Eligibility Requirements for OTCQX

Posted by on August 16, 2016

Over the next few Lawcasts, I will give a high level summary of each of the eligibility requirements related to OTCQX

  • Have $2 million in total assets as of the most recent annual or quarter end;
  • As of the most recent fiscal year-end, have at least one of the following: (i) $2 million in revenues; (ii) $1 million in net tangible assets; (iii) $500,000 in net income; or (iv) $5 million in market value of publicly traded securities;
  • Have a market capitalization of at least $10 million;
  • Meet one of the penny stock exemptions under Rule 3a51-1 of the Exchange Act – that is, the company cannot be a penny stock;
  • Not be a blank check or shell company as defined by the Securities Act;
  • Not be in bankruptcy or reorganization proceedings;
  • Be in good standing in its state of incorporation and in each state in which it conducts business;
  • Have a minimum of 50 beneficial shareholders owning at least one round lot (100 shares) each;
  • Be quoted by at least one market maker on the OTC Link;
  • Have a minimum bid price of $0.25 per share for its common stock as of the close of business on each of the 30 consecutive calendar days immediately preceding the company’s application for OTCQX. If (i) there has been no prior public market for the company’s securities in the U.S. and (ii) FINRA has approved a Form 211, then the company may apply to OTC Markets for an exemption from the minimum bid price requirements, which exemption is at the sole discretion of OTC Markets.
  • Have GAAP compliant (i) audited balance sheets as of the end of each of the two most recent fiscal years, or as of a date within 135 days if the company has been in existence for less than two fiscal years, and audited statements of income, cash flows and changes in stockholders’ equity for each of the two most recent fiscal years i (or such shorter period as the company has been in existence), and must include all going concern disclosures including plans for mitigation; and GAAP compliant (ii) unaudited interim financial reports, including a balance sheet as of the end of the company’s most recent fiscal quarter, and income statements, statements of changes in stockholders’ equity and statements of cash flows;
  • Be included in a Recognized Securities Manual or be subject to the reporting requirements of the Exchange Act; and
  • Have an OTCQX Advisor – previously called a designated advisor for disclosure or DAD