the SmallCap core listing requirement and would be eligible for the proposed
extended grace period if enacted. If the extended grace periods are not
implemented, our common stock would be subject to delisting from the SmallCap
Market. In such event, under NASDAQ rules, we have the right, and presently
intend, to appeal the delisting to the NASDAQ Listing Qualification Panel
("Panel") and request an extension of time to comply with the rule.
The Board does not currently plan to implement a reverse stock split
unless we receive a delisting determination letter from NASDAQ or the Board
otherwise determines it is in the best interests of the Company. If we receive a
delisting determination letter, we currently intend to appeal to the Panel and
base our appeal, in part, upon a reverse stock split. Accordingly, we are
re-submitting this proposal to provide the Board with the authority to implement
a reverse stock split in a ratio between no change and up to one-for-ten shares.
However, we can provide no assurance that a reverse stock split will lead to a
successful appeal with the Panel.
Until the Panel reaches its decision, the Company's common stock will
remain listed and will continue to trade on the NASDAQ SmallCap Market. There
can be no assurance as to when the Panel will reach a decision or that such a
decision will be favorable to the Company. The Company's common stock will be
delisted from the NASDAQ SmallCap Market if the appeal is denied. In such event,
the Company presently expects to apply to list its common stock on another
quotation system or exchange on which the shares of the Company would qualify.
The delisting of the Common Stock from the NASDAQ SmallCap Market could have a
material adverse effect on the market price of, and the efficiency of the
trading market for, the Common Stock.
In addition, if our common stock were to become delisted from trading
on the NASDAQ SmallCap Market and the trading price were to remain below $5.00
per share, trading in our common stock may also be subject to the requirements
of certain rules promulgated under the Securities Exchange Act of 1934, which
require additional disclosures by broker-dealers in connection with any trades
involving a stock defined as a "penny stock." Generally, a "penny stock" is
defined as any non-NASDAQ equity security that has a market price of less than
$5.00 per share, subject to certain exceptions. The additional burdens imposed
upon broker-dealers by these requirements could discourage broker-dealers from
facilitating trades in our shares, which could severely limit the market
liquidity of the stock and the ability of investors to trade our common stock.
The Board believes that if stockholders approve the proposed amendment
and the Board decides to effect a reverse stock split, our stock price should
increase to over the $1.00 per share minimum bid price, although no assurance
can be given in this regard.
We cannot guarantee that even with the reverse stock split, we will
meet or maintain all of NASDAQ's continued listing criteria in the future, or
that the price for shares of our common stock after the reverse stock split will
increase in proportion to the ratio of the reverse stock split. The delisting of
the Common Stock from the NASDAQ SmallCap Market could have a material adverse
effect on the market price of, and the efficiency of the trading market for, the
The proposed reverse stock split amendment is not the first step in a
going private transaction.
POTENTIAL EFFECTS OF THE REVERSE STOCK SPLIT
A reverse stock split, if implemented, would reduce the number of
shares of common stock outstanding and potentially increase the trading price of
our common stock. However, we cannot predict the effect of any reverse stock
split upon the market price of our common stock. The history of reverse stock
splits for companies in similar circumstances varies. We cannot assure you that
the trading price of our common stock after the reverse stock split will rise in
exact proportion to the reduction in the number of shares of our common stock
outstanding. Also, as stated above, we cannot assure you that a reverse stock
split would lead to a sustained increase in the trading price of our common
stock, that the trading price would remain above the thresholds required by
NASDAQ, or that we will continue to meet the other continued listing
requirements of NASDAQ. The trading price of our common stock may change due to
a variety of other factors, including our operating results, other factors
related to our business and general market conditions.
The approximate number of shares of common stock that would be
outstanding as a result of the proposed reverse stock split, based on 18,428,871
shares of common stock outstanding as of April 15, 2003, would be as low