Titanium Transportation Group Inc.

Titanium Transportation Group Inc.

December 18, 2014 16:43 ET

Titanium Transportation Group to Complete $6.7 Million Oversubscribed Private Placement Financing

WOODBRIDGE, ONTARIO--(Marketwired - Dec. 18, 2014) - Titanium Transportation Group Inc. ("Titanium") is pleased to announce that it intends to close its non-brokered private placement of subscription receipts ("Subscription Receipts") for total gross proceeds of approximately $6.7 million on or about December 19, 2014 (the "Private Placement"). The Private Placement was originally announced by Titanium on October 21, 2014 in connection with the execution of the LOI for the RTO (each as defined and discussed further below), at which time it was contemplated that the Private Placement would be completed for gross proceeds of a minimum of $3 million and a maximum of $5 million.

Mr. Ted Daniel, CEO of Titanium commented, "Titanium has a proven track record of acquiring asset-based transportation companies, extracting synergies, and implementing leading edge technologies. The completion of the private placement will allow Titanium to accelerate its next phase of growth and consolidation."

Private Placement

On or about December 19, 2014, Titanium expects to complete the non-brokered Private Placement of approximately $6.7 million of Subscription Receipts. Each Subscription Receipt will be sold at a price of $1.50 (the "Issue Price") and shall be automatically exchanged, for no additional consideration or further action on the part of the holder thereof, for one unit of Titanium (a "Titanium Unit") following the satisfaction of certain escrow release conditions (the "Escrow Release Conditions"), which must be satisfied prior to 5:00 p.m. (Toronto time) on the date that is 90 days following the closing of the Private Placement (which period may be extended by Titanium for up to an additional 30 days) (the "Deadline").

The gross proceeds of the Private Placement will be held in escrow until the Escrow Release Conditions have been satisfied. The Escrow Release Conditions include, but are not limited to, satisfaction or waiver of all condition precedents to the RTO set out in the Definitive Agreement (as defined below). If the Escrow Release Conditions are not satisfied prior to the Deadline, Titanium will repurchase the Subscription Receipts for cancellation at a repayment price per Subscription Receipt equal to the Issue Price.

Following the completion of the Consolidation (as defined below), purchasers of Subscription Receipts will be automatically issued an aggregate of approximately 4,488,098 Titanium Units. Each Titanium Unit will be comprised of one post-Consolidation common share in the capital of Titanium (a "Titanium Share") and one warrant to acquire a post-Subdivision Titanium Share (a "Titanium Warrant"). In connection with the RTO, the Titanium Shares and Titanium Warrants issued pursuant to exchange of the Subscription Receipts will be converted into an equivalent number of common shares ("RI Shares") or warrants ("RI Warrants") of the Resulting Issuer (as defined below), as applicable. Accordingly, if the Escrow Release Conditions are satisfied, each Subscription Receipt will ultimately be automatically exchanged for one RI Share and one RI Warrant. Each RI Warrant will entitle the holder to acquire an RI Share at the exercise price of $2.50 per share for a period of up to 36 months following the date the RI Shares are listed on a stock exchange. The RI Warrants will be subject to accelerated expiry if the volume weighted average price of the RI Shares is no less than $3.00 per RI Share (subject to customary adjustments) for 20 consecutive trading days.

In connection with the Private Placement, Titanium has agreed to pay certain registered dealers ("Finders"), Finder's compensation in respect of Private Placement subscribers referred to Titanium by such dealers, comprised of (i) an aggregate cash Finder's fee of approximately $66,850, equal to 5.0% of the aggregate gross proceeds from the sale of Subscription Receipts to purchasers referred to Titanium by Finders, (ii) an aggregate of 44,567 warrants to acquire shares (each, a "Finder's Warrant"), equal to 5.0% of the number of Subscription Receipts sold to purchasers referred to Titanium by Finders. Each Finder's Warrant will, following the RTO, entitle the holder to acquire a share on the same terms as the Titanium Warrants. The aggregate Finder's compensation shall only be paid by Titanium following the satisfaction of the Escrow Release Conditions.

The RTO

On October 21, 2014, Titanium, 9050400 Canada Inc. ("9050400") and Northeastern Group Inc. ("Northeastern"), a reporting issuer in Ontario, announced they had entered into a letter of intent (the "LOI") in connection with a potential business combination which would result the acquisition of all of the issued and outstanding common shares of Titanium and 9050400 by Northeastern (the "RTO"). A definitive agreement regarding the RTO (the "Definitive Agreement") was executed by the same parties effective November 20, 2014. Upon completion, the RTO will result in the reverse takeover of Northeastern.

