Securities Law & Instruments

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- Relief granted from the requirement to file financial statements with a business acquisition report that have been audited in accordance with either Canadian or United States generally accepted auditing standards.

Rules Cited

National Instrument 52-107 -- Acceptable Accounting Principles, Auditing Standards and Foreign Currency, ss. 6.1, 6.2, 9.1.

National Instrument 51-102 -- Continuous Disclosure Obligations, Part 8.

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ALBERTA, SASKATCHEWAN, MANITOBA, ONTARIO,

QUÉBEC, NEW BRUNSWICK, NOVA SCOTIA

AND NEWFOUNDLAND AND LABRADOR

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATION

AND

IN THE MATTER OF

INFLAZYME PHARMACEUTICALS LTD.

 

MRRS DECISION DOCUMENT

WHEREAS the local securities regulatory authority or regulator (the "Decision Maker") in each of Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia and Newfoundland and Labrador (the "Jurisdictions") has received an application from Inflazyme Pharmaceuticals Ltd. (the "Filer") for a decision under the securities legislation of the Jurisdictions (the "Legislation") that the Filer be granted an exemption from section 6.2 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency ("NI 52-107") and in Québec by a revision of the general order that will provide the same result as an exemption order;

AND WHEREAS, under the Mutual Reliance Review System for Exemptive Relief Applications (the "System"), the Ontario Securities Commission is the principal regulator for this application;

AND WHEREAS, unless otherwise defined, the terms herein have the meaning set out in National Instrument 14-101 Definitions or, in Québec, Commission Notice 14-101;

AND WHEREAS the Filer has represented to the Decision Makers that:

    1. the Filer is a corporation incorporated and subsisting pursuant to the laws of the Province of British Columbia;

    2. the Filer is a biopharmaceutical company focussed on developing new therapies for the treatment of inflammation and other diseases;

    3. the Filer's authorized capital consists of 200,000,000 common shares and 50,000,000 Class A preference shares, of which 106,215,150 common shares and 21,957,676 Class A preference shares were issued and outstanding as of May 31, 2004;

    4. the common shares of the Filer are listed on the Toronto Stock Exchange;

    5. the Filer is a reporting issuer or the equivalent in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland;

    6. the Filer is not in default of any requirements of the Legislation or of the securities legislation of British Columbia;

    7. on April 20, 2004, the Filer exchanged 12,684,055 of its common shares for all the issued and outstanding shares of AdProTech Limited ("AdProTech") in a transaction valued at approximately $20,000,000 (the "Acquisition");

    8. AdProTech is a company incorporated under the laws of the United Kingdom;

    9. AdProTech is a biotechnology company developing new protein therapeutics based on different approaches to the inhibition of the human complement system;

    10. the financial statements of AdProTech to date have been prepared and audited according to generally accepted accounting principles ("GAAP") and generally accepted auditing standards ("GAAS") in the United Kingdom;

    11. the Acquisition constitutes a "significant acquisition" of the Filer for the purposes of National Instrument 51-102 Continuous Disclosure Obligations ("NI 51-102"), requiring the Filer to file a business acquisition report on or before July 5, 2004 pursuant to section 8.2 of NI 51-102;

    12. pursuant to section 8.4 of NI 51-102, the business acquisition report must be accompanied by certain financial statements of AdProTech;

    13. in order to ensure appropriate disclosure, the Filer proposes to use its March 31, 2004 year end statements for the pro forma statements required under section 8.4 of NI 51-102 and therefore proposes to delay the filing of the required business acquisition report until on or before July 15, 2004 rather than the due date of July 5, 2004 required by section 8.2 of NI 51-102;

    14. NI 52-107 sets out the GAAP and GAAS permitted to be used in the preparation and auditing of financial statements required to be filed under NI 51-102;

    15. the GAAP and GAAS used in the preparation and auditing of AdProTech's financial statements do not comply with the standards set out in NI 52-107;

    16. the Filer has obtained an auditors' report from Deloitte & Touche LLP (the "Auditors' Report"), the auditor of AdProTech, which is accompanied by a statement by the auditor (the "Statement") that:

      a. describes the material differences in the form and content of the Auditors' Report prepared in accordance with United Kingdom GAAS as compared to an auditors' report prepared in accordance with Canadian generally accepted auditing standards ("Canadian GAAS");

      b. indicates that the Auditors' Report prepared in accordance with Canadian GAAS would not contain a reservation.

AND WHEREAS under the System, this MRRS Decision Document evidences the decision of each Decision Maker (collectively, the "Decision");

AND WHEREAS each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the Decision has been met;

THE DECISION of the Decision Makers under the Legislation is that the requirement contained in section 6.2 of NI 52-107 to file financial statements with a business acquisition report that are audited in accordance with Canadian GAAS or US GAAS shall not apply to the Filer provided that:

    a) the Filer otherwise files a business acquisition report in respect of the Acquisition in accordance with Part 8 of NI 51-102, including the financial statements required thereunder; and

    b) the Filer files financial statements of AdProTech audited in accordance with United Kingdom GAAS, which financial statements shall include the Auditors' Report, the Statement and a reconciliation to Canadian generally accepted accounting principles of the statements for the most recently completed year end and for the most recently completed interim period of AdProTech, as required by subsections 6.1(4) and 6.1(5) of NI 52-107.

July 7, 2004.

"John Hughes"