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Every lawyer that represents a U.S. public company will at some point in that lawyer’s career get an anxiety-filled call from a client (very often late in the day on a Friday), with the unwelcome news of misconduct on the part of some employee, director or officer of the company. Such misconduct can involve serious accounting improprieties, disclosure failures, criminal or civil actions involving the company and/or management, scandalous personal indiscretions, threatened disciplinary actions, fraud, false statements, or omissions, bribery or forgery. Whether or not such matters directly involve the company, the two most critical questions that will be raised will be what must be disclosed with respect to the matter and when must the matter be disclosed. The following checklist is intended to highlight certain guideposts that are important to consider while analyzing these questions.

Materiality

Is the information “material” within the meaning of federal securities laws?

• Consider this analyses based on the information as it becomes available with sufficient level of confidence to be actionable and in light of the specific factors mentioned below.

• Consider the quantitative impact of any non-compliance in relation to earnings, balance sheet items, cash flow, forecasts and budgets.

• Consider the qualitative impact of any non-compliance in relation to the company’s strategy, prospects, senior management and management controls. In Staff Accounting Bulletin 99, the SEC also noted the following among a non-exhaustive list of qualitative matters to consider: whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or profitability; whether the misstatement affects the registrant’s compliance with regulatory requirements; whether the misstatement affects the registrant’s compliance with loan covenants or other contractual requirements; whether the misstatement has the effect of increasing management’s compensation; and whether the misstatement involves concealment of an unlawful transaction.

Is there existing disclosure that needs to be corrected or updated?

• Confirm that there are no public statements (e.g., filings, press releases, trade releases, analyst meetings, etc.) that are materially misleading based on new information.

• Confirm that there are no private statements (e.g., rating agencies, ISS, lenders, one-on-one investor meetings, etc.) that are materially misleading based on new information.

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

• Confirm that financial statements, covering one or more years or interim periods, may continue to be relied upon despite any error in such financial statements in accordance with FASB ASC Topic 250.

• We note that this would not be an issue since there would have been no error in accounting for the awarded contract.

Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

• Confirm that the company has not granted a waiver, including an implicit waiver, from a provision of the code of ethics to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

Form 10-K Disclosure

Item 3. Legal Proceedings. (Item 103 of Regulation S-K)

• Confirm that there are no related material pending legal proceedings.

• “Material” legal proceedings also include: (1) any proceeding that involves a claim for damages exceeding 10% of the consolidated current assets of the company, (2) any material bankruptcy, receivership, or similar proceeding with respect to the company or any of its significant subsidiaries or (3) any material proceedings to which any director, officer or affiliate of the company has a material interest adverse to the company.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Item 303 of Regulation S-K)

• Confirm that there are no related unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income from continuing operations.

• Confirm that there are no related known trends or uncertainties that have had or that the company reasonably expects will have a material impact on net sales or revenues or income from continuing operations.

Item 9A. Controls and Procedures. (Item 307 of Regulation S-K)

• Confirm that there are no related changes to the conclusions of principal executive and principal financial officers regarding the effectiveness of disclosure controls and procedures as of the end of the period covered by the report, based on the evaluation of these controls and procedures.

Item 9A. Controls and Procedures. (Item 308 of Regulation S-K)

• Confirm that there are no related changes to management’s assessment of the effectiveness of internal control over financial reporting as of the end of the company’s most recent fiscal year and statement as to whether or not internal control over financial reporting is effective.

• Confirm that there are no material weaknesses in internal control over financial reporting that have been identified by management.

• Confirm that there are no related changes to registered public accounting firm’s attestation report on internal control over financial reporting.

• Confirm that there are no changes in internal control over financial reporting identified in connection with management’s evaluation of internal controls that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

Item 503(c) of Regulation S-K

• Confirm that no additional risk factors are necessary.

Exchange Act

Section 10A

• Confirm that all remedial actions have been taken so that the auditors have no mandatory reporting requirements.

