April 15, 2024
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 Toronto Cleantech Capital 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 does not apply to the auditor’s report that accompanies the audited consolidated financial statements of THS L.P. (THS LP), being the parent company of Turkey Hill Sugarbush Limited (Turkey Hill), as at November 30, 2022 (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 existing under the laws of the Province of British Columbia 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.
On July 2, 2021, the Filer completed its initial public offering of common shares pursuant to a final long-form prospectus dated June 3, 2021.
The Filer’s common shares are listed and posted for trading on the TSXV under the symbol “YAY.P”.
On September 8, 2023, the Filer entered into a business combination agreement with THS LP, THS Genpar Inc. (THS GP), limited partners of THS LP (the Limited Partners), and the shareholders of THS GP (the GP Shareholders and together with the Limited Partners, the THS Securityholders) pursuant to which THS LP would be indirectly acquired by the Filer, which transaction would constitute the Filer’s Qualifying Transaction.
THS LP is a limited partnership formed under the laws of the Province of Ontario. THS GP a corporation incorporated under the laws of the Province of Ontario and is the general partner of THS LP.
The operating subsidiary of THS LP was incorporated under the Business Corporations Act (Ontario) and Turkey Hill was incorporated under the Canada Business Corporations Act. Turkey Hill is a wholly-owned subsidiary of THS LP and is a leader in the maple syrup industry supplying high quality pure maple syrup and maple syrup related products since 1976. Turkey Hill’s business is not a seasonal business. THS LP is a holding company created solely to hold the securities of Turkey Hill.
Neither THS LP, THS GP, nor Turkey Hill is a reporting issuer in any jurisdiction nor is any class of its securities listed on a stock exchange.
Neither the Filer, THS LP, THS GP nor Turkey Hill are in default of securities legislation in any jurisdiction of Canada.
Pursuant to Policy 2.4, the Filer is required to file a Filing Statement on 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 the Filing Statement, the Filing Statement must include financial statement disclosure concerning Turkey Hill 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.
As THS LP and Turkey Hill were not previously audited prior to entering into the proposed Qualifying Transaction, the auditors of THS LP and Turkey Hill (the Auditors) are unable to express an unmodified audit opinion specific to inventory balances for the year ended November 30, 2022 (and the year beginning December 1, 2021) as they were not physically present as of that date to complete an inventory count. As a result, the Auditor’s report for THS LP’s audited consolidated financial statements for the year ended November 30, 2022 contains a modified opinion (scope limitation) relating to the physical verification of inventory (the Inventory Qualification). The only modification in the Auditor’s report is the Inventory Qualification. Subsequently, the Auditors were on-site to perform a physical inventory count for the year-ended November 30, 2023, as well as completed a physical inventory count on June 30, 2023 and the Auditor’s report for the audited consolidated financial statements for the year-ended November 30, 2023 therefore contains an unmodified opinion.
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 consolidated annual financial statements of THS LP for the years ended November 30, 2022 and November 30, 2023; and
(b) the only modification in the Auditor’s report on the audited consolidated annual financial statements of THS LP for the year ended November 30, 2022 is the Inventory Qualification.
“Cameron McInnis”
Cameron McInnis
Chief Accountant
Ontario Securities Commission OSC File #: 2024/0160