Mr. Richard Matthews reports

BIG WIND CAPITAL INC. ENTERS INTO DEFINITIVE AGREEMENT WITH HILL TOP SECURITY, INC.

Big Wind Capital Inc. has entered into an acquisition agreement dated Dec. 19, 2017, with Hill Top Security Inc. (HTSI), pursuant to a series of transactions whereby the company will license 100 per cent of the assets of HTSI through an exclusive, perpetual, worldwide, royalty-free licence and acquire 49 per cent of the shares of common stock of HTSI, for consideration as more particularly described below.

The transaction is subject to a number of terms and conditions as set forth in the definitive agreement, including (among other things) the approval of the Canadian Securities Exchange. If completed, the initial acquisition will constitute a fundamental change of Big Wind, as such term is defined in exchange policies. Big Wind's common shares will remain halted until the exchange has reviewed and approved the transaction.

In connection with the initial acquisition, the company will change its name to Hilltop Cybersecurity Inc., or such other name as the parties may reasonably agree upon. Upon the completion of the initial acquisition, the company will continue the business of HTSI and will trade under the symbol of CYBX.

HTSI and its business

HTSI is an enterprise software and service company headquartered in the Commonwealth of Virginia that specializes in creating solutions to provide key organizational stakeholders with accurate and timely business intelligence to increase security posture and reduce risk. HTSI has a unique, military-grade, cybersecurity platform for small- to medium-sized businesses, comprising blockchain event validation, cybertagging, incident response and rapid restoration.

The transaction

Initial acquisition

Pursuant to the definitive agreement, Big Wind will initially acquire a 25-per-cent interest in HTSI for an aggregate cash payment of $660,000 (U.S.) (a 15-per-cent interest to be acquired from an existing shareholder of HTSI for a cash payment of $160,000 (U.S.) and an additional 10-per-cent interest in HTSI to be acquired by investing $500,000 (U.S.) into HTSI).

Immediately after the completion of the initial acquisition, Big Wind, HTSI and the shareholders of HTSI will execute a shareholder agreement in substantially the form attached to the definitive agreement in respect of HTSI.

Second acquisition

Following the initial acquisition, but in no event later than 90 days following the closing of the initial acquisition, Big Wind and HTSI will make reasonable commercial efforts to concurrently complete the following series of transactions:

1. HTSI will sell and issue 1,875 HTSI shares to Big Wind, such amount being equal to 24 per cent of the issued and outstanding HTSI shares (postissuance, such that immediately after the aforementioned issuance and including the HTSI shares acquired pursuant to the initial acquisition, Big Wind will hold an aggregate 49 per cent of the issued and outstanding HTSI shares), and grant to Big Wind a perpetual, worldwide, royalty-free licence in the assets (as more particularly described in the definitive agreement), pursuant to a licence agreement by and between HTSI and Big Wind in substantially the form attached to the definitive agreement to be executed upon the completion of the second acquisition.
2. In consideration for the actions of HTSI set forth above, Big Wind will: (1) deliver a payment to HTSI of $1.5-million (U.S.); (2) issue to HTSI such number of convertible common shares of Big Wind equal to, upon conversion thereof to Big Wind shares (on a one-to-one basis), an aggregate of 45 per cent of the issued and outstanding Big Wind shares (postissuance), to be distributed pro rata to the HTSI shareholders (other than Big Wind); (3) issue 1.2 million additional convertible common shares of Big Wind to be distributed pro rata to certain key shareholders and insiders of HTSI; and (4) execute and deliver consulting agreements in the form attached to the definitive agreement to certain of the shareholders of HTSI as indicated in the definitive agreement.

The HTSI shareholders will have the right to exchange the convertible common shares of Big Wind received pursuant to the second acquisition at any time and from time to time for an equal number of fully paid and non-assessable Big Wind shares.

