INFORMATION STATEMENT
PURSUANT TO SECTION 14(C)
OF THE SECURITIES EXCHANGE ACT OF 1934
AND RULE 14C-2 THEREUNDER
__________________________________________
August __, 2013
GREENFIELD FARMS FOOD, INC.
NO VOTE OR OTHER ACTION OF THE COMPANY'S SHAREHOLDERS IS REQUIRED IN CONNECTION WITH THIS INFORMATION STATEMENT.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED
NOT TO SEND US A PROXY
The Company is distributing this Information Statement to its shareholders in full satisfaction of any notice requirements it may have under Securities and Exchange Act of 1934, as amended, and applicable Nevada law. No additional action will be undertaken by the Company with respect to the receipt of written consents, and no dissenters' rights with respect to the receipt of the written consents, and no dissenters' rights under the Laws of Nevada are afforded to the Company's shareholders as a result of the adoption of these resolutions.
Expenses in connection with the distribution of this Information Statement, which are anticipated to be less than $5,000.00, will be paid by the Company.
DESCRIPTION OF THE CORPORATION
CORPORATE HISTORY: We were founded in 2008 as Sweet Spot Games, Inc., a Nevada corporation on June 2, 2008. We changed our name to Greenfield Farms Food, Inc. ("Greenfield") on March 31, 2011. Previously, we were a consumer and wholesale driven producer of grassfed beef supplying Lowes Food Stores, a North Carolina based grocer on a very limited basis. Greenfield Farms Grassfed Beef and its collective group of producers represented over 2,500 acres in pasture under management and approximately 2,000 head of cattle.
On March 12, 2013, Greenfield announced that it is beginning a new licensing program for its "Greenfield Farms Grassfed Beef" trademark, which the Company believes will allow it to expand its business and enhance its market and brand presence. With this program, the Company will phase away from its traditional business model of taking cattle from farm to market thus eliminating all of the capital and startup costs required for such operations by expanding its brand presence with capable cattle producers and marketers. The Company also believes that the trademark licensing concept allows for more rapid market penetration with minimal risk and the ability to more easily ascertain assumed returns. Greenfield also announced that is has signed its first licensee, Hill Meadow Foods, Inc., in an exclusive agreement until December 31, 2013, at which time it will become non-exclusive.
The Company is also exploring other business opportunities in complementary food related business segments. On February 12, 2013, the Company announced that it had signed a definitive agreement to acquire 100% of the equity interest in Ohio-based Carmela's Pizzeria. Carmela's presently has four Dayton, Ohio area locations offering authentic New York style pizza. In addition, Carmela's offers a full service menu for Dine In, Carry out and Delivery as well as pizza buffets in select stores. Details of the transaction call for all of the equity interests in Carmela's to be acquired by a newly created wholly-owned operating subsidiary of Greenfield in exchange for shares of Greenfield preferred stock and warrants. Closing of this transaction is subject to, among other things, final due diligence by the parties, completion of audited financial statements, preparation of schedules to the definitive agreement, and any final board of director and/or stockholder approvals as necessary.
THE REVERSE SPLIT
The Board of Directors believes that it is in the best interest of the Company's shareholders and the Company for the Board to have the authority to maintain the Company’s authorized capital and to effect a reverse stock split of the Company's common shares in order to comply with default provisions of certain convertible promissory notes we have outstanding, make the Company more attractive for a potential financing transaction, and to pursue business expansion opportunities. The Board of Directors intends to effect a reverse stock split no sooner than 20 days following the mailing of this Information Statement to the Company's shareholders and only upon its determination that a reverse stock split would be in the best interests of the shareholders at that time, but prior to June 30, 2014. The Board of Directors would set the specific timing for such a split within the authority granted by the shareholders, but only following notification to and approval by FINRA.
