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Item
1.01
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Entry
into a Material Definitive Agreement
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On
July 19, 2019, Notox Technologies Corp. (the “Company”) entered into binding letter of intent (the “LOI”)
with Xthetica Inc. (“Xthetica”), a private Ontario, Canada corporation, pursuant to which the Company agreed to acquire
all of the issued and outstanding capital stock of Xthetica Inc. (“NewCo”), a newly incorporated Nevada corporation
owned by the sole shareholder of Xthetica, from that shareholder in exchange for an aggregate of 10,000,000 restricted shares
of the Company’s common stock and warrants to purchase 10,000,000 restricted shares of the Company’s common stock,
in each case issuable over a period of three years.
NewCo
was recently formed for the purpose of acquiring 100% of the right, title and interest in and to certain assets owned by Xthetica
(collectively, the “Assets”), including Xthetica’s rights and obligations under a series of distribution agreements
with manufacturers of medical aesthetics products, access to all of Xthetica’s current inventory for the purpose of selling
the same, and the goodwill of Xthetica. The effective date of the Asset acquisition is expected to be July 1, 2019.
Pursuant
to the LOI, the parties have agreed to work together to determine the appropriate structure for the proposed transaction (the
“Transaction”), which will be governed by a definitive agreement that set outs in full the terms of the Transaction.
The definitive agreement is expected to be executed as soon as reasonably practicable and in any event on or before August 15,
2019, with the closing date of the Transaction no later than 30 days thereafter (or such other date as the parties may agree upon
in writing).
The
shares and warrants issuable by the Company to the sole shareholder of Xthetica or his assigns are anticipated to be issued as
follows:
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(a)
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1,000,000
shares and 1,000,000 warrants on or before December 31, 2019;
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(b)
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3,000,000
shares and 3,000,000 warrants on or before December 31, 2020; and
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(c)
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6,000,000
shares and 6,000,000 warrants on or before December 31, 2021.
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Each
share will be issued at a deemed price per share equal to the value of the Company’s common stock on the OTCQB (or such
other stock exchange or quotation medium on which the shares are then trading) on the date of issuance, while each warrant will
be exercisable into one share of the Company’s common stock at a price of US$1.40 per share for a period of three (3) years
from the date of issuance, subject to standard adjustments for stock splits, stock dividends and the like.
The
LOI also requires the Company to cause a new wholly owned subsidiary (“SubCo”) to enter into employment or consulting
agreements in form and substance acceptable to Xthetica with a maximum of seven (7) individuals recommended to the Company by
Xthetica. The particulars of the employment and consulting arrangements, including the compensation payable by the Company (through
SubCo) to the individuals, are currently being negotiated in good faith by the Company, Xthetica and the applicable individuals,
and the LOI specifically grants the Company the right to solicit and engage those persons.
The
LOI includes a number of closing conditions, including the completion of satisfactory due diligence by the Company, the completion
of the assignment of the Assets by Xthetica to NewCo, and the satisfactory review by the parties of the tax and securities implications
of the proposed transaction. As of the date of this report, the Company’s due diligence investigation has largely been completed;
however, the Company has the ability to terminate the LOI at any time prior to the close of business on July 31, 2019 should the
remaining due diligence or the consequences of concluding the transaction prove unsatisfactory.
Upon
the completion of the Transaction, of which there is no guarantee, NewCo will become a wholly owned operating subsidiary of the
Company.
There
is no material relationship between the Company or its affiliates and Xthetica or the sole shareholder of Xthetica, except that
the Company previously engaged the sole shareholder to assist in the process of searching for a full time CEO for the Company.