Securities Law & Instruments

Headnote

Section 144 -- application for variation of cease trade order -- issuer cease traded due to failure to file with the Commission and send to shareholders annual financial statements -- issuer has applied for a variation of the cease trade order to permit the issuer to proceed with a private placement -- potential investors to receive copy of cease trade order and partial revocation order prior to making investment decision -- partial revocation granted subject to conditions.

Statutes Cited

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

Rules Cited

National Instrument 45-106 Prospectus and Registration Exemptions.

National Policy 12-202 Revocation of a Compliance-related Cease Trade Order.

June 16, 2009

IN THE MATTER OF

THE SECURITIES ACT,

R.S.O. 1990, c. S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

DEVINE ENTERTAINMENT CORPORATION

 

ORDER

(Section 144)

WHEREAS the securities of Devine Entertainment Corporation (the Applicant) are subject to a cease trade order issued by the Director on May 26, 2009 pursuant to paragraphs 2 and 2.1 of subsection 127(1) of the Act (the Cease Trade Order);

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

AND WHEREAS the Applicant has represented to the Commission that:

1. The Applicant was incorporated under the laws of the Province of Ontario on September 21, 1982 under the name "518104 Ontario Limited" and subsequently changed its name to "Devine Videoworks Corp." in January 1983. In April 1994, the name of the Applicant was changed to its current name, "Devine Entertainment Corporation".

2. The Applicant's registered office and principal place of business is located at Suite 504, 2 Berkeley Street, Toronto, Ontario M5A 2W3.

3. The Applicant's authorized share capital consists of an unlimited number of common shares (the Common Shares) and an unlimited number of preferred shares (the Preferred Shares), issuable in series. Currently there are 45,980,549 Common Shares and a series of 494,550 Preferred Shares (the Series 1 Preferred Shares) issued and outstanding.

4. The Applicant is an award-winning Canadian-based developer, producer and distributor of high-quality feature films, primetime television dramas, and children's and family entertainment for the theatrical motion picture, television and the home DVD marketplace worldwide. The Applicant produces positive and meaningful films that emphasize human values and focus on art, inspiration and personal expression and simultaneously entertain and educate its principal market of children aged six to fourteen years. The Applicant's productions are designed to make viewing films a compelling family activity that encourages intellectual interaction.

5. The Applicant's principal asset is its library of completed films, television programs and recordings. In the past twenty years, the Applicant's films have been honoured with over 110 international awards, including five Emmy Awards and six Gemini Awards. The Applicant's DVDs, videos and CDs are distributed worldwide.

6. The Applicant has no securities that are currently listed or quoted on any exchange or market in Canada. Prior to the issuance of the Cease Trade Order, the Common Shares of the Applicant were traded on the NASD OTC Bulletin Board market.

7. The Cease Trade Order was issued due to the failure of the Applicant to file and mail to its shareholders (the Shareholders) audited financial statements for the year ended December 31, 2008. No further financial statements have been filed or mailed to the Shareholders since that time and no further continuous disclosure documents required by applicable securities legislation have been filed by the Applicant since that time.

8. The Applicant's failure to file financial statements for the year ended December 31, 2008 was a result of financial distress. There are currently insufficient funds available to retain the auditors to audit the required financial statements and to pay the participation and filing fees for the Applicant to be current. If the Applicant cannot proceed with the proposed private placement, as described below, it is likely that the Applicant will not be able to continue its operations.

9. The Applicant is a reporting issuer or the equivalent under the securities legislation of the Provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Nova Scotia, Prince Edward Island, and Newfoundland and Labrador. The Applicant's Common Shares are registered under Section 12 (g) of the Securities Exchange Act of 1934 in the United States.

10. In addition to the Cease Trade Order, the Applicant is subject to the following cease trade orders, each of which was issued due to the failure of the Applicant to file and mail to its Shareholders audited financial statements for the year ended December 31, 2008:

(a) order issued by the Autorité des marchés financiers (the AMF) on May 14, 2009; and

(b) order issued by the British Columbia Securities Commission (the BCSC, and together with the AMF, the Other Securities Regulators) on May 19, 2009.

11. The Applicant is seeking to effect a private placement of units in the capital of the Applicant (the Placement) to enable it to pay its auditors and legal counsel and effect all other payments to bring the filings of its Required Documents (as defined below) current and to maintain its ongoing business operations. Absent a partial revocation of the Cease Trade Order, the Placement would constitute a contravention of the Cease Trade Order.

12. It is currently contemplated that the Placement would consist of a Common Share, a full warrant and two step-up warrants as described below, with accredited investors (as such term is defined in National Instrument 45-106 Prospectus and Registration Exemptions) resident in the Province of Ontario or to investors resident in the United States or offshore jurisdictions (each a Potential Investor) to raise gross proceeds of up to US$1,000,000.

