Being Upfront On Backdoor Listings

The Toronto Stock Exchange (the "TSX") is proposing to clarify the rules on backdoor listings involving TSX-listed issuers and on the adoption of securities based compensation plans of companies that are acquired by TSX-listed issuers.

"BACKDOOR LISTINGS"

A backdoor listing, otherwise known as a reverse takeover or reverse merger, is dealt with in Section 626 of the TSX Company Manual (the "Manual") and involves a transaction where an unlisted entity acquires effective control over a TSX-listed entity – this is often completed by the TSX-listed entity acquiring the outstanding securities of the unlisted entity in exchange for securities of the TSX-listed entity resulting in greater than 100% dilution. Pursuant to the Manual, where an entity undergoes a backdoor listing it must meet the TSX's original listing requirements in order to maintain its listing on the TSX. The TSX believes this rule protects investors and maintains the integrity of the TSX as a stock