XMachina AI Group Inc. Announces Completion of Business Combination

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XMachina AI Group Inc. announces completion of business combination

The Resulting Issuer plans to apply for listing on the Canadian Securities Exchange

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

VANCOUVER, British Columbia, June 09, 2022–(BUSINESS WIRE)–XMachina AI Group Inc. (formerly, 1210352 B.C. Ltd, the “Resulting Issuer” or “Company“) is pleased to announce that the previously announced business combination (the “Business Combination“), pursuant to which it planned to acquire XMachina-AI Inc. (“XMAI“), was completed on June 7, 2022. The Resulting Issuer will continue to carry on the business of XMAI and intends to have its subordinate voting shares (“Subordinate Voting Shares“) listed on the Canadian Securities Exchange (the “Exchange“).

Business Combination

The Business Combination was completed by way of a three-cornered amalgamation under the laws of the Province of British Columbia under the terms of a business combination agreement entered into among XMAI, the Company and 1343167 B.C. Ltd., a wholly owned subsidiary of the Company (“Subco“). Pursuant to the Business Combination, Subco amalgamated with XMAI resulting in an amalgamated company (“Amalco“), with Amalco becoming a wholly-owned subsidiary of the Company, known as “XMachina AI Inc.”. In addition, the Company underwent: (i) the Share Capital Amendment (as disclosed in its press release dated April 27, 2022); (ii) the Name Change (as defined below); (iii) issued Subordinate Voting Shares in exchange for common shares in the capital of XMAI (the “XMAI Common Shares“) on a 1:1 basis; (iv) issued multiple voting shares (the “Multiple Voting Shares“) in exchange for preferred shares in the capital of XMAI on a 1:1 basis; and (v) issued warrants and options in exchange for equivalent securities held by the former shareholders of XMAI.

In connection with the Business Combination, the Company changed its name from “1210352 B.C. Ltd.” to “XMachina AI Group Inc.” (the “Name Change“) and replaced all of directors and officers of the Company with the nominees of XMAI on the effective date of the Business Combination.

Exchange Listing

As contemplated by the Business Combination Agreement, the Resulting Issuer intends to apply to list the Subordinate Voting Shares on the Exchange (the “Listing“). The Resulting Issuer is a “reporting issuer” in the Provinces of British Columbia and Alberta, but is not currently listed for trading on any stock exchange. Completion of the Listing will be subject to, among other things, the Resulting Issuer receiving conditional listing approval from the Exchange, and the subsequent satisfaction by the Resulting Issuer of standard conditions of the Exchange. The Resulting Issuer has not yet applied for the Listing and the Exchange has not yet provided acceptance of such listing and there is no assurance that the Resulting Issuer’s application will be submitted on the expected timeline or at all. In connection therewith, the Resulting Issuer expects to file a long form non-offering prospectus (the “Prospectus“) with the British Columbia Securities Commission (the “BCSC“) and a listing statement (the “Listing Statement“) with the Exchange, in accordance with the policies of the BCSC and the Exchange, respectively.

Concurrent Financing and Conversion of Subscription Receipts

On June 1, 2022, in connection with the Business Combination, XMAI completed a brokered private placement with Hampton Securities acting as lead broker, of 1,675,000 subscription receipts (the “Subscription Receipts“) at a price of $0.25 per Subscription Receipt for aggregate gross proceeds of $418,750 (the “Concurrent Financing“). Immediately prior to the Business Combination, each Subscription Receipt was converted into XMAI Common Shares on a 1:1 basis. In connection with the Concurrent Financing, XMAI issued 134,000 common share purchase warrants (the “Broker Warrants“) to certain brokers representing their compensation in assisting with the Concurrent Financing. Each Broker Warrant is exercisable into one (1) common share at a price of $0.25 any time prior to May 31, 2024. In addition to the Broker Warrants, XMAI paid to certain brokers a total of $15,050 in cash representing the cash compensation in connection with the Concurrent Financing.

