GRAND RAPIDS — With the current dive in the stock market and the falling closings of the Nasdaq this month, public companies are taking a hit.
SofTech (SOFTC) Inc., a provider of 2- and 3-D computer-aided design and manufacturing products and related services, is one of the companies having some trouble in the market lately.
The company recently received the determination of the Nasdaq Listing Qualifications Panel from a hearing held in January with regard to its listing on the Nasdaq National Market System.
The Panel has granted the company its request to continue to be listed on the Nasdaq SmallCap Market via an exception from the $1 minimum bid price requirement.
According to the Nasdaq Web site, the SmallCap Market lists nearly 1,800 individual securities.
The site advises: “As the smaller capitalization tier of Nasdaq, the financial criteria for listing on this market are somewhat less stringent than on the Nasdaq National Market, though the Corporate Governance standards are now the same.”
As SmallCap companies become more firmly established, they often move up into the Nasdaq National Market.
In order to maintain a continued listing on the SmallCap Market, a company must meet the market requirements.
These include having $2 million in net tangible assets, $35 million in market capitalization or $500,000 net income in the latest fiscal year or two of three last fiscal years.
The firm’s common stock must have at least 500,000 shares held by persons other than officers and directors and beneficial holders of more than 10 percent of the company’s common stock. The company also is required to have an aggregate market value of public float of at least $1 million, a minimum bid price of $1, be held by at least 300 people who hold at least 100 shares, and, finally, have at least two market-makers.
It is the $1 minimum bid requirement with which SofTech is having trouble.
While it failed to meet the requirement as of Sept. 13 and has failed to correct for this deficiency to date, the company has been granted a temporary exception from this standard subject to meeting certain conditions, including, but not limited to, successful and timely completion of an application for listing on the SmallCap Market.
The exception from this listing expires Monday.
In the event the company is deemed to have met the terms of the exception, its listing on the Nasdaq SmallCap Market will continue.
SofTech believes it can meet these conditions; however, there can be no assurance that it will do so.
If at some future date the company’s securities should cease to be listed on the SmallCap market, they may continue to be listed in the Over The Counter Bulletin Board, which is generally considered to be a less-efficient market.
In an attempt to increase the market price of the common stock above the minimum bid requirement, the company’s board of directors recently unanimously adopted resolutions proposing, declaring advisable and recommending that the stockholders authorize an amendment to the company’s Amended Certificate of Incorporation to effect a stock combination of the company’s common stock in an exchange ratio (the reverse split).
According to representatives for SofTech, if stockholders approve the amendment, the board will have authority, without further stockholder approval, to implement a reverse split, in which case the company’s outstanding shares of common stock would be exchanged for new shares of common stock.
A reverse split is a consolidation of shares in a ratio determined by the board. Such ratios can range from one new share for three old shares to one to six. The ratio is called the exchange number.
In addition, the board will have the authority to determine the effective date and time of the reverse split.
The board would set such timing and number of shares to be exchanged with the intention of maximizing the company’s ability to remain in compliance with the SmallCap Market’s listing maintenance requirements.
The amendment also gives the board the authority to not proceed with the reverse split if it should determine the decision is no longer in the firm’s best interests.
Hoover’s Online indicates that the SofTech board may consider a variety of factors in determining whether to implement the reverse split and, if so, in determining the exchange number.
A few factors to be examined are overall stock market trends, recent changes and anticipated trends in the market price per share of the company’s common stock, business and transactional developments, and the company’s actual and projected financial performance.
While spokesmen say the company feels self-assured, there are still a wide range of risks and uncertainties. Among the risks are the company’s ability to maintain continued compliance with Nasdaq’s listing requirements for the SmallCap Market and the possibility of a decision by the Nasdaq Listing and Hearing Review Council to review the decision issued by the panel.