[
Editor’s note: The guidance in this section is intended to be applied when the acquirer is not a shell company or special purpose acquisition company. Additional analysis would be required in those situations. See also
SEC 7050 for information relating to reverse mergers.]
[
Editor's note: See
SEC FRM 2200 for guidance regarding financial statements of target companies in
Form S-4.]
Item 17(b) of
Form S-4 provides the general disclosure requirements applicable to a non-reporting target. Item 17(b)(7) of
Form S-4 sets forth the financial statement requirements for a non-reporting target company.
If the target is a non-reporting company and either (i) the registrant’s security holders are voting or (ii) the transaction is a roll-up transaction (as described in
S-K 901), then the non-reporting target company's annual financial statements should be the same as those that would be required in an annual report sent to security holders under Exchange Act Rules 14a-3(b)(1) and (b)(2), if an annual report was required. See
SEC FRM 2200.4.
If the target is a non-reporting company and (i) the registrant's security holders are
not voting
and (ii) the transaction is
not a roll-up transaction (as described in
S-K 901), then the non-reporting target company's financial statement requirements are determined based on its significance to the registrant and whether the
Form S‑4 will be used for resales by persons considered underwriters under
Securities Act Rule 145(c):
- If (i) the non-reporting target company is significant to the registrant above the 20% level (as determined under
S-X 3-05 or
8-04, as applicable) and (ii) the
Form S-4 is
not to be used for resales by persons considered underwriters under
Securities Act Rule 145(c), then the target company's financial statements (prepared in accordance with GAAP) for the latest fiscal year and comparative year-to-date interim financial information as recent as would have been filed on
Form 10-Q had the target been subject to the Exchange Act are required (see
SEC FRM 2200.5). In addition, if the non-reporting target company provided its security holders with financial statements prepared in conformity with GAAP for either or both of the two fiscal years before the latest fiscal year, then those financial statements must be provided as well. See Item 17(b)(7)(i). See
SEC 2121.906.
- If (i) the non-reporting target company is significant to the registrant above the 20% level (as determined under
S-X 3-05 or
8-04, as applicable) and (ii) the
Form S-4 is to be used for resales by persons considered underwriters under
Securities Act Rule 145(c), then the target company's financial statements (prepared in accordance with GAAP) for the periods required by
S-X 3-05(b)(2) or
8-04 should be presented. See Instruction 3 to Item 17(b)(7) and
SEC FRM 2200.5. In addition, if the non-reporting target company provided its security holders with financial statements prepared in conformity with GAAP for either or both of the two fiscal years before the latest fiscal year, then those financial statements must be provided as well.
- If the non-reporting target company is significant to the registrant at or below the 20% level, then no financial information for the target company is required. See Item 17(b)(7)(ii). The registrant should, however, consider the non-reporting target when evaluating aggregate significance under
S-X 3-05 or
8-04. See
SEC FRM 2200.5 and Division of Corporation Finance: Manual of Publicly Available Telephone Interpretations, Third Supplement (July 2001) Section H. Financial Statements, Question 2.
The audit requirement for a non-reporting target company in a
Form S-4 depends on whether or not the
Form S-4 will be used for resales by persons considered underwriters under
Securities Act Rule 145(c) (without regard to whether the registrant's shareholders are voting). See
SEC FRM 2200.7.
[
Editor’s note: The auditor will consider the appropriate auditing standards (AICPA standards, PCAOB standards, or both PCAOB and AICPA standards) to be applied when performing an audit of a non-reporting target company’s financial statements included in a
Form S-4.]