Got a response back from Debbie. Here it is:
Good morning Xxx,
Thank you for your inquiry and I will try and explain. We are asking the shareholders to approve a reverse stock split of between 1:40 and 1:60 and at the same time we are asking for approval to reduce the number of authorized shares from 1.35 billion to 500 million. These are two separate actions. I am copying some language from the Proxy Statement below, that explains the rationale for theses requests. If you would like further clarification or have additional questions, please feel free to contact me again. We hope that you will follow the recommendations of the Board of Directors and vote "FOR" the proposals in the Proxy Statement.
"Our Board of Directors’ primary reason for approving and recommending the reverse stock split is to increase the per share price of our common stock to meet the listing requirements of either the NASDAQ Capital Market (“NASDAQ”) or the NYSE MKT (“NYSE MKT”). Our Board of Directors believes that attaining and maintaining the listing of our common stock on NASDAQ or NYSE MKT is in the best interests of our company and our stockholders. As of July 11, 2014, our common stock has traded on the OTC Market’s electronic interdealer quotation QB system (“OTCQB”) in a 52 week closing price range from $0.09 to $0.20 per share. NASDAQ requires a minimum bid price of $4.00 or a minimum closing price of $2.00 or $3.00 per share (depending upon the applicable listing standard) in connection with the initial listing application while the NYSE MKT requires a minimum price of $2.00 or $3.00 per share in connection with the initial listing application. We are also required to meet additional conditions to list our common stock on NASDAQ or NYSE MKT and there is no guarantee that we will be able to meet those conditions. We will submit an application to list our common stock on NASDAQ or NYSE MKT at such time as determined prudent by our Board of Directors.
In addition, if our common stock were listed on NASDAQ or NYSE MKT, our Board of Directors believes that the liquidity in the trading of our common stock could be significantly enhanced, which could result in an increase in the trading price......
Our Board of Directors further believes that an increased stock price may encourage investor interest and improve the marketability of our common stock to a broader range of investors. We believe that the reverse stock split will make our common stock more attractive to a broader range of institutional and other investors, as we have been advised that the current market price of our common stock may affect its acceptability to certain institutional investors, professional investors and other members of the investing public. Many brokerage houses and institutional investors have internal policies and practices that either prohibit 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 unattractive to brokers. Moreover, because brokers’ commissions on low-priced stocks generally represent a higher percentage of the stock price than commissions on higher-priced stocks, the current average price per share of our common stock can result in individual stockholders paying transaction costs representing a higher percentage of their total share value than would be the case if the share price were substantially higher. We believe that the reverse stock split will make our common stock a more attractive and cost effective investment for many investors, which should enhance the liquidity available to the holders of our common stock. Accordingly, we believe that approval of the reverse stock split is in our Company’s and our stockholders’ best interests.
Reducing the number of outstanding shares of our common stock through the reverse stock split is intended, absent other factors, to increase the per share market price of our common stock..... "
Best regards,
Debbie Bailey
