RE:Another equity financing...Summary of Material Change Electrovaya announced a private placement of units (the “Units”), for gross proceeds of approximately $2,000,000, and the entering into of a binding commitment with MMCAP International Inc. SPC (the “Investor”) for a drawdown equity facility (the “Facility”) of up to $8,000,0000 for a term of twelve months. Item 5 Full Description of Material Change On December 20, 2017, the Investor agreed to purchase, on a private placement basis, 3,333,333 Units from the Corporation at a price of $0.60 per Unit (the “Offering”), with each Unit consisting of one common share in the capital of the Corporation (the “Common Shares”) and one Common Share purchase warrant (each, a “Unit Warrant”). The Offering closed with an effective date of December 22, 2017. Each Unit Warrant entitles the holder thereof to acquire one Common Share at a price of $0.73 until December 21, 2022. The Common Shares and Unit Warrants composing the Units are each subject to a hold period of four months and one day from the date of issuance pursuant to applicable securities laws. The proceeds of the Offering will be used for general working capital purposes. The Corporation and the Investor also entered into a binding term sheet with respect to the Facility. Under the Facility, the Corporation may, in one or more drawdowns, sell to the Investor, and the Investor shall purchase from the Corporation, on a private placement basis, and in accordance with the terms of the definitive agreements to be entered into in respect of the Facility, that number of - 2 - Common Shares specified in the relevant drawdown notice at a purchase price equal to the volume-weighted average trading price (“VWAP”) of the Common Shares on the Toronto Stock Exchange (“TSX”) for the five trading days after the applicable drawdown notice date, provided that aggregate drawdowns in any calendar month shall not exceed $2,000,000. The Facility will have a term of twelve months and the Company can sell Common Shares under the Facility for proceeds of up to a maximum of $8,000,000. The Corporation may only initiate a drawdown under the Facility provided that, among other things: (i) the VWAP of the Common Shares on the TSX for the five trading days preceding the applicable drawdown date exceeds $0.50 per Common Share; (ii) the market capitalization of the Corporation exceeds $50,000,000; and (iii) the terms of any drawdown in the definitive agreements in respect of the Facility are satisfied. A minimum of ten trading days must pass between the completion of one drawdown and the initiation of another, subject to waiver by the Investor. The Facility remains subject to the entering into of definitive agreements between the Investor and the Corporation. As consideration for the Investor’s purchase commitment under the Facility, Electrovaya will issue the Investor 4,000,000 common share purchase warrants (the “Commitment Warrants”). Each Commitment Warrant will be exercisable to purchase one Common Share at a price of $0.74 for a period of 60 months from the date the definitive agreements governing the Facility are entered into. The proceeds of any drawdown under the Facility will be used for general working capital purposes. The Facility, and any drawdowns thereunder, are subject to the approval of the Toronto Stock Exchange. Each of the Offering and the entering into of the Facility constitute a “related party transaction” with respect to Electrovaya within the meaning of that term pursuant to Multilateral Instrument 61-101 of the Canadian Securities Administrators - Protection of Minority Security Holders in Special Transactions (“MI 61-101”), as the Investor “beneficially owns” (within the meaning of that term under MI 61-101) greater than 10% of the outstanding Common Shares. MI 61-101 provides that related party transactions are, in the absence of an exemption therefrom, subject to the requirement to obtain a formal valuation for the subject matter of the related party transaction and minority shareholder approval of the related party transaction (which approval must exclude any votes attached to Common Shares held by the participating related party). The Corporation relied on the exemptions from the formal valuation and minority approval requirements of MI 61-101 in respect of the Offering and the Facility provided for in sections 5.5(a) and 5.7(1)(a) of MI 61-101 - Fair Market Value Not More than 25% of Market Capitalization. The purpose and business reasons of the Offering and entering into the Facility is to provide working capital to permit the Corporation to service purchase orders and outstanding debt obligations. The Corporation believes completion of the - 3 - Offering and the entering into of the Facility, as well as drawing on it, will permit the Corporation to continue servicing its outstanding debt and purchase orders. As a result of the completion of the Offering, the Investor gained beneficial ownership (within the meaning of that term as defined in MI 61-101) over an additional 6,666,666 Common Shares. Upon the grant of the Commitment Warrants, the Investor will gain beneficial ownership over an additional 4,000,000 Common Shares. To the Corporation’s knowledge, this will result in the Investor beneficially owning 29,462,546 Common Shares, or approximately 24.97% of the outstanding Common Shares, after partially diluting for all of the Common Shares and convertible securities that the Investor owns and controls after the issuance of the Commitment Warrants. Prior to the completion of the Offering and the issuance of the Commitment Warrants, to the knowledge of the Corporation, the Investor beneficially owned 18,795,880 Common Shares, representing 17.51% of the outstanding Common Shares on a partially-diluted basis. Drawdowns under the Facility may result in further material changes to the percentage of the Common Shares that the Investor beneficially owns. The Corporation is not able to predict such effects on the Investor’s shareholding as the issue price of Common Shares under the Facility is not fixed and any issuance thereunder will be at the prevailing VWAP. The Corporation expects that the issuance of Common Shares under the Facility may require shareholder approval in the future under the rules of the TSX, as the issuance of additional Common Shares may result in a “material effect on control” of the Corporation (as that term is defined under the rules and policies of the TSX). The Corporation will seek approval of the Facility and drawdowns thereunder from shareholders if required by the TSX. The Offering and the Facility were discussed by the board of directors of the Corporation at a meeting held for that purpose. A special committee was not considered necessary to consider the Offering and the Facility as the Investor does not have any representation on the board of directors. Further, Mr. Sankar Das Gupta, a director of the Corporation, is the largest shareholder of the Corporation, as a result of which the directors concluded that the interests of the minority shareholders were generally aligned with the board. Alternatives to the completion of the Offering and the Facility were discussed, including the status quo, but it was determined that the best option for the Corporation to proceed with entering into each of the Offering and the Facility as it provided certain financing for which the Corporation had an immediate need, and without which it was not certain if the Corporation could continue to meet its business objectives and obligations. While the Corporation continually evaluates financing proposals, including alternatives to the Offering and the Facility, none were deemed to be more advantageous than the Offering and the Facility due to the immediately available funds and the flexible continuing nature of the Facility. The Offering - 4 - and Facility were approved without any material disagreements or abstentions by any directors. There are no prior valuations in respect of the Corporation that relate to the subject matter of or that are otherwise relevant to the Offering or the Facility in the 24 months before the date of this material change report, or that are known, after reasonable inquiry, to the Corporation or to any of its directors or senior officers. This material change report was not filed at least 21 days prior to the closing of the Offering and the entering into of the binding term sheet with respect to the Facility. Management of the Corporation believes this was reasonable and necessary in the circumstances, as it allowed the Corporation to take advantage of time-sensitive financing opportunities. Item 6 Reliance on subsection 7.1(2) of National Instrument 51-102 Not applicable. Item 7 Omitted Information None. Item 8 Executive Officer Enquiries in respect of the material change referred to herein may be made to: Richard Halka EVP & CFO Tel.: 905-855-4627 Item 9 Date of Report January 17, 2017