Updated from Feb. 8 with eDiets.com delisting notice.BOSTON ( TheStreet) -- U.S. stocks started off the year with a winning January, as the S&P 500, Nasdaq and Dow Jones Industrial Average posted gains of as much as 2.7%, or more than 30% on an annualized basis, twice last year's increase. Small-cap stocks fared even better, with the Russell 2000 Index rising more than 3%, as an acceleration in global economic growth attracted investors to companies that can produce outsized profits. Lost amid the euphoria is the fact that small companies pose risks rarely present at larger peers. In fact, 19 stocks trading on the technology-heavy Nasdaq this year have been alerted of deficiencies that could force a delisting. Those deficiencies range from violations of the minimum bid-price rule, as share prices of some penny stocks have languished below $1, to violations of audit-committee requirements, market value, proxy solicitation or even public interest. Companies faced with a delisting typically see a detrimental effect on share prices. For instance, the New York Stock Exchange in January delisted the stock of Capitol Bancorp. The company's shares traded for $3 a year ago, but now can be bought for 25 cents on the Pink Sheets. Still, because companies on exchanges' watch lists record higher-than-average volatility, risk-friendly investors have the chance to make lots of money, either by shorting the stocks on expectations shares will fall, or going long on the hopes they will live to fight another day. Fifteen companies listed on the Nasdaq received delisting warnings in December, and those stocks fell by an average 10% over the past three months. Community Central Bank ( CCBD) was the biggest loser, down 53%, while Star Buffet ( STRZ) rallied more than 70% during the same period. Nevertheless, all 19 companies were notified in January that they're in violation of listing requirements and could be delisted from the Nasdaq. The following companies now have a limited window of time to regain compliance with the exchange's listing rules.
Educational Development ( EDUC) Company Profile: Educational Development is a publisher of a line of children's books in the U.S. Current Share Price: $6.80 (Feb. 7) Listing Violation: Audit committee composition. The listing rule requires that a majority of the board of directors must be comprised of independent directors and that the company's audit committee have at least three members, all of whom must be independent. Received Nasdaq Notice: Jan. 3 Management's Expected Action: Educational Development has until its next annual meeting to regain compliance with the listing requirement. "The board is currently considering candidates and intends to appoint an independent director to fill the vacancy on the board and the audit committee as soon as possible," the company said in a regulatory filing. The company said it expects that to occur before the next annual meeting.
Vitacost.com ( VITC) Company Profile: Vitacost.com is an online retailer and direct marketer of health products, including dietary supplements, metabolites, cosmetics, organic body and personal-care products, sports nutrition and health foods. In December, Vitacost.com revealed that financial statements over the past 16 years can't be relied upon due to accounting problems, and that management is considering a prepackaged Chapter 11 reorganization. Current Share Price: $5.70 (Feb. 7) Listing Violation: Annual shareholder meeting and proxy solicitation. Vitacost.com has not held its annual meeting of stockholders within the timeframe allowed under the Nasdaq's continued listing rules. Vitacost.com is also in violation of the Nasdaq's listing requirements over a public interest concern from December and a delinquent quarterly filing in November. Received Nasdaq Notice: Jan. 3 Management's Expected Action: Vitacost.com said it intends to address this issue at a hearing before the Nasdaq Hearings Panel, although no timetable was given. In December, Vitacost.com revealed in a regulatory filing that the Nasdaq has determined that "continued listing of the Company's securities on The Nasdaq Stock Market is no longer warranted."
INX ( INXI) Company Profile: INX is a technology-infrastructure company, aiding enterprises with network routing and switching, wireless networking, and network security solutions. INX also provides Internet protocol (IP) network-based voice or telephone solutions, as well as IP network-based video communications solutions. Current Share Price: $7.14 (Feb. 7) Listing Violation: The most recent of INX's six listing violations stems from proxy solicitation and annual shareholder meeting. INX is facing four separate listing violations for delinquency in filing quarter financial statements, dating back to the quarter ended Dec. 31, 2009. Received Nasdaq Notice: Jan. 5 Management's Expected Action: The Nasdaq Listing Panel already has granted continued listing of INX's securities on the Nasdaq through April 11, as the company works to regain compliance with the listing requirements. "While the company is taking steps to regain compliance in accordance with the Panel's decision, there can be no assurances that the company will be able to do so," INX said in a statement.
OptimumBank Holdings ( OPHC) Company Profile: OptimumBank operates as the bank holding company for OptimumBank, which provides community banking products and services to individuals and corporate customers in the Broward, Miami-Dade and Palm Beach counties of Florida. Current Share Price: $2.60 (Feb. 7) Listing Violation: Board independence. The listing rule requires the board of directors to have a majority of members who are independent. Independent director Jack Calloway resigned from OptimumBank's board of directors on Jan. 6, leaving the company with only three independent directors on its six member board. Received Nasdaq Notice: Jan. 10 Management's Expected Action: OptimumBank said it is actively seeking a qualified independent director to fill the vacancy on its board of directors. The Nasdaq listing rule provides the company with a cure period until either its next annual shareholders' meeting or Jan. 6, 2012, whichever is earlier. If the next annual shareholders' meeting is held before July 5, a resolution must come no later than that date.
