Danacore Industries Inc. Announces Definitive Agreement with Bay Talent Group Inc. for Proposed Qualifying Transaction

Vancouver, British Columbia--(Newsfile Corp. - June 20, 2019) - Danacore Industries Inc. ("Danacore" or the "Company") (TSXV: DANA.P), is pleased to announce that further to its news release dated April 23, 2019, it has entered into an amalgamation agreement dated June 19, 2019 (the "Amalgamation Agreement") with Bay Talent Group Inc. ("Bay Talent" or "BTG") and Danacore Acquisition Corp., a wholly owned subsidiary of the Company ("Danacore Subco") pursuant to which Danacore will, by way of a "three-cornered amalgamation", acquire all of the issued and outstanding securities of Bay Talent (together with the related transactions and corporate procedures set forth in the Amalgamation Agreement, the "Transaction").

The Transaction is subject to TSX Venture Exchange (the "TSXV") approval and is intended to constitute Danacore's "Qualifying Transaction" in accordance with TSXV Policy 2.4 - Capital Pool Companies.

In connection with the Transaction, Danacore intends to consolidate its common shares on a 2:1 basis (the "Danacore Share Consolidation") and Bay Talent intends to consolidate its common shares on a 1.3:1 basis (the "BTG Share Consolidation").

About Bay Talent

BTG was formed under the laws of the Province of Ontario on June 2, 2017. BTG has two wholly-owned operating subsidiaries, Provision IT Resources Ltd. ("Provision") and PTC Accounting and Finance Inc. ("PTC"), existing under the laws of Ontario and Canada, respectively. Provision and PTC are boutique executive search, staffing, office administration and consulting firms operating in Southwestern Ontario. The firms offer a range of professional staffing services for the accounting, finance, information technology, and human resources industries in particular. In the last year, Provision and PTC have also been retained by organizations in the financial, government, insurance, and pension fund sectors, as well as, small and medium sized businesses across a broad range of industries.

BTG's strategy is to complete disciplined acquisitions of executive staffing and consulting firms that meet BTG's acquisition valuation, geographic, strategic and operational criteria. BTG proposes to create value by providing diversified vertical and cross-selling opportunities to target staffing and recruiting firms, and realizing general and administrative savings from consolidating back-end operations.

Based on the unaudited financial statements of Bay Talent for the three month financial period ended March 31, 2019, Bay Talent had revenue of $3,011,887, net loss of $736,098, total assets of $4,832,784, total liabilities of $4,442,182, and shareholders' equity of $390,602 as at March 31, 2019. Based on the unaudited financial statements of Bay Talent for the most recently completed financial year ended December 31, 2018, Bay Talent had revenue of $8,674,646, net loss of $1,673,991, total assets of $4,119,132, total liabilities of $3,364,623, and shareholders' equity of $754,509 as at December 31, 2018.

The Transaction

Pursuant to the terms of the Amalgamation Agreement, and subject to certain conditions, including receipt of applicable regulatory and shareholder approvals, Bay Talent will amalgamate with Danacore Subco pursuant to the provisions of the Ontario Business Corporations Act (the "Amalgamation"). The amalgamated entity will be a wholly-owned subsidiary of Danacore and the shareholders of Bay Talent will be issued one common share of Danacore (on a post-Danacore Share Consolidation basis) for every one Bay Talent common share (on a post-BTG Share Consolidation basis) held immediately prior to the completion of the Transaction. All outstanding options and warrants of Bay Talent will also be exchanged for options and warrants, respectively, of Danacore on the same terms and conditions as the original security, after adjustment for the BTG Share Consolidation.

The Amalgamation Agreement provides that no party will solicit or negotiate with any other entities with respect to a transaction similar to the Transaction.

The Amalgamation and BTG Share Consolidation must be approved by not less than 662/3% of the votes cast at a meeting of shareholders of Bay Talent, which will be held to consider, among other things, the Amalgamation and BTG Share Consolidation. In addition, as part of the Transaction, shareholders of Bay Talent, holding more than 85% of the currently issued and outstanding Bay Talent shares, have entered into support agreements whereby they have agreed to vote their BTG common shares in favour of the Transaction at a meeting of the Bay Talent shareholders called for such purpose. It is expected that the BTG shareholder meeting will be held in July 2019.

