Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY (DEFICIT)

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STOCKHOLDERS' EQUITY (DEFICIT)
6 Months Ended
Sep. 30, 2018
Equity [Abstract]  
STOCKHOLDERS? EQUITY (DEFICIT)

NOTE 11 – STOCKHOLDERS’ EQUITY (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:  

 

          Common Shares  
    Amount(a)     Per Share     Issued and
Outstanding Shares
 
Balance at March 31, 2018                     5,758,970  
Preferred Stock Series C Conversion(b)                 67,587,868  
Preferred Stock Series B Dividends     2,183       0.62       3,502  
Warrants – Abeyance(b)                 308,411  
Issuance of Common Stock for settlement of consulting agreement                 50,000  
Issuance of Common Stock of Prior Conversion of Convertible Notes                 141,982  
Balance at September 30, 2018                     73,850,733  

    

  (a) Net proceeds or fair value on grant date, as applicable.

  (b) Shares previously 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).

 

Series A Convertible Preferred Stock 

 

On April 19, 2016, the holder of the Company’s Series A Convertible Preferred Stock, agreed to convert all 500 shares of their outstanding Series A Convertible Preferred Stock into 800 shares of the Company’s common stock (a conversion ratio of 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 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 September 30, 2018, and March 31, 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 0.2857:1 (originally issuable into an aggregate of 157,714 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 the Company’s common stock trades above $153.13 per share for at least 20 consecutive trading days, and trades with at least 3,000 shares of average volume per day during such period; an additional 50% of the Series B Preferred Stock shares if the Company’s common stock trades above $175.00 per share for at least 20 consecutive trading days, and trades with at least 3,000 shares of average volume per day during such period; and as to the remaining Series B Preferred Stock shares, if the Company’s common stock trades above $196.88 per share for at least 20 consecutive trading days, and trades with at least 3,000 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.

 

As of September 30, 2018, there were 408,508 shares of Series B Preferred Stock outstanding, which have the following features:

 

  a liquidation preference senior to all of the Company’s common stock;

 

  a dividend, payable quarterly, at an annual rate of six percent (6%) of the original issue price until such Series B Preferred Stock is no longer outstanding either due to conversion, redemption or otherwise; and

 

  voting rights on all matters, with each share having 1/25th of one vote.

 

 As the Series B Preferred Stock is convertible at any time following the original issuance date into common stock at a rate of approximately 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 0.2857, times the price of the Company’s common stock of $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 64,738 shares of common stock at a conversion price of $3.25 per share, and a warrant to purchase 44,444 shares of common stock at an exercise price of $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 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 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 additional 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 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.

 

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, and which currently total 34.95% per annum, payable in full through maturity upon redemption, conversion, or maturity, and when, as and if declared by the 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 the 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, we will pay the holder of the Series C Preferred Stock being converted an amount, in cash or stock at the 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.

 

During 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 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 six months ended September 30, 2018.

 

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

 

Warrants

 

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). 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. 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.

 

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), 2018 (3,909,500), and 308,411 shares were issued in April 2018. The First Warrant has been fully-exercised and extinguished to date.

 

At September 30, 2018 and March 31, 2018, outstanding warrants had an intrinsic value of $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.

 

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

 

Warrants     Exercise     Expiration    

Intrinsic Value at

 
Outstanding     Price ($)     Date     September 30, 2018  
  2,667 (1)     61.50       April 21, 2019        
  4,972 (2)     37.50       April 21, 2021        
  64,000 (3)     6.25       June 12, 2022        
  1,000,000 (4)     0.39       May 24, 2023        
  1,071,639                     $  

  

  (1) Warrants issued in connection with the sale of units in the Company’s unit offering in April 2014. The Warrants became exercisable on April 21, 2014 and will remain exercisable thereafter until April 21, 2019.
  (2) Warrants issued in connection with the sale of convertible notes. The warrants were exercisable on the grant date (April 26, 2016) and remain exercisable until April 26, 2021.
  (3) Warrants issued in connection with the Initial Tranche of the funding from Vantage. The warrants were exercisable on the grant date (June 12, 2017) and remain exercisable until June 12, 2022.
  (4) Warrants issued in connection with the Severance Agreement with Richard Azar. The warrants were exercisable on the grant date (May 25, 2018) and remain exercisable until May 24, 2023.