Nextech3D.AI (CSE:NTAR, OTCQX:NEXCF) said it has entered into an arrangement agreement with its wholly-owned subsidiary Toggle3D and a special purpose financing company, 1400330 B.C. Ltd (FinanceCo) for the spin-out of Toggle3D to a SpinCo.
The agreement, effective April 5, 2023, sets out the terms on which Nextech will complete a plan of arrangement under the Business Corporations Act (British Columbia) whereby the Toggle3D platform and associated assets will be spun out.
The arrangement, if completed, will result in Nextech retaining an aggregate of 16 million common shares of Spinco and an aggregate of 4 million Spinco shares being distributed directly to Nextech’s shareholders on a pro-rata basis.
Nextech said it currently intends to transfer an aggregate of 3 million of the 16 million Spinco shares it will receive pursuant to the arrangement to certain service providers in consideration of past services and other indebtedness.
“This spin-off transaction is moving forward quickly and will give Nextech shareholders ownership in yet another exciting public company,” the company said in a statement.
READ: Nextech3D.AI says Toggle3D has increased converting power of its CAD to POLY importer by over 10 times
It noted that Toggle3D already has over 1,300 users on its AI-Powered 3D design studio, which leaves it “perfectly positioned for growth in the rapidly emerging 3D everything and everywhere world”.
It described the spin-out as “another major milestone” for the company and its shareholders.
“This transaction is anticipated to bring to the public markets our patent pending CAD to POLY technology under a highly experienced and focused management team, unlocking the true value of our groundbreaking AI technology and creating yet another pure play technology company, while creating value for our shareholders,” Nextech said.
Spinco intends to seek a listing of its common shares on the Canadian Securities Exchange (CSE) following the completion of the arrangement.
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.
Nextech said it believes that Toggle3D is the first platform of its kind, and that 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 by 2023.
Private Placement
In connection with the spin-out arrangement, FinanceCo shall complete a private placement of a minimum of 6 million subscription receipts at a price of C$0.25 each to raise aggregate gross proceeds of a minimum of C$1.5 million, Nextech said.
Each subscription receipt will automatically convert upon the satisfaction or waiver of all conditions precedent to the arrangement and certain other ancillary (release) 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 common share of FinanceCo and one share purchase warrant.
Each FinanceCo warrant is exercisable to acquire one additional FinanceCo share at an exercise price of C$0.50 for a period of three years from the date of issuance. In the event that the closing price of the FinanceCo 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, FinanceCo may disseminate a press release announcing the acceleration of such expiry date to a date that is 30 days following the date of such press 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 paid to Spinco.
Immediately following the conversion of the subscription receipts, FinanceCo will amalgamate with a wholly-owned subsidiary of Spinco pursuant to the arrangement and all FinanceCo shares and warrants shall be exchanged for equivalent securities of Spinco on a 1:1 basis.
Nextech said it is intended that the proceeds raised from the private placement will be used for further development and promotion of the Toggle3D app and for general corporate purposes. The private placement is anticipated to close prior to May 31, 2023.
Nextech3D.ai is a diversified augmented reality (AR), artificial intelligence (AI) technology company that leverages 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