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1- 8 of 8
Search Results for:
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Ordering of Search Results
When searching across multiple libraries:
FAQs will appear in alphabetical order by category and sub-category
Listing Council Decisions will appear in reverse chronological order by year.
Staff Interpretations will appear in reverse chronological order by year
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Libraries:
Listing Council Decisions
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Filters:
All Years; Shareholder Approval; All
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Identification Number
623
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Rule 4350(i)(2): An exception applicable to a specified issuance of securities may be made upon prior written application to NASDAQ's Listing Qualifications when:
(A) the delay in securing stockholder approval would seriously jeopardize the financial viability of the enterprise; and
(B) reliance by the company on this exception is expressly approved by the audit committee or a comparable body of the board of directors comprised solely of independent, disinterested directors. Listing Qualifications shall respond to each application for such an exception in writing.
A company that receives such an exception must mail to all shareholders not later than ten days before issuance of the securities a letter alerting them to its omission to seek the shareholder approval that would otherwise be required. Such notification shall disclose the terms of the transaction (including the number of shares of common stock that could be issued and the consideration received), the fact that the issuer is relying on a financial viability exception to the stockholder approval rules, and that the audit committee or a comparable body of the board of directors comprised solely of independent, disinterested directors has expressly approved reliance on the exception. The issuer shall also make a public announcement through the news media disclosing the same information as promptly as possible, but no later than ten days before the issuance of the securities.
Issue: The Panel determined that Staff erred in denying the financial viability exception to the shareholder approval rules. The Panel found the Staff had applied a bright-line test that denies the financial viability exception based on any issuance that includes a discounted offering of stock to corporate officers.
Determination: After a review of the record in this matter, the Listing Council affirms the Panel’s decision to continue the listing of the company’s securities.
NASDAQ shareholder approval requirements are designed to provide shareholders with a meaningful voice in significant transactions and in transactions where they may face significant dilution. The Listing Council believes that this voice, mandated by NASDAQ rules, is a basic tenet of the NASDAQ corporate governance rules. In adopting these rules, however, NASDAQ also understood that there are special situations wherein companies are unable to seek prior shareholder approval to issue securities because any delay would jeopardize a company’s ability to continue as a going concern.
After reviewing the record before it, the Listing Council agrees with the Panel’s determination that the company’s viability was threatened. The Listing Council also agrees with the Panel’s determination that it can be fairly and reasonably implied that a discounted issuance of stock to management in a private placement, as contemplated in the present case, is considered “equity compensation” for purposes of Listing Rule 4350(i)(1)(A), and as such, requires prior shareholder approval absent an exception. The Listing Council finds that the Panel reasonably concluded that, based upon the record before it, the Staff had applied a “bright-line” test that would deny the availability of the financial viability exception for any issuance that includes an equity compensation component. The Listing Council agrees with the Panel that applying a “bright-line” test, which summarily excludes companies from access to the financial viability exception based upon the existence of equity compensation, is improper. Staff must consider the facts and circumstances surrounding each request for a financial viability exception.
In the case at hand, the Panel found convincing the company’s belief that any effort to amend the terms of the financing in any way would have required the approval by multiple parties and raised a very high risk that the deal would fall through. The Panel was not convinced that the terms of the financing were intended to allow management to enrich itself or that any enrichment would occur without the approval of shareholders. Instead, the Panel believed that the management participation in the financing, which was negotiated at the end of the process at the direction of the independent committee of the Board, was to some extent offset by other significant concessions.
Based on the foregoing, the Listing Council affirms the Panel decision to grant the company additional time to regain compliance with the Capital Market continued listing standards.
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Publication Date*:
7/31/2012
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Identification Number:
623
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Identification Number
630
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Rule 4450(b)(1): For continued listing on The NASDAQ Global Market, an issuer must demonstrate either: (A) a market value of listed securities of $50 million; or (B) total assets and total revenue of $50 million each for the most recently completed fiscal year or two of the last three most recently completed fiscal years.
Rule 4350(i)(1)(D)(i): Requires shareholder approval in connection with a transaction other than a public offering involving the sale, issuance or potential issuance by the issuer of common stock (or securities convertible into or exercisable for common stock) at a price less than the greater of book or market value which together with sales by officers, directors or substantial shareholders of the company equals 20% or more of common stock or 20% or more of the voting power outstanding before the issuance.
