Hybrid Power Solutions Inc.

Headnote

National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions -- relief granted from the requirements of paragraph 3.3(1)(a)(i) of National Instrument 52-107 Financial Disclosure requiring relief from financial statements to be accompanied by an auditor's report that expresses an unmodified opinion -- relief granted on terms and conditions.

Applicable Legislative Provisions

Securities Act, R.S.O. 1990, c. S.5, as am.

IN THE MATTER OF
THE SECURITIES LEGISLATION
OF BRITISH COLUMBIA AND ONTARIO
(the Jurisdictions)

AND

IN THE MATTER OF
THE PROCESS FOR EXEMPTIVE RELIEF APPLICATIONS
IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF
HYBRID POWER SOLUTIONS INC.
(the Filer)

DECISION

Background

¶ 1 The securities regulatory authority or regulator in each of the Jurisdictions (Decision Maker) has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (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 that are required by securities legislation to be audited must be accompanied by an auditor's report that expresses an unmodified opinion does not apply to the Filer's audited financial statements for the years ended May 31, 2023 (the 2023 Financial Statements) and May 31, 2022 (the 2022 Financial Statements) (the Exemption Sought).

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

(a) the British Columbia 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 Alberta, Saskatchewan, and Newfoundland and Labrador; and

(c) the decision is the decision of the principal regulator and evidences the decision of the securities regulatory authority or regulator in Ontario.

Interpretation

¶ 2 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

¶ 3 This decision is based on the following facts represented by the Filer:

1. the Filer previously operated under the name HPSI Holdings Inc. (HSPI), which was incorporated on December 7, 2015 under the Ontario Business Corporations Act (the OBCA); on June 13, 2022, HPSI continued its existence out of Ontario and into British Columbia under the British Columbia Business Corporations Act (the BCBCA); on July 22, 2022, HPSI and its former parent Hybrid Power Solutions Inc. (formerly, 2494760 Ontario Inc.) completed a vertical short-form amalgamation into a single corporate entity to form the Filer under the BCBCA; in connection with the vertical amalgamation, HPSI changed its name to Hybrid Power Solutions Inc., which is the current name of the Filer;

2. the Filer's head office is located in Vancouver, British Columbia;

3. the Filer is a reporting issuer in British Columbia, Alberta, Saskatchewan, Ontario, and Newfoundland and Labrador;

4. the Filer's common shares are listed for trading on the Canadian Securities Exchange under the symbol HPSS;

5. the Filer is a clean energy company specializing in producing industrial grade clean technology products such as portable power packs and stationary energy storage; the Filer's business is not seasonal;

6. the Filer's auditor is MNP LLP (MNP);

7. on April 14, 2023, the Filer filed a preliminary long form prospectus with the BCSC and OSC (the Preliminary Prospectus) in connection with the Filer's initial public offering of units; the BCSC and OSC provided a receipt for the Preliminary Prospectus on April 17, 2023;

8. the Preliminary Prospectus incorporated the 2022 Financial Statements and auditor's report thereon, which contained a qualified audit opinion from MNP related to opening inventories and the effect of opening inventories on the results of operations and cash flows (the 2022 Modified Opinion); as MNP was appointed as auditor of the Filer during the financial year ended May 31, 2022, MNP was not able to observe the counting of physical inventories at June 1, 2021 or satisfy themselves concerning those inventory quantities by alternative means;

9. the Preliminary Prospectus also incorporated the Filer's audited interim financial statements for the 6-month period ended November 30, 2022 (the November 2022 Interim Statements); the audit report included with the November 2022 Interim Statements expressed an unmodified audit opinion;

10. on July 14, 2023, the Filer filed its final long form prospectus with the BCSC and OSC (the Prospectus), containing the 2022 Financial Statements and the November 2022 Interim Statements; the BCSC and OSC provided a receipt for the Prospectus on July 17, 2023;

11. subsequent to the Prospectus, the Filer filed, and was issued receipts from the BCSC and OSC for:

(a) an amended and restated long form prospectus dated August 28, 2023 (amending the Prospectus) (the Amended and Restated Prospectus);

(b) an amendment dated September 13, 2023 to the Amended and Restated Prospectus; and

(c) an amendment dated October 18, 2023 to the Amended and Restated Prospectus

(the Amended and Restated Prospectus together with subsequent amendments are referred to as the Final Prospectus);

12. on September 28, 2023 (the Default Date), the Filer filed the 2023 Financial Statements and auditor's report thereon, pursuant to its obligations as a reporting issuer under section 4.1 of NI 51-102; the 2022 Financial Statements were included as comparative information in the 2023 Financial Statements; the 2023 Financial Statements contained the 2022 Modified Opinion; the auditor's report for the 2023 Financial Statements was otherwise unmodified;

13. in its submissions to the BCSC and OSC regarding the Prospectus containing the 2022 Financial Statements, the Filer requested exemptive relief from the requirement that the audited financial statements contained in the Prospectus contain an unmodified audit opinion, relying on section 5.8(2) of 41-101CP, which provides that relief may be granted 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 (which requirement was met with the inclusion of the November 2022 Interim Statements in the Prospectus); the receipt provided for the Prospectus constituted evidence that the relief requested had been granted;

14. the Filer is currently in default of securities legislation due to the inclusion of the 2022 Modified Opinion in the 2023 Financial Statements;

15. except for the default noted above, the Filer is not in default of securities legislation in any jurisdiction;

16. the Filer acknowledges that any right of action, remedy, penalty or sanction available to any person or company or to a securities regulatory authority against the Filer from the Default Date until the date of this decision document is not terminated or altered as a result of this decision;

17. the 2023 Financial Statements contain an unmodified opinion respecting the statement of financial position, statement of loss and comprehensive loss, statement of change in shareholders deficiency and statement of cash flows for the 12 months ended May 31, 2023;

18. on December 28, 2023, the Filer filed a Notice Declaring Intention to be Qualified Under NI 44-101 and NI 44-102 so that it could proceed with the filing of a short form base shelf prospectus;

19. without the Exemption Sought, the Filer will continue to be in default of securities legislation in connection with the filing of the 2023 Financial Statements and will not qualify to file a short form base shelf prospectus pursuant NI 44-101 and NI 44-102; and

20. except for the qualification referred to above, the 2023 Financial Statements and the 2022 Financial Statements comply with NI 52-107.

Decision

¶ 4 Each of the Decision Makers is satisfied that the decision meets the test set out in the Legislation for the Decision Maker to make the decision.

The decision of the Decision Makers under the Legislation is that the Exemption Sought is granted.

OSC File #: 2024/0020