Question-and-Answer Session
Operator
(Operator Instructions) Your first question comes from [Gale Stefanick] – Stern Agee Financial.
[Gale Stefanick] – Stern Agee Financial
Thank you for the presentation and a little clarity on what’s going on. I have been a Lumera shareholder for some time as I bet many others are and what I see that is somewhat a problem going forward is that we are being diluted by the proposal, the merger proposal considerably. It does appear that the companies are somewhat equal overall and I’m sure GigOptix has greater depth of management.
However, I have been through a number of reverse splits over many years in the finance business and being diluted by the merger and then talking about a second financing post-merger which will be more dilutive; I don’t see how there will be any near term improvement in stock price and in fact most reverse splits do not work unless you have considerable fundamentals from the get go. Any response?
Peter J. Biere
Well, this is Peter. Again, the first thing, I had to read a little bit into your question because when you talked about dilution the Lumera shareholders will take immediately on the merger, as we’ve tried to describe, the number of securities are going to be issued are the same on both sides. That includes common shares; it includes options and warrants as well so if you just look at the common shares, the Lumera shareholders will end up with approximately 57% of the common immediately after the merger. GigOptix shareholders will get about 43% of the common.
Some, and I don’t know the number right off the top of my head, some of the options are in the money but most of the options and warrants are well out of the money so we need to build value inside the company to get those above water. They are potentially dilutive so that is true but somebody, and it wasn’t you, but somebody is confusing this four-to-one reverse split as more dilutive on the Lumera shareholders and that’s not the case; that’s simply as you know, I know you understand this but it’s simply a mechanism to reverse the number of shares lower and increase the average share price for market listing purposes.
[Gale Stefanick] – Stern Agee Financial
But one quick comment there, that is one of my points. In looking at reverse splits of low priced stocks, they almost never work to keep the share price higher after the reverse split unless you have some pretty compelling fundamentals at the same time. In other words, if this stock were to split one for four now, it would be a $2 stock roughly and most of the time without nice fundamentals along with that, the stock will decline even further or back to $1, let’s say. Almost always. And I won’t say it never, I won’t say a company never goes up after a reverse slip; they typically go down.
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