Securities Law & Instruments

 

Headnote

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, ss. 3.1, 3.2 and 5.1 – National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1 – s. 1.1, definition of “MD&A” - An issuer that is not yet an ‘SEC issuer’ wants to file financial statements prepared in accordance with U.S. GAAP and audited in accordance with U.S. GAAS – the issuer intends to become an SEC registrant – the issuer has filed a registration statement with the SEC; the issuer will meet all the elements of the definition of ‘SEC issuer’ once the SEC accepts its registration statement; the issuer will file financial statements and MD&A that comply with the requirements for SEC issuers in NI 52-107 and NI 51-102; if the issuer does not become an SEC issuer by a set date, it will re-file its financial statements in accordance with Canadian GAAP and Canadian GAAS and its MD&A in accordance with Form 51-102F1 Management's Discussion and Analysis.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c.S.5, as am.

March 30, 2017

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
FRANKLY INC.
(THE FILER)

DECISION

Background

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) exempting the Filer from the requirement in section 3.2 and 3.3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements, other than acquisition statements, be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and, if applicable, audited in accordance with Canadian GAAS, and exempting the Filer from the requirement in section 1.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (in the definition of MD&A) that management’s discussion and analysis be prepared in accordance with the form of 51-102F1 (Canadian MD&A Form) with respect to the financial statements for the year ended December 31, 2016 and the interim period ended March 31, 2017 and the management’s discussion and analysis prepared for these periods (collectively, the Exemptions Sought).

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.

Interpretation

2            Terms defined in National Instrument 14-101 Definitions, NI 52-107, NI 51-102 and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.

Representations

3            This decision is based on the following facts represented by the Filer:

1.             the Filer is a company continued pursuant to the Business Corporations Act (British Columbia);

2.             the Filer’s head office is located at 333 Bryant Street, Suite 240, San Francisco, CA 94107;

3.             the Filer's registered office is located at 2900-550 Burrard Street, Vancouver, British Columbia, V6C 0A3;

4.             the primary business of the Filer is to provide an integrated software platform to broadcasters and media companies which use this technology to get their content onto multiscreen devices, increase social interaction on those multiscreen experiences, and enable digital advertising;

5.             the Filer is a reporting issuer in British Columbia, Alberta and Ontario and is not in default of securities legislation in any jurisdiction;

6.             the common shares of the Filer are listed on the TSX Venture Exchange Inc. under the symbol “TLK”;

7.             the Filer’s financial year end is December 31;

8.             all of the executive officers and the majority of the directors of the Filer are resident in the United States; no directors or officers are resident in Canada;

9.             the vast majority of the consolidated assets of the Filer are located in the United States through two operating subsidiaries;

10.          the business of the Filer is administered principally in the United States;

11.          the majority of the Filer’s outstanding voting securities are directly or beneficially held by residents of the United States or countries other than Canada;

12.          on November 14, 2016, the Filer filed a registration statement on Form S-1 (the Form S-1) with the U.S. Securities and Exchange Commission (the SEC), which was subsequently amended on January 11, 2017 and February 1, 2017 in response to comments of the SEC;

13.          the Filer plans to further amend the Form S-1 (the S-1 Amendment) on or about March 31, 2017 to include complete audited financial statements for the fiscal years ended December 31, 2016 and December 31, 2015 prepared in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS (the Financial Statements);

14.          subject to receipt of relief for the Exemptions Sought, the Filer intends to file the Financial Statements on SEDAR concurrently with the filing of the S-1 Amendment with the SEC;

15.          the Filer has filed the Form S-1 with the SEC in order to register its common shares under the Securities Act of 1933, as amended, to conduct an initial public offering of its common shares in the United States and list its common shares on The Nasdaq Capital Market, and upon the effectiveness of the Registration Statement on Form S-1, will become subject to the periodic reporting requirements to file reports with the SEC under the Securities Exchange Act of 1934, as amended (1934 Act); the Filer anticipates that it will become an SEC Issuer as defined in NI 52-107 within 60 days of the date of filing the S-1 Amendment;

16.          upon becoming an SEC Issuer, the Filer may (i) under Part 3.7 of NI 52-107, prepare its financial statements, other than acquisitions statements, in accordance with U.S. GAAP, (ii) under Part 1.1 of NI 51-102, prepare its management’s discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act, and (iii) under Part 3.8 of NI 52-107, have its annual financial statements audited in accordance with U.S. PCAOB GAAS;

17.          the Exemption Sought will eliminate the need to also prepare financial statements for the fiscal year ended December 31, 2016 and the interim period ended March 31, 2017 in accordance with Canadian GAAP applicable to publicly accountable enterprises;

18.          if the Filer does not become an SEC Issuer by June 30, 2017, the Filer will immediately re-file on SEDAR the previously filed financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2016 and the interim period ending March 31, 2017 and related management’s discussion and analysis; the re-filed financial statements will be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS; the management’s discussion and analysis will be amended to reflect the re-filed financial statements and will be re-filed in the Canadian MD&A Form; and the Filer will issue a news release upon re-filing the financial statements that explains the nature and purpose of the re-filings; and

19.          the Filer will comply with the requirement of subsection 4.3(4) of NI 51-102 by filing the restated interim financial statements for each of the interim periods in fiscal 2016 in accordance with U.S. GAAP on or prior to April 30, 2017.

Decision

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 Exemptions Sought are granted provided that:

(a)           the Filer files:

i.              financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2016 and the interim period ending March 31, 2017 and, if applicable, audited in accordance with U.S. PCAOB GAAS;

ii.             the related management’s discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act for these periods; and

(b) if the Filer does not become an SEC Issuer by June 30, 2017, the Filer will immediately file on SEDAR:

i.              the financial statements for the year ended December 31, 2016 and the interim period ending March 31, 2017, prepared in Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, as applicable;

ii.             the related management’s discussion and analysis in the Canadian MD&A Form; and

iii.            a news release explaining the nature and purpose of the re-filings.

Peter Brady
Executive Director
British Columbia Securities Commission