumption Agreement, IBC Bank approved the transactions contemplated by the Sale Agreement and the assumption by N&B Energy of all of the amounts and liabilities which the Company owed to IBC Bank (the “IBC Obligations”) and N&B Energy agreed to assume all of the IBC Obligations. Finally, pursuant to the Assumption Agreement, IBC Bank released and forever discharged the Company and CE Operating and each of their current and former officers, directors, and shareholders, from all covenants, agreements, obligations, claims and demands of any kind, whether in law or at equity, which IBC Bank then had, arising out of or related to the amounts which the Company owed to IBC Bank under the Note, Loan Agreement or mortgages and/or under such documents or agreements, and further agreed to release the lien which IBC Bank then held on the West Texas Properties.

N&B Energy Sale Agreement Closing

On September 26, 2018, the transactions contemplated by the Sale Agreement closed and N&B Energy assumed all of the IBC Obligations (pursuant to the Assumption Agreement described above) and paid the Company $100 in cash, and the Company transferred ownership of the Assets to N&B Energy.

Notwithstanding the sale of the Assets, the Company retained its assets in Glasscock County and Hutchinson Counties, Texas and also retained a 12.5% production payment (effective until a total of $2.5 million has been received); a 3% overriding royalty interest in its existing Okfuskee County, Oklahoma asset; and retained an overriding royalty interest on certain other undeveloped leasehold interests, pursuant to an Assignment of Production Payment and Assignment of Overriding Royalty Interests.

The effective date of the Sale Agreement is August 1, 2018. The Assets were assigned “as is” with all faults.

As a result of the Assumption Agreement and the Sale Agreement, the Company reduced its liabilities by $37.9 million and its assets by approximately $12.1 million.

The following table summarizes the net assets sold and gain recognized in connection with the sale of the Jackrabbit Acreage, the Company repaid the non-related individual the full amount due on the short-term promissory note of $263,158. See Note 4 “PropertyAssumption Agreement and Equipment” and Note 6 “Notes Payable and Debenture” for further details.Sale Agreement:

Sale of Jackrabbit Acreage

On November 9, 2017, the Company (through its subsidiary, Camber Permian LLC) and NFP Energy LLC (“NFP”), its joint venture partner, sold oil and gas properties totaling approximately 2,452 acres in Gaines County, Texas, to Fortuna Resources Permian, LLC (“Fortuna”). With the proceeds from the sale, the Company paid the 1st lien holders including Alan Dreeben and 2nd lien holder Vantage Fund, LLC, thus reducing its liabilities by $1,518,924 and paid NFP $662,072, to terminate the joint venture agreement. See Note 4 “Property and Equipment” for further details.

NOTE 3 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The Company has provided a discussion of significant accounting policies, estimates and judgments in its March 31, 20172018 Annual Report on Form 10-K. There have been no changes to the Company’s significant accounting policies since March 31, 2017.2018 which are expected to have a material impact on the Company’s financial position, operations or cash flows.

Reclassifications

Certain reclassifications have been made to the prior year financial statements to conform them with the current year presentation.

Recently Adopted Accounting Pronouncements

In August 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern. The new standard requires management to assess the Company’s ability to continue as a going concern. Disclosures are required if there is substantial doubt as to the Company’s continuation as a going concern within one year after the issue date of financial statements. The standard provides guidance for making the assessment, including consideration of management’s plans which may alleviate doubt regarding the Company’s ability to continue as a going concern. ASU 2014-15 is effective for years ending after December 15, 2016. The Company has adopted this standard for the year ending March 31, 2017, and management has concluded that there is substantial doubt as to the Company’s continuation as a going concern within one year after the issue date of the financial statements.

2014-09,Recently Issued Accounting Pronouncements

In May 2014, the FASB issued ASU No. 2014-09, “Revenue from Contracts with Customers (“ASU 2014-09”)(Topic 606)”, which supersedes nearly all existingthe revenue recognition requirements and industry-specific guidance under GAAP. The core principle of ASU 2014-09 isRevenue Recognition (Topic 605). Topic 606 requires an entity to recognize revenuesrevenue when it transfers promised goods or services are transferred to customers in an amount that reflects the consideration to which anthe entity expects to be entitled to in exchange for those goods or services. ASU 2014-09 defines a five- step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing GAAP. The guidance is effective for annual and interim periods beginning after December 15, 2017. The standard is required to beCompany adopted Topic 606 on April 1, 2018, using either the full retrospective approach, with all prior periods presented adjusted, or the modified retrospective approach, with a cumulative adjustmentmethod applied to retained earnings on the opening balance sheet. The Company will adopt the new standard utilizingcontracts that were not completed as of April 1, 2018. Under the modified retrospective approach.method, prior period financial positions and results will not be adjusted. The cumulative effect adjustment recognized in the opening balances included no significant changes as a result of this adoption. While the Company does not expect the adoption of this ASU2019 net earnings to have a material impact on its financial statements. However, we anticipate the new standard will result in more robust footnote disclosures. We cannot currently determine the extent of the new footnote disclosures as further clarification is needed forbe materially impacted by revenue recognition timing changes, Topic 606 requires certain practices commonchanges to the industry. We will continuepresentation of revenues and related expenses beginning April 1, 2018. Refer to evaluate the impacts that future contracts may have.Note 9 – Revenue from Contracts with Customers for additional information.

In FebruaryNovember 2016, the FASBFinancial Accounting Standards Board (“FASB”) issued ASU 2016-02, aan Accounting Standards Update (“ASU”) amending the presentation of restricted cash within the consolidated statements of cash flows. The new lease standard requiring lesseesguidance requires that restricted cash be added to recognize lease assetscash and lease liabilities for most leases classified as operating leases under previous U.S. GAAP. The guidance is effective for fiscal years beginning after December 15, 2018, with early adoption permitted.cash equivalents on the consolidated statements of cash flows. The Company will be requiredadopted this ASU on April 1, 2018 on a retrospective basis with the following impacts to useour consolidated statements of cash flows for the six months ended September 30, 2017:

As of September 30, 2018 and March 31, 2018, the Company had restricted cash of $0 and $26,834 related to the loan agreement with IBC bank.

Following is a modified retrospective approach for leases that exist or are entered into after the beginningsummary of the earliest comparative period in the financial statements. The Company is currently evaluating the impact of adopting this standard on its consolidated financial statements.cash and cash equivalents and restricted cash:

In August 2016, the FASB issued ASU 2016-15, Statement of Cash Flows (Topic 230). ASU 2016-15 seeks to reduce the existing diversity in practice in how certain cash receipts and cash payments are presented and classified in the statement of cash flows. This update is effective for fiscal years beginning after December 15, 2017. The Company adopted this ASU on April 1, 2018 and the adoption did not have a significant impact to the Company’s consolidated financial statements.

In January 2017, including interim periods within those fiscal years,the FASB issued ASU 2017-01,Business Combinations: Clarifying the Definition of a Business, which amends the current definition of a business. Under ASU 2017-01, to be considered a business, an acquisition would have to include an input and a substantive process that together significantly contributes to the ability to create outputs. ASU 2017-01 further states that when substantially all of the fair value of gross assets acquired is concentrated in a single asset (or a group of similar assets), the assets acquired would not represent a business. The new guidance also narrows the definition of the term “outputs” to be consistent with how it is described in Topic 606,Revenue from Contracts with Customers. The changes to the definition of a business will likely result in more acquisitions being accounted for as asset acquisitions. The guidance is effective for the annual period beginning after December 15, 2017, with early adoption permitted. The Company is currently evaluatingadopted this ASU on April 1, 2018 and the provisions of ASU 2016-15 and assessingadoption did not have a significant impact to the impact, if any, it may have on its statement ofCompany’s consolidated cash flows.financial statements.

In May 2017, the FASB issued ASU 2017-09, “Compensation-Stock Compensation (Topic 718): Scope of Modification Accounting”, which provides guidance about which changes to the terms or conditions of a share-based payment award require an entity to apply modification accounting in Topic 718. ASU 2017-09 is effective for annual periods beginning after December 15, 2017, with early adoption permitted, including adoption in any interim period for which financial statements have not yet been issued. The Company is currently evaluatingadopted this ASU on April 1, 2018 and the adoption did not have a significant impact of adopting this standard on itsto the Company’s consolidated financial statements.

Recently Issued Accounting Pronouncements

 The Company does not believe that any other recently issued effective pronouncements, or pronouncements issued but not yet effective, if adopted, would have a material effect on the accompanying consolidated financial statements.

NOTE 4 – PROPERTY AND EQUIPMENT

Oil and Gas Properties

Camber uses the full cost method of accounting for oil and natural gas producing activities. Costs to acquire mineral interests in oil and natural gas properties, to drill and equip exploratory wells used to find proved reserves, and to drill and equip development wells including directly related overhead costs and related asset retirement costs are capitalized.

Under this method, all costs, including internal costs directly related to acquisition, exploration and development activities are capitalized as oil and natural gas property costs on a country-by-country basis. Costs not subject to amortization consist of unproved properties that are evaluated on a property-by-property basis. Amortization of these unproved property costs begins when the properties become proved or their values become impaired. Camber assesses overall values of unproved properties, if any, on at least an annual basis or when there has been an indication that impairment in value may have occurred. Impairment of unproved properties is assessed based on management’s intention with regard to future development of individually significant properties and the ability of Camber to obtain funds to finance their programs. If the results of an assessment indicate that the properties are impaired, the amount of the impairment is added to the capitalized costs to be amortized.

