Securities Law & Instruments


Headnote

Application by an issuer for a revocation of a cease trade order issued by the Commission – cease trade order issued because the issuer had failed to file certain continuous disclosure materials required by Ontario securities law – defaults subsequently remedied by bringing continuous disclosure filings up-to-date - cease trade order revoked.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am., ss. 127, 144.

IN THE MATTER OF
THE SECURITIES ACT,
R.S.O. 1990, CHAPTER S.5, AS AMENDED (THE ACT)

AND

IN THE MATTER OF
ENSSOLUTIONS GROUP INC.
(the Applicant)

ORDER
(Section 144)

                WHEREAS the Director of the Ontario Securities Commission (the “Commission”) issued a temporary cease trade order dated May 8, 2015 under paragraph 2 of subsection 127(1) and subsection 127(5) of the Act, and a permanent cease trade order dated May 20, 2015 under paragraph 2 of subsection 127(1) of the Act (together, the “Ontario Cease Trade Order”) ordering that all trading in the securities of the Applicant cease until the Ontario Cease Trade Order is revoked by the Director;

                AND WHEREAS the Ontario Cease Trade Order was made on the basis that the Applicant was in default of certain filing requirements under Ontario securities law as described in the Ontario Cease Trade Order;

                AND WHEREAS the Applicant has applied to the Commission pursuant to section 144 of the Act for a revocation of the Ontario Cease Trade Order;

                AND UPON the Applicant representing to the Commission that:

1.             The Applicant was incorporated as Chrysalis Capital V Corporation pursuant to the Canada Business Corporations Act on February 8, 2007. Chrysalis Capital V Corporation was a “capital pool company” pursuant to the policies of the TSX Venture Exchange (the “TSXV”). In order to effect its “qualifying transaction” pursuant to the policies of the TSXV, on October, 30, 2008, a wholly-owned subsidiary of Chrysalis Capital V Corporation amalgamated with Enssolutions Ltd. by virtue of a “three-cornered” amalgamation. As a result, Enssolutions Ltd. became a wholly-owned subsidiary of Chrysalis Capital V Corporation. Chrysalis Capital V Corporation subsequently changed its name to Enssolutions Group Inc.

2.             The Applicant’s authorized capital consists of an unlimited number of common shares and an unlimited number of preferred shares, issuable in series. The issued and outstanding capital of the Applicant is 95,835,366 common shares. There are no preferred shares issued or outstanding.

3.             The Applicant is a reporting issuer in the provinces of Ontario, Alberta and British Columbia (the “Reporting Jurisdictions”). The Applicant is not a reporting issuer in any other jurisdiction in Canada.

4.             The Applicant’s common shares are listed for trading on the NEX Board of the TSXV under the symbol “ENV.H”. The TSXV halted trading of the Applicant’s shares on May 8, 2015. The Applicant’s common shares are also quoted for trading on the OTC Pink marketplace in the United States of America under the symbol “NSLSF”. The Applicant’s securities are not listed or quoted on any other exchange or market in Canada or elsewhere as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

5.             The Ontario Cease Trade Order was issued as a result of the Applicant’s failure to file audited annual financial statements for the year ended December 31, 2014, management’s discussion and analysis (“MD&A”) relating to the audited annual financial statements for the year ended December 31, 2014 and certificates of the foregoing filings (collectively, the “Required Documents”) as required by National Instrument 52-109 Certification of Disclosure in Issuers’ Annual and Interim Filings (“NI 52-109”).

6.             The Applicant is also subject to similar cease trade orders issued by the British Columbia Securities Commission on May 11, 2015 (the “BC CTO”), and by the Alberta Securities Commission on August 28, 2015 (the “AB CTO”), for failure to file the Required Documents and certain other documents. The Applicant is concurrently applying for revocations of the BC CTO and AB CTO.

