AGF Investments Inc
National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- An issuer (a capital pool company) proposes to complete a reverse take-over transaction with a target company -- The proposed transaction, if completed, will serve as the issuer's qualifying transaction under Policy 2.4 Capital Pool Companies of the TSX Venture Exchange (TSXV) -- The issuer applied for relief from the requirements in section 4.10(2)(a)(ii) of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) and Item 5.2 of Form 51-102F3 Material Change Report to file, in respect of the proposed transaction, historical audited financial statements of certain predecessor entities that are not material to the issuer. Relief granted, subject to conditions.
Applicable Legislative Provisions
National Instrument 51-102 Continuous Disclosure Obligations, s. 4.10(2)(a)(ii).
Form 51-102F3 Material Change Report, Item 5.2.
IN THE MATTER OF THE SECURITIES LEGISLATION OF ONTARIO AND IN THE MATTER OF THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS IN MULTIPLE JURISDICTIONS AND IN THE MATTER OF ABIGAIL CAPITAL CORPORATION (the Filer)
The principal regulator in the Jurisdictions (as defined below) has received an application from the Filer for a decision under the securities legislation of Ontario (the Legislation) for an exemption from the requirements in subparagraph 4.10(2)(a)(ii) of National Instrument 51-102 -- Continuous Disclosure Obligations (NI 51-102) and item 5.2 of Form 51-102F3 Material Change Report (51-102F3) to file all of the financial statements of a reverse takeover acquirer that would be required to be included in the form of prospectus that the reverse takeover acquirer was eligible to use prior to the reverse takeover for a distribution of securities in the Jurisdictions.
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 Alberta and British Columbia (collectively with Ontario, the Jurisdictions).
Terms defined in National Instrument 14-101 Definitions and MI 11-102 have the same meanings if used in this decision, unless otherwise defined.
This decision is based on the following facts represented by the Filer:
1. The Filer was incorporated under the Business Corporations Act (British Columbia) on November 5, 2018. The Filer is a capital pool company whose common shares (Shares) are listed on the TSX Venture Exchange (TSXV). 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 of the TSXV Corporate Finance Manual.
2. The head office of the Filer is located at 905-1111 West Hastings St., Vancouver, British Columbia.
3. The Filer is a reporting issuer in the Jurisdictions and to the knowledge of the Filer it is not in default of any of its obligations as a reporting issuer under the securities laws of the Jurisdictions.
4. The common shares of the Filer are listed and posted for trading on the TSXV under the trading symbol "ACC.P".
5. OverActive Media Corp. (OAM) is a privately owned Ontario corporation with a head office located at 41 Fraser Avenue, Toronto, Ontario, Canada.
6. OAM is active in the global sports, media and entertainment industry with a mandate to build an integrated global company delivering sports, media and entertainment products focused on esports, videogames, content, culture and live and online events for today's generation of fans. OAM owns teams in many of the most important esports leagues in the world, including the Call of Duty League, the Overwatch League, the League of Legends European Championship, the LVP Superliga, and is a founding shareholder of B Site Inc., an entity owned by team organizations for the purpose of collaborating in esports leagues and tournaments, including Flashpoint, the first team-owned CS:GO league. OAM also operates OAM Live, a live event business unit offering planning, competition programming, production and broadcast services to teams, leagues and organizations around the world for in person and online events.
7. On April 19, 2021, the Filer and OAM entered into a binding qualifying transaction agreement pursuant to which the Filer will acquire all of the outstanding shares of OAM by way of an amalgamation of OAM and a wholly-owned subsidiary of the Filer (the Qualifying Transaction).
8. The Qualifying Transaction will be a "reverse takeover" as defined in NI 51-102 and will serve as the Filer's "Qualifying Transaction" under TSXV Policy 2.4 -- Capital Pool Companies. In connection with the Qualifying Transaction, the Filer will be filing its filing statement (the Filing Statement) in the form of Form 3B2 Information Required in a Filing Statement for a Qualifying Transaction (TSXV Form 3B2) pursuant to the policies of the TSXV. TSXV Form 3B2 requires disclosure of financial statements of the Filer and OAM prescribed by National Instrument 41-101 General Prospectus Requirements and Form 41-101F1 Information Required in a Prospectus (Form 41-101F1). In addition to applying to the principal regulator for the exemptive relief requested herein, the Filer has also applied to the TSXV for a waiver from the equivalent financial statement requirements in TSXV Form 3B2.
9. On May 12, 2019, OAM acquired 100% of MediaXP Inc. (MediaXP) for total consideration of approximately $400,000, consisting of cash, equity and a note payable.
10. At the time of its acquisition, MediaXP was a minimally profitable, single-owner managed live events business.
11. OAM acquired MediaXP (which now operates as OAM Live) as a platform for the operation of its planned live events production business, commencing in 2020. Due to the COVID-19 pandemic, these events were cancelled and as result OAM Live has had limited operations to date.
12. On September 6, 2019, OAM acquired all of the assets and liabilities of MAD Lions Esports Club, S.L. (MAD Lions S.L.) for total consideration of $3.5 million, consisting of equity, forgiveness of debt, and a retention payment to key MAD Lions S.L. employees.
