Questions on Proposal No. 3

Q: How does the Board recommend that I vote on Proposal No. 3?

A: The Board unanimously recommends that you vote “ FOR ” the ratification of the selection of BPM. as the Company’s independent auditors.

Q: How are broker non-votes counted for Proposal No. 3?

A: A broker “non-vote” occurs when a nominee holding shares for a beneficial owner (i.e., in “street name”) does not have discretionary voting power with respect to a proposal and has not received instructions from the beneficial owner. If the nominee broker properly and timely requests instructions from the beneficial owner and does not receive them, under applicable rules the broker has discretionary authority to vote on certain routine matters such as the ratification of the Company’s independent registered public accounting firm in Proposal No. 3 and therefore there are no broker non-votes for Proposal No. 3.

Q: How are abstentions counted for Proposal No. 3?

A: Abstentions will not be counted as votes cast at the Annual Meeting with respect to Proposal No. 3 and will have no effect on the results of the vote for Proposal No. 3.

Q: What vote is required to approve Proposal No. 3?

A: Our Bylaws provide that an affirmative vote of the holders of a majority of the votes cast at the Annual Meeting is necessary for approval of Proposal No. 3.

SPECIAL FACTORS

Material Terms

The Board has authorized the Reverse Stock Split, in order to reduce the number of record holders of our Common Stock to fewer than 300. As a result of the Reverse Stock Split, stockholders holding fewer than 1,000 Pre-Reverse Stock Split shares as of the effective date of the Reverse Stock Split will have no further interest in the Company and will no longer be stockholders of the Company. Stockholders holding 1,000 or more pre-Reverse Stock Split shares as of the effective date of the Reverse Stock Split will continue to be stockholders of the Company after the Reverse Stock Split.

In lieu of issuing any fractional shares otherwise issuable to stockholders who hold fewer than 1,000 pre-Reverse Stock Split shares, we will make the cash payment of $1.20 per pre-Reverse Stock Split share to such stockholders. Stockholders owning at least 1,000 pre-Reverse Stock Split shares, who after the Reverse Stock Split will continue as stockholders, but own a fractional share as the result of the Reverse Stock Split, will receive a Cash Payment based on the pre-Reverse Stock Split share equivalent of their fractional share. All such fractional shares acquired by the Company in the Reverse Stock Split will be cancelled and returned to the status of authorized but unissued shares.

Purpose of the Transaction

The purpose of the Transaction is to reduce the number of record holders of our Common Stock to fewer than 300, thereby enabling us to deregister our Common Stock under the Exchange Act and suspend our duty to file periodic reports and other information with the SEC thereunder. This will enable us to terminate the Company’s status as a public reporting company with the SEC and reduce the financial and administrative costs incurred with respect to such status. The Transaction is an isolated transaction and is not pursuant to a plan to periodically increase a stockholder’s proportionate interest in our assets or earnings and profits.

In determining whether the number of our stockholders of record falls below 300 as a result of the Reverse Stock Split, we must count stockholders of record in accordance with Rule 12g5-1 under the Exchange Act. Rule 12g5-1 provides, with certain exceptions, that in determining whether issuers, including the Company, are subject to the registration provisions of the Exchange Act, securities are considered to be “held of record” by each person who is identified as the owner of such securities on the respective records of security holders maintained by or on behalf of the issuers.

As a result of the Reverse Stock Split, we anticipate that the number of shares of our Common Stock issued and outstanding will be reduced from 21,642,853 (the number outstanding as of April 24, 2014) to approximately 20,862. After completion of the proposed acquisition of fractional shares, we anticipate that the total number of record holders of our Common Stock will be reduced from approximately 3,363 to 184.

The cash-out of fractional stockholder interests represents the anticipated cancellation of 581,876 pre-Reverse Stock Split shares, or approximately 2.7% of our outstanding pre-Reverse Stock Split shares.

We estimate that the total cash to be paid to stockholders will be approximately $936,000. In addition, the expenses incurred to effect the Transaction are estimated to be approximately $330,000. The cash to be paid to stockholders and for expenses are expected to be paid out of our currently available cash. The fractional shares acquired in the Transaction will be cancelled and returned to the status of authorized but unissued shares of our Common Stock.

Upon the filing of the Form 15, our obligation to file periodic reports under the Exchange Act will be immediately suspended. Deregistration of our Common Stock will be effective 90 days after filing of the Form 15. Upon deregistration of our Common Stock, our obligation to comply with the requirements of the proxy rules and to file proxy statements under Section 14 of the Exchange Act will also be terminated. We will not be required to file periodic reports with the SEC in the future unless we subsequently file another registration statement under the Securities Act of 1933, as amended, or again have record holders of our Common Stock in excess of 300 on the first day of a subsequent fiscal year.

Background of the Transaction

We have been a publicly reporting company since 1987. As a public reporting company, we expected to be able to leverage our public company equity to raise capital and pursue acquisitions to help grow our business and expand our operations; however, in recent years, we have found it difficult to raise significant capital and at this point have no future plans to attempt to do so. Furthermore we have experienced limited trading volume, volatile trading prices and low trading prices for our Common Stock, and have derived only minimal benefits from being a public reporting company. In addition, as a result of the delisting of our Common Stock from the New York Stock Exchange effective May 4, 2007, there is currently no established public trading market for our Common Stock. Our Common Stock is currently quoted on the OTC Markets, formerly known as the “Pink Sheets”, under the symbol “HKFI.PK”. The OTC Markets is a centralized quotation service that collects and publishes market maker quotes for over-the-counter securities in real time. Over-the-counter market quotations, like those on the OTC Markets, reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions. Our Common Stock has failed to attract significant interest from institutional investors or market analysts, which could have created a more active and liquid market for our Common Stock. Our Board of Directors does not presently intend to raise capital through sales of our securities in a public offering or to acquire other businesses or entities using our securities as consideration.

As a result of the foregoing, we are not likely to make use of the advantages for raising capital, effecting acquisitions or other purposes that our status as a public reporting company may offer.

Chronology of Deliberations

From time to time in 2013, we began evaluating: (i) the advantages and disadvantages of being a public reporting company, including the costs with respect to filing reports and other information with the SEC, complying with certain of the rules and regulations under the Sarbanes-Oxley Act of 2002, and complying with applicable corporate governance requirements, and (ii) the low trading price for our Common Stock in view of the belief that it did not reflect the real value of the Company.

On March 12, 2014, the Board met to discuss the Transaction including, without limitation, the proposed timeline for the Transaction, the budget for paying fractional shares in a reverse stock split and the hiring of a financial advisor. Additionally the Board discussed the formation of the Special Committee to oversee the Transaction and ultimately established the Special Committee, consisting of Steven Scheiwe and Sam Cortez. The Board authorized the Special Committee to oversee and evaluate the Transaction.

On March 20, 2014, the Special Committee met with Gil Matthews of Sutter to discuss retaining Sutter to evaluate the fairness of the amount of the Cash Payment to be paid pursuant to the Reverse Stock Split. The Special Committee agreed to retain Sutter solely for the purpose of rendering an opinion as to the fairness, from a financial point of view, of the Cash Payment to our Stockholders. The Special Committee also further discussed the process and mechanics of the Reverse Stock Split.

