NOTE 14 – STOCKHOLDERS’ DEFICIT

Common Stock

During the six months ended September 30, 2020, the Company issued 176,514 shares of restricted common stock to service providers in consideration for investor relations and marketing services. The Company recognized $209,502, based on the grant date fair value of the Company’s common stock, in share-based compensation expense in current and prior periods corresponding to the issuance of these shares, of which $36,502, was recognized during the three and six months ended September 30, 2020.

Included in such 176,514 shares of common stock were 175,000 shares issued to Sylva International LLC d/b/a SylvaCap Media (“SylvaCap”). On February 15, 2020, the Company entered into a letter agreement with SylvaCap, pursuant to which SylvaCap agreed to act as the Company’s non-exclusive digital marketing service provider in consideration for an aggregate of 100,000 shares of restricted common stock, which are fully-earned upon their issuance, and $50,000 per month during the term of the agreement, which was to end on June 15, 2020. On May 19, 2020, the Company entered into a first amendment to the SylvaCap agreement. Pursuant to the amendment, the Company and SylvaCap extended the term of the letter agreement to October 19, 2020. The 100,000 shares were issued on May 15, 2020. On August 31, 2020, the parties entered into a second amendment to the agreement. Pursuant to the amendment, the parties agreed to amend the engagement agreement to increase the stock fee payable thereunder to 175,000 shares of common stock of the Company and to provide for the agreement to remain in place until the earlier of (a) October 19, 2020; and (b) the closing of the Company’s currently contemplated merger with Viking. SylvaCap also made representations regarding its financial condition and investing knowledge pursuant to the amendment in order for the Company to confirm that an exemption from registration exists for the issuance of the shares.

Series A Convertible Preferred Stock

On August 31, 2020, the Board of Directors approved the designation of 28,092 shares of Series A Convertible Preferred Stock (the “Series A Preferred Stock”), which were designated with the Secretary of State of Nevada on August 31, 2020 (the “Series A Designation”).

The Series A Preferred Stock has substantially similar rights as the Series C Preferred Stock of Viking (as amended), as adjusted for the exchange ratio of the Merger. Specifically, each outstanding share of Series A Preferred Stock will vote an aggregate of (a) 4,900 voting shares, multiplied by (b) the exchange ratio of the Merger, on all stockholder matters, voting together with the Company’s common stock as a single class (which voting rights will equal the same voting rights that would have applied had the Series C Preferred Stock of Viking been fully converted into Viking common stock immediately prior to the effective time of the Merger)(described herein as the “voting shares”); will receive, upon the occurrence of a liquidation of the Company, the same amount of consideration that would have been due if such shares of Series A Preferred Stock had been converted into common stock of the Company immediately prior to such liquidation; and provide rights for such shares of Series A Preferred Stock to convert, at the option of the holder thereof, into a number of shares of Company common stock equal to (a) 4,900 shares, multiplied by (b) the exchange ratio of the Merger (which will equal the number of shares of Company common stock which would have been issuable to the holders of the Series C Preferred Stock of Viking in the Merger, had such Series C Preferred Stock been converted into common stock of Viking immediately prior to the effective time of the Merger)(described herein as the “conversion shares”).

Such Series A Preferred Stock does not have any redemption rights and shares equally in any dividends authorized by the Board of Directors for distribution to common stockholders, on an as-converted basis.

The Series A Designation also provides that such number of voting shares and conversion shares as calculated as discussed above, shall be updated by the Company following the Merger, without any required approval of the holders of such Series A Preferred Stock, to include the actual numerical value of such voting shares and conversion shares, upon closing of the Merger.

No shares of Series A Preferred Stock will be issued by the Company until or unless the Merger closes.

Series C Redeemable Convertible Preferred Stock

On February 3, 2020, the Company sold 525 shares of Series C Preferred Stock for total proceeds of $5 million. In the event the Merger Agreement entered into with Viking in February 2020 is terminated for any reason, we (until June 22, 2020, when such terms were amended) were required to redeem the 525 shares of Series C Preferred Stock at a 110% premium, in an aggregate amount equal to $5,775,000. . In addition, certain provisions of the Series C Preferred Stock may require the Company to redeem the stock, including the requirement to redeem 525 shares of Series C Preferred Stock in the event the Merger Agreement is terminated are termination is outside the control of the Company, I Series C Preferred Stock is classified as temporary equity on the September 30, 2020 and March 31, 2020 balance sheets. Temporary equity is a security with redemption features that are outside the control of the issuer, is not classified as an asset or liability in conformity with GAAP, and is not mandatorily redeemable.

During the six months ended September 30, 2020, the Company sold 630 shares of Series C Preferred Stock to Discover in consideration for $6 million. During the six months ended September 30, 2019, the Company sold no shares of Series C Preferred Stock.

