Citation:
Section 147.1(1), Order No. 7687 The Securities Act (Manitoba)
Date: February 18, 2025
Delta 9 Cannabis Inc. PARTIAL REVOCATION ORDER Under the securities legislation of Manitoba (Legislation) Background 1. Delta 9 Cannabis Inc. (the Issuer) is subject to a failure-to-file cease trade order (the FFCTO) issued by The Manitoba Securities Commission (the Principal Regulator) on October 23, 2024.
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The Issuer has applied to the Principal Regulator 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 (British Columbia) on May 16, 2001.
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The Issuer is a reporting issuer in each of the following Canadian Provinces and Territories: Alberta, British Columbia, Manitoba, New Brunswick, Newfoundland and Labrador, Northwest Territories, Nova Scotia, Nunavut, Ontario, Prince Edward Island, Québec, Saskatchewan and Yukon (the Reporting Jurisdictions).
The Issuer’s registered and head office is located at PO Box 68096 Osborne Village, Winnipeg, Manitoba, R3L 2V9, Canada.
The Issuer is a vertically integrated cannabis company providing cannabis products through wholesale and retail sales channels. The Issuer also sells cannabis grow pods and operates a licensed cannabis production facility through its subsidiary, Delta 9 Bio-Tech Inc. (Delta 9 Bio-Tech).
The authorized capital of the Issuer consists of an unlimited number of common shares (the Common Shares). As at the date of this Application, there are approximately 365,344,259 Common Shares issued and outstanding. The Issuer also has approximately 8,645,744 restricted share units, each of entitle the holder
Securities Commission - The Manitoba Financial Services Agency 500-400 St. Mary Avenue, Winnipeg, Manitoba R3C 4K5 Canada
204-945-2548
themfsa.ca
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thereof to acquire one Common Share. The Issuer has no other outstanding securities (including debt securities).
The Common Shares were listed on the Toronto Stock Exchange (the TSX) under the symbol “DN”. The Common Shares were delisted from the TSX on August 22, 2024 as a result of the failure of the Issuer to meet the continued listing requirements of the TSX.
The Common Shares are also quoted and currently halted for trading on the OTCQX in the United States under the symbol “DLTNF”.
Following completion of the Transaction, defined below, the Issuer intends to apply for a full revocation of the FFCTO and an order to cease to be a reporting issuer in the Reporting Jurisdictions.
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) (ii)
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interim financial statements for the period ended June 30, 2024; management’s discussion and analysis relating to the interim financial statements for the period ended June 30, 2024; and
certification of the foregoing filings as required by National Instrument 52- 109 Certification of Disclosure in Issuers’ Annual and Interim Filings (NI 52- 109).
(the Initial Unfiled Documents) Following the issuance of the FFCTO, the Issuer failed to file the following continuous disclosure materials as required by applicable Canadian securities laws:
(i) (ii)
interim financial statements for the period ended September 30, 2024; management’s discussion and analysis relating to the interim financial statements for the period ended September 30, 2024; and
(iii) certification of the foregoing filings as required by NI 52-109. (together with Initial Unfiled Documents, the Unfiled Documents) In light of ongoing financial difficulties, the Issuer and and its subsidiaries, Delta 9 Logistics Inc., Delta 9 Bio-Tech, Delta 9 Lifestyle Cannabis Clinic Inc. and Delta 9 Cannabis Store Inc. (together with the Issuer, collectively, the Delta Group) announced that the Delta Group had commenced proceedings (the CCAA Proceedings) and filed for creditor protection under the Companies’ Creditors Arrangement Act (CCAA) and received an order (the Initial Order) for creditor protection under the CCAA from the Court of King’s Bench for Alberta (the Court). The Issuer also entered into a term sheet with 2759054 Ontario Inc. o/a The FIKA Company (the Purchaser) as plan sponsor to the CCAA Proceedings whereby the Purchaser proposed to acquire the cannabis retail store business and the logistics and distribution business of the Company, while facilitating a sale and investment solicitation process (the SISP) for the assets of the licensed cannabis production
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business of Delta 9 Bio-Tech, in exchange for equity of the Purchaser and the satisfaction of certain secured debt of the Issuer (the Transaction).
Pursuant to the Initial Order, the Court, inter alia, appointed Alvarez & Marsal Canada Inc. as monitor (in such capacity, the Monitor) of the Delta Group under the CCAA Proceedings.
On July 24, 2024 the Court granted an order authorizing, inter alia, the Monitor to conduct, with the assistance of the Issuer, the SISP, intended to solicit interest in the opportunity for a sale of or investment in all or part of Delta 9 Bio-Tech.
On December 2, 2024, the Court approved a plan of arrangement under the CCAA (the Plan of Arrangement) with respect to the Transaction, which contemplates, among other things, (i) the subscription by the Purchaser for certain Common Shares of the Issuer (the Purchased Shares) in exchange for the payment and assumption, by the Purchaser, of, among other things, certain of the Delta Group’s secured debt, the payment of certain amounts to certain of the Delta Group’s unsecured creditors, and the provision of equity in the Plan Sponsor to certain of the Delta Group’s unsecured creditors; and (ii) the cancellation of all Common Shares and other securities of the Issuer other than the Purchased Shares (the Arrangement Transaction).
On December 28, 2024, the Issuer and Simply Solventless Concentrates Ltd. (the Bio-Tech Purchaser), entered into a share purchase agreement (as amended, the Bio-Tech Purchase Agreement), pursuant to which the Bio-Tech Purchaser agreed to purchase the shares of Delta 9 Bio-Tech (the Purchased Bio-Tech Shares), a wholly-owned subsidiary of the Issuer, in exchange for cash consideration of $3.0 million (the Bio-Tech Transaction).
The Court waived any requirements for shareholder approval under applicable law in connection with the Arrangement Transaction.
In connection with carrying out the SISP and approving the Plan of Arrangement, the Issuer has engaged in certain acts in furtherance of trades in the securities of the Issuer (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 or the rules and regulations made pursuant thereto.
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 Arrangement Transaction and the Bio-Tech Transaction, materials for which are available through the Monitor and posted on the Monitor’s website.
As the Arrangement Transaction will involve trades in securities of the Issuer, the closing of the Arrangement Transaction is conditional on the partial revocation of the FFCTO.
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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.
Following completion of the Arrangement Transaction, all securities of the Issuer will remain subject to the FFCTO until a full revocation of the FFCTO is granted.
Other than the Arrangement 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.
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 Arrangement Transaction, provided that:
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prior to completion of the Arrangement Transaction, the Purchaser 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 the Purchaser in writing (the Acknowledgement), that all of the Issuer’s securities, including the securities issued in connection with the Arrangement 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;
the Issuer undertakes to make available a copy of the Acknowledgement to staff of the Principal Regulator upon request; and
this order will terminate on the earlier of: (i) the completion of the Arrangement Transaction; and (ii) 90 days from the date hereof.
“Patrick Weeks” Patrick Weeks, Deputy Director Manitoba Securities Commission