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Frequently Asked Questions
  Listing Council Decision 2014-1
Identification Number 1115
Filing Delinquency and Public Interest
 
Rule 5101: Nasdaq has broad discretionary authority over the initial and continued listing of securities in Nasdaq in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest.
 
Rule 5110(b): Nasdaq may use its discretionary authority under the Rule 5100 Series to suspend or terminate the listing of a Company that has filed for protection under any provision of the federal bankruptcy laws or comparable foreign laws, or has announced that liquidation has been authorized by its board of directors and that it is committed to proceed, even though the Company's securities otherwise meet all enumerated criteria for continued listing on Nasdaq. In the event that Nasdaq determines to continue the listing of such a Company during a bankruptcy reorganization, the Company shall nevertheless be required to satisfy all requirements for initial listing, including the payment of initial listing fees, upon emerging from bankruptcy proceedings.
 
Rule 5250(c)(2): Each Foreign Private Issuer shall submit on a Form 6-K, an interim balance sheet and income statement as of the end of its second quarter. This information, which must be presented in English, but does not have to be reconciled to U.S. GAAP, must be provided no later than six months following the end of the Company's second quarter. In the case of a Foreign Private Issuer that is a limited partnership, such information shall be distributed to limited partners if required by statute or regulation in the jurisdiction in which the limited partnership is formed or doing business or by the terms of the partnership's limited partnership agreement.
 
Issue: At issue in this matter is whether the Company should remain listed, yet suspended from trading, notwithstanding that the Company does not comply with Rule 5250(c)(2), which requires the Company to file interim financial reports, or Rule 5110(b) as the Company filed for protection under its home country’s bankruptcy laws. Staff also raised public interest concerns pursuant to Rules 5101 and IM-5101-1. A Panel determined to grant the Company additional time to regain compliance, but subsequently determined to delist the Company for failing regain compliance by the conclusion of the extension.
 
Determination: Reverse the Panel decision to delist the Company.
 
It appears that the Company faced unanticipated delays in the bankruptcy process, including filing of various motions and creditor meetings, which resulted in the Company not regaining compliance within the time granted by the Panel. In its submissions to the Listing Council, the Company states that it is diligently working to obtain all necessary approvals, complete the restructuring, emerge from bankruptcy, and immediately evidence compliance with all applicable requirements for initial listing on the Capital Market well within the discretionary period available to the Listing Council. The Company has made some progress in this regard, reaching a milestone with the court’s approval of the creditors’ plan of settlement. In its brief to the Listing Council, the Company represented that the final settlement with the creditors will be approved by the court within approximately 30 to 45 days after the approval of the plan. The Company also represents that, following its emergence from bankruptcy, it will begin new operations with anticipated bookings of up to approximately $14 million. In its brief to the Listing Council, Staff notes that, because the Company’s shares are currently suspended from trading on Nasdaq and the post-merger company must meet all the requirements for initial listing, it does not object to the Listing Council granting the Company additional time to demonstrate compliance with initial listing standards.
 
The Panel determined to grant the Company the full extent of time available to allow it to regain compliance. When the Company did not meet the terms of the Panel decision, the Panel appropriately moved to delist the Company. The Listing Council has discretionary authority to grant the Company an additional extension of time to regain compliance. In light of the above, the Listing Council believes that allowing the Company to remain listed on Nasdaq yet suspended from trading presents a low risk of investor harm.
 
Accordingly, the Listing Council reverses the Panel decision to delist the Company and grants the Company through July 2014 to emerge from bankruptcy and evidence compliance with all requirements for initial listing on the Capital Market. Nothing in this decision limits the Listing Council from revisiting its determination should it become aware of a change in the facts and circumstances of the matter, which, in the opinion of the Listing Council, warrant modification of its decision.
 
Publication Date*: 8/5/2014 Identification Number: 1115 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2017-2
Identification Number 1368

Filing Delinquency

Rule 5250(c)(1): A Company shall timely file all required periodic financial reports with the Commission through the EDGAR System or with the Other Regulatory Authority. A Company that does not file through the EDGAR System shall supply to Nasdaq two (2) copies of all reports required to be filed with the Other Regulatory Authority or email an electronic version of the report to Nasdaq at continuedlisting@nasdaq.com. All required reports must be filed with Nasdaq on or before the date they are required to be filed with the Commission or Other Regulatory Authority. Annual reports filed with Nasdaq shall contain audited financial statements.

