Ivrnet Inc. Announces Definitive Agreement with Flexity Systems Ltd. for Proposed Reverse Takover Transaction

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CALGARY, AB / ACCESSWIRE / November 19, 2021 / IVRNET INC. ("IVRNET" or the "Company") (TSXV:IVI), is pleased to announce that it has entered into an amalgamation agreement dated November 19, 2021 (the "Amalgamation Agreement") with FLEXITY SYSTEMS LTD. ("FLEXITY") and 1333749 B.C. Ltd., a wholly owned subsidiary of the Company ("IVRNET Subco"), pursuant to which IVRNET will, by way of a "three-cornered amalgamation", acquire all of the issued and outstanding securities of FLEXITY (together with the related transactions and corporate procedures set forth in the Amalgamation Agreement, the "Transaction").

The Transaction is subject to TSX Venture Exchange (the "TSXV") approval pursuant to TSXV Policy 5.2 - Changes of Business and Reverse Takeovers.

In connection with the Transaction, IVRNET intends to consolidate its common shares (the "IVRNET Shares") on a 20:1 basis (the "IVRNET Share Consolidation") and complete the Continuation, Name Change, Brokered Financing and Shares for Debt Settlement, each as described below.

The Resulting Issuer (as defined herein) anticipates listing on the TSXV as a Tier 1 Industrial, Technology or Life Sciences Issuer, subject to TSXV acceptance.

About FLEXITY

FLEXITY is a private company incorporated under the Business Corporations Act (British Columbia) ("BCBCA") on July 6, 2021. FLEXITY is a revenue generating company providing information technology, communication software, data analytics and cybersecurity products and services primarily through its wholly-owned subsidiary "FLEXITY Solutions Inc." ("FSI"). FSI was incorporated under the Business Corporations Act (Canada) on December 7, 2004 and has a substantial history of business operations and revenue generation. FLEXITY has no other subsidiaries.

On June 25, 2021, BHG-BC Holdings Ltd. ("BHG"), FSI's senior secured lender, acquired FSI's shares and control of FSI as part of an enforcement proceeding on debt owing to BHG. FLEXITY then acquired direct 100% ownership of FSI on August 27, 2021 from BHG and another minority shareholder in exchange for FLEXITY shares. BHG is the current controlling shareholder of FLEXITY.

On August 27, 2021, FLEXITY completed an internal reorganization through a carve out transaction pursuant to which it disposed of: (i) 100% ownership of an unprofitable subsidiary of FSI, FLEXITY Holdings Inc. ("FHI"), to FUPS-BC Holdings Ltd., which is controlled by BHG; and (ii) certain assets of FSI to FHI, which was settled through the delivery by FHI of a non-interest bearing promissory note (which the parties intend to settle against outstanding debt owed by FSI to BHG from past lender/creditor arrangements). The purpose of the aforementioned carve out transaction was to divest the unprofitable segments of the business that were non-core to FLEXITY's future business operations. FLEXITY intends to complete the RTO and list on the basis of its retained core business.

Over the past three years, FLEXITY, through FSI, has shifted its focus from the traditional low margin product reseller business to the higher margin professional services/managed services business. FLEXITY's product offering has evolved as its historical design-build solutions business have grown to incorporate new applications and advanced IT infrastructure offerings. As a long-standing and trusted technology provider, particularly in the health and public services sectors, FLEXITY has been successful in introducing novel integrated software and hardware solutions together with additional managed services to both existing and new customers.

FLEXITY has completed numerous projects in both the private and public sector. FLEXITY services several large organizations, including Global Fortune 500 companies, major Canadian cities, major educational and financial institutions, 15 significant southern Ontario hospitals, and other public institutions. FLEXITY provides 24/7 network and IT infrastructure management, support and consulting services to these customers, which services are critical to the ongoing operation of those organizations on a daily basis. FLEXITY's head office is located in Ontario and it does not have any foreign operations.

As discussed above, the primary business of FLEXITY is that of FSI. Set out below is a summary of certain financial information of FSI, which is based on the unaudited carve-out financial statements of FSI for the nine-month financial period ended July 31, 2021 and the audited carve-out financial statements for the fiscal years ended October 31, 2020 and 2019.

