Discovery Air Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications and Multilateral Instrument 11-101 Principal Regulator System- National Instrument 51-102, s. 13.1 -- Continuous Disclosure Obligations -- Financial Statements -- An issuer wants relief from the requirement to file audited annual financial statements for the year ending December, 2004 in its business acquisition report -- The issuer is required to file annual audited financial statements of the company its acquiring for two of its most recently completed fiscal years; it will file the company's audited annual financial statements for its most recent year, December, 2005as well as all other interim, comparative and pro forma financial statements as required by National Instrument 51-102, Continuous Disclosure Obligations.

Applicable Ontario Legislation

National Instrument 51-102, s. 13.1.

September 5, 2006

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

SASKATCHEWAN AND ONTARIO

(the Jurisdictions)

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

DISCOVERY AIR INC. (the Filer)

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the Decision Maker) in each of Saskatchewan and Ontario has received an application from the Filer for a decision under National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) exempting the Filer from including audited annual financial statements for the year ending December 2004 in the business acquisition report (BAR) to be filed in connection with the Acquisition (defined below) (the Requested Relief).

Principal Regulator

Under Multilateral Instrument 11-101 Principal Regulator System (MI 11-101) and National Policy 12-201 The Mutual Reliance Review System for Exemptive Relief Applications (NI 12-201):

(a) the Saskatchewan Financial Services Commission (the SFSC) is the principal regulator for the Filer;

(b) the Filer is relying on the exemption in Part 3 of MI 11-101 in British Columbia, Alberta, Manitoba and the Northwest Territories; and

(c) this MRRS decision document evidences the decision of each Decision Maker.

The SFSC has assigned to the director of the SFSC the power to make exemption orders and rulings under the provisions of The Securities Act, 1988;

Interpretation

Defined terms contained in National Instrument 14-101 Definitions have the same meaning in this decision unless otherwise defined in this decision.

Representations

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

1. The Filer was continued under the Canada Business Corporations Act on March 27, 2006.

2. The Filer is a reporting issuer or equivalent in each of the Jurisdictions and British Columbia, Alberta, Manitoba and the Northwest Territories.

3. The class A common shares of the Filer are listed on the Toronto Stock Exchange.

4. On June 20, 2006, the Filer acquired all of the issued and outstanding shares (the Acquisition) in the capital of Great Slave Helicopters Ltd. ("GSHL"), a private company with its head office in Yellowknife, Northwest Territories.

5. Following the Acquisition, the Filer's principal operations, carried on through GSHL, became located in the Northwest Territories and the Filer moved its head office to Yellowknife, Northwest Territories.

6. The Acquisition is a significant transaction within the meaning of the BAR requirements in NI 51-102, triggering the requirement to file a BAR under NI 51-102.

7. The BAR is required to be filed by September 5, 2006.

8. With its BAR, the Filer is required to file the annual audited financial statements of GSHL for each of its two most recently completed fiscal years, being the fiscal years ending December 31, 2004 and December 31, 2005.

9. GSHL did not have its annual financial statements audited except for its most recent fiscal year ended December 31, 2005.

10. It will be very onerous for the Filer and GSHL to have GSHL's financial statements for the fiscal year ended December 31, 2004 audited because:

(a) GSHL has had a turnover in accounting staff, changed its system to manage inventory, changed its accountants/auditors since its year ended December 31, 2004 and changed its year end from March 31 to December 31;

(b) GSHL's current auditors were not involved with the financial statements for the fiscal year ended December 31, 2004 and it would be difficult, time-consuming and costly to obtain third party verification and other documentation necessary to conduct an audit for such period; and

(c) An audit would be qualified with respect to items such as inventory and possibly fixed assets, accounts receivable and other assets.

11. The Filer will file GSHL's December 31, 2005 audited annual financial statements with its BAR.

12. The Filer is required to file with its BAR interim financial statements for GSHL for the interim period of GSHL ended immediately prior to the Acquisition and pro forma interim financial statements for the combined entity for the interim period of the Filer ended immediately prior to the Acquisition.

13. The interim financial statements for GSHL and pro forma interim financial statements for the combined entity dated prior to the date of Acquisition would not provide any additional material information that can not be obtained from the more current interim financial statements. Accordingly, the Filer will file the most current financial information with the BAR and include GSHL's interim financial statements for the period ended June 30, 2006. The Filer will file its pro forma financial statements for the period ended July 31, 2006 with a compilation report and its pro forma financial statements for its fiscal year ended October 31, 2006 with a compilation report.

14. The Filer will file its financial statements for the interim period ended July 31, 2006 prior to the filing of its BAR.

Decision

The Decision Makers being satisfied that each has jurisdiction to make this decision and that the relevant test under the Legislation has been met, the Requested Relief is granted provided that the Filer files a BAR in accordance with NI 51-102 that includes:

1. annual audited financial statements for GSHL for the year ended December 31, 2005, together with an audit report and including unaudited comparatives for the year ended December 31, 2004;

2. interim financial statements for GSHL for the period ended June 30, 2006 including comparatives to June 30, 2005;

3. pro forma financial statements for the Filer for its fiscal year ended October 31, 2005, together with a compilation report; and

4. interim pro forma financial statements for the Filer for the period ended July 31, 2006, together with a compilation report.