DevCorp Capital Inc.

TSX VENTURE : DCC.P


June 21, 2013 19:30 ET

DevCorp Capital Inc. Announces Acquisition of Good to Go Rentals Ltd. and Neigum Hot Oilers Ltd. as Its Qualifying Transaction

CALGARY, ALBERTA--(Marketwired - June 21, 2013) -

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
2011 2012 Adjusted
2012
(1)(2)
2013 (Trailing
Twelve Months)
Adjusted 2013
(Trailing Twelve
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
2011 2012 Adjusted
2012
(1)(2)
2013 (TTM) Adjusted 2013
(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.

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