Rule 5820(d)(4): In the case of a Company that fails to file a periodic report (e.g., Form 10-K, 10-Q, 20-F, 40-F, or N-CSR), the Listing Council may grant an exception for a period not to exceed 360 days from the due date of the first such late periodic report. The Company can regain compliance with the requirement by filing that periodic report and any other delinquent reports with due dates falling before the end of the exception period. In determining whether to grant an exception, and the length of any such exception, the Listing Council will consider the Company's specific circumstances, including the likelihood that the filing can be made within the exception period, the Company's past compliance history, the reasons for the late filing, corporate events that may occur within the exception period, the Company's general financial status, and the Company's disclosures to the market. This review will be based on information provided by a variety of sources, which may include the Company, its audit committee, its outside auditors, the staff of the SEC and any other regulatory body.

Issue: At issue is whether the Listing Council has discretion to allow a company to remain listed notwithstanding that it has been and remains delinquent in filing its periodic financial reports for more than a year.

Determination: Affirm the decision to suspend and delist the Company.

In light of the facts and circumstances of this matter, which include the fact that the Company has been delinquent in filing its periodic financial reports with the SEC for more than a year, in violation of Rule 5250(c), and that it has failed to regain compliance with the Rule notwithstanding its receipt from the Staff and the Hearing Panel of multiple extensions of time within which to do so, the Listing Council finds that it lacks discretion under Rule 5820(d)(4) to grant any further compliance extensions, and that delisting of the Company’s securities is required.

Delisting does not bar the Company from applying to relist on Nasdaq, or another U.S. exchange. In this regard, should the Company resolve the issues that give rise to this matter it may reapply to list on Nasdaq.

Lastly, the Listing Council deems to be non-cognizable within the context of the Company’s disciplinary hearing the Company’s request that the Listing Council consider modifying Rule 5820(d)(4) to permit it and companies like it to have a period of time longer than a year to regain compliance with Rule 5250(c). Although the Listing Council may recommend to the Exchange’s Board of Directors amendments to its Rules, the Listing Council lacks authority to unilaterally modify those Rules.

Publication Date*: 5/3/2017 Identification Number: 1368 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2002-2
Identification Number 688
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.
 
* * *
 
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.
 
* * *
 
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).
 
* * *
 
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.
 
* * *
 
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.
 
* * *
 
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 Identification Number: 688 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2013-4
Identification Number 1112
Quantitative Listing Standards
 
Rule 5505(a)(3): a company must meet have at least 300 Round Lot Holders to list on the Capital Market.
 
Rule 5505(b): a company must meet one of the following standards to list on the Capital Market:
(1) Equity Standard
(A) Stockholders' equity of at least $5 million;
(B) Market Value of Publicly Held Shares of at least $15 million; and
(C) Two year operating history.
(2) Market Value of Listed Securities Standard
(A) Market Value of Listed Securities of at least $50 million (current publicly traded Companies must meet this requirement and the price requirement for 90 consecutive trading days prior to applying for listing if qualifying to list only under the Market Value of Listed Securities Standard);
(B) Stockholders' equity of at least $4 million; and
(C) Market Value of Publicly Held Shares of at least $15 million.
(3) Net Income Standard
(A) Net income from continuing operations of $750,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years;
(B) Stockholders' equity of at least $4 million; and
(C) Market Value of Publicly Held Shares of at least $5 million.
Prior to its conversion from a special purpose acquisition company ("SPAC") to an operating company, the Company did not comply with:
 
Rule 5550(a)(3): which requires a company to have a minimum 300 public holders for continued listing on the Capital Market.
 
Rule 5550(a)(4): which requires a company to have a minimum 500,000 publicly held shares on the Capital Market.
 
Issue: Should the Company, which is a SPAC, be granted an extension to remain listed on Nasdaq, notwithstanding a Panel decision that affirmed Staff’s determination to delist the Company based on its non-compliance with the Capital Market continued listing standards, and which, post-acquisition, does not meet Capital Market initial listing standards? [1]
 
Determination: Affirm the decision to suspend and delist the Company.
 
The Company has not complied with continued, and now initial, listing standards. It has repeatedly requested extensions of time to conclude transactions to regain compliance with continued listing standards or to meet initial listing standards, yet each time failed to fully carry out what was promised to regain compliance. Now the Company requests that the Listing Council grant it additional time to regain compliance with initial listing standards. For the reasons stated below, the Listing Council denies the Company’s request.
 
Companies applying for listing on Nasdaq must meet initial listing standards before being approved. For the vast majority of companies, Staff’s denial of initial listing may be appealed and the company remains unlisted on Nasdaq during the appellate process. SPACs, by contrast, may remain listed on Nasdaq while pending an appellate review of Staff and subsequent Panel determinations regarding such a company’s eligibility for initial listing. The Company does not dispute that it is currently ineligible for initial listing and it has not presented any compelling reason to grant it continued listing until such a time that it can meet initial listing standards. As noted by Staff in its brief to the Listing Council, the Company’s solution remains unchanged, namely that it is working diligently to complete transactions that will allow it to meet Nasdaq’s initial listing standards. The Listing Council does not find the Company’s plan of compliance adequately definitive to find that compliance is imminent. The Listing Council notes that the Company is not precluded from reapplying to list on Nasdaq once it determines that it meets initial listing standards.
 
