I challenged Paul on the announcement of a future Reverse Split (r/s) in the past 10K (along with a name change and corporate restructuring). I was not happy that the idea of a r/s would be presented when the share price was foundering.

His response was that it is far better to get the r/s idea out in the open before any potential success is achieved. This in contrast to having strong business announcements undermined by an announcement of a r/s. So, the cards are face up on the table, for all to see.

In thinking about a r/s and observing trading behaviors of other companies doing a r/s, I am warming to the idea of doing a r/s and am now understanding the importance of getting the dirty done now instead of later.

A r/s is dangerous. It succeeds in two ways. One way is to have strong news preceeding the announcement of a r/s and followed by strong news. The other is to get the r/s out early and then followed by strong news. A mix of the two ideas also works.

The psychological devestation of a r/s is well known. In my opinion, that is why we are seeing a continual depreciation of share price along with year end tax loss selling. It is a weight over a stock that is hard to get out from under.

Yet the benefits can be tremendous. A company that has a huge outstanding has a far harder time in share price appreciation. The float is just to darn large. Without a r/s, NPCT most likely would have a fully dilluted outstanding close to 200 million shares (without Arizcan). To have a share price move to even .50 would be difficult at best.

Reversing a stock reduces liquidity. This reduction can make the shares more prone to faster movement (up and down). Strong demand factors have far more impact on a smaller outstanding.

Now a share structure that is not liquid is also a problem, keeping investors out of the market. It is a fine balance between reducing liquidity and making a stock not liquid.

So, this r/s of NPCT will need to work that fine balance.

Another factor is that if no r/s were done, I can see the share price being valued sometime in the future to $2.50 per share (see previous post to sciwag). Yet, it would be a struggle to get there with a 200 million share outstanding. It would also be prone to greater manipulation.

And, the bottom line is that even at a couple bucks per share, that would not qualify NPCT to get off of the badlands of the OTC market.

Moving to the Nasdaq is a goal of administration. And doing a r/s with news to support it to a far higher share price, high enough to avert any selling or shorting pressure, would allow the process of moving off the OTC to Nasdaq.

Being on the Nasdaq and having a consistent share price in excess of $5.00 will also allow brokers to consider the stock for their clients. Many of us use electronic brokers but the majority of investors still use a human broker. I have one human broker as well. Even at $5.00/share, many houses are reluctant to make a recommendation, much less follow it. It also relates to market cap in relation to share price. $1/2 billion market cap is small fry. I`ll use that figure in my next post.

So, though a r/s has been announced through the past 10K and that I feel it is a heavy weight on the stock currently, the benefit of a r/s outweighs not doing a r/s. The strength of the stock in the future will be enhanced.

Some will feel cheated by a r/s. However, I do not and look to the potential of a correctly executed r/s that will enhance my share value both pre-reverse-split and post-reverse-split. I feel my shares will gain higher share price values with a reverse than without a reverse.

Number crunching and potentials later.

Kent