Securities Law & Instruments

Headnote

Section 144 -- Revocation of a cease trade order -- Issuer subject to a cease trade order as a result of its failure to file.

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, c. S.5, AS AMENDED

(the Act)

AND

IN THE MATTER OF

CERTAIN DIRECTORS, OFFICERS AND INSIDERS

OF COOLBRANDS INTERNATIONAL INC.

(BEING THE PERSONS LISTED IN

SCHEDULE "A" HERETO)

(the Applicants)

 

ORDER

(Section 144)

WHEREAS, on December 13, 2006 the Ontario Securities Commission (the Commission) made an order under paragraph 2 and paragraph 2.1 of subsection 127(1) of the Act that all trading in and acquisitions of securities of CoolBrands International Inc. (the Corporation) whether direct or indirect, by any of the persons listed in Schedule A annexed thereto, shall cease until two full business days following the receipt by the Commission of all filings the Corporation is required to make under Ontario securities law, or until further order of the Director (the MCTO);

AND WHEREAS the Corporation and the Applicants have applied to the Commission for a revocation of the MCTO pursuant to section 144 of the Act;

AND UPON the Corporation and the Applicants having represented to the Commission that:

1. The Corporation, formerly a Nova Scotia company, was continued under the Canada Business Corporations Act on March 27, 2006;

2. The Corporation is a reporting issuer or the equivalent under the securities legislation of the Provinces of Ontario, British Columbia, Alberta, Manitoba, Saskatchewan, Quebec, New Brunswick, Nova Scotia, Prince Edward Island and Newfoundland and Labrador. The Corporation is not a reporting issuer in any other jurisdiction in Canada;

3. Pursuant to articles of amendment filed by the Coporation on May 31, 2007, the authorized capital of the Corporation consists of an unlimited number of common shares, of which 56,075,433 common shares have been issued and are outstanding;

4. The Corporation's common shares are listed for trading on The Toronto Stock Exchange;

5. The MCTO was issued by the Commission because the Corporation failed to file the following continuous disclosure materials required by Ontario securities law (the Initial Default):

a. Audited annual financial statements for the year ended August 31, 2006 (the 2006 annual statements);

b. Management's discussion and analysis relating to the audited annual financial statements for the year ended August 31, 2006; and

c. Annual information form for the year ended August 31, 2006;

6. The Corporation filed its audited annual financial statements for the year ended August 31, 2006 and Management's Discussion and Analysis (MD&A) as required by National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) on the System for Electronic Document Analysis and Retrieval (SEDAR) on January 29, 2007. The Corporation also filed on SEDAR its annual information form as required by NI 51-102 for the year ended August 31, 2006 on February 28, 2007;

7. However, the Corporation filed and subsequently withdrew the annual certificates required by Multinational Instrument 52-109 Certification of Disclosure in Issuers' Annual and Interim Filings (MI 51-102) for the financial year ended August 31, 2006. The Corporation advised that the annual certificates had been filed in error;

8. The Corporation subsequently also failed to file the interim certificates required by MI 52-109 relating to the following interim periods: (i) the three months ended November 30, 2006; (ii) the six months ended February 28, 2007 and (iii) the nine months ended May 31, 2007;

9. Since the imposition of the MCTO, the Corporation has filed the following documents on SEDAR:

(a) audited annual financial statements for the financial years ended August 31, 2007 and 2008; Management's Discussion and Analysis (MD&A) as required by under NI 51-102 for the financial years ended August 31, 2007 and 2008 and all related annual certificates required by MI 52-109 (filed on November 29, 2007 and October 29, 2008);

(b) annual information forms as required by NI 51-102 for both 2007 and 2008;

(c) interim unaudited financial statements, interim MD&A and related interim certificates as required under MI 52-109 for the following financial periods: the three months ended November 30, 2007 (filed on January 14, 2008); the six months ended February 28, 2008 (filed on April 3, 2008); the nine months ended May 31, 2008 (filed on June 26 2008); and the three months ended November 30, 2008 (filed December 18, 2008); and

(d) 2006, 2007 and 2008 annual reports and management information circulars, respectively filed on March 5, 2007; February 6, 2008; and February 4, 2009;

