TekModo Industries Inc.

TekModo Industries Inc.

May 19, 2017 07:30 ET

TekModo Announces Rights Offering

VANCOUVER, BRITISH COLUMBIA--(Marketwired - May 19, 2017) -



TekModo Industries Inc. (TSX VENTURE:TEK) ("TekModo or the "Company") is pleased to announce that it has filed a rights offering circular (the "Rights Offering Circular") and related notice of rights offering (the "Notice of Rights Offering") with the securities regulatory authorities in each of the provinces and territories of Canada in connection with an offering (the "Rights Offering") of rights ("Rights") to acquire units of the Company for gross proceeds of a minimum of C$2 million and a maximum of approximately C$2.17 million. These documents will be available at www.sedar.com.

Pursuant to the Rights Offering, each eligible registered holder of common shares of the Company ("Common Shares") as at the close of business on May 25, 2017 (the "Record Date") will receive one (1) Right for each Common Share held. 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.

A share consolidation on the basis of one (1) new Common Share for every two and one-half (2.5) existing Common Shares will occur immediately after closing of the Rights Offering and the number of Common Shares, the Common Shares issuable upon exercise of the Warrants and the exercise price of the Warrants will be adjusted accordingly.

Each Unit purchased at $0.015 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 pre-consolidation price of $0.025 per Common Share. As noted, however, the Common Shares issuable upon exercise of the Warrants and the exercise price of the Warrants will be adjusted to reflect the consolidation.

As a result of the foregoing, a shareholder holding 1,000 pre-consolidation Common Shares will receive 1,000 Rights. If such shareholder exercises all of its Rights, the shareholder will receive the securities in Column B, based on the pre-Consolidation figures in Column A:

1,000 Common Shares 400 Common Shares
1,000 Warrants each entitling the holder to purchase 1,000 additional Common Shares at an exercise price of $0.025per Common Share 400 Warrants each entitling the holder to purchase 400 additional Common Shares at an exercise price of $0.0625 per Common Share

The Rights issued under the Rights Offering will be evidenced by transferable rights certificates (each, a "Rights Certificate"), and will expire at 5:00 p.m. (Toronto time) on June 26, 2017 (the "Expiry Date"), after which time unexercised Rights will be void and of no value. The Rights Offering includes an additional subscription privilege under which eligible holders of Rights, who fully exercise their Rights, will be entitled to subscribe, on a pro rata basis with other shareholders who participate in the oversubscription, for Units that have not been purchased under the Rights Offering

The Common Shares will trade on the TSX Venture Exchange ("TSXV") on an "ex-rights" basis. The Rights will be listed for trading on the TSXV under the symbol "TEK.RT" commencing on May 23, 2017 and will be de-listed from the TSXV at 12:00 noon (Toronto time) on the Expiry Date.

The Notice of Rights Offering and related Rights Certificates will be mailed to all registered holders of Common Shares in a province or territory of Canada as of the close of business on the Record Date. Eligible registered shareholders, as described in the Rights Offering Circular, who wish to exercise their Rights must forward a completed Rights Certificate, together with the applicable funds, to TSX Trust Company, the rights agent of the Company, on or before the Expiry Date. Shareholders who own their Common Shares through an intermediary, such as a bank, trust company, securities dealer or broker, will receive materials and instructions from their intermediary.

Standby Guarantee

In connection with the Rights Offering, the Company has entered into a standby guarantee agreement (the "Standby Guarantee") for C$2 million with Jake Vogel and John Proust (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, up to the amount of $2 million. The Standby Guarantee has been approved by the independent directors of the Company. As consideration for the Standby Guarantee, the Company has agreed to issue 25,121,887 bonus warrants to the Standby Purchasers as permitted under TSXV Policies. Each bonus warrant will be exercisable for five years from the date of issuance, into one pre-consolidated Common Share at a price of $0.025 per Common Share. On a post-consolidation basis the Standby Purchasers will receive 10,048,755 bonus warrants with an exercise price of $0.0625.

Loan Agreements

As previously announced, in order to ensure that TekModo can meet its short term capital requirements, the Standby Purchasers have agreed to lend the Company up to C$2 million, which will allow the Company to seamlessly continue its operations until the launch and closing of the Rights Offering. The loans are 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 Purchasers 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.

On Behalf of the Board of TekModo Industries Inc.,

Jacob Vogel, Executive Chairman

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.

This news release contains forward-looking statements. All statements, other than statements of historical fact that address activities, events or developments that we believe, expect or anticipate will or may occur in the future are forward-looking statements. In some cases, these forward-looking statements can be identified by words or phrases such as "may", "could", "would", "should", "shall", "will", "expect", "is expected", "anticipate, "intend", "plan", "potential", "continue", "believe(s)", "estimate(s)" or variations (including negative variations) of such words and phrases. These forward-looking statements reflect our current expectations or beliefs based on information currently available to us. Forward-looking statements in include, without limitation, statements with respect to: our expectations regarding the listing of the Common Shares on the TSXV and the potential warrant holdings of the Standby Purchasers following closing of the Rights Offering.

Forward-looking statements are subject to a number of risks and uncertainties that may cause outcomes to differ materially from those discussed in the forward-looking statements and, even if such actual results are realized or substantially realized, there can be no assurance that they will have the expected consequences to, or effects on, the Company. Factors that could cause actual results or events to differ materially from current expectations include, among other things: uncertainties related the closing of the Rights Offering; the ability of the Standby Purchasers to terminate the Standby Commitment Agreement in certain circumstances and other risks and uncertainties related to the Company's business and the Rights Offering, including those described in the Company's public disclosure documents on SEDAR at www.sedar.com.

Any forward-looking statement speaks only as of the date on which it is made and, except as may be required by applicable securities laws, the Company disclaims any intent or obligation to update any forward-looking statement, whether as a result of new information, future events or results or otherwise. Although we believe that the assumptions inherent in the forward-looking statements are reasonable, forward-looking statements are not guarantees of future performance and, accordingly, undue reliance should not be put on such statements due to their inherent uncertainty.

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