Sales of oil and natural gas properties are accounted for as adjustments to the net full cost pool with no gain or loss recognized, unless the adjustment would significantly alter the relationship between capitalized costs and proved reserves. If it is determined that the relationship is significantly altered, the corresponding gain or loss will be recognized in the statements of operations.

Costs of oil and natural gas properties are amortized using the units of production method. Amortization expense calculated per equivalent physical unit of production amounted to $5.67$4.45 and $13.81$5.75 per barrel of oil equivalent for the ninesix months ended December 31,September 30, 2018 and 2017, and 2016, respectively.

All of Camber’s oil and gas properties are located in the United States. Below are the components of Camber’s oil and gas properties recorded at:

For the ninesix months ended December 31, 2017,September 30, 2018, the Company recorded impairments totaling $4,025,374,$755,966, all if which represented $3,925,000were due to lease expirationsexpirations.

Capital Leases

During March and $100,374 related to an impairment of proved properties based on the quarterly ceiling test. The Company wrote off an additional $412,000 of leasehold costs related to leases that were not renewed. In addition, for the nine months ended December 31, 2017,April 2018, the Company capitalized approximately $1,000,000 attributable to intangible and tangible completion costs.

Rogers Transaction

The cure period on the Rogers Loan expired on September 11, 2017, and as of such date, all principal, interest and unpaid costs thereunder were immediately due and payable (which totaled approximately $9.4 million as of the date of acceleration which amount included $2.1 million of default interest). Prior to the default, CATI Operating, LLC (“CATI”) had not recorded interest due on the note based on its earlier agreements. As a result of the default, demand and acceleration, CATI recorded the default interest demand of $2.1 million in the three-month period ended December 31, 2017. In September 2017, Rogers foreclosed on the assets of CATI which secured the note. On October 3, 2017, the trustee of those assets, for the benefit of the lender, sold these assets in public auction foreclosure sales which took place in Gonzales County and Karnes County, Texas. The proceeds from the foreclosure sales of approximately $3.5 million were applied against the outstanding indebtedness.

On December 15, 2017, CATI entered into a Release of Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and Fixture Filing (the “Release”) with Rogers. Pursuant to the Release, the Company completed a transaction in which CATI provided Rogers,purchased certain equipment pursuant to an Assignment of Overriding Royalty Interest (the “Royalty Assignment”), with an overriding royalty (equal to 0.01 of 8/8ths of all oil and gas) on CATI’s remaining leasehold and Rogers released CATI from all remaining indebtedness owed.capital leases. The Release, which was filed in various counties in Texas on January 22, 2018 and January 23, 2018, discharged approximately $9.4 million in principal and interest outstanding and owed to Rogers, according to Rogers. The effective date of the Release was December 15, 2017. Additionally, the remaining leasehold and ownership of CATI was assigned to Arkose Lease Partners, L.L.C., a third party (“Arkose”), pursuant to an Assignment of Membership Interest (the “Assignment”), dated November 1, 2017, in exchange for Arkose’s assumption of all plugging and abandonment liabilities of CATI. See Note 6 “Notes Payable and Debenture” for further details. See further discussion of accounting for the Rogers Transaction in Note 6.

Vantage Transaction

On August 2, 2017 and effective June 13, 2017, Vantage provided us the Initial Tranche funding, we assigned all of our rights in Camber Permian to Vantage pursuant to an Assignment (the “Assignment”), and we granted Vantage the Vantage Warrant. See Note 2 “Liquidity and Going Concern Considerations” for further details. The book value of the Camber Permian rightsequipment was $114,500.

Sale of Jackrabbit Acreage

On November 9, 2017approximately $575,000, and effective November 1, 2017, the Company and NFP Energy LLC (“NFP”) its joint venture partner sold its 90% ownership positionsuch amount is included in oil and gas properties totaling approximately 2,452 acres in Gaines County, Texas, to Fortuna Resources Permian (“Fortuna”), for $1,000 per acre or an aggregate of $2,206,718 payable to the Company. The Company paid NFP $662,072, to terminate the joint venture agreement and the property sold had a net book valuecorresponding current liability of $1,544,843. The transaction resulted in a $314,002 gain whichapproximately $387,000 is included in Loss on Saleaccrued expenses as of OilJune 30, 2018. The effective borrowing rate is approximately 35%, and Gas Properties onall obligations were due by December 2018. In conjunction with the income statement. This acreage, partassignment of the Company’s “Jackrabbit” acreage, targetedliabilities owed under the San Andres formationIBC Loan Agreement to N&B Energy in the Permian Basin.  Additionally, the Company and NFP jointly terminated their venture.  With the proceeds from the sale, the Company paid the first lien holders including Alan Dreeben (a former director of the Company) and second lien holder Vantage, thus reducing its liabilities by approximately $1,525,000. The Company maintains a 90% ownership position in the remaining approximately 1,200 acres in the area.

Segundo Transaction

On August 25, 2016, the Company completed the Acquisition and acquired working interests in producing properties and undeveloped acreage from the Sellers (seeSeptember 2018, as discussed under “Note 2 – Liquidity and Going Concern Considerations”). The assets acquired include varied interests in two largely contiguous acreage blocks in the liquids-rich Mid-Continent region.

As consideration for the AcquisitionConsiderations – Assumption Agreement” all of the acquired assets,remaining obligations were assumed by the Company assumed approximately $30.6 million of commercial bank debt, issued 13,009,664 shares of common stock to certain of the Sellers valued at the grant date fair value, issued 552,000 shares of Series B Preferred Stock to one of the Sellers and its affiliate (see “Note 10 – Stockholders’ Equity”) valued at the grant date fair value, and paid $4,975,000 in cash to certain of the Sellers. The effective date of the Acquisition was April 1, 2016.

The following tables summarize the purchase price and allocation of the purchase price to the net assets acquired in connection with the Acquisition:

The proceeds from the $40 million loan from IBC were as follows:

purchaser. 

Other Property and Equipment

In February 2014, the Company purchased a field office for approximately $50,000 which is used to provide local operational support for its properties in the Eagle FordEagleford and Austin Chalk areas. The land upon which the field office resides was initially leased by the Company over a three-year term beginning in January 2014 through December 2016, for yearly lease amounts of $7,200 and $7,800, and $8,400 over the three-year term, respectively. In January 2017, the Company renewed the lease on a year-to-year basis for $7,200. The field office was transferred as a part of the Release with Rogers. See Note“Note 6 “Notes– Notes Payable and Debenture” for further details.

Office Lease

On July 27, 2015, the Company moved its corporate headquarters from 3555 Timmons Lane, Suite 1550, Houston, Texas 77027 to 450 Gears Road, Suite 780, Houston, Texas 77067 in connection with the expiration of the Company’s prior office space lease. The Company entered into a sublease on approximately 3,300 square feet of office space that expired on January 31, 2016 and had a base monthly rent of approximately $5,000 of which it had paid four months in advance as well as a $5,000 security deposit. For the proceeding months, the Company paid month-to-month rent until it was able to move into its new office suite. On April 1, 2016, the Company entered into a lease agreement pursuant to which the Company agreed to lease 4,439 square feet of office space at 450 Gears Road, Houston, Harris County, Texas 77067 (Suite 860, versus Suite 780 as was leased previously). The lease had a 65-month term (through August 2021), and commenced on April 1, 2016. The monthly rental cost under the lease was -$0- for the month of April 2016, and $7,676 for the months of May 2016 through April 2017, plus as applicable, its pro rata share of operating expenses and taxes which exceed the total operating expenses and taxes of the property for the first year of the lease. On March 31, 2017, the Company amended its lease at 450 Gears Road to expand to a total of 6,839 square feet, commencing on May 1, 2017. The amendment extended the lease period to November 2021.

In August 2017, the Company ceased its use of this office space and moved its headquarters to 4040 Broadway, Suite 425, San Antonio, Texas. The Company iswas committed to the remaining lease payments for the Houston office space for approximately $346,000 assuming an early termination of the lease on July 31, 2019.2019, and has recently settled these amounts pursuant to a settlement agreement discussed below. The Company recorded monthly rent expense associated with the Houston lease through August 2017. In accordance with the accounting guidance in ASC 420-10-25-13 regarding exit or disposal cost obligations, as of August 2017, the Company recorded rent expense, within general and administrative expense, and accrued a liability of $302,289, which represents the fair value of costs that will continue to be incurred during the remaining term of the Houston lease without economic benefit to the Company. As of DecemberSeptember 30, 2018 and March 31, 2017,2018, the carrying amount of the liability of $302,289 and $302,289, respectively, was included in accrued expenses onCurrent Liabilities in the Company’s balance sheet.Consolidated Balance Sheets. In addition, the Company wrote-off $189,533 of mostly fully depreciated property and equipment that was not re-located to the San Antonio headquarters, resulting in a loss of $3,368.$3,368 which was recognized as a loss during the fiscal year ended March 31, 2018. In October 2018, the Company entered into a settlement with its prior landlord as described below under “Note 8 – Commitments and Contingencies – Legal Proceedings – MidFirst”.

Effective October 1, 2017, the Company entered into an agreement to sublease space on a month-to-month basis in San Antonio, Texas at 4040 Broadway, Suite 425, from RAD2 Minerals, Ltd., an entity owned and controlled by Mr. Azar, the Company’s former Interim Chief Executive Officer, who resigned as Interim CEO effective May 25, 2018 and resigned as a member of the Board of Directors on June 21, 2018. Monthly rent for October through December 2017 was $5,000 per month, increasing to $7,500 per month effective January 2018. The agreement was subsequently modified to have a month-to-month term at $2,500 per month, effective July 1, 2018.

