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Frequently Asked Questions
  Listing Council Decision 2017-5
Identification Number 1473

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: May the Company remain listed notwithstanding is the fact that: (1) it was, until August 31, 2017, delinquent in filing its Quarterly Reports on Form 10-Q for the quarters ended September 30, 2016 and December 31, 2016, in violation of Nasdaq Listing Rule 5250(c); and (2) it was, until August 25, 2017, delinquent in filing its Annual Report on Form 10-K for the fiscal year ended June 30, 2016, in violation of Nasdaq Listing Rule 5250(c)?

Determination: Overrule the Hearing Panel decision to suspend and delist the Company.

The Hearing Panel in this case had previously granted the Company extensions to regain compliance with the Rule – until July 30, 2017 to file its delinquent Form 10-K and until August 31, 2017 to file its delinquent Form 10-Qs – but it revoked those extensions when the Company failed to provide the Panel, as directed, with a specific update from its auditor as to the anticipated schedule for completion of the audit. Although the Council agreed with the Panel that the Company should have been more forthcoming and specific about the status of the audit work, the Council concluded that the Company's update was not so inadequate as to warrant the Panel revoking its extensions. To the extent that the Panel was concerned that Company's status report was too vague, it could have and should have requested clarification from the Company and/or its auditor before it took the drastic step that it did. In sum, the Council concluded that the Panel acted too hastily and should have given the Company a chance to complete its work to regain compliance with the Rule.

Publication Date*: 12/6/2017 Mailto Link Identification Number: 1473
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 Mailto Link Identification Number: 1368
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 Mailto Link Identification Number: 688
Frequently Asked Questions
  Listing Council Decision 2013-3
Identification Number 1089
Public Interest and Quantitative Continued Listing Standards
 
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 5550(b): For continued listing, a Company shall have either:
(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 #1: As initially presented to the Listing Council, 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 5550(b), which requires the Company to have a minimum of $2.5 million in stockholders' equity, or Rule 5110(b) as the Company filed for protection under Chapter 11 bankruptcy. Staff also raised public interest concerns pursuant to Rules 5101 and IM-5101-1. Staff determined to deny the Company continued listing. On appeal, a Panel initially determined to grant the Company additional time to regain compliance subject to certain milestone, but subsequently determined to delist the Company for failing to meet all of the milestones.
 
Determination #1: Reverse the Panel decision to delist the Company.
 
In its submissions to the Listing Council, the Company notes 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. Moreover, the Company notes that the its Board of Directors will be reconstituted concurrent with the Company's emergence from bankruptcy so as to ensure the Company's compliance with all applicable board composition and corporate governance criteria upon emergence from bankruptcy.
 
Staff argues that the Company should be delisted because it failed to meet the milestones of the Panel decision and its own deadlines, and it failed to provide evidence that it will satisfy the applicable initial listing standards upon its emergence from bankruptcy. In addition, Staff is concerned that maintaining the Company's listing does not protect investors or the integrity of Nasdaq, notwithstanding that its securities are suspended from trading on Nasdaq. In support of this argument, Staff notes that prospective investors have an expectation that companies listed on Nasdaq meet the requirements of listing.
 
The Listing Council notes Staff's concern, but believes the risk of investor harm is low. The Company has made ongoing disclosure of the status of the bankruptcy and reorganization. Hence investors are aware of the bankruptcy proceedings, and importantly the Company appears to have genuine viable business operations. In this regard, the Company disclosed $328,377,000 in revenues as of the last fiscal quarter. As such, it is unclear to the Listing Council what prospective investor harm is caused by a Company that is suspended from trading on Nasdaq, is traded with minimal volume over the counter, has provided ongoing public disclosure of its bankruptcy proceedings, and has significant other operations. The Listing Council is aware and considered that the Company has not filed its 10-K for the last fiscal year, but it believes for the reasons set forth above that, even with that failure, the risk of investor harm is low.
 
Bankruptcy proceedings can take time to resolve and the bankruptcy in the present case is, at the very least, adversarial. The Listing Council is unable to continue the Company's listing in perpetuity as it has limited discretion to grant a deficient company an extension to its listing on Nasdaq. The Panel previously granted the Company the full extent of its discretionary authority to allow the Company to regain compliance. When faced with clear evidence that the Company would be unable to regain compliance within its discretionary period, the Panel appropriately determined to delist the Company. The Listing Council, however, has additional discretionary authority that it can exercise in this matter. Based on the facts and circumstances of this case and for the reasons stated above, the Listing Council has decided to exercise its discretionary authority and allow the Company to remain listed on Nasdaq, subject to a suspension of trading.
 
Accordingly, the Listing Council reverses the Panel decision to delist the Company.
 
