Securities Law & Instruments

Headnote

MI 11-101 -- relief granted from requirements in National Instrument 52-107 and National Instrument 51-102 to prepare financial statements and management discussion and analysis in accordance with Canadian GAAP and have such financial statements audited in accordance with Canadian GAAS and instead to prepare and have such financial statements prepared in accordance with U.S. GAAP and U.S. GAAS.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency , ss. 3.1, 3.2.

National Instrument 51-102 Continuous Disclosure Obligations.

February 11, 2009

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO (THE JURISDICTION)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATIONS IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

JUMPTV INC. (THE FILER)

 

DECISION

Background

The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation):

(i) for an exemption from the requirements in sections 3.1 and 3.2 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) requiring the Filer's annual financial statements for the periods ending December 31, 2006, December 31, 2007 (the Historical Annual Financial Statements) and the annual financial statements for the period ending December 31, 2008 (the Current Annual Financial Statements) be prepared and audited in accordance with Canadian GAAP and Canadian GAAS;

(ii) for an exemption from the requirements in section 3.1 of NI 52-107 that the interim financial statements for the period ending March 31, 2009 (the Interim Financial Statements, and together with the Historical Annual Financial Statements and the Current Annual Financial Statements, the Financial Statements) be prepared in accordance with Canadian GAAP; and

(iii) to be permitted to file management discussion and analysis (MD&A) relating to the Financial Statements prepared as if it were an SEC issuer, as defined in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102)

(collectively, the Exemption Sought).

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

(a) the Ontario Securities Commission is the principal regulator for this application, and

(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, Nova Scotia, New Brunswick, and Prince Edward Island, Newfoundland and Labrador (the Non-Principal Jurisdictions).

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

"U.S." means the United States of America.

"U.S. GAAP" means generally accepted accounting principles in the U.S. that the SEC has identified as having substantial authoritative support, as supplemented by Regulation S-X and Regulation S-B of the 1934 Act.

"U.S. GAAS" means generally accepted auditing standard in the U.S., as supplemented by the SEC's rules on auditor independence.

Representations

This decision is based on the following facts represented by the Filer:

1. The Filer was incorporated on January 14, 2000 under the Canada Business Corporations Act.

2. The Filer's registered office and head office in Canada is located at 463 King Street West, 3rd Floor, Toronto, Ontario.

3. The Filer is a reporting issuer in good standing in the Jurisdiction and each of the Non-Principal Jurisdictions and is not in default of any requirements of the securities legislation in the Jurisdiction or in each of the Non-Principal Jurisdictions.

4. The authorized capital of the Filer consists of an unlimited number of common shares (Common Shares), an unlimited number of Class 1 preference shares (Class 1 Shares), issuable in series and an unlimited number of Class 2 preference shares (Class 2 Shares), issuable in series.

5. On October 20, 2008 (the Closing Date), the Filer completed a business combination with NeuLion, Inc. (NeuLion), pursuant to which NeuLion became a wholly-owned subsidiary of the Filer (the RTO).

6. As of November 30, 2008, 113,758,823 Common Shares were issued and outstanding, each of which carries the right to one vote on each matter that may come before a meeting of the Filer's shareholders (the Shareholders). Additionally, 33,406,354 outstanding stock options, warrants, retention warrants, merger warrants, Series A and B warrants, and stock appreciation rights are outstanding, each of which is exchangeable for one Common Share upon exercise. The holders of Class 1 Shares and holders of Class 2 Shares are not entitled to receive notice of, to attend or to vote at any meeting of the Shareholders. As of November 30, 2008, there are no Class 1 Shares or Class 2 Shares issued and outstanding. The Common Shares are listed and posted for trading on the Toronto Stock Exchange.

7. Of the 113,758,823 Common Shares outstanding 59% are, to the knowledge of the Filer, directly or beneficially held by U.S. residents.

8. The Filer is engaged in the business of broadcasting of live international and sports video over the Internet with the majority of its business partners being located outside of Canada.

9. Other than one executive officer, all of the executive officers and 75% of the directors of the Filer are resident outside of Canada.

10. The majority of the capital assets of the Filer are located outside of Canada.

11. The business of the Filer is administered principally outside of Canada.

12. The Shareholders voted on and approved the merger between the Filer and NeuLion (the Merger) as outlined in the in the management information circular dated September 4, 2008 (the Information Circular), at a special meeting of the Filer dated October 17, 2008 called for the purposes of, inter alia, voting on the Merger. Under the terms of the Merger, the Filer agreed to, inter alia, issue to NeuLion, approximately 50% of the Filer's then issued and outstanding Common Shares in exchange for all of the NeuLion's issued and outstanding equity securities.

13. As disclosed to the Shareholders in the Information Circular:

(i) the Filer determined that NeuLion is the acquirer and will consider the Merger as an RTO effective as of the closing of the Merger; and

(ii) in connection with the RTO, the Filer will no longer qualify as a "foreign private issuer" within the meaning of United States securities laws as a result of the RTO and will be required, pursuant to Section 12(g) of the 1934 Act, as amended, to file a Registration Statement on Form 10 (the Registration Statement) with respect to its Common Shares within 120 days following its fiscal year end.

