26 Small-Cap Stocks in Danger of Delisting

BOSTON ( TheStreet) -- Small-cap stocks, measured by the Russell 2000 Index, were hit hard in May and trailed the broader market as investors sought the safety of large-cap shares such as Procter & Gamble ( PG) and Colgate-Palmolive ( CL).

The underperformance of small-cap stocks is worrisome, given they inherently carry higher risks than their larger peers do. One of those is the inability to remain compliant with listing standards of the Nasdaq, spurring delisting warnings from the exchange.

Overall, May was a money-losing month for equity investors, with the S&P 500 and Dow Jones Industrial Average down roughly 3% each. Farming and machinery stocks that have done well for investors, like Deere ( DE) and Archer-Daniels Midland ( ADM), were down more than 10%. Retailers like Big Lots ( BIG), Staples ( SPLS), Sears Holdings ( SHLD) and Gap ( GPS) were among the worst decliners on the S&P 500 in May.

Meanwhile, many small-cap stocks, such as YRC Worldwide ( YRCW), have seen even sharper declines. 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 board independence, delinquency and market value.

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 break through with surging revenue or profit growth.

The following 26 companies were notified in May 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.


First Federal Bancshares of Arkansas ( FFBHD)

Company Profile: First Federal Bancshares of Arkansas is a savings and loan holding company, which through its subsidiary, First Federal Bank, provides a line of financial products to individuals and small- to medium-sized businesses.

Current Share Price: $9.65 (as of last Friday, May 27)

Listing Violation: Public float. The listing rule requires that a company have at least 750,000 publicly held shares for continued listing. Currently, First Federal Bancshares of Arkansas has a public float of about 376,000 shares.

Received Nasdaq Notice: May 4

Management's Expected Action: The company said it expected to get a warning letter from the Nasdaq after it completed a reverse stock split, which reduced the number of shares outstanding. First Federal Bancshares of Arkansas has until June 20, to submit a plan to regain compliance. If the plan is accepted, the company would have until Oct. 31 to regain compliance with the rule. The company said that it already plans to issue up to 2.9 million shares of its common stock through a rights offering before June 20.

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Commonwealth Bankshares ( CWBS)

Company Profile: Commonwealth Bankshares is a bank holding company, which through its subsidiary, Bank of the Commonwealth provides a range of commercial banking services to individuals and small-to medium-sized businesses.

Current Share Price: 50 cents (May 27)

Listing Violation: Bid price and market value of publicly held shares. The Nasdaq requires that Commonwealth Bankshares maintain a minimum $5 million market value of publicly held shares and a bid price of at least $1 for continued listing.

Received Nasdaq Notice: May 9 and May 17

Management's Expected Action: Commonwealth Bankshares has until Nov. 7 to regain compliance with the bid price rule. The company said it intends to actively monitor the bid price of its common stock and "will consider available options to resolve the deficiency and regain compliance." For the rule requiring a certain market value of publicly held shares, Commonwealth Bankshares has until Nov. 14 to regain compliance.


Anchor BanCorp Wisconsin ( ABCW)

Company Profile: Anchor BanCorp Wisconsin is engaged in the savings and loan business through its wholly owned banking subsidiary, AnchorBank.

Current Share Price: 75 cents (May 27)

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. Anchor BanCorp Wisconsin shares last closed above $1 on March 29.

Received Nasdaq Notice: May 13

Management's Expected Action: Anchor BanCorp says it has until Nov. 9 to regain compliance with the bid price requirement. The company said it is "currently evaluating its alternatives to resolve the listing deficiency."

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ShengdaTech ( SDTH)

Company Profile: ShengdaTech is a Chinese manufacturer of specialty additives, such as calcium carbonate.

Current Share Price: $3.55 (trading has been halted since March 14)

Listing Violation: Delinquent. The company failed to timely file its Form 10-Q for the quarter ending March 31. In March, ShengdaTech was hit with a separate notice after it failed to file its annual 10-K report with the SEC in a timely manner.

Received Nasdaq Notice: May 16

Management's Expected Action: ShengdaTech has already appealed to the Nasdaq regarding the delisting notices it has received, and the exchange has temporarily stayed the delisting action pending a hearing on the matter. The company said it has submitted a new compliance plan to Nasdaq in preparation for a hearing scheduled at the end of May.

