Founders Advantage Capital Corp. Announces Third Acquisition – Signs Letter of Intent to Acquire a 52% Interest in IMPACT Communications

CALGARY, ALBERTA–(Marketwired – Dec. 22, 2016) – Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the “Corporation” or “FA Capital”) is pleased to announce that it has entered into a letter of intent to acquire a 52% majority interest (the “Transaction”) in IMPACT Communications (“IMPACT”) for a cash purchase price of $12.0 million, subject to closing adjustments. After completion of the Transaction, the current owner of IMPACT, Keith Kostek and certain of his affiliated entities (the “IMPACT Founders”), will retain a 48% interest in IMPACT and will continue to manage the day-to-day operations. Completion of the Transaction is subject to a number of conditions and is expected to close by March 31, 2017.

IMPACT, based in Kelowna, British Columbia, manufactures and distributes two-way radio accessories in the land mobile radio industry under the tradename IMPACT Radio Accessories and indirectly through its wholly-owned subsidiary, Threat4 Ltd. IMPACT sells through over 1,000 dealers throughout North America, with its products being used in the field by some of the most recognized names in public safety, military, security, retail, and hospitality. Management anticipates IMPACT will have unaudited trailing twelve month EBITDA (“TTM EBITDA”) of approximately $4.0 million on the closing date (see Non-IFRS Measures caution herein). More information about IMPACT can be found at www.impactcomms.com.

Stephen Reid, Chief Executive Officer of the Corporation, commented: “After reviewing over 200 potential investee entities across North America in 2016, we are delighted to find our third acquisition in Kelowna, BC. Keith and his team have built an excellent business based on product dependability and customer service. Given IMPACT’s potential for growth through additional customers and exciting new products, along with their diverse and extensive customer list, we feel IMPACT is a perfect fit for our investment model.”

Keith Kostek, founder of IMPACT, commented: “I am delighted to be partnering with FA Capital, and look forward to working together in the next stage of IMPACT’s growth. The FA team truly understands the unique aspects of an owner operated business, and their structure aligns well with my goals as a founder, and the changing needs of the business.”

The Transaction has been structured to provide the Corporation with 52% of after-tax annual cash distributions up to approximately $2.96 million (the “Annual Threshold”) paid by IMPACT to its securityholders, with the IMPACT Founders receiving 48% of annual distributions up to such Annual Threshold. The final Annual Threshold will be determined based on the TTM EBITDA for IMPACT less anticipated annual income tax payments. All cash distributions by IMPACT to its securityholders will be subject to Board approval and may be adjusted from time to time to pursue expansion or capital initiatives or other corporate purposes. To the extent that any cash distributions paid in a year are in excess of the Annual Threshold, the IMPACT Founders will receive 65% of such excess distributions, with the Corporation receiving 35% of such excess distributions. In addition, with respect to any liquidity event, the net proceeds of disposition will be allocated amongst the Corporation and the IMPACT Founders based upon their security holdings and adjusted for certain growth in cash distributions received as at the date of the liquidity event.

Following closing of the Transaction, IMPACT will have a combined board of directors consisting of Keith Kostek and two nominees of the Corporation. The Transaction will not be a “significant acquisition” for the Corporation as defined by applicable securities laws.

The Corporation intends to fund the Transaction primarily through available borrowings under its existing credit facility, subject to lender approval, and expects to apply for an increase to such facilities to fund any additional amount required.

As part of the Transaction, the Corporation has granted the IMPACT Founders the right to sell the Corporation an additional 22% of IMPACT for $5.1 million (the “Put Option”). The IMPACT Founders may elect to exercise the Put Option at any time between September 30, 2017 and March 31, 2018, provided the TTM EBITDA for IMPACT at the Put Option exercise date exceeds the TTM EBITDA for IMPACT as at the closing date for the initial Transaction. The Corporation has 90 days to complete such acquisition if the Put Option is exercised. In the event the Put Option is exercised, the Corporation would hold a 74% interest in IMPACT and the IMPACT Founders would hold a 26% interest. Further, in the event the Put Option is exercised, the Corporation would be entitled to 74% of annual cash distributions up to the Annual Threshold and 65% of annual distributions above the Annual Threshold (with the IMPACT Founders entitled to 26% of annual distributions up to the Annual Threshold and 35% of annual distributions above the Annual Threshold).

Toronto-based WCM Capital acted as exclusive corporate finance advisor to IMPACT, arranging the Transaction with the Corporation (for more information visit www.wcmcapital.ca ).

