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SEL Exchange Inc. Announces Sale of SLM Logistics Corporation and Corporate Update

TORONTO, ONTARIO — (Marketwired) — 12/04/14 — SEL Exchange Inc. (the “Company”) (TSX VENTURE: SEL) announces it has entered into an agreement (the “Agreement”) with Reverse Logistics Distribution Inc., an Ontario private company that is an arm–s length party to the Corporation, with respect to the sale of the Company–s wholly owned subsidiary, SLM Logistics Corporation (“SLM”).

Since the unexpected departure of the Company–s former CEO on September 22, 2014, the SLM business and cash flow have been negatively affected. Certain customers of SLM have stopped purchasing goods resulting in SLM having little or no cash flow to pay its ongoing liabilities. Management had taken several measures, including the reduction in staffing, curtailing business development and reducing other expenses, in order to improve the cash flow of SLM. The Board of Directors had considered several options, including placing SLM into creditor protection, but decided that the sale of SLM was in the best interest of the Company as it stops the current cash burn from SLM, eliminates a substantial amount of liabilities and distances the Company from its former executive.

Pursuant to the Share Purchase Agreement, the purchase price of SLM is $150,000 (the “Sale Price”). The Sale Price will be paid to the Company in installments with the an initial payment of $50,000 to be paid on closing, $50,000 within 30 days of closing and the remaining $50,000 within 12 months from closing.

The sale of SLM is subject to the approval of the TSX Venture Exchange and the Company receiving dis-interested shareholder approval – the purchaser will not be allowed to vote their shares of the Company in favor of the sale of SLM. The Company expects to obtain written confirmation from dis-interested shareholders holding at least 50.1% of the overall shares of the Company.

As the acquisition of SLM was the Company–s qualifying transaction, certain common shares that are currently held in escrow pursuant to a surplus escrow agreement are subject to cancellation under the terms of the escrow agreement entered into by the holder of such common shares at the time of the Company–s qualifying transaction. The holder of the escrowed common shares has made a submission to the TSX Venture Exchange for an amendment to the provisions of the escrow agreement to amend the provision that all of the escrowed shares will be cancelled on the sale of SLM. There is no certainty that the required waiver will be granted.

Service Results Technology (“SRT”) and SEL Exchange US Operations:

The Company will continue to own 100% of Service Results Technology and SEL Exchange USA.

Service Results Technology (“SRT”) continues to generate cash flow and is awaiting the results of the previously announced Request for Proposal from a major international OEM to see if it will continue to handle their Canadian business which currently represents approximately 40% of SRT–s annual revenue.

SEL Exchange USA Inc., which is based in Tennessee, continues to generate negative cash flow as it moves from a startup to full production. Discussions are progressing with a number of significant U.S. based retailers and third party companies to manage their return and warranty inventory.

Special Committee Update:

The special committee of the board of directors was set up to investigate any possible wrong doing by the Company in relation to the charges laid against the Company–s former CEO. The special committee has conducted its own review of the operations, sales, collections and payments pertaining to its entire customer base with special focus on any customers that were arrested and charged alongside the former CEO.

The special committee has found no improper dealings with such individuals or customers as all transactions were properly documented, all products were shipped, properly invoiced and balances collected. There is no evidence that any payments were made to any of the co-accused. The special committee has yet to hire a forensic auditor to perform a separate investigation of the special committee–s findings. As the Company will soon be performing its year end audit, it has been determined that the forensic auditor will, instead, perform processes as part of the year end audit where they will specifically look at all transactions between the Company and those individuals arrested.

Corporate Debentures and Financing

Given the events at the Company, and its need to preserve cash, the Company intends to enter into discussions with the current debenture holders which hold approximately $4 million in debt. The goal is to renegotiate the terms of the outstanding debentures to reduce pressure on short term cash outflows from the business. Any proposed amendment to the debentures will require the approval of a majority of the debenture holders and the TSX Venture Exchange.

The Company is also in discussions with a number of lending agencies in an attempt to raise $1 million in debt to improve its balance sheet, provide some short term liquidity to allow SEL Exchange US to get to a breakeven position and pay off some of the non-recurring costs that have arisen out of the existing situation.

About SEL Exchange Inc.

The Company will continue operations through its remaining two wholly owned subsidiaries Service Results Technology Inc. and SEL Exchange USA, Inc. which are dedicated to managing consumer and retail store returns and problematic electronics through a product management system. The Company manages product warranties, service repairs, consumer returns from receiving to end-of-life with quality assurance testing, factory servicing, resale through non-traditional channels and recycling of non saleable product to support a closed-loop distribution process. The Company is able to recycle the non-saleable returns it receives, thereby allowing customer returns to have a very low environmental impact. The Company currently operates in Ontario, Canada and Tennessee, USA.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

Forward looking information is typically identified by words such as: believe, expect, anticipate, intend, estimate, postulate and similar expressions, or are those, which, by their nature, refer to future events. The Corporation cautions investors that any forward-looking information provided by the Corporation is not a guarantee of future results or performance, and that actual results may differ materially from those in forward looking information as a result of various factors, including, but not limited to: the state of the financial markets for the Corporation –s securities; the state of the industry; recent market volatility; the Corporation –s ability to raise the necessary capital or to be fully able to implement its business strategies; and other risks and factors that the Corporation is unaware of at this time. The Corporation expressly disclaims any obligation to update any forward-looking statements except as may be required by law.

SEL Exchange Inc.
Pat Westfall
Chief Financial Officer

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