However, the company faces bigger problems as a special committee is currently conducting an internal investigation into potentially serious discrepancies and unexplained issues relating financial records identified by ShengdaTech's auditors, which caused the delay in filing its annual report. Several law firms have already announced class-action lawsuits against the company, arguing that ShengdaTech's financial statements were materially false and misleading.

ShengdaTech said it is in the process of evaluating potential independent registered public accounting firms to replace its former auditor, KPMG, and that it intends to become compliant with its reporting obligations as soon as practicable.


TAT Technologies ( TATT)

Company Profile: TAT Technologies provides a variety of services and products to the military and commercial aerospace and defense industries through its Gedera facility, as well as through its subsidiaries, Bental, in Israel, and Limco in the U.S.

Current Share Price: $5.80 (May 27)

Listing Violation: Audit committee composition. The listing rule requires that a majority of the board of directors must consist of independent directors and that the company's audit committee have at least three members, all of whom must be independent.

Received Nasdaq Notice: May 16

Management's Expected Action: On May 24, TAT Technologies announced that its board has elected Anat Hollander as an independent director and a member of the company's audit committee, which remedies the listing deficiency.

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Wonder Auto Technology ( WATG)

Company Profile: Wonder Auto Technology is engaged in the business of designing, developing, manufacturing and selling automotive electrical parts, specifically alternators and starters, engine valves, tappets, rods and shafts in China.

Current Share Price: $5.42 (trading has been halted since May 6)

Listing Violation: Delinquent. The company has not yet filed its Form 10-Q for the period ended March 31 or its Form 10-K for the fiscal year ended Dec. 31.

Received Nasdaq Notice: May 16

Management's Expected Action: Wonder Auto's audit committee has started an investigation in response to a report alleging that the company had engaged in several transactions without properly disclosing their related-party nature. "Based on the information presently available to it, the audit committee expects that its investigation will continue at least through June 2011," the company said.

Several shareholder lawsuits have popped up following the announcement, with investigations focusing on whether Wonder Auto and its directors and officers "violated applicable laws due to the company incorrectly recognizing revenue and failing to properly disclose several transactions," according to shareholder rights litigation firm Robbins Umeda.


China Integrated Energy ( CBEH)

Company Profile: China Integrated Energy is a non-state-owned integrated energy company in China, engaged in the wholesale distribution of finished oil and heavy oil products; the production and sale of biodiesel and; the operation of retail gas stations.

Current Share Price: $1.84 (trading has been halted since April 20)

Listing Violation: Public interest concern, audit committee composition and board independence.

Received Nasdaq Notice: May 16

Management's Expected Action: The public interest concern comes as the Nasdaq alleges that the company obstructed the board's independent investigation following complaints relating to accounting, internal accounting controls or auditing matters. KPMG has already advised that its previously issued audit report should no longer be relied upon. In addition, the Nasdaq noted that the company's audit committee has been unable to conduct an independent investigation into the serious allegations.

China Integrated Energy has already said it plans to appeal the Nasdaq's determination. However, the company is facing several class action lawsuits from shareholders. One firm, Kaplan Fox & Kilsheimer LLP, filed a complaint that alleges company executives "made false and misleading statements and material omissions regarding China Integrated Energy's business, operations, management and the intrinsic value of China Integrated Energy." The complaint also alleges improper acquisitions and the wrongful transfer of cash by the company to Gao Bo, the son of China Integrated Energy's CEO.

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Archipelago Learning ( ARCL)

Company Profile: Archipelago Learning is a subscription-based online education company that provides standards-based instruction, practice, assessments and productivity tools.

Current Share Price: $9.94 (May 27)

Listing Violation: Board independence. The listing rule requires the board of directors to have a majority of members who are independent.

Received Nasdaq Notice: May 16

Management's Expected Action: On April 5, Michael Powell resigned from the company's board of directors, leaving Archipelago out of compliance with the board independence requirement. The company said it plans to fill the vacancy on the board with an independent candidate in the near future to regain compliance.


China Automotive Systems ( CAAS)

Company Profile: China Automotive Systems makes power-steering systems and other component parts for cars.

