(1) The
Company has reserved 30,000,000 shares for issuance upon possible conversion of a
debenture and 60,000,000 shares for issuances under a stock option plan. Of the
60,000,000 shares available for issuance under the stock option plan, 19,000,000 have
been issued and will be adjusted for the reverse split. The debenture will be adjusted
for the reverse split. Under the terms of the plan, the 41,000,000 remaining to be
issued will not be changed by the reverse stock split.
The
Board of Directors does not have any present plans to issue the any of the additional
shares which will be made available for issuance by reason of the reverse stock split.
However, investors should note that the increased number of shares available for
issuance by the Board of directors may be viewed as having an anti-takeover effect and
may discourage a potential tender offer for the Company. The Board of Directors is not
aware of any potential tender offer for the Company and notes that even without the
reverse stock split, almost ninety per-cent of the Company’s authorized stock are
available for issuance at the discretion of the Board.
The
Board of Directors believes that the relatively low per-share market price of the
Common Stock may impair the acceptability of the Common Stock to certain institutional
investors and other members of the investing public. Certain investors view low-priced
stock as unattractive or, as a matter of policy, are precluded form purchasing
low-priced shares. In addition, certain brokerage houses, as a matter of policy, will
not extend margin credit on stocks trading at low prices. On the other hand, certain
other investors may be attracted to low-priced stock because of the greater trading
volatility sometimes associated with such securities. The Board further believes that
by reducing the number of shares outstanding, the Company’s issued and
outstanding shares will be more appropriate for a company, such as the Company, whose
business is in the development and exploratory stage.
There
can be no assurance that the Reverse Stock Split will not adversely impact the market
price of the Common Stock, that the marketability of the Common Stock will improve as a
result of approval of the Reverse Stock Split or that the approval of the Reverse Stock
Split will otherwise have any of the effects described herein.
Certificates and Fractional Shares
The
certificates presently representing shares of Common Stock will be deemed to represent
up to one-fiftieth share of Common Stock after the effective date of the Reverse Stock
Split. New shares of common Stock, will be issued in due course as old shares are
tendered to the transfer agent for exchange of transfer. Shares will be rounded up and
no Fractional shares will be issued.
Effectiveness
It the
amendment and the Reverse Stock Split are approved by the stockholders, the Company
will, subject to the subsequent action of its Board of Directors, file the
amendment to its Certificate of Incorporation with the Secretary of
State of the State of Nevada promptly after such approval, at which time the amendment
will become effective and the Company will concurrently effect the Reverse Stock
Split.
Vote
Required for Approval
The
proposal to approve a reverse stock split of up to one for fifty requires the consents
of the holders of a majority of the Common Stock issued and outstanding as of the
Record Date.
Board
of Directors' Recommendation
The
Board of Directors recommends that the stockholders consent to the adoption of the
Reverse Stock Split.