TORONTO STOCK EXCHANGE 9 Applicants at the pre-revenue stage For businesses not yet generating revenue, the objective of the run rate calculation is to illustrate how quickly the business is “burning” available cash reserves (often referred to as burn rate for this type of applicant). Unlike a business reporting revenue, the objective of the run rate calculation for a business with no revenue is to demonstrate whether the cash on hand is sufficient for the entity to survive for a specified length of time, balancing cash conservation with necessary development activities to further advance the enterprise’s value proposition in order to attract subsequent funding from investors. As the run rate calculation is composed completely of cash outflows, it is critical to take a conservative approach: • If hiring personnel is required to advance the project, expenses should reflect the required headcount, timing of new hires and realistic salary costs based on prevailing market rates for applicable professionals and skilled contractors. • Project advancement expenditures and expected timing should be consistent with the information set out in the technical report or feasibility report. • The calculation should include a contingency buffer for the unexpected events such as unforeseen delays and project overruns. As part of running the business, management monitors their material projects for delays (regulatory and operational), cost overruns and other unforeseen developments, so it is also expected that the ensuing run rate calculation accounts for such factors. (iv) Working Capital For the purposes of the OLR, and as per footnote 2 to Section 309(a)(ii), working capital is calculated as the current assets less current liabilities, consistent with the concept in public enterprise accounting standards such as IFRS or US GAAP.
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