Euromax Resources Ltd. – s. 144

Headnote

National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions -- application for a partial revocation of a cease trade order -- issuer cease traded due to failure to file annual information form, annual financial statements, related management's discussion and analysis and related certifications -- issuer has applied for a partial revocation of the cease trade order to permit the issuer to proceed with a private placement to accredited investors and employees, executive officers, directors or consultants of the issuer -- issuer will use proceeds from the private placement to bring itself into compliance with its continuous disclosure obligations, pay outstanding filing fees and for working capital purposes -- partial revocation granted subject to conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., s. 144.

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

IN THE MATTER OF THE SECURITIES ACT, R.S.O. 1990, c. S.5, AS AMENDED (the Act) AND IN THE MATTER OF EUROMAX RESOURCES LTD.

ORDER (Section 144)

Background

1. Euromax Resources Ltd. (the Issuer) is subject to a failure-to-file cease trade order (the FFCTO) issued by the Ontario Securities Commission, its principal regulator (the Principal Regulator) on April 8, 2024.

2. The Issuer has applied to the Principal Regulator for a partial revocation order of the FFCTO (the Requested Relief).

Interpretation

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

3. This decision is based on the following facts represented by the Issuer:

a. The Issuer is a corporation incorporated under the Business Corporations Act (British Columbia) with its registered office in Vancouver, British Columbia and a corporate office located in the Republic of North Macedonia.

b. The Issuer's registered office is located at 700 West Georgia St., Suite 2200, Vancouver, British Columbia, V7Y 1K8, Canada.

c. The Issuer is a reporting issuer in Alberta, British Columbia and Ontario. The Issuer is not a reporting issuer in any other jurisdiction in Canada.

d. The Issuer is currently a "venture issuer" as defined in National Instrument 51-102 Continuous Disclosure Obligations. The Issuer was not a "venture issuer" prior to January 9, 2024.

e. The Issuer's authorized share capital consists of an unlimited number of common shares. The Issuer currently has 491,715,971 common shares issued and outstanding, as well as stock options to acquire up to 8,378,603 shares, 6,843,504 restricted share units, and 122,226,678 share purchase warrants outstanding. The Company also has two convertible debentures outstanding. The convertible debentures were issued in 2016 to the European Bank for Reconstruction and Development and CC Ilovitza Limited, have a principal amount of USD$5 million and CAD$5.2 million, respectively, and a maturity date of February 28, 2025.

f. Until January 8, 2024, the Issuer's common shares were traded on the Toronto Stock Exchange (TSX) under the symbol "EOX". On January 8, 2024, the Issuer's common shares were voluntarily delisted from the TSX, and as announced on December 20, 2023, as of January 9, 2024, the Issuer's common shares have been listed for trading solely on the TSX Venture Exchange (TSX-V) under the symbol "EOX". As of April 9, 2024, the Issuer's common shares have been suspended from trading on the TSX-V.

g. The FFCTO was issued as a result of the Issuer's failure to file the following continuous disclosure materials as required by Ontario securities law:

• audited annual financial statements for the year ended December 31, 2023;

• management's discussion & analysis for the year ended December ??31, 2023;

• annual information form for the year ended December 31, 2023; and

• the certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (collectively, the Required Filings).

h. The Issuer's delay in filing the Required Filings is due to the fact that the Issuer's de-listing from the TSX and listing on the TSX-V occurred after December 31, 2023 so the Issuer continued to be subject to the reporting requirement of 90 days applicable to TSX issuers for the year ended December 31, 2023, even though companies listed on the TSX-V are subject to a 120 day period to report year end financial results. In addition, as further described in paragraph (r) below, the Issuer was required to complete a financing in order to complete the Required Filings.

i. The Issuer has failed to pay certain fees to the Principal Regulator, including in connection with the Required Filings (the Outstanding Fees).

j. Other than the failure to file the Required Filings and the failure to pay the Outstanding Fees, the Issuer is not in default of any of the requirements of the Securities Act (Ontario) or the rules and regulations made pursuant thereto. The Issuer is not in default of the FFCTO. The Issuer's SEDAR+ and SEDI profiles are up to date.

k. The Issuer is seeking a partial revocation of the FFCTO to be able to complete a private placement for up to 61,464,496 units of the Issuer (each, a Unit) for aggregate gross proceeds of approximately C$1.2 million (the Placement Funds), with each Unit: i) to be issued at a proposed price of C$0.02; and ii) consisting of one (1) common share in the capital of the Issuer (each, a Share) and one (1) common share purchase warrant (each, a Warrant), with each Warrant entitling the holder thereof, upon payment of the proposed Warrant exercise price of C$0.05, to acquire one (1) Share for a period of five (5) years from the date of closing (the Private Placement). The proposed placees of the Private Placement include two controlling shareholders and two directors (the Proposed Placees). All Proposed Placees are insiders of the Issuer.

The table below sets out the current shareholdings of each Proposed Placee and the percentage change post-closing of the private placement.