The Special Committee held a meeting on April 17, 2014 at which management of the Company provided a recommendation of $1.20 per pre-Reverse Stock Split share for the Cash Payment. The Special Committee also further discussed the process and mechanics of the Reverse Stock Split.

On April 21, 2014, the Special Committee met with Sutter to discuss the Cash Payment to be paid in lieu of fractional shares, the Fairness Opinion to be issued by Sutter, the ratio for the Reverse Stock Split and other considerations for the Transaction. The Special Committee unanimously approved the Cash Payment for fractional shares, subject to further discussion and receipt of the Fairness Opinion from Sutter.

On April 25, 2014, the Special Committee met to receive a final presentation on the fairness of the Transaction from Sutter. The Special Committee unanimously approved the Cash Payment at this time.

Also on April 25, 2014, the Board held a meeting at which the Special Committee presented their recommendation that it was in the best interests of the Company and its stockholders for the Board to approve the Transaction. After a discussion the Board unanimously approved a recommendation of the Transaction to the stockholders.

Reasons for the Transaction

Although we have been a public reporting company since 1987, we believe that now we can derive only minimal benefits from being a public reporting company. Benefits of being a public reporting company (“Public Company Benefits”) typically include:

There is currently no established public trading market for our Common Stock and our Common Stock has failed to attract significant interest from institutional investors or market analysts. This has resulted in a relatively low trading volume and market capitalization, which has limited the liquidity benefit to our stockholders. In addition, the legal requirements of public reporting companies create large administrative and financial costs for us. As a small company with limited managerial resources, we believe that these financial resources and this time could more effectively be devoted to other purposes. See “Special Factors - Background of the Transaction” above for more information.

Our Board of Directors believes that consummating a “going private” transaction is a necessary step to reduce corporate overhead costs by eliminating the costs associated with being a public reporting company, including with respect to filing reports with the SEC, complying with certain of the rules and regulations under the Sarbanes-Oxley Act of 2002, and complying with applicable corporate governance requirements. Furthermore, our Board of Directors has determined that the costs of being a public reporting company currently outweigh the Public Company Benefits and, thus, that it is no longer in the best interests of the Company or its stockholders, creditors, or other stakeholders, for the Company to remain a public reporting company, for the reasons described below. The primary purpose of the Transaction is to reduce the number of record holders of our Common Stock to fewer than 300 to enable us to elect to deregister our Common Stock under the Exchange Act and suspend our duty to file periodic reports and other information with the SEC thereunder. The Board believes that the Transaction provides the most certainty for the Company to achieve this purpose.

Exchange Act Reporting Costs.

The Company incurs significant direct and indirect costs in complying with its periodic reporting and other obligations under the Exchange Act (collectively, the “Public Company Costs”), including: the legal, accounting, printing, mailing, public relations, compliance and administrative costs of preparing, reviewing, filing, printing and distributing the reports and other filings required under the Exchange Act; the broker and Exchange Agent charges for forwarding materials to beneficial holders of our Common Stock; management’s time and attention expended in preparing and reviewing such reports and other filings; and the substantially higher premiums for directors’ and officers’ insurance policies payable by public reporting companies. The Company’s direct, out-of-pocket costs comprising the Public Company Costs were approximately $639,950 during 2013.

While we presently have no specific plans to do so, we may, periodically, send stockholders financial and/or other information. We anticipate that our consolidated financial statements will be subject to audit only to the extent required by applicable law and covenants in any credit or financing agreement which we may enter. We expect that, in connection with any pending litigation, contractual, regulatory and general business issues, we will, from time to time, engage and confer with outside counsel, as needed.

In addition, the Board of Directors believes that the Transaction and subsequent deregistration of our Common Stock and the suspension of our duty to file periodic reports and other information with the SEC, will allow our management and employees to devote more time and effort to improving our operations.

Liquidity for Small Stockholders.

Our Board of Directors believes that our stockholders may be deterred from selling their shares because of the lack of an active trading market and because of disproportionately high brokerage costs. The trading volume in our Common Stock has been, and continues to be, limited. Our Common Stock does not trade every day. The average daily trading volume of our Common Stock over the twelve-month, six-month and three-month periods ended April 24, 2014 was approximately 15,414, 16,024 and 11,100 shares, respectively. Our Board of Directors believe that the Transaction would give stockholders who are cashed out an opportunity to receive a fair price in cash for their shares without having to pay disproportionately high brokerage commissions. The cash payment of $1.20 per share of our Common Stock held prior to the Reverse Stock Split represents a premium of approximately 13% over the volume weighted average closing price of our Common Stock during the 30-trading day period ended April 24, 2014.

Lack of Capital from Public Markets.

In addition to the Public Company Costs, the Company is not able to, and does not presently intend to exploit, many of the Public Company Benefits. The price of our Common Stock has been volatile but overall low over the past two years. The current trading price of our Common Stock would make using it as a vehicle to raise capital or to provide acquisition consideration extremely dilutive to our stockholders. As a result, the Company is not receiving any of the traditional Public Company Benefits, yet, the Public Company Costs continue to increase, substantially depleting the limited resources of the Company. The increase in costs arises, among other things, because of an increase in securities regulation. Our Board of Directors believes that the Public Company Costs, if continued, would be detrimental to the financial condition of the Company.

Other Public Company Benefits which exist for the benefit of public stockholders include: (i) the rights and protections afforded stockholders by the federal securities laws; (ii) the substantive requirements of the federal securities laws, including the Sarbanes-Oxley Act of 2002, which are imposed on public companies; and (iii) limitations and reporting requirements imposed on officers and directors of public companies, including restrictions on short-swing trading and the reporting obligations of officers and directors. These benefits were not considered to outweigh the Public Company Costs due to the small size of the Company, its limited staffing and the lack of a liquid trading market for our Common Stock. Accordingly, our Board of Directors has determined that the Public Company Costs, currently and in the foreseeable future, will continue to outweigh the Public Company Benefits and, thus, it is no longer in the best interests of the Company or its stockholders, creditors, or other stakeholders, for the Company to remain a public reporting company.

Effects of the Transaction

Effects Generally.

The Board of Directors is soliciting stockholder approval for the Reverse Stock Split including, without limitation, the Amendment. If approved by the stockholders and implemented by the Board of Directors, we anticipate that the Reverse Stock Split will occur as soon as possible after the date of the Annual Meeting. The Reverse Stock Split will become effective on the date the Company files the Amendment with the Secretary of State of the State of Delaware, or on any later date that the Company may specify in the Amendment. We intend to effect the Reverse Stock Split as soon as possible after the Reverse Stock Split is approved by our stockholders, subject to final authorization by our Board of Directors.

Effects of the Transaction on our Stockholders.

Based on information available to us, we estimate that the Transaction will reduce the total number of record holders of our Common Stock from approximately 3,363 to approximately 184. The reduction in the number of our record stockholders below 300 will enable us to deregister our Common Stock under the Exchange Act and suspend our duty to file periodic reports and other information with the SEC thereunder, which will substantially reduce the information required to be furnished by us to the public, including our stockholders.