Current Share Price: $7.70 (May 27)

Listing Violation: Delinquent. In March, China Automotive Systems was hit with a separate delisting notice after it failed to file its annual 10-K report with the SEC in a timely manner.

Received Nasdaq Notice: May 16

Management's Expected Action: China Automotive announced previously that it has to restate financial statements for fiscal 2009 and the first three quarter of fiscal 2010 due to the accounting treatment of its convertible notes issued in February 2008. Because of the restatement, China Automotive has failed to submit its Form 10-K for 2010 and the Form 10-Q for the first quarter of 2011.

In response to the Nasdaq's letter, China Automotive provided its plan for regaining compliance on May 13. The company said it believes that it will be able to file its amended reports before the end of June 2011, and it expects that these filings will allow it to regain compliance with the Nasdaq listing rules.

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China Electric Motor ( CELM)

Company Profile: China Electric Motor sells micro motor products used in consumer electronics, cars, power tools, toys and household appliances.

Current Share Price: $2.91 (trading has been halted since March 30)

Listing Violation: Public interest concern, delinquent, audit committee composition, and board independence. In April, China Electric Motor was hit by another notice for failing to file its annual 10-K report with the SEC in a timely manner.

Received Nasdaq Notice: May 17

Management's Expected Action: China Electric Motor is one of several Chinese companies under increased scrutiny of regulators. The company's auditor, MaloneBailey, recently fired more than a third of its Chinese-company clients after allegedly discovering evidence of forged bank documents during the audits of most of those dismissed clients.

China Electric Motor said it is working with advisors to resolve issues discovered during MaloneBailey's most recent audit. At the same time, China Electric Motor also disclosed that the SEC has initiated a formal, nonpublic investigation into whether the company violated federal securities laws. China Electric Motor said it is committed to cooperating with the SEC. In addition, the company said it intends to make a hearing request and attempt to resolve the listing deficiency with the Nasdaq.


First Place Financial ( FPFC)

Company Profile: First Place Financial is a community-oriented financial institution engaged mainly in gathering deposits to originate one- to four-family residential mortgage loans, commercial and consumer loans.

Current Share Price: $1.40 (May 27)

Listing Violation: Delinquent. First Place Financial has delayed filing of quarter reports for periods ending Sept. 30, Dec. 31 and March 31.

Received Nasdaq Notice: May 17

Management's Expected Action: First Place Financial has previously disclosed that it needs additional time to file its financial statements as it deals with the Office of Thrift Supervision, which found issues with the bank's allowance for loan losses.

The company said it intends to request a hearing before the Nasdaq's Listing Panel which, if granted, will automatically stay any delisting action through at least June 8.

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Nanophase Technologies ( NANX)

Company Profile: Nanophase Technologies is engaged in the development, manufacture and sale of engineered nanomaterial products in North America, Europe and Asia.

Current Share Price: $1.21 (May 27)

Listing Violation: Equity. The Nasdaq requires a minimum stockholders' equity of $10 million for continued listing. Nanophase's stockholders' equity as of March 31 was $9.9 million.

Received Nasdaq Notice: May 17

Management's Expected Action: Nanophase announced that it had applied to transfer its listing to the Nasdaq Capital Market, where the continued listing equity requirement is $2.5 million and alternative continued listing standards are lower than the comparable items in the Nasdaq Global Market.


Wuhan General Group ( WUHN)

Company Profile: Wuhan General Group manufactures industrial blowers, industrial steam and water turbines for use in electrical power generation plants.

Current Share Price: 72 cents (May 27)

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. Wuhan General shares last closed above $1 on March 31.

Received Nasdaq Notice: May 17

Management's Expected Action: Wuhan General has until Nov. 14 to regain compliance with the minimum bid price requirement. The company said it will consider available options to resolve the noncompliance with the listing rule. This comes after the company in March said that filed financial statements for the year ended December 31, 2009 and for the quarter ended March 31, 2010 should no longer be relied upon because of errors.

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OptimumBank Holdings ( OPHC)

Company Profile: OptimumBank Holdings is a holding company for OptimumBank, which provides community banking products and services to individuals and businesses in Broward, Miami-Dade, and Palm Beach counties, Florida.