The Company currently has several convertible notes outstanding with third party institutional investors. These notes are convertible into our common stock at various discounts to our market price ranging from 35% to 45% of the average of the lowest three closing bid prices in the ten (10) to thirty (30) trading day period prior to conversion, depending on the individual note. In addition, these notes require the Company to maintain sufficient authorized share reserves for future issuances in amounts equal to five (5) times the number of shares that are actually issuable upon full conversion of the notes. Currently we have 950,000,000 shares of common stock authorized and 949,839,719 issued and outstanding leaving virtually no shares available for issuance to these convertible note holders. Accordingly, the default provisions of the convertible notes provide that should the lender declare an Event of Default as a result of our inability to issue shares of stock upon conversion and/or our lack of sufficient authorized shares equaling five times the number issuable upon conversion, the principal balance of the notes would increase to 150% of the then outstanding principal balance of the notes. As of the date of this Information Statement, our lenders have not declared any Events of Default as they are aware we are pursuing the reverse split of our common stock.
We have the following convertible notes containing authorized share default provisions outstanding. Of the $218,000 in face value of the notes listed below, we received net proceeds of $205,400 following offering costs of $12,600. Of this amount, $130,000 was used in settlement of notes and accounts payable to our former President, Larry Moore. The balance of $75,400 was used for general working capital purposes including payments to our current President, Henry Fong, totaling $30,650 for fees due him.
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Loan Date
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Lender
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Original
Balance
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Current
Balance
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Shares
Currently
Issuable Upon
Conversion
Pre-split
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Shares
Currently
Issuable Upon
Conversion
Post-split
1 for 50
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Shares
Currently
Issuable Upon
Conversion
Post-split 1
for 100
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June 15, 2012
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Asher (1)
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$83,500
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$35,200
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502,857,143
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10,057,143
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5,028,571
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August 13, 2012
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Asher (1)
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20,000
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20,000
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285,714,286
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5,714,286
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2,857,143
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January 28, 2013
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Asher (1)
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53,000
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53,000
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662,500,000
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13,250,000
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6,625,000
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February 12, 2013
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Asher (1)
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15,500
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15,500
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193,750,000
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3,875,000
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1,937,500
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May 9, 2013
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Asher (1)
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32,500
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32,500
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361,111,111
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7,222,222
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3,611,111
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June 17, 2013
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Asher (1)
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7,500
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7,500
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83,333,333
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1,666,667
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833,333
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February 29, 2013
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CareBourn (2)
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6,000
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6,000
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85,714,286
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1,714,286
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857,143
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Total
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$218,000
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$169,700
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2,174,980,159
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43,499,604
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21,749,801
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________________________
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(1)
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Asher Enterprises, Inc.
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(2)
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CareBourn Capital, LP
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Accordingly, as we are required to maintain authorized shares equal to five (5) times the number of shares issuable upon conversion of these promissory notes, we would require approximately 217,500,000 and 108,750,000 authorized and available shares in the event of a 1 for 50 or 1 for 100 reverse split, respectively. Effecting the reverse split would therefore provide for sufficient authorized shares to meet the necessary authorized reserve requirements and therefore alleviate the default situation with these notes.
In addition, as explained more fully on pages 9 and 10 under “Security Ownership of Certain Beneficial Owners and Management", the Company currently has outstanding 96,623 shares of its Series A Convertible Preferred Stock that is convertible into 676,361,000 shares our common stock as well as 44,000 shares of our Series B Preferred Stock that was convertible into 488,888,888 shares of our common stock as of August 1, 2013. In order to permit the holders of these preferred shares to convert into common stock at their discretion, we require additional shares of authorized but unissued common stock that would be available following the reverse split equaling 23,304,998 or 11,652,499 in the event of a 1 for 50 or 1 for 100 reverse split, respectively.
