[Federal Register Volume 60, Number 131 (Monday, July 10, 1995)]
[Proposed Rules]
[Pages 35656-35662]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 95-16392]



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SECURITIES AND EXCHANGE COMMISSION
17 CFR Parts 210, 228, 239 and 249

[Release Nos. 33-7189; 34-35897; International Series No. 820; File No. 
S7-19-95]
RIN 3235-AG47


Streamlining Disclosure Requirements Relating to Significant 
Business Acquisitions and Requiring Quarterly Reporting of Unregistered 
Equity Sales

AGENCY: Securities and Exchange Commission.

ACTION: Proposed rules and forms.

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SUMMARY: In connection with its review of problematic practices 
relating to Regulation S, the Commission is publishing for comment rule 
revisions that reduce the need for reliance on Regulation S by 
eliminating certain impediments to registered offerings of securities 
under the Securities Act of 1933 by streamlining requirements with 
respect to financial statements of significant acquisitions. Also, rule 
revisions are proposed that would require registrants to report on a 
quarterly basis recent sales of equity securities that have not been 
registered under the Securities Act of 1933.

DATES: Comments should be received on or before September 8, 1995.

ADDRESSES: Comment letters should refer to File number S7-19-95 and 
should be submitted in triplicate to Jonathan G. Katz, Secretary, U.S. 
Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, 
D.C. 20549. The Commission will make all comments available for public 
inspection and copying in its Public Reference Room at the same 
address.

FOR FURTHER INFORMATION CONTACT: Annemarie Tierney, (202) 942-2990, 
Office of International Corporate Finance, or Douglas Tanner, (202) 
942-2960, Office of Chief Accountant, Division of Corporation Finance, 
U.S. Securities and Exchange Commission, Washington, D.C. 20549.

SUPPLEMENTARY INFORMATION: The Commission is publishing for comment 
proposed amendments to the following rules and forms under the 
Securities Act of 1933 (the ``Securities Act'') 1 and the 
Securities Exchange Act of 1934 (the ``Exchange Act'') 2 
concerning financial statements of acquired (or to be acquired) 
businesses and quarterly reporting of unregistered equity offerings: 
Rule 3-05 of Regulation S-X,3 Rule 310 of Regulation S-B,4 
Item 17 of Form S-4,5 Item 17 of Form F-4,6 Item 7 of Form 8-
K,7 Item 2 of Form 10-Q,8 Item 2 of Form 10-QSB,9 Item 5 
of Form 10-K,10 and Item 5 of Form 10-KSB.11

    \1\ 15 U.S.C. 77a et seq.
    \2\ 15 U.S.C. 78a et seq.
    \3\ 17 CFR 210.3-05.
    \4\ 17 CFR 228.310.
    \5\ 17 CFR 239.25.
    \6\ 17 CFR 239.34.
    \7\ 17 CFR 249.308.
    \8\ 17 CFR 249.308a.
    \9\ 17 CFR 249.308b.
    \10\ 17 CFR 249.310.
    \11\ 17 CFR 249.310b.
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I. Introduction

    The Commission adopted Regulation S 12 in April 1990 in order 
to clarify the extraterritorial application of the registration 
requirements of the Securities Act.13 Since adoption, a number of 
problematic practices have developed involving unregistered sales of 
equity securities of domestic reporting companies purportedly in 
reliance upon Regulation S. In a companion release,14 the 
Commission is publishing its views concerning problematic practices 
under Regulation S and is requesting comment as to whether Regulation S 
also should be amended to impose additional restrictions on its use.

    \12\ 17 CFR 230.901-904.
    \13\ Release No. 33-6863 (Apr. 24, 1990) [55 FR 18306] (the 
``Adopting Release'').
    \14\ Release No. 33-7190.
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    Commenters have suggested that companies may be compelled to sell 
securities offshore, rather than in registered transactions, because of 
registration disclosure requirements relating to significant 
acquisitions. The Commission is proposing to streamline these 
requirements to reduce regulatory impediments to the use of registered 
offerings. Also, in response to commenters' suggestions that investors 
need information about private or offshore placements of equity 
securities that is not currently disclosed, the Commission is proposing 
to require quarterly reporting of unregistered equity offerings. 
Commenters have suggested this public reporting may also have the 
ancillary benefit of deterring abuses of Regulation S.
II. Proposed Simplification of Registration Disclosure of Significant 
Acquisitions

    Domestic companies subject to the reporting requirements of the 
Exchange Act are required to report significant acquisitions on Form 8-
K within 15 days after consummation of the transaction; a grace period 
of up to 60 days from the filing due date is given for filing the 
required audited financial statements.15 On the other hand, a 