13. Each unit (Unit) of the Placement would be issued at a subscription price of $0.01 (U.S.) and would consist of one Common Share and one Common Share purchase warrant (a Warrant). Each Warrant would be exercisable to acquire one Common Share at an exercise price of $0.02 (U.S) per Common Share at any time on or prior to forty-five (45) days after completing the Placement. Each whole Warrant would entitle the holder thereof to acquire one Common Share and one Common Share Purchase Warrant (First Step-up Warrant) at a price of $0.03 (U.S.) per share at any time on or prior to ninety (90) days after completing the Placement. Each whole First Step-up Warrant would entitle the holder thereof to acquire one Common Share and one Common Share Purchase Warrant (Final Step-up Warrant) at a price of $0.04 (U.S.) per share at any time on or prior to one hundred and thirty-five (135) days after completing the Placement.

14. The Applicant requires all of the funds from the Placement to enable it to pay its auditors and legal counsel and effect all other payments to bring the filings of its Required Documents (as defined below) current and to maintain its ongoing business operations, including the funds from the subscription for the units as well as from the exercise of full warrant and two step-up warrants and is applying for a partial revocation of the Cease Trade Order for all of the trades in the Placement:

(a) Up to 10,000,0000 Common Shares at a price of $0.01 per share;

(b) Up to 10,000,0000 Common Shares at a price of $0.02 per share on exercise of the Warrant;

(c) Up to 10,000,0000 Common Shares at a price of $0.03 per share on exercise of the First Step-up Warrant; and

(d) Up to 10,000,0000 Common Shares at a price of $0.04 per share on exercise of the Final Step-up Warrant.

11. As the Placement will involve trades in securities of the Applicant (including, for greater certainty, acts in furtherance of trades in securities of the Applicant), the Placement cannot be completed without a variation of the Cease Trade Order.

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

13. Prior to completion of the Placement, each Potential Investor will receive:

(a) a copy of the Cease Trade Order;

(b) a copy of this Order; and

(c) written notice from the Applicant, and will acknowledge, that all of the Applicant's securities, including the Units, Common Shares and Warrants issued in connection with the Placement, will remain subject to the Cease Trade Order until it is revoked, and that the granting of this Order does not guarantee the issuance of a full revocation order in the future.

14. The Applicant is not in default of any requirements of the Cease Trade Order or the Act or the rules and regulations made pursuant thereto, subject to the deficiencies outlined in paragraph 7 above.

15. Upon the issuance of this Order, the Applicant will:

(a) issue a press release and file a material change report announcing, among other things, the Placement and this Order;

(b) market the Placement and provide information relating to the Applicant to the Potential Investors in accordance with the provisions of this Order and in accordance with the Act and the rules and regulations made pursuant thereto; and

(c) issue Units, Common Shares and Warrants in connection with the Placement.

16. To bring its continuous disclosure record up to date, the Applicant intends, within a reasonable time following the completion of the Placement, to file the following documents on SEDAR once completed (collectively, the Required Documents):

(a) the financial statements for the year ended December 31, 2008, and the related management's discussion and analysis;

(b) its interim financial statements for the interim period ending March 31, 2009 and the related management's discussion and analysis;

(c) all certifications by the Chief Executive Officer and the Chief Financial Officer of the Applicant with respect to the Applicant's annual and interim filings required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings; and

(d) all other continuous disclosure documents required by applicable securities legislation to be filed by the Applicant.

17. The Applicant will use the proceeds from the Placement to:

(a) complete the audit and filing of the Required Documents, as required;

(b) pay all outstanding participation fees, filing fees and late fees owing to the Commission.

18. The Applicant intends, within a reasonable time following the completion of the Placement, to apply to the Commission and the Securities Regulators for a full revocation of the Cease Trade Order and the cease trade orders imposed by each of the Other Securities Regulators.

19. 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.

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 Cease Trade Order is partially revoked solely to permit trades in securities of the Applicant (including, for greater certainty, acts in furtherance of trades in securities of the Applicant) that are necessary for and are in connection with the Placement, provided that:

(a) prior to completion of the Placement, each Potential Investor:

(i) receives a copy of the Cease Trade Order;

(ii) receives a copy of this Order; and

(iii) receives written notice from the Applicant, and provides a written acknowledgement to the Applicant, that all of the Applicant's securities, including the Units, Common Shares and Warrants issued in connection with the Placement, will remain subject to the Cease Trade Order until it is revoked, and that the granting of this Order does not guarantee the issuance of a full revocation order in the future;

(b) the Applicant undertakes to make available copies of the written acknowledgements to staff of the Commission on request; and

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

(i) completion of the Placement; and

(ii) 180 days from the date hereof.

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