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Exhibit 3.1

                           CERTIFICATE OF DESIGNATION

                                       OF

                             NEW VISUAL CORPORATION

         New Visual Corporation, a Utah corporation (the "Company"), hereby
certifies that the following resolution was adopted by the Board of Directors of
the Company as required by Section 16-10a-602 of the Utah Revised Business
Corporation Act (the "Act"). The resolution was adopted by Unanimous Written
Consent, dated as of April 10, 2002, pursuant to Section 16-10a-821 of the Act,
and the Articles of Incorporation and Bylaws of the Corporation. Shareholder
approval was not required. No shares of the Series A Junior Participating
Preferred Stock of the Company are outstanding.

         RESOLVED, that pursuant to the authority granted to and vested in the
Board of Directors of the Company in accordance with the provisions of the
Articles of Incorporation, as amended and restated (the "Articles of
Incorporation"), the Board of Directors hereby creates a series of Preferred
Stock, par value $0.01 per share (the "Preferred Stock"), of the Company and
hereby states the designation and number of shares, and fixes the relative
rights, preferences and limitations thereof as follows:

                            SERIES B PREFERRED STOCK:

         Section 1. DESIGNATION OF AMOUNT. The shares of such series shall be
designated as "Series B Preferred Stock" (the "Series B Preferred Stock") and
the number of shares constituting the authorized Series B Preferred Stock shall
be fixed at 4,000. Such number of shares may not be increased or decreased.

         Section 2.  DEFINITIONS. The following definitions shall apply:

                  "BOARD" shall mean the Board of Directors of the Company.

                  "BUSINESS DAY" shall mean any day excluding Saturday, Sunday
and any day which shall be in the State of California a legal holiday or a day
on which banking institutions are authorized by law to close.

                  "COMMITMENT DATE" shall mean the date immediately prior to the
date of original issuance of the Series B Preferred Stock.

                  "COMPANY" shall mean this corporation.

                  "COMMON STOCK" shall mean the Common Stock of the Company.

                  "FAIR MARKET VALUE PER SHARE" of a share of Common Stock shall
mean an amount determined as follows:

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                           (i) If the Common Stock is traded on a stock
                  exchange, an amount equal to the average of the daily closing
                  selling prices of the Common Stock on the stock exchange
                  reasonably determined by the Board of Directors to be the
                  primary market for the Common Stock over the ten (10) trading
                  day period ending on the date prior to the date of the event
                  giving rise to the need to determine such Fair Market Value,
                  as such prices are officially quoted in the composite tape of
                  transactions on such exchange;

                           (ii) If the Common Stock is traded over-the-counter,
                  an amount equal to the average of the daily closing selling
                  prices (or, if such information is not available, the average
                  of the daily closing bid and asked prices) of the Common Stock
                  over the ten (10) trading day period ending on the date prior
                  to the date of the event giving rise to the need to determine
                  such Fair Market Value, as such prices are reported by the
                  National Association of Securities Dealers through its NASDAQ
                  system or any successor system; and

                           (iii) If no determination can be made on the basis
                  set forth in either (i) or (ii) above, the Fair Market Value
                  Per Share shall be an amount determined in good faith by the
                  Board of Directors of the Company as of the date of the event
                  giving rise to the need for such determination; provided,
                  however, that in the event that the holders of a Majority of
                  the Series B Preferred Stock shall object to such
                  determination, such holders shall have the right within ten
                  (10) days of the date such determination is made by the Board
                  of Directors to notify the Board of Directors of their
                  objection and to designate an appraiser to make such
                  determination. Such appraiser shall be of recognized standing
                  and shall be reasonably acceptable to the Board of Directors.
                  All fees, expenses and costs of retaining such appraiser shall
                  be paid by the Series B Preferred holders objecting to the
                  determination by the Board of Directors. In the event that the
                  Board of Directors objects to the appraiser selected by the
                  holders of a Majority of the Series B Preferred Stock and the
                  parties cannot agree on an appraiser, the Company may, at its
                  own expense, select its own appraiser of recognized standing
                  and the two appraisers shall select a third, whose appraisal
                  shall be determinative. The cost of such third appraiser shall
                  be shared equally by the Company and the Series B Preferred
                  holders objecting to the determination by the Board of
                  Directors. In the event that the final appraised value,
                  determined as set forth above, shall be an amount which
                  exceeds by five percent (5%) or more the value as originally
                  determined by the Board of Directors, the Company shall
                  reimburse the Series B Preferred holders for any fees, costs
                  and expenses of appraiser(s) paid by such Series B Preferred
                  holders.

