Flash Numbers - Preliminary Financial Data Offering Disclosure

Summary

These clauses may be used in prospectuses for registered securities offerings in which the issuer will disclose preliminary financial data (or flash numbers). These clauses may be used in an initial public offering (IPO) or subsequent offering by a U.S. or foreign private issuer. These clauses include practical guidance and drafting notes. Flash numbers are generally not required to be disclosed in a registered securities offering. However, issuers often include them in the prospectus when they indicate a significant positive or negative trend in the company's operating results that is not otherwise disclosed by the financial statements required to be provided. Issuers generally do not include flash numbers for periods during which the issuer's financial performance has remained the same or deviated only somewhat from projections. From time to time, an issuer may experience an unexpectedly favorable fiscal quarter in advance of an offering, but the offering will occur either before the issuer's quarterly results are ready or, if the issuer is a reporting company, before a Form 10-Q or other periodic disclosure document is filed. the issuer's management will be motivated to include this information because it will likely have a positive effect on the offering. For further discussion of periodic disclosure requirements, see the Periodic and Current Reporting Resource Kit. An issuer may similarly experience a fiscal quarter with significant, unexpected negative results in advance of an offering. In these circumstances, issuer's counsel may determine that the issuer is required to disclose it by one or more rules under the securities laws, such as: • Item 303 of Regulation S-K (17 C.F.R. § 229.303) requires registered issuers to disclose known trends or uncertainties that have had or will have a material impact on operating results, in the reasonable belief of the registered issuer. • Rule 408 (17 C.F.R. § 230.408) under the Securities Act of 1933, as amended (Securities Act) requires an issuer's registration statement to disclose all material information (even if not otherwise required to be included) necessary to make the statements therein, in light of the circumstances, not misleading. Even if you, as issuer's counsel, determine that such information is not necessary to be disclosed under the above rules, disclosure may still be the best policy. Proactive disclosure may soften the impact on the market of such information as compared to waiting to disclose it in the next Form 10-Q (or other periodic filing, as appropriate), after the offering has begun. However, note that the staff of the Securities and Exchange Commission (SEC) carefully reviews all preliminary financial data presented in an offering document and often issues comment letters requiring clarification or supplemental disclosures. For more information on liability, see Liability under the Federal Securities Laws for Securities Offerings. For more on IPOs generally, see Initial Public Offerings Resource Kit. For a full listing of key content covering offering documents for securities offerings, see Offering Documents Resource Kit.