You should read the following discussion and analysis in conjunction with the consolidated financial statements and notes thereto appearing elsewhere in
this annual report on Form 10-K.
In preparing the management's discussion and analysis, the registrant presumes that you have read or have access to the discussion and analysis for the preceding fiscal year.
SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This document includes "forward-looking statements" within the meaning of the Private Securities Litigation Reform Act of 1995, as amended or the Reform Act. All statements other than statements of historical fact are "forward-looking statements" for purposes of federal and state securities laws, including, but not limited to, any projections of earning, revenue or other financial items; any statements of the plans, strategies and objectives of management for future operations; any statements concerning proposed new services or developments; any statements regarding future economic conditions of performance; and statements of belief; and any statements of assumptions underlying any of the foregoing. Such forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause the actual results, performance or achievements of the Company to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following:
The Company's ability to raise capital and the terms thereof; and other factors referenced in this Form 10-KT.
The use in this Form 10-KT of such words as "believes", "plans", "anticipates", "expects", "intends", and similar expressions are intended to identify forward-looking statements, but are not the exclusive means of identifying such statements. These forward-looking statements present the Company's estimates and assumptions only as of the date of this report. Except for the Company's ongoing obligation to disclose material information as required by the federal securities laws, the Company does not intend, and undertakes no obligation, to update any forward-looking statements. Although the Company believes that the expectations reflected in any of the forward-looking statements are reasonable, actual results could differ materially from those projected or assumed or any of the Company's forward-looking statements. The Company's future financial condition and results of operations, as well as any forward-looking statements, are subject to change and inherent risks and uncertainties. 49 Table of Contents PLAN OF OPERATIONS Overview The Company's business plan is to engage in the acquisition, exploration, development and production of oil and natural gas properties, both individually and through collaborative partnerships with other companies in this field of endeavor. The Company's majority-owned investee, Viking Energy Group, Inc., has relationships with industry experts and formulated an acquisition strategy, with emphasis on acquiring under-valued, producing properties from distressed vendors or those deemed as non-core assets by larger sector participants. The Company does not focus on speculative exploration programs, but rather targets properties with current production and untapped reserves. The Company's growth strategy includes the following key initiatives: · Acquisition of under-valued producing oil and gas assets · Employ enhanced recovery techniques to maximize production · Implement responsible, lower-risk drilling programs on existing assets · Aggressively pursue cost-efficiencies · Opportunistically explore strategic mergers and/or acquisitions · Actively hedge mitigating commodity risk The following overview provides a background, mostly occurring through Viking prior to the acquisition, for the current strategy being implemented by management during the nine months endedDecember 31, 2020 and the year endedMarch 31, 2020
Acquisitions Of Viking -
On
As a part of this acquisition, Viking retained an operational office inHouston, Texas that includes several senior level professionals with over 100 years of combined oil and gas experience which provides Viking the capability of operating many of its own wells internally. This expertise has since been utilized to evaluate additional oil and gas acquisitions, evaluate the profitable management of all of Viking's oil and gas assets, and evaluate and develop new drilling prospects.