[[Page 35657]]
company that registers securities under the Securities Act must provide 
information in the registration statement about significant 
acquisitions, including audited financial statements, from such time as 
the acquisition is probable.16 One, two or three years of audited 
financial statements may be required, depending on the relative 
significance of the acquired business.17 If the registrant is 
unable to obtain such financial statements from the potential acquiree 
for inclusion in the registration statement, the issuer would have to 
resort to alternative financings. Thus, reporting companies, including 
those with shelf registrations of securities, may be compelled to forgo 
public offerings and to undertake private or offshore offerings. The 
rules proposed today are intended generally to allow companies to 
provide information about significant acquisitions in Securities Act 
registration statements on the same time schedule as for Exchange Act 
reporting.18

    \15\ See Item 2 and Item 7 of Form 8-K [17 CFR 249.308].
    \16\ See Rule 3-05 of Regulation S-X and Item 310(c) of 
Regulation S-B [17 CFR 210.3-05 and 17 CFR 228.310(c)].
    Registered offerings that are not primarily of a capital raising 
nature are permitted to go forward without those financial 
statements until 75 days following the acquisition, as permitted by 
Form 8-K. Specifically, the restriction on offerings registered 
under the Securities Act does not apply to (a) offerings or sales of 
securities upon the conversion of outstanding convertible securities 
or upon the exercise of outstanding warrants or rights; (b) dividend 
or interest reinvestment plans; (c) employee benefit plans; (d) 
transactions involving secondary offerings; or (e) sales of 
securities pursuant to Rule 144. The restriction also applies to 
certain unregistered offerings as well. See Instruction 2 to Item 7 
of Form 8-K.
    \17\ The significance of an acquired business is evaluated based 
on (i) the amount of the issuer's investment in the acquired 
business; (ii) the total assets of the acquired business; and (iii) 
the pre-tax income of the acquired business, all as compared to the 
registrant's most recent comparable financial items.
    \18\ The amendments would also permit certain private placements 
under Rules 505 and 506 of Regulation D under the Securities Act [17 
CFR 230.505 and 506] to go forward under the same conditions as a 
registered offering.
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    In addition, the Commission is proposing to provide an automatic 
waiver of the earliest year of required audited financial statements 
otherwise required to be provided for a consummated business 
acquisition in filings made under either the Securities Act or the 
Exchange Act if those financial statements are not readily available. A 
similar waiver provision was previously adopted for small business 
issuers and has proved quite useful in addressing significant practical 
problems for issuers engaged in acquisitions.19

    \19\ The Commission has established the Advisory Committee on 
the Capital Formation and Regulatory Processes (the ``Advisory 
Committee''), chaired by Commissioner Steven M.H. Wallman. The 
Advisory Committee is considering fundamental issues relating to the 
regulatory framework governing the capital formation process, 
including whether the current system of registering securities 
offerings should be replaced with a company registration system. The 
recommendations of the Advisory Committee may result in rule 
proposals or legislative recommendations that, if endorsed by the 
Commission, ultimately may address the matters discussed in this 
release. Because most financing transactions that would be 
undertaken within the framework of several of the company 
registration models now being considered by the Advisory Committee 
could be conducted primarily on the basis of disclosure provided in 
a registered company's filed periodic and current reports, business 
acquisition reporting generally would be rendered consistent in both 
the public offering and periodic reporting contexts.
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A. Elimination of Required Financial Statements for Pending 
Acquisitions and Waiver of Financial Statements for Recently Completed 
Acquisitions

    The Commission proposes to eliminate the requirement to provide 
audited financial statements for pending business acquisitions in 
Securities Act registration statements, other than registrations by 
``blank check companies.'' 20 In addition, the proposed rules 
would automatically waive the required financial statements for 
significant acquisitions completed within 75 days of a registered 
offering, if such audited financial statements are not readily 
available at the time the offer commences.21 However, other than 
financial statements and pro forma information presented pursuant to 
Rules 3-05 and Article 11 of Regulation S-X and Item 310 of Regulation 
S-B, the proposed rule changes do not change information required with 
respect to significant acquisitions.

    \20\ A ``blank check company'' is defined in Sec. 230.419 of 
Regulation C [17 CFR 230.419(a)].
    \21\ The date of an offering will be deemed to be the date of a 
final prospectus or prospectus supplement relating to the offering 
as filed with the Commission pursuant to Rule 424(b) [17 CFR 
230.424(b)] under the Securities Act.
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    Although financial statements of acquirees may be omitted under the 
proposed amendments, pro forma financial information required by 
Article 11 of Regulation S-X and Item 310 of Regulation S-B would 
continue to be required when financial statements of the acquiree are 
furnished.22 In any case, likely effects of a probable or recently 
consummated business combination are required to be discussed in 
Management's Discussion and Analysis, to the extent material.23