We intend to apply for deregistration of our Common Stock and suspension of our duty to file periodic reports and other information as soon as practicable following completion of the Transaction. See “Special Factors - Purpose of the Transaction.” However, the Board reserves the right, in its discretion, to abandon, postpone or modify the Transaction prior to the effective date of the Reverse Stock Split if it determines that doing so is in our best interests and the best interests of our stockholders. See “Special Factors - Structure of the Transaction ¬Reservation” beginning on page 31.

When the Transaction is consummated, stockholders owning fewer than 1,000 pre-Reverse Stock Split shares will no longer have any equity interest and will not participate in our future earnings or any increases in the value of our assets or operations. Such stockholders owning fewer than 1,000 pre-Reverse Stock Split shares will, following the Transaction, have their pre-Reverse Stock Split shares cancelled and converted into the right to receive the Cash Payment. Within five to ten business days after the effective date of the Reverse Stock Split, the Exchange Agent will send these stockholders a letter of transmittal with instructions as to how such stockholders will be paid the Cash Payment. The letter of transmittal will include instructions on how to surrender stock certificates to our Exchange Agent. Stockholders should allow approximately five business days after mailing their properly completed documentation and stock certificates for such materials to be received by our Exchange Agent and should anticipate receiving their cash payment, without interest, after at least ten business days after the receipt of such materials by our Exchange Agent.

If your shares are held in a stock brokerage account or by a bank or other nominee, you are considered the beneficial owner of shares held in “street name” with respect to those shares. Your broker or other nominee is considered, with respect to those shares, the stockholder of record. Although the Transaction is designed to reduce the number of stockholders of record, we intend to treat stockholders holding Common Stock in street name held through a broker or other nominee in the same manner as stockholders whose shares are registered in their names for purposes of the Transaction. Nominees will be instructed to effect the Transaction for their beneficial owners. However, nominees may have different administrative procedures with respect to how they communicate with beneficial owners, and stockholders owning shares in street name should contact their nominee(s).

Stockholders owning at least 1,000 pre-Reverse Stock Split shares, who after the Reverse Stock Split will continue as stockholders, and option holders, will benefit from any future increase in our earnings. Such stockholders will continue to have an equity interest in the Company after the Transaction and will own a security, the liquidity of which may be severely restricted. Such stockholders will also be entitled to a Cash Payment, only if they hold a fractional share as the result of the Reverse Stock Split. They will receive a Cash Payment based on the pre-Reverse Stock Split share equivalent of their fractional share.

After the consummation of the Transaction, pursuant to Section 158 of the Delaware General Corporation Law and the Bylaws, the Company, through the Exchange Agent, will issue uncertified shares for those stockholders eligible to receive at least one (1) share of post-Reverse Stock Split common stock in exchange for their pre-Reverse Stock Split shares. Shares will be issued in book entry format eligible for DTC’s Direct Registration System. As a result, no physical stock certificate will be issued to stockholders continuing after the consummation of the Transaction.

Effects of the Transaction on our Affiliates.

As of April 24, 2014, our officers and directors hold an aggregate of 1,792,046 shares of our Common Stock and options for 150,000 shares of our Common Stock. They will receive Cash Payment for any fractional shares they hold, but any officer or director owning more than 1,000 pre-Reverse Stock Split shares will continue as a stockholder after the Reverse Stock Split. Additionally, none of our officers and directors will continue to be subject to the reporting requirements of Section 16 of the Exchange Act or be subject to the short-swing profit recapture provisions thereunder. Stockholders acquiring more than 5% of our Common Stock will no longer be required to report their beneficial ownership under the Exchange Act. The beneficial ownership percentage and the reduction in the number of Common Stock outstanding following the Transaction may increase or decrease depending on purchases, sales, and other transfers of Common Stock by our stockholders prior to the effective time of the Reverse Stock Split, and the number of shares that are actually cashed-out in the Transaction. The beneficial ownership percentage of shares of our Common Stock held by our officers and directors and the beneficial ownership percentage of the stockholders who will continue to hold our Common Stock after the Transaction, may increase or decrease as a result of such purchases, sales and other transfer of shares of our Common Stock by our stockholders prior to the effective time of the Reverse Stock Split, and depending on the number of shares that are actually cashed-out in the Transaction.

Potential Disadvantages of the Transaction to Stockholders.

While we believe that the Transaction will result in the benefits described above, several disadvantages should also be noted:

Financial Effects of the Transaction.

Completion of the Transaction will require us to spend approximately $330,000, which includes legal, financial and other fees and costs related to the Transaction. This estimate does not include the cost of the aggregate cash payment to Discontinued Stockholders, which we estimate will be approximately $936,000. These costs will be offset by the costs we would otherwise incur as a public reporting company to comply with SEC reporting requirements, which we estimate to be approximately $639,950 per year.

Trading Market for Our Common Stock.

There is currently no established public trading market for our Common Stock. Our Common Stock is currently quoted on the OTC Markets, formerly known as the “Pink Sheets”, under the symbol “HKFI.PK”. The OTC Markets is a centralized quotation service that collects and publishes market maker quotes for over-the-counter securities in real time. Over-the-counter market quotations, like those on the OTC Markets, reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions. Subsequent to the Transaction, our Common Stock may no longer be traded on the OTC Markets.

Fairness of Transaction

The Board established the Special Committee and delegated to it the authority to review, analyze and evaluate the fairness of the Transaction, present its conclusion and make a recommendation to the Board, after which the Board could determine whether to adopt the Special Committee’s conclusion on fairness or undertake its own evaluation. The Special Committee fully reviewed and considered the terms, purposes, alternatives and effects of the Transaction and has determined that the Transaction is in the best interests of the Company and our stockholders and is substantively and procedurally fair to the stockholders of the Company, including: (i) our stockholders who will be cashed-out as a result of the Transaction and (ii) our stockholders who will continue to hold our Common Stock after the Transaction. After studying the Transaction and its anticipated effects on our stockholders, the Special Committee unanimously approved the Transaction and deemed it procedurally and substantively fair to all of the Company’s stockholders and to the Company and recommended to the Board of Directors that it approve the Transaction.

The Board of Directors has fully reviewed and considered the terms, purpose, alternatives and effects of the Transaction, together with the analysis of the Special Committee described in this section “Fairness of the Transaction,” and has unanimously adopted the determination and recommendation of the Special Committee regarding the fairness of the Transaction.

Substantive Fairness of the Transaction.

In determining the fairness of the Transaction, the Special Committee considered numerous factors including, but not limited to those discussed below, in addition to the alternative transactions discussed in “Special Factors — Background of the Transaction” beginning on page 16. In light of these factors, the Special Committee believes that the Transaction is substantively fair to the Company’s stockholders, including our stockholders who will be cashed-out as a result of the Transaction and our stockholders who will continue to hold our Common Stock after the Transaction. The Special Committee did not assign specific weight to the factors set forth below in a formulaic fashion. Moreover, in their considerations, individual directors may have given differing weights to different factors. However, the Special Committee did place special emphasis on the significant cost and time savings we expect the Company to realize from deregistration of our Common Stock under the Exchange Act and the suspension of our duty to file periodic reports and other information with the SEC thereunder.