Acquisitions -
OnDecember 28, 2018 , Viking, through its newly formed Ichor Energy subsidiaries completed an acquisition (the "Ichor Energy Acquisition") of working interests in certain oil and gas leases inTexas (primarily in Orange andJefferson Counties) andLouisiana (primarily in Calcasiue Parish), which include 58 producing wells and 31 salt water disposal wells. The properties produce hydrocarbons from known reservoirs/sands in the on-shoreGulf Coast region, with an average well depth in excess of 10,600 feet, and daily production volumes averaging in excess of 2,300 BOE. This acquisition of these assets is consistent with the location of our Petrodome assets and are effectively managed from
ourHouston office. OnMay 10, 2019 ,Petrodome Louisiana Pipeline LLC ("Petrodome LA"), a subsidiary of Viking's subsidiary,Petrodome Energy, LLC , acquired a majority working interest in 6 gas wells (including 2 producing gas wells), 1 producing oil well and 1 salt water disposal well located in the East MudLake Field inCameron Parish, Louisiana , with leases to mineral rights (oil and gas) concerning approximately 765 acres. OnOctober 10, 2019 , Viking, through a newly formed subsidiary,Elysium Energy, LLC ("Elysium"), entered into a Purchase and Sale Agreement to purchase working interests and over-riding royalty interests in oil and gas properties inTexas (approximately 71 wells in 11 counties) andLouisiana (approximately 52 wells in 6 parishes), along with associated wells and equipment (the "Elysium Energy Acquisition"). As ofDecember 31, 2019 , Viking paid deposits of$2,750,000 into escrow in connection with this acquisition, which deposits were applied toward the purchase price at closing of the Elysium Energy Acquisition on or about
February 3, 2020 . 50 Table of Contents OnFebruary 3, 2020 , Elysium, a wholly owned subsidiary ofElysium Energy Holdings, LLC ("Elysium Holdings "), which at the time was a partially owned subsidiary of Viking, acquired interests in oil and gas properties located inTexas andLouisiana , which included leases, working interests, and over-riding royalty interests in oil and gas properties inTexas (approximately 72 wells in 11 counties) andLouisiana (approximately 55 wells in 6 parishes), along with associated equipment. OnFebruary 4, 2020 , Elysium hedged 75% of the estimated oil and gas production associated with the newly acquired assets for 2020, 60% of the estimated production for 2021 and 50% of the estimated production for the period betweenJanuary 2022 andJuly 2022 . Theses hedges have a floor of$45 and a ceiling ranging from$52.70 to$56.00 for oil, and a floor of$2.00 and a ceiling of$2.425 for natural gas. OnDecember 23, 2020 , the remaining membership interests inElysium Holdings were assigned by the Company to Viking, andElysium Holdings became a wholly owned subsidiary of Viking.
Going Concern Qualification
The Company's consolidated financial statements have been prepared on a going concern basis, which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. The Company generated a net loss of$52.0 million for the nine months endedDecember 31, 2020 (the "2020 Loss") as compared to a net loss of$26.0 million for the year endedMarch 31, 2020 . The 2020 Loss was comprised of certain non-cash items with a net impact of$49.7 million including: (i) a loss on changes in fair value of the derivative liability relating to the Series C Preferred Stock of$41.9 million ; (ii) equity in loss of unconsolidated entity of$5.4 million (iii) a bad debt charge-off of$2.3 million ; and (iv) other items of$0.1 million .
As of
As of
Management believes it will be able to continue to leverage the expertise and relationships of its operational and technical teams to enhance existing assets and identify new development, drilling and acquisition opportunities in order to improve the Company's financial position. The Company may have the ability, if it can raise additional capital, to acquire new assets in a separate division from existing subsidiaries. Nonetheless, recent oil and gas price volatility as a result of geopolitical conditions and the global COVID-19 pandemic have already had and may continue to have a negative impact on the Company's financial position and results of operations. Negative impacts could include but are not limited to: The Company's ability to sell [its] oil and gas production, reduction in the selling price of the Company's oil and gas, failure of a counterparty to make required hedge payments, possible disruption of production as a result of worker illness or mandated production shutdowns, the Company's ability to maintain compliance with loan covenants and/or refinance existing indebtedness, and access to new capital and financing.
These conditions raise substantial doubt regarding the Company's ability to continue as a going concern for the twelve months following the issuance of its financial statements for the nine-month period endedDecember 31, 2020 . The Company's ability to continue as a going concern is dependent upon its ability to utilize the resources in place to generate future profitable operations, to develop additional acquisition opportunities, and to obtain the necessary financing to meet its debt obligations and repay its liabilities arising from business operations when they come due. Management believes the Company will be able to continue to develop new opportunities and will be able to obtain additional funds through debt and / or equity financings to facilitate its development strategy; however, there is no assurance of additional funding being available. These consolidated financial statements do not include any adjustments to the recorded assets or liabilities that might be necessary should the Company have to curtail operations or be unable to continue in existence. During the nine months endedDecember 31, 2020 , and year endedMarch 31, 2020 , the Company sold 630 and 525 shares, respectively, of Series C Preferred Stock pursuant to the terms of various Stock Purchase Agreements, for total proceeds of$6.0 and$5.0 million , respectively, and through the issuance of new debt instruments received total proceeds of$18.0 and$0 million , respectively. InApril 2021 the Company borrowed$2.5 million from an institutional investor, and inJuly 2021 the Company sold 1,575 Series C Shares for total proceeds