Effective August 1, 2018, the Company terminated its month-to-month lease with RAD2 and entered into a month-to-month lease at 1415 Louisiana, Suite 3500 Houston, Texas 77002. The entity which has provided the use of the Company’s Chief Financial Officer is providing this space without charge to the Company.

NOTE 5 – ASSET RETIREMENT OBLIGATIONS

The following table presents the reconciliation of the beginning and ending aggregate carrying amounts of long-term legal obligations associated with the retirement of oil and gas property and equipment for the nine-monthsix-month periods ended December 31,September 30, 2018 and 2017, and 2016, respectively.

Camber does not have any short-term asset retirement obligations as of December 31, 2017September 30, 2018 and March 31, 2017.2018.

NOTE 6 – NOTES PAYABLE AND DEBENTURE

The Company’s notes payable and debenture consisted of the following:

Rogers Loan and Promissory Note

At December 31, 2017, the Company had no liability under the $7.5 million Letter Loan Agreement originally entered into with Rogers on August 13, 2013.

Additionally, per a prior amendment, the Company transferred all of its oil and gas interests and equipment to our then newly formed wholly-owned Texas subsidiary, CATI which clarified that following the transfer, Rogers had no right to foreclose upon the Company (at the Nevada corporate parent level) upon the occurrence of an event of default under the Rogers Loan, and that instead Rogers would only take action against CATI and its assets and required Rogers to release all UCC and other security filings on the Company (provided that Rogers is allowed to file the same filings on CATI and its assets). Subsequently, the Company assigned all of its oil and gas interests and equipment to CATI pursuant to an Assignment and Bill of Sale dated December 16, 2015.

On February 1, 2017, the Company agreed to extend the maturity date of the Rogers Loan from January 31, 2017 to April 30, 2017. As consideration, the Company paid $9,000 to Rogers and $9,000 to Robertson Global Credit, LLC (“Robertson”), the servicer of the loan. In April 2017, the maturity date was extended again until July 31, 2017. As consideration, the Company paid $9,000 to Ms. Rogers and $9,000 to Robertson. The Company failed to pay the amount due to Rogers on July 31, 2017.

On August 25, 2017, the Company received a notice that its wholly-owned subsidiary CATI had defaulted on the maturity payment of its loan with Rogers, which matured on July 31, 2017. The letter stated that CATI was indebted to Rogers in an amount of $8.9 million, which includes all principal and interest (of which $2.1 million was default interest) through August 25, 2017. The letter further asserted additional interest of $3,577 per day as well as other unpaid fees totaling $18,162 plus interest on those fees. The default notice further stated that the default in failing to pay the fees must be cured by September 5, 2017 and the default on the principal and interest payment must be cured by September 11, 2017.

The cure period on the Rogers Loan expired on September 11, 2017, and as of such date, all principal, interest and unpaid costs thereunder were immediately due and payable (which totaled approximately $9.4 million as of the date of acceleration which amount included $2.1 million of default interest). Prior to the default, CATI had not recorded interest due on the note based on its earlier agreements. As a result of the default, demand and acceleration, CATI recorded the default interest demand of $2.1 million in the three-month period ended December 31, 2017. In September 2017, Rogers foreclosed on the assets of CATI which secured the note. On October 3, 2017, the trustee of those assets, for the benefit of the lender, sold these assets in public auction foreclosure sales which took place in Gonzales County and Karnes County, Texas. The proceeds from the foreclosure sales of approximately $3.5 million were applied against the outstanding indebtedness.

On December 15, 2017, CATI entered into a Release of Mortgage, Deed of Trust, Assignment, Security Agreement, Financing Statement and Fixture Filing (the “Release”) with Rogers. Pursuant to the Release, the Company completed a transaction in which CATI provided Rogers, pursuant to an Assignment of Overriding Royalty Interest (the “Royalty Assignment”), with an overriding royalty (equal to 0.01 of 8/8ths of all oil and gas) on CATI’s remaining leasehold and Rogers released CATI from all remaining indebtedness owed. The Release, which was filed in various counties in Texas on January 22, 2018 and January 23, 2018, discharged approximately $9.4 million in principal and interest outstanding and owed to Rogers, according to Rogers. The effective date of the Release was December 15, 2017. Additionally, the remaining leasehold and ownership of CATI was assigned to Arkose Lease Partners, L.L.C., a third party (“Arkose”), pursuant to an Assignment of Membership Interest (the “Assignment”), dated November 1, 2017, in exchange for Arkose’s assumption of all plugging and abandonment liabilities of CATI.

The following table summarizes the loss on the Rogers foreclosure on the assets of CATI, Release with Rogers, and assignment to Arkose:

Dreeben Note

On June 27, 2016, the Company entered into an amended and restated short-term promissory note, amending and restating the note originally entered into with Mr. Dreeben on March 28, 2016 evidencing an additional $100,000 borrowed on June 13, 2016, plus a $10,000 original issue discount on such loan amount and extending the maturity date of the note to August 31, 2016.

On August 31, 2016, the Company paid Mr. Dreeben the full amount due on the short-term promissory note of $385,000.

On January 31, 2017, the Company borrowed $1,000,000 from Alan Dreeben, one of the Company’s then directors, pursuant to a short-term promissory note. The short-term promissory note had a principal balance of $1,050,000 (the $1,000,000 principal amount borrowed plus a $50,000 original issue discount), accrued interest at 6% per annum and had a maturity date of January 31, 2018, with standard and customary events of default. As additional consideration for Mr. Dreeben agreeing to make the loan, the Company issued Mr. Dreeben 40,000 shares of restricted common stock in August 2017. The fair value of the restricted shares was $30,000 based on the closing price of the Company’s common stock on the issuance date. The fair value of the shares was recorded as additional debt discount.

On November 9, 2017, in connection with the sale of the Jackrabbit Acreage, the Company repaid Mr. Dreeben the full amount due on the short-term promissory note of $1,050,000. See Note 4 “Property and Equipment” for further details.

Vantage Funding

On July 17, 2017, Vantage provided $120,000 to the Company under the Vantage Note and on July 20, 2017, Vantage provided $30,000 to the Company under the Vantage Note. Vantage was granted a second lien on the Jackrabbit property in connection with the financing. On November 9, 2017, in connection with the sale of the Jackrabbit Acreage, the Company paid Vantage the full amount due on the Vantage Note of $150,000. See Note 2 “Liquidity and Going Concern Considerations” for further details. 

Non-Related Individual Note

On March 9, 2017, the Company borrowed $250,000 from a non-related individual pursuant to a short-term promissory note. The short-term promissory note has a principal balance of $263,158 (the $250,000 principal amount borrowed plus a $13,158 original issue discount), accrues interest at 6% per annum and has a maturity date of March 9, 2018 and contains standard and customary events of default. On November 9, 2017, in connection with the sale of the Jackrabbit Acreage, the Company paid the non-related individual the full amount due on the short-term promissory note of $263,158. See Note 4 “Property and Equipment” for further details.

Debenture

On April 6, 2016, the Company entered into a Securities Purchase Agreement with the Investor, pursuant to which the Company issued a redeemable convertible subordinated debenture, (the “Debenture”), with a face value of $530,000, initially convertible into 163,077 shares of common stock at a conversion price equal to $3.25 per share and warrants to initially purchase 1,384,61655,385 shares of common stock (subject to adjustment thereunder) at an exercise price equal to $3.25$81.25 per share (the “First Warrant”). The Investor purchased the debenture at a $30,000 original issue discount for the sum of $500,000 and agreed that it would exercise the First Warrant, upon satisfaction of certain conditions, for the sum of $4.5 million, which warrant was exercised in October 2016. The debenture matures in seven years and accrues interest at a rate of 6.0% per annum. Due to the recent decline in the price of ourthe Company’s common stock and that a trigger event occurred on June 30, 2016 as a result of the delay in filing ourof its Annual Report on Form 10-K for the year ended March 31, 2016, the premium rate on the debenture increased from 6% to 34% and the conversion discount became 85% of the lowest daily volume weighted average price during the measuring period (60 days prior to and 60 days after the last date that the Investor receives the last of the shares due), less $0.10 per share of common stock not to exceed 85% of the lowest sales price on the last day of such period less $0.10 per share.

As the fair value of the warrants issued in connection with the debenture exceedsexceeded the $530,000 value of the debenture, the Company fully discounted the entire debenture and will amortize the discount over the term of the debenture. The discount is being amortized through interest expense using the effective interest method over the term of the debenture.

On August 23, 2017, the Investor converted $35,000 of the principal amount of the Debenture into an aggregate of 1,754,71170,189 shares of common stock, which included 10,770431 shares for conversion of principal (at $3.25$81.25 per share) and 1,743,94169,758 shares for premiums.

Loan AgreementOn April 20, 2018, the Investor was issued 141,982 shares of common stock as a result of true-ups in connection with IBCthe August 23, 2017 conversion of the Debenture.

