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10120 Other Eligibility Issues
us SEC - Financial Reporting Manual
10120.1 Transactions Related to a Subsidiary of the Registrant - A parent may: (1) spin-off a wholly-owned subsidiary, (2) register an offer and sale of the wholly-owned subsidiary's common stock for an initial public offering, or (3) transfer a business into a newly-formed subsidiary for purposes of an initial public offering of that subsidiary's common stock. In these circumstances, the analysis to determine whether an issuer is an EGC focuses on whether the subsidiary, and not the parent, meets the requirements of an EGC. See also Section 10120.3.
10120.2 Assessing Eligibility Subsequent to a Merger Transaction - Eligibility as an EGC will vary subsequent to a merger transaction.
Example:
Example 1: Company A acquires Company B for cash or stock, in a forward acquisition. Company A is both the legal acquirer and the accounting acquirer.
Example 2: Company C undertakes a reverse merger with Company D, an operating company. Company D is presented as the predecessor in the post-transaction financial statements.
In each example, the companies' fiscal year is the calendar year; the transactions occur on September 30, 2012; and Section 10110.9 on succession does not apply.
The evaluation of Company's A's and Company's C's eligibility as an EGC post-transaction, should be considered as follows. See also Section 10120.3.
Example 1: Forward Acquisition
| Example 2: Reverse Merger
| |
Annual revenues test
| Look to Company A's revenues, which will include Company B's revenues from Oct. 1, 2012.
| Look to Company D's revenues, which will include Company C's revenues from Oct. 1, 2012.
|
Five-year anniversary test
| Look to Company A's date of first sale.
| Look to Company C's date of first sale.
|
Issued debt during previous three years test
| Look to Company A's debt issuances, which will include Company B's debt issuances from Oct., 1, 2012.
| Look to Company D's debt issuances, which will include Company C's debt issuances from Oct. 1, 2012.
|
Large accelerated filer test
| At Dec. 31, 2012, look to Company A's market value at June 30, 2012.
At Dec. 31, 2013, look to Company A's market value (which will include Company B's) at June 30, 2013.
| At Dec. 31, 2012, look to Company C's market value at June 30, 2012.
At Dec. 31, 2013, look to Company C's market value (which will include Company D's) at June 30, 2013.
|
NOTE:
The above table should be considered in conjunction with Section 10110.9.
For example, assume a shell company files its initial public offering of common equity securities on or before December 8, 2011 and thus, is not an EGC. Two years later, it undertakes a reverse merger with another company that qualifies as an EGC. Post-transaction, notwithstanding the above table, the registrant is not an EGC and may not take advantage of any scaled disclosure provisions.
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10120.3 Disallowing Emerging Growth Company Status - Based on the particular facts and circumstances, the staff may question EGC status of a company if it appears the company is engaging in a transaction for the purpose of converting a non-EGC into an EGC, or for the purpose of obtaining the benefits of EGC status indirectly when it is not entitled to do so directly.
This is a work of the U.S. Government
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