Going Public in the Canadian Capital Markets Daniel Bloch November 22, 2011.

Going Public in the Going Public in the Canadian Capital MarketsCanadian Capital Markets

Daniel BlochNovember 22, 2011

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Aird & Berlis LLPAird & Berlis LLP

• Aird & Berlis LLP is a Toronto Canada based full service law firm with over 75 years of experience offering Canadian legal services

• The firm is well positioned to be the gateway to Canada for non-Canadians wishing access to the Canadian capital markets

Canada’s Competitive StrengthsCanada’s Competitive Strengths

1. Strong Capital Markets:• Canada has been ranked the soundest

financial system for 3 consecutive years• Canada is the market of choice for resource

companies• Canada’s capital markets provide earlier

access to US capital without the higher cost of regulatory compliance

• Canada has a strong culture, well versed in equity investments

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Canada’s Competitive Strengths (Cont’d) Canada’s Competitive Strengths (Cont’d)

2. Natural Resource Wealth:• Canada is the world’s largest producer of

Zinc and Uranium• Canada is a major producer of gold, nickel,

aluminum and lead• Canada has the largest oil reserves in the

world after Saudi Arabia

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Toronto Stock Exchange (“TSX”) andToronto Stock Exchange (“TSX”) and TSX Venture Exchange (“TSXV”) TSX Venture Exchange (“TSXV”)

(as of December 31, 2010)(as of December 31, 2010)

• Total financings in 2010 amounted to $54B• Value of stocks traded in 2010 was $1.4T• 524 going public events• More listed issuers than any exchange in North

America. 3670 listed issuers in total• 2nd highest number of listed issuers globally• 318 listed issuers with no connection to

Canada other than their listing• Many additional issuers with no connection to

Canada other than being a Canadian incorporated corporation

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TSX and TSXV: TSX and TSXV: Global Leaders in Mining Global Leaders in Mining

(as of December 31, 2010) (as of December 31, 2010)

• Most listed mining issuers in the world, totalling 1531 issuers (58% of the world’s public mining companies)

• Raised $17.8B through over 2400 financings in 2010 (60% of the world’s mining equity capital)

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Mining (Con’t)Mining (Con’t)

• 50% of the 9,500 mineral exploration projects held by TSX and TSXV companies are outside of Canada

• Over 200 analysts cover listed mining issuers• In the past 10 years, 80% of the total global

number and 36% of the total global value of mining financings have been completed on the TSX and TSXV

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Diversified Mining ExchangesDiversified Mining Exchanges

• The TSX and TSXV provide superior access to capital for junior explorers, while concurrently listing some of the world’s largest mining companies, including:

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Largest Mining Companies Listed on the TSX

TickerCompanyMarket Cap. (Dec. 31, 2010)

ABXBarrick Gold Corporation$53.0B

POTPotash Corporation of Saskatchewan Inc. $44.2B

GGoldcorp Inc. $36.6B

TCKTeck Resources Limited$36.5B

KKinross Gold Corporation$21.4B

CCOCameco Corporation$15.9B

AGUAgrium Inc. $14.4B

SLW Silver Wheaton Corp. $13.6B

AEMAgnico-Eagle MinesLtd. $12.9B

IVN Ivanhoe Mines Ltd. $12.2B

TSX and TSXV: TSX and TSXV: Leading Marketplace for Oil & GasLeading Marketplace for Oil & Gas

(as of December 31, 2010) (as of December 31, 2010)

• More oil & gas listings than any other public marketplace, totalling 394 issuers

• $11.3B oil & gas equity raised through 504 financings

• 55 new oil & gas listings in 2010• Exchanges home to 35% of the world’s public

oil & gas companies• Large and experienced analyst community• High graduation potential from TSX to TSXV• Tailored and flexible listing criteria to

accommodate junior issuers9

TSX & TSXV:TSX & TSXV:Global Leaders in TechnologyGlobal Leaders in Technology

(as of December 31, 2010 and first 6 months of 2011) (as of December 31, 2010 and first 6 months of 2011)

• 2nd in North America for number of listed technology companies in 2010, totalling 182 issuers

• $378M of equity capital raised through 101 financings in 2010

• 54 financings completed in first half of 2011• 13 new listings in 2010 and 6 in the first half of

