Nextech AR Solutions Corp. (CSE:NTAR, OTCQX:NEXCF) has announced that after further consideration, it has determined to pursue a direct spinout of its generative AI-powered Toggle3D platform through a wholly-owned subsidiary of the company.
The transaction is currently anticipated to proceed by way of plan of arrangement under which the Toggle3D platform and associated assets will be spun out into a new Subco, but will be subject to final tax and legal structuring considerations.
In a statement, Evan Gappelberg, CEO of Nextech AR commented: “The spin-out of ARway Corporation on October 26, 2022, has proven to be a tremendously successful method to unlock value for Nextech shareholders. As of February 1, 2023, ARway is trading at $1.25 with 26.5 million shares issued, which is worth $33.1 million. Nextech still retains ownership of 13 million shares which are worth $16 million dollars from essentially zero prior to the spin-out."
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He added: "Now we are announcing that we are going to do the same thing with Toggle3D. We believe there is a tremendous amount of shareholder value currently trapped inside Nextech and these spin-outs are aimed at unlocking that value by listing pure-play technology companies. We believe that Toggle3D is now commercially ready to disrupt the $11 billion CAD market and once it's spun out, we believe that just like ARway, it will create value for Nextech shareholders.
"This Toggle3D spin-out and the possibility of additional future spin-outs are intended to unlock the value of the technology that we have been heavily investing in, incubating and building inside Nextech for the last 4 years.”
Launched in September, Toggle3D is an AR-enhanced standalone web application which enables product designers, 3D artists, marketing professionals and eCommerce site owners to create, customize and publish high-quality 3D models and experiences without any technical or 3D design knowledge required. The Company believes that Toggle3D is the first platform of its kind, and this break-through SaaS product is a potential game changer for the manufacturing and design industry, as it provides a viable solution to convert large CAD files into lightweight 3D models at affordable prices and at scale. According to BIS Research, the CAD market, quantified by the amount spent on the creation of CAD files, is projected to reach $11 billion dollars by 2023.
The directors and officers of subco on closing of the arrangement are anticipated to be Gappelberg, director and chief executive officer; Belinda Tyldesley, director and corporate secretary; Andrew Chan, chief financial officer, and Jeff Dawley, director.
The arrangement is subject to court and shareholder approval and standard closing conditions.
Gappelberg continued: “Times are changing … for 16 years we all have been walking around with a smartphone in our pockets. The next generation of devices is about to emerge in the form of computer glasses. Once launched, computer glasses will become the device of choice in 2023 and beyond, causing everything AR/3D to go up in value seemingly overnight. We believe that an AR/3D spatially aware world is the next evolution of our computer-driven world. We expect a major shift in the focus of investors in 2023 when Apple Computer releases a pair of computer glasses which perfectly positions Nextech, ARway, and now Toggle3D for significant valuation adjustments to the upside.”
The spin-out arrangement, if completed, is anticipated to result in, among other things, (i) Nextech retaining approximately 65% of the issued and outstanding shares of Subco upon completion of the transaction, (ii) approximately 20% of the subco shares being distributed directly to Nextech shareholders on a pro-rata basis; and (iii) approximately 15% of the subco shares being distributed to certain service providers of Nextech in consideration of past services, as calculated prior to completion of a private placement (as detailed below) following which the above percentages will be adjusted on a pro rata basis.
In connection with the arrangement, Nextech intends to seek a direct listing of the subco shares on the Canadian Securities Exchange (CSE).
Private Placement
In connection with the arrangement, subco or a special purpose financing vehicle shall complete a private placement of subscription receipts at a price of C$0.25 each to raise aggregate gross proceeds of a minimum of C$1.5 million.
Each subscription receipt will automatically convert upon the satisfaction or waiver of all conditions precedent to the arrangement and certain other ancillary conditions into units at no additional cost to, and without further action by, the holder of such subscription receipt, with each unit ultimately being comprised of one subco share and one share purchase warrant, with each warrant being exercisable to acquire one additional subco share at an exercise price of C$1.00 for a period of 3 years from the date of issuance, provided that in the event that the closing price of the subco shares is equal to or exceeds $1.00 for a period of at least 10 trading days on the principal stock exchange on which such shares trade, subco may disseminate a press release announcing the acceleration of such expiry date to a date that is 30 days following the date of such release.
The gross proceeds from the private placement will be held in escrow pending the satisfaction of the release conditions, whereupon the units underlying the subscription receipts will be issued to the purchasers and the gross proceeds of the private placement will be released to the issuer.
Nextech AR Solutions is a diversified augmented reality, AI technology company that leverages proprietary artificial intelligence (AI) to create 3D experiences for the metaverse. Its main businesses are creating 3D WebAR photorealistic models for the prime eCommerce marketplace as well as many other online retailers.
The company develops or acquires what it believes are disruptive technologies and once commercialized, spins them out as stand-alone public companies issuing a stock distribution to shareholders while retaining a significant ownership stake in the public spin-out.
Contact the author at jon.hopkins@proactiveinvestors.com