The LOI was negotiated at arm's length and is effective as of May 31, 2018. GBC is engaged in the business developing state of the art private blockchain solutions for corporations and government agencies and is a joint venture company of Datametrex AI Limited (TSX V: DM) and its San Francisco based joint venture partner Bitnine Global Inc. ("Bitnine").
GBC had previously filed a Non-Offering prospectus (the "NOP") on March 19, 2018 with the Ontario Securities Commission ("OSC") in connection with proposed distribution of the common shares of GBC held by Datametrex to its shareholders and a proposed concurrent listing on the Canadian Stock Exchange ("CSE"). On May 28, 2018, GBC withdrew its prospectus application from the OSC. The Company decided to withdraw the NOP in order to take GBC public via an RTO as it will allow GBC to do a concurrent financing and set a valuation. GBC has matured tremendously since the decision to go public via NOP was made, including filing four patents in total with the United States Patent and Trademark Office ("USPTO") and Korea Intellectual Property Office ("KIPO"), it has signed contracts with multi-billion dollar conglomerates (see directly below for press releases), completed and delivered prototype solutions and as a result, demand to participate in a financing has emerged. It is management's view that an RTO will better position all stakeholders as GBC transitions to be a stand alone public company, while at the same time providing GBC to additional growth capital. Prototype Solution contracts include:
Terms of the Transaction
It is currently anticipated that the Transaction will be effected by way of merger, amalgamation, share exchange, plan of arrangement, business combination or other similar form of transaction as is acceptable to GBC and RegTech (the "Parties").
RegTech and GBC will enter into a definitive agreement in respect of the Transaction (the "Definitive Agreement") pursuant to which the common shares of GBC will be exchanged for 123,333,333 common shares in the capital of RegTech (collectively, the "Resulting Issuer Shares") at a deemed price of C$0.30 per Resulting Issuer Share on a pre-Consolidation (defined below) basis and pursuant to an exchange ratio to be agreed to by the Parties in accordance with the terms of the Definitive Agreement. The aggregate pre-financing valuation on the proposed Transaction will result in a combined market capitalization of C$39,079,890. In addition, GBC will have the right but not the obligations to complete a private placement of common shares at a price per share of C$0.30 for maximum gross proceeds of C$10,000,000 concurrent with the Transaction.
Datametrex currently holds an equity interest of 29.5% in GBC and, as a result of the closing of the proposed Transaction, Datametrex will hold an equity interest of approximately 28% in the resulting issuer. Datatmetrex understands that there is currently no commitment for an equity financing by GBC, however should GBC decide to arrange an equity financing concurrently with the closing of the proposed Transaction, Datametrex's equity interest in the resulting issuer would be diluted on a pro rata basis.
On or immediately prior to the completion of the Transaction, it is anticipated that: (i) RegTech will effect a name change to Graph Blockchain Inc. or such other name as may be determined by the board of directors of GBC; and (ii) RegTech will consolidate (the "Consolidation") its issued and outstanding common shares (the "RegTech Shares") on the basis of one new RegTech Share for every ten (10) RegTech Shares issued and outstanding on the effective date of the Consolidation.
It is contemplated that upon exercise of the GBC Warrants (defined below), the holders thereof will be issued Resulting Issuer Shares.
Completion of the Transaction is conditional upon other things: (i) the Parties and, if required, the shareholders of GBC (the "GBC Shareholders") entering into the Definitive Agreement; (ii) the satisfactory completion of all legal, business and technical due diligence to the satisfaction of each party; and (iii) the receipt of all required consents and approvals, including without limitation, the approval of the TSX Venture Exchange (the "TSXV") or the Canadian Securities Exchange (the "CSE", and any one of the TSXV and CSE , the "Exchange") to list the Resulting Issuer Shares for trading, and the approval of the GBC Shareholders and, if required, the shareholders of RegTech (the "RegTech Shareholders"), as may be necessary to complete the Transaction.
Prior to, and as a condition of the completion of, the Transaction, RegTech will complete a private placement of RegTech Shares to raise minimum gross proceeds of C$300,000 at a price of C$0.15 per RegTech Share (the "Offering"). The net proceeds from the Offering will be used to pay the costs of the Transaction and working capital purposes. Further details regarding the Offering will be included in a subsequent news release once additional details become available.
Signing of the Definitive Agreement is expected to occur on or prior to June 15, 2018. The Parties have agreed to complete the Transaction no later than August 31, 2018.
Upon completion of the Transaction, it is the intention of the Parties that the Resulting Issuer will continue to focus on the current business and affairs of GBC.
Completion of the Transaction is subject to a number of conditions, including but not limited to, Exchange acceptance. Where applicable, the Transaction cannot close until the required shareholder approval is obtained. There can be no assurance that the Transaction will be completed as proposed or at all.
Investors are cautioned that, except as disclosed in the management information circular, listing or filing statement to be prepared in connection with the Transaction, any information released or received with respect to the Transaction may not be accurate or complete and should not be relied upon.
Insiders, Officers and Board of Directors of the Resulting Issuer
The board of directors of the Resulting Issuer upon completion of the Transaction is expected to consist of a minimum of three directors, of which two will be independent, all of whom will be appointed by GBC. In addition, it is anticipated that upon completion of the Transaction, the current management of GBC will become the management of the Resulting Issuer as set out below. In addition, it is anticipated upon completion of the Transaction, that Datametrex AI Limited and Bitnine Global Inc. will be insiders as a result of holding more than 10 percent of the issued and outstanding Resulting Issuer Shares.