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.