SEC ADOPTS CHANGES TO SMALL PUBLIC COMPANY DISCLOSURE AND REPORTING REQUIREMENTS

Effective February 4, 2008, the Securities and Exchange Commission (“SEC”) amended the reporting requirements for small public companies. The SEC created a new category of filer, the “smaller reporting company,” which replaces the current “small business issuer” category. Among other things, the new rules:

• integrate Regulation S-B’s substantive disclosure provisions into Regulation S-K; and

• eliminate Regulation S-B and its related forms, but allow a transition period for former small business issuers to transition to the new periodic forms under the Securities Exchange Act of 1934 (“Exchange Act”).

In order to qualify as a smaller reporting company, a company cannot be an investment company or asset-backed issuer and (1) must have a public float of less than $75 million; or (2) have annual revenues of less than $50 million if there is no public float or market price. The previous threshold to qualify as a small business issuer was a public float of less than $25 million. A reporting company must determine its public float under Rule 12b-2 of the Exchange Act, determined on the last business day of the second quarter. Non-reporting companies must calculate their public float based on their choice of a date within 30 days of the filing date of their initial registration statement. A foreign company will be able to qualify as a smaller reporting company if it otherwise meets the requisite criteria discussed above and it files a domestic form that permits disclosure based on the standards for smaller reporting companies.

Integration of Regulation S-B into Regulation S-K

The new rules integrate former Regulation S-B disclosure items (other than Item 310 as discussed below) into Regulation S-K.  As a result, each relevant item of Regulation S-K has been amended to contain separate disclosure standards for smaller reporting companies.  Each new paragraph has a heading “Smaller Reporting Companies” for ease of reference.

The new rules allow each smaller reporting company to select, on an item-by-item basis, the new scaled disclosure requirements in Regulation S-K for smaller reporting companies, or the more comprehensive disclosure requirements in Regulation S-K that apply to other companies.  These new rules give each smaller reporting company the flexibility to determine at its option whether it takes advantage of one, some, or all of Regulation S-K’s new scaled disclosure requirements.

Whether or not smaller reporting companies elect to rely on the scaled disclosure provisions, each will need to check the new “smaller reporting company” box on the cover page of their reports to indicate that the company is a smaller reporting company.

Although the smaller reporting company disclosure requirements under Regulation S-K are very similar to what had been required under Regulation S-B, there are some important differences. Item 310, which formerly governed the form, content and preparation of financial statements for small business issuers, has been replaced by the requirements of Article 8 of Regulation S-X. Article 8 contains the financial statement requirements for smaller reporting companies, and requires two years of comparative audited balance sheet data, rather than one year as formerly required under Regulation S-B. According to the SEC, the only smaller reporting company disclosure requirement that is more rigorous is Item 404. Under Item 404, smaller reporting companies must report related person transactions that exceed the lesser of $120,000 or 1% of the company’s total assets at the end of the last two completed fiscal years. In contrast, a larger company must report only those related person transactions that exceed $120,000.

Elimination of Regulation S-B and S-B Forms

The SEC has eliminated Regulation S-B and the “small business issuer” designation. Under the new rules, smaller reporting companies may no longer use S-B forms such as Form SB-2 or Form 10-KSB.  Instead, these companies must use the forms for larger U.S. companies, such as Form S-1 and Form 10-K.  The SEC has instituted a transition period for former small business issuers transitioning to smaller reporting companies.  During the transition period, former small business issuers will have the option to file their next annual report for a fiscal year ending on or after December 15, 2007 on either Form 10-KSB or Form 10-K.  Such an issuer may continue to file its periodic reports using Regulation S-B and the S-B forms for periodic reports until its next annual report is filed.  Thereafter, all of its periodic reports must be filed on a form that does not have the S-B designation.

In regards to registration statements, all companies filing such documents on a date after February 4, 2008 are required to file on the appropriate form without a S-B designation. This will likely result in most smaller reporting companies using Form S-1 for public offerings.

VENTURES ISSUERS HAVE REDUCED CERTIFICATION OF DISCLOSURE IN ISSUERS' ANNUAL AND INTERIM FILINGS

In November, 2007, the Canadian Securities Administrators issued a notice on the status of the initiative to repeal and replace Multilateral Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings(MI 52-109) and its related forms.

Among other changes, the proposed version of MI 52-109 will no longer require the CEO and the CFO of a venture issuer to certify that they have designed and evaluated the effectiveness of disclosure controls and procedures and internal control over financial reporting. The resulting certificate will be accompanied by an explanation for investors of how it differs from the full certificate required to be filed by reporting issuers other than venture issuers.

