National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- decision exempting the Filer from the requirement in s. 7.1(1) of NI 52-107 to prepare pro forma financial statements in accordance with Canadian GAAP and requirement in s. 3.1 to prepare financial statements in accordance with Canadian GAAP -- Filer proposes to complete reverse take-over transaction with foreign issuer that prepares its financial statements in accordance with IFRS-IASB -- Filer's information circular pertaining to the reverse take-over transaction will include financial statements of foreign issuer prepared in accordance with IFRS-IASB -- Following completion of reverse take-over transaction Filer will prepare its financial statements in accordance with IFRS-IASB -- Relief granted subject to conditions.
Applicable Legislative Provisions
National Instrument 52-107, s. 9.1.
May 13, 2010
IN THE MATTER OF
THE SECURITIES LEGISLATION OF
IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF
APPLICATIONS IN MULTIPLE JURISDICTIONS
IN THE MATTER OF
KARMIN EXPLORATION INC. (the Filer)
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the Legislation) exempting the Filer from: (i) the requirement in section 3.1 of National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency (NI 52-107) that it prepare its financial statements in accordance with Canadian GAAP, in order that the Filer may prepare its financial statements for financial periods ending on or after the Acquisition Closing Date (as defined below) in accordance with International Financial Reporting Standards as issued by the International Accounting Standards Board (IFRS-IASB) (the IFRS Adoption Relief); and (ii) the requirement in section 7.1(1) of NI 52-107 that it prepare the pro forma financial statements in the Information Circular (as defined below) in accordance with Canadian GAAP (the Pro Forma Relief and, together with the IFRS Adoption Relief, the Exemption Sought).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
a) the Ontario Securities Commission is the principal regulator for this application, and
b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in the Provinces of Alberta, British Columbia and Nova Scotia.
Terms used in this decision and defined in National Instrument 14-101 Definitions, MI 11-102 and NI 52-107 have the meanings given to them in such instruments, unless otherwise defined in this decision.
This decision is based on the following facts represented by the Filer:
1. The Filer is a corporation incorporated under the Business Corporations Act (Alberta). The head office of the Filer is located at 133 Kendall Street, Point Edward, Ontario, N7V 4G6.
2. The Filer is a "reporting issuer" in the Jurisdiction and in the Provinces of Alberta, British Columbia and Nova Scotia. The Filer is not, to its knowledge, in default of its reporting issuer obligations under the legislation in those jurisdictions.
3. The Filer's securities are listed on the TSX Venture Exchange (the TSX-V) under the symbol "KAR" and the Filer is a "venture issuer" for the purposes of National Instrument 51-102 Continuous Disclosure Obligations.
4. The Filer is a base and precious metal exploration company.
5. The Filer currently prepares its financial statements in accordance with Canadian GAAP. The financial year end of the Filer is April 30.
6. The Canadian Accounting Standards Board has confirmed that publicly accountable enterprises will be required to prepare their financial statements in accordance with IFRS-IASB for interim and annual financial statements relating to fiscal years beginning on or after January 1, 2011.
7. NI 52-107 sets out acceptable accounting principles for financial reporting by domestic issuers, foreign issuers, registrants and other market participants. Under NI 52-107, a domestic issuer must use Canadian GAAP and only foreign issuers may use IFRS-IASB.
8. In CSA Staff Notice 52-321 Early Adoption of International Financial Reporting Standards, Use of US GAAP and Reference to IFRS-IASB, staff of the Canadian Securities Administrators recognized that some issuers may wish to prepare their financial statements in accordance with IFRS-IASB for periods beginning prior to January 1, 2011 and indicated that staff were prepared to recommend exemptive relief on a case by case basis to permit a domestic issuer to do so.
9. The Filer has entered into an agreement to acquire all of the outstanding ordinary shares of Ignite Energy Resources Pty Ltd. (Ignite), an Australian company in exchange for the issuance by the Filer of its common shares (the Acquisition). The Acquisition will result in a reverse take-over of the Filer for the purposes of the policies of the TSX-V.
10. Ignite prepares its financial statements in accordance with IFRS-IASB. The financial year end of Ignite is December 31.
11. Completion of the Acquisition is expected to take place on a date prior to August 31, 2010 (the Acquisition Closing Date), and is subject to, among other things, the approval of the Acquisition and related matters by the shareholders of the Filer at a special meeting.
12. In accordance with the policies of the TSX-V and applicable laws, the Filer intends to mail a management information circular (the Information Circular) to its shareholders as soon as is practicable in connection with its special meeting.
13. As required by the policies of the TSX-V and applicable laws, the Filer will include financial statements of the Filer and Ignite in the Information Circular. In particular, the Information Circular will include the audited consolidated financial statements of Ignite as at December 31, 2009 and December 31, 2008 and for the years ended December 31, 2009, December 31, 2008 and December 31, 2007, together with the notes thereto and the auditors' report(s) thereon. Ignite is a foreign issuer and the financial statements of Ignite included in the Information Circular will be prepared in accordance with IFRS-IASB.
14. The Information Circular will also include unaudited pro forma financial statements of the Filer as at January 31, 2010 together with the notes thereon. Section 7.1(1) of NI 52-107 provides that pro forma financial statements must be prepared in accordance with the issuer's GAAP.
15. Following the Acquisition Closing Date, the Filer intends to adopt the financial year end of Ignite (December 31).
16. The Filer has carefully assessed the readiness of its staff, board of directors, audit committee, auditors, investors and other market participants for its adoption of IFRS-IASB for financial periods beginning on or after the Acquisition Closing Date and has concluded that they will be adequately prepared for the Filer's adoption of IFRS-IASB.
17. The Filer has considered the implications of continuing Ignite's accounting under IFRS-IASB for financial periods beginning on or after the Acquisition Closing Date including implications affecting certification of financial statements, business acquisition reports, offering documents and previously released material forward looking information, and has concluded that upon continuing Ignite's accounting under IFRS-IASB it will continue to be able to fulfill these obligations.
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that:
(i) the Pro Forma Relief is granted, and
(ii) the IFRS Adoption Relief is granted provided that:
a. the Acquisition is completed;
b. the Filer prepares its annual financial statements for years ending on or after the Acquisition Closing Date in accordance with IFRS-IASB; and
c. the Filer prepares its interim financial statements for the interim periods beginning on or after the Acquisition Closing Date in accordance with IFRS-IASB.