Item
3.02 Unregistered
Sales of Equity Securities.
The
information set forth in Item 1.01 of this Current Report on Form
8-K is incorporated by reference into this Item 3.02.
The
Series D Preferred Stock and Commitment Shares were not registered
under the Securities Act, but qualified for exemption under Section
4(a)(2) and/or Regulation D of the Securities Act. The securities
were exempt from registration under Section 4(a)(2) of the
Securities Act because the issuance of such securities by the
Company did not involve a “public offering,” as defined
in Section 4(a)(2) of the Securities Act, due to the insubstantial
number of persons involved in the transaction, size of the
offering, manner of the offering and number of securities offered.
The Company did not undertake an offering in which it sold a high
number of securities to a high number of investors. In addition,
the Investors had the necessary investment intent as required by
Section 4(a)(2) of the Securities Act since the Investors agreed
to, and received, the securities bearing a legend stating that such
securities are restricted pursuant to Rule 144 of the Securities
Act. This restriction ensures that these securities would not be
immediately redistributed into the market and therefore not be part
of a “public offering.” Based on an analysis of the
above factors, the Company has met the requirements to qualify for
exemption under Section 4(a)(2) of the Securities Act.
Item
3.03 Material
Modification to Rights of Security Holders.
The
information set forth in Item 1.01 and Item 3.02 of this Current
Report on Form 8-K is incorporated by reference into this Item
3.03.
On
December 16, 2020, the Secretary of State of the State of Delaware
delivered confirmation of the effective filing of the
Company’s Certificate of Designations of the Preferred Stock,
which established 20,000 shares of the Company’s Series D
Preferred Stock, having such designations, rights and preferences
as set forth therein (the “Series D
Designation”).
The
shares of Series D Preferred Stock have a stated value of $1,200
per share (the “Series D Stated Value”) and are
convertible into Common Stock at the election of the holder of the
Series D Preferred Stock, at any time following a Qualified
Offering (as defined in the Series D Designation) at a price of
$0.10 per share, subject to adjustment (the “Conversion
Price”). Each holder of Series D Preferred Stock shall be
entitled to receive, with respect to each share of Series D
Preferred Stock then outstanding and held by such holder, dividends
at the rate of twelve percent (12%) per annum (the “Preferred
Dividends”).
The
Preferred Dividends shall accrue and be cumulative from and after
the date of issuance of any share of Series D Preferred Stock on a
daily basis computed on the basis of a 360-day year and compounded
daily. The Preferred Dividends are payable quarterly. The Company
shall pay such dividends in the form of cash or Series D Preferred
Stock, as determined by the Company.
The
holders of Series D Preferred Stock rank senior to the Common Stock
and Common Stock Equivalents (as defined in the Series D
Designation) with respect to payment of dividends and rights upon
liquidation and will vote together with the holders of the Common
Stock on an as-converted basis, subject to beneficial ownership
limitations, on each matter submitted to a vote of holders of
Common Stock (whether at a meeting of shareholders or by written
consent). In addition, as further described in the Series D
Designation, as long as any of the shares of Series D Preferred
Stock are outstanding, the Company will not take certain corporate
actions without the affirmative vote at a meeting (or the written
consent with or without a meeting) of the majority of the shares of
Series D Preferred Stock then outstanding.
Each share of Series D Preferred Stock shall be convertible, at any
time and from time to time after the Qualified Offering (as defined
in Series D Designation) the at
the option of the holder of such shares, into that number of shares
of Common Stock determined by dividing the Series D Stated Value by
the Conversion Price, subject to certain beneficial ownership
limitations.
The Series D Designation are subject to certain Registration
Rights, whereby if the Corporation does not complete a market
listing to the NYSE American, the Nasdaq Capital Market, the Nasdaq
Global Market, the Nasdaq Global Select Market or the New York
Stock Exchange (or any successors to any of the foregoing) within
one hundred twenty (120) calendar days from the issuance of the
Series D Preferred Stock, the Company will, within ten (10)
calendar days, file a registration statement covering the shares of
Common Stock underlying the Series D Preferred Shares.
Additionally, the Company will include the shares of Common Stock
underlying the Series D Preferred Shares in any registration
statement which is being filed by the Corporation’s existing
investment banker, provided, that said registration statement is
not yet effective with the SEC and provided that the Company
receives the prior written approval of said investment
banker.
The
foregoing description of the Series D Designation does not purport
to be complete and is subject to, and qualified in its entirety by
the Series D Designation, a copy of which is attached as Exhibit
3.1 to this Current Report on Form 8-K and incorporated herein by
reference.