Securities Law & Instruments

Headnote

Section 144 of the Securities Act (Ontario) -- application for a partial revocation of a cease trade order issued by the Commission -- issuer cease traded due to failure to file certain continuous disclosure documents required by Ontario securities law -- issuer has applied for a partial revocation of the cease trade order to permit the issuer to proceed with a private placement with accredited investors (as such term is defined in National Instrument 45-106 Prospectus and Registration Requirements) -- issuer will use proceeds from private placement to prepare and file continuous disclosure documents and pay related fees -- partial revocation granted subject to conditions.

Applicable Legislative 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, CHAPTER S.5, AS AMENDED (the Act) AND IN THE MATTER OF BESRA GOLD INC.

ORDER (Section 144)

WHEREAS the securities of Besra Gold Inc. (the "Applicant") are subject to a temporary cease trade order made by the Director of the Ontario Securities Commission (the "Commission") dated December 17, 2014 pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act and a further cease trade order issued by the Director of the Commission on December 29, 2014 pursuant to paragraph 2 of subsection 127(1) of the Act (together, the "Cease Trade Order") directing that trading in securities of the Applicant cease until further order by the Director;

AND WHEREAS additional cease trade orders were issued by the British Columbia Securities Commission (the BCSC) on December 17, 2014 and the Autorité des marchés financiers (the AMF) on January 5, 2015 (the "Additional Cease Trade Orders");

AND WHEREAS notwithstanding the Additional Cease Trade Orders, the Applicant has applied only to the Commission pursuant to section 144 of the Act for a partial revocation of the Cease Trade Order;

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant is incorporated under the Canada Business Corporations Act.

2. The Applicant's registered office is located at Suite 500, 10 King Street East, Toronto, Ontario MC3 15C.

3. The Applicant is a reporting issuer under the securities legislation (the "Legislation") of the Provinces of Ontario, British Columbia, Alberta and Quebec.

4. The Applicant's principal regulator, as determined in accordance with part 3 of National Policy 11-203 Process for exemptive relief applications in multiple jurisdictions (NP 11-203) is Ontario.

5. The Cease Trade Order and Additional Cease Trade Orders were issued due to the failure of the Applicant to file its financial statements, management's discussion and analysis and certifications of the foregoing filings for the year ended June 30, 2014 and the interim period ended September 30, 2014.

6. The Applicant is not currently subject to a cease trade order from the Alberta Securities Commission, however, the Applicant is currently in default in Alberta for failure to file the following:

(a) audited annual financial statements for the year ended June 30, 2014;

(b) management's discussion and analysis for the year ended June 30, 2014;

(c) certifications of the foregoing filings for the year ended June 30, 2014;

(d) interim financial statements for the period ended September 30, 2014;

(e) management's discussion and analysis for the period ended September 30, 2014; and

(f) certifications of the foregoing interim filings for the period ended September 30, 2014.

7. The Applicant is not, to its knowledge, in default of any of the requirements of the Act, or the rules and regulations made pursuant thereto, other than the following:

(a) the Applicant failed to file audited annual financial statements for the year ended June 30, 2014;

(b) the Applicant failed to file management's discussion and analysis for the year ended June 30, 2014;

(c) the Applicant failed to file certifications of the foregoing filings for the year ended June 30, 2014;

(d) the Applicant failed to file interim financial statements for the period ended September 30, 2014;

(e) the Applicant failed to file management's discussion and analysis for the period ended September 30, 2014;

(f) the Applicant failed to file certifications of the interim filings for the period ended September 30, 2014; and

(g) the Applicant failed to pay annual participation fees.

8. The Applicant has not previously been subject to a cease trade order of the Commission or in any other jurisdiction, other than the Cease Trade Order and the Additional Cease Trade Orders, and a Management Cease Trade Order dated October 10, 2014 issued by the Commission related to the Applicant's failure to file audited annual financial statements and management's discussion and analysis for the year ended June 30, 2014 and certifications of the foregoing filings for such period.

9. The Applicant's authorized capital consists of an unlimited number of common shares (the "Common Shares"), of which 378,781,274 Common Shares are issued and outstanding.

10. Other than (i) outstanding incentive stock options exercisable for an aggregate of 43,883,264 Common Shares, (ii) outstanding warrants to purchase an aggregate of 54,551,652 Common Shares, (iii) outstanding convertible securities convertible into an aggregate of 48,014,958 Common Shares, no Common Shares are reserved for issuance pursuant to outstanding convertible securities.

11. Prior to the date hereof, the Applicant has not remedied the deficiencies described in the Cease Trade Order as it does not have sufficient funds to do so.

