Stratton Capital Corp.
NEX BOARD : SNK.H
TSX VENTURE : SNK.H

March 03, 2015 12:37 ET

Stratton Capital Corp. Enters Into Letter of Intent With Pro Gaming League Inc. for Proposed Qualifying Transaction

TORONTO, ONTARIO--(Marketwired - March 3, 2015) - Stratton Capital Corp. (NEX:SNK.H) ("Stratton") is pleased to announce that it has signed a letter of intent (the "LOI") with Pro Gaming League Inc., a corporation existing under the laws of Ontario ("PGL"), which outlines the general terms and conditions pursuant to which Stratton and PGL would be willing to complete a transaction that will result in a reverse take-over of Stratton by the shareholders of PGL (the "Transaction"). The LOI was negotiated at arm's length and is effective as of February 27, 2015.

The LOI is to be superseded by a definitive merger, amalgamation or share exchange agreement (the "Definitive Agreement") to be signed on or before March 31, 2015 (or such other date as may be mutually agreed in writing between Stratton and PGL). The Transaction is subject to requisite regulatory approval, including the approval of the TSX Venture Exchange (the "TSXV") and a number of additional closing conditions, including completion of financing by PGL for gross proceeds of no less than $5.0 million, the approval of the directors of each of Stratton and PGL of the Definitive Agreement and completion of due diligence investigations to the satisfaction of each of Stratton and PGL, as well as the conditions described below. The legal structure for the Transaction will be confirmed after the parties have considered all applicable tax, securities law and accounting efficiencies, however, it is currently contemplated that the transaction will be structured as a securities exchange.

Stratton is 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. Stratton is a "reporting issuer" in the provinces of Ontario, British Columbia and Alberta.

Since the Transaction is not a non-arm's length transaction, Stratton is not required to obtain shareholder approval for the Transaction.

Trading in the common shares of Stratton has been halted. It is unlikely that the common shares of Stratton will resume trading until the Transaction is completed and approved by the TSXV.

Conditions to Transaction

Prior to completion of the Transaction (and as conditions of closing, among other things):

  • PGL must complete a private placement financing (the "Offering") for minimum gross proceeds of not less than $5,000,000. The terms and pricing of such financing and the involvement of any agents has not yet been determined and will be dependent on various factors, including market conditions.
  • The parties will prepare a filing statement in accordance with the rules of the TSXV, outlining the terms of the Transaction.
  • PGL and Stratton will enter into a Definitive Agreement in respect to the Transaction on or before March 31, 2015.
  • PGL will obtain the requisite shareholder approvals for the Transaction.
  • All requisite regulatory approvals relating to the Transaction, including, without limitation, TSXV approval, will have been obtained.

The Proposed Transaction

Pre-Closing Capitalization of Stratton

As of the date hereof, Stratton has 7,256,176 common shares ("Stratton Shares") issued and outstanding and options to acquire an aggregate of 715,793 additional Stratton Shares at an exercise price of $0.10 per Stratton Share.

Pre-Closing Capitalization of PGL

As of the date hereof, PGL's authorized capital consists of an unlimited number of common shares ("PGL Shares"), of which 21,375,000 are issued and outstanding. PGL also has outstanding securities exercisable or exchangeable for, or convertible into, or other rights to acquire, an aggregate of 5,375,000 PGL Shares.

Terms of the Transaction

Stratton proposes to acquire all of the PGL Shares pursuant to the terms of the Definitive Agreement. It is expected that the valuation of Stratton and PGL on an undiluted basis and before the Offering shall be not less than an aggregate of Cdn$8,400,000, with the valuation attributed to Stratton to be Cdn$400,000 (4.8%) and the valuation attributed to PGL to be Cdn$8,000,000 (95.2%). Holders of common share purchase warrants of PGL (the "Warrants") in the capital of PGL shall either: (i) exercise the warrants prior to closing of the Transaction; or (ii) concurrent with the closing of the Transaction, the warrants will be exercised on a cashless basis such that holders of warrants will receive one (1) common share of PGL for every two (2) warrants held.

About PGL

PGL is a web based eSports platform founded by gamers for gamers. eSports is one of the fastest growing verticals across the professional sports industry. This by gamers for gamers business strategy has proved successful as evidenced by the positive accolades expressed by both amateur and professional players alike.

PGL has built a feature set that uniquely meets the demands of today's eSports community while capitalizing on the trends of the industry as a whole. PGL's central strategy is to drive gamers to its platform in order to entice them to become free and or paid subscribers. From this strategy, PGL is able to drive revenue through paid subscriptions, advertising/sponsorship, and fees from match play and tournaments.

There are two persons that control 10% or more of PGL's voting equity. David Westlake of Oshawa, Ontario owns approximately 13.6% of PGL's issued and outstanding shares and Chad Larrson of Toronto, Ontario owns approximately 18.2% of PGL's issued and outstanding shares.

Sponsorship

Sponsorship of a qualifying transaction of a capital pool company is required by the TSXV unless exempt in accordance with TSXV policies. Stratton is currently reviewing the requirements for sponsorship and may apply for an exemption from the sponsorship requirements pursuant to the policies of the TSXV, however, there is no assurance that an exemption is available or that Stratton will ultimately obtain an exemption if one is available. Stratton intends to include any additional information regarding sponsorship in a subsequent press release.

All information contained in this news release with respect to Stratton and PGL 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.

Stratton will issue additional press releases related to the final legal structure of the Transaction, financing terms, officers and directors of the resulting issuer, sponsorship and other material information as it becomes available.

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 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.

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

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION: This news release includes certain "forward-looking statements" under applicable Canadian securities legislation. Forward-looking statements include, but are not limited to, statements with respect to: the terms and conditions of the proposed Transaction; the terms and conditions of the proposed Offering; future developments; 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; delay or failure to receive board, shareholder or regulatory approvals; and the results of continued development, marketing and sales. 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 forward-looking statements. Stratton and PGL disclaim any intention or obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law.

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