Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 3.3(1)(a) and 5.1 -- An issuer requires relief from the requirement that financial statements required by securities legislation to be audited must be accompanied by an auditor's report that expresses an unmodified opinion -- The auditors were not in attendance at the physical inventory taking and not able to satisfy themselves by other auditing procedures as to the opening inventory quantities; the inventory reservation relates to the financial statements of a non-reporting issuer whose business is not seasonal; the issuer is providing a subsequent audited period of at least six months for which the auditor's report expresses an unmodified opinion; the qualification is not imposed by, and could not reasonably be eliminated by management; the qualification will not recur in future; the auditor's report will be unmodified except for the qualification related to opening inventory and, since inventory affects the calculation of financial performance and cash flows, the net cash flows from operating activities.
Applicable Legislative Provisions
National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss. 3.3(1)(a), 5.1.
November 30, 2015
IN THE MATTER OF THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (THE JURISDICTIONS) AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF LITE ACCESS TECHNOLOGIES INC. (THE FILER)
1 The securities regulatory authority or regulator in each of the Jurisdictions (the Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) that the requirement that financial statements required by the Legislation to be audited must be accompanied by an auditor's report that expresses an unmodified opinion does not apply the following financial statements of Lite Access Holdings Inc. (formerly known as Lite Access Technologies Inc.) (the Target):
(a) the audited financial statements of the Target for the financial years ended September 30, 2014, 2013 and 2012 previously filed on June 1, 2015 as part of a Canadian Securities Exchange (CSE) Form 2A Listing Statement (the Listing Statement ); and
(b) the audited financial comparatives relating to the financial year ended September 30, 2013 that were contained in the audited financial statements of the Target for the financial year ended September 30, 2014 filed on November 9, 2015
(the Requested Relief).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a dual application):
(a) the British Columbia Securities Commission is the principal regulator for this application;
(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 Alberta; and
(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.
2 Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
3 This decision is based on the following facts represented by the Filer:
1. the Filer was incorporated under the Business Corporations Act (British Columbia) on October 26, 2014;
2. the Filer's head office is located in British Columbia;
3. the Target was incorporated on October 20, 2003 under the laws of British Columbia; the Target's principal business is providing air blown fibre and microduct solutions to enable high speed connectivity for end users; the Target's business is not seasonal;
4. the Filer is a "reporting issuer" within the meaning of applicable securities legislation in British Columbia, Ontario and Alberta;
5. on May 26, 2015, pursuant to an amalgamation agreement among the Filer, the Target and 1028642 BC Ltd., a wholly-owned subsidiary of the Filer, the Filer acquired all of the issued and outstanding shares of the Target, in consideration of which the Filer issued a total of 15,548,671 common shares of the Filer to the former shareholders of the Target (the Business Combination);
6. prior to the Business Combination, the Target was not a reporting issuer in any jurisdiction of Canada and its common shares were not listed on any stock exchange or posted for trading on any quotation system;
7. in conjunction with closing of the Business Combination, the Filer changed its name to "Lite Access Technologies Inc." and listed its common shares on the CSE;
8. the Business Combination was a "reverse takeover" as defined in National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102);
9. the completion of the Business Combination triggered the requirements of section 4.10(2) of NI 51-102, that the Filer file financial statements of the Target as required in the form of prospectus that the Target would have been eligible to use prior to the closing of the Business Combination;
10. the applicable form of prospectus for the Target is Form 41-101F1 Information Required in a Prospectus;
11. in order to obtain the listing on the CSE, on June 1, 2015 the Filer filed, among other things, the Listing Statement, which included audited financial statements of the Target for the fiscal years ended September 30, 2014, 2013 and 2012, with the CSE (the Target Financial Statements);
12. Crowe MacKay LLP (the Auditors) were not appointed as auditors of the Target until after September 30, 2013 and were not able to observe the counting of physical inventories of the Target as at either of September 30, 2013, September 30, 2012 or October 1, 2011; by applying alternative procedures, the Auditors were able to obtain sufficient audit evidence regarding inventory balances for the Target as at September 30, 2013;
13. since opening inventories enter into the determination of the results of operations and cash flows, the Auditors were not able to determine whether adjustments to the cost of sales, income taxes, net income and cash provided from operations of the Target for the years ended September 30, 2013 and September 30, 2012 might have been necessary;
14. as a result, the Auditors expressed a modified opinion relating to inventory on Target Financial Statements for the financial years ended September 30, 2013 and 2012;
15. on November 9, 2015, the Filer re-filed the Target's comparative audited financial statements for the financial year ended September 30, 2014, together with an audit report which included a modified opinion in relation to the results of operations and cash flows for the comparative year ended September 30, 2013 and opening retained earnings as at October 1, 2012;
16. a modified opinion is contrary to subsection 3.3(1) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107);
17. the Filer and Target are not in default of any securities legislation of any jurisdiction of Canada, other than the requirement in subsection 3.3(1) of NI 52-107 that the Target Financial Statements be accompanied by an auditor's report that expresses an unmodified opinion; and
18. paragraph 5.8(2) of Companion Policy 41-101CP to National Instrument 41-101 General Prospectus Requirements contemplates that relief may be granted to non-reporting issuers in appropriate circumstances to permit the auditor's report on financial statements to contain a modification relating to opening inventory if there is a subsequent audited period of at least six months on which the auditor's report expresses an unmodified opinion and the business is not seasonal.
4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.
The decision of the Decision Makers under the Legislation is that the Requested Relief is granted.