RESTATED
      CERTIFICATE OF INCORPORATION





OF





CHINA
      MEDICINE CORPORATION





China
      Medicine Corporation, a corporation organized and existing under the General
      Corporation Law of the State of Delaware (the “Corporation”), does hereby
      certify:




1.  The
      name
      of the Corporation is China Medicine Corporation. The Corporation was organized
      under the name Lounsberry Holdings III, Inc. on February 10, 2005.




2.  The
      Certificate of Incorporation of the Corporation is hereby amended and restated
      to read as follows:




FIRST:
      The name of the Corporation is China Medicine Corporation (the
“Corporation”).




SECOND:
      The address of its registered office in the State of Delaware is 2711
      Centerville Road, Suite 400, Wilmington, Delaware 19808, County of New Castle.
      The name of its registered agent at such address is the Corporation Service
      Company.




THIRD:
      The purpose of the Corporation is to engage in any lawful act or activity for
      which corporations may be organized under the General Corporation Law of
      Delaware.




FOURTH:
      The Corporation is to have perpetual existence.




FIFTH:
      (a)  The
      total
      number of shares of capital stock which the Corporation shall have authority
      to
      issue is one hundred million (100,000,000), of which (i) 90,000,000 shares
      are
      designated as common stock with a par value of $.0001 per share (“Common Stock”)
      and (ii) 10,000,000 shares are designated as preferred stock with a par value
      of
      $.0001 per share (“Preferred Stock”).




(b)  The
      Preferred Stock of the Corporation shall be issued by the Board of Directors
      of
      the Corporation in one or more classes or one or more series within any class
      and such classes or series shall have such voting powers, full or limited,
      or no
      voting powers, and such designations, preferences, limitations or restrictions
      as the Board of Directors of the Corporation may determine, from time to time,
      including but not limited to:




(i)  the
      designation of such class or series;




(ii)  the
      dividend rate of such class or series, the conditions and dates upon which
      such
      dividends shall be payable, the preference or relation which such dividends
      shall bear to the dividends payable on any other class or classes or of any
      other series of capital stock, whether such dividends shall be cumulative or
      non-cumulative, and whether such dividends may be paid in shares of any class
      or
      series of capital stock or other securities of the Corporation;




(iii)  whether
      the shares of such class or series shall be subject to redemption by the
      Corporation, and, if made subject to such redemption, the times, prices and
      other terms and conditions of such redemption;




(iv)  the
      terms
      and amount of any sinking fund provided for the purchase or redemption of the
      shares of such class or series;




1




(v)  whether
      or not the shares of such class or series shall be convertible into or
      exchangeable for shares of any other class or classes or series of capital
      stock
      or other securities of the Corporation, and, if provision be made for conversion
      or exchange, the times, prices, rates, adjustment and other terms and conditions
      of such conversion or exchange;




(vi)  the
      extent, if any, to which the holders of the shares of such class or series
      shall
      be entitled to vote, as a class or otherwise, with respect to the election
      of
      the directors or otherwise, and the number of votes to which the holder of
      each
      share of such class or series shall be entitled;




(vii)  the
      restrictions, if any, on the issue or reissue of any additional shares or any
      class or series of Preferred Stock; and




(viii)  the
      rights of the holders of the shares of such class or series upon the dissolution
      of, or upon the distribution of assets of, the Corporation.




(c)  The
      terms
      and conditions of any rights, options and warrants approved by the Board of
      Directors may provide that any or all of such terms and conditions may be waived
      or amended only with the consent of the holders of a designated percentage
      of a
      designated class or classes of capital stock of the Corporation (or a designated
      group or groups of holders within such class or classes, including but not
      limited to disinterested holders), and the applicable terms and conditions
      of
      any such rights, options or warrants so conditioned may not be waived or amended
      absent such consent.





(d)  Holders
      of shares of Common Stock shall be entitled to cast one vote for each share
      held
      at all stockholders’ meetings for all purposes, including the election of
      directors. The Common Stock does not have cumulative voting rights.




(e)  No
      holder
      of shares of stock of any class shall be entitled as a matter of right to
      subscribe for or purchase or receive any part of any new or additional issue
      of
      shares of stock of any class, or of securities convertible into shares of stock
      of any class, whether now hereafter authorized or whether issued for money,
      for
      consideration other than money, or by way of dividend.




SIXTH:
      The Board of Directors shall have the power to adopt, amend or repeal the
      by-laws of the Corporation.




SEVENTH:
      No director shall be personally liable to the Corporation or its stockholders
      for monetary damages for any breach of fiduciary duty by such director as a
      director. Notwithstanding the foregoing sentence, a director shall be liable
      to
      the extent provided by applicable law, (i) for breach of the director’s duty of
      loyalty to the Corporation or its stockholders, (ii) for acts or omissions
      not
      in good faith or which involve intentional misconduct or a knowing violation
      of
      law, (iii) pursuant to Section 174 of the General Corporation Law or (iv) for
      any transaction from which the director derived an improper personal benefit.
      If
      the General Corporation Law hereafter is amended to authorize the further
      elimination or limitation of the liability of directors, then the liability
      of a
      director of the Corporation, in addition to the limitation on personal liability
      provided herein, shall be limited to the fullest extent permitted by the amended
      General Corporation Law. No amendment to or repeal of this Article SEVENTH
      shall
      apply to or have any effect on the liability or alleged liability of any
      director of the Corporation for or with respect to any acts or omissions of
      such
      director occurring prior to such amendment.




EIGHTH:
      The Corporation shall indemnify, to the fullest extent permitted by Section
      145
      of the General Corporation Law, as amended from time to time, each person that
      such section grants the Corporation the power to indemnify.




2




3.  Set
      forth
      as Exhibit A to this Restated Certificate of Incorporation is a Statement of
      Designations setting forth the rights, preferences and privileges of a series
      of
      Preferred Stock consisting of five million (5,000,000) shares and designated
      as
      the Series A Convertible Preferred Stock.




4.  This
      Restated Certificate of Incorporation has been duly adopted in accordance with
      the provisions of Sections 242 and 245 of the General Corporation Law of
      Delaware.




