Empower Clinics Inc.

Headnote

Section 144 of the Securities Act (Ontario) -- application for partial revocation of a cease trade order -- issuer cease traded due to failure to file certain continuous disclosure documents required by securities law -- issuer has applied for partial revocation of the cease trade order to permit the issuer to proceed with a private placement to settle certain debt and raise funds -- issuer will use proceeds from private placement to prepare and file continuous disclosure documents and pay related fees -- partial revocation granted subject to conditions (BC PR).

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.

National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions.

Citation: 2024 BCSECCOM 121

PARTIAL REVOCATION ORDER

EMPOWER CLINICS INC.

UNDER THE SECURITIES LEGISLATION OF BRITISH COLUMBIA AND ONTARIO (the Legislation)

Background

¶ 1 Empower Clinics Inc. (the Issuer) is subject to a failure-to-file cease trade order (the FFCTO) issued by the regulator or securities regulatory authority in each of British Columbia (the Principal Regulator) and Ontario (each a Decision Maker) respectively on August 14, 2023.

¶ 2 The Issuer has applied to each of the Decision Makers for a partial revocation order of the FFCTO.

¶ 3 This order is the order of the Principal Regulator and evidences the decision of the Decision Maker in Ontario.

Interpretation

¶ 4 Terms defined in National Instrument 14-101 Definitions or in National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions have the same meaning if used in this order, unless otherwise defined.

Representations

¶ 5 This decision is based on the following facts represented by the Issuer:

a. The Issuer was originally incorporated under the laws of the State of Nevada on February 20, 1997 under the name "Trans New Zealand Oil Company". Its name was changed to "AMG Oil Ltd." on July 27, 1998 and to "Adira Energy Ltd." on December 17, 2009. On November 27, 2008, the Issuer continued its jurisdiction of incorporation from the State of Nevada to Canada pursuant to a continuation under the Canada Business Corporations Act. On April 23, 2018, the Issuer changed its name to "Empower Clinics Inc.".

b. The Issuer's head office and registered office is located at Suite 505 -- 1771 Robson Street, Vancouver, British Columbia, V6G 1C9.

c. The Issuer is a reporting issuer in the provinces of British Columbia, Ontario and Alberta.

d. The authorized capital of the Issuer consists of an unlimited number of common shares (each, a Common Share), of which 103,471,756 Common Shares are issued and outstanding. In addition, the Issuer currently has outstanding an aggregate of 1,200,000 stock options (each of which is exercisable into one Common Share), 21,262,942 Common Share purchase warrants (each of which is exercisable into one Common Share), and convertible debentures in the aggregate principal amount of $2,186,400 (which are convertible into Common Shares at a conversion price of $0.05 per Common Share), each subject to adjustment in accordance with their respective terms.

e. The Common Shares are listed on the Canadian Securities Exchange (the Exchange) under the symbol "EPW". The Common Shares were halted from trading on the Exchange on August 15, 2023 following the issuance of the FFCTO.

f. The FFCTO was issued as a result of the Issuer's failure to file the following documents (collectively, the Unfiled Documents):

(i) annual audited financial statements for the year ended March 31, 2023;

(ii) annual management's discussion and analysis (MD&A) for the year ended March 31, 2023;

(iii) certificates required to be filed in respect of the financial statements referred to in subparagraph (i) above, as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109);

(iv) the disclosure required by Form 52-110F2 Disclosure by Venture Issuers for the year ended March 31, 2023; and

(v) the disclosure required by Form 58-101F2 Corporate Governance Disclosure (Venture Issuers) for the year ended March 31, 2023.

g. The Unfiled Documents were not filed in a timely manner as a result of financial hardship.

h. Subsequent to the failure to file the Unfiled Documents, the Issuer also failed to file the following documents (collectively, with the Unfiled Documents, the Unfiled Continuous Disclosure Documents):

(i) interim unaudited financial reports for the interim periods ended June 30, 2023, September 30, 2023 and December 31, 2023;

(ii) interim MD&As for the interim periods ended June 30, 2023, September 30, 2023 and December 31, 2023;

(iii) certificates required to be filed in respect of the financial reports referred to in subparagraph (i) above under NI 52-109; and

