| STOCKHOLDERS' DEFICIT | NOTE
10 – STOCKHOLDERS’ DEFICIT Series
A Convertible Preferred Stock On
April 19, 2016, the holder of our Series A Convertible Preferred Stock agreed to convert all 500 shares of our outstanding Series
A Convertible Preferred Stock into 20,000 shares of our common stock (a conversion ratio of 40:1 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),
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 December 31, 2017, 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
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 7.14:1 (originally
issuable into an aggregate of 3,942,857 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 our common stock trades above $6.125 per share for at least 20 consecutive
trading days, and trades with at least 75,000 shares of average volume per day during such period; an additional 50% of the Series
B Preferred Stock shares if our common stock trades above $7.00 per share for at least 20 consecutive trading days, and trades
with at least 75,000 shares of average volume per day during such period; and as to the remaining Series B Preferred Stock shares,
if our common stock trades above $7.875 per share for at least 20 consecutive trading days, and trades with at least 75,000 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, the 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 Stock 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 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
7.14:1, 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 issued times the conversion rate of approximately 7.14, times the price of the Company’s common
stock of $3.78 per share at the date of the closing of the Acquisition on August 25, 2016. 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 1,618,462 shares of common stock at a conversion price of $3.25
per share, and a warrant to purchase 1,111,112 shares of common stock at an exercise price of $4.50 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 to interest expense. 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) 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 to interest expense in the third quarter of fiscal 2017. 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, 2017 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, in each case, payable upon redemption, conversion, or maturity, and when, as and if declared by our Board of Directors
in its discretion. The Series C Preferred Stock ranks senior to the common stock and pari passu with respect to our 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 Company will
pay the holder of the Series C Preferred Stock being converted an amount, in cash or stock at its 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 summarizes the Series C Preferred Stock converted during the nine months ended December 31 2017:
Date Number
of Shares Converted Face
Value Common
Stock Due Additional
Dividend Premium Shares Total
Common Stock
April
11, 2017 10 $ 100,000 30,770 1,243,772 1,274,542
10 $ 100,000 30,770 1,243,772 1,274,542 As
of December 31, 2017, the Company accrued common stock dividends on the Series C Preferred Stock based on the then 24.95% and
34.95% premium dividend rate described above, as applicable. The Company recognized a charge to additional paid-in capital and
stock dividends distributable but not issued of $1,771,532 related to the stock dividend declared but not issued. Due
to the decline in the price of the Company’s common stock 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. 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:
Common
Shares
Amount
(a) Per
Share Issued
and Outstanding Shares
Balance
at March 31, 2017 27,115,868
Preferred
Stock Series B Conversion $ 399,728 $ 0.39 1,024,943
Preferred
Stock Series C Conversion (b) — — 10,243,718
Preferred
Stock Series B Dividends 34,837 0.59 59,146
Warrant
Conversion - Abeyance (c) — — 31,545,154
Consulting
Services 560,000 0.16 3,500,000
Litigation
Settlement 313,635 0.16 1,960,218
Note
Conversion 35,000 0.02 1,754,711
Share-Based
Compensation (d) 23,573 0.50 47,146
Dreeben
Note Shares 30,000 0.75 40,000
Third
Party Lender Note Shares 5,900 0.59 10,000
Balance at December
31, 2017 77,300,904
(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).
(c) Shares
issued from the October 7, 2016 exercise of warrants resulting from an increase in the conversion premium.
(d) For
the year ended March 31, 2017, Camber issued 22,131 shares of its common stock with an aggregate grant date fair value of
$72,035, which were valued based on the trading value of Camber’s common stock on the date of grant. Also, on December
31, 2016, the Company agreed to award an additional 19,010 shares of its common stock with an aggregate grant fair value of
$23,573, which were valued based on the trading value of Camber’s common stock on the date of grant. Those common stock
awards had yet to be physically issued as of March 31, 2017 and therefore, were recognized as accrued common stock payable
on the March 31, 2017 balance sheet. The shares were awarded according to the employment agreement with an officer and as
additional compensation for other officers and managerial personnel. These common stock awards were issued 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 1,384,616 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. As
of February 12, 2018, a total of 52,395,154 shares of common stock had been issued to the Investor in connection with the exercise
of the First Warrant of the approximately 110,447,753 shares which are due (58,052,599 shares remain 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. At
December 31, 2017, 11,195 outstanding warrants had an intrinsic value of $1,231. 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 $0.01 per share on August 12, 2015. The
following is a summary of the Company’s outstanding warrants at December 31, 2017:
Warrants
Outstanding Exercise
Price ($) Expiration
Date Intrinsic
Value at December 31, 2017
11,000 (1) 37.50 April
4, 2018 $ —
2,000 (2) 37.50 May 31, 2018 —
11,195 (3) 0.01 August 13, 2018 1,231
66,668 (4) 3.59 April 21, 2019 —
124,285 (5) 1.50 April 21, 2021 —
1,600,000 (6) 0.25 June 12, 2022 —
1,815,148 $ 1,231
(1) Warrants issued
in connection with the issuance of certain notes in April 2013, of which the outstanding principal and interest was paid in
full on August 16, 2013. The warrants were exercisable on the grant date (April 4, 2013) and remain exercisable until April
4, 2018.
(2) Warrants issued
in connection with the issuance of certain notes in May 2013, of which the outstanding principal and interest was paid in
full on August 16, 2013. The warrants were exercisable on the grant date (May 31, 2013) and remain exercisable until May 31,
2018.
(3) Warrants issued
in connection with the Rogers Loan. The warrants were exercisable on the grant date (August 13, 2013) and remain exercisable
until August 13, 2018. The exercise price was lowered to $0.01 per share on August 12, 2015.
(4) 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.
(5) 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.
(6) 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. 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. |
