BitRush Corp.

Headnote

Section 144 of the Securities Act (Ontario) -- application for partial revocation of a failure-to-file cease trade order -- issuer cease traded due to failure to file certain continuous disclosure documents required by Ontario securities law -- issuer has applied for a variation of the cease trade order to permit the issuer to issue shares from treasury pursuant to a court order and to permit the issuer to proceed with a shares-for-debt transaction followed by a private placement to accredited investors -- partial revocation granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127 and 144.

National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

IN THE MATTER OF
BITRUSH CORP.
(the Issuer)

PARTIAL REVOCATION ORDER
Under the securities legislation of Ontario
(the Legislation)

Background

1. The Issuer is subject to a failure-to-file cease trade order (the FFCTO) issued by the Ontario Securities Commission (the Principal Regulator) dated December 2, 2016.

2. The Issuer has applied to the Principal Regulator for a partial revocation of the FFCTO.

Interpretation

Terms defined in National Instrument 14-101 Definitions or in National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions have the same meaning if used in this order, unless otherwise defined.

Representations

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

a. The Issuer is a corporation amalgamated under the laws of the Province of Ontario effective on January 21, 1999.

b. The Issuer's head office and registered office is located at 100 King Street West (56th floor), Toronto, Ontario M5X 1C9, Canada.

c. The Issuer is a reporting issuer in the Province of Ontario and is not a reporting issuer or equivalent under the securities legislation of any other jurisdiction in Canada.

d. The Issuer's authorized capital consists of an unlimited number of (i) common shares (Common Shares), of which 58,063,064 Common Shares are currently issued and outstanding, and (ii) Class A non-voting Preferred Shares and Class A non-voting, non-cumulative Preferred Shares, none of which are issued and outstanding.

e. The Common Shares are listed for trading on the Canadian Securities Exchange under the trading symbol "BRH", but trading in the Common Shares has remained suspended since December 2, 2016 upon and as a result of the issuance of the FFCTO.

f. The FFCTO was issued due to the failure of the Issuer to file its certification of the filings for the period ended September 30, 2016 as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings. No further financial statements or certifications have been filed since that time, and, except for certain documents as filed on SEDAR, no other continuous disclosure documents required by applicable securities legislation have been filed by the Issuer since that time.

g. The Issuer suffered financial distress as a result of the actions and conduct of the Issuer's former Chief Executive Officer (the Former CEO) which conduct the Ontario Superior Court of Justice (the SCJ) found to be in breach of the Former CEO's fiduciary duties and to have caused the affairs of the Issuer to be conducted in a manner that was oppressive and prejudicial to, and unfairly disregarded, the Issuer and its shareholders, as further set out in the order of the SCJ dated June 29, 2018 (the SCJ Order). As a result of the costs of the court action (the Legal Action) brought by the Issuer against the Former CEO and others, the Issuer has lacked the funds necessary to prepare, file, or deliver any outstanding and/or subsequent financial statements or information or other continuous disclosure documents required by applicable securities legislation.

h. The SCJ Order requires that certain Common Shares held by MezzaCap Investments Ltd. (MezzaCap), a company controlled by the Former CEO be cancelled (of which 68,894,175 Common Shares have been cancelled representing all of the Common Shares held by MezzaCap) and that the Issuer issue a certain number of shares from treasury to the parties named in the SCJ Order, as further described in paragraph j.

i. The Issuer is seeking to effect a financing transaction to enable the Issuer to bring itself into compliance with its continuous disclosure obligations and fund operations, one or more of which transactions, or the actions associated therewith, may constitute a contravention of the FFCTO. More specifically, the Issuer proposes to complete a brokered or non-brokered private placement of its securities (the Private Placement) with accredited investors (as such term is defined in National Instrument 45-106 -- Prospectus Exemptions) resident in the Province of Ontario (each a Potential Investor) to raise gross proceeds of up to $500,000. The Issuer is proposing to sell units (Units) or convertible debentures or promissory notes that would be convertible into Units at the option of the holder. It is anticipated that each Unit will be comprised of one (1) Common Share and one half (1/2) of a common share purchase warrant (a Warrant), for a subscription price of no less than $0.05 per Unit. It is anticipated that each whole Warrant will entitle the investor to purchase one additional Common Share, on or before the date that is three (3) years from the date the Common Shares resume trading on the Canadian Securities Exchange, at an exercise price of no less than $0.10 per Common Share. The Warrants may contain a feature enabling the Issuer to accelerate the expiry date for the Warrants upon notice to the Warrant holders and the Issuer reserves the right to alter the terms of the Private Placement based on dealer or investor requirements.

j. The Issuer seeks to effect the issuances from treasury of an aggregate of 10,356,910 Common Shares as mandated by the SCJ in the SCJ Order, of which 4,500,000 Common Shares are to be issued to Dr. Joachim Kalcher and 5,856,910 Common Shares are to be issued to HSRC Investment Pte Ltd. (HSRC) (collectively, the Mandated Issuances).

k. The Issuer seeks to effect certain shares-for-debt transactions pursuant to which each of HSRC (which is currently owed a total of approximately $380,000 representing funds advanced to the Issuer to pursue the Legal Action), Crawley MacKewn Brush LLP, Barristers & Solicitors (which is currently owed a total of $260,000 representing unpaid outstanding legal fees incurred by the Issuer in the Legal Action), Just In-Genius Inc. (which is currently owed a total of approximately $235,000 representing funds advanced to the Issuer for the payment of various Issuer invoices related to the ongoing operation of the Issuer and other then unpaid fees incurred by the Issuer) and Echelon Wealth Partners Inc. (which is owed approximately $50,000 representing an outstanding and unpaid invoice for the preparation and delivery of its valuation report in the Legal Action) would exchange an aggregate of up to approximately $925,000 owed to them (the Debt) for an aggregate of up to 18,500,000 Common Shares in full satisfaction of the Debt, representing an exchange price of $0.05 per share, subject to any required approval of the Canadian Securities Exchange (the Shares-for-Debt Issuances).