_______________________________________
[1]A SPAC must meet continued listing standards upon listing on NASDAQ. Once the SPAC completes its conversion to an operating company, it must meet initial listing standards.
Publication Date*: 5/6/2014 Identification Number: 1112 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2003-4
Identification Number 676
Rule 4310(c)(2): $2,500,000 shareholders' equity requirement, or its alternatives, for continued listing on the SmallCap Market.
 
Issue: The company no longer satisfied the shareholders' equity requirement. The company asserted that it would regain compliance after it received financing in connection with a transaction with a potential partner. The company expected to consummate the transaction within three months. The company also planned to raise financing through a placement agent.
 
Determination: The company was properly delisted for failure to comply with the shareholders' equity requirement. The company had been deficient for approximately eight months and had not provided sufficient evidence to indicate that its proposed transaction would occur in the near term. There was no evidence in the record, and the company had not filed any reports on Form 8-K or issued any press releases, announcing that it received a term sheet or entered into a definitive agreement with the potential partner. In addition, the company had not provided any evidence or publicly announced that it raised any financing through its placement agent.
 
* * *
 
Rule 4310(c)(4): $1 minimum bid price requirement for continued listing on the SmallCap Market.
 
Issue: The bid price of the company's common stock was below $1. The company believed its common stock price would increase after it received financing in connection with its proposed transaction. Even though the company had been non-compliant with the bid price requirement for one year, it indicated that it would only implement a reverse stock split if its plan did not improve its bid price.
 
Determination: The company was properly delisted for failure to comply with the minimum bid price requirement. The company had been deficient for approximately one year. Anticipated favorable market reaction is not a definitive plan to regain compliance with the minimum bid price requirement. Furthermore, the company had not filed a preliminary proxy statement to effect a reverse stock split.
Publication Date*: 7/31/2012 Identification Number: 676 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2012-1
Identification Number 1037
Public Interest
 
Rule 5101: NASDAQ is entrusted with the authority to preserve and strengthen the quality of and public confidence in its market.  NASDAQ stands for integrity and ethical business practices in order to enhance investor confidence, thereby contributing to the financial health of the economy and supporting the capital formation process. NASDAQ Companies, from new public Companies to Companies of international stature, are publicly recognized as sharing these important objectives. NASDAQ, therefore, in addition to applying the enumerated criteria set forth in the Listing Rule 5000 Series, has broad discretionary authority over the initial and continued listing of securities in NASDAQ in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest. NASDAQ may use such discretion to deny initial listing, apply additional or more stringent criteria for the initial or continued listing of particular securities, or suspend or delist particular securities based on any event, condition, or circumstance that exists or occurs that makes initial or continued listing of the securities on NASDAQ inadvisable or unwarranted in the opinion of NASDAQ, even though the securities meet all enumerated criteria for initial or continued listing on NASDAQ. In all circumstances where the Listing Qualifications Department (as defined in Listing Rule 5805) exercises its authority under Listing Rule 5101, the Listing Qualifications Department shall issue a Staff Delisting Determination under Listing Rule 5810(c)(1), and in all circumstances where an Adjudicatory Body (as defined in Listing Rule 5805) exercises such authority, the use of the authority shall be described in the written decision of the Adjudicatory Body.
 
Bid Price
 
Rule 5550(a)(2): A Company that has its Primary Equity Security listed on the Capital Market must continue to maintain a minimum bid price of at least $1 per share.
 
Issue: The company was delisted by a Hearings Panel for public interest concerns and for failure to regain compliance with NASDAQ’s minimum bid price requirement.  
 
After granting the company two 180 day compliance periods to regain compliance with the minimum bid requirement, Staff issued a delisting determination. The company appealed the determination to the Hearings Panel. During the Hearings Panel proceedings, Staff determined the company was a public interest concern based on the action it took in writing off substantial loans owed by the company’s CEO, who is also Chairman of the company. On November 16, 2011, the Hearings Panel issued a decision to delist the company based on its non-compliance with the minimum bid price requirement and for public interest concerns. On November 29, 2011, the company appealed the Hearings Panel decision to delist the company to the Listing Council.
 
Bid Price
The company has been, and continues to be, out of compliance with NASDAQ’s bid price requirement. The company failed to regain compliance with the bid price rule by effectuating a reverse stock split, as it had committed to do as a condition of receiving a second 180 compliance period. Staff issued a delisting determination at the expiration of the second compliance period, consistent with Listing Rule 5550(a)(2).
 
