Armistice Resources Ltd. - s. 144

August 13, 2004

Order

Headnote

Section 144 -- application for partial revocation of cease trade order -- issuer cease traded due to failure to file with the Commission and send to shareholders annual and interim financial statements -- issuer had previously applied for a partial revocation of the cease trade order to permit the issuer to convert certain existing indebtedness into common shares, and to proceed with a limited financing to allow the issuer to fund the settlement of certain litigation, to reorganize the issuer's affairs, and to provide working capital -- issuer seeking a further variation to allow a further financing on similar terms -- potential investors to receive copy of cease trade order, partial revocation order, current financial statements and current technical report prior to making investment decision -- partial revocation granted subject to conditions.

Applicable Ontario Statutory Provisions

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

Applicable Ontario Rules

National Instrument 43-101 Standards of Disclosure for Mineral Projects.

OSC Rule 45-501 Exempt Distributions.

Applicable Ontario Policies

National Policy 46-201 Escrow for Initial Public Offerings.

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, C.S.5, AS AMENDED (THE "ACT")

AND

IN THE MATTER OF

ARMISTICE RESOURCES LTD.

ORDER

(Section 144)

WHEREAS the securities of Armistice Resources Ltd. (the "Applicant") are subject to a cease trade order issued by a Director of the Ontario Securities Commission (the "Commission") on June 6, 2003 (the "Cease Trade Order");

AND WHEREAS by order of the Commission dated May 6, 2004 (the "Partial Revocation Order") the Cease Trade Order was partially revoked to permit the Applicant to, among other things, proceed with a limited financing (the "Financing"), subject to certain terms and conditions;

AND WHEREAS the Applicant has applied to the Commission pursuant to section 144 of the Act (the "Application") for a variation of the Partial Revocation Order to permit an extension of the Financing (the "Proposed Extended Financing");

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated by amalgamation under the Canada Business Corporations Act on December 1, 1998.

2. The Applicant is a reporting issuer under the securities legislation (the "Legislation") of the provinces of Ontario, British Columbia, Alberta and Québec.

3. The Cease Trade Order was issued due to the failure of the Applicant to file with the Commission its interim financial statements for the period ended March 31, 2003.

4. The Applicant is also subject to cease trade orders issued by the British Columbia Securities Commission on July 16, 2003, by the Alberta Securities Commission on September 26, 2003, and the Québec Autorité des Marches Financiers on June 10, 2003, all relating to the failure of the Applicant to file its financial statements for the period ended March 31, 2003.

5. The Partial Revocation Order was issued so as to permit the Applicant to convert certain existing indebtedness into units of the Applicant, and to proceed with a limited financing to allow the Applicant to fund the settlement of certain litigation, to reorganize the Applicant's affairs, and to provide working capital.

6. Pursuant to the Partial Revocation Order, on June 30, 2004 the Applicant completed the conversion of existing indebtedness, the Financing raising gross proceeds of $2,000,000 (as well as receiving an executed subscription agreement and commitment for a further $3,000,000), and the settlement of the litigation. Prior to completion of the Financing, the Applicant paid to the Commission its outstanding participation fees, and filed with the Commission and provided potential investors with a technical report prepared in accordance with National Instrument 43-101 (the "Revised Technical Report") as well as financial statements for the periods ending March 31, 2003, June 30, 2003 (audited), September 30, 2003, December 31, 2003 and March 31, 2004.

7. The Applicant's authorized capital now consists of an unlimited number of common shares (the "Common Shares"), of which approximately 138,504,911 common shares are issued and outstanding.

8. 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.

9. Prior to the date hereof, the Applicant had not remedied the deficiencies described in paragraph 5 (a) as it did not have sufficient funds to do so. The Applicant has paid its annual participation fees as of the date hereof.

10. Prior to the issuance of the Cease Trade Order, the Applicant was not previously subject to a cease trade order of the Commission or any other jurisdiction.

11. Trades in the common shares of the Applicant were previously reported on the Canadian Unlisted Board. The Applicant has no securities, including debt securities, listed or quoted on any exchange or market.

12. The Applicant is applying for an amendment to the Partial Revocation Order so as to permit the Proposed Extended Financing to raise additional gross proceeds of $5,000,000.

13. While the $2,000,000 received as a result of the closing of the first tranche of the Financing was sufficient to fund the settlement of the litigation, the re-organization of the Applicant's affairs, and to provide a limited amount of working capital, the Applicant requires further working capital to fund the holding of an annual shareholders meeting, the preparation of audited financial statements for the fiscal year ended June 30, 2004, the dewatering of the mine works on the Applicant's Virginiatown, Ontario mineral property, and the preparation of applications for full revocation of the Cease Trade Order and the cease trade orders levied against the Applicant by the British Columbia Securities Commission, the Alberta Securities Commission, and the Québec Autorité des Marches Financiers. The Applicant also has stated that it wishes to have sufficient funds available to enable it to fund the preparation of, and to meet the financial criteria for, an application for a listing on the Toronto Stock Exchange.

14. The Applicant will undertake the following steps in connection with the Proposed Extended Financing (the "Steps"):

a) Upon issuance of this Order, issue a news release and file a Material Change Report announcing the Proposed Extended Financing and the Amended Order;

b) Upon issuance of this Order, solicit investments in the Applicant only from potential investors (the "Potential Investors") who qualify as "accredited investors" (as defined in OSC Rule 45-501 Exempt Distributions) in the Province of Ontario in accordance with the provisions of this order and in accordance with the requirements of Ontario securities law; and

c) Prior to the completion of the Proposed Extended Financing, each of the Potential Investors who will be participating in the Proposed Extended Financing will be required to execute and return to the Applicant a form of acknowledgement in a form acceptable to the Commission.

15. The Applicant proposes that the Proposed Extended Financing be completed on or about August 31, 2004, but in any event no later than October 15, 2004.

16. Following the completion of the Steps, the Applicant intends to make a further application for a full revocation of the Cease Trade order so as to permit trading of the securities generally in Ontario, and to make applications for the full revocation of the cease trade orders imposed by other jurisdictions.

17. 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 (collectively, an "RTO").

18. Other than the Common Shares and Warrants, the Applicant has no securities, including debt securities, outstanding with the exception of stock options granted to directors, which options will be cancelled pursuant to a prior contractual arrangement amongst the holders thereof.

19. Prior to the completion of the Proposed Extended Financing, each of the Potential Investors who will be participating in the Proposed Extended Financing will be required to execute and return to the Applicant a form of acknowledgement in a form acceptable to the Commission.

20. The Applicant has applied for an amendment of the Partial Revocation Order so as to permit the Applicant to enter into the Steps on substantially the terms described in this order.

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 Partial Revocation Order be and is hereby amended solely to permit the trades or the acts in furtherance of trades as contemplated in the Steps as set out in paragraph 14.

August 13, 2004.

"John Hughes"