In the Matter of Perk.com Inc., 2014 CanLII 99068

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 PERK.COM INC. (THE “FILER” OR “PERK”)

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 an exemption pursuant to Section 13.1 of National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102) from the requirement in Part 8 of NI 51-102 to include in a business acquisition report (a BAR) relating to the acquisition (the Acquisition) by the Filer of all of the issued and outstanding shares of Corona Labs Inc. (Corona) from Fuse Powered Inc. (the Vendor), certain financial statements required pursuant to Item 3 of Form 51-102F4 and Section 8.4 of NI 51-102 on the condition that the Filer include in the BAR, the Alterative Financial Statements (as defined herein) (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;

(b) the Filer has provided notice that subsection 4.7(1) of Multilateral Instrument 11-102 Passport System (MI 11-102) is intended to be relied upon in British Columbia and Alberta (collectively, the Passport Jurisdictions); and

(c) the decision of the principal regulator automatically results in an equivalent decision in the Passport Jurisdictions.

Interpretation

Terms defined in National Instrument 14-101 Definitions, MI 11-102 or NI 51-102 have the same meanings if used in this decision, unless otherwise defined herein.

Representations

The decision is based on the following facts represented by the Filer:

1. The Filer, formerly named Mira VI Acquisition Corp. (Mira VI), was incorporated under the Business Corporations Act (Ontario) on November 5, 2014. On July 10, 2015, Mira VI Subco Inc. (Mira VI Subco), a wholly owned subsidiary of Mira VI, merged with Perk.com Inc. (Perk US), resulting in Perk US becoming a wholly owned subsidiary of Mira VI.

2. The head office of the Filer is located at 720 Brazos St., Suite 110 Austin, Texas, 78701 U.S.A.

3. The authorized share capital of the Filer currently consists of an unlimited number of Common Shares and an unlimited number of Class A Restricted Voting Shares. As of January 20, 2016, there are 19,753,858 issued and outstanding Common Shares and 2,158,474 issued and outstanding Class A Restricted Voting Shares.

4. The Filer is a reporting issuer under the Legislation and the securities legislation of the Passport Jurisdictions (collectively, the Passport Jurisdiction Legislation) and is not in default of any requirement under the Legislation or the Passport Jurisdiction Legislation.

5. The common shares, of the Filer are listed on the Toronto Stock Exchange under the symbol “PER”.

6. The Filer is not a party to any proceeding or, to the best of its knowledge, information and belief, any pending proceeding under the Legislation (or the Passport Jurisdiction Legislation).

7. The financial year end of the Filer is December 31.

The Acquisition

8. On November 30, 2015, the Filer announced that it had entered into an agreement to acquire 100% of the equity interest of Corona, subject to customary conditions precedent.

9. The acquisition of Corona was completed by the Filer on December 3, 2015.

The BAR Requirement

10. Pursuant to Part 8 of NI 51-102, an issuer must file a BAR within 75 days after the date of an acquisition should it be determined that the acquisition was a “significant acquisition”. The three tests for determining whether an acquisition is a “significant acquisition” are set out in Section 8.3 of NI 51-102, and are referred to as the “asset test”, the “investment test” and the “profit or loss test”. An acquisition is considered to be a “significant acquisition” if any of the described tests are triggered.

11. Based on the available financial information for Corona, the Filer has determined that the Acquisition does not trigger the optional “asset test” in paragraph 8.3(4)(a) of NI 51-102. Perk’s total assets as at September 30, 2015 were US$43,834,000. Corona’s assets as at September 30, 2015, were US$117,200 and would represent approximately 0.3% of Perk’s assets as of September 30, 2015 under the optional “asset test”.

12. The Filer has also determined that the Acquisition does not trigger the optional “investment test” in paragraph 8.3(4)(b) of NI 51-102. The purchase price paid in the Acquisition was CDN$3,000,000 (US$2,240,000) which represents approximately 5.0% of Perk’s assets as of September 30, 2015 under the optional “investment test”.

13. Paragraph 8.3(4)(c) of NI 51-102 prescribes the optional “profit or loss test” as follows:

“The specified profit or loss calculated under the following subparagraph (i) exceeds 20% of the specified profit or loss calculated under the following subparagraph (ii):

(i) the reporting issuer's proportionate share of the consolidated specified profit or loss of the business or related businesses for the later of

(A) the most recently completed financial year of the business or related businesses; or

(B) the 12 months ended on the last day of the most recently completed interim period of the business or related businesses;

(ii) the reporting issuer's consolidated specified profit or loss for the later of

(A) the most recently completed financial year, without giving effect to the acquisition; or

(B) the 12 months ended on the last day of the most recently completed interim period of the reporting issuer, without giving effect to the acquisition.”

