PROPOSAL NO. 5 APPROVAL OF THE CHARTER AMENDMENT
Our Board has declared advisable and approved, subject to stockholder approval, an amendment to Article FOURTH of the Certificate of Incorporation, as amended
(the Charter), of the Company to increase the Companys authorized common stock from 10,000,000 shares to 15,000,000 shares (the Charter Amendment).
If the Charter Amendment is approved by the Companys stockholders at the 2020 Annual Meeting, the Company intends to file the Charter Amendment,
substantially in the form of Appendix B hereto with the Secretary of State of Delaware as soon as practicable following stockholder approval and the certification of the vote related thereto. The Charter Amendment has the effect of
increasing our authorized shares of common stock from 10,000,000 shares to 15,000,000 shares.
Purpose of the Amendment
The Companys Charter currently authorizes the Board to issue a maximum of 10,700,000 shares of the Companys capital stock, consisting of 10,000,000
shares of common stock, par value $0.001 per share and 700,000 shares of preferred stock, par value $0.50 per share.
Of the 10,000,000 shares of common
stock currently authorized, as of April 15, 2020, 7,333,533 shares are issued and outstanding and approximately 1,346,785 shares, in the aggregate, are reserved for issuance. The Company, therefore, only has approximately 1,319,682 shares of
unreserved common stock available for future issuance.
If the Charter Amendment is approved by stockholders, after filing the Certificate of Amendment
with Secretary of State of the State of Delaware, the authorized number of common stock will be 15,000,000 shares, of which 1,346,785 shares, in the aggregate, will be reserved. Accordingly, after reserving such shares and accounting for the current
number of issued and outstanding shares, the Company will have approximately 6,319,682 shares of common stock available for issuance.
The Board believes
the Charter Amendment is advisable in order to maintain our financing and capital raising flexibility in connection with our working capital needs and for general corporate purposes. Other possible business and financial uses for the additional
authorized shares of common stock include, without limitation, future stock splits, acquiring other companies, businesses or products in exchange for shares of common stock, attracting and retaining employees by the issuance of additional securities
under our equity compensation plans, and other transactions and corporate purposes that the Board deems to be in the best interest of the Company and its stockholders. The additional authorized shares would enable us to act quickly in response to
opportunities that may arise for these types of transactions, in most cases without the necessity of obtaining further stockholder approval and incurring expenses associated with holding a special stockholders meeting before such issuance(s)
could proceed, except as otherwise required under applicable Delaware law or under applicable Nasdaq rules.
The Company reviews and evaluates potential
capital raising activities, transactions, and other corporate actions on an ongoing basis to determine if such actions would be in the best interests of the Company and its stockholders and, accordingly, the Company reserves the right to issues
shares of common stock, from time to time, pursuant to such actions. There are currently no commitments, definitive agreements or plans with respect to the issuance of any of the additional shares of common stock that would be authorized by the
proposed Charter Amendment.
Once authorized, the additional shares of common stock may be issued with approval of the Board but without further approval
of the stockholders unless stockholder approval is required by applicable law, rule or regulation, including, but not limited to, applicable Delaware law and applicable Nasdaq rules. Accordingly, approval of this proposal may facilitate the ability
of the Company to issue shares of common stock in connection with financings, acquisitions, benefit plans, and other corporate transactions and it is possible that no further stockholder approval will be required in connection with any such
transactions.
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