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Frequently Asked Questions
  If a company has fallen below the stockholders' equity, total assets and total revenue, net income from continuing operations, publicly held shares or shareholders requirement, will it be delisted?  
Identification Number 364
Not immediately. Based on the company's periodic public filings, Nasdaq will determine if it is still in compliance with these requirements. If Nasdaq determines that the company no longer complies with a particular requirement, then Nasdaq will issue a letter requesting that the company submit a plan of compliance.  In general, these plans are due within 45 calendar days, although Staff, in its discretion, may shorten this period. Upon review of the company's plan of compliance, Nasdaq will determine whether:
    • The company has regained compliance;
    • An extension of time is warranted; or
    • To initiate delisting proceedings.
In each circumstance, Nasdaq will notify the company of the decision in writing. For further information, please see Listing Rule 5810 regarding Staff review of deficiencies. If Nasdaq determines to delist the securities, the company may appeal at that time. See Hearings FAQs for additional information.
 
Publication Date*: 7/31/2012 Identification Number: 364 Mailto Link
Frequently Asked Questions
  A company has been cited for a deficiency in shareholders' equity, and would like to sell additional shares to regain compliance, but is unable to do so given existing market conditions. Can the company gain additional time to regain compliance?  
Identification Number 365
Nasdaq Staff and Hearings Panels are aware of the difficulties that market conditions present for companies attempting to raise additional capital. If a company submits a plan of compliance that involves raising capital, and despite taking all reasonable steps, is unable to execute the plan in the near term due to market conditions, then Nasdaq Staff and/or the Hearings Panel will take that into account in determining whether to grant the company an exception to the full extent of its discretion.  
 
Publication Date*: 7/31/2012 Identification Number: 365 Mailto Link
Frequently Asked Questions
  A company has been cited for failing to meet the stockholders' equity requirement.  What factors should the company consider when preparing the plan of compliance?  
Identification Number 366
In the submission to the Listing Qualifications Staff, please note the following suggested guidelines:
    • The submission should be definitive, concise and directly address the company's plan to regain compliance in the near term and maintain compliance over the long term.
    • Nasdaq's Listing Rules allow Staff to provide a company up to 180 calendar days from the date of the deficiency notice to regain compliance. The company should take this into consideration when drafting its plan of compliance. In addition, the plan should discuss the company's ability to sustain compliance for the next six to twelve months. Note that the 180 day extension is not automatic. Extensions of time may vary and are not granted in all cases.
    • If the company's plan of compliance includes a private placement involving common stock, or any securities convertible or exercisable into common stock, a merger, a debt conversion, or other similar transactions, please ensure that the proposed action complies with Nasdaq's corporate governance requirements, particularly the shareholder approval rules, and other provisions of the Listing Rules. If necessary, the company should file the Listing of Additional Shares Notification Form. Please contact your Listing Qualifications analyst for further guidance on these matters.
    • If a transaction is being contemplated to remedy the deficiency, please include a balance sheet and income statement evidencing the pro forma effect of the transaction. The financial statements should be based on historical financial information, not more than 45 days old. Please show three columns of data - historical, all adjustments, and the pro-forma totals.
    • The submission should include projections, if available, for the next 12 months. Please include balance sheet and income projections. Clearly state all assumptions being made.
    • Provide copies of all definitive or draft agreements or contractual arrangements for private placements, mergers, or other financial arrangements. Please include a list of investors for private placements. The company should file all applicable Listing of Additional Shares Notifications electronically through the Listing Center.
    • Plans relying on future projected revenues to comply with the equity requirement are generally not accepted unless the company has definitive contracts and the revenue will be received in the near term.
    • Nasdaq will consider the company's net losses when reviewing a proposed equity-raising transaction to determine whether the plan is sufficient to regain and sustain compliance with the equity requirement.
Please contact your Listing Qualifications Analyst at +1 301 978 8008 for further assistance.
 
Publication Date*: 7/31/2012 Identification Number: 366 Mailto Link
Frequently Asked Questions
  For companies that have been cited for failure to meet the stockholders' equity requirement, what are some examples of plans of compliance that have been accepted by Nasdaq?  
Identification Number 367
A company listed on the Nasdaq Capital Market provided a definitive agreement for an asset sale, which would raise $50 million in the near term. Based on a pro forma balance sheet, after accounting for projected net losses, the company would have equity of more than $15 million immediately after the transaction and more than $10 million at the end of the fiscal year, in excess of the $2.5 million requirement.
 
A company listed on the Nasdaq Global Market announced its intention to complete a public offering in the near term and provided a press release announcing the pricing of an underwritten firm commitment public offering. Net proceeds of the offering were expected to be approximately $40 million. Subsequently, the company filed a pro forma balance sheet, adjusted to reflect the public offering, showing stockholders equity of approximately $45 million, in excess of the $10 million requirement.
 
A company listed on the Nasdaq Global Market stated that certain holders of the company's warrants had exercised 500,000 warrants for proceeds of $12 million. Staff had concerns with the company's ability to sustain compliance based on the company's history of losses. In that regard, the company provided definitive agreements from the warrant holders relating to the exercise of additional warrants, which when exercised, would result in proceeds to the company of $5,000,000. Based on the exercise, the company stated that stockholders equity had increased to approximately $22 million, on a pro forma basis, in excess of the $10 million requirement.
 
A company listed on the Nasdaq Global Market announced the acquisition of a target company shortly after receiving notice from Nasdaq that it was not in compliance with the $10 million minimum equity requirement. Therefore, the company believed that it had already achieved compliance with the minimum equity standard and anticipated that it would be able to file audited financial statements and pro forma financial information to reflect compliance within two weeks
 
Publication Date*: 7/31/2012 Identification Number: 367 Mailto Link
Frequently Asked Questions
  For companies that have been cited for failure to meet the stockholders' equity requirement, what is an example of a plan of compliance that has not been accepted by Nasdaq?  
Identification Number 368
A company listed on the Nasdaq Global Market stated that it was pursuing a potential convertible note offering of between $20 million and $30 million to be completed before the end of the year, followed by an equity offering of up to $30 million. The company was not able to complete the convertible note offering in the near term and did not provide definitive documentation, for either transaction.
 
Publication Date*: 7/31/2012 Identification Number: 368 Mailto Link
material_search_footer*The Publication Date reflects the date of first inclusion in the Reference Library, which was launched on July 31, 2012, or a subsequent update to the material. Material may have been previously available on a different Nasdaq web site.
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