22 Capital Corp. agrees to qualifying transaction with nDivision Inc.

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TORONTO, July 25, 2017 /CNW/ - 22 Capital Corp. (TSXV: LFC.P) ("22 Capital") is pleased to announce that it has signed a binding letter agreement (the "Letter Agreement") with nDivision Inc., a privately held corporation existing under the laws of the State of Texas ("nDivision"), which outlines the general terms and conditions pursuant to which 22 Capital and nDivision have agreed to complete a transaction that will result in a reverse take-over of 22 Capital by the shareholders of nDivision (the "Transaction"). The Letter Agreement was negotiated at arm's length and is effective as of July 24, 2017.

nDivision operates in the artificial intelligence industry helping organizations with the digital transformation of their data and cloud computing enablement, accomplished primarily through the use of advanced autonomic technology which facilitates the replacement of human labour with digital labour.

Terms of the Transaction

22 Capital will acquire all of the issued and outstanding common shares of nDivision (the "nDivision Shares") in exchange for an aggregate of 42,213,320 shares of 22 Capital after giving effect to a 2.4 for one share consolidation (the "Consolidation"). Prior to the completion of the Transaction, 22 Capital will complete a private placement of 1,111,111 common shares, as such shares exist following the Consolidation (the "Post-Consolidation Shares") (or subscription receipts convertible into Post-Consolidation Shares) at a price of C$0.45 per Post-Consolidation Share for aggregate gross proceeds of C$500,000 (the "Offering"). Up to 277,777 securities (C$125 ,000) may be purchased by insiders of 22 Capital (the "Insider Participation") in connection with the Offering. The net proceeds from the Offering will be used for working capital and for general corporate purposes. Further details regarding the Offering will be included in a subsequent news release once additional details become available.

Upon completion of the Transaction it is expected that the shareholders of 22 Capital will hold approximately 9.7% of the equity of the combined entity (the "Resulting Issuer"), purchasers in the Offering will hold approximately 2.3% of the equity of the Resulting Issuer, and the former shareholders of nDivision will hold approximately 88.0% of the equity of the Resulting Issuer (immediately prior to giving effect to the Offering).

About nDivision (www.nDivision.com)

nDivision is a corporation existing under the laws of the State of Texas and was formed on June 13, 2012 under Section 6.201 of the Business Organizations Code of the State of Texas. Its registered office is located at 4925 Greenville Ave, Suite 200, Dallas, Texas 75206.

nDivision was founded in Dallas, Texas in July of 2011 as a Limited Liability Company, and subsequently converted to a corporation in June of 2012. nDivision initially partnered with a global IT service provider to provide professional services to their small and medium customers, and went on to become a hardware reseller. Shortly after commencement of operations, nDivision acquired a small Managed Service Provider in order to provide Managed Services and to participate in the same global IT service provider's Managed Services partner program. Managed Services includes the practice of outsourcing the responsibilities and functions of IT infrastructure management and providing a strategic method for improving operations. nDivision has made significant investments in sophisticated technology to automate much of the work required to provide Managed Services in an attempt to become a recognized industry participant in replacing human labor with digital labor to reduce costs, and drive up service levels. The recurring revenues generated from Managed Services are a key focus for its business and currently account for approximately 80% of nDivision's total operating costs.  nDivision is positioned to grow its recurring revenues organically through strategic partnerships and independent sales agents, as well as acquisitively.

Insiders, Officers and Board of Directors of the Resulting Issuer

Upon completion of the Transaction, Alan Hixon, the Chief Executive Officer of nDivision, will serve as President, Chief Executive Officer and a director of the Resulting Issuer. Prior to the completion of the Transaction, a Chief Financial Officer and Corporate Secretary will be determined by the board of directors of the Resulting Issuer.

The following sets out the names and backgrounds of all persons who are currently expected to be considered officers of the Resulting Issuer. 

Alan Hixon, President and Chief Executive Officer

Mr. Hixon started his career with IBM and has 35 years' experience in the IT industry, spanning hardware, software, services and leasing.  In 1994, he founded an IT services company in the U.K. which grew to C$100,000,000 in annual revenues and 500 employees.  In July of 2011, he founded nDivision with Brad Wiggins and Justin Roby, incorporating many of the principles that had been successful in his first venture.  Mr. Hixon is responsible for vision, strategy, marketing and strategic partnerships.

