NOT FOR DISSEMINATION IN THE UNITED STATES OR FOR DISTRIBUTION TO U.S. WIRE
SERVICES
DevCorp Capital Inc. (TSX VENTURE:DCC.P) ("DevCorp") is pleased to announce that
it has entered into a letter of intent dated May 21, 2013 (the "Letter
Agreement") to acquire Good to Go Rentals Ltd. ("GTGR") and Neigum Hot Oilers
Ltd. ("GTGT" and together with GTGR, "GTG"). GTGR is a private Saskatchewan
oilfield rental and services company based out of Kindersley, Saskatchewan and
GTGT is a private Saskatchewan trucking company based out of Kindersley,
Saskatchewan. If completed, the proposed transaction will constitute DevCorp's
Qualifying Transaction as set forth in Policy 2.4 of the TSX Venture Exchange
("TSXV" or the "Exchange").
The Proposed Transaction
The structure of the proposed arm's length transaction will be determined by
mutual agreement of the parties and is expected to take the form of a reverse
take-over, three cornered amalgamation, merger, plan of arrangement or other
form of business combination (the "Proposed Transaction") resulting in the
creation of a new company ("Resultco"), with a name to be determined by the
parties and at a future date. The parties have agreed that the structure will
ultimately permit (i) the holders of GTG shares (the "GTG Shares") to
collectively receive 60,000,000 common shares of Resultco (each one a "Resultco
Share") for all of the issued and outstanding GTG Shares, at a deemed value of
$0.20 per Resultco Share for aggregate deemed consideration of $12,000,000; (ii)
the holders of GTG Shares to collectively receive, cash payable in the aggregate
consideration of $12,000,000; and (iii) subject to Resultco having achieved
certain milestones, performance bonus of up to $1,000,000 in cash and up to
$1,000,000 Resultco Shares, payable and issuable at a price based on a 90 day
average trading price of Resultco Shares, on each of the first and second
anniversary of closing.
GTGT has been operating from Kindersley Saskatchewan since 1991, originally
operating as a hot oiler and general oil field hauling company. In the late
1990's GTGT started offering a limited equipment rental service with their
trucking operation. Due to the success of the rental business, GTGR was formed
with an expanded rental offering in 2005. Currently, GTGT provides a full suite
of equipment rentals including tanks, rig matting, blow back tanks, drilling
surface rentals, generators and light towers. GTGR is controlled by Norm Neigum
and Dean Dorsett and GTGT is controlled by Darla Dorsett.
Private Placement
In conjunction with the Proposed Transaction, it is contemplated that the
parties will complete a private placement (the "Offering") for net proceeds of a
minimum of $8,000,000. The Offering shall consist of a combination of issuance
of Resultco Shares at a price of $0.20 per Resultco Share and debt financing,
with such debt financing not to exceed 60% of the gross amount raised under the
Offering. Any agent under the Offering will be entitled to receive a cash
commission and agent's options.
DevCorp shall also be permitted, subject to the maximum amount that may be
raised pursuant to the debt financing, to issue convertible debentures in
conjunction with the Offering or Proposed Transaction. If convertible debentures
are issued under the Offering, further news release will be issued setting forth
its terms.