    \22\ 17 CFR 210.11-01 to 11-03.
    \23\ See Item 303 of Regulation S-K and S-B [17 CFR 229.303 and 
228.303].
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    Comments are requested concerning whether the accommodations 
proposed today should only be available with respect to acquisitions 
below a particular level of significance compared to the assets and 
pre-tax income of the registrant. If a significance test is 
appropriate, should it be, for example, 75%, 60%, 50%, 40%, 30% or 20%? 
Comment is requested whether other classes of issuers, in addition to 
``blank check companies,'' should be excluded from the provisions of 
the proposed amendments. Is it appropriate to provide the same grace 
period for offering documents as for Form 8-K reports? Should the grace 
period be shorter, e.g. 15 days? Further, comment is requested 
regarding whether such relief should be available to all registrants 
(including new registrants) or whether minimum reporting history or 
public float requirements should be established. Comment is requested 
as to whether audited financial statements with respect to significant 
business combinations that have not been consummated but are probable 
should be required to be furnished in the prospectus if the financial 
statements are readily available. Comment is requested as to whether 
unaudited financial statements with respect to probable or recently 
consummated business combinations should be required if they are 
readily available.
    Although a domestic company may proceed with a registered offering 
of securities without financial statements of a recent or probable 
acquiree in the circumstances described above, it will be required to 
file financial statements of each significant acquired business on Form 
8-K within 75 days of consummation of the acquisition. The proposed 
revisions would apply to offerings of domestic and foreign issuers 
alike. However, foreign private issuers are not subject to quarterly or 
Form 8-K reporting rules, and are not required currently to furnish 
financial statements of acquired businesses in the absence of a 
registered offering of securities. Comment is requested as to whether 
the rule should therefore include, as a condition for omission of the 
financial statements in a registration statement, that the foreign 
private issuer undertake in the registration statement to provide on 
Form 6-K the audited financial statements of the acquired business 
within 75 days of consummation of the business combination.
    The amendments proposed today would also eliminate the significance 
threshold that triggers the requirement to provide in registration 
statements audited financial statements of acquired businesses that, in 
the aggregate, but not individually, are significant.24 Comment 

[[Page 35658]]
is requested as to whether elimination of the requirement is 
appropriate or whether a significance level applicable to aggregations 
of individually insignificant businesses should be maintained at the 
current threshold of 20%, or increased to 40%, 50%, 60% or 75%.

    \24\ In such case, the issuer must furnish audited financial 
statements of the most recent fiscal year for a majority of the 
individually insignificant businesses. See Rule 3-05(b)(i) of 
Regulation S-X.
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    No change is proposed with respect to current rules governing 
financial statements required for acquired operating real estate 
properties. The Commission has previously addressed the issue of 
financial statements for operating real estate properties. Rule 3-14 of 
Regulation S-X reflects conclusions reached regarding the appropriate 
form of financial information and the number of periods for which the 
financial information should be furnished.25 Comment is requested 
on whether relief proposed under the proposed amendments should also be 
available for operating real estate properties acquired or to be 
acquired by the registrant.

    \25\ Audited income statements of significant acquired or to be 
acquired operating real estate properties are required to be 
furnished pursuant to Rule 3-14 of Regulation S-X and Item 310(e) of 
Regulation S-B [17 CFR 210.3-14 and 228.310(e)]. The income 
statements are required to be presented only for the most recent 
fiscal year, regardless of significance, if the property is not 
acquired from a related party and the registrant is not aware of any 
material factors relating to the specific property that would cause 
the reported financial information not to be necessarily indicative 
of future operating results. The income statements may exclude items 
not comparable to the proposed future operation of the property, 
such as mortgage interest, leasehold rental, depreciation, corporate 
expenses and federal and state income taxes.
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    Where securities are being registered in an offering to acquire a 
business, audited financial statements of the business to be acquired 
will still be required as provided under the current rules.26 The 
proposed amendments do not cover these situations. The registrant may 
rely on the proposed rules with respect to other pending or recently 
completed acquisitions.

    \26\ Forms S-4 and F-4 do provide certain accommodations with 
respect to acquirees that are not reporting companies under the 
Exchange Act. See Item 17 in each Form [17 CFR 239.25 and 33].
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    Likewise, the proposed new rules would not change the financial 
statement requirements of the business to be acquired for proxy 
statements in which financial statements of such business are required 
to be provided pursuant to Item 14 of Schedule 14A.27 Comment is 
requested as to whether the relief afforded under the proposed 
amendments should be available for a company being acquired if that 
acquisition transaction is the subject of the registration statement or 
proxy statement.

    \27\ Financial statements of an acquired business are required 
pursuant to Item 14 if action is to be taken with respect to 
mergers, consolidations, acquisitions and similar matters [17 CFR 
240.14a-101.14].
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B. Automatic Waiver of Certain Unavailable Acquiree Financial 
Statements

    When audited financial statements of an acquired business are 
required in filings made under the Exchange Act or the Securities Act, 
the number of years for which statements are mandated varies depending 
on the level of significance of the acquisition relative to the assets 
and income of the registrant.28 In 1992, as part of its Small 
Business Initiatives,29 the Commission provided certain relief in 
cases where the acquiree's audited financial statements are not readily 
available. This automatic waiver is proposed to be extended to all 
issuers. As proposed to be amended, Rule 3-05 would provide that, where 
an acquiree's audited financial statements are not readily available, 
the requirement for furnishing them would be automatically waived if 
the significance of the acquired business does not exceed 20%, and the 
earlier of the two years of the required financial statements would be 
automatically waived where significance does not exceed 40%.30