5.  The
      capital of the Corporation will not be reduced under or by reason of any
      amendment herein certified.




IN
      WITNESS WHEREOF, the Corporation has caused this Certificate to be signed by
      its
      president this 23 rd day of
      October, 2007.





sigSenshan
              Yang, Chief Executive
              Officer




3




**Exhibit
      A**




**STATEMENT
      OF DESIGNATIONS**




Section
      1 . **Definitions** .
      Capitalized terms used and not otherwise defined herein that are defined in
      the
      Purchase Agreement (as defined below) shall have the meanings given such terms
      in the Purchase Agreement. For the purposes hereof, the following terms shall
      have the following meanings:




“ Bankruptcy
      Event ”
means
      any of the following events: (a) the Company or any Significant Subsidiary
      (as
      such term is defined in Rule 1.02(s) of Regulation S-X) thereof commences a
      case
      or other proceeding under any bankruptcy, reorganization, arrangement,
      adjustment of debt, relief of debtors, dissolution, insolvency or liquidation
      or
      similar law of any jurisdiction relating to the Company or any Significant
      Subsidiary thereof; (b) there is commenced against the Company or any
      Significant Subsidiary thereof any such case or proceeding that is not stayed
      or
      dismissed within 90 days after commencement; (c) the Company or any Significant
      Subsidiary thereof is adjudicated insolvent or bankrupt or any order of relief
      or other order approving any such case or proceeding is entered; (d) the Company
      or any Significant Subsidiary thereof suffers any appointment of any custodian
      or the like for it or any substantial part of its property that is not
      discharged or stayed within 90 days; (e) the Company or any Significant
      Subsidiary thereof makes a general assignment for the benefit of creditors;
      (f)
      the Company or any Significant Subsidiary thereof calls a meeting of its
      creditors with a view to arranging a composition, adjustment or restructuring
      of
      its debts; or (g) the Company or any Significant Subsidiary thereof, by any
      act
      or failure to act, expressly indicates its consent to, approval of or
      acquiescence in any of the foregoing or takes any corporate or other action
      for
      the purpose of effecting any of the foregoing.




“ Closing
      Date ”
means
      the Closing Date, as defined in the Purchase Agreement.




“ Commission ”
means
      the Securities and Exchange Commission.




“ Common
      Stock ”
means
      the Company’s common stock, par value $.0001 per share, and stock of any other
      class into which such shares may hereafter have been reclassified or
      changed.




“ Common
      Stock Equivalents ”
means
      any securities of the Company or the Subsidiaries which would entitle the holder
      thereof to acquire at any time Common Stock, including without limitation,
      any
      debt, preferred stock, rights, options, warrants or other instrument that is
      at
      any time convertible into or exchangeable for, or otherwise entitles the holder
      thereof to receive, Common Stock.




“ Conversion
      Date ”
shall
      have the meaning set forth in Section 6(a).




“ Conversion
      Ratio ”
shall
      have the meaning set forth in Section 6(a).




“ Conversion
      Price ”
shall
      mean the price paid for one share of Preferred Stock divided by the number
      of
      shares of Common Stock issuable upon conversion of one share of Preferred
      Stock.




4




“ Conversion
      Shares ”
means,
      collectively, the shares of Common Stock into which the shares of Series A
      Preferred Stock are convertible in accordance with the terms
      hereof.




“ Conversion
      Shares Registration Statement ”
means
      a
      registration statement that meets the requirements of the Registration Rights
      Agreement and registers the resale of all Conversion Shares by the Holder,
      who
      shall be named as a “selling stockholder” thereunder, all as provided in the
      Registration Rights Agreement.




“ Dilutive
      Issuance ”
shall
      have the meaning set forth in Section 7(b) hereof.




“ Effective
      Date ”
means
      the date that the Conversion Shares Registration Statement is declared effective
      by the Commission.




“ EBITDA ”
shall
      have the meaning set forth in the Purchase Agreement.




“ Exchange
      Act ”
means
      the Securities Exchange Act of 1934, as amended.




“ Exempt
      Issuance ”
shall
      have the meaning set forth in Section 1.3.10 of the Purchase
      Agreement.




“ Fundamental
      Transaction ”
shall
      have the meaning set forth in Section 7(f)(iv) hereof.




“ Holder ”
shall
      have the meaning given such term in Section 2 hereof.




“ Investors ”
shall
      mean the persons named in Schedule A to the Purchase Agreement.




“ Junior
      Securities ”
means
      the Common Stock and all other equity or equity equivalent securities of the
      Company other than those securities that are explicitly senior in rights or
      liquidation preference to the Series A Preferred Stock.




“ Original
      Issue Date ”
shall
      mean the date of the first issuance of any shares of the Series A Preferred
      Stock regardless of the number of transfers of any particular shares of Series
      A
      Preferred Stock and regardless of the number of certificates which may be issued
      to evidence such Series A Preferred Stock.




“ Person ”
means
      a
      corporation, an association, a partnership, a limited liability company, a
      business association, an individual, a trust, a government or political
      subdivision thereof or a governmental agency.




“ Purchase
      Agreement ”
means
      the Preferred Stock Purchase Agreement, dated as of the February 8, 2006, to
      which the Company and the original Holders are parties, as amended, modified
      or
      supplemented from time to time in accordance with its terms, a copy of which
      is
      on file at the principal offices of the Company.




“ Registration
      Rights Agreement ”
means
      the Registration Rights Agreement, dated as of the Closing Date, to which the
      Company and the original Holder are parties, as amended, modified or
      supplemented from time to time in accordance with its terms.




“ Securities ”
shall
      have the meaning set forth in Section 1.3.17 of the Purchase
      Agreement.




5




“ Securities
      Act ”
means
      the Securities Act of 1933, as amended, and the rules and regulations
      promulgated thereunder.




“ Series
      A Preferred Stock ”
shall
      have the meaning set forth in Section 2.




“ Subscription
      Amount ”
shall
      mean the three million nine hundred thousand dollars ($3,900,000) to be paid
      for
      the Preferred Stock and Warrants purchased pursuant to the Purchase Agreement,
      in United States Dollars and in immediately available funds.




“ Subsidiary ”
shall
      mean a corporation, limited liability company, partnership, joint venture or
      other business entity of which the Company owns beneficially or of record more
      than a majority of the equity interest.




“ Trading
      Day ”
means
      a
      day on which the Common Stock is traded on a Trading Market.




“ Trading
      Market ”
means
      the following markets or exchanges on which the Common Stock is listed or quoted
      for trading on the date in question: the Nasdaq SmallCap Market, the American
      Stock Exchange, the New York Stock Exchange, the Nasdaq National Market or
      the
      OTC Bulletin Board.




“ Transaction
      Documents ”
shall
      have the meaning set forth in the Purchase Agreement.




