Item
5.03 Amendments to Articles of Incorporation or Bylaws; Change in Fiscal Year.
The
Company previously designated 2,200,000 shares of Series C Convertible Preferred Stock on September 20, 2007. Effective on May
18, 2020, due to the fact that no shares of Series C Convertible Preferred Stock were outstanding, the Board of Directors approved,
and the Company filed, a Certificate of Withdrawal of Certificate of Designation relating to such series of preferred stock with
the Secretary of State of Nevada and terminated the designation of its Series C Convertible Preferred Stock effective as of the
same date.
On
May 18, 2020, the Board of Directors of the Company approved the filing of (a) an Amended and Restated Certificate of Designation
of the Company’s Series A Preferred Stock (the “Series A Preferred Stock” and the “Series A
Designation”); and (b) an Amended and Restated Certificate of Designation of the Company’s Series B Convertible
Preferred Stock (the “Series B Preferred Stock” and the “Series B Designation”), with the
Secretary of State of Nevada, which designations were filed with, and became effective with, the Secretary of State of Nevada
on the same date. The Series A Designation designated three shares of Series A Preferred Stock and the Series B Designation designated
2,000,000 shares of Series B Preferred Stock.
Series
A Preferred Stock
The
Series A Designation provides for the Series A Preferred Stock to have the following rights:
Dividend
Rights. The Series A Preferred Stock do not accrue dividends.
Liquidation
Preference. The Series A Preferred Stock have no liquidation preference.
Conversion
Rights. The Series A Preferred Stock have no conversion rights.
Voting
Rights. For so long as any shares of Series A Preferred Stock remain issued and outstanding, the holders thereof, voting
separately as a class, have the right to vote on all shareholder matters (including, but not limited to at every meeting of the
stockholders of the Company and upon any action taken by stockholders of the Company with or without a meeting) equal to sixty
percent (60%) of the total vote (the “Total Series A Vote” and the “Voting Rights”). For
example, if there are 10,000 shares of the Company’s common stock issued and outstanding at the time of a shareholder vote,
the holders of the Series A Preferred Stock, voting separately as a class, will have the right to vote an aggregate of 15,000
shares, out of a total number of 25,000 shares voting.
Additionally,
so long as Series A Preferred Stock is outstanding, the Company shall not, without the affirmative vote of the holders of at least
66-2/3% of all outstanding shares of Series A Preferred Stock, voting separately as a class (i) amend, alter or repeal any provision
of the Articles of Incorporation or the Bylaws of the Company so as to adversely affect the designations, preferences, limitations
and relative rights of the Series A Preferred Stock, (ii) effect any reclassification of the Series A Preferred Stock, (iii) designate
any additional series of preferred stock, the designation of which adversely effects the rights, privileges, preferences or limitations
of the Series A Preferred Stock; or (iv) amend, alter or repeal any provision of the Series A Designation (except in connection
with certain non-material technical amendments).
Notwithstanding
the above, no shares of Series A Preferred Stock held by any person who is not a then member of the Board of Directors of the
Company (each a “Non-Director Holder”), shall have any Voting Rights and the Voting Rights of all other shares
of Series A Preferred Stock (including, but not limited to the Total Series A Vote) shall be calculated without regard to, and
without taking into account, the shares of Series A Preferred Stock held by such Non-Director Holder.
Redemption
Right. The Company has the option in its sole discretion, at any time, with the majority consent or approval of the Board
of Directors of the Company, to redeem any outstanding shares of Series A Preferred Stock of the Company held by any Non-Director
Holder, by paying the Non-Director Holder(s) a redemption price of $1.00 per share for each such Series A Preferred Stock shares
redeemed (the “Redemption Amount”, and each a “Redemption”). The payment by the Company
to the Non-Director Holder (at such Non-Director Holder’s address of record) of the Redemption Amount in connection with
a Redemption automatically results in the cancellation, termination and invalidation of any outstanding Series A Preferred Stock
held by a Non-Director Holder or his, her or its assigns.
Purchase
Right. In the event the Company is legally prohibited from exercising the redemption right discussed above, any one or
more of the other holders of the Series A Preferred Stock, other than any Non-Director Holder(s) (the “Director Holders”),
have the option, exercisable in their sole discretion, to purchase their pro rata share of any shares of Series A Preferred Stock
held by any Non-Director Holder(s) for $1.00 per share of Series A Preferred Stock (the “Purchase Amount”,
and the “Purchase”). The payment by the Director Holder(s) of the Series A Preferred Stock to the Non-Director
Holder of the Purchase Amount automatically, and without any required action by the Director Holder(s) or the Non-Director Holder,
results in the transfer of the rights to, and ownership of, such Series A Preferred Stock held by a Non-Director Holder or his,
her or its assigns, to the Director Holder(s), pro rata with their payment of the Purchase Amount.