of$15.0 million . Although the Company has been successful in obtaining the financial resources in the past, these conditions continue to raise substantial doubt regarding the Company's ability to continue as a going concern. Therefore, the Company believes it appropriate to continue to include a going concern qualification in its financial statements. RESULTS OF OPERATIONS The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted inthe 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 consolidated 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. Additionally, recent oil and gas price volatility as a result of geopolitical conditions and the global COVID-19 pandemic have already had and are expected to continue to have a negative impact on the Company's financial position and results of operations. Negative impacts could include but are not limited to the Company's ability to sell its oil and gas production, reduction in the selling price of the Company's oil and gas, failure of a counterparty to make required payments, possible disruption of production as a result of worker illness or mandated production shutdowns or 'stay-at-home' orders, and access to new capital and financing. 51 Table of Contents
Our primary sources of cash for the 9-month period endedDecember 31, 2020 were from funds generated from the sale of preferred stock and/or loans from the Company's then Series C Preferred shareholder. The primary uses of cash were funds used in operations and funds invested in connection with the Viking Acquisition. Pursuant to theDecember 31, 2019 Redemption Agreement, we entered into a new unsecured promissory note in the amount of$1,539,719 with Lineal, evidencing the repayment of the priorJuly 2019 Lineal Note, together with additional amounts loaned by Camber to Lineal throughDecember 31, 2019 ; and loaned Lineal an additional$800,000 , which was evidenced by an unsecured promissory note in the amount of$800,000 , entered into by Lineal in favor of the Company onDecember 31, 2019 . TheDecember 2019 Lineal Note and Lineal Note No. 2, accrue interest, payable quarterly in arrears, beginning onMarch 31, 2020 and continuing untilDecember 31, 2021 , when all interest and principal is due, at 8% and 10% per annum (18% upon the occurrence of an event of default), respectively. TheDecember 2019 Lineal Note and Lineal Note No. 2 are unsecured. Such loans are described in greater detail above under "Item 1. Business - General - Lineal Acquisition and Divestiture", and Lineal has advised it does not have resources to repay the loans. The loans have been fully reserved as ofDecember 31, 2020 . OnJune 22, 2020 , the Company and the Investor (as defined above) entered into a Stock Purchase Agreement pursuant to which the Investor purchased 630 shares of Series C Preferred Stock for$6 million (of which$4.2 million of such funds were subsequently loaned to Viking as discussed herein). The following discussion of the consolidated financial condition and results of operation of the Company should be read in conjunction with the consolidated financial statements and the related Notes included elsewhere in this Report.
Liquidity and Capital Resources
December 31, March 31, Working Capital: 2020 2020 Current assets$ 909,836 $ 1,132,660
Current liabilities
Nine Months Ended Year Ended December 31, March 31, Cash Flows: 2020 2020
Net Cash Used in Operating Activities$ (2,688,067 ) $ (3,588,464 ) Net Cash Provided by (Used in) Investing Activities$ 15,100,000 $ (9,641,019 ) Net Cash Provided by Financing Activities$ 18,000,000 $
6,107,375
Increase (Decrease) in Cash during the Period$ 211,933 $
(7,122,108 ) Cash, end of Period$ 868,548 $ 656,615 The Company had current assets of$909,836 as ofDecember 31, 2020 , as compared to$1,132,660 as ofMarch 31, 2020 . The Company had current liabilities of$95,048,013 as ofDecember 31, 2020 , as compared to$79,665,574 as ofMarch 31, 2020 . The Company had a working capital deficit of$94,138,177 ofDecember 31, 2020 , as compared to a working capital deficit of$78,532,574 as ofMarch 31, 2020 . 52 Table of Contents Net cash used by operating activities decreased to$2,773,275 during the nine months endedDecember 31, 2020 , as compared to cash used by operating activities of$3,588,464 for the year endedMarch 31, 2020 , as the operating period was for nine months as compared to twelve. Net cash provided by investing activities of$1,079,481 during the nine months endedDecember 31, 2020 is a result of cash acquired in the Viking Acquisition of$5,279,481 , as compared to cash used by investing activities of$9,641,019 during the year endedMarch 31, 2020 , representing investments in notes receivable in excess of$9 mil -lion dollars.
Net cash provided by financing activities increased to
Revenue The Company had gross revenues of$150,814 for the nine months endedDecember 31, 2020 as compared to$397,118 for the year endedMarch 31, 2020 primarily due to nine months of revenues compared to twelve months for the prior period.