    \28\ The number of years for which audited financial statements 
are required depends on the level of significance: one year at 10%, 
two years at 20%, and three years at 40%. See Rule 3-05(b)(1) of 
Regulation S-X.
    \29\ Release No. 33-6949 (July 30, 1992) [57 FR 36442]; Release 
No. 33-6996 (April 28, 1993) [58 FR 26509].
    \30\ If a registrant omits financial statements in reliance on 
the proposed amendments, the pro forma financial information 
included in a Form 8-K relating to the acquisition could not be used 
as the basis for measuring the significance of subsequent 
acquisitions as otherwise permitted by Rule 3-05(b)(1) of Regulation 
S-X. See proposed amendments to Rule 3-05(b)(1) of Regulation S-X.
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    Comment is requested as to the appropriateness of this automatic 
waiver provision. Should the Commission eliminate altogether the 
requirement for financial statements of any acquisition below the 20% 
significance level? Should financial statements that are not readily 
available be waived automatically unless the acquisition exceeds the 
50% level of significance? Comment is requested also as to whether 
unaudited financial statements should be required to be filed if 
audited financial statements are omitted pursuant to the automatic 
waiver granted under the proposed rule.

III. Quarterly Reporting of Unregistered Equity Sales

    Concerns have been raised by some commenters that while 
unregistered offshore or private placements of common stock may have a 
material effect on the issuer and may result in significant dilution of 
existing shareholders, they frequently are not publicly disclosed.
    Recognizing the market need for such information, the Commission 
last year adopted Rule 135c 31 to remove any regulatory impediment 
to such disclosure. The rule provides a safe harbor under Section 5 for 
public announcement of unregistered offerings. Some have suggested that 
mandated reporting of unregistered equity placements would assure 
investors are provided with material information about such 
transactions and have the additional benefit of spotlighting abuses of 
Regulation S. The SEC Government-Business Forum on Small Business 
Capital Formation included a recommendation that reporting of 
Regulation S offerings on Form 8-K be required.32

    \31\ 17 CFR 230.135c, adopted in Release No. 33-7053 (Apr. 26, 
1994) [59 FR 21644].
    \32\ Final Report of the SEC Government-Small Business Capital 
Formation (February 1995).
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    In response to these concerns and suggestions, the Commission is 
proposing amendments to its annual and quarterly report forms for 
domestic issuers that would require the disclosure of unregistered 
sales of equity securities 33 during the previous fiscal quarter, 
whether pursuant to a private placement, a Regulation S offering or 
otherwise. This information would be provided in an issuer's Quarterly 
Report on Form 10-Q or 10-QSB for sales during the issuer's first three 
fiscal quarters and in the Annual Report on Form 10-K or 10-KSB for 
offerings during the final fiscal quarter.

    \33\ The term ``equity security'' would include convertible and 
exchangeable securities, warrants, options and other types of 
equity-related securities, as provided under Rule 3a11-1 [17 CFR 
240.3a-11-1] under the Exchange Act.
    The disclosure proposed 34 is that currently set forth in 
Items 701 of Regulation S-K 35 and Regulation S-B,36 and 
includes:

    \34\ This information is currently required in registration 
statements on Forms S-1, S-11 and F-1.
    \35\ 17 CFR 229.701.
    \36\ 17 CFR 228.701.
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     The title and amount of securities sold, and the date of 
the transaction.
     Underwriter or placement agent.
     The consideration received.37

    \37\ As to consideration, Item 701 requires: ``As to securities 
sold for cash, state the aggregate offering price and the aggregate 
underwriting discounts or commissions. As to any securities sold 
otherwise than for cash, state the nature of the transactions and 
the nature and aggregate amount of consideration received by the 
registrant.''

[[Page 35659]]

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     Persons or classes of persons to whom the securities were 
sold.
     The exemption from registration claimed.
    Comment is requested on investors' need for such information. 
Comment is also requested as to whether the information will be 
sufficiently timely, or instead, should be provided in a filing at an 
earlier date, such as a mandatory Current Report on Form 8-K, or a 
notice of sale similar to that used for Regulation D. Should notice be 
required prior to or at the time of the sale? Some have suggested that 
earlier reporting should be required unless the Regulation S restricted 
period is lengthened so that a report must be filed before the end of 
the restricted period. Comment also is requested as to the adequacy of 
the information required; is there additional information that would be 
helpful to investors; are there items that are not necessary?
    The proposed requirement is limited to unregistered sales of common 
equity securities (and common equity equivalents) because of the 
significant market impact the issuance of such securities often has and 
the current lack of public information about such sales. Comment is 
requested as to whether a reporting requirement should be extended to 
other types of securities or registered offerings, e.g., takedowns off 
a shelf registration statement, and if so why?