Summary of Financial Information for GTGR
The following are summaries of certain significant financial information derived
from unaudited management prepared financial statements for GTGR as at and for
years ended July 31, 2011 and 2012 and for the 9 months ended April 30, 2013:
GTGR Assets, Liabilities and Equity
----------------------------------------------------------------------------
2011 2012 April 30, 2013
----------------------------------------------------------------------------
ASSETS
Total Current Assets $ 1,507,791 $ 1,686,629 $ 1,624,739
Total Capital Assets $ 3,674,987 $ 5,185,293 $ 6,428,521
Total Other Assets $ 214 $ 214 $ 261
-----------------------------------------------
Total Assets $ 5,182,992 $ 6,872,136 $ 8,053,521
LIABILITIES
Total Current Liabilities $ 2,134,709 $ 2,697,864 $ 164,474
Total Long Term Liabilities $ 721,219 $ 263,950 $ 36,368
-----------------------------------------------
Total Liabilities $ 2,855,928 $ 2,961,814 $ 200,841
EQUITY
Total Share Capital $ 175,779 $ 175,779 $ 175,779
Total Retained Earnings $ 2,151,285 $ 3,734,543 $ 7,676,901
-----------------------------------------------
Total Equity $ 2,327,064 $ 3,910,322 $ 7,852,680
-----------------------------------------------
Total Liabilities & Equity $ 5,182,992 $ 6,872,136 $ 8,053,521
-----------------------------------------------
-----------------------------------------------
GTGR Revenue, Expense, Net Income and EBITDA
---------------------------------------------------------------
Adjusted
2013
2013 (Trailing
(Trailing Twelve
Adjusted Twelve Months)
2011 2012 2012(1)(2) Months) (1)(2)
---------------------------------------------------------------
Revenue $4,527,163 $6,887,036 $ 6,887,036 $ 8,285,639 $ 8,285,639
Expenses $2,796,790 $4,842,583 $ 2,697,583 $ 5,569,040 $ 2,688,040
Net Income $1,297,944 $1,583,258 $ 3,728,258 $ 2,255,405 $ 5,136,405
EBITDA $2,351,058 $3,084,342 $ 5,229,342 $ 3,754,706 $ 6,635,706
Notes:
(1) Expenses have been adjusted to account for disproportionate
management wages and bonuses that were used by the owners as a
means to remove excess cash from the businesses in 2012 and 2013
Trailing Twelve Months ("TTM"), which is not expected to re-occur
in the future. These wages and bonuses totalled $2,385,000 in 2012
and $3,145,000 in 2013 TTM for GTGR. Management wages of $240,000
for 2012 and $264,000 for 2013 TTM have been added into the
expenses for GTGR, which DevCorp believes are more reflective of
industry wages and bonuses. The net adjustment to expenses in 2012
is $2,145,000 and 2013 is $2,881,000 for GTGR. As a result of the
lower expenses, both adjusted Net Income and adjusted EBITDA
figures are higher in the adjusted 2012 and 2013 TTM figures.
(2) EBITDA is earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA is earnings before interest, taxes,
depreciation and amortization and is adjusted for other non-
recurring items. EBITDA and adjusted EBITDA are non-GAAP financial
measures and do not have any standardized meaning under GAAP and
is therefore unlikely to be comparable to similar measures
presented by other companies. DevCorp believes that EBITDA and
adjusted EBITDA are useful supplemental measures, which provide an
indication of the results generated by GTGR's primary business
activities prior to consideration of how those activities are
financed, amortized or taxed. Readers are cautioned, however, that
EBITDA and adjusted EBITDA should not be construed as an
alternative to comprehensive income (loss) determined in
accordance with GAAP as an indicator of GTGR's financial
performance.
Summary of Financial Information for GTGT
The following are summaries of certain significant financial information derived
from unaudited management prepared financial statements for GTGT as at and for
years ended February 28, 2011 and 2012 and the 14 months ended April 30, 2013:
GTGT Assets, Liabilities and Equity
----------------------------------------------------------------------------
GTGT: 2011 2012 April 30, 2013
----------------------------------------------------------------------------
ASSETS
Total Current Assets $ 936,623 $ 1,407,512 $ 1,044,766
Total Capital Assets $ 684,741 $ 1,202,798 $ 1,736,094
Total Other Assets $ 866,896 $ 678,260 $ 470,113
----------------------------------------------
Total Assets $ 2,488,260 $ 3,288,570 $ 3,250,973
LIABILITIES
Total Current Liabilities $ 957,664 $ 1,416,060 $ 68,349
Total Long Term Liabilities $ 452,114 $ 318,389 $ 113,086