Issues: At the time of the Panel’s decision, the company did not meet the market value of listed securities/total assets and total revenue requirement for continued listing on The NASDAQ Global Market. In addition, the company violated NASDAQ’s shareholder approval rules by entering into transactions designed to positively impact the company’s market value of listed securities shortfall. As a result, the Panel transferred the company’s securities to The NASDAQ Capital Market, granted the company a short extension to cure the shareholder approval rule violation by gaining shareholder approval for the transactions, and issued a letter of reprimand to the company for the shareholder approval rule violation. The company appealed and requested to be allowed to relist on The NASDAQ Global Market under the less stringent continued listing requirements, and not the more stringent initial listing standards.
Determination: The Listing Council affirms the Panel’s decision and denies the company’s request for an exception to The NASDAQ Global Market continued listing standards. In reaching its determination, the Listing Council applied a facts and circumstances analysis. Based upon its analysis, the Listing Council found that the Panel properly determined that the company did not comply with all of the requirements for continued listing on the Global Market and as a consequence should be delisted from The NASDAQ Global Market. The Listing Council notes that the initial inclusion requirements are the appropriate standards to apply when a company has been delisted from a NASDAQ market. In determining whether to grant an exception to the initial listing requirements, the Listing Council considered, among other things, the company’s behavior before being delisted.
The Listing Council notes that Staff was concerned that the transaction originally contemplated to enable the company to regain compliance with Listing Rule 4450(b)(1) would require shareholder approval, based on the limited information available to Staff at the time. As such, the company was put on notice of staff’s concerns when it received the staff’s Hearing Memo. The Listing Council further notes that the issue of whether shareholder approval was necessary, as a result of the aggregation of the two offerings subsequently contemplated by the company, was raised at the Panel Hearing, and the company stated that it would consult with staff. There is no evidence in the record that the company was proactive in consulting Staff on either occasion. Thereafter, the company completed the offerings and, as a consequence, violated the shareholder approval rules. It was only after staff’s notice of violation of the shareholder approval rules that the company contacted staff. The Panel concluded that the company’s violation of the shareholder approval rule was the result of insufficient attention to its obligations under the rules. The Listing Council also notes that the amount raised through the transactions was less than discussed at the Panel Hearing, and the company did not provide the Panel with a calculation of the transaction’s impact on market capitalization or projections of continued compliance.
After an examination of the facts and circumstances surrounding this case, the Listing Council denies the company’s request for an exception to list on The NASDAQ Global Market and finds the Panel’s decision to allow the company the opportunity to list on The NASDAQ Capital Market was appropriate at the time it was rendered. Based on the foregoing, the Listing Council affirms the Panel’s decision to transfer the listing of the company’s securities from The NASDAQ Global Market to The NASDAQ Capital Market.
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Publication Date*:
7/31/2012
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Identification Number:
630
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Identification Number
640
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Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval or prior to the issuance of securities…in connection with a transaction other than a public offering involving…(ii) the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% 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 failed to obtain shareholder approval before issuing Series E preferred stock that was convertible into the common stock. The company had previously completed two series of similar financings. After analysis, Staff determined to aggregate the three financings. As such, when aggregated with the prior financings, the Series E preferred stock transaction required shareholder approval because it was issued at a discount to market value and its issuance could potentially exceed greater than 20% of the company’s pre-transaction total shares outstanding. The Panel delisted the company’s securities based on a violation of the shareholder approval rules.
Determination: The company was properly suspended because it had violated the shareholder approval requirements, as set forth in Rule 4350(i)(1)(D)(ii). NASDAQ shareholder approval requirements are designed to provide shareholders with a meaningful voice in significant transactions and in transactions where they may face significant dilution, such as in the current case before the Listing Council. The Listing Council believes that this voice, mandated by NASDAQ rules, is a basic tenet of the NASDAQ corporate governance rules. The NASDAQ shareholder approval requirements are also designed to provide shareholders with notice prior to the consummation of the transaction so that they have the opportunity to sell their shares. In this case, there was no shareholder vote or advance notice of the consummation of this transaction. The Listing Council agrees with the Panel’s assessment that because the Series E documents do not by their terms preclude an issuance without shareholder approval; there exists a theoretical possibility that the company could be compelled to issue the securities. The Listing Council also considered the company’s argument that it would either restructure the transaction with investors unrelated to the Series C, D, and E transactions in an effort to craft a re-financing plan that would allow the company to unwind the Series E transaction, or move forward with a shareholder vote for approval of the Series E transaction. To date the company has done neither. As such, the company is still in violation of the shareholder approval rules. At the time of its deliberations, the Listing Council noted that: (i) there have been no Form 8-K filings with announcements regarding a re-financing plan that would allow the company to unwind the Series E transaction, (ii) the company’s recently filed definitive proxy statement for its annual meeting of stockholders and did not include any proposals to obtain shareholder approval of the Series E transaction, and (iii) the company did not provide an update as to the status of its previously filed amended proxy statement and notice of a special meeting of shareholders, in which the company was seeking shareholder approval for the Series E financing. The Listing Council does not disagree with the company’s assessment that its imperfect efforts to file completed Listing of Additional Shares Notifications should be the cause of its delisting. However, the Listing Council notes that the company was effectively put on notice by staff’s letter, regarding its, first of three, Listing of Additional Shares Notification violations. The Listing of Additional Shares program is used by NASDAQ to monitor compliance with listing rules governing shareholder approval, public interest concerns, reverse mergers, and voting rights. As such, the Listing Council views compliance with the Listing of Additional Shares program as essential in order to protect investors in securities listed on The NASDAQ Stock Market.
