DALLAS (CN) – The NASDAQ warned wheeled shoemaker Heelys that it is not in compliance with a rule requiring at least three members on a listed company’s audit committee. The Carrollton-based company’s audit committee has two members, after Richard Middlekauf’s May 27resignation from the board of directors.
Heelys inventor Roger Adams and Middlekauff, Adams’ cousin, resigned from the board one day before the annual shareholder meeting, according to the Dallas Morning News.
In their resignation letters, the said that the board was failing to fulfill its fiduciary duties to shareholders, according to documents Heelys filed with the SEC. Both men had been directors since the company’s inception in 2000.
Heelys stated in its SEC filings that both directors resigned because they disagreed with the decision not to pursue the sale of the company and that they were both motivated by a “strong personal interest” to sell all or part of their company shares. As of April 15, Adams owned 17 percent of Heelys’ stock and Middlekauff owned 7.3 percent.
Both men indicated that Capital Southwest Venture Corp., Heelys’ largest shareholder, may be planning a stock buyback program or planning to take the company private. Capital Southwest owned nearly 34 percent of Heelys shares on April 15.
The letters also allege that the board rejected several offers “representing substantial premiums” over Heelys’ stock price. The company has since said it would remain independent after a 6-month strategic review led by investment adviser Houlihan Lokey.
Shares of Heelys were unchanged Thursday at $2.17. In August 2008, Heelys rejected an unsolicited buyout bid by Skechers USA for $5.25 per share, or $142.8 million.
“After careful consideration, our board rejected the offer after concluding that their proposal was not in the best interest of our stockholders,” said Gary Martin, chairman of the board, at the time. “The board believes the $5.25 offering price does not reflect the value of Heelys and that entering into discussions with Skechers based on their unsolicited proposal is premature at this time.”
The Nasdaq has asked Heelys to provide proof of compliance with the rule on or before Nov. 23.
“We have initiated a search for a new independent director and we intend to be fully compliant as soon as possible,” said Martin in a statement.
Heelys has been named as defendant in at least 11 lawsuits since 2004, most of them alleging that children were injured by the wheeled shoes, or that the company manipulated its share price by failing to disclose the risks of injuries from wearing them. One of the claims was for wrongful death.