Founders Advantage Capital Corp.
TSX VENTURE : FCF

Founders Advantage Capital Corp.

August 17, 2016 20:31 ET

Founders Advantage Capital Corp. Files Business Acquisition Report for Acquisition of Majority Interest in Dominion Lending Centres

CALGARY, ALBERTA--(Marketwired - Aug. 17, 2016) - Founders Advantage Capital Corp. (TSX VENTURE:FCF) (the "Corporation") announced today that it has filed its Business Acquisition Report ("BAR") in connection with the Corporation's acquisition of a 60% majority interest in Dominion Lending Centres ("DLC") on June 3, 2016. The BAR is available for review on SEDAR at www.sedar.com.

As prescribed by applicable securities laws, the BAR contains audited consolidated financial statements for DLC as at and for the years ended December 31, 2015 and 2014 and the unaudited interim financial statements for DLC as at and for the three months ended March 31, 2016 (as compared to the three-month period ended March 31, 2015). The following table provides a summary of certain financial data for DLC (the following is intended to be a summary only and should be read in conjunction with the complete consolidated financial statements for DLC, along with the notes thereto, which are included in the BAR).

Three Months Ended March 31(1) Years Ended December 31(1) (5)
2016 2015 2015 2014
Statement of Earnings Items
Revenues 6,365,884 4,269,023 23,685,620 20,289,703
Earnings from operations 2,127,614 1,278,741 8,206,023 7,612,405
Net earnings 1,489,644 881,554 2,910,880(4) 5,512,135
EBITDA(2) (3) 2,444,689 1,341,279 5,606,004(4) 8,049,488
(1) Please refer to the BAR for the complete audited combined consolidated financial statements as at and for the years ended December 31, 2015 and 2014, prepared using International Financial Reporting Standards (IFRS) and the interim unaudited combined consolidated financial statements as at and for the three month periods ended March 31, 2016 and 2015, prepared using IFRS.

(2) 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 of the Corporation 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. EBITDA is reconciled to "Net earnings", an IFRS measure, as follows:
Three Months Ended March 31 Years Ended December 31
2016 2015 2015 2014
Net earnings 1,489,644 881,554 2,910,880(4) 5,512,135
Plus: Interest on long-term debt 139,732 58,173 198,831 279,062
Plus: Income taxes 649,136 341,363 2,255,536 2,007,310
Plus: Amortization expense 166,177 60,189 240,757 250,981
EBITDA 2,444,689 1,341,279 5,606,004(4) 8,049,488
(3) EBITDA has not been adjusted or "normalized" to reflect items relating solely to the transaction or which relate to DLC's operations which will be altered as a result of the transaction (such as executive compensation and transaction costs).

(4) Net earnings and EBITDA for the 12 months ending December 31, 2015 includes an impairment of an investment of $1,002,527, a tax assessment of $1,434,459 related to prior periods and a write-down of notes receivable and amounts due from related parties of $874,866, which collectively represent additional one-time expenses for the period in the amount of $3,311,852. In the event that EBITDA was adjusted to remove these expenses, EBITDA for the period would be $8,917,856.

(5) DLC financials for the 12 month periods ending December 31, 2015 and 2014 do not include any earnings from MA Mortgage Architects Inc. ("MA") as that business was acquired by DLC effective December 31, 2015.

As the DLC transaction was completed on June 3, 2016, the Corporation will be providing consolidated unaudited financial data for the Corporation and DLC for the period ending June 30, 2016 in due course, including management discussion and analysis thereon. However, for the three-month period ended March 31, 2016 (being the financial period immediately prior to the period in which the transaction was completed), the Corporation would like to highlight the following financial highlights relating to DLC:

  • DLC advises that the period from January 1 to March 31 is historically its slowest period and traditionally represents an estimated 16% - 18% of DLC's annual revenue. Based on the seasonality of DLC's operations, readers are cautioned not to weight quarterly financial data equally for all quarters. In addition, we note that DLC earns mortgage volume bonuses from lenders in the latter quarters of each year as mortgage volume targets are achieved.

  • DLC's revenue increased by 49% to $6,365,884 for the three months ended March 31, 2016 when compared to the same three-month period for 2015 ($4,269,023).

  • DLC "re-flagged" or acquired 13 mortgage brokerage firms in the three months ended March 31, 2016, an increase of 44% over the same three-month period in 2015 in which it acquired 9 mortgage brokerage firms. As at March 31, 2016, DLC had an aggregate of 445 franchises and 4,997 mortgage brokers in its system as compared to 435 franchises and 4,893 mortgage brokers as at March 31, 2015.

  • DLC mortgage brokers funded 18,552 mortgages for a total mortgage value of $6,041,276,831 for the three months ended March 31, 2016 compared to 17,624 mortgages and a total mortgage value of $5,392,533,336 for the same period in 2015.

  • DLC's expenses increased by 70% to $2,966,929 for the three months ended March 31, 2016 when compared to the same three-month period for 2015 ($1,743,821), primarily as a result of the acquisition of MA, increased professional fees in connection with the transaction, increased salaries and increased lease charges.

  • The three-month period ending March 31, 2016 is the first financial period in which the earnings of MA have been consolidated following the acquisition of MA by DLC effective December 31, 2015.

Stephen Reid, President and Chief Executive Officer of the Corporation, commented: "Our investment in DLC continues to perform as we expected and we look forward to reporting our consolidated results as at June 30, 2016 which will reflect the Corporation's 60% interest in almost one month of DLC operations."

About Founders Advantage Capital Corp.

The Corporation is listed on the TSX Venture Exchange as an Investment Issuer (Tier 1) and employs a passive and permanent investment approach. The Corporation has developed an investment approach to create long-term value for its shareholders and partner entrepreneurs (investees) by pursuing majority interest acquisitions of cash flow positive 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 maintain operational control while partnering with a long-term and passive 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.

Caution concerning forward-looking information

This news release or documents referred to herein contain "forward-looking information" and "forward-looking statements" within the meaning of applicable securities laws, including statements regarding the future performance of DLC, that DLC will receive bonus payments for mortgage volumes in the event mortgage volume targets are achieved and the seasonality of DLC's operations. These information and statements address future activities, events, plans, developments and projections. All statements, other than statements of historical fact, constitute forward-looking statements or forward-looking information. Such forward-looking information and statements are frequently identified by words such as "may", "will", "should", "anticipate", "plan", "expect", "believe", "estimate", "intend" and similar terms, and reflect assumptions, estimates, opinions and analysis made by management in light of its experience, current conditions, expectations of future developments and other factors which it believes to be reasonable and relevant. Forward-looking information and statements involve known and unknown risks and uncertainties that may cause actual results, performance and achievements to differ materially from those expressed or implied by the forward-looking information and statements and, accordingly, undue reliance should not be placed thereon. Risks and uncertainties that may cause actual results to vary include, general economic, market and business conditions, risks associated with the Canadian housing sector, fluctuations in interest rates, housing demand in the markets in which DLC and its franchisees operate, DLC's ability to renew and expand upon its franchise arrangements, as well as other risks and uncertainties which are more fully described in our annual and quarterly Management's Discussion and Analysis and in other filings made by us with Canadian securities regulatory authorities and available at www.sedar.com. The Corporation disclaims any obligation to update or revise any forward-looking information or statements except as may be required by applicable law.

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