Partner Jet Corp. (Re), 2021 CanLII 138050

Ontario Commission des 22nd Floor 22e étage Securities valeurs mobilières 20 Queen Street West 20, rue queen ouest Commission de l’Ontario Toronto ON M5H 3S8 Toronto ON M5H 3S8

November 11, 2021

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 Partner Jet Corp. (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 relief (the Exemptions Sought) from (i) National Instrument 51-102 – Continuous Disclosure Obligations (NI 51-102), specifically that the Filer is exempt from the requirement in section 14.2 of Form 51-102F5 Information Circular (Form 51-102F5) to include certain predecessor financial statement or combined financial statements in a management information circular (the Circular) to be sent to current holders (Shareholders) of common shares in the capital of the Filer (the Filer Shares) in connection with a special meeting (the Meeting) of the Shareholders to consider and approve an amalgamation of the Filer and Volatus Aerospace Corp. (Volatus) pursuant to the Business Corporations Act (Ontario) (the Amalgamation) and (ii) National Instrument 52-107 – Acceptable Accounting Principles and Auditing Standards (NI 52-107), specifically that the Filer is exempt from the requirement that financial statements required by the Legislation to be audited must be accompanied by an auditor’s report that expresses an unmodified opinion in respect of the audited annual financial statements for Volatus’ subsidiary Omniview Tech Corp. (Omniview) for the fiscal year ending August 31, 2020, together with unaudited comparable figures for the fiscal year ending August 31, 2019, to be included in the Circular.

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

1. the Ontario Securities Commission is the principal regulator for this application; and

2. 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

1. The Filer was incorporated on December 17, 1987 under the Business Corporations Act (Ontario) (the OBCA) and its head office is located in Mississauga, Ontario.

2. The Filer is a reporting issuer in Alberta, British Columbia and Ontario.

3. The Filer is not in default of securities legislation in any jurisdiction of Canada.

4. The common shares of the Filer are listed and posted for trading on the TSX Venture Exchange (the Exchange) under the symbol “PJT”.

5. The financial year-end of the Filer is November 30.

6. The Filer carries on the business of providing full-service aircraft management, private aircraft charter sales and flight support services capable of operating a wide range of corporate aircraft.

Volatus

7. Volatus was incorporated on November 8, 2019 under the Canada Business Corporations Act (the CBCA) and its head office is located in Pointe-Claire, Quebec.

8. The financial year end of Volatus is December 31.

9. Volatus and its subsidiaries are not a reporting issuer in any jurisdiction in Canada and are not in default of securities legislation in any jurisdiction of Canada.

10. Shares of Volatus and its subsidiaries are not traded in Canada or another country on a marketplace as defined in National Instrument 21-101 Marketplace Operation or any other facility for bringing together buyers and sellers of securities where trading data is publicly reported.

11. Volatus is a drone solution provider, providing sales and service of drones and drone parts and related equipment, pilot training, aerial inspection and survey services and other drone related services. Volatus is also developing its own line of unmanned aircraft for sale.

12. Volatus has the following four direct subsidiaries (together the Volatus Direct Subsidiaries):

(i) Volatus Unmanned Services Inc., incorporated pursuant to the provisions of the CBCA on October 26, 2020 (VUS). Volatus holds 72% of the votes attaching to all voting securities of VUS;

(ii) Volatus Flight Systems Inc., incorporated pursuant to the provisions of the CBCA on May 11, 2020 (VFS). Volatus holds 70% the votes attaching to all voting securities of VFS;

(iii) Volatus Technologies Inc., incorporated pursuant to the provisions of the CBCA on January 10, 2021 (“VTI”). Volatus holds 100% of the votes attaching to all voting securities of VTI; and

(iv) Volatus Aerospace USA Corp, incorporated pursuant to the laws of Delaware (Volatus US). Volatus holds 90% of the votes attaching to all voting securities of Volatus US.

13. Volatus US holds 100% of the shares of ConnexiCore LLC, incorporated pursuant to the laws of Pennsylvania, which was acquired by Volatus US on July 31, 2021.

14. VUS has the following six wholly owned subsidiaries (together with ConnexiCore LLC the Acquired Volatus Subsidiaries):

(i) M3 Drone Services Ltd., incorporated pursuant to the provisions of the CBCA on April 5, 2020, which was acquired by VUS on December 31, 2020;

(ii) M3 Drone Training Zone Inc., incorporated pursuant to the provisions of the CBCA on November 22, 2016, which was acquired by VUS on December 31, 2020;

(iii) SkyGate Videography Inc., incorporated pursuant to the provisions of the Business Corporations Act (Prince Edward Island) on December 3, 2018, which was acquired by VUS on December 31, 2020;

(iv) UAViation Aerial Solutions Limited, incorporated pursuant to the provisions of the Business Corporations Act (British Columbia) on August 1, 2015, which was acquired by VUS on December 31, 2020;

(v) OmniView, incorporated pursuant to the provisions of the CBCA on September 23, 2015, which was acquired by VUS on March 31, 2021; and

(vi) Canadian UAV Solutions Inc, incorporated pursuant to the provisions of the CBCA on September 12, 2017, which was acquired by VUS on March 31, 2021.

