Item 5.03 Amendments to Articles of Incorporation
or Bylaws; Change in Fiscal Year
In connection with the Sale, our Board of
Directors designated a new class of preferred stock, the Series B
Convertible Preferred Stock, and on November 26, 2018, we filed a
Certificate of Designation of the Rights, Preferences, Privileges
and Restrictions of the Series B Convertible Preferred Stock (the
“
Certificate of
Designation
”) with the
Secretary of State of the State of Nevada. The Certificate of
Designation provides for the issuance of up to 1,000,000 shares of
Series B Preferred Stock, par value $0.001 per
shares.
The
Certificate of Designation provides, among other things, that
holders of Series B Preferred Stock shall receive noncumulative
dividends on an as-converted basis in the same form as any
dividends to be paid out on shares of our common stock. Any
dividends paid will first be paid to the holders of Series B
Preferred Stok prior and in preference to any payment or
distribution to holders of common stock. Other than as set forth in
the previous sentence, the Certificate of Designation provides that
no other dividends shall be paid on Series B Preferred Stock.
Dividends on the Series B Preferred Stock are not mandatory or
cumulative. There are no sinking fund provisions applicable to the
Series B Preferred Stock, and the holders of Series B Preferred
Stock have no redemption rights. The Corporation may redeem the
Series B Preferred Stock upon 30 days’ prior notice at a
price equal to the sum of 133% of the Original Issue Price plus the
amount of any unpaid dividends on the shares to be redeemed. The
Original Issue Price is set at $1.00 per share for the Series B
Preferred Stock.
In
the event of any liquidation, dissolution or winding up of the
Company, the Series B Preferred Stock will be paid prior and in
preference to any payment or distribution on any shares of common
stock, or subsequent series of preferred stock, an amount per share
equal to the Original Issue Price of the Series B Preferred Stock
and the amount of any accrued or declared but unpaid dividends. The
holders of the Series B Preferred Stock will then receive
distributions along with the holders of the common stock on a pari
passu basis according to the number of shares of common stock the
Series B Preferred holders would be entitled if they converted
their shares of Series B Convertible Preferred Stock at the time of
such distribution.
Each
share of Series B Preferred Stock is convertible at any time at the
holder's option into that number of fully paid and nonassessable
shares of our common stock equal to the quotient of the Conversion
Principal Amount divided by the lesser of (a) the Fixed Conversion
Price established by our Board of Directors on the date of
conversion, and (b) the Fair Market Value. The Certificate of
Designation defines Fair Market Value as 60% of the lowest Traded
Price for the common stock for the previous fifteen (15) trading
days prior to the Conversion Date on the market or exchange where
our common stock is trading. The Conversion Principal Amount is
equal to the Original Issue Price ($1.00) divided by nine-tenths
(0.9). The Fixed Conversion Price is the price set by our Board of
Directors upon conversion but in no event less than the last Traded
Price of our common stock. Traded Price is defined as the price at
which our common stock changes hands on the designated exchange or
market.
Conversion
of the Series B Preferred Stock is subject to a Beneficial
Ownership Limitation that prohibits the conversion of the Series B
Preferred Stock if the conversion would result in beneficial
ownership by the holder and its affiliates of more than 4.99% of
our outstanding shares of common stock. A holder of Series B
Preferred Stock may increase its Beneficial Ownership Limitation up
to 9.99% but only after 61 days have passed since the holder gave
notice to the Company.
We
are required to reserve authorized but unissued common stock for
the full number of shares deliverable upon the conversion of all
outstanding shares of all series of preferred stock.
The
Series B Preferred Stock has no voting rights. The rights of the
Series B Preferred Stock survive any reorganization, merger or sale
of the Company.
As
long as any shares of Series B Preferred Stock remain outstanding,
the Certificate of Designation provides that without the approval
of 75% of the holders of the outstanding Series B Preferred Stock,
we may not (i) alter or change the rights, preferences, or
privileges of the Series B Convertible Preferred Stock, (ii)
increase or decrease the number of authorized shares of Series B
Convertible Preferred Stock, or (iii) authorize the issuance of
securities having a preference over or on par with the Series B
Preferred Stock.
This
foregoing description of the Certificate of Designation does not
purport to be complete and is qualified in its entirety by
reference to the complete text of such certificate, a copy of which
is filed herewith as Exhibit 3.1.