Pursuant to the RTO, Titanium, 9050400 and Northeastern will complete a "three-cornered" amalgamation under the provisions of the CBCA, pursuant to which Titanium and 9050400 will amalgamate with a wholly-owned subsidiary of Northeastern (the "Amalgamation"). Pursuant to the Amalgamation, the then-issued and outstanding Titanium Shares and 9050400 common shares will be exchanged for common shares of Northeastern ("Northeastern Shares") on a 1:1 basis, resulting in the existing holders of Titanium Shares (including investors under the Private Placement) becoming holders of Northeastern Shares post-RTO. In addition, the outstanding Titanium Warrants and Finder's Warrants (each as defined below) will be exchanged pursuant to the Amalgamation for comparable securities of Northeastern, having substantially the same terms and conditions (and, for greater certainty, being economically equivalent to the exchanged Titanium Warrants or Finder's Warrants, as applicable). The amalgamated entity will be a wholly-owned subsidiary of Northeastern post-RTO, and Northeastern will change its name to "Titanium Transportation Group Inc." (referred to herein as the "Resulting Issuer").

Prior to the closing of the Amalgamation, Northeastern will complete a consolidation (the "Consolidation") of the Northeastern Shares on the basis of 267 pre-Consolidation Northeastern Shares for each post-Consolidation Northeastern Share, which is expected to result in the Northeastern Shares issued and outstanding immediately prior to the Amalgamation being consolidated into approximately 133,333 Northeastern Shares (post-Consolidation), subject to rounding. In addition, prior to the exchange of the Subscription Receipts, Titanium will subdivide the outstanding Titanium Shares so that following such subdivision and prior to the Amalgamation, there will be 23,600,000 Titanium Shares issued and outstanding (the "Subdivision").

The Consolidation and Subdivision are being effected to result in a deemed transaction value of $1.50 per Northeastern Share (on a post Consolidation and Subdivision basis). A total of 23,600,000 RI Shares will be issued to existing Titanium shareholders and an additional 1,466,667 RI Shares will be issued to existing 9050400 shareholders, each at a deemed issue price of $1.50 per share. Following the completion of the RTO, it is expected that the Resulting Issuer will have a total of approximately 29,688,098 RI Shares and 4,532,665 warrants issued and outstanding.

The Definitive Agreement contemplates the satisfaction of several material conditions prior to the completion of the RTO, including the execution of an amalgamation agreement to effect the RTO, receipt of requisite shareholder, regulatory, corporate and third party approvals and completion of the Private Placement. There can be no assurance that the RTO will be completed as proposed or at all. Until these and other conditions are satisfied, the likelihood of closing the RTO is uncertain. Any information released or received with respect to the RTO may not be accurate or complete and should not be relied upon.

About Titanium

Titanium is a leading asset-based transportation and logistics company servicing Canada and the United States, with approximately 600 trailers, 200 power units and 250 employees. Titanium provides truckload, dedicated, and cross-border trucking services, freight logistics, and warehousing and distribution to over 600 customers. Titanium is a recognized consolidator of asset-based transportation companies in Ontario, having completed six asset-based trucking acquisitions since 2011. Titanium has also been ranked by PROFIT magazine as one of Canada's Fastest Growing Companies for six consecutive years.

Through organic growth and acquisitions, Titanium has rapidly expanded in recent years, with total revenues increasing from approximately $12.9 million in 2010 (unaudited) to approximately $42.0 million in 2013. Titanium had revenue for the financial year ended December 31, 2013 of $42,040,258 and EBITDA of $2,709,518. In the same period, Titanium had direct costs of revenue of $33,267,573, for a gross margin of $8,722,685 and a net income of $1,074,806. As at December 31, 2013 Titanium had total assets of $20,393,836, total liabilities of $16,017,592 and shareholders' equity of $4,376,244. All financial figures referenced in this paragraph are based on audited financial statements of Titanium, except as otherwise noted.

