| On May 10, 2005, the National Association of Securities | | | | OTCBB for a period of at least one year, and must file |
| Dealers, Inc., now known as the Financial Industry | | | | at least one Form 10-K and three Forms 10-Qs. If at |
| Regulatory Authority ("FINRA"), through its subsidiary, | | | | any time prior to being relisted, the issuer is late in filing |
| the Nasdaq Stock Market, Inc. ("Nasdaq"), filed with the | | | | a periodic report, the one year period restarts. |
| Securities and Exchange Commission (the | | | | If an issuer is late with more than one filing in a row, |
| "Commission") a proposed rule change to limit the | | | | the sequence of late filings will only count as one |
| eligibility for quotation on the OTCBB of the securities | | | | "strike" until such time as the issuer gets back current |
| of an issuer that is repeatedly late in filing required | | | | in its filings. Because of this, there is some strategy in |
| periodic reports. This is known as the "three-strikes | | | | how you get back current once you have become |
| rule." | | | | delinquent in a filing. For example, if an issuer has |
| On November 16, 2005, the Commission approved the | | | | missed a filing and has had an "e" appended to their |
| change to Rule 6530 (the "Eligibility Rule"). | | | | stock symbol, there will be a temptation to file the |
| The rule change makes those OTCBB issuers that | | | | delinquent filing as soon as possible to get the "e" |
| are delinquent three times in a 24-month period, and | | | | removed. However, if it is likely that the next filing will |
| those OTCBB issuers that are removed for failure to | | | | also be late, the issuer might consider waiting and doing |
| file two times in a 24-month period, ineligible for | | | | both filings at the same time in order to incur only one |
| quotation on the OTCBB for a period of one year | | | | "strike" under this new rule amendment. This strategy |
| following their removal. Reports filed within the | | | | has to be weighed against the possibility that, after the |
| extension period permitted by SEC Rule 12b-25 are | | | | "e" period, the issuer will need to submit a new Form |
| considered timely filed. | | | | 211 to move back up to the OTCBB from the Pink |
| Historically, NASDAQ has reported that approximately | | | | Sheets. |
| 80% of issuers achieve compliance within the grace | | | | NASDAQ implemented the proposed rule in |
| period, but that 20% of issuers fail to comply and are | | | | connection with filings for periods ending on or after |
| eventually de-listed. | | | | October 1, 2005. Delinquent filings prior to that period do |
| Once removed, the issuer cannot re-list on the | | | | not count towards the new rule. |