Application by an issuer for a revocation of a cease trade order issued by the Commission – cease trade order issued because the issuer failed to file certain continuous disclosure materials required by Ontario securities law – defaults subsequently remedied by bringing continuous disclosure filings up-to-date – Issuer has provided an undertaking to the Commission that it will not complete (a) a restructuring transaction involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada, (b) a reverse takeover with a reverse takeover acquiror that has a direct or indirect, existing or proposed, material underlying business which is not located in Canada, or (c) a significant acquisition involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada, unless the issuer files a preliminary prospectus and a final prospectus with the Ontario Securities Commission and obtains receipts for the preliminary prospectus and the final prospectus from the Director under the Act.
Securities Act, R.S.O. 1990, c. S.5, as am., s. 144.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990 C.S.5, AS AMENDED
IN THE MATTER OF
KHOT INFRASTRUCTURE HOLDINGS, LTD.
WHEREAS the securities of Khot Infrastructure Holdings, Ltd. (the Applicant) are subject to a cease trade order made by the Ontario Securities Commission (the Commission) on May 5, 2017 (the Cease Trade Order), directing that trading and acquiring, whether direct or indirect, cease in respect of each security of the Applicant;
AND WHEREAS the Cease Trade Order was made on the basis that the Applicant was in default of certain filing requirements under Ontario securities law as described in the Cease Trade Order;
AND WHEREAS the Applicant has applied to the Commission under section 144 of the Act to revoke the Cease Trade Order;
AND UPON the Applicant having represented to the Commission that:
1. The Applicant was incorporated on December 22, 2010 under the Business Corporations Act (British Columbia) and continued to the laws of the British Virgin Islands, under the BVI Business Companies Act, 2004, on December 18, 2013.
2. The Applicant’s registered and records office is located at Sea Meadow House, P.O. Box 116, Road Town, Tortola, VG 1110.
3. The Applicant is a reporting issuer under the securities legislation (the Legislation) of the province of Ontario and is not a reporting issuer in any other jurisdiction in Canada.
4. The Applicant’s authorized capital consists of an unlimited number of common shares without par value (the Common Shares), of which 65,302,351 Common Shares are currently issued and outstanding.
5. Other than the outstanding and issued Common Shares disclosed above and 150,000 incentive stock options expiring December 31, 2017, 1,950,000 incentive stock options expiring January 8, 2019, 775,000 incentive stock options expiring December 3, 2020 and the Loans (as defined below), the Applicant does not have any other securities, including debt securities, outstanding.
6. The Common Shares are listed and posted for trading on the Canadian Securities Exchange (the CSE), however, trading in such shares was halted on May 5, 2017, because of the Cease Trade Order. In addition, the Common Shares are verified for trading on the OTCQB Venture Marketplace but trading in the Common Shares is currently halted.
7. Other than the CSE and the OTCQB Venture Marketplace, the securities of the Applicant are not currently listed or quoted on any exchange or market in Canada or elsewhere.
8. The Cease Trade Order was issued as a result of the Applicant’s failure to file its audited annual financial statements, related management’s discussion and analysis (MD&A) for the year ended December 31, 2016, as well as certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (the 52-109 Certificates) within the prescribed timeframe as required under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102);
9. The Applicant subsequently failed to file other continuous disclosure documents with the Commission within the prescribed timeframe in accordance with the requirements of securities law, including its interim financial statements, related MD&A and 52-109 Certificates for the interim periods ended March 31, 2017, June 30, 2017 and September 30, 2017.
10. Since the issuance of the Cease Trade Order, the Applicant has filed the following continuous disclosure documents:
a. audited annual financial statements, MD&A and 52-109 Certificates for the year ended December 31, 2016;
b. interim financial statements, MD&A, and 52-109 Certificates for the interim periods ended March 31, 2017, June 30, 2017 and September 30, 2017; and
c. a management information circular dated August 27, 2017 (the Circular);
11. The Applicant called an annual general and special shareholders meeting (the Shareholders Meeting) to be held on September 19, 2017, in order to present its annual audited financial statements for the fiscal year ended December 31, 2016, and to obtain shareholder approval for: (a) the election of directors; (b) the appointment of auditors; (c) adoption of an incentive stock option plan; (d) a change of business; (e) a share consolidation on the basis of one post-consolidated common share for every ten pre-consolidated common shares; and (f) a change of name.