• Section 10A requires, among other things, that the auditor report to the board of directors certain uncorrected illegal acts of the issuer and that the issuer notify the SEC that it has received such a report. If the issuer fails to provide that notice, the auditor is required by Section 10A to furnish directly to the SEC the report given to the board. Disclosure is triggered if the illegal act has a material effect on the issuer’s financial statements, senior management has not taken, and the board of directors has not caused senior management to take, timely and appropriate remedial actions with respect to the illegal act and the failure to take remedial action is reasonably expected to warrant either a departure from the auditor’s standard audit report, when made, or the auditor’s resignation from the audit engagement. https://www.sec.gov/rules/final/34-38387.txt

Effective Registration Statements on Form S-8 and Form S-3

• Note that effective registration statements are automatically updated with filings under the Exchange Act and, therefore, would incorporate any misstatements or omissions previously made and any failures to timely incorporate new material information.

Sections 10(b) and 13(a) of the Exchange Act and Rule 10b-5

• Confirm that there have been no statement of a material fact or omissions to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading about the company or its business, including those relating to revenues, expenses, profits, assets or liabilities, that could be impacted by alleged misconduct.

Sarbanes-Oxley

Section 302 of Sarbanes-Oxley

• Confirm that certifying officers can certify on each periodic report that, among other things:

(i) based on the officer’s knowledge, the report contains no material misstatements or omissions;

(ii) based on the officer’s knowledge, the relevant financial statements are accurate in all material respects;

(iii) internal controls are properly designed; and

(iv) the certifying officers have disclosed to audit committee and auditors all significant internal control deficiencies.

Section 304 of Sarbanes-Oxley

• Confirm that no reduction or recoupment in performance-based compensation or profits on stock sales is required, if financial statements are to be restated. Confirm terms of compensation plans are not implicated.

Section 404 of Sarbanes-Oxley

• Confirm that the auditors are able report on the effectiveness of internal controls over financial reporting that could result in a material misstatement of the company’s financial statements.

Section 802 of Sarbanes-Oxley

• Confirm that no records have been altered, destroyed, mutilated, concealed, or falsified with the intent to obstruct, impede or influence a potential or actual federal investigation.

Whistleblowers

Section 922 of the Dodd-Frank

• Consider risk the SEC’s whistleblower and bounty payment program.

• The Dodd-Frank Act provides that the SEC shall pay awards to eligible whistleblowers who voluntarily provides the SEC with original information that leads to a successful enforcement action yielding monetary sanctions of over $1 million. https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml

• The Dodd-Frank Act and Sarbanes-Oxley Act also expressly prohibits retaliation by employers against whistleblowers and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers in violation of the Act.

Agreements

Representations and covenants

• Confirm compliance with representations and covenants under credit agreement and other agreements.

• For example, joint venture and similar agreements, commercial agreements (purchase, sale, services), indentures for outstanding notes, underwriting agreements, dealer-manager agreements, etc.

Investor Relations

• Consider response to questions from investors

D&O Insurance

Policies and related applications

• Confirm that there are no disclosure implications to present policies, including pending renewal applications.

General liability insurance

Policies and related applications

• Confirm that there are no disclosure implications to present policies, including pending renewal applications.

Blackouts / trading windows

• Consider need to institute a trading blackout, if the information is considered material non-public information.

• This may not necessarily impact 10b5-1 plans although it may create an appearance issues.

Government grants or awards

• Consider implications, if any

U.S. or foreign permits or licenses

• Consider implications, if any

Tax reporting

• Consider implications, if any

Every lawyer that represents a U.S. public company will at some point in that lawyer’s career get an anxiety-filled call from a client (very often late in the day on a Friday), with the unwelcome news of misconduct on the part of some employee, director or officer of the company. Such misconduct can involve serious accounting improprieties, disclosure failures, criminal or civil actions involving the company and/or management, scandalous personal indiscretions, threatened disciplinary actions, fraud, false statements, or omissions, bribery or forgery. Whether or not such matters directly involve the company, the two most critical questions that will be raised will be what must be disclosed with respect to the matter and when must the matter be disclosed. The following checklist is intended to highlight certain guideposts that are important to consider while analyzing these questions.