About IVRNET

IVRNET was incorporated pursuant to the provisions of the ABCA on August 13, 1999 under the name "ENTREPLEX TECHNOLOGY CORPORATION". On October 1, 1999, the articles were amended to remove certain restrictions on share transfers and ownership. On September 19, 2000, the name of the company was changed to "IVRNET INC.". On December 31, 2000, IVRNET amalgamated with Global Industrial Solutions Networks Inc. and Club Speed Systems Inc. The resulting amalgamated company continued as "IVRNET INC". On April 28, 2003, the IVRNET Shares were consolidation on a 5 to 1 basis and the articles were amended to add back the restrictions on share transfers and ownership that were removed in the October 1, 1999 amendment to the articles. On July 31, 2003, IVRNET amalgamated with Home Media Corp. The resulting amalgamated company continued as "IVRNET INC."

IVRNET is a software and communications company that develops, hosts, sells, and supports value added business automation software solutions. IVRNET's products and services are delivered through the traditional phone network and the internet. These applications facilitate automated interaction through personalized communication between people; mass communication for disseminating information to thousands of people concurrently and personalized communication between people and automated systems. IVRNET's applications are accessible through nearly any form of communication technology, at any time, from anywhere in North America via voice, phone, fax, email, texting, and the internet.

Set out below is a summary of certain financial information of IVRNET, which is based on the unaudited financial statements of IVRNET for the nine-month financial period ended September 30, 2021 and on the audited financial statements of IVRNET for the fiscal years ended December 31, 2020 and 2019.

⁽¹⁾ EBITDA is defined as earnings before interest, taxes, depreciation and amortization. EBITDA is not a recognized measure under Canadian generally accepted accounting principles. Management believes however that EBITDA is a useful supplementary measure as it provides indication of the results of IVRNET's business operations without regard to how these activities were financed or how these results were taxed.

The Company's registered office is located at Suite 1400, 350 - 7 Avenue SW Calgary, Alberta T2P 3N9.

IVRNET is a reporting issuer in the provinces of British Columbia, Alberta, Saskatchewan and Ontario and its IVRNET Shares are listed for trading on the TSX Venture Exchange under the symbol "IVI".

The Transaction

Pursuant to the terms of the Amalgamation Agreement, and subject to certain conditions, including receipt of applicable regulatory and shareholder approvals, FLEXITY will amalgamate with IVRNET Subco pursuant to the provisions of the BCBCA (the "Amalgamation"). The amalgamated entity will be a wholly-owned subsidiary of IVRNET and the shareholders of FLEXITY will be issued 77.803251 IVRNET Shares (on a post-IVRNET Share Consolidation basis) for every one FLEXITY common share (a "FLEXITY Share") held immediately prior to the completion of the Transaction (the "Exchange Ratio"). Additionally, all outstanding preferred shares, convertible debentures and options of FLEXITY will be exchanged for preferred shares, convertible debentures, and options, respectively, of IVRNET on the same terms and conditions as the original security (as adjusted to account for the IVRNET Share Consolidation and the Exchange ratio, as applicable).

As a result of the Transaction, it is expected that IVRNET will issue:

1. up to an aggregate of 75,000,000 IVRNET Shares (in exchange for 963,970 FLEXITY Shares issued and outstanding as of the date hereof at the Exchange Ratio) at a deemed price of $0.90 each;
2. 6,267 preferred shares of IVRNET convertible into 8,352,613 IVRNET Shares (in exchange for 6,267 preferred shares of FLEXITY issued and outstanding as of the date hereof) in each case, at a deemed price of $1,000 each;
3. an aggregate of 3,112,130 stock options of IVRNET (in exchange for the outstanding stock options of FLEXITY); and
4. convertible debentures of IVRNET convertible into an aggregate of 7,027,640 IVRNET Shares (in exchange for the outstanding convertible debentures of FLEXITY).

The Amalgamation Agreement provides that no party will solicit or negotiate with any other entities with respect to a transaction similar to the Transaction.

The Amalgamation has been unanimously approved by the FLEXITY shareholders. In addition, as part of the Transaction, and pursuant to the Amalgamation Agreement, shareholders of FLEXITY, holding more than 91.29% of the currently issued and outstanding FLEXITY shares, have agreed to lock-up their FLEXITY Shares and the IVRNET Shares issued in exchange therefor for a period of 18 months with 25% of such securities being released on the closing date of the Transaction ("Closing Date"), and thereafter on each of the 6, 12 and 18 month anniversaries of the Closing Date (the "Lock-Up Arrangement"). The Lock-Up Arrangement is separate from and in addition to any escrow or resale restrictions that may be imposed by the applicable policies of the TSXV.