12. The Applicant proposes to raise up to $15,000,000 by way of a limited private placement financing (the "Proposed Financing") in order to

(i) raise sufficient funds to prepare and file the outstanding continuous disclosure documents and related filing fees to bring it into compliance with its obligations as a reporting issuer, and the associated fees of professional advisors; and

(ii) pay outstanding accounts and fund continuing operations, as described more fully in representation 15 below. The Proposed Financing will be conducted on a prospectus exempt basis and will be limited to no more than three subscribers (each, a "Potential Investor") who is an accredited investor (as such term is defined in National Instrument 45-106 Prospectus and Registration Exemptions).

13. The trades under the Proposed Financing will take place in Ontario.

14. The Applicant has undertaken to bring itself back into compliance with its continuous disclosure obligations by filing all outstanding continuous disclosure documents that are required to be filed in all jurisdictions and to pay all outstanding filing fees and participation fees owing within sixty (60) days of the date of closing of the Proposed Financing.

15. Following closing of the Proposed Financing, the Applicant intends to use the proceeds from the Proposed Financing solely to permit the Applicant to satisfy certain outstanding debts, filing fees and other expenses as described below:

Description

Cost

 

(a)

the settlement of certain debt with its auditors to facilitate the release of the audit for the year ended June 30, 2014 and to complete other filings

$560,000

 

(b)

the services of legal counsel with regard to the Proposed Financing, the application for this Order and the final full revocation orders and other miscellaneous costs and expenses of the foregoing including application fees

$20,000

 

(c)

payments to supplier creditors

$4,850,000

 

(d)

payments to financial creditors and financing costs

$4,950,000

 

(e)

ongoing project acquisition costs

$2,500,000

 

(f)

general working capital

$2,120,000

 

Total Financing Required

$15,000,000

16. Prior to the completion of the Proposed Financing, the Applicant will:

(a) provide each Potential Investor with a copy of the Cease Trade Order;

(b) provide each Potential Investor with a copy of the Order herein sought; and

(c) obtain and, upon receipt, provide to the Commission a signed and dated acknowledgement from each Potential Investor in the Proposed Financing, which clearly states that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future and that all of the Applicant's securities, including the securities to be issued in connection with the Proposed Financing, will remain subject to the Cease Trade Order until it is revoked.

17. The Applicant believes that the proceeds from the Proposed Financing will be sufficient to bring its continuous disclosure obligations up to date and to pay all related outstanding fees. The Applicant will use the proceeds of the Proposed Financing first to pay for the costs associated with bringing its continuous disclosure record up to date. Any remaining amounts will be used to pay for other costs as outlined in representation 15 above.

18. The Applicant has applied for a partial revocation of the Cease Trade Order so as to permit the Applicant to proceed with the Proposed Financing as described in this Order. As the Proposed Financing will involve trades in securities of the Applicant, the Proposed Financing cannot be completed without a variation of the Cease Trade Order.

19. The Applicant is not considering, nor is it involved in any discussion relating to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.

20. Following the filing of all outstanding continuous disclosure documents and the payment of all outstanding filing fees owing, the Applicant intends to make a further application to the Commission for a full revocation of the Cease Trade Order and also intends to make an application to the BCSC and the AMF for a full revocation of the Additional Cease Trade Orders.

21. The Common Shares of the Applicant are listed and posted for trading on the Australian Stock Exchange ("ASX") and the OTC Markets ("OTC"), however, trading in such shares on the ASX was suspended on October 10, 2014 because of the Applicant's failure to file its financial statements for the year ended June 30, 2014. The Common Shares were de-listed from the Toronto Stock Exchange and downgraded from OTCQB® to the OTC Pink® marketplace on October 30, 2014 because of the Applicant's failure to file its financial statements for the year ended June 30, 2014.

22. Other than on the ASX and OTC, the securities of the Applicant are not currently listed or quoted on any exchange or market in Canada or elsewhere.

AND WHEREAS considering the application and the recommendation of the staff of the Commission;

AND WHEREAS 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 Cease Trade Order be and is hereby partially revoked solely to permit the trades and acts in furtherance of trades that are necessary for and are in connection with the Proposed Financing and all other acts in furtherance of the Proposed Financing that may be considered to fall within the definition of "trade" within the meaning of the Act, provided that:

(a) prior to the completion of the Proposed Financing, each Potential Investor in the Proposed Financing:

(i) receives a copy of the Cease Trade Order;

(ii) receives a copy of this Order; and

(iii) receives a written notice from the Applicant, and provides a signed and dated acknowledgement to the Applicant, clearly stating that all of the Applicant's securities, including the securities to be issued in connection with the Proposed Financing, will remain subject to the Cease Trade Order until it is revoked, and that the granting of this Order does not guarantee the issuance of a full revocation order in the future;

(b) prior to the completion of the Proposed Financing, the Applicant provides the signed and dated written acknowledgments referred to in paragraph (a)(iii) above to staff of the Commission; and

(c) the Order will terminate on the earlier of the closing of the Proposed Financing and 60 days from the date hereof.

DATED at Toronto, Ontario on this 4th day of March, 2015.

"Kathryn Daniels"
Deputy Director, Corporate Finance