As of DecemberSeptember 30, 2018 and March 31, 2017,2018, the Company was not in compliancehad a convertible subordinated debenture with certain covenants of the loan agreement with IBC, including requiring the Company to maintain a net worth of $30 million, and the balance of the loan due to IBC$293,628 and $247,403, respectively (net of $37.4 million (less unamortized debt issuance costsdiscount of approximately $1.5 million)$201,372 and $247,597, respectively), waswhich is recognized as a short-term liability on the Company’s balance sheetsheets as of DecemberSeptember 30, 2018 and March 31, 2017.2018, respectively. The Company has also recognized approximately $239,000$422,104 and $388,183 in accrued interest as of DecemberSeptember 30, 2018 and March 31, 2017.2018, respectively.

On October 31, 2018, the Investor converted the entire $495,000 of principal owed under the terms of the debenture, into an aggregate of 20,037,653 shares of common stock, including 152,308 shares of common stock issuable upon conversion of the principal amount thereof (at a conversion price of $3.25 per share), and 19,885,345 shares in connection with conversion premiums due thereon (at a conversion price, as calculated as provided in such debenture, of $0.0609 per share). A total of 2,500,000 of such shares were issued to the Investor in connection with the conversion (an additional 3,272,000 shares were issued on November 5, 2018) and the remaining shares were held in abeyance subject to the Investor’s 9.99% ownership limitation, to be issued from time to time, at the request of the Investor.

Loan Agreement with International Bank of Commerce (“IBC” or “IBC Bank”)

On August 25, 2016, the Company, as borrower, and Azar, Seay, Richard E. Menchaca, RAD2, DBS Investments, Ltd. (“DBS”, controlled by Seay) and Saxum Energy, LLC (“Saxum”, which is controlled by Mr. Menchaca), as guarantors, all of which were directly or indirectly Sellers), and IBC Bank, as lender, entered into a Loan Agreement.

Pursuant to the Loan Agreement, IBC Bank loaned the Company $40 million, evidenced by a Real Estate Lien Note in the amount of $40 million. The Company was required to make monthly payments under the note equal to the greater of (i) $425,000; and (ii) fifty percent (50%) of the Company’s monthly net income. The note accrued annual interest at 2% above the prime rate then in effect, subject to a minimum interest rate of 5.5% per annum. The note was due and payable on August 25, 2019. Payments under the note were subject to change as the interest rate changes in order to sufficiently amortize the note in 120 monthly installments. The Company had the right, from time to time and without penalty to prepay the note in whole or in part, subject to the terms thereof.

The proceeds of the loan were used to repay and refinance approximately $30.6 million of indebtedness owed by certain of the Sellers, to IBC Bank (including an aggregate of $18.3 million owed by RAD2 and another entity controlled by Azar, $9.8 million owed by DBS, and $2.1 million owed by Mr. Menchaca), as well as to pay the $4.975 million due to the Sellers at closing. Another $3.36 million was used to fund a sinking fund required by IBC Bank, as discussed below, to pay principal on the note.

The amount owed under the note was secured by a Security Interest in substantially all of the Company’s assets and properties, pursuant to three Security Agreements. Also, each of the guarantors guaranteed the repayment of a portion of the Loan Agreement pursuant to a Limited Guaranty Agreement. Additionally, in connection with the parties’ entry into the Loan Agreement and to further secure amounts due thereunder, certain of the guarantors pledged shares of common stock which they received at the closing of the Acquisition to IBC Bank, with RAD2 pledging 124,824 shares of common stock; DBS pledging 37,437 shares of common stock; and Saxum pledging 26,936 shares of common stock.

The Company agreed to pay IBC Bank a loan finance charge of $400,000 in connection with its entry into the Loan Agreement, with half due on the date the Company entered into the Loan Agreement and half due on or before the 180^th day following the date of the Loan Agreement. As further consideration for agreeing to the terms of the Loan, the Company agreed to issue IBC Bank 15,612 shares of common stock. The Company recognized a $2.8 million note discount related to these transactions and other debt issuance costs and will amortize the discount and debt issuance costs over the term of the note.

On September 8, 2017, the Company received a Notice of Default and Opportunity to Cure (the “Notice”) from IBC, stating that the Company was in default under its loan due to failing to make a required $425,000 loan payment on August 25, 2017 (the “Payment Default”). The Notice was also sent to the guarantors under the Loan Agreement. The Notice also cited the Company for several covenant defaults including exceeding a cap on monthly general and administrative expenses; falling below $30 million of net worth; failing to comply with certain post-closing covenants regarding the assignment of certain oil and gas interests, the execution of certain supplemental mortgages and the completion of certain curative title requirements; failing to pay costs and expenses required pursuant to the terms of the Loan Agreement; failing to meet the requirements of a cash flow test as described in greater detail in the Loan Agreement; and exceeding the loan to value determination provided for in the Loan Agreement. In order to cure the Payment Default described in the Notice, the Company was required to pay $425,000, as well as any attorney’s fees and/or late fees as determined by IBC, on or before September 18, 2017, which amount was not paid and to cure the covenant defaults, which covenant defaults were not cured.

Pursuant to extension agreements entered into with IBC, in or around December 2017 and January 2018, (a) IBC agreed to waive the Company’s obligation to make the August 30, 2017, $425,000 monthly principal payment originally due under the IBC loan; (b) the Company confirmed the amount outstanding under the IBC loan ($37,443,308 as of each extension); (c) IBC agreed that interest only payments would be due on September 30, 2017, October 30, 2017, November 30, 2017 and December 31, 2017, with principal payments of $425,000 per month to begin thereafter, which principal payments were not made; (d) the parties agreed that the amounts owed to IBC were payable on demand, provided that if no demand was made, such amounts would be payable by way of monthly payments of $425,000 of principal, plus accrued interest, with the remaining amount owed to IBC due at maturity (August 25, 2019); (e) that the amount owed to IBC will accrue interest at the rate of 2% per annum above the prime rate, subject to a floor of 5.5% (currently 6.25% per annum); (f) if the Company fails to make any payment due to IBC within 10 days of its due date, IBC is due a late payment of 5% of the amount past due (subject to a minimum of $10 and a maximum of $1,500 per late payment); and (g) the Company and the guarantors of the IBC loan released IBC from any claims against IBC as of the date of each of such extensions.

NotwithstandingAs of September 30, 2018, the amounts owed to IBC Bank were assumed by N&B Energy pursuant to the Assumption Agreement, described above extensions, the Company is still in default under the IBC loan, the entire amount of the IBC loan may be accelerated“Note 2 – Liquidity and IBC may take action to enforce its remedies under the loan agreement. The IBC loan is secured by substantially all of the Company’s assets and if IBC were to foreclose on our assets it would have a material adverse effect on our operations and may force us to seek bankruptcy protection.Going Concern Considerations – Assumption Agreement”.

NOTE 7 – DERIVATIVESDERIVATIVE LIABILITY 

The Company has determined that certain warrants the Company has issued contain provisions that protect holders from future issuances of the Company’s common stock at prices below such warrants’ respective exercise prices and these provisions could result in modification of the warrants’ exercise price based on a variable that is not an input to the fair value of a “fixed-for-fixed” option as defined under FASB ASC Topic No. 815 -– 40. The warrants granted in April 2014 contain anti-dilution provisions that provide for a reduction in the exercise price of such warrants in the event that future common stock (or securities convertible into or exercisable for common stock) is issued (or becomes contractually issuable) at a price per share (a “Lower Price”) that is less than the exercise price of such warrant at the time. The amount of any such adjustment is determined in accordance with the provisions of the warrant agreement and depends upon the number of shares of common stock issued (or deemed issued) at the Lower Price and the extent to which the Lower Price is less than the exercise price of the warrant at the time.

Activities for derivative warrant instruments during the ninesix months ended December 31,September 30, 2018 and 2017 and 2016 were as follows:

The fair value of the derivative warrants was calculated using the Black-Scholes pricing model. Variables used in the Black Scholes pricing model as of December 31, 2017September 30, 2018 include (1) discount rate of 1.76%2.59%, (2) expected term of 1 year,0.56 years, (3) expected volatility of 141.35%227.10%, and (4) zero expected dividends. Variables used in the Black-Scholes pricing model as of December 31, 2016September 30, 2017 include (1) discount rate of 1.20%1.47%, (2) expected term of 2 years, (3) expected volatility of 179.29%162.52%, and (4) zero expected dividends.

As of December 31, 2017,September 30, 2018, the significant inputs to the Company’s derivative liability calculation were Level 3 inputs.

NOTE 8 – COMMITMENTS AND CONTINGENCIES

 The Company entered into multiple office lease agreements, see detail under “Note 4 – Property and Equipment – Office Leases”.

The Company’s oil and gas lease acreage is subject to expiration if the Company does not drill and hold such acreage by production or exercise options to extend such leases. At March 31, 2018, the Company had 423 acres of unproved lease acreage that is set to expire during fiscal year 2019 unless drilled or otherwise extended by the Company. During the six months ended September 30, 2018, leases for 245 unproved acres expired and a resulting impairment of approximately $755,966 was recognized, leaving 178 acres remaining.

Legal Proceedings.From time to time suits and claims against Camber arise in the ordinary course of Camber’s business, including contract disputes and title disputes. Camber records reserves for contingencies when information available indicates that a loss is probable and the amount of the loss can be reasonably estimated. 

