Rule 4310(c)(14): The issuer shall file with NASDAQ three (3) copies of all reports and other documents filed or required to be filed with the Commission. This requirement is considered fulfilled for purposes of this paragraph if the issuer
files the report or document with the Commission through the Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system. An issuer that is not required to file reports with the Commission shall file with NASDAQ three (3) copies of reports required
to be filed with the appropriate regulatory authority. All required reports shall be filed with NASDAQ on or before the date they are required to be filed with the Commission or appropriate regulatory authority. Annual reports filed with NASDAQ shall contain
audited financial statements.
Issue: The company filed its Form 10-Q for the quarter ended June 30, 2003, however, the filing had not been reviewed by its independent auditors, as required by SEC Rule 10-01(d) of Regulation S-X. As a result, the company’s financial
statements for that period could not be relied upon.
Determination: The company was properly delisted for failure to comply with the filing requirement. The Listing Council takes seriously the requirement to file accurate and reliable financial statements and the concomitant purpose to provide
investors with current information regarding the company. Investors in securities listed on NASDAQ are entitled to assume that the companies of those securities will promptly and accurately comply with their reporting obligations under the Securities Exchange
Act of 1934.
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Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval ... prior to the issuance of designated securities in connection with a transaction other than a public offering involving: … (ii) the sale, issuance or potential issuance
by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% of more of the voting power outstanding before the issuance for less than the greater of book or market value of the
stock.
Issue: The company violated Listing Rule 4350(i)(1)(D)(ii) by issuing greater than 20% of its pre-transaction total shares outstanding at a discount to the market price. The offering consisted of 9,500,000 shares of common stock, plus
the potential issuance of 4,750,000 shares of common stock resulting from the exercise of the warrants. As such, the aggregate issuance would be 14,250,000 shares, or 22% of the 63,085,854 total shares outstanding on a pre-transaction basis, at below the market
price based on a blended average of the common stock and warrant exercise prices.
Determination: The company was properly delisted for failure to comply with the shareholder approval requirement. Although the company stated that it was prepared to cure its shareholder approval violation, a period of approximately two
and one-half months had passed, and the violation still had not been cured at the time of the Listing Council’s consideration.