 

Name and Position of Placee	# of common shares or other securities purchased	# of common shares held post-closing	Shareholding percentages
Galena Resource Equities Limited (Shareholder)	46,600,652 common shares and 46,600,652 warrants	Pre-closing: 226,953,072	Pre-closing: ~46.16%
		Post-closing: 273,553,724	Post-closing: ~49.45%
NDX B.V. (Shareholder)	8,223,645 common shares and 8,223,645 warrants	Pre-closing: 101,250,000	Pre-closing: ~20.59%
		Post-closing: 109,473,645	Post-closing: ~19.79%
Martyn Konig (Director)	5,141,056 common shares and 5,141,056 warrants	Pre-closing: 11,105,645	Pre-closing: ~2.26%
		Post-closing: 16,246,701	Post-closing: ~2.94%
Tim Morgan-Wynne (Director)	1,499,143 common shares and 1,499,143 warrants	Pre-closing: 1,209,606	Pre-closing: ~0.25%
		Post-closing: 2,708,749	Post-closing: ~0.49%

l. As the Proposed Placees are insiders of the Issuer, the Issuer is subject to Policy 5.9 of the TSX-V and Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (MI 61-101). The Issuer intends to rely on the exemptions from the formal valuation and minority approval requirements of Policy 5.9 of the TSX-V and MI 61-101 contained in sections 5.5(b) and 5.7(1)(a) of MI 61-101. Therefore, there are no approvals in respect of, or in connection with, the Private Placement that must be obtained at a meeting of securityholders of the Issuer.

m. The Issuer has been in discussions with the Proposed Placees with respect to the need to raise additional funding since around February 2024. However, it postponed the pricing and announcement of the Private Placement in order to allow for certain material developments regarding the Issuer's legal challenge to the revocation of its concessions merger to be completed and announced, in accordance with the rules of the TSX-V. These developments were announced on March 27, 2024. Following the issuance of the FFCTO, the Issuer halted discussions with the Proposed Placees regarding the Private Placement.

n. In respect of the Private Placement, the Issuer submitted a draft Form 4B -- Notice of Private Placement for consideration by the TSX-V on April 2, 2024, before the FFCTO was issued.

o. The Issuer has not entered into any subscription agreements with the Proposed Placees.

p. In respect of the proposed distribution to the Proposed Placees who are controlling shareholders, the Issuer intends to rely upon the accredited investor exemption in section 2.3 of National Instrument 45-106 Prospectus Exemptions (NI 45-106) and section 73.3 of the Securities Act (Ontario), and in respect of the proposed distributions to the other Proposed Placees, it intends to rely upon the employee, executive officer, director and consultant exemption in section 2.24 of NI 45-106.

q. The Private Placement will occur in British Columbia and the securities issued pursuant to the Private Placement will be distributed to investors located outside of Canada.

r. The Issuer requires the Private Placement to be completed before finalizing the audit of its annual financial statements. Given that the Issuer is in the exploration and evaluation stage of the mining life cycle and does not generate inflow from its operating activities, its ability to continue with its operation is contingent on its ability to obtain additional funding either through equity or debt to finance the development of its copper project in North Macedonia until its commercial production. The auditors (BDO LLP) have required that the Private Placement be completed and the Placement Funds received by the Issuer in order to get sufficient comfort on the Issuer's ability to continue as a going concern, before issuing their audit opinion. If the Issuer succeeds in receiving the Placement Funds, it will forthwith engage BDO LLP to issue the audit opinion on the Issuer's annual financial statements as required by applicable securities legislation, which will permit completion of the Required Filings.

s. The Issuer intends to prepare and file the Required Filings and pay the Outstanding Fees within a reasonable period of time following the completion of the Private Placement. The Issuer currently expects to be in a position to file the Required Filings by no later than May 8, 2024.

t. The Issuer is not currently involved in any discussions relating to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.

u. As noted above, the Issuer expects to raise approximately C$1.2 million from the Private Placement. A detailed breakdown of the intended use of the Placement Funds is below:

a. Salaries -- C$360,000

b. Legal and administrative fees -- C$204,000

c. Tax, audit, and accounting fees -- C$168,000

d. Office, administration and communication costs -- C$312,000

e. Project working capital -- C$168,000

v. As the Private Placement would involve a trade of securities and acts in furtherance of trades, the Private Placement cannot be completed without the Requested Relief.

w. The Private Placement will be completed in accordance with all applicable laws and the requirements of the TSX-V.

x. If the Issuer succeeds in receiving the Placement Funds, it reasonably anticipates having sufficient resources to bring its continuous disclosure obligations up to date, pay the Outstanding Fees and comply with all other continuous disclosure requirements. The Issuer anticipates that it will require approximately C$58,885 to engage its auditor and complete the audit of the annual financial statements. Once these are complete, the Issuer intends to file the Required Filings, thereby applying for a full revocation order.

y. Since the issuance of the FFCTO, there have not been any material changes in the business, operations or affairs of the Issuer that have not been disclosed to the public.

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

Order

4. The Principal Regulator is satisfied that a partial revocation of the FFCTO meets the test set out in the Legislation for the Principal Regulator to make the decision.

5. The decision of the Principal Regulator under the Legislation is that the FFCTO is partially revoked solely to permit the trades in securities of the Issuer (including for greater certainty, acts in furtherance of trades in securities of the Issuer) that are necessary for and are in connection with the Private Placement, provided that:

a. prior to completion of the Private Placement, the Issuer will:

i. provide to each subscriber under the Private Placement a copy of the FFCTO;

ii. provide to each subscriber under the Private Placement a copy of this partial revocation order;

iii. obtain from each subscriber under the Private Placement a signed and dated acknowledgement which clearly states that all of the Issuer's securities, including the securities issued in connection with the Private Placement, will remain subject to the FFCTO, and that the issuance of a partial revocation order does not guarantee the issuance of a full revocation order in the future;

b. the Issuer undertakes to make available a copy of the written acknowledgments referred to in paragraph 5(a)(iii) to staff of the Principal Regulator on request; and

c. this order will terminate on the earlier of (A) the closing of the Private Placement and (B) 60 days from the date hereof.

DATED this 25th, day of April 2024.

OSC File #: 2024/0184