Securities Law & Instruments

Headnote

Section 144 - partial revocation of cease trade order to permit certain trades pursuant to a private placement.

Statutes Cited

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127 and 144.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED, (the "Act")

AND

IN THE MATTER OF

THE LEARNING LIBRARY INC.

 

ORDER

(Section 144)

WHEREAS the securities of The Learning Library Inc. (the "Issuer") are subject to a temporary order of the Director dated June 3, 2003 under paragraph 127(1)2 and subsection 127(5) of the Act and extended by a further order of the Director dated June 13, 2003 (collectively referred to as the "Cease Trade Order") directing that trading in the securities of the Issuer cease;

AND WHEREAS the Issuer has applied to the Ontario Securities Commission (the "Commission") for an order pursuant to section 144 of the Act for a partial revocation of the Cease Trade Order;

AND WHEREAS the Issuer has represented to the Commission as follows:

1. The Issuer is a corporation formed under the Business Corporations Act (Ontario) on June 25, 2001 by the amalgamation (the "Amalgamation") of The Learning Library Inc. with Sydenham Capital Inc. and E-Amigos.com Inc., both capital pool companies listed on the TSX Venture Exchange (the "Exchange").

2. Pursuant to the Amalgamation, the Issuer became a reporting issuer in the provinces of British Columbia and Alberta, having inherited the reporting issuer status of both Sydenham Capital Inc. and E-Amigos.com Inc., and was listed on the Exchange. Subsequent to the Amalgamation, the Issuer applied for, and was granted, reporting issuer status in the Province of Ontario.

3. The authorized capital of the Issuer consists of an unlimited number of common shares and an unlimited number of preferred shares, of which 24,987,199 common shares and 2,661,333 preferred shares are issued and outstanding.

4. As a result of its financial hardship, the Issuer failed to file its unaudited interim financial statements for the three month period ended March 31, 2003 (the "Initial Financial Statements in Default").

5. As a result of the Issuer's failure to file the Initial Financial Statements in Default, the Commission issued the Cease Trade Order.

6. As a result of the imposition of the Cease Trade Order, the Exchange suspended trading in the Issuer's shares on June 3, 2003.

7. On June 17, 2003, the British Columbia Securities Commission issued a cease trade order against the Issuer (the "BC Cease Trade Order") and on October 10, 2003, the Alberta Securities Commission issued a cease trade order against the Issuer (the "Alberta Cease Trade Order").

8. Since the Cease Trade Order was issued, the Issuer has failed to file the following additional financial statements within the timeframes required by applicable securities laws:

(i) unaudited interim financial statements for the six month period June 30, 2003; and

(ii) unaudited interim financial statements for the nine month period ended September 30, 2003,

collectively, with the unaudited interim financial statements for the three month period ended May 30, 2003, the "Financial Statements in Default").

9. On March 25, 2004, the Issuer filed the Financial Statements in Default with the securities regulatory authorities in the provinces of Alberta, British Columbia and Ontario through SEDAR.

10. The Issuer has filed Form 13-502F1 with the Commission and paid the appropriate participation fee to the Commission for the year ended December 31, 2003 pursuant to Commission Rule 13-502. The Issuer is currently preparing its audited financial statements for the year ended December 31, 2003 (the "2003 Year End Financial Statements"). Upon completing the Private Placement (defined below), the Issuer will file the 2003 Financial Statements with the Commission, together with Form 13-502F1 and pay the appropriate participation fee for the year ended December 31, 2004 pursuant to Commission Rule 13-502.

11. The Issuer's prospects have failed to improve to the point where it anticipates being able to sustain a viable business model as a public company. As a result, the directors of the Issuer have determined that it is in the best interests of the Issuer to divest the Issuer's current business and to complete a transaction to acquire an alternative business which has better prospects for the Issuer's shareholders. Accordingly, the Issuer proposes to undertake a reorganization pursuant to which it will take the following steps: (i) complete a private placement to provide it with the resources necessary to divest its business and complete a change of business (the "Private Placement"); (ii) hold an annual and special meeting of its shareholders to seek approval to sell its existing business (the "Shareholders' Meeting"); and (iii) advance discussions to conduct a change of business for the Issuer.

12. Under the Private Placement, the Issuer proposes to issue up to 7,000,000 units at a price of $0.10 per unit to purchasers resident in the Province of Ontario or other jurisdictions outside of Canada and the United States for aggregate gross proceeds of up to $700,000, each unit to consist of one common share of the Issuer and one common share purchase warrant of the Issuer exercisable to acquire one common share for a period of two years at a price of $0.15 per share. The proceeds from the Private Placement will be used by the Issuer for: (i) the preparation and audit of its annual financial statements for the year ended December 31, 2003; (ii) the preparation of a management information circular and related proxy materials, and the mailing thereof by the transfer agent, in connection with the Shareholders' Meeting; (iii) the services of the registrar and transfer agent of the Issuer; (iv) the payment of annual participation and similar fees to applicable securities regulators and annual Exchange listing fees; (v) the services of legal counsel with respect to the Private Placement, the Shareholders' Meeting and other aspects of the proposed reorganization, this Order, the revocation of the Cease Trade Order, Alberta Cease Trade Order and the BC Cease Trade Order; (vi) the payment of existing normal course arm's length creditors of the Issuer; and (vii) general working capital.

13. Under the Private Placement, the subscription agreement provided to purchasers will set forth information with respect the Cease Trade Order, Alberta Cease Trade Order and the BC Cease Trade Order and this Order and provide notice that any and all securities issued in connection with the Private Placement will remain subject to such cease trade orders following the completion of the Private Placement.

14. In connection with the completion of the Private Placement, the Issuer intends to issue a comprehensive press release with respect to the Private Placement, the state of its business and financial situation, the state of the Cease Trade Order, Alberta Cease Trade Order, the BC Cease Trade Order and this Order, the Shareholders' Meeting and its intentions to divest its current business and complete a change of business.

15. In connection with the Shareholders' Meeting, the Issuer will send copies of the Financial Statements in Default and the 2003 Year End Financial Statements to its shareholders, together with the proxy materials for the meeting.

16. The Issuer has applied for a partial revocation of the Cease Trade Order to permit it and the purchasers to enter into the Private Placement on substantially the terms described in this Order.

17. In connection with its proposed change of business, the Issuer intends to provide prospectus like disclosure to its shareholders and will comply with all applicable securities laws and rules of the Exchange in order to complete its change of business and have its shares reinstated for trading on the Exchange.

18. In connection with a change of its business, the Issuer will apply to the Commission for full revocation of the Cease Trade Order so as to permit trading of the securities generally.

19. Concurrent with the Issuer's application with the Commission for full revocation of the Cease Trade Order, the Issuer will apply to the British Columbia Securities Commission and the Alberta Securities Commission for orders revoking the BC Cease Trade Order and the Alberta Cease Trade Order, respectively.

AND WHEREAS the Commission's power to make the Order has been assigned to the Director;

AND UPON the Director being satisfied that to do so would not be prejudicial to the public interest;

IT IS ORDERED, pursuant to section 144 of the Act, that the Cease Trade Order be and is hereby partially revoked to solely permit the trades or acts in furtherance of trades related to the completion of the Private Placement as set out in this Order.

May 11, 2004.

"Iva Vranic"