1. Stock split
All publicly-traded companies have a set number of shares that are outstanding on the stock market.
A stock split is a decision by the company's board of directors to increase the number of shares that
are outstanding by issuing more shares to current shareholders. For example, in a 2-for-1 stock split,
every shareholder with one stock is given an additional share. So, if a company had 10 million shares
outstanding before the split, it will have 20 million shares outstanding after a 2-for-1 split.
A stock's price is also affected by a stock split. After a split, the stock price will be reduced since the
number of shares outstanding has increased. In the example of a 2-for-1 split, the share price will be
halved. Thus, although the number of outstanding shares and the stock price change, the market
capitalization remains constant.
A stock split is usually done by companies that have seen their share price increase to levels that are
either too high or are beyond the price levels of similar companies in their sector. The primary motive
is to make shares seem more affordable to small investors even though the underlying value of the
company has not changed.
A stock split can also result in a stock price increase following the decrease immediately after the split.
Since many small investors think the stock is now more affordable and buy the stock, they end up
boosting demand and drive up prices. Another reason for the price increase is that a stock split
provides a signal to the market that the company's share price has been increasing and people
assume this growth will continue in the future, and again, lift demand and prices.
Another version of a stock split is the reverse split. This procedure is typically used by companies with
low share prices that would like to increase these prices to either gain more respectability in the
market or to prevent the company from being delisted (many stock exchanges will delist stocks if they
fall below a certain price per share). For example, in a reverse 5-for-1 split, 10 million outstanding
shares at 50 cents each would now become two million shares outstanding at $2.50 per share. In both
cases, the company is worth $5 million.
The bottom line is a stock split is used primarily by companies that have seen their share prices
increase substantially and although the number of outstanding shares increases and price per share
decreases, the market capitalization (and the value of the company) does not change. As a result,
stock splits help make shares more affordable to small investors and provides
greater marketability and liquidity in the market.
WHAT ARE THE ADVANTAGES AND DISADVANTAGES OF THE
REVERSE STOCK SPLIT?
Advantages.

2. • By completing the Reverse Stock Split, and assuming we are permitted to
deregister our shares and eliminate our obligations under the Sarbanes-Oxley
Act of 2002 (the “Sarbanes-Oxley Act”) and our periodic reporting
obligations under the Exchange Act, we expect to save approximately
$170,000 per year.
• Assuming we can deregister the Common Stock, we will save the significant
amount of time and effort expended by our management on the preparation of
SEC filings and in compliance with the Sarbanes-Oxley Act.
• The Reverse Stock Split will have a limited effect on the relative voting
power of our continuing shareholders.
Disadvantages.
• Shareholders owning less than 75 shares of our Common Stock will no longer
be shareholders of the Company following the Reverse Stock Split and will
not receive dividends or participate in any future success of the Company.
• The terms of the Reverse Stock Split were not negotiated on an arms-length
basis, but were approved by the Special Committee and the Board of
Directors, and the price for fractional shares to be cashed-out in connection
with the Reverse Stock Split Amendment was determined fair pursuant to the
opinion of McFarland Dewey & Co., LLC, our independent financial advisor.
See “Reports, Appraisals and Negotiations” below.
• Shareholders receiving cash in lieu of fractional shares following the filing of
the Reverse Stock Split Amendment will pay taxes on any gain realized over
their tax basis (usually their initial investment) in their shares.
• If successful in suspending the Company’s reporting obligations under the
Exchange Act, we will cease to file annual, quarterly, current and other
reports and documents with the SEC, and continuing shareholders will have
access to less information about the Company and our business, operations
and financial performance. However, for the protection of our continuing
shareholders, we will continue to maintain certain corporate governance
measures for a period of five years following the Reverse Stock