(iv) the disclosure required by Form 51-102F6V Statement of Executive Compensation -- Venture Issuers for the year ended March 31, 2023.

i. Prior to the filing deadline for the Unfiled Documents, the Issuer was working diligently with its auditor to file the Unfiled Documents by the applicable deadline. However, because the auditor was only engaged by the Issuer in 2023, the auditor required time to familiarize itself with the Issuer's operations. In addition, because certain divisions of the Issuer were recently classified as discontinued operations, the auditor was required to conduct independent impairment modeling procedures resulting in additional complexity and time needed with respect to completion of the Unfiled Documents. Filing of the Unfiled Continuous Disclosure Documents has been further delayed since the issuance of the FFCTO by the Issuer's lack of available funds to facilitate completion of the Unfiled Documents, the completion of which is necessary in order to prepare and file the remaining Unfiled Continuous Disclosure Documents.

j. On December 22, 2023, an existing, arm's length shareholder of the Issuer advanced $25,000 (the Advance) to the Issuer, to enable the Issuer to meet certain urgent working capital requirements.

k. Pursuant to a promissory note dated December 27, 2023 (the Note), KW Capital Partners Limited (KW Capital), the holder of outstanding secured convertible debentures of the Issuer in the aggregate principal amount of $1,936,000 (the KW Debentures), advanced the Issuer $12,500 to enable the Issuer to meet certain urgent working capital requirements. The Note has a maturity date of May 31, 2024, bears interest at the rate of 10.0% per annum based on a 365-day year, and is subject to a 2.0% administration fee due at maturity.

l. The evidence of indebtedness for the Advance and the Note may each constitute a "security" and the issuance of the Advance and the issuance of the Note may each constitute a violation of the FFCTO.

m. Other than (i) the failure to file the Unfiled Continuous Disclosure Documents, (ii) the issuance of the Advance, and (iii) the issuance of the Note, the Issuer is not in default of the Legislation. The Issuer confirms that its SEDAR+ profile and SEDI profiles (as they pertain to current insiders of the Issuer) are up to date.

n. There have been no material changes in the business, operations or affairs of the Issuer since the issuance of the FFCTO that have not been previously disclosed by news release and/or material change report and filed on the Issuer's SEDAR+ profile.

The Transactions

o. The Issuer wishes to bring itself back into compliance with its continuous disclosure obligations by filing the Unfiled Continuous Disclosure Documents and paying all related fees and, to that end, proposes the following transactions, which may be closed in one or more tranches:

(i) a private placement of up to 24,400,000 units of the Issuer (each, a Unit), at a price of $0.04 per Unit, for gross proceeds of up to $976,000, with each Unit to be comprised of one Common Share and one Common Share purchase warrant (each, a Warrant), and with each Warrant exercisable into one Common Share at a price of $0.05 per Common Share for 24 months following the date of issuance (the Private Placement); and

(ii) a shares for debt transaction, whereby the Issuer will settle debt in the aggregate amount of $197,085, comprised of:

(a) $100,000 owing to Steven McAuley, the chief executive officer and a director of the Issuer, in settlement of advances made by Mr. McAuley to the Issuer to cover operating expenses of the Issuer and certain accrued but unpaid salary owing to Mr. McAuley, and

(b) $97,085 owing to KW Capital for accrued interest outstanding on the KW Debentures,

by the issuance of an aggregate of 4,927,125 Units (having the same terms as the Units issued pursuant to the Private Placement) at a deemed price of $0.04 per Unit (the Shares for Debt Transaction and, together with the Private Placement, the Transactions).

p. The proceeds of the Private Placement (the Proceeds) are intended to be used by the Issuer as follows:

Description	Estimated Amount
Payment of legal, accounting, transfer agent and Exchange fees incurred to date and in connection with the Transactions, including outstanding auditor fees	$265,000
Preparation and filing of the Unfiled Continuous Disclosure Documents, applications for a full revocation order and payment of related fees{1}	$221,000
Employee (excluding directors and officers) salaries and benefits through end of March 2024	$100,000
Fees and expenses related to the calling and holding of the Issuer's annual general meeting	$50,000
Clinical trial site launches	$150,000
General working capital	$190,000
Total:	$976,000

q. The Issuer intends to prepare and file the Unfiled Continuous Disclosure Documents and pay all outstanding fees within a reasonable period of time following the completion of the Transactions. The Issuer also intends to make an application to the Decision Makers for a full revocation of the FFCTO. Based on management's current reasonable estimation, the Issuer believes the Proceeds will be sufficient to enable the Issuer to file the Unfiled Continuous Disclosure Documents, pay all related outstanding fees, and provide the Issuer with sufficient working capital to continue its business until the FFCTO has been fully revoked.

