Question: In annual reports for fiscal years ending on or after December 15, 2007 but before December 15, 2009, non-accelerated filers are required to provide management's report on internal control over financial reporting pursuant to Item 308T of Regulation S-K. The report is deemed not to be "filed" for purposes of Section 18 of the Exchange Act, unless the company specifically states that the report is to be considered "filed" under the Exchange Act or incorporates it by reference into a filing under the Securities Act or the Exchange Act. Does a non-accelerated filer's failure to provide management's report in its Form 10-K under Item 308T(a) affect its form eligibility or the ability to use Rule 144?

Answer: It is the Division's view that the failure to provide this management report renders the annual report materially deficient. As a result, if management did not complete the evaluation and provide the report as required by Item 308T(a), the company would not be timely or current in its Exchange Act reporting. This would result in the company not being eligible to file new Form S-3 or Form S-8 registration statements and the loss of the availability of Rule 144. Because the filing of the Form 10-K constitutes the Section 10(a)(3) update for any effective Forms S-3 or S-8, the company also would be required to suspend any sales under already effective registration statements.

However, if the company subsequently amends its Form 10-K to provide management's report on whether or not internal control is effective, the company can file new Forms S-8 and resume making sales under already effective Forms S-8, and shareholders can avail themselves of Rule 144 (assuming all other conditions to use of the form or rule are satisfied). This would be the case regardless of whether management reached an effective or ineffective conclusion about its internal control. Although amending the Form 10-K to provide management's report may result in the company becoming current, it would remain untimely and would not be eligible to file new Forms S-3. [July 3, 2008]

Question: An issuer otherwise eligible to use Form S-3 failed to file a current report on Form 8-K fourteen months before the proposed filing of the Form S-3. Is Form S-3 available to the registrant?

Answer: Yes. Form S-3 is available because the condition to have filed all required Exchange Act reports and on a timely basis applies only to reports required to be filed in the preceding twelve months. [Feb. 27, 2009]

Question: General Instruction I.A.3 to Form S-3 requires that the registrant have timely filed all reports required to be filed during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement. What reports are covered by this Instruction?

Answer: In determining eligibility for use of Form S-3, the requirement that the registrant has filed in a timely manner all reports required to be filed during the past twelve calendar months refers only to Section 13(a) or 15(d) reports and Section 14(a) and 14(c) materials. [Feb. 27, 2009]

Question: May a domestic company that succeeds to the reporting obligations of a foreign private issuer, and is otherwise eligible to file a Form S-3, incorporate by reference the predecessor's annual report on Form 20-F to satisfy the disclosure requirements of Form S-3?

Answer: No. Either the issuer would have to include audited financial statements and other disclosures satisfying the requirements of Form S-3 or it could wait until it has filed its first annual report on Form 10-K to incorporate by reference the Form 10-K into the Form S-3. [Feb. 27, 2009]

Question: General Instruction I.A.3 of Form S-3 requires that the registrant have filed all material required to be filed for a period of at least twelve calendar months immediately preceding the filing of the registration statement. The instruction also requires that the registrant have filed in a timely manner all reports required to be filed during the twelve calendar months and any portion of a month immediately preceding the filing of the registration statement. How is calendar month calculated?

Answer: For purposes of these eligibility requirements, a calendar month begins on the first day of the month and ends on the last day of that month. Hence, if a registrant were not timely on a Form 10-Q due on September 15, 2008, but was timely thereafter, it would first be eligible to use Form S-3 on October 1, 2009. [Feb. 27, 2009]

Question: A company failed to furnish an Item 2.02 Form 8-K. As a result, does the company lose its eligibility to file a registration statement on Form S-3?

Answer: General Instruction I.A.3(b) to Form S-3 requires that all reports required to be filed with the Commission during the preceding 12 months have been filed. Because an Item 2.02 Form 8-K is furnished, rather than filed, this failure to furnish does not adversely affect the company's eligibility to use Form S-3. [Feb. 27, 2009]

Question: What does the reference to "material" in General Instruction I.A.5 of Form S-3 apply to?

Answer: The reference to materiality applies to defaults on indebtedness and on long-term lease rentals. It does not apply to the failure to declare dividends or make sinking fund installments on preferred stock. [Feb. 27, 2009]

Question: Is the omission to declare a dividend on non-cumulative preferred stock a payment failure disqualifying an issuer from using Form S-3?

Answer: No, because there is no liability to pay the dividend that arises under the terms of the non-cumulative preferred. This omission cannot be equated to a payment default on a debt instrument or capital lease. A declared but unpaid dividend on preferred stock, however, would disqualify the issuer from using Form S-3, as would the existence of accrued and unpaid dividends on cumulative preferred stock. [Feb. 27, 2009]

Question: Does a default on a covenant not involving an "installment on indebtedness" disqualify a company from using Form S-3?