Brad Wiggins, Chief Administrative Officer

Mr. Wiggins has 18 years' experience in the IT industry, initially in the engineering and data management software and IT infrastructure space.  He went on to create a computer hardware reseller and professional services business.  Mr. Wiggins is responsible for general operations at nDivision and is expected to take a lead role in any acquisitions.

Justin Roby, Chief Technology Officer

Mr. Roby has 19 years' experience in the IT industry.  At age 15, he was the youngest full-time employee in IBM's history.  He went on to found a computer diagnostics and networking business and became one of the most certified IT consultants in the U.S.  Mr. Roby is responsible for driving nDivision's efficiency gains and competitive advantage, through the use of state-of-the-art technology.

Mike Beavers, Chief Commercial Officer

Mr. Beavers has 17 years' experience in the IT industry and has extensive technical experience in both customer and service provider environments. Over a three-year period, he helped grow a Managed Service Provider from start-up to approximately C$65,000,000 a year in annual revenues.  Mr. Beavers is responsible for strategic growth of recurring revenues, service delivery and spearheading large client opportunities at nDivision.

It is expected that upon completion of the Transaction the board of directors of the Resulting Issuer will consist of seven directors. 22 Capital will issue an additional news release including further information with respect to the incoming board of directors and other officers of the Resulting Issuer as soon as such titles are formally determined.

As at the date hereof, Messrs. Hixon, Wiggins and Roby beneficially own, in the aggregate, directly or indirectly, approximately 91% of the nDivision Shares.

Financial Information for nDivision

The following information summarizes selected unaudited financial information for nDivision and is expressed in U.S. dollars (as of June 30, 2017).

Balance Sheet	June 30, 2017
Current assets	$1,280,822
Total assets	$2,716,868
Current liabilities	$880,541
Total Liabilities	$2,164,198
Total shareholders' equity	$552,669

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 nDivision and will be a Tier 2-listed Technology Issuer on the TSXV.

Conditions to Transaction

Prior to completion of the Transaction (and as conditions of closing):

• 22 Capital shall convene a meeting of its shareholders for the purpose of approving, among other matters: (i) the Consolidation; (ii) a name change to such name as may be approved by nDivision and acceptable to applicable regulatory authorities; (iii) an amendment to its articles to create a class of restricted voting shares (each a "Restricted Share"), each of which shall be convertible into Post-Consolidation Shares on a one for one basis; (iv) the election of the directors to replace the current directors of 22 Capital immediately following the completion of the proposed Transaction; (v) the continuance of 22 Capital to the Province of British Columbia if fewer than 25% of the proposed nominees to be appointed to the board of directors of the Resulting Issuer on completion of the Transaction are non-residents of Canada (the "Continuance"); and (vi) the approval of the Transaction, if required by the TSXV.
• 22 Capital will prepare a filing statement (or management information circular) in accordance with the rules of the TSXV, outlining the terms of the Transaction. nDivision will provide assistance and details as to the business, assets, properties and operations of nDivision and will be responsible for any and all audited annual financial statements, interim financial statements, if applicable, and pro forma financial statements related to its business and operations.
• 22 Capital will complete the Offering.
• 22 Capital and nDivision will enter into a definitive agreement (the "Definitive Agreement") in respect to the Transaction.
• nDivision will obtain the requisite shareholder approvals for the Transaction and the ancillary matters contemplated in the Definitive Agreement.
• All requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained.

Pre-Closing Capitalization of 22 Capital

As of the date hereof, 22 Capital has 10,140,000 common shares (the "Existing Shares") issued and outstanding, options (the "Options") to acquire an aggregate of 1,010,000 Existing Shares at an exercise price of C$0.10 per Existing Share, and broker warrants (the "Broker Warrants") to acquire 560,000 Existing Shares at an exercise price of C$0.10 per Existing Share. As a condition of the Transaction, all of the Options will be exercised prior to the completion of the Transaction. Upon completion of the Consolidation and the exercise of the Options, and immediately prior to the closing of the Transaction, 22 Capital will have 4,645,833 Post-Consolidation Shares issued and outstanding, together with an aggregate of 233,333 Broker Warrants exercisable at a price of C$0.24 per Post-Consolidation Share until May 10, 2019.