IV. Cost-Benefit Analysis

    To assist the Commission in its evaluation of the costs and 
benefits that may result from the proposed changes to disclosure 
requirements contained in this release, commenters are requested to 
provide views and data relating to any costs and benefits associated 
with the proposals. It is expected that the proposals relating to 
financial statements of acquired businesses will decrease registrants' 
costs and compliance burdens. It is expected that the proposals to 
disclose sales of unregistered equity securities on a quarterly basis 
will modestly increase registrants' costs and compliance burdens. This 
requirement should not significantly increase the burden on company 
resources, since most registrants are required to gather such 
information in connection with the preparation of audited and unaudited 
financial statements. To the extent this requirement results in any 
additional expense, it may be justified in view of the material 
information that would be available to investors.

V. Request for Comments

    Any interested person wishing to submit written comments on any 
aspect of the amendments to forms and rules that are subject to this 
release are requested to do so. Comments should be submitted in 
triplicate to Jonathan G. Katz, secretary, U.S. Securities and Exchange 
Commission, 450 5th Street, N.W., Washington, D.C. 20549 and should 
refer to file number S7-19-95.

VI. Summary of Initial Regulatory Flexibility Analysis

    The Commission has prepared an Initial Regulatory Flexibility 
Analysis pursuant to the requirements of the Regulatory Flexibility 
Act,38 regarding the proposed amendments to Rule 3-05 of 
Regulation S-X, Item 310 of Regulation S-B, Form S-4 and Form F-4 and 
Forms 10-Q, 10-QSB, 10-K and 10-KSB. The analysis notes that these 
proposed amendments relating to financial statement requirements for 
acquired businesses would provide issuers greater flexibility and 
efficiency in accessing the public securities markets. The proposed 
amendments with respect to disclosure of recent sales of unregistered 
securities are intended to provide investors with more information 
regarding changes in outstanding securities of public companies.

    \38\ 5 U.S.C. 603 (1988).
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    As discussed more fully in the analysis, the proposed changes would 
affect persons that are small entities, as defined by the Commission's 
rules. It is expected that the changes primarily would decrease 
reporting, recordkeeping and compliance burdens, although the 
requirement to report unregistered sales would modestly increase such 
burdens. The analysis also indicates that there are no current federal 
rules that duplicate, overlap or conflict with the revised disclosure 
provisions.
    As stated in the analysis, several possible significant 
alternatives to the disclosure proposals were considered, including, 
among others, establishing different compliance or reporting 
requirements for small entities or exempting them from all or part of 
the proposed requirements. As more fully discussed in the analysis, the 
alternatives were either addressed in the proposals, inconsistent with 
the purposes of the federal securities laws, or otherwise without 
justification.
    Written comments are encouraged with respect to any aspect of the 
analysis. Such comments will be considered in the preparation of the 
Final Regulatory Flexibility Analysis if the proposed revisions are 
adopted. A copy of the analysis may be obtained by contacting Annemarie 
Tierney, Office of International Corporate Finance, Division of 
Corporation Finance at (202) 942-2990, U.S. Securities and Exchange 
Commission, 450 Fifth Street, N.W., Washington, D.C. 20549.

VII. Statutory Bases

    The amendments to the Commission's rules and forms are being 
proposed pursuant to sections 2, 3, 4 and 19 of the Securities Act of 
1933 and 3(b), 4A, 12, 13, 14, 15, 16 and 23 of the Securities Exchange 
Act of 1934.

Text of Proposals

    In accordance with the foregoing, Title 17, Chapter II of the Code 
of Federal Regulations is proposed to be amended as follows:
PART 210--FORM AND CONTENT OF AND REQUIREMENTS FOR FINANCIAL 
STATEMENTS, SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 
1934, PUBLIC UTILITY HOLDING COMPANY ACT OF 1935, INVESTMENT 
COMPANY ACT OF 1940, AND ENERGY POLICY AND CONSERVATION ACT OF 
1975--REGULATION S-X

    1. The authority citation for Part 210 continues to read as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77s, 77aa(25), 
77aa(26), 78l, 78m, 78n, 78o(d), 78w(a), 78ll(d), 79e(b), 79j(a), 
79n, 79t(a), 80a-8, 80a-20, 80a-29, 80a-30, 80a-37a, unless 
otherwise noted.

    2. Section 210.3-05 is amending by revising paragraph (b) to read 
as follows:


Sec. 210.3-05  Financial statements of businesses acquired or to be 
acquired.

