Securities Law & Instruments

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- National Instrument 52-107, Acceptable Accounting Principles and Auditing Standards, ss. 3.2 and 3.3 -- An issuer that is not yet an 'SEC issuer' wants to file financial statements prepared in accordance with U.S. GAAP and audited in accordance with U.S. GAAS -- the issuer intends to become an SEC registrant -- the issuer has filed a registration statement with the SEC -- the issuer will meet all the elements of the definition of 'SEC issuer' once the SEC accepts its registration statement -- the issuer will file financial statements and MD&A that comply with the requirements for SEC issuers in NI 52-107 and NI 51-102 -- if the issuer does not become an SEC issuer by a set date, it will re-file its financial statements in accordance with Canadian GAAP and Canadian GAAS and its MD&A in the Canadian form.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss 3.2, 3.3.

Date: June 18, 2020

IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO (the Jurisdiction) AND IN THE MATTER OF NERIUM BIOTECHNOLOGY, INC. (the Filer)

DECISION

Background

The Ontario Securities Commission (the "Decision Maker") has received an application from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirements of (i) subsection 3.2 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards ("NI 52-107") that the Filer's financial statements, other than acquisition statements, be prepared in accordance with Canadian generally accepted accounting principles ("Canadian GAAP") applicable to publicly accountable enterprises to permit the Filer to prepare its financial statements in accordance with United States generally accepted accounting principles (as defined in NI 52-107) ("U.S. GAAP") for the year ended December 31, 2019, the three-month period ended March 31, 2020 and the three-- and six-month periods ended June 30, 2020; and (ii) subsection 3.3 of NI 52-107 that the Filer's financial statements be audited in accordance with Canadian generally accepted auditing standards ("Canadian GAAS") to permit the Filer's financial statements to be audited in accordance with Public Company Accounting Oversight Board (United States of America) generally accepted auditing standards ("U.S. PCAOB GAAS") for the year ended December 31, 2019 (collectively, the "Exemption Sought").

Interpretation

Terms defined in National Instrument 14-101 Definitions and NI 52-107 have the same meaning if used in this decision unless otherwise defined herein.

Representations

This decision is based upon the following facts represented by the Filer:

1. The Filer was incorporated on June 1, 2006 pursuant to the Canada Business Corporations Act.

2. The Filer's head office is located at 1147 Huebner Road, Suite 175, San Antonio, Texas, United States, 78230.

3. The Filer's registered and records office is located at 199 Bay Street, Suite 4000, Toronto, Ontario, Canada, M5L 1A9.

4. The primary business of the Filer is the research, development, manufacturing and marketing of oleander-based products for the treatment of certain forms of proliferative diseases and viral infections.

5. The Filer is a reporting issuer in Ontario. The Filer is not a reporting issuer in any other jurisdiction of Canada.

6. The Filer's financial year end is December 31.

7. No securities of the Filer have ever been listed for trading on any Canadian or other stock exchange.

8. The Filer is not eligible to cease to be a reporting issuer in Ontario.

9. The Filer's authorized share capital consists of the following as at the date of this application:

(i) an unlimited number of Common shares, of which 36,469,181 are issued and outstanding; and

(ii) an unlimited number of Preferred shares issuable in series, of which none are issued and outstanding.

10. To the knowledge of the Filer, approximately 90.16% of the Filer's outstanding Common shares are directly or beneficially held by United States residents and approximately 9.84% of the outstanding Common shares are directly or beneficially held by Canadian residents.

11. All of the executive officers and the majority of the directors of the Filer are residents in the United States.

12. The majority of the consolidated assets of the Filer are located in the United States.

13. The business of the Filer is administered principally in the United States.

14. The Filer's financial statements are stated in United States dollars.

15. On June 28, 2011, the Filer's registration statement on Form 20-F (the "Prior Registration") with the U.S. Securities Exchange Commission ("SEC") was declared effective and, as a result the Filer became a SEC Issuer (as defined in NI 52-107).

16. In connection with the Prior Registration and the Filer's status as a SEC Issuer, the Filer began preparing its financial statements in accordance with U.S. GAAP and having its financial statements audited in accordance with U.S. PCAOB GAAS, as applicable.

17. On December 14, 2012, the Filer filed a Form 15 with the SEC to terminate its registration and, as a result, the Filer ceased to be a SEC Issuer; however, the Filer did not cease to prepare its financial statements in accordance with U.S. GAAP and have its financial statements audited in accordance with U.S. PCAOB GAAS, as applicable.

18. The Filer is not in default of securities legislation in Ontario, other than, as discussed above, with respect to (i) its annual financial statements for the year ended December 31, 2012, its annual and interim financial statements for the years ended December 31, 2013 to 2018 and its interim financial statements for the year ended December 31, 2019 having been prepared in accordance with U.S. GAAP and having been audited in accordance with U.S. PCAOB GAAS, as applicable, and (ii) the late filing of its annual financial statements for the year ended December 31, 2019.

19. The Filer filed a new registration statement on Form 10 (the "Form 10") on June 15, 2020 with the SEC in order to again become a SEC Issuer. The Filer anticipates that it will become a SEC Issuer in 60 days from the date of filing the Form 10, subject to the Filer not withdrawing and resubmitting the Form 10 in order to address comments from the SEC.

20. Upon becoming a SEC Issuer, the Filer may (i) under Part 3.7 of NI 52-107, prepare its financial statements, other than acquisition statements, in accordance with U.S. GAAP, and (ii) under Part 3.8 of NI 52-107, have its annual financial statement audited in accordance with U.S. PCAOB GAAS.

21. If the Filer does not become a SEC Issuer by September 30, 2020, the Filer will immediately re-file on SEDAR the financial statements for the year ended December 31, 2019, the three-month period ended March 31, 2020 and the three-- and six-month periods ended June 30, 2020; the re-filed financial statements will be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises; the re-filed annual financial statements will be audited in accordance with Canadian GAAS; the related management's discussion and analysis will be amended to reflect the re-filed financial statements; and the Filer will issue a news release upon re-filing the financial statements that explains the nature and purpose of the re-filings.

22. The Filer will not issue any securities until the earlier of it (i) qualifying as a SEC Issuer or (ii) having filed the documents referenced in subsection 3.3 above.

Decision

The Decision Maker is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Maker under the Legislation is that the Exemption Sought is granted provided:

(a) the Filer files financial statements prepared in accordance with U.S. GAAP for the year ended December 31, 2019, the three-month period ending March 31, 2020 and the three-- and six-month periods ending June 30, 2020 and audited in accordance with U.S. PCAOB GAAS, as applicable;

(b) if the Filer does not become a SEC Issuer by September 30, 2020, the Filer will immediately file on SEDAR:

i. the financial statements for the year ended December 31, 2019, the three-month period ended March 31, 2020 and the three-- and six-month periods ended June 30, 2020, prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, as applicable;

ii. the financial statements for the years ended December 31, 2018 and 2017, prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS;

iii. the related management's discussion and analysis amended to reflect the re-filed financial statements; and

iv. a news release explaining the nature and purpose of the re-filings; and

(c) the Filer does not issue any securities until the earlier of it (i) qualifying as a SEC Issuer; or (ii) filing the documents referenced in paragraph (b) above.

"Cameron McInnis"
Chief Accountant
Ontario Securities Commission