5500. The Nasdaq Capital Market

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5500. The Nasdaq Capital Market

5501. Preamble to The Nasdaq Capital Market Listing Requirements

This section contains the initial and continued listing requirements and standards for listing a Company’s Primary Equity Security on The Nasdaq Capital Market. This section also contains the initial and continued listing requirements for Rights and Warrants; Preferred and Secondary Classes of Common Stock; and Convertible Debt, Rights and Warrants on the Capital Market.

In addition to meeting the quantitative requirements in this section, a Company must meet the requirements of the Rule 5100 Series, the disclosure obligations set forth in the Rule 5200 Series, the Corporate Governance requirements set forth in the Rule 5600 Series, and pay any applicable fees in the Rule 5900 Series. A Company’s failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.

Companies that meet these requirements, but are not listed on the Nasdaq Global Market, are listed on the Nasdaq Capital Market.

Amended by SR-NASDAQ-2009-052 eff. June 16, 2009.

5505. Initial Listing of Primary Equity Securities

A Company applying to list its Primary Equity Security on the Capital Market must meet all of the requirements set forth in Rule 5505(a) and at least one of the Standards in Rule 5505(b).

(a) Initial Listing Requirements for Primary Equity Securities:

(1) (A) Minimum bid price of $4 per share; or

(B) Minimum closing price of $3 per share, if the Company meets the requirements of the Equity or Net Income Standards under Rules 5505(b)(1) or (b)(3), or of $2 per share, if the Company meets the requirements of the Market Value of Listed Securities Standard under Rule 5505(b)(2), provided that in either case the Company must also demonstrate that it has net tangible assets (i.e., total assets less intangible assets and liabilities) in excess of $2 million, if the issuer has been in continuous operation for at least three years; or net tangible assets in excess of $5 million, if the issuer has been in continuous operation for less than three years; or average revenue of at least $6 million for the last three years. A security must meet the applicable closing price requirement for at least five consecutive business days prior to approval.

For purposes of this paragraph (B), net tangible assets or average revenues must be demonstrated on the Company’s most recently filed audited financial statements filed with, and satisfying the requirements of, the Commission or Other Regulatory Authority, and which are dated less than 15 months prior to the date of listing.

(2) At least 1,000,000 Publicly Held Shares;

(3) At least 300 Round Lot Holders;

(4) At least three registered and active Market Makers;

(5) In the case of ADRs, at least 400,000 issued.

(b) Initial Listing Standards for Primary Equity Securities:

(1) Equity Standard

(A) Stockholders’ equity of at least $5 million;

(B) Market Value of Publicly Held Shares of at least $15 million; and

(C) Two year operating history.

(2) Market Value of Listed Securities Standard

(A) Market Value of Listed Securities of at least $50 million (current publicly traded Companies must meet this requirement and the price requirement for 90 consecutive trading days prior to applying for listing if qualifying to list only under the Market Value of Listed Securities Standard);

(B) Stockholders’ equity of at least $4 million; and

(C) Market Value of Publicly Held Shares of at least $15 million.

(3) Net Income Standard

(A) Net income from continuing operations of $750,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years;

(B) Stockholders’ equity of at least $4 million; and

(C) Market Value of Publicly Held Shares of at least $5 million.

Adopted March 12, 2009 (SR-NASDAQ-2009-018); amended April 18, 2012 (SR-NASDAQ-2012-002).

IM-5505. Initial Listing for Securities below $4

(a) Penny Stock Provisions. Rule 5505(a)(1)(B) provides an alternative initial listing requirement for certain companies with a minimum bid price below $4. A company that qualifies for initial listing only under this alternative could become a “penny stock” if it later fails the net tangible assets and revenue tests after listing and does not satisfy any of the other exclusions from being a penny stock contained in Rule 3a51-1 under the Act. In order to assist brokers’ and dealers’ compliance with the requirements of the Penny Stock Rules, Nasdaq will monitor companies listed under the alternative requirement and publish on its website on a daily basis a list of any company that initially listed under the alternative requirement, which no longer satisfies the net tangible assets or revenue test contained in Rule 5505(a)(1)(B), and which does not satisfy any of the other exclusions from being a penny stock contained in Rule 3a51-1 under the Act. If a company initially lists with a bid price below $4 under the alternative requirement contained in Rule 5505(a)(1)(B), but subsequently achieves a $4 closing price for at least five consecutive business days and, at the same time, satisfies all other initial listing criteria, it will no longer be considered as having listed under the alternative requirement and Nasdaq will notify the Company that it has qualified for listing under the price requirement contained in Rule 5505(a)(1)(A).

Brokers and dealers are reminded that the list published by Nasdaq is only an aid and that the Penny Stock Rules impose specific obligations on brokers and dealers with respect to transactions in penny stocks.

(b) Determination of closing price. For purposes of Rule 5505(a)(1)(B) and this IM- 5505, the closing price will be the Nasdaq Official Closing Price, if there is one, or the consolidated closing price distributed under the applicable National Market System Plan if there is no Nasdaq Official Closing Price. Nasdaq will require that a security maintain the necessary closing price for five consecutive business days, but may extend this five day period, based on any fact or circumstance, including the margin of compliance, the trading volume, the Market Maker montage, the trend of the security’s price, or information or concerns raised by other regulators concerning the trading of the security.

Adopted April 18, 2012 (SR-NASDAQ-2012-002).

5510. Initial Listing Requirements for Preferred Stock and Secondary Classes of Common Stock

(a) When the Primary Equity Security is listed on the Capital Market or is a Covered Security, a Company’s preferred stock or secondary class of common stock must meet all of the requirements in Rules (1) through (5) below in order to be listed.

