First Choice Products Inc. – s. 144
Headnote
National Policy 12-202 Revocation of Certain Cease Trade Orders and subsection 127(1) of the Securities Act (Ontario) -- routine application for a full revocation of a cease trade order -- relief granted.
Statutes Cited
Securities Act, R.S.O. 1990, c. S.5, as am.
IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED
(the Act)
AND
IN THE MATTER OF
FIRST CHOICE PRODUCTS INC.
ORDER
(Section 144 of the Act)
WHEREAS the securities of First Choice Products Inc. (the Issuer) are subject to a cease trade order (the ON Cease Trade Order) dated February 22, 2013, issued by the Director of the Ontario Securities Commission (the Commission) pursuant to paragraph 2 of subsection 127(1) of the Securities Act (Ontario) (the Act), directing that all trading in the securities of the Issuer cease until the order is revoked by the Director.
AND WHEREAS the ON Cease Trade Order was made on the basis that the Issuer was in default of certain filing requirements under the Act as described in the ON Cease Trade Order and below;
AND WHEREAS the Issuer has applied to the Commission pursuant to section 144 of the Act for a full revocation of the ON Cease Trade Order;
AND UPON the Issuer having represented to the Commission that:
1. The Issuer was incorporated under the name "First Choice Products Inc." on January 12, 1989, under the Companies Act (Alberta) and continued into the Province of British Columbia on April 4, 2014.
2. The Issuer's registered office and principal place of business is located at Simpson Tower, 401 Bay Street, Suite 2100, Mailbox #55, Toronto, Ontario, M5H 2Y5.
3. The Issuer is a reporting issuer under the securities legislation of the province of Ontario, British Columbia, and Alberta (the Reporting Jurisdictions). The Issuer is not a reporting issuer in any other jurisdiction in Canada. The Issuer's principal regulator is the Commission.
4. The Issuer's authorized capital consists of 200,000,000 common shares (the Common Shares), of which approximately 110,173,370 Common Shares are issued and outstanding and 118 unsecured convertible debentures in the principal amount of $188,000 convertible into Common Shares at a price of $0.00190 per Common Share (as defined in item 20).
5. Other than the issued and outstanding Common Shares and Unsecured Debentures, the Issuer has no other securities issued and outstanding.
6. The Issuer's securities are not listed, quoted, or traded on any exchange, marketplace or other facility in Canada or elsewhere. Previously, the Issuer was listed on the CNSX and OTC Market, under the trading symbols: ESX; and FCIZF respectively. On January 6, 2014, the CNSX changed its name to the Canadian Securities Exchange (the CSE). On May 2, 2016, trading in the securities of the Issuer was halted. The Issuer was voluntarily delisted from the CSE on June 30, 2016.
7. The Cease Trade Order was issued as a result of the Issuer's failure to file the following continuous disclosure materials as required by the Act:
(i) comparative audited annual financial statements for the year ended September 30, 2012;
(ii) management's discussion and analysis (MD&A) relating to the comparative audited annual financial statements for the year ended September 30, 2012; and
(iii) the certification of the foregoing filings as required by National Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (NI 52-109 Certificates) (collectively, the Unfiled Documents).
8. The Issuer's failure to file the Unfiled Documents was as a result of the Issuer's financial difficulties.
9. The Issuer is also subject to a cease trade order dated February 4, 2013 issued by the British Columbia Securities Commission (the BCSC), pursuant to section 164(1) of the Securities Act (British Columbia (the BC Act), directing that all trading in the securities of the Issuer cease until the order is revoked by the Executive Director (the BC Cease Trade Order). In addition, the Issuer's securities are also subject to a cease trade order dated May 15, 2013 issued by the Alberta Securities Commission (the ASC), pursuant to paragraph 2, subsection 172(1) of the Securities Act (Alberta) (the Alberta Act), directing that all trading in the securities of the Issuer cease until the order is revoked or varied (the "AB Cease Trade Order", together with the BC Cease Trade Order and ON Cease Trade Order, are collectively referred to as the Cease Trade Orders).