Significant Cost and Time Savings .

By deregistering our Common Stock and suspending our duty to file periodic reports with the SEC, we expect to realize recurring annual cost savings of approximately $639,950, which represents our Public Company Costs and includes savings from personnel expense relating to the time spent by our management to prepare and review our reports required to be filed with the SEC under the Exchange Act. In addition, the Special Committee has determined that the Public Company Costs, currently and in the foreseeable future, will continue to outweigh the Public Company Benefits and, thus, it is no longer in the best interests of the Company or its stockholders, creditors, or other stakeholders, for the Company to remain a public reporting company. See the “Special Factors -Purpose of the Transaction” and “Special Factors - Reasons for the Transaction” beginning on pages 16 and 17, respectively.

Opportunity to Remain a Holder of, or to Liquidate, Common Stock .

Another factor considered by the Special Committee in determining the fairness of the Transaction to holders of our Common Stock is the opportunity the Company’s stockholders have to remain stockholders or to liquidate their Company holdings. Current holders of fewer than 1,000 shares of our Common Stock can either remain Company stockholders by acquiring additional shares so that they own at least 1,000 shares of our Common Stock immediately before the effective date of the Reverse Stock Split or be cashed out in the Reverse Stock Split. If a stockholder purchases additional shares of our Common Stock, then the stockholder may incur brokerage fees or commissions. Holders of fewer than 1,000 shares of our Common Stock at the effective time of the Reverse Stock Split will have their fractional post-Reverse Stock Split shares purchased by the Company at a premium price without paying any brokerage fees or commissions. The Special Committee did not quantify the consideration of brokerage fees and commissions paid for having such fractional shares cashed out in the Reverse Stock Split since such fees, if any, vary significantly depending upon the method used to acquire or dispose of shares. Conversely, stockholders who own 1,000 shares or more and who desire to liquidate their shares in connection with the Transaction at the premium price offered can reduce their holdings to less than 1,000 shares by selling or gifting shares prior to the effective date of the Reverse Stock Split. The Special Committee did not place undue emphasis on this factor due to the limited trading market for our Common Stock. See “Special Factors - Reasons for the Transaction” and “Special Factors - Structure of the Transaction” beginning on pages 17 and 28, respectively.

Recent and Historical Trading Prices .

The Special Committee considered recent and historical trades of our Common Stock. There is currently no established public trading market for our Common Stock. Our Common Stock is currently quoted on the OTC Markets, formerly known as the “Pink Sheets”, under the symbol “HKFI.PK”. The OTC Markets is a centralized quotation service that collects and publishes market maker quotes for over-the-counter securities in real time. Over-the-counter market quotations, like those on the OTC Markets, reflect inter-dealer prices, without retail mark-up, mark-down, or commission and may not necessarily represent actual transactions.

The recent and historical trading of our Common Stock relates to the fairness of the Transaction to stockholders because it provides some insight into how the market has historically valued our Common Stock. Since Discontinued Stockholders will no longer be able to directly participate in the financial success of the Company, the Cash Payment paid to these stockholders as a result of the Reverse Stock Split represents the final opportunity to obtain value for their investment. Although not a perfect measure, the trends over time in the market price of our Common Stock reflect market perceptions about the Company’s intrinsic value.

Based on the foregoing, the Special Committee determined that a Cash Payment based on the historical trading prices of our Common Stock would be an appropriate method of determining the fair value of shares of our Common Stock being cashed out in the Transaction. In its deliberations concerning the fairness of the Transaction, the Special Committee considered:

The cash payment to stockholders of $1.20 per share represents a 13% premium to the volume weighted average closing price of our Common Stock during the 30-trading day period ended April 24, 2014, which was $1.06. The cash payment to our stockholders of $1.20 per share represents a premium of approximately 26.3% over the $0.95 closing price of our Common Stock on April 24, 2014. The Special Committee determined that, as a result these premiums, the Cash Payment was a fair price for the shares our Common Stock being cashed out in the Transaction in light of the factors considered by the Special Committee.

Net Book Value of Our Common Stock, Excluding Minority Interest and Intangible Assets .

Net book value is based upon the historical cost of the Company’s assets and ignores the value of the company as a going concern. Our net book value of our Common Stock as of: (i) January 28, 2012 and January 26, 2013 was $10,991,000 and $(389,000), respectively, and (ii) January 25, 2014 was $202,000.

Liquidity of Our Common Stock .

The Special Committee discussed the lack of an active trading market for our Common Stock, the lack of any market analyst coverage of the Company and our inability to access the public capital markets as some of the indications that our stockholders are not receiving the typical Public Company Benefits. Specifically, the Special Committee considered that our Common Stock had an average daily trading volume over the six-month period ended April 24, 2014 of approximately 16,024 shares, respectively. The Special Committee determined that the limited liquidity of our Common Stock was an additional indication of fairness to the Discontinued Stockholders. See “Special Factors - Reasons for Transaction” beginning on page 17.

Equal Treatment of Affiliated and Unaffiliated Holders of Our Common Stock .

The Transaction will not affect holders of our Common Stock differently on the basis of affiliate status. The sole determining factor in whether a stockholder will no longer hold our Common Stock after the Transaction or will continue as a holder of our Common Stock as a result of the Transaction is the number of shares of our Common Stock held by the stockholder as of the effective date of the Reverse Stock Split.

Minimum Effect on Voting Power .

The Transaction will have a minimum effect on the voting power of the Company’s stockholders. The voting and other rights of our Common Stock will not be affected by the Transaction. The only effect of the Transaction on the Company’s voting power will be a slight change in the overall ownership percentage of the stockholders who continue to hold our Common Stock following the Transaction.

Liquidation Value .

The Special Committee viewed the liquidation value of the Company to be an inappropriate measure for the purpose of evaluating the fairness of the Cash Payment. There is no present intention of liquidating the Company. Further, the Transaction will only result in the termination of an equity interest by the stockholders reduced to fractional shares as a result of the Reverse Stock Split. The total of all such shares represents approximately 2.7% of our outstanding pre-Reverse Stock Split shares. A liquidation process would also involve additional legal fees, costs of sale and other expenses that would reduce any amounts that stockholders might receive upon a liquidation. Given the other factors considered by the Special Committee as described in this Proxy Statement, the Special Committee did not pursue a liquidation value approach.

No Firm Offers .

We have not received during the last two years any firm, unconditional offers for a merger or consolidation with or into another company, or vice versa, or the sale or transfer of all or substantially all of our assets to another company, or a purchase of our securities by another person that would involve a change in our control on terms satisfactory to the Company.

Potential Disadvantages of the Transaction

The Special Committee also considered possible disadvantages effecting the Transaction including, but not limited to the following:

Termination of Publicly Available Information About the Company .