The Listing Council is aware that the company is a repeat offender of both the filing of Listing of Additional Shares Notifications and the shareholder approval requirements. If the company was a first time offender, the Listing Council may have been more sympathetic, such is not the case here. In its deliberations, the Listing Council considered that: (i) there is a large amount of easily accessible information on the NASDAQ Legal and Compliance website regarding staff’s views as to when shareholder approval for transactions is required and when a Listing of Additional Shares Notification must be filed; (ii) Staff stands ready to offer informal guidance to assist issuers in structuring transactions so that there will not be violations of the Marketplace Rules; and (iii) there is a process pursuant to Rule 4550, which requires the payment of a fee, for formal guidance regarding shareholder approval interpretations. As such, the company’s argument that once its senior management and Board learned of the repeated Listing of Additional Shares violations they acted promptly and decisively to ensure that no similar violations would occur in the future, was not persuasive. Management should have been on notice with the staff’s warning letter to become more actively engaged and should have taken proactive steps at that time in an effort to prevent future violations. Based on the foregoing, the Listing Council affirms the Panel’s decision to delist the company’s securities from The NASDAQ Stock Market.
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Rule 4310(c)(4): For continued inclusion, the minimum bid price per share for common stock shall be $1.
Issue: At the time of the Listing Council’s deliberations, the bid price of the company’s common stock was below $1.
Determination: As an additional and separate ground for its decision, the Listing Council finds that the company fails to comply with the $1.00 minimum bid price requirement contained in Listing Rule 4310(c)(4). The Listing Council notes that although the company was provided an opportunity to address its non-compliance with this rule, the company declined to do so. Given that at the time of the Listing Council’s deliberations the company’s bid price as quoted on the OTC Bulletin Board was $0.57, the Listing Council finds this violation of Listing Rule 4310(c)(4) as a separate and additional basis for affirming the company’s suspension and delisting from The NASDAQ Stock Market.
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Publication Date*:
7/31/2012
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Identification Number:
640
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Identification Number
617
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Rule 4310(c)(14): The issuer shall file with NASDAQ three (3) copies of all reports and other documents filed or required to be filed with the Securities and Exchange Commission ("Commission"). This requirement is considered fulfilled for purposes of this paragraph if the issuer files the report or document with the Commission through the Electronic Data Gathering, Analysis, and Retrieval system. An issuer that is not required to file reports with the Commission shall file with NASDAQ three (3) copies of reports required to be filed with the appropriate regulatory authority. All required reports shall be filed with NASDAQ on or before the date they are required to be filed with the Commission or appropriate regulatory authority. Annual reports filed with NASDAQ shall contain audited financial statements.
Issue: After the company disclosed its audit committee's conclusions that the previously issued financial statements for the years ended December 31, 2001, 2002, and 2003, as well as all quarterly periods beginning January 1, 2001, should no longer be relied upon, the Panel delisted the company's securities based on a filing delinquency. The company had not filed its Form 10-Q for the quarter ended June 30, 2004 or any restatements.
Determination: The company was properly delisted because at the time of the Panel's decision the company was not current in all required public filings. As of the date of the Listing Council's consideration of this matter, the company had still not filed its Forms 10-Q for the quarters ended June 30 and September 30, 2004 or any prior period restatements. The Listing Council takes seriously the requirement to file accurate and reliable financial statements and the concomitant purpose to provide investors with current information regarding the company. Investors in securities listed on NASDAQ are entitled to assume that issuers of those securities will promptly and accurately comply with their reporting obligations under the Securities Exchange Act of 1934. In this case, investors did not have access to accurate financial information regarding the company from January 1, 2001 through the date of the Listing Council's deliberations.