2011• Active institutional investor community• Great visibility and analyst coverage• Good graduation potential from TSX to TSXV

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Superior Analyst CoverageSuperior Analyst Coverage

• The top 10 tech companies set out in this chart get covered by an average of 14 analysts. Nasdaq technology companies between $500M-$5B market cap get covered by an average of 11 analysts

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Largest TechnologyCompanies Listed on the TSX

TickerCompanyMarket Cap. (Dec. 31, 2010)

RIMResearch in Motion Limited$14.6B

GIBCGI Group Inc.$5.5B

OTCOpen Text Corporation$3.5B

SXCSXC Health Solutions Corporation $3.5B

CAECAE Inc.$3.3B

MDAMacDonald, Dettwiler and Associates Ltd.$2.2B

CLSCelestica Inc.$1.7B

CSUConstellation Software Inc.$1.2B

ETEvertz Technologies Limited$979.3M

WINWi-LAN Inc.925.4M

Canadian CorporationsCanadian Corporations

• Although not required, international issuers may incorporate a Canadian corporation to list on the TSX or the TSXV

• A Canadian corporation may be used to provide investor confidence in shareholder rights and corporate governance

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Methods of Going PublicMethods of Going Public

1. Initial Public Offering (“IPO”)

• An IPO involves the issuer filing of a prospectus with one or more Canadian securities commissions

• Issuers must complete a listing application to have shares listed on the TSX or TSXV

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Methods of Going Public (Cont’d)Methods of Going Public (Cont’d)

2. Reverse Takeover (“RTO”)

• An RTO involves having a private company sell its shares (or in theory) assets into a TSX or TSXV listed shell company

• The private company shareholders would then become the majority shareholders of the TSX or TSXV listed shell company

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3. Qualifying Transaction (“QT”)

• Capital Pool Companies (“CPC”) are exclusive to the TSXV

• A CPC may raise between CDN $200,000 and CDN $5,000,000

• Proceeds are then targeted toward completing a QT by merging with or acquiring an operating company or assets within 24 months of listing

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• In Canada, a Special Purpose Acquisition Corporation (“SPAC”) offers an alternative vehicle for listing on the TSX

• A SPAC allows the public to invest in companies or industry sectors normally sought by private equity firms

• Two step process:• 1) A SPAC is initially listed as a non-operating cash

entity. Must raise a minimum of CDN $30 million• 2) Proceeds are then targeted toward the acquisition

of an operating company or assets within 36 months of listing (a “Qualifying Acquisition”)

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Shareholders: Shareholders: Going Public ObligationsGoing Public Obligations

• In “going public”, escrow requirements may be imposed on:

• certain members of management• directors• promoters• significant (i.e. 10% and 20%)

shareholders• in certain circumstances, spouses of the

foregoing

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Shareholders: Shareholders: Going Public Obligations (Cont’d) Going Public Obligations (Cont’d)

• Escrow periods range: 18 months to 3 years

• Securities held in escrow are released in prescribed percentages over the escrow period

• Transfers of securities before the escrow expires are generally not permitted

• Escrow securities may be pledged to a financial institution as collateral for a loan

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Securities Regulation: Securities Regulation: Corporate GovernanceCorporate Governance

• Good corporate governance is a theme that runs throughout all aspects of securities regulation

• Common governance themes include:• Independence: board & committee• Qualifications & Competency: financial

literacy and director education• Disclosure: timeliness, governance policies,

shareholder approval of stock option plans, certificates and DC&P

• Liability: more time and more money

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Securities Regulation Comparison:Securities Regulation Comparison: Canada / United States / Israel Canada / United States / Israel

1. Regulatory Overview - Canada• Securities Regulation is managed through laws

established by Canada's 13 provincial and territorial governments

• Provincial/Territorial regulators work together to harmonize regulation through the Canadian Securities Administrators (CSA)

• TSX and TSXV rules and policies govern conduct of issuers

• Self-regulatory organizations, such as Investment Industry Regulatory Organization of Canada (IIROC), assist in regulating the market

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Securities Regulation Comparison (Cont’d)Securities Regulation Comparison (Cont’d)

2. Regulatory Overview - United States

• Securities regulation is governed by both federal and state-level regulation

• The primary federal regulator is the SEC

• Also regulated by various exchanges and self-regulatory organizations such as FINRA

