Tax Asset Preservation Plan

9 Months Ended

Mar. 31, 2016

Stockholders' Equity Note [Abstract]

Tax Asset Preservation Plan

4. Tax Asset Preservation Plan

 

As previously disclosed in our Form 8-K filed on March 1, 2016, we entered into a Tax Asset Preservation Plan (the “TAPP”) with American Stock Transfer & Trust Company, LLC, as rights agent. Our Board of Directors adopted the TAPP in an effort to deter acquisitions of the Company’s common stock, par value $0.01 per share (“Common Stock”), that would potentially limit the Company’s ability to use its net loss carryforwards and certain other tax attributes (collectively, “NOLs”) to reduce its potential future federal income tax obligations. If we experience an “ownership change,” as defined in Section 382 of the Internal Revenue Code of 1986 (the “Code”), our ability to use the NOLs could be substantially limited, and the timing of the usage of the NOLs could be substantially delayed, which could adversely affect the value of the NOLs.

The TAPP has a 4.9% “trigger” threshold which is intended to act as a deterrent to any person acquiring 4.9% or more of the outstanding Common Stock without the approval of our Board of Directors. This would protect the Company’s NOLs because changes in ownership by persons owning less than 4.9% of the outstanding Common Stock are not included in the calculation of whether the Company has experienced an ownership change under Section 382 of the Code. There is no guarantee, however, that the TAPP will prevent the Company from experiencing an ownership change.

In connection with the adoption of the TAPP, our Board of Directors declared a dividend of one preferred share purchase right (a “Right”) for each outstanding share of Common Stock as of the close of business on March 16, 2016. Each Right will allow its holder to purchase from the Company one one-thousandth of a share of Series B Junior Participating Preferred Stock for $30.00, subject to adjustment. Prior to exercise, the Right does not give its holder any dividend, voting or liquidation rights. The Rights will not be exercisable until 10 days after the public announcement that a person or group has become an “Acquiring Person” by obtaining beneficial ownership of 4.9% or more of the outstanding Common Stock (or if already the beneficial owner of at least 4.9% of the outstanding Common Stock, by acquiring additional shares of Common Stock representing 0.001% or more of the shares of Common Stock then outstanding). 

The Rights will expire on the earlier of (i) close of business on the fifth business day after the Company files with the SEC a Current Report on Form 8-K reporting the results of the 2016 annual meeting of stockholders of the Company (including any postponement or adjournment thereof) and (ii) the time at which the Board of Directors determines that the NOLs are fully utilized or no longer available under Section 382 of the Code. If, however, any person becomes an Acquiring Person, the Plan will not expire until March 1, 2026.

The Board of Directors may direct the Company to redeem the Rights for $0.001 per Right at any time before any person or group becomes an Acquiring Person. If the Board of Directors directs the Company to redeem any Rights, it must redeem all of the Rights. Once the Rights are redeemed, the only right of the holders of Rights will be to receive the redemption price of $0.001 per Right. The redemption price will be adjusted if the Company has a stock split or stock dividends of the Common Stock. The value of the Rights is de minimis.