Example 1: Forward acquisition
$1B annual revenues test
In 2012, look to Company A’s revenues for 2011.
In 2013, look to Company A’s revenues for 2012, which will include Company B’s rev- enues from October 1 2012.
Five-year anniversary test
$1B issued debt during previous three years test
Large accelerated filer test Look to Company A’s date of first sale.
Look to Company A’s debt issuances, which will include Company B’s debt issuances from October 1 2012.
At December 31 2012, look to Company A’s market value at June 30 2012.
At December 31 2013, look to Company A’s market value (which will include Company B’s) at June 30 2013.
The SEC also addressed two specific examples and how
the EGC status of the issuer would be determined in the event of an acquisition or reverse merger.17 • In 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.
• In 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 FAQ 24, which relates to succession of Exchange Act obligations, is not implicated. In determining whether Company A and Company C trigger any of the disqualifications from the definition of EGC in section 2(a)(19)(A), (B), (C) or (D) (referenced above), the SEC staff notes the following framework: (see table)
Timing of the EGC determination Securities Act Rule 401(a) provides that “the form and contents of a registration statement and prospectus shall conform to the applicable rules and forms as in effect on the initial filing date of such registration statement and prospectus,” and applies to registration statements at the initial filing date, not at the time that a registration statement is submitted for confidential review.18
Therefore,
Example 2: Reverse merger
In 2012, look to Company D’s revenues for 2011.
In 2013, look to Company D’s revenues for 2012, which will include Company C’s rev- enues from October 1 2012.
Look to Company C’s date of first sale.
Look to Company D’s debt issuances, which will include Company C’s debt issuances from October 1 2012.
At December 31 2012, look to Company C’s market value at June 30 2012.
At December 31 2013, look to Company C’s market value (which will include Company D’s) at June 30 2013.
an issuer must qualify as an EGC at the time of submission in order to use the confidential review process for a registration statement, or any amended submission of the registration statement. If an issuer loses EGC status while the SEC staff is reviewing the registration statement on a confidential basis, then the issuer must file the registration statement and all of the draft submissions in order to proceed with the review process. When the EGC files the registration statement, the issuer’s EGC status is retained while that registration statement is in registration by operation of Securities Act Rule 401(a). With regard to the use of the permitted test-the-waters communications under Securities Act section 5(d) (discussed below), an issuer must determine whether it qualifies as an EGC at the time it engages in the test-the-waters communications. In this regard, the SEC has noted that if the issuer later loses its EGC status by the time the registration statement is filed, then the issuer would not retroactively lose the ability to utilise prior test-the-waters communications.19
Benefits available to EGCs When an issuer qualifies as an EGC, it may take advantage of a number of benefits in connection with its IPO and subsequent public reporting and corporate governance. These benefits are designed to facilitate the public offering process, promote communications in and around the time of the IPO, and allow the EGC to ease into certain public
JOBS Act Quick Start 17
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