Fire & Flower Holdings Corp. – s. 144

Headnote

National Policy 11-207 Failure-to-File Cease Trade Orders and Revocations in Multiple Jurisdictions -- application for partial revocation of failure-to-file cease trade order -- issuer cease traded due to failure to file with the Commission interim 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 trades of securities of the issuer in connection with a court-approved transaction under the Companies' Creditors Arrangement Act -- 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 FIRE & FLOWER HOLDINGS CORP.

ORDER (Section 144)

BACKGROUND

1. Fire & Flower Holdings Corp. (the Issuer) is subject to a failure-to-file cease trade order (the FFCTO) issued by the Ontario Securities Commission (the Principal Regulator) on August 28, 2023.

2. The Issuer has applied to the Principal Regulator pursuant to section 144 of the Securities Act (Ontario) for a partial revocation order of the FFCTO.

INTERPRETATION

3. Terms defined in National Instrument 14-101 Definitions or 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

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

a. The Issuer was incorporated under the Business Corporations Act (Ontario) on December 12, 2017, and continued under the Canada Business Corporations Act on February 12, 2019.

b. The Issuer is a reporting issuer in each of Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan, and Yukon.

c. The Issuer's registered and head office is located at 77 King St. West, Suite 400, Toronto, Ontario, Canada.

d. The Issuer is a technology-powered, adult-use cannabis retailer with retail locations in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, and Yukon.

e. The authorized capital of the Issuer consists of an unlimited number of common shares (the Common Shares). As at the date hereof, there are approximately 45,154,000 Common Shares issued and outstanding. The Issuer also has approximately 1,935,529 options and 17,796,284 Series C Warrant units outstanding. The Issuer has no other outstanding securities (including debt securities).

f. The Common Shares were listed on the Toronto Stock Exchange (the TSX) under the symbol "FAF". The Common Shares were delisted from the TSX effective as of the close of markets on July 14, 2023, as a result of the failure of the Issuer to meet the continued listing requirements of the TSX. The Common Shares are also quoted for trading on the OTCQX in the United States under the symbol "FFLWF". The Issuer intends to delist the Common Shares from the OTCQX following completion of the Transaction (as hereinafter defined).

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

(i) interim financial statements for the period ended June 30, 2023;

(ii) management's discussion and analysis relating to the interim financial statements for the period ended June 30, 2023; and

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

h. In light of ongoing financial difficulties, the Issuer and its subsidiaries (the F&F Group) filed for creditor protection under the Companies' Creditors Arrangement Act (the CCAA) and received an order (the Initial Order) for creditor protection under the CCAA from the Ontario Superior Court of Justice (Commercial List) (the Court) on June 6, 2023 (the CCAA Proceedings).

i. Pursuant to the Initial Order, the Court, inter alia, appointed FTI Consulting Canada Inc. as monitor (in such capacity, the Monitor) of the F&F Group under the CCAA Proceedings and authorized the Issuer to obtain a debtor-in-possession loan from 2707031 Ontario Inc. in the amount of $9,800,000 in order to fund the CCAA Proceedings and other short-term working capital requirements of the F&F Group.

j. On June 21, 2023, the Court granted an order (the SISP Order) authorizing the Monitor to conduct, with the assistance of the Issuer, a sale and investment solicitation process (the SISP) intended to solicit interest in the opportunity for a sale of or investment in all or part of the Issuer's assets and business operations.

k. On August 17, 2023, the Issuer announced that the bid by 2759054 Ontario Inc., operating as FIKA Cannabis (FIKA), had been designated as the successful bid under the SISP (the Successful Bid) and that in accordance with the SISP Order the Issuer would seek Court approval of the Successful Bid and authority to consummate the transactions provided for therein.

l. On August 29, 2023, the Court granted an order under the CCAA (the Sale Approval and Vesting Order) pursuant to which, inter alia, the Court (i) approved the subscription agreement, dated August 17, 2023 with 2759054 Ontario Inc. (the Subscription Agreement) and the transaction (the Transaction) contemplated therein, including the sale and issuance by the Issuer of 1,000,000,000 Class "A" Common shares (the Purchased Shares) to FIKA for the aggregate purchase price of $36,000,000, (ii) authorized the transfer and vesting of all of F&F Group's right, title and interest in certain excluded assets and excluded liabilities to "Residual Co.", (iii) authorized and directed the Issuer to issue the Purchased Shares to FIKA, and vest in FIKA, all right title and interest in and to the Purchased Shares, (iv) authorized the termination and cancellation all capital shares, capital stock, partnership, membership, joint venture or other ownership or equity interest, participation or securities (whether voting or nonvoting, whether preferred, common or otherwise, and including share appreciation, contingent interest or similar rights) of the Issuer other than the Purchased Shares, and (v) approved a claims process pursuant to which claimants may file claims against the F&F Group.

m. Pursuant to the Sale Approval and Vesting Order, having been advised of the provisions of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions relating to the requirement for "minority" shareholder approval in certain circumstances, the Court ordered that no meeting of shareholders or other holders of equity interests of the F&F Group is required to be held in respect of the Transaction.

n. In connection with carrying out the SISP Order and obtaining the Sale Approval and Vesting Order, the Issuer has engaged in certain acts in furtherance of trades in the securities of the Issuer, including its entry into the Subscription Agreement (the Acts), which Acts were taken at the direction of, and with the approval of, and under the supervision of, the Court. Except for the Acts and the Unfiled Documents, the Issuer is not in default of any requirements of the FFCTO, the securities legislation of any jurisdiction in which the Issuer is a reporting issuer (the Legislation), or the rules and regulations made pursuant thereto.

o. 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 apart from matters relating to the CCAA Proceedings and the Transaction.

p. As the Transaction will involve trades in securities of the Issuer, the closing of the Transaction is conditional on the partial revocation of the FFCTO.

q. The issuance of the Purchased Shares by the Issuer will occur in Ontario.

r. The Purchased Shares will not be qualified for distribution to the public under any applicable Canadian securities laws and will be subject to restrictions on transfer in Canada.

s. Following completion of the Transaction, all securities of the Issuer will remain subject to the FFCTO until a full revocation of the FFCTO is granted.

t. Other than the Transaction, no further trading in securities of the Issuer will be made by the Issuer unless further relief from the FFCTO is sought by the Issuer or a full revocation of the FFCTO is granted.

u. Following completion of the Transaction, the Issuer intends to apply for a full revocation of the FFCTO and a cease to be a reporting issuer order.

ORDER

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

6. 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 Transaction, provided that:

a. prior to completion of the Transaction, FIKA will receive:

(i) a copy of the FFCTO;

(ii) a copy of this order; and

(iii) written notice from the Issuer, to be acknowledged by FIKA in writing (the Acknowledgement), that all of the Issuer's securities, including the securities issued in connection with the Transaction, will remain subject to the FFCTO unless further relief is granted or until a full revocation order is granted, the issuance of which is not certain and that the Issuer intends to apply to cease to be a reporting issuer immediately following closing of the Transaction;

b. the Issuer undertakes to make available a copy of the Acknowledgement to staff of the Principal Regulator upon request; and

c. this order will terminate on the earlier of:

(i) the completion of the Transaction; and

(ii) 60 days from the date hereof.

DATED this 6th day of September, 2023.

OSC File #: 2023/0397