OnX Enterprise Solutions Inc.
TSX : ON

OnX Enterprise Solutions Inc.

October 25, 2006 17:00 ET

OnX Enterprise Solutions Announces Proposed Sale of Non-Strategic VAR Business

TORONTO, ONTARIO--(CCNMatthews - Oct. 25, 2006) - OnX Enterprise Solutions Inc. (TSX:ON), (the "Company") announced today that, subject to completion of final documentation, it has entered into an agreement with Sheldon Pollack and Phil DeLeon, two significant shareholders and senior officers of the Company, with respect to the sale of the Company's hardware and software resale and infrastructure solutions and services business (the "VAR Business").

Pursuant to the proposed transaction, Acquisitionco will be formed to purchase certain assets and assume certain liabilities of the VAR Business. The transaction will generate net sale proceeds of approximately $6.8 million for the Company. Acquisitionco will make offers of employment to the individuals that are currently employed primarily in connection with the VAR Business.

As previously reported, in light of the historically low share price and corresponding market value for the Company, management and the board of directors of the Company (the "Board") have continued to evaluate various strategic initiatives with a view to enhancing shareholder value. Management and the Board considered a number of alternatives but were not satisfied that any of them would lead to the desired outcome. In the course of this process, it was concluded that divesting the low margin, unpredictable VAR Business would be a critical first step in achieving the Company's stated objective of becoming a leading provider of web-based application and infrastructure outsourcing. Accordingly, to facilitate this first step, Messrs. Pollack and DeLeon offered to purchase the VAR Business.

If the transaction is completed, the Company will retain its existing Web Solutions and Services and Managed Services businesses, which have current revenues of approximately $15.0 million (a significant portion of which is of a recurring nature) and gross profit margins currently in the 35% -40% range. At closing, the Company will receive cash of approximately $4.5 million and the balance of the net sale proceeds (approximately $2.3 million) will be paid 6 months thereafter. The total proceeds will be available for working capital and to fund growth and acquisition opportunities. Messrs. Pollack and DeLeon will continue in their executive roles with the Company.

While there can be no assurance that this transaction will result in a higher share price and corresponding market value for the Company, it is hoped that the sale of the VAR Business will make the Company's shares more attractive for investors and, potentially, facilitate strategic acquisitions of compatible businesses.

As part of this process, the Company will change its corporate name. A number of names are under consideration.

An independent committee of the Board (the "Independent Committee") was formed to review the proposal and to make a recommendation to the board of directors and shareholders of the Company. As the implementation of the transaction would be subject to the formal valuation requirements of Ontario Securities Commission Rule 61-501, the Independent Committee retained an independent valuation firm to prepare a valuation of the VAR Business. The valuation firm has established a value range of $6.0 million to $7.3 million for the VAR Business and, based on the net proceeds of approximately $6.8 million to be received by the Company (inclusive of the assumption of liabilities), has indicated that it will provide an opinion that the consideration being paid to the Company pursuant to the transaction is fair to the Company from a financial point of view. The transaction will also be subject to approval by the minority shareholders of the Company, as required by Rule 61-501, and the entering into of definitive agreements. The members of the Independent Committee have indicated that, upon receipt of the final valuation confirming the value range indicated above together with a favourable fairness opinion, they will recommend approval of the transaction to the directors and shareholders of the Company.

An annual and special meeting of the shareholders of the Company has been scheduled for November 28, 2006. It is expected that the transaction, if approved, would be completed on or about November 30, 2006.

Forward Looking Statement

Investors should take note that certain statements in this press release are forward-looking and may not give full weight to all of the potential risks and uncertainties. These forward-looking statements include statements that are subject to risks and uncertainties. Forward-looking statements are subject by their nature to risks and uncertainties, and actual results, actions or events could differ materially from those set forth in the forward-looking statements. Any forward-looking statements speak only as of the date made. The company is not undertaking to update any information in the foregoing reports until the effective date of its future reports required by the securities laws.

About OnX Enterprise Solutions Inc.

OnX Enterprise Solutions is a leading IT services organization focused on delivering superior customer value by way of our proven consulting, integration and outsourcing solutions. For over two decades, OnX has been helping organizations grow revenues, reduce costs and, overall, manage the complexity and risks associated with information technology. Headquartered in Thornhill, Ontario the Company has offices in Ottawa, Windsor and Toronto. OnX Enterprise Solutions is publicly traded on the Toronto Stock Exchange.

Contact Information