“ VWAP ”
means,
      for any date, the price determined by the first of the following clauses that
      applies: (a) if the Common Stock is then listed or quoted on a Trading Market,
      the daily volume weighted average price of the Common Stock for such date (or
      the nearest preceding date) on the primary Trading Market on which the Common
      Stock is then listed or quoted as reported by Bloomberg Financial L.P. (based
      on
      a Trading Day from 9:30 a.m. EST to 4:02 p.m. Eastern Time) using the VAP
      function; (b) if the Common Stock is not then listed or quoted on the
      Trading Market and if prices for the Common Stock are then reported in the
“Pink
      Sheets” published by the National Quotation Bureau Incorporated (or a similar
      organization or agency succeeding to its functions of reporting prices), the
      most recent bid price per share of the Common Stock so reported; or (c) in
      all other cases, the fair market value of a share of Common Stock as determined
      by a nationally recognized-independent appraiser selected in good faith by
      Purchasers holding a majority of the principal amount of Series A Preferred
      Stock then outstanding.




“ Warrants ”
shall
      have the meaning set forth in the Purchase Agreement.




Section
      2 . **Designation,
      Amount and Par Value** .
      The
      series of preferred stock, par value $.0001 per share (“Preferred Stock”)
      consisting of five million (5,000,000 shares) shall be designated as the
      Company’s Series A Convertible Preferred Stock (the “ Series
      A Preferred Stock ”)
      and
      the number of shares so designated shall be (which shall not be subject to
      increase without the consent of all of the holders of 75% of the then
      outstanding shares of Series A Preferred Stock (each a “ Holder ”
and
      collectively, the “ Holders ”)).
      In
      the event of the conversion of shares of Series A Preferred Stock into this
      Company’s Common Stock, pursuant to Section 6 hereof, or in the event that the
      Company shall otherwise acquire and cancel any shares of Series A Preferred
      Stock, the shares of Series A Preferred Stock so converted or otherwise acquired
      and canceled shall have the status of authorized but unissued shares of
      preferred stock, without designation as to series until such stock is once
      more
      designated as part of a particular Series by the Company’s Board of Directors.
      In addition, if the Company shall not issue the maximum number of shares of
      Series A Preferred Stock, the Company may, from time to time, by resolution
      of
      the Board of Directors and the approval of the holders of a majority of the
      outstanding shares of Series A Preferred Stock, reduce the number of shares
      of
      Series A Preferred Stock authorized, provided, that no such reduction shall
      reduce the number of authorized shares to a number which is less than the number
      of shares of Series A Preferred Stock then issued or reserved for issuance.
      The
      number of shares by which the Series A Preferred Stock is reduced shall have
      the
      status of authorized but unissued shares of Preferred Stock, without designation
      as to series, until such stock is once more designated as part of a particular
      Series by the Company’s Board of Directors. The Board of Directors shall cause
      to be filed with the Secretary of State of the State of Delaware such
      certificate as shall be necessary to reflect any reduction in the number of
      shares constituting the Series A Preferred Stock.




6




Section
      3 . **Dividends
      and Other Distributions** .
      No
      dividends shall be payable with respect to the Series A Preferred Stock. No
      dividends shall be payable with respect to the Common Stock while the Series
      A
      Preferred Stock is outstanding. The Common Stock shall not be redeemed while
      the
      Series A Preferred Stock is outstanding.




Section
      4 . **Voting
      Rights** .
      The
      Series A Preferred Stock shall have no voting rights. However, so long as any
      shares of Series A Preferred Stock are outstanding, the Company shall not,
      without the affirmative approval of the Holders of 75% of the shares of the
      Series A Preferred Stock then outstanding, (a) alter or change adversely the
      powers, preferences or rights given to the Series A Preferred Stock or alter
      or
      amend this Certificate of Designation, (b) authorize or create any class of
      stock ranking as to dividends or distribution of assets upon a Liquidation
      (as
      defined in Section 5) senior to or otherwise pari passu with the Series A
      Preferred Stock, or any of preferred stock possessing greater voting rights
      or
      the right to convert at a more favorable price than the Series A Preferred
      Stock, (c) amend its certificate of incorporation or other charter documents
      in
      breach of any of the provisions hereof, (d) increase the authorized number
      of
      shares of Series A Preferred Stock, or (e) enter into any agreement with respect
      to the foregoing. The holders of the Series A Preferred Stock will not be
      entitled to vote as a class with respect to the increase or decrease in the
      number of authorized shares of preferred stock; provided, however, that the
      provisions of Section 6(c) of this Certificate of Designation may not be amended
      or waived.




Section
      5 . **Liquidation** .
      Upon
      any liquidation, dissolution or winding-up of the Company, whether voluntary
      or
      involuntary (a “ Liquidation ”),
      the
      Holders shall be entitled to receive out of the assets of the Company, whether
      such assets are capital or surplus, for each share of Series A Preferred Stock
      an amount equal to one and 25/100 dollars ($1.25), which amount is referred
      to
      as the “ Liquidation
      Value ,”
before
      any distribution or payment shall be made to the holders of any Junior
      Securities and after any distributions or payments made to holders of any class
      or series of securities which are senior to the Series A Preferred Stock upon
      voluntary or involuntary liquidation, dissolution or winding up, and if the
      assets of the Company shall be insufficient to pay in full such amounts, then
      the entire assets to be distributed to the Holders shall be distributed among
      the Holders ratably in accordance with the respective amounts that would be
      payable on such shares if all amounts payable thereon were paid in full. In
      the
      event the assets of the Company available for distribution to the holders of
      shares of Series A Preferred Stock upon dissolution, liquidation or winding
      up
      of the Company, whether voluntary or involuntary, shall be insufficient to
      pay
      in full all amounts to which such holders are entitled pursuant to Section
      5, no
      such distribution shall be made on account of any shares of any other class
      or
      series of capital stock of the Company ranking on a parity with the shares
      of
      Series A Preferred Stock upon such dissolution, liquidation or winding up unless
      proportionate distributive amounts shall be paid on account of the shares of
      Series A Preferred Stock, ratably, in proportion to the full distributable
      amounts for which holders of all such parity shares are respectively entitled
      upon such dissolution, liquidation or winding up. At the election of a Holder
      made by written notice delivered to the Company at least two (2) business days
      prior to the effective date of the subject transaction, as to the shares of
      Series A Preferred Stock held by such Holder, a Fundamental Transaction
      (excluding for purposes of this Section 5 any Fundamental Transaction described
      in Section 7(f)(iv)(A) or 7(f)(iv)(B)) or Change of Control shall be treated
      as
      a Liquidation as to such Holder.




