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CarbonOne Technologies to acquire the TekModo Group

News International-French

5 Sep 2016

The company announces that it is proceeding with a non-brokered private placement financing for up to US$4 million in connection with its previously disclosed acquisition of TekModo Structures LLC and TekModo LLC.

CarbonOne and TekModo have agreed to close the transaction on September 20, 2016 to allow for completion of the offering.

Trading in CarbonOne’s shares will remain halted until closing of the transaction. Upon closing, CarbonOne will change its name to TekModo Industries Inc. and will re-commence trading under the new symbol “TEK”.

The offering

CarbonOne is offering up to 34,666,666 units at a price of C$0.15 per unit for gross proceeds of up to C$5.2 million (US$4 million). Each unit comprises one common share and one half of one transferable common share purchase warrant, with each full warrant entitling the holder thereof to purchase one additional common share at an exercise price of C$0.25 per warrant share for a period of two years from closing of the offering. CarbonOne will use reasonable commercial efforts to have the warrants listed for trading on the TSX Venture Exchange.

CarbonOne may pay up to 6% of the gross proceeds in cash or units and up to 10% in warrants (the “Finder’s Warrants”). The Finder’s Warrants will be exercisable at C$0.15 for a period of one year following closing of the Transaction.

The offering is subject to TSX-V final approval and the concurrent closing of the Transaction. It is intended that the proceeds from the offering will be used to fund the costs of the transaction and to advance the business of TekModo Industries Inc., as described below.
The transaction

TekModo is a manufacturer and distributor of advanced composite panels for use in the recreational vehicle, bus, marine and commercial transportation vehicle industries, with rapidly growing revenue and an established customer base. The Transaction will bring manufacturing and marketing expertise to CarbonOne, along with direct access to potential end users of CarbonOne’s development products.

CarbonOne intends to acquire all of the units of TekModo. TekModo unit holders have now agreed to reduce the cash consideration payable by CarbonOne from US$911,980 to US$436,980 and to receive share consideration at a deemed price of C$0.15 from CarbonOne in lieu of the US$475,000. In addition to the reduction in the cash payment, the structure of the Transaction has been amended such that TekModo unit holders may now receive non-voting common shares of a US subsidiary of TekModo Industries Inc., which will be exchangeable for up to 56,879,506 CarbonOne shares. The exchangeable shares or CarbonOne shares issued at closing of the Transaction will be subject to a standard four-month hold period and will be subject to time release.

As part of the agreement with TekModo, CarbonOne arranged for lenders to advance a sidecar loan of US$600,000 to TekModo for continued development and manufacturing of TekModo’s products. The lenders have now agreed, subject to TSX-V approval, to take repayment of the loan in Units rather than cash at closing of the Transaction, for total consideration of 5,200,000 CarbonOne Units. In addition, in consideration for the lenders completing this loan, CarbonOne agreed to issue 1,040,000 CarbonOne shares to the lenders as permitted by TSX-V policies.