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
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
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
For additional insights on reverse mergers,
SPACs, other alternatives to traditional initial public offerings, the small
and microcap markets and the economy, visit the Reverse Merger and
SPAC Blog by David N. Feldman, Esq., Partner of Richardson &
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