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 shares for debt transaction with convertible note holders followed by a convertible note offering to accredited investors (as such term is defined in National Instrument 45-106 Prospectus and Registration Requirements) -- issuer will use proceeds from note offering 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, c. S.5, AS AMENDED (the Act) AND IN THE MATTER OF MICROPLANET TECHNOLOGY CORP.

ORDER (Section 144)

WHEREAS the securities of MicroPlanet Technology Corp. (the Applicant) are subject to a temporary cease trade order made by the Director of the Ontario Securities Commission (the Commission) dated May 12, 2015 pursuant to paragraph 2 of subsection 127(1) and subsection 127(5) of the Act and a further cease trade order dated May 25, 2015 issued by the Director of the Commission 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 Alberta Securities Commission (ASC) on May 6, 2015 (the Alberta Cease Trade Order), the British Columbia Securities Commission on May 8, 2015 and the Manitoba Securities Commission on May 13, 2015 (collectively, the Other Cease Trade Orders);

AND WHEREAS the Applicant has applied to the Commission pursuant to section 144 of the Act for a partial revocation of the Cease Trade Order (the Application);

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated under the laws of the Province of Alberta on February 19, 2004.

2. The Applicant's head office is located in the State of Washington and its registered office is located in the Province of Alberta.

3. The Applicant is a reporting issuer in the provinces of Alberta, Ontario, British Columbia, Manitoba and Saskatchewan. 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 Alberta.

4. The authorized capital of the Applicant comprises: (i) an unlimited number of Common Shares; and (ii) and an unlimited number of Preferred Shares, issuable in series, of which one series, being Series 1 of the Preferred Shares, has been designated and authorized. As of the date hereof, 210,660,303 Common Shares are issued and outstanding.

5. As of the date hereof, the Applicant has: (i) secured convertible notes with aggregate principal and accrued but unpaid interest of $4,152,975 outstanding; and (ii) unsecured convertible notes with aggregate principal and accrued but unpaid interest of $97,265 outstanding (collectively, the Convertible Notes). The Convertible Notes are currently in default.

6. The Common Shares were traded on the TSX Venture Exchange (the Exchange) until May 6, 2015, on which date trading was suspended. On August 18, 2015 the Common Shares were transferred to the NEX, a separate board of the Exchange, on which the trading of the Common Shares remains suspended.

7. The Cease Trade Order was issued as a result of the Applicant's failure to file, in accordance with the requirements of Ontario securities law, annual audited financial statements, annual management's discussion and analysis and certification of annual filings for the year ended December 31, 2014 (collectively, the 2014 Annual Filings).

8. Since April 17, 2015, the Applicant has not filed any continuous disclosure documents, including interim financial statements, management's discussion and analysis and certification of interim filings for the three, six and nine month periods ended March 31, 2015, June 30, 2015 and September 30, 2015 (collectively with the 2014 Annual Filings, the Continuous Disclosure Documents), and the Applicant has failed to pay certain fees to the Commission and the securities regulatory authorities where the Other Cease Trade Orders are in effect.

9. 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 Applicant's failure to file the Continuous Disclosure Documents and comply with related obligations and its failure to pay certain fees to the Commission and the securities regulatory authorities where the Other Cease Trade Orders are in effect.

10. The Applicant is concurrently applying to the ASC for a partial revocation of the Alberta Cease Trade Order to permit all of the Proposed Transactions (as defined below) to be completed in Alberta (the Alberta Variation).

11. The Applicant is currently in default in Saskatchewan for failure to file the Continuous Disclosure Documents and pay related fees.

12. 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 Other Cease Trade Orders.

13. The Applicant wishes to bring itself back into compliance with its continuous disclosure obligations by filing the Continuous Disclosure Documents and paying all related fees and, to that end, proposes the following transactions (collectively, the Proposed Transactions):

(a) the Applicant will (i) offer to enter into note conversion agreements with all of the holders of Convertible Notes (the Participating Note Holders), pursuant to which the Participating Note Holders agree to exchange their Convertible Notes for a new series of Preferred Shares (the New Preferred Shares) and (ii) subsequently complete a private placement of the New Preferred Shares to the Participating Note Holders in reliance on the "securities for debt" prospectus exemption under Section 2.14 of National Instrument 45-106 -- Prospectus Exemptions (NI 45-106) (the Shares for Debt Transaction); and

(b) subsequent to and conditional upon the completion of the Shares for Debt Transaction, the Applicant will undertake a private placement of convertible notes (the New Convertible Notes) to accredited investors (as such term is defined in NI 45-106) (each, a Potential Investor) for gross aggregate proceeds of up to $1,000,000 (the Proceeds) pursuant to the "accredited investor" prospectus exemption under Section 2.3 of NI 45-106 and Section 73.3(2) of the Act (the Note Offering).