• Securities regulation is impacted by the Sarbanes-Oxley Act (“SOX”)

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Securities Regulation Comparison (Cont’d)Securities Regulation Comparison (Cont’d)

• 3. Regulatory Overview - Israel • : . חוק המרכזיים החוקים מדינתיים הינם החוקים

- " ט, התשנ , 1999החברות ערך ניירות וחוק- חח" .1968התשכ מכוחם שהותקנו והתקנות

ערך )• לניירות הרשות הינו (.the ISAהרגולטורבתקנון, • הקבועים הכללים את ישנם בנוסף

. " מ בע אביב בתל ערך לניירות הבורסה

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1. Composition of the Board of Directors1. Composition of the Board of Directors

CANADAUNITED STATES ISRAEL

•The board should have a majority of “independent” directors and an “independent” chair

•Listed companies must have a majority of independent directors

•Independent directors must be identified in annual proxy statements (or in Form 10-k or 20-F if no annual statement).

•Listed companies must have at least two independent directors

•Independent directors are to be elected in a general meeting for 3 years

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2. Code of Ethics2. Code of Ethics

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•The board should adopt a written code of ethics which promotes integrity and deters wrongdoing

•Companies shall adopt a code of conduct applicable to all directors, officers and employees

•Ethics codes must be publicly available and satisfy stringent SOX requirements

•A company must disclose in annual report whether or not it has a code of ethics and if not, it must explain why it does not have one

•The code must provide for an enforcement mechanism

•Companies do not have to adopt a code of ethics

3. Audit Committees3. Audit Committees

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• Listed issuers are required to have audit committee composed of at least 3 “independent” directors who are “financially literate”

•According to the Nasdaq Rules, an audit committee must have at least three directors, each of whom must: 1) meet the criteria of “independence” both under the Securities Exchange Act and the Nasdaq Rules;

2) not have participated in the preparation of financial statements in the past 3 years; and

3) have the ability to read and understand various financial statements

•Additionally, at least one member must have past employment experience or a certification in finance or accounting

•SOX increased audit committee responsibility and authority and raised member requirements

•An audit committees must include at least three directors

•All of the independent directors must be members of the audit committee

•A controlling shareholder or a relative of a controlling shareholder cannot be members of the audit committee

4. Financial Disclosure Obligations4. Financial Disclosure Obligations

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CANADA UNITED STATES ISRAEL

•Companies must file:1) Unaudited quarterly statements2) Annual report with audited financial statements

•Financial statements, generally speaking, required to be prepared in IFRS

•US companies are required to file with the SEC:1) Annual report with audited financial statements2) Quarterly financial reports

•Non-U.S. Companies are required to file with the SEC:1) Annual report with audited financial statements2) Periodic Form 6-k reports containing significant information (these reports substitute quarterly reporting requirements)

•Companies must file:1) Unaudited quarterly statements (דוחות סקורים)2) Annual report with audited financial statements.( דוחות(מבוקרים

•Financial statements required to be prepared in IFRS

5. Certification Obligations5. Certification Obligations

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• Certifying officers must certify that interim and annual financial statements fairly represent the financial condition of the issuer

•Under 302 of SOX, CEOs and CFOs must certify each Exchange Act report containing financial disclosure to certify the accuracy of the reports

•CEOs and CFOs are also obligated to certify periodic reports containing financial statements

• Certifications are sanctioned by criminal liability

, על ISOXבהתאם להוראות ה-מנכ"ל החברה ונושא המשרה

הבכירה בתחום הכספים (לרוב סמנכ"ל הכספים) לחתום על

הצהרות לפיהן הדוחות הכספיים משקפים באופן נאות את המצב

הכספי ותוצאות הפעילות של החברה.

6. Internal Control over Financial 6. Internal Control over Financial Reporting (“ICFR”)Reporting (“ICFR”)

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•All issuers, except venture issuers, are required to establish and maintain effective ICFR

•TSXV issuers are exempt because of limited financial resources

•The CSA refused to implement the requirement to obtain an independent auditor report

•Under section 404 of SOX, management is responsible for establishing and maintaining adequate ICFR and assessing the effectiveness of internal controls

• SOX adds an additional requirement for an independent auditor to attest to and report on management’s ICFR. This is regarded as being the most onerous SOX provision

•The same requirements apply to domestic and foreign issuers

מנהלי החברה אחראים על הבקרות והנהלים הפנימיים להבטחת

האפקטיביות של הבקרה הפנימית על הדיווח הכספי.