On April 1, 2011, four shareholders of the Company converted 881,351,480 shares of Common Stock to 96,623 shares of our Series A Convertible Preferred Stock, including 85,000 shares issued to our former President, Larry Moore. The Series B Convertible Preferred Stock was authorized by the board of directors on July 15, 2013 and consists of up to 100,000 shares of preferred stock with par value of $0.001 per share and a stated value of $1.00 per share. A total of 44,000 shares of Series B Preferred Stock was issued on the conversion of debt payable by the Company, including $40,000 to the Company's President, Henry Fong. No cash was received by the Company for the issuance of either the Series A or Series B Preferred Stock.
We have also announced plans for the possible acquisition of Carmela's Pizzeria, the business of which is summarized under "Description of the Corporation" above. While we have executed a definitive agreement with the owners of Carmela's, the effectiveness of this acquisition is subject to closing of the transaction, which has not yet occurred as of the date of this Information Statement. Although we do not anticipate we will require the reverse split to occur in order to close the Carmela's transaction given the current deal terms call for the issuance of convertible preferred stock and warrants; both the convertible preferred stock and warrants anticipated to be issued will be convertible into common shares of the Corporation requiring additional authorized shares available for issuance. It is anticipated the convertible preferred stock will be convertible into common stock at the option of the holder, therefore there is no assurance of when any conversion of either the preferred stock or warrants will take place. The terms of the acquisition call for the owners of Carmela's to receive stock and warrants that together would be equal to 80% of the then outstanding common stock of the Company on a fully-diluted basis at the time of closing.
Criteria to be Used for Decision to Apply the Reverse Stock Split
Upon effectiveness of the reverse stock split, the Board of Directors will be authorized to proceed with the reverse split in their discretion. In determining whether to proceed with the reverse split and setting the exact amount of split, if any, the Board of Directors will consider a number of factors, including market conditions, existing and expected trading prices of our common stock, our additional funding requirements and the amount of our authorized but unissued common stock. No further action on the part of shareholders will be required to either increase the Company’s authorized capital or to implement or abandon the reverse stock split. The Board of Directors reserves its right to elect not to proceed, and abandon, the reverse stock split if it determines, in its sole discretion, that this proposal is no longer in the best interests of the Company's shareholders.
ADVANTAGES AND DISADVANTAGES OF REVERSE SPLIT
There are certain advantages and disadvantages of completing the reverse split and not changing the Company's authorized common stock. The advantages include:
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The ability to raise capital by issuing capital stock under future financing transactions, if any.
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To have shares of common stock available to pursue business expansion opportunities, if any.
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To maintain compliance with covenants of certain convertible promissory notes currently outstanding including default provisions that provide for an increase in principal of at least 1.5 times the total amount due.
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The disadvantages include:
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Dilution to the existing shareholders, including a decrease in our net income per share in future periods. This could cause the market price of our stock to decline.
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Dilution to existing shareholders due to conversion to common stock from our currently outstanding promissory notes.
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The issuance of authorized but unissued stock could be used to deter a potential takeover of the Company that may otherwise be beneficial to shareholders by diluting the shares held by a potential suitor or issuing shares to a shareholder that will vote in accordance with the desires of the Company's Board of Directors, at that time. A takeover may be beneficial to independent shareholders because, among other reasons, a potential suitor may offer such shareholders a premium for their shares of stock compared to the then-existing market price. The Company does not have any plans or proposals to adopt provisions or enter into agreements that may have material anti-takeover consequences.
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CERTAIN RISK FACTORS ASSOCIATED WITH THE REVERSE STOCK SPLIT
There can be no assurance that the total market capitalization of the Company's Common Stock (the aggregate value of all Company’s Common Stock at the then market price) after the proposed reverse stock split will be equal to or greater than the total market capitalization before the proposed reverse stock split or that the per share market price of the Company's Common Stock following the reverse stock split will increase in proportion to the reduction in the number of shares of the Company's Common Stock outstanding before the reverse stock split.
If the reverse stock split is effected, the resulting per-share stock price may not attract or satisfy potential acquisition targets and there is no guarantee that any transaction will be effected.
