THIS NEWS RELEASE IS INTENDED FOR DISTRIBUTION IN CANADA ONLY AND IS NOT AUTHORIZED FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES.

NEWS RELEASE

March 15, 2017 – Vancouver, British Columbia – After careful consideration and discussions with its stakeholders and potential financiers, TekModo Industries Inc. (TSX-V: TEK) (“TekModo” or the “Company”) announces that it will be proceeding with a rights offering (the “Rights Offering”), instead of the previously announced non-brokered private placement of up to 15,000,000 units at a price of C$0.20 per unit (post 1:5 consolidation). The full amount of the Rights Offering is expected to be approximately $2.17 million (CDN), and a standby guarantee, to be provided by Jake Vogel and John Proust will ensure that a minimum of $2 million is raised. In order to ensure that TekModo can meet its short term capital requirements, Mr. Vogel and Mr. Proust (the “Standby Purchasers”) have agreed to lend the Company $2 million (CDN), which will allow the Company to seamlessly continue its operations until the launch and closing of the Rights Offering.  In addition, the Company announces that it will be modifying the previously announced share consolidation from 1:5 to 1:2.5.

Rights Offering

The Company intends to proceed with the Rights Offering pursuant to which TekModo will offer rights (the “Rights”) to holders of its common shares on the record date for the Rights Offering, on the basis of one Right for each common share held. The record date for the Rights Offering has not yet been determined. Each Right will entitle the holder to subscribe for one unit of the Company (a “Unit”) at a subscription price of C$0.015 per Unit. Each Unit will consist of one pre-consolidated common share and one share purchase warrant (a “Warrant”). Each Warrant will be exercisable into one pre-consolidated common share for a period of 5 years from the issuance date of the Units, at a price equal to the last closing price of the Company’s common shares prior to the announcement of the Rights Offering. The share consolidation will occur immediately after closing and the number of common shares, the common shares issued upon exercise of the warrants and the exercise price of the warrants will be adjusted accordingly.

The Company will make application to have the Rights listed for trading on the TSX Venture Exchange. The Company intends to use the proceeds of the Rights Offering to provide working capital for the company and/or repay the loans made to the Company that are being provided as an advance against the standby guarantee. The Company will provide further details respecting the Rights Offering, including the record date for determining shareholders entitled to receive rights under the Rights Offering, when determined.

Standby Guarantee

In connection with the Rights Offering, the Company intends to enter into a standby agreement (the “Standby Guarantee”) with the Standby Purchasers.  Under the Standby Guarantee, the Standby Purchasers have agreed to subscribe for, and the Company has agreed to issue, all Units offered under the Rights Offering that are not otherwise purchased by the Company’s shareholders. The Standby Guarantee will be approved by the independent directors of the Company. As consideration for the Standby Guarantee, the Company has agreed to issue bonus warrants to the Standby Purchasers, equal to up to 25% of the amount of the Standby Guarantee and as permitted under TSX Venture Exchange Policies.  The bonus warrants will be exercisable into pre-consolidated shares at a price equal to the last closing price of the of the Company’s common shares prior to the announcement of the Rights Offering with the exercise price and the number of warrant shares to be adjusted after the share consolidation.

The Rights Offering will be subject to regulatory approval, including the approval of the TSX Venture Exchange.  Additional details respecting the Rights Offering will be disclosed in a subsequent news release, a Rights Offering Notice and Rights Offering Circular to be prepared in accordance with applicable Canadian securities laws.

Loan Agreements

In connection with and as an advance against the Standby Guarantee, the Company will enter into loan agreements with the Standby Purchasers.  The Standby Purchasers will advance up to $2 million (CDN), immediately to TekModo in order to meet its short term capital requirements. The loans will be unsecured, mature on the earlier of the completion of the Rights Offering or September 30, 2017 and bear interest at a rate of 8% per annum.

The acquisition cost of any Units acquired by the Standby Purchasers pursuant to the exercise of Rights, either under the Standby Guarantee or as holders of Rights, will be satisfied by the reduction of the amounts payable to the standby guarantors under the loan agreements.

The loans constitute “related party transactions” within the meaning of Multilateral Instrument 61-101 Protection of Minority Security Holders in Special Transactions (“MI 61-101”) because funds have been provided by two directors of the Company. MI 61-101 has been adopted by the TSX Venture Exchange as Policy 5.9 Protection of Minority Security Holders in Special Transactions. The Company is relying on the exemptions from the formal valuation and minority approval requirements contained in Sections 5.5(c) and 5.7(1)(b) of MI 61-101, on the basis that the transaction constitutes a distribution of securities for cash and the consideration received does not exceed $2,500,000.

The loan is subject to approval of the TSX Venture Exchange.

This news release is not an offer of securities for sale in the United States. The offer and sale of the securities offered in the Rights Offering has not been and will not be registered under the US Securities Act of 1933, as amended, or any state securities laws, and such securities may not be offered or sold in the United States absent registration or applicable exemption from such registration requirements. This press release shall not constitute an offer to sell or the solicitation of an offer to buy securities in the United States or in any jurisdiction in which the offer, sale or solicitation would be unlawful.

On Behalf of the Board of TekModo Industries Inc.

“Jacob Vogel”

Executive Chairman

Contact TekModo

John Proust, Executive Director

Marc LaCounte, President

Tel: 574-970-5800

Investor inquiries: investor@tekmodo.com

Product inquiries: info@tekmodo.com

Website: www.tekmodo.com

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.

Cautionary Notes Regarding Forward-looking Statements

This news release contains certain forward-looking information and forward-looking statements within the meaning of applicable securities legislation (collectively “forward-looking statements”). Certain information contained herein constitutes “forward-looking information” under Canadian securities legislation. Generally, forward-looking information can be identified by the use of forward-looking terminology such as “will”, “intends”, “is expected to” and variations of such words and phrases or statements that certain actions, events or results “will” occur. Forward-looking statements are based on the opinions and estimates of management as of the date such statements are made and they are subject to known and unknown risks, uncertainties and other factors that may cause the actual results, level of activity, performance or achievements of the Company to be materially different from those expressed by such forward-looking statements or forward-looking information the use of proceeds associated with the loans or the Rights Offering.  Although management of the Company has attempted to identify important factors that could cause actual results to differ materially from those contained in forward-looking statements or forward-looking information, there may be other factors that cause results not to be as anticipated, estimated or intended. 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 and forward looking information. The Company does not undertake to update any forward-looking statements or forward-looking information that are incorporated by reference herein, except as required by applicable securities laws.

Leave a Reply

Your email address will not be published. Required fields are marked *