Stocks Under $5 in Danger of Delisting

Share price of First Place Financial corrected to read $3.25 as of Feb. 28

BOSTON ( TheStreet) -- Small-cap stocks, measured by the Russell 2000 Index, rose more than 5% last month, attracting investors to growth companies on hopes of outsized profits as the economy rebounds. Still, many carry risks rarely present at larger peers, including the inability to remain compliant with listing standards of the Nasdaq and New York Stock Exchange.

February was a winning month for the stock market, with the S&P 500, Nasdaq and Dow Jones Industrial Average each rising roughly 3% despite geopolitical waves over protests in the Middle East.

But some smaller companies, which typically expose investors to greater volatility, suffer from deficiencies ranging 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 tend to meet their fate with large losses.

The list of deficient companies isn't limited to under-the-radar stocks that consumers aren't familiar with. For instance, book retailer Borders Group ( BGP) was slapped with a delisting notice in early February due to a share price that languished below $1. Borders eventually filed for bankruptcy and began liquidating several stores. The company's stock was bounced from the NYSE and now trades for about a quarter on the Pink Sheets.

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. Companies like eDiets.com ( DIET) and Star Buffet ( STRZ), both slapped with delisting warnings, are up 23% and 78%, respectively, over the past three months.

Nevertheless, the following seven companies were notified in February that they're in violation of listing requirements and could be kicked off the Nasdaq. The companies now have a limited window of time to regain compliance with the exchange's listing rules.


LiveDeal ( LIVE)

Company Profile: LiveDeal provides local customer acquisition services for small businesses. LiveDeal was the first company to bring the print yellow pages to the Internet in 1994.

Current Share Price: $4.90 (Feb. 28)

Listing Violation: Public float. The listing rule requires that a company have at least 500,000 publicly held shares for continued listing. Currently, LiveDeal has a public float of about 376,000 shares.

Received Nasdaq Notice: Feb. 2

Management's Expected Action: LiveDeal has until March 19 to provide the Nasdaq staff with a specific plan to achieve and sustain compliance with all listings requirements, including a time frame for the completion of the plan. While LiveDeal says it has not made any final decisions regarding what actions to take, the company noted that potential compliance strategies it is considering include a forward stock split, which would increase the number of shares held, or the issuance of additional shares of common stock.

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GrayMark Healthcare ( GRMH)

Company Profile: GrayMark Healthcare provides diagnostic sleep-testing services and care-management services for people with chronic sleep disorders.

Current Share Price: 75 cents (Feb. 28)

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. GrayMark shares last closed above $1 on Dec. 22.

Received Nasdaq Notice: Feb. 4

Management's Expected Action: GrayMark has until Aug. 3 to regain compliance with the minimum bid price requirement. It seems as though the company will effect a reverse stock split before that time. On Feb. 1, shareholders owning a combined 53.8% of GrayMark's outstanding stock approved a reverse stock split in one of five ratios. The exact ratio of the reverse stock split will be determined by the company's board of directors.


Rosetta Genomics ( ROSG)

Company Profile: Rosetta Genomics develops and commercializes new diagnostic tests based on microRNAs, which the company says play an important role in normal function and in various pathologies.

Current Share Price: 55 cents (Feb. 28)

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. Rosetta Genomics shares last closed above $1 on Dec. 22. The company was hit in December with a separate delisting warning related to market value, equity and net income.

Received Nasdaq Notice: Feb. 7

Management's Expected Action: Rosetta Genomics has until Aug. 8 to regain compliance with the minimum bid price requirement. While the company did not offer any indication of what it may do to regain compliance with the rule, Rosetta Genomics did note that the Nasdaq provided the company with an extension of a deadline to meet the market value, equity and net income requirement. The company must achieve certain milestones toward regaining compliance by Feb. 28 and April 29.

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Phazar ( ANTP)

Company Profile: Phazar makes antennas, wireless mesh network products, towers, support structures, masts and communication accessories.

Current Share Price: $3.45 (Feb. 28)

Listing Violation: Listing of additional shares and shareholder approval. The rule requires that Phazar obtain shareholder approval for the issuance of 47,000 shares issued for services rendered and a 40,000 share option, which the company announced in a Jan. 27 filing. Phazar was required to have notified the Nasdaq 15 days prior to the establishment of these equity compensation arrangements. The securities transactions pre-date Phazar's shareholder-approved 2009 Equity Incentive Plan.

Received Nasdaq Notices: Feb. 10

Management's Expected Action: Phazar has until March 28 to submit a plan to regain compliance with the referenced listing standards and, if approved, the company would have until Aug. 9 to meet the requirement.


Empire Resorts ( NYNY)

Company Profile: Empire Resorts owns Monticello Gaming and Raceway, a video gaming machine and harness horseracing facility located in Monticello, New York.

Current Share Price: 78 cents (Feb. 28)

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. Empire Resorts shares last closed above $1 on Dec. 31.

Received Nasdaq Notice: Feb. 14

Management's Expected Action: Empire Resorts has until Aug. 15 to regain compliance with the minimum bid price requirement. The company said it is considering actions that it may take to regain compliance with the continued listing requirements, but no decisions about a response have been made yet.

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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: 75 cents (Feb. 28)

Listing Violation: Delinquency. Brooklyn Federal failed to file its annual 10-Q report with the SEC in a timely manner. In January, Brooklyn Federal was hit with delisting warnings related to its market value of publicly held shares and delinquency in filing its 10-K for the quarter ended Sept. 30.

Received Nasdaq Notice: Feb. 15

Management's Expected Action: Brooklyn Federal said the filings of its 10-K and 10-Q have been delayed due to the resignation of the company's independent registered public accounting firm on Dec. 20. The audit committee engaged a new registered public accounting firm, but it has completed only the initial stages of the 10-K audit. Brooklyn Federal has until March 14 to submit a plan to regain compliance with respect to its delinquent periodic reports. If the plan is accepted, the company would have until June 27 to regain compliance. Meanwhile, Brooklyn Federal has until July 11 to regain compliance with the requirement for a minimum market value of publicly held stock of $5 million.


First Place Financial ( FPFC)

Company Profile: First Place Financia lis the holding company of First Place Bank, based in Warren, Ohio.

Current Share Price: $3.25 (Feb. 28)

Listing Violation: Delinquency. First Place Financial failed to file its annual 10-Q report with the SEC in a timely manner. In November, First Place Financial was slapped with a separate delisting warning for failing to filing its 10-K for the quarter ended Sept. 30 in a timely manner.

Received Nasdaq Notice: Feb. 17

Management's Expected Action: First Place Financial has previously disclosed that it needs additional time to file its 10-Q as it deals with the Office of Thrift Supervision, which found issues with the bank's allowance for loan losses. First Place Financial has engaged an independent firm to conduct a detailed review of the bank's loan portfolio. The company has already said it intends to amend its annual report for the fiscal year ended June 30, as well as the company's quarterly filings for September and December 2010.

Already, First Place Financial has submitted to the Nasdaq a plan to regain compliance. However, due to the delayed filing of the quarterly report for the period ending Dec. 31, First Place Financial is required to update the plan by March 4. The company said it will request that the Nasdaq allow the company until May 16 to regain compliance with all delinquent filings.

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-- Written by Robert Holmes in Boston.

>>To see these stocks in action, visit the Stocks Under $5 in Danger of Delisting portfolio on Stockpickr.

>To contact the writer of this article, click here: Robert Holmes.

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