229.1 Application of Regulation S-K. 229.20 Information required in document.

AUTHORITY: Secs. 6, 7, 8, 10, 19(a), 48 Stat. 78, 79, 81, 85; secs. 12, 13, 14, 15(d), 23(a), 48 Stat. 892, 894, 901; secs. 205, 209, 48 Stat. 906, 908; sec. 203(a), 49 Stat. 704; secs. 1, 3, 8, 49 Stat. 1375, 1377, 1379; sec. 301, 54 Stat. 857; secs. 8, 202, 68 Stat. 685, 686; secs. 3, 4, 5, 6, 78 Stat. 565-568, 569, 570–574; sec. 1, 79 Stat. 1051; secs. 1, 2, 3, 82 Stat. 454, 455; secs. 1, 2, 3-5, 28(c) 84 Stat. 1435, 1497; sec. 105(b), 88 Stat. 1503; secs. 8, 9, 10, 11, 18, 89 Stat. 117, 118, 119, 121, 155; 15 U.S.C. 77f, 77g, 77h, 77j, 77s(a), 781, 78m, 78n, 78/(d), 78w(a).

§ 229.1 Application of Regulation S-K.

This part (together with the General Rules and Regulations under the Securities Act of 1933 and the Securities Exchange Act of 1934 (Parts 230 and 240 of this chapter) and the Interpretative Releases under these acts (Parts 231 and 241 of this chapter) and the forms under these acts (Parts 239 and 249 of this chapter)) states the requirements applicable to the content of the non-financial statement portions of:

(a) Registration statements under the Securities Act of 1933 (Part 239 of this chapter) to the extent provided in the forms to be used for registration under this Act; and

(b) Registration statements under section 12 (Subpart C of Part 249 of this chapter), annual or other reports under sections 13 and 15(d) (Subparts D and E of Part 249 of this chapter), and proxy and information statements under section 14 of the Securities Exchange Act of 1934 to the extent provided in the forms and rules which are to be used for registration and reporting under these sections of this Act. [42 FR 65561, Dec. 30, 1977]

§ 229.20 Information required in document.

Item 1. Description of business. (a) General development of business. De

scribe the general development of the business of the registrant, its subsidiaries and any predecessor(s) during the past five years, or such shorter period as the registrant may have been engaged in business. Information shall be disclosed for earlier periods if material to an understanding of the general development of the business.

(1) In describing developments, information shall be given as to matters such as the following: the year in which the registrant was organized and its form of organization; the nature and results of any bankruptcy, receivership or similar proceedings with respect to the registrant or any of its significant subsidiaries; the nature and results of any other material reclassification, merger or consolidation of the registrant or any of its significant subsidiaries; the acquisition or disposition of any material amount of assets otherwise than in the ordinary course of business; and any material changes in the mode of conducting the business.

NOTE.-The following requirement in paragraph (2) applies only to registrants filing a registration statement on Form S-1 (17 CFR 239.11) under the Securities Act of 1933 or on Form 10 (17 CFR 249.210) under the Securities Exchange Act of 1934 for the first time who (including predecessors) have not received revenue from operations during each of the three fiscal years immediately prior to the filing of the registration statement. No response is required if similar information has previously been filed for prior periods in a registration statement on Form 10 effective under the Securities Exchange Act of 1934 or in a registration statement effective under the Securities Act of 1933.

(2) Describe, if formulated, the registrant's plan of operation for the remainder of the fiscal year, if the registration statement is filed prior to the end of the registrant's second fiscal quarter. Describe, if formulated, the registrant's plan of operation for the remainder of the fiscal year and for the first six months of the next fiscal year if the registration statement is filed subsequent to the end of the second fiscal quarter. If such information is not available, the reasons for its not being available shall be stated.

Disclosure relating to any plan should include such matters as:

(i) If a registration statement on Form S-1 (17 CFR 239.11), a statement in narrative form indicating the registrant's opinion as to the period of time that the proceeds from the offering will satisfy cash requirements and whether in the next 6 months it will be necessary to raise additional funds to meet the expenditures required for operating the business of the registrant. The specific reasons for such opinion shall be set forth and categories of expenditures and sources of cash resources shall be identified; however, amounts of expenditures and cash resources need not be provided. In addition, if the narrative statement is based on a cash budget, such budget should be furnished to the Commission as supplemental information, but not as a part of the registration statement.

(ii) An explanation of material product research and development to be performed during the period covered in the plan.

(iii) Any anticipated material acquisition of plant and equipment and the capacity thereof.

(iv) Any anticipated material changes in number of employees in the various departments such as research and development, production, sales or administration.

(v) Other material areas which may be peculiar to the registrant's busi

ness.

