Atari Walks Delisting Tightrope

The company doesn't meet audit committee requirments.
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A shakeup of

Atari's

(ATAR)

board of directors has left the company in danger of having its stock delisted from the

Nasdaq

national market.

In a letter on Tuesday, Nasdaq warned Atari that didn't comply with stock market listing requirements, since it currently has just two board members on its audit committee, neither of whom qualifies as a financial expert, Atari said in a regulatory filing Wednesday. The company has until Aug. 17 to submit a plan for coming into compliance, Atari said."Atari will submit the requested compliance plan to the Nasdaq on or before Aug. 17 and will promptly respond to and address any questions or concerns communicated by the Nasdaq regarding such plan," the company said in the filing.

The warning from Nasdaq follows recent turmoil on the company's board. In the last two weeks, both Jim Caparro, the company's former CEO, and Thomas Mithcell, a former partner with Ernst & Young who had served on Atari's board since 2001, resigned from the board. The company has since announced that it will shrink its board to seven members from nine in response to the resignations.

The company has had just two board members on its audit committee since October, when Caparro resigned from the committee not long before

becoming Atari's CEO. The company moved last week to replace him on the committee with David Ward, who has served on Atari's board since 2002. But Mitchell's departure means that the committee is again back to just two boardmembers and is now without its financial expert.

The board shakeup is only the latest in a string of turmoil at Atari. Caparro, for instance,

resigned as CEO in June after less than seven months at the helm.

Caparro's resignation comes amid a planned reorganization at the company that has seen it shutter three studios this year and follows a broader management shakeup at the company that involved replacing its CFO among other top executives. Meanwhile, the company has

posted disappointing results on declining sales in recent quarters.

In a letter announcing his resignation, which Atari included in a recent filing, Mitchell was particularly scathing of the company's lack of progress in turning itself around. Despite plans to untangle Atari from corporate parent

Infogrames

, the companies are still intertwined, a minority of Atari directors are independent and the company is involved in "many" related-party transactions, he said.

"For the past two years, the companies have attempted to simplify the corporate structure and raise additional capital without success," Mitchell wrote. "Under the above circumstances, I no longer wish to serve on the board of Atari and, hereby, tender my resignation ... effective immediately."

Atari's stock fell in following the filing. In after-hours trading, the stock was off 5 cents, or 2%, to $2.45. In the earlier regular session, the company's stock traded off 4 cents, or 1.6%, to $2.50.