What are the tax and regulatory considerations for investors holding these warrants during the extended period?

Tax & regulatory take‑aways for warrant holders

1. Tax treatment of the warrants – In Canada and the U.S., a stock‑warrant is generally treated as a capital‑instrument rather than a dividend‑paying security. When a warrant is exercised, the holder is deemed to have disposed of the warrant (a capital‑gain or loss) and simultaneously acquires the underlying shares at the exercise price. The 2025‑2026 extension therefore lets investors push the taxable event forward: any capital gain on the warrant is only realized at exercise, allowing a possible deferral of tax until the later exercise date. For U.S. investors, the “wash‑sale” rule still applies if the same or substantially identical shares are repurchased within 30 days of a loss‑realizing exercise. Canadian investors should watch the “adjusted cost base” of the warrant (exercise price plus any premium paid) to correctly calculate the capital gain on exercise. If the warrants are held for more than a year before exercise, the gain will be taxed at the long‑term capital‑gain rate (15 % in Canada, 0 %–20 % in the U.S. depending on income).

2. Section 1244 and loss‑offset limits – Because DIAGNOS is a “venture‑capital‑type” corporation listed on the TSX Venture Exchange, any loss on the underlying shares may be eligible for the Section 1244 ordinary‑loss treatment (U.S.) if the corporation meets the statutory capital‑stock requirements, which can be valuable for high‑income investors seeking to offset ordinary income. However, the loss must be realized on the shares, not on the warrant itself, so the timing of exercise matters.

3. Regulatory considerations –

   • Exchange‑listing rules – The warrants are listed on three venues (TSX Venture, OTC QB, and the German FWB). Exercising on the TSX Venture may trigger Canadian securities‑filing obligations (e.g., reporting of beneficial ownership if the holder exceeds 5 % of the class). Exercising on the OTC or FWB side could expose U.S. or EU investors to additional reporting thresholds (Form 4/13D in the U.S., MiFID‑II transparency rules in the EU).
     
   • Foreign‑investor registration – Non‑Canadian holders must be aware of the “Foreign Investor Registration” (FIR) requirements on the TSX Venture, which can affect the ability to exercise or to receive the underlying shares without a local custodian.
     
   • Dilution & anti‑dilution provisions – The private‑placement warrants often contain anti‑dilution clauses that adjust the exercise price if DIAGNOS issues additional equity at a lower price. Investors should monitor any subsequent financing that could trigger a price reset, as this may alter the tax basis of the warrant and the eventual share‑purchase price.
     

Actionable trading insight

- Plan the exercise window: If the warrant’s intrinsic value (difference between the current market price of DIAGNOS shares and the exercise price) is comfortably above the cost to exercise, consider exercising now to lock in a long‑term capital‑gain position and avoid a rushed decision at the original September 2025 expiry.

- Tax‑deferral vs. opportunity cost: Weigh the benefit of deferring the capital‑gain tax against the risk that the share price could decline during the extension. A modest “hold‑to‑exercise” strategy is sensible only if you expect the AI‑driven health‑tech platform to gain traction (e.g., upcoming FDA clearances or partnership announcements).

- Regulatory compliance check: Before exercising, verify that you meet the relevant ownership‑disclosure thresholds on each exchange and that any foreign‑investor registration is in place. Failure to do so can result in delayed settlement or unintended regulatory penalties, which would erode the net return from the warrant exercise.

In short, the extended exercise period gives warrant holders flexibility to time the taxable event and manage regulatory exposure, but the upside must be balanced against the potential for share‑price volatility, anti‑dilution adjustments, and filing obligations across three jurisdictions. A disciplined review of the tax basis, capital‑gain timing, and cross‑border reporting requirements will help convert the warrant’s extended life into a net‑positive trading outcome.