Companies that qualify as smaller reporting companies are not subject to S-X 5-04 or 4-08(e), even when the disclosure thresholds are triggered. However, when the restricted net assets of a smaller reporting company's consolidated subsidiaries are a significant proportion of consolidated net assets as of the most recently completed fiscal year end, the amount and nature of those restrictions may be important to understanding the smaller reporting company's liquidity and its ability to pay interest and principal on debt or dividends. In these circumstances, the smaller reporting company should fully discuss, in MD&A, the nature of the restrictions on its subsidiaries net assets, the amount of those net assets, and the potential impact on the company's liquidity (see S-K 303(a) and Instruction 5). Disclosures within MD&A similar to the parent company condensed financial information specified by S-X 5-04 and 4-08(e) may be necessary to facilitate this discussion.

* * * * *