In addition, BTG shareholders holding BTG common shares acquired at a price of $0.05 per share and who own, control or direct 1,000,000 or more common shares of BTG (on a pre-BTG Share Consolidation basis) are being requested to agree to subject all common shares and convertible securities of BTG held by them from time to time and upon completion of the Transaction to a 3.5 year escrow, with 16.6% of the escrowed securities to be released every three months commencing 27 months after closing of the Transaction with the remaining securities being released on the 42nd month anniversary of closing of the Transaction (the "Lock-Up Agreements"). The Lock-Up Agreements are separate from and in addition to any escrow or resale restrictions that may be imposed by the applicable policies of the TSXV.

The completion of the Transaction is subject to the satisfaction of certain conditions, including but not limited to: (i) the Brokered Financing (as defined below), raising gross proceeds of not less than $2.8 million; (ii) the shareholders of Danacore approving the adoption of amended and restated articles, an option plan; (iii) approval of the Amalgamation and BTG Share Consolidation by the shareholders of Bay Talent; (iii) Danacore having cash, net of liabilities (excluding Transaction costs) of at least $850,000; (v) the absence of any material adverse change in the business of either Danacore or BTG; (vi) no proceeding or law being enacted or commenced that frustrates the consummation of the Transaction; (vii) dissent rights having not being exercised by shareholders of BTG holding more than 10% of the outstanding common shares; (viii) delivery by BTG of Lock-Up Agreements for shareholders holding an aggregate of 14,067,257 BTG common shares (on a pre-BTG Share Consolidation basis representing 42.17% of the currently issued and outstanding BTG common shares (on a pre-BTG Share Consolidation basis)); (ix) receipt of all requisite regulatory, stock exchange, court or governmental authorizations and consents, including the approval of the TSXV. Accordingly, there can be no assurance that the Transaction will be completed on the terms proposed above or at all. For avoidance of doubt, the Amalgamation is not subject to Danacore shareholder approval.

Subject to satisfaction or waiver of the conditions precedent referred to herein and contained in the Amalgamation Agreement, Danacore and Bay Talent anticipate that the Transaction will be completed on or before August 30, 2019.

Each of Danacore and Bay Talent will bear their own costs in respect of the Proposed Transaction except that BTG will pay all regulatory fees and expenses in respect of the Transaction incurred by it and by Danacore, including any fee related to sponsorship.

Concurrent Financings

In connection with the Transaction and pursuant to an engagement letter dated April 29, 2019, among Bay Talent and Gravitas Securities Inc., as co-lead agent with Canaccord Genuity Corp. (the "Agents"), Bay Talent proposes to complete a "best efforts" brokered private placement of up to 10,000,000 subscription receipts (each, a "Subscription Receipt"), at a price of $0.50 per Subscription Receipt, for gross proceeds of up to $5,000,000 (the "Brokered Financing").

The Agents' compensation under the Brokered Financing includes: (a) a fee payable in cash equal to 8% of the gross proceeds received by BTG from the sale of Subscription Receipts (the "Agents' Fee"); and (b) such number of options (each, an "Agents' Compensation Option") as is equal to 8% of the aggregate number of Subscription Receipts issued under the Brokered Financing, with each Agents' Compensation Option exercisable at an exercise price of $0.50 per Agents' Compensation Option for a period of two years from the effective date of the Transaction into one Unit (as defined below).

The gross proceeds of the Brokered Financing less an amount equal to the Agents' expenses and 50% of the Agents' Fee (the "Escrowed Funds") will be delivered to and held by a licensed Canadian trust company or other escrow agent (the "Escrow Agent") mutually acceptable to the Agents and Bay Talent, in an interest bearing account, pending the satisfaction of certain escrow release conditions (including among other things, the completion of all conditions precedent to the Transaction to the satisfaction of the Agents) (the "Escrow Release Conditions") prior to December 31, 2019 (the "Escrow Release Deadline").

The gross proceeds of the Brokered Financing (less an amount equal to the Agent's expenses and the Agent's Fee) will be used for general operating expenses and funding completion of the Qualifying Transaction.