Subsequent to Staff’s delisting determination, and the company’s appeal of the matter to the Hearings Panel , the company asserted that it had regained compliance with Listing Rule 5550(a)(2) since its bid price had closed at or above $1.00 for ten trading days. Staff had not made such a determination and was reviewing what it considered suspicious trading in the company’s stock. Upon completion of its preliminary review of the aberrant trading in the company’s stock, Staff determined to extend the period to regain compliance with the bid price requirement to twenty days, consistent with the authority provided by Listing Rule 5810(c)(3)(F). Staff based its decision on several facts that led it to believe that the stock was manipulated.
 
The company did not maintain a bid price of $1 or more during the twenty day compliance period, never had a closing bid price significantly over $1, and currently has closing bid prices in the mid 20 cent range, which is near the price it had traded prior to the brief run up in its stock price. The company had committed to effectuate a stock split if its stock was still below $1.00 at the end of the second compliance period, a condition to receiving the second period pursuant to Listing Rule 5810(c)(3)(A)(ii), yet did not do so. The company did not indicate a willingness to effectuate a reverse stock split during the Hearings Panel proceedings.
 
Public Interest Concerns: Related Party Loan Write Off
Prior to its listing in August 2008, the company extended loans totaling approximately $140 million to two companies controlled by the company’s CEO and largest shareholder for the stated purpose of funding the construction of expressways in China. Subsequently, the loan terms were modified and extended on multiple occasions. Despite receiving only one interest payment on the non-performing notes, the company also froze interest accruals on the non-performing notes and determined to extend $129 million in new loans to the two entities owned and controlled by the Chairman and CEO, in addition to two other companies also owned by him (collectively, the “Non-Performing Loans”).
  
In September 2009, in an attempt to collect on the monies owed by the CEO’s entities, the company entered into a letter of intent to purchase 51% of one of the companies, yet it had to abandon the purchase when it was clear that government approval was not forthcoming. In July 2011, the company announced that its board of directorsors had determined to write off a substantial portion of the Non-Performing Loans. The company also announced that the CEO had offered ownership interest in a commercial, residential real estate and retail shopping mall development project as partial payment of the Non-Performing Loans, and that the board of directorsors was evaluating the proposal. In August 2011, the company issued a press release that announced that the board of directorsors had met and discussed, among other things, the company’s plans to write off the Non-Performing Loans involving the CEO, and taking a 51% interest in a property held by the CEO as a partial offset to the Non-Performing Loans. In a Form 8-K filed with the SEC in October 2011, the company stated that it had entered into agreements to acquire 51% of the entity controlled by the CEO, (the “Development Company”), as described in the company’s prior disclosures. The company also noted that it had recorded provisions for bad debt expense of $149.5 million, or more than 70% of the $210 million owed by the companies controlled by the CEO.
 
In October 2011, Staff informed the company that it had determined that the company’s actions concerning the related party Non-Performing Loans represented a public interest concern, which was an additional basis for delisting pursuant to Listing Rule 5101. As a basis for its determination, Staff asserted that the company failed to undertake sufficient efforts to collect the amounts due on the Non-Performing Loans, instead accepting rights to control a separate related-party company, the value of which was much less than the outstanding principal and interest balances. Staff further noted that the company’s failure to aggressively pursue collection efforts, and the subsequent transactions, were done for the benefit of the CEO and to the detriment of non-affiliated shareholders. In response to the additional basis for delisting, the company claimed that management and the board of directorsors acted in the best interests of the public shareholders with respect to the Non-Performing Loans, noting that it had modified, extended, and deferred interest payments on the loans as a normal response to any non-performing loan and the decision to write off the majority of the loan was made only made after all efforts were exhausted.
 
Public Interest Concerns: CFO Resignation
In mid-December 2011, the company issued a Form 8-K that disclosed that, the company received a letter of resignation on September 21, 2011 from CFO of the company, who was also a company director. The resignation letter was sent to the CEO. The company asserted in the Form 8-K that it did not accept the CFO’s resignation, but that it knew that he did not continue to perform his duties as CFO of the company. There is evidence in the record that the company along with then-company counsel and independent auditors were aware of the CFO’s unambiguous and immediate resignation from the company as a director and CFO. The company appointed an interim CFO a day prior to filing the mid-December 2011 Form 8-K.
 
Notwithstanding the CFO’s resignation several SEC disclosures were subsequently filed with the SEC containing his signature. As detailed in the company’s mid-December 2011 Form 8-K, the company’s Form 10-K for the fiscal year ended June 30, 2011 filed on October 13, 2011, its Quarterly Report on 10-Q for the quarter ended September 30, 2011, filed on November 14, 2011 and its Annual Report on Form 10-K/A for the fiscal year ended June 30, 2011, filed on November 14, 2011, all of which included the resigned CFO’s signatures, had in fact not been prepared or reviewed by the resigned CFO, and the resigned CFO had not personally signed such reports or consented to the use of his signature on such reports. It also appears that the company forged the resigned CFO’s signature on a letter to Staff, dated September 30, 2011 – eight days after his resignation and unknown to him.
 