14. The Participating Note Holders and Potential Investors are resident in or otherwise subject to the securities laws of Alberta, Ontario, the United States or Australia.

15. To the Applicant's knowledge, none of the Participating Note Holders or Potential Investors are insiders or related parties of the Applicant.

16. The Proceeds are estimated to be applied as follows:

(a)

Payment of legal, accounting, transfer agent, regulatory and Exchange fees incurred to date and in connection with the Proposed Transactions, including outstanding fees and late fees owing to the Commission

$180,000

 

(b)

Preparation and filing of the Continuous Disclosure Documents, applications for full revocation orders and payment of related fees

$100,000

 

(c)

Holding the Applicant's 2014 and 2015 annual general meetings

$30,000

 

(d)

Preparation and filing of documents required to obtain re-listing and re-instatement of trading on the Exchange and payment of related fees

$40,000

 

(e)

Payment of manufacturing related vendor debt

$220,000

 

(f)

Working Capital

$430,000

 

 

Total

$1,000,000

17. The Applicant intends to make an application to the Commission for a full revocation of the Cease Trade Order and apply to the securities regulatory authorities where the Other Cease Trade Orders are in effect for full revocation thereof. In the Applicant's reasonable estimation, the Proceeds will be sufficient to enable the Applicant to make such applications.

18. The Applicant will use the Proceeds 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 16 above. The Proceeds referred to in representation 16(e) and (f) are urgently required for the Applicant's business to continue as a going concern.

19. 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 60 days of the date of closing of the Note Offering.

20. The purpose of the Note Offering is to enable the Applicant to raise sufficient funds to maintain the viability of its business, to bring its continuous disclosure record up to date, to apply for a full revocation of the Cease Trade Order and the Other Cease Trade Orders and to provide working capital. The purpose of the Shares for Debt Transaction is to improve the Applicant's balance sheet to make the Applicant more financeable.

21. As the Proposed Transactions will each involve a "trade" (as such term is defined in the Act) of securities of the Applicant in Ontario, the Proposed Transactions cannot proceed in Ontario without a partial revocation of the Cease Trade Order.

22. 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.

23. Each Participating Note Holder and Potential Investor will, in advance of the applicable Transaction:

(a) receive copies of the Cease Trade Order and the Other Cease Trade Orders;

(b) receive copies of this Order and the Alberta Variation; and

(c) receive a written notice from the Applicant, and will provide a written acknowledgment to the Applicant, that the granting of this Order and the Alberta Variation does not guarantee the issuance of any full revocation orders in the future and that all of the Applicant's securities, including the New Preferred Shares and New Convertible Notes, as applicable, will remain subject to the Cease Trade Order and the Other Cease Trade Orders until such are revoked.

24. Upon the issuance of this Order, the Applicant will issue a press release announcing the Order and the intention to complete the Proposed Transactions. Upon completion of each of the Shares for Debt Transaction and the Note Offering, the Applicant will issue a press release and file a material change report. As other material events transpire, the Applicant will issue appropriate press releases and file material change reports as applicable.

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

(a) prior to completion of the applicable Transaction, each Participating Note Holder and Potential Investor will:

(i) receive copies of the Cease Trade Order and the Other Cease Trade Orders;

(ii) receive copies of this Order and of the Alberta Variation; and

(iii) receive a written notice from the Applicant, and will provide a written acknowledgment to the Applicant, that the granting of this Order and the Alberta Variation does not guarantee the issuance of any full revocation orders in the future and that all of the Applicant's securities, including the New Preferred Shares and New Convertible Notes, as applicable, will remain subject to the Cease Trade Order and the Other Cease Trade Orders until such are revoked;

(b) the Applicant will provide the signed and dated written acknowledgments referred to in paragraph (a)(iii) above to staff of the Commission on request; and

(c) this Order will terminate on the earlier of: (i) the completion of the Note Offering, and (ii) 60 days from the date hereof.

DATED at Toronto, Ontario on this 10th day of March, 2016.

"Jo-Anne Matear"
Manager, Corporate Finance
Ontario Securities Commission