SUN VALLEY, Calif., Sept. 14, 2004 (PRIMEZONE) -- Flamemaster Corporation (Nasdaq:FAME) today reported that its Board of Directors authorized a 1 for 10 reverse stock split. The split will be effective on October 26, 2004 to shareholders of record October 5, 2004. There will be no fractional shares issued. Fractional shares will be paid in cash at the rate of $3.35 per share, the closing price on September 13, 2004.
The recently increased reporting requirements of the SEC and Nasdaq resulting from accounting and governance scandals have put a severe financial and management burden on smaller SEC registered and reporting companies such as ours. In addition, the cost of maintaining and servicing our small odd lot shareholders (under 10 shares) as a proportion of shareholder expense has become excessive and an unfair burden to shareholders holding round lots (100 or more shares). Holders of less than 10 shares account for less than 1/20th of 1% of the outstanding shares, but represent a much greater share of shareholder expense. The cost of servicing holders of fewer than 10 shares for one year exceeds the market value of those shares.
The Board of Directors has also authorized the filing of a Form 15 with the Securities and Exchange Commission to deregister on the record date of October 5, 2004, or as soon thereafter as possible. This is pursuant to regulation 240.12g-4(a)(2)(ii) which states "...where the total assets of the issuer have not exceeded $10,000,000 on the last day of each of the issuer's most recent three fiscal years." The Company will, therefore, no longer be required to file reports mandated by the SEC.
The savings the Company will realize from these actions are expected to exceed the cost of reduced liquidity resulting from the Company's shares no longer being eligible to trade on Nasdaq. At the same time, the Board and management are keenly aware of the concerns shareholders might have with this change in reporting status. The Board and management are thoroughly committed to operating the company in a manner that maximizes returns to all shareholders.
It is the intent of management and the Board of Directors that the resulting savings from these measures will be passed on to shareholders by increasing the quarterly cash dividend in the future. The Board of Directors has also authorized a share buy back program of 35,000 split adjusted shares over the next 3 years, which will represent about 50% of the float.
The Board of Directors has already declared the 60th consecutive quarterly cash dividend of .023 per share to be paid November 30, 2004 to shareholders of record November 9, 2004. However, upon the successful completion of the 1 for 10 reverse split the dividend will be adjusted accordingly.
The Board and management look forward to concentrating on growing the business and providing shareholders with a solid return without having to spend an excessive amount of time, energy and monetary expense to deal with regulatory requirements.
The release herein may contain or identify a forward-looking statement. These statements are based on a number of assumptions and estimates, which are inherently subject to uncertainty and contingencies, many of which are beyond the control of the Company and reflect future business decisions, which are subject to change.