In the event that Big Wind and HTSI do not consummate the second acquisition for any reason, then the parties agree that HTSI will have the right to repurchase from Big Wind any or all of the HTSI shares purchased pursuant to the second acquisition, in its sole discretion, within 90 days from the date on which either of HTSI or Big Wind receives written notice from the other of its determination not to consummate the second acquisition, for an amount equal to $500,000 (U.S.), or a lesser proportionate amount corresponding to the portion of such HTSI shares actually repurchased. If the concurrent financing (as defined herein) is completed, then Big Wind will have sufficient capital to complete the second acquisition.

Concurrent financing

Pursuant to the definitive agreement, Big Wind will use its commercially reasonable efforts to complete a non-brokered private placement prior to the completion of the second acquisition to raise: gross proceeds of a minimum of $1-million through the issuance of a minimum of 6,666,666 Big Wind shares and up to a maximum of gross proceeds of $2-million through the issuance of a maximum of 13,333,333 Big Wind shares at a price of 15 cents per Big Wind share with such Big Wind shares having a voluntary hold period of eight months and a day from the date of distribution; additional gross proceeds of a minimum of $1.05-million through the issuance of a minimum of three million units of Big Wind at a price of 35 cents per unit, each such Big Wind 35-cent unit consisting of one Big Wind share and one Big Wind share purchase warrant, with each Big Wind 35-cent unit warrant entitling the holder thereof to acquire a Big Wind share at an exercise price of 40 cents per Big Wind share for a period of 24 months from the issuance thereof, and up to a maximum of gross proceeds of $1.75-million through the issuance of up to five million Big Wind 35-cent units; and additional gross proceeds of a minimum of $1-million through the issuance of a minimum of 1,666,666 units of Big Wind at a price of 60 cents per unit, each such Big Wind 60-cent unit consisting of one Big Wind share and one Big Wind share purchase warrant, with each Big Wind 60-cent unit warrant entitling the holder thereof to acquire a Big Wind share at an exercise price of 70 cents per Big Wind share for a period of 18 months from the issuance thereof, and up to a maximum of gross proceeds of $5-million through the issuance of up to 8,333,333 Big Wind 60-cent units, or such other financing as is mutually agreed in writing by HTSI and Big Wind, provided that such concurrent financing is acceptable to the exchange.

Prior to the execution of the definitive agreement, Big Wind advanced to HTSI an aggregate sum of $600,000 (U.S.) from gross proceeds of the concurrent financing completed prior to the date of the definitive agreement, which HTSI has and will use for further development of its software platform and for general working capital purposes. The advance reduces dollar for dollar the total amount required to be paid to HTSI by Big Wind to complete the initial acquisition.

Conditions

The transaction is conditional upon, among other things:

• The representations and warranties of each of Big Wind and HTSI, as set out in the definitive agreement, being true and correct in all material respects at the closing of the transaction;
• The absence of any material adverse change in the business of each of the parties;
• The parties receiving all requisite regulatory approval, including the approval of the exchange, and any third party approvals and authorizations;
• HTSI and Big Wind obtaining the requisite shareholder approvals for the transaction;
• The parties obtaining requisite board approvals for the transaction;
• Big Wind completing additional tranche(s) of the concurrent financing.

The board

The board of directors of the company will be reconstituted in conjunction with the closing of the initial acquisition. The board of directors of the company immediately following closing of the initial acquisition will be composed of three members, being Corby Marshall, William Marsh and Ross McElroy. The company's senior management will consist of Mr. Marshall (chief executive officer) and Ryan Cheung (chief financial officer).

In connection with the second acquisition, it is contemplated that the board of directors of the company will be reconstituted in conjunction with the closing thereof, such that the board of directors will be composed of five members, namely Mr. Marshall, Mr. Marsh, Neiland Wright, Thomas Gilmore and Mr. McElroy. Following the completion of the second acquisition, the company's senior management will consist of Mr. Marshall (CEO), Mr. Cheung (CFO), Mr. Wright (chief technology officer) and Mr. Gilmore (chief information security officer). If required, the company will seek shareholder approval of an increase in the size of the company's board to five members and to elect the fifth member to the board, being the third nominee-director of HTSI at a special meeting of shareholders to be held after the completion of the initial acquisition and before the completion of the second acquisition.

Big Wind will issue additional news releases related to the transaction and related financings and other material information as they become available.

We seek Safe Harbor.