Securities Law & Instruments

Headnote

Section 144 of the Securities Act (Ontario) -- application for partial revocation of a cease trade order -- issuer cease traded due to failure to file interim financial statements and audited annual financial statements with the Commission -- issuer applied for partial revocation of the cease trade order to permit the issuer to proceed with a private placement with an accredited investor (as such term is defined in National Instrument 45-106 Prospectus and Registration Requirements) resident in Alberta -- issuer will use proceeds from private placement to prepare and file continuous disclosure documents and pay related fees -- partial revocation granted subject to conditions.

Statutes Cited

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, CHAPTER S.5, AS AMENDED (the ACT) AND IN THE MATTER OF ITOK CAPITAL CORP.

ORDER (Section 144)

WHEREAS the securities of ITOK Capital Corp. (the Filer) are subject to a temporary cease trade order made by the Director dated May 13, 2013 under paragraph 2 of subsection 127(1) and subsection 127(5) of the Act and a further cease trade order issued by the Director on May 27, 2013 pursuant to subsection 127(1) of the Act (together, the OSC CTO) directing that trading in the securities of the Filer cease until the OSC CTO is revoked;

AND WHEREAS the Filer has applied to the Ontario Securities Commission (the Commission) pursuant to section 144(1) of the Act for a partial revocation of the OSC CTO (the Application);

AND WHEREAS the Filer has represented to the Commission that:

1. The Filer is a corporation that was incorporated pursuant to the Business Corporations Act, R.S.O. 1990, c. B.16 (Ontario) on 21 January 2005.

2. The Filer's registered and head office is located at 200 Davis Drive, Suite #730, Newmarket, Ontario, L3Y 2R4.

3. The Filer is a reporting issuer in Ontario, British Columbia and Alberta. The Filer is not a reporting issuer in any other jurisdictions in Canada.

4. The authorized capital of the Filer consists of an unlimited number of common shares and an unlimited number of preference shares. As at the date hereof, 1,333,332 common shares (the Shares) and no preference shares were issued and outstanding.

5. The Filer was originally a Capital Pool Company as defined in Exchange Policy 2.4 of the TSX Venture Exchange and listed on the TSX Venture Exchange on May 8, 2008. The Filer did not complete its Qualifying Transaction by May 12, 2010, in accordance with the Exchange Policies and its Shares were transferred to the NEX Exchange of the TSX Venture Exchange. The Shares were subsequently delisted from the NEX Exchange on January 30, 2014, for failure to pay the quarterly listing and maintenance fees.

6. The OSC CTO was issued as a result of the Filer's failure to file its annual audited financial statements, annual management's discussion and analysis (MD&A), and certification of annual filings for the year ended 31 December 2012; and interim unaudited financial statements, interim management's discussion and analysis, and certification of interim filings for the interim period ended 31 March 2013 (the Unfiled Documents).

7. The Unfiled Documents were not filed in a timely manner as a result of financial difficulties.

8. Subsequent to the failure to file the Unfiled Documents, the Filer also failed to file the following documents:

a. annual audited financial statements for the year ended December 31, 2013;

b. interim unaudited financial statements for the interim periods ended June 30, 2013, September 30, 2013, March 30, 2014, June 30, 2014, and September 30, 2014;

c. MD&A relating to the financial statements referred to in paragraphs (a) and (b) above; and

d. certificates required to be filed in respect of the financial statements referred to in paragraphs (a) and (b) above under National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings.

(together with the Unfiled Documents, the Unfiled Continuous Disclosure).

9. The Filer is also subject to cease trade orders issued by the British Columbia Securities Commission on May 13, 2013 and the Alberta Securities Commission on August 26, 2013, for failure to file required filings under applicable securities laws (the Other CTOs). Applications for partial revocations of the Other CTOs were made concurrently with the Application.