Expenses
The Company's operating expenses were$5,351,187 for the nine months endedDecember 31, 2020 , as compared to$5,424,387 for the year endedMarch 31, 2020 . General and administrative expenses decreased due to the shorter nine month period as compared to the twelve month period in the prior period which was partially offset by a$2.2 million charge to bad debt for the Lineal loan during the nine months endedDecember 31, 2020 .
Income (Loss) from Operations
The Company generated a loss from operations of$5,200,373 for the nine months endedDecember 31, 2020 , as compared to a loss from operations of$5,027,269 from operations for the year endedMarch 31, 2020 , due primarily to those items listed above. Other income (expense)
The Company had other income (expense) of ($46,811,015 ) for the nine months endedDecember 31, 2020 , as compared to ($22,930,900 ) for the year endedMarch 31, 2020 . The largest components of this change is the recognition of a change in the fair value of derivative liabilities of$41,878,821 during the nine months endedDecember 31, 2020 as compared to$24,101,870 for the year endedMarch 31, 2020 and equity in losses of unconsolidated affiliates of ($5,401,540 ) during the nine months endedDecember 31, 2020 , which was primarily the loss associated the equity investment in Viking.
Off Balance Sheet Arrangements
The Company does not have any off-balance sheet arrangements that have or are reasonably likely to have a current or future effect on its financial condition, changes in financial condition, revenues or expenses, results of operations, liquidity or capital expenditures or capital resources that is material to an investor in the Company's securities. Seasonality
The Company's operating results are not affected by seasonality.
Inflation
The Company's business and operating results are not currently affected in any material way by inflation although they could be adversely affected in the future were inflation to increase, resulting in cost increases.
Critical Accounting Policies
We prepare our financial statements in conformity with GAAP, which requires management to make certain estimates and assumptions and apply judgments. We base our estimates and judgments on historical experience, current trends and other factors that management believes to be important at the time the financial statements are prepared and actual results could differ from our estimates and such differences could be material. Due to the need to make estimates about the effect of matters that are inherently uncertain, materially different amounts could be reported under different conditions or using different assumptions. On a regular basis, we review our critical accounting policies and how they are applied in the preparation of our financial statements, as well as the sufficiency of the disclosures pertaining to our accounting policies in the footnotes accompanying our financial statements. Described below are the most significant policies we apply in preparing our consolidated financial statements, some of which are subject to alternative treatments under GAAP. We also describe the most significant estimates and assumptions we make in applying these policies. See "Note 2 - Summary of Significant Accounting Policies" to our consolidated financial statements. 53 Table of Contents
Oil and Gas Property Accounting
The Company uses the full cost method of accounting for its investment in oil and natural gas properties. Under this method of accounting, all costs of acquisition, exploration and development of oil and natural gas properties (including such costs as leasehold acquisition costs, geological expenditures, dry hole costs, tangible and intangible development costs and direct internal costs) are capitalized as the cost of oil and natural gas properties when incurred. The full cost method requires the Company to calculate quarterly, by cost center, a "ceiling," or limitation on the amount of properties that can be capitalized on the balance sheet. To the extent capitalized costs of oil and natural gas properties, less accumulated depletion and related deferred taxes exceed the sum of the discounted future net revenues of proved oil and natural gas reserves, the lower of cost or estimated fair value of unproved properties subject to amortization, the cost of properties not being amortized, and the related tax amounts, such excess capitalized costs are charged to expense.
