Jetlines partner threatens legal action after being left at the altar.

Possible legal action

The jilted partner of Canada Jetlines Ltd. is “baffled” by the aspiring airline’s decision to walk away from a planned IPO, accusing it of multiple serious breaches of the companies’ agreement and threatening legal action.

Jetlines, which plans to begin offering no-frills regional flights out of Vancouver this summer, announced Friday that it had scrapped a reverse takeover deal with Inovent Capital Inc., a capital pool company. That agreement included a proposed $50 million initial public offering on the TSX Venture Exchange.

“I spent an inordinate amount of time working on this financing and the deal and I’m quite disappointed and shocked at this turn of events,” David Brett, CEO of Inovent, said in an interview Tuesday. “It was a total surprise.”

Jetlines president Dave Solloway said Monday that the fledgling airline was approached by a third party that was interested in doing a deal but couldn’t talk to them because of its agreement with Inovent. According to Mr. Solloway, the agreement with Inovent expired at the end of January and Jetlines decided not to renew it so it could engage in talks with its new suitor.

But Mr. Brett alleged that Jetlines had no right to terminate the agreement and shouldn’t have been talking to other potential suitors anyway because of a non-solicitation agreement.

“We’re walking down the aisle together and meanwhile they are courting another,” Mr. Brett said. “We are quite baffled by it.”

Inovent also alleged that Jetlines conducted an unauthorized private placement of its shares at a price of $0.50 while Mr. Brett and his partners were out trying to raise money “at as much as 300% higher than that.”

He also claimed that Jetlines must repay a loan of $120,000, otherwise Inovent can seize the airline’s assets in court.

According to the amended prospectus filed by Inovent and Jetlines in December, Jetlines had $572,250 in assets and $262,926 in liabilities as of Sept. 30.

Jetlines maintains that it did nothing wrong when it terminated its agreement with Inovent.

“We are confident that the allegations are unfounded, that at all times, our conduct was appropriate and that Inovent received appropriate disclosure of all relevant events,” CEO Jim Scott said in an statement Tuesday.

“We had hoped to extend our agreement with Inovent. However, the terms demanded by Inovent for an extension of our agreement were not in our view appropriate or in the best interest of Jetlines and its shareholders, and were not accepted by Jetlines.”