Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY (DEFICIT)

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STOCKHOLDERS' EQUITY (DEFICIT)
6 Months Ended
Sep. 30, 2019
Equity [Abstract]  
STOCKHOLDERS' EQUITY (DEFICIT)

NOTE 13 – STOCKHOLDERS’ EQUITY (DEFICIT)

 

Common Stock

 

On April 20, 2018, Discover was issued 5 shares of common stock as a result of true-ups in connection with the August 23, 2017 conversion of $35,000 of the principal amount of the debenture held by Discover.

 

During the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1 share (with fair value of $15,625 based on the share price 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 $882 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 share to settle a stock dividend accrued on Series B Preferred Stock.

 

On November 15, 2018, the Company entered into a consulting agreement with Regal Consulting, an investor relations firm, pursuant to which the firm agreed to provide the Company investor relations and consulting services for a period of six months, for monthly consideration of $28,000 and 7 restricted shares of the Company’s common stock. In January 2019, the Company issued 13 shares of restricted common stock to Regal Consulting for the months of November and December 2018, which shares were issued during the year ended March 31, 2019.  On February 13, 2019, and effective on January 31, 2019, the Company entered into a First Amendment to the Consulting Agreement previously entered into with Regal Consulting. Pursuant to the First Amendment, the parties agreed to expand the investor relations services required to be provided by Regal Consulting under the agreement in consideration for $50,000 per month and 40 restricted shares of common stock per month (the “Regal Shares”)(which are fully-earned upon issuance) during the term of the agreement, and agreed to extend the term of the agreement until October 1, 2019 (unless the Company completes an acquisition or combination prior to such date). All of the Regal Shares had been earned and issued to Regal as of September 30, 2019. Subsequent to September 30, 2019, the Company entered into a settlement with Regal as described in greater detail below under “NOTE 20 – Subsequent Events”.

 

On February 13, 2019, the Company entered into a letter agreement with SylvaCap Media (“SylvaCap”), pursuant to which SylvaCap agreed to act as the Company’s non-exclusive digital marketing service provider in consideration for an aggregate of 480 shares of restricted common stock (the “SylvaCap Shares”), which are fully-earned upon their issuance, and $50,000 per month during the term of the agreement, which ends on November 12, 2019 (unless the Company completes an acquisition or combination prior to such date) or upon termination by either party for cause. The Company also agreed to provide SylvaCap piggy-back registration rights in connection with the SylvaCap Shares and to pay SylvaCap $6,250 every three months as an expense reimbursement. The total value of the restricted shares of common stock due of $261,540 was accrued in common stock payable as of March 31, 2019. The 480 SylvaCap shares were issued in May 2019 and there are no shares due as of September 30, 2019. 

 

On July 9, 2019, Discover converted 1 share of the Series C Preferred Stock into a total of 490,839 shares of common stock. A total of 4,300 of such shares were issued to Discover in connection with the initial conversion, and additional shares were issued subsequent thereto, except for 426,244 shares which were held in abeyance subject to Discover’s 9.99% ownership limitation, to be issued from time to time, at the request of Discover, of which all shares had been issued through September 30, 2019.

 

On July 19, 2019 and August 21, 2019, Discover Growth Fund LLC, which purchased shares of Series C Preferred Stock from us in December 2018 (“Discover Growth”) converted 2 shares of the Series C Preferred Stock into a total of 981,678 shares of common stock (489,839 shares on each conversion date). All but 41,823 of the shares had been issued to Discover Growth as of September 30, 2019, which shares were held in abeyance subject to Discover Growth’s 9.99% ownership limitation, to be issued from time to time, at the request of Discover Growth subsequent to September 30, 2019.

 

From April 1, 2019 to September 30, 2019, Discover was issued 29,073 shares of common stock as true-ups in connection with the October 31, 2018 conversion of the $495,000 remaining balance of principal owed under the terms of a convertible debenture.

 

Series A Convertible Preferred Stock 

 

As of September 30, 2019 and March 31, 2019, the Company had no Series A Convertible Preferred Stock issued or outstanding.  