3. Split, provided that there are unaffiliated shareholders during such period.
These measures include making publicly available to our continuing
shareholders annual audited and quarterly unaudited financial statements, and,
on an annual basis, providing disclosure to our shareholders in accordance
with applicable SEC rules for smaller reporting companies regarding the
Company’s executive compensation, the names of holders of 5% or more of
the Company’s capital stock, ownership of the Company’s capital stock by
directors and executive officers and dividend history. The Company will also
maintain a majority of independent directors and an independent audit
committee of the Board of Directors. In determining the ownership of the
Company’s capital stock, we will rely on the records of our transfer agent.
• We will no longer be listed on the AMEX; however, it is a condition to the
delisting of our Common Stock from the AMEX that we make application for
our Class A Common Stock to be listed on the OTCQX following
deregistration. If our application for listing on the OTCQX is accepted, we
will be required to have quarterly and annual financial reports posted on
OTCQX.com or EDGAR if we are unable to deregister under the Exchange
Act. All annual reports must be audited and prepared in accordance with US
GAAP. Furthermore, in order to list our Class A Common Stock on the
OTCQX, we will be required to appoint a Designated Advisor for Disclosure,
which advisor must issue a letter upon us making application for listing on the
OTCQX and annually thereafter to Pink OTC Markets Inc. confirming that
we have made adequate current information publicly available and meet the
tier inclusion requirements of the OTCQX. There is no guarantee that the
Class A Common Stock will be approved for listing nor is there any guarantee
that if approved for listing, how long our stock will be listed on the OTCQX.
Furthermore, while we will not seek to have our Class B Common Stock
listed for trading, shares of Class B Common Stock will be freely convertible
at anytime into an equal number of shares of our Class A Common Stock.
• We will no longer be subject to the provisions of the Sarbanes-Oxley Act, the
liability provisions of the Exchange Act or the oversight of the AMEX.
• Our executive officers, directors and 5% shareholders will no longer be
required to file reports relating to their transactions in our Common Stock
with the SEC. In addition, our executive officers, directors and 10%
shareholders will no longer be subject to the recovery of profits provision of
the Exchange Act.

4. Print this article
1. Common Splits
o The most common stock splits are 2-for-1, 3-for-2 and 3-for-1. If a company has a 2-for-1
stock split, one share valued at $200 would become two shares valued at $100 each. If the
company chose a 3-for-1 split of that same stock, each share would be worth $66.67 each.
Why Do This?
o One of the primary goals of a stock split is to make shares more attractive to individual
investors and stimulate buying. A company can split stock to increase liquidity. When a
company's shares soar in value, there can be large disparities between the bids for the stock
and its asking price. Splitting the stock closes that gap and can increase the number of
potential investors.
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Advantages and Disadvantages
o There is division among market experts on the merits of a stock split. There is a belief that
the impact of a stock split is purely psychological, as it tends to create the perception that
the stock is more valuable. That may be enough to spur new buying. Some newsletters focus
exclusively on stocks that have or could split. Critics say a split doesn't always result in new
sales and is superfluous because the capitalization of the company is not affected.
Brokerage Commissions
o Stock splits no longer affect brokerage commissions because most brokerages now charge
flat fees on trades, no matter how many shares are involved. Historically, brokerages
charged commissions based on the number of shares traded, so a stock split helped boost
their profits.
Reverse Split
o In a reverse split, a company combines a number of shares to create one share. Companies
whose share prices are sliding can do a reverse split to avoid being dropped from a stock
exchange or to prevent its stock from becoming classified as a penny stock

5. Understanding Stock Splits
By T.L. Chancellor, eHow Contributor
When a company splits its stock, the number of outstanding shares increases while the
value of each share decreases in equal proportion. In most stock splits, one share of stock
becomes two and the value of each share is halved, leaving the company's overall value
unchanged. In some instances, a company executes a reverse split, in which the number of
shares is decreased and the value of each share is increased
Common Splits
The most common stock splits are 2-for-1, 3-for-2 and 3-for-1. If a company has a 2-for-1
stock split, one share valued at $200 would become two shares valued at $100 each. If the
company chose a 3-for-1 split of that same stock, each share would be worth $66.67 each.
Why Do This?
One of the primary goals of a stock split is to make shares more attractive to individual
investors and stimulate buying. A company can split stock to increase liquidity. When a
company's shares soar in value, there can be large disparities between the bids for the stock
and its asking price. Splitting the stock closes that gap and can increase the number of
potential investors.
Advantages and Disadvantages
There is division among market experts on the merits of a stock split. There is a belief that
the impact of a stock split is purely psychological, as it tends to create the perception that
the stock is more valuable. That may be enough to spur new buying. Some newsletters focus
exclusively on stocks that have or could split. Critics say a split doesn't always result in new
sales and is superfluous because the capitalization of the company is not affected.
Brokerage Commissions
Stock splits no longer affect brokerage commissions because most brokerages now charge
flat fees on trades, no matter how many shares are involved. Historically, brokerages
charged commissions based on the number of shares traded, so a stock split helped boost
their profits.

