4/23/2008Nasdaq to Boot Camera Maker
Nasdaq decides to boot Nestor from the stock exchange.
Nasdaq staff yesterday informed Rhode Island based photo enforcement vendor Nestor Inc. that it would be kicked off of the the Capital Market stock exchange on May 1. The red light camera and speed camera vendor's dismal financial performance has sent the stock into a tailspin from a peak of $48 dollars per share in March 2000 to a dismal 21 cents today. The stock has traded for nearly a full year at less than $1, in violation of Nasdaq rules.
A letter from Nasdaq Listings Director Stanley Higgins explained that the only way for Nestor to save its stock would be to appeal the ruling by April 29 and promise to perform a reverse stock split within 60 days. If Nestor pursues this course, it must pay a $4000 fee for a trial by mail or a $5000 fee for an in-person hearing. The fee is non-refundable.
"If our common stock is not listed on the Nasdaq Capital Market or other national stock market or exchange... we would be in default of our senior secured notes and could be subject to the remedies available to the holders of such notes," Nestor's latest annual report, released last week, explained. "In addition, delisting from the Nasdaq Capital Market would adversely affect the trading price and limit the liquidity of our common stock and therefore may cause the value of an investment in our company to decrease."
Nestor's problems come despite great success in increasing its output of automated tickets. The company is seeing record revenues and significant growth in contracts with municipalities. Currently the company operates a collection of 302 red light cameras and eight speed cameras. Nestor pockets between $11 and $99 for every ticket it is able to issue, helping boost the company's revenue 42 percent over last year. Thirty new cameras are expected this year in California, Texas and Canada.
"Although we are disappointed that the market has not yet recognized the dramatic advances the company has made, we remain confident in the company's future and look forward to finalizing a transaction with our senior note holders that will give the company the runway it needs to succeed in the marketplace," Nestor CEO Clarence A. Davis said yesterday.
The upbeat statements, however, do little to hide the bottom line figures. Nestor managed to post a net loss of $2.6 million in the last quarter of 2007. By January, the company had accumulated a deficit of $76.5 million.
"We will need to generate significantly higher revenue, or reduce costs, to achieve profitability, which we may be unable to do," Nestor's annual report explained. "Even if we do achieve profitability, we may not be able to sustain or increase our profitability in the future."
To boost revenue, Nestor has funneled significant money into consultants and lobbyists charged with convincing lawmakers to adopt legislation authorizing photo ticketing. Such legislation is pending in states like Florida.
"If additional states do not authorize the use of automated red light enforcement, our opportunities to generate additional revenue from the sale of CrossingGuard systems and related services will be limited," Nestor's annual report explained. "Furthermore, in the event of adverse publicity, whether directed at us or our competitors' products, due to processing errors or other system failures, the automated traffic enforcement industry could suffer as a whole, which would have a material adverse effect on our business, financial condition and results of operations."