7.             From the date of the Ontario Cease Trade Order up to and including May 31, 2017, the Applicant accumulated debt in the amount of U.S. $2,550,000 (the “Shareholder Loans”) to David C. Lincoln (the “Major Shareholder”), a shareholder, officer, director and creditor of the Applicant, under certain lines of credit and certain interest-bearing promissory notes issued by the Applicant to the Major Shareholder (the “Promissory Notes”). The Applicant used the majority of the advances made under the Shareholder Loan during this period to bring its continuous disclosure record up to date and to meet its operational and administrative expenses. The Major Shareholder is a U.S. resident and an “accredited investor” pursuant to Rule 501(a) of Regulation D under the United States Securities Act of 1933, as amended. The Applicant is of the view that the funds advanced to the Applicant under the Shareholder Loan which were evidenced by the Promissory Notes may have constituted the distribution of a security by the Applicant in contravention of the Ontario Cease Trade Order.

8.             Except as provided in paragraph 7 above, there have been no changes in the number of the Applicant’s securities, including debt securities, issued and outstanding since the date of the Ontario Cease Trade Order.

9.             On November 4, 2015, the Applicant filed the Required Documents with the Commission.

10.          On December 10, 2015, the Applicant filed interim financial statements, MD&A and corresponding certificates as to interim filings as required by NI 52-109 for the three-month period ended March 31, 2015, the three and six-month periods ended June 30, 2015 and the three and nine-month periods ended September 30, 2015.

11.          On April 29, 2016, the Applicant filed audited annual financial statements for the year ended December 31, 2015, MD&A relating to the audited annual financial statements for the year ended December 31, 2015 and certificates of the foregoing filings as required by NI 52-109.

12.          On May 19, 2016, the Applicant filed interim financial statements, MD&A – Quarterly Highlights and corresponding certificates as to interim filings as required by NI 52-109 for the three-month period ended March 31, 2016. On June 14, 2016, the Applicant refiled interim financial statements, MD&A – Quarterly Highlights and corresponding certificates as to interim filings as required by NI 52-109 for the three-month period ended March 31, 2016.

13.          On August 26, 2016, the Applicant filed interim financial statements, MD&A – Quarterly Highlights and corresponding certificates as to interim filings as required by NI 52-109 for the three and six-month periods ended June 30, 2016.

14.          On November 18, 2016, the Applicant filed interim financial statements, MD&A – Quarterly Highlights and corresponding certificates as to interim filings as required by NI 52-109 for the three and nine-month periods ended September 30, 2016.

15.          On March 24, 2017, the Applicant refiled the MD&A and corresponding certificates as required by NI 52-109 relating to the audited annual financial statements for the year ended December 31, 2015.

16.          On April 21, 2017, the Applicant filed audited annual financial statements for the year ended December 31, 2016, MD&A relating to the audited annual financial statements for the year ended December 31, 2016 and certificates of the foregoing filings as required by NI 52-109.

17.          On January 20, 2016, the Applicant held its annual and special meeting of shareholders (the “January Shareholders Meeting”) for the year ended December 31, 2014. A management’s information circular dated December 16, 2015 was filed and sent to shareholders. At the January Shareholders Meeting, the following matters were presented and approved:

(a)           John W. Allen, James C. Griffths, David C. Lincoln and Mark A. Young were elected as directors for the ensuing year.

(b)           Farber Hass Hurley LLP, Certified Public Accountants, was appointed auditors of the Applicant for the ensuing year.

(c)           The proposed consolidation of all of the Applicant’s issued and outstanding common shares on the basis of a ratio within the range of one post-consolidation common share for every five pre-consolidation common shares to one post-consolidation common share for every 50 pre-consolidation common shares (the “Consolidation”), with the ratio to be selected and implemented by the Applicant’s board of directors, if at all, at any time prior to December 31, 2016, was approved. The Consolidation was not effected by the Applicant.

(d)           The Applicant’s 10% rolling stock option plan was approved.