A decline in the market price of the Company's Common Stock after the reverse stock split may result in a greater percentage decline than would occur in the absence of a reverse stock split, and the liquidity of the Company's Common Stock could be adversely affected following such a reverse stock split.
IMPACT OF THE PROPOSED REVERSE STOCK SPLIT IF IMPLEMENTED
The purpose of allowing the Board to pick the ratio of the reverse stock split is to provide us with the flexibility to achieve the desired results of the reverse stock split. By this means the Board of Directors would implement a reverse stock split only upon its determination that a reverse stock split would be in our best interests at that time. If the Board of Directors were to effect a reverse stock
split, the Board of Directors would set the timing for the reverse stock split and select the specific ratio and publicly announce the chosen ratio at least ten days prior to the effectiveness of the reverse stock split. No further action on the part of stockholders would be required to either implement or abandon the reverse stock split. If the Board of Directors does not implement the reverse stock split prior to June 30, 2014, the Board of Directors would not effect a reverse stock split without seeking additional stockholder approval. The Board of Director reserves its right to elect not to proceed with the reverse stock split if, in its sole discretion, this proposal is no longer in our best interests.
A reverse stock split refers to a reduction in the number of outstanding shares of a class of a corporation’s capital stock, which may be accomplished, as in this case, by reclassifying and combining all of our outstanding shares of common stock into a proportionately smaller number of shares. For example, if the reverse stock split is approved by our stockholders and the Board of Directors elects a 1-for-100 reverse stock split, a stockholder holding 10,000 shares of our common stock before the reverse stock split would hold 100 shares of our common stock immediately after the reverse stock split.
Common Stock Holdings
Each issued share of common stock immediately prior to the effective time of the reverse stock split will automatically be changed, as of the effective time of the reverse stock split, into a fraction of a share of common stock based on the exchange ratio determined by the Board of Directors. However, the total number of authorized shares of our common stock would not be reduced from the current total of 950,000,000.
Because the reverse stock split would apply to all issued shares of our common stock, the proposed reverse stock split would not alter the relative rights and preferences of existing stockholders nor affect any stockholder’s proportionate equity interest in the Company, except for stockholders that would otherwise receive fractional shares as described below.
The following table sets forth the approximate percentage reduction in the outstanding shares of our common stock and the approximate number of shares of our common stock that would be outstanding as a result of the reverse stock split at various ratios that the Board of Directors may determine in its discretion, based on the 950,000,000 shares of our common stock issued and outstanding as of August 1, 2013:
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Proposed Reverse
Stock Split Ratio
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Percentage Reduction In
Outstanding Shares
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Shares Outstanding After
Reverse Stock Split
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1 for 50
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98.0%
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18,996,795
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1 for 75
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98.7%
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12,664,530
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1 for 100
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99.0%
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9,498,398
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Stockholders should note that it is not possible to accurately predict the effect of the reverse stock split on the market prices for the common stock, and the history of reverse stock splits is varied. In particular, there is no assurance that the price per share of the common stock after the reverse stock split will increase in an amount proportionate to the decrease in the number of issued and outstanding shares, or will increase at all. In addition, there can be no assurance that any increase in the market price of our common stock immediately after the reverse stock split will be maintained for any period of time. Even if an increased share price can be maintained, the reverse stock split may not achieve some or all of the other desired results summarized above. Further, because some investors may view the reverse stock split negatively, there can be no assurance that the actual implementation of the reverse stock split will not adversely affect the market price of the common stock.
