American Apparel, Inc. (AMEX: APP) was recently called out by 24/7 Wall St. as a brand which may disappear in 2012 in a large brand “deathwatch” piece in recent days.  Our concern is not alone, and we noted “The once-hip retailer reached the brink of bankruptcy earlier this year.”  This brand may be closer to disappearing than ever, particularly as far as its stock is concerned.

American Apparel announced right after the market close that it has received a letter from the NYSE Amex LLC related to the composition of the company’s audit committee and board of directors.

The letter shows that the company is not in compliance requirements that the Audit Committee consist of at least three members.  It also noted that the board of directors has “a structure which is not in compliance with Section 802(d) of the Company Guide, which the Exchange interprets as requiring that classes of a classified board be of approximately equal size and that a majority of directors be elected every two years.”

The company noted that resignations of certain directors as previously disclosed, its audit committee currently consists of two members instead of three members.  That also has its board of directors consisting of only three Class A directors, one Class B director, and two Class C directors.  This leaves two Class B vacancies reserved for the designees of Lion/Hollywood LLC and one Class C vacancy.

This letter gives American Apparel time either to its next annual meeting of stockholders or July 1, 2012 to regain compliance with listing standards.

American Apparel did announce that it intends to fill the vacancy on the Audit Committee and that it plans to realign its board of directors to fall within listing standards before the first date.  Our question is simple… CAN American Apparel find those independent directors?

This company is far from being without risk.  The company has had enough trouble and bad press that getting able-bodied members might not be as easy as it thinks.

Shares closed up almost 5% today at $1.13 and the 52-week trading range is $0.66 to $1.90.

JON C. OGG

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