About IMPACT Communications

IMPACT is a world leader in the design and manufacture of unique radio communication products for mission critical public safety, military, security, retail and hospitality applications. Headquartered in the city of Kelowna, in the Okanagan Valley of British Columbia, with a distribution center in Wilmington, North Carolina, Impact has grown to be one of the largest aftermarket brands in North America.

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a long-term investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing controlling interest acquisitions of cash flow positive, premium middle-market privately-held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.

The Corporation’s common shares are listed on the TSX Venture Exchange under the symbol “FCF”.

For further information please refer to the Corporation’s website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Non-IFRS Measures

EBITDA, or earnings before interest, income tax, depreciation and amortization, is a non-IFRS item as it does not have a standardized meaning under IFRS. Management uses EBITDA as a performance and valuation measure. EBITDA is not a substitute for, and should be used in conjunction with, IFRS financial measures. Other companies may calculate EBITDA differently and the Corporation cautions that EBITDA as calculated above may not be comparable to EBITDA as calculated by other issuers.

Non-IFRS measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, or other measures of financial performance calculated in accordance with IFRS. The Non-IFRS measures are unlikely to be comparable to similar measures presented by other issuers.

Cautionary Statement Regarding Forward-Looking Information

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “estimate”, “will”, “expect”, “plan”, “schedule”, “intend”, “propose”, or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:

  • completion of the Transaction on the terms set out herein;
  • timing of closing of the Transaction;
  • the anticipated TTM EBITDA for IMPACT;
  • the Annual Threshold amount at the closing date;
  • the Corporation funding the Transaction with available borrowings;
  • the Corporation making application to increase its existing credit facility; and
  • the return on investment for the Corporation in the event the Annual Threshold is achieved.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

  • that the future performance of IMPACT will be consistent with past performance;
  • that all closing conditions will be satisfied or waived;
  • that the Corporation’s lender will approve the Transaction; and
  • that the parties will be able to successfully negotiate the definite agreements.

Although the Corporation believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as the Corporation can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

  • the failure to obtain necessary approvals and consents to complete the Transaction;
  • the satisfaction or waiver of all closing conditions;
  • the Transaction will not yield the anticipated benefits to the Corporation; and
  • the risks and uncertainties applicable to the operation of IMPACT’s business generally.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled “Risk Factors” in the Corporation’s current annual information form. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities law, the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

The Globe and Mail: Founders Advantage Capital offers a twist on private-equity model

Founders Advantage Capital Corp. Completes Acquisition of a Majority Interest in CLUB16 Trevor Linden Fitness and She’s FIT! Health Clubs

CALGARY, ALBERTA–(Marketwired – Dec. 20, 2016) – Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the “Corporation”) is pleased to announce that it has completed its previously announced acquisition of a 60% majority interest (the “Transaction”) in a limited partnership (“CLUB16 LP”) holding eight (8) Club16 Trevor Linden Fitness Clubs (“CLUB16”) and five (5) She’s FIT! Health Clubs (“She’s FIT!”) in the Vancouver and Lower Mainland area for a total cash purchase price of $20.5 million (the “Purchase Price”). The thirteen (13) fitness locations are collectively referred to herein as the “Fitness Clubs”. The Purchase Price is subject to adjustment within 90 days post-closing to adjust for any increase in the trailing twelve month normalized EBITDA for the Fitness Clubs as at the closing date above an agreed upon base amount.

Having a ten (10) year history, the thirteen (13) Fitness Clubs have over 78,800 memberships and appeal to a large segment of the fitness centre market with value pricing, high quality experience, and both ladies only and co-ed facilities. The management calculated unaudited trailing twelve month EBITDA for the Fitness Clubs as at October 31, 2016 was approximately $6.1 million, when normalized to add back various non-recurring items (see Non-IFRS Measures caution herein). More information about CLUB16 can be found at www.trevorlindenfitness.com.

After completion of the Transaction, the current owners of the Fitness Clubs, comprised of Trevor Linden, Chuck Lawson, Carl Ulmer and certain other minority shareholders (the “CLUB16 Founders”) will retain a 40% interest in CLUB16 LP and will continue to manage the day-to-day operations and continued growth. Following closing of the Transaction, the business of CLUB16 LP will be overseen by a corporate general partner having a combined Board consisting of Chuck Lawson, Carl Ulmer and three nominees of the Corporation (being Stephen Reid, Gary Mauris and James Bell).