----------------------------------------------
Total Liabilities $ 1,409,778 $ 1,734,449 $ 181,435
EQUITY
Total Share Capital $ 20 $ 20 $ 20
Total Retained Earnings $ 1,078,462 $ 1,554,101 $ 3,069,519
----------------------------------------------
Total Equity $ 1,078,482 $ 1,554,121 $ 3,069,539
----------------------------------------------
Total Liabilities & Equity $ 2,488,260 $ 3,288,570 $ 3,250,973
----------------------------------------------
----------------------------------------------
GTGT Revenue, Expense, Net Income and EBITDA
-----------------------------------------------------------------
Adjusted Adjusted 2013
2011 2012 2012(1)(2) 2013 (TTM) (TTM)(1)(2)
-----------------------------------------------------------------
Revenue $ 3,379,881 $ 5,604,211 $ 5,604,211 $ 6,757,310 $ 6,757,310
Expenses $ 2,649,944 $ 4,593,749 $ 3,915,131 $ 5,271,618 $ 5,184,960
Net Income $ 583,569 $ 805,639 $ 1,484,257 $ 1,485,692 $ 1,572,350
EBITDA $ 984,336 $ 1,346,261 $ 2,024,879 $ 1,489,276 $ 1,573,934
Notes:
(1) Expenses have been adjusted to account for disproportionate
management wages and bonuses that were used by the owners as a
means to remove excess cash from the businesses in 2012 and 2013
TTM, which is not expected to re-occur in the future. These wages
and bonuses totalled $878,618 in 2012 and $306,658 in 2013 TTM for
GTGT. Management wages of $200,000 for 2012 and $220,000 for 2013
TTM have been added into the expenses for GTGT which DevCorp
believes are more reflective of industry wages and bonuses. The
net adjustment to expenses in 2012 is $678,618 and $86,658 in 2013
for GTGT. As a result of the lower expenses, both adjusted Net
Income and adjusted EBITDA figures are higher in the adjusted 2012
and 2013 TTM figures.
(2) EBITDA is earnings before interest, taxes, depreciation and
amortization. Adjusted EBITDA is earnings before interest, taxes,
depreciation and amortization and is adjusted for other non-
recurring items. EBITDA and adjusted EBITDA are non-GAAP financial
measures and do not have any standardized meaning under GAAP and
is therefore unlikely to be comparable to similar measures
presented by other companies. DevCorp believes that EBITDA and
adjusted EBITDA are useful supplemental measures, which provide an
indication of the results generated by GTGR's primary business
activities prior to consideration of how those activities are
financed, amortized or taxed. Readers are cautioned, however, that
EBITDA and adjusted EBITDA should not be construed as an
alternative to comprehensive income (loss) determined in
accordance with GAAP as an indicator of GTGR's financial
performance.
Trading Halt
Trading in the DevCorp Shares may remain halted pending the review of the
proposed Qualifying Transaction by the TSXV. There can be no assurance that
trading in the DevCorp Shares will resume prior to the completion of the
Qualifying Transaction.
Resulting Issuer
Upon completion of the Proposed Transaction, it is expected that Resultco will
have 106,735,000 common shares issued and outstanding, being the aggregate of:
(i) 60,000,000 Resultco Shares to be issued for all of the issued and
outstanding shares of GTG Shares; (ii) assuming minimum Offering of $8,000,000
is subscribed for, 40,000,000 Resultco Shares to be issued under the minimum
Offering; and (ii) 6,735,000 being the current issued and outstanding shares of
DevCorp. Upon completion of the Proposed Transaction and assuming the minimum
Offering of $8,000,000, the shareholders of GTG would hold approximately 56.21%
of the issued and outstanding capital of Resultco, on a non-diluted basis.
In addition, assuming that convertible debentures are not issued under the
Offering, Resultco will have outstanding convertible securities as follows: (i)
360,000 stock options exercisable at $0.10; and (ii) 165,000 agent's options
exercisable at $0.10 per share.
Directors and Officers of Resulting Issuer
The directors and officers of Resultco are expected to be as follows:
Sidney Dutchak, President and Chief Executive Officer and Director
Mr. Dutchak has been an independent businessman since July 2007. He was
President of Cordy Oilfield Services Inc. (formerly QCC Technologies Inc.) from
March 2001 to July 2007. Prior to that Mr. Dutchak was a director of QCC
Technologies since 1999. Mr. Dutchak has served on several public company
boards, and within the past five years served on the boards of How To Web TV
Inc., Ergo Ventures Inc. and Maple Leaf Reforestation Inc.