Determination: Affirmed. After a review of the record in this matter, the Listing Council affirms the Hearings Panel decision.
 
Bid Price
The Listing Council concludes that Staff acted appropriately in delisting the company based on bid price deficiency and its failure to cure the deficiency with a reverse stock split at the end of its second compliance period as it had committed to do. The Listing Council further concludes that it was appropriate for Staff to apply a 20-day compliance period to the bid price deficiency pursuant to Listing Rule 5810(c)(3)(F) based on concerns of stock price manipulation. The company asserts that the increases in its stock price and volume are due to the public’s positive reaction to the Development Company acquisition. The Listing Council finds this argument unpersuasive given that the abnormal trading in the company’s stock began over a month after the initial notice of the potential acquisition on, yet days prior to subsequent news concerning the prospective transaction.  The Listing Council further concludes that Hearings Panel acted appropriately in delisting the company for failing to regain compliance with the minimum bid price requirement. The company was unwilling to effectuate a reverse stock split adequate for it to regain compliance with Listing Rule 5550(a)(2) and the company’s closing bid price was declining during the period from the Hearings Panel  hearing through the issuance of its decision.
 
The company’s revised compliance plan provided to the Listing Council includes a provision to seek authority to effectuate a reverse stock split to regain compliance with Listing Rule 5550(a)(2), which would take approximately 45 to 50 days according to the company. The Listing Council believes that the company has had ample opportunity to cure its bid price deficiency over the 360 days it was afforded by Staff, and as such, the Listing Council finds no reason to reverse the Hearings Panel’s decision to delist the company.
 
Public Interest Concerns: Related Party Loan Write Off
The company wrote off as bad debt approximately $150 million of the $210 million owed under the Non-Performing Loans. The Listing Council believes that it was a reasonable determination to find a public interest concern based on the facts and circumstances. The Non-Performing Loans were made to entities controlled by the company’s Chairman and CEO, who received the benefits of the loans over many years, paying negligible interest and repaying only a fraction of the original amount loaned. The Listing Council is concerned that the company has not acted in the best interest of its public shareholders and believes that the company’s actions with respect to the Non-Performing Loans show a pattern of conduct that, in aggregate, reasonably support a determination that delisting was warranted pursuant to Listing Rule 5101.
 
Public Interest Concerns: CFO Resignation
The Listing Council finds very concerning the apparent forgery of the resigned CFO’s signature on documents filed with the Commission and submitted to NASDAQ, the failure to disclose the CFO’s resignation as CFO and director timely, and the statements made an independent director at the Hearings Panel  hearing, which were misleading and evasive. It is undisputed that the CFO resigned in September 2011. It is also undisputed that the CEO and independent director were notified of resignation at the time of the resignation. Notwithstanding, the CEO and independent director permitted the company to submit documents to the SEC and NASDAQ with the resigned CFO’s signature as the purported CFO. In addition, at the Hearings Panel hearing, which occurred after the resignation of the CFO yet before the appointment of an interim CFO, an independent director stated that he had spoken to the CFO regarding possible manipulation of the company’s stock price. The earliest evidence in the record of NASDAQ’s concern regarding possible manipulation of the company’s stock price was in a request for information sent to the company’s then-counsel on September 22, 2011, a day after the resignation of the CFO from the company. The Listing Council finds the company’s misrepresentations and lack of disclosure concerning CFO’s resignation very troubling and an additional basis to delist the company pursuant to Listing Rule 5101.
 
Rule 5101 provides NASDAQ with “broad discretionary authority” over the listing of securities on NASDAQ “in order to maintain the quality of and public confidence in the market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade and to protect investors and the public interest.” This authority stems directly from NASDAQ’s delegated responsibilities under the Securities Exchange Act of 1934. Listing Rule 5101 is not invoked lightly and, in instances in which a public interest concern is identified, the issues are very serious. In the present case, Staff’s concerns over the company’s actions concerning the loans made to the CEO and Chairman were sufficient to find a public interest concern and to delist the company pursuant to Listing Rule 5101. The company’s misrepresentations and lack of disclosure concerning the CFO’s resignation is an independent, and truly troubling, basis for determining the company represents a public interest concern, and thus warrants delisting pursuant to Listing Rule 5101.
 