The principal effect of the reverse stock split will be that:
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Based on the current number of issued and outstanding shares of the Company’s Common Stock, the number of shares of the Company's Common Stock issued and outstanding will be reduced (based upon the ratio adopted by the Board of Directors) from 949,839,719 shares to not less than 9,498,398 shares nor more than 18,996,795;
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the number of shares that may be issued upon the exercise of conversion rights by holders of securities convertible into the Company's Common Stock will be reduced proportionately; and
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proportionate adjustments will be made to the per-share exercise price and the number of shares issuable upon the exercise of all outstanding options or warrants entitling the holders to purchase shares of the Company's Common Stock, which will result in approximately the same aggregate price being required to be paid for such options upon exercise immediately preceding the reverse stock split; and
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the number of authorized shares of Common Stock will continue to be 950,000,000 shares after the reverse split.
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Odd Lot Transactions
It is likely that some of our stockholders will own “odd-lots” of fewer than 100 shares following a reverse stock split. A purchase or sale of less than 100 shares (an “odd lot” transaction) may result in incrementally higher trading costs through certain brokers, particularly “full service” brokers, and generally may be more difficult than a “round lot” sale (i.e., sales denominated in units of 100 shares). Therefore, those stockholders who own less than 100 shares following a reverse stock split may be required to pay somewhat higher transaction costs and may experience some difficulties or delays should they then determine to sell their shares of common stock. The Board of Directors believes, however, that these potential effects are outweighed by the potential benefits of the reverse stock split.
Authorized Shares
The reverse stock split would affect all issued and outstanding shares of the Company's Common Stock and outstanding rights to acquire the Company's Common Stock. Upon the effectiveness of the reverse stock split, the number of authorized shares of the Company's Common Stock that are not issued or outstanding would increase due to the reduction in the number of shares of the Company's Common Stock issued and outstanding based on the reverse stock split ratio selected by the Board of Directors. As of August 1, 2013, we had 950,000,000 shares of authorized Common Stock and 949,839,719 shares of Common Stock issued and outstanding and 50,000,000 shares of authorized Preferred Stock of which 140,623 shares were issued and outstanding. Following the reverse split, if enacted, we will continue to have 950,000,000 shares of authorized Common Stock and not less than 9,498,397 shares nor more than 18,996,794 shares of Common Stock issued and outstanding together with 50,000,000 shares of authorized Preferred Stock and not less than 1,407 shares nor more than 2,813 outstanding. Authorized but unissued shares will be available for issuance, and we may issue such shares in the future.
These additional shares would be available for issuance from time to time for corporate purposes such as capital-raising transactions and acquisitions of companies or other assets, as well as for issuance upon conversion or exercise of securities such as convertible preferred stock, convertible debt, warrants or options convertible into or exercisable for common stock. We believe that the availability of the additional shares will provide us with the flexibility to meet business needs as they arise, to take advantage of favorable opportunities and to respond effectively in a changing corporate environment. For example, we may elect to issue shares of common stock to raise equity capital, to make acquisitions using stock like for the proposed acquisition of Carmela's Pizzeria, to establish strategic relationships with other companies, to adopt additional employee benefit plans or reserve additional shares for issuance under such plans, where the Board of Directors determines it advisable to do so, without the necessity of soliciting further stockholder approval, subject to applicable stockholder vote requirements under Nevada corporation law. If we issue additional shares for any of these purposes, the aggregate ownership interest of our current stockholders, and the interest of each such existing stockholder, would be diluted, possibly substantially.
The additional shares of our common stock that would become available for issuance upon an effective reverse stock split could also be used by us to oppose a hostile takeover attempt or delay or prevent a change of control or changes in or removal of our management, including any transaction that may be favored by a majority of our stockholders or in which our stockholders might otherwise receive a premium for their shares over then-current market prices or benefit in some other manner. For example, without further stockholder approval, the Board of Directors could strategically sell shares of common stock in a private transaction to purchasers who would oppose a takeover or favor our current Board of Directors. Although the increased proportion of authorized but unissued shares to issued shares could, under certain circumstances, have an anti-takeover effect, the reverse stock split is not being proposed in order to respond to a hostile takeover attempt or to any attempt to obtain control of the Company.