    (a) ***
    (b) Periods to be presented. (1)(i) If securities are being 
registered to be offered to the security holders of the business to be 
acquired, the financial statements specified in Secs. 210.3-01 and 
210.3-02 shall be furnished for the business to be acquired, except as 
provided otherwise for filings on Form N-14, S-4 or F-4. In all other 
cases, financial statements of the business acquired or to be acquired 
shall be filed for the periods specified in this paragraph or such 
shorter period as the business has been in existence. The financial 
statements covering fiscal years shall be audited except as provided in 
Item 14 of Schedule 14A, (Sec. 240.14a-101 of this chapter) with 
respect to certain proxy statements or in 

[[Page 35660]]
registration statements filed on Forms N-14, S-4 or F-4 (Sec. 239.23, 
25 or 34 of this chapter). The periods for which such financial 
statements are to be filed shall be determined using the conditions 
specified in the definition of significant subsidiary in Sec. 210.1-
02(w) as follows:
    (A) If none of the conditions exceeds 10 percent, financial 
statements are not required.
    (B) If any of the conditions exceeds 10 percent, but none exceed 20 
percent, financial statements shall be furnished for at least the most 
recent fiscal year and any interim periods specified in Secs. 210.3-01 
and 210.3-02.
    (C) If any of the conditions exceeds 20 percent, but none exceed 40 
percent, financial statements shall be furnished for at least the two 
most recent fiscal years and any interim periods specified in 
Secs. 210.3-01 and 210.3-02.
    (D) If any of the conditions exceeds 40 percent, the full financial 
statements specified in Secs. 210.3-01 and 210.3-02 shall be furnished.
    (ii) The determination shall be made by comparing the most recent 
annual financial statements of each such business to the registrant's 
most recent annual consolidated financial statements filed at or prior 
to the date of the acquisition. However, if the registrant made a 
significant acquisition subsequent to the latest fiscal year-end and 
filed a report on Form 8-K which included audited financial statements 
of such acquired business for the periods required by this section and 
the pro forma financial information required by Sec. 210.11, such 
determination may be made by using the pro forma amounts for the latest 
fiscal year in the report on Form 8-K rather than by using the 
historical amounts for the latest fiscal year of the registrant. The 
tests may not be made by ``annualizing'' data. However, if a Form 8-K 
was filed to report a significant acquisition but audited financial 
statements were not furnished pursuant to the provisions of paragraph 
(b)(2)(i) of this section, the determination of significance may not be 
made using the pro forma amounts for the latest fiscal year.
    (2) Notwithstanding the requirements in paragraph (b)(1) of this 
section:
    (i) If none of the conditions specified in the definition of 
significant subsidiary in paragraph (b)(1) of this section exceeds 20 
percent and the required audited financial statements of the acquired 
business are not readily available, an automatic waiver of the required 
audited financial statements is granted. If none of the conditions 
specified in the definition of significant subsidiary in paragraph 
(b)(1) of this section exceeds 40 percent and the required audited 
financial statements are not readily available, an automatic waiver is 
granted with respect to the required audited financial statements for 
the fiscal year preceding the latest fiscal year.
    (ii)(A) Separate financial statements of the acquired or to be 
acquired business need not be presented in a proxy statement or 
registration statement pursuant to this rule, if either:
    (1) The consummation of the acquisition has not yet occurred; or
    (2) The acquisition was consummated within 75 days of the date of 
the offering under the Securities Act of 1933 [15 U.S.C. Secs. 77a et 
seq.], or mailing date in the case of a proxy statement, and the 
required audited financial statements of the acquired business are not 
readily available at the date of the final prospectus or mailing of the 
proxy.
    (B) Except that the provisions of this paragraph are not applicable 
to registration statements for securities issued to acquire the 
business or registrations statements subject to the provisions of 
Sec. 419 of Regulation C [17 CFR 230.419].
    (iii) Separate financial statements of the acquired business need 
not be presented once the operating results of the acquired business 
have been reflected in the audited consolidated financial statements of 
the registrant for a complete fiscal year unless such financial 
statements have not been previously filed or unless the acquired 
business is of such significance to the registrant that omission of 
such financial statements would materially impair an investor's ability 
to understand the historical financial results of the registrant. For 
example, if, at the date of acquisition, the acquired business met at 
least one of the conditions in the definition of significant subsidiary 
in Sec. 210.1-02 at the 80 percent level the income statements of the 
acquired business should normally continue to be furnished for such 
periods prior to the purchase as may be necessary when added to the 
time for which audited income statements after the purchase are filed 
to cover the equivalent of the period specified in Sec. 210.3-02.
    (iv) A separate audited balance sheet of the acquired business is 
not required when the registrant's most recent audited balance sheet 
required by Sec. 210.3-01 is for a date after the date the acquisition 
was consummated.
* * * * *
    3. Section 210.11-01 is amended by revising paragraph (e) to read 
as follows:


Sec. 210.11-01   Pro forma financial information.

* * * * *
    (e) This rule does not apply to transactions between a parent 
company and its totally held subsidiary or to a transaction for which 
financial statements of an acquired or to be acquired business are not 
presented pursuant to Sec. 210.3-05(b)(i) and Sec. 210.3-05(b)(ii).

