| STOCKHOLDERS' DEFICIT | NOTE 11 – STOCKHOLDERS’ 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 April 4, 2017,
the Company paid the required quarterly dividend on the Series B Preferred Stock by way of the issuance of 2,366 shares of
the Company’s common stock to the preferred shareholders at a fair market value of $34,896, based on the closing price of the
Company’s common stock ($14.75 per share) on March 31, 2017. The beneficial owners of the Series B Preferred Stock were
Richard N. Azar, II, the Company’s former Interim Chief Executive Officer and director, and Alan Dreeben, the
Company’s former director. 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 40,998 shares of common stock of the Company. 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 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
June 30, 2018, the remaining shares have not been issued and an accrual of $200,000 has been accrued based on the May 2018 due
date. 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
40,000 shares of restricted common stock, with piggy-back registration rights. In October 2017, the
Company agreed to reimburse entities owned in part by Alan Dreeben, a former director of the Company, for legal fees expended by
such entities in connection with the defense of Petroflow Energy Corporation v. Sezar Energy, L.P. and Brittany Energy,
LLC 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 beneficial owners of the Series B Preferred Stock are 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 $877 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 are 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 June 30, 2018 has not been paid. In connection with
the departure of Mr. Anthony C. Schnur as Chief Executive Officer and director of the Company effective June 2, 2017, the Company
entered into a Severance Agreement and Release with Mr. Schnur, whereby (i) his employment agreement with the Company was terminated,
(ii) he entered into a mutual release with the Company; (iii) the Company agreed to issue him 4,800 shares of unregistered common
stock (to be issued in installments of 480 per month) and a monthly cash payment of $14,000 for twelve months; and (iv) he was
granted reimbursement of the payment of his COBRA premiums through (a) the one year anniversary of the termination or (b) until
he is eligible to participate in the health insurance plan of another employer, whichever is sooner, and provided that the amount
of such health benefits shall reduce his monthly cash payment. On January 11, 2018, and effective as of the original date of the
Release, the Company and Mr. Schnur entered into the First Amendment to the Severance Agreement and Release, whereby the terms
of the Release were changed to provide for among other things, the payment of $49,000 on or before January 12, 2018; $15,000 on
or before the 15th of each month from February 2018 to July 2018; and $19,000 on or before August 15, 2018, and further provided
for the issuance of the entire amount of the Settlement Shares within five days of the later of the date the Company’s stockholders
approved the issuance of the Settlement Shares and the date the NYSE American approved the issuance of such shares. The Settlement
Shares were issued in February 2018. 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), 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 three-month period ended June 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) — — 10,141,725
Preferred Stock Series B Dividends 1,350 0.77 1,751
Warrants – Abeyance (b) — — 308,411
Issuance of Common Stock of Prior Conversion of Convertible Notes — — 141,982
Balance at June 30, 2018 16,352,839
(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 June
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 June 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 1/25 th 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
June 30, 2018, the Company issued a stock dividend on the Series B Preferred Stock consisting of 1,753 shares (with fair value
$877 based on a share price of $0.50 per share at June 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 $877 and stock dividends
distributable but not issued based on the par value of the common stock issued. During the quarter ended June 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 $81.25 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,
in connection with the entry into the October 2017 Purchase Agreement, the Investor purchased 212 shares of Series C Preferred
Stock for $2 million; 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 31, 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”); on February 22, 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 “Fifth Closing”); on March 9, 2018,
the Company sold the Investor an additional 105 shares of Series C Preferred Stock for $1 million (the “Sixth Closing”);
on April 10, 2018, the Company sold the Investor an additional 105 shares of Series C Preferred Stock for $1 million (the “Seventh
Closing”); on May 22, 2018, the Company sold the Investor an additional 105 shares of Series C Preferred Stock for $1 million
(the “Eighth Closing”); and on July 9, 2018, the Company sold the Investor an additional 210 shares of Series C Preferred
Stock for $2 million (the “Ninth Closing”). The Sixth Closing, Seventh
Closing, Eighth Closing, and Ninth Closing occurred notwithstanding the terms of the October 2017 Purchase Agreement which required
the sixth closing to be for a total of $5 million (the “$5 Million Closing”), as the parties mutually agreed to the
sales of only $1 million of Series C Preferred Stock to be sold pursuant to the $5 Million Closing, at the Sixth Closing, Seventh
Closing and Eighth Closing, and for $2 million of Series C Preferred Stock to be sold at the Ninth Closing. 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. 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 ($81.25 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-month
period ended June 30, 2018, the Company issued 210 shares of Series C Preferred Stock pursuant to the terms of the October 2017
Purchaser Agreement, for total consideration of $2 million. As of June 30, 2018 and March 31, 2018, there were 1,091 and 1,132
shares of Series C Preferred Stock outstanding, respectively. During the three-month
period ended June 30, 2018, the Investor converted 251 shares of the Series C Preferred stock with a face value of $2.51 million
and issued 772,323 shares of common stock and additional shares of common stock in dividend premium shares of 9,369,402 for an
aggregate of a total of 10,141,725 shares issued. As of June 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 $698,122 and $1,928,084 related
to the stock dividend declared but not issued for the three month period ended June 30, 2018 and the year ended March 31, 2018,
respectively. 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. See discussion of the
October 2017 Purchase Agreement with the Investor in Note 2. 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 64,000 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. In June 2017, the
Company granted warrants to purchase 64,000 shares of the Company’s common stock which were valued at the grant date under
the Black-Scholes Option pricing model at $288,592. The exercise price of the warrants is $6.25 per share of common stock. The
warrants expire five years from the grant date. The volatility utilized in the model was 135.42%. The discount rate was 1.78%. 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. Additionally, warrants
to purchase 2,667 shares of common stock granted 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 $69.82 per share,
in connection with an automatic adjustment to the exercise price due to the Acquisition. As of June 30, 2017 and March 31, 2017,
the fair value of the derivative liability associated with the 2,667 warrants was $5. Therefore, there was no change in the derivative
liability fair value for the three months ended June 30, 2018. At June 30, 2018 and
March 31, 2018, outstanding warrants had an intrinsic value of $114,014 and $232, respectively. The intrinsic value is based upon
the difference between the market price of Camber’s common stock on the date of exercise and the grant price of the stock
options. The following is a summary of the Company’s
outstanding warrants at June 30, 2018:
Warrants Exercise Expiration Intrinsic Value at
Outstanding Price ($) Date June 30, 2018
448 (1) 0.25 August
13, 2018 114
2,667 (2) 69.82 April 21, 2019 —
4,972 (3) 37.50 April 21, 2021 —
64,000 (4) 6.25 June 12, 2022 —
1,000,000 (5) 0.39 May 24, 2023 113,900
1,072,088 $ 114,014
(1) 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.
(2) 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.
(3) 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.
(4) 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.
(5) 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. |
