January 19, 2018 – Elkhart, Indiana – TekModo Industries Inc. (TSX-V: TEK) (“TekModo” or the “Company”) continues to face operational challenges.  While demand for the Company’s existing products remains strong, the Company continues to require funding for its operations.  TekModo has been unable to attract sufficient capital in order complete its previously announced financing (see November 9, 2017 news release) which has been terminated.  In the interim, Jacob Vogel, a director and officer of the Company, has advanced US$925,000 to the Company as a loan (the “Existing Loan”) with a one year term and interest payable on maturity at the rate of 8% per annum.

Without a financing in place, the Company has formed a special committee to pursue strategic alternatives for its operating subsidiaries.  One option that TekModo is pursuing is a non-binding letter agreement dated January 18, 2018, pursuant to which TekModo would sell all of its operating subsidiaries to Mr. Vogel.  As contemplated in the agreement, the Company proposes to sell all of the issued and outstanding units of TekModo LLC (“TML”) and TekModo Structures LLC (“TSL”), and common shares of EcoCarbon Technologies USA (“EcoCarbon” together with TML and TSL, the “Subsidiaries”).

Under the terms of the non-binding letter agreement, Mr. Vogel has agreed to: (i) advance, prior to closing, up to an additional US$300,000 as an interim loan (the “Interim Loan”) accruing interest at the rate of 12% per annum.  The Interim Loan is in addition to the Existing Loan and Mr. Vogel has advanced the first US$175,000 on account of that Interim Loan.  The amount of the Interim Loan may be increased, as required by mutual agreement between the Company and Mr. Vogel; (ii) pay US$100,000 to the Company on closing; (iii) assign all or a portion of the Existing Loan and/or the Interim Loan to the Subsidiaries and release the Company from its obligations under both loans; and (iv) obtain a release from the Company’s bank for TekModo’s guarantee on the equipment loan in the approximate amount of US $900,000.

The Interim Loan will allow the Company to continue its operations seamlessly in the short term, pending the signing of a definitive agreement with Mr. Vogel or the identification of a strategic alternative.

The parties also agreed to negotiate in good faith and enter into a definitive agreement as soon as possible. The completion of the transaction is subject to a number of conditions including TSX Venture Exchange approval, due diligence, financing by the purchaser and TekModo shareholder approval. There are no assurances that a definitive agreement with respect to the proposed transaction will be entered into or that if entered into, the transaction will be completed.  TekModo will issue a further press release outlining more information with respect to the proposed transaction once a definitive agreement is entered into by the parties. TekModo and the special committee will continue to pursue strategic alternatives until a definitive agreement with Mr. Vogel has been signed.

The sale of the Subsidiaries constitutes a “related party transaction” pursuant to TSX Venture Exchange Policy 5.9 and Multilateral Instrument 61-101 – Protection of Minority Security Holders in Special Transactions (“MI 61-101”) as Mr. Vogel is a director and officer of the Company.  The Company will be preparing a formal valuation and will be seeking minority shareholder approval in accordance with the requirements of MI 61-101.

Operations Update

 The hardware, software, and control system modifications of the GRP Line are now complete, but certain mechanical systems still need to be installed on the GRP Line.  At this time, based on delays in the process to date, management cannot estimate when customers can expect to receive prototype materials for testing.

The Company’s large laminator, which provides TekModo with its principal source of manufacturing revenues continues to operate without issue, producing the lightweight Fortis substrate. The Company continues to experience solid demand for its distributed products including Fortis/FRP seamless sidewall systems and Cosmolite ruggedized structural roof and floor composites.

On Behalf of the Board of TekModo Industries Inc.

John Proust

Executive Director

Marc LaCounte

President

Tel: 574-970-5800

Investor inquiries: investor@tekmodo.net

Product inquiries: info@tekmodo.net

Website: www.tekmodo.net

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 “expects” 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.  In particular, the Company’s expectations regarding the completion of a definitive agreement or the identification of a strategic alternative are forward looking statements. There can be no guarantee that the definitive agreement will be signed, if signed that the transaction will close, or that a strategic alternative will be found if the transaction with Mr. Vogel does not proceed.  The Company will continue to require additional capital to pursue the sale of its Subsidiaries or other strategic alternatives.  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.

 

 

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