Xtract One Technologies Inc. and Madison Square Garden Sports Corp. announced that MSG Sports will invest up to C$13.4 million (US$10 million) in Xtract One, a security technology company that prioritises the patron access experience by leveraging AI.
The initial investment of C$8.4 million (US$6.3 million) is effective immediately, with the subsequent investment of C$5 million (US$3.7 million) being conditional on the approval of Xtract One’s shareholders and all applicable regulatory approvals (together with the “Investment”).
Investment
The Investment is comprised of the sale of up to 31,925,595 units (each a “Unit”) for C$0.42 per Unit.
Each Unit will be comprised of one common share of Xtract One (a “Common Share”) and one Common Share purchase warrant (each a “Warrant”) exercisable for C$0.60 for five years following the date of its issuance.
Investment tranche
All securities issued under the Investment will be subject to Canadian resale restrictions of four months and one day
The initial tranche of the Investment comprised the issuance of 20,000,000 Units for aggregate gross proceeds of C$8,400,000. The proposed second tranche of the Investment will be comprised of the issuance of 11,925,595 Units for aggregate gross proceeds of C$5,008,749.90.
All securities issued under the Investment will be subject to Canadian resale restrictions of four months and one day, in addition to applicable US resale restrictions.
Registration requirements
No commission or fee is or will be paid in connection with the Investment.
The Units issued under the Investment have not been registered under the United States Securities Act of 1933, as amended, and may not be offered or sold within the United States in the absence of U.S. registration or an applicable exemption from the U.S. registration requirements.
Purpose of investment
The initial and proposed subsequent equity Investment will enable Xtract One to further innovate its advanced security solution and accelerate its growth into new market segments.
Xtract One is transforming perimeter screening and security, replacing obsolete walk-through metal detectors with a fast, frictionless entry experience, while simultaneously providing a security solution that delivers exceptional experiences and safer environments.
Opportunities and benefits
We continue to see growth in the market and customer adoption of our security technology solutions"
“We are thrilled to announce this investment and partnership with MSG Sports. We continue to see impressive growth in market interest and customer adoption of our security technology solutions,” said Peter Evans, CEO of Xtract One.
He adds, “I believe this relationship will create unique opportunities and benefit multiple industries.”
Xtract One will hold a special meeting of shareholders to obtain disinterested shareholder approval of the second tranche of the Investment, currently scheduled for April 11, 2023.
About MSG Sports’ Investment
The investment by MSG Sports took place through its wholly-owned subsidiary MSG Sports Ventures, LLC (“MSGSV”), which is located at 2 Penn Plaza, New York, New York 10121.
Before its investment, MSGSV did not hold any securities of Xtract One. As a result of its investment for total gross proceeds of C$8.4 million, MSGSV holds 20,000,000 Common Shares and 20,000,000 Warrants, representing approximately 10.92% of the issued and outstanding Common Shares on a non-diluted basis and 19.69% on a partially diluted basis.
Investment increase
MSGSV has been granted the right to appoint an observer to the board of directors of Xtract One
Should its investment increase to C$13.4 million, MSGSV would hold an aggregate of 31,925,595 Common Shares and 31,925,595 Warrants, representing approximately 16.36% of the issued and outstanding Common Shares on a non-diluted basis, and 28.12% of the issued and outstanding Common Shares on a partially diluted basis, based on the current issued and outstanding Common Shares.
In connection with its investment, MSGSV entered into an investor rights agreement with Xtract One (the “Investor Rights Agreement”) under the terms of which MSGSV has been granted the right to appoint an observer to the board of directors of Xtract One.
Investor Rights Agreement
Under the Investor Rights Agreement, subject to certain limitations set forth therein, MSGSV is also entitled to
(a) certain “demand” registration rights that will allow MSGSV to request that Xtract One:
- qualify for resale under Canadian securities laws and/or,
- register for resale under the United States Securities Act of 1933, as amended, any Common Shares acquired by MSGSV as a result of its investment or upon exercise of the Warrants (collectively, the “Registrable Securities”); and,
(b) certain “piggyback” registration rights that will allow MSGSV to include the Registrable Securities in any public offering of equity securities initiated by Xtract One or another shareholder having registration rights.
MSGSV acquired ownership of the Common Shares and Warrants for investment purposes and may, from time to time, acquire additional securities of Xtract One, dispose of some or all of the securities of Xtract One that it holds or continue to hold the Common Shares, and Warrants.