Zefiro founder Debs disappointed with dismissal by BCSC

Dr. Talal Debs reports ZEFIRO FOUNDER UPDATES SHAREHOLDERS ON BRITISH COLUMBIA SECURITIES COMMISSION RULING AHEAD OF SHAREHOLDER VOTE Dr. Talal A. Debs, founder and director of Zefiro Methane Corp., has provided an update to Zefiro shareholders on some crucial victories in his drive for change. Key outcomes include the following: The British Columbia Securities Commission (BCSC) dismissed a cross-application by controlling lender David McGrath, who sought to set aside X Machina Sustainable Technologies Inc.'s (XMST) rights and block Zefiro's largest shareholder, X Machina Capital Strategies Fund I LP (XMC), from voting at the company's coming annual general and special meeting on March 20, 2026. The BCSC denied relief Dr. Debs requested as concerned shareholders, but the hearing brought to light deeply flawed governance and disclosure record of incumbent Zefiro directors. Hearing proceedings also made it clear that the concerned shareholders' shareholder advocacy through the announcement of a proxy contest drove conflicted management and controlling lenders to equitize and/or refinance over $3-million (U.S.) of the company's near-term debt maturities. Dr. Debs announced that the application before the commission brought by Dr. Debs, XMST and XMC (collectively, the concerned shareholders) against Zefiro, its interim chief executive officer, Catherine Flax, Mr. McGrath and Michael McGavick (together referred to as the controlling lenders) was dismissed. The commission also dismissed a cross-application made by Mr. McGrath to restrain Dr. Debs from voting certain common shares of Zefiro he holds as well as the common shares held by XMST and XMC, which cross-application was previously partially stayed by the commission. The commission is not expected to provide reasons for its decision in the near term. Dr. Debs commented: "In my view, the great benefit of public markets is that they provide an avenue for genuine transparency and the ability to hold incumbent management to account. XMC intends to demand this of Zefiro's management, board and related party investors like the controlling lender David McGrath, whether this relates to disclosures, decisions on financing or strategic transactions, and combinations. We are thankful that the BCSC took the time to hear our application which has led to greater transparency for Zefiro's shareholders." Dr. Debs also announced that XMST intends to enforce its rights under its investor rights agreement with Zefiro, dated June 6, 2023, to acquire 1,386,184 common shares and warrants and options to acquire 6,096,481 common shares (or approximately 7.63 per cent of the issued and outstanding common shares on a partially diluted basis). Application brought to light Zefiro's record of poor governance and disclosure The application challenged the issuance of 13,214,494 common shares to Ms. Flax, Mr. McGrath and Mr. McGrath's brother-in-law (Mr. McGavick) on Jan. 27, 2026, the date immediately prior to the record date for the meeting, at which a requisition made by the concerned shareholders will be dealt with along with normal course annual meeting matters. Although the application was dismissed, it was beneficial to shareholders in that it unearthed troubling governance and disclosure practices of the incumbent directors: Poor governance regarding issuance of debt settlement shares: The transaction related to the debt settlement shares was negotiated on behalf of the company by its chief financial officer (with minimal oversight from the chair of the board of directors). In effect, the CFO was negotiating against his superior, Ms. Flax, as well as Mr. McGrath, who had negative control of the company through the May, 2025, $2.48-million (U.S.) loan agreement with a subsidiary of the company (the May, 2025, loan). Every director of the company was in conflict due to the proxy fight against the concerned shareholders and yet no independent legal or financial advice was sought by the incumbent directors. As acknowledged by Zefiro, the process was not best in class -- in fact, it was far from that. Shareholders should be wary of the incumbent directors' assurances that they adhere to good governance practices. Failure to provide important disclosure required by Multilateral Instrument 61-101: In connection with the debt settlement shares, the company filed a material change report that failed to comply with MI 61-101, Protection of Minority Security Holders in Special Transactions. The report failed to disclose that Mr. McGrath had negative control over the operations of the company and could therefore be considered a related and conflicted party in connection with the debt settlement shares. The following required disclosure was also omitted: (i) the review and approval process adopted by the board of directors for the transaction, which would have brought to light the poor governance process outlined above; and (ii) a discussion of the fact that Dr. Debs opposed the transaction. Further, the company failed to disclose that the cash proceeds from the transaction would be applied to pay a significant portion of a loan made in the name of the interim CEO's spouse. The company also filed a material change report with respect to the May, 2025, loan, albeit four days late. The report did not disclose that Mr. McGrath and Mr. McGavick were lenders. Further, it did not disclose that the May, 2025, loan granted a negative control covenant to Mr. McGrath. For his part, Dr. Debs had encouraged the company to disclose the controlling lenders' identities: Failure to file material contracts on a timely basis: Securities regulations clearly require the filing of material contracts, yet the details of the May, 2025, loan were obscured from public consumption. The loan agreement was not filed to SEDAR+ until Feb. 6, 2026, well after the issuance of the debt settlement shares and over eight months after the agreement was originally entered into, and following the commencement of the application. Cross-application The cross-application appeared to be brought by Mr. McGrath to increase the costs of the concerned shareholders in seeking to reconstitute the board of Zefiro and also served to waste the resources of the company and its shareholders. In a ruling of the commission on Feb. 23, 2026, the commission partially stayed the cross-application and granted leave to Mr. McGrath to allocate a portion of his oral submission to convincing the panel that the commission had a broader jurisdiction than noted in its ruling. Mr. McGrath was unsuccessful in trying to convince the commission. Enforcement of rights under the investor rights agreement The investor rights agreement provides XMST and its principals with the right to acquire their pro rata share of any securities issued by Zefiro so long as they own, directly or indirectly, at least 10 per cent of the issued and outstanding common shares. Two years after signing the agreement and without any prior public disclosure, the company took the position that the investor rights agreement is void. The chair of the board, perhaps appreciating the absurdity of doing so, affirmed that this is simply reserving Zefiro's rights; however, the company then proceeded to once again claim that the investor rights agreement is invalid. The XMST Group intends to take all steps necessary to protect its rights under the investor rights agreement and exercise its pre-emptive rights to acquire 1,386,184 common shares and options and warrants to acquire 6,096,481 common shares (or approximately 7.63 per cent of the issued and outstanding common shares on a partially diluted basis). Next steps Although Dr. Debs is disappointed with the dismissal of the application, he and the other concerned shareholders will continue to fight for the right of Zefiro shareholders to have a leadership team that puts the company and its shareholders first, not themselves. The concerned shareholders will oppose all transactions and steps taken by the incumbent board to seek to entrench themselves or diminish the value of the common shares. The concerned shareholders urge you to submit your vote today using the blue proxy. Shareholders are encouraged to visit the Zefiro Truth website for more information about the concerned shareholders' nominees and plan for change. Shareholder voting assistance If you have any questions or require assistance with voting, please contact Carson Proxy Advisors. North American toll-free phone:   1-800-530-5189 Local and text:  416-751-2066 E-mail:  [email protected] We seek Safe Harbor.