7




Section
      6. **Conversion** .




a)  Conversions
      at Option of Holder .
      Each
      share of Series A Preferred Stock shall be initially convertible (subject to
      the
      limitations set forth in Section 6(c)), into one (1) share of Common Stock
      (as
      adjusted as provided below, the “ Conversion
      Ratio ”)
      at the
      option of the Holders, at any time and from time to time from and after the
      Original Issue Date. Holders shall effect conversions by providing the Company
      with the form of conversion notice attached hereto as Annex
      A (a
“ Notice
      of Conversion ”)
      as
      fully and originally executed by the Holder, together with the delivery by
      the
      Holder to the Company of the stock certificate(s) representing the number of
      shares of Series A Preferred Stock so converted, with such stock certificates
      being duly endorsed in full for transfer to the Company or with an applicable
      stock power duly executed by the Holder in the manner and form as deemed
      reasonable by the transfer agent of the Common Stock. Each Notice of Conversion
      shall specify the number of shares of Series A Preferred Stock to be converted,
      the number of shares of Series A Preferred Stock owned prior to the conversion
      at issue, the number of shares of Series A Preferred Stock owned subsequent
      to
      the conversion at issue, the stock certificate number and the shares of Series
      A
      Preferred Stock represented thereby which are accompanying the Notice of
      Conversion, and the date on which such conversion is to be effected, which
      date
      may not be prior to the date the Holder delivers such Notice of Conversion
      and
      the applicable stock certificates to the Company by overnight delivery service
      (the “ Conversion
      Date ”).
      If no
      Conversion Date is specified in a Notice of Conversion, the Conversion Date
      shall be the Trading Day immediately following the date that such Notice of
      Conversion and applicable stock certificates are received by the Company. The
      calculations and entries set forth in the Notice of Conversion shall control
      in
      the absence of manifest or mathematical error. Shares of Series A Preferred
      Stock converted into Common Stock in accordance with the terms hereof shall
      be
      canceled and may not be reissued. The Conversion Price of the Series A Preferred
      Stock shall be equal to one and 25/100 dollars ($1.25) per share. If the initial
      Conversion Price is adjusted pursuant to Section 7 or as otherwise provided
      herein, the Conversion Ratio shall likewise be adjusted and the new Conversion
      Ratio shall equal the Liquidation Value divided by the new Conversion Price.
      Thereafter, subject to any further adjustments in the Conversion Price, each
      share of Series A Preferred Stock shall be initially convertible into that
      number of shares of Common Stock equal to the new Conversion Ratio.




b)  Automatic
      Conversion Upon Change of Control .
      Subject
      to Section 5, all of the outstanding shares of Series A Preferred Stock shall
      be
      automatically converted into the Conversion Shares upon the close of business
      on
      the business day immediately preceding the date fixed for consummation of any
      transaction resulting in a Change of Control of the Company (an “Automatic
      Conversion Event”). A “Change in Control” means a consolidation or merger of the
      Company with or into another company or entity in which the Company is not
      the
      surviving entity or the sale of all or substantially all of the assets of the
      Company to another company or entity not controlled by the then existing
      stockholders of the Company in a transaction or series of transactions. The
      Company shall not be obligated to issue certificates evidencing the Conversion
      Shares unless certificates evidencing the shares of Series A Preferred Stock
      so
      converted are either delivered to the Company or its transfer agent or the
      holder notifies the Company or its transfer agent in writing that such
      certificates have been lost, stolen, or destroyed and executes an agreement
      satisfactory to the Company to indemnify the Company from any loss incurred
      by
      it in connection therewith. Upon the conversion of the Series A Preferred Stock
      pursuant to this Section 6(b), the Company shall promptly send written notice
      thereof, by hand delivery or by overnight delivery, to the holder of record
      of
      all of the Series A Preferred Stock at its address then shown on the records
      of
      the Company, which notice shall state that certificates evidencing shares of
      Series A Preferred Stock must be surrendered at the office of the Company (or
      of
      its transfer agent for the Common Stock, if applicable).




8




c)  Beneficial
      Ownership Limitation .
      Except
      as provided in Section 6(b) of this Statement of Designation, which shall apply
      as stated therein if an Automatic Conversion Event shall occur, the Company
      shall not effect any conversion of the Series A Preferred Stock, and the Holder
      shall not have the right to convert any portion of the Series A Preferred Stock
      to the extent that after giving effect to such conversion, the Holder (together
      with the Holder’s affiliates), as set forth on the applicable Notice of
      Conversion, would beneficially own in excess of 4.9% of the number of shares
      of
      the Common Stock outstanding immediately after giving effect to such
      conversion.  For purposes of the foregoing sentence, the number of shares
      of Common Stock beneficially owned by the Holder and its affiliates shall
      include the number of shares of Common Stock issuable upon conversion of the
      Series A Preferred Stock with respect to which the determination of such
      sentence is being made, but shall exclude the number of shares of Common Stock
      which would be issuable upon (A) conversion of the remaining, non-converted
      shares of Series A Preferred Stock beneficially owned by the Holder or any
      of
      its affiliates, so long as such shares of Series A Preferred Stock are not
      convertible within sixty (60) days from the date of such determination, and
      (B)
      exercise or conversion of the unexercised or non-converted portion of any other
      securities of the Company (including the Warrants) subject to a limitation
      on
      conversion or exercise analogous to the limitation contained herein beneficially
      owned by the Holder or any of its affiliates, so long as such other securities
      of the Company are not exercisable nor convertible within sixty (60) days from
      the date of such determination.  For purposes of this Section 6(c), in
      determining the number of outstanding shares of Common Stock, the Holder may
      rely on the number of outstanding shares of Common Stock as reflected in the
      most recent of the following: (A) the Company’s most recent quarterly reports,
      Form 10-Q, Form 10-QSB, Annual Reports, Form 10-K, or Form 10-KSB, as the case
      may be, as filed with the Commission under the Exchange Act (B) a more recent
      public announcement by the Company or (C) any other written notice by the
      Company or the Company’s transfer agent setting forth the number of shares of
      Common Stock outstanding.  Upon the written or oral request of the Holder,
      the Company shall within two (2) Trading Days confirm orally and in writing
      to
      the Holder the number of shares of Common Stock then outstanding.  In any
      case, the number of outstanding shares of Common Stock shall be determined
      after
      giving effect to the conversion or exercise of securities of the Company,
      including the Series A Preferred Stock, by the Holder or its affiliates since
      the date as of which such number of outstanding shares of Common Stock was
      publicly reported by the Company. For purposes of this Section 6(c), beneficial
      ownership shall be calculated in accordance with Section 13(d) of the Exchange
      Act. This Section 6(c) may be not be waived or amended.