                  "FINANCING TRANSACTION" shall mean any transaction or series
of related transactions (with transactions consummated within a single period of
ninety (90) days or fewer presumed to be related), entered into by the Company,
which transaction or transactions are designed to provide cash financing to the
Company, including, without limitation, any loan or loans taken by the Company
or any issuance by the Company of its debt or equity securities (or options,

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warrants or rights to acquire the same) for cash, cash equivalents, marketable
securities or similar items intended to be reduced to cash or readily reducible
to cash or any combination of the foregoing.

                  "JUNIOR STOCK" shall mean the Common Stock, the Series A
Junior Participating Preferred Stock of the Company and any other class or
series of stock of the Company, whether presently outstanding or hereafter
issued, over which the Series B Preferred Stock has preference or priority in
the payment of dividends or the distribution of assets upon liquidation,
dissolution or winding up of the Company.

                  "LIQUIDATION PREFERENCE EQUIVALENT DISTRIBUTION" shall mean an
amount determined by multiplying the cash distribution (whether in the nature of
full or partial redemption, dividend or otherwise) to be paid to any other class
or series of Preferred Stock by a fraction: (i) the numerator of which shall be
the Preference Amount and (ii) the denominator of which shall be the amount per
share payable to such other class or series of Preferred Stock in the event of
any liquidation, dissolution or winding up of the Company, as provided in any
resolution of the Board fixing such preferential right for such class or series
of Preferred Stock.

                  "MAJORITY OF THE SERIES B PREFERRED STOCK" shall mean more
than 50% of the outstanding shares of Series B Preferred Stock.

                  "NON-OBJECTING HOLDER" shall mean any holder that does not
give a Notice of Objection pursuant to Section 5(g) hereof.

                  "QUALIFYING FINANCING TRANSACTION" shall mean a Financing
Transaction as a result of which the Company receives net cash proceeds, after
deducting all reasonable and customary transaction expenses, equal to or greater
than $15,000,000.

                  "SERIES B PREFERRED STOCK" shall mean the Series B Preferred
Stock of the Company.

                  "SIGNIFICANT CORPORATE TRANSACTION" shall mean any of the
following: (i) a merger, consolidation or reorganization of the Company with or
into another corporation or legal entity, or a tender offer or stock sale
transaction, as a result of which less than a majority of the combined voting
power of the securities of the legal entity resulting from such merger,
consolidation or reorganization, following the consummation thereof, is held in
the aggregate by the holders of Voting Stock of the Company immediately prior to
the consummation thereof; or (ii) a sale or other transfer by the Company of
all, or substantially all, of its assets to any legal entity (or license of
substantially all of the Company's intellectual property or other assets to
similar effect), the majority of the combined voting power of the securities of
which, as of the consummation of the transaction, is not held in the aggregate
by the holders of Voting Stock of the Company immediately prior to the
consummation of such transaction.

                  "SIZABLE FINANCING TRANSACTION" shall mean a Financing
Transaction as a result of which the Company receives net cash proceeds, after
deducting all reasonable and customary transaction expenses, equal to or greater
than $3,000,000, but less than $15,000,000.

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                  "SUBSIDIARY" shall mean any corporation a majority of the
Voting Stock of which is, at the time as of which any determination is being
made, owned by the Company either directly or through one or more Subsidiaries.

                  "VOTING STOCK" shall mean the Common Stock.

         Section 3.  DIVIDENDS.

                  (a) RIGHT TO DIVIDENDS. The holders of the then outstanding
Series B Preferred Stock shall be entitled to receive annual cash dividends
when, as and if declared by the Board, out of any funds legally available
therefor. Dividends on the Series B Preferred Stock shall not be cumulative.

                  (b) PRIORITY. Unless all declared dividends on the Series B
Preferred Stock shall have been paid, (1) no dividend whatsoever (other than a
dividend payable solely in Common Stock) shall be paid or declared, and no
distribution shall be made, on any Junior Stock, and (2) no shares of Junior
Stock shall be purchased, redeemed or acquired by the Company and no monies
shall be paid into or set aside or made available for a sinking fund for the
purchase, redemption or acquisition thereof; provided, however, that this
restriction shall not apply to the repurchase of up to an aggregate $1,000,000
of Common Stock in any twelve-month period from directors or employees of or
consultants or advisers to the Company or any Subsidiary pursuant to agreements
under which the Company has the option to repurchase such shares upon the
occurrence of certain events, including, without limitation, the termination of
employment by or service to the Company or any Subsidiary.

