Form 8-K for SEVEN ARTS ENTERTAINMENT INC.
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11-Jul-2012
Notice of Delisting or Failure to Satisfy a Continued Listing Rule
Item 3.01 Notice of Delisting or Failure to Satisfy a Continued Listing Rule or Standard; Transfer of Listing
On July 3, 2012, the Company received a letter from the Listing Qualifications Staff (the "Staff") of The NASDAQ Stock Market LLC, in which the Staff stated that it does not believe that the Company complies with NASDAQ's Voting Rights Rule (Listing Rule 5640) for the following reasons:
1) The Company issued 50,000 shares of Series B convertible preferred stock at a price of $100.00/share. The preferred stock is convertible into shares of common stock at $1.10/share subject to adjustments in the event the Company issues any common stock for less than 80% of the conversion price. Such price protection provision could potentially cause the conversion price to be reduced below the market value immediately preceding the entering into the binding agreement. Therefore, since the preferred stock votes on an "as converted basis," the preferred shares could potentially have greater voting rights than the existing common shares.
2) The Certificate of Designation for the Series B convertible preferred stock does not contain a "step-down" provision in respect of the rights granted to the preferred stockholders to appoint two Board members.
A copy of such letter notice is furnished as Exhibit 99.1.
In addition to the foregoing, the Company was advised by the Staff in a phone conversation on the morning of July 9, 2012, that the Staff intended to implement a halt in trading of the Company's common shares on The NASDAQ Capital Market "pending the receipt of additional information requested." Trading in the Company's common shares was subsequently halted and remains so as of the filing of this Current Report. The Company was also advised that the Staff intends to initiate proceedings to delist the Company's common stock from The NASDAQ Capital Market and that a letter setting forth the bases for the delisting determination would be issued to the Company within the next several days. Finally, the Company was advised that it will have the right to request a review of Staff's delisting determination by a NASDAQ Listing Qualifications Panel (the "Panel") and that a request for a hearing before the Panel would stay the delisting pending the issuance of a decision by the Panel following the hearing. The Company intends to provide a further update on the status of the trading halt and the forthcoming Staff delisting determination as soon as possible.
Item 9.01 Financial Statements and Exhibits
(d) Exhibits
99.1 NASDAQ letter dated July 3, 2012
