Reasons for the Reverse Stock Split
Our Board of Directors is submitting this Reverse S
tock Split to our stockholders for approval with th
e primary intent of increasing
the market price of our common stock to enhance our
ability to meet the initial listing requirements o
f the NASDAQ Stock Market or NYSE
MKT and to make our common stock more attractive to
a broader range of institutional and other investo
rs. The Board also considered the
need to adjust the number of authorized shares of o
ur Common Stock and determined that an adjustment t
o the authorized number of shares of
our Common Stock be made based on one-half of the r
everse stock split ratio set by the Board with no a
djustment made if the reverse stock
ratio set by the Board is one-for-two. We believe
that effecting the Reverse Stock Split is in our an
d our stockholders' best interests.
We believe that the Reverse Stock Split will enhanc
e our ability to obtain an initial listing on the N
ASDAQ Stock Market or NYSE
MKT The NASDAQ Stock Market requires, among other
items, an initial bid price of least $4.00 per shar
e or if certain financial and
governance standards are achieved, a closing price
on the OTC Bulletin Board of $3.00 (or $2.00 depend
ing on the applicable listing standard)
for five consecutive days and following initial lis
ting, maintenance of a continued price of at least
$1.00 per share. The NYSE MKT requires an
initial listing bid price of $3.00 (or $2.00 depend
ing on the applicable listing standard). Reducing t
he number of outstanding shares of our
common stock should, absent other factors, increas
e the per share market price of our common stock, a
lthough we cannot provide any
assurance that our minimum bid price would remain f
ollowing the Reverse Stock Split over the minimum b
id price requirement of any such
stock exchange.
Additionally, we believe that the Reverse Stock Spl
it will make our common stock more attractive to a
broader range of institutional
and other investors, as we have been advised that t
he current market price of our common stock may aff
ect its acceptability to certain
institutional investors, professional investors and
other members of the investing public. Many broke
rage houses and institutional investors
have internal policies and practices that either pr
ohibit them from investing in low-priced stocks or
tend to discourage individual brokers from
recommending low-priced stocks to their customers.
In addition, some of those policies and practices
may function to make the processing of
trades in low-priced stocks economically unattracti
ve to brokers. Moreover, because brokers' commissi
ons on low-priced stocks generally
represent a higher percentage of the stock price th
an commissions on higher-
priced stocks, the current average price per share
of common stock
can result in individual stockholders paying transa
ction costs representing a higher percentage of the
ir total share value than would be the case
if the share price were substantially higher. We b
elieve that the Reverse Stock Split will make our c
ommon stock a more attractive and cost
effective investment for many investors, which will
enhance the liquidity of the holders of our common
stock.
In order to provide maximum flexibility, we are sub
mitting this proposal with a range of exchange rati
os of not less than one-for-
two (1:2) and not greater than one-for-ten (1:10).
The need for the broad range is due to the volatili
ty of the stock price which ranged from a
high of $0.80 to a low of $0.11 during the twelve m
onths prior to April 3, 2013.