The Transaction has been structured to provide the Corporation with 60% of the first $5.85 million of annual distributions (the “Annual Threshold”) paid by CLUB16 LP to its securityholders, with the CLUB16 Founders receiving 40% of such Annual Threshold. All cash distributions by CLUB16 LP to its securityholders will be subject to Board approval of the general partner and may be adjusted from time to time to pursue expansion or capital initiatives or other corporate purposes. To the extent that any distributions are paid in a year in excess of the Annual Threshold, the CLUB16 Founders will receive 70% of such excess distributions, with the Corporation receiving 30% of such excess distributions.

For further information on the Transaction please refer to the Corporation’s press release dated November 2, 2016.

Trevor Linden, former professional hockey player and co-founder of CLUB16, commented: “We are excited about the partnership with FA Capital to further grow the CLUB16 membership base and brand.” Chuck Lawson, co-founder of CLUB16 and founder of She’s FIT! added: “We are very pleased to complete this transaction as we believe FA Capital’s management’s depth, reputation and track record will help accelerate the future growth and success of Club16. We look forward to further expanding our brand across the province with our new partner.”

Stephen Reid, Chief Executive Officer of the Corporation commented: “The completion of our second acquisition further proves out our unique model. The partnership with Club16 is a significant step in advancing our business plan of partnering with premium mature defensive companies with historical strong growth and free cash flow generation.”

About CLUB16 Trevor Linden Fitness

CLUB16 and She’s FIT! believes its business model is unique and revolutionary in the fitness industry and one of the many reasons for CLUB16’s growth. In management’s view, the biggest barrier to joining a health club used to be high membership fees, fixed contracts and the perception that you must be fit to go to a health club. Removing these barriers with “no contract memberships”, “affordable start up fees” and “value priced dues” as well as monitoring health clubs for negative issues that make the average person uncomfortable in the fitness/health club environment, allows the Fitness Clubs to be more accessible and affordable to everyone. In pursuing their business model, management feels CLUB16 and She’s FIT! can play a large part in helping more people improve their health and their lives.

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a long-term investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing controlling interest acquisitions of cash flow positive, premium middle-market privately-held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.

The Corporation’s common shares are listed on the TSX Venture Exchange under the symbol “FCF”.

For further information please refer to the Corporation’s website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Non-IFRS Measures

EBITDA, or earnings before interest, income tax, depreciation and amortization, is a non-IFRS item as it does not have a standardized meaning under IFRS. Management uses EBITDA as a performance and valuation measure. EBITDA is not a substitute for, and should be used in conjunction with, IFRS financial measures. Other companies may calculate EBITDA differently and the Corporation cautions that EBITDA as calculated above may not be comparable to EBITDA as calculated by other issuers.

Non-IFRS measures should not be considered in isolation or construed as alternatives to their most directly comparable measure calculated in accordance with IFRS, or other measures of financial performance calculated in accordance with IFRS. The Non-IFRS measures are unlikely to be comparable to similar measures presented by other issuers.

DLC Enters Letter of Intent to Acquire Marlborough Stirling Canada Limited

CALGARY, ALBERTA–(Marketwired – Dec. 14, 2016) – Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the “Corporation” or “FA Capital”) is pleased to announce that its subsidiary Dominion Lending Centres (“DLC”) has entered into a letter of intent to acquire all of the securities of Marlborough Stirling Canada Limited (“MSC”) for an aggregate purchase price of $5.5 million. The acquisition is expected to close on or about December 15, 2016. It is currently contemplated that the securities of MSC will be acquired by a new corporation (“Acquireco”) which is 70% owned by DLC and 30% owned by a third-party. Funding to complete the acquisition will be provided by DLC and the third-party partner proportionate to their shareholdings in Acquireco. FA Capital owns a 60% interest in DLC.

MSC provides software and services to the Canadian mortgage lending industry under the following three product lines: MorWEB; Omiga; and Optimus. MorWEB offers web-based mortgage origination functionality designed specifically for mortgage brokers. Omiga is a multi-channel data capture software that allows for the processing of mortgage applications (including underwriting, risk assessment, offer production and funds disbursement). Optimus is a post-completion software service offering payment processing, reporting and arrears management, property tax management and securitization.

