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Listing Council Decisions
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All Years; Board Composition/Committee Assignments; All
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Identification Number
616
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Rule 4310(c)(2)(B): For continued inclusion on The NASDAQ Capital Market, the issuer shall maintain: (i) stockholders' equity of $2,500,000; (ii) market value of listed securities of $35,000,000; or (iii) net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the last three most recently completed fiscal years.
Issue: At the time of the Panel's decision, the company did not meet the minimum stockholders' equity requirement or its alternatives for continued listing on The NASDAQ Capital Market. The company argued that it would demonstrate in excess of $500,000 in net income from continuing operations when it filed its Form 10-K for the fiscal year ended December 31, 2004. As such, the company requested an exception for six months to file its Form 10-K. Alternatively, the company requested additional time to consummate a combination with an American Stock Exchange listed company. The effect of the combination would increase the company's stockholders' equity above the $2,500,000 continued listing requirement. The Panel was unwilling to grant the company additional time to file its Form 10-K and also opined that the combination was not sufficiently definitive for an extension of time.
Determination: The company was properly delisted because at the time of the Panel's decision the company was not able to demonstrate compliance with the minimum stockholders' equity requirement or its alternatives. At the time of the Listing Council's deliberations, the company had been non-compliant for over eight months and had still not consummated its business combination with the American Stock Exchange listed company.
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Rule 4350(c): Each issuer shall maintain a sufficient number of independent directors on its board of directors to satisfy the audit committee requirement set forth in Listing Rule 4310(d)(2).
Rule 4310(d)(2): Each issuer must have, and certify that it has and will continue to have, an audit committee of at least three members, each of whom must: (i) be independent as defined under Listing Rule 4200(a)(15); (ii) meet the criteria for independence set forth in Rule 10A-3(b)(1) under the Act (subject to the exemptions provided in Rule 10A-3(c)); (iii) not have participated in the preparation of the financial statements of the company or any current subsidiary of the company at any time during the past three years; and (iv) be able to read and understand fundamental financial statements, including a company's balance sheet, income statement, and cash flow statement. Additionally, each issuer must certify that it has, and will continue to have, at least one member of the audit committee who has past employment experience in finance or accounting, requisite professional certification in accounting, or any other comparable
experience or background which results in the individual's financial sophistication, including being or having been a chief executive officer, chief financial officer or other senior officer with financial oversight responsibilities.
Issue: After the Panel had issued its decision, a member of the company's audit committee resigned, leaving the company with only two independent audit committee members.
Determination: As a separate and additional ground for affirming the delisting of the company's common stock, the Listing Council found that because the company had not appointed a new independent director to the company's audit committee, the company had failed to demonstrate compliance with the independent directors and audit committee composition requirements.
Publication Date*:
7/31/2012
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Identification Number:
616
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Identification Number
666
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Rule 4310(c)(14): The issuer shall file with NASDAQ all reports and other documents required to be filed with the Securities and Exchange Commission ("SEC"). Annual reports filed must contain audited financial statements.
Issue: After the company disclosed that it would delay filing its Form 10-K as a result of its audit committee’s investigation into accounting improprieties, the Panel delisted the company’s securities based on a filing deficiency. The company subsequently filed its Forms10-K and 10-Q, which were deficient for a period of approximately 4 and 2 ½ months, respectively, as a result of accounting restatements related to revenue recognition adjustments.
Determination: The Panel’s decision was reversed because the company made the required filings and received an unqualified independent auditors’ opinion. However, there was insufficient record evidence to determine whether public interest concerns existed, particularly given the extent of the restatements, an investigation being conducted by the SEC, and the result of an internal investigation, which concluded that the company had engaged in fraudulent accounting. Therefore, the matter was remanded to the Panel with instructions to further remand to Staff for an investigation. Thereafter, the Panel was required to issue a decision making a determination as to whether public interest concerns existed. If the Panel determined that no public interest concerns existed and there were no other deficiencies, the Panel was instructed to promptly relist the company’s securities.
