Mitek and SuperCom trying to recover from public listing rule missteps

A pair of publicly held digital identity vendors are recovering from bent regulations that are fundamental and could lead to problems in the near future.

The news involves SuperCom and Mitek, and of the two, SuperCom has the better position at the moment.

Executives at government ID and biometric services contactor SuperCom say they were notified last year — December 13, 2021 — by Nasdaq Stock Market officials that SuperCom common shares had fallen below the market’s $1 minimum bid. (News the executives no doubt were very aware of.)

Minimum-bid rules are a way to maintain a market’s perceived cache and dynamism to attract high-profile initial public offerings.

SuperCom shares had fallen through the proscribed floor for 30 consecutive business days ended on that date. That is grounds for delisting.

December 12, 2022, SuperCom executives say they are back in compliance. They say Nasdaq officials recorded 10 consecutive business days of share bids at or above $1. With that, SuperCom was out of the Nasdaq penalty box.

This fall, SuperCom shareholders approved a 1-for-10 reverse stock split of ordinary shares. A reverse stock split creates a smaller pool of shares that then are more valuable. It can be seen as a company’s recognition that other, more typical, business events to boost the value of a firm are unlikely soon.

In any case, the split has pulled SuperCom up from the Nasdaq floor. The exchange now considers the matter closed.

In the third quarter, the most recently reported period, ended September 30, revenue for the company was up 102 percent, from $3.1 million to $6.3 million. Revenue was up 97 percent, according to the company compared to the second quarter.

SuperCom narrowed its unaudited third quarter net loss, from $2.4 million in the third quarter 2021 compared to $2.1 million in the recent third quarter.

Gross profit grew 96 percent, from $1.1 million in the third quarter last year, to $2.1 million in the most recent period.

Biometric identity verifier Mitek also is in trouble with Nasdaq officials, but for missing an important document deadline, a delisting offense.

According to a notice that Mitek executives filed with the U.S. Securities and Exchange Commission, they are unable to file their 10-K report to the government and, thus, to Nasdaq officials, on time “without unreasonable effort or expense.”

Form 10-Ks describe a public company and its performance in great detail – more detail than the annual report to shareholders.

The company has until February 14 to submit plans to Nasdaq officials for filing. If they like what they read, Mitek could get until June 12 to pull it together. Mitek had already received a similar notice from the exchange for failing to file its third quarter results on time.

The question is, why would an established company muff the deadline? The answer is in SEC form 12b-25 in which company executives tell of their independent accounting firm resigning.

That is one of those phrases that put fear in boards of directors and happiness in the step of shareholder attorneys.

Then comes: “the Company is also in the process of evaluating deficiencies identified in connection with its assessment of the effectiveness of its internal control over financial reporting as of September 30, 2022.”

So, Mitek leaders have to find, interview and qualify a new public accounting firm, which has to start from 0 with a complex public company and create a 10-K to satisfy the SEC and Nasdaq while also finding internal control problems involving financial reporting. The filing may be made even more complicated by Mitek’s acquisitions of Hooyu and ID R&D within the last year and a half.

A delay in filing might be justified even if perhaps not excusable.

SuperCom also received a late filing letter from the Nasdaq over a Form 20-F in mid-2020.

Article Topics

biometrics  |  digital identity  |  financial results  |  Mitek  |  stocks  |  SuperCom