Why right of recision to purchasers of FFFC stock.
FFFC acquired 70% of Brawnstone on July 24, 2014. Regulation S-X states that if a public company acquires a "significant subsidiary" it must file audited financial statements of that company. Brawnstone is "significant" because its revenues are more than 20% of FFFC's pre merger.
We do not know, but its safe to assume that Brawnstone's fiscal year ended 12/31. (It was an LLC owned by an individual engaged in services, so it would be difficult to persuade the IRS to let you have a different fiscal year.)
Because of the size of the companies, the audited financial statements required are the balance sheet as of 12/31/2013, and the statements of operations, cash flows and shareholders equity for the 2012 and 2013.
Plus the March 31, 2014 three month numbers, unaudited, would be required.
Why is this needed?
The most likely predicator of the future economic results of Brawnstone are the historical numbers. They have to be audited, in order to have some reliability.
Not providing the audits is per se evidence of fraud.
just like if you buy a car and there is no odometer disclosure.
How can you know what Brawnstone really did pre-merger? you cannot.
no matter what they turn out to be, you could make out an argument that you were not provided with material information.