                  (c) ADDITIONAL DIVIDENDS ON COMMON STOCK. After declared
dividends on the Series B Preferred Stock shall have been paid or set apart, if
the Board shall elect to declare additional cash dividends on the Common Stock,
additional cash dividends shall also be declared on the Series B Preferred
Stock. Such additional dividends shall, in the aggregate, be equal to at least
the amount obtained by multiplying the aggregate dividend payable on Common
Stock by two (2). Each holder of shares of Series B Preferred Stock shall be
entitled to participate ratably in such additional dividends based upon the
number of shares of Series B Preferred Stock held.

                  (d) DIVIDENDS ON OTHER CLASSES OR SERIES OF PREFERRED STOCK.
In the event that the Company shall at any time pay any cash dividend or other
distribution solely to any other class or series of Preferred Stock of the
Company, including any such resulting from a redemption or other repurchase of
shares of such class or series of Preferred Stock, the Company shall declare and
pay or otherwise distribute a Liquidation Preference Equivalent Distribution to
the holders of the Series B Preferred Stock. In the event that the distribution
to holders of such other class or series of Preferred Stock was in respect of a
redemption or repurchase of their shares of Preferred Stock, the Liquidation
Preference Equivalent Distribution shall result in the redemption of such shares
of Series B Preferred Stock as may be redeemed thereby at a Redemption Price
(defined in Section 4 below) per share equal to the Preference Amount (defined
in Section 4 below). The Liquidation Preference Equivalent Distribution shall be
distributed ratably to the holders of Series B Preferred Stock based upon the
number of shares of Series B Preferred Stock held.

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         Section 4.  LIQUIDATION RIGHTS OF SERIES B PREFERRED STOCK.

                  (a) PREFERENCE. In the event of any liquidation, dissolution
or winding up of the Company, whether voluntary or involuntary, the holders of
shares of outstanding Series B Preferred Stock shall be entitled to be paid out
of the assets of the Company available for distribution to its shareholders,
whether such assets are capital, surplus, or earnings, before any payment or
declaration and setting apart for payment or any amount shall be made in respect
of the Junior Stock, an amount for each share of outstanding Series B Preferred
Stock held by each such holder equal to $1000 plus all declared and unpaid
dividends thereon (the "Preference Amount"). If upon any liquidation,
dissolution, or winding up of the Company, whether voluntary or involuntary, the
assets to be distributed to the holders of the Series B Preferred Stock shall be
insufficient to permit the payment to each such shareholder of the full
Preference Amount payable to it with respect to all shares of Series B Preferred
Stock held by such shareholder, then all of the assets of the Company to be
distributed shall be distributed ratably to the holders of the Series B
Preferred Stock on the basis of the number of shares of Series B Preferred Stock
held.

                  (b) REMAINING ASSETS. After the payment or distribution to
each holder of the Series B Preferred Stock of the full Preference Amount
payable to it with respect to all shares of Series B Preferred Stock held by
such shareholder, the holders of the Junior Stock then outstanding shall be
entitled to receive ratably all remaining assets of the Company to be
distributed.

                  (c) MERGER, ETC. Neither the merger nor the consolidation of
the Company, nor the sale, lease or conveyance of all or part of its property
and business as an entirety shall be deemed to be a liquidation, dissolution or
winding up of the affairs of the Company within the meaning of this Section.

          Section 5.  REDEMPTION.

                  (a) OPTION OF THE COMPANY. Upon fifteen (15) days prior
written notice, any or all of the shares of Series B Preferred Stock may be
redeemed at the option of the Company, expressed by resolution of the Board of
Directors, at any time, or from time to time, at a per share redemption price
(the "Redemption Price") equal to the Preference Amount. In case of the
redemption of less than all shares of Series B Preferred Stock at the time
outstanding, including any series of Preferred Stock ranking on a parity with
the Series B Preferred Stock, the shares to be redeemed shall be selected by the
Company pro rata.

                  (b) REDEMPTION IN THE EVENT OF A QUALIFYING FINANCING
TRANSACTION OR SIGNIFICANT CORPORATE TRANSACTION. Within ten (10) days following
the final closing of a Qualifying Financing Transaction and simultaneously with
the final closing or consummation date of a Significant Corporate Transaction,
all of the shares of Series B Preferred Stock held by each Non-Objecting Holder
shall be redeemed at a per share Redemption Price equal to the Preference
Amount.

