Legal & Tax Guide for U.S. Issuers

9 Benefit analysis U.S. Domestic Issuer Advantages • No Need to Reorganize • Fewer U.S. Tax Implications Related to Reorganization • U.S. Law Applies to Corporate Matters • Well Established Corporate/SEC Reporting • U.S. Shareholder Familiarity with U.S. Corporations • U.S. SEC Filings can serve as Basis for Canadian Reporting • Ease of U.S. Listing Disadvantages • Requires SEC Registration, Regulation A compliance or “.s” Restrictions on TSX • No Exemptions from SEC Exchange Act Registration • All Securities that are Unregistered under the U.S. Securities Act or Unqualified under Regulation A are Subject to a One Year Regulation S Distribution Compliance Period • Cannot Rely on Exemptions and Accommodations for Foreign Private Issuers • Sarbanes Oxley Requirements for SEC Reporting Issuers Foreign Private Issuer (FPI) Advantages • FPI Exemptions for Issuance of Securities Outside United States – Faster Market Access • FPI Exemption from SEC Exchange Act Reporting Under 12g3-2(b) • No Sarbanes Oxley Requirements for Non-SEC Reporting Issuers • Well Established Canadian Reporting Requirements • FPI Exemptions for M&A Transactions • Possible MJDS Availability for Canadian Corporations Disadvantages • Potential Tax Complications in Reorganizing to Off-Shore Jurisdiction • Potential Securities Law Complications in Reorganizing to Off-Shore Jurisdiction • May Require Complicated Capital Structure (Non-Voting Equity) to Maintain Foreign Issuer Status • Reorganizing Requires Shareholder Approval • Some Industries May Require Compliance with U.S. Export Controls and Regulation 14. A secondary market may develop on other markets such as the OTC Pink Sheets, OTCQX or OTCQB without SEC registration. Issuers may facilitate development of a U.S. secondary market through qualifying for certain exemptions under state blue sky laws. Access to U.S. investors Company Financings – Qualified Investors in the United States may invest in Toronto Stock Exchange or TSX Venture Exchange listed companies. A company may offer and sell securities in the United States without registration under the U.S. Securities Act or qualification under Regulation A, to Accredited Investors under Regulation D or QIBs under Rule 144A. Securities issued in the United States without registration or qualification are “restricted securities” and will bear a U.S. restrictive legend. There is no limitation on the amount that can be raised in the United States pursuant to exemptions under Regulation D or Rule 144A. TSX Trading – A holder of restricted securities of a Foreign Private Issuer may resell the securities on Toronto Stock Exchange or TSX Venture Exchange pursuant to exclusions available under Regulation S or after one year under Rule 144 of the U.S. Securities Act. If the company is a Foreign Private Issuer, restricted securities may generally be resold through the facilities of Toronto Stock Exchange or TSX Venture Exchange under Regulation S, subject only to applicable Canadian hold periods and resale restrictions. Many major U.S. brokerdealers can facilitate trading through the facilities of Toronto Stock Exchange and TSX Venture Exchange, subject to U.S. securities laws. U.S. Markets – Companies that are reporting issuers under the U.S. Exchange Act are eligible for listing on a U.S. Exchange (e.g., NYSE, NASDAQ, etc.), subject to satisfying the listing requirements of the exchange. 14 Many Toronto Stock Exchange and TSX Venture Exchange companies seek secondary listings on the U.S. Exchanges after satisfying listing standards based in part on trading and pricing histories in Canada.