Legal & Tax Guide for U.S. Issuers

11 CONSIDERATIONS U.S. Domestic Issuer Foreign Private Issuer (FPI) Sarbanes Oxley Non-reporting issuers are not subject to the requirements of Sarbanes-Oxley. Issuers that are required to file reports under the U.S. Exchange Act are subject to the requirements of Sarbanes Oxley, including Section 404 reporting requirements related to internal control over financial reporting. U.S. GAAP financial statements A U.S. Domestic Issuer reporting under the U.S. Exchange Act or Regulation A is required to prepare financial statements in accordance with U.S. GAAP. Annual financial statements are required to be audited by a member in good standing with the Public Company Accounting Oversight Board. Interim financial statements are required to be reviewed by the issuer’s auditor. A FPI that is a reporting issuer with the SEC is permitted to prepare financial statements in accordance with home country GAAP or International Financial Reporting Standards. Annual financial statements prepared in home country GAAP must be reconciled to U.S. GAAP and audited by a member in good standing with the Public Company Accounting Oversight Board. Interim financial statements prepared in home country GAAP are not required to be reviewed by the issuer’s auditor or reconciled to U.S. GAAP unless included in a U.S. Securities Act registration statement. U.S. resale restrictions Unless registered under the U.S. Securities Act or qualified under Regulation A, all securities issued in the IPO are restricted securities and subject to a one year distribution compliance period or hold period. 1 Restricted Securities are identified by adding a “.s” designation to a U.S. Domestic Issuer’s TSX trading symbol. Securities issued by a FPI outside the United States in accordance with Regulation S are unrestricted securities and may be freely transferred on TSX. Securities issued in the United States to qualified investors in the United States in private placements are “restricted securities” and may be resold on TSX in accordance with the requirements of Regulation S. Subsequent financings A U.S. Domestic Issuer must register or qualify securities with the SEC under the U.S. Securities Act or Regulation A or an exemption from registration requirements must be available. Exempt financings are completed on a “private placement” or offshore financings outside the U.S. under Regulation S, and involve, in either case, the sale of restricted securities and subject to a one-year distribution compliance period or hold period. 2 Securities issued by a FPI outside the United States in accordance with Regulation S are unrestricted securities and may be freely transferred on TSX. Securities issued by a FPI in the United States to qualified investors in private placements are “restricted securities” and may be resold on TSX in accordance with the requirements of Regulation S. A public offering of securities into the United States may be made by filing a registration statement under the U.S. Securities Act with the SEC on Forms F-1 or S-1 or, if available, Forms F-3 or S-3. Additionally, certain FPIs may qualify for MJDS, which permits the FPI to register securities under the U.S. Securities Act pursuant to a Canadian prospectus filed under cover of Form F-10. Filing a registration statement with the SEC will subject the FPI to the ongoing reporting requirements under the U.S. Exchange Act pursuant to Section 15(d). 1. Regulation A provides a limited exception from the registration requirements of the U.S. Securities Act for offers and sales during a 12 month period of up to US$50 million. The issuer would be required to file a Form 1-A with the SEC and the securities would be free trading securities. 2. Regulation S requires a one-year distribution compliance period during which securities issued under Regulation S by U.S. Domestic Issuers may not be sold in the United States or to, or for the account or benefit of, a U.S. person. The distribution compliance period is six months for U.S. Domestic Issuers that file reports under the U.S. Exchange Act and are current in their filings.