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                  (c) PARTIAL REDEMPTION IN THE EVENT OF A SIZABLE FINANCING
TRANSACTION. Within ten (10) days following the final closing of a Sizable
Financing Transaction, a portion of the shares of Series B Preferred Stock held
by each Non-Objecting Holder shall be redeemed at a per share Redemption Price
equal to the Preference Amount. Each Non-Objecting Holder shall have that number
of shares of Series B Preferred Stock held by it redeemed as results from
multiplying the total number of shares of Series B Preferred Stock held by it by
a fraction, the numerator of which is the net cash proceeds received by the
Company as a result of the Sizable Financing Transaction and the denominator of
which is $15,000,000.

                  (d) QUARTERLY REDEMPTION AFTER MARCH 31, 2005. Commencing on
March 31, 2005, and on each June 30, September 30, December 31, and March 31
thereafter until December 31, 2006 (each such date, of which there will be
eight, is referred to as a "Quarterly Redemption Date" ) shares of Series B
Preferred Stock held by each Non-Objecting Holder shall be redeemed at a per
share Redemption Price equal to the Preference Amount. As of each of the eight
Quarterly Redemption Dates each such Non-Objecting Holder shall be entitled to
have redeemed the number of shares of Series B Preferred Stock (the "Redeemable
Shares") that results from multiplying the number of shares of Series B
Preferred Stock held by such holder as of such Quarterly Redemption Date by a
fraction, (i) the numerator of which shall be one and (ii) the denominator of
which shall be the number of Quarterly Redemption Dates remaining including the
Quarterly Redemption Date as of which the calculation is done. For example, for
the first Quarterly Redemption Date such fraction will be 1/8, for the second
Quarterly Redemption Date it shall be 1/7, for the third Quarterly Redemption
Date it shall be 1/6 and so forth until the final Quarterly Redemption Date when
it shall be 1/1. For purposes of calculating the number of Redeemable Shares
held by a holder, any shares which the Company has previously been required to
redeem pursuant to any provision of this Section 5, and with respect to which
the holder sent a Notice of Objection to the Company pursuant to paragraph (g)
below, shall be treated as already redeemed by the Company and shall not be
included within Redeemable Shares or treated as shares held by the holder for
purposes of any calculation. In the event that any Quarterly Redemption Date
shall not fall on a Business Day the next Business Day following the date which
would have been the Quarterly Redemption Date shall be the Quarterly Redemption
Date.

                  (e) [Reserved]

                  (f) NOTICE. Notice of a Company redemption pursuant to
paragraph 5(a) above, and of a required redemption pursuant to paragraphs 5(b),
5(c), or 5(d) above, shall be given by the Company by causing a notice of
redemption to be mailed to each holder of record of such shares to be redeemed
as of the redemption date, addressed to each such holder at his or her address
appearing on the books of the Company or given by him or her to the Company for
the purpose of notice, or if no such address appears or is given, at the place
where the principal office of the Company is located. Notice of a required
redemption pursuant to paragraphs 5(b) and 5(c) above shall be given as promptly
as possible, and in any event no later than the third Business Day following the
final closing of a Qualifying Financing Transaction or a Sizable Financing
Transaction, in the event such a transaction is consummated, and no later than
the fifteenth day prior to the proposed consummation of a Significant Corporate

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Transaction, in the event such a transaction is contemplated to occur, and at
least fifteen (15) days prior to the date fixed for redemption. Such notice
shall indicate that the relevant transaction has or is expected to occur and
state that the holder is entitled to redemption pursuant to paragraph 5(b) or
5(c) hereof, as applicable. Notice of a required redemption pursuant to
paragraph 5(d) above shall be given fifteen (15) days prior to each Quarterly
Redemption Date. All notices of redemption given by the Company pursuant to
paragraphs 5(a), 5(b), 5(c) and 5(d) hereof shall specify (i) the number of
shares of Series B Preferred Stock of such holder to be redeemed, (ii) the date
fixed for redemption, (iii) the Redemption Price, and (iv) the place and manner
of payment of the Redemption Price (including, if payment will be made available
pursuant to paragraph (i) below, a statement to that effect). Each notice of
redemption mailed pursuant to this paragraph 5(f) shall be deemed to be
delivered when deposited in the United States mail, addressed as set forth
above, with postage thereon prepaid and shall be deemed to be received upon the
earliest of (i) the date of actual receipt; (ii) five days following mailing; or
(iii) on the date stamped on the return receipt if sent by registered mail or
certified mail, with return receipt requested.