10. The Issuer subsequently failed to file other continuous disclosure documents with the Commission within the prescribed timeframe in accordance with the requirements of the Act, including the following:
(a) all audited financial statements, accompanying MD&A and related NI 52-109 Certificates for the years ended September 30, 2012 to September 30, 2022;
(b) all unaudited interim financial statements, accompanying MD&A and related NI 52-109 Certificates for the interim periods ended December 30, 2012 to June 30, 2023;
(c) disclosure required by Form 51-102F6V Statement of Executive Compensation -- Venture Issuers (Form 51-102F6V) for the years ended September 30, 2012 to September 30, 2022;
(d) disclosure required by Form 52-110F2 Disclosure by Venture Issuers (Form 52-110F2), for the years ended September 30, 2012 to September 30, 2022; and
(e) disclosure required by Form 58-101F2 Corporate Governance Disclosure (Venture Issuers) (Form 58-101F2), for the years ended September 30, 2012 to September 30, 2022
(together with the Unfiled Documents, the Unfiled Continuous Disclosure).
11. Since the issuance of the Cease Trade Orders, the Issuer has filed the following continuous disclosure documents with the Commission:
(a) audited financial statements, accompanying MD&A and related NI 52-109 Certificates for the years ended September 30, 2021, and September 30, 2022;
(b) unaudited interim financial statements, accompanying MD&A and related NI 52-109 Certificates for the interim periods ended December 31, 2022, March 31, 2023, and June 30, 2023;
(c) disclosure required by Form 51-102F6V for the years ended September 30, 2021, and September 30, 2022;
(d) disclosure required by Form 52-110F2, for the years ended September 30, 2021 and September 30, 2022; and
(e) disclosure required by Form 58-101F2, for the years ended September 30, 2021 and September 30, 2022.
12. The Issuer has not filed the following:
(a) audited financial statements, accompanying MD&A and related NI 52-109 Certificates for the years ended September 30, 2012 to September 30, 2020;
(b) unaudited interim financial statements, accompanying MD&A and related NI 52-109 Certificates for the interim periods ended June30, 2012 to June 30, 2020;
(c) disclosure required by Form 51-102F6V for the years ended September 30, 2012 to September 30, 2020;
(d) disclosure required by Form 52-110F2, for the years ended September 30, 2012 to September 30, 2020; and
(e) disclosure required by Form 58-101F2, for the years ended September 30, 2012 to September 30, 2020. (collectively, the Outstanding Filings).
13. The Issuer has filed with the Commission all continuous disclosure that it is required to file under the Act, except for the Outstanding Filings and any other continuous disclosure that the Commission elected not to require as contemplated under sections 6 and 7 of National Policy 12-202 Revocation of a Compliance-related Cease Trade Order (NP 12-202).
14. During the period when the Cease Trade Orders were in effect and between January to March 14, 2014, the then directors of the Issuer distributed Common Shares to 19 investors for proceeds of $105,500 under a private placement. These distributions breached the BC Cease Trade Order, prohibiting any person from trading the Issuer's securities (the BC CTO Breach). The BC Cease Trade Order remains in force and a settlement was reached between the BCSC and such directors on March 16, 2017, under the Order and Settlement Agreements: 2017 BCSECCOM 95, 2017 BCSECCOM 94. Although Common Shares were not issued by the Issuer to the investors, the Issuer acknowledges that this amount remains outstanding and owed to such investors. These distributions breached the ON Cease Trade Order. The distributions also breached the AB Cease Trade Order pursuant to statutory reciprocal order provisions under section 198.1 of the Securities Act (Alberta).
15. Except for the failure to file the Outstanding Filings and the BC CTO Breach, the Issuer (i) is up-to-date with all of its other continuous disclosure obligations; (ii) is not in default of any of its obligations under the Cease Trade Orders; and (iii) is not in default of any requirements under the Act or the rules and regulations made pursuant thereto.
16. As of the date hereof, the Issuer has paid all outstanding activity, participation and late filing fees that are required to be paid to the Commission and has filed all forms associated with such payments.
17. As of the date hereof, the Issuer's profiles on the System for Electronic Document Analysis and Retrieval Plus (SEDAR+) and the issuer profile supplement on the System for Electronic Disclosure by Insiders (SEDI) are current and accurate.