MI 52-109 still remains in effect. However, several securities commissions in Canada, including British Columbia and Alberta, have issued notices or blanket orders allowing for the proposed certificates under the yet to be amended MI 52-109 to be used by venture issuers with fiscal years ending on or after December 31, 2007. British Columbia Securities Commission BCN 52-511, and Alberta Securities Commission Blanket Order ABASC 836 change the certification requirements for reporting issuers in BC and Alberta. In contrast to the certificate required under MI 52-109, this venture issuer basic certificate does not include representations relating to the establishment and maintenance of disclosure controls and procedures and internal control over financial reporting as defined in MI 52-109. All TSX venture issuers in jurisdictions with such relief should consider using the certificates allowed to them, as their use will reduce the potential for liability for the issuer’s officers.

The following is the venture issuer certification now required for annual financial statements:

CERTIFICATION OF ANNUAL FILINGS

VENTURE ISSUER BASIC CERTIFICATE

I, <identify (i) the certifying officer, (ii) his or her position at the issuer, (iii) the name of the issuer and (iv) if the certifying officer's title is not "chief executive officer" or "chief financial officer", indicate in which of these capacities the certifying officer is providing the certificate>, certify the following:

1.  Review: I have reviewed the AIF, if any, annual financial statements and annual MD&A, including for greater certainty all documents and information that are incorporated by reference in the AIF (together the annual filings) of <identify issuer> (the issuer) for the financial year ended <state the relevant date>.

2.  No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the annual filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the annual filings.

3.  Fair presentation: Based on my knowledge, having exercised reasonable diligence, the annual financial statements together with the other financial information included in the annual filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the annual filings.

Date: <insert date of filing>

_______________________
[Signature]
[Title]

(If the certifying officer's title is not "chief executive officer" or "chief financial officer", indicate in which of these capacities the certifying officer is providing the certificate.)

The following is the venture issuer certification now required for quarterly financial statements:

CERTIFICATION OF INTERIM FILINGS

VENTURE ISSUER BASIC CERTIFICATE

I, <identify (i) the certifying officer, (ii) his or her position at the issuer, (iii) the name of the issuer and (iv) if the certifying officer's title is not "chief executive officer" or "chief financial officer", indicate in which of these capacities the certifying officer is providing the certificate>, certify the following:

1.  Review: I have reviewed the interim financial statements and interim MD&A (together the interim filings) of <identify issuer> (the issuer) for the interim period ending <state the relevant date>.

2.  No misrepresentations: Based on my knowledge, having exercised reasonable diligence, the interim filings do not contain any untrue statement of a material fact or omit to state a material fact required to be stated or that is necessary to make a statement not misleading in light of the circumstances under which it was made, for the period covered by the interim filings.

3.  Fair presentation: Based on my knowledge, having exercised reasonable diligence, the interim financial statements together with the other financial information included in the interim filings fairly present in all material respects the financial condition, results of operations and cash flows of the issuer, as of the date of and for the periods presented in the interim filings.

Date: <insert date of filing>

_______________________
[Signature]
[Title]

(If the certifying officer's title is not "chief executive officer" or "chief financial officer", indicate in which of these capacities the certifying officer is providing the certificate.)

SEC PROPOSES ONE YEAR EXTENSION OF SOX 404 AUDITOR ATTESTATION REQUIREMENTS FOR SMALLER REPORTING COMPANIES

On February 1, 2008 the Securities and Exchange Commission (“SEC”) proposed a one-year extension of the Section 404(b) auditor attestation requirement for U.S. smaller business reporting issuers, now called “smaller reporting companies”. Under the proposed extension, the Sarbanes-Oxley (“SOX”) Section 404(b) requirements relating to an auditor’s attestation of a reporting issuer’s report on internal control over financial reporting would apply to non-accelerated filers beginning with fiscal years ending on or after Dec. 15, 2009.

The term “non-accelerated filer” refers to a Securities Exchange Act of 1934 reporting company that does not meet the definition of either an “accelerated filer” or a “large accelerated filer” which definition includes companies that have an aggregate worldwide market value of the voting and non-voting common equity held by their non-affiliates of $75,000,000 or more.

According to the SEC, their proposal to extend the Section 404(b) compliance date for smaller reporting companies is the latest in a series of recent efforts to help reduce unnecessary costs of compliance for smaller companies, without diminishing important investor protections. In connection with the extension of the proposed attestation requirement the SEC also announced that its professional staff has commenced a cost-benefit study of the auditor attestation requirement for smaller companies under Section 404(b) of the Sarbanes-Oxley Act of 2002. The study is intended to analyze the "real world" cost and benefit data from a broad array of companies currently complying with Section 404 under newly-issued guidance for companies and auditors. In addition to assessing the Section 404 cost reductions resulting from the SEC’s recent actions, the final report is intended to improve the efficiency and effectiveness of Section 404 implementation.