                  (g) NOTICE OF OBJECTION. Each holder of Series B Preferred
Stock that does not desire to have its shares of Series B Preferred Stock
redeemed pursuant to paragraphs 5(b) or 5(c) above (following the occurrence of
the relevant transaction specified therein), or pursuant to paragraph 5(d) above
on any Quarterly Redemption Date, shall be entitled to decline to have its
shares redeemed by mailing or forwarding by facsimile a written notice (the
"Notice of Objection") to the Company at the place where the principal office of
the Company is located. To be effective, such Notice of Objection must be
received by the Company (i) in the case of a redemption resulting from a
Qualifying Financing Transaction or a Sizable Financing Transaction, at least
five (5) Business Days prior to the date fixed for redemption (as set forth in
the Company's notice), (ii) in the case of redemption resulting from a
Significant Corporate Transaction, at least three (3) Business Days prior to the
date fixed for redemption (as set forth in the Company's notice) and (iii) in
the case of a redemption pursuant to paragraph 5 (d) above, at least five (5)
Business Days prior to the Quarterly Redemption Date. Following receipt of such
Notice of Objection, the shares of Series B Preferred Stock of such holder shall
no longer be considered scheduled for redemption and shall not be redeemed. Such
holder shall have no further right to require the redemption of such shares
pursuant to paragraph 5(d) hereof, and the Company shall be entitled to exclude
such shares from shares noticed for redemption in the future pursuant to such
paragraphs.

                  (h) TERMINATION OF RIGHTS. The Series B Preferred Stock
scheduled for redemption shall, as of the date fixed for redemption, no longer
be deemed to be outstanding for any purpose whatsoever, and all rights of the
holders of such shares in or with respect to the Company shall forthwith cease
and terminate, except only the right of the holders of such shares to receive
the Redemption Price of such shares upon surrender of the certificate or
certificates representing the shares to be redeemed. On or after the date fixed
for redemption and stated in the notice of redemption, each holder of Series B
Preferred Stock scheduled for redemption shall surrender his or her certificate
evidencing such shares to the Company at the place designated by the Company and
shall thereupon be entitled to receive payment of the Redemption Price therefor.
In case less than all the shares represented by any such surrendered certificate
are redeemed, a new certificate shall be issued representing the unredeemed
shares. If such notice of redemption shall have been duly given, and if on the
date fixed for redemption funds necessary for the redemption shall be available

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therefor, notwithstanding that the certificates evidencing any Series B
Preferred Stock so scheduled for redemption shall not have been surrendered, all
rights including dividends with respect to the shares so scheduled for
redemption and the right to transfer such shares on the books of the Company
shall forthwith after such date cease and terminate, except for the right of the
holders of record on the date fixed for redemption to receive the Redemption
Price, without interest, upon surrender of their certificates therefor.
Notwithstanding the foregoing, in the event that any holder that has properly
surrendered its certificates has not been paid the Redemption Price by the date
which is fifteen (15) days after the date of such proper surrender of such
certificates, such holder shall be entitled to be paid interest on the unpaid
amounts payable to it, from such date, at a rate equal to the sum of (i) the
Prime Rate, as published in the "Money Rates" section of THE WALL STREET
JOURNAL, SOUTHWEST EDITION, plus (ii) an additional three percent (3%) per
annum, but not less than 12% per annum nor greater than 18% per annum, until all
such amounts have been paid in full. The foregoing right to be paid interest
shall not prejudice any other rights or remedies such holder may have in the
event of late payment or nonpayment.

                  (i) FUND. If on or prior to any date fixed for redemption of
Series B Preferred Stock the Company deposits with any bank or trust company
having a capital surplus of at least $15,000,000, as a trust fund, a sum
sufficient to redeem, on the date fixed for redemption thereof, the shares
scheduled for redemption, with irrevocable instructions and authority to the
bank or trust company to pay, on and after the date fixed for redemption or
prior thereto, the Redemption Price of the shares to their respective holders
upon the surrender of their share certificates, then from and after the date
fixed for redemption the shares so scheduled shall be deemed to be redeemed. The
deposit shall be deemed to constitute full payment of the shares to their
holders and from and after the date of deposit the shares shall be deemed to be
no longer outstanding, and the holders thereof shall cease to be shareholders
with respect to such shares and shall have no rights with respect thereto except
the right to receive from the bank or trust company payment of the Redemption
Price of the shares, without interest, upon the surrender of their certificates
therefor and any existing right to convert such shares.

