News Column

71 Capital Corp. Announces Entering into of Letter of Intent for Qualifying Transaction

August 20, 2014

NOT FOR DISSEMINATION TO U.S. NEWSWIRE SERVICES

TORONTO, Aug. 20, 2014 /CNW/ - 71 Capital Corp. (the "Corporation") (TSXV-NEX: SVN.H) announced today that it has entered into a letter of intent (the "Letter of Intent") whereby the Corporation will acquire all of the issued and outstanding securities (the "Brightstar Shares") of Brightstar Seniors' Living Corporation ("Brightstar") in exchange for the issuance of post-consolidation common shares (as described below) to the shareholders of Brightstar. The acquisition of the Brightstar Shares will constitute the Qualifying Transaction of the Corporation (the "Qualifying Transaction") as such term is defined in the policies of the TSX Venture Exchange (the "Exchange").

It is anticipated that the acquisition of the Brightstar Shares will be effected through the amalgamation of a wholly owned subsidiary ("SubCo") of the Corporation and Brightstar.  The vendors of the Brightstar Shares are Alan Chapple of Toronto, Ontario, through his Ontario company Filton Holdings Ltd., Elisabeth Blackburn of Toronto, Ontario, through her Ontario company Cru Communications and Broadcast Productions Inc., James Buckler of Unionville, Ontario through his Ontario company Dardanelles Holdings Ltd., and Lawson Gay of Courtice, Ontario through his company 2153491 Ontario Ltd.

Brightstar is a full service development company that will focus on developing independent seniors housing projects in the greater Toronto area and elsewhere. The Corporation is a capital pool company.

Terms of Qualifying Transaction

Pursuant to the terms of the Letter of Intent, subject to completion of satisfactory due diligence, a definitive amalgamation agreement (the "Agreement") and receipt of applicable approvals, SubCo will amalgamate with Brightstar and the shareholders of Brightstar will receive post-consolidation shares (as described below) in the capital of the Corporation in exchange for their shares of the new amalgamated company.

The Qualifying Transaction is an arm's length transaction.  No insiders of the Corporation own securities in Brightstar and no insiders of Brightstar own securities in the Corporation. It is intended that the Corporation will complete a 5(old shares) for 1 (new share) consolidation of its shares and a name change in connection with the Qualifying Transaction.  The Corporation intends to call a meeting of its shareholders in the near future in order to approve the consolidation and name change.

Upon completion of the Qualifying Transaction, Brightstar will be a wholly owned subsidiary of the Corporation and the Corporation will be engaged in the business of Brightstar.

Brightstar

Brightstar was founded in March 2008 under the laws of Ontario Brightstar is a private company engaged in the development of independent seniors housing projects.  Brightstar intends on both developing and building projects for its own account and entering into joint venture partnership with faith and/or not for profit groups pursuant to which Brightstar will supply the sales, marketing and building expertise and the faith and/or not for profit groups will supply the land. 

Brightstar has had discussions with many faith and not for profit groups that own valuable but underused real estate.  Brightstar's appeal to these groups is that it provides them with a way to use their property without having to sell it while at the same time benefiting both the communities these groups serve as well as the organizations themselves.  Although early discussions have taken place with these groups no joint venture agreements have yet been executed.  Brightstar is however in the process of developing its first project in southern Ontario, less than one hour drive from Toronto.  The project is called Brookhouse Gate and is located in the centre of the quaint village of Newcastle, Ontario.  It is a 78 unit four storey condominium project, the appropriate zoning is in place and construction is anticipated for 2015. Revenue will be recognized when title to condominium units is transferred to the purchasers of such units.  Expenses will be capitalized until such time.  As at July 31, 2014 the unaudited financial information of the project includes land and development costs to date of $2,300,000 with equity of $1,400,000. Total assets are $2,400,000 and total liabilities are $1,000,000. A sales presentation centre is currently being completed and a marketing program is underway to obtain condominium unit sales.

