PowerComm Inc. - MRRS Decision

Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency -- The issuer filed annual financial statements with an auditor's report that contained a reservation pertaining to inventory contrary to NI 52-107 and in default of securities legislation; relief granted from NI 52-107 to permit the reservation; the issuer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the issuer from June 29, 2007 until the date of this decision document are not terminated or altered as a result of this decision; relief is effective from the date of this decision.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles, Auditing Standards and Reporting Currency, s. 9.1.

Citation: PowerComm Inc., 2008 ABASC 149

March 28, 2008

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND AND

NEWFOUNDLAND AND LABRADOR

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

POWERCOMM INC.

(the Filer)

 

MRRS DECISION DOCUMENT

Background

1. The local securities regulatory authority or regulator (the Decision Maker) in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the Legislation) for an exemption from the requirement that the Filer's financial statements required by securities legislation to be audited and accompanied by an auditor's report that does not contain a reservation, does not apply in respect of the Filer's financial statements for the year ended March 31, 2006 (the Requested Relief).

2. Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Alberta Securities Commission is the principal regulator for the Filer; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

3. Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless they are defined in this decision.

Representations

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

(a) The head office of the Filer is located in Edmonton, Alberta.

(b) The Filer is a reporting issuer in the provinces of British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, New Brunswick, Nova Scotia, Prince Edward Island, Newfoundland and Labrador.

(c) The common shares of the Filer are listed on the TSX under the symbol "PCG".

(d) The Filer resulted from an amalgamation between RMM Ventures Inc. and PowerComm Inc. (PowerComm), effective December 31, 2006 under the Business Corporations Act (Alberta). The amalgamation was accounted for as a reverse takeover transaction with PowerComm as the accounting parent.

(e) Grant Thornton LLP (the Auditors) were appointed the auditors of PowerComm during 2004.

(f) PowerComm completed an inventory system conversion during 2005 and the Auditors were unable to verify inventory balances as at March 31, 2005 or satisfy themselves concerning the inventory quantities as of this date by alternative means.

(g) On May 1, 2007, the Filer obtained a receipt for a long form prospectus (the Prospectus) dated April 30, 2007. The Prospectus included the following financial statements:

(i) an audited balance sheet of PowerComm as at March 31, 2005 and 2006 and statements of loss, deficit and cash flows for the three years ended March 31, 2004, 2005 and 2006 (the 2006 Financial Statements); and

(ii) an audited consolidated balance sheet of PowerComm as at December 31, 2006 and consolidated statements of earnings, retained earnings and cash flows for the nine month period then ended.

(h) Since opening inventories enter into the determination of the results of operations and cash flows, the Auditors were not able to determine whether adjustments to cost of sales, income taxes, net income and cash flows from operating activities of PowerComm for the year ended March 31, 2006 or opening retained earnings at April 1, 2005 might be necessary. As a result, the Auditors expressed a reservation of opinion (the Inventory Reservation) on the 2006 Financial Statements.

(i) On June 29, 2007 (the Default Date), the Filer filed its comparative annual financial statements for the year-ended March 31, 2007. These financial statements were accompanied by an auditor's report without reservation of opinion.

(j) On August 29, 2007, the Filer refiled its comparative annual financial statements for the year-ended March 31, 2007, together with an auditor's report which included a reservation of opinion in relation to the results of operations and cash flows for the year ended March 31, 2006 and opening retained earnings as at April 1, 2005 because of the Inventory Reservation.

(k) The Filer is currently in default of securities legislation due to the Inventory Reservation in its comparative annual financial statements for the year-ended March 31, 2007.

(l) The Filer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the Filer from June 29, 2007 until the date of this decision document are not terminated or altered as a result of this decision.

Decision

The Decision Makers being satisfied that they have jurisdiction to make this decision and that the relevant test under the Legislation has been met, the Requested Relief is granted provided that the Requested Relief is effective from the date of this decision.

"Blaine Young"
Associate Director, Corporate Finance
Alberta Securities Commission