         Any monies deposited by the Company pursuant to the preceding paragraph
of this Section 5 and unclaimed at the end of five (5) years from the date fixed
for redemption shall be paid to the Company upon its request expressed in a
resolution of its Board of Directors, after which repayment the holders of the
shares so scheduled for redemption shall look only to the Company for the
payment of any lawful claim for such monies which holders of such shares may
have.

         Section 6. VOTING RIGHTS.

                   (a) NO VOTING RIGHTS. Except as otherwise required by law and
except as set forth in paragraph (c) below, holders of shares of Series B
Preferred Stock shall not be entitled to vote on any matter submitted to a vote
or consent of the stockholders of the Company, and shares of Series B Preferred
Stock shall not be counted in determining the number of shares necessary to
approve any matter requiring a vote of stockholders.

                  (b) VOTING WITH VOTING STOCK. Except as otherwise required by
law and except as set forth in paragraph (c) below, on any matter upon which the
holders of Series B Preferred Stock are entitled to vote, the holders of Series
B Preferred Stock and the holders of any other Voting Stock of the Company shall

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vote together as a single class and not as separate classes, and shares of
Series B Preferred Stock shall be entitled to the number of votes equal to the
number of full shares of Common Stock into which such shares of Series B
Preferred Stock could be converted, pursuant to the provisions of Section 7
hereof, at the record date for the determination of the shareholders entitled to
vote on such matters or, if no such record date is established, at the date such
vote is taken.

                  (c) SERIES VOTE. The affirmative consent of a Majority of the
Series B Preferred Stock, voting as a separate series, shall be required to
designate any series or class of preferred stock of the Company having a
preference prior to the Series B Preferred Stock upon any liquidation, or having
dividend rights prior in payment to the Series B Preferred Stock.

         Section 7. CONVERSION. The holders of the Series B Preferred Stock
shall have the following conversion rights:

                  (a) RIGHT TO CONVERT. Each share of Series B Preferred Stock
shall be convertible, at any time or from time to time, at the option of the
holder thereof, into fully paid and nonassessable shares of Common Stock.

                  (b) CONVERSION PRICE. Each share of the Series B Preferred
Stock shall be convertible into the number of shares of Common Stock which
results from dividing $1000 by the Conversion Price (as hereinafter defined) in
effect at the time of conversion for each share of Series B Preferred Stock
being converted. The price at which shares of Common Stock shall be deliverable
upon conversion of the Series B Preferred Stock (the "Conversion Price") shall
be:

                           (1) If the Fair Market Value Per Share of Common
                  Stock shall be an amount equal to or greater than the Floor
                  Amount (as defined below) and equal to or less than the
                  Ceiling Amount (as defined below), an amount equal to the Fair
                  Market Value Per Share;

                           (2) If the Fair Market Value Per Share of the Common
                  Stock shall be an amount less than the Floor Amount, the Floor
                  Amount; and

                           (3) If the Fair Market Value Per Share of the Common
                  Stock shall be an amount greater than the Ceiling Amount, the
                  Ceiling Amount.

                           (4) For purpose of this Section 7, the Floor Amount
                  shall be an amount equal to $0.34, subject to adjustment as
                  set forth in paragraphs (e) and (f) below, and the Ceiling
                  Amount shall be an amount equal to $4.00, subject to
                  adjustment as set forth in paragraphs (e) and (f) below. In
                  the event that the Company shall, at any time, issue any
                  Preferred Stock convertible into Common Stock of the Company
                  or any note, debt or other equity security convertible into
                  Common Stock of the Company, and the conversion price at which
                  such security is convertible into Common Stock is lower than
                  the then existing Floor Amount, the then existing Floor Amount
                  shall be reduced to an amount equal to such conversion price.

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                  (c) MECHANICS OF CONVERSION. Each holder of Series B Preferred
Stock who desires to convert the same into shares of Common Stock shall
surrender the certificate or certificates therefor, duly endorsed, at the office
of the Company or of any transfer agent for the Series B Preferred Stock or
Common Stock, and shall give written notice to the Company at such office that
such holder elects to convert the same and shall state therein the number of
shares of Series B Preferred Stock being converted. Thereupon, the Company shall
promptly issue and deliver to such holder a certificate or certificates for the
number of shares of Common Stock to which such holder is entitled and shall
promptly pay in cash or, if the Company is legally or financially unable to pay
such dividends in cash, Common Stock, as set forth in Section 7(d) below, all
declared and unpaid dividends on the shares of Series B Preferred Stock being
converted. Such conversion shall be deemed to have been made immediately prior
to the close of business on the date of such surrender of the certificate
representing the shares of Series B Preferred Stock to be converted, and the
person entitled to receive the shares of Common Stock issuable upon such
conversion shall be treated for all purposes as the record holder of such shares
of Common Stock on such date.

