One More Year

On March 2, 2005, the Securities and Exchange Commission granted non-accelerated filers — companies with a public float of $75 million or less — and foreign private issuers filing annual reports on Form 20-F or 40-F a 1-year extension for compliance with SEC rules adopted under Section 404 of the Sarbanes-Oxley Act (SOX) of 2002. The rules require companies to:

• include in their annual reports a report by management on the company's internal control over financial reporting and an attestation as to the same by the company's independent auditor (Items 308(a) and (b) under Regulations S-K and S-B);
• evaluate, as of the end of each fiscal period, any change in internal control over financial reporting that occurred during the period that has materially affected, or is reasonably likely to materially affect, the company's internal control over financial reporting (Exchange Act Rules 13a-15d or 15d-15(d)); and
• include certain representations regarding internal control over financial reporting in the certificates by the company's principal executive and financial officers that are filed with its annual and quarterly reports (Exchange Act Rules 13a-14(a) and 15d-14(a)).

Under the terms of the extension, a company that is a non-accelerated filer or foreign private issuer must begin to comply with the requirements listed above for its first fiscal year ending on or after July 15, 2006. For a company with a Dec. 31 fiscal year end, this would require that management's report and the auditors' attestation be included in the company's Annual Report on Form 10-K or 10-KSB for the fiscal year ended Dec. 31, 2006, which would be filed in March 2007. Unlike the management/auditor reports and officer certifications, the evaluation of changes in internal control over financial reporting would need to be included in the first periodic report after the first annual report including management's report — in the example above, the Quarterly Report on Form 10-Q or Form 10-QSB for the first quarter of 2007.