Quarterly report pursuant to Section 13 or 15(d)

STOCKHOLDERS' EQUITY (DEFICIT)

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STOCKHOLDERS' EQUITY (DEFICIT)
9 Months Ended
Dec. 31, 2019
Equity [Abstract]  
STOCKHOLDERS' EQUITY (DEFICIT)

NOTE 12  – 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 a 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. On October 15, 2019, the Company entered into a Settlement and Mutual Release Agreement (the “Release”) with Regal, pursuant to which it agreed to settle and terminate the consulting agreement with Regal. Pursuant to the Release, the Company agreed to issue Regal 1,514 shares of the Company’s restricted common stock and to pay Regal $17,500 in consideration for agreeing to terminate the agreement. The Company and Regal also provided each other mutual releases in connection with the Release. 

 

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 December 31, 2019.

 

During the three and nine months ended December 31, 2019, Discover and Discover Growth Fund, which purchased shares of Series C Preferred Stock from us in December 2018 (“Discover Growth”, which subsequently transferred all of its shares of Series C Preferred Stock to Discover) converted 8 and 11 shares of the Series C Preferred Stock with a face value of $80,000 and $110,000, respectively, and a total of 3,604,160 shares and 4,608,610 shares of common stock were issued, respectively, which includes additional shares for conversion premiums and true ups in connection with those conversions through December 31, 2019.

 

As of December 31, 2019, a total of 777,489 shares were due to Discover in connection with the Series C Preferred Stock conversions discussed above, which shares were held in abeyance subject to Discover’s 9.99% ownership limitation, to be issued from time to time, at the request of such party, of which 290,833 shares were issued subsequent to December 31, 2019.

 

From April 1, 2019 to December 31, 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 December 31, 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 December 31, 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 nine months ended December 31, 2018, the Company sold 632 and 1,577 shares of Series C Preferred Stock pursuant to the terms of an October 2017 Stock Purchase Agreement, October 2019 Stock Purchase Agreement and November 2018 Stock Purchase Agreement, for total consideration of $6 million and $15 million, respectively.  During the three and nine months ended December 31, 2019, the Company sold no shares of Series C Preferred Stock. As of December 31, 2019 and 2018, there were 2,294 and 2,305 shares of Series C Preferred Stock outstanding, respectively.

 

During the three and nine months ended December 31, 2018, Discover converted 10 and 404 shares of the Series C Preferred Stock with a face value of $0.1 million and $4.04 million, respectively, and a total of 2,234 shares and 4,403 shares of common stock were issued, respectively, which includes additional shares for conversion premiums and true ups in connection with those conversions through December 31, 2018.

 

During the three and nine months ended December 31, 2019, Discover and Discover Growth converted 8 and 11 shares of the Series C Preferred Stock with a face value of $80,000 and $110,000, respectively, and a total of 3,604,160 shares and 4,608,610 shares of common stock were issued, respectively, which includes additional shares for conversion premiums and true ups in connection with those conversions through December 31, 2019.

 

As of December 31, 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 $1,890,887 and $1,615,886 related to the stock dividend declared but not issued for the quarters ended December 31, 2019 and 2018, respectively. The Company recognized a total charge to additional paid-in capital and stock dividends distributable but not issued of $5,662,828 and $3,211,064 related to the stock dividends declared but not issued for the nine months ended December 31, 2019 and 2018, respectively.

 

As of December 31, 2019, a total of 777,489 shares were due to Discover, which shares were held in abeyance subject to Discover’s 9.99% ownership limitation, to be issued from time to time, at the request of such party, of which 290,833 shares were issued subsequent to December 31, 2019.

 

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

 

As described above in “NOTE 1 – General” and “NOTE 10 – Merger Agreement and Divestiture”, on the Closing Date, pursuant to the Lineal 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 and effective on December 31, 2019, the Company divested its ownership in Lineal and the Series E Preferred Stock and Series F Preferred Stock were returned to the Company and cancelled.

 

Warrants

 

The following is a summary of the Company’s outstanding warrants at December 31, 2019:

 

Warrants

 

 

Exercise

 

 

 

Expiration

 

 

 

Intrinsic Value at

 

Outstanding

 

 

Price ($)

 

 

 

Date

 

 

 

December 31, 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.