As part of its measures to modernize and improve its capital raising, reporting and disclosure requirements for smaller public companies, the SEC has adopted final rules regarding the smaller company reporting system. Under the final rules, Regulation S-B is abolished and a larger group of smaller reporting companies may use a scaled reporting regime.
Under the new rules, the SEC replaced the current “small business issuer” category with a new expanded category of “smaller reporting companies” having less than $75 million in public equity float, or, if a company does not have a calculable public equity float, having revenues of less than $50 million in the last fiscal year. This change combines for most purposes the “small business issuer” and “non-accelerated filer” categories of smaller companies.
Under the new rules, the prior non-financial Regulation S-B provisions are moved to Regulation S-K with scaled disclosure requirements for smaller public companies and the prior Regulation S-B financial statement requirements are moved to Regulation S-X with scaled disclosure requirements for smaller reporting companies. The scaled reporting requirements are generally unchanged from those that were previously contained in Regulation S-B. Similarly, the SEC has eliminated the current S-B forms other than for transition period use. The new rules permit smaller reporting companies to elect to comply with scaled financial disclosure and non-financial disclosure on an item-by-item or à la carte basis.
Companies that qualify currently as “small business issuers” under Regulation S-B have the option to file their next annual report for a fiscal year ending on or after December 15, 2007, either on Form 10-KSB or on Form 10-K using the new scaled disclosure requirements in Regulation S-K. After that annual report filing, all quarterly reports will be filed on Form 10-Q and all annual reports will be filed on Form 10-K with the new scaled disclosure requirements. Any amendments to registration statements that have not yet been declared effective will need to be filed on the appropriate form available to an issuer without the “SB” designation. Companies newly qualifying as “smaller reporting companies” will have the option to use the new scaled Regulation S-K requirements when filing their next periodic report due after February 4, 2008. Companies will determine if they qualify as a “smaller reporting company” based on the last business day of their most recent second fiscal quarter.
The SEC staff has indicated that it plans to issue a short guide for smaller reporting companies on how to prepare filings under this new regime