SECURITIES AND EXCHANGE COMMISSION
Issuer Delisting; Order Granting the Application of The Ohio Art Company to Withdraw its Common Stock, $1.00 Par Value, from Listing and Registration on the American Stock Exchange LLC
File No. 1-07162
August 23, 2004
On February 25, 2004, The Ohio Art Company, an Ohio corporation (“Issuer”), filed an application with the Securities and Exchange Commission (“Commission” or “SEC”), pursuant to Section 12(d) of the Securities Exchange Act of 1934 (“Act”)1 and Rule 12d2-2(d) thereunder,2 to withdraw its common stock, $1.00 par value (“Security”), from listing and registration on the American Stock Exchange LLC (“Amex” or “Exchange”). Notice of such application was published for comment in the Federal Register on March 4, 2004.3 The Commission received 14 comment letters on the application.4 On May 3, 2004, the Issuer submitted a letter to the Commission in response to the comments received.5 As discussed below, after careful consideration of the comments received, the Commission is granting the application.
On February 19, 2004, the Board of Directors (“Board”) of the Issuer unanimously approved a resolution to withdraw the Issuer’s Security from listing and registration on the Amex.6 The Board stated that the reasons for such action include: (i) the number of stockholders of record in the Issuer's Security; (ii) the limited extent of trading in the Issuer's Security; and (iii) the material costs of complying with the requirements of the Sarbanes-Oxley Act. Further, the Issuer stated in its press release7 that it anticipates that its Security will be quoted on the Pink Sheets, an electronic quotation service for over-the-counter securities, following the deregistration and delisting from the Amex to the extent that market makers continue to demonstrate an interest in trading the Security. The press release further stated that, after careful consideration, the Board concluded that it is no longer in the best interests of the company to be subject to the Commission’s reporting requirements. While the delisting application states that it relates solely to its withdrawal from listing and registration on the Amex, the Board resolutions submitted with the application and the Issuer’s press release state that the Issuer intends to file Form 15 with the Commission in order to suspend registration of the Security.8
The Issuer stated in its application that it has met the requirements of Amex Rule l8 by complying with all applicable laws in the State of Ohio, in which it is incorporated, and with the Amex’s rules governing an issuer’s voluntary withdrawal of a security from listing and registration.
As previously noted, the Commission received 14 comment letters on the application.9 Generally, the commenters believe that the Commission should reject the Issuer’s application because of a discrepancy in the number of record holders of the Issuer’s Security. In particular, the commenters note that, although the Issuer stated in its application that it intended to withdraw its Security from listing and registration on the Amex because of the number of stockholders of record, the Issuer’s Form 10-K for the fiscal year ended January 31, 2003, indicated that it had over 800 record holders of the Security.10 In addition, the commenters believe that the Issuer has failed to explain in subsequent disclosure documents the discrepancy between the actual number of record holders of the Security and the number the Issuer reported on its Form 10-K. The commenters generally state that Commission approval of the delisting application would further devalue investments in the Security to the detriment of the Issuer’s current stockholders. Finally, some commenters request that, for the protection of investors, the Commission investigate or order a hearing to consider commenters’ concerns about the discrepancy.11
On April 30, 2004, the Issuer responded to the commenters’ concerns and discussions with the Commission staff about the discrepancy between the actual stockholders of record and the number reported by the Issuer in its For 10-K for the fiscal year, ended January 31, 2003. The Issuer stated that its Form 10-K for the fiscal year ended January 31, 2003 reported that it had 836 stockholders of record.12 The Issuer also stated that, when calculating this number, it incorrectly included certain non-objecting beneficial holders, and has been consistently doing so for at least 10 years. The Issuer stated that, as a result, it “reported more than stockholders of record as defined by the SEC.”13 Specifically, as of April 30, 2004, the Issuer stated that it believes it has approximately 304 stockholders of record, as defined by the SEC.14
The Issuer represented that it was unaware of the discrepancy until early 2004 when it began to consider delisting from the Amex. The Issuer also stated that it did not amend its Form 10-K to reflect the actual number of record holders of the Security because it did not believe it was necessary since the Issuer announced its intention to delist shortly after it became aware of the discrepancy. Finally, the Issuer stated that since its public announcement of its intent to delist, shareholders should have had adequate time to revise their investment decisions if they so desired.