14. While the acquisition of Corona does not trigger the requirement for the Filer to file a BAR pursuant to the optional “asset test” or the optional “investment test”, the acquisition of Corona does trigger the requirement for the Filer to file a BAR pursuant to the optional “profit and loss test” as the absolute value of the loss of Corona is greater than 20% of the absolute value of Perk's losses for the relevant period.

Financial Statement Requirement

15. Corona was founded in 2008 and operated as a standalone private company until November 2011. The Vendor, which is also a private company, acquired Corona in November 2014. Following such acquisition, the Vendor required Corona to upgrade its accounting processes and systems in order to provide better accounting data and information.

16. Annual financial statements for the year ended December 31, 2014 for Corona do exist but the Filer’s Chief Financial Officer and VP Finance have concluded that it is not possible to audit them because:

(a) certain required historical accounting records of Corona have been lost and are unavailable;

(b) Corona has had a turnover in accounting staff and the personnel that would have the information necessary to complete an audit are no longer employees of Corona; in addition, certain accounting records for fiscal 2014 were maintained by personnel of the Vendor who are unlikely to be available to auditors; this lack of continuity/availability would specifically limit an auditor’s ability to fulfill its obligations in conducting an audit under U.S. AICPA GAAS; and

(c) Corona’s accounting records for fiscal 2014, to the extent they exist, are not comprehensive enough to allow an auditor to fulfill its obligations in conducting an audit under U.S. AICPA GAAS.

17. Pursuant to Section 8.4 of NI 51-102 and Item 3 of Form 51-102F4, absent the Exemption Sought, the Filer would be required to include in its BAR for the Acquisition, the following financial statements:

(a) an audited statement of comprehensive income, a statement of changes in equity and a statement of cash flows for Corona for the year ended December 31, 2014, and an audited statement of financial position at the end of that year;

(b) an unaudited statement of comprehensive income, statement of changes in equity and statement of cash flows for Corona for the year ended December 31, 2013, and an unaudited statement of financial position as at the end of that year;

(c) an unaudited interim financial report for Corona for the nine month interim period ended September 30, 2015, and an unaudited interim financial report for the comparable period in the preceding financial year;

(d) a pro forma statement of financial position of the Filer as at the date of the Filer’s most recent statement of financial position filed, at September 30, 2015, that gives effect, as if it had taken place as at the date of that pro forma statement of financial position, to the Acquisition;

(e) a pro forma income statement of the Filer that gives effect to the Acquisition for:

(i) the Filer’s financial year ended December 31, 2014 as if the Acquisition had taken place at the beginning of the 2014 financial year; and

(ii) the Filer’s nine month interim period ended September 30, 2015 as if the Acquisition had taken place at the beginning of the 2015 financial year; and

(f) pro forma earnings per share based on the pro forma financial statements referred to in paragraph ((e)) above.

18. The Filer proposes to include the following alternative financial statements regarding the Acquisition in the BAR (the Alternative Financial Statements) as a condition of obtaining the Exemption Sought:

(a) an audited statement of comprehensive income, a statement of changes in equity and a statement of cash flow for Corona for the nine month period ended September 30, 2015; and an audited statement of financial position of Corona as at September 30, 2015;

(b) an unaudited statement of comprehensive income, a statement of changes in equity and statement of cash flows for the year ended December 31, 2014; and an audited statement of financial position for Corona as at December 31, 2014;

(c) a pro forma statement of financial position of the Filer as at the date of the Filer’s most recent statement of financial position filed, at September 30, 2015, that gives effect, as if it had taken place as at the date of that pro forma statement of financial position, to the Acquisition;

(d) a pro forma income statement of the Filer that gives effect to the Acquisition for:

(i) the Filer’s financial year ended December 31, 2014 as if the Acquisition had taken place at the beginning of the 2014 financial year; and

(ii) the Filer’s nine month interim period ended September 30, 2015 as if the Acquisition had taken place at the beginning of the 2015 financial year; and

(e) pro forma earnings per share based on the pro forma financial statements referred to in paragraph ((d)) above.

19. The Alternative Financial Statements will be prepared in accordance with accounting policies permitted by International Financial Reporting Standards, and audited in accordance with the auditing standards of the American Institute of Certified Public Accountants.

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 the Filer includes the Alternative Financial Statements in the BAR in respect of the Acquisition.

“Sonny Randhawa” _________________________

Sonny Randhawa

Manager, Corporate Finance

Ontario Securities Commission