March 8, 2013
Headnote National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions - issuer made acquisition that met the profit and loss test under Part 8 of NI 51-102, thus requiring the filing of a business acquisition report - issuer subsequently, and before the date the business acquisition report is required to be filed, disposed of the business – issuer granted relief from requirement to file pro forma financial statements Applicable Legislative Provisions National Instrument 51-102 Continuous Disclosure Obligations, Part 8 and s. 13.1
In the Matter of
the Securities Legislation of
Ontario
(the “Jurisdiction”)
and
In the Matter of
the Process for Exemptive Relief
Applications in Multiple Jurisdictions
and
In the Matter of
Premier Gold Mines Limited
(the “Filer”)
Decision
Background
The principal regulator in the Jurisdiction has received an application from the Filer for a decision under the securities legislation of the Jurisdiction of the principal regulator (the “Legislation”) for exemptive relief pursuant to Part 13 of National Instrument 51-102 – Continuous Disclosure Obligations (“NI 51-102”) from the requirement to include pro forma financial statements in the business acquisition report that is required to be filed under Part 8 of NI 51-102 (a “BAR”) in respect of the December 4, 2012 transaction between Bridgeport Ventures Inc. (“Bridgeport”) the Filer and Premier Royalty Corporation (“Royalty Subco”).
Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):
(a) the Ontario Securities Commission is the principal regulator for this application, and
(b) the Filer has provided notice that section 4.7(1) of Multilateral Instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in British Columbia, Alberta, Saskatchewan, Manitoba, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador.
Interpretation
Terms defined in National Instrument 14-101 – Definitions and MI 11-102 have the same meaning if used in this decision, unless otherwise defined.
Representations
This decision is based on the following facts represented by the Filer:
The Filer is a corporation established under the laws of the Province of Ontario and its head office is located in Thunder Bay, Ontario.
The Filer is a reporting issuer under the securities legislation in each of the provinces of Canada.
The common shares of Premier Gold are listed for trading on the Toronto Stock Exchange under the trading symbol “PG”.
On December 4, 2012, Bridgeport acquired the Filer’s wholly-owned subsidiary, Royalty Subco, by way of a plan of arrangement pursuant to the Business Corporations Act (Ontario) (the "Arrangement"). The common shares of Bridgeport were consolidated on the basis of one post-consolidation Bridgeport common share for every four (4) existing Bridgeport common shares. Bridgeport then issued 18,976,350 post-consolidation Bridgeport common shares ("Resulting Issuer Shares") to the Filer. In connection with the Arrangement, Bridgeport's name was changed to "Premier Royalty Inc." (the "Resulting Issuer").
The Filer had previously provided a bridge loan facility (the "Bridge Loan") to Royalty Subco in connection with the acquisition by Royalty Subco of certain royalties. In addition to stipulated cash payback provisions at 8% interest ($8 million on closing of the Arrangement and the balance within one year), the Filer had a one-time right to effectively convert all or a portion of the Bridge Loan into units of the Resulting Issuer at a price of $1.40 per unit (on a post-consolidation basis) prior to the closing of the Arrangement.
On December 4, 2012, the Filer converted $20.56 million outstanding under the Bridge Loan into 14,633,471 Resulting Issuer Shares and an aggregate of 6,965,676 warrants to purchase Resulting Issuer Shares ("Resulting Issuer Warrants").
Upon the completion of the Arrangement, the Filer held approximately 33.7 million Resulting Issuer Shares, which represented approximately 53.47% of the issued and outstanding Resulting Issuer Shares (on a non-diluted basis).
Under Part 8 of NI 51-102, the Filer is required to file a BAR within 75 days of any completed acquisition that is determined to be significant based on the acquisition satisfying any of the three significance tests set out in subsection 8.3(2) of NI 51-102.
The Arrangement is a significant acquisition under the income test in subsection 8.3(2) of NI 51-102, and therefore requires the Filer to file a BAR. The Filer had a loss before tax of approximately $15.17 million for the year ended December 31, 2011 and Bridgeport had a net loss before tax of approximately $7.2 million for the year ended April 30, 2012, which represents 25.7% of the proportionate share of Filer's loss before tax of $15.17 million.
Under section 8.4 of NI 51-102, the BAR is required to include, among other things, pro forma financial statements of the Filer after giving effect to the Arrangement.
On January 28, 2013, all of the Resulting Issuer Shares and Resulting Issuer Warrants held by the Filer were sold (the “Disposition Transaction”) to Sandstorm Gold Ltd. by way of private agreement. As a result, the Filer did not own any Resulting Issuer Shares and Resulting Issuer Warrants prior to the 75th day after the completion of the Arrangement.
As the Disposition Transaction was completed prior to the deadline to prepare a BAR, pro forma financial statements of the Filer after giving effect to the Arrangement are not relevant to investors. The objective of pro forma financial statements is to illustrate the impact of a transaction on a reporting issuer’s financial position and financial performance. Since the Filer no longer owns any equity in the Resulting Issuer as a result of the Disposition Transaction, pro forma financial statements could be confusing and misleading to investors. The audited consolidated financial statements of Bridgeport for the years ended April 30, 2012 and 2011 and the unaudited consolidated interim financial statements of Bridgeport for the three and six months ended October 31, 2012 and comparable periods in the immediately preceding financial year, to be included in the BAR will provide investors with all necessary disclosure regarding Bridgeport.
Except for the failure to file the BAR for the Arrangement, the Filer is not in default of any requirement of the Legislation.
Decision
The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.
The decision of the principal regulator under the Legislation is that the requirement to include pro forma financial statements in the BAR in respect of the Arrangement shall not apply, subject to the Filer filing with, or incorporating by reference into, the BAR the audited financial statements of Bridgeport for the years ended April 30, 2012 and 2011 and the unaudited consolidated interim financial statements of Bridgeport for the three and six months ended October 31, 2012 and comparable periods in the immediately preceding financial year.
“Kathryn Daniels “
Deputy Director, Corporate Finance Ontario Securities Commission