Amendments to Rule 144 and Rule 145

Rule 144

Securities Act Rule 144 currently provides a "safe harbour" to facilitate the resale of restricted securities by investors, provided that, among other things: (i) the securities have been held for at least a year; (ii) there is adequate current information about the issuer of the securities in the public domain; (iii) the number of shares sold in any three-month period does not exceed certain volume restrictions; (iv) the securities are sold in ordinary brokers' transactions; and (v) a Form 144 is filed with the SEC if the sale involves more than 500 shares or the aggregate dollar amount of securities sold in any three-month period is greater than US$10,000. These restrictions cease to apply to persons who are not affiliates of the issuer after two years.

Rule 144 has been amended effective February 15, 2008 to shorten the holding period applicable to the resale of restricted securities from one year to six months. Under the amended Rule 144, if the issuer of the securities to be resold has been subject to reporting obligations under the United States Securi­ties Exchange Act of 1934, as amended (the "Exchange Act") for at least 90 days before the sale of the securities, persons who have not been affiliates of the issuer for at least three months will be able to freely resell their re­stricted securities after a six-month holding period without any volume or manner of sale restrictions, provided that there is adequate current in­formation concerning the issuer in the public domain under Rule 144(c). In addition, Rule 144, as amended, will allow non-affiliates of reporting and non-reporting companies to freely resell restricted securities after satisfying a 12-month holding period.

The amended Rule 144 will likewise be available for resales of equity securities held by affiliates after a six-month holding period, but the current public information requirement, the volume limitations, the manner of sale requirements and the Form 144 filing requirements would continue to apply. However, with respect to resales by affiliates, the manner of sale requirements for equity securities will be revised to permit their resale through riskless principal transactions and to permit a broker to insert bid and ask quotations for the security in an "alternative trading system," provided that certain conditions are met. In addition, the thresholds that trigger Form 144 filing requirements will be increased to 5,000 shares or US$50,000.

The amendments to Rule 144 prevent securities issued by a reporting or non-reporting issuer that is or previously was a "shell company" from being resold pursuant to Rule 144, for at least one year after the issuer files information (the so-called "Form 10 Information") with the SEC (normally on a Form 8-K for a U.S. domestic company) confirming that it has ceased to be a shell company and providing the level of disclosure about the new business that would be appropriate for an initial registration statement under the Exchange Act. This one-year waiting period represents a significant change from the original proposal, announced in November 2007, which contemplated a waiting period of only 90 days after the filing of the Form 10 information with the SEC.

The amendments should greatly simplify compliance with the requirements of Rule 144 for securities of public reporting companies and make it easier for smaller companies to raise capital given the shorter hold periods for resales.

Rule 145

Currently under Securities Act Rule 145, affiliates of a party to a business combination transaction are presumed to be "underwriters" and are subject to certain post-transaction restrictions on resale of securities received in the transaction for up to two years following the transaction. This applies even if the securities issued in the transaction were registered on Form S-4. Effective February 15, 2008, Rule 145 was amended to eliminate this "presumptive underwriter" doctrine unless one of the parties to the transaction is a "shell company" (other than a business combination shell company) and the restricted period for securities issued in these types of transactions has been shortened to conform to the changes to Rule 144 described above.

Summary of Amendments to Rules 144 and 145

The table below summarizes the most significant chan­ges to Rules 144 and 145, to take effect on February 15, 2008.

Amendments to Forms S-3 and F-3

Effective January 28, 2008, the SEC adopted amendments that allow smaller issuers with less than US$75 million in public float to use short-form registration statements on Form S-3 and Form F-3, with the view to facilitating more efficient access to the public securities markets by such issuers. These forms permit eligible issuers to incorporate by reference into the registration statement the disclosure contained in the issuer's past and future Exchange Act filings, which allows for the automatic updating of the registration statement.

Currently, Forms S-3 and F-3 may only be used for primary offerings (an offering of securities by or on behalf of an issuer for its own account) by issuers that have been public for at least one year, have timely filed all reports required to be filed by them under the Exchange Act for the past 12 months, and have a public float of at least US$75 million. The new rules allow domestic issuers and foreign private issuers to conduct primary offerings on Forms S-3 or F-3, respectively, without regard to the public float requirement, as long as, among other things: (i) the issuer has a class of common equity securities listed on a national securities exchange in the United States; (ii) the issuer does not sell more than one-third of its outstanding public float during a rolling 12-month period prior to the sale; and (iii) the issuer is not a "shell company" and has not been a "shell company" for at least 12 calendar months immediately preceding the filing of the registration statement (unless it has a public float of at least US$75 million).

In addition, the amended Forms S-3 and F-3 permit eligible smaller issuers to register "shelf" offerings, whereby the issuer can register a specified number of its securities for sale in one or more tranches (commonly called "take-downs") on a delayed or continuous basis over a two-year period, at an offering price to be determined at the time of each take-down.