New Board and Management

Following the Business Combination, the leadership team of the Resulting Issuer is as follows:

  • Claude G. Théoret, Chief Executive Officer and Director (Chairman)
  • Patrick E. Brown, Chief Financial Officer and Director
  • Daniel O. Drouet, Chief Technology Officer and Director
  • J. Scott Munro, Chief Investment Officer, Corporate Secretary and Director
  • Alexander Suelzle, Director
  • Robert J. Lachance, Director
  • Vaughn J.E. DiMarco, Vice President of Growth

Capitalization

Upon completion of the Business Combination, the Resulting Issuer has 49,454,660 Subordinate Voting Shares, issued and outstanding, on an undiluted basis, of which:

  • The former shareholders of the Company hold 850,210 Subordinate Voting Shares, representing approximately 1.72%;
  • The subscribers that participated in the Concurrent Financing hold 1,675,000 Subordinate Voting Shares, representing approximately 3.39%; and
  • The former shareholders of XMAI now hold 46,929,450 Subordinate Voting Shares, representing approximately 94.89%.

Each Subordinate Voting Share entitles the holder thereof to one (1) vote per share at meetings of the shareholders of the Company.

In addition, upon completion of the Business Combination, the Resulting Issuer has 5,000,000 Multiple Voting Shares, issued and outstanding, on an undiluted basis, which are held as follows:

  • Chief Executive Officer and director of the Resulting Issuer, Claude G. Théoret, holds 1,750,000 Multiple Voting Shares;
  • Chief Financial Officer and Director of the Resulting Issuer, Patrick E. Brown, holds 1,125,000 Multiple Voting Shares;
  • Chief Technology Officer and Director of the Resulting Issuer, Daniel Drouet, holds 500,000 Multiple Voting Shares;
  • Chief Investment Officer and Director of the Resulting Issuer, J. Scott Munro, holds 1,125,000 Multiple Voting Shares; and
  • Vice President of Growth of the Resulting Issuer, Vaughn DiMarco, holds 500,000 Multiple Voting Shares.

Each Multiple Voting Share entitles the holder thereof to ten (10) vote per share at meetings of the shareholders of the Company.

In addition, the Resulting Issuer has 968,000 warrants which were issued to former warrantholders of XMAI, 134,000 Broker Warrants, 5,300,000 options previously issued to former directors and officers of XMAI, each exercisable to acquire one (1) Subordinate Voting Share.

Information for Shareholders

The Resulting Issuer’s transfer agent, Endeavor Trust Corporation (“Endeavor“), will be delivering by email or regular mail statements pursuant to the Direct Registration System (a “DRS Advice“) to all former shareholders of XMAI representing their Subordinate Voting Shares that were issued in connection with the completion of the Business Combination. Shareholders of the Resulting Issuer wishing to receive a physical share certificate should contact Endeavor accordance with the instructions on their DRS Advice for information on how to obtain a physical share certificate in place of a DRS Advice.

Additional Information About Business Combination

Additional terms of the Business Combination were previously disclosed in the press release of the Company on April 27, 2022, which is available under the Resulting Issuer’s SEDAR profile at www.sedar.com.

Further details about the Business Combination and the Resulting Issuer will be provided in the Listing Statement and the Prospectus to be prepared and filed by the Resulting Issuer in respect of the Business Combination.

Investors are cautioned that, except as disclosed in the Listing Statement and the Prospectus (or other disclosure document prepared by the Resulting Issuer) in connection with the Business Combination, any information released or received with respect to the Business Combination may not be accurate or complete and should not be relied upon.

Auditors and Year-End

In connection with the completion of the Business Combination, MNP LLP, at its principal office in Vancouver, British Columbia, will replace Adam Sung Kim Ltd., as the auditors of the Resulting Issuer. The year end of the Resulting Issuer will remain the same as the year end of the Company, namely December 31st.

Early Warning Disclosure

Aaron Brown of Coquitlam, British Columbia, a shareholder of the Resulting Issuer, will file an early warning report in accordance with National Instrument 62-104 – Take-Over Bids and Issuer Bids (“NI 62-104“) and National Instrument 62-103 – The Early Warning System and Related Take-Over Bid and Insider Reporting Issues (“NI 62-103“) in connection with the closing of the Business Combination (the “Closing“). Immediately prior to the Closing, Mr. A. Brown, directly or indirectly, held 140,000 Subordinate Voting Shares (representing 16.47% of the issued and outstanding Subordinate Voting Shares). Pursuant to the Business Combination, Mr. A. Brown acquired 100,000 Subordinate Voting Shares in exchange for 100,000 XMAI Common Shares held prior to the Closing. Immediately following the Closing, Mr. A. Brown holds or controls, directly or indirectly, an aggregate of 240,000 Subordinate Voting Shares representing 0.49% of the issued and outstanding Subordinate Voting Shares on a non-diluted basis and partially diluted basis.