Upon the satisfaction of the Escrow Release Conditions, each Subscription Receipt will be automatically converted, without payment of any additional consideration, into one unit of Bay Talent (each, a "Unit"). Each Unit will be comprised of one common share of Bay Talent (each, a "Unit Share") and one-half of one Bay Talent common share purchase warrant with each whole warrant (each, a "Unit Warrant") being exercisable, for a period of two years from the effective date of the Transaction, to purchase one BTG common share at a price of $0.70 per BTG common share, in each case, on a post-BTG Share Consolidation basis. The Unit Shares and Unit Warrants will be exchanged for common shares ("Danacore Unit Shares") and warrants of Danacore ("Danacore Unit Warrants") pursuant to the Transaction, on a one-for-one basis (after giving effect to the Danacore Share Consolidation). The Danacore Unit Warrants will be subject to an acceleration right (the "Warrant Acceleration Right") if on any ten consecutive trading days, beginning on the date that is four months and one day following the effective date of the Transaction, the daily volume weighted average trading price of Danacore's common shares on the TSXV is greater than $1.00 per common share. If Danacore exercises its Warrant Acceleration Right, the new expiry date of the Danacore Unit Warrants will be the 30th day following the notice of such exercise.

If: (i) the Escrow Release Conditions are not satisfied or waived on or before the Escrow Release Deadline, or (ii) prior to the Escrow Release Deadline, the Amalgamation Agreement is terminated or Bay Talent advises the Escrow Agent or publicly announces that it does not intend to satisfy the Escrow Release Conditions, the Subscription Receipt holders will be entitled to a return of the total subscription price paid, the Escrowed Funds (plus accrued interest earned thereon) will be returned to the Subscription Receipt holders on a pro rata basis and the Subscription Receipts will be cancelled without any further action on the part of the holders. Bay Talent will be responsible for the payment of any shortfall between the Escrowed Funds and the subscription price paid by the holders of the Subscription Receipts.

Prior to or concurrently with the closing of the Transaction, Bay Talent also intends to complete a non-brokered private placement of up to 6,666,666 Bay Talent common shares at a price of $0.30 per share (on a pre-BTG Share Consolidation basis), for gross proceeds of up to $2,000,000 (the "Non-Brokered Financing"). The Non-Brokered Financing is expected to close prior to closing of the Proposed Transaction and Brokered Offering.

Resulting Issuer

On closing of the Transaction, Danacore (then, the "Resulting Issuer") will change its name to "Bay Talent Group Inc." In addition, the Resulting Issuer intends to change its year end to December 31, coinciding with that of Bay Talent.

Upon completion of the Transaction and assuming completion of the maximum amount of the Brokered and Non-Brokered Financing, former shareholders of Bay Talent will hold approximately 85.99% of the Resulting Issuer common shares ("Resulting Issuer Shares") and Danacore shareholders will hold 14.01% of the Resulting Issuer Shares. It is anticipated that there will be an aggregate of approximately 48,173,980 Resulting Issuer Shares issued and outstanding and an additional 9,572,935 convertible securities of the Resulting Issuer exercisable into Resulting Issuer Shares.

The Resulting Issuer will carry on the executive search business conducted by Bay Talent, and the Resulting Issuer Shares will be listed under a new trading symbol. On closing of the Transaction, the Resulting Issuer anticipates meeting the TSXV's initial listing requirements for a technology company.

Upon completion of the Transaction, it is expected that the board of directors and management of the Resulting Issuer will consist of Hamed Shahbazi, Allan Hartley, David Carbonaro, Jonson Sun and Simon Dealy. All directors and officers of Danacore, other than Hamed Shahbazi will resign at the closing of the Transaction.

The following individuals are expected to be directors or senior officers of the Resulting Issuer:

Allan Hartley - Chief Executive Officer and Director

Allan Hartley is a prominent executive with experience in the staffing and consulting industries since 1983. Mr. Hartley is the former Chief Executive Officer of Staffing 360 Solutions (NASDAQ:STAF) which he helped build to a US$130m revenue generating business in 2013 from zero in 2012 through an accretive acquisition strategy. Mr. Hartley has extensive experience in the staffing industry including being a key architect in the launch of AccountAbilities, Inc., which he subsequently took public as President at a valuation of US$200m, forming Creative Financial Staffing, a staffing and consulting company. Mr. Hartley was also a member of the team that launched Deloitte's Resource Connection and Norell's Professional Group (now Spherion/Randstad). Previously, Mr. Hartley managed a US$20M office of Robert Half and managed a US$60M division of KForce.