Issue #2: Should the Company remain listed when, subsequent to the issuance of the Listing Council decision, the Company filed for Chapter 7 liquidation, became deficient for not meeting board independence requirements, and became delinquent in paying its listing fees to Nasdaq. Based on the new facts and circumstances, the Listing Council revisited the matter and issued a second decision.
 
Decision #2: Subsequent to the issuance of the Listing Council decision in this matter, Staff notified the Company and Listing Council of two additional deficiencies: (1) Rule 5250(f), which requires payment of applicable Listing Fees and (2) Rule 5605, which requires a majority independent board and independent directors on certain committees. Staff noted that these deficiencies served as additional bases for delisting the Company's securities from Nasdaq. Staff also noted that the bankruptcy proceedings were converted from Chapter 11 bankruptcy to Chapter 7 liquidation. In response, the Company stated that that an interim Trustee was recently appointed and that the election for the permanent Trustee will be held in the near future, and thereafter the decision relating to the payment of the 2013 Nasdaq annual fee, and the timing of payment of such fee, will be made by the permanent Trustee. Last, the Company noted that it still remains possible that the proceeding could be converted back to a Chapter 11 proceeding in the future.
 
In conducting its review of the new facts and circumstances of this matter, the Listing Council considered the entire record reviewed by the Listing Council in issuing its initial decision, as supplemented by Staff's letter and the Company's response noted above. As disclosed by Staff's letter, the facts and circumstances on which the Listing Council based its initial decision have changed. The Company's Chapter 11 reorganization has been converted into Chapter 7 liquidation. The Company represented in its response that it remains possible that the bankruptcy could be converted back to Chapter 11 reorganization. However, the Company provided no information on how or when such a conversion could take place. Therefore, in the absence of any evidence that the Company could emerge from its Chapter 7 bankruptcy proceedings as an operating company that can comply with the listing requirements on or prior to the expiration of the discretion afforded to the Listing Council, it has determined to delist the Company.
 
Publication Date*: 8/21/2013 Mailto Link Identification Number: 1089
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 Mailto Link Identification Number: 1037
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 Mailto Link Identification Number: 1367
Frequently Asked Questions
  Listing Council Decision 2005-3
Identification Number 616
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.
 
* * *
 
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 Mailto Link Identification Number: 616
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 Mailto Link Identification Number: 1115
Frequently Asked Questions
  Listing Council Decision 2017-3
Identification Number 1434

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 the fact that it was delinquent in filing its annual report and several 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 partial progress in regaining compliance (by filing its delinquent Form 10-K) is inadequate, 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*: 10/3/2017 Mailto Link Identification Number: 1434
Frequently Asked Questions
  Listing Council Decision 2004-10
Identification Number 621
Rule 4350(g): Each issuer shall solicit proxies and provide statements for all meetings of shareholders and shall provide copies of such proxy solicitation to NASDAQ.
 
Rule 4350(e): Each issuer shall hold an annual meeting of shareholders and shall provide notice of such meeting to NASDAQ. Issue: Eight months after the end of its fiscal year, the company still had not filed a definitive proxy statement with the Securities and Exchange Commission or set a definitive shareholder meeting date.
 
Determination: The company was properly delisted for failure to comply with the proxy solicitation and annual meeting requirements.
 
* * *
 
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 [for] common stock) equal to 20% or more of the common stock or 20% or 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 the pre-transaction total shares outstanding at a discount to the market price. The offering, which was scheduled to close in two tranches, consisted of up to 20,000,000 shares of common stock at $0.75 per share, together with the potential issuance of another 10,000,000 shares of common stock resulting from the exercise of warrants at $1.00 per share. As such, the aggregate potential issuance would be 30,000,000 shares, or 99% of the 30,095,328 total shares outstanding on a pre-transaction basis. The first tranche consisted of approximately 2,650,000 shares of common stock, together with 1,325,000 associated warrants, with the balance of the securities to be issued only upon receiving shareholder approval. After the closing of the first tranche, but before closing the second tranche, the company’s securities were delisted from The NASDAQ Stock Market. Before closing the second tranche and also before obtaining shareholder approval, the transaction was restructured to reduce the offering price of the common stock to $0.40 per share and the warrant exercise price to $0.50 per share. At the second closing, the company issued 25,374,999 additional shares of common stock and warrants exercisable for 12,687,502 shares of common stock, for an aggregate potential issuance of 38,062,501 shares of common stock. The company was aware, that even though it was delisted, it was still subject to NASDAQ’s shareholder approval rules.
 
Determination: The Listing Council determined, as a separate ground, that the company’s securities should not be relisted, based on the company’s failure to comply with the shareholder approval requirement. The Listing Council noted that the company was aware that even though it had been delisted, it was still subject to all of NASDAQ’s corporate governance rules, while appealing its Panel decision. As such, the issuance of securities in the second tranche of the offering required shareholder approval because the company issued greater than 20% of the pre-transaction total common shares outstanding at a discount to the market price.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 621
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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