d)  Mechanics
      of Conversion




i.  Delivery
      of Certificate Upon Conversion .
      Except
      as otherwise set forth herein, not later than three Trading Days after each
      Conversion Date (the “ Share
      Delivery Date ”),
      the
      Company shall deliver to the Holder (A) a certificate or certificates which,
      after the Effective Date, shall be free of restrictive legends and trading
      restrictions (other than those required by the Purchase Agreement) representing
      the number of shares of Common Stock being acquired upon the conversion of
      shares of Series A Preferred Stock, and (B) a bank check in the amount of
      accrued and unpaid dividends (if the Company has elected or is required to
      pay
      accrued dividends in cash). After the Effective Date, the Company shall, upon
      request of the Holder, deliver any certificate or certificates required to
      be
      delivered by the Company under this Section electronically through the
      Depository Trust Company or another established clearing Company performing
      similar functions if the Company’s transfer agent has the ability to deliver
      shares of Common Stock in such manner. If in the case of any Notice of
      Conversion such certificate or certificates are not delivered to or as directed
      by the applicable Holder by the third Trading Day after the Conversion Date,
      the
      Holder shall be entitled to elect by written notice to the Company at any time
      on or before its receipt of such certificate or certificates thereafter, to
      rescind such conversion, in which event the Company shall immediately return
      the
      certificates representing the shares of Series A Preferred Stock tendered for
      conversion.




9




ii.  Obligation
      Absolute; Partial Liquidated Damages .
      The
      Company’s obligations to issue and deliver the Conversion Shares upon conversion
      of Series A Preferred Stock in accordance with the terms hereof are absolute
      and
      unconditional, irrespective of any action or inaction by the Holder to enforce
      the same, any waiver or consent with respect to any provision hereof, the
      recovery of any judgment against any Person or any action to enforce the same,
      or any setoff, counterclaim, recoupment, limitation or termination, or any
      breach or alleged breach by the Holder or any other Person of any obligation
      to
      the Company or any violation or alleged violation of law by the Holder or any
      other person, and irrespective of any other circumstance which might otherwise
      limit such obligation of the Company to the Holder in connection with the
      issuance of such Conversion Shares. In the event a Holder shall elect to convert
      any or all of its Series A Preferred Stock, the Company may not refuse
      conversion based on any claim that such Holder or any one associated or
      affiliated with the Holder of has been engaged in any violation of law,
      agreement or for any other reason (other than the inability of the Company
      to
      issue shares of Common Stock as a result of the limitation set forth in Section
      6(c) hereof) unless, an injunction from a court, on notice, restraining and
      or
      enjoining conversion of all or part of this Series A Preferred Stock shall
      have
      been sought and obtained and the Company posts a surety bond for the benefit
      of
      the Holder in the amount of 150% of the Conversion Value of Series A Preferred
      Stock outstanding, which is subject to the injunction, which bond shall remain
      in effect until the completion of arbitration/litigation of the dispute and
      the
      proceeds of which shall be payable to such Holder to the extent it obtains
      judgment. In the absence of an injunction precluding the same, the Company
      shall
      issue Conversion Shares or, if applicable, cash, upon a properly noticed
      conversion. If the Company fails to deliver to the Holder such certificate
      or
      certificates pursuant to Section 6(d)(i) within two Trading Days of the Share
      Delivery Date applicable to such conversion, the Company shall pay to such
      Holder, in cash, as liquidated damages and not as a penalty, for each $5,000
      of
      Conversion Value of Series A Preferred Stock being converted, $50 per Trading
      Day (increasing to $100 per Trading Day after three (3) Trading Days and
      increasing to $200 per Trading Day six (6) Trading Days after such damages
      begin
      to accrue) for each Trading Day after the Share Delivery Date until such
      certificates are delivered. Nothing herein shall limit a Holder’s right to
      pursue actual damages for the Company’s failure to deliver certificates
      representing shares of Common Stock upon conversion within the period specified
      herein and such Holder shall have the right to pursue all remedies available
      to
      it hereunder, at law or in equity including, without limitation, a decree of
      specific performance and/or injunctive relief.




iii.  Compensation
      for Buy-In on Failure to Timely Deliver Certificates Upon
      Conversion .
      If the
      Company fails to deliver to the Holder such certificate or certificates pursuant
      to Section 6(d)(i) by a Share Delivery Date, and if after such Share Delivery
      Date the Holder purchases (in an open market transaction or otherwise) Common
      Stock to deliver in satisfaction of a sale by such Holder of the Conversion
      Shares which the Holder was entitled to receive upon the conversion relating
      to
      such Share Delivery Date (a “ Buy-In ”),
      then
      the Company shall pay in cash to the Holder the amount by which (x) the Holder’s
      total purchase price (including brokerage commissions, if any) for the Common
      Stock so purchased exceeds (y) the product of (1) the aggregate number of shares
      of Common Stock that such Holder was entitled to receive from the conversion
      at
      issue multiplied by (2) the price at which the sell order giving rise to such
      purchase obligation was executed. For example, if the Holder purchases Common
      Stock having a total purchase price of $11,000 to cover a Buy-In with respect
      to
      an attempted conversion of shares of Series A Preferred Stock with respect
      to
      which the aggregate sale price giving rise to such purchase obligation is
      $10,000, under clause (A) of the immediately preceding sentence the Company
      shall be required to pay the Holder $1,000. The Holder shall provide the Company
      written notice indicating the amounts payable to the Holder in respect of the
      Buy-In, together with applicable confirmations and other evidence reasonably
      requested by the Company. Nothing herein shall limit a Holder’s right to pursue
      any other remedies available to it hereunder, at law or in equity including,
      without limitation, a decree of specific performance and/or injunctive relief
      with respect to the Company’s failure to timely deliver certificates
      representing shares of Common Stock upon conversion of the shares of Series
      A
      Preferred Stock as required pursuant to the terms hereof.




