Rule 5550(b): For continued listing of a Company’s Primary Equity Security on the Capital Market, a Company shall maintain: (1) Stockholders’ equity of at least $2.5 million; (2) Market Value of Listed Securities of at least $35 million;
or (3) 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: In November, 2010, the Hearings Panel placed the company on a one-year monitor pursuant to Listing Rule 5815(d)(4)(A), which obligated the company to proactively inform the Hearings Panel of potential non-compliance with continued
listing requirements. The company had a record of non-compliance with the stockholders’ equity continued listing standard. In May 2011, the company filed its Form 10-Q for the quarter ended March 31, 2011, which evidenced that the company was no longer in
compliance with NASDAQ’s stockholders’ equity requirement at the close of the quarter. The company had not informed the Hearings Panel of the deficiency at any point prior to the filing of the Form 10-Q. The Hearings Panel determined to delist the company
for the stockholders’ equity deficiency and for violating Rule 5815(d)(4)(A) by not proactively informing the Hearings Panel of the deficiency. The company appealed the Hearings Panel decision to the Listing Council.
Determination: Remand. The Listing Council agrees with the Hearings Panel that the company should have been delisted based on the facts and circumstances before the Hearings Panel at the time of its determination. The company has been
unable to maintain adequate stockholders’ equity over the past year, and has ignored the Hearings Panel’s direction to keep it proactively informed of potential non-compliance. Adding to the Listing Council’s concerns is the fact that the company has historically
missed projected milestones.
Through its submissions to the Listing Council, the company has described some positive developments concerning the sale of assets and the potential acquisition of others. As result of closing a transaction for the sale of a company asset, the company
now has stockholders’ equity in excess of continued listing requirements and, based on the pro forma burn rate projection provided by the company, it will continue to have stockholders’ equity in excess of the continued listing requirements for at least a
full year.
The Listing Council continues to have concerns regarding the company’s ability to maintain compliance with NASDAQ’s listing standards, and is therefore directing the Hearings Panel to place the company under a Hearings Panel monitor for one year from the
date of this decision. A Hearings Panel monitor will allow NASDAQ to quickly address any deficiencies that arise, while also allowing the company’s stock to trade as normal. The Listing Council stresses in the strongest terms that, while it is subject to
the Hearings Panel monitor, the company has an obligation to promptly notify the Hearings Panel in the event its stockholders’ equity falls below $2.5 million and in the event the company falls out of compliance with any other applicable listing requirement.
The Listing Council may not object to the Hearings Panel delisting the company based solely on non-compliance with this notice obligation. Accordingly, the Listing Council finds that the company has regained compliance with NASDAQ’s continued listing requirements
and remands this matter to the Hearings Panel for a one year monitor pursuant to Listing Rule 5815(d)(4)(A).