TekModo enters into Definitive Agreement to sell Subsidiaries

ELKHART, IN, April 12, 2018 /CNW/ - TekModo Industries Inc. (TSX-V: TEK) ("TekModo" or the "Company")  is pleased to announce that it has signed a definitive agreement to sell three subsidiaries to TS Investment Holdings, LLC ("TS Investment"), by and through its managing member, Jacob Vogel. As contemplated in the definitive agreement, the Company will sell all of the issued and outstanding units of TekModo LLC ("TML") and TekModo Structures LLC ("TSL"), and all of the issued and outstanding common shares of EcoCarbon Technologies USA ("ECT", together with TML and TSL, the "Subsidiaries") (the "Transaction"). 

As consideration for the sale of the Subsidiaries, TS Investment has agreed to: (i) pay US$75,000 to TekModo; (ii) pay the amount of outstanding accounts payable of TekModo and the related costs of this Transaction up to US$200,000, as requested by TekModo; (iii) assign US$925,000 of Jacob Vogel's loans from TekModo to the Subsidiaries, subject to certain adjustments; (iv) assign to the Subsidiaries all loans or advances made by Jacob Vogel or Steven Vogel to TekModo that are made after the effective date of the definitive agreement and prior to the closing date of the Transaction, which advances are required to fund the operations of TML or TSL prior to the closing of the Transaction.  TekModo estimates that approximately US$375,000 will be required to continue to fund the operations of the Subsidiaries prior to closing; and (v) obtain a release for TekModo from the Company's guarantee (the "Guarantee") of its equipment line of credit with Centier Bank in the amount of approximately US$846,000.  The completion of the Transaction is terminable by the Company or TSL at any time and is subject to a number of conditions including, obtaining extensions to repay existing debt to all debenture holders (the "Debenture Holders") and a release of TekModo from the Guarantee.

On closing of the Transaction, TekModo will owe the following amounts: (i) the principal amount of CDN$500,000 and accrued interest at the rate of 8% per annum to Debenture Holders; (ii) US$610,000 to Mr. Vogel, which will not be assigned to the Subsidiaries; and (iii) CDN$401,310 to J. Proust & Associates Inc., a company controlled by John Proust, a director and officer of TekModo.

The board of directors of TekModo (the "Board") wishes to thank the Company's stakeholders for the feedback provided to the special committee of Board (the "Special Committee") following the news release dated on January 19, 2018. The Special Committee has undertaken a comprehensive process to pursue strategic alternatives to the Transaction, however, has been unable to secure any other offers to finance or acquire the Subsidiaries since the January 19, 2018 news release.

The Special Committee engaged Evans & Evans, Inc. to prepare a formal valuation (the "Valuation") of the Subsidiaries which has confirmed a value of between CDN$3.44 million and CDN$3.58 million (US$2.65 million and US$2.75 million). After careful consideration and based on the Valuation, the Guarantee, the lack of strategic alternatives, the continued need for funding of the Subsidiaries on a monthly basis and the fact that the principal amount of CDN$450,000 in convertible debentures are now due and owing, the Special Committee recommended approval of the Transaction to the Board.  The Board subsequently approved the Transaction with  Jacob Vogel and Marc LaCounte declaring their interest in the Transaction and abstaining from voting.  The Company will be preparing an information circular to seek disinterested shareholder approval to the Transaction, and after closing, the Company will apply to list on the NEX in order to restructure its affairs and pursue new opportunities.

The Transaction 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 Jacob Vogel is a director and officer of the Company.  The Company has received the Valuation and will be seeking minority shareholder approval in accordance with the requirements of MI 61-101.  The Company will also seek TSX Venture Exchange acceptance of the Transaction.

On Behalf of the Board of TekModo Industries Inc.

John Proust
Executive Director

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 the transaction, the terms and conditions set out in the definitive agreement, the valuation, the repayment of the Company's debt,the extensions from the debenture holders, shareholder approval and exchange acceptance are forward-looking statements. There can be no guarantee that that the transaction contemplated by the definitive agreement will be completed, the formal valuation will reflect the estimated valuation, shareholder approval and exchange acceptance will be obtained, or that a strategic alternative will be pursued if the transaction does not proceed.  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. 

SOURCE TekModo Industries Inc.