10




iv.  Reservation
      of Shares Issuable Upon Conversion .
      The
      Company covenants that it will at all times reserve and keep available out
      of
      its authorized and unissued shares of Common Stock solely for the purpose of
      issuance upon conversion of the Series A Preferred Stock, each as herein
      provided, free from preemptive rights or any other actual contingent purchase
      rights of persons other than the Holders, not less than such number of shares
      of
      the Common Stock as shall (subject to any additional requirements of the Company
      as to reservation of such shares set forth in the Purchase Agreement) be
      issuable (taking into account the adjustments and restrictions of Section 7)
      upon the conversion of all outstanding shares of Series A Preferred Stock.
      The
      Company covenants that all shares of Common Stock that shall be so issuable
      shall, upon issue, be duly and validly authorized, issued and fully paid,
      nonassessable and, if the Conversion Shares Registration Statement is then
      effective under the Securities Act, registered for public sale in accordance
      with such Conversion Shares Registration Statement.




v.  Fractional
      Shares .
      Upon a
      conversion hereunder, the Company shall not be required to issue stock
      certificates representing fractions of shares of the Common Stock. All
      fractional shares shall be carried forward and any fractional shares which
      remain after a Holder converts all of his or her Series A Preferred Stock shall
      be dropped and eliminated.




vi.  Transfer
      Taxes .
      The
      issuance of certificates for shares of the Common Stock on conversion of the
      Series A Preferred Stock shall be made without charge to the Holders thereof
      for
      any documentary stamp or similar taxes that may be payable in respect of the
      issue or delivery of such certificate, provided that the Company shall not
      be
      required to pay any tax that may be payable in respect of any transfer involved
      in the issuance and delivery of any such certificate upon conversion in a name
      other than that of the Holder of such shares of Series A Preferred Stock so
      converted and the Company shall not be required to issue or deliver such
      certificates unless or until the person or persons requesting the issuance
      thereof shall have paid to the Company the amount of such tax or shall have
      established to the satisfaction of the Company that such tax has been
      paid.




vii.  Absolute
      Obligation .
      Except
      as expressly provided herein, no provision of this Certificate of Designation
      shall alter or impair the obligation of the Company, which is absolute and
      unconditional, to pay the liquidated damages (if any) on, the shares of Series
      A
      Preferred Stock at the time, place, and rate, and in the coin or currency,
      herein prescribed.




11




Section
      7 .  **Certain
      Adjustments** .




a)  Stock
      Dividends and Stock Splits .
      If the
      Company, at any time while the Series A Preferred Stock is outstanding: (A)
      shall pay a stock dividend or otherwise make a distribution or distributions
      on
      shares of its Common Stock or any other equity or equity equivalent securities
      payable in shares of Common Stock (which, for avoidance of doubt, shall not
      include any shares of Common Stock issued by the Company pursuant to this Series
      A Preferred Stock), (B) subdivide outstanding shares of Common Stock into a
      larger number of shares, (C) combine (including by way of reverse stock split)
      outstanding shares of Common Stock into a smaller number of shares, or (D)
      issue
      by reclassification of shares of the Common Stock any shares of capital stock
      of
      the Company, then the Conversion Value shall be multiplied by a fraction of
      which the numerator shall be the number of shares of Common Stock (excluding
      treasury shares, if any) outstanding before such event and of which the
      denominator shall be the number of shares of Common Stock outstanding after
      such
      event. Any adjustment made pursuant to this Section shall become effective
      immediately after the record date for the determination of stockholders entitled
      to receive such dividend or distribution and shall become effective immediately
      after the effective date in the case of a subdivision, combination or
      re-classification.




b)  Price
      Adjustment . U ntil
      such
      time as the Investors hold no Securities, except for (i) Exempt Issuances,
      (ii) issuances
      covered by Sections 7(a), 7(c) and 7(d) hereof or (iii) an issuance of Common
      Stock upon exercise or upon conversion of warrants, options or other convertible
      securities for which an adjustment has already been made pursuant to this
      Section 7 ,
      as to
      all of which this Section 7(b) does not apply, if the Company closes on the
      sale
      or issuance of Common Stock at a price, or warrants, options, convertible debt
      or equity securities with a exercise price per share or exercise price per
      share
      which is less than the Conversion Price then in effect (such lower sales price,
      conversion or exercise price, as the case may be, being referred to as the
      “Lower Price”), the Conversion Price in effect from and after the date of such
      transaction shall be reduced to the Lower Price. For purpose of determining
      the
      exercise price of warrants issued by the Company, the price, if any, paid per
      share for the warrants shall be added to the exercise price of the
      warrants. The
“Conversion Price” shall mean the price paid for one share of Preferred Stock
      divided by the number of shares of Common Stock issuable upon conversion of
      one
      share of Preferred Stock. The “Conversion Rate” is the number of shares of
      Common Stock issuable upon conversion of one (1) share of Preferred Stock.
      The
      initial Conversion Rate is one (1) share of Common Stock per share of Preferred
      Stock and the initial Conversion Price is one and 25/100 dollars
      ($1.25).




c)  Conversion
      Price Adjustment Based on Pre-Tax Income Per Share and Adjusted
      EBITDA .




i.
            In
                the event Konzern’s Adjusted EBITDAfor
                the year ended December 31, 2005 is less than $5,650,000, then the
                Conversion Price shall be reduced by the percentage shortfall, up
                to a
                maximum of 30%. Thus, if Adjusted EBITDA for 2005 is $3,955,000 or
                less,
                the Conversion Price shall be reduced by 30%. As used in this Section
                7(c)(i), Adjusted EBITDA shall meanshall
                mean earnings before interest, taxes, depreciation and amortization,
                determined in accordance with U.S. GAAP, minus capital
                expenditures.Such
                reduction shall be made at the time the Company files its Form 10-KSB
                for
                the year ended March 31, 2006, and shall apply to the all of the
                Series A
                Preferred Stock which is outstanding on the date the Form 10-KSB
                is filed,
                or, if not filed on time, on the date that filing was
                required.




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ii.
            In
                addition to any adjustment pursuant to Section 7(c)(i) of this Warrant,
                in
                the event the Company’s fully-diluted Pre-Tax Income, as defined in
                Section 1.3.14 of the Purchase Agreement, Per Share for the year
                ended
                December 31, 2006 is between $0.40 and $0.20 (50% Decline) per share
                on a
                fully-diluted basis, then the conversion price shall be reduced
                proportionately by 0% if the fully-diluted Pre Tax Income is $0.40
                per
                share or greater and by 50% if the fully-diluted Pre Tax Income is
                $0.20
                per share (50% decrease) or less. For example if the earnings are
                $0.32
                per share (20% Decline) then the Conversion Price, as defined in
                the
                Certificate of Designation, shall be reduced by 20% of the then current
                conversion price per share. Fully-diluted Pre-Tax Income Per Share
                shall
                be based on the number of outstanding shares of Common Stock plus
                all
                shares of Common Stock issuable upon conversion of all outstanding
                convertible securities and upon exercise of all outstanding warrants,
                options and rights, regardless of whether (i) such shares would be
                included in determining diluted earnings per share and (ii) such
                convertible securities are subject to a restriction or limitation
                on
                exercise. Thus, for purpose of determining fully-diluted Pre-Tax
                Income
                Per Share, the 4.9% Limitation shall be disregarded. The adjustment
                to the
                conversion price shall be made within five business days of the audited
                numbers being reported to the SEC and shall apply to the all of the
                Series
                A Preferred Stock which is outstanding on the date the Form 10-KSB
                or Form
                10-K for the year ended December 31, 2006 is filed, or, if not filed
                on
                time, on the date that filing was
                required.