14. In addition, U.S. federal securities laws require that any financing conducted by the Filer after the Closing Date be conducted in the manner required for a United States domestic issuer.

15. Under Canadian GAAP, the RTO is accounted for as a "reverse take-over". As a result of the application of this requirement, NeuLion's historical financial statements become the comparative financial statements for the Filer. NeuLion's historical financial statements are stated in conformity with U.S. GAAP and have no quantitative differences with Canadian GAAP.

16. The financial information for all comparative periods in the Filer's Financial Statements will be replaced with NeuLion financial information as a result of the RTO, which financial information has not been previously reported in Canadian GAAP.

17. Upon filing the Registration Statement, the Filer will become an "SEC issuer" within the meaning of NI 52-107 and will be eligible to rely on the exemptions in sections 4.1 and 4.2 of NI 52-107 and file financial statements prepared in accordance with U.S. GAAP and where applicable, audited in accordance with U.S. GAAS.

18. The Filer's Financial Statements are stated in United States dollars.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Exemption Sought is granted provided that:

(a) the Filer files Financial Statements that are prepared in accordance with U.S. GAAP;

(b) the notes to the first two sets of the Filer's annual financial statements after the change from Canadian GAAP to U.S. GAAP (the Future Annual Financial Statements) and the notes to the Filer's interim financial statements for interim periods during those two years (the Future Interim Financial Statements, and together with the Future Annual Financial Statements, the Future Financial Statements):

(i) explain the material differences between Canadian GAAP (as applicable to public enterprises) and U.S. GAAP that relate to recognition, measurement and presentation;

(ii) quantify the effect of material differences between Canadian GAAP (as applicable to public enterprises) and U.S. GAAP that relate to recognition, measurement and presentation, including a tabular reconciliation between net income reported in the Future Financial Statements and net income computed in accordance with Canadian GAAP (as applicable to public enterprises); and

(iii) provide disclosure consistent with disclosure requirements of Canadian GAAP (as applicable to public enterprises) to the extent not already reflected in the Future Financial Statements;

(c) the financial information for any comparative periods in the Financial Statements that were previously reported in accordance with Canadian GAAP be presented as follows:

(i) as restated and presented in accordance with U.S. GAAP; and

(ii) supported by an accompanying note that:

A. explains the material differences between Canadian GAAP (as applicable to public enterprises) and U.S. GAAP that relate to recognition, measurement and presentation; and

B. quantifies the effect of material differences between Canadian GAAP (as applicable to public enterprises) and U.S. GAAP that relate to recognition, measurement and presentation, including a tabular reconciliation between net income as presented in accordance with Canadian GAAP and net income as restated and presented in accordance with U.S. GAAP;

(d) the Historical Annual Financial Statements and the Current Annual Financial Statements are accompanied by an auditor's report prepared in accordance with U.S. GAAS that:

(i) contains an unqualified opinion;

(ii) identifies all financial periods presented for which the auditor has issued an auditor's report;

(iii) refers to the former auditor's reports on the comparative periods, if the Filer has changed its auditor and one or more of the comparative periods presented in the Historical Annual Financial Statements or the Current Annual Financial Statements were audited by a different auditor; and

(iv) identifies the auditing standards used to conduct the audit and the accounting principles used to prepare the Historical Annual Financial Statements and the Current Annual Financial Statements;

(e) the Filer complies with section 5.2 of NI 51-102 as if the Filer were an SEC issuer as defined in NI 51-102;

(f) where the Legislation requires Financial Statements to be audited, the Financial Statements are audited in accordance with U.S. GAAS;

(g) the Filer refiles the Historical Annual Financial Statements and related MD&A using U.S. GAAP and U.S. GAAS;

(h) if the Filer does not file the Registration Statement within 120 days following its fiscal year end, the Filer will refile on the System for Electronic Document Analysis and Retrieval (SEDAR):

(i) the Historical Annual Financial Statements and related MD&A (originally prepared using U.S. GAAP and U.S. GAAS) using Canadian GAAP and Canadian GAAS;

(ii) the Current Annual Financial Statements and related MD&A (originally prepared using U.S. GAAP and U.S. GAAS) using Canadian GAAP and Canadian GAAS; and

(iii) the Interim Financial Statements and related MD&A (originally prepared using U.S. GAAP and U.S. GAAS), if any, using Canadian GAAP and Canadian GAAS;

(i) if the Registration Statement does not become effective within six months from the date of this decision, the Filer will either:

(i) refile on SEDAR the Financial Statements and related MD&A (originally prepared using U.S. GAAP and U.S. GAAS); or

(ii) or will submit an application to vary this decision,

within six months from the date of this decision.

"Jo-Anne Matear"
Assistant Manager, Corporate Finance Branch
Ontario Securities Commission