Effect on Fractional Shareholders
All fractional interests resulting from the reverse split will be rounded up to the nearest whole share.
Effect on Registered and Beneficial Shareholders
Upon a reverse stock split, we intend to treat shareholders holding the Company's Common Stock in "street name", through a bank, broker or other nominee, in the same manner as registered shareholders whose shares are registered in their names. Banks, brokers or other nominees will be instructed to effect the reverse stock split for their beneficial holders holding the Company's Common Stock in "street name." However, these banks, brokers or other nominees may have different procedures than registered shareholders for processing the reverse stock split. If you hold your shares with a bank, broker or other nominee and if you have any questions in this regard, we encourage you to contact your nominee.
Effect on Registered Certified Shares
Some of our registered shareholders hold all their shares in certificate form. If any of your shares are held in certificate form,
you will not be required to exchange your certificate
for a new one evidencing the post-reverse stock split shares. Shareholders who wish to exchange their pre-reverse stock split certificates may do so by contacting the Company's s transfer agent, West Coast Stock Transfer at 731 N. Vulcan Avenue, Suite 205, Encinitas, CA 92024, or (619) 664-4780 to complete such exchange at their own expense.
SHAREHOLDERS SHOULD NOT DESTROY ANY STOCK CERTIFICATE(S) AND ARE NOT REQUIRED TO SUBMIT ANY CERTIFICATE(S) TO THE COMPANY OR ITS TRANSFER AGENT.
Accounting Matters
The stated capital attributable to the Company's Common Stock on its balance sheet will be unchanged. The per-share net income or loss and net book value of the Company's Common Stock will be restated because there will be fewer shares of the Company's Common Stock outstanding.
Procedure for Effecting Reverse Stock Split
If the Board of Directors decides to implement the reverse stock split at any time prior to June 30, 2014, the Company will promptly file a Certificate of Change with the Nevada Secretary of State to amend our existing Articles of Incorporation. The reverse stock split will become effective on the date of filing the Certificate of Amendment, which is referred to as the "effective date." Beginning on the effective date, each certificate representing pre-reverse stock split shares will be deemed for all corporate purposes to evidence ownership of post-reverse stock split shares.
Absence of Dissenters’ Rights of Appraisal
Neither the adoption by the Board of Directors, nor the approval by the shareholders, of the Reverse Split provides shareholders any right to dissent and obtain appraisal of or payment for such shareholder’s shares under Section 78 of the Revised Nevada Statutes, the Articles of Incorporation or the Bylaws.
Federal Income Tax Consequences
The following is a summary of certain material U.S. federal income tax consequences of the reverse stock split, if implemented. The summary is based on the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”), applicable Treasury Regulations, judicial authority, and administrative rulings effective as of the date of hereof. These laws and authorities are subject to change, possibly on a retroactive basis. The discussion below does not address any state, local or foreign tax consequences of the reverse stock split, nor does it address any consequences under non-income tax laws or under any tax treaty. We have not sought and will not seek an opinion of counsel or a ruling from the Internal Revenue Service regarding the federal income tax consequences of a reverse stock split.