During the six months ended September 30, 2020, Discover converted 756 shares of the Series C Preferred Stock with a face value of $7,560,000, (recorded value of $11,019,175) and a total of 19,823,486 shares of common stock were issued, which includes additional shares for conversion premiums and true-ups in connection with those conversions through September 30, 2020. During the six months ended September 30, 2019, Discover converted 2 shares of the Series C Preferred Stock and Discover Growth Fund LLC, which purchased shares of Series C Preferred Stock from the Company in December 2018 and subsequently transferred all its remaining shares to Discover who also converted 1 share of Series C Preferred Stock, with an aggregate face value of $30,000, (recorded value of $39,789 )and a total of 1,472,517 shares of common stock were issued, which includes additional shares for conversion premiums and true-ups in connection with those conversions through September 30, 2019.

As of September 30, 2020, a total of 15,348 shares of common stock related to prior conversions of Series C Preferred Stock are held in abeyance subject to the Company increasing its authorized and unissued shares of common stock.

As of September 30, 2020 and March 31, 2020, the Series C Preferred shares were convertible into a substantial number of the Company’s common shares which could result in significant dilution of the Company’s existing shareholders. If the outstanding Series C Preferred were converted as of September 30, 2020 and March 31, 2020, the Company estimates that the following common shares would be required to be issued to satisfy the conversion of the Series C Preferred shares:

	September 30, 2020		March 31, 2020
Estimated number of shares issuable for conversion at $3.25 per share		8,286,154		8,673,846
Estimated number of common shares required to satisfy Conversion Premium using VWAP at period end		218,176,277		129,932,618
		226,462,431		138,606,464

Additionally. if the Series C preferred shares were converted on the above dates, the Company could be required to issue additional common shares (true-up shares).

On December 14, 2020, the Company, with the approval of the Board of Directors of the Company, and the sole holder of the Company’s Series C Preferred Stock, filed certificate of corrections with the Secretary of State of Nevada to correct the original designation of the Series C Preferred Stock and the first amended and restated designation thereof, to correct certain errors which were identified in such designations, which failed to clarify, in error, that (A) the failure of any holder of Series C Preferred Stock to receive the number of shares of common stock due upon conversion of Series C Preferred Stock within five trading days of any conversion notice, and any halt or suspension of trading of the Company’s common stock on its then applicable trading market or by any U.S. governmental agency, for 10 or more consecutive trading days, should not have been ‘deemed liquidation events’ under the Series C Preferred Stock designation, unless such events were due to the occurrence of an event that is solely within the control of the Company; (B) the Company was not required to redeem any shares of Series C Preferred Stock for cash solely because the Company does not have sufficient authorized but unissued shares of common stock to issue upon receipt of a notice of conversion or upon a maturity conversion (where the remaining shares of Series C Preferred Stock convert into common stock of the Company automatically on the seven year anniversary date of the Series C Preferred Stock)(a “Maturity Conversion”); and (C) that a Maturity Conversion is only required to occur to the extent that the Company has sufficient authorized but unissued shares of common stock available for issuance upon conversion in connection therewith. The corrections were made solely to match the agreements to the original intent of the parties. The parties determined the corrections were needed because without such corrections, under ASC480-10- S99-3A5 and ASC 480-10-S99-3A3(f), the non-corrected designations required the Series C Preferred Stock to be classified as temporary equity due to the foregoing events being outside the Company’s control. However, the corrections failed to remove all redemption provisions that were outside the control of the Company. therefore, the Series C Preferred Stock remained in temporary equity.

The corrections were effective as of the original filing dates with the Secretary of State of Nevada of the Company’s original Series C Preferred Stock designation (August 25, 2016) and the Company’s first amended and restated Series C Preferred Stock designation (July 8, 2019), subject to certain exceptions set forth in the Nevada Revised Statutes.

Also on December 14, 2020, the Company, with the approval of the Board of Directors of the Company, and the sole holder of the Company’s Series C Preferred Stock, filed a second amended and restated designation of the Series C Preferred Stock with the Secretary of State of Nevada, which was effective upon filing (the “Second Amended and Restated Designation”), which amended the first amended and restated designation of the Series C Preferred Stock (as corrected), to include the right of the Company to redeem all (but not less than all) of the outstanding shares of Series C Preferred Stock at a redemption price equal to 110% of the face value of such preferred stock ($10,000 per share), at the Company’s option, at any time, in the event the Company is not in default of any of the terms of any Stock Purchase Agreement pursuant to which such applicable shares of Series C Preferred Stock were sold; (b) update the conversion price of the face amount ($10,000 per share) of the Series C Preferred Stock in connection with the Company’s prior 1-for-50 reverse stock split (i.e., to confirm the change in such conversion price from $3.25 per share to $165.50 per share), which had no effect on the conversion rate of conversion premiums due under the terms of the Series C Preferred Stock, and which conversion price was already being reflected in prior conversion notices after the date of such reverse split; (c) formally amend the measurement period for the calculation of the conversion of conversion premiums due under the terms of the Series C Preferred Stock to begin on the later of February 3, 2020 or, if no trigger event (as described in the designation of the Series C Preferred Stock) has occurred, 30 trading days, and if a trigger event has occurred 60 trading days, before the date of an applicable conversion notice, which had previously been agreed to contractually by the parties (i.e., the beginning of each future measurement period for conversions made after February 3, 2020, will extend back to February 3, 2020); and (d) update the references in the designation to the “Merger” which had previously referred to the Company’s combination with Lineal Star Holdings, LLC, which transaction was rescinded and terminated effective December 31, 2019, to refer to the planned merger with Viking Energy Group, Inc., which has the effect of the Viking merger being approved by the holder of the Series C Preferred Stock and not being a ‘deemed liquidation event’ under the Second Amended and Restated Designation.