MSC is one of two providers that have been approved to provide a connectivity platform between Canadian lenders and mortgage brokers. In consideration for the MSC services, Canadian lenders pay MSC fees based on the funded volume of mortgages. To date, a single MSC competitor has dominated the lender connectivity marketplace and MSC has a small percentage of the marketplace. DLC anticipates it can increase MSC’s market share by having more DLC mortgage brokers use the MSC platform.

Gary Mauris, President of DLC commented: “We believe this transaction is a significant step forward for the DLC group of companies. It provides us an additional origination delivery platform and allows us to have material influence on user experience, data management, and will easily allow us to add additional revenue streams under a central platform.”

About DLC

DLC group of companies is Canada’s leading and largest mortgage brokerage with $33 billion in funded mortgages in 2015. DLC group of companies operates through three main subsidiaries, Dominion Lending Centres, Mortgage Centre Canada and Mortgage Architects and has operations in all 13 provinces and territories. DLC group of companies’ extensive network includes over 5,000 agents, 325 franchises and 650 locations. Headquartered in British Columbia, DLC group of companies was founded in 2006 by Gary Mauris and Chris Kayat.

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a long-term investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing controlling interest acquisitions of cash flow positive, premium middle-market privately-held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.

The Corporation’s common shares are listed on the TSX Venture Exchange under the symbol “FCF”.

For further information please refer to the Corporation’s website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

Cautionary Statement Regarding Forward-Looking Information

Certain statements in this document constitute forward-looking information under applicable securities legislation. Forward-looking information typically contains statements with words such as “anticipate”, “believe”, “estimate”, “will”, “expect”, “plan”, “schedule”, “intend”, “propose”, or similar words suggesting future outcomes or an outlook. Forward-looking information in this document includes, but is not limited to:

  • completion of the transaction on the terms set out herein;
  • timing of closing of the transaction; and
  • that MSC can increase its market share by having more DLC mortgage brokers use the MSC platform.

Such forward-looking information is based on a number of assumptions which may prove to be incorrect. Assumptions have been made with respect to the following matters, in addition to any other assumptions identified in this document:

  • that all closing conditions will be satisfied or waived; and
  • that the parties will be able to successfully negotiate the definite agreements.

Although the Corporation believes that the expectations reflected in such forward-looking information are reasonable, undue reliance should not be placed on them as the Corporation can give no assurance that such expectations will prove to be correct. Forward-looking information is based on expectations, estimates and projections that involve a number of risks and uncertainties which could cause actual results to differ materially from those anticipated by the Corporation and described in the forward-looking information. The material risks and uncertainties include, but are not limited to:

  • the failure to obtain necessary approvals and consents to complete the transaction;
  • the satisfaction or waiver of all closing conditions;
  • the transaction will not yield the anticipated benefits to DLC or the Corporation; and
  • the risks and uncertainties applicable to DLC’s operations.

The foregoing list of risks is not exhaustive. For more information relating to risks, see the section titled “Risk Factors” in the Corporation’s current annual information form. The forward-looking information contained in this document is made as of the date hereof and, except as required by applicable securities law, the Corporation undertakes no obligation to update publicly or revise any forward-looking statements or information, whether as a result of new information, future events or otherwise.

Founders Advantage Capital Corp. Announces Extension of ATB Credit Facilities

CALGARY, ALBERTA–(Marketwired – Dec. 7, 2016) – Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the “Corporation”) is pleased to announce the extension of its $17 million revolving credit facility and $5 million non-revolving credit facility with ATB Financial from December 31, 2016 to June 30, 2017. As at the date hereof, the Corporation has $5 million drawn on the non-revolving credit facility and $Nil drawn on the revolving credit facility.

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a long-term investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing controlling interest acquisitions of cash flow positive, premium middle-market privately-held entities. The Corporation seeks to win mandates by appealing to the segment of the market which is not aligned with traditional private equity control, royalty monetizations or related structures. The Corporation’s innovative platform offers disproportionate incentives (contractually) for growth in favour of our partner entrepreneurs. This unique platform is designed to appeal to entrepreneurs who believe in the growth of their businesses and who want the added ability to continue to manage the business with a long-term partner.

The Corporation’s common shares are listed on the TSX Venture Exchange under the symbol “FCF”.

For further information please refer to the Corporation’s website at www.advantagecapital.ca.

NEITHER THE TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICES PROVIDER (AS THAT TERM IS DEFINED IN THE POLICIES OF THE TSX VENTURE EXCHANGE) ACCEPTS RESPONSIBILITY FOR THE ADEQUACY OR ACCURACY OF THIS RELEASE.

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