Current Share Price: $1.80 (May 27)

Listing Violation: Market value/equity/net income. Stockholders' equity was less than $2.5 million as of March 31.

Received Nasdaq Notice: May 17

Management's Expected Action: OptimumBank said it has until July 1 to submit a plan to regain compliance with the rule. If the plan is accepted, the company could get an extension until Nov. 13 to regain compliance. Already, the company is conducting a private placement offering of its common stock, which is intended to increase stockholders' equity.


Waccamaw Bankshares ( WBNK)

Company Profile: Waccamaw Bankshares is engaged in attracting deposits from the general public and using such deposit funds to make commercial, consumer, and residential construction and permanent mortgage real estate loans.

Current Share Price: 70 cents (May 27)

Listing Violation: Delinquent. Waccamaw Bankshares failed to file its annual 10-K report and quarterly 10-Q report with the SEC in a timely manner.

Received Nasdaq Notice: May 17

Management's Expected Action: Waccamaw Bankshares is required to submit a plan to regain compliance by June 3. The Nasdaq can grant the company an extension until Sept. 27 to regain compliance if the plan is approved. If the company is unable to file its annual report prior to June 3, Waccamaw said it intends to submit a plan to regain compliance to the Nasdaq no later than June 3.

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China Ritar Power ( CRTP)

Company Profile: China Ritar Power is a manufacturer of lead-acid batteries in China.

Current Share Price: $1.60 (trading has been halted since April 15)

Listing Violation: Delinquent. The company failed to file its quarterly report on Form 10-Q for the period ending March 31.

Received Nasdaq Notice: May 17

Management's Expected Action: China Ritar Power had already run afoul of the Nasdaq after failing to file its annual report for 2010 on time. In early May, the company submitted a plan of compliance to Nasdaq, which it then supplemented on May 12. Due to the most recent listing violation, the Nasdaq has requested that China Ritar Power provide Nasdaq an update on its compliance plans.


Alanco Technologies ( ALAN)

Company Profile: Alanco Technologies is a provider of advanced information technology solutions, such as data storage, RFID technology and wireless asset management.

Current Share Price: $1.01 (May 27)

Listing Violation: Public interest concern. The Nasdaq claims Alanco "no longer has any operating business" following the sale of its StarTrak Systems subsidiary to Orbcomm.

Received Nasdaq Notice: May 17

Management's Expected Action: Alanco already has requested a hearing before the Nasdaq's listing panel. The company did add it "is actively pursuing new opportunities to enhance shareholder value by leveraging its assets through a strategic merger or acquisition."

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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: 45 cents (May 27)

Listing Violation: Delinquent. Brooklyn Federal has been hit with several delisting warnings over the past few months, relating to its market value of publicly held shares and delinquency in filing its 10-K for the quarter ended Sept. 30 and 10-Q report, as well as minimum bid price.

Received Nasdaq Notice: May 18

Management's Expected Action: Brooklyn Federal says the delay in filings is due to the resignation of the company's independent registered public accounting firm back in December. The audit committee has engaged a new registered public accounting firm. Currently, Brooklyn Federal has until May 31 to file its annual report for fiscal 2010 and quarterly report for the period ending Dec. 31, unless it requests an extension and amends its compliance plan to include the most recent quarter's delayed filing.


CAS Medical Systems ( CASM)

Company Profile: CAS Medical Systems is a medical technology company that develops, manufactures and markets non-invasive patient monitoring products used in patient care.

Current Share Price: $2.60 (May 27)

Listing Violation: Equity. The Nasdaq requires a minimum stockholders' equity of $10 million for continued listing. CAS Medical's stockholders' equity as of March 31 was $9.4 million.

Received Nasdaq Notice: May 18

Management's Expected Action: While CAS Medical has 45 days to submit a plan to the Nasdaq for how it expects to regain compliance, the company said it believes that it currently meets the criteria to transfer its common stock listing to the Nasdaq Capital Market.

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Energy Focus ( EFOI)

Company Profile: Energy Focus manufactures, markets, and installs lighting systems and customer specific energy efficient lighting solutions for a wide-range of use in both the general commercial market and the pool market.

Current Share Price: 52 cents (May 27)

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. Energy Focus shares last closed above $1 on April 5.

