Progress toward delisting
September 12, 2006
There's a tendency to think of the $1 share price as the threshold of delisting,
but that doesn't really mean much. A minimum bid of $1 is a requirement for continued
listing on the NASDAQ Capital Market, but it's easily circumvented by doing a reverse
split, as long as the float stays above 500,000. SCOX now has a float of about 14
million shares, so it could comfortably split 1 for 4 two more times without issuing
any more shares. This isn't going to be a factor.
What SCO has to worry about is not the share price per se, but valuation, which is not affected by stock splits. To remain listed on the Capital Market, an issuer must meet any one of the following requirements:
(a) Stockholders' equity of at least $2.5 M
(b) Market cap of at least $35 M
(c) Net annual income from continuing operations of at least $500 K
SCO already fails alternative (c). Market cap will cross the threshold when the share price falls to 1.66, which no longer seems so far off. All it would take is for one more big holder to bail, as happened last July 3. That leaves stockholders' equity.
The equity trend was reset in Q1 of fiscal 2006 as a result of the latest appearance of the PIPE fairy. Since then, it has looked like this:
Q1: $18.4 M
Q2: $14.1 M
Q3: $11.4 M
At this rate, SCO has about another three quarters to go before it fails alternative (a) -- if the PIPE fairy stays away.
Source: Investor Village SCOX [ http://www.investorvillage.com/smbd.asp?mb=1911 ]