d)  Pro
      Rata Distributions .
      If the
      Company, at any time while Series A Preferred Stock is outstanding, shall
      distribute to all holders of Common Stock (and not to Holders) evidences of
      its
      indebtedness or assets or rights or warrants to subscribe for or purchase any
      security, then in each such case the Conversion Price shall be determined by
      multiplying such Conversion Price in effect immediately prior to the record
      date
      fixed for determination of stockholders entitled to receive such distribution
      by
      a fraction of which the denominator shall be the VWAP determined as of the
      record date mentioned above, and of which the numerator shall be such VWAP
      on
      such record date less the then fair market value at such record date of the
      portion of such assets or evidence of indebtedness so distributed applicable
      to
      one outstanding share of the Common Stock as determined by the Board of
      Directors in good faith. In either case the adjustments shall be described
      in a
      statement provided to the Holders of the portion of assets or evidences of
      indebtedness so distributed or such subscription rights applicable to one share
      of Common Stock. Such adjustment shall be made whenever any such distribution
      is
      made and shall become effective immediately after the record date mentioned
      above.




e)  Calculations .
      All
      calculations under this Section 7 shall be made to the nearest cent or the
      nearest 1/100th of a share, as the case may be. The number of shares of Common
      Stock outstanding at any given time shall not include shares owned or held
      by or
      for the account of the Company or any of its subsidiaries. For purposes of
      this
      Section 7, the number of shares of Common Stock deemed to be issued and
      outstanding as of a given date shall be the sum of the number of shares of
      Common Stock (excluding treasury shares and shares owned by subsidiaries, if
      any) actually issued and outstanding.




f)  Notice
      to Holders .




i.  Adjustment
      to Conversion Price .
      Whenever the Conversion Price is adjusted pursuant to any of this Section 7,
      the
      Company shall promptly mail to each Holder a notice setting forth the Conversion
      Price after such adjustment and setting forth a brief statement of the facts
      requiring such adjustment. If the Company issues a variable rate security,
      despite the prohibition thereon in the Purchase Agreement, the Company shall
      be
      deemed to have issued Common Stock or Common Stock Equivalents at the lowest
      possible conversion or exercise price at which such securities may be converted
      or exercised in the case of a Variable Rate Transaction (as defined in the
      Purchase Agreement), or the lowest possible adjustment price in the case of
      an
      MFN Transaction (as defined in the Purchase Agreement).




13




ii.  Notices
      of Other Events .
      If (A)
      the Company shall declare a dividend (or any other distribution) on the Common
      Stock; (B) the Company shall declare a redemption of the Common Stock; (C)
      the
      Company shall authorize the granting to all holders of the Common Stock rights
      or warrants to subscribe for or purchase any shares of capital stock of any
      class or of any rights; (D) the approval of any stockholders of the Company
      shall be required in connection with any reclassification of the Common Stock
      or
      any Fundamental Transaction, (E) the
      Company shall authorize the voluntary or involuntary dissolution, liquidation
      or
      winding up of the affairs of the Company; then in each case, the Company shall
      cause to be filed at each office or agency maintained for the purpose of
      conversion of the Series A Preferred Stock, and shall cause to be mailed
      to
      the Holders at their last addresses as they shall appear upon the stock
      books of
      the
      Company, at least 30 calendar days prior to the applicable record or effective
      date hereinafter specified, a notice stating (x)
      the
      date on which a record is to be taken for the purpose of such dividend,
      distribution, redemption, rights or warrants, or if a record is not to be taken,
      the date as of which the holders of the Common Stock of record to be entitled
      to
      such dividend, distributions, redemption, rights or warrants are to be
      determined or (y) the date on which such reclassification is expected to become
      effective or close, and the date as of which it is expected that holders of
      the
      Common Stock of record shall be entitled to exchange their shares of the Common
      Stock for securities, cash or other property deliverable upon such
      reclassification or Fundamental Transaction; provided ,
      that
      the failure to mail such notice or any defect therein or in the mailing thereof
      shall not affect the validity of the corporate action required to be specified
      in such notice.




iii.  Exempt
      Issuance .
      Notwithstanding the foregoing, no adjustment in the Conversion Price will be
      made in respect of an Exempt Issuance.




iv.  Fundamental
      Transaction .
      If, at
      any time while this Series A Preferred Stock is outstanding, (A) the Company
      effects any merger or consolidation of the Company with or into another Person,
      (B) the Company effects any sale of all or substantially all of its assets
      in
      one or a series of related transactions, (C) any tender offer or exchange offer
      (whether by the Company or another Person) is completed pursuant to which
      holders of Common Stock are permitted to tender or exchange their shares for
      other securities, cash or property, or (D) the Company effects any
      reclassification of the Common Stock or any compulsory share exchange pursuant
      to which the Common Stock is effectively converted into or exchanged for other
      securities, cash or property (in any such case, a “ Fundamental
      Transaction ”),
      then
      upon any subsequent conversion of this Series A Preferred Stock, the Holder
      shall have the right to receive, for each Conversion Share that would have
      been
      issuable upon such conversion absent such Fundamental Transaction, the same
      kind
      and amount of securities, cash or property as it would have been entitled to
      receive upon the occurrence of such Fundamental Transaction if it had been,
      immediately prior to such Fundamental Transaction, the holder of one share
      of
      Common Stock (the “ Alternate
      Consideration ”).
      For
      purposes of any such conversion, the determination of the Conversion Price
      shall
      be appropriately adjusted to apply to such Alternate Consideration based on
      the
      amount of Alternate Consideration issuable in respect of one share of Common
      Stock in such Fundamental Transaction, and the Company shall apportion the
      Conversion Price among the Alternate Consideration in a reasonable manner
      reflecting the relative value of any different components of the Alternate
      Consideration. If holders of Common Stock are given any choice as to the
      securities, cash or property to be received in a Fundamental Transaction, then
      the Holder shall be given the same choice as to the Alternate Consideration
      it
      receives upon any conversion of this Series A Preferred Stock following such
      Fundamental Transaction. To the extent necessary to effectuate the foregoing
      provisions, any successor to the Company or surviving entity in such Fundamental
      Transaction shall file a new Certificate of Designations with the same terms
      and
      conditions and issue to the Holder new preferred stock consistent with the
      foregoing provisions and evidencing the Holder’s right to convert such preferred
      stock into Alternate Consideration. The terms of any agreement pursuant to
      which
      a Fundamental Transaction is effected shall include terms requiring any such
      successor or surviving entity to comply with the provisions of this paragraph
      (f)(iv) and insuring that this Series A Preferred Stock (or any such replacement
      security) will be similarly adjusted upon any subsequent transaction analogous
      to a Fundamental Transaction. Notwithstanding the foregoing or any other
      provisions of this Certificate of Designations, in the event that the agreement
      relating to a Fundamental Transaction provides for the conversion or exchange
      of
      the Series A Preferred Stock into equity or debt securities, cash or other
      consideration and the agreement is approved by the holders of a majority of
      the.
      then-outstanding shares of Series A Preferred Stock, then the holders of the
      Series A Preferred Stock shall have only the rights set forth in such
      agreement.