Publication Date*: 7/31/2012 Identification Number: 1037 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2014-3
Identification Number 1134
Bid Price and Stockholders' Equity
 
Rule 5505: Initial Listing of Primary Equity Securities
 
A Company applying to list its Primary Equity Security on the Capital Market must meet all of the requirements set forth in Rule 5505(a) and at least one of the Standards in Rule 5505(b).
(a) Initial Listing Requirements for Primary Equity Securities:
(1) (A) Minimum bid price of $4 per share
Rule 5550: Continued Listing of Primary Equity Securities
 
A Company that has its Primary Equity Security listed on the Capital Market must continue to meet all of the requirements set forth in Rule 5550(a) and at least one of the Standards set forth in Rule 5550(b). Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.
(b) Continued Listing Standards for Primary Equity Securities:

(1) Equity Standard: Stockholders’ equity of at least $2.5 million;
(2) Market Value of Listed Securities Standard: Market Value of Listed Securities of at least $35 million; or
(3) Net Income Standard: Net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.

Issue: At issue in this matter is whether the Company should remain listed, yet suspended from trading, notwithstanding that the Company has not received approval of its listing application for listing of the newly-merged company, which was treated as a change of control for purposes of Rule 5110(a), and because the Company does not comply with the Capital Market $4 bid price initial listing requirement of Rule 5505(a)(1)(A). Moreover, it is unclear whether the Company meets all other initial listing standards for listing on the Capital Market.
 
Prior to its merger, the Company did not comply with Rule 5550(b)(1), which requires a Capital Market company to maintain a minimum of $2.5 million in stockholders’ equity for continued listing.
 
Determination: Reverse the Panel decision to delist the Company.
 
It is clear from the record, the Company has had difficulty in resolving what it believes to be the only Capital Market initial listing requirement that it does not meet, namely the $4 bid price requirement. Although it appears that there is some disagreement over whether the Company meets all other listing standards other than bid price, the Listing Council need not settle this factual issue. The Listing Council notes that the Company received approval of, and implemented, a stock split as it had committed to do. The Company requested an extension until September 30, 2014 to evidence compliance with all Capital Market initial listing standards. In light of the brief nature of the extension and because the Company’s securities are currently suspended from trading on Nasdaq, the Listing Council is willing to grant the Company a brief extension to evidence compliance with all initial listing requirements for listing on the Capital Market and to receive approval of an application for listing thereon from Staff.
 
Accordingly, the Listing Council reverses the Panel decision to delist the Company and grants the Company through September 30, 2014 to inform the Listing Council that it has achieved compliance with all requirements for initial listing on the Capital Market and received approval of an initial listing application for listing thereon. Should the Company fail to meet the terms of this decision, the Company’s securities will be delisted from Nasdaq.
 
Publication Date*: 11/19/2014 Identification Number: 1134 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2013-1
Identification Number 1087
Public Interest
 
Rule 5101: Nasdaq has broad discretionary authority over the initial and continued listing of securities in Nasdaq in order to maintain the quality of and public confidence in its market, to prevent fraudulent and manipulative acts and practices, to promote just and equitable principles of trade, and to protect investors and the public interest.
 
Issue: Should the Company be granted an extension to remain listed on Nasdaq, notwithstanding a Panel decision that affirmed Staff's determination to delist the Company based on public interest concerns Staff identified in a recent press release and subsequent Company disclosures, which include: (1) a liquidity crisis, and a related line of credit from an entity controlled by Company employees; (2) recent management turnover and the reasons for management resignations; (3) corporate structuring that precludes transfer of cash or other assets from the Company's Chinese subsidiaries to the Company; (4) the Company's past association with a stock promoter with a regulatory history, and trading activity in the Company's stock by certain brokers, significant shareholders and the former CEO?
 
Determination: Affirm the decision to delist the company.
 
Fundamental to the Company's argument is its assertion that Staff applied its own business judgment in determining to delist the Company and as such the determination, and the Panel decision, was ultra vires. This argument is without merit. There is no evidence that Staff acted outside of the scope of authority provided by either Rule 4120(a)(5) or Rule 5101. Rule 4120(a)(5) permits Nasdaq to halt a listed security when it requests information from the issuer relating to material news, its ability to meet Nasdaq listing qualification requirements, or any other information which is necessary to protect investors and the public interest. The Listing Council finds that Staff had satisfied the requirements of Rule 4120(a)(5) as a recent press release did represent material news. Moreover, there is no dispute that the disclosure raised questions concerning the Company's ability to meet Nasdaq's listing standards given the significant resignations, announcement of the retention of a restructuring adviser, and the entry into the revolving loan agreement to meet the Company's “immediate cash needs.”
 
