TORONTO STOCK EXCHANGE 7 Example - Spin-Off For a spin-off of a publicly listed issuer, market capitalization for the purpose of OLR will be based on the appropriate proportion of the pre spin-off market capitalization of the parent issuer. The method of calculating this proportion will be specific to the case at hand and includes consideration of whether the transaction is taking place via distribution or re-organization, and whether a formal valuation has been prepared, among other factors. (iii) Run Rate Calculation Several listing categories require completion of a run rate calculation. The run rate calculation provides a forward-looking view of an applicant’s cash usage, supplementing the historical information in the applicant’s statement of cash flows. The intent of the run rate calculation is to track how quickly an issuer is spending its cash in relation to its cash reserves. The run rate calculation must be based on a conservative set of assumptions and be consistent with plans and programs established in technical reports, board approved budgets, signed sales contracts and established product/service delivery schedules and known financial commitments and obligations expected for the periods presented. A run rate calculation is particularly appropriate for entities at an early stage of development, because such entities will most likely report negative working capital, have no revenues and have negative cash flow from operations. Accordingly, an evaluation of run rate including other available funding sources (i.e., alternative evidence of liquidity) is a better tool to assess whether the applicant can fund its stated business objectives. Case-Specific The determination of run rate is wholly dependent on the nature of the applicant’s business as well as management’s plans and programs; accordingly, there is no “one size fits all” approach. Principally, the analysis should clearly show the net amount of cash the applicant is projected to use at the end of each quarter as well as the available cash runway to demonstrate that the applicant has sufficient funding at the end of the applicable 12, 18 or 24-month period specified in the applicable original listing test. As a result, TSX does not prescribe a standardized template approach for the run rate calculation. Instead, a principles-based approach is used, taking into account historical financial results and subsequent events. The guidance below is intended to highlight some of the principles behind the run rate calculation in the context of OLR but is not intended to be an exhaustive list. Sources of funds may include only those assumptions with a high degree of certainty Financing proceeds Sources of funds should not include expected fundraising proceeds for “yet to be defined” initiatives or plans that are at a preliminary stage or are speculative in nature. Sources of funds may include an offering that is expected to be completed with a high degree of certainty, such as where an engagement letter has been executed, a term sheet has been issued, work is underway to fill the order book and there is a high degree of confidence regarding expected proceeds and closing date. Sources of funds should not include proceeds from future exercises of warrants (even if deeply in the money at the time of application) or other convertible securities, unless the holder of the convertible security has provided a notice of exercise/conversion.
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