XPEL, Inc.

Headnote

Multilateral Instrument 11-102 Passport System and National Policy 11-203 Process for Exemptive Relief Applications in Multiple Jurisdictions – National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, ss. 3.2 and 3.3 – National Instrument 51-102 Continuous Disclosure Obligations, s. 1.1, definition of “MD&A”. An issuer that is not yet an ‘SEC issuer’ wants to file financial statements prepared in accordance with U.S. GAAP and audited in accordance with U.S. GAAS. The issuer intends to become an SEC registrant. The issuer has filed a registration statement with the SEC; the issuer will meet all the elements of the definition of ‘SEC issuer’ once the SEC accepts its registration statement; the issuer will file financial statements and MD&A that comply with the requirements for SEC issuers in NI 52-107 and NI 51-102; if the issuer does not become an SEC issuer by a set date, it will re-file its financial statements in accordance with Canadian GAAP and Canadian GAAS and its MD&A in the Canadian form.

Applicable Legislative Provisions

National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards, s. 5.1.
National Instrument 51-102 Continuous Disclosure Obligations, s. 13.1.

June 28, 2019

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
XPEL, INC.
(the Filer)

DECISION

Background

1.             The securities regulatory authority in the Jurisdiction (the Decision Maker) has received an application (the Application) from the Filer for a decision under the securities legislation of the Jurisdiction (the Legislation) exempting the Filer from the requirement in section 3.2 and 3.3 of National Instrument 52-107 Acceptable Accounting Principles and Auditing Standards (NI 52-107) that financial statements, other than acquisition statements, be prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and, if applicable, audited in accordance with Canadian GAAS (the Canadian Accounting and Auditing Requirements), and exempting the Filer from the requirement in section 1.1 of National Instrument 51-102 Continuous Disclosure Obligations (NI 51-102) (in the definition of MD&A) that management’s discussion and analysis be prepared in accordance with the form of 51-102F1 (Canadian MD&A Form) with respect to the financial statements for the year ended December 31, 2018 and the interim period ended March 31, 2019, and the management’s discussion and analysis prepared for those periods (the Canadian MD&A Form Requirements) (collectively, the Exemptions 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, Alberta and Manitoba.

Interpretation

2.             Terms defined in National Instrument 14-101 Definitions, NI 52-107, NI 51-102 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 is a company incorporated under the laws of the State of Nevada, United States of America (U.S.);

2.             the Filer’s head office is located at 618 W. Sunset Road, San Antonio, Texas, U.S., 78216;

3.             the Filer’s registered office is 2905 Lake East Drive, Suite 150, Las Vegas, Nevada, U.S. 89117;

4.             the principal business of the Filer is the manufacturing, selling, distribution and installation of after-market automotive products, including automotive paint protection film, headlight protection film, automotive window films and other related products;

5.             the Filer is a reporting issuer in British Columbia, Alberta, Manitoba and Ontario and is not in default of securities legislation in any jurisdiction;

6.             the common shares of the Filer are listed on the TSX Venture Exchange Inc. under the symbol “DAP.U”;

7.             the Filer’s financial year end is December 31;

8.             all of the executive officers and the directors of the Filer are resident in the U.S.; no directors or officers are resident in Canada;

9.             the majority of the consolidated assets of the Filer are located in the U.S.;

10.          the business of the Filer is administered principally in the U.S.;

11.          the majority of the Filer’s outstanding voting securities are directly or beneficially held by residents of the U.S. or countries other than Canada;

12.          the Filer has filed a registration statement on Form 10 (the Form 10) with the U.S. Securities and Exchange Commission (SEC) on April 3, 2019, which was subsequently amended on April 24, 2019 and May 30, 2019 in response to comments of the SEC;

13.          the Filer has included in the Form 10, as amended, audited financial statements for the fiscal years ended December 31, 2017 and December 31, 2018 prepared in accordance with U.S. GAAP and audited in accordance with U.S. PCAOB GAAS (the Financial Statements);

14.          the Filer filed the Form 10, as amended, with the SEC in order to register its common shares under the Securities Exchange Act of 1934 (the 1934 Act) and intends to list its common shares on the Nasdaq Capital Market, and upon the effectiveness of the Form 10, as amended, will become subject to the periodic reporting requirements to file reports with the SEC under the 1934 Act;

15.          the Filer has addressed all comments on the Form 10, as amended, provided to date by the SEC, and has received confirmation from the SEC that it has completed its review of the Form 10;

16.          on March 28, 2019, the Decision Maker issued a decision (the Initial Order) granting relief substantially similar to the Exemptions Sought (the Existing Relief);

17.          in accordance with the terms and conditions of the Existing Relief, the Filer has filed:

(a)           the Financial Statements and the related management’s discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act, on SEDAR, concurrently with the filing of the Form 10 with the SEC; and

(b)           financial statements for the interim period ending March 31, 2019, prepared in accordance with U.S. GAAP and the related management’s discussion and analysis prepared in accordance with Item 303 of Regulation S-K under the 1934 Act on SEDAR.

18.          under the terms of the Existing Relief, if the Filer does not become an SEC Issuer by June 30, 2019, the Filer will be required to immediately file on SEDAR:

(a)           financial statements for the year ended December 31, 2018 and the interim period ending March 31, 2019, prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, as applicable;

(b)           the related management’s discussion and analysis in the Canadian MD&A Form; and

(c)           a news release explaining the nature and purpose of the filings;

19.          at the time of the Initial Order, the Filer anticipated that it would become a SEC Issuer by June 30, 2019;

20.          as a result of delays associated with making the Filer’s common shares eligible with the Depository Trust Company (DTC) it has been delayed in its ability to list its common shares on The Nasdaq Capital Market, and the Filer is no longer certain that it will be an SEC Issuer by June 30, 2019, but it is expected that it will become an SEC Issuer by no later than August 29, 2019;

21.          the Exemptions Sought will extend the deadline of the Existing Relief such that the Filer is required to make the filings described in paragraph 18 if the Filer does not become an SEC Issuer by August 29, 2019; and

22.          the Filer submits that the Exemptions Sought would not be prejudicial to the public interest.

Decision

4.             The Decision Maker 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 Maker under the Legislation is that the Existing Relief is revoked and the Exemptions Sought are granted provided that, if the Filer does not become an SEC Issuer by August 29, 2019, the Filer will immediately file on SEDAR:

(a)           financial statements for the year ended December 31, 2018 and the interim period ending March 31, 2019, prepared in accordance with Canadian GAAP applicable to publicly accountable enterprises and audited in accordance with Canadian GAAS, as applicable;

(b)           the related management’s discussion and analysis in the Canadian MD&A Form; and

(c)           a news release explaining the nature and purpose of the re-filings.

As to the Exemption Sought from the Canadian Accounting and Auditing Requirements:

“Cameron McInnis”
Chief Accountant
Ontario Securities Commission

As to the Exemption Sought from the Canadian MD&A Form Requirements:

“Marie-France Bourret”
Manager, Corporate Finance
Ontario Securities Commission