Failure to Meet Form 10-Q Filing Deadline

When a company fails to file a 10-Q by the filing deadline, it must use a non-timely (NT) filing. An NT filing must explain why the deadline has not been achieved, and it gives the company an additional five days to file. Companies are required to submit an NT 10-Q to request the extension and explain the delay.

As long as a company has a reasonable explanation, the SEC allows late filings within a specified time period. Common reasons why companies are not able to file on time include mergers and acquisitions (M&A), corporate litigation, an ongoing review by corporate auditors, or lingering effects from a bankruptcy.

A 10-Q filing is considered timely if it is filed within this extension. Failure to comply with this extended deadline results in consequences, including the potential loss of the SEC registration, removal from stock exchanges, and legal ramifications.

Components of SEC Form 10-Q

There are two parts to a 10-Q filing. The first part contains relevant financial information covering the period. This includes condensed financial statements, management discussion, and analysis on the financial condition of the entity, disclosures regarding market risk, and internal controls.

The second part contains all other pertinent information. This includes legal proceedings, unregistered sales of equity securities, the use of proceeds from the sale of unregistered sales of equity, and defaults upon senior securities. The company discloses any other information—including the use of exhibits—in this section.

Importance of SEC Form 10-Q

The 10-Q provides a window into the financial health of the company. Investors can use the form to get a sense of its quarterly earnings and other elements of its operations, and to compare them to previous quarters—thus tracking its performance.

Some areas of interest to investors that are commonly visible in the 10-Q include changes to working capital and/or accounts receivables, factors affecting a company’s inventory, share buybacks, and even any legal risks that a company faces.

You can use a close competitor’s 10-Q to compare that to a company in which you are invested, or considering to invest in, to see how it’s performing. This will give you an idea of whether it’s a strong choice, where its weaknesses are, and how it could stand to improve.

Other Important SEC Filings

The 10-Q is one of many reports public companies are required to file with the SEC. Other important and mandated filings include:

Form 10-K: The 10-K must be filed once per year and includes the final quarter of the company’s performance (replacing a fourth-quarter 10-Q). This report serves as a summary of the year, often containing more detailed information than an annual report, and must be filed within 90 days of the end of a company’s fiscal year. The 10-K generally includes a summary of the company’s operations, management’s financial outlook, financial statements, and any legal or administrative issues involving the company.

Form 8-K: This report is filed if there are any changes or developments to a business that didn’t make the 10-Q or 10-K reports. This is considered an unscheduled document and may contain information such as press releases. If a company disposes of or acquires assets, has announcements of executive hiring or departures, or goes into receivership, this information is filed with an 8-K.

Annual report: A company’s annual report is filed every year, and contains a wealth of company news including—but not limited to—general information about the company, a letter to shareholders from the CEO, financial statements, and an auditors report. This report is submitted a few months after the end of a company’s fiscal year. The report is available through a company’s website or investor relations team, and can also be obtained from the SEC.

Form 10-Q FAQs

What Is a 10-Q Filing?

A 10-Q filing is a report that all public companies must submit to the Securities and Exchange Commission (SEC) after the end of each of their first three fiscal quarters (hence the “Q”). The filing is submitted by filling out a Form 10-Q.

What Is the Difference Between a 10-K and a 10-Q?

The main difference between Forms 10-K and 10-Q lies in the frequency and the amount of info they contain. Form 10-K is an annual report, filed at the end of a company’s fiscal year. Filed just once, it summarizes all the data for the year, including the fourth quarter. In contrast, Form 10-Q is filed three times a year, at the end of a company’s fiscal quarter. It details financial info for that quarter.

Also, Form 10-K is an audited report. Form 10-Q generally is not.

Are Public Companies Required to File Form 10-Q?

Yes, all U. S. public companies issuing common shares of stock that trade on exchanges are required to file Form 10-Q. The date by which they have to file varies on the number of shares, expressed in terms of dollar worth, they have outstanding.

Must Review Reports Accompany Financial Statements in a 10-Q?