ועדה לבחינת בנוסף, בכל חברה מכהנת 3, בה מכהנים לפחות הדוחות הכספיים

דירקטורים ורוב חבריה דירקטורים בלתי תלויים. הועדה אחראית לבחון:

את ההערכות והאומדנים שנעשו 1.בקשר עם הדוחות.

את הבקרות הפנימיות הקשורות 2.בדוחות.

את שלמות ונאותות הגילוי בדוחות.3.

את המדיניות החשבונאית שאומצה 4.והטיפול החשבונאי שיושם בעניינים

המהותיים של התאגיד.את הערכות השווי, לרבות ההנחות 5.

והאומדנים שבבסיסן, שעליהן נסמכים נתונים בדוחות הכספיים.

7. Insider Reporting Obligations7. Insider Reporting Obligations

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CANADA UNITED STATES ISRAEL •An “insider” must make publicly available filings of their direct and indirect securities holdings

•An “insider” is:•director or officer of a listed issuer•a holder of 10% or more of the listed issuer shares

•a director or officer of a holder of 10% or more of the listed issuer shares

•An insider must file an insider report within 5 days of a trade and in some cases 3 days

•Reports must be filed on SEDI

•Insider trading policies are common

•SEC Rule 10b5 prohibits manipulative and deceptive practices in connection with the purchase or sale of any security

•Directors and Officers of an issuer are subject to reporting requirements under section 16 of the Securities Exchange Act and are required to file insider reports.

•There are 2 levels of reporting for stockholders:1) Schedule 13G reporting – requires stockholders with 5% or more of an issuer’s equity to file a report with the SEC. 2) Section 16 of the SecuritiesExchange Act reporting –requires stockholders with greaterthan 10% of an issuer’s securitiesto file a report with the SEC

•Changes in ownership must be reported within 2 business days

•Reports must be filed on EDGAR and on the company’s website

ישנו איסור מוחלט על שימוש במידע •פנים לצורך ביצוע עסקאות בניירות

ערך או על מסירת מידע פנים.

כל בעל עניין מחויב למסור דיווח על •שינויים בהחזקותיו, כאשר בעל עניין

הוא התאגיד, עובד של התאגיד, חברה בת של התאגיד וכן מי שמחזיק מעל

מהון המניות המונפק של התאגיד 5%או מכוח ההצבעה בו.

דיווח על החזקות בעל העניין יימסר • 9:30לציבור לכל המאוחר עד השעה

ביום המסחר שלאחר היום בו נודע לתאגיד על שינוי ההחזקות וכן פעם

בחודש באופן מרוכז.

8. Related Party Transactions8. Related Party Transactions

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CANADA ISRAEL

• “Related party transactions” between issuers and “related parties” are regulated in order to protect minority shareholders. The 4 main areas of protection include:

•1) Enhanced public disclosure: •Disclose particulars in a material change report

•2) Preparation and publication of a formal valuation from an independent qualified valuator •A common exemption is when the fair market value is not more than 25% of the market capitalization

• “Related party transactions” between issuers and “related parties” are regulated in order to protect minority shareholders.

ככלל, עסקאות חריגות עם בעל שליטה או עסקאות חריגות שלבעל השליטה יש בהן עניין אישי דורשות אישור ועדת ביקורת, דירקטוריון ואסיפה כללית. על האסיפה הכללית לאשר את העסקה ברוב קולות בעלי .המניות שאין להם עניין אישי באישור העסקה

ישנן עסקאות נוספות הדורשות אישורים מיוחדים, כגון אישור תנאי כהונה והעסקה של דירקטורים ועסקאות .חריגות עם נושאי משרה

לכללי האישור הקבועים בחוק ישנם חריגים המאפשרים הקלות בדרכי האישור. הקלות בולטות הינן, בין היתר, אישור עסקה המזכה את החברה בלבד, הארכת עסקה קיימת ואישור תנאי שכר לדירקטור התואמים את השכר .שנקבע לדירקטור חיצוני על פי התקנות

Related Party Transactions (Cont’d)Related Party Transactions (Cont’d)

