tech NASDAQ stock market composite report, another adult video and entertainment distributor has created a "NASDAQ Compliance Committee" from within its board of directors.
New Frontier Media, Inc. says it formed the committee as part of efforts to show NASDAQ a commitment to compliance with the stock exchange's rules and regulations. New Frontier's continued listing on NASDAQ's SmallCap Market is now being reviewed by the exchange's Listing and Hearing Review Council.
Two months ago, a NASDAQ qualification panel found New Frontier had performed two transactions without complying with NASDAQ rules that require advance approval of shareholders. The NASDAQ ruling won't affect New Frontier's NASDAQ listing for now.
The transactions involved issue and sale of securities the New Frontier board approved at less than market value prices, with each surpassing 20 percent of the outstanding shares prior to their issue and sale. The apparent aim was increasing net tangible assets by turning debt to equity as well as raising liquidity for necessary working capital.
Under Colorado law, the transactions didn't require shareholder approval, though a a shareholder majority indicated in writing they would have approved the transactions if their proxies were solicited.
But New Frontier is now seeking formal shareholder ratification - even though NASDAQ indicates that won't remedy the rule violation.
One transaction (Dec. 1998-Feb. 1999) had holders of $1.75 million in convertible debentures from the previous June converting to more than 20 percent of the outstanding shares prior to the conversion at a price less than the market price. That cut liabilities, eliminated interest expense, and raised net tangible assets.
The other transaction (March 1999) found New Frontier issuing over 20 percent of its outstanding shares prior to their issue in a $5.2 million private offering. That raised liquidity and brought forth necessary working capital.
The New Frontier special committee will review all future corporate transactions to assure their compliance with NASDAQ listing requirements. The company will also consult with NASDAQ staff in case New Frontier proposes to act against the special committee's legal counsel's advice.
Earlier this fall, Metro Global Media was dropped from listing on the NASDAQ composite because it had not yet filed its required 401(k) forms with the SEC. The company was working on the filing two weeks ago.