(b) Financial information about industry segments—(1) Industry segments. State for each of the registrant's last five fiscal years or for each fiscal year the registrant has been engaged in business, whichever period is shorter, the amounts of revenue (with sales to unaffiliated customers and sales or transfers to other industry segments of the registrant shown separately), operating profit or loss and identifiable assets attributable to each of the registrant's industry segments. (See Appendix A for a suggested tabular format for presentation of this information.) Include for those fiscal years for which financial statements are presented in the document the revenue, profit and asset information re

lating to those industry segments for which such information is included in the financial statements. For fiscal years for which financial statements are not presented in the document, set forth the revenue, profit and asset information included in the financial statements for those years or which would have been included if segment financial information had been required.

(i) The prior period information shall be retroactively restated in the following circumstances, unless not material, with appropriate disclosure of the nature and effect of the restatement:

(A) When the financial statements of the registrant as a whole have been retroactively restated.

(B) When there has been a change in the way the registrant's products or services are grouped into industry segments and such change affects the segment information being reported. Restatement is not required when a registrant's reportable segments change solely as a result of a change in the nature of its operations or as a result of a segment losing or gaining in significance.

(ii) If intersegment sales/transfers or purchases were made at prices substantially higher or lower than prevailing market prices or at prices substantially higher or lower than those charged to or received from unaffiliated parties for similar products or services and the effect of this pricing practice on the reported revenue and/or operating profit or loss of a segment is material to an understanding of the segment information, disclose the basis of accounting for such transfers. In addition, discuss the effect of the transfers on revenue and/or operating profit or loss of the segments. (See Instruction 3 to Item 1(b)(1).) If practicable, the discussion should indicate the estimated or approximate amounts of revenue and operating profit or loss which the particular segment would have had or the percentage of increase or decrease in the amounts of reported revenue and operating profit or loss if the intersegment sales/transfers or purchases had been made at the prevailing market place or at the price

charged to or received from unaffiliated parties.

(iii) If the registrant includes in the document interim period financial information, discuss any facts relating to the performance of any of the segments during the period which, in the opinion of management, indicate that the five year segment financial data may not be indicative of current or future operations of the segment. Comparative financial information shall be included to the extent necessary to the discussion.

Instructions to Item 1(b)(1). 1. See Item 1(b)(2) with respect to information for fiscal years beginning before December 16, 1976.

2. To the extent that the financial information included pursuant to this item complies with generally accepted accounting principles, the registrant may include in its financial statements a cross reference to this data in lieu of presenting duplicative information about its segments in the financial statements.

3. In determining what information about the industry segments is material to an understanding of the registrant's business taken as a whole and therefore should be disclosed, the registrant should take into account both quantitative and qualitative factors such as the significance of the matter to the registrant (for example, whether a matter with a relatively minor impact on the company's business is represented by management to be important to its future profitability), the pervasiveness of the matter (for example, whether it affects or may affect numerous items in the segment information) and the impact of the matter (for example, whether it distorts the trends reflected in the segment information). Situations may arise when information should be disclosed about a segment, although the information in quantitative terms may not appear significant to the registrant's business taken as a whole.

(2) Information as to lines of business. For fiscal years beginning before December 16, 1976, the revenue, income and any necessary explanatory information relating to lines of business included by the registrant in a document filed with the Commission may be furnished in lieu of the industry segment information for such years. The lack of comparability of the historical line of business information with the industry segment information shall be explained.

(c) Narrative description of business. (1) Describe the business done and intended to be done by the registrant and its subsidiaries focusing upon the registrant's dominant industry segment or each reportable industry segment about which financial information is presented in the financial statements. The description of each such segment shall include the information specified in paragraphs (c)(1) (i) through (x) of this item 1 to the extent material to an understanding of the registrant's business taken as a whole. In determining what information about a company's industry segments is material and should be disclosed, the registrant should take into account both quantitative and qualitative factors such as the significance of the matter to the registrant (for example, whether a matter with a relatively minor impact on the company's business is represented by management to be important to its future profitability), the pervasiveness of the matter (for example, whether it affects or may affect numerous items in the segment information) and the impact of the matter (for example, whether it distorts the trends reflected in the segment information). Situations may arise when information should be disclosed about a segment although the information in quantitative terms may not appear material to the registrant's business taken as a whole. The descriptions of the segments may vary in scope and detail as a result of the importance of the segments to a registrant's business and the materiality of the class of information discussed as to each.

(i) The principal products produced and services rendered by the registrant in the industry segment and the principal markets for, and methods of distribution of, the segment's principal products and services. In addition, state for each of the last five fiscal years the amount or percentage of total revenue contributed by any class of similar products or services which accounted for 10 percent or more of consolidated revenue in either of the last two fiscal years or 15 percent or more of consolidated revenue if total