[Code of Federal Regulations]
[Title 17, Volume 2]
[Revised as of April 1, 2002]
From the U.S. Government Printing Office via GPO Access
[CITE: 17CFR229.101]

[Page 366-370]
 
              TITLE 17--COMMODITY AND SECURITIES EXCHANGES
 
             CHAPTER II--SECURITIES AND EXCHANGE COMMISSION
 
 PART 229--STANDARD INSTRUCTIONS FOR FILING FORMS UNDER SECURITIES ACT OF 1933, SECURITIES EXCHANGE ACT OF 1934 AND ENERGY POLICY AND CONSERVATION ACT OF 1975--
REGULATION S-K--Table of Contents
 
                        Subpart 229.100--Business
 
Sec. 229.101  (Item 101) Description of business.


    (a) General development of business. Describe 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.
    (2) Registrants, (i) filing a registration statement on Form S-1 
(Sec. 239.11 of this chapter) under the Securities Act or on Form 10 and 
Form 10-SB (Sec. 249.210 of this chapter) under the Exchange Act, (ii) 
not subject to the reporting requirements of section 13(a) or 15(d) of 
the Exchange Act immediately prior to the filing of such registration 
statement, and (iii) that (including predecessors) have not received 
revenue from operations during each of the 3 fiscal years immediately 
prior to the filing of registration statement, shall provide the 
following information:
    (A) If the registration statement is filed prior to the end of the 
registrant's second fiscal quarter, a description of the registrant's 
plan of operation for the remainder of the fiscal year; or
    (B) If the registration statement is filed subsequent to the end of 
the registrant's second fiscal quarter, a descripition of 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 such information is 
not available, the reasons for its not being available shall be stated. 
Disclosure relating to any plan shall include such matters as:
    (1) In the case of a registration statement on Form S-1, 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 six 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 shall be furnished to the 
Commission as supplemental information, but not as part of the 
registration statement;
    (2) An explanation of material product research and development to 
be performed during the period covered in the plan;
    (3) Any anticipated material acquisition of plant and equipment and 
the capacity thereof;
    (4) Any anticipated material changes in number of employees in the 
various departments such as research and development, production, sales 
or administration; and
    (5) Other material areas which may be peculiar to the registrant's 
business.
    (b) Financial information about segments. Report for each segment, 
as defined by generally accepted accounting principles, revenues from 
external customers, a measure of profit or loss and total assets. A 
registrant must report this information for each of the last three 
fiscal years or for as long as it has been in business, whichever period 
is shorter. If the information provided in response to this paragraph 
(b) conforms with generally accepted accounting principles, a registrant 
may include in its financial statements a cross reference to this data 
in lieu of presenting duplicative information in the financial 
statements; conversely, a registrant may cross reference to the 
financial statements.
    (1) If a registrant changes the structure of its internal 
organization in a

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manner that causes the composition of its reportable segments to change, 
the registrant must restate the corresponding information for earlier 
periods, including interim periods, unless it is impracticable to do so. 
Following a change in the composition of its reportable segments, a 
registrant shall disclose whether it has restated the corresponding 
items of segment information for earlier periods. If it has not restated 
the items from earlier periods, the registrant shall disclose in the 
year in which the change occurs segment information for the current 
period under both the old basis and the new basis of segmentation, 
unless it is impracticable to do so.
    (2) If the registrant includes, or is required by Article 3 of 
Regulation S-X (17 CFR 210) to include, interim financial statements, 
discuss any facts relating to the performance of any of the segments 
during the period which, in the opinion of management, indicate that the 
three 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.
    (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 segment or each reportable 
segment about which financial information is presented in the financial 
statements. To the extent material to an understanding of the 
registrant's business taken as a whole, the description of each such 
segment shall include the information specified in paragraphs (c)(1) (i) 
through (x) of this section. The matters specified in paragraphs (c)(1) 
(xi) through (xiii) of this section shall be discussed with respect to 
the registrant's business in general; where material, the segments to 
which these matters are significant shall be identified.
    (i) The principal products produced and services rendered by the 
registrant in the 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 three 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 any of the last three fiscal years or 15 percent or more of 
consolidated revenue, if total revenue did not exceed $50,000,000 during 
any of such fiscal years.
    (ii) A description of the status of a product or segment (e.g. 
whether in the planning stage, whether prototypes exist, the degree to 
which product design has progressed or whether further engineering is 
necessary), if there has been a public announcement of, or if the 
registrant otherwise has made public information about, a new product or 
segment that would require the investment of a material amount of the 
assets of the registrant or that otherwise is material. This paragraph 
is not intended to require disclosure of otherwise nonpublic corporate 
information the disclosure of which would affect adversely the 
registrant's competitive position.
    (iii) The sources and availability of raw materials.
    (iv) The importance to the segment and the duration and effect of 
all patents, trademarks, licenses, franchises and concessions held.
    (v) The extent to which the business of the segment is or may be 
seasonal.
    (vi) The practices of the registrant and the industry (respective 
industries) relating to working capital items (e.g., where the 
registrant is required to carry significant amounts of inventory to meet 
rapid delivery requirements of customers or to assure itself of a 
continuous allotment of goods from suppliers; where the registrant 
provides rights to return merchandise; or where the registrant has 
provided extended payment terms to customers).
    (vii) The dependence of the segment upon a single customer, or a few 
customers, the loss of any one or more of which would have a material 
adverse effect on the segment. The name of any customer and its 
relationship, if any, with the registrant or its subsidiaries shall be 
disclosed if sales to the customer by one or more segments are made in 
an aggregate amount equal to 10 percent or more of the registrant's 
consolidated revenues and the loss of such customer would have a 
material