The completion of the Transaction is subject to the satisfaction of certain conditions, including but not limited to: (i) completion of the Brokered Financing (as defined below); (ii) the shareholders of IVRNET approving the Transaction in accordance with TSXV Policy 5.2, the IVRNET Consolidation, the Name Change and the Continuation (each as defined below);(ii) the absence of any material adverse change in the business of either IVRNET or FLEXITY; (iii) no proceeding or law being enacted or commenced that frustrates the consummation of the Transaction or that has, or could have, a material adverse effect on IVRNET or FLEXITY; (iv) receipt of all requisite regulatory, stock exchange, court or governmental authorizations and consents, including the approval of the TSXV; and (vi) the BHG Distribution (as defined below). Accordingly, there can be no assurance that the Transaction will be completed on the terms proposed above or at all.

Subject to satisfaction or waiver of the conditions precedent referred to herein and contained in the Amalgamation Agreement, IVRNET and FLEXITY anticipate that the Transaction will be completed in Q1, 2022.

Each of IVRNET and FLEXITY will bear their own costs in respect of the proposed Transaction except that FLEXITY will pay all TSXV filing fees and expenses in respect of the Transaction incurred by it and by IVRNET, including any fee related to sponsorship (if applicable).

The BHG Distribution

BHG, an entity incorporated under the BCBCA holds 880,000 FLEXITY Shares representing 91.3% of the FLEXITY Shares outstanding as of the date hereof (on an undiluted basis). As a condition to completion of the Transaction, BHG will distribute its FLEXITY Shares to certain unitholders of BHG (the "BHG Distribution").

Non-Arm's Length Relationships

It is anticipated that the Transaction will constitute an Arm's Length Transaction (as defined in the policies of the TSXV). No Non-Arm's Length Party (as defined in the policies of the TSXV) of IVRNET has any beneficial interest, direct or indirect, in FLEXITY prior to giving effect to the Transaction and no such persons are also Insiders (as defined in TSXV Policy 1.1) of FLEXITY.

It is anticipated that shareholder approval of the Transaction will be required pursuant to TSXV Policy 5.2 and that such shareholder approval will be obtained by written consent in accordance with TSXV Policy 5.2.

Concurrent Financings

In connection with the Transaction, IVRNET proposes to complete a "best efforts" brokered private placement of a minimum of 5,226,299 and up to a maximum of 12,543,117 subscription receipts (each, a "Subscription Receipt"), at a price of $0.9567 per Subscription Receipt, for gross proceeds of a minimum of $5,000,000 and up to a maximum of $12,000,000 (the "BrokeredFinancing").

Upon the satisfaction of certain escrow release conditions, including completion of the Transaction, each Subscription Receipt will be automatically converted, without payment of any additional consideration, into one unit of IVRNET (each, a "Unit"). Each Unit will be comprised of one IVRNET Share (each, a "Unit Share") and one-half of one IVRNET common share purchase warrant with each whole warrant (each, a "Unit Warrant") being exercisable, for a period of two years from the effective date of the Transaction, to purchase one IVRNET Share at a price of $1.25 per IVRNET Share, in each case, on a post-IVRNET Share Consolidation basis.

The gross proceeds of the Brokered Financing (less any brokers expenses and brokers fees payable) will be used for acquisitions, certain capital expenditures and general and administrative expenses, which include but are not limited to, salaries and benefits, premises leasing, professional fees and office related expenses.

Resulting Issuer

On closing of the Transaction, IVRNET (then, the "Resulting Issuer") will change its name to "FLEXITY Enterprises Inc." (the "Name Change"). In addition, the Resulting Issuer intends to continue into British Columbia under the BCBCA as a British Columbia corporation (the "Continuation").

Concurrently with the completion of the Transaction, certain outstanding debt owing to BHG will be converted to preferred shares of IVRNET at a rate of $1,000 per share (the "Shares for Debt Settlement"). The rights and restrictions attaching to the preferred shares of IVRNET will be identical to the rights and restrictions of the preferred shares of FLEXITY.

Upon completion of the Transaction and assuming completion of the maximum amount of the Brokered Financing, former shareholders of FLEXITY will hold approximately 81.07% of the common shares of the Resulting Issuer ("Resulting Issuer Shares") and IVRNET shareholders will hold 5.37% of the Resulting Issuer Shares. It is anticipated that there will be an aggregate of approximately 92,508,676, Resulting Issuer Shares issued and outstanding, 3,112,130 nominally priced stock options, and an additional 27,649,923 convertible securities of the Resulting Issuer exercisable into Resulting Issuer Shares.

The Resulting Issuer will carry on the professional services and managed services business currently conducted by FLEXITY, and the Resulting Issuer Shares will be listed under a new trading symbol. On closing of the Transaction, the Resulting Issuer anticipates meeting the TSXV's initial listing requirements for a Tier 1 Industrial, Technology or Life Sciences Issuer.