12. The Applicant has adjourned the Shareholders Meeting and will amend and re-send the Circular and file a listing statement in accordance with applicable policies of the CSE, including with respect to its proposed change of business.
13. The Applicant has paid all outstanding filing fees, participation fees and late filing fees that are required to be paid to the Commission and has filed all forms associated with such payments.
14. The Applicant (i) is up-to-date with all of its other continuous disclosure obligations; (ii) except as provided in paragraph 15, is not in default of any of its obligations under the Cease Trade Order; and (iii) is not in default of any requirements under the Act or the rules and regulations made pursuant thereto.
15. From the date of the Cease Trade Order, the Company issued US$366,679.12 in loans (the Loans), which accrue interest at a rate of 8% per annum, with the accrued interest to be paid at the time of the repayment of the Loans. The Loans were convertible into Common Shares at a price of $0.01 per Common Share, however they were thereafter amended to remove this convertibility feature. The Applicant is of the view that the Loans may have constituted the distribution of a security by the Applicant in contravention of the Cease Trade Order.
16. Other than the Cease Trade Orders, the Applicant has not previously been subject to a Cease Trade Order issued by any securities regulatory authority.
17. The Applicant is not considering, nor is it involved in any discussions relating to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.
18. The Applicant has given the Commission a written undertaking (the Undertaking) that:
a. The Applicant will hold an annual meeting of shareholders within three months after the date on which the Cease Trade Order is revoked; and
b. The Applicant will not complete:
i. A restructuring transaction involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada,
ii. A reverse takeover with a reverse takeover acquirer that has a direct or indirect, existing or proposed, material underlying business which is not located in Canada, or
iii. A significant acquisition involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada,
A. The Applicant files a preliminary prospectus and a final prospectus with the Commission and obtains receipts for the preliminary and final prospectus from the Director under the Act,
B. The Applicant files or delivers with the preliminary prospectus and the final prospectus the documents required by Part 9 of National Instrument 41-101 General Prospectus Requirements (NI 41-101) including a completed personal information form and authorization in the form set out in Appendix A of NI 41-101 for each current and incoming director, executive officer and promoter of the Applicant, and
C. The preliminary prospectus and final prospectus contain the information required by applicable securities legislation, including the information required for a probable restructuring transaction, reverse takeover or significant acquisition (as applicable).
19. Since the issuance of the Cease Trade Order, the Applicant has announced and disclosed the following material changes:
a. on October 3, 2016, the Applicant filed a Notice of Change of Auditor and Letter of Former Auditor;
b. on July 28, 2017, the Applicant filed the Letter of Successor Auditor; and
c. on January 24, 2018, the Applicant filed a material change report disclosing that it entered into loan agreements with various parties, including loan agreements with a director of the Applicant that constituted “related party transactions” as such term is defined in Multilateral Instrument 61-101 Protection of Minority Security Holders.
There have been no other material changes to the business, operations or affairs of the Applicant.
20. Upon the revocation of the Cease Trade Order, the Applicant will issue a news release and concurrently file a material change report on SEDAR announcing the revocation of the Cease Trade Order and outlining the Applicant’s future plans, including its proposed change of business.
21. The Applicant’s SEDAR and SEDI profiles are up-to-date.
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Director being satisfied that it would not be prejudicial to the public interest to revoke the Ontario Cease Trade Order;
IT IS ORDERED, pursuant to section 144 of the Act, that the Ontario Cease Trade Order is revoked.
DATED at Toronto this 1st day of February, 2018.
Manager, Corporate Finance
Ontario Securities Commission