Mr. John McKimm reports

SEB CLOSES A $2,000,000 SHARE OFFERING

Smart Employee Benefits Inc. (SEB) has closed a $2-million common share equity offering.

Aggregate proceeds of $2-million were raised through the issuance of 12.5 million common shares of the company at a price of 16 cents per common share.

Finders that introduced subscribers to the offering were issued common shares equal to 7 per cent of the number of common shares issued to such subscribers, as well as finder warrants equal to 7 per cent of the number of common shares issued to such subscribers. Finders were issued 411,250 common shares and finder warrants. Each finder warrant is exercisable into one common share of the company at 20 cents per common share for a period of 18 months from closing.

All securities issued in connection with the offering will be subject to a four-month hold period. The hold periods will expire as follows: for the first tranche, expiry on Feb. 4, 2018; for the second tranche, expiry on Feb. 7, 2018; and for the third tranche, expiry on Feb. 11, 2018.

Further to the company's press release on Oct. 2, 2017, NeST Group, through a controlled investment company, has completed an equity investment of $960,000 for six million common shares as part of the offering.

States John McKimm, president/chief executive officer/chief investment officer of Smart Employee, "SEB has made substantial progress in the past 12 months and is well positioned for growth going forward."

Sales are anticipated to exceed $110-million for fiscal 2017, up approximately 15 per cent from fiscal 2016.

Equity financing: Approximately $9.2-million has been raised in the past year, over 80 per cent subscribed for by existing shareholders, insiders and strategic partners.

Debt financing: Short-term debt was consolidated and termed out in April, 2017, with a $22.5-million financing from a major Canadian bank, resulting in interest savings of over $1.5-million per annum.

Backlog, evergreen and option year contracts are in excess of $500.0-million with approximately $440-million in technology non-benefits (TNB) and over $60.0-million in technology benefits processing (TBP).

Annuity revenue: Over 90 per cent of Smart Employee revenues are from annuity client relationships.

Benefits business unit: Over 300,000 plan members are managed on one or more of Smart Employee's five core health benefit processing solutions. The Aon transaction, which closed in April, 2017, added over 250,000 plan members to Smart Employee's benefits processing, added technology, and an infrastructure of approximately 160 people in Montreal, Toronto and India. Since closing, Smart Employee has added five new national clients and multiple "channel partner" relationships with consulting and sales organizations and insurers across Canada, including Aon.

Cost savings: Cash expenses and cost structure have been reduced by over $5.5-million (including interest charges) with the majority of these savings being fully realized in fiscal 2018.

Positive EBITDA (earnings before interest, taxes, depreciation and amortization): Fiscal 2016 was the first year of positive EBITDA, after adjustments for one-time costs. Significant growth of EBITDA is forecasted for fiscal 2017 and beyond, resulting from cost savings and organic growth initiatives. Both TNB and TBP business units are now expected to be cash flow positive. TNB is a stable business with a healthy growth profile, and TBP is expected to be cash flow positive for the first time in the fourth quarter, fiscal 2017. Previous years' EBITDA has been negative due to Smart Employee's heavy investment in its benefits processing solutions and infrastructure. TBP is the focus of future growth with profit margins typical of a SaaS (software-as-a-service) business model. Gross margins in TBP are expected to be in excess of 70 per cent. Profitability scales quickly once the fixed cost structure is covered.

NeST joint venture: Smart Employee has signed a joint venture (JV) with NeST to develop the USA marketplace as a back-office service provider to TPAs (third party administrators) and PEOs (professional employer organizations). Pursuant to this JV, Smart Employee will receive a licence fee of $2.25-million (U.S.), paid over time from the JV, and NeST will provide the working capital for growth. Smart Employee will service the JV, largely from Canada and India. The JV will be focused on sales and marketing. Smart Employee has invested tens of millions of dollars in software and infrastructure for benefits processing, and this JV will expedite the returns on this investment.

"Going forward, SEB has a strong base from which to execute a growth strategy in both Canada and the U.S. The equity and debt financing has improved the strength of the balance sheet. The TBP 'channel partner' strategy is driving strong organic growth. The TNB has a stable history of profitability and growth. The JV with NeST funds the growth in the USA. SEB is forecasting no major capital expenditure programs, and its infrastructure is very scalable. Additionally, SEB anticipates being largely free of term debt by 2019 with a healthy growing cash flow profile."

About Smart Employee Benefits Inc.

Smart Employee's global infrastructure comprises two operating business units: technology non-benefits (TNB) and benefits processing (BP). The TNB currently serves corporate and government clients across Canada and internationally. BP focuses on offering SaaS and BPO solutions in the benefits processing sector to corporate and government clients, globally.

We seek Safe Harbor.