6. Reverse Split
In a reverse split, a company combines a number of shares to create one share. Companies
whose share prices are sliding can do a reverse split to avoid being dropped from a stock
exchange or to prevent its stock from becoming classified as a penny stock.
What Is a Stock Split?
A stock split is a corporate action that increases the number of the corporation's outstanding
shares by dividing each share, which in turn diminishes its price. The stock's market capitalization,
however, remains the same, just like the value of the $100 bill does not change if it is exchanged for
two $50s. For example, with a 2-for-1 stock split, each stockholder receives an additional share for
each share held, but the value of each share is reduced by half: two shares now equal the original
value of one share before the split.
Let's say stock A is trading at $40 and has 10 million shares issued, which gives it a market
capitalization of $400 million ($40 x 10 million shares). The company then decides to implement a 2-
for-1 stock split. For each share shareholders currently own, they receive one share, deposited directly
into their brokerage account. They now have two shares for each one previously held, but the price of
the stock is split by 50%, from $40 to $20. Notice that the market capitalization stays the same - it
has doubled the amount of stocks outstanding to 20 million while simultaneously reducing the stock
price by 50% to $20 for a capitalization of $400 million. The true value of the company hasn't changed
one bit.
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The most common stock splits are, 2-for-1, 3-for-2 and 3-for-1. An easy way to determine the new
stock price is to divide the previous stock price by the split ratio. In the case of our example, divide
$40 by 2 and we get the new trading price of $20. If a stock were to split 3-for-2, we'd do the same
thing: 40/(3/2) = 40/1.5 = $26.6.
It is also possible to have a reverse stock split: a 1-for-10 means that for every ten shares you own,
you get one share. Below we illustrate exactly what happens with the most popular splits in regards to
number of shares, share price and market cap of the company splitting its shares.

7. What's the Point of a Stock Split?
So, if the value of the stock doesn't change, what motivates a company to split its stock? Good
question. There are several reasons companies consider carrying out this corporate action.
The first reason is psychology. As the price of a stock gets higher and higher, some investors may feel
the price is too high for them to buy, or small investors may feel it is unaffordable. Splitting the stock
brings the share price down to a more "attractive" level. The effect here is purely psychological. The
actual value of the stock doesn't change one bit, but the lower stock price may affect the way the
stock is perceived and therefore entice new investors. Splitting the stock also gives existing
shareholders the feeling that they suddenly have more shares than they did before, and of course, if
the prices rises, they have more stock to trade.
Another reason, and arguably a more logical one, for splitting a stock is to increase a stock's liquidity,
which increases with the stock's number of outstanding shares. You see, when stocks get into the
hundreds of dollars per share, very large bid/ask spreads can result (see Why the Bid/Ask Spread Is
So Important.). A perfect example is Warren Buffett's Berkshire Hathaway, which has never had a
stock split. At times, Berkshire stock has traded at nearly $100,000 and its bid/ask spread can often
be over $1,000. By splitting shares a lower bid/ask spread is often achieved, thereby increasing
liquidity.
None of these reasons or potential effects that we've mentioned agree with financial theory, however.
If you ask a finance professor, he or she will likely tell you that splits are totally irrelevant - yet
companies still do it. Splits are a good demonstration of how the actions of companies and the
behaviors of investors do not always fall into line with financial theory. This very fact has opened up a
wide and relatively new area of financial study called behavioral finance (see Taking A Chance On
Behavorial Finance.).
Advantages for Investors
There are plenty of arguments over whether a stock split is an advantage or disadvantage to
investors. One side says a stock split is a good buying indicator, signaling that the company's share
price is increasing and therefore doing very well. This may be true, but on the other hand, you can't
get around the fact that a stock split has no affect on the fundamental value of the stock and
therefore poses no real advantage to investors. Despite this fact the investment newsletter business
has taken note of the often positive sentiment surrounding a stock split. There are entire publications
devoted to tracking stocks that split and attempting to profit from the bullish nature of the splits.
Critics would say that this strategy is by no means a time-tested one and questionably successful at
best.
Factoring in Commissions
Historically, buying before the split was a good strategy because of commissions that
were weighted by the number of shares you bought. It was advantageous only because it saved you
money on commissions. This isn't such an advantage today because most brokers offer a flat fee for
commissions, so you pay the same amount whether you buy 10 shares or 1,000 shares. Some online
brokers have a limit of 2,000 or 5,000 shares for that flat rate, but most investors don't buy that
many shares at once. The flat rate therefore covers most trades, so it does not matter if you buy pre-
split or post-split.
Conclusion
The most important thing to know about stock splits is that there is no effect on the worth (as
measured by market capitalization) of the company. A stock split should not be the deciding factor
that entices you into buying a stock. While there are some psychological reasons why companies will
split their stock, the split doesn't change any of the business fundamentals. In the end, whether you
have two $50 bills or one $100 bill, you have the same amount in the bank.

