April 11, 2025
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 Bigstack Opportunities I Inc. (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) that the requirement in section 3.3(1)(a)(i) of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements required to be audited must be accompanied by an auditor’s report that expresses an unmodified opinion not apply to the auditor’s report that accompanies the audited annual financial statements of Coil Solutions Inc. (Coil) for the year ended August 31, 2023 (the Exemption Sought).
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 and Alberta.
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 incorporated under the Business Corporations Act (Ontario) on November 25, 2020 and a “Capital Pool Company” pursuant to Policy 2.4 - Capital Pool Companies (Policy 2.4) of the TSX Venture Exchange (the TSXV). The Filer was formed for the purpose of effecting a “Qualifying Transaction” pursuant to Policy 2.4. As a result, the principal business of the Filer to date has been to identify and evaluate businesses and assets with a view to completing a Qualifying Transaction, as that term is defined in Policy 2.4.
On July 16, 2021, the Filer completed its initial public offering of common shares pursuant to a final long-form prospectus dated May 14, 2021.
The Filer’s common shares are listed and posted for trading on the TSXV under the symbol “STAK.P”.
The Filer is a reporting issuer in the Jurisdiction, British Columbia and Alberta and is not in default of any securities legislation in any jurisdiction of Canada.
Reeflex Coil Solutions Inc. (Reeflex) is a corporation incorporated under the Business Corporations Act (Alberta) on June 14, 2024. Reeflex currently has no business operations or assets other than cash and a management team.
On November 3, 2024, the Filer entered into a non-binding letter of intent (the LOI) with Reeflex pursuant to which the Filer and Reeflex intend to negotiate and enter into a definitive agreement that is expected to supersede the LOI. Pursuant to the LOI, the definitive agreement will set out the terms of a reverse take-over of the Filer pursuant to which Reeflex would be acquired by the Filer (the Business Combination), which transaction would constitute the Filer’s Qualifying Transaction.
In connection with and immediately prior to the Business Combination, Reeflex intends to acquire all of the issued and outstanding securities of Coil, a corporation incorporated under the Business Corporations Act (Alberta) on August 15, 2007 (the Acquisition). Coil is an industry leader and innovator in coil tubing solutions and downhole tools, including stimulation technology, with a specialization in drilling products. Coil’s business is not a seasonal business. The Acquisition will result in Coil becoming a wholly-owned operating subsidiary of Reeflex immediately prior to the Business Combination.
Neither Reeflex nor Coil is a reporting issuer in any jurisdiction nor is any class of either of their securities listed on a stock exchange.
Neither Reeflex nor Coil is in default of securities legislation in any jurisdiction of Canada.
Pursuant to Policy 2.4, the Filer is required to file a filing statement in TSXV Form 3B2 (the Filing Statement) providing disclosure on the business or businesses being acquired pursuant to the Qualifying Transaction and the business of the resulting issuer from the Qualifying Transaction.
In accordance with Item 45 of TSXV Form 3B2, the Filing Statement must include financial statement disclosure concerning Coil in accordance with National Instrument 41-101 General Prospectus Requirements (NI 41-101), which includes two years of audited financial statements as well as comparative interim financial statements for the most recently completed interim period and MD&A related thereto (similar to what is required for an IPO venture issuer).
In accordance with the disclosure requirements for a Filing Statement and section 3.3(1)(a)(i) of NI 52-107, the financial statements included in the Filing Statement that are required to be audited must be accompanied by an auditor’s report that expresses an unmodified opinion, which would include the audited annual financial statements of Coil for the years ended August 31, 2024 and 2023.
The auditors of Coil (the Auditors) were not physically present to complete or observe an inventory count at August 31, 2022 (or satisfy themselves by alternative means). Since the inventories held at August 31, 2022 represent the opening inventory for the period ended August 31, 2023, and such inventories enter into the determination of financial performance and cash flows, the Auditors were unable to determine whether adjustments to financial performance and cash flows might be necessary for the year ended August 31, 2023. As a result, the Auditors’ report for the audited annual financial statements of Coil for the year ended August 31, 2023 contains a modified opinion relating to the physical verification of inventory at the beginning of the year ended August 31, 2023 (the Inventory Modification). The preceding is the only modification in the Auditors’ report. The Auditors’ report for the audited annual financial statements as at August 31, 2024 and for the year then ended is not modified.
Subsection 5.8(2) of Companion Policy 41-101CP to NI 41-101 contemplates that relief may be granted to non-reporting issuers in appropriate circumstances to permit the auditor’s report on financial statements to contain a modified opinion relating to opening inventory if there is a subsequent audited period of at least six months on which the auditor’s report expresses an unmodified opinion and the business is not seasonal.
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 Exemption Sought is granted provided that:
(a) the Filer includes in the Filing Statement the audited annual financial statements of Coil for the years ended August 31, 2024 and 2023; and
(b) the only modification in the Auditors’ report on the audited annual financial statements of Coil for the year ended August 31, 2023 is the Inventory Modification.
“Cameron McInnis”
Cameron McInnis
Chief Accountant
Ontario Securities Commission
OSC File #: 2025/0163