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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 Mailto Link Identification Number: 366
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