Brooklyn Federal Bancorp ( BFSB) Company Profile: Brooklyn Federal operates as the holding company for Brooklyn Federal Savings Bank, which provides various banking products and services in Brooklyn, Nassau, and Suffolk, New York. Current Share Price: 86 cents (Feb. 7) Listing Violation: Market value of publicly held shares and delinquency. The Nasdaq requires that companies maintain a minimum $5 million market value of publicly held shares for continued listing. The Nasdaq's calculation excludes outstanding common stock owned by officers, directors or beneficial owners. Brooklyn Federal also did not file its annual 10-K filing with the SEC in a timely manner, prompting a separate warning from the exchange. Received Nasdaq Notice: Jan. 12 Management's Expected Action: Brooklyn Federal said that its 10-K filing has been delayed due to the resignation of the company's independent registered public accounting firm Dec. 20. The company's audit committee has initiated the process of selecting a new registered public accounting firm. Brooklyn Federal has 60 days from the receipt of the Nasdaq's first letter to submit a plan for approval. If approved by the Nasdaq, the company would have 180 days to regain compliance. In regards to the minimum market value rule violation, the company has 180 days from the receipt of that letter to regain compliance.
CleanTech Innovations ( CTEK) Company Profile: CleanTech Innovations manufactures and designs wind turbine, bellows expansion joints, pressure vessels, and fabricated metal specialty products. Current Share Price: $4.79 (Feb. 7) Listing Violation: Public interest concern. The Nasdaq asserts that CleanTech intentionally failed to adhere to obligations to timely disclose material information regarding the company's December 2010 financing during the listing application process. CleanTech was approved for listing on the Nasdaq Capital Market on Dec. 10, and on Dec. 13 the company entered into a $20 million debt and equity bridge financing through a private placement. On Dec. 16, the company announced the financing transactions in a filing with the SEC as it simultaneously filed a registration statement registering the shares issued in the financing. Received Nasdaq Notice: Jan. 13 Management's Expected Action: "We intend to vigorously appeal the Staff's decision to an independent Nasdaq Hearings Panel," the company said in a regulatory filing. "However, there can be no assurance that our appeal for continued listing will be successful." CleanTech expects to appear before the Nasdaq panel within 45 days of the Jan. 20 filing.
Aehr Test Systems ( AEHR) Company Profile: Aehr Test Systems makes wafer-contact systems designed to reduce the cost of testing flash, dynamic random access memory, and other memory devices. Current Share Price: $1.64 (Feb. 7) Listing Violation: Minimum stockholders' equity. The Nasdaq Global Market requires a minimum stockholders' equity of $10 million for continued listing. Received Nasdaq Notice: Jan. 18 Management's Expected Action: Aehr Test Systems says it plans to submit its plan to regain compliance with the listing requirement on or before March 4.
Seven Arts Pictures ( SAPX) Company Profile: Seven Arts Pictures develops motion pictures worldwide. Current Share Price: 71 cents (Feb. 7) Listing Violation: Delinquency. Seven Arts was late in filing its annual report with the SEC for the fiscal year ended June 30. Seven Arts is also in violation of the Nasdaq's bid price rule, as the stock last closed above $1 for the 10 consecutive trading sessions ended Sept. 2. Received Nasdaq Notice: Jan. 19 Management's Expected Action: Seven Arts said on Jan. 25 that it intends to file its annual report within five business days. Seven Arts now has 60 calendar days to submit a plan to regain compliance with Nasdaq listing rules.
OceanFreight ( OCNF) Company Profile: OceanFreight provides shipping services, specializing in transporting dry-bulk cargo, which include iron ore, coal and grain, as well as crude oil. Current Share Price: 82 cents (Feb. 7) Listing Violation: Bid price. The listing rule requires that a company maintains a minimum closing bid price of $1 per share for its common stock. OceanFreight shares last closed above $1 on Dec. 9. Received Nasdaq Notice: Jan. 25 Management's Expected Action: OceanFrieght said it intends to monitor the closing bid price of its common stock between now and July 25 and "is considering its options in order to regain compliance with the Nasdaq minimum bid price requirement."
eDiets.com ( DIET) Company Profile: eDiets.com develops and markets Internet-based diet and fitness programs. Current Share Price: 39 cents (Feb. 9) Listing Violation: Market value, equity and net income. eDiets.com does not comply with the minimum $35 million market value of listed securities requirement for continued listing on the Nasdaq. In June, eDiets.com was also slapped with a delisting warning from the Nasdaq due to a violation of the minimum bid price requirement. Received Nasdaq Notice: Jan. 31 Management's Expected Action: eDiets.com has until Aug. 1 to regain compliance with the market value requirement. Meanwhile, eDiets.com says that it expects to hear from a Nasdaq hearing panel regarding the pending delisting of its stock as it has not yet regained compliance with the minimum bid price requirement. On Feb. 4, the company said it expects the panel's decision within the next 30 to 45 days. -- Written by Robert Holmes in Boston. >To contact the writer of this article, click here: Robert Holmes. >To follow Robert Holmes on Twitter, go to http://twitter.com/RobTheStreet. >To submit a news tip, send an email to: firstname.lastname@example.org.