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Rule 4350(i)(1)(B): Each issuer shall require shareholder approval ... prior to the issuance of designated securities ... when the issuance or potential issuance will result in a change of control of the issuer.
Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval ... prior to the issuance of designated securities in connection with a transaction other than a public offering involving: ... (ii) the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% of more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.
Issue: The company violated Rules 4350(i)(1)(B) and 4350(i)(D)(ii) by issuing greater than 20% (in this case over 50%) of its pre-transaction total shares outstanding at a discount to the market price. The company issued 17,647,058 shares of its common stock in a private placement at $0.85 per share for a total purchase price of $15,000,000. Following the sale, the purchasers would own 50.3% of the company's outstanding common stock and would have the right to designate a majority of the board of directors. The price of the company's common stock was $1.65 at the time of the transaction.
Determination: Given that the company had 17,419,857 pre-transaction total shares outstanding, the transaction resulted in a greater than 20% issuance of securities and a change of control. The company was properly delisted for failure to comply with the shareholder approval requirements.
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Rule 4310(c)(17): Issuers are required to notify NASDAQ 15 days prior to: (i) issuing securities that may potentially result in a change of control, or (ii) entering into a transaction that may result in the potential issuance of common stock (or securities convertible into common stock) greater than 10% of either the pre-transaction total shares outstanding or the voting power outstanding on a pre-transaction basis.
Issue: The company did not file the required listing of additional shares form notifying NASDAQ of the transaction.
Determination: The company was properly delisted for failure to comply with the listing of additional shares notification requirement.
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Publication Date*:
7/31/2012
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Identification Number:
617
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Identification Number
621
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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.
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Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval …prior to the issuance of designated securities… in connection with a transaction other than a public offering involving: … (ii) the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable [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.
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Publication Date*:
7/31/2012
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Identification Number:
621
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Identification Number
659
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Rule 4310(c)(14): The issuer shall file with NASDAQ three (3) copies of all reports and other documents filed or required to be filed with the Commission. This requirement is considered fulfilled for purposes of this paragraph if the issuer files the report or document with the Commission through the Electronic Data Gathering, Analysis, and Retrieval ("EDGAR") system. An issuer that is not required to file reports with the Commission shall file with NASDAQ three (3) copies of reports required to be filed with the appropriate regulatory authority. All required reports shall be filed with NASDAQ on or before the date they are required to be filed with the Commission or appropriate regulatory authority. Annual reports filed with NASDAQ shall contain audited financial statements.
Issue: The company filed its Form 10-Q for the quarter ended June 30, 2003, however, the filing had not been reviewed by its independent auditors, as required by SEC Rule 10-01(d) of Regulation S-X. As a result, the company’s financial statements for that period could not be relied upon.
Determination: The company was properly delisted for failure to comply with the filing requirement. The Listing Council takes seriously the requirement to file accurate and reliable financial statements and the concomitant purpose to provide investors with current information regarding the company. Investors in securities listed on NASDAQ are entitled to assume that the companies of those securities will promptly and accurately comply with their reporting obligations under the Securities Exchange Act of 1934.
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Rule 4350(i)(1)(D)(ii): Each issuer shall require shareholder approval ... prior to the issuance of designated securities in connection with a transaction other than a public offering involving: … (ii) the sale, issuance or potential issuance by the company of common stock (or securities convertible into or exercisable common stock) equal to 20% or more of the common stock or 20% of more of the voting power outstanding before the issuance for less than the greater of book or market value of the stock.
Issue: The company violated Listing Rule 4350(i)(1)(D)(ii) by issuing greater than 20% of its pre-transaction total shares outstanding at a discount to the market price. The offering consisted of 9,500,000 shares of common stock, plus the potential issuance of 4,750,000 shares of common stock resulting from the exercise of the warrants. As such, the aggregate issuance would be 14,250,000 shares, or 22% of the 63,085,854 total shares outstanding on a pre-transaction basis, at below the market price based on a blended average of the common stock and warrant exercise prices.
Determination: The company was properly delisted for failure to comply with the shareholder approval requirement. Although the company stated that it was prepared to cure its shareholder approval violation, a period of approximately two and one-half months had passed, and the violation still had not been cured at the time of the Listing Council’s consideration.
