Item 3.03 Material Modifications of the Rights of Security Holders
On April 19, 2021, the Registrant filed an Amended Certificate of Designation
(the “Designation”) for a series of preferred stock Named Series B Preferred Stock (the “B Preferred”). The B
Preferred Consists of 5,000 shares. Each share of B Preferred has a liquidation preference of $1,000 and has no voting rights except as
to matters pertaining to the rights and privileges of the B Preferred. Each share of B Preferred is convertible at the option of the holder
thereof into (i) 5,000 shares of the Registrant’s common stock (one share for each $0.20 of liquidation preference) (the “Conversion
Shares”) and (ii) 5,000 common stock purchase warrants expiring April 16, 2026 (the “Warrants”). The Warrants have an
initial exercise price of $0.30 per share. The Designation provides that both the number of Conversion Shares and the Warrants adjust
for stock splits, reorganizations and the like and the Warrants provide for proportional adjustments in the event of certain dilutive
issuances with certain issuances excluded from any adjustment. The reader is referred to the exhibits to this report for the full terms
of the B Preferred and the Warrants. The Designation also provides that commencing June 30, 2021 and for so long as 2,000 shares of B
Preferred are outstanding, the holders of the B Preferred, voting as a class, shall be entitled to elect one member of the Registrant’s
board of directors.
On April 19, 2021, the Registrant closed on the sale of 3,000 shares
of B Preferred to 18 accredited investors for gross proceeds of $3,000,000 in an offering (the “Offering”) exempt from registration
under Rule 506(b) under the Securities Act of 1933, as amended (the “Act”). In addition, Eagle Equities, LLC (“Eagle”),
the sole holder of the Registrant’s variable rate convertible promissory notes accepted as full settlement of approximately $2,663,214
in principal and interest: (i) 1,500 shares B Preferred, valued at $1,500,000 as a part of the offering; (ii) $1,3000,000 in cash from
the proceeds of the offering; and (iii) 1,200,000 shares of the Registrant’s common stock. As part of this settlement, Eagle waived
all rights to any prepayment penalties due, any default interest payments due, and any other penalties and fees relating to the outstanding
debt. As a result of this settlement, the Registrant no longer has any variable rate convertible notes, or any other convertible notes
of any kind, outstanding.
In addition to the $1,300,000 paid to Eagle, the Registrant paid fees
of $270,000 plus certain retainer and success warrants to Spencer Clarke, LLC (“SC”) its placement agent in the private placement,
pursuant to their Letter of Engagement. The Registrant received $1,430,000 of the proceeds of the Offering which will be used as working
capital.
The Subscription Agreement in the Offering, which is an exhibit hereto,
provides that the Registrant will file a registration statement on Form S-1 with respect to the Conversion Shares and the shares issuable
on exercise of the Warrants within 30 days of April 19, 2021 and will use its best efforts to cause the same to become effective under
the Act.
Certain of the above referenced documents are filed as exhibits hereto
and any description contained herein is qualified in its entirety by the language of the exhibits.