After deregistration of our Common Stock and suspension of our duty to file periodic reports and other information with the SEC, information regarding our operations and financial results that is currently available to the general public and our stockholders will no longer be readily available, and stockholders seeking information about us will have to contact us directly to receive such information. We may or may not provide stockholders with information, upon request or otherwise, that we are not required by law to provide. The Special Committee believes that the overall benefits to the Company of no longer being a public reporting company substantially outweigh the disadvantages associated with a lack of publicly available information about the Company. See “Special Factors - Effects of the Transaction” beginning on page 19.

Reduction of Market for Our Common Stock .

After the completion of the Transaction and the deregistration of our Common Stock and suspension of our duty to file periodic reports and other information with the SEC, our stockholders may experience reduced liquidity for their shares of our Common Stock, even if our Common Stock continues to be quoted in the OTC Markets. See “Special Factors - Effects of the Transaction” beginning on page 19 for more information.

Possible Post-Transaction Decline in Price of Our Common Stock due to illiquidity .

After the completion of the Transaction, our stockholders may experience reduced liquidity for their shares of our Common Stock. This reduced liquidity may adversely affect the market price of our Common Stock. See “Special Factors - Effects of the Transaction” beginning on page 19 and “Termination of Publicly Available Information about the Company” immediately below.

Another potential disadvantage of the Transaction is that we will no longer have the Public Company Benefits, such as better access to the capital markets for issuances of securities. We would still have access to capital markets, but if we were to conduct a public offering of our securities, we would have to again become a reporting company, and the expenses that we are seeking to eliminate would then be reinstated. Furthermore we would no longer have the benefit of being able to use public securities in attracting and retaining executives and other employees. We believe that the cost savings from ceasing to be a public reporting company outweigh the drawbacks of losing more ready access to the capital markets.

Sarbanes-Oxley Act and Other Reporting and Disclosure Provisions Will No Longer Apply to the Company .

After the completion of the Transaction and the deregistration of our Common Stock and suspension of our duty to file periodic reporting and other information with the SEC, we will no longer be subject to the provisions of the Sarbanes-Oxley Act of 2002 or the liability provisions of the Exchange Act that apply to public companies, including the requirement that the chief executive officer and the chief financial officer certify the accuracy of the financial statements contained in our Exchange Act filings. In addition, our officers, directors and 10% or greater stockholders will no longer be subject to the short-swing profit recapture provisions and reporting requirements of Section 16 of the Exchange Act. See “Special Factors - Effects of the Transaction” beginning on page 19.

Certain Stockholders Will Not Participate in Future Increases in Our Value .

Following the Transaction, stockholders who own less than 1,000 pre-Reverse Stock Split shares will no longer have an equity interest in the Company and will not participate in our future earnings or any increases in the value of our assets or operations. See “Special Factors - Effects of the Transaction” beginning on page 19.

Although potentially relevant to a determination of fairness of the Transaction, the factors listed below, for the reasons given, were determined by the Special Committee to not be applicable to the Company and were not considered or were not given any weight by the Special Committee.

The Special Committee believes that all of the factors mentioned above, both favorable and unfavorable, when viewed together support a conclusion that the Transaction is substantively fair to all the Company stockholders, including those stockholders who will be cashed out as a result of the Transaction and those who will continue to be stockholders of the Company after the Transaction. The Special Committee set the cash payment Price at $1.20 based on the factors described above, and in particular, the premium that the Cash Payment represents over the historic trading prices and net book value of our Common Stock as discussed above.

Fairness Opinion of Sutter.

The Special Committee considered the financial analyses reviewed and discussed with the Special Committee by representatives of Sutter and the opinion of Sutter delivered on April 25, 2014 with respect to the fairness, from a financial point of view, of the Cash Payment to certain stockholders of the Company. The Special Committee engaged Sutter because of its qualifications, reputation and experience in the valuation of businesses and securities. There is no material relationship that has existed, or is mutually understood to be contemplated in the future, between Sutter and the Company. Other than the valuation analysis prepared by Sutter at the request of the Special Committee in March 2014, there has been no material relationship between the Company and Sutter.

Procedural Fairness of the Transaction.

In addition to the fairness of the substance of the Transaction, the Special Committee believes that the process by which decisions were made regarding the Transaction is procedurally fair to the Company’s stockholders, including those stockholders who will be cashed out as a result of the Transaction and to those stockholders who will continue to be stockholders of the Company after the Transaction.

The Special Committee noted that stockholders can purchase, subject to availability, prior to the effective date of the Reverse Stock Split, such additional shares of our Common Stock through the market in order to make their holdings of our Common Stock exceed 1,000 shares, thereby avoiding the result of holding only fractional shares from the Reverse Stock Split.

The Board is recommending, but stockholders are determining the outcome.

The Special Committee has not granted unaffiliated stockholders access to our corporate files and no one has retained any unaffiliated representative to act solely on behalf of unaffiliated stockholders for any purpose. With respect to unaffiliated stockholders’ access to our corporate files, the Special Committee believes that this Proxy Statement, together with our other filings with the SEC, provide adequate information for unaffiliated stockholders. In deciding not to adopt these additional procedures, the Special Committee also took into account factors such as our size and financial capacity and the costs of such procedures.

Summary of Fairness Opinion

Pursuant to an engagement letter dated March 25, 2014, the Special Committee retained Sutter to render an opinion to the Special Committee as to whether the Cash Payment represents a fair value, from a financial point of view, for our Common Stock.

On April 25, 2014, Sutter delivered its opinion to the Special Committee that, as of April 25, 2014, and based upon and subject to the various assumptions made, procedures followed, matters considered and qualifications and limitations set forth in the opinion, the Cash Payment represents a fair value, from a financial point of view, for our Common Stock. Sutter updated its opinion on , 2014.

The full text of Sutter’s updated written opinion, dated    , 2014, is attached as Exhibit A and is incorporated by reference herein. Stockholders of the Company are urged to read the entire opinion carefully and in its entirety to learn about the assumptions made, procedures followed, matters considered and limits on the scope of the review undertaken by Sutter in rendering its opinion. The analysis performed by Sutter should be viewed in its entirety; none of the methods of analysis should be viewed in isolation when reaching a conclusion on whether the consideration was fair, from a financial point of view. The opinion addresses only the fairness of the Cash Payment, from a financial point of view, to the value of our Common Stock as of April 25, 2014, and does not address the Company’s underlying business decision to proceed with or effect the Transaction or the likelihood of consummation of the Transaction. Sutter’s opinion was directed to the Special Committee in connection with its consideration of the Transaction and was not intended to be, a recommendation to the Special Committee, the Board of Directors, any security holder or any other person as to how to act or vote with respect to any matter relating to the Transaction.

In arriving at its opinion, Sutter:

For its opinion, Sutter assumed and relied upon, without independent verification, the accuracy and completeness of the information that was publicly available or supplied or otherwise made available to it by the Company and further relied upon the assurances of the management of the Company that information furnished by them for purposes of its analysis did not contain any material omissions or misstatements of material fact. With respect to the Financial Projections, Sutter was advised by the management of the Company and assumed that they have been reasonably prepared on bases reflecting the best currently available estimates and judgments of the management of the Company of the future financial performance of the Company, and Sutter expressed no view as to the assumptions on which they are based.