Turning to the exercise of its discretionary authority under Rule 5101, the Company's determination to allow a $33 million cash balance to decrease to approximately $25,000 over the course of 14 months without a means to adequately fund the Company's operations is very concerning to Nasdaq and a valid basis to exercise its discretionary authority under Rule 5101 to delist the Company. The Listing Council agrees with Staff's position that bringing the Company to the brink of insolvency by spending down corporate assets to this level is not an ordinary event, but rather irresponsible, reckless and inconsistent with conduct expected of a Nasdaq- listed company. In addition, the Company was slow to react to its liquidity crisis, as there is adequate evidence in the record to conclude that it knew of its liquidity issues several months before it secured the related party revolving loan, in contrast to the Company's assertion that there were no other alternatives due to a lack of time. While remedial steps were taken by the Company, it is unclear that such steps will adequately address the issues that gave rise to Staff's delisting determination. The Company remains unable to assert any material control over its subsidiaries in terms of funding the Company's operations, and receives its operating capital from a revolving loan agreement with a company controlled by subsidiary executives. In addition, the lack of control of its subsidiaries presents a bevy of concerns, including questions surrounding the Company's internal controls over accounting and other U.S. federal regulatory obligations. As noted in the record, the new Company executives provided a qualified attestation to the Company's financial reports.
 
Addressing the Company's assertion that the delisting is not in the public interest, the Commission has long recognized that Nasdaq is vested with discretionary authority to deny an issuer's request that its securities be included in Nasdaq, and holds that Nasdaq's primary concern in making listing determinations should be the protection of prospective investors. In Tassaway, the SEC stated that “while exclusion from Nasdaq may hurt existing shareholders, the primary emphasis must be placed on the interest of prospective public investors and that this latter group is entitled to assume that the securities in [Nasdaq] meet [its] standards.” It is against this regulatory backdrop that the Listing Council finds that it was appropriate to deny continued listing to a company that (1) allowed a $33 million cash balance to decrease to approximately $25,000 over the course of 14 months without a means to adequately fund the Company's operations; (2) chose to rely on funding from employees of its Chinese subsidiaries to avoid insolvency, with no apparent consideration of other sources; (3) experienced significant management turnover; (4) has a lack of contractual arrangements with its Chinese subsidiaries that allow for the transfer of funds from China to the U.S. for business expenses.
 
Although the Company's ties to a stock promoter with a regulatory history and his affiliates continued during the time that the Company took the actions at issue in this matter through the initiation of the appeal to the Listing Council, it appears that the Company has taken action to sever such ties at this time. Moreover, as the Panel noted, the Company has taken some steps to resolve some of the issues that have raised Staff's concerns. Nonetheless, the Listing Council does not believe that the Company should be listed on Nasdaq at this time. The issues arising from the recent press release and Staff's subsequent investigation are very concerning, and are representative of a Company clearly not prepared for the rigors and responsibilities that are demanded of listed companies. As such, it is consistent with the discretion afforded under Rule 5101 to delist the Company to protect investors while allowing the Company to demonstrate over time its ability to act as a responsible corporate citizen.
 
Accordingly, the Listing Council affirms the Panel decision to deny continued listing to the Company based on the exercise of the broad discretionary authority under Rule 5101.
 
Publication Date*: 8/21/2013 Identification Number: 1087 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2012-2
Identification Number 1064

Quantitative Continued Listing Standards

Rule 5450: A Company that has its Primary Equity Security listed on the Global Market must continue to substantially meet all of the requirements set forth in Rule 5450(a) and at least one of the Standards in Rule 5450(b). Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series. A security maintaining its listing under 5450(b)(3) need not also be in compliance with the quantitative maintenance criteria in the Rule 5500 series.

(a)...
(b) Continued Listing Standards for Primary Equity Securities:

(1) Equity Standard

(A) Stockholders' equity of at least $10 million;
(B) At least 750,000 Publicly Held Shares;
(C) Market Value of Publicly Held Shares of at least $5 million; and
(D) At least two registered and active Market Makers.

(2) Market Value Standard

(A) Market Value of Listed Securities of at least $50 million;
(B) At least 1,100,000 Publicly Held Shares;
(C) Market Value of Publicly Held Shares of at least $15 million; and
(D) At least four registered and active Market Makers.

(3) Total Assets/Total Revenue Standard

(A) Total assets and total revenue of at least $50 million each for the most recently completed fiscal year or two of the three most recently completed fiscal years;
(B) At least 1,100,000 Publicly Held Shares;
(C) Market Value of Publicly Held Shares of at least $15 million; and
(D) At least four registered and active Market Makers.

* * * * *

Rule 5550: A Company that has its Primary Equity Security listed on the Capital Market must continue to meet all of the requirements set forth in Rule 5550(a) and at least one of the Standards set forth in Rule 5550(b). Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.

(a) …
(b) Continued Listing Standards for Primary Equity Securities:

(1) Equity Standard: Stockholders' equity of at least $2.5 million;
(2) Market Value of Listed Securities Standard: Market Value of Listed Securities of at least $35 million; or
(3) Net Income Standard: Net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.

