Trusted Brand 2016 Inc.
TSX VENTURE : HAH.P

February 15, 2017 17:35 ET

Trusted Brand 2016 Inc. Announces Proposed Qualifying Transaction

CALGARY, ALBERTA--(Marketwired - Feb. 15, 2017) -

NOT FOR DISTRIBUTION TO UNITED STATES NEWSWIRE SERVICES OR FOR DISSEMINATION IN THE UNITED STATES

Trusted Brand 2016 Inc. ("Trusted Brand" or the "Corporation") (TSX VENTURE:HAH.P) is pleased to announce that it has entered into a letter of intent dated January 30, 2017, pursuant to which it intends to acquire all of the issued and outstanding shares of 1367790 Alberta Ltd. and 2186774 Ontario Inc. (together, the "Holmes Services Companies"). Trusted Brand will acquire all of the issued and outstanding shares of the Holmes Services Companies in exchange for the issuance of 30,000,000 common shares of the Corporation (the "Holmes Acquisition"). It is expected that the Holmes Acquisition will constitute a "Qualifying Transaction" for the Corporation as such term is defined in the policies of the TSX Venture Exchange Inc. ("TSXV" or the "Exchange"). It is expected that soon after completion of the transaction, Trusted Brand will change its name to Holmes Trusted Services Inc.

The principal shareholders of the Holmes Services Companies are Mike Holmes of Toronto, Ontario (73.6%), Seth Atkins of Toronto, Ontario (4.8%), and Drew Atkins of Calgary, Alberta (21.6%). Following the completion of the Holmes Acquisition and the Concurrent Financing, it is expected that they will hold approximately 47.5%, 3.1% and 13.9% of the Resulting Issuer, respectively.

It is intended that Trusted Brand will, in conjunction with the completion of the Holmes Acquisition, complete a private placement of up to 12,500,000 common shares with gross proceeds of approximately $5,000,000, at a price of $0.40 per share (the "Concurrent Financing").

Holmes Services Companies

The Holmes Services Companies provide two key services to the home building industry. The first is a new home construction certification program operating as "Holmes Approved Homes". This unique private service has successfully generated a network of high quality new home builders that operate jointly to achieve elevated market distinction and co-branded support on a variety of fields and topics. The second service provides home inspection services for new home construction and/or existing homes and is called Mike Holmes Inspections. This multi-faceted company provides all of the new home construction "stage" inspections for Holmes Approved Homes but also provides traditional home inspection and specialty services. Both services were initiated in 2011 and are in their sixth year of operation.

The Holmes Brand is based on three pillars: Quality, Integrity, & Trust. This is what Mike Holmes represents like no other in the construction industry. Named the third most trusted Celebrity by Forbes Magazine in 2013, Mike connects with the hearts and minds of current and future homeowners by helping to educate on how to Make it Right™.

Highlights of the Holmes Acquisition

The Holmes Services Companies are being merged into a single financial entity to achieve a more streamlined and efficient delivery of both services and with the goal of expanding into the U.S. markets.

The following is a summary of the Holmes Services Companies' financial information for the years ended 2014 and 2015 and the nine months ended September 30, 2016. The financial statements for the years ended 2014 and 2015 have been audited and the nine month period ended September 30, 2016, is a review engagement prepared by the Holmes Services Companies' auditor, BDO LLP, of Toronto, Ontario.

In Canadian Dollars Nine Months Ended
September 30, 2016
Year End
December 31, 2015
Year End
December 31, 2014
Revenues $1,856,642.00 $2,420,262.00 $1,749,337
Shareholder Equity ($228,522) ($329,620) ($276,319)
Total Expenses ($1,662,980) ($2,413,691) ($1,815,270)
Net Income (Loss) and Comprehensive Income (Loss) $101,109 ($53,301) ($45,799)

The total assets and total liabilities of the Holmes Services Companies as at September 30, 2016, were $2,327,715 and $2,556,266, respectively.

