Redline Communications Group Inc. -- s. 144

Order

Headnote

Application by an issuer for a revocation of a cease trade order issued by the Commission -- cease trade order issued because the issuer had failed to file certain continuous disclosure materials required by Ontario securities law -- defaults subsequently remedied by bringing continuous disclosure filings up-to-date -- cease trade order revoked.

Applicable Legislative Provisions

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

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990 C. S.5 AS AMENDED

AND

IN THE MATTER OF

REDLINE COMMUNICATIONS GROUP INC.

ORDER

(Section 144)

WHEREAS the securities of Redline Communications Group Inc. (the Applicant) are subject to a temporary cease trade order made by the Director dated June 11, 2010 under paragraph 2 of subsection 127(1) and subsection 127(5) of the Securities Act (Ontario) (the Act), as extended by a further order made by the Director dated June 23, 2010 pursuant to subsection 127(1) of the Act (collectively, the Ontario Cease Trade Order) directing that the trading in securities of the Applicant cease until the Ontario Cease Trade Order is revoked.

AND WHEREAS the Applicant has made an application to the Ontario Securities Commission (the Commission) pursuant to subsection 144(1) of the Act (the Application) for an order revoking the Ontario Cease Trade Order;

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated under the laws of Canada on September 14, 2007.

2. The Applicant's registered office and principal place of business if located at 302 Town Centre Boulevard, Suite 100, Markham, Ontario, Canada, L3R 0E8.

3. The Applicant is a reporting issuer in all of the provinces and territories of Canada.

4. As at the date hereof, the authorized capital of the Applicant consists of an unlimited number of common shares (the Common Shares) of which 21,197,112 are issued and outstanding. As at the date hereof, 84,471 of Class A Common Stock in the capital of Redline Communications, Inc., a subsidiary of the Applicant, are exchangeable on a one-for-one basis for no additional consideration for an additional 84,471 Common Shares.

5. The Applicant does not have any securities, including debt securities, listed, traded or quoted for trading on any exchange or market in Canada or elsewhere, other than the Common Shares which are listed for trading on the Toronto Stock Exchange under the symbol "RDL".

6. The Ontario Cease Trade Order was issued as a result of the failure of the Applicant to file, in accordance with applicable securities laws, audited annual financial statements and related management's discussion and analysis for the period ending December 31, 2009 and interim financial statements and related management's discussion and analysis for the three-month period ended March 31, 2010 and certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (collectively, the 2009 Annual and 2010 Q1 Interim Filings). In addition, the Applicant had also failed to file its interim financial statements and related management's discussion and analysis for the three-month period ended June 30, 2010 and certification of such documents (the 2010 Q2 Interim Filings and together with the 2009 Annual and 2010 Q1 Interim Filings, the Required Documents).

7. Following receipt of allegations concerning certain improprieties with respect to revenue recognition policies, as announced on March 15, 2010, the Applicant formed a special committee of its directors, which committee was responsible for supervising a review of the Applicant's historical financial statements and determining the extent to which these issues could result in the Applicant being required to restate any historical financial statements. The special committee also considered the adequacy of the Applicant's internal controls. The special committee was advised by external legal counsel, and engaged Grant Thornton LLP to assist in the review. In July 2010, the Applicant was provided with the initial results of the forensic investigation prepared by Grant Thornton LLP, following an extensive and independent review of the Applicant's past revenue recognition practices and historical financial statements. The outcome of the investigation and the related work led to the restatement of the Applicant's consolidated financial statements for each of the years ended December 31, 2006, 2007 and 2008, and the first three quarters of 2009.

8. The Applicant is not in default of any requirements of the Ontario Cease Trade Order or the Act or the rules and regulations made pursuant thereto, subject to the deficiencies outlined in paragraph 6 above.

9. In addition to the Ontario Cease Trade Order, the Applicant is subject to: (i) an order of the British Columbia Securities Commission (the BCSC) issued on June 15, 2010 pursuant to section 164(1) of the Securities Act, R.S.B.C. 1996, c. 418 (the BC Cease Trade Order); (ii) an order of the Autorité des marchés financiers (the AMF) (decision no. 2010-FIIC-0151) issued on June 11, 2010 and a further cease trade order issued on June 28, 2010 pursuant to section 318 of the Loi sur les valeurs mobilières, L.R.Q., c. V-1.1 (the Quebec Cease Trade Order); and (iii) an order of the Manitoba Securities Commission (the MSC) (order no. 6154) issued on June 18, 2010 pursuant to section 147.1(1) of the Securities Act, C.C.S.M. c. S50 (the Manitoba Cease Trade Order) (the Ontario Cease Trade Order, the BC Cease Trade Order, the Manitoba Cease Trade Order and the Quebec Cease Trade Order are collectively referred to as the Cease Trade Orders).

10. The Applicant has filed the Required Documents on SEDAR as of September 9, 2010.

11. The Applicant has filed an application with each of the BCSC, the AMF and the MSC for a full revocation of the BC Cease Trade Order, the Quebec Cease Trade Order and the Manitoba Cease Trade Order, respectively.

12. The Applicant's SEDAR and SEDI profiles are up-to-date.

13. The Applicant held its 2010 annual general meeting of shareholders (the Meeting) on September 30, 2010.

14. Other than the Ontario Cease Trade Order, the Applicant has not previously been subject to a cease trade order by the Commission.

15. The Applicant is up-to-date with all of its other continuous disclosure obligations and has paid outstanding participating fees, filing fees and late fees associated with those obligations owing to the Commission in connection with the Required Documents and has filed all of the forms associated with such payments.

16. 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.

17. Upon the issuance of this Order, the Applicant will issue a press release announcing the revocation of the Cease Trade Orders of the Applicant. The Applicant will concurrently file the press release and material change report on SEDAR.

AND UPON considering the Application and the recommendation of the staff of the Commission;

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 Ontario Cease Trade Order is revoked.

DATED at Toronto, Ontario on this 22nd day of February, 2011.

"Michael Brown"
Assistant Manager, Corporate Finance
Ontario Securities Commission