8-K: IIOT-OXYS, Inc. Amends Preferred Stock Terms, Introducing 12% Cumulative Dividends

IIOT-OXYS, Inc. has amended its Certificate of Designation to introduce a new series of preferred stock with a 12% cumulative dividend and other preferential terms.

Summary

• IIOT-OXYS, Inc. filed an amendment to its Certificate of Designation on February 12, 2024, creating a new series of preferred stock called Series C Convertible Preferred Stock.
• Up to 5,000 shares of this new preferred stock can be issued.
• The Series C Preferred Stock will pay cumulative dividends of 12% per annum, payable quarterly, starting from the issuance date and ending on the conversion date.
• Dividends can be paid in cash or in shares of Series C Preferred Stock.
• Holders of Series C Preferred Stock are also entitled to receive dividends on an as-if-converted basis, matching any dividends paid on common stock.
• The company cannot pay dividends on common stock unless it simultaneously pays the equivalent dividend on the preferred stock.
• Dividends are calculated based on a 360-day year and accrue daily, regardless of whether the company has profits or funds available.
• Late dividend payments will incur a late fee of 18% per annum, compounding daily.
• The company is restricted from redeeming or purchasing junior or pari passu securities while any Series C Preferred Stock remains outstanding, unless it is purchasing Series C Preferred Stock.
• Converted shares of Series C Preferred Stock will no longer be outstanding, and all rights, except the right to receive common stock, will terminate on the conversion date.

Sentiment

Score: 6

Explanation: The document outlines a significant change in the company's capital structure with the introduction of a new preferred stock series. The high dividend rate and late fees could be seen as both positive and negative, depending on the company's financial health and ability to meet its obligations. The sentiment is neutral to slightly positive, as it could be a good move for the company if they can manage the obligations.

Positives

• The 12% cumulative dividend on the Series C Preferred Stock provides a potentially attractive return for investors.
• The ability to receive dividends in cash or shares of preferred stock offers flexibility to investors.
• The as-if-converted dividend participation ensures preferred shareholders benefit from any common stock dividends.
• The restrictions on redeeming or purchasing junior or pari passu securities protect the value of the Series C Preferred Stock.

Negatives

• The 18% per annum late fee on unpaid dividends could indicate potential financial strain if the company struggles to meet its dividend obligations.
• The restrictions on paying dividends on common stock until preferred dividends are paid could limit the company's flexibility in rewarding common shareholders.

Risks

• The company's ability to consistently pay the 12% cumulative dividend is dependent on its financial performance.
• The high late fee of 18% per annum on unpaid dividends could indicate a higher risk of financial instability.
• The restrictions on other securities could limit the company's ability to raise capital or manage its capital structure.

Future Outlook

The document does not contain specific forward-looking statements or guidance beyond the terms of the Series C Preferred Stock.

Management Comments

• Clifford L. Emmons, Chief Executive Officer, certified the amendment to the Certificate of Designation.

Industry Context

The creation of a new series of preferred stock with a high dividend rate could be a strategy to attract investors in a competitive market, or to raise capital without diluting common stock ownership. This is a common practice for companies seeking to raise capital.

Comparison to Industry Standards

• The 12% cumulative dividend rate is relatively high compared to typical preferred stock offerings, which often range from 5% to 8%.
• The 18% late fee is also significantly higher than standard late payment penalties, which are usually tied to prime rates or other benchmarks.
• The restrictions on other securities are common in preferred stock agreements to protect the interests of preferred shareholders, but the specific terms can vary widely.
• Companies like Digital Realty Trust (DLR) and Public Storage (PSA) issue preferred stock with lower dividend rates, typically around 5-6%, but with different risk profiles and terms.

Stakeholder Impact

• Shareholders may see a potential benefit from the new preferred stock if it strengthens the company's financial position.
• Potential investors in the Series C Preferred Stock will be attracted by the high dividend rate.
• Common shareholders may be impacted by the restrictions on common stock dividends until preferred dividends are paid.

Next Steps

• The company will likely proceed with the issuance of the Series C Preferred Stock.
• The company will need to ensure compliance with the dividend payment terms.
• The company will need to manage its capital structure in light of the restrictions on other securities.

Key Dates

Keywords

Preferred Stock, Dividends, Convertible Securities, Corporate Finance, Capital Structure, IIOT-OXYS, Series C Preferred Stock