SEC Issues Final Rule Expanding the Number of Smaller Reporting Companies
January 14, 2008
On December 19, 2007, the Securities and Exchange Commission issued its final rule release adopting amendments to the Securities Act and the Securities Exchange Act expanding the number of “smaller reporting companies” that qualify for “scaled disclosure” under its disclosure and reporting requirements. Under the new rules, a “smaller reporting company” is defined as a company that has less than $75 million in public float or less than $50 million in revenue in the last fiscal year in the event such company is unable to calculate public float (i.e., it does not have common equity outstanding or no market price exists for its outstanding common equity). In both cases this calculation will be measured on the last business day of a company’s second fiscal quarter. Smaller reporting companies that qualify will be able to avail themselves of non-financial scaled disclosure requirements and financial scaled disclosure requirements.
The new rules will rescind Regulation S-B and modify Regulation S-K to provide scaled disclosure on the following non-financial items:
(i) Description of Business (Item 101)
(ii) Market Price of and Dividends on Registrant’s Common Equity and Related Stockholder Matters (Item 201)
(iii) Selected Financial Data (Item 301)
(iv) Supplementary Financial Information (Item 302)
(v) Management’s Discussion and Analysis of Financial Condition and Results of Operations (Item 303)
(vi) Quantitative and Qualitative Disclosures about Market Risk (Item 305)
(vii) Executive Compensation (Item 402)
(viii) Transactions with Related Persons, Promoters and Certain Control Persons (Item 404)
(ix) Corporate Governance (Item 407)
(x) Prospectus Summary, Risk Factors, and Ratio of Earnings to Fixed Charges (Item 503)
(xi) Use of Proceeds (Item 504)
(xii) Exhibits (Item 601)
Under the new rules, smaller reporting companies will be required to provide two years of comparative audited balance sheet data in annual financial statements instead of the one year previously required for SB filers.
Smaller reporting companies will have the option to elect to comply with the scaled financial and non-financial disclosure requirements on an à la carte or item-by-item basis.
The effective date of the amendments is February 4, 2008. Current small business issuers will have the option to file their next annual report for a fiscal year ending on or after December 15, 2007, on either Form 10-KSB or Form 10-K and can continue to file their periodic reports using Regulation S-B and the SB forms until the next annual report. Form 10-QSB will be removed effective October 31, 2008, and Form 10-KSB will be removed effective March 15, 2009. http://www.sec.gov/rules/final/2007/33-8876.pdf