IVRNET's current directors are David Snell, Andrew Watts, Robert Barlow and Dave King. Mr. Watts is also the President and Chief Executive Officer of IVRNET. Upon completion of the Transaction, IVRNET's current executive officers will resign as officers of IVRNET, Mr. Watts will resign as director of IVRNET and IVRNET will reconstitute its board of directors to consist of six directors. As a result, upon completion of the Transaction, it is expected that the board of directors of IVRNET will consist of Conrad Krebs, Bradley Meadows, Dave King, Dave Snell, Robert Barlow and John Burdiga and the management of the Resulting Issuer will consist of Lenny Liscio as Chief Executive Officer, Louis Gervais as Chief Operating Officer, Ehsaan Akram as Chief Financial Officer, and Conrad Krebs as Corporate Secretary, the backgrounds of each of whom are described below.

The Resulting Issuer intends to appoint additional directors, confirmation of which will follow in a separate news release.

Lenny Liscio, Chief Executive Officer

Mr. Liscio was appointed to Chief Executive Officer of FSI, FLEXITY's wholly-owned subsidiary, in August, 2020 after serving a lengthy tenure as Chief Financial Officer from 2010. Prior to joining FSI, Mr. Liscio held the position of Vice President and Chief Financial Officer at CPNI Inc., an early stage global software company providing a mobile solution to banks that allowed their customers to efficiently transfer money. Prior to CPNI, Mr. Liscio served first as the CFO and then as the CEO of Olivetti Canada, a desktop and network computing services provider. Mr. Liscio is a Chartered Professional Accountant and graduate of the University of Toronto with a Bachelor of Commerce degree.

Louis Gervais, Chief Operating Officer

Recently, Mr. Gervais held a lengthy tenure of 11 years at one of Canada's largest IT service providers, where he held various management roles and successfully built new business units, addressing different aspects of IT ranging from professional services, pre-sales and practice leadership. Just prior to his involvement in FLEXITY, Mr. Gervais built and led a successful team of pre-sales professionals covering Data Centre and Cloud, Enterprise Networking and Security Virtualization, Managed Services, as well as Professional and Microsoft services. His business expertise working with many valued partners in the industry, combined with his leadership for cross-functional teams to develop and execute new business development strategies not only uncovered new opportunities but also aligned customer objectives. Mr. Gervais has a degree in Business from UQAM (Universite du Quebec a Montreal), completed the Executive program at HEC (Hautes etudes Commerciales Universite de Montreal), as well as a Queen's Executive program.

Ehsaan Akram, Chief Financial Officer

Mr. Akram is currently the VP - Portfolio Companies at R.C. Morris Capital Management Ltd., where he manages financial reporting and compliance within the company's portfolio. He is a CPA and has significant experience in both private and public company financial operations with previous senior financial roles at Pizza Pizza and Avicanna. He began his career in the assurance group of Pricewaterhouse Coopers. Mr. Akram is a graduate of Ryerson University.

Conrad Krebs, Director

Mr. Krebs is a Partner at R.C. Morris Capital Management Ltd., where he manages the corporate finance, lending, and due diligence functions. Over his many years at R.C. Morris, he has played active financial management roles in numerous technology and communications companies. Mr. Krebs is a CPA, and has previously worked as an accountant at MetroBridge Networks and the Edmonton Exchanger Group of Companies. He is a graduate of the University of Western Ontario.

Bradley Meadows, Director

Mr. Meadows is a Partner at R.C. Morris Capital Management Ltd., where he manages the transaction origination and investment banking functions. He is a CPA, and previously worked in the audit and risk advisory practices at KPMG. He is a graduate of Capilano University.

Dave King, Director

Mr. King is the Principal of Early Stage Advisors where he provides advisory, board, restructuring and M&A services to early stage technology companies and under-performing venture and private equity backed portfolio companies. Some of Mr. King's past projects include seven acquisitions, two divestitures and one public offering. Earlier in his career Mr. King held leadership roles with Confirmit, Hewlett Packard, Sequent Computer Systems and IBM.

Dave Snell, Director

Mr. Snell is a technology executive, director and investor, with over 30 years of experience running telecommunications and IT companies. His career spans increasingly senior leadership roles at Wi-LAN Inc., Cell-Loc Inc., Electronics Manufacturing Group and culminated in 19 years as President and CEO of IVRNET. Mr Snell is a professional engineer with a B.Sc. and M.Sc. in Electrical Engineering from University of Alberta.