18.          On May 26, 2016, the Applicant held its annual and special meeting of shareholders (the “May Shareholders Meeting”) for the year ended December 31, 2015. A management’s information circular dated April 22, 2016 was filed and sent to shareholders. At the May Shareholders Meeting, the following matters were presented and approved:

(a)           John W. Allen, James C. Griffiths, David C. Lincoln, Cornelia H. V. Molson and Mark A. Young were elected as directors for the ensuing year.

(b)           Farber Hass Hurley LLP, Certified Public Accountants, was appointed auditors of the Applicant for the ensuing year.

(c)           The Applicant’s 10% rolling stock option plan was approved.

19.          On May 17, 2017, the Applicant held its annual and special meeting of shareholders (the “2017 Shareholders Meeting”) for the year ended December 31, 2016. A management’s information circular dated April 17, 2017 was filed and sent to shareholders. At the 2017 Shareholders Meeting, the following matters were presented and approved:

(a)           John W. Allen, James C. Griffiths, David C. Lincoln, Cornelia H. Molson, James D. Staudohar and Mark A. Young were elected as directors for the ensuing year.

(b)           Farber Hass Hurley LLP, Certified Public Accountants, was appointed auditors of the Applicant for the ensuing year.

(c)           The proposed consolidation of all of the Applicant’s issued and outstanding common shares on the basis of a ratio within the range of one post-consolidation common share for every five pre-consolidation common shares to one post-consolidation common share for every 25 pre-consolidation common shares (the “Renewed Consolidation”), with the ratio to be selected and implemented by the Applicant’s board of directors, if at all, at any time prior to December 31, 2017, was approved. The Renewed Consolidation has not been effected by the Applicant and remains subject to receipt of all necessary regulatory approvals, including approval of the TSXV and the revocation of the Ontario Cease Trade Order.

(d)           The Applicant’s 10% rolling stock option plan was approved.

20.          The Applicant has also issued and filed on SEDAR certain clarifying press releases as requested by the Commission with respect to its officers and directors, and the potential sale of its U.S. subsidiary.

21.          As a result, the Applicant has filed all outstanding continuous disclosure documents that are required to be filed under Ontario securities law.

22.          Subject to paragraph 7 above, the Applicant has not contravened the Ontario Cease Trade Order. The Consolidation and Renewed Consolidation may have been acts in furtherance of a trade in contravention the Ontario Cease Trade Order.

23.          The Applicant has paid all outstanding activity, participation and late filing fees that are required to be paid.

24.          The Applicant’s SEDAR profile and SEDI issuer profile supplement are current and accurate.

25.          The Applicant’s current directors are John W. Allen, James C. Griffths, David C. Lincoln, Cornelia H. V. Molson, James D. Staudohar and Mark A. Young. The Applicant’s current officers are James D. Staudohar (President and Chief Executive Officer), Charles Mathews (Chief Financial Officer), Mark A. Young (Chairman) and David C. Lincoln (Vice-Chairman).

26.          To the knowledge of the directors and management of the Applicant, as of the date hereof, David C. Lincoln who currently serves as a director of the Applicant beneficially owns or exercises control or direction over 79,217,033 Common Shares representing 82.7% of the Common Shares of the Issuer and is the only shareholder of the Applicant who beneficially owns, directly or indirectly, or exercises control or direction over Common Shares carrying more than 10% of the voting rights attaching to the Common Shares of the Applicant.

27.          The Applicant is not considering nor is it involved in any discussions related to a reverse take-over, merger, amalgamation or other form of combination or transaction similar to any of the foregoing.

28.          Upon the issuance of this revocation order, the Applicant will issue a news release announcing the revocation of the Ontario Cease Trade Order. The Applicant will concurrently file the news release and a material change report regarding the revocation of the Ontario Cease Trade Order on SEDAR.

                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 Ontario Cease Trade Order;

                IT IS ORDERED, pursuant to section 144 of the Act, that the Ontario Cease Trade Order is hereby revoked.

                DATED at Toronto this 19th day of June, 2017.

“Michael Balter”
Manager, Corporate Finance
Ontario Securities Commission