10. The Filer is seeking to complete the issuance of a secured convertible debenture in the principal amount of Cdn$90,000.00 (the Debenture) with NCEG Ltd., a private Alberta corporation (the Investor). The Investor is an accredited investor (as such term is defined in National Instrument 45-106 Prospectus and Registration Exemptions). The Debenture will have a maturity date of one year from the date of issue, bear interest at a rate of 12% per annum and be convertible (as to both principal and interest) into units of the Filer at a price of $0.05 per unit (the Units). Each unit will be comprised of one common share and one common share purchase warrant entitling the holder to purchase one additional common share at a price of $0.05 per share for a period of 5 years from the date the Debenture is issued. The conversion of the Debenture into Units is subject to the approval of the shareholders of the Filer.

11. The Investor is not a related party of the Filer and will not become an insider of the Filer on the completion of the Debenture.

12. The Filer intends to prepare and file the Unfiled Continuous Disclosure within a reasonable period of time following the completion of the Debenture.

13. Other than the failure to file the Unfiled Continuous Disclosure, the Filer is not in default of any of the requirements of the Act or the rules and regulations made pursuant thereto. The Filer's SEDAR and SEDI profiles are up to date.

14. After the completion of the Debenture, the Filer intends to file the Unfiled Continuous Disclosure and pay all outstanding fees. The Filer also intends to apply to the applicable securities regulators to have the OSC CTO and the Other CTOs fully revoked.

15. The following is a breakdown of the use of proceeds of the Debenture based upon raising $90,000:

Description

Cost

 

Fees and penalties for late filing of financial disclosures and expenses for the lifting of the Cease Trade Orders (including legal fees)

$32,000.00

 

Cost associated with preparation and filing of Unfiled Continuous Disclosure (including audit fees for 2012, 2013 and 2014 and legal fees)

$25,000.00

 

Outstanding office rent for 2011 and 2012

$6,933.57

 

Outstanding fees payable to NEX

$8,475.00

 

Past audit fees due

$9,168.00

 

Working capital

$8,423.43

 

TOTAL

$90,000.00

16. The Filer reasonably believes that the proceeds of the Debenture will be sufficient to bring its continuous disclosure obligations up to date and pay all related outstanding fees and provide it with sufficient funds to maintain its business.

17. As the Debenture would involve a trade of securities and acts in furtherance of trades, the Debenture could not be completed without a partial revocation of the OSC CTO.

18. The Debenture will be completed in accordance with all applicable laws.

19. Prior to the completion of the Debenture, the Filer will:

(a) provide the Investor with:

i. a copy of the OSC CTO; and

ii. a copy of the partial revocation order for which this application has been made; and

(b) obtain from the Investor a signed and dated acknowledgement which clearly states that all of the Filer's securities, including the securities issued in connection with the Debenture, will remain subject to the OSC CTO and the Other CTOs, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future.

20. Upon issuance of this order, the Filer will issue a press release announcing the order and the intention to complete the Debenture. Upon completion of the Debenture, the Filer will issue a press release and file a material change report. As other material events transpire, the Filer will issue appropriate press releases and file material change reports as applicable.

AND UPON considering the application and the recommendations of 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 s.144 of the Act, that the OSC CTO is partially revoked solely to permit trades in securities of the Filer (including for greater certainty, acts in furtherance of trades in securities of the Filer) that are necessary for and are in connection with the Debenture, provided that:

(a) prior to the completion of the Debenture, the Filer will:

i. provide to the Investor a copy of the OSC CTO;

ii. provide to the Investor a copy of this partial revocation order; and

iii. obtain from the Investor a signed and dated acknowledgement, which clearly states that all of the Filer's securities, including the securities issued in connection with the Debenture, will remain subject to the OSC CTO, and the Other CTOs, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future.

(b) The Filer will make available a copy of the written acknowledgement referred to in paragraph (a)iii. to staff of the Commission on request; and

(c) This order will terminate on the earlier of the closing of the Debenture and 60 days from the date hereof.

DATED at Toronto, Ontario on this 3rd day of March, 2015.

"Shannon O'Hearn"
Manager, Corporate Finance
Ontario Securities Commission