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  Listing Council Decision 2005-2
Identification Number 617
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.
Publication Date*: 7/31/2012 Mailto Link Identification Number: 617
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