Post-Year-End Offerings

Certain issues arise when a company wishes to file a registration statement and undertake an offering during the first quarter of the year (i.e., after December 31st for companies with a fiscal year-end of December 31st) but before the company's year-end financial statements are complete. In particular, a company should focus on the financial statements that are required to be included (or incorporated by reference) in its registration statement and the comfort that the company's accountants may be willing to provide on the financial information contained in the registration statement, as well as comfort with respect to the period of time after the date of that financial information.1

Financial Statements

When a company prepares a registration statement after its fiscal year-end, which is often December 31, it is important to understand when the company's financial statements go "stale" so that the proper financial information can be included in the registration statement. A company will need to time the offering so that the company's registration statement is declared effective prior to the date on which the relevant financial statements become stale.2 In addition, the company's accountants will not consent to, and the Securities and Exchange Commission ("SEC") will likely not begin its review of, a filing, unless the financial statements included in the registration statement are in compliance with the staleness rules under Regulation S-X as of the filing date.

Financial statements in a registration statement are tested for staleness by the number of days between the date of the financial statements in the filing and the effectiveness date of the registration statement.3 Generally, financial statements go stale (other than third quarter financials as described below) under applicable SEC rules 135 days (or 130 days in the case of large accelerated filers and accelerated filers) after the date of the most recent balance sheet presented in the registration statement.4 It is important to note that a filing may be made on the next business day if the last day before financial statements go stale is on a weekend or U.S. federal holiday. It is also important to note that the staleness rules under Regulation S-X vary for different types of companies (e.g., large accelerated filers5, accelerated filers6, initial filers7, delinquent filers8, and companies without current net income9).

Below is a chart listing when third quarter and year-end financial statements go stale for companies with a December 31 fiscal year-end.10 The financial statements referenced go stale at the close of business on the following dates (or the next business day, if the date falls on a weekend or holiday).

Date Which Financial Statements Go Stale? 1. February 14 Third quarter financial statements for initial filers, delinquent filers and companies without current net income. (Updated annual audited financial statements must be included when the number of days between the effectiveness date of the registration statement and the fiscal year-end exceeds 45 days.) 2. March 1 (+) Third quarter financial statements for large accelerated filers that are not delinquent filers or companies without current net income. (Updated annual audited financial statements must be included when the number of days between the effectiveness date of the registration statement and the fiscal year-end exceeds 60 days.)11 3. March 16 (+) Third quarter financial statements...