Materiality

Is the information “material” within the meaning of federal securities laws?

• Consider this analyses based on the information as it becomes available with sufficient level of confidence to be actionable and in light of the specific factors mentioned below.

• Consider the quantitative impact of any non-compliance in relation to earnings, balance sheet items, cash flow, forecasts and budgets.

• Consider the qualitative impact of any non-compliance in relation to the company’s strategy, prospects, senior management and management controls. In Staff Accounting Bulletin 99, the SEC also noted the following among a non-exhaustive list of qualitative matters to consider: whether the misstatement concerns a segment or other portion of the registrant’s business that has been identified as playing a significant role in the registrant’s operations or profitability; whether the misstatement affects the registrant’s compliance with regulatory requirements; whether the misstatement affects the registrant’s compliance with loan covenants or other contractual requirements; whether the misstatement has the effect of increasing management’s compensation; and whether the misstatement involves concealment of an unlawful transaction.

Is there existing disclosure that needs to be corrected or updated?

• Confirm that there are no public statements (e.g., filings, press releases, trade releases, analyst meetings, etc.) that are materially misleading based on new information.

• Confirm that there are no private statements (e.g., rating agencies, ISS, lenders, one-on-one investor meetings, etc.) that are materially misleading based on new information.

Item 4.02. Non-Reliance on Previously Issued Financial Statements or a Related Audit Report or Completed Interim Review.

• Confirm that financial statements, covering one or more years or interim periods, may continue to be relied upon despite any error in such financial statements in accordance with FASB ASC Topic 250.

• We note that this would not be an issue since there would have been no error in accounting for the awarded contract.

Item 5.05. Amendments to the Registrant’s Code of Ethics, or Waiver of a Provision of the Code of Ethics.

• Confirm that the company has not granted a waiver, including an implicit waiver, from a provision of the code of ethics to its principal executive officer, principal financial officer, principal accounting officer or controller or persons performing similar functions.

Form 10-K Disclosure

Item 3. Legal Proceedings. (Item 103 of Regulation S-K)

• Confirm that there are no related material pending legal proceedings.

• “Material” legal proceedings also include: (1) any proceeding that involves a claim for damages exceeding 10% of the consolidated current assets of the company, (2) any material bankruptcy, receivership, or similar proceeding with respect to the company or any of its significant subsidiaries or (3) any material proceedings to which any director, officer or affiliate of the company has a material interest adverse to the company.

Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. (Item 303 of Regulation S-K)

• Confirm that there are no related unusual or infrequent events or transactions or any significant economic changes that materially affected the amount of reported income from continuing operations.

• Confirm that there are no related known trends or uncertainties that have had or that the company reasonably expects will have a material impact on net sales or revenues or income from continuing operations.

Item 9A. Controls and Procedures. (Item 307 of Regulation S-K)

• Confirm that there are no related changes to the conclusions of principal executive and principal financial officers regarding the effectiveness of disclosure controls and procedures as of the end of the period covered by the report, based on the evaluation of these controls and procedures.

Item 9A. Controls and Procedures. (Item 308 of Regulation S-K)

• Confirm that there are no related changes to management’s assessment of the effectiveness of internal control over financial reporting as of the end of the company’s most recent fiscal year and statement as to whether or not internal control over financial reporting is effective.

• Confirm that there are no material weaknesses in internal control over financial reporting that have been identified by management.

• Confirm that there are no related changes to registered public accounting firm’s attestation report on internal control over financial reporting.

• Confirm that there are no changes in internal control over financial reporting identified in connection with management’s evaluation of internal controls that has materially affected, or is reasonably likely to materially affect, internal control over financial reporting.