Sutter did not make any independent valuation or appraisal of the assets or liabilities (fixed, contingent or otherwise) of the Company, nor was it furnished with any such valuations or appraisals. Sutter did not evaluate the solvency of the Company under any law of any jurisdiction relating to bankruptcy, insolvency or similar matters.

Sutter is not a legal, tax, accounting or regulatory advisor. Sutter is a financial advisor only and has relied upon, without independent verification, the assessment of the Company with respect to legal, tax, accounting and regulatory matters. Sutter’s opinion did not address the underlying business decision of the Company to effect the Reverse Stock Split or the relative merits of the Reverse Stock Split as compared to any other alternative business transaction, or other alternatives, or whether or not such alternatives could be achieved or are available.

Sutter’s opinion is necessarily based on financial, economic, market and other conditions as in effect on, and the information made available to it, as of April 25, 2014. Events occurring after such date may affect the opinion and the assumptions used in preparing it, and Sutter did not assume any obligation to further update, revise or reaffirm the opinion.

Sutter’s opinion addressed only the fairness, from a financial point of view, of the Cash Payment per fractional share of the Company’s Common Stock to the Company’s stockholders pursuant to the Transaction, as of April 25, 2014. The issuance of Sutter’s opinion was approved by a Sutter’s fairness opinion committee.

Summary of Material Financial Analyses

The following is a summary of the material financial analyses performed by Sutter in connection with Sutter’s opinion relating to the Cash Payment in connection with the Transaction. The rendering of an opinion is a complex analytic process involving various determinations as to the most appropriate and relevant methods of financial analysis and the application of those methods to the particular circumstances. Therefore, this summary does not purport to be a complete description of the analyses performed by Sutter. The order of analyses described below does not represent the relative importance or weight given to those analyses by Sutter. Some of the summaries of the financial analyses include information presented in tabular format. In order to fully understand Sutter’s financial analyses, the tables must be read together with the text of each summary, as the tables alone do not constitute a complete description of the financial analyses. Considering the data below without considering the full narrative description of the financial analyses, including the methodologies and assumptions underlying the analyses, could create a misleading or incomplete view of Sutter’s financial analyses.

In performing its analyses, Sutter made numerous assumptions with respect to industry performance, general business and economic conditions and other matters, many of which are beyond the control of the Company. Sutter does not assume any responsibility if future results are materially different from those discussed. Any estimates contained in these analyses are not necessarily indicative of actual values or predictive of future results or values, which may be significantly more or less favorable than as set forth below.

Selected Publicly Traded Comparable Companies .

In order to assess how the public market values shares of publicly traded companies similar to the Company, Sutter reviewed and compared certain financial information relating to the Company with selected guideline companies, which, in the exercise of its professional judgment and based on its knowledge of the industry, Sutter deemed relevant to the Company. Although none of the selected guideline companies is identical to the Company, Sutter selected these companies because they had publicly traded equity securities, were retailers operating primarily in shopping centers, and were deemed to be similar to the Company in one or more respects including size and financial performance. The selected comparable companies were:

bebe stores, inc.  

Cache, Inc.  

The Cato Corporation  

Christopher & Banks Corporation  

Citi Trends, Inc.  

Destination XL Group, Inc.  

Haverty Furniture Companies, Inc.  

Kirkland's, Inc.  

Pacific Sunwear of California, Inc.  

Shoe Carnival, Inc.

For the Company and each of the selected guideline companies, Sutter calculated and compared various financial multiples and ratios of the Company and the selected guideline comparable companies based on each respective company’s public filings for historical information and consensus third-party research estimates from yahoofinance.com for forecasted earnings per share ("EPS").

In its review of the selected guideline companies, Sutter considered, among other things:

enterprise values (“EV”) as a multiple of (i) reported revenues for the latest twelve-month period (“LTM”), (ii) reported LTM earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (iii) reported LTM earnings before interest and taxes (“EBIT”); and

market price as a multiple of EPS ("P/E ratios") reported for the LTM and for consensus EPS estimates for the current and next fiscal years.

The multiples as of April 24, 2014, are summarized in the following table:

Sutter considered that although the selected guideline companies were used for comparison purposes, no business of any selected guideline company was either identical or directly comparable to the Company’s business. Accordingly, Sutter’s comparison of selected guideline companies to the Company and analyses of the results of such comparisons was not purely mathematical, but instead necessarily involved complex considerations and judgments concerning differences in financial and operating characteristics and other factors that could affect the relative values of the selected guideline companies and the Company.

Selected Guideline Transaction Analysis .

Sutter reviewed and compared the purchase prices and financial multiples paid in selected other transactions that occurred in the prior four years for companies that were retailers operating primarily in shopping centers, and were deemed to be similar to the Company in size.

Multiples for the selected guideline transactions were based on publicly available information at the relevant agreement date for each transaction. For each of the selected guideline transactions, Sutter reviewed:

EV as a multiple of (i) reported revenues for the latest twelve-month period (“LTM”), (ii) reported LTM earnings before interest, taxes, depreciation and amortization (“EBITDA”) and (iii) reported LTM earnings before interest and taxes (“EBIT”); and

P/E ratios reported for the LTM and estimated by management for the then-current and next fiscal years.

The multiples as of the respective agreement dates are summarized in the following table:

Sutter compared the Company’s implied enterprise value as a multiple of LTM revenue and LTM EBITDA to the corresponding multiples for the selected transactions described above. Sutter also compared the Company’s implied LTM price to earnings multiple to the LTM price to earnings multiples for the selected transactions. Sutter gave little weight to the selected guideline transactions because most of the acquired companies were larger and more profitable than the Company,

Discounted Cash Flow Analysis .

Sutter performed a discounted cash flow ("DCF") analysis on the Company by calculating ranges of the estimated net present value of the unlevered after-tax free cash flows attributable to stockholders of the Company that the Company forecasted to generate fiscal year 2014 through fiscal year 2018. Sutter’s DCF analysis was based on the Mid Case, High Case and Low Case EBITDA financial projections provided by the Company’s management in the following table. All projections are forward looking statements, which are subject to a variety of risks and uncertainties, as discussed in “Cautionary Statement Regarding Forward Looking Statements” on page 6.