Upon completion of the Holmes Acquisition, the Holmes Services Companies will be wholly owned by the Corporation. It is anticipated that Trusted Brand will be a Tier 1 Industrial Issuer under the policies of the Exchange upon completion of the Holmes Acquisition.

The Holmes Acquisition

Subject to the completion of satisfactory due diligence, a definitive share acquisition agreement and receipt of applicable regulatory approvals, the Corporation intends to acquire all of the outstanding and issued common shares of the Holmes Services Companies such that 1367790 Alberta Ltd. and 2186774 Ontario Inc. will each be wholly-owned subsidiaries of Trusted Brand.

The consideration to be paid by Trusted Brand for all of the Holmes Services Companies' common shares issued and outstanding at the time of closing shall be satisfied by the issuance of 30,000,000 Trusted Brand common shares, at a deemed value of $0.40 per share, for a total deemed value of $12,000,000 representing 87.3% of the issued and outstanding shares of Trusted Brand after the completion of the Holmes Acquisition and prior to the Concurrent Financing.

Concurrent Financing

It is intended that Trusted Brand will, in conjunction with the completion of the Holmes Acquisition, complete a brokered private placement of common shares with gross proceeds of approximately $5,000,000, at a price of $0.40 per share.

The capital investment will be utilized to increase operating revenue in Canada and expand the services into the United States. Additional details related to the concurrent financing will be released in the near future.

Share Capital of the Corporation

The Corporation currently has 3,962,900 common shares issued and outstanding. Assuming the Concurrent Financing involving the issuance of 12,500,000 common shares at a price of $0.40 to raise $5,000,000 and the concurrent completion of the Holmes Acquisition, the Resulting Issuer will have approximately 46,462,900 common shares outstanding (undiluted), of which the former shareholders of the Holmes Services Companies will own approximately 64.5%.

Trusted Brand currently has 396,290 outstanding director and officer share options at an exercise price of $0.25 and 228,290 outstanding agent's warrants at an exercise price of $0.25.

Concurrent with the closing of the Holmes Acquisition, the Corporation is planning to issue incentive stock options to directors, officers, employees and key consultants of the Corporation to acquire up to 4,200,000 common shares.

Conditions Precedent to Completion of the Holmes Acquisition

Completion of the Holmes Acquisition is subject to a number of conditions, including but not limited to:

  1. completion of due diligence review by Trusted Brand;
  2. completion of the Concurrent Financing by Trusted Brand;
  3. approval of all regulatory bodies having jurisdiction in connection with the subject transactions including, but not limited to, the Exchange;
  4. approval of the final terms and conditions of the Holmes Acquisition by the board of directors of the Holmes Services Companies and the board of directors of Trusted Brand;
  5. as required, the entering into of formal agreements reflecting the proposed Holmes Acquisition, which are agreeable to all parties; and
  6. the Holmes Acquisition being accepted by the Exchange as Trusted Brand's Qualifying Transaction with a Final Exchange Bulletin being released by no later than May 31, 2017, or such other date the parties may agree upon.

Arm's Length Transaction

Under the policies of the Exchange, the Holmes Acquisition was negotiated as and is being completed as an arm's length transaction.

Proposed Management

Upon completion of the Holmes Acquisition, it is anticipated that Trusted Brand's board of directors will change with certain resignations and the appointment of Holmes Services Companies' nominees.

The backgrounds of each of the proposed members of the board of directors and senior management of the Resulting Issuer are as follows:

Seth Atkins, Proposed President, CEO and Director

Mr. Atkins, age 44, has worked directly with Mike Holmes for almost 10 years. He advanced from the position of Design Principal to that of Senior Vice President of The Holmes Group of Companies and worked with Mike to create the Holmes Approved Home and Mike Holmes Inspections services. Together, and now with Mike's daughter, Amanda Holmes as fellow Senior VP, the company has grown quickly into a multi-million dollar business that responsibly leverages the Holmes Brand in pursuit of a better homeowner experience. Mr. Atkins was previously a design Associate at BairdSampsonNeuert Architects in Toronto, Ontario for 6 years. He received his Masters of Architecture from the University of Toronto in 2002, a Bachelor of Fine Arts from the University of British Columbia in 1998, and a Bachelor of Science in Architectural Studies from the University of Utah in 1996. Mr. Atkins is a LEED Accredited Professional since 2004.