[[Page 368]]

adverse effect on the registrant and its subsidiaries taken as a whole. 
The names of other customers may be included, unless in the particular 
case the effect of including the names would be misleading. For purposes 
of this paragraph, a group of customers under common control or 
customers that are affiliates of each other shall be regarded as a 
single customer.
    (viii) The dollar amount of backlog orders believed to be firm, as 
of a recent date and as of a comparable date in the preceding fiscal 
year, together with an indication of the portion thereof not reasonably 
expected to be filled within the current fiscal year, and seasonal or 
other material aspects of the backlog. (There may be included as firm 
orders government orders that are firm but not yet funded and contracts 
awarded but not yet signed, provided an appropriate statement is added 
to explain the nature of such orders and the amount thereof. The portion 
of orders already included in sales or operating revenues on the basis 
of percentage of completion or program accounting shall be excluded.)
    (ix) A description of any material portion of the business that may 
be subject to renegotiation of profits or termination of contracts or 
subcontracts at the election of the Government.
    (x) Competitive conditions in the business involved including, where 
material, the identity of the particular markets in which the registrant 
competes, an estimate of the number of competitors and the registrant's 
competitive position, if known or reasonably available to the 
registrant. Separate consideration shall be given to the principal 
products or services or classes of products or services of the segment, 
if any. Generally, the names of competitors need not be disclosed. The 
registrant may include such names, unless in the particular case the 
effect of including the names would be misleading. Where, however, the 
registrant knows or has reason to know that one or a small number of 
competitors is dominant in the industry it shall be identified. The 
principal methods of competition (e.g., price, service, warranty or 
product performance) shall be identified, and positive and negative 
factors pertaining to the competitive position of the registrant, to the 
extent that they exist, shall be explained if known or reasonably 
available to the registrant.
    (xi) If material, the estimated amount spent during each of the last 
three fiscal years on company-sponsored research and development 
activities determined in accordance with generally accepted accounting 
principles. In addition, state, if material, the estimated dollar amount 
spent during each of such years on customer-sponsored research 
activities relating to the development of new products, services or 
techniques or the improvement of existing products, services or 
techniques.
    (xii) Appropriate disclosure also shall be made as to the material 
effects that compliance with Federal, State and local provisions which 
have been enacted or adopted regulating the discharge of materials into 
the environment, or otherwise relating to the protection of the 
environment, may have upon the capital expenditures, earnings and 
competitive position of the registrant and its subsidiaries. The 
registrant shall disclose any material estimated capital expenditures 
for environmental control facilities for the remainder of its current 
fiscal year and its succeeding fiscal year and for such further periods 
as the registrant may deem materials.
    (xiii) The number of persons employed by the registrant.
    (d) Financial information about geographic areas. (1) State for each 
of the registrant's last three fiscal years, or for each fiscal year the 
registrant has been engaged in business, whichever period is shorter:
    (i) Revenues from external customers attributed to:
    (A) The registrant's country of domicile;
    (B) All foreign countries, in total, from which the registrant 
derives revenues; and
    (C) Any individual foreign country, if material. Disclose the basis 
for attributing revenues from external customers to individual 
countries.

[[Page 369]]