In performing its discounted cash flow analysis, Sutter calculated ranges of the estimated present values of the Company’s unlevered, after-tax free cash flows attributable to stockholders of the Company that the Company forecasted to generate for fiscal year 2014 to fiscal year 2018 by applying discount rates ranging from 15% to 17%, reflecting Sutter’s estimates of the Company’s weighted average cost of capital. Sutter calculated an implied price per share for the Company’s Common Stock based on a range of terminal EBITDA multiples of 6.0x to 7.0x to the Company’s estimated terminal year EBITDA. The range of terminal EBITDA multiples utilized in Sutter’s discounted cash flow analysis was based on the EBITDA multiples of selected guideline companies. The range of estimated present values of these estimated terminal value amounts was then calculated by applying discount rates ranging from 15% to 17%. Combining the total present value of the estimated unlevered free cash flows and the present value of the terminal values resulted in a range of implied enterprise values for the Company. Sutter then deducted outstanding interest-bearing debt and added outstanding cash from the Company's balance sheet as of January 26, 2014, to determine a range of implied equity values of the Company. The following table sets forth the calculated implied prices per share in Sutter’s analyses:

General

The summary set forth above does not contain a complete description of the analyses performed by Sutter, but does summarize the material analyses performed by Sutter in rendering its opinion. The preparation of a fairness opinion is a complex process and is not necessarily susceptible to partial analysis or summary description. Sutter believes that its analyses and the summary set forth above must be considered as a whole and that selecting portions of its analyses or of the summary, without considering the analyses as a whole or all of the factors included in its analyses, would create an incomplete view of the processes underlying the analyses set forth in the Sutter opinion. In arriving at its opinion, Sutter considered the results of all of its analyses and did not attribute any particular weight to any factor or analysis. Instead, Sutter made its determination as to fairness on the basis of its experience and financial judgment after considering the results of all of its analyses. The fact that any specific analysis has been referred to in the summary above is not meant to indicate that this analysis was given greater weight than any other analysis. In addition, the ranges of valuations resulting from any particular analysis described above should not be taken to be Sutter’s view of the actual value of the Company.

Sutter is a full-service investment banking firm headquartered in San Francisco, California. Sutter’s investment bankers are dedicated to providing experienced professional assistance to its clients in the areas of financial advisory services, mergers and acquisitions, fairness opinions, business valuations, litigation support, bankruptcy, securities trading, and public finance. The Company’s Special Committee selected Sutter because of its qualifications, reputation and experience in the valuation of businesses and securities in connection with mergers and acquisitions. There is no material relationship that has existed, or is mutually understood to be contemplated in the future, between Sutter and the Company.

Sutter is acting as financial advisor to the Special Committee in connection with the Transaction. Pursuant to its engagement letter with Sutter, the Company has agreed to pay Sutter an aggregate cash fee of up to $60,000. Of such fee, $10,000 was paid upon execution of the engagement letter, $30,000 was paid at the time Sutter rendered its opinion and the balance of $20,000 shall be paid at the time the Opinion, is first published, quoted or publicly referred to in any proxy statement or other public document (including, without limitation, any publicly available filing with any Agency) relating to the Transaction.

In addition, the Company has agreed to indemnify Sutter for certain liabilities that may arise out of its engagement by the Special Committee and the rendering of Sutter’s opinion. In the ordinary course of business, Sutter and its affiliates may acquire, hold or sell, for its and its affiliates’ own accounts and for the accounts of customers, equity, debt and other securities and financial instruments (including bank loans and other obligations) of the Company and the other parties to the transaction, and, accordingly, may at any time hold a long or a short position in such securities. Sutter and its affiliates may in the future provide investment banking and other financial services to the Company and their respective affiliates for which Sutter would expect to receive compensation.

Structure of the Transaction

The Transaction consists of the Reverse Stock Split, with the Cash Payment being made in lieu of issuing fractional shares to stockholders. The Reverse Stock Split will become effective on the date the Company files the Amendment with the Secretary of State of the State of Delaware. On the effective date of the Reverse Stock Split each stockholder of record will receive one share of Common Stock for every 1,000 pre-Reverse Stock Split shares held in his or her account as of such date. Any stockholder of record who holds fewer than 1,000 pre-Reverse Stock Split shares in his or her account at the time of the Reverse Stock Split will receive a cash payment of $1.20 per pre-Reverse Stock Split share and will no longer be a stockholder of the Company after the Transaction. Any stockholder who after the Reverse Stock Split will continue as a stockholder, but owns a fractional share, will receive the Cash Payment on the pre-Reverse Stock Split equivalent to their fractional share.

We intend for the Transaction to treat stockholders holding Common Stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are held of record in their own names, and nominees will be instructed to effect the Transaction for their beneficial holders. However, nominees may have different procedures and stockholders holding shares in street name should contact their nominees.

In general, the Transaction can be illustrated by the following examples:

Example 1 .

A stockholder holds 999 shares of our Common Stock in his account before the effective date of the Reverse Stock Split. Instead of receiving a fractional share of our Common Stock immediately after the Reverse Stock Split, the stockholder’s shares will be converted into the right to receive cash. The stockholder would receive $1,198.80 ($1.20 x 999 shares). Note : If the stockholder wants to continue the investment in the Company, before the effective date of the Reverse Stock Split, the stockholder can buy at least one more share of Common Stock. The stockholder would have to act far enough in advance of the Reverse Stock Split so that the purchase is completed and the additional share or shares are credited in his account by the effective date.

Example 2 .

A stockholder holds 1,000 shares of our Common Stock as of the effective date of the Reverse Stock Split. After the Reverse Stock Split, the stockholder will hold one share of Common Stock.

Example 3 .

A stockholder has two separate accounts. As of the effective date of the Reverse Stock Split, the stockholder holds 500 shares of our Common Stock in one account and 500 shares of Common Stock in the other. If we can determine that the two separate accounts belong to the same person (based upon the name of the account or the social security number or address associated with the account), then we will treat the two accounts as a single account. Accordingly, the stockholder will be treated as having 1,000 pre-Reverse Stock Split shares. In the Reverse Stock Split, the stockholder’s stock will be converted into one share of our Common Stock.

If, however, we are unable to determine that the two separate accounts belong to the same person, then the stockholder will receive cash payments equal to the Cash Payment of the Common Stock in each account instead of receiving fractional shares. In this case, the stockholder would receive two checks, one of which will be for $600 ($1.20 x 500 shares) and the second of which will be for $600 ($1.20 x 500 shares). Note : If the stockholder wants to be certain to continue as a stockholder in the Company, the stockholder can consolidate or transfer two accounts before the effective date of the Reverse Stock Split into an account with at least 1,000 pre-Reverse Stock Split shares. Alternatively, the stockholder can buy at least 500 more shares for the first account and 500 more shares for the second account, and hold them in such stockholder’s respective accounts. The stockholder would have to act far enough in advance of the Reverse Stock Split so that the consolidation or the purchase is completed by the effective date.

Example 4 .

A stockholder holds 999 shares of our Common Stock in street name in a brokerage account as of the effective date of the Reverse Stock Split. We intend for the Transaction to treat stockholders holding shares of our Common Stock in street name through a nominee (such as a bank or broker) in the same manner as stockholders whose shares are registered in their names. Nominees will be instructed to effect the Transaction for their beneficial holders. If this occurs, the stockholder will receive, through the stockholder’s broker, a check for $1,198.80 ($1.20 x 999). However, nominees may have a different procedure and stockholders holding shares of our Common Stock in street name should contact their nominees.