                  (d) CONVERSION OF UNPAID DIVIDENDS. Whenever a holder of
Series B Preferred Stock elects to convert shares of Series B Preferred Stock
into Common Stock pursuant to this Section, all declared dividends which the
Company is legally or financially unable to pay in cash on shares of Series B
Preferred Stock shall be converted into Common Stock. The number of shares of
Common Stock issuable upon the conversion of the declared but unpaid dividends
shall be determined by dividing the amount of such declared but unpaid dividends
by the Conversion Price in effect on the date the Company receives the holder's
notice of its election to convert, and rounding the result to the nearest whole
share by eliminating fractions of less than .5 share and rounding to the next
whole number fractions of .5 share or greater.

                  (e) ADJUSTMENT FOR STOCK SPLITS AND COMBINATIONS. If the
Company at any time or from time to time after the Commitment Date, effects a
subdivision of the outstanding Common Stock, the Conversion Price, Floor Amount
and Ceiling Amount in effect before that subdivision shall be proportionately
decreased, and conversely, if the Company at any time or from time to time after
the Commitment Date combines the outstanding shares of Common Stock into a
smaller number of shares, the Conversion Price, Floor Amount and Ceiling Amount
in effect before the combination shall be proportionately increased. Any
adjustment under this subsection (e) shall become effective at the close of
business on the date the subdivision or combination becomes effective.

                  (f) ADJUSTMENT FOR CERTAIN DIVIDENDS AND DISTRIBUTIONS. If the
Company at any time or from time to time after the Commitment Date makes, or
fixes a record date for the determination of holders of Common Stock entitled to
receive a dividend or other distribution payable in additional shares of Common
Stock, then and in each such event the Conversion Price, Floor Amount and
Ceiling Amount in effect shall be decreased as of the time of such issuance or,
in the event such record date is fixed, as of the close of business on such
record date, by multiplying the Conversion Price, Floor Amount and Ceiling
Amount in effect by a fraction (1) the numerator of which is the total number of
shares of Common Stock issued and outstanding immediately prior to the time of
such issuance or the close of business on such record date, and (2) the
denominator of which shall be the total number of shares of Common Stock issued

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and outstanding immediately prior to the time of such issuance or the close of
business on such record date plus the number of shares of Common Stock issuable
in payment of such dividend or distribution; provided, however that if such
record date is fixed and such dividend is not fully paid or if such distribution
is not fully made on the date fixed therefor, the Conversion Price, Floor Amount
and Ceiling Amount shall be recomputed accordingly as of the close of business
on such record date and thereafter the Conversion Price, Floor Amount and
Ceiling Amount shall be adjusted pursuant to this subsection (f) as of the time
of actual payment of such dividends or distributions.

                  (g) ADJUSTMENT FOR RECLASSIFICATION, EXCHANGE AND
SUBSTITUTION. In the event that at any time or from time to time after the
Commitment Date the Common Stock issuable upon the conversion of the Series B
Preferred Stock is changed into the same or a different number of shares of any
class or classes of stock, whether by recapitalization, reclassification or
otherwise (other than a subdivision or combination of shares or stock dividend
or a reorganization, merger, consolidation or sale of assets, provided for
elsewhere in this Section 7), then and in any such event each holder of Series B
Preferred Stock shall have the right thereafter to convert such stock into the
kind and amount of stock and other securities and property receivable upon such
recapitalization, reclassification or other change by holders of the maximum
number of shares of Common Stock into which such shares of Series B Preferred
Stock could have been converted immediately prior to such recapitalization,
reclassification or change.

                  (h) REORGANIZATIONS, MERGERS, CONSOLIDATIONS OR SALES OF
ASSETS. If at any time or from time to time after the Commitment Date there is a
capital reorganization of the Common Stock (other than a recapitalization,
subdivision, combination, reclassification or exchange of shares provided for
elsewhere in this Section 7), or a merger or consolidation of the Company with
or into another corporation, or the sale of all or substantially all of the
Company's properties and assets to any other person, then, as a part of such
reorganization, merger, consolidation or sale, provision shall be made so that
the holders of the Series B Preferred Stock shall thereafter be entitled to
receive upon conversion of the Series B Preferred Stock the number of shares of
stock or other securities or property to which a holder of the number of shares
of Common Stock deliverable upon conversion would have been entitled on such
capital reorganization, merger, consolidation, or sale.