(1) Minimum bid price of at least $4 per share;

(2) At least 100 Round Lot Holders;

(3) At least 200,000 Publicly Held Shares;

(4) Market Value of Publicly Held Shares of at least $3.5 million; and

(5) At least three registered and active Market Makers.

(b) In the event the Company’s Primary Equity Security is not listed on the Capital Market or is not a Covered Security, the preferred stock and/or secondary class of common stock may be listed on the Capital Market so long as it satisfies the initial listing criteria for Primary Equity Securities set forth in Rule 5505.

Adopted March 12, 2009 (SR-NASDAQ-2009-018).

5515. Initial Listing Requirements for Rights, Warrants, and Convertible Debt

The following requirements apply to a Company listing convertible debt, rights or warrants on The Nasdaq Capital Market.

(a) For initial listing, rights, warrants and put warrants (that is, instruments that grant the holder the right to sell to the issuing company a specified number of shares of the Company’s common stock, at a specified price until a specified period of time) must meet the following requirements:

(1) At least 400,000 issued;

(2) The underlying security must be listed on Nasdaq or be a Covered Security;

(3) At least three registered and active Market Makers; and

(4) In the case of warrants, at least 400 Round Lot Holders (except that this requirement will not apply to the listing of rights or warrants in connection with the initial firm commitment underwritten public offering of such warrants).

(b) For initial listing, a convertible debt security must meet the requirements in (1) through (3), and one of the conditions in (4) must be satisfied:

(1) Principal amount outstanding of at least $10 million;

(2) Current last sale information must be available in the United States with respect to the underlying security into which the bond or debenture is convertible;

(3) At least three registered and active Market Makers; and

(4)

(A) the issuer of the debt must have an equity security that is listed on Nasdaq, the American Stock Exchange or the New York Stock Exchange;

(B) an issuer whose equity security is listed on Nasdaq, the American Stock Exchange or the New York Stock Exchange, directly or indirectly owns a majority interest in, or is under common control with, the issuer of the debt security, or has guaranteed the debt security;

(C) a nationally recognized securities rating organization (an “NRSRO”) has assigned a current rating to the debt security that is no lower than an S&P Corporation “B” rating or equivalent rating by another NRSRO; or

(D) if no NRSRO has assigned a rating to the issue, an NRSRO has currently assigned: (1) an investment grade rating to an immediately senior issue; or (2) a rating that is no lower than an S&P Corporation “B” rating, or an equivalent rating by another NRSRO, to a pari passu or junior issue.

(c) In the case of Index Warrants, the requirements established in Rule 5725 for Nasdaq Global Market securities apply.

Adopted Mar. 12, 2009 (SR-NASDAQ-2009-018); amended Feb. 19, 2010 (SR-NASDAQ-2010-024).

5550. Continued Listing of Primary Equity Securities

A Company that has its Primary Equity Security listed on the Capital Market must continue to meet all of the requirements set forth in Rule 5550(a) and at least one of the Standards set forth in Rule 5550(b). Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.

(a) Continued Listing Requirements for Primary Equity Securities:

(1) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid;

(2) Minimum bid price of at least $1 per share;

(3) At least 300 Public Holders;

(4) At least 500,000 Publicly Held Shares; and

(5) Market Value of Publicly Held Shares of at least $1 million.

(b) Continued Listing Standards for Primary Equity Securities:

(1) Equity Standard: Stockholders’ equity of at least $2.5 million;

(2) Market Value of Listed Securities Standard: Market Value of Listed Securities of at least $35 million; or

(3) Net Income Standard: Net income from continuing operations of $500,000 in the most recently completed fiscal year or in two of the three most recently completed fiscal years.

Adopted March 12, 2009 (SR-NASDAQ-2009-018); amended June 16, 2009 (SR-NASDAQ-2009-052).

5555. Continued Listing Requirements for Preferred Stock and Secondary Classes of Common Stock

(a) When the Primary Equity Security is listed on the Capital Market or is a Covered Security, a Company’s preferred stock or secondary class of common stock must meet all of the requirements in (1) through (5) below in order to be listed. Failure to meet any of the continued listing requirements will be processed in accordance with the provisions set forth in the Rule 5800 Series.

(1) Minimum bid price of at least $1 per share;

(2) At least 100 Public Holders;

(3) At least 100,000 Publicly Held Shares;

(4) Market Value of Publicly Held Shares of at least $1 million; and

(5) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid.

(b) In the event the Company’s Primary Equity Security is not listed on the Capital Market or is not a Covered Security, the preferred stock and/or secondary class of common stock may be listed on the Capital Market so long as the security satisfies the continued listing criteria for Primary Equity Securities set forth in Rule 5550.

Adopted March 12, 2009 (SR-NASDAQ-2009-018).

5560. Continued Listing Requirements for Rights, Warrants, and Convertible Debt

(a) For rights, warrants, and put warrants (that is, instruments that grant the holder the right to sell to the issuing company a specified number of shares of the Company’s common stock, at a specified price until a specified period of time), the underlying security must remain listed on Nasdaq or be a Covered Security, and there must be at least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid.

(b) A convertible debt security must meet the following requirements for continued listing:

(1) A principal amount outstanding of at least $5 million;

(2) At least two registered and active Market Makers, one of which may be a Market Maker entering a stabilizing bid; and

(3) Current last sale information must be available in the United States with respect to the underlying security into which the bond or debenture is convertible.

Adopted March 12, 2009 (SR-NASDAQ-2009-018).

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