15. Volatus holds approximately 45.4% of the Filer Shares having acquired such shares in 2020.

16. There is a written agreement in place which provides that Ian McDougall controls the voting of the Filer Shares held by Volatus.

17. Ian McDougall does not control Volatus and, as such, Volatus and the Filer are not under common control prior to the Amalgamation.

The [Amalgamation](https://www.canlii.org/en/on/laws/stat/rso-1990-c-b16/latest/rso-1990-c-b16.html)

18. The Filer and Volatus entered into the Amalgamation Agreement on June 30, 2021, pursuant to which it is proposed that they will amalgamate and continue as one corporation. The Amalgamation will constitute a Reverse Takeover (as such term is defined under the Exchange Policies) of the Filer by Volatus, since Volatus shareholders will hold more than 50% of the issued and outstanding voting securities of the amalgamated entity (the Resulting Issuer) after closing of the Amalgamation. The head office of the Resulting Issuer will be located in Oro-Medonte, Ontario.

19. The Amalgamation Agreement provides, among other things, that at the effective time of the Amalgamation:

(i) each one (1) common share in the capital of Volatus (each, a Volatus Share) shall be exchanged for one (1) common share in the capital of the Resulting Issuer (each, a Resulting Issuer Common Share);

(ii) each one (1) Class A preferred share in the capital of Volatus (each, a Class A Volatus Share), but excluding Class A Volatus Shares held by holders that have validly exercised their dissent rights, shall be exchanged for one (1) preferred share in the capital of the Resulting Issuer;

(iii) each Filer Share, but excluding Filer Shares held by Volatus or by holders that have validly exercised their dissent rights, shall be exchanged for Resulting Issuer Common Shares on the basis of one (1) Resulting Issuer Common Share for each 2.95454 Filer Shares; and

(iv) each outstanding Filer Share held by Volatus shall be cancelled without any repayment.

20. Pursuant to the Filer’s constating documents, the OBCA, Exchange Policies and applicable securities laws, the Filer Shareholders will be required to approve the Amalgamation at the Meeting. The Meeting is expected to be held on or about December 14, 2021, at 10:00 a.m. (Toronto time).

21. The Amalgamation must be approved by a special resolution passed by (i) at least 66⅔% of the votes cast at the Meeting by the Filer Shareholders present virtually or by proxy at the Meeting and (ii) at least a majority of the votes cast at the Meeting other than those cast by Volatus and other Filer Shareholders required to be excluded pursuant to Multilateral Instrument 61-101 – Protection of Minority Shareholders in Special Transactions (MI 61-101), voting as a single class, present virtually or by proxy and entitled to vote at the Meeting.

22. The Amalgamation will be subject to the related party transaction requirements under MI 61-101 and the Exchange Policies, as Volatus currently holds approximately 45.4% of the issued and outstanding common shares of the Filer. As a result, the Meeting is required pursuant to MI 61-101 and Exchange Policies.

23. The Amalgamation will be a "restructuring transaction" as such term is used in NI 51-102 in respect of the Filer and therefore the Circular is subject to the requirements of item 14.2 of Form 51-102F5.

24. The Filer is relying on the prospectus exemption in section 2.11(b) of National Instrument 45-106 Prospectus Exemptions for the distribution of shares of the Resulting Issuer in connection with the Amalgamation.

Disclosure Requirements

25. Item 14.2 of Form 51-102F5 requires, among other items, that the Circular contain the disclosure (including financial statements) prescribed under securities legislation and described in the form of prospectus that Volatus would be eligible to use immediately prior to the filing and sending of the Circular to Filer Shareholders for a distribution of Volatus Shares; therefore, the Circular must contain the disclosure in respect of Volatus prescribed by NI 41-101 and Form 41-101F1 Information Required in a Prospectus (Form 41-101F1).

26. Item 32 of Form 41-101F1 requires a prospectus of a venture issuer to include financial statements of a business acquired by an issuer within two years before the date of the prospectus if a reasonable investor reading the prospectus would regard the primary business of the issuer to be the business acquired.

27. A reasonable investor would regard the Acquired Volatus Subsidiaries to be part of the primary business of Volatus.

28. The Filer is required under Form 41-101F1 to include in the Circular the following financial statements:

a. Consolidated audited annual financial statements for Volatus, including the Acquired Volatus Subsidiaries, for each of the financial years ended December 31, 2020 and 2019; and

b. Consolidated unaudited interim financial statements of Volatus, including the Acquired Volatus Subsidiaries, for the interim periods ended June 30, 2021 and 2020;

c. Consolidated audited annual financial statements for the Filer for each of the financial years ended November 30, 2020 and November 30, 2019;

d. Consolidated unaudited interim financial statements of the Filer for the three months ended August 31, 2021; and

e. pro forma statements of the Filer, as at August 31, 2021, that give effect to the Amalgamation as if it had taken place as at that date.