Answer: No. A default will be disqualifying only if it involves failure to pay principal or interest on indebtedness and is material to the financial position of the registrant and its subsidiaries, taken as a whole. [Feb. 27, 2009]

Question: In the event an installment payment on indebtedness has been missed, but the terms of the debt do not define a missed payment as a default until the creditors take some action, can an issuer satisfy General Instruction I.A.5 of Form S-3?

Answer: Yes, if the company makes a determination that there is no default as a legal matter. [Feb. 27, 2009]

Question: An issuer committed a material default on indebtedness but the holders of the securities subsequently waived the default. Can an issuer satisfy General Instruction I.A.5 of Form S-3?

Answer: No. Regardless of the fact that a disqualifying default is either cured or waived after it occurs, the form may not be used between the date of the default and the audit at the end of the fiscal year in which such material default occurred. [Feb. 27, 2009]

Question: In the event a prospective default never occurs because the lenders have waived payment in advance of the due date, can an issuer satisfy General Instruction I.A.5 of Form S-3?

Answer: Yes. [Feb. 27, 2009]

Question: From which date should an issuer measure the twelve-month period in General Instruction I.A.3 to Form S-3?

Answer: The twelve-month period for which a registrant must have been subject to the requirements of Section 12 or 15(d) of the Exchange Act, and filed certain required materials under Section 13, 14 or 15(d) of the Exchange Act, relates to the effective date of the registrant's Securities Act or Exchange Act registration statement that gave rise to the filing obligation. Thus, the date on which the registration statement was initially filed is not taken into consideration in computing the twelve-month period. [Feb. 27, 2009]

Question: Would an issuer that timely filed its Exchange Act reports during the past twelve months, but was not required to file reports under the Exchange Act for a portion of that period, be able to satisfy Instruction I.A.3 of Form S-3?

Answer: In order to be eligible to use Form S-3, an issuer must have been subject to the requirements of Exchange Act Section 12 or 15(d) for a period of at least twelve months. An issuer that timely filed its Exchange Act reports during the past twelve months, but was not subject to Section 12 or 15(d) for a portion of that period (and therefore was reporting on a voluntary basis during that portion), would be eligible to use Form S-3 only under the conditions specified in the Lamar Advertising Co. no-action letter (Nov. 18, 1996) issued by the Division. [Aug. 14, 2009]

Question: If a company defaults on indebtedness, which default is material to the company as a whole, or fails to pay a dividend on preferred stock, can the company satisfy the eligibility requirement in Instruction I.A.5 of Form S-3 in the following fiscal year even if the default has not been cured, or the dividends have not been paid?

Answer: Yes, provided that the company has filed a Form 10-K including audited financial statements covering the period in which the material event of default or failure to pay preferred dividends occurred. If, after the end of the fiscal year, the company has a new material event of default or a new failure to pay dividends on preferred stock, then the company would not be eligible to use Form S-3 until the filing of its next Form 10-K. See Securities Act Release No. 6331 (Aug. 6, 1981). [June 4, 2010]

Question: If a company declares bankruptcy and subsequently fails to make interest or principal payments on indebtedness as required pursuant to the terms of the indebtedness, can the company nonetheless satisfy the eligibility requirement in Instruction I.A.5 of Form S-3 since the filing of bankruptcy results in an automatic stay of creditors' rights with respect to the company's indebtedness?

Answer: No. [June 4, 2010]

Question: Following the merger of a private operating company or companies with or into a reporting shell company (for example, a special purpose acquisition company), may the resulting combined entity rely on the reporting shell company’s pre-combination reporting history to satisfy the eligibility requirements of Form S-3 during the 12 calendar months following the business combination?

Answer: If the registrant is a new entity following the business combination transaction with a shell company, the registrant would need 12 calendar months of Exchange Act reporting history following the business combination transaction in order to satisfy General Instruction I.A.3 before Form S-3 would become available. If the registrant is a “successor registrant,” General Instruction I.A.6(a) would not be available because the succession was not primarily for the purpose of changing the state of incorporation of the predecessor or forming a holding company. General Instruction I.A.6(b) also would not be available because the private operating company or companies would not have met the registrant requirements to use Form S-3 prior to the succession. Where the registrant is not a new entity or a “successor registrant,” the combined entity would have less than 12 calendar months of post-combination Exchange Act reporting history. Form S-3 is premised on the widespread dissemination to the marketplace of an issuer’s Exchange Act reports over at least a 12-month period. Accordingly, in situations where the combined entity lacks a 12-month history of Exchange Act reporting, the staff is unlikely to be able to accelerate effectiveness under Section 8(a) of the Securities Act, which requires the staff, among other things, to give “due regard to the adequacy of the information respecting the issuer theretofore available to the public,…and to the public interest and the protection of investors.” [September 21, 2020]