10. While the Corporation has now filed all documents that were the subject of the Initial Default, the Corporation has not filed on SEDAR: (i) annual certificates required by MI 52-109 for the financial year ended August 31, 2006; and (ii) interim certificates required by MI 52-109 relating to its unaudited interim financial statements for each of the interim periods of fiscal 2007 (the Default Certificates);

11. The Default Certificates were not filed by the Corporation because the Corporation's chief financial officer at that time was concerned about internal control weaknesses pertaining to certain businesses then operated by the Corporation's direct and indirect subsidiaries. Despite these deficiencies, the Corporation's management and audit committee concluded that the Corporation's disclosure controls and procedures were sufficiently effective to ensure that the information required to be disclosed by the Corporation in its regulatory filings was properly recorded, processed, summarized, and reported to the Corporation's management.

12. Before and during fiscal 2007, the Corporation disposed of or closed substantially all of the businesses of its subsidiaries in which the internal control weaknesses had been identified. While historically the Corporation business consisted of marketing and selling a broad range of ice creams and frozen snacks, the Corporation has downsized so that its principal operations today consist of the management of its cash resources, reviewing and considering potential opportunities to invest such cash resources.

13. As a result of the Corporation's downsizing, the internal control weaknesses previously identified are no longer relevant, as they related to businesses that are no longer part of its operations.

14. Due to: (a) the length of time that has elapsed since the date of the MCTO; (b) the significant change in the business of the Corporation outlined above which has resulted in the Corporation no longer owning the businesses which contained the weaknesses which were the cause of the failure to file the certificates; and (c) the fact that the chief financial officer of the Corporation who was employed for the 2006 financial year and for the first and second quarters of the 2007 financial year (the periods relating to three of the unfiled certificates) is no longer employed by the Corporation, it is impractical, and the Corporation feels that it will never be in a position, to file the Default Certificates;

15. The Corporation's annual financial statements for the year ended August 31, 2006 were audited, although officers' certificates were not provided in connection therewith. The auditors provided unqualified opinions for the 2006, 2007 and 2008 financial years, covering the entire period under consideration. The Corporation has not restated any results and is not aware of any material misrepresentations of financial information for the periods for which the certificates were not provided;

16. Except for the Default Certificates, the Corporation is not in default of any of its obligations as a reporting issuer under the Act or the rules and regulations made pursuant thereto;

17. The Corporation is now substantially up-to-date with its continuous disclosure obligations and has paid all outstanding participation fees, filing fees and late fees owing to the Commission;

18. The Corporation believes that, given the fact that the Corporation has filed on SEDAR all annual and interim financial statements required by NI 51-102 and related certificates as required by MI 52-109 since the filing of its audited annual financial statements for the year ended August 31, 2007, there is sufficient information available to investors to understand the financial position of the Corporation;

19. The Corporation's SEDAR and SEDI profiles are up-to-date;

20. Due to the factors identified in representation 14, the Corporation is unable to file the Default Certificates;

21. Given that the Corporation is unable to provide the Default Certificates, the Applicants cannot rely on the MCTO to expire pursuant to its terms.

22. Upon the issuance of this order, the Corporation will issue and file a news release and a material change report on SEDAR.

AND UPON considering the application and the recommendations of staff of the Commission;

AND WHEREAS the Director is satisfied that it would not be prejudicial to the public interest to revoke the MCTO;

IT IS ORDERED, pursuant to section 144 of the Act, that the MCTO is revoked.

DATED at Toronto, this 10th day of March, 2009.

"Jo-Anne Matear"
Assistant Manager, Corporate Finance

 

APPENDIX A

MICHAEL SERRUYA
DAVID J. STEIN
AARON SERRUYA
ROMEO DEGASPERIS
GARRY MACDONALD
RONALD W. BINNS
ROBERT E. BAKER
BETH L. BRONNER
L. JOSHUA SOSLAND
WILLIAM MCMANAMAN
GARY P. STEVENS
TIMOTHY TIMM
JOHN R. LESAUVAGE
CRAIG HETTRICH
THOMAS J. LAVAN
DAN HESCHKE
FRANCIS ORFANELLO
MATTHEW SMITH
DAVID M. SMITH