Received Nasdaq Notice: May 18

Management's Expected Action: Energy Focus has until Nov. 14 to regain compliance with the minimum bid price requirement, although the company gave no indication of what it plans to do to remedy the deficiency.


Isle of Capri Casinos ( ISLE)

Company Profile: Isle of Capri Casinos is a developer, owner and operator of branded gaming facilities and related lodging and entertainment facilities in regional markets in the U.S.

Current Share Price: $8.98 (May 27)

Listing Violation: Board independence. The listing rule requires the board of directors to have a majority of members who are independent.

Received Nasdaq Notice: May 18

Management's Expected Action: Isle of Capri says it intends to comply with Nasdaq's majority independent director board composition requirements within the cure period provided by the exchange.

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First Mariner Bancorp ( FMAR)

Company Profile: First Mariner Bancorp is a holding company for First Mariner Bank, which provides commercial, consumer, retail and mortgage banking services for individuals and small to mid-sized businesses in Maryland.

Current Share Price: 55 cents (May 27)

Listing Violation: Market value/equity/net income. Stockholders' equity was less than $2.5 million as of March 31.

Received Nasdaq Notice: May 18

Management's Expected Action: First Mariner has until July 5 to submit a plan to regain compliance with the listing rule. The company said it intends to submit a plan to regain compliance within the allowed time.


LiveDeal ( LIVE)

Company Profile: LiveDeal is a provider of Internet directory, classified and audience acquisition services to small businesses.

Current Share Price: $3.78 (May 27)

Listing Violation: Market value/equity/net income. Stockholders' equity was less than $2.5 million as of March 31.

Received Nasdaq Notice: May 18

Management's Expected Action:>: LiveDeal has until July 5 to submit a plan to regain compliance with the listing rule. The company said it has not made any final decisions regarding what action to take in response.

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Omega Navigation Enterprises ( ONAV)

Company Profile: Omega Navigation Enterprises is a global marine transportation services company specializing in product tankers.

Current Share Price: 75 cents (May 27)

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. Omega Navigation shares last closed above $1 on April 5

Received Nasdaq Notice: May 18

Management's Expected Action: Omega Navigation says it intends to monitor the closing bid price of its common stock between now the end of the grace period on Nov. 14. The company added that it is considering its options in order to regain compliance with the rule.


Suffolk Bancorp ( SUBK)

Company Profile: Suffolk Bancorp is a bank holding company for Suffolk County National Bank, which offers an array of products and services to residents of Suffolk County, New York.

Current Share Price: $14.44 (May 27)

Listing Violation: Delinquent. The company did not file its quarterly report on Form 10-Q for the period ended March 31 in a timely manner.

Received Nasdaq Notice: May 18

Management's Expected Action: Earlier this month, Suffolk Bancorp said management identified possible weaknesses in the company's internal controls. Most notably, management found that deficiencies primarily related to the timing of the recognition of credit risk, as well as the computations of the allowance for loan losses.

Suffolk Bancorp has 60 days in which either to comply or to file a plan of compliance satisfactory to the Nasdaq, and the company said it is working to either complete its filing or create a plan to regain compliance.

Already, shareholder litigation firms are going after Suffolk Bancorp. Robbins Umeda LLP, for example, is investigating whether directors and officers of Suffolk Bancorp harmed shareholders by breaching their fiduciary duties by causing or allowing the company "to issue false and/or misleading financial statements."

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Vitacost.com ( VITC)

Company Profile: Vitacost.com is an online retailer and direct marketer of health products, including dietary supplements and cosmetics.

Current Share Price: $5.70 (trading has been halted since Dec. 7)

Listing Violation: Delinquent. In April, Vitacost.com was hit by a notice after it failed to file its annual 10-K report with the SEC in a timely manner. In January, Vitacost.com was notified by the Nasdaq that it failed to meet listing requirements related to its annual shareholder meeting and proxy solicitation.

Received Nasdaq Notice: May 18

Management's Expected Action: 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. At the time, the Nasdaq suspended trading in the stock.

>>To see these stocks in action, visit the 26 Small-Cap Stocks in Danger of Delisting portfolio on Stockpickr.

-- Written by Robert Holmes in Boston.

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

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Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.