David Carbonaro, LL.B. - Director

David Carbonaro practices securities, corporate finance, mining and international law. Mr. Carbonaro has advised public companies, securities dealers and investment banks on corporate finance matters in what has become a rapidly changing and demanding regulatory landscape. Mr. Carbonaro has also been instrumental in a number of strategic initiatives for Canadian clients in China and the Middle East, and is devoting his legal and business expertise to assisting Canadian companies access the tremendous opportunities available in these emerging markets. Mr. Carbonaro has received several recognitions during his long career including by Chambers Global: The Guide to the World's Leading Lawyers for Business 2014 as a leading Foreign Expert in the areas of Corporate/Commercial (Experts Based Abroad) and Energy and Natural Resources: Mining and in 2013 as a leading lawyer in the areas of Energy & Natural Resources: Mining and Corporate Commercial (Saudi Arabia). Mr. Carbonaro earned an LL.B. from Osgoode Hall Law School.

Jonson Sun - Director

Jonson Sun is the founder and president of GIC Merchant Bank Corp., a merchant bank with diversified holdings in companies in Canada, China, South Africa and Dubai. Mr. Sun was also a founder of Ilium Capital Corporation, a financial holding company that oversees over $3B in clients' assets and raises $200M for private companies each year through its comprehensive retail and institutional channels. Mr. Sun also co-founded DanQ International Inc., a leading multi-family office platform in China serving 30 top Chinese families with combined assets of over $20B and serves as its Chief Family Globalization Advisor and as Director. Mr. Sun is also a director of Pishon Innovation Lab and Focus Point Education Corp. Mr. Sun has led and incubated active merchant banking investments in a number of private and public venture companies, including WELL Health Technologies, Emerge Commerce, Zecotek Photonics, WastePlan, Bay Talent Group and Tapplock.

Hamed Shahbazi - Director

Mr. Shahbazi holds a Bachelor of Applied Science Degree from the University of British Columbia. Mr. Shahbazi was the founder, Director and Chief Executive Officer of TIO Networks Corp. from June 1997 to May 2018. Mr. Shahbazi is currently the Chief Executive Officer and Chairman of WELL Health Technologies Corp. (formerly Movarie Capital Corp., Wellness Lifestyles Inc.) since May 2018 and currently serves as a director of Danacore. He also has served as a Director of RiseTech Capital Corp. since October 2018.

Simon Dealy, CPA, MBA - Director, Chief Financial Officer and President

Simon Dealy is a senior executive with more than 25 years of experience in P&L, operations, finance, strategic planning, M&A, business development and company startups across a broad spectrum of industries and multiple countries. Mr. Dealy is the former Chief Executive Officer and owner of Control Solutions International, a global internal audit provider delivering services across 35 countries. Upon the sale of Control Solutions, Mr. Dealy was appointed Senior Vice President of Staffing 360 Solutions (NASDAQ:STAF) which he helped build to a US$130m revenue generating business in 2013 from zero in 2012. Mr. Dealy has also advised a number of companies in various stages of development. Mr. Dealy earned his Bachelor of Business Banking and Finance from the University of South Australia and his Masters of Business Administration from Suffolk University. Mr. Dealy is a CPA (Australia).

Steven Wang, MBA - Vice President

Steven Wang holds a BBA from University of Toronto and an MBA from the Schulich School of Business. In the past three years, Mr. Wang has been instrumental in the restructuring of several companies by implementing new accounts' receivable procedures, and negotiating acquisitions. Mr. Wang has led Bay Talent's capital raising activities.

GIC Merchant Bank ("GICMB"), an entity incorporated under the laws of the Province of Ontario, holds 8,067,257 Bay Talent common shares (on a pre-BTG Consolidation basis) representing 24.16% of the Bay Talent common shares outstanding as of the date hereof (on an undiluted basis). Upon completion of the Transaction, GICMB is expected to hold approximately 14% of outstanding common shares of the Resulting Issuer and on that basis, GICMB is expected to be, along with the directors and senior officers of the Resulting Issuer set forth above, an Insider (as defined in TSXV Policy 1.1) of the Resulting Issuer.

Non-Arm's Length Relationships

The Transaction will not constitute a Non-Arm's Length Qualifying Transaction (as such term is defined in the policies of the TSXV). No Insider, Promoter or Control Person as such terms are defined in the policies of the TSXV) of Danacore has any material interest in Bay Talent prior to giving effect to the Transaction and no such persons are also insiders of Bay Talent except that Mr. Hamed Shahbazi is a director of both Danacore and Bay Talent and holds common shares representing approximately 5.93% and 8.14% of the issued and outstanding shares of Danacore and Bay Talent, respectively. Mr. Shahbazi abstained from voting on all board resolutions from Danacore and Bay Talent relating to the Transaction.

