Form 10-K, an annual report filed by US-based public registrants, is the most comprehensive source of information regarding a company’s financials and its underlying business. These reports are thoroughly scrutinized by investors and other users, which explains why they need to be promptly amended in the event of an error or if material information is missing or omitted. Although amended filings can raise concern for investors and other stakeholders (especially if filed to correct material errors), some amendments are filed for mundane reasons.
In this analysis, we look at the primary reasons NYSE and Nasdaq listed companies disclosed for having to file amended 10-Ks in 2020.
In 2020, 504 amended 10-Ks were filed, a 34% increase from the 375 filed in 2019. This increase can likely be attributed to the impact of the COVID-19 pandemic on regulatory filings and annual general meeting schedules; nearly 15% of the amended 10-Ks referenced the pandemic in their explanatory note.
For the seventh consecutive year, the most common reason for filing a 10-K/A was to incorporate information required in Part III. This information, encompassing Items 10-14, can be filed within the original 10-K, proxy statement, or amended 10-K no later than 120 days after the period end. This is a technical amendment and should not cause concerns. Here is an example of a typical disclosure:
We are filing this Amendment No. 1 on Form 10-K/A (this “Amendment No. 1”) to amend our Annual Report on Form 10-K for the year ended December 31, 2019, originally filed with the Securities and Exchange Commission (the “SEC”) on March 26, 2020, to include the information required by Items 10 through 14 of Part III of Form 10-K. We previously omitted this information from our Form 10-K in reliance on General Instruction G(3) to Form 10-K, which permits that information to be incorporated in the Form 10-K by reference from a definitive proxy statement if the proxy statement is filed no later than 120 days after our fiscal year-end. We are filing this Amendment No. 1 solely to provide the information required in Part III of Form 10-K because our definitive proxy statement containing this information will not be filed until a later date. The reference on the cover of the Form 10-K to the incorporation by reference to portions of our definitive proxy statement into Part III of the original Form 10-K is hereby deleted.
In 2020, 8.9% of these filings specifically cited COVID-19 as the reason for their delayed proxy filing or postponed annual general meeting.
The second most common reason for a 10-K/A was to include disclosure related to the 45-day filing extension granted by the SEC in response to the pandemic. Originally issued on March 4, 2020 (SEC Release 34- 88318) and amended March 25, 2020 (SEC Release 34-88465), Order Under Section 36 of the Securities Exchange Act of 1934 Granting Exemptions from Specified Provisions of the Exchange Act and Certain Rules Thereunder (the “Order”), granted a 45-day extension for filings between March 1, 2020 and July 1, 2020 to registrants “unable to meet a filing deadline due to circumstances related to COVID-19”. The Order required registrants to disclose in these filings that they had relied on the Order and the reasons for the delayed filing. Here’s an example of such a disclosure:
TMSR Company Holding Limited (the “Company”) is filing this Amendment No. 1 (this “Amendment”) to its Annual Report on Form 10-K for the fiscal year ended December 31, 2019, originally filed with the Securities and Exchange Commission (the “SEC”) on April 17, 2020 (the “Annual Report”).
The Registrant is filing this Amendment to include those disclosures required by the SEC’s March 4, 2020 Order (Release No. 34-88318), as modified on March 25, 2020 (Release No. 34-88465). The Amendment, is not intended to reflect events that may have occurred subsequent to the original filing date of the Annual Report.
As previously reported on the current report on Form 8-K filed on March 30, 2020, the Company was unable to file its Annual Report by the original deadline of March 30, 2020, due to circumstances related to the COVID-19 pandemic. The Company followed the restrictive measures implemented in China, by suspending operation and having employees work remotely during February and March 2020. The Company gradually resumed operation and production starting in April 2020. Such restrictive measures caused a delay in the entry time of the on-site audit by the Company’s independent public accountant. In addition, the offices of WWC. P.C., the independent public accounting firm of the Company, is located in one of the epicenters of the coronavirus outbreak in the United States. As a result, the Company experienced a delay in the preparation, audit and completion of the Company’s financial statements for the Annual Report.
Missing signatures and exhibits were the third most common reason for an amended 10-K. These amendments are often due to typographical or other inconsequential errors and do not raise alarms.
Although many of these amendments are mundane and routine in nature (such as Part III requirements), other reasons could be indicative of process weaknesses or other underlying issues and should be carefully evaluated.
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