    (ii) Long-lived assets, other than financial instruments, long-term 
customer relationships of a financial institution, mortgage and other 
servicing rights, deferred policy acquisition costs, and deferred tax 
assets, located in:
    (A) The registrant's country of domicile;
    (B) All foreign countries, in total, in which the registrant holds 
assets; and
    (C) Any individual foreign country, if material.
    (2) A registrant shall report the amounts based on the financial 
information that it uses to produce the general-purpose financial 
statements. If providing the geographic information is impracticable, 
the registrant shall disclose that fact. A registrant may wish to 
provide, in addition to the information required by paragraph (d)(1) of 
this section, subtotals of geographic information about groups of 
countries. To the extent that the disclosed information conforms with 
generally accepted accounting principles, the registrant may include in 
its financial statements a cross reference to this data in lieu of 
presenting duplicative data in its financial statements; conversely, a 
registrant may cross-reference to the financial statements.
    (3) A registrant shall describe any risks attendant to the foreign 
operations and any dependence on one or more of the registrant's 
segments upon such foreign operations, unless it would be more 
appropriate to discuss this information in connection with the 
description of one or more of the registrant's segments under paragraph 
(c) of this item.
    (4) If the registrant includes, or is required by Article 3 of 
Regulation S-X (17 CFR 210), to include, interim financial statements, 
discuss any facts relating to the information furnished under this 
paragraph (d) that, in the opinion of management, indicate that the 
three year financial data for geographic areas may not be indicative of 
current or future operations. To the extent necessary to the discussion, 
include comparative information.
    (e) Available information. Disclose the following in any 
registration statement you file under the Securities Act of 1933:
    (1) Whether you file reports with the Securities and Exchange 
Commission. If you are reporting company, identify the reports and other 
information you file with the SEC.
    (2) That the public may read and copy any materials you file with 
the SEC at the SEC's Public Reference Room at 450 Fifth Street, NW., 
Washington, DC 20549. State that the public may obtain information on 
the operation of the Public Reference Room by calling the SEC at 1-800-
SEC-0330. If you are an electronic filer, state that the SEC maintains 
an Internet site that contains reports, proxy and information 
statements, and other information regarding issuers that file 
electronically with the SEC and state the address of that site (http://
www.sec.gov). You are encouraged to give your Internet address, if 
available;
    (f) Reports to security holders. Disclose the following information 
in any registration statement you file under the Securities Act:
    (1) If the SEC's proxy rules or regulations, or stock exchange 
requirements, do not require you to send an annual report to security 
holders or to holders of American depository receipts, describe briefly 
the nature and frequency of reports that you will give to security 
holders. Specify whether the reports that you give will contain 
financial information that has been examined and reported on, with an 
opinion expressed ``by'' an independent public or certified public 
accountant.
    (2) For a foreign private issuer, if the report will not contain 
financial information prepared in accordance with U.S. generally 
accepted accounting principles, you must state whether the report will 
include a reconciliation of this information with U.S. generally 
accepted accounting principles.
    (g) Enforceability of civil liabilities against foreign persons. 
Disclose the following if you are a foreign private issuer filing a 
registration statement under the Securities Act:
    (1) Whether or not investors may bring actions under the civil 
liability provisions of the U.S. Federal securities laws against the 
foreign private issuer, any of its officers and directors who are 
residents of a foreign country, any underwriters or experts named in

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the registration statement that are residents of a foreign country, and 
whether investors may enforce these civil liability provisions when the 
assets of the issuer or these other persons are located outside of the 
United States. The disclosure must address the following matters:
    (i) The investor's ability to effect service of process within the 
United States on the foreign private issuer or any person;
    (ii) The investor's ability to enforce judgments obtained in U.S. 
courts against foreign persons based upon the civil liability provisions 
of the U.S. Federal securities laws;
    (iii) The investor's ability to enforce, in an appropriate foreign 
court, judgments of U.S. courts based upon the civil liability 
provisions of the U.S. Federal securities laws; and
    (iv) The investor's ability to bring an original action in an 
appropriate foreign court to enforce liabilities against the foreign 
private issuer or any person based upon the U.S. Federal securities 
laws.
    (2) If you provide this disclosure based on an opinion of counsel, 
name counsel in the prospectus and file as an exhibit to the 
registration statement a signed consent of counsel to the use of its 
name and opinion.

Instructions to Item 101: 1. In determining what information about the 
segments is material to an understanding of the registrant's business 
taken as a whole and therefore required to be disclosed, pursuant to 
paragraph (c) of this Item, the registrant should take into account both 
quantitative and qualitative factors such as the significance of the 
matter to the registrant (e.g., whether a matter with a relatively minor 
impact on the registrant's business is represented by management to be 
important to its future profitability), the pervasiveness of the matter 
(e.g., whether it affects or may affect numerous items in the segment 
information), and the impact of the matter (e.g., whether it distorts 
the trends reflected in the segment information). Situations may arise 
when information should be disclosed about a segment, althought the 
information in quantitative terms may not appear significant to the 
registrant's business taken as a whole.
    2. Base the determination of whether information about segments is 
required for a particular year upon an evaluation of interperiod 
comparability. For instance, interperiod comparability would require a 
registrant to report segment information in the current period even if 
not material under the criteria for reportability of SFAS No. 131 if a 
segment has been significant in the immediately preceding period and the 
registrant expects it to be significant in the future.
    3. The Commission, upon written request of the registrant and where 
consistent with the protection of investors, may permit the omission of 
any of the information required by this Item or the furnishing in 
substitution thereof of appropriate information of comparable character.

[47 FR 11401, Mar. 16, 1982, as amended at 63 FR 6381, Feb. 6, 1998; 64 
FR 1734, Jan. 12, 1999]