Page 79 - Initial Public Offering - An Introduction to IPO on Wall Street

 Other required financial reports may be excluded by EGCs (e.g. major undertakings
purchased or to be purchased (Rule 3-05), some equity method investments (Rule 3-09),
public debt shares underwriters (Rule 3-10) and associates whose securities securitize the
allocation of a registered debt (Rule 3-16)) which are not fairly assumed to be needed at the
time of the proposed offering (Rule 3-16). Non-EGCs are allowed to exclude private
disclosures from other needed financial reports if such financial reports correspond with
periods that are not fairly assumed to be needed at the time of public filing. Non-EGCs are
not allowed to exclude from public reports the other financial reports needed. Where other
requested financial data is anticipated to be needed at the time the registration statement
becomes active, EGCs and non-EGCs can, on the basis of relevant conditions and facts,
can ask for consideration by the SEC to exempt certain financial reports corresponding to
Rule 3-13 of Regulation S-X, where applicable.

Pro Forma Financial Information—Pro forma financial data contains financial reports or
financial schedules planned as though there have already been such transactions or activities.
In order to demonstrate the effect of a recent purchase or sale, the use of earnings from the IPO
to repay unpaid liabilities or other activities that cause the financial reports to not be
representative of the current entity, Pro forma details may be presented in an IPO registration
statement.

Although in conjunction with business mixes, the need for pro forma financial details most
commonly arises, the rule also applies to other cases. For instance, the use of IPO earnings to
settle deferred liabilities often requires the provision of financial details pro forma. Other
activities or transactions that may involve pro forma financial data may be needed if the pro
forma financial data is important to investors, including the following:
 The financial reports of the registrant are not representative of the continuing organization
(for example, tax or cost-sharing arrangements would be eradicated);
 Dividends are reported after the date of the balance sheet by a registrant;
 Refundable preferred stock or liability on either the starting or expiration date of an IPO
changes to common stock;
 Other capitalization adjustments take place on or before the closing date of an IPO; and
 An issuer was previously a firm, a partnership or related business under subchapter S

The following are the basic criteria for pro forma changes:

 Balance sheet: The representation of Pro forma should be based on the most recent historic
balance sheet contained in the filing. If the activity is already represented in the past balance
sheet, a pro forma balance sheet is not needed.
 Income statement: The pro forma submission should be based on the most recent financial
year and the transitional period covered by the filing.
 Footnote reporting on pro forma changes may also be needed for the revenue statement and
balance sheet

Information about the company’s officers, directors and principal shareholders—Form S-1
allows a corporation to define and explain the corporate background of its executive officers
and administrators; directors' and main shareholders' security holdings; directors' and principal
shareholders' dealings with and indebtedness to officers; and the identification of deals with
and compensation payable to its proponents.

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