 

Series B Redeemable Convertible Preferred Stock  

 

As of September 30, 2019 and March 31, 2019, there were 0 and 44,000 shares of Series B Preferred Stock outstanding, respectively, 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 1/781,250 of one vote.

 

During the quarter ended September 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1 share of the Company’s common stock as described above.

 

On May 15, 2019, the Company entered into a conversion agreement with the then holder of all 44,000 shares of the Company’s then outstanding Series B Preferred Stock. Pursuant to the Conversion Agreement, all of the Series B Preferred Stock was converted into 1 share of the Company’s common stock pursuant to the stated terms of such Series B Preferred Stock, in consideration for $25,000 in cash due at the time of the parties entry into the agreement, which payment was made during the three months ended September 30, 2019. The holder also provided the Company a release in connection with certain of his rights under the Series B Preferred Stock (including any and all accrued and unpaid dividends) and certain other matters. 

 

Series C Redeemable Convertible Preferred Stock

 

During the three and six months ended September 30, 2018, the Company sold 735 and 945 shares of Series C Preferred Stock pursuant to the terms of an October 2017 Stock Purchase Agreement, for total consideration of $7 million and $9 million, respectively. As of September 30, 2019 and 2018, there were 2,302 and 1,683 shares of Series C Preferred Stock outstanding, respectively.

 

During the three and six months ended September 30, 2018, Discover converted 143 and 394 shares of the Series C Preferred Stock with a face value of $1.43 million and $3.94 million, respectively, and a total of 1,837 shares and 2,169 shares of common stock were issued, respectively, which includes additional shares for conversion premiums and true ups in connection with those conversions through September 30, 2018.

 

As of September 30, 2019 and March 31, 2019, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 34.95% premium dividend rate. The Company recognized a total charge to additional paid-in capital and stock dividends distributable but not issued of $1,893,886 and $896,182 related to the stock dividend declared but not issued for the quarters ended September 30, 2019 and 2018, respectively. The Company recognized a total charge to additional paid-in capital and stock dividends distributable but not issued of $3,771,941 and $1,595,178 related to the stock dividend declared but not issued for the six months ended September 30, 2019 and 2018, respectively.

 

As discussed above under “Common Stock”, during the three and six months ended September 30, 2019, Discover and Discover Growth converted 1 and 2 shares of the Series C Preferred Stock with a face value of $10,000 and $20,000, respectively, and a total of 490,839 shares and 981,678 shares of common stock were issued, respectively, which includes additional shares for conversion premiums. As of September 30, 2019, a total of 468,067 shares were due to Discover and Discover Growth, which shares were held in abeyance subject to Discover’s and Discover Growth’s 9.99% ownership limitation, to be issued from time to time, at the request of such parties.

 

Series E Redeemable Convertible Preferred Stock and Series F Convertible Preferred Stock

 

As described above in “NOTE 1 – General” and “NOTE 11 – Merger Agreement”, on the Closing Date, pursuant to the Plan of Merger, the Company acquired 100% of the ownership of Lineal from the Lineal Members in consideration for 1,000,000 of the newly issued shares of Series E Preferred Stock and 16,750 of the newly issued shares of Series F Preferred Stock.

 

Warrants

 

The following is a summary of the Company’s outstanding warrants at September 30, 2019:

 

Warrants     Exercise     Expiration     Intrinsic Value at  
Outstanding     Price ($)     Date     September 30, 2019  
  1 (1)     1,171,875.00       April 26, 2021     $  
  3 (2)     195,412.50       September 12, 2022        
  32 (3)     12,187.50       May 24, 2023        
  36                     $  

 

  (1) 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.
  (2) Warrants issued in connection with the Initial Tranche of the funding from Vantage. The warrants were exercisable on the grant date (September 12, 2017) and remain exercisable until September 12, 2022.
  (3) Warrants issued in connection with the Severance Agreement with Richard N. Azar II. The warrants were exercisable on the grant date (May 25, 2018) and remain exercisable until May 24, 2023.