Office LeaseMidFirst

In August 2017, the Company ceased its use of this office space and moved its headquarters to 4040 Broadway, Suite 425, San Antonio, Texas. The Company is committed to the remaining lease payments for the Houston office space for approximately $346,000, assuming an early termination of the lease on July 31, 2019. The Company recorded monthly rent expense associated with the Houston lease through August 2017. In accordance with the accounting guidance in ASC 420-10-25-13 regarding exit or disposal cost obligations, as of August 2017, the Company recorded rent expense, within general and administrative expense, and accrued a liability of $302,289, which represents the fair value of costs that will continue to be incurred during the remaining term of the Houston lease without economic benefit to the Company. As of December 31, 2017, the carrying amount of the liability of $302,289 was included in accrued expenses on the Company’s balance sheet. In addition, the Company wrote-off $189,533 of mostly fully depreciated property and equipment that was not re-located to the San Antonio headquarters resulting in a loss of $3,368.

Effective October 1, 2017, the Company entered into an agreement to sublease space on a month to month basis in San Antonio, Texas from RAD2 Minerals, Ltd., an entity owned and controlled by Mr. Azar, the Company’s Chief Executive Officer. Monthly rent for October through December 2017 was $5,000 per month increasing to $7,500 per month effective January 2018.

Consulting Contracts

On October 4, 2017, the Company entered into an agreement with a digital marketing advisor pursuant to which the advisor agreed to create original content with the goal of increasing public awareness about the Company and the Company agreed to pay the advisor (a) $20,000 per month beginning in October 2017 and ending on February 28, 2018, (b) $50,000 per month thereafter through October 4, 2018, the end of the term of the agreement, and (c) 3,750,000 shares of restricted common stock, with 2.5 million shares issued in November 2017 and the remainder due on May 1, 2018. 

On October 4, 2017, the Company entered into a consultingconfidential settlement agreement with a third party consultant which consultant agreed to provide investor relationsMidFirst Bank, its prior landlord and public relations servicessettled all claims relating to the Company. As consideration pursuant to the agreement, the Company issued the consultant 1,000,000 shares of restricted common stock with piggy-back registration rights in November 2017.

On November 13, 2017, the Company entered into a consulting agreement with another third party consulting company whereby the consulting company agreed to act as the Company’s Interim Vice President of Strategy. As consideration pursuant to the agreement, the Company agreed to pay (a) a non-refundable installment of $150,000 upon the execution of the agreement,prior office space lease. See also “Note 4 – Property and (b) beginning on February 1, 2018, the Company will pay $50,000 per month on the first of each month.Equipment” for further discussion.

Legal ProceedingsMaranatha Oil Matter

From time to time,In November 2015, Randy L. Robinson, d/b/a Maranatha Oil Co. sued the Company may become party to litigation or other legal proceedingsin Gonzales County, Texas (Cause No. 26160). The plaintiff alleged that it considersassigned oil and gas leases to bethe Company in April 2010, retaining a part4% overriding royalty interest and 50% working interest and that the Company failed to pay such overriding royalty interest or royalty interest. The interests relate to certain oil and gas properties which the Company subsequently sold to Nordic Oil USA in April 2013. The petition alleges causes of actions for breach of contract, failure to pay royalties, non-payment of working interest, fraud, fraud in the ordinary courseinducement of its business.contract, money had and received, constructive trust, violation of theft liability act, continuing tort and fraudulent concealment. The suit seeks approximately $100,000 in amounts alleged owed, plus pre-and post-judgment interest. The Company is not currently involved in any legal proceedings that it believes could reasonably be expectedhas filed a denial to have a material adverse effect on our business, prospects, financial condition or results of operations. The Company may become involved in material legal proceedings in the future.claims.

Rubenstein Matter

On September 28, 2017, Aaron Rubenstein, a purported shareholder of the Company’s common stock, filed a lawsuit against the Company (as nominal defendant) and Richard N. Azar II, itsit’s then Chief Executive Officer and director (who has since resigned from both positions), RAD2 Management, LLC, RAD2 Minerals, Ltd. and Segundo Resources, LLC, each an entity owned and controlled by Mr. Azar, in the United States District Court, Western District of Texas (Case No. 5:17-cv-962-FB).  The suit seeks the recovery (for the benefit of the Company) of alleged short-swing profits from Mr. Azar and his related entities under Section 16(b) of the Exchange Act relating to various transactions involving Series B Preferred Stock of the Company in November 2016 and January 2017. Mr. Azar deniesdenied the existence of any short-swing profits and filed a denial with the court. The Company also filed a denial with the court.

The parties are currently in discussions regarding a settlement of the plaintiff’s claims. Following the date of this filing the Company anticipates entering into a settlement agreement and that the plaintiff will file a dismissal of the plaintiff’s claims with the court.

Petroflow Matter

In October 2017, the Company agreed to pay directly and reimburse entities owned in part by Alan Dreeben, a former director of the Company, for legal fees and settlement payments expended in connection with the defense ofPetroflow Energy Corporation v. Sezar Energy, L.P. and Brittany Energy, LLC, Case No. 16-CV-700-TCK;TLW, In the United States District Court – N.D. OK. The Company was the beneficiary through the release of interest in disputed lease interests from Petroflow to the Company that provides the Company with complete control over those properties to renew expired leases and to have 100% of the drilling rights related to those properties. Sezar Energy and Brittany Energy have assigned any interests they may have had in conjunction with litigation in exchange for the Company making the agreed settlement payments of $475,000 plus direct payments and reimbursement of the legal costs paid on behalf of the defendants by Mr. Dreeben. Total legal fees expended by such entities totaled $392,043, and the Company reimbursed such fees by issuing Mr. Dreeben 1,960,21878,409 shares of common stock with a value of $0.20 per share in November 2017. In addition, the Company directly paid legal fees and settlement payments totaling $378,694.$567,633. The total expense related to the Petroflow matter of $770,737$959,676 is included in General and Administrative expense on the income statement.statement of operations during the year ended March 31, 2018.

Segundo Settlement Agreement

Also on July 12, 2018, the Company entered into a Compromise Settlement Agreement and Mutual Release with Segundo described in greater detail above under “Note 2 – Liquidity and Going Concern Considerations – Segundo Settlement Agreement”.

NOTE 9 – REVENUE FROM CONTRACTS WITH CUSTOMERS

Change in Accounting for Revenue from Oil and Gas Operations

The Company adopted ASU 2014-09,“Revenue from Contracts with Customers (Topic 606)”, on April 1, 2018, using the modified retrospective method applied to contracts that were not completed as of April 1, 2018. Refer to “Note 3 – Summary of Significant Accounting Policies” for additional information.

Exploration and Production

There were no significant changes to the timing or valuation of revenue recognized for sales of production from exploration and production activities.

Disaggregation of Revenue from Contracts with Customers

The following table disaggregates revenue by significant product type for the three and six months ended September 30, 2018:

There were no significant contract liabilities or transaction price allocations to any remaining performance obligations as of September 30, 2018 or March 31, 2018.

NOTE 10 – INCOME TAXES

The Company has estimated that its effective tax rate for U.S. purposes will be zero for the 2019 and 2018 fiscal years as a result of net losses and 2017 fiscal year and consequently,a full valuation allowance against the net deferred tax assets. Consequently, the Company has recorded no provision or benefit for income taxes for the three and ninesix months ended December 31, 2017September 30, 2018 and 2016.2017.

NOTE 1011 – STOCKHOLDERS’ DEFICITEQUITY (DEFICIT)

Common Stock

On January 10, 2018, the Company amended its Articles of Incorporation to increase the number of authorized shares of common stock from 200,000,000 shares to 500,000,000 shares.

On August 23, 2017, the Investor converted $35,000 of the principal amount of the Debenture into an aggregate of 70,189 shares of common stock, which included 431 shares for conversion of principal (at $81.25 per share) and 69,758 shares for premiums.

On April 20, 2018, the Investor was issued 141,982 shares of common stock as a result of true-ups in connection with the August 23, 2017 conversion of the Debenture.

On October 4, 2017, the Company entered into an agreement with a digital marketing advisor pursuant to which the advisor agreed to create original content with the goal of increasing public awareness about the Company and the Company agreed to pay the advisor (a) $20,000 per month beginning in October 2017 and ending on February 28, 2018, (b) $50,000 per month thereafter through October 4, 2018, the end of the term of the agreement, and (c) 150,000 shares of restricted common stock, with 100,000 shares payable within 15 days of the parties’ entry into the agreement and the remainder due on May 1, 2018. As of September 30, 2018, the remaining shares were issued and the obligation was settled in full.  

As of March 31, 2018, the 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $606,764 in dividends. The Company paid the dividends by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders in May 2018, pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $87.50 per share). The beneficial owners of the Series B Preferred Stock as of March 31, 2018, were Richard N. Azar, II, the Company’s former Chief Executive Officer and former director, and Alan Dreeben, the Company’s former director.

As of June 30, 2018, the 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $606,764 in dividends. The Company paid the dividends by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders in September 2018, pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $87.50 per share). The beneficial owners of the Series B Preferred Stock as of June 30, 2018, were Richard N. Azar, II, the Company’s former Chief Executive Officer and former director, and Alan Dreeben, the Company’s former director.

As of September 30, 2018, the 408,508 outstanding shares of Series B Preferred Stock had accrued $153,191 in dividends. The Company plans to pay the dividends by way of the issuance of an aggregate of 1,753 shares of its common stock to the preferred shareholders pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $87.50 per share). The beneficial owners of the Series B Preferred Stock as of September 30, 2018, were Richard N. Azar, II, the Company’s former Chief Executive Officer and former director, and Alan Dreeben, the Company’s former director. To date, the accrued dividend outstanding as of September 30, 2018 has not been paid.