10-Qs generally are not audited or accompanied by accountants’ reports. SEC regulations prohibit companies from making materially false or misleading statements, or omitting material information to make disclosures not misleading. The SEC staff reviews 10-Qs and may provide comments to a company where disclosures appear to be inconsistent with the disclosure requirements or deficient in explanation or clarity.

What Is 1%/10 Net 30?

The 1%/10 net 30 calculation is a way of providing cash discounts on purchases. It means that if the bill is paid within 10 days, there is a 1% discount. Otherwise, the total amount is due within 30 days.

Understanding 1%/10 Net 30

The 1%/10 net 30 calculation represents the credit terms and payment requirements outlined by a seller. The vendor may offer incentives to pay early to accelerate the inflow of cash. This is particularly important for cash-strapped businesses or companies with no revolving lines of credit. Companies with higher profit margins are more likely to offer cash discounts.

Although the numbers are always interchangeable across vendors, the standard structure for offering a payment discount is the same. The first number will always be the percentage discount. This figure will indicate the total percentage discount on the invoice prior to shipping or taxes that may be discounted upon early payment.

Special Considerations

Discount terms like 1%/10 net 30 are virtual short-term loans. This is because if the discount is not taken, the buyer must pay the higher price as opposed to paying a reduced cost. In effect, the difference between these two prices reflects the discount lost, which can be reported as a percentage. This percentage is called the cost of credit.

When the credit terms are 1%/10 net 30, the net result becomes, in essence, an interest charge of 18.2% upon the failure to take the discount.

The accounting entry for a cash discount taken may be performed in two ways. The gross method of purchase discounts assumes the discount will not be taken and will only input the discount upon actual receipt of payment within the discount period.

Therefore, the entire amount of receivable will be debited. When payment is received, the receivable will be credited in the amount of the payment and the difference will be a credit to discounts taken. The alternative method is called the net method. For a discount of 1%/10 net 30, it is assumed the 1% discount will be taken. This results in a receivable being debited for 99% of the total cost.

Example of 1%/10 Net 30

For example, if “$1000 – 1%/10 net 30” is written on a bill, the buyer can take a 1% discount ($1000 x 0.01 = $10) and make a payment of $990 within 10 days, or pay the entire $1000 within 30 days.

The second number is always the number of days of the discount period. In the example above, the discount period is 10 days. Finally, the third number always reflects the invoice due date.

What Is a 12B-1 Fee?

A 12b-1 fee is an annual marketing or distribution fee on a mutual fund. The 12b-1 fee is considered to be an operational expense and, as such, is included in a fund’s expense ratio. It is generally between 0.25% and 0.75% (the maximum allowed) of a fund’s net assets. The fee gets its name from a section of the Investment Company Act of 1940.

Understanding 12B-1 Fees

Back in the early days of the mutual fund business, the 12b-1 fee was thought to help investors. It was believed that by marketing a mutual fund, its assets would increase and management could lower expenses because of economies of scale. This has yet to be proven. With mutual fund assets passing the $10 trillion mark and growing steadily, critics of this fee are seriously questioning the justification for using it. Today, the 12b-1 fee is mainly used to reward intermediaries for selling a fund’s shares. As a commission paid to salespersons, it is currently believed to do nothing to enhance the performance of a fund.

In 2015, the Securities and Exchange Commission (SEC) began examining the use of 12b-1 fees to determine if the rules for charging these fees are being adhered to and the presence of such fees is being properly disclosed.

12b-1 Fee Broken Down

The 12b-1 fee can be broken down into two distinct charges: the distribution and marketing fee and the service fee. Total 12b-1 fees charged by a fund are limited to 1% annually. The distribution and marketing piece of the fee is capped at 0.75% annually, while the service fee portion of the fee can be up to 0.25%.

Use of 12b-1 in Broker-Sold Shares

Class B and class C shares of broker-sold funds typically have 12b-1 fees, but they may also be charged on no-load mutual fund shares and class A broker-sold shares.