No impairment expense was recorded for the year ended
Proved Reserves
Estimates of our proved reserves included in this report are prepared in
accordance with
i. the quality and quantity of available data; ii. the interpretation of that data; iii. the accuracy of various mandated economic assumptions; and iv. the judgment of the persons preparing the estimate. Our proved reserve information included in this report was predominately based on estimates. Because these estimates depend on many assumptions, all of which may substantially differ from future actual results, reserve estimates will be different from the quantities of oil and gas that are ultimately recovered. In addition, results of drilling, testing and production after the date of an estimate may justify material revisions to the estimate. In accordance withSEC requirements, we based the estimated discounted future net cash flows from proved reserves on the unweighted arithmetic average of the prior 12-month commodity prices as of the first day of each of the months constituting the period and costs on the date of the estimate. The estimates of proved reserves materially impact depreciation, depletion, amortization and accretion ("DD&A") expense. If the estimates of proved reserves decline, the rate at which we record DD&A expense will increase, reducing future net income. Such a decline may result from lower market prices, which may make it uneconomic to drill for and produce from higher-cost fields. 54 Table of Contents
Asset Retirement Obligation
Asset retirement obligations ("ARO") primarily represent the estimated present value of the amount we will incur to plug, abandon and remediate our producing properties at the projected end of their productive lives, in accordance with applicable federal, state and local laws. We determined our ARO by calculating the present value of estimated cash flows related to the obligation. The retirement obligation is recorded as a liability at its estimated present value as of the obligation's inception, with an offsetting increase to proved properties. Periodic accretion of discount of the estimated liability is recorded as accretion expense in the accompanying consolidated statements of operations and comprehensive income. ARO liability is determined using significant assumptions, including current estimates of plugging and abandonment costs, annual inflation of these costs, the productive lives of wells and a risk-adjusted interest rate. Changes in any of these assumptions can result in significant revisions to the estimated ARO. Derivative Liabilities The Company has determined that certain obligations to issue shares relating to conversions of the Series C Preferred Stock contain provisions that could result in modification of the the Series C Preferred Stock conversion price that is 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 Series C Preferred Stock are convertible into shares of common stock at a fixed$3.25 conversion rate. Upon conversion, the holder is entitled to dividends as if the shares had been held to maturity, which is referred to as the Conversion Premium. The Conversion Premium may be paid in shares or cash, at the option of the Company. If the Conversion Premium is paid in cash, the amount is fixed and generally not subject to adjustment. If the Conversion Premium is paid in shares, the conversion ratio is based on a VWAP calculation based on the lowest stock price over the Measurement Period. The Measurement Period is 30 days (or 60 days if there is a Triggering Event) prior to the conversion date and 30 days (or 60 days if there is a Triggering Event) after the conversion date. The VWAP calculation is subject to adjustment if there is a Triggering Event and the Measurement Period is subject to adjustment in the event that the Company is in default of one or more Equity Conditions provided in the Certificate of Designation. For example, the Measurement period may be extended one day for every day the Company is not in compliance with one or more of the Equity Conditions. Trigger 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 theSEC . At the conversion date, the number of shares due for the Conversion Premium is estimated based on the previous 30-day (or 60 day) VWAP. If the Company does not elect to pay the Conversion Premium in cash, the Company will issue all shares due for the conversion and the estimated shares due for the conversion premium. If the VWAP calculation for the portion of the Measurement Period following the date of conversion is lower than the VWAP for the portion of the Measurement Period prior to the date of conversion, the holder will be issued additional common shares, referred to as "true-up" shares. If the VWAP calculation is higher, no true-up shares are issued. The derivative liability at the end of each period includes a derivative liability for the outstanding Series C shares and a derivative liability for the potential obligation to issue True-Up Shares relating to Series C shares that have been converted and the Measurement Period has not expired, if applicable The fair value of the derivative liability relating to the Conversion Premium for any outstanding Series C Shares is equal to the cash required to settle the Conversion Premium. The fair value of the potential true-up share obligation has been estimated using a binomial pricing mode and the lesser of the conversion price or the low closing price of the Company's stock subsequent to the conversion date. and the historical volatility of the Company's common stock. The Company is a smaller reporting company and is