Rule 4310(c)(2)(B): For continued inclusion, the issuer shall maintain: (i) stockholders' equity of $2.5 million; (ii) market value of listed securities of $35 million; or (iii) net income from continuing operations of $500,000 in the
most recently completed fiscal year or in two of the last three most recently completed fiscal years.
Issue: At the time of the Panel decision, the company did not meet the minimum stockholders’ equity requirement or its alternatives. The company argued that it had demonstrated in excess of $500,000 in net income from continuing operations
for its first three quarters and projected compliance when it filed its Form 10-K for the year ended June 30, 2004. As such, the company requested an exception for additional time to file its Form 10-K, which would demonstrate compliance with the net income
alternative in the Rule. The Panel was unwilling to grant the company the additional three months the company required to file its Form 10-K.
Determination: The company was properly delisted because at the time of the Panel’s decision the company was not able to demonstrate compliance with minimum stockholders’ equity requirement or its alternatives. Under Listing Rule 4330(e),
a security that has been terminated from NASDAQ must meet the initial listing requirements before re-inclusion. Because the Panel properly delisted the company’s securities from the SmallCap Market, the initial listing requirements provide the correct standard
for a review of the company’s listing qualifications. The Listing Council reversed the Panel’s decision, and the Panel was instructed to relist the company, based on events occurring after the Panel’s decision. Specifically, during the pendency of the Listing
Council’s review, the company filed its Form 10-K, which demonstrated net income from continuing operations of $6,556,000 in the most recently completed fiscal
year. As such, the company met all of the requirements for initial listing on the SmallCap Market, except for the $4 bid price. Based upon the totality of the circumstances, the Listing Council determined to waive the $4 initial listing bid price requirement
and instead required that the company meet the $1 continued listing bid price requirement.