SafeNet delays filing Form 10-Q, risking delisting
IT security behemoth delayed filing Form 10-Q at the end of June as required, resulting in a pointed note from NASDAQ that the company risked delisting unless it came into compliance, and an equally pointed note from Citibank that that failure also cast a pall over the issuance of its $250 million 2.5 percent convertible subordinated notes due 2010
Delisting SafeNet? Yes, we are all equal, but as George Orwell reminded us, some are more equal than others. Not in the United States, apparently, and not at NASDAQ: The exchange has notified Belcamp, Maryland IT security behemoth SafeNet (NASDAQ: SFNT) that it was not in compliance with the exchanger’s rules.
The company announced it was delaying filing its Form 10Q for the quarter ending 30 June 2006. Late last week the company said it had in place a plan which, if achieved, would allow for this Form 10-Q to be filed by early October. NASDAQ, a no-nonsense exchange, snapped into action: The NASDAQ Listing Qualifications Staff sent the company a letter saying that the failure to file the Form 10-Q in a timely fashion, as required by NASDAQ Marketplace Rule 4310(c)(14), could serve as a basis for the delisting of the company’s stock from The NASDAQ Global Select Market. The company said it would request a hearing before a NASDAQ Listings Qualifications Panel to address the filing delay. At the hearing the company will present its plan to regain compliance with NASDAQ’s filing requirements. The company’s common stock will remain listed on The NASDAQ Global Select Market pending the issuance of a formal decision by the NASDAQ Panel.
SafeNet said it hoped to remedy its filing delay before NASDAQ effects the de-listing of SafeNet’s common shares, but that it could not assure that the panel will grant a request for continued listing.
The plan would also allow the filing of another delayed document — the amendment to Form 8-K containing financial information regarding SafNet’s acquisition of Krefeld, Germany-based encryption specialist Eracom Technologies.
As if all this were not enough: On 14 August 2006 SafeNet received a purported Notice of Default from Citibank, Trustee, under the Indenture relating to the issuance of its $250 million 2.5 percent convertible subordinated notes due 2010, as a result of the failure to file the Form 10-Q. The notice gave the company sixty days to cure the default. This is serious, as the indenture provides that the trustee or holders of at least 25 percent of the aggregate principal amount of the convertible subordinated notes may accelerate repayment of these notes if a default under the indenture is not cured within sixty days. The company’s plan does contemplate that the company’s required SEC filings would be made within this sixty day period, but SafeNet admits that it cannot assure such filings will be made within this period.
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