18. On March 21, 2022, Dave Martens resigned as the sole director and officer of the Issuer. Effective March 21, 2022, Gregory M. Prekupec and Jason Atkinson were appointed to serve as directors of the Issuer to fill the vacancy created by Mr. Marten's resignation. Additionally, Mr. Prekupec was appointed as Chief Executive Officer and Mr. Atkinson was appointed Chief Financial Officer. On June 22, 2022, Daniel Nauth was appointed as director of the Issuer. Effective August 15, 2022, Mr. Atkinson tendered his resignation as Chief Financial Officer of the Issuer, and was subsequently replaced by Mr. Prekupec, the Issuer's current Chief Executive Officer and director. Mr. Atkinson continues to serve as a Director of the Issuer. Other than the aforementioned appointments and resignations (the Appointments and Resignations), there have been no changes to the Issuer's directors or executive officers since August 15, 2022.
19. On May 8, 2023, the Issuer received a partial revocation of the Cease Trade Orders to permit the Private Placement (as defined in item 20).
20. On July 10, 2023, the Issuer completed a non-brokered private placement of Convertible Debentures to raise up to $118,000 (the Private Placement) and the issuance of Common Shares to settle $32,809 in debt (the Debt Conversion) owed to Gregory Prekupec (Chief Executive Officer, Chief Financial Officer and director of the Issuer) and Jason Atkinson (a director of the Issuer). The Private Placement offering consisted of unsecured convertible debentures (the Unsecured Debentures) for gross proceeds of $188,000, with each Convertible Debenture issued in the principal amount of $1,000, bearing interest at an annual rate of 5% payable in arrears in equal installments semi-annually, and maturing on the date that is 24 months from the date of issuance (the Maturity Date). The principal sum of the Unsecured Debentures, or any portion thereof, will be convertible at the holder's option into Common Shares at a price of $0.00190 per Common Share. The Unsecured Debentures may only be converted after the issuance of a full revocation order of the Cease Trade Orders. The Private Placement and Debt Conversion complied with the accredited investor prospectus exemption contained in section 73.3 of the Act and section 2.3 of the National Instrument 45-106 Prospectus Exemptions.
21. Since the issuance of the Cease Trade Orders, except for the Appointments and Resignations and the Private Placement, there have been no material changes in the business, operations or affairs of the Issuer which have not been disclosed by news release and/or material change report and filed on SEDAR+.
22. Other than the Cease Trade Orders, the Issuer has not previously been subject to a cease trade order issued by any securities regulatory authority.
23. The Issuer has ceased to carry on an active business and, while it may consider identifying and evaluating suitable assets or businesses to acquire or merge with, as noted in the Issuer's news release on July 10, 2023, with a view to maximize value for shareholders, it currently has no such plans.
24. The Issuer has given the Commission a written undertaking that:
(a) the Issuer will hold an annual meeting of shareholders within three months after the date on which the Cease Trade Orders are revoked; and
(b) the Issuer will not complete
(i) a restructuring transaction involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada,
(ii) a reverse takeover with a reverse takeover acquirer that has a direct or indirect, existing or proposed, material underlying business which is not located in Canada, or
(iii) a significant acquisition involving, directly or indirectly, an existing or proposed, material underlying business which is not located in Canada, unless
(1) the Issuer files a preliminary prospectus and a final prospectus with the Commission and obtains receipts for the preliminary and final prospectus from the Director under the Act,
(2) the Issuer files or delivers with the preliminary prospectus and the final prospectus the documents required by Part 9 of National Instrument 41-101 General Prospectus Requirements (NI 41-101) including a completed personal information form and authorization in the form set out in Appendix A of NI 41-101 for each current and incoming director, executive officer and promoter of the Issuer, and
(3) the preliminary prospectus and final prospectus containing the information required by applicable securities legislation, including the information required for a probable restructuring transaction, reverse takeover or significant acquisition (as applicable).
25. Upon the revocation of the ON Cease Trade Order, the Issuer will issue a news release and concurrently file a material change report on SEDAR+ announcing the revocation of the Cease Trade Order and outlining the Issuer's future plans.
AND UPON considering the Application and the recommendation of the staff of the Commission;
AND UPON the Director being satisfied that it would not be prejudicial to the public interest to revoke the ON Cease Trade Order;
IT IS ORDERED pursuant to section 144 of the Act that the ON Cease Trade Order is revoked.
DATED at Toronto this 29th day of November 2023.
"David Surat"
Manager, Corporate Finance
Ontario Securities Commission
OSC File #: 2023/0322