did immediately prior to the Stock Split, except for minor adjustment as a result of the additional shares that will need to be issued a result of the treatment of fractional shares.
For the above reasons, the board believes that the Stock Split is in the best interest of ProText and its stockholders. There can be no assurance, however, that the reverse stock split will have the desired benefits.
Effects: The Stock Split will be effected by filing an amendment to the Companys Certificate of Incorporation with the Delaware Secretary of States office and will become effective upon such filing and final approval of the board of directors of the Company. The actual timing of any such filing will be made by the board of directors based upon its evaluation as to when the filing will be most advantageous to the Company and its stockholders.
ProText is currently authorized to issue 10,000,000,000 shares of its common stock of which 1,724,690,324 shares are currently issued and outstanding. The company also has 11,829,023 shares of preferred stock outstanding, of which 1,526,718 shares are designated Series A Preferred Stock and 28,968 are issued and outstanding, 1,000,000 shares are designated Series B Preferred Stock and 550,055 are issued and outstanding and 9,000,000 shares are designated Series C Preferred Stock, all of which are issued and outstanding. The Series A Preferred Stock is non-voting, each share of Series B Preferred Stock is entitled to two votes per share for each share of common stock into which the preferred stock could be converted and each share of Series C Preferred Stock is entitled to 200 votes. The Series C Preferred Stock is non-convertible. Stockholders holding 9,000,000 shares of Series C Preferred Stock, representing in the aggregate approximately 51% of the voting rights entitled to vote on the Amendment, as of the Record Date, have consented to the action required to authorize the Amendment.
The effect of the Stock Split upon existing stockholders of the common stock will be that the total number of shares of ProTexts common stock held by each stockholder will automatically convert into the number of whole shares of common stock equal to the number of shares of common stock owned immediately prior to the Stock Split divided by up to 800, with an adjustment for any fractional shares. (Fractional shares will be rounded up into a whole share).
If acted upon by the Companys board of directors, the consent by the majority of the common stock stockholders reported herein, would result in each stockholders percentage ownership interest in the Company and proportional voting power will remain virtually unchanged, except for minor changes and adjustments that will result from rounding fractional shares into whole shares. The rights and privileges of the holders of shares of common stock will be substantially unaffected by the Stock Split. All issued and outstanding options, warrants, and convertible securities would be appropriately adjusted for the Stock Split automatically on the effective date of the Stock Split. All shares, options, warrants or convertible securities that the Company has agreed to issue (or agrees to issue prior to the effective date of the Stock Split) also will be appropriately adjusted for the Stock Split.
The Stock Split may also result in some stockholders holding odd lots of less than 100 shares of common stock. Brokerage commissions and other costs of transactions in odd lots may be higher, particularly on a per-share basis, than the cost of transactions in even multiples of 100 shares.
As a result of the proposal to conduct a Stock Split, ProText will have more authorized shares available for issuance than it currently has available and therefore, there is a significant risk of stockholder value represented by the common stock being diluted. The proposed Stock Split creates a risk that current stockholders of the common stock will see the value of those shares diluted through the issuance of additional authorized but currently unissued shares. The current net tangible book value per share would be diluted if additional shares are issued without an increase taking place in the net book value of the assets of ProText. The current book value of shares held by existing stockholders would not be maintained in the event additional shares are issued. In the event that the board approves a 800 for 1 reverse split of the common stock and reduces the number of outstanding shares of common stock to approximately 2,156,000 and then authorizes the issuance of all 10,000,000,000 authorized shares, that action would have a material dilutive effect upon existing stockholders.
After the taking of any action to conduct or authorize the Stock Split, there is no requirement that stockholders must obtain new or replacement share certificates. Each of the holders of record of shares of the Companys common stock that is outstanding on the effective date of the Stock Split may contact ProTexts transfer agent to exchange the certificates for new certificates representing the number of whole shares of post-reverse stock split common stock into which the existing shares have been converted as a result of the Stock Split.
EXISTING CERTIFICATES SHOULD NOT BE SENT TO PROTEXT OR THE TRANSFER AGENT BEFORE THE EFFECTIVE DATE OF THE FILING OF THE PROPOSED AMENDMENTS TO THE CERTIFICATE OF INCORPORATION.