referencelibrarybanner
Listing Center Coronavirus FAQs for Nasdaq-listed Companies
Reference Library - Advanced Search
Find
 


Library 



 
Timeframe
Category
 
Sub-Category
** To make multiple selections, select the first criterion and then press and hold the Ctrl Key **
 
1- 1 of 1 Search Results for:
Libraries:   Staff Interpretation Letters
Filters:   All Years; Shareholder Approval;
 
Search   Clear


Expand All
Printer Friendly View
Mailto Link 
Page: 1 of 1
Frequently Asked Questions
  Staff Interpretation Letter 2008-14
Identification Number 759
This is in response to your correspondence wherein you asked that the company be granted an exception to the shareholder approval requirements pursuant to Marketplace Listing Rule 4350(i)(2) for certain proposed transactions (the “Proposed Transactions”).
 
According to the information you provided, in the Proposed Transactions, the company would issue more than 20% of its pre-transaction outstanding common shares at a discount: (i) in a private placement to several institutional investors including certain existing shareholders; and (ii) in exchange for the Note and warrants held by the Note Holder (the “Exchange”).  No officer, director, employee, or consultant of the company would acquire securities in the Proposed Transactions.  Without the requested exception, shareholder approval would be required pursuant to: (i) Listing Rule 4350(i)(1)(B) because the issuance would result in a change of control; and (ii) Listing Rule 4350(i)(1)(D)(ii) because the issuance would exceed 20% of the pre-transaction outstanding shares at a discount to the market value.
 
You stated that the company does not have sufficient cash resources to operate its business for the time that it would take to obtain shareholder approval.  You further stated that absent the funding from the Proposed Transactions, the company would have no choice other than to file for protection under applicable bankruptcy laws.  The company does not have the cash resources to meet its payroll requirements, and, in fact, it failed to pay its employees for the most recent pay period.  The company is unable to fund it accounts payable obligations.  Some of its suppliers and service providers have stopped doing business with the company, and many others will do likewise unless funding is obtained immediately.
 
The company has previously required, and expects to require in the future, significant infusions of equity capital to continue the development of its products.  For nearly a year, the company has unsuccessfully sought to raise equity capital.  Approximately six months ago, the company issued the Note and pledged all of its assets as security for the Note.  Subsequent to the issuance of the Note, potential investors who expressed interest in the company would agree to invest only if the Note Holder would exchange its debt for equity.  Previously, the Note Holder would not agree to such an exchange.  You stated that because of the increasingly high likelihood of a bankruptcy filing absent an equity infusion, the Note Holder has only recently agreed to the Exchange.
 
The company believes that the Proposed Transactions would enable it to continue its operations for at least three years and to return to profitability.  Further, the company expects that if it completes the Proposed Transactions, it will meet the requirements for continued listing on NASDAQ except for the bid-price requirement.  In that regard, the company has committed to complete a reverse stock split at a ratio sufficient to comply with the bid-price requirement in the near term.
 
Based on our review of the circumstances described in your correspondence and on your representations regarding the company’s financial condition, we have determined to grant the exception from the shareholder approval requirements.  This determination is based on your representations regarding the company’s inability to fund its operations and its likely need to seek bankruptcy protection in the event that the Proposed Transactions are delayed.  The exception is subject to the following: (i) the company must mail to all shareholders, not later than ten days before the issuance of any securities in the Proposed Transactions, a letter describing the Proposed Transactions and alerting them to its omission to seek the shareholder approval that would otherwise be required; (ii) the letter must indicate that the audit committee, or a comparable body of the board of directors, has expressly approved reliance on the exception; and (iii) the company must also make a public announcement through the news media disclosing the same information as promptly as possible, but no later than ten days prior to the issuance of the securities.
 
Publication Date*: 7/31/2012 Mailto Link Identification Number: 759
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.
Page: 1 of 1
home_footer_links
Copyright_statement
App Store       Google Play       Listing Center Content RSS Feed
The Nasdaq Stock Market, Nasdaq, The Nasdaq Global Select Market, The Nasdaq Global Market, The Nasdaq Capital Market, ExACT and Exchange Analysis and Compliance Tracking system are trademarks of Nasdaq, Inc.
FINRA® and Financial Industry Regulatory Authority, Inc.® are registered trademarks of Financial Industry Regulatory Authority, Inc. OTCBBTM and OTC Bulletin BoardTM are trademarks of FINRA