traded on the NYSE American exchange. Historically, our stock price has been extremely volatile and subject to large and sometimes unexplained price variations on a daily or weekly basis. In addition, the Company declared four reverse stock splits in 2018 and 2019 and the Company's common stock generally trades at less than$1.00 per share. These factors have exacerbated daily volatility of our stock price. Consequently, we believe that the closing price of our stock on the reporting date may not, in all cases, represent the fair value of the common share required to satisfy the redemption of the Series C preferred Stock. Recognizing that the closing share price of our publicly traded stock is an observable input to fair value, we used such price for determining fair value in most cases and only considered an alternative measure of fair value when the closing price of the Company's common stock varied by more than 20% from the five-day moving average immediately prior to the measurement date. In such cases, we used an average closing price of the previous 30 day period as an estimate of fair value, adjusted for stock splits if applicable. In addition, conversion of the Series C shares require a significant number of common shares to be issued in relation to the total number of shares outstanding. We do not believe that the market price of the Company's common stock appropriately reflects the potential for significant dilution caused by a large conversion and may not be representative of market value. In cases where the number of common shares required to satisfy a conversion of the Series C shares into common stock was significant in relation to the total number of shares outstanding (approximately 30% or greater) we determined the fair value of the embedded features based on the historical market capitalization of the Company. 55
The following tables present a range of estimates of the number of shares
potentially issuable to settle future conversions of the Series C Preferred
Stock outstanding at
Estimate of Common Shares Due to Series C Pref. Shareholders (assuming Dividends/Conversion Premium are paid in stock as opposed to cash)
Series C Pref. Shares Outstanding - December 31, 2020 2,093 Assume Triggering Event Yes Low VWAP During Measurement Low VWAP During Measurement Low VWAP During Measurement Period -$0.3475 Period -$0.50 Period -$1.00 Conversion Price Conversion Price Conversion Price for Preferred for Preferred for Preferred Stock$ 3.25 Stock$ 3.25 Stock $ 3.25 VWAP during VWAP during VWAP during Measurement Measurement Measurement Period$ 0.3475 Period$ 0.5000 Period$ 1.0000 Price for Price for Price for Calculating Calculating Calculating Conversion Conversion Conversion Premium (i.e. Premium (i.e. Premium (i.e. 85% 85% of VWAP less 85% of VWAP less of VWAP less$0.10 ) $ 0.1954$0.10 )$ 0.3250 $0.10 )$ 0.7500 Series C Pref Series C Pref Series C Pref Shares$ 2,093 Shares$ 2,093 Shares 2,093 Face value per Face value per Face value per share$ 10,000 share$ 10,000 share$ 10,000 Total value$ 20,930,000 Total value$ 20,930,000 Total value$ 20,930,000 Annual Annual Annual Conversion Conversion Conversion Premium
Premium$ 7,315,035 Premium$ 7,315,035 $ 7,315,035 Total conversion Total conversion Total conversion Premium (7 years Premium (7 years Premium (7 years worth of worth of worth of dividends)$ 51,205,245 dividends)$ 51,205,245 dividends)$ 51,205,245.00 Underlying Underlying Underlying common common shares common Shares shares for Face for Face Value for Face Value Value Portion Portion 6,440,000 Portion 6,440,000 6,440,000 Underlying Underlying Underlying common common shares common shares shares for for Conversion for Conversion Conversion Premium 262,053,454 Premium 157,554,600 Premium 68,273,660 Total Potential Total Potential Total Potential Shares 268,493,454 Shares 163,994,600 Shares 74,713,660 Series C Pref. Shares Outstanding - March 31, 2020 3,886 Assume Triggering Event No Low VWAP During Measurement Low VWAP During Measurement Low VWAP During Measurement Period -$0.3475 Period -$0.50 Period -$1.00 Conversion Price Conversion Price Conversion Price for Preferred for Preferred for Preferred Stock$ 3.25 Stock$ 3.25 Stock$ 3.25 VWAP during VWAP during VWAP during Measurement Measurement Measurement Period$ 0.3475 Period$ 0.5000 Period$ 1.0000 Price for Price for Price for Calculating Calculating Calculating Conversion Conversion Conversion Premium (i.e. Premium (i.e. Premium (i.e. 95% 95% of VWAP less 95% of VWAP less of VWAP less$0.05 )$ 0.2801 $0.05 )$ 0.4250 $0.05 )$ 0.9000 Series C Pref Series C Pref Series C Pref Shares 2,093 Shares 2,093 Shares 2,093 Face value per Face value per Face value per share$ 10,000 share$ 10,000 share$ 10,000 Total value$ 20,930,000 Total value$ 20,930,000 Total value$ 20,930,000 Annual Annual Annual Conversion Conversion Conversion
Premium
Premium$ 7,315,035 Premium$ 7,315,035 $ 7,315,035 Total conversion Total conversion Total conversion Premium (7 years Premium (7 years Premium (7 years worth of worth of worth of dividends)$ 51,205,245 dividends)$ 51,205,245 dividends)$ 51,205,245 Underlying Underlying Underlying common common shares common Shares shares for Face for Face Value for Face Value Value Portion Portion 6,440,000 Portion 6,440,000 6,440,000 Underlying Underlying Underlying common common shares common shares shares for for Conversion for Conversion Conversion Premium 182,810,586 Premium 120,482,929 Premium 56,894,717 Total Potential Total Potential Total Potential Shares 189,250,586 Shares 126,922,929 Shares 63,334,717
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