Protective
Provisions. Subject to the rights of series of preferred stock which may from time to time come into existence, so long
as any shares of Series A Preferred Stock are outstanding, the Company cannot without first obtaining the approval (by written
consent, as provided by law) of the holders of a majority of the then outstanding shares of Series A Preferred Stock, voting together
as a class:
(a)
Issue any additional shares of Series A Preferred Stock after the original issuance of shares of Series A Preferred Stock;
(b)
Increase or decrease the total number of authorized or designated shares of Series A Preferred Stock;
(c)
Effect an exchange, reclassification, or cancellation of all or a part of the Series A Preferred Stock;
(d)
Effect an exchange, or create a right of exchange, of all or part of the shares of another class of shares into shares of Series
A Preferred Stock; or
(e)
Alter or change the rights, preferences or privileges of the shares of Series A Preferred Stock so as to affect adversely the
shares of such series, including the rights set forth in the Series A Designation.
Transfer
Restrictions. Each holder of Series A Preferred Stock is prohibited from Transferring any shares of Series A Preferred
Stock. “Transfer” means directly or indirectly (a) offering for sale, selling, pledging, hypothecating, transferring,
assigning or otherwise disposing of (or enter into any transaction or device that is designed to, or could be expected to, result
in the sale, pledge, hypothecation, transfer, assignment or other disposition at any time) (including, without limitation, by
operation of law); or (b) entering into any swap or other derivatives transaction that transfers to another, in whole or in part,
any of the benefits or risks of ownership of the applicable securities, whether any such transaction is to be settled by delivery
of securities or other securities, in cash or otherwise.
Series
B Convertible Preferred Stock
The
Series B Designation provides for the Series B Preferred Stock to have the following rights:
Dividend
Rights. The Series B Preferred Stock does not accrue any dividends, but the Series B Preferred Stock holders are entitled
to share in dividends paid to the holders of the Company’s common stock to the same extent that such holders would have
received such dividends had they converted the Series B Preferred Stock into common stock pursuant to the conversion rights discussed
below.
Liquidation
Preference. In the event of any liquidation, dissolution or winding up of the Company, either voluntary or involuntary
(each a “Liquidation Event”), the holders of Series B Preferred Stock are entitled to receive pari passu with
any distribution of any of the assets of the Company to the holders of the Company’s common stock, but not prior to any
holders of senior securities (which include holders of capital leases, other preferred stock and debt holders, and banks or others,
which hold priority liquidation preferences over the assets of the Company), which holders of the senior securities have priority
to the distribution of any assets of the Company, an amount per share for each share of Series B Preferred Stock held by them
equal to $1.00 per share.
Conversion
Rights. Each share of Series B Preferred Stock may be converted, at the option of the holder thereof, into that number
of shares of common stock of the Company as equals $1.00 divided by 90% of the average of the volume weighted average prices (“VWAP”)
of the Company’s common, for the five trading days immediately preceding the date the notice of conversion is received,
with any remainder rounded to the hundredths place. Notwithstanding the above, at no time may the Series B Preferred Stock be
converted into shares of our common stock by any holder, if such conversion would result in such holder thereof and its affiliates
owning an aggregate of in excess of 4.999% of the then outstanding shares of our common stock, which amount may be increased to
9.999% on a per holder basis, upon 61 days’ prior written notice.
Voting
Rights. The Series B Preferred Stock has no voting rights on general corporate matters, provided that the Series B Designation
does contain customary protective provisions restricting the Company’s ability to undertake any of the following without
the approval of a majority in interest of such shares of Series B Preferred Stock:
(a)
Increase or decrease (other than by redemption or conversion) the total number of authorized shares of Series B Preferred Stock;
(b)
Re-issue any shares of Series B Preferred Stock converted pursuant to the terms of the Series B Designation;
(c)
Issue any shares of Series B Preferred Stock other than pursuant to the SPA;
(d)
Alter or change the rights, preferences or privileges of the shares of Series B Preferred Stock so as to affect adversely the
shares of such series; or
(e)
Amend or waive any provision of the Company’s Articles of Incorporation or Bylaws relative to the Series B Preferred Stock
so as to affect adversely the shares of Series B Preferred Stock in any material respect as compared to holders of other series
of shares.
Redemption
Rights. The Series B Preferred Stock have no redemption rights.
*
* * * *
The
description of the Series A Designation and Series B Designation above is not complete and is qualified in its entirety by the
full text of the Series A Designation and Series B Designation, filed herewith as Exhibits 3.1 and 3.2, respectively,
which are incorporated by reference in this Item 5.03.