l. The Issuer proposes to use the proceeds of the Private Placement as follows:

i. $200,000 -- Legal, accounting, administrative, and audit fees of Issuer and capital raising fees associated with Private Placement;

ii. $30,000 -- Fees and penalties for late filing of continuous disclosure materials and for applying for a full revocation of the FFCTO;

iii. $70,000 -- CSE relisting, transfer agency and associated fees;

iv. $20,000 -- D&O Insurance;

v. $160,000 -- General ongoing Issuer and AdBit ad platform operations and administration including legal, consultant, advisors, and Board fees and Cyber and E&O Insurance fees; and

vi. $20,000 -- Working capital.

m. The Mandated Issuances will restore the share capital of the Issuer as ordered by the SCJ pursuant to the SCJ Order and the Shares-for-Debt Issuances will ensure that the Issuer conserves the cash it raises in the Private Placement to be used as described in paragraph I.

n. To the knowledge of the Issuer, no current insiders of the Issuer will participate or invest in the Private Placement.

o. As the Private Placement, the Mandated Issuances and the Shares-for-Debt Issuances will involve trades in securities of the Issuer (including, for greater certainty, acts in furtherance of trades in securities of the Issuer, as applicable), they cannot be completed without a variation of the Cease Trade Order.

p. The Private Placement trades are expected to take place in Ontario and the Shares-for-Debt Issuances will take place in Ontario (except for the Shares-for-Debt Issuance to HSRC which will be made from Ontario into a jurisdiction outside of Canada and the United States), while the Mandated Issuances will be made from Ontario in jurisdictions outside of Canada and the United States.

q. The Private Placement, the Mandated Issuances and the Shares-for-Debt Issuances will be completed in accordance with applicable securities legislation. The Issuer will rely on the prospectus exemptions provided in section 2.3 of Ontario Securities Rule 72-503 -- Distributions Outside Canada with respect to the Mandated Issuances and the Shares-for-Debt Issuance to HSRC and section 2.14 of National Instrument 45-106 -- Prospectus Exemptions with respect to the other Shares-for-Debt Issuances that will take place in Ontario.

r. The Issuer believes that the proceeds of the Private Placement will be sufficient to bring its continuous disclosure obligations up to date and pay all related outstanding fees and that the completion of the Mandated Issuances and the Shares-for-Debt Issuances will benefit the Issuer in attracting potential investors and raising funds in the Private Placement.

s. Prior to completion of the Private Placement each Potential Investor and, in the case of the Mandated Issuances and the Shares-for-Debt Issuances prior to the completion thereof, each creditor, will:

i. receive a copy of the FFCTO;

ii. receive a copy of this Order; and

iii. receive written notice from the Issuer, and provide a written acknowledgment to the Issuer, that the granting of this Order does not guarantee the issuance of any full revocation orders in the future and that all of the Issuer's securities, including the securities issued in connection with the Private Placement, the Mandated Issuances and/or the Shares-for-Debt Issuances will remain subject to the FFCTO until it is revoked.

t. The Issuer is not in default of any requirements of the Cease Trade Order or the Legislation or the rules and regulations made pursuant thereto, other than the deficiencies outlined in paragraph 3.f. above.

u. Upon the issuance of this Order, the Issuer will issue a press release announcing the Order and the intention to complete the Private Placement, the Mandated Issuances and the Shares-for-Debt Issuances. Upon completion of each of the Private Placement, the Mandated Issuances and the Shares-for-Debt Issuances, the Issuer will issue a press release and file a material change report.

v. Within a reasonable time following the completion of the Private Placement, the Issuer will file its continuous disclosure documents as required by the Legislation to bring its continuous disclosure record up to date in compliance with its obligations as a reporting issuer under the Legislation.

w. The Issuer intends, within a reasonable time following the completion of the Private Placement, to apply to the Commission for a full revocation of the Cease Trade Order.

x. The Issuer 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.

Order

4. The Principal Regulator is satisfied that a partial revocation order of the FFCTO meets the test set out in the Legislation for the Principal Regulator to make the decision.

5. The decision of the Principal Regulator under the Legislation is that the FFCTO is partially revoked to permit the Private Placement trades, the Mandated Issuances and the Shares-for-Debt Issuances, provided that:

a. Prior to completion of the Private Placement each Potential Investor and, in the case of the Mandated Issuances and the Shares-for-Debt Issuances prior to the completion thereof, each creditor, will:

i. receive a copy of the FFCTO;

ii. receive a copy of this Order; and

iii. receive written notice from the Issuer, and provide a written acknowledgment to the Issuer, that the granting of this Order does not guarantee the issuance of any full revocation orders in the future and that all of the Issuer's securities, including the securities issued in connection with the Private Placement, the Mandated Issuances and/or the Shares-for-Debt Issuances will remain subject to the FFCTO until it is revoked.

b. The Issuer undertakes to make available a copy of the written acknowledgment to staff of the Principal Regulator on request; and

c. this Order will terminate on the earlier of:

i. completion of the Private Placement; and

ii. 180 days from the date hereof.

DATED at Toronto this 29th day of April, 2019.

"Marie-France Bourret"

Acting Manager, Corporate Finance

Ontario Securities Commission