Titanium, through predecessor entities, commenced operations as a provider of freight transportation services in 2002. The company was incorporated as "Titanium Transportation Group Inc." on April 17, 2013 under the Canada Business Corporations Act. As at the date hereof, prior to the completion of the Private Placement and RTO, Titanium is primarily owned by Trunkeast Investments Canada Limited, an Ontario corporation that owns approximately 53.3% of the issued and outstanding Titanium Shares. The remaining 46.7% of the issued and outstanding Titanium Shares are owned by the directors, officers and employees of Titanium.

Proposed Directors and Officers of the Resulting Issuer

Set forth below is information on each individual that is currently anticipated to be a director or officer of the Resulting Issuer upon closing of the RTO.

Theodor (Ted) Daniel (Proposed Director and Chief Executive Officer): Mr. Daniel founded TLI in May of 2002. He began his career at KPMG LLP, where he completed his designation requirements. He then furthered his career at Schwartz Levitsky Feldman LLP in accounting, tax, and mergers and acquisitions corporate finance capacities. He then spent approximately 10 years on various turnaround assignments in a Chief Financial Officer capacity. Prior to the establishment of TLI, he worked as Chief Financial Officer of a mid-sized transportation company for six years, gaining extensive experience in the trucking industry. Mr. Daniel then established TLI and led Titanium Group to successful a partnership with the Zzen Group of Companies in 2007. His strong financial leadership and passion for efficiency via technology has resulted in Titanium Group being recognized by Profit Magazine as one of Canada's Fastest-Growing Companies for the past six consecutive years. Further, he has led the company to the successful completion of six company acquisitions since April 2011. Mr. Daniel is a CPA, Chartered Accountant by profession and holds a BA (Computer Science) and a Honours BA (Business and Administrative Studies) from York University.

Luciano (Lu) Galasso (Proposed Director): Mr. Galasso is a Partner with the Zzen Group of Companies in Vaughan, Ontario. The Zzen Group owns and operates companies in land development, real estate, services, hospitality, and manufacturing sectors. He is the Chief Financial Officer for the manufacturing and service companies, and is responsible for financing and acquisitions for that sector. He is also asset manager for the international hospitality business. Prior to Zzen Group, he was a Vice President of Royal Group Technologies Limited ("Royal Group") participating in the taxation and finance areas. He was a member of the "going public" transaction involving Royal Group, Royal Group's acquisition team, and responsible for implementing Royal Group's ownership structures for its international investments. Mr. Galasso is a CPA, Chartered Accountant and worked with Arthur Andersen prior to Royal Group. He is the President of the Meta Foundation, a charitable organization dedicated to people with special needs, and is a Director and fundraiser for the St. Christopher Children's Home, an orphanage on the Island of St. Kitts.

Ari Levy (Proposed Director): Mr. Levy is a Corporate Director, Private Investor, and/or Strategic Advisor to the chief executive officers of several early stage energy, resource, and disruptive technology growth companies. He was Vice President and Director of TD Asset Management for 11 years, from 2002 to 2013. During his tenure he became the Lead Portfolio Manager for TD Energy, Resource and Precious Metals Funds, led the Resource team providing global analytical support for all TDAM active equity mandates, and was Co-Manager of the flagship TD Canadian Equity Fund. He joined TDAM in early 2002 as an Analyst, and to co-manage the TD Resource Funds. He took on the additional role of Product Specialist for all active equities into the institutional channel for several years beginning in 2007. Most recently, he also served as the Chair of the TDAM Engagement Committee. He continued to serve on the TD Waterhouse Private Giving Foundation Board of Directors through September 2014. Previously, he spent several years as the Global Energy, Industrials and Transportation/Autos Analyst for Goodman & Co. Investment Counsel and as the Co-Lead Analyst on several of their top performing sector funds. Prior to this, he was Senior Analyst, Canadian Equities for a major Canadian pension fund. He has been extensively involved in the education and training sector in finance and investment management. Mr. Levy is a graduate of the combined Law/MBA program (BCL, LL.B. and MBA) and has a BA (Economics) from McGill University. He is a CFA charter holder, a Certified Patent Valuation Analyst (CPVA), a Chartered Business Valuator (CBV) and a member in good standing of the Law Society of Upper Canada.

William (Bill) Chyfetz (Proposed Director): Mr. Chyfetz was Vice President and Secretary of Progressive Waste Solutions Ltd. (TSX: BIN) and its predecessors from July 2000 to September 2014. He was also General Counsel from July 2000 to July 2010 and Associate General Counsel from July 2010 to September 2014. Mr. Chyfetz is a chartered accountant with a CPA, CA designation as well as a Barrister & Solicitor called to the Ontario bar. Mr. Chyfetz obtained his LLB from Osgoode Hall Law School and his B. Comm from McGill University.