Robert Barlow, Director

Mr. Barlow is an interim executive, consultant, investor and independent board member and mentor to public and private organizations. He has over 25 years of experience delivering high-impact technology platforms, with a career in technology that began at ClearNET, followed by a move to TELUS as the Director of New Technology Introduction and R&D. In 2007 he formed WireIE Holdings International Inc., an international wholesale broadband network operator.

John Burdiga, Director

Mr. Burdiga is the managing partner at Cambio Merchant Capital, a boutique investment banking firm, and has over 25 years' experience in the capital markets and financial services industry. His background and experience in both the private and public company forum through various directorships and appointments has afforded him tremendous experience in the areas of financing, venture capital structure, licensing, business reorganization and strategic planning.

Insiders & Principals

Upon completion of the Transaction and completion of the BHG Distribution, Christopher Morris, a director and officer of BHG, is expected to hold approximately 43.53% of the outstanding Resulting Issuer Shares and on that basis, Mr. Morris is expected to be, along with the directors and senior officers of the Resulting Issuer set forth above, a Principal and an Insider (as defined in TSXV Policy 1.1) of the Resulting Issuer. Mr. Morris is the managing partner of R.C. Morris Capital Management Ltd., a Vancouver and Toronto-based asset management firm making direct debt and equity investments in middle market North American companies.

Sponsorship

Sponsorship of a "Reverse Takeover" is required by the TSXV unless exempt therefrom in accordance with the TSXV's policies. In the absence of an available exemption from the sponsorship requirements, based on the size and nature of the Transaction, including the amount of the Brokered Financing, and FSI's operating history, IVRNET intends to make an application to the TSXV for a waiver from sponsorship requirements. There is no assurance that if applied for, a waiver will be granted.

Filing Statement

In connection with the Transaction and pursuant to the requirements of the TSXV, IVRNET will file a filing statement on its issuer profile on SEDAR (www.sedar.com), which will contain details regarding the Transaction, IVRNET, FLEXITY and the Resulting Issuer.

Cautionary Note

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV Requirements, disinterested 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 IVRNET should be considered highly speculative.

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

For further information, please contact:

Andrew Watts, CEO of IVRNET
Phone: 1.800.351.7227
Email: [email protected]
Conrad Krebs, Director of FLEXITY
Phone: 604.629.5977
Email: [email protected]

Forward Looking Information

This press release contains forward-looking statements and information that are based on the beliefs of management and reflect IVRNET's current expectations. When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.

The forward-looking statements and information in this press release include information relating to the business plans of IVRNET, FLEXITY and the Resulting Issuer, the Brokered Financing and the Transaction (including TSXV approval and the closing of the Transaction).

Such statements and information reflect the current view of IVRNET. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks:

• there is no assurance that the Brokered Financing will be completed or as to the actual gross proceeds to be raised in connection with the Brokered Financing.
• there is no assurance that IVRNET and FLEXITY will obtain all requisite approvals for the Transaction, including the approval of the shareholders of IVRNET, or the approval of the TSXV for the Transaction (which may be conditional upon amendments to the terms of the Transaction);
• following completion of the Transaction, the Resulting Issuer may require additional financing from time to time in order to continue its operations. Financing may not be available when needed or on terms and conditions acceptable to the Resulting Issuer;
• COVID-19 could cause material delays in the consummation of the Transaction;
• unanticipated costs and expenses;
• new laws or regulations could adversely affect the Resulting Issuer's business and results of operations; and
• the stock markets have experienced volatility that often has been unrelated to the performance of companies. These fluctuations may adversely affect the price of the Resulting Issuer's securities, regardless of its operating performance.

Such forward information and statements are based on numerous assumptions, including among others, that all conditions required for the Transaction will be fulfilled, that the Company will be able to obtain receipt of all shareholder, regulatory and third party approvals required for the Transaction, that COVID-19 will not materially impact the consummation of the Transaction or the businesses or personnel of IVRNET and FLEXITY, and that general business and economic conditions will not change in a material adverse manner. Although the assumptions made by the Company in providing forward looking information or making forward-looking statements are considered reasonable by management at the time, there can be no assurance that such assumptions will prove to be accurate.

Although the Company has attempted to identify important factors that could cause actual actions, events or results to differ materially from those contained in the forward-looking information or implied by forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended Accordingly, readers should not place undue reliance on forward-looking statements or information.

The forward-looking information contained in this press release represents the expectations of IVRNET as of the date of this press release and, accordingly, is subject to change after such date. Accordingly, readers should not rely upon this information as of any other date. While IVRNET may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable laws.

SOURCE: Ivrnet Inc.