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Publication Date*:
7/31/2012
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Identification Number:
659
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Identification Number
670
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Rule 4350(i)(1)(A): issuers must obtain shareholder approval for an arrangement made pursuant to which stock may be acquired by officers and directors. Shareholder approval is not required if the amount of securities which may be issued under the arrangement does not exceed the lesser of 1% of the number of shares of common stock, 1% of the voting power outstanding or 25,000 shares.
Issue: The company violated Listing Rule 4350(i)(1)(A) by issuing shares in private placements to Section 16 officers and directors at a discount to market price. The discount was approximately 1%, which amounted to $1,000. The Panel issued a decision requiring the Section 16 officers and directors, who had received a discount in the private placements, to pay the difference between what they had paid and the market price of the company’s common stock on the date of issuance.
Determination: The company may either restructure the transaction such that the Section 16 officers and directors provide additional consideration to the company or rescind the violative transactions. Although the company has proposed to seek shareholder ratification of the violative transactions in connection with its annual meeting, shareholder ratification of a violative transaction is not an acceptable substitute for prior shareholder approval. The Panel’s decision was reversed to the extent it permitted the company to address the shareholder approval violation by requiring
insiders to pay the market price on the date of issuance. This allows insiders to eliminate their investment risk by electing to opt out of the transaction if the market price subsequently decreases. The company should adjust the price to the greater of the market value as of the date of the binding agreement or the date NASDAQ first notified the company of the deficiency.
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Publication Date*:
7/31/2012
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Identification Number:
670
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Identification Number
682
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Rule 4310(c)(2): $2,500,000 shareholders' equity requirement, or its alternatives, for continued listing on the SmallCap Market.
Issue: Following the Panel's February decision to delist the company's securities based on a deficiency with the shareholders' equity requirement, the company regained compliance through the completion of several equity offerings. In July, the Listing Council issued a decision reversing the Panel's decision to delist the company's securities and remanded the matter to the Panel for further consideration, pursuant to an exception. Pursuant to its discretionary authority under Listing Rule 4300, the Listing Council determined that the company's public filings for the following quarter must reflect shareholders' equity exceeding the minimum $2,500,000 continued listing requirement as a result of the company's history of operating losses. The company did not comply with the terms of the Listing Council's July decision.
Determination: In November, the Listing Council determined that the company's securities should not be relisted, based on its failure to comply with the shareholders' equity requirement, as set forth in the Listing Council's July decision.
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Rule 4310(c)(4): $1 minimum bid price requirement for continued listing on the SmallCap Market.
Issue: Pursuant to the Listing Council's July decision, the company was required to demonstrate a closing bid price of at least $1 per share within 90 days of the decision. However, the company's bid price remained below $1 during and after such period.
Determination: In November, the Listing Council determined that the company's securities should not be relisted, based on its failure to comply with the terms of the Listing Council's July decision and the minimum bid price requirement.
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Rule 4350(i)(1)(D): Shareholder approval requirement for a transaction other than an initial public offering involving the sale or issuance of common stock, or securities convertible into or exercisable for common stock, equal to 20% or more of the common stock or voting power outstanding before the issuance, for less than the greater of book or market value.
Issue: In its proxy statement, the company solicited shareholder approval for a non-specific transaction that set forth the maximum number of shares to be issued. The company disclosed in the proxy that such issuance might be at a discount to market and could exceed 20% of the company's outstanding common stock. Following shareholder approval of its proposal, the company issued preferred shares, but failed to provide in the transaction documents the maximum number of shares issuable in accordance with the shareholder proposal.
Determination: In November, the Listing Council determined that the company's securities should not be relisted, based on its failure to comply with the shareholder approval requirement. If shareholder approval for a transaction is necessary under NASDAQ rules, NASDAQ's policy requires that a company provide specific details to shareholders regarding the nature of the transaction; for example, the number of shares offered, the type of security being issued, the names of the investors and the purchase price. NASDAQ permits shareholder proposals for non-specific private placements, if shareholders have sufficient information to make a meaningful decision, including the maximum number of shares to be issued, the maximum dollar amount of the issuance, the maximum amount of discount (if any) to the market, and the time frame to complete the transaction (generally limited to three months). Although the company
provided sufficient information to shareholders in the proxy statement, the transactional and corporate documents in the record on review did not evidence the maximum number of shares to be issued upon conversion of the preferred shares, as set forth in the shareholder proposal. Since the number of shares issuable upon conversion of the preferred shares potentially may exceed the maximum number set forth in the shareholder proposal, the company failed to comply with the shareholder approval requirements.
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Publication Date*:
7/31/2012
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Identification Number:
682
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