What a difference a year makes, huh?

One year ago, delirious Internet companies were talking about secondary offerings, next- stage financing and stock-for-stock acquisitions.

Now, with many Internet stocks down more than 95% from their all-time highs, a number of companies are worrying about their shares being delisted altogether from NASDAQ.

This year alone, 137 companies on NASDAQ’s major league roster have been sent down to the minor leagues, usually to the Over the Counter Bulletin Board (OTCBB) or Pink Sheets.

This comes on top of the 440 companies that were delisted in 1999 and 596 in 1998.

And many more could say bye-bye to NASDAQ over the next six months. Although a few years ago the typical delisted company cut across a large number of industries, these days many of the companies on the verge of being delisted are the same hotshot Internet and tech companies that powered the NASDAQ Composite for the past few years, culminating with an 86% return in 1999.

What can lead companies to be delisted? One obvious reason: They are taken over.

Otherwise, companies can be removed from NASDAQ when they cease to meet the market’s continued listing requirements.

It is widely thought that a company can be delisted if it’s stock merely falls below $5 for a specific period of time. This is not totally true.

The only way a company can be kicked off for trading below $5 is if it doesn’t meet one of the other minimum standards.

For instance, it may not have met Corporate Governance demands, failing to submit timely and accurate financial reports.

Companies could also be delisted if their stock falls below $5 and they don’t have at least two market makers or at least 400 round lot shareholders (owning at least 100 shares).

There are also minimum thresholds for net tangible assets, total revenue and market value.

Currently, more than 120 companies are trading below $5, many of them Internet companies.

However, another 23 pure-play Internet companies are currently trading below $1 per share, according to Internet.com. They include Vitaminshoppe.com, Theglobe.com, Peapod Inc., PlanetRx.com and E-Stamp Corp.

And keep in mind that once a company’s stock price falls below a buck, the situation becomes much more dire. This is because it can be delisted solely based on its stock price.

Here’s how it works: If a company’s stock trades below $1 for 30 consecutive trading days or six weeks, NASDAQ will issue a deficiency notice. Of course, if during that 30-day period the stock climbs above a buck and then slips below it again, the clock is reset.

In any case, the deficiency notice warns the company that it has 90 calendar days to bring its price up to $1 for 10 consecutive days.

The company may accomplish this through various actions such as a merger, acquisition or a significant transaction or order with another company. If the company is unsuccessful, it could mean the end of the game… delisting.

A bit harsh? Not really. According to Scott Peterson, Director of NASDAQ Media Relations, Nasdaq is fair to both the players (companies trading) as well as the fans (investors). “We go the extra mile for the company and try to work on them to keep their listing standards; we recognize that they value being listed on Nasdaq — but we believe it is also an investor protection issue — if they can’t meet the requirements… we will delist them.”

At the end of the 90 day period (if NASDAQ’s standards have not been met), the company has the option of requesting a hearing – oral or written — before a panel of two securities experts (a securities lawyer or accountant) of their choice. The company typically will then appeal to the panel and explain its plan of how it will get its share price over its bid price, thus buying more time.

Of course, there are things companies can do to lift their stock price above a buck without improving their finances. For example, PlanetRx.com recently announced plans to institute a 1-for-8 reverse stock split. “A desperate move,” says Morning Star stock analyst, David Kathman. “If the transaction goes through, PlanetRx stock would trade at $3.20 a share but will have one-eighth the number of shares; the price would technically be meeting the requirements but realistically, it wouldn’t change how bad the company is doing. I’m not so sure the SEC will buy the transaction proposal.”

In any case, if by some chance a potentially delisted company’s appeal is approved, an “exception to the rule” will occur and the company will be allotted a designated amount of time to pick up its price.

If the appeal is denied, then what is referred to as “two bites of the apple” occurs: The company can request a second hearing panel with the hope of being granted more time to bring up its price. If the second panel does not believe that the company’s plan has merit, well then, strike three, its’ out!

The entire delisting process can take up to six and one half months total.

Ousted to the minors.

Once a company is delisted, it has the option of trading on another exchange with no listing requirements, such as the OTCBB or Pink Sheets. While this option enables the company to continue trading, its chances for returning to NASDAQ are small.

Why? The company would have to bring its stock price up to $5 to get back on, whereas when it was on NASDAQ, it only needed to maintain a continued bid price of $1 to maintain its listing.

So, what exactly is so bad about being delisted? “Without trading on NASDAQ,” explains Kathman, “the company is not nearly as liquid; most investors avoid OTC stocks, and with good reason. They’re not as stable, which makes it virtually impossible for the company to pick itself up.”