Legal & Tax Guide for U.S. Issuers

8 Once a registration statement is declared effective, the company will be subject to ongoing reporting requirements of the U.S. Exchange Act pursuant to Section 15(d) of the U.S. Exchange Act. 12 A Foreign Private Issuer may file annual reports on Form 20-F (or Form 40-F, if eligible) and current reports on Form 6-K. Certain shareholders are required to file beneficial ownership reports on Schedule 13D/G if the company elects to register the class of securities under Section 12 of the Exchange Act and becomes a reporting issuer. A Foreign Private Issuer is generally exempt from the SEC proxy rules, Section 16 and SEC tender offer rules. All SEC reporting issuers are subject to the requirements of Sarbanes-Oxley, 13 including Section 404, requiring auditor attestation of internal control over financial reporting. 3. Regulation A Regulation A under the U.S. Securities Act is an exemption from the general registration requirements of the U.S. Securities Act, which permits issuers to offer and sell up to US$50 million of securities in any twelve-month period. Regulation A is available to both Canadian and U.S. issuers. Regulation A is an interesting hybrid in that it shares many features with both public and private offerings. For example, Regulation A permits the offer and sale of free-trading securities to any type of investor (e.g. no need to limit sales to accredited investors in the U.S.), but does not give rise to the requirement to become a reporting issuer under the U.S. Exchange Act or become subject to Sarbanes- Oxley which are features of public offerings. Like public offerings, Regulation A offerings do require the filing of a disclosure document for review by the SEC, and in the case of offerings of under one of its two tiers, Regulation A requires some ongoing disclosure obligations. Regulation A, however, is designed to reduce the disclosure and compliance burdens placed on an issuer as compared to a public offering. Regulation A permits a U.S. domestic issuer to issue free trading securities sold in a Canadian initial or follow-on offering. This allows a U.S. issuer to remain a domestic issuer but also complete a Canadian offering without giving rise to the need to restrict shares issued in Canada, comply with the .S regime described above, or otherwise register the offering under the U.S. Securities Act. Following closing of an offering under Tier 2 of Regulation A, issuers are required to provide to the SEC at least one annual report and any required interim or semi-annual reports under applicable Regulation A rules. Regulation A ongoing reporting requirements are similar to the equivalent SEC reports but are designed to be less burdensome than equivalent SEC reports. Regulation A issuers are exempt from SEC proxy rules and tender offer rules, and shareholders are exempt from beneficial ownership reports on Schedule 13D/G and Section 16 reports. One limitation to Regulation A is that it does not permit short-form or shelf filings which will restrict the use of the Canadian bought-deal structure in follow-on offerings. 12. A Foreign Private Issuer may terminate filing SEC reports AFTER filing its first annual report by filing a termination statement in accordance with Form 15-F. 13. The Sarbanes-Oxley Act of 2002 (Pub.L. 107-204, 116 Stat. 745, enacted July 30, 2002), also known as the Public Company Accounting Reform and Investor Protection Act of 2002 and commonly called Sarbanes-Oxley, Sarbox or SOX, is a United States federal law enacted on July 30, 2002, as a reaction to a number of major corporate and accounting scandals. The legislation set new or enhanced standards for all U.S. public company boards, management and public accounting firms. It does not apply to privately held companies.