On October 7, 2016, the Investor exercised the First Warrant in full and was due 55,385 shares of common stock upon exercise thereof and an additional 101,710 shares of common stock in consideration for the conversion premium due thereon. A total of 32,400 shares were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due in consideration for the conversion premium increases as the annual rate of return under the First Warrant increases, including by 10% upon the occurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per annum upon the exercise of the First Warrant. Additionally, as the conversion rate for the conversion premium is currently 85% of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed 85% of the lowest sales prices on the last day of such period less $0.10 per share, the number of shares issuable in connection with the conversion premium increases as the trading price of the Company’s common stock decreases, and the trading price of the Company’s common stock has decreased since the date the First Warrant was exercised, triggering a further reduction in the conversion price of the conversion premium and an increase in the number of shares due to the Investor in connection with the conversion of the amount owed in connection with the conversion premium. An aggregate of 4,417,911 shares of common stock were issued to the Investor in connection with the exercise of the Warrant during fiscal 2017 (200,000), fiscal 2018 (3,909,500), and 308,411 shares were issued in April 2018. The First Warrant has been fully-exercised and extinguished to date.

The following summarizes the Company’s common stock activity during the six-month period ended September 30, 2018:  

Series A Convertible Preferred Stock

On April 19, 2016, the holder of ourthe Company’s Series A Convertible Preferred Stock, agreed to convert all 500 shares of ourtheir outstanding Series A Convertible Preferred Stock into 20,000800 shares of ourthe Company’s common stock (a conversion ratio of 40:1.6:1 as provided in the original designation of the Series A Convertible Preferred Stock adjusted for the Company’s 1:25 reverse stock split effective on July 25, 2015)2015 and the Company’s 1:25 reverse stock split effective March 5, 2018), which conversion was completed on April 25, 2016. The Company paid the holder $20,000 in connection with such conversion in order to comply with the terms of the Asset Purchase Agreement that required that no shares of Series A Convertible Preferred Stock be outstanding at the closing. As of DecemberSeptember 30, 2018, and March 31, 2017,2018, respectively, the Company had no Series A Convertible Preferred Stock issued or outstanding.

Series B Redeemable Convertible Preferred Stock

On September 1, 2016, as consideration for the closing of the Acquisition, the Company issued an aggregate of 552,000 shares of Redeemable Convertible Preferred Stock, which had a total value of $13,800,000 based on the $25 per Series B Preferred Stock share par value. The preferred shares were issued to RAD2 (200,000 shares) and Segundo Resources, LLC (an affiliate of RAD2) (352,000 shares) on behalf of and for the benefit of RAD2.

The Company’s Series B Preferred Stock has a liquidation preference of $25 per share. The Series B Preferred Stock is convertible, at the option of the holder at any time following the original issuance date, into common stock at a rate of approximately 7.14:0.2857:1 (originally issuable into an aggregate of 3,942,857157,714 shares of common stock if fully converted), at the option of the holder thereof, or automatically as to 25% of the Series B Preferred Stock shares if ourthe Company’s common stock trades above $6.125$153.13 per share for at least 20 consecutive trading days, and trades with at least 75,0003,000 shares of average volume per day during such period; an additional 50% of the Series B Preferred Stock shares if ourthe Company’s common stock trades above $7.00$175.00 per share for at least 20 consecutive trading days, and trades with at least 75,0003,000 shares of average volume per day during such period; and as to the remaining Series B Preferred Stock shares, if ourthe Company’s common stock trades above $7.875$196.88 per share for at least 20 consecutive trading days, and trades with at least 75,0003,000 shares of average volume per day during such period. Each outstanding share of Series B Preferred Stock will be entitled to one vote per share on all stockholder matters. The Series B Preferred Stock is redeemable at any time by the Company upon the payment by the Company of the face amount of the Series B Preferred Stock ($25 per share) plus any and all accrued and unpaid dividends thereon.

The Company has the option, exercisable from time to time after the original issue date, to redeem all or any portion of the outstanding shares of Series B Preferred Stock by paying each applicable holder, an amount equal to the original issue price multiplied by the number of Series B Preferred shares held by each applicable holder plus the accrued dividends.

During the year ended March 31, 2017, the Company issued a stock dividend on the Series B Preferred Stock consisting of 82,674 shares of the Company’s common stock. Due to the fact that the Company is in an accumulated deficit position, the Company recognized a charge to additional paid in-capital of $83 based on the par value of the common stock issued.

On June 19, 2017, a holder of the Company’s Series B Convertible Preferred Stock converted 143,492 shares of Series B Convertible Preferred Stock into 1,024,943 shares of common stock of the Company.

As of December 31, 2017, theSeptember 30, 2018, there were 408,508 outstanding shares of Series B Preferred Stock had accrued an aggregate of $453,573 in quarterly dividends ($153,191 each for the quarters ended June 30, 2017, September 30, 2017 and December 31, 2017). The Company paid the accrued dividends on February 5, 2018, by way of the issuance of an aggregate of 131,313 shares of our common stock to the preferred shareholders pursuant to the terms of the designation (which provides that the Shares shall be based on a value of $3.50 per share).

The 408,508 shares of Series B Preferred Stockoutstanding, which have the following features:

As the Series B Preferred Stock is convertible at any time following the original issuance date into common stock at a rate of approximately 7.14:0.2857:1, the Company recognized a fair value measurement of $14,898,038 for the Series B Preferred Stock, which is based on the 552,000 preferred shares originally issued times the conversion rate of approximately 7.14,0.2857, times the price of the Company’s common stock of $3.78$94.50 per share at the date of the closing of the Acquisition on August 25, 2016.

During the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1,751 shares (with fair value $833 based on a share price of $0.50 per share at September 30, 2018) of the Company’s common stock. Due to the fact that the Company is in a retained deficit position, the Company recognized a charge to additional paid in-capital of $881 and stock dividends distributable but not issued based on the par value of the common stock issued. During the quarter ended September 30, 2018, the Company issued 1,751 shares to settle a stock dividend accrued on Series B Preferred Stock.

Series C Redeemable Convertible Preferred Stock

On April 6, 2016, the Company entered into a Stock Purchase Agreement with the Investor, pursuant to which it agreed, subject to certain conditions, to sell 527 shares of Series C redeemable convertible preferred stock (with a face value of $5.26 million) at a 5% original issue discount of $263,000, convertible into 1,618,46264,738 shares of common stock at a conversion price of $3.25 per share, and a warrant to purchase 1,111,11244,444 shares of common stock at an exercise price of $4.50$112.50 per share (the “Second Warrant”).

On September 2, 2016, the Second Warrant and 53 shares of Series C Preferred Stock were issued for $526,450 ($500,000, net cash proceeds to Camber) after the Acquisition (as defined and described in “Note 2 – Liquidity and Going Concern Considerations”) closed. The prorated share of the $263,000 discount ($26,450) was recorded as reduction to interest expense.additional paid in capital. On November 17, 2016, the remaining 474 shares of Series C Preferred Stock were issued for $4,736,550 ($4,500,000, net cash proceeds to the Company)Camber) and the Company paid placement agent and legal fees of $514,000 for services rendered in connection with the issuance. The Company also recognized $236,550 of the remaining 5% original issue discount, which was recorded as reduction to interest expenseadditional paid in capital.

On October 5, 2017, the Company and the Investor entered into the October 2017 Purchase Agreement, pursuant to which (1) the Investor purchased 212 shares of Series C Preferred Stock on the closing date of the agreement, October 4, 2017 (the “Initial Closing”), for $2 million, and agreed, subject to certain closing conditions set forth in the agreement, agreed to purchase (2) 106 shares of Series C Preferred Stock for $1,000,000, 10 days after the Initial Closing (which closing occurred on November 21, 2017); (3) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the second closing (which closing occurred on December 27, 2017); (4) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the third quarterclosing (which closing occurred on January 30, 2018); (5) 105 shares of fiscal 2017.Series C Preferred Stock for $1,000,000, 10 days after the fourth closing; (6) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the fifth closing; and (7) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the sixth Closing.

On October 5, 2017, the Company and the Investor entered into a Stock Purchase Agreement, amended on March 2, 2018 (as amended, the “October 2017 Purchase Agreement”) pursuant to which the Company agreed to sell, pursuant to the terms thereof, 1,684 shares of our Series C Redeemable Convertible Preferred Stock (the “Series C Preferred Stock”) for $16 million (a 5% original issue discount to the face value of such shares), subject to certain conditions set forth therein.

On March 2, 2018, the Company and the Investor entered into an amendment to the October 2017 Purchase Agreement (the “Amendment”), pursuant to which the Investor (a) waived any and all Trigger Events (as defined in the certificate of designation of the Series C Preferred Stock (the “Designation”)) that had occurred prior to March 2, 2018, (b) agreed that all calculations provided for in the Designation would be made as if no such Trigger Event had occurred, and (c) waived any right to receive any additional shares of common stock based upon any such Trigger Event, with respect to all shares of Series C Preferred Stock, other than any which have already been converted.

During the year ended March 31, 2018, the Company sold the Investor an aggregate of 633 shares of Series C Preferred Stock for $6 million under the terms of the October 2017 Purchase Agreement. 

The Investor also agreed, pursuant to the amendment, that the conversion rate of conversion premiums pursuant to the Designation would remain 95% of the average of the lowest 5 individual daily volume weighted average prices during the applicable Measuring Period (as defined in the Designation), not to exceed 100% of the lowest sales prices on the last day of the Measuring Period, less $0.05 per share of common stock, unless a triggering event has occurred, and that such $0.05 per share discount would not be adjusted in connection with the Company’s previously reported 1-for-25 reverse stock split affected on March 5, 2018.