Item 503(c) of Regulation S-K

• Confirm that no additional risk factors are necessary.

Exchange Act

Section 10A

• Confirm that all remedial actions have been taken so that the auditors have no mandatory reporting requirements.

• Section 10A requires, among other things, that the auditor report to the board of directors certain uncorrected illegal acts of the issuer and that the issuer notify the SEC that it has received such a report. If the issuer fails to provide that notice, the auditor is required by Section 10A to furnish directly to the SEC the report given to the board. Disclosure is triggered if the illegal act has a material effect on the issuer’s financial statements, senior management has not taken, and the board of directors has not caused senior management to take, timely and appropriate remedial actions with respect to the illegal act and the failure to take remedial action is reasonably expected to warrant either a departure from the auditor’s standard audit report, when made, or the auditor’s resignation from the audit engagement. https://www.sec.gov/rules/final/34-38387.txt

Effective Registration Statements on Form S-8 and Form S-3

• Note that effective registration statements are automatically updated with filings under the Exchange Act and, therefore, would incorporate any misstatements or omissions previously made and any failures to timely incorporate new material information.

Sections 10(b) and 13(a) of the Exchange Act and Rule 10b-5

• Confirm that there have been no statement of a material fact or omissions to state a material fact necessary in order to make the statements made, in the light of the circumstances under which they were made, not misleading about the company or its business, including those relating to revenues, expenses, profits, assets or liabilities, that could be impacted by alleged misconduct.

Sarbanes-Oxley

Section 302 of Sarbanes-Oxley

• Confirm that certifying officers can certify on each periodic report that, among other things:

(i) based on the officer’s knowledge, the report contains no material misstatements or omissions;

(ii) based on the officer’s knowledge, the relevant financial statements are accurate in all material respects;

(iii) internal controls are properly designed; and

(iv) the certifying officers have disclosed to audit committee and auditors all significant internal control deficiencies.

Section 304 of Sarbanes-Oxley

• Confirm that no reduction or recoupment in performance-based compensation or profits on stock sales is required, if financial statements are to be restated. Confirm terms of compensation plans are not implicated.

Section 404 of Sarbanes-Oxley

• Confirm that the auditors are able report on the effectiveness of internal controls over financial reporting that could result in a material misstatement of the company’s financial statements.

Section 802 of Sarbanes-Oxley

• Confirm that no records have been altered, destroyed, mutilated, concealed, or falsified with the intent to obstruct, impede or influence a potential or actual federal investigation.

Whistleblowers

Section 922 of the Dodd-Frank

• Consider risk the SEC’s whistleblower and bounty payment program.

• The Dodd-Frank Act provides that the SEC shall pay awards to eligible whistleblowers who voluntarily provides the SEC with original information that leads to a successful enforcement action yielding monetary sanctions of over $1 million. https://www.sec.gov/spotlight/dodd-frank/whistleblower.shtml

• The Dodd-Frank Act and Sarbanes-Oxley Act also expressly prohibits retaliation by employers against whistleblowers and provides them with a private cause of action in the event that they are discharged or discriminated against by their employers in violation of the Act.

Agreements

Representations and covenants

• Confirm compliance with representations and covenants under credit agreement and other agreements.

• For example, joint venture and similar agreements, commercial agreements (purchase, sale, services), indentures for outstanding notes, underwriting agreements, dealer-manager agreements, etc.

Investor Relations

• Consider response to questions from investors

D&O Insurance

Policies and related applications

• Confirm that there are no disclosure implications to present policies, including pending renewal applications.

General liability insurance

Policies and related applications

• Confirm that there are no disclosure implications to present policies, including pending renewal applications.

Blackouts / trading windows

• Consider need to institute a trading blackout, if the information is considered material non-public information.

• This may not necessarily impact 10b5-1 plans although it may create an appearance issues.

Government grants or awards

• Consider implications, if any

U.S. or foreign permits or licenses

• Consider implications, if any

Tax reporting

• Consider implications, if any