r. As the Transactions will each involve a "trade" (as such term is defined in the Legislation) of securities of the Issuer, the Transactions cannot be concluded without a partial revocation of the FFCTO.

s. The Transactions will be completed in accordance with all applicable laws. In particular, the Transactions will be conducted on a prospectus exempt basis (i) with subscribers in British Columbia, Ontario and other provinces who satisfy the requirements of section 2.3 (Accredited Investor) of National Instrument 45-106 Prospectus Exemptions (NI 45-106), and (ii) with creditors of the Issuer to settle bona fide debt of the Issuer pursuant to section 2.14 of NI 45-106.

t. Upon issuance of this partial revocation order, the Issuer will issue a press release announcing receipt of this partial revocation order and its intention to complete the Transactions. Upon completion of the Transactions, the Issuer will issue a press release and file a material change report. As other material events transpire, the Issuer will continue to issue appropriate press releases and file material change reports as applicable.

u. Steven McAuley is a "related party" (as that term is defined in Multilateral Instrument 61101 Protection of Minority Security Holders in Special Transactions (MI 61-101)) of the Issuer and the settlement of debt owing by the Issuer to Mr. McAuley in the amount of $100,000 in connection with the Shares for Debt Transaction is a "related party transaction" pursuant to subsection (e) of the definition of that term in MI 61-101. The Issuer is relying on exemptions from the formal valuation and minority shareholder approval requirements available under MI 61-101. The Issuer is exempt from the formal valuation requirement in section 5.4 of MI 61-101 in reliance on section 5.5(b) of MI 61101 as the Issuer is not listed on a specified market. Additionally, the Issuer is exempt from the minority shareholder approval requirement in section 5.6 of MI 61-101 in reliance on section 5.7(a) of MI 61-101 as the fair market value of the Units to be issued to Mr. McAuley represents less than 25% of the Issuer's market capitalization. There are no approvals in respect of, or in connection with, the Shares for Debt Transaction that must be obtained at a meeting of securityholders of the Issuer. The foregoing shall be disclosed in the news release and material change report with respect to the Transactions.

Order

¶ 6 Each of the Decision Makers is satisfied that a partial revocation order of the FFCTO meets the test set out in the Legislation for the Decision Maker to make the decision.

¶ 7 The decision of the Decision Makers under the Legislation is that the FFCTO is partially revoked solely to permit the Transactions, provided that:

(a) Prior to completion of the Transactions, the Issuer will

(i) Provide each participant in any of the Transactions a copy of the FFCTO and a copy of this partial revocation order; and

(ii) Obtain a signed and dated acknowledgement from each such participant in the Transactions which clearly states that all of the Issuer's securities will remain subject to the FFCTO until the FFCTO is revoked and that the issuance of this partial revocation order does not guarantee the issuance of a full revocation in the future; and

(b) The Issuer undertakes to make available copy of the written acknowledgement to staff of the Decision Makers on request.

¶ 8 April 2, 2024

OSC File #: 2023/0546

{1} Includes estimated payments of: (i) $3,600 to the Principal Regulator ($600 for annual filings, $500 for late fees and $2,500 for the full revocation application); (ii) approximately $18,000 to the Ontario Securities Commission ($2,590 for annual filings; $5,000 for 2023 late fees, up to $5,000 for 2024 late fees (assuming maximum late fees are payable), $4,800 for the full revocation application and an additional amount for participation late fees, which are expected to be nominal); (iii) $26,500 to the Alberta Securities Commission ($500 for annual filings, $5,000 for 2023 late fees, up to $5,000 for 2024 late fees (assuming maximum late fees are payable) and $16,000 for historical late fees); and (iv) $1,200 to SEDAR+ for filing fees ($850 for annual filings and $350 for the full revocation application).