Mr. Christopher G. Hill of Montreal, Quebec, a shareholder of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Mr. Hill directly or indirectly, held 130,000 Subordinate Voting Shares (representing 15.29% of the issued and outstanding Subordinate Voting Shares). Immediately following the Closing, Mr. Hill holds or controls, directly or indirectly, an aggregate of 130,000 Subordinate Voting Shares representing 0.26% of the issued and outstanding Subordinate Voting Shares on a non-diluted basis and partially diluted basis.

Ms. Barbara DiMarco of Erin, Ontario, a shareholder of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Ms. DiMarco directly or indirectly, held 130,000 Subordinate Voting Shares (representing 15.29% of the issued and outstanding Subordinate Voting Shares). Immediately following the Closing, Ms. DiMarco holds or controls, directly or indirectly, an aggregate of 130,000 Subordinate Voting Shares representing 0.26% of the issued and outstanding Subordinate Voting Shares on a non-diluted basis and partially diluted basis.

Ms. Michell J. Théoret of St. Albert, Alberta, a shareholder of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Ms. Théoret directly or indirectly, held 130,000 Subordinate Voting Shares (representing 15.29% of the issued and outstanding Subordinate Voting Shares). Immediately following the Closing, Ms. Théoret holds or controls, directly or indirectly, an aggregate of 130,000 Subordinate Voting Shares representing 0.26% of the issued and outstanding Subordinate Voting Shares on a non-diluted basis and partially diluted basis.

Claude G. Théoret, of Montreal Quebec, the Chief Executive Officer, director and a controlling shareholder of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 related to the acquisition of 5,489,350 Subordinate Voting Shares, 1,750,000 Multiple Voting Shares, and 1,000,000 options to purchase Subordinate Voting Shares (the “Options“) in connection with the Closing. Immediately prior to the Closing, Mr. Théoret did not, directly or indirectly, hold any shares of the Resulting Issuer. Immediately following the Closing, Mr. Théoret holds or controls, directly or indirectly, an aggregate of (i) 5,489,350 Subordinate Voting Shares representing 11.10% of the issued and outstanding Subordinate Voting Shares on a non-diluted basis, (ii) 1,000,000 Options, which if exercised into Subordinate Voting Shares, together with 5,489,350 Subordinate Voting Shares will represent approximately 11.64% of partially diluted basis, and (iii) 1,750,000 Multiple Voting Shares, representing 35% of the issued and outstanding Multiple Voting Shares. The Multiple Voting Shares are convertible on a one-to-one tenth thousandth (1:0.0001) basis into 175 Subordinate Voting Shares. Multiple Voting Shares represent, on an as-converted or exchanged for Subordinate Voting Share-basis (converting or exchanging only the shares and securities that Mr. Théoret owns or exercises control and direction over), ownership of an aggregate of approximately 11.10% of outstanding Subordinate Voting Shares.

Patrick Brown of Vancouver, British Columbia, the Chief Financial Officer and director of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Mr. P. Brown did not, directly or indirectly, hold any shares of the Resulting Issuer. Immediately following the Closing, Mr. P. Brown holds or controls, directly or indirectly, an aggregate of 1,125,000 Multiple Voting Shares, representing 22.50% of the issued and outstanding Multiple Voting Shares. The Multiple Voting Shares are convertible on a one-to-one tenth thousandth (1:0.0001) basis into 112 Subordinate Voting Shares. Multiple Voting Shares represent, on an as-converted or exchanged for Subordinate Voting Share-basis (converting or exchanging only the shares and securities that Mr. P. Brown owns or exercises control and direction over), ownership of an aggregate of approximately 3.03% of outstanding Subordinate Voting Shares.