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CANADA ISRAEL

•3) Approval of disinterested shareholders – a “majority of the minority” vote• If approval is required, there must be a meeting of the affected shareholders and an information circular •Common exemptions include: 1) The fair market value is not more than 25% of the market capitalization 2) The fair market value is not more than $2.5M

•4) Enhanced corporate governance

Continuous DisclosureContinuous Disclosure

• Continuous disclosure is the backbone of securities law in Canada

• Helps convey important information (timely and periodic) about reporting issuers to shareholders and the market

• Gives equal access to all investors and creates and maintains market confidence

• Forms a key element of the short form prospectus system

• Regulated by NI 51-102

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Timely DisclosureTimely Disclosure

• Disclosure by listed issuers is required forthwith upon a material change or change of material fact• Persons (including insiders) are not

permitted to trade if they are aware of an undisclosed material change or undisclosed change of material fact

• If a material change occurs, the issuer must file a news release on a timely basis and a material change report within 10 days

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Timely Disclosure (Cont’d)Timely Disclosure (Cont’d)

• Matters likely requiring disclosure include:1) Change in Corporate Structure

• changes in share ownership that may affect control• major reorganizations, amalgamations, or mergers• take-over bids, issuer bids, or insider bids

2) Change in Capital Structure• the public or private sale of additional securities• planned repurchases or redemption of securities• planned splits of common shares or offerings of

warrants or rights to buy shares• any share consolidation, share exchange, or stock

dividend

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Timely Disclosure (Cont’d)Timely Disclosure (Cont’d)

3) Change in Financial Results• a significant increase or decrease in near-term earnings

prospects• unexpected changes in the financial results for any period• shifts in financial circumstances, such as cash flow

reductions, major asset write-offs or write-downs• changes in the value or composition of the company’s

assets• any material change in the company’s accounting policy

4) Change in Business and Operations• any development that affects the company’s resources,

technology, products or markets• a significant change in capital investment plans or corporate

objectives

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Periodic DisclosurePeriodic Disclosure

• Periodic disclosure obligations include:

1) Annual financial statements

2) Interim financial statements

3) Management Discussion and Analysis

4) Business Acquisition Reports

5) Annual Information Form

6) Proxy solicitation and information circulars

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NI 43-101: NI 43-101: Disclosure for Mineral ProjectsDisclosure for Mineral Projects

• NI 43-101 governs the reporting and display of information related to mineral properties owned by, or explored by, Canadian listed issuers

• TSX and TSXV also have additional requirements for listed mining issuers

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NI 43-101 (Cont’d)NI 43-101 (Cont’d)

• NI 43-101:

1) requires that all oral or written disclosure of scientific or technical information be based upon information prepared by or under the supervision of a qualified person or approved by a qualified person

2) requires the use of standardized terminology and definitions

3) prescribes the framework and outline that all technical reports must satisfy

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NI 43-101 (Cont’d)NI 43-101 (Cont’d)

4) requires a technical report to be filed within certain time periods for each mineral property material to the issuer

• The purpose of the report is to support scientific or technical information contained in various public disclosure documents.

• NI 43-101 prohibits certain disclosure (e.g. quantity, grade or metal or mineral content of a deposit that has not been categorized in an acceptable category)

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NI-51-101:NI-51-101:Disclosure for Oil & Gas ActivitiesDisclosure for Oil & Gas Activities

• NI 51-101 requires that a reporting issuer:

1) File a “Statement of Reserves Data” with the commission. The disclosure of this data is subject to very specific requirements• The standards and terminology set out in

51-101 are globally recognized

2) File a report of an independent qualified reserves evaluator or auditor who must have evaluated at least 75% of the future net reserves and reviewed the balance

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NI-51-101 (Cont’d)NI-51-101 (Cont’d)

3) File a “Report of Management and Directors” confirming compliance with disclosure obligations

4) Make information readily available to the evaluator/auditor

• The board must review procedures relating to information disclosure, the appointment of the evaluator and the statement of reserves filing

• The board may delegate its responsibilities to a reserves committee

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QuestionsQuestions

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Name: Daniel BlochTitle: PartnerT 1.416. 865.4739F 1.416.863.1515E [email protected] Cell: 054 9703299

Thank YouThank You

Going Public in the Canadian Capital Markets Daniel Bloch November 22, 2011.

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