PART 228--INTEGRATED DISCLOSURE SYSTEM FOR SMALL BUSINESS ISSUERS

    4. The authority citation for Part 228 continues to read as 
follows:

    Authority: 15 U.S.C. 77e, 77f, 77g, 77h, 77j, 77k, 77s, 
77aa(25), 77aa(26), 77ddd, 77eee, 77ggg, 77hhh, 77jjj, 77nnn, 77sss, 
78l, 78m, 78n, 78o, 78w, 78ll, 80a-8, 80a-29, 80a-30, 80a-37, 80b-
11, unless otherwise noted.
    5. By amending Sec. 228.310 by adding paragraph (c)(3)(iv), 
removing paragraph (c)(4), redesignating paragraph (c)(5) as paragraph 
(c)(4), and revising paragraph (d)(2) to read as follows:


Sec. 228.310  (Item 310) financial statements.

* * * * *
    (c) * * *
    (3) * * *
    (iv) Notwithstanding the requirements in paragraphs (c)(3)(i) and 
(c)(3)(ii) of this Item, separate financial statements of the acquired 
or to be acquired business need not be presented in a proxy statement 
or registration statement pursuant to this rule, if either:
    (A) The consummation of the acquisition has not yet occurred; or
    (B) The acquisition was consummated within 75 days of the date of 
the offering under the Securities Act of 1933 [15 U.S.C. Secs. 77a et 
seq.], or mailing date in the case of a proxy statement, and the 
required audited financial statements of the acquired business are not 
readily available at the date of the final prospectus or mailing of the 
proxy.

Except that the provisions of this paragraph are not applicable to 
registration statements for securities issued to acquire the business 
or registrations statements subject to the provisions of Sec. 419 of 
Regulation C [17 CFR 230.419].
    (4) * * *
    (d) * * *
    (2) The provisions of paragraph (c)(2) of this Item apply to 
paragraph (d) of this Item. However, paragraph (d) of this Item does 
not apply to a transaction for which financial statements of an 
acquired or to be acquired business are not presented pursuant to 
paragraph (c)(3)(iv) of this Item.
* * * * * 

[[Page 35661]]


PART 239--FORMS PRESCRIBED UNDER THE SECURITIES ACT OF 1993

    6. The authority citation for Part 239 continues to read in part as 
follows:

    Authority: 15 U.S.C. 77f, 77g, 77h, 77j, 77sss, 78c, 78l, 78m, 
78n, 78o(d), 78w(a), 78ll(d), 79e, 79f, 79g, 79j, 79l ,79m, 79n, 
79q, 79t, 80a-8, 80a-29, 80a-30 and 80a-37, unless otherwise noted.
* * * * *
    7. By revising paragraph (b)(7) of Item 17 of Form S-4 (referenced 
in Sec. 239.25) to read as follows:

    Note: Form S-4 does not and these amendments will not appear in 
the Code of Federal Regulations.

Form S-4

* * * * *
    Item 17. Information with Respect to Companies Other Than S-3 or S-
2 Companies.
* * * * *
    (b) * * *
    (7) Financial statements as would have been required to be 
included in an annual report furnished to security holders pursuant 
to Rules 14a-3(b)(1) and (b)(2) (Sec. 240.14a-3 of this chapter) or 
Rules 14c-3(a)(1) and (a)(2) (Sec. 240.14c-3 of this chapter), had 
the company being acquired been required to prepare such a report; 
Provided, however, that the balance sheet for the year preceding the 
latest full fiscal year and the income statements for the two years 
preceding the latest full fiscal year need not be audited if they 
have not previously been audited. In any case, such financial 
statements need only be audited to the extent practicable. If this 
Form is used for resales to the public by any person who with regard 
to the securities being reoffered is deemed to be an underwriter 
within the meaning of Rule 145(c) (Sec. 230.145(c) of this chapter), 
the financial statements of such companies must be audited for the 
periods required to be presented pursuant to paragraphs (b)(1) and 
(b)(2)(i) of Rule 3-05 of Regulation S-X (17 CFR 210.3-05).
* * * * *
    8. By revising paragraph (b)(5) of Item 17 of Form F-4 to read as 
follows:

    Note: Form F-4 does not and these amendments will not appear in 
the Code of Federal Regulations.

Form F-4

* * * * *
    Item 17. Information with Respect to Foreign Companies Other 
Than F-3 or F-2 Companies.
* * * * *
    (b) * * *
    (5) Financial statements as would have been required to be 
included in an annual report on Form 20-F (17 CFR 249.220f) had the 
company being acquired been required to prepare such a report; 
Provided, however, that the balance sheet for the year preceding the 
latest full fiscal year and the income statements for the two years 
preceding the latest full fiscal year need not be audited if they 
have not previously been audited. In any case, such financial 
statements need only be audited to the extent practicable. If this 
Form is used for resales to the public by any person who with regard 
to the securities being reoffered is deemed to be an underwriter 
within the meaning of Rule 145(c) (Sec. 230.145(c) of this chapter), 
the financial statements of such companies must be audited for the 
periods required to be presented pursuant to paragraphs (b)(1) and 
(b)(2)(i) of Rule 3-05 of Regulation S-X (17 CFR 210.3-05).
* * * * *