Daniel O. Drouet of Montreal, Quebec the Chief Technology Officer and director of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Mr. Drouet did not, directly or indirectly, hold any shares of the Resulting Issuer. Immediately following the Closing, Mr. Drouet holds or controls, directly or indirectly, an aggregate of 500,000 Multiple Voting Shares, representing 10.00% of the issued and outstanding Multiple Voting Shares. The Multiple Voting Shares are convertible on a one-to-one tenth thousandth (1:0.0001) basis into 50 Subordinate Voting Shares. Multiple Voting Shares represent, on an as-converted or exchanged for Subordinate Voting Share-basis (converting or exchanging only the shares and securities that Mr. Drouet owns or exercises control and direction over), ownership of an aggregate of approximately 3.03% of outstanding Subordinate Voting Shares.

J. Scott Munro of Surrey, British Columbia, the Chief Investment Officer and director of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Mr. Munro did not, directly or indirectly, hold any shares of the Resulting Issuer. Immediately following the Closing, Mr. Munro holds or controls, directly or indirectly, an aggregate of 1,125,000 Multiple Voting Shares, representing 22.50% of the issued and outstanding Multiple Voting Shares. The Multiple Voting Shares are convertible on a one-to-one tenth thousandth (1:0.0001) basis into 112 Subordinate Voting Shares. Multiple Voting Shares represent, on an as-converted or exchanged for Subordinate Voting Share-basis (converting or exchanging only the shares and securities that Mr. Munro owns or exercises control and direction over), ownership of an aggregate of approximately 4.22% of outstanding Subordinate Voting Shares.

Vaughn DiMarco of Montreal, Quebec, Vice President of Growth of the Resulting Issuer, will file an early warning report in accordance with NI 62-104 and NI 62-103 in connection with the Closing. Immediately prior to the Closing, Mr. DiMarco did not, directly or indirectly, hold any shares of the Resulting Issuer. Immediately following the Closing, Mr. DiMarco holds or controls, directly or indirectly, an aggregate of 500,000 Multiple Voting Shares, representing 10.00% of the issued and outstanding Multiple Voting Shares. The Multiple Voting Shares are convertible on a one-to-one tenth thousandth (1:0.0001) basis into 50 Subordinate Voting Shares. Multiple Voting Shares represent, on an as-converted or exchanged for Subordinate Voting Share-basis (converting or exchanging only the shares and securities that Mr. DiMarco owns or exercises control and direction over), ownership of an aggregate of approximately 2.65% of outstanding Subordinate Voting Shares.

The shares are held by Mr. A. Brown, Mr. Hill, Ms. DiMarco, Ms. Théoret, Mr. Théoret, Mr. P. Brown, Mr. Drouet, Mr. Munro, and Mr. DiMarco (together, the “Reporters“) are for investment purposes, and Mr. Théoret (“Escrow Reporter“) will be subject to an escrow time-based release schedule, as will be more particularly described in the Listing Statement and Prospectus. The Reporters currently have no plans or intentions that relate to, or would result in, any of the actions requiring disclosure under the early warning reporting provisions of applicable securities laws. In accordance with applicable securities laws, the Reporters may, from time to time and at any time, acquire additional shares and/or other equity, debt or other securities or instruments of the Resulting Issuer in the open market or otherwise, and reserves the right to dispose of any or all of such securities in the open market or otherwise at any time and from time to time, and to engage in similar transactions with respect to such securities, the whole depending on market conditions, the business and prospects of the Resulting Issuer and other relevant factors, subject to a time-based release schedule pursuant to escrow agreement to be entered into by Escrow Reporter. A copy of the early warning reports will be filed by authorized representative of each Reporter under the Resulting Issuer’s profile on SEDAR at www.sedar.com.

Related Party Transaction

As Mr. Aaron Brown, a former controlling shareholder of the Resulting Issuer, indirectly received Subordinate Voting Shares in connection with the Business Combination, his acquisition of Subordinate Voting Shares is considered a “related party transaction” for the purposes of Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101“). The participation of Mr. Brown is exempt from the formal valuation requirements of MI 61-101 as none of the Resulting Issuer’s securities are listed or quoted on the Toronto Stock Exchange, the New York Stock Exchange, the American Stock Exchange, the NASDAQ Stock Market, or a stock exchange outside of Canada or the United States other than the Alternative Investment Market of the London Stock Exchange of the PLUS markets operated by PLUS Markets Group plc. In addition, the participation of Mr. Brown is exempt from the minority shareholder approval requirements of MI 61-101 pursuant to Subsection 5.7(1)(e) of MI 61-101 Financial Hardship, which provides an exemption where the financial hardship criteria set out in Subsection 5.5(g) of MI 61-101 are met and where there is no other requirement, corporate or otherwise, to hold a meeting to obtain any approval of the holders of any class of affected securities.