14




Section
      8 .  Miscellaneous .




a)  Notices .
      Any and
      all notices or other communications or deliveries to be provided by the Holders
      hereunder, including, without limitation, any Notice of Conversion, shall be
      in
      writing and delivered personally, by facsimile, sent by a nationally recognized
      overnight courier service, addressed to the Company, at its principal address
      as
      reflected in its most recent filing with the Commission. Any and all notices
      or
      other communications or deliveries to be provided by the Company hereunder
      shall
      be in writing and delivered personally, by facsimile, sent by a nationally
      recognized overnight courier service addressed to each Holder at the facsimile
      telephone number or address of such Holder appearing on the books of the
      Company, or if no such facsimile telephone number or address appears, at the
      principal place of business of the Holder. Any notice or other communication
      or
      deliveries hereunder shall be deemed given when received, and any notice by
      telecopier shall be effective if confirmation of receipt is given by the party
      to whom the notice is transmitted.




b)  Lost
      or Mutilated Preferred Stock Certificate .
      If a
      Holder’s Series A Preferred Stock certificate shall be mutilated, lost, stolen
      or destroyed, the Company shall execute and deliver, in exchange and
      substitution for and upon cancellation of a mutilated certificate, or in lieu
      of
      or in substitution for a lost, stolen or destroyed certificate, a new
      certificate for the shares of Series A Preferred Stock so mutilated, lost,
      stolen or destroyed but only upon receipt of evidence of such loss, theft or
      destruction of such certificate, and of the ownership thereof, and indemnity,
      if
      requested, all reasonably satisfactory to the Company.




c)  Next
      Business Day .
      Whenever any payment or other obligation hereunder shall be due on a day other
      than a Business Day, such payment shall be made on the next succeeding Business
      Day.




15




d)  Headings .
      The
      headings contained herein are for convenience only, do not constitute a part
      of
      this Certificate of Designations and shall not be deemed to limit or affect
      any
      of the provisions hereof.




e)  Rank
      of Series .
      For
      purposes of this Certificate of Designation, any stock of any series or class
      of
      the Company shall be deemed to rank





(i)
      prior
      to the shares of Series A Preferred Stock, as to dividends or upon liquidation,
      dissolution or winding up, as the case may be, if the holders of such class
      or
      classes shall be entitled to the receipt of dividends or of amounts
      distributable upon dissolution, liquidation or winding up of the Company, as
      the
      case may be, in preference or priority to the holders of shares of Series A
      Preferred Stock;





(ii)
      on a
      parity with shares of Series A Preferred Stock, as to dividends or upon
      liquidation, dissolution or winding up, as the case may be, whether or not
      the
      dividend rates, dividend payment dates or redemption or liquidation prices
      per
      share or sinking fund provisions, if any, be different from those of Series
      A
      Preferred Stock, if the holders of such stock shall be entitled to the receipt
      of dividends or of amounts distributable upon dissolution, liquidation or
      winding up of the Company, as the case may be, in proportion to their respective
      dividend rates or liquidation prices, without preference or priority, one over
      the other, as between the holders of such stock and the holders of shares of
      Series A Preferred Stock; and





(iii)
      junior to shares of Series A Preferred Stock as to dividends or upon
      liquidation, dissolution or winding up, as the case may be, if such class shall
      be Common Stock or if the holders of shares of Series A Preferred Stock shall
      be
      entitled to receipt of dividends or of amounts distributable upon dissolution,
      liquidation or winding up of the Company, as the case may be, in preference
      or
      priority to the holders of shares of such class or classes.





f)  Amendment .
      This
      Certificate of Designation may be amended with the approval of the Company’s
      board of directors and the consent of the holders of seventy-five percent (75%)
      of the outstanding shares of Series A Preferred Stock, except that the
      conversion limitation set forth in Section 6.2(b) shall not be
      amended.




16




**ANNEX
      A**




**NOTICE
      OF CONVERSION**




(TO
      BE
      EXECUTED BY THE REGISTERED HOLDER IN ORDER TO CONVERT SHARES OF SERIES A
      PREFERRED STOCK)




The
      undersigned hereby elects to convert the number of shares of Series A
      Convertible Preferred Stock indicated below, into shares of common stock, par
      value $0.0001 per share (the “ Common
      Stock ”),
      of
      Lounsberry Holdings III, Inc., a Delaware corporation (the “ Company ”),
      according to the conditions hereof, as of the date written below. If shares
      are
      to be issued in the name of a person other than undersigned, the undersigned
      will pay all transfer taxes payable with respect thereto and is delivering
      herewith such certificates and opinions as reasonably requested by the Company
      in accordance therewith. No fee will be charged to the Holder for any
      conversion, except for such transfer taxes, if any.




Conversion
      calculations:




Date
                to Effect Conversion:
                ________________________________________Number
                of shares of Common Stock owned prior to Conversion:
                _______________Number
                of shares of Series A Preferred Stock to be Converted:
                ________________Value
                of shares of Series A Preferred Stock to be Converted:
                ____________________Number
                of shares of Common Stock to be Issued:
                ___________________________Certificate
                Number of Series A Preferred Stock attached
                hereto:_________________Number
                of Shares of Series A Preferred Stock represented by attached
                certificate:_________Number
                of shares of Series A Preferred Stock subsequent to Conversion:
                ________________




[HOLDER]By:Name:
                _________________________________Title:
              __________________________________




17