PART 249--FORMS, SECURITIES EXCHANGE ACT OF 1934

    9. The authority citation for Part 249 continues to read in part as 
follows:

    Authority: 15 U.S.C. 78a et seq., unless otherwise noted;
* * * * *
    10. By amending Form 8-K (referenced in Sec. 249.308) by revising 
Instruction 2 of Item 7 to read as follows:

    Note: Form 8-K does not and these amendments will not appear in 
the Code of Federal Regulations

Form 8-K

* * * * *
    Item 7. Financial Statements and Exhibits.
* * * * *
    Instructions. * * *
    2. During the pendency of an extension pursuant to this 
paragraph, registrants will be deemed current for purposes of their 
reporting obligations under Section 13(a) or 15(d) of the Securities 
Exchange Act of 1934. With respect to filings under the Securities 
Act of 1933, however, registration statements will not be declared 
effective and post-effective amendments to registration statements 
will not be declared effective. In addition, offerings should not be 
made pursuant to effective registration statements, or pursuant to 
Rules 505 and 506 of Regulation D (Secs. 230.501 through 506 of this 
chapter), where any purchasers are not accredited investors under 
Rule 501(a) of that Regulation, until the required audited financial 
statements are filed; Provided, however, that the above restriction 
shall not apply during the pendency period of an extension pursuant 
to this Item if the required audited financial statements of the 
acquired business are not readily available. Further, the following 
offerings or sales of securities shall not be affected by this 
restriction:
    (a) Offerings or sales of securities upon the conversion of 
outstanding convertible securities or upon the exercise of 
outstanding warrants or rights;
    (b) Dividend or interest reinvestment plans;
    (c) Employee benefit plans;
    (d) Transactions involving secondary offerings; or
    (e) Sales of securities pursuant to Rule 144 (Sec. 230.144 of 
this chapter).
* * * * *
    11. By amending Form 10-Q (referenced in Sec. 249.308a) by adding 
paragraph (c) to Item 2 of Part II prior to the Instruction to read as 
follows:

    Note: Form 10-Q does not and these amendments will not appear in 
the Code of Federal Regulations

Form 10-Q

* * * * *

Part II

    Item 2. Changes in Securities.
* * * * *
    (c) Furnish the information required by Item 701 of Regulation 
S-K (Sec. 229.701 of this chapter) as to all equity securities of 
the registrant sold by the registrant during the period covered by 
the report that were not registered under the Securities Act.

* * * * *
    12. By amending Form 10-QSB (referenced in Sec. 249.308b) by adding 
paragraph (c) to Item 2 of Part II prior to the Instruction to read as 
follows:

    Note: Form 10-QSB does not and these amendments will not appear 
in the Code of Federal Regulations

Form 10-QSB

* * * * *

Part II

* * * * *
    Item 2. Changes in Securities.
* * * * *
    (c) Furnish the information required by Item 701 of Regulation 
S-B (Sec. 228.701 of this chapter) as to all equity securities of 
the registrant sold by the registrant during the period covered by 
the report that were not registered under the Securities Act.

* * * * *
    13. By amending Form 10-K (referenced in Sec. 249.310) by revising 
Item 5 of Part II as follows:

    Note: Form 10-K does not and these amendments will not appear in 
the Code of Federal Regulations

Form 10-K

* * * * *

Part II

* * * * *
    Item 5. Market for Registrant's Common Equity and Related 
Stockholder Matters.

    Furnish the information required by Item 201 of Regulation S-K 
(Sec. 229.201 of this chapter) and Item 701 of Regulation S-K 
(Sec. 229.701 of this chapter) as to all equity securities of the 
registrant sold by the registrant during the period covered by the 
report that were not registered under the Securities Act; provided 
that information that has previously been included in a Quarterly 
Report on Form 10-Q or 10-QSB (Sec. 249.308a or 249.308b of this 
chapter) need not be provided.
* * * * * 

[[Page 35662]]

    14. By amending Form 10-KSB (referenced in Sec. 249.310b) by 
revising Item 5 of Part II to read as follows:

    Note: Form 10-K does not and these amendments will not appear in 
the Code of Federal Regulations

Form 10-KSB

* * * * *

Part II

* * * * *
    Item 5. Market for Common Equity and Related Stockholder 
Matters.
    Furnish the information required by Item 201 of Regulation S-B 
and Item 701 of Regulation S-B as to all equity securities of the 
registrant sold by the registrant during the period covered by the 
report that were not registered under the Securities Act; provided 
that information that has previously been included in a Quarterly 
Report on Form 10-Q or 10-QSB need not be provided.
* * * * *
    By the Commission.
    Dated: June 27, 1995.

Margaret H. McFarland,
Deputy Secretary.
[FR Doc. 95-16392 Filed 7-7-95; 8:45 am]
BILLING CODE 8010-01-P