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Rule 4350(d)(2): An issuer must have an audit committee of at least three members, comprised solely of independent directors.
Issue: Two members of the audit committee served as interim presidents for approximately 45 days.
Determination: There was insufficient record evidence to determine whether the audit committee members were independent; therefore, the matter was remanded to the Panel. The company must provide the Panel with information as to whether such members received compensation as defined in the Rule 10A-3(b)(1)(ii)(A) of the Securities Exchange Act of 1934 and whether such members otherwise comply with NASDAQ Marketplace Listing Rule 4350(d)(2). If the audit committee members do not meet the criteria pursuant to the aforementioned rules, the company must submit a plan to the Panel to rectify the audit committee deficiency. If the Panel determines that the company’s only deficiency is the audit committee requirement, the Panel must provide the company an opportunity to cure the deficiency.
Publication Date*:
7/31/2012
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Identification Number:
666
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Identification Number
683
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Rules 4450(a)(3) and 4450(b)(1): $4,000,000 net tangible assets/$10,000,000 shareholders' equity, or its alternatives, the $50,000,000 market value of listed securities/$50,000,000 total assets and $50,000,000 total revenue requirements for continued listing on the National Market.
Issue: The company no longer satisfied the net tangible assets/shareholders' equity continued listing requirement for the National Market. The company also did not comply with the alternative requirements for continued listing under Maintenance Standard 2 on the National Market, as set forth in Listing Rule 4450(b). The company did not submit a plan to regain compliance with the National Market requirements, but requested that it be granted the opportunity to list its common stock on the SmallCap Market. The company submitted an unaudited consolidated balance sheet, which reflected shareholders' equity exceeding the SmallCap Market continued listing requirement.
Determination: The company was properly delisted for failure to satisfy the net tangible assets/ shareholders' equity requirement for continued listing on the National Market. The company did not submit a definitive plan to regain compliance with the net tangible assets/shareholders' equity requirement or to maintain compliance over the long term. The company also did not provide evidence of its ability to sustain compliance with the shareholders' equity requirement for continued listing on the SmallCap Market in the near or long term and did not meet any of the alternatives for the shareholders' equity requirement, as set forth in Listing Rule 4310(c)(2)(B). The company would soon fall below the shareholders' equity requirement for continued listing on the SmallCap Market based on its projections and history of losses.
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Rule 4450(a)(5): $1 minimum bid price requirement for continued listing on the National Market.
Issue: The company's bid price was below $1. The company believed that if its common stock were listed on the SmallCap Market, the resulting increase in visibility and liquidity would increase its stock price, so that it could effect a reverse stock split to regain compliance with the $1 minimum bid requirement.
Determination: The company was properly delisted for failure to comply with the $1 minimum bid price requirement for continued listing on the National Market. The Listing Council is unwilling to rely on anticipated favorable market reaction in order to find that a company can regain compliance with the minimum bid price requirement. Although the company received shareholder approval for a reverse stock split more than eight months prior to the decision, the company did not announce a definitive date to effect such a reverse stock split.
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Rule 4450(a)(2): Market value of publicly held shares of $5,000,000 for continued listing on the National Market.
Issue: The market value of publicly held shares of the company’s common stock was below $5,000,000 for more than four months. The company requested that it be granted the opportunity to list its common stock on the SmallCap Market.
Determination: The company was properly delisted for failure to comply with the market value of publicly held shares requirement. The company had not submitted a definitive plan to regain compliance with the publicly held shares requirement or maintain compliance over the long term. Although the company’s market value of publicly held shares exceeded the SmallCap continued listing requirements, the company failed to evidence compliance with all of the SmallCap Market standards for continued listing.
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Rules 4350(c) and 4350(d)(2): Independent director and audit committee composition requirements.
Issue: For more than four months, the company's audit committee was only comprised of two members. The company stated that it expected to appoint a qualified audit committee member in the near future.