Mike Holmes, Proposed Executive Chairman and Director

Mr. Holmes, age 53 is currently the CEO and primary owner of The Holmes Group of Companies. Mr. Holmes is the long-time host of over five series featured on cable primetime TV including Holmes on Homes, Holmes Inspections, Holmes' Make it Right, Home Free on FOX TV and, most recently, Holmes & Holmes featuring Mike's son (Mike Jr). His shows have been broadcast worldwide in over 72 countries and the Holmes brand is synonymous with quality, integrity and trust. The Holmes brand resonates with homeowners and his goal of education for all has created one of the most prolific international brands coming from Canada. Mr. Holmes' extensive efforts to raise building standards has led to him being awarded the prestigious Queen's Diamond Jubilee medal and being recognized in the House of Commons in 2006.With over a dozen years of filming Mike also donates his time to SOS Children's Villages Canada, Skills Canada, World Skills and the Holmes Foundation to help more people be trained to Make it Right!

Charidy Lazorko, Chief Financial Officer

Ms. Lazorko, age 38, is a CPA,CGA with over 13 years of private and public company experience. Charidy has been involved as an officer in numerous companies providing financial services, with an emphasis in corporate restructuring, amalgamations and asset acquisitions, and she has acted as a financial advisor for a multitude of other private transactions in numerous industries. She has been CFO of a number of public companies during her career.

Karen Stewart, Director

Ms. Stewart, age 53, is the founder and has been Chief Executive Officer of Fairway Divorce Solutions, a private divorce resolution company, since 2006. In this capacity, Ms. Stewart has developed a corporate and franchise business with locations from Ontario to British Columbia. She is also the founder and has been CEO of Oreiva Insurance Inc., a private insurance brokerage, since 2013. Karen has over 20 years of experience in the financial services industry including but not limited to: financial broker dealers in IDA and MFDA, boutique brokerage firms, real estate investment firms and an insurance brokerage business. She received her Masters of Business Administration from the University of Saskatchewan in 1988 as well as her Bachelor of Science Degree from the University of Saskatchewan in 1986.

Dave Antony, Director

Mr. Antony, age 54, is a Chartered Professional Accountant and has 25 years' experience in assisting companies in structuring transactions, accessing capital, and corporate governance. He is currently the Chief Executive Officer and a director of Blackhawk Resource Corp., and he is also a director of Spriza Media Inc., both of which are listed on the TSXV. Mr. Antony has been involved as an officer and director of numerous public and private companies. In addition, Mr. Antony sits on both the Local Advisory and National Advisory Committees for the TSXV.

In addition to these individuals, it is expected that the Resulting Issuer will appoint a COO and corporate secretary. The Corporation will issue a subsequent news release with information regarding the persons to be appointed to these positions.

Sponsorship and Resumption of Trading

Details of the concurrent financing will be released in the near future. Trusted Brands may seek a waiver from all of part of the sponsorship requirements for the proposed Qualifying Transaction in accordance with Exchange requirements. It is expected that trading in the shares of Trusted Brand will remain halted until further notice.

Completion of the Holmes Acquisition 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 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.

Forward-Looking Statements

Certain statements contained in this news release constitute forward looking statements. The use of any of the words "anticipate", "continue", "estimate", "expect", "may", "will", "project", "should", "believe", "subject to" and similar expressions are intended to identify forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause actual results or events to differ materially from those anticipated in such forward-looking statements are based on reasonable assumption but no assurance can be given that these expectations will prove to be correct and the forward-looking statements included in this news release should not be unduly relied upon.

NEITHER TSX VENTURE EXCHANGE NOR ITS REGULATION SERVICE 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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