Fountain Powerboat Industries received notice from the American Stock Exchange that it is not in compliance with one of Amex’s standards for the continued listing of the company’s common stock.
The notice, dated June 11, said the decision was based on Amex's review of the company's quarterly report for the period ended March 31, 2008.
Specifically, the notice states Fountain "... has sustained losses which are so substantial in relation to its overall operations or its existing financial resources, or its financial condition has become so impaired that it appears questionable, in the opinion of the Exchange, whether such company will be able to continue operations and/or meet its obligations as they mature.”
For the quarter ended March 31, Fountain reported a working capital deficit of about $16.8 million, an operating loss of about $1.7 million and a net loss of nearly $2 million, according to a report filed with the Securities and Exchange Commission.
Amex also noted Fountain is not in compliance with covenants contained in its $14.5 million term loan and Fountain has been operating under a waiver from its lender that expires June 30.
“…if by that time we are not able to comply with the loan covenants or obtain an additional waiver, the lender will have a right to foreclose on our assets,” Fountain noted in documents filed with the SEC.
Fountain must submit a plan to Amex by July 11, addressing how it intends to regain compliance. Amex will evaluate the company's plan and, if it’s accepted, Fountain could perhaps continue its listing during the plan period, subject to periodic reviews.
If Fountain does not submit a plan, or if any plan it submits is not accepted by Amex, the company will be subject to delisting proceedings.
Amex could approve Fountain’s plan, but if the company is not in compliance with all continued listing standards of the company guide by Dec. 11, or if the company does not make progress consistent with the plan during the plan period, Amex could initiate delisting proceedings.
“Until the company's Board of Directors evaluates the recommendations of the company's officers with respect to a plan, the company is unable to make any more definite statement about its intention to submit a plan or its prospects for submitting an acceptable plan,” Fountain said in a statement.
At mid-morning, Fountain was trading at $1.19 per share, up from an opening of $1.11. Yesterday, it hit its 52-week low of $1.
Fountain previously reported it has acquired assets to build Baja boats. The company plans to evaluate how that new line of boats and any new business resulting from it will fit in with any plan it may develop to respond to Amex's notice.
Fountain expects to begin manufacturing the Baja by Fountain boat product line for the 2009 model year.
Fountain paid $4 million for the assets, which it borrowed, according to documents filed with the Securities and Exchange Commission. The company also acquired trademarks and other assets used to sell the acquired models.
“(Fountain) is aware, however, that the Baja boat line was unprofitable when it was operated by Baja Marine Corp. Therefore, (Fountain) will be required to make substantial operational changes to operate profitably,” according to documents filed with the SEC.
Fountain Powerboats, a subsidiary of Fountain Powerboat Industries, has its executive offices and manufacturing facilities in North Carolina. The company designs, manufactures and sells offshore sport boats, sport fishing boats and express cruisers.