Determination: The company was properly delisted for failure to demonstrate compliance with the independent director and audit committee composition requirements. As of the date of the Listing Council's meeting on this matter, the company had not announced the appointment of a new independent director.
Publication Date*:
7/31/2012
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Identification Number:
683
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Identification Number
688
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Rule 4310(c)(2): $2,000,000 net tangible assets/$2,500,000 shareholders’ equity requirement, or its alternatives, for continued listing on the SmallCap Market.
Issue: The company no longer satisfied the net tangible assets/shareholders’ equity requirement. The company provided projections and stated it would be in compliance after certain reorganization transactions were consummated.
Determination: The company was properly delisted for failure to comply with the net tangible assets/ shareholders’ equity requirement. Even assuming that the company’s projections were accurate, the company would soon fall below the net tangible assets/shareholders’ equity requirement based on the company’s history of losses.
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Rule 4310(c)(7): 500,000-share public float requirement for continued listing.
Issue: The company’s proxy statement reflected that the company had less than 500,000 shares in the public float. The company stated it had in excess of 500,000 shares in the public float, assuming conversion of its preferred stock.
Determination: The company was properly delisted for failure to comply with the public float requirements. The public float requirement is based solely on shares issued and outstanding.
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Rules 4350(c) and 4350(d)(2): Independent director and audit committee composition requirements.
Issue: One of the three members of the audit committee beneficially owned approximately 90% of the company.
Determination: The company was properly delisted for failure to demonstrate compliance with the independent director and audit committee composition requirements. A director, who has the ability to directly or indirectly control the company through 90% ownership, is an affiliate of the company, as referred to in Listing Rule 4200(a)(14)(A), and accordingly, he is not independent. The company did not disclose in its proxy statement a basis for an exception to the audit committee composition requirements, pursuant to Rule 4350(d)(2)(B).
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Rules 4350(g) and 4350(e): Annual meeting and proxy solicitation requirements.
Issue: The company did not hold an annual shareholder meeting or mail proxy statements for 2½ years, while it was resolving a takeover contest and related litigation.
Determination: The company was properly delisted for failure to comply with the annual shareholder meeting and proxy solicitation requirements. An unresolved takeover contest and related litigation is an insufficient reason to violate the proxy solicitation and annual meeting requirements.
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Rule 4350(h): Requirement for independent review of related party transactions for conflicts of interest.
Issue: The company, the chief executive officer, a director and a shareholder group led by the director entered into related party transactions and, as majority shareholders, approved the transactions. The company provided minutes of meeting, reflecting the existence of a special committee of directors.
Determination: The company was properly delisted for failure to demonstrate that the company’s audit committee or a comparable body of the board of directors reviewed the transactions for conflicts of interest. The minutes did not reflect that the audit committee or an independent committee reviewed the transactions for conflicts of interests. The minutes did not state whether the special committee reviewed the transactions for conflicts of interests or which directors were on the special committee.
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Rule 4351: Voting rights requirement.
Issue: The company issued convertible preferred shares to investors at a discount to the market price on the date the investors and the company entered into a stock purchase agreement. The company’s majority shareholders approved the transaction. The preferred shareholders had the right to vote their shares on an as-converted basis at the company’s annual shareholder meeting. To determine whether a voting rights violation exists, the preferred shareholders’ voting rights are compared to their relative contribution based on the company’s market value at the time of issuance of the preferred shares. The company stated that for purposes of the voting rights rule, the time of issuance of the preferred stock should be the date the letter of intent was signed, not the date the shares were issued.
Determination: The company was properly delisted for failure to comply with the voting rights requirements. In determining whether a voting rights violation exists, the execution date of a non-binding agreement cannot be the basis for determining the value of the securities because the value is not definitive if the agreement is unenforceable and the terms can be changed. The company created a new class of securities that vote at a higher rate than the existing common shareholders, and shareholders cannot otherwise agree to permit a voting rights violation by the company through approval of the transaction.
Publication Date*:
7/31/2012
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Identification Number:
688
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