(together the Required Financial Statements).

29. The Acquired Volatus Subsidiaries were not reporting issuers, or equivalent, during any of the periods in question and, as such, although Volatus has basic source documents, it would be extremely difficult if not impossible to conduct an audit related to all periods in question prior to Volatus’ acquisition of such Acquired Volatus Subsidiaries in most cases due to the inability to ensure proper cut-off procedures and completeness of records. In some cases, the records of the Acquired Subsidiary are insufficiently detailed to extract the information that would be required to produce the Required Financial Statements and, in Volatus’ view, it is impracticable to do so in respect of most of the Acquired Volatus Subsidiaries.

30. Omniview is the only Acquired Subsidiary that has assets or revenues that represent a material portion of the consolidated assets or revenue of Volatus.

31. Following the acquisitions of the Acquired Volatus Subsidiaries, Volatus has integrated the Acquired Volatus Subsidiaries into its existing organization structure, which will have a different cost structure than such Acquired Volatus Subsidiaries had prior to acquisition by Volatus.

32. The Filer is also required under Form 41-101F1 to include in the Circular the restated combined financial statements of the Volatus and any other entity with which Volatus completed a transaction within three years before the date of the Circular, if Volatus accounted for or will account for the transaction as a combination in which all of the combining entities or businesses ultimately are controlled by the same party or parties both before and after the combination, and that control is not temporary.

33. Volatus and the Filer were not under common control before and after Volatus’ acquisition of Filer Shares in 2020 and, as such, restated combined financial statements of Volatus and the Filer are not required to be included in the Circular.

34. Omniview has not previously had its financial statements audited.

35. The auditors of Volatus were not appointed as auditors of Omniview until after March 31, 2021 and were not able to observe the counting of physical inventories of Omniview as at August 31, 2019 or August 31, 2020.

36. As a result, Volatus’ auditors will be required to express a modified opinion in their audit opinion in respect of the Omniview financial statements for the financial year ended August 31, 2020, concerning the inventory quantities held at August 31, 2019 and 2020, as well as the opening retained earnings.

37. A modified opinion is contrary to subsection 3.3(1) of NI 52-107, which requires that an auditor’s report on financials statements expresses an unmodified opinion.

38. Section 5.1 of NI 52-107, together with paragraph 3.4 of the companion policy thereto, contemplates that relief may be granted from the requirements of NI 52-107, including the requirement that an auditor's report express an unmodified opinion.

39. Paragraph 5.8(2) of the companion policy to NI 41-101 contemplates that relief may be granted from NI 52-107 to non-reporting issuers in appropriate circumstances to permit the auditor's report on financial statements to contain a qualified 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.

40. Audited financial statements prepared for Omniview for the 7-month period ending March 31, 2021 will not contain a modified auditors opinion.

41. The business of Omniview is not seasonal.

Alternative Disclosure

42. In lieu of the Required Financial Statements, the Filer will include in the Circular the following financial statements (the Alternate Disclosure):

a. consolidated audited annual financial statements for Volatus for the financial years ended December 31, 2020 and 2019;

b. audited annual financial statements for Omniview for the financial year ended August 31, 2020 together with unaudited comparable figures for the financial year ended August 31, 2019, with a modified opinion in the audit opinion concerning the inventory quantities held at August 31, 2019 and 2020, as well as the opening retained earnings;

c. consolidated unaudited interim financial statements for Volatus for the 3 and 6-month period ended June 30, 2021, which have been subject to a review engagement;

d. Audited interim financial statements for Omniview for the 7-month period ended March 31, 2021 together with unaudited comparable figures for the 7-month period ended March 31, 2020;

e. consolidated audited annual financial statements for the Filer for the financial years ended November 30, 2020 and November 30, 2019;

f. consolidated unaudited interim financial statements of the Filer for the three months ended August 31, 2021; and

g. pro forma statements of the Filer, as at August 31, 2021, that give effect to the Amalgamation as if it had taken place as at that date.

43. The Filer will not include restated combined financial statements of Volatus and the Filer in the Circular.

44. The Alternate Disclosure will provide the Filer’s Shareholders with sufficient information to make an informed investment decision regarding the Amalgamation.

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 Exemptions Sought are granted provided that the Circular:

(a) is filed and mailed to the Filer’s Shareholders by November 17, 2021;

(b) includes the Alternate Disclosure in the Circular;

(c) otherwise complies with the Legislation.

“Jo-Anne Matear”

Jo-Anne Matear

Manager, Corporate Finance

Ontario Securities Commission

“Cameron McInnis”

Cameron McInnis

Chief Accountant

Ontario Securities Commission