You are working on a public offering for Mayan Vacation Properties, Inc., an operator of resorts in the Yucatan Peninsula. Mayan is a calendar year filer, and the question has come up when its third quarter interim financial statements will go stale. That has deal timing implications, of course.

Contrary to certain predictions and beliefs the world did not end on December 21, 2012. So you can’t rely on B’ak’tun 13 to short-circuit the need to provide an answer.

Q: When do third quarter financial statements go stale?

A: It depends on the type of filer. The 2012 third quarter financial statements for the different types of filers listed below went stale at the close of business on the following dates in 2013 (assuming a calendar year fiscal year).

You're right: It's not 2012 anymore. Fortunately, we partner with KPMG to issue an annual desktop reference that gives you the correct dates for the current year, and Latham has an online staleness calculator that gives the correct date for any year, regardless of fiscal year end.

Q: What if a large accelerated filer or accelerated filer is also a loss corporation or a delinquent filer?

A: The earlier February 14 staleness date applies to all loss corporations and delinquent filers, regardless of their size.
Q: When must annual audited financial statements for 2012 be included in a 2013 IPO registration statement?

A: In order for an IPO registration statement to be declared effective, annual audited financial statements for 2012 must be included after February 14, 2013.
Q: Let’s assume Mayan is a loss corporation. Can it conduct an offering off of an effective shelf registration statement during the gap period AFTER February 14 (when its third quarter financial statements go stale) and BEFORE it files its Annual Report on Form 10-K?

A: Yes. As a refresher, a “loss corporation” is a company that does not expect to report positive income after taxes but before extraordinary items and the cumulative effect of a change in accounting principle for the most recently ended fiscal year and for at least one of the two prior fiscal years. See S-X Rule 3-01(c). The SEC Staff will not object to a loss corporation taking down securities off an effective shelf during the gap period, as long as the shelf was effective before the gap period commenced. See C&DI 119.02. But a loss corporation couldn’t go effective on a new shelf registration statement after the close of business on February 14, 2013 without audited year-end financials.

Q: On January 2, 2013, because the world did not end, Mayan was able to consummate the acquisition of B’ak’tun Inc., a specialty calendar maker. Mayan now wants to do a securities offering. When do B’ak’tun’s third quarter financial statements go stale?

A: Let’s assume you've read the section on "Recent and Probable Acquisitions" in our publication Financial Statement Requirements in US Securities Offerings, and it looks as though separate B’ak’tun financials will be needed in any new Mayan registration statement under Rule 3-05 of Regulation S-X (i.e., the deal closed more than 74 days prior to the effective date of the registration statement or exceeds any of the significance tests in Rule 3-05 at above the 50% level). The general rule is that the permitted age of financial statements of an acquired or soon‑to‑be acquired business is determined by looking to the staleness Rules that apply to its financial statements rather than the staleness rules applicable to the financial statements of the acquiring company. In other words, you usually need to determine whether the acquired company is, for example, a large accelerated filer, an accelerated filer or an initial filer, and then analyze the dates on which its financial statements go stale under the rules summarized above.

Since B’ak’tun is a private company, it would be treated like an IPO filer for staleness purposes. That means its third quarter financial statements would normally go stale on February 14, 2013. However, the SEC Staff will allow you to look to the acquiring company to determine staleness in this circumstance. See Financial Reporting Manual, Section 2045.5. So, if Mayan’s financials do not go stale until, say, March 1, the deal team may have a bit of breathing room.

Q: Same fact pattern, except Mayan is not doing a securities offering. Do B’ak’tun’s third quarter financial statements also go stale on February 14 for Form 8-K purposes?

A: No. If Mayan is not conducting a securities offering and just needs to get a Form 8-K on file to report the acquisition, then B’ak’tun’s third quarter financials are good all the way until March 31. In other words, Mayan will not need to include B’ak’tun annual audited financial statements for 2012 in its Item 9.01 8-K if it is able to get that 8-K on file before April 1.

As a reminder, the Latham financial statement guides for US and non-US issuers have answers to your questions about what is required in financial statements for US securities offerings.