Sponsorship

Sponsorship of a "Qualifying Transaction" of a Capital Pool Company is required by the TSXV unless exempt therefrom in accordance with the TSXV's policies. In the absence of an available exemption from the sponsorship requirements, based on the size and nature of the Transaction, including the amount of the Brokered Financing, Danacore intends to make an application to the TSXV for a waiver from sponsorship requirements. There is no assurance that if applied for, a waiver will be granted.

Filing Statement

In connection with the Transaction and pursuant to the requirements of the TSXV, Danacore will file a filing statement on its issuer profile on SEDAR (www.sedar.com), which will contain details regarding the Transaction, Danacore, Bay Talent and the Resulting Issuer.

Cautionary Note

Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release

Completion of the Transaction is subject to a number of conditions, including but not limited to, TSXV acceptance and if applicable pursuant to TSXV 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 TSX Venture Exchange Inc. has in no way passed upon the merits of the proposed Transaction and has neither approved nor disapproved the contents of this press release.

For further information, please contact:

Mark Orsmond, CEO of Danacore
Phone: (604) 377-0014
Email: mark@orsmond.net

Allan Hartley 
Phone: (617) 513-1657, CEO of Bay Talent
Email: ahartley@baytalentgroup.com

Forward Looking Information

This press release contains forward-looking statements and information that are based on the beliefs of management and reflect Danacore's current expectations. When used in this press release, the words "estimate", "project", "belief", "anticipate", "intend", "expect", "plan", "predict", "may" or "should" and the negative of these words or such variations thereon or comparable terminology are intended to identify forward-looking statements and information.

The forward-looking statements and information in this press release include information relating to the business plans of Danacore, Bay Talent and the Resulting Issuer, the Brokered and Non-Brokered Financings and the Transaction (including TSXV approval and the closing of the Transaction).

Such statements and information reflect the current view of Danacore. Risks and uncertainties that may cause actual results to differ materially from those contemplated in those forward-looking statements and information. By their nature, forward-looking statements involve known and unknown risks, uncertainties and other factors which may cause our actual results, performance or achievements, or other future events, to be materially different from any future results, performance or achievements expressed or implied by such forward-looking statements. Such factors include, among others, the following risks:

  • there is no assurance that the Brokered Financing will be completed or as to the actual gross proceeds to be raised in connection with the Brokered Financing.
  • there is no assurance that Danacore and Bay Talent will obtain all requisite approvals for the Transaction, including the approval of the Bay Talent Shareholders, or the approval of the TSXV for the Transaction (which may be conditional upon amendments to the terms of the Transaction);
  • following completion of the Transaction, the Resulting Issuer may require additional financing from time to time in order to continue its operations. Financing may not be available when needed or on terms and conditions acceptable to the Resulting Issuer;
  • new laws or regulations could adversely affect the Resulting Issuer's business and results of operations; and
  • the stock markets have experienced volatility that often has been unrelated to the performance of companies. These fluctuations may adversely affect the price of the Resulting Issuer's securities, regardless of its operating performance.

There are a number of important factors that could cause the Resulting Issuer's actual results to differ materially from those indicated or implied by forward-looking statements and information. Such factors include, among others: limited business history of Bay Talent; risks related to Bay Talent's corporate strategy including that previous and future acquisitions do not meet expectations, disruptions or changes in the credit or security markets; results of operation activities; unanticipated costs and expenses, fluctuations in commodity prices, and general market and industry conditions.

Danacore cautions that the foregoing list of material factors is not exhaustive. When relying on the Company's forward-looking statements and information to make decisions, investors and others should carefully consider the foregoing factors and other uncertainties and potential events. Danacore has assumed that the material factors referred to in the previous paragraph will not cause such forward-looking statements and information to differ materially from actual results or events. However, the list of these factors is not exhaustive and is subject to change and there can be no assurance that such assumptions will reflect the actual outcome of such items or factors.

The forward-looking information contained in this press release represents the expectations of Danacore as of the date of this press release and, accordingly, is subject to change after such date. Readers should not place undue importance on forward looking information and should not rely upon this information as of any other date. While Danacore may elect to, it does not undertake to update this information at any particular time except as required in accordance with applicable laws.

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