(Last updated: 3/31/2010)
1170.1 Predecessor Entity
The definition of "predecessor" in Regulation C, Rule 405 is very broad. For purposes of financial statements, designation of an acquired business as a predecessor is generally not required except where a registrant succeeds to substantially all of the business (or a separately identifiable line of business) of another entity (or group of entities) and the registrant's own operations before the succession appear insignificant relative to the operations assumed or acquired.
1170.2 Financial Statement Dates and Periods
Financial information of a registrant's predecessor is required for all periods before the succession, with no lapse in audited periods or omission of other information required about the registrant. Financial statements for the registrant and its predecessor should collectively be 'as of' all dates and 'for' all periods required by S-X Articles 3 and 10 (or Article 8 for SRC). Any interim period of the predecessor before its acquisition by the registrant should be audited when audited financial statements for the period after the acquisition are presented. Schedules required by S-X Article 12 are required for predecessor entities.
  1. After an acquisition, financial statements of the predecessor should be included in Forms 10-K and 10-Q for the required comparative periods before the acquisition, in addition to those of the registrant.
  2. After the acquisition of a business by a special-purpose acquisition company registrant (“SPAC”), the financial statements of the registrant for periods prior to the acquisition may not be required to be included in Forms 10-K and 10-Q once the financial statements include the period in which the acquisition or recapitalization was consummated. Generally, these financial statements would not be required in cases in which the registrant had only nominal statement of comprehensive income activity. (Last updated: 10/20/2014)
  3. S-X 3-01 and 8-02 do not specifically refer to balance sheets of predecessors. When only one registrant balance sheet would otherwise be included in the filing, a registrant, including a Smaller Reporting Company, must file an audited predecessor balance sheet as of the end of its last fiscal year. (Last updated: 6/30/2010)

1170.3 Partial Year Financial Statements
When predecessor audited financial statements are provided for part of a fiscal year and successor audited financial statements are provided for the rest of the year, the predecessor is not required to provide comparative financial statements for the prior year partial period.
Example: A shell company formed on January 15, 2021 acquires an operating company, determined to be its predecessor, on June 25, 2021. The Newco subsequently files an IPO registration statement in the third quarter of 2022. The IPO registration statement must include audited financial statements of the predecessor for the two years ended December 31, 2020 and the period from January 1, 2021 to June 25, 2021. The Newco registrant must provide audited financial statements for the period from the inception date through December 31, 2021 (there were no operations from inception date to acquisition date) and unaudited interim financial statements for the periods ending June 30, 2021 and June 30, 2022. Financial statements of the predecessor for the period January 1, 2020 to June 25, 2020 are not required.
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