Early Warning Press Release Pursuant to National Instrument 62-103 Re: Frankly Inc.

TORONTO, Aug. 27, 2015 /CNW/ -

  1. Name and address of the offeror:

    Gannaway Entertainment, Inc. (the "Offeror")
    Attn: Gary Gannaway
    188 E. 64th Street, Apt. 1501
    New York, New York 10065

  2. Designation and number or principal amount of securities and the offeror's securityholding percentage in the class of securities of which the offeror acquired ownership or control in the transaction or occurrence giving rise to the obligation to file the news release, and whether it was ownership or control that was acquired in those circumstances:

    On August 25, 2015, pursuant to a unit purchase agreement dated July 28, 2015 (the "Purchase Agreement"), the Offeror acquired ownership and control of 3,021,072 Class A restricted voting shares (the "Class A Shares") of Frankly Inc. (the "Issuer"), representing 29.81% of the 10,134,605 issued and outstanding Class A Shares of the Issuer.

    The Class A Shares are convertible into voting common shares of the Issuer ("Voting Common Shares") by the Offeror or the Issuer in certain circumstances that have not yet occurred.  In the event that the Offeror or the Issuer converted the Class A Shares held by the Offeror, then the Offeror would own and control an aggregate of 3,021,072 Voting Common Shares, which would represent, on a converted basis, 11.93% of the issued and outstanding Voting Common Shares.

  3. Designation and number or principal amount of securities and the Offeror's security holding percentage in the class of securities immediately after the transaction or occurrence giving rise to the obligation to file the news release:

    3,021,072 Class A Shares, being 29.81% of the 10,134,605 issued and outstanding Class A Shares.

  4. Designation and number or principal amount of securities and the percentage of outstanding securities of the class of securities referred to in paragraph #3 over which

    1. the Offeror, either alone or together with any joint actors, has ownership and control:

      See 2 above.

    2. the Offeror, either alone or together with any joint actors, has ownership but control is held by other persons or companies other than the offeror or any joint actor:

      Not Applicable.

    3. the Offeror, either alone or together with any joint actors, has exclusive or shared control but does not have ownership:

      Not Applicable.

  5. Name of the market where the transaction or occurrence that gave rise to the news release took place:

    Not applicable.

  6. The value, in Canadian dollars, of any consideration offered per security if the offeror acquired ownership of a security in the transaction or occurrence giving rise to the obligation to file a news release:

    3,021,072 Class A Shares were issued from treasury of the Issuer to the Offeror in partial consideration for the Issuer's purchase of the Offeror's membership units of Gannaway Web Holdings, LLC, doing business as WorldNow. The aggregate issue price of the Class A Shares issued by the Issuer to the Offeror was US$6,182,990 ($8,244,437 in Canadian dollars as of the date hereof).

  7. Purpose of the Offeror and any joint actors in effecting the transaction or occurrence that gave rise to the news release, including any future intention to acquire ownership of, or control over, additional securities of the reporting issuer:

    The Class A Shares are held by the Offeror for investment purposes. Depending on market and other conditions, the Offeror may, directly or indirectly, acquire ownership or control over additional Class A Shares or Voting Common Shares, through market transactions, private agreements or otherwise, in accordance with applicable securities legislation. Depending on market and other conditions (and subject to any escrow and/or lock-up agreements), the Offeror may sell any of its Class A Shares or any Voting Common Shares acquired by the Offeror on conversion of its Class A Shares.

  8. The general nature and the material terms of any agreement, other than lending arrangements, with respect to securities of the reporting issuer entered into by the Offeror, or any joint actor, and the issuer of the securities or any other entity in connection with the transaction or occurrence giving rise to the news release, including agreements with respect to the acquisition, holding, disposition or voting of any of the securities:

    The Offeror acquired the Class A Shares pursuant to the Purchase Agreement, a redacted copy of which was filed by the Issuer with the applicable Canadian securities regulators and is available on SEDAR.

    The Offeror has entered into an escrow agreement dated August 25, 2015 with the Issuer pursuant to which the Offeror has agreed to deposit all of its Class A Shares into escrow with a U.S. bank, acting as escrow agent, as a source of payment for any indemnified claims that may arise pursuant to certain provisions of the Purchase Agreement.

    The Offeror has also entered into a lock-up agreement dated August 25, 2015 with the Issuer pursuant to which the Offeror has agreed not to sell, without the prior written consent of the Issuer, its Class A Shares for specified time periods, subject to certain limited exceptions. The lock-up period with respect to securities representing 50% of the value of the Offeror's Class A Shares will expire on August 25, 2016 and the lock-up period with respect to the remainder of the Offeror's Class A Shares will expire on August 25, 2017. The lock-up periods are subject to earlier expiry upon the occurrence of certain events that constitute a "change of control" of the Issuer. Upon expiry of the lock-up periods, the Issuer has agreed to exercise its rights to convert the Offeror's Class A Shares that have been released from the lock-up into Voting Common Shares.

  9. Names of any joint actors in connection with the disclosure in this news release and report of acquisition:

    Not applicable.

  10. In the case of a transaction or occurrence that did not take place on a stock exchange or other market that represents a published market for the securities, including an issuance from treasury, the nature and value, in Canadian dollars of the consideration paid by the offeror:

    See 6 above.

  11. If applicable, a description of any change in any material fact set out in a previous report by the entity under the early warning requirements or Part 4 of National Instrument 62-103 in respect of the reporting issuer's securities:

    Not applicable.

  12. If applicable, a description of the exemption from securities legislation being relied on by the offeror and the facts supporting the reliance:

    Not applicable.

 

SOURCE Gannaway Entertainment, Inc.

For further information: Gary Gannaway, (646) 425-3996, ggannaway@worldnow.com

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