Katarzyna (Kasia) Malz (Proposed Chief Financial Officer): Ms. Malz joined Titanium in October 2014. Prior to joining Titanium, she was an assurance manager at William and Partners with extensive experience in quality control and tax compliance. She has years of experience with Titanium Group while at Williams and Partners as a consolidation specialist. She has been instrumental in developing resources to create efficiencies within the firm. Having taken steps toward her CBV designation, she has experience with business valuations. Ms. Malz is a CPA, Chartered Accountant and holds a Master of Accounting and an Honours Bachelor of Mathematics from the University of Waterloo.

Marilyn Daniel (Proposed Vice-President, Trucking Division): Ms. Daniel assisted in founding TLI in May of 2002. Her role has been fundamental in sales development, recruiting and development of internal processes for Titanium Group. Prior to the establishment of TLI, Ms. Daniel worked at the Ministry of the Attorney General for eight years. Her last position was as a policy analyst to the Assistant Deputy Minister. Since entering the transportation industry in 2002, she has completed her NATMI Director of Safety Certification from the University of Florida, and has completed level II of the CITT logistics management program. Her quest for knowledge and passion for challenge of regulations and insurance forums has led her to participate in national safety councils across Ontario. Most recently, she has been appointed to the Northbridge Insurance Best Practices Council. Northbridge Insurance recently purchased Markel Insurance, which was the largest transportation insurance provider in Canada. Through good management and dedication, she has successfully grown Titanium Group's fleet from one to presently over 200 power units. Mrs. Daniel holds an Honours BA (Political Science/History) from the University of Toronto.

Douglas Billau (Proposed Vice-President, Logistics Division): Mr. Billau is the Executive Vice President of the Logistics Division at Titanium. He started with Titanium Group as an account executive in September 2004 and quickly became its top sales executive in 2005. He was promoted to his current position in 2007. During this time, he developed many of the sales strategies still used by its sales executives today. He hired and mentored a strong new sales team that has allowed the Logistics revenue to grow from $3.8 million in 2008 to an expected $25 million in 2014. He has also served as an information technology advisor and database programmer for numerous Titanium information technology projects, such as the Titanium warehouse management system, transportation costing software and training modules for sales associates. Prior to working in sales at Titanium, Mr. Billau was a Visual Basic and SQL Server programmer at ASI Technologies Inc. for two years. He also served as a member of the Tri-Committee for utilization of information technology for public works from 2002 to 2004. From 2000 to 2002, he worked as a computer programming instructor at CDI College. For 3 years prior to 2000, he was a manager at General Customs Brokers Inc. Mr. Billau is a Microsoft Certified Professional and college-trained computer programmer and holds a Programmer Analyst Diploma from CDI College.

Cautionary statement regarding forward-looking statements

Certain statements contained in this press release constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking statements are provided for the purposes of assisting the reader in understanding Titanium or Northeastern's financial position and results of operations as at and for the periods ended on certain dates and to present information about management's current expectations and plans relating to the future and readers are cautioned that such statements may not be appropriate for other purposes. Forward-looking information may relate to Titanium or Northeastern's future outlook and anticipated events, including the completion of the RTO and Private Placement, and may include statements regarding the financial position, business strategy, budgets, litigation, projected costs, capital expenditures, financial results, taxes and plans and objectives of or involving Titanium or Northeastern. Particularly, statements regarding future results, performance, achievements, prospects or opportunities for Titanium or Northeastern or the industry in which they operate are forward-looking statements. In some cases, forward-looking information can be identified by terms such as "may", "might", "will", "could", "should", "would", "occur", "expect", "plan", "anticipate", "believe", "intend", "seek", "aim", "estimate", "target", "project", "predict", "forecast", "potential", "continue", "likely", "schedule", or the negative thereof or other similar expressions concerning matters that are not historical facts.

The forward-looking statements made in this press release are dated, and relate only to events or information, as of the date of this press release. Except as specifically required by law, neither Titanium nor Northeastern undertake any obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise, after the date on which the statements are made or to reflect the occurrence of unanticipated events.

Contact Information

  • Titanium Transportation Group Inc.
    Ted Daniel, CPA, CA
    Chief Executive Officer
    (905) 266-3011
    ted.daniel@ttgi.com