Avalon Works Corp. – s. 144

Order

Section 144 of the Securities Act (Ontario) – application for partial revocation of a cease trade order – concurrent applications filed in Alberta and British Columbia – issuer cease traded due to failure to file interim financial statements with the Commission – issuer has applied for partial revocation of the cease trade order to permit the issuer to proceed with a private placement with accredited investors (as such term is defined in the Securities Act (Ontario) and National Instrument 45-106 Prospectus Exemptions) – issuer will use proceeds from private placement 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, CHAPTER S.5, AS AMENDED
(the Act)

AND

IN THE MATTER OF
AVALON WORKS CORP.

ORDER
(Section 144 of the Act)

                WHEREAS the securities of Avalon Works Corp. (the Filer) are subject to a temporary cease trade order dated August 6, 2010 made by the Director under paragraph 2 of subsection 127(1) and subsection 127(5) of the Act and a further cease trade order dated August 18, 2010 made by the Director under paragraph 2 of subsection 127(1) of the Act (together, the OSC CTO) directing that trading in the securities of the Filer cease until the OSC CTO is revoked by the Director;

                AND WHEREAS the Filer has applied to the Ontario Securities Commission (the Commission) pursuant to section 144(1) of the Act for a partial revocation of the OSC CTO (the Application);

                AND UPON the Filer having represented to the Commission that:

1.             The Filer was incorporated under the Canada Business Corporations Act on April 6, 2000.

2.             The head office of the Filer is located at 237 Argyle Avenue, Ottawa, Ontario, K2P 1B8.

3.             The authorized capital of the Filer consists of an unlimited number of common shares of which 19,742,000 are issued and outstanding.

4.             The Filer is a reporting issuer under the securities legislation of the provinces of British Columbia, Alberta and Ontario.

5.             The Filer's securities are not listed on any stock exchange or quotation system.

6.             The OSC CTO was issued as a result of the Filer's failure to file its interim financial statements for the nine-month period ended May 31, 2010, management’s discussion and analysis (MD&A) relating to the interim financial statements for the nine-month period ended May 31, 2010 and related certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52-109) (the Unfiled Documents).

7.             The Unfiled Documents were not filed in a timely manner as a result of financial difficulties. Subsequent to the failure to file the Unfiled Documents, the Filer also failed to file the following documents as required by Ontario securities law:

(a)           annual audited financial statements for the years ended August 31, 2010, August 31, 2011, August 31, 2012, August 31, 2013, August 31, 2014, August 31, 2015, August 31, 2016, August 31, 2017 and August 31, 2018;

(b)           interim unaudited financial statements for the interim periods ended October 31, 2010, February 28, 2011, May 31, 2011, October 31, 2011, February 28, 2012, May 31, 2012, October 31, 2012, February 28, 2013, May 31, 2013; October 31, 2013, February 28, 2014, May 31, 2014, October 31, 2014, February 28, 2015, May 31, 2015, October 31, 2015, February 28, 2016, May 31, 2016, October 31, 2016, February 28, 2017, May 31, 2017, October 31, 2017, February 28, 2018, May 31, 2018 and October 31, 2018;

(c)           MD&A relating to the financial statements referred to in paragraphs (a) and (b) above; and

(d)           certificates required to be filed in respect of the financial statements referred to in paragraphs (a) and (b) above under NI 52-109

(together with the Unfiled Documents, the Unfiled Continuous Disclosure).

8.             The Filer is also subject to a cease trade order (the BCSC CTO) of the British Columbia Securities Commission (BCSC) dated August 9, 2010 issued in response to the Filer’s failure to file its Unfiled Documents.

9.             The Filer is also subject to a cease trade order (the ASC CTO) of the Alberta Securities Commission (ASC) dated November 22, 2010 issued in response to the Filer’s failure to file its Unfiled Documents (the ASC CTO, the BCSC CTO together with the OSC CTO, the CTOs).

10.          The Filer seeks to vary the CTOs to permit the Filer to complete a private placement of an amount of up to a maximum of $200,000 (two hundred thousand dollars) by way of the issuance of 400,000,000 common shares at a price of $0.0005 (the Placement).

11.          The Placement is intended to take place in Ontario, Alberta and British Columbia.

12.          Each distribution made in respect of the Placement will comply with the accredited investor prospectus exemption contained in section 73.3 of the Act and section 2.3 of National Instrument 45-106 Prospectus Exemptions.

13.          The Filer intends to prepare and file the Unfiled Continuous Disclosure within a reasonable period of time following the completion of the Placement but will seek to obtain an exemption to only file annual audited financial statements, MD&A and related certifications for the last two most recently completed financial years and the interim financial statements, MD&A and related certifications for the last two most recently completed financial years.

14.          Other than the failure to file the Unfiled Continuous Disclosure, the Filer is not in default of any of the requirements of the Act or the rules and regulations made pursuant thereto. The Filer's SEDAR and SEDI profiles are up to date.

15.          After the completion of the Placement, the Filer intends to file the Unfiled Continuous Disclosure and pay all outstanding fees. The Filer also intends to apply to the applicable securities regulators to have the CTOs fully revoked.

16.          The Filer intends to allocate the proceeds from the Placement as follows:

Legal Fees

$10,000 – $20,000

Audit Fees

$25,000 – $60,000

Late Filing and Participation Fees

$65,000 – $80,000

Accounting Fees

$10,000 – $20,000

Registrar and Transfer Agent Fees

$10,000 – $20,000

Total

$120,000 – $200,000

17.          The Filer reasonably believes that the Placement will be sufficient to bring its continuous disclosure obligations up to date and pay all related outstanding fees and provide it with sufficient working capital to advance its business.

18.          As the Placement would involve a trade of securities and acts in furtherance of trades, the Placement cannot be completed without a partial revocation of the OSC CTO.

19.          The Placement will be completed in accordance with all applicable laws.

20.          Prior to the completion of the Placement, the Filer will:

(a)           provide any subscriber to the Placement with:

(i)            a copy of the OSC CTO;

(ii)           a copy of the partial revocation order for which the Application has been made; and

(b)           obtain from the subscriber a signed and dated acknowledgement which clearly states that all of the Filer's securities, including the securities issued in connection with the Placement, will remain subject to the OSC CTO and the CTOs, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future.

21.          Upon issuance of this order, the Filer will issue a press release announcing the order and the intention to complete the Placement. Upon completion of the Placement, the Filer will issue a press release and file a material change report. As other material events transpire, the Filer will issue appropriate press releases and file material change reports as applicable.

                AND UPON considering the Application and the recommendation of staff of the Commission;

                AND UPON 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 OSC CTO is partially revoked solely to permit trades in securities of the Filer (including for greater certainty, acts in furtherance of trades in securities of the Filer) that are necessary for and are in connection with the Placement, provided that:

(a)           prior to the completion of the Placement, the Filer will:

(i)            provide to each subscriber under the Placement a copy of the OSC CTO;

(ii)           provide to each subscriber under the Placement a copy of this partial revocation order; and

(iii)           obtain from each subscriber under the Placement a signed and dated acknowledgement, which clearly states that all of the Filer's securities, including the securities issued in connection with the Placement, will remain subject to the OSC CTO, and the ASC CTO and the BCSC CTO, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future;

(b)           the Filer will make available a copy of the written acknowledgement referred to in paragraph (a)(iii) to staff of the Commission on request; and

(c)           this order will terminate on the earlier of:

(i)            the closing of the Placement; and

(ii)           60 days from the date hereof.

                DATED at Toronto, Ontario on this 25th day of February, 2019.

“Winnie Sanjoto”
Manager, Corporate Finance
Ontario Securities Commission