Class A shares, which usually charge a front-end load but no back-end load, may come with a reduced 12b-1 expense but normally don’t come with the maximum 1% fee. Class B shares, which typically carry no front-end but charge a back-end load that decreases as time passes, often come with a 12b-1 fee. Class C shares usually have the greatest likelihood of carrying the maximum 1% 12b-1 fee. The presence of a 12b-1 fee frequently pushes the overall expense ratio on a fund to above 2%.

The Calamos Growth Fund is an example of a fund that carries a smaller 0.25% 12b-1 fee on its class A shares and charges the maximum 1% 12b-1 fee on its class C shares.

What 12b-1 Fees Are Used For

The distribution fee covers marketing and paying brokers who sell shares. They also go toward advertising the fund and mailing fund literature and prospectuses to clients. Shareholder service fees, another form, specifically pay for the fund to hire people to answer investor inquiries and distribute information when necessary, though these fees may be required without the adoption of a 12b-1 plan. Another category of fees that can be charged is known as “other expenses.” Other expenses can include costs associated with legal, accounting, and administrative services. They may also pay for transfer agent and custodial fees.

What Was Form 1040EZ: Income Tax Return for Single and Joint Filers With No Dependents?

IRS Form 1040EZ: Income Tax Return for Single and Joint Filers with No Dependents was the shortened version of the Internal Revenue Service (IRS) Form 1040. This form was for taxpayers with basic tax situations and offered a fast and easy way to file income taxes. 

The form was discontinued as of the 2018 tax year in favor of the redesigned Form 1040.

Who Could File Form 1040EZ: Income Tax Return for Single and Joint Filers With No Dependents?

To use the form, a taxpayer had to have taxable income of less than $100,000, less than $1,500 of interest income, and claim no dependents. Other requirements for filing the Form 1040EZ included:

• The taxpayer and their spouse, if married filing jointly, had to be under age 65 at the end of the relevant filing period.
• They could not be blind as of the end of the relevant filing period.
• The filer could take no deductions for student loan interest, educator expenses, tuition and fees, or itemized deductions.
• If the filer received interest income, they could not have been required to file Schedule B, didn’t have amounts in boxes 11, 12, or 13 of Form 1099-INT or boxes 6 and 10 of Form 1099-OID, and didn’t earn any interest as a nominee.
• Tax credits for retirement savings, health coverage, and education were not allowed.
• The tax filer could not have received any advance earned income credit (EIC), although they would have been allowed to claim the EIC when filing Form 1040EZ.
• The filer could not be a debtor in any Chapter 11 bankruptcy case that was filed after October 16, 2005.
• The filer, their spouse, if married filing jointly, or any of their dependents for which they claimed the personal exemption didn’t receive any advance payments of the premium tax credit offered for health coverage plans sold on the Marketplace.
• The filer doesn’t owe any household employee taxes on wages paid to household employees.

For most individuals, the 1040EZ was the first tax form they ever completed. Consider a typical high-school student employed part-time. Provided they met the income qualifications, the 1040EZ will likely be the most straightforward and appropriate form to file. 

Form 1040EZ vs. Form 1040

Form 1040EZ had only a few credits or deductions available to taxpayers. Filers were able to include an earned income credit (EIC) and elect nontaxable combat pay.

For most tax years, Form 1040 had 80% more lines than form 1040EZ. One significant difference was that Form 1040 had fields to include information about dependents, while 1040EZ did not allow individuals to claim dependents. Similar to the standard form, the EZ version had sections to record wages, salaries and tips, and taxable interest under $1,500. The filer was also able to include unemployment compensation payments.

Form 1040EZ allowed filers to claim income from wages, tips, salaries, taxable grants or scholarships, the Alaska Permanent Fund, and unemployment compensation. Form 1040, though, had at least 16 income categories.

Categories available on the standard form included dividend payments, retirement account distributions, and farm and rental income. Form 1040 also allowed the entry of Social Security benefits, alimony, and other forms of income. This form also had a long list of deductions, ranging from education costs to healthcare savings plan contributions.