The Commission has considered the comments it received and notes that, on July 23, 2004, the Issuer filed an amendment to its Form 10-K, which provides, among other things, the Issuer’s statement regarding the discrepancy.15
The Commission believes that the Issuer has complied with the rules of the Exchange, and the requirements of Rule 12d2-2 under the Act. As noted above, on July 23, 2004, the Issuer’s Form 10-K was amended. The Commission believes that the amended Form 10-K addresses many of the commenters concerns about the discrepancy in the number of stockholders of record reported in the Issuer’s Form 10-K for the fiscal year ended January 31, 2003. Further, the Commission has considered comments requesting it to investigate or order a hearing regarding the discrepancy in the Issuer’s Form 10-K and delisting application on the number of shareholders of record. We believe that the Issuer’s amended Form 10-K, in addition to the Issuer’s delisting application, adequately addresses the concerns of the commenters and provides the facts related to the reasons for filing the application to withdraw from listing and registration on the Amex.
The Commission notes that the Issuer has listed its Security on the Amex, but the Issuer is not obligated to remain listed on the Amex, or any other national securities exchange. The Commission believes that stockholders of the Issuer’s Security and other interested parties have had adequate time to sell their security or take any other such action as permitted under state and federal law. Further, as noted above, the Issuer has stated in its press release that it anticipates that its Security will be quoted on the Pink Sheets.16 Finally, the Commission notes that the Issuer’s application relates solely to the withdrawal of the Security from listing on the Amex and from registration under Section 12(b) of the Act,17 and shall not affect its obligation to be registered under Section 12(g) of the Act.18
The Commission, having considered the facts stated in the application and having due regard for the public interest and protection of investors, orders that the application be, and it hereby is, granted, effective at the opening of business on August 23, 2004.
For the Commission, by the Division of Market Regulation, pursuant to delegated authority. 19
Jonathan G. Katz
1 15 U.S.C. 78l(d).
2 17 CFR 240.12d2-2(d).
3 See Securities Exchange Act Release No. 49336 (February 27, 2004), 69 FR 10274.
4 See letters from John H. Rosenthal, dated May 27, 2004; Samuel J. Yake, dated May 22, 2004 and March 8, 2004; Sarah L. Yake dated May 22, 2004 and April 22, 2004; Joseph Livezey, dated May 14, 2004; Timothy A. Seasholtz, dated April 28, 2004; David Wright, President, Henry Partners L.P., dated March 23, 2004 and March 15, 2004; David E. Tobin, Vice President, PAR Capital Management, dated March 22, 2004; James E. Mitchell, General Partner, Mitchell Partners, L.P., dated March 22, 2004; Nelson Obus, Managing Member, Wynnefield Capital, Inc., dated March 19, 2004; David A. Bove, dated March 17, 2004; and William R. Buerger, dated March 13, 2004, to Jonathan G. Katz, Secretary, Commission.
5 See letter from William C. Killgallon, Chairman and Chief Executive Officer, The Ohio Art Company, to Division of Market Regulation, Commission, dated April 30, 2004 (“Response Letter”).
6 The Board resolution is attached to the Issuer’s delisting application as Exhibit A.
7 The press release is attached to the Issuer’s delisting application as Exhibit B.
10 But see 17 CFR 240.12g-4(a)(1), which provides, among other things, that termination of registration of a class of securities under Section 12(g) of the Act shall take effect in 90 days, or such shorter period as the Commission may determine, after the issuer certifies to the Commission on Form 15 that such class of securities is held of record by less than 300 persons.
11 See letters from David Wright, Henry Partners, dated March 23, 2004; David Tobin, PAR Capital Management, dated March 22, 2004; and James E. Mitchell, General Partner, Mitchell Partners, L.P., dated March 22, 2004, supra note 4.
13 See Form 10-K, Item 5 (requesting information on “Market for Registrant’s Common Equity and Related Shareholder Matters”); see also Rule 12g5-1 under the Act, 17 CFR 240.12g5-1 (providing a definition of securities “held of record”).
15 See Form 10-K/A, The Ohio Art Company, File No. 001-07162, dated July 23, 2004.
17 15 U.S.C. 781(b).
18 15 U.S.C. 781(g).
19 17 CFR 200.30-3(a)(1).