Michael Kohut, Director
Michael Kohut is currently the Chief Financial Officer of Trilogy Energy Corp.
since June 2006. Mr. Kohut is also a director of Big Rock Brewery Inc. Prior to
that, Mr. Kohut was the President, CEO and a director of Global Railway
Industries Ltd. for over 7 years. Mr. Kohut graduated from the University of
Calgary with a Bachelor of Commerce in 1989 and received a Chartered Accounting
designation in 1992.
James Riddell, Director
Mr. Riddell is currently the President and Chief Operating Officer of Paramount
Resources Ltd. Mr. Riddell has been the President and Chief Operating Officer of
Paramount since June 2002 and a director since 2000. Mr Riddell has also been
the Chief Executive Officer and a Director of Trilogy Energy Corp. since its
inception in February, 2005; he also held the office of President until May
2010. Mr. Riddell is also a director and Executive Chairman of the Board of MGM
Energy Corp. (a public oil and gas exploration and development company) and a
director and Vice Chairman of Big Rock Brewery Inc. (a public business which
produces and markets beer). Mr. Riddell graduated from Arizona State University
with a Bachelor of Science degree in Geology (1989) and from the University of
Alberta with a Master of Science degree in Geology (1993).
Robert Jepson, Director
Mr. Jepson is currently the Vice President of Business Development of Spira Data
Corp. Mr. Jepson was the prior President, Chief Executive Officer and Director
of Vault Energy Trust, a public trust trading on the Toronto Stock Exchange
("TSX"). Mr. Jepson co-founded Bellator Exploration Inc. where he held the
positions of Vice President Land, Chief Operating Officer and Director. Bellator
was a public oil and gas companies that traded on the TSX. Mr. Jepson obtained
his Bachelor of Business Administration in Petroleum Land Management from the
University of Oklahoma in 1984.
Greg Fisher, Director
From March of 2008 until June of 2011, Mr. Fisher was the Chief Financial
Officer of Performance Services Ltd., a private Alberta Company in the business
of providing well servicing and environmental services. From June of 2005 to
January of 2008, Mr. Fisher was the Chief Financial Officer of Vault Energy
Trust, a public trust trading on the TSX.
Sean Monaghan, Director
Mr. Monaghan has been a senior officer and major shareholder of Lethbridge
Industries Ltd., Columbia Industries Ltd., Inspira Manufacturing Inc. and Promac
Industries Ltd. since November 1992. The four aforementioned corporations are
all private Alberta corporations conducting business in the machining and
fabrications industry. Mr. Monaghan was a director of Vault Energy Trust from
June of 2005 to December 2007. Mr. Monaghan is a director of Performance Well
Services Ltd. and was a director of Bellator Exploration Inc. Bellator was a
public oil and gas company that traded on the TSX. Mr. Monaghan obtained his
Bachelor of Arts (Economics) from the University of Lethbridge in 1982.
Gregory Peterson, Director
Mr. Peterson is a partner with Gowling Lafleur Henderson LLP, a national
Canadian law firm since 1989. Mr. Peterson is currently the Corporate Secretary
of Wenzel Downhole Tools Ltd., a downhole tools manufacturing company that is
listed on the TSX. Mr. Peterson is currently a director of Manitok Energy Inc.,
a TSXV listed oil and gas company. Mr. Peterson has been a prior director and
the corporate secretary of many public companies, private companies and sports
associations.
Norm Neigum, Director
Mr. Neigum is a founder of GTG. Mr. Neigum grew up in Mendham, Saskatchewan and
moved with his family in 1969 to Medicine Hat, Alberta where he became involved
in the oil industry.
Following his passion for drilling wells, Mr. Neigum worked as a rig manager for
17 years. In 1991, Mr. Neigum and his wife Darla Dorsett started GTGT. By 2005,
rapid growth spurred the creation of GTGR which now has manufactured or
purchased over 700 pieces of oilfield rental equipment.