                  (i) ACCOUNTANTS' CERTIFICATE OF ADJUSTMENT. In each case of an
adjustment or readjustment of the Conversion Price, Floor Amount or Ceiling
Amount or the number of shares of Common Stock or other securities issuable upon
conversion of the Series B Preferred Stock, the Company, at its expense, shall
cause independent public accountants of recognized standing selected by the
Company (who may be the independent public accountants then auditing the books
of the Company) to compute such adjustment or readjustment in accordance with
the provisions hereof and prepare a certificate showing such adjustment or
readjustment, and shall mail such certificate, by first class mail, postage
prepaid, to each registered holder of the Series B Preferred Stock at the
holder's address as shown in the Company's books. The certificate shall set
forth such adjustment or readjustment, showing in detail the facts upon which
such adjustment or readjustment is based.

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                  (j) NOTICES OF RECORD DATE. In the event of (i) any taking by
the Company of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution referred to in this Section 7, or (ii) any
capital reorganization of the Company, any reclassification or recapitalization
of the capital stock of the Company, any merger or consolidation of the Company
with or into any other corporation, or any transfer of all or substantially all
of the assets of the Company to any other person or any voluntary or involuntary
dissolution, liquidation or winding up of the Company, the Company shall mail to
each holder of Series B Preferred Stock at least ten (10) days prior to the
record date specified therein (unless such holder shall have already been
notified pursuant to Section 5(f) above), a notice specifying (1) the date on
which any such record is to be taken for the purpose of such dividend or
distribution and a description of such dividend or distribution, (2) the date on
which any such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up is expected to become effective,
and (3) the date, if any, that is to be fixed, as to when the holders of record
of Common Stock (or other securities) shall be entitled to exchange their shares
of Common Stock (or other securities) for securities or other property
deliverable upon such reorganization, reclassification, transfer, consolidation,
merger, dissolution, liquidation or winding up.

                  (k) FRACTIONAL SHARES. No fractional shares of Common Stock
shall be issued upon conversion of Series B Preferred Stock. In lieu of any
fractional share to which the holder would otherwise be entitled, the Company
shall pay cash equal to the product of such fraction multiplied by the Fair
Market Value Per Share of one share of Common Stock on the date of conversion.

                  (l) RESERVATION OF STOCK ISSUABLE UPON CONVERSION. The Company
shall at all times reserve and keep available out of its authorized but unissued
shares of Common Stock, solely for the purpose of effecting the conversion of
the shares of Series B Preferred Stock, such number of its shares of Common
Stock as shall from time to time be sufficient to effect the conversion of all
outstanding shares of the Series B Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be sufficient
to effect the conversion of all then outstanding shares of the Series B
Preferred Stock, the Company will take such corporate action as may, in the
opinion of its counsel, be necessary to increase its authorized but unissued
shares of Common Stock to such number of shares as shall be sufficient for such
purpose.

                  (m) NOTICES. Any notice required or permitted by this Section
7 to be given to a holder of Series B Preferred Stock or to the Company shall be
in writing and be deemed given and received upon the earliest of (i) actual
receipt; (ii) five (5) days after the same has been deposited in the United
States mail; or (iii) on the date shown on the return receipt if sent by
certified or registered mail, return receipt requested, and addressed (i) to
each holder of record at the address of such holder appearing on the books of
the Company, or (ii) to the Company at: 5920 Friars Road, Suite 104, San Diego,
CA 92108, or (iii) to the Company or any holder, at any other address specified
in a written notice given to the other for the giving of notice.

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         Section 8. AMENDMENTS. Notwithstanding any other provision of these
Articles of Incorporation, unless otherwise required by law, the provisions of
these Articles which set forth the rights, preferences and privileges of the
Series B Preferred Stock may be amended by the vote or consent of the holders of
a Majority of the Series B Preferred Stock and no other class or series of stock
of the Company shall be required to vote upon or consent to such amendment.


                   REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.
                         SIGNATURES ON FOLLOWING PAGE.

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         IN WITNESS WHEREOF, this Certificate of Designation is executed on
behalf of the Company by its Chief Executive Officer and attested by its
Secretary this 10th day of April, 2002.


                                                         /s/ RAY WILLENBERG, JR.
                                                         Ray Willenberg, Jr.
                                                         Chief Executive Officer


Attest:


/S/ C. RICH WILSON III
C Rich Wilson, III
Secretary

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