Issue: The company was before the Hearing Panel on an appeal of a Staff determination to delist the company for failing to provide an adequately definitive plan to regain compliance with Rule 5450(b). In reaching its determination that the company’s plan was not definitive, Staff noted that the company did not provide signed agreements or contracts demonstrating the its ability to complete multiple capital raising transactions, the form and timing of which had changed multiple times during the period Staff was reviewing the plan. The Hearing Panel issued a decision that moved the company to the Capital Market and provided an extension through June 2012 to regain compliance with Rule 5550(b). The Listing Council called the Hearing Panel decision for review, yet holding the Listing Council proceedings in abeyance until final action was reached in the Hearing Panel matter. Prior to the expiration of the Hearing Panel extension, the company informed the Listing Council that it would not regain compliance with the listing standards by expiration of the Hearing Panel exception and requested that the Listing Council exercise its authority to stay delisting of the company. The Listing Council did not exercise such authority, and the Hearing Panel thereafter issued a decision to delist the company. The company appealed the Hearing Panel decision to delist the company to the Listing Council.

Determination: Affirm the decision to delist the company.

The company’s estimations both on timing and the amount of capital raised have been consistently over-optimistic and inaccurate. The various milestones set by the company relating to its plan of compliance were not met. With respect to a conversion of notes described in the compliance plan, the company encountered delays in the timeframe set forth to the Staff and the Hearing Panel. The Listing Council was not provided with any update from the company concerning the actual amounts raised through such conversions and the effect such conversions have had in regard to its stockholders’ equity deficit. Given the low price of the company’s shares relative to the currently applicable conversion prices, the Listing Council agrees with Staff’s concern that the company’s note holders will not be motivated to convert their debt to equity. With respect to the private placement and registered direct offerings described in the compliance plan, the company’s description of the offerings was not definitive. The company’s description did not provide milestones, commitments or agreements. The company merely stated that such equity raises would occur sometime following the agreement with the note holders. As recently as August 2012, the company has publicly stated that “it has been difficult so far to attract new equity investments,” which provides further evidence that the company is not likely to close a transaction sufficient to regain compliance in the near term and maintain compliance going forward. As such, the Listing Council agrees with Staff that the company’s plans of compliance have not been definitive[1], and that the company will not likely be able to regain and maintain compliance with continued listing standards.

_______________________________________

[1] Nasdaq FAQs provide guidance to companies on, among other things, what is expected to be presented in plans of compliance (To view these FAQs, click here). These FAQs are clear that such plans should be definitive and, with regard to private placements and other financial arrangements, companies should provide agreements and lists of investors. The Listing Council acknowledges that the determination of whether a plan of compliance is definitive is a matter of judgment and respects Hearing Panel discretion in the exercise thereof. However, in the present case, the Listing Council failed to find, either in the record or in the Hearing Panel decision, a basis for concluding with any confidence that the Company’s plan of compliance was “definitive.” This observation affects neither the Hearing Panel decision of March 2012 nor the Hearing Panel decision of June 2012.

Publication Date*: 12/3/2012 Identification Number: 1064 Mailto Link
Frequently Asked Questions
  Listing Council Decision 2017-1
Identification Number 1367

Filing Delinquency

Rule 5250(c)(1): A Company shall timely file all required periodic financial reports with the Commission through the EDGAR System or with the Other Regulatory Authority. A Company that does not file through the EDGAR System shall supply to Nasdaq two (2) copies of all reports required to be filed with the Other Regulatory Authority or email an electronic version of the report to Nasdaq at continuedlisting@nasdaq.com. All required reports must be filed with Nasdaq on or before the date they are required to be filed with the Commission or Other Regulatory Authority. Annual reports filed with Nasdaq shall contain audited financial statements.

Issue: At issue is whether the company should remain listed notwithstanding that it has been and remains delinquent in filing its annual report and quarterly filings notwithstanding its receipt of several prior periods of exemption from Rule 5250(c).

Determination: Affirm the decision to suspend and delist the Company.

In light of the facts and circumstances of this matter, which include the fact that the Company has been delinquent in filing its periodic financial reports with the SEC for a prolonged period of time, in violation of Rule 5250(c), and that it has failed to regain compliance with the Rule notwithstanding its receipt from the Hearing Panel of multiple extensions of time within which to do so, the Listing Council finds that the Company’s vague projections as to when it will regain compliance with the Rule lack credibility, that its request for a further extension is unwarranted, and that delisting of the Company’s securities is appropriate, pursuant to Rule 5820(d)(4).

Delisting does not bar the Company from applying to relist on Nasdaq, or another U.S. exchange. In this regard, should the Company resolve the issues that give rise to this matter it may reapply to list on Nasdaq.

Publication Date*: 5/3/2017 Identification Number: 1367 Mailto Link
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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