Alex Jackson, Chief Financial Officer
Alex Jackson is a founding partner of Storm Mountain Capital Partners, a private
acquisitions and divestitures advisor based in Calgary, Alberta. Alex brings
more than 13 years of experience in finance roles with 10 years focused
specifically on energy. He was formerly the Director of Business Development at
a private equity firm focused on natural resource development. Alex previously
was a Senior Commercial Advisor in the acquisitions and divestitures group at
Enerplus Corporation and started his career in London, England with RBC. Alex is
a CFA charterholder and holds a BComm from Royal Roads University and a BSc from
the University of Calgary.
Frank Sur, Corporate Secretary
Mr. Sur is a lawyer with Gowling Lafleur Henderson LLP, a national Canadian law
firm, practicing in the area of corporate finance law.
Sponsorship of the Qualifying Transaction
DevCorp intends to apply to the TSXV for a waiver from the requirement to retain
a Sponsor in connection with the Proposed Transaction, but there is no assurance
that such waiver will be granted.
Significant Conditions to Completion of the Proposed Transaction
Completion of the Proposed Transaction is subject to a number of conditions,
including but not limited to: (a) entering into of a definite agreement; (b)
completion of due diligence; (c) TSXV regulatory approval; and (d) approval of
the shareholders of GTG and DevCorp.
Cautionary Note Regarding Forward-Looking Statements
This news release contains forward-looking statements relating to the Proposed
Transaction, including statements regarding the exchange ratio for the Proposed
Transaction, the anticipated acquisition of GTG, the anticipated election of
additional directors for Resultco, the sponsorship by a registered investment
dealer, completion of the Offering, the receipt of all necessary regulatory
approvals and satisfaction of all other closing conditions in connection with
the Proposed Transaction and other statements that are not historical facts.
Readers are cautioned not to place undue reliance on forward-looking statements,
as there can be no assurance that the plans, intentions or expectations upon
which they are based will occur. By their nature, forward-looking statements
involve numerous assumptions, known and unknown risks and uncertainties, both
general and specific, that contribute to the possibility that the predictions,
forecasts, projections and other forward-looking statements will not occur,
which may cause actual performance and results in future periods to differ
materially from any estimates or projections of future performance or results
expressed or implied by such forward-looking statements. These assumptions,
risks and uncertainties include, among other things: the risk that the Proposed
Transaction will not be completed if a formal agreement is not reached or that
the necessary approvals and/or exemptions are not obtained or some other
condition to the closing of the Proposed Transaction is not satisfied; the risk
that closing of the Proposed Transaction could be delayed if DevCorp and GTG are
not able to obtain the necessary approvals on the timelines planned; the
assumptions relating to the parties entering into the formal agreement in
respect of the Proposed Transaction, its structure, and the timing thereof; the
risk that the Offering is not completed; the timing of obtaining required
approvals and satisfying closing conditions for the Proposed Transaction, state
of the economy in general and capital markets in particular, investor interest
in the business and future prospects of DevCorp and GTG.
The forward-looking statements contained in this press release are made as of
the date of this press release. Except as required by law, DevCorp and GTG
disclaim any intention and assume no obligation to update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise, except as required by applicable securities law.
Additionally, DevCorp and GTG undertake no obligation to comment on the
expectations of, or statements made, by third parties in respect of the matters
discussed above.
Completion of the transaction is subject to a number of conditions, including
but not limited to, Exchange acceptance and if applicable pursuant to Exchange
Requirements, majority of the minority shareholder approval. Where applicable,
the transaction cannot close until the required shareholder approval is
obtained. There can be no assurance that the transaction will be completed as
proposed or at all.
Investors are cautioned that, except as disclosed in the management information
circular or filing statement to be prepared in connection with the transaction,
any information released or received with respect to the transaction may not be
accurate or complete and should not be relied upon. Trading in the securities of
a capital pool company should be considered highly speculative.
The Exchange has in no way passed upon the merits of the proposed transaction
and has neither approved nor disapproved the contents of this press release.
Not for distribution to U.S. Newswire Services or for dissemination in the
United States of America. Any failure to comply with this restriction may
constitute a violation of U.S. Securities Laws.
FOR FURTHER INFORMATION PLEASE CONTACT:
DevCorp Capital Inc.
Greg Peterson
Director
(403) 298-1872
greg.peterson@gowlings.com
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