The holder of the Series C Preferred Stock is entitled to cumulative dividends through maturity, which initially totaled 6% per annum, and are adjustable to up to 34.95% per annum, based on certain triggering events and the trading price of the Company’s common stock. The interest rate on the Series C Preferred Stock issued prior to October 5, 2017stock, and which currently total 34.95% per annum, and the interest rate on the Series C Preferred Stock issued after October 5, 2017 currently totals 24.95% per annum, with such interest,payable in each case, payablefull through maturity upon redemption, conversion, or maturity, and when, as and if declared by ourthe Company’s Board of Directors in its discretion. The Series C Preferred Stock ranks senior to the common stock and pari passu with respect to ourthe Company’s Series B Redeemable Convertible Preferred Stock.

The Series C Preferred Stock may be converted into shares of common stock at any time at the option of the holder, or at the Company’s option if certain equity conditions (as defined in the Certificate of Designation) are met. Upon conversion, the Companywe will pay the holder of the Series C Preferred Stock being converted an amount, in cash or stock at itsthe Company’s sole discretion, equal to the dividends that such shares would have otherwise earned if they had been held through the maturity date (7 years), and issue to the holder such number of shares of common stock equal to $10,000 per share of Series C Preferred Stock (the “Face Value”) multiplied by the number of such shares of Series C Preferred Stock divided by the conversion rate ($3.25 per share).

The conversion premium under the Series C Preferred Stock is payable and the dividend rate under the Series C Preferred Stock is adjustable on the same terms and conditions as accrued interest is payable and adjustable under the Debenture. The Series C Preferred Stock has a maturity date that is seven years after the date of issuance and, if the Series C Preferred Stock has not been wholly converted into shares of common stock prior to such date, we may redeem the Series C Preferred Stock on such date by repaying to the holder in cash 100% of the Face Value plus an amount equal to any accrued but unpaid dividends thereon. 100% of the Face Value, plus an amount equal to any accrued but unpaid dividends thereon, automatically becomes payable in the event of a liquidation, dissolution or winding up by us.

The following summarizesDuring the three and six-month periods ended September 30, 2018, the Company sold 735 and 945 shares of Series C Preferred Stock pursuant to the terms of the October 2017 Purchaser Agreement, for total consideration of $7 million and $9 million, respectively. As of September 30, 2018 and March 31, 2018, there were 1,683 and 1,132 shares of Series C Preferred Stock outstanding, respectively.

During the three and six-month periods ended September 30, 2018, the Investor converted 143 and 394 shares of the Series C Preferred Stock convertedstock with a face value of $1.43 million and $3.94 million and was issued 440,002 and 1,212,326 shares of common stock and additional shares of common stock in dividend premium shares of 8,533,610 and 17,184,686, respectively and true ups on those and prior conversions for an aggregate of a total of 67,587,868 shares issued during the ninesix months ended December 31 2017:September 30, 2018.

As of DecemberSeptember 30, 2018 and March 31, 2017,2018, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 24.95%34.95% and 34.95%24.95% premium dividend rate per the 2016 and 2017 Stock Purchase Agreement, respectively, as described above, as applicable.above. The Company recognized a total charge to additional paid-in capital and stock dividends distributable but not issued of $1,771,532$1,419,800 and $1,928,084 related to the stock dividend declared but not issued.

Due toissued for the decline in the price of the Company’s common stocksix month period ended September 30, 2018 and the trigger event that occurred on June 30, 2016 as a result of the delay in filing our Annual Report on Form 10-K for the year ended March 31, 2016, the dividend premium rate increased from 6% to 30% and the conversion discount became 85% of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed 85% of the lowest sales prices on the last day of such period less $0.10 per share. A total of 1,067,600 shares were issued to the Investor on December 23, 2016.2018, respectively.

As of December 31, 2016, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 30% premium dividend rate described above. The Company recognized a charge to additional paid-in capital and stock dividends distributable but not issued of $750,000 related to the stock dividend declared but not issued.

During the year ended March 31, 2017, the Investor converted 123 shares of the Series C Preferred stock with a face value of $1.2 million and was issued 378,464 shares of common stock and additional shares of common stock in dividend premium shares of 5,605,393 for an aggregate of a total of 5,693,857 shares issued.

On October 5, 2017, the Company and the Investor entered into a Stock Purchase Agreement (the “October 2017 Purchase Agreement”), pursuant to which the Company may receive aggregate consideration of $16 million, subject to certain conditions set forth therein. See “Note 2 – Liquidity and Going Concern Considerations – “Stock and Securities Purchase Agreements with Institutional Investor” for a description of the Series C Preferred Stock purchased or to be purchased by the Investor.

On October 5, 2017, in connection with the entry into the October 2017 Purchase Agreement, the Investor purchased 212 shares of Series C Preferred Stock for $2 million (the “Initial Closing”). On November 21, 2017, pursuant to the terms of the October 2017 Purchase Agreement, we sold the Investor an additional 106 shares of Series C Preferred Stock for $1 million (the “Second Closing”). On December 27, 2017, pursuant to the terms of the October 2017 Purchase Agreement, we sold the Investor an additional 105 shares of Series C Preferred Stock for $1 million (the “Third Closing”). On January 30, 2018, pursuant to the terms of the October 2017 Purchase Agreement, we sold the Investor an additional 105 shares of Series C Preferred Stock for $1 million (the “Fourth Closing”).

See discussion of the October 2017 Purchase Agreement with the Investor in Note 2.

Common Stock

The following summarizes the Company’s common stock activity during the nine-month period ended December 31, 2017:

Warrants

On August 2, 2017, and effective June 13, 2017, the Company entered into an agreement with Vantage pursuant to which Vantage agreed to provide up to $6 million of funding to the Company, at the sole discretion of Vantage. The initial tranche consisted of $400,000 received on June 12, 2017, in exchange for the assignment to Vantage of all of the Company’s rights and ownership in its wholly-owned subsidiary Camber Permian II, LLC (“Camber Permian”) which included leaseholds and potential participation rights and warrants to purchase 1,600,000 shares of the Company’s common stock. The fair value of the warrants was determined to be $284,305 as of the grant date using the Black-Scholes Option Pricing model. Variables used in the Black Scholes model as of June 12, 2017 include (1) discount rate of 1.78% (2) expected term of 5 years, (3) expected volatility of 135.42%, and (4) zero expected dividends.

During the three and nine months ended December 31, 2017, the Vantage Warrants were granted (in August 2017, as described above), and warrants to purchase 41,300 shares of common stock originally issued in April 2012 expired. No other warrants were issued or were cancelled.

During the year ended March 31, 2017, warrants to purchase 1,384,616 shares of common stock were granted in connection with the Company’s sale of the debenture noted in “Note 6 – Note Payables and Debenture” and warrants to purchase 1,111,112 shares of common stock at an exercise price of $4.50 per share were granted in connection with our sale of 53 shares of Series C Preferred Stock noted above. The Company also granted warrants to purchase 124,285 shares of common stock in connection with the sale of convertible notes. No warrants were cancelled during the year ended March 31, 2017, other than warrants to purchase 100,420 shares of common stock at an exercise price of $71.50 per share which expired unexercised on July 4, 2016.

On October 7, 2016, the Investor exercised the First Warrant in full and was due 1,384,61655,385 shares of common stock upon exercise thereof and an additional 2,542,735101,709 shares of common stock in consideration for the conversion premium due thereon. A total of 810,00032,400 shares were issued to the Investor on October 7, 2016, with the remaining shares being held in abeyance until such time as it would not result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock). The Company received gross proceeds of $4,500,000 from the exercise of the First Warrant and paid placement agent fees of $427,500 for services rendered in connection with the First Warrant. Pursuant to the terms of the First Warrant, the number of shares due in consideration for the conversion premium increases as the annual rate of return under the First Warrant increases, including by 10% upon the occurrence of certain triggering events (which had occurred by the October 7, 2016 date of exercise), to 17% per annum upon the exercise of the First Warrant. Additionally, as the conversion rate for the conversion premium is currently 85% of the lowest daily volume weighted average price during the measuring period, less $0.10 per share of common stock not to exceed 85% of the lowest sales prices on the last day of such period less $0.10 per share, the number of shares issuable in connection with the conversion premium increases as the trading price of ourthe Company’s common stock decreases, and the trading price of ourthe Company’s common stock has decreased since the date the First Warrant was exercised, triggering a further reduction in the conversion price of the conversion premium and an increase in the number of shares due to the Investor in connection with the conversion of the amount owed in connection with the conversion premium. Additionally, pursuant to the interpretation of the Investor, the measurement period for the calculation of the lowest daily volume weighted average price currently continues indefinitely.

AsAn aggregate of February 12, 2018, a total of 52,395,1544,417,911 shares of common stock had beenwere issued to the Investor in connection with the exercise of the Warrant during fiscal 2017 (200,000), 2018 (3,909,500), and 308,411 shares were issued in April 2018. The First Warrant of the approximately 110,447,753 shares which are due (58,052,599 shares remainhas been fully-exercised and extinguished to be issued to the Investor, which shares are currently held in abeyance until such time as it would not result in the Investor exceeding its beneficial ownership limitation (4.99% of the Company’s outstanding common stock)) as of February 8, 2018 (subject to increases as the value of our common stock decreases). In the nine months ended December 31, 2017, 31,545,154 shares of common stock were issued and subsequent to December 31, 2017, 15,580,000 shares of common stock were issued.