The following discussion is intended only as a summary of the material U.S. federal income tax consequences of the reverse stock split and does not purport to be a complete analysis or listing of all of the potential tax. In particular, this discussion does not deal with all U.S. federal income tax considerations that may be relevant to each of our stockholders in light of their particular circumstances, such as stockholders who exercise dissenters’ rights, who are treated as partnerships or otherwise as pass-through entities for U.S. federal income tax purposes, who are dealers in securities, who are traders in securities who have elected the mark-to-market method of accounting, who are subject to the alternative minimum tax provisions of the Internal Revenue Code, who are financial institutions or insurance companies, who are “S corporations”, who are “regulated investment companies”, who are “real estate investment trusts”, who are tax-exempt organizations, who are tax-qualified retirement plans, who are governments or agencies or instrumentalities thereof, who are eligible to treat their shares of Company common stock as “qualified small business stock”, who do not hold their Company common stock as a capital asset at the time of the reverse stock split, who acquired their Company common stock in connection with common stock option or common stock purchase plans or in other compensatory transactions, who hold Company common stock as part of an integrated investment (including a “straddle”) comprised of Company common stock and one or more other positions, who hold our common stock subject to the constructive sale provisions of Section 1259 of the Internal Revenue Code, who are expatriates or certain former long-term residents of the U.S., who are “controlled foreign corporations”, who are “passive foreign investment companies”, who are corporations that accumulate earnings to avoid U.S. federal income tax, or who have a functional currency other than the U.S. dollar. This summary does not address the tax effects of the reverse stock split to holders of Company options or warrants. Those stockholders, if any, are encouraged to consult their own tax advisors.
The following discussion does not address the tax consequences of transactions effectuated prior to, concurrent with or after the reverse stock split (whether or not such transactions are in connection with the reverse stock split). Stockholders are encouraged to consult their own tax advisors regarding the tax consequences to them of any transactions undertaken prior to, concurrent with or after the reverse stock split.
For purposes of this discussion, the term “U.S. Holder” means a beneficial owner of shares of Company common stock that is any of the following:
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an individual treated as a U.S. citizen or resident for U.S. federal income tax purposes;
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a corporation (or other entity taxable as a corporation for U.S. federal income tax purposes) created or organized in or under the laws of the United States, any state thereof, or the District of Columbia;
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an estate, the income of which is subject to U.S. federal income taxation regardless of its source;
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a trust if a U.S. court can exercise primary supervision over the trust’s administration and one or more U.S. persons have the authority to control all substantial decisions of the trust; or
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a trust in existence on August 20, 1996 that has a valid election in effect under applicable Treasury Regulations to be treated as a U.S. person.
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If a partnership holds shares of Company common stock, the tax treatment of a partner generally will depend on the status of the partner and on the activities of the partnership. Partners of partnerships holding Company common stock should consult their tax advisors.
PLEASE CONSULT YOUR OWN TAX ADVISOR CONCERNING THE CONSEQUENCES OF THE REVERSE STOCK SPLIT IN YOUR PARTICULAR CIRCUMSTANCES UNDER THE INTERNAL REVENUE CODE AND THE LAWS OF ANY OTHER TAXING JURISDICTION.
Tax Consequences to U.S. Holders of Common Stock.
We believe that the reverse stock split will qualify as a “reorganization” under Section 368(a)(1)(E) of the Internal Revenue Code. Accordingly, provided that the fair market value of the post-reverse stock split shares is equal to the fair market value of the pre-reverse stock split shares surrendered in the reverse stock split:
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A U.S. Holder will not recognize any gain or loss as a result of the reverse stock split (except to the extent of cash received in lieu of a fractional share).
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A U.S. Holder’s aggregate tax basis in his, her or its post-reverse stock split shares will be equal to the aggregate tax basis in the pre-reverse stock split shares exchanged therefor, reduced by the amount of the adjusted basis of any pre-reverse stock split shares exchanged for such post-reverse stock split shares that is allocated to any fractional share for which cash is received.
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A U.S. Holder’s holding period for the post-reverse stock split shares will include the period during which such stockholder held the pre-reverse stock split shares surrendered in the reverse stock split.
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Tax Consequences to the Company.
We do not expect to recognize any taxable gain or loss as a result of the reverse stock split.
Distribution and Costs
The Company will pay the cost of preparing, printing and distributing this Information Statement. Only one Information Statement will be delivered to multiple shareholders sharing an address, unless contrary instructions are received from one or more of such shareholders. Upon receipt of a written request at the address noted above, the Company will deliver a single copy of this Information Statement and future shareholder communication documents to any shareholders sharing an address to which multiple copies are now delivered.