Additional Information Regarding the Transaction

In connection with the Transaction, each shareholder of nDivision will receive one-half of one Post-Consolidation Share and one-half of one Restricted Share for each nDivision Share then held, resulting in the issue to such shareholders of nDivision of 21,106,660 Post-Consolidation Shares and 21,106,660 Restricted Shares. The Restricted Shares shall have full voting rights on all matters other than with respect to the election of directors. The Transaction is subject to requisite regulatory approval, including the approval of the TSXV and standard closing conditions, including the approval of the directors of each of 22 Capital and nDivision of the Definitive Agreement, completion of due diligence investigations to the satisfaction of each of 22 Capital and nDivision, as well as the conditions described below. The legal structure for the Transaction will be determined after the parties have considered all applicable tax, securities law, and accounting efficiencies.

22 Capital was incorporated under the provisions of the Business Corporations Act (Ontario) with its registered and head office in Toronto, Ontario. It is a capital pool company and intends for the Transaction to constitute its "Qualifying Transaction" as such term is defined in the policies of the TSXV. 22 Capital is a "reporting issuer" within the meaning of the Securities Act (Ontario), Securities Act (British Columbia) and Securities Act (Alberta).

Since the Transaction is an arm's length transaction, 22 Capital is not required to obtain shareholder approval for the Transaction. However, 22 Capital intends to hold a special meeting of shareholders to approve certain matters ancillary to the Transaction, including, among other items, a name change, the Consolidation, an amendment to its articles to create a class of Restricted Shares, the election of the directors of the Resulting Issuer and the Continuance, if required.

Trading in the common shares of 22 Capital is halted at present. It is unlikely that the common shares of 22 Capital will resume trading until the Transaction is completed and approved by the TSXV.

Sponsorship

22 Capital is required to retain a sponsor in respect of the proposed Transaction in accordance with the policies of the TSXV. A sponsor has not yet been formally retained, however 22 Capital expects to formally retain a sponsor shortly, and will issue a subsequent news release once additional details become available.

Further Information

All information contained in this news release with respect to 22 Capital and nDivision was supplied by the parties respectively, for inclusion herein, and each party and its directors and officers have relied on the other party for any information concerning the other party.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to the requirements of the TSXV, majority of the minority shareholder approval. 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 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. Trading in the securities of a capital pool company should be considered highly speculative.

The TSXV has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

NEITHER THE TSXV NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSXV) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

CAUTIONARY NOTE REGARDING FORWARD-LOOKING INFORMATION:

This news release contains "forward-looking information" and "forward-looking statements" (collectively, "forward-looking statements") within the meaning of the applicable Canadian securities legislation. All statements, other than statements of historical fact, are forward-looking statements and are based on expectations, estimates and projections as at the date of this news release. Any statement that involves discussions with respect to predictions, expectations, beliefs, plans, projections, objectives, assumptions, future events or performance (often but not always using phrases such as "expects", or "does not expect", "is expected", "anticipates" or "does not anticipate", "plans", "budget", "scheduled", "forecasts", "estimates", "believes" or "intends" or variations of such words and phrases or stating that certain actions, events or results "may" or "could", "would", "might" or "will" be taken to occur or be achieved) are not statements of historical fact and may be forward-looking statements. In this news release, forward-looking statements relate, among other things, to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Offering; use of funds; and the business and operations of the Resulting Issuer after the proposed Transaction. Forward-looking statements are necessarily based upon a number of estimates and assumptions that, while considered reasonable, are subject to known and unknown risks, uncertainties, and other factors which may cause the actual results and future events to differ materially from those expressed or implied by such forward-looking statements. Such factors include, but are not limited to: general business, economic, competitive, political and social uncertainties; and the delay or failure to receive board, shareholder or regulatory approvals. There can be no assurance that such statements will prove to be accurate, as actual results and future events could differ materially from those anticipated in such statements. Accordingly, readers should not place undue reliance on the forward-looking statements and information contained in this news release. Except as required by law, 22 Capital and nDivision assume no obligation to update the forward-looking statements of beliefs, opinions, projections, or other factors, should they change, except as required by law.

SOURCE 22 Capital Corp.

For further information regarding the Transaction, please contact: Steve Mintz, President and Chief Executive Officer, 22 Capital Corp., Telephone: [phone], Email: [email protected]; Alan Hixon, Chief Executive Officer, nDivision, Telephone: [phone], Email: [email protected]