8. Insolvency & Restructuring - Switzerland
Merger as a Restructuring Measure
June 17 2005
Mergers under the Act
Merger as Restructuring Measure
Conflict with Corporate Rules on Insolvency
In 2004 the new Merger Act entered into force. The act contains the legal framework for mergers and similar
transactions (eg, spin-offs and asset transactions) for Swiss corporations, foundations and certain unincorporated
businesses, as well as specific public law institutions. This update considers the issue of mergers involving distressed
companies.
Mergers under the Act
Before the enactment of the Merger Act, mergers of corporations in Switzerland occurred by one company merging
into another (absorption), or two or more companies merging into a new company (combination). This basic set-up
has not changed under the Merger Act. However, aside from regulating in detail the prerequisites of a merger, the act
introduced a simplified procedure for affiliated companies and small caps, and also introduced specific provisions
governing companies in distress or liquidation. While in some respects the prerequisites for a merger have become
stricter, in others mergers have become much simpler.
A merger that does not fall into the simple merger category involves the following steps:
The companies involved must submit to a merger agreement and issue a merger report, and these documents,
together with the merger balance sheet, must be verified by an appropriately qualified auditor.
A period of 30 days must be set aside during which shareholders have the right to inspect the merger
documents.
Prior to a resolution on the merger being taken, employees have the right to be consulted in accordance with
employment law rules.
After these consultation periods, the shareholders' meetings of the merging companies may resolve on the
merger. This resolution will be entered into the Commercial Register, at which point the merger becomes
effective
Finally, creditors may generally request that their claims be secured.
The simplified procedure mainly applies to the absorption of a subsidiary by the parent company or to a merger
between sister companies. If the subsidiary to be merged into the parent or the two sister companies to be merged
is/are held 100% by the parent, the merger agreement is simpler than normal and a merger report and verification are
not required. While employees still must be consulted, there is no need for shareholders to inspect the merger
documentation.
If a subsidiary is held not 100% but 90% or more, the procedure will be simplified in part only. In general, a merger
report and resolution are not required, but a special auditor will still need to verify the merger.

9. Merger as Restructuring Measure
Prior to the Merger Act, the question of whether distressed companies could be involved in a merger was much
debated in Swiss legal doctrine. This debate has been brought to an end by the act, which explicitly allows a
distressed company to be absorbed or combined if certain prerequisites are met.
A company is distressed if the latest balance sheet shows that half of the capital stock and statutory reserve is no
longer covered. A severe form of distress occurs if the corporation's liabilities exceed its assets (over-indebtedness).
Normally, an over-indebted company must file for bankruptcy or a moratorium (for further details please see
"Corporate Restructuring Explained").
While a company in financial difficulties may be rescued by merging into another company, there must be some
protection for the creditors of the other company or companies involved in the merger. Therefore, under the act a
distressed company may merge with another, non-distressed corporation only if the non-distressed company has
sufficient free equity to cover fully the share capital of the distressed company. 'Free equity' is the amount which the
company could also pay out as a dividend (ie, equity in excess of the share capital and statutory reserves).
The act still allows the merger if creditors of the participating companies subscribe a subordination of their claims to
the extent that there is not sufficient free equity. This will ensure that where the company becomes insolvent, the debt
will be treated as equity. The subordinating creditors will participate only if and to the extent that all other creditors
have been fully satisfied.
In order to verify that the prerequisites are satisfied, the surviving company must submit a report by an appropriately
qualified auditor to that effect.
Conflict with Corporate Rules on Insolvency
Where a company is in distress, corporate law provides that it must call a shareholders' meeting at which the board of
directors will suggest restructuring measures. If the company is over-indebted, it must file for bankruptcy immediately.
Non-observance of these rules would subject the members of the board to personal liability.
Although the first rule does not necessarily conflict with the possibilities granted under the Merger Act, the second
rule does, if applied strictly: if the board must file for bankruptcy immediately, there is no room for a merger.
Three key points must be made. Firstly, in order to verify the over-indebtedness, the company must establish (except
in obvious cases) audited interim accounts at a going-concern value and at liquidation values. Only where both
accounts show over-indebtedness must the company file for bankruptcy. This is a time-consuming process during
which the company may also prepare for a merger.
Secondly, the company may avoid filing for bankruptcy if creditors are willing to agree on a subordination of their
claims.
Finally, and most importantly, there is a tendency in Swiss law to relax the requirement for an immediate filing. The
Federal Supreme Court has held that the filing may be avoided if a serious possibility of restructuring exists.
Additionally, proposals for a new accounting law suggests that the board should be granted a period of 60 days in
which to file for bankruptcy. While the law is a long way from being enacted, doctrine sometimes refers to the
proposals to interpret the discretion of the board.
The board of directors is accordingly given a certain leeway even if it fears that the company is over-indebted, but
sees a possibility of a merger to avoid bankruptcy.
However, if a merger is not already on the horizon when the situation becomes critical, there may not be sufficient
time and the board of directors may have to follow the requirements of corporate law. At this stage, the board may
decide to file for bankruptcy, but at the same time apply for a corporate moratorium (for further details please see
"Corporate Restructuring Explained"). A board of directors may find itself in an uncomfortable situation and therefore
prefer this route. If a merger is an option, the company may still go ahead with it under a moratorium.