The Securities Purchase Agreements (“SPAs”) between the Company and the Investors regarding the purchase and sale of the Series C Preferred Shares require the Company to, among other things, timely file all reports required to be filed by Company pursuant to requirements of the SEC, and to maintain sufficient reserves from its duly authorized Common Stock for issuance of all Conversion Shares. On October 6, 2021, the Company received notice from the Investors that they believed the Company breached the SPAs for failing to comply with the foregoing two items, and the Notes contain a provision stating a breach by the Company of any terms within the SPA or COD is also a breach under the Notes, which would result in an immediate acceleration of the Notes at the holder’s option.

On October 9, 2021 the Company entered into agreements (the “October Agreements”) with each of the First Series C Preferred Stock investors, pursuant to which the investors agreed to refrain from declaring defaults or bringing a breach of contract action under the SPAs, and one investor, a noteholder, agreed to refrain from declaring defaults or bringing a breach of contract action under the Notes, in each case provided the Company: (i) within 30 days of the date of the October Agreements, amended the COD to provide that holders of the Preferred Shares will vote together with holders of common stock on all matters other than election of directors and shareholder proposals (including proposals initiated by any holders of Preferred Shares), on an as-if converted basis, subject to the beneficial ownership limitation in the COD, even if there are insufficient shares of authorized common stock to fully convert the Preferred Shares (the “COD Amendment Requirement”); (ii) files by November 19, 2021 all reports required to be filed by the Company with the SEC; and (iii) to implement and maintain, as soon as possible but no later than December 31, 2021, a sufficient reserve from its duly authorized Common Stock for issuance of all Conversion Shares

In November 2021, as a further accommodation to the Company and in order to help facilitate implementation of the Company’s business plans and continued trading on the NYSE American, the investors agreed to extend the deadline for the Filing Requirement to December 6, 2021. The deadline for the Reserve Requirement remains December 31, 2021, meaning the Company is to obtain on or before such date, approval of the proposals outlined in the preliminary proxy statement filed by the Company with the Securities and Exchange Commission on November 9, 2021.

The Certificates of Designations with respect to the Company’s Series C Preferred Stock and Series G Preferred Stock (collectively, the “CODs”) and/or the Stock Purchase Agreements regarding the sale of such Series C Preferred Stock and Series G Preferred Stock (collectively, the “SPA’s”), contain covenants requiring the Company to timely file all reports required to be filed by the Company pursuant to the Exchange Act (the “Filing Requirement”). The Company did not satisfy the Filing Requirement and, consequently, on or about March 9, 2022, the preferred stock holders, Discover and Antilles, filed a Verified Complaint against the Company (the “Discover/Antilles Complaint”) as a result of the default by the Company under the CODs. A default under the CODs and/or SPA’s is also considered an event of default under each of the Promissory Notes executed by the Company in favor of Discover (collectively, the “Discover Notes”) (see subsequent events), and upon an event of default under the Discover Notes, Discover may, at its option, declare the principal and any and all interest then accrued thereon, at once due and payable, and exercise any other rights under applicable agreements. Discover did not exercise its right to declare the amount owing under the Discover Notes immediately due and payable, but Failure by Discover to exercise such right does not constitute a waiver of the right to exercise the same in the event of any subsequent default. As of April 18, 2022, Discover, Antilles and the Company entered into a Settlement Agreement to settle the Discover/Antilles Complaint, and the Settlement Agreement was approved by the Court on or about May 12, 2022. If the Company fails to satisfy future Filing Requirements, it would be considered a default under the CODs and SPA’s, which in turn would constitute an event of default under the Discover Notes.

Warrants

The following is a summary of the Company’s outstanding warrants at September 30, 2020:

Warrants			Exercise		Expiration	Intrinsic Value at
Outstanding			Price ($)		Date	September 30, 2020
	1	⁽¹⁾		1,171,875.00	April 26, 2021	$	—
	3	⁽²⁾		195,312.50	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 funding. The warrants were exercisable on the grant date (September 12, 2017) and remain exercisable until September 12, 2022.

(3)

Warrants issued in connection with a Severance Agreement with Richard N. Azar II, the Company’s former Chief Executive Officer. The warrants were exercisable on the grant date (May 25, 2018) and remain exercisable until May 24, 2023.