Garfinkle Biderman LLP acted as legal advisors for the Company in connection with the Business Combination and Fasken Martineau DuMoulin LLP acted as legal advisors for XMAI in connection with the Business Combination.

About the Resulting Issuer

XMachina-AI acquires companies that are applying AI and advanced data analytics in innovative ways to solve real world business problems. The Company then accelerates their growth by injecting capital, top tier talent and by streamlining their corporate processes. Current sectors of interest for the Company include supply-chain and logistics, manufacturing, construction and real estate management. For more information, please visit: https://machina-ai.com

No recognized securities exchange accepts responsibility for the adequacy of this news release, which has been prepared by management of the Resulting Issuer.

Cautionary Note Regarding Forward-Looking Statements

This news release contains statements that constitute “forward-looking statements.” Such forward looking statements involve known and unknown risks, uncertainties and other factors that may cause the Resulting Issuer’s actual results, performance or achievements, or developments to differ materially from the anticipated results, performance or achievements expressed or implied by such forward-looking statements.

Forward-looking statements are statements that are not historical facts and are generally, but not always, identified by the words “expects,” “plans,” “anticipates,” “believes,” “intends,” “estimates,” “projects,” “potential” and similar expressions, or that events or conditions “will,” “would,” “may,” “could” or “should” occur.

Forward-looking statements in this document include, among others, statements relating to expectations and intentions regarding the Listing on the Exchange, preparing and filing and receiving a receipt from the BCSC with respect to the Prospectus, the business plans of the Resulting Issuer and other statements that are not historical facts. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors and risks include, among others: (a) that there is no assurance that the Resulting Issuer will obtain a conditional or final approval from the Exchange in connection with the Listing or final receipt from the BCSC in connection with the Prospectus on the expected timeline or at all; (b) the anticipated costs to complete the Listing may exceed current expectations; (c) following completion of the Business Combination, the Resulting Issuer may require additional financing from time to time in order to continue its operations which may not be available when needed or on acceptable terms and conditions; (d) the new laws and regulations could adversely affect the Resulting Issuer’s business and results of operations; (e) the stock markets have experienced volatility that often has been unrelated to the performance of companies and these fluctuations may adversely affect the price of the Resulting Issuer’s securities, regardless of its operating performance; (f) limited business history of the Resulting Issuer; (g) disruptions or changes in the AI markets or the economy generally; (h) unanticipated costs and expenses; and (i) general market and industry conditions.

The forward-looking information contained in this news release represents the expectations of the Resulting Issuer as of the date of this news release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward-looking information and should not rely upon this information as of any other date. The Resulting Issuer undertakes no obligation to update these forward-looking statements in the event that management’s beliefs, estimates or opinions, or other factors, should change.

Completion of the Listing is subject to a number of conditions, including but not limited to Exchange acceptance and the BCSC acceptance. There can be no assurance that the Listing will be completed as proposed or at all.

Investors are cautioned that, except as disclosed in the Management Information Circular dated April 14, 2022 prepared in connection with the Business Combination, and as will be disclosed in the Listing Statement or Prospectus to be prepared in connection with the Listing, any information released or received with respect to the Business Combination and Listing may not be accurate or complete and should not be relied upon.

United States Disclaimer

This news release does not constitute an offer to sell or a solicitation of an offer to buy any of the securities in the United States. The Company’s securities have not been and will not be registered under the United States Securities Act of 1933, as amended (the “U.S. Securities Act“) or any state securities laws and may not be offered or sold within the United States or to U.S. Persons (as such term is defined in Regulation S under the U.S. Securities Act) unless registered under the U.S. Securities Act and applicable state securities laws or an exemption from such registration is available.

View source version on businesswire.com: https://www.businesswire.com/news/home/20220608006234/en/

Contacts

XMachina AI Group Inc.
Claude G. Théoret
Chief Executive Officer & Director
T: 514-564-8880
E: claude@machina-ai.com

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