Additionally, warrants to purchase 66,668 shares of common stock issued in connection with an equity raise completed in April 2014, contained a weighted average anti-dilutive provision in which the exercise price of the warrants are adjusted downward based on any subsequent issuance or deemed issuance of common stock or convertible securities by the Company for consideration less than the then exercise price of such warrants. As a result of the anti-dilution rights, the exercise price of the warrants was adjusted to $3.59 per share, in connection with an automatic adjustment to the exercise price due to the Acquisition. As of December 31, 2017, the fair value of the derivative liability associated with the 66,668 warrants was $771 compared to $21,662 at March 31, 2017. Therefore, the $20,891 change in the derivative liability fair value was recorded as other income on the consolidated statement of operations.date.

At DecemberSeptember 30, 2018 and March 31, 2017, 11,1952018, outstanding warrants had an intrinsic value of $1,231.$0 and $232, respectively. The intrinsic value is based upon the difference between the market price of Camber’s common stock on the date of exercise and the grant price of the stock options. These warrants were initially issued in connection with the Rogers Loan on August 13, 2013, and the exercise price was lowered from $33.75 to $0.01 per share on August 12, 2015.

The following is a summary of the Company’s outstanding warrants at December 31, 2017:September 30, 2018:

On October 4, 2017, the Company entered into an agreement with a digital marketing advisor pursuant to which the advisor agreed to create original content with the goal of increasing public awareness about the Company and the Company agreed to pay the advisor (a) $20,000 per month from October 2017 through February 28, 2018, (b) $50,000 per month thereafter through October 4, 2018, the end of the term of the agreement, and (c) 3,750,000 shares of restricted common stock, with 2.5 million shares payable within 15 days of the parties’ entry into the agreement and the remainder due on May 1, 2018.

On October 4, 2017, the Company entered into a consulting agreement with a third-party consultant which consultant agreed to provide investor relations and public relations services to the Company. As consideration pursuant to the agreement, the Company agreed to issue the consultant 1,000,000 shares of restricted common stock with piggy-back registration rights.

Stock Purchase Agreement

On October 5, 2017, the Company and the Investor entered into a Stock Purchase Agreement described in greater detail above under Note 2 “Liquidity and Going Concern Considerations” – “Stock and Securities Purchase Agreements with Institutional Investor”.

Under the terms of the October 2017 Purchase Agreement, (1) the Investor purchased 212 shares of Series C Preferred Stock on the closing date of the agreement, October 4, 2017 (the “Initial Closing”), for $2 million, and agreed, subject to certain closing conditions set forth in the agreement, to purchase (2) 106 shares of Series C Preferred Stock for $1,000,000, 10 days after the Initial Closing (which closing occurred on November 21, 2017); (3) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the second closing (which closing occurred on December 27, 2017); (4) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the third closing (which closing occurred on January 30, 2018); (5) 105 shares of Series C Preferred Stock for $1,000,000, 10 days after the fourth closing; (6) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the fifth closing; and (7) 525 shares of Series C Preferred Stock for $5,000,000, 30 days after the sixth Closing, none of which closings, except as discussed above, have occurred to date.

Amendment to Articles of Incorporation

Effective on January 10, 2018, the Company filed, with the Secretary of State of Nevada, a Certificate of Amendment to the Company’s Articles of Incorporation to increase the number of the Company’s authorized shares of common stock, $0.001 per value per share, from 200,000,000 shares to 500,000,000 shares.

NOTE 1112 – SHARE-BASED COMPENSATION

Camber measures the cost of employee services received in exchange for an award of equity instruments based on the grant-date fair value of the award over the vesting period.

Stock Options

As of December 31,September 30, 2018 and 2017, and 2016, the Company had 7,92078 and 19,920 stock options outstanding with a weighted average exercise price of $25.49$1,294 and $35.38, respectively.

Of the Company’s outstanding options, no options were exercised.exercised or forfeited during the three months ended September 30, 2018. Additionally, no stock options were granted during the three and ninesix months ended December 31, 2017. During three and nine months ended December 31, 2017, 18,000 stock options expired.September 30, 2018. Compensation expense related to stock options during the three-month periodsperiod ended December 31,September 30, 2018 and 2017 and 2016 was $1,605$0 and $4,816, respectively. Compensation expense related to stock options during the nine-month periods ended December 31, 2017 and 2016 was $11,238 and $14,449, respectively.

Options outstanding and exercisable at December 31,September 30, 2018 and 2017 and 2016 had no intrinsic value, respectively. The intrinsic value is based upon the difference between the market price of Camber’s common stock on the date of exercise and the grant price of the stock options.

As of December 31, 2017, the Company hasSeptember 30, 2018, there was no remaining unrecognized share-based compensation expense related to all non-vested stock options.

The following tabulation summarizes the remaining terms of the options outstanding:

NOTE 13 – INCOME (LOSS) PER COMMON SHARE

The calculation of earnings (loss) per share for the three and six months ended September 30, 2018 and 2017 was as follows:

NOTE 1214 – SUPPLEMENTAL CASH FLOW INFORMATION

Net cash paid for interest and income taxes was as follows:

Non-cash investing and financing activities included the following:

NOTE 1315 – SUBSEQUENT EVENTS

See various subsequent events disclosed in Note 2 “Liquidity and Going Concern Considerations”, Note 6 “Notes Payable and Debenture” and Note 10 “Stockholders’ Deficit.”Conversion of Series C Preferred Stock

InFrom October 1, 2018 to November 7, 2018, the Investor was issued an aggregate of 50,028,006 shares of common stock in connection with the departuretrue ups associated with prior conversions of Mr. Anthony C. SchnurSeries C Preferred Stock; and as Chief Executive Officer and director of November 7, 2018, was not due any additional shares in connection with true ups.

October 2018 Stock Purchase Agreement

On October 29, 2018, the Company effective June 2, 2017,and the CompanyInvestor entered into a SeveranceStock Purchase Agreement and Release with Mr. Schnur (the “Release”“October 2018 Purchase Agreement”), whereby (i) his employment agreement with the Company was terminated, (ii) he entered into a mutual release with the Company; (iii) the Company agreed to issue him 120,000Investor purchased 369 shares of unregisteredSeries C Preferred Stock for $3.5 million.   The Series C Preferred Stock sold pursuant to the October 2018 Purchase Agreement have substantially similar terms as those sold pursuant to the October 2017 Purchase Agreement described in Note 11 above. 

Conversion of Series B Preferred Stock

In October 2018, Richard N. Azar II, both on his own behalf and on behalf of the entities which he beneficially owned, converted all 364,508 shares of the Series B Preferred Stock which he beneficially owned into an aggregate of 104,146 shares of common stock, (to be issued in installments of 10,000 per month)(the “Settlement Shares”) andwhich 12,419 shares of newly converted common stock (along with a monthly cash paymenttotal of $14,000 for twelve months; and (iv) he was granted reimbursement of the payment of his COBRA premiums through (a) the one year anniversary of the termination or (b) until he is eligible2,818 shares previously beneficially owned by Mr. Azar) were immediately cancelled pursuant to participate in the health insurance plan of another employer, whichever is sooner, and provided that the amount of such health benefits shall reduce his monthly cash payment. On January 11, 2018, and effective as of the original date of the Release, the Company and Mr. Schnur entered into a First Amendment to Severance Agreement and Release (the “Release Amendment”), whereby the terms of the Release were changed to provide for among other things,Segundo Settlement, described above under “Part I. Financial Information – Item 1. Financial Statements – Note 2 – Liquidity and Going Concern Considerations – Segundo Settlement”.

Conversion of Debenture

On October 31, 2018, the paymentInvestor converted the entire $495,000 of $49,000 on or before January 12, 2018; $15,000 on or beforeprincipal owed under the 15th of each month from February 2018 to July 2018; and $19,000 on or before August 15, 2018, and further provided for the issuanceterms of the entire amount of the Settlement Shares within five days of the later of the date the Company’s stockholders approved the issuance of the Settlement Shares and the date the NYSE American approved the issuance of such shares. The Settlement Shares were issued on January 30, 2018.

On or around February 8, 2018, we entereddebenture, into an Extension and/or Modification and Release Agreement Commercial Indebtedness, effective December 30, 2017 (the “December 2017 Extension”)aggregate of 20,037,653 shares of common stock, described above under “Part I. Financial Information – Item 1. Financial Statements – Note 6 – Notes Payable”, as borrower, with each of the Pledgers, as pledgors and IBC, as lender. Pursuant to the December 2017 Extension, IBC agreed that an interest only payment would be due beginning on January 30, 2018, with principal payments of $425,000 per month to begin thereafter, which principal payments wereshares have not made; the parties agreed that the amounts owed to IBC were payable on demand, provided if no demand was provided, such amounts would be payable by way of monthly payments of $425,000 of principal, plus accrued interest, with the remaining amount owed to IBC due at maturity (August 25, 2019); that the amount owed to IBC will accrue interest at the rate of 2% per annum above the prime rate, subject to a floor of 5.5% (currently 6.5% per annum); if we fail to make any payment due to IBC within 10 days of its due date, IBC is due a late payment of 5% of the amount past due (subject to a minimum of $10 and a maximum of $1,500 per late payment); and we and the Pledgors released IBC from any claims we had against IBCbeen issued as of the date of each of such releases. this report.