13. Prior to the Mad Lions S.L. acquisition, Mad Lions S.L. was in financial distress, was generating minimal revenue and required financial support from OAM to continue its business operations and avoid insolvency.
14. The assets acquired included the "MAD Lions" brand and esports team that were competing in regional ("minor league") tournaments and leagues, principally in Europe. These teams were subsequently disbanded, and the MAD Lions brand was extended to include OAM's MAD Lions Madrid (Superliga) team, its MAD Lions LEC team and its MAD Lions CS:GO team, none of which were acquired from MAD Lions S.L.
15. On January 31, 2019, OAM acquired 100% of Splyce, Inc. (Splyce), a company in which OAM held an existing minority interest for total consideration of $29.2 million, consisting of cash, equity, a note payable and OAM's previous non-controlling interest in Splyce.
16. At the time of acquisition, Splyce managed various professional esports teams, including a team competing in the League of Legends Championship Season (LCS). LCS team owners had been offered the right to purchase a team in the recently formed League of Legends European Championship (LEC). By acquiring Splyce, OAM also indirectly acquired this right, which it subsequently exercised, leading to OAM's current ownership of its MAD Lions LEC team.
17. With respect to reverse takeover transactions, Section 4.10(2)(a)(ii) of NI 51-102 and item 5.2 of 51-102F3 require that a reporting issuer file, within specified periods, the financial statements as prescribed by the appropriate prospectus form for the reverse takeover acquirer, being Form 41-101F1. The reverse takeover acquirer in respect of the Filer is OAM.
18. The Filing Statement will include the following financial statements (the OAM Financial Statements):
(a) OAM's audited consolidated financial statements for the years ended December 31, 2020 and 2019; and
(b) OAM's unaudited (but auditor reviewed) consolidated financial statements for the three months ended March 31, 2021 and 2020.
19. The OAM Financial Statements incorporate on a consolidated basis the financial and operating results of MediaXP, the MAD Lions S.L. assets and Splyce following the date of their acquisition. The OAM Financial Statements will also disclose the amount of revenue, expenses, and net loss that each of MediaXP, Mad Lions and Splyce contributed from the date of the acquisition up to December 31, 2019.
20. The Filer will be relying on the exception contained in item 48.2 of TSXV Form 3B2 and will not be including a pro forma income statement of the Filer in the Filing Statement.
21. Subsection 4.10(2)(a) of NI 51-102 provides that if a reporting issuer completes a reverse takeover, it must file the following financial statements for the reverse takeover acquirer, unless the financial statements have already been filed:
(i) financial statements for all annual and interim periods ending before the date of the reverse takeover and after the date of the financial statements included in an information circular or similar document, or under item 5.2 of the Form 51-102F3 Material Change Report, prepared in connection with the transaction; or
(ii) if the reporting issuer did not file a document referred to in subparagraph (i), or the document does not include the financial statements for the reverse takeover acquirer that would be required to be included in a prospectus, the financial statements prescribed under securities legislation and described in the form of prospectus that the reverse takeover acquirer was eligible to use prior to the reverse takeover for a distribution of securities in the jurisdiction. [emphasis added]
22. Item 5.2 of Form 51-103F3 requires a material change report filed in respect of a closing of the Transaction to include, for each entity that results from the Transaction, disclosure (including financial statements) prescribed under securities legislation and described in the form of prospectus that the entity would be eligible to use.
23. The financial statement requirements for a prospectus are found in NI 41-101 and Form 41-101F1. Item 32.1 of Form 41-101F1 includes the following requirements:
The financial statements of an issuer required under this item to be included in a prospectus must include:
(a) the financial statements of any predecessor entity that formed, or will form, the basis of the business of the issuer, even though the predecessor entity is, or may have been, a different legal entity, if the issuer has not existed for 3 years,
(b) the financial statements of a business or businesses acquired by the issuer within 3 years before the date of the prospectus or proposed to be acquired, if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business or businesses acquired, or proposed to be acquired, by the issuer, [emphasis added] and
24. Subsection 5.3(1) of the Companion Policy to NI 41-101 notes that both a reverse takeover and a qualifying transaction for a capital pool company are examples of when a reasonable investor might regard the primary business of the issuer to be the acquired business.
25. Accordingly, to the extent any of MediaXP, the MAD Lions S.L. assets or Splyce are deemed to constitute the primary business of OAM, the Filing Statement would also have to include, in addition to the OAM Financial Statements, audited financial statements of each of MediaXP, MAD Lions S.L. and Splyce for the "stub" period from January 1, 2019 to the date of acquisition (collectively, the Stub Period Statements).
26. Provided the exemptive relief requested herein is granted, the Filing Statement will not include the Stub Period Statements.
27. The OAM Financial Statements, together with the other disclosure prescribed by TSXV Form 3B2 that will be included in the Filing Statement, will provide disclosure of all material facts relating to the Corporation, OAM and OAM's business and will contain sufficient information to permit investors to make a reasoned assessment of the Corporation's business following completion of the Qualifying Transaction.
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:
1. the Filing Statement includes the OAM Financial Statements; and
2. the Filing Statement is filed on SEDAR forthwith following acceptance by the TSXV.
DATED at Toronto, Ontario on this 25th day of June, 2021.