Stockholder Approval

A majority of the outstanding shares of our Common Stock will constitute a quorum for the purpose of approving the Amendment to the Certificate of Incorporation to effect the Transaction. Assuming the presence of a quorum, the affirmative vote of the holders of a majority of outstanding shares of our Common Stock entitled to vote at the Annual Meeting is required to approve the Transaction. Our current directors and executive officers have indicated that they intend to vote the shares of our Common Stock for which they hold or share voting power (1,792,046 shares of our Common Stock, or 8.3% of our issued and outstanding shares of Common Stock eligible to vote at the Annual Meeting) “ FOR ” the Transaction.

Effective Date

The Reverse Stock Split will become effective on the date the Company files the Amendment with the Secretary of State of the State of Delaware, or on any later date that the Company may specify in the Amendment. We intend to effect the Reverse Stock Split as soon as possible after the Reverse Stock Split is approved by our stockholders, subject to final authorization by our Board of Directors.

Exchange of Certificates for Cash Payment

We will affect the Reverse Stock Split as soon as practicable after receiving stockholder approval. Continental Stock Transfer & Trust Company has been appointed as the Exchange Agent to carry out the exchange of certificates for the cash payment of $1.20 per pre-Reverse Stock Split share.

Within five to ten business days after the effective date of the Reverse Stock Split, the Exchange Agent will send these stockholders a letter of transmittal with instructions as to how such stockholders will be paid the Cash Payment. The letter of transmittal will include instructions on how to surrender stock certificates to our Exchange Agent. Upon proper completion and execution of the letter of transmittal, and the return of the letter of transmittal and accompanying share certificate(s) to the Exchange Agent, and such other documentation as the Company or the Exchange Agent may reasonably require, each stockholder entitled to receive payment will receive payment from the Exchange Agent as outlined in the letter of transmittal. Stockholders should allow for approximately five business days after mailing for the Exchange Agent to receive the letter of transmittal and accompanying stock certificate and after at least ten business days following receipt of properly completed materials by the Exchange Agent for payment to be made. In the event we are unable to locate a stockholder, or if a stockholder fails to properly complete, execute and return the letter of transmittal and accompanying stock certificate to the Exchange Agent, any funds payable to such stockholder pursuant to the Transaction will be held in escrow until a proper claim is made, subject to applicable abandoned property laws. In lieu of issuing any fractional shares otherwise issuable to stockholders who hold fewer than 1,000 pre-Reverse Stock Split shares, we will make the cash payment of $1.20 per pre-Reverse Stock Split share to such stockholders, without interest. Stockholders owning at least 1,000 pre-Reverse Stock Split shares, who after the Reverse Stock Split will continue as stockholders, but own a fractional share as the result of the Reverse Stock Split, will receive a Cash Payment based on the pre-Reverse Stock Split share equivalent of their fractional share. All such fractional shares acquired by the Company in the Reverse Stock Split will be cancelled and returned to the status of authorized but unissued shares.

No service charges will be payable by stockholders in connection with the exchange of certificates for cash. All such expenses will be borne by us except for expenses, if any, imposed by your nominee. Additional instructions with respect to lost or destroyed certificates will be included with the letter of transmittal that we will send to stockholders after the effective date of the Reverse Stock Split. In the event that the Company is unable to locate certain stockholders or if a stockholder fails to properly complete, execute, and return the letter of transmittal and accompanying stock certificate(s) to the Exchange Agent, any funds payable to such holders pursuant to the reverse stock split will be held in escrow until a proper claim is made, subject to applicable unclaimed property and escheat laws. Until the cash payments have been delivered to the appropriate public official pursuant to the abandoned property laws, such payments will be paid to the holder of the eligible certificate or his, her or its designee, without interest, at such time as the Common Stock have been properly presented for exchange.

For purposes of determining ownership of shares of our Common Stock on the effective date of the Reverse Stock Split, such shares will be considered held by the person in whose name such shares are registered on our Exchange Agent’s records. We intend that stockholders holding shares of our common stock in street name will be treated in the same manner as registered stockholders whose shares are registered in their names. Prior to the effective date of the Reverse Stock Split, we will conduct an inquiry of all brokers, banks and other nominees that hold shares of our Common Stock in street name. We will ask them to effect the Reverse Stock Split for their beneficial holders holding shares of our Common Stock in street name. We will rely on these brokers, banks and other nominees to provide us with information on how many fractional shares will be cashed out. However, these brokers, banks and other nominees may have different procedures than the Company’s procedures for registered stockholders for processing the Reverse Stock Split. If you hold your shares in street name with a bank, broker or other nominee, and if you have any questions in this regard, we encourage you to contact your bank, broker or nominee.

Post Reverse Stock Split Book Entry Shares

After the consummation of the Transaction, pursuant to Section 158 of the Delaware General Corporation Law and the Bylaws, the Company, through the Exchange Agent, will issue uncertified shares for those stockholders eligible to receive at least one (1) share of post-Reverse Stock Split common stock in exchange for their pre-Reverse Stock Split shares. Shares will be issued in book entry format eligible for DTC’s Direct Registration System. As a result, no physical stock certificate will be issued to stockholders continuing after the consummation of the Transaction.

Escheat Laws

The unclaimed property and escheat laws of each state provide that under circumstances defined in that state’s statutes, holders of unclaimed or abandoned property must surrender that property to the state. Persons whose shares of Common Stock are cashed out and whose addresses are unknown to us, or who do not return their stock certificates and request payment for their cashed out shares of Common Stock, generally will have a certain period of time from the effective date of the Reverse Stock Split in which to claim the cash payment payable to them. For example, with respect to stockholders whose last known addresses are in New York, as shown by our records, the period is three years. Following the expiration of that three-year period, the Unified Disposition of Unclaimed Property Act of New York would likely cause the cash payments to escheat to the State of New York. For stockholders who reside in other states or whose last known addresses, as shown by our records, are in states other than New York, such states may have abandoned property laws which call for such state to obtain either (i) custodial possession of property that has been unclaimed until the owner reclaims it or (ii) escheat of such property to the state. Under the laws of such other jurisdictions, the “holding period” or the time period which must elapse before the property is deemed to be abandoned may be shorter or longer than three years. In the event that the Company is unable to locate certain stockholders or if a stockholder fails to properly complete, execute, and return the letter of transmittal and accompanying stock certificate(s) to the Exchange Agent, any funds payable to such holders pursuant to the Reverse Stock Split will be held in escrow until a proper claim is made, subject to applicable unclaimed property and escheat laws.

Regulatory Approvals

The Company is not aware of any material governmental or regulatory approval required for completion of the reverse stock split, other than compliance with the relevant federal and state securities laws and the Delaware General Corporation Law.

Litigation

As of the date of this Proxy Statement, there is no ongoing litigation related to the reverse stock split.

Reservation

Although the Board has approved the Transaction and subsequent termination of registration of our Common Stock under the Exchange Act and suspension of our duty to file periodic reports and other information with the SEC thereunder, the Board reserves the right to abandon, postpone or modify the Transaction and such termination and suspension at any time before they are consummated for any reason. A number of factors or circumstances could cause our Board of Directors to abandon, postpone or modify the Transaction and such deregistration and suspension, including, without limitation, the following:

If the Board decides to abandon, postpone or modify the Transaction, then the Company will notify the stockholders of such decision in accordance with applicable rules and regulations.