Earlier this week, the SEC's Division of Corporation Finance issued some guidance with the staff's observations in its reviews of "super" Forms 8-K filed following reverse mergers. As we know, in 2005 the SEC adopted a rule requiring the filing within four business days after a merger with a reporting shell company. The filing must include all the information that would be in an SEC Form 10 registration for the combined company, essentially the equivalent of a public offering prospectus with some differences. If you haven't noticed, in recent months the SEC has taken to reviewing pretty much all of these, even though that is not required. Here are the highlights of the advice: 1. Remember that pretty much any acquisition, including by lease, merger, exchange, etc., triggers the obligation. Acquisition of a business is one thing, but acquisition of an asset also can trigger the filing. 2. Item 9.01(b) of Form 8-K requires pro forma financial information to be included, not just the financial statements of the acquired company. Make sure that includes an explanation of how the company accounted for the reverse merger or acquisition that took place. A number of experienced practitioners I have worked with on reverse mergers believed that pro formas are not required, but they discover otherwise much to their chagrin. 3. Remember that any exhibits, including those representing material contracts, have to be in English. 4. Make sure to clearly disclose holding company and control arrangements, as well as a detailed description of both current and planned business going forward. 5. If you include risk factors (in most cases they are not required in a super 8-K), make sure they are tailored specifically to the company and not just "generic." 6. The SEC often asks post-reverse merged companies to focus in their Management's Discussion & Analysis section "any significant elements of historical income or loss that will not continue in the company's post-transaction operations." 7. If officers are not spending full time on the company, be specific about the amount of time they will devote. Remember that certain background information has to go back 10 years. 8. Disclose post-transaction compensation to executive officers. Include a summary compensation table for the acquired company's most recent fiscal year. 9. In disclosing affiliate and related transactions, go back two fiscal years before the public company's last fiscal year. Be specific in describing what standards you use to determine that a director is independent. In truth, all of this is good advice, and in many ways unique to the reverse merger process. CEOs, lawyers, accountants, let's do this right!
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