Securities Law & Instruments

Headnote

Section 144 -- application for partial revocation of cease trade order -- variation of cease trade order to permit private placement, share consolidation, debt conversion and project financing, subject to conditions.

Applicable Ontario Statutory Provisions

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

IN THE MATTER OF

THE SECURITIES ACT,

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

AND

IN THE MATTER OF

RTICA CORPORATION

 

ORDER

(Section 144 of the Act)

WHEREAS the securities of Rtica Corporation (the Applicant) are currently subject to a cease trade order dated October 3, 2005 made pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, as extended by a further order dated October 14, 2005 made pursuant to paragraph 2 of subsection 127(1) of the Act (collectively, the Cease Trade Order) ordering that trading in the securities of the Applicant cease;

AND WHEREAS the Applicant has applied to the Ontario Securities Commission (the Commission) pursuant to section 144 of the Act for an order varying the Cease Trade Order with respect to the Private Placement, Share Consolidation, Debt Conversion and U.S. Plant Financing (all as defined below);

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated on May 30, 1997 under the laws of Alberta, and was subsequently continued under the laws of the Business Corporations Act (Ontario) on April 25, 2001. The Applicant maintains a head office at 999 Barton Street, Stoney Creek, Ontario. The Applicant's records are currently located at the offices of Stikeman, Graham, Keeley & Spiegel LLP, located at 220 Bay Street, Suite 700, Toronto, Ontario M5J 2W4.

2. The authorized share capital of the Applicant consists of an unlimited number of common shares, of which 38,203,780 common shares are issued and outstanding as of August 9, 2006. In addition to its common shares, the Applicant has debt securities outstanding. The debt securities of the Applicant consists of an aggregate of $1,256,914 in promissory notes and, including accrued interest, a total of $2,832,034 in convertible debentures. A conversion of the convertible debentures outstanding in accordance with the terms thereof would result in an issue of 20,527,634 common shares of the Applicant on a fully diluted basis.

3. The Applicant is a reporting issuer or the equivalent under the securities legislation of the provinces of Ontario, British Columbia and Alberta. The Applicant is not a reporting issuer in any other jurisdiction in Canada. The Applicant is subject to cease trade orders in the provinces of Alberta and British Columbia. The Applicant has filed applications with each of the Alberta Securities Commission and British Columbia Securities Commission for a partial revocation of their cease trade orders.

4. The common shares of the Applicant are listed on the NEX board of the TSX Venture Exchange but have been suspended from trading, and are not listed or quoted on any other exchange or market in Canada or elsewhere.

5. The Cease Trade Order was issued due to the failure by the Applicant to file with the Commission audited annual financial statements and related MD&A for the year ended May 31, 2005 and interim financial statements and related MD&A for the three months ended August 30, 2005 as required by the Act (the Statements). The Applicant has further failed to file interim financial statements and related MD&A for the six months ended November 30, 2005 and for the nine months ended February 28, 2006 (together with the Statements, the Financial Statements).

6. The Financial Statements were not filed with the Commission due to a lack of funds to pay for the preparation and, in respect of the annual financial statements for the year ended May 31, 2005, audit of such statements.

7. The Applicant obtained an order dated May 31, 2006 to enable the Applicant to effect a private placement of convertible debentures in order to raise approximately $70,000. The proceeds were used to complete the audit and filing of the Financial Statements, bring its continuous disclosure record up to date and improve the Applicant's financial position.

8. The Applicant has now filed its annual financial statements for the year ended May 31, 2005, including the required annual chief executive officer and chief financial officer certifications, where applicable, together with associated fees; and its interim financial statements for the three, six and nine month periods ended August 31, 2005, November 30, 2005 and February 28, 2006, compared to the same periods in 2004, respectively, including the interim chief executive officer and chief financial officer certifications, where applicable.

8. The Applicant is up-to-date in its continuous disclosure obligations, has paid all filing fees associated therewith.

9. The Applicant is currently inactive and is seeking to effect the following transactions to enable the Applicant to satisfy the solvency requirements in British Columbia that must be met to achieve reactivation:

(a) a private placement of its securities to raise up to $1,800,000 to provide working capital for the Applicant (the Private Placement);

(b) a conversion of debt to equity (the Debt Conversion);

(c) the holding of a shareholders' meeting (the Shareholders' Meeting) to seek approval for both the consolidation of the existing outstanding common shares at a rate of 10:1 (the Share Consolidation) and a future financing to build and commission a commercial production facility in the United States (the U.S. Plant Financing); and

(d) completion of the Share Consolidation.

9. Prior to completion of the Private Placement, Debt Conversion, Share Consolidation and U.S. Plant Financing, the proposed recipients of the securities will receive:

(a) a copy of the Cease Trade Order;

(b) a copy of this Order; and

(c) written notice that all of the Applicant's securities will remain subject to the Cease Trade Order following completion of those transactions and that the Cease Trade Order may remain in effect indefinitely.

10. The Private Placement, Share Consolidation, Debt Conversion and U.S. Plant Financing will be completed in accordance with all applicable policies of the NEX board of the TSX Venture Exchange and applicable securities legislation.

11. The Applicant intends, within a reasonable time following completion of the Private Placement, Debt Conversion, Shareholders' Meeting and Share Consolidation, to apply to the Commission for a full revocation of the Cease Trade Order.

12. As the Private Placement, Debt Conversion, Shareholders' Meeting, Share Consolidation and U.S. Plant Financing will involve trades in securities or acts in furtherance of trades, they cannot be completed without a partial revocation of the Cease Trade Order.

AND WHEREAS the Director is 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 varied solely to permit trades and acts in furtherance of trades in connection with the Private Placement, Debt Conversion, Shareholders' Meeting, Share Consolidation and U.S. Plant Financing provided that, prior to the issuance of the securities the potential investors, and each direct and indirect beneficial owner of the potential investors, as applicable, will:

(a) receive a copy of the Cease Trade Order;

(b) receive a copy of this Order; and

(c) receive written notice from the Applicant and acknowledge that all of the Applicant's securities, including any securities of the Applicant issued upon conversion of an outstanding security, will remain subject to the Cease Trade Order until it is revoked.

DATED August 17, 2006.

"Erez Blumberger"
Assistant Manager, Corporate Finance
Ontario Securities Commission