Current Price – $0.2;
Offer Price – $0.3 (for holders of up to 199 shares);
Upside – $20 (for holders of up 199 shares);
Expiration date – TBD (shareholder meeting to be held on 21st of March);
Important Note – The liquidity is very low. I see little risk of this transaction not going through. The required funds to buyout small shareholders are very low (controlling shareholder owns more than 50% of the stock).
The primary reason for the proposed reverse stock split is to relieve the Company of the costs and associated burdens of remaining a public SEC-reporting company.
Specifically, the Board and Special Committee determined that if the proposed reverse stock split is approved by the stockholders and implemented, the estimated cost savings resulting from no longer being an SEC-registered company will be approximately $220,000 per year. Estimated transaction costs are expected to be approximately $111,400 including estimated total cash payment of approximately $26,400 to purchase fractional share interests that will be cashed out. The Company expects to pay such transaction costs and consideration for such fractional share interests from existing cash reserves.
It is anticipated that the proposed 1:200 reverse stock split, including the proposed cash payment of thirty cents ($0.30) per pre-split share for all resulting fractional shares (in lieu of issuing any fractional shares) after the split, will reduce the number of the Company’s record shareholders to 215. In terms of equivalent pre-split shares, it is anticipated that approximately 88,000 shares would be cashed out and the number of record shareholders (346 as of January 4, 2016) would be reduced by approximately 131.
To effectuate the reverse stock split, will require approval by holders of a majority of the outstanding shares of Common Stock entitled to vote.
Source of Funds:
The Special Committee’s estimates of the anticipated transaction costs of the proposed reverse stock split and subsequent SEC deregistration also were adopted by the Board. Such estimates were that such costs would be less than $150,000 and currently are estimated to be approximately $111,400 including legal ($45,000), valuation ($20,000), share cash-out (estimated at $26,400 for cashing out the equivalent of approximately 88,000 pre-split shares) and other costs including transfer agent fees and costs of obtaining a new CUSIP number.