Brightstar anticipates earning revenue from its projects in the following three ways (i) charging a development fee for the services associated with the development of each project (this fee will be a percentage of the total cost of each project); (ii) earning a percentage of the profits from the individual projects and (iii) earning profits on those projects which are developed for its own account without a joint venture partner.

Management and Board of Directors of the Resulting Issuer

Upon completion of the Qualifying Transaction, it is anticipated that the resulting issuer's Board of Directors will consist of Alan Chapple, John Blackburn, Jim Buckler and Lawson Gay.  Additional board members may be named later.

Alan Chapple, PEng. MBA is the Chairman and CEO of Brightstar Seniors Living CorporationAlan Chapple's extensive background in construction, land development and corporate management has contributed to his expertise with financial restructuring and arranging financing for development projects.  Mr. Chapple has an entrepreneurial focus on real estate development and has served as the Chairman and CEO of publicly traded companies including Armbro Enterprises Inc., now Aecon Group Inc.  He is currently involved in the development of condominium projects that focus on the senior demographic.

John Blackburn, PLE, AIHM is the AIHM is the President of Brightstar Seniors Living Corporation. John Blackburn is a Professional Land Economist (PLE) with over 35 years of experience in marketing, sales and public relations, both in the E.U. and North America. He is the winner of numerous marketing and public relations awards, including BILD's Top Awards, 2 Grand SAMs, the prestigious Riley Brethour Award, the Sales & Marketing Manager of the Year Award, the CHBA Award of Honour, and the Queen Elizabeth II Diamond Jubilee medal, in recognition of his contributions to Canada.  John is an accredited member of the Institute of Housing Management and first Vice President of the Board of Directors of the Association of Ontario Land Economists.

Jim Buckler, BSc, CPA, CA is the Executive Vice President and CFO of Brightstar Seniors Living Corporation. Jim Buckler has an extensive background in the acquisition, development and sale of commercial, industrial and residential real estate with over 35 years of experience in financing, accounting, taxation and financial reporting.  He worked with Mr. Chapple as the Vice-President of Finance at Armbro.  As well he played a senior financial role in the infrastructure development of Highway 407. He is a member of the Institute of Chartered Accountants of Ontario and the South Carolina Board of Accountancy.

Lawson Gay is the President of Gay Company Ltd.  Lawson Gay is Founder and President of HL Gay Family Homes and President of Gay Company Ltd.  Gay Company is a family owned company that has been owned and operated by successive generations since the late 1800s, building all types of industrial, commercial, institutional and residential projects.  He is a member of the Greater Oshawa Chamber of Commerce and Past President of the Durham Construction Association.

Sponsorship of Qualifying Transaction

Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless exempt in accordance with the Exchange policies. The Corporation is currently reviewing the requirements for sponsorship and may apply for exemption from sponsorship requirements pursuant to the policies of the Exchange, however there is no assurance that the Corporation will ultimately obtain this exemption.

Proforma Capital Structure

As a condition to the completion of the Qualifying Transaction, Brightstar will complete a private placement (the "Private Placement") for minimum gross proceeds of $500,000 and maximum proceeds of up to $1,500,000. The Private Placement will be completed through the issuance of subscription receipts ("Subscription Receipts") Each Subscription Receipt will automatically convert, for no additional consideration, into one common share in the capital of Brightstar immediately prior to the completion of the Amalgamation (the "Release Date").  The gross proceeds of the offering of Subscription Receipts will be placed into escrow with a third party escrow agent.  The proceeds will be released to Brightstar on the Release Date.  If the Release Date does not occur before December 31, 2014 the proceeds will be returned to the investors without deduction. The purchase price for each Subscription Receipt will be $0.25 or such other amount as may be negotiated between Brightstar and arm's length investors.

The Corporation currently has 4,411,271 common shares issued and outstanding. The shares will be consolidated on the basis of 5 old shares for each 1 new share, resulting in 882,260 new shares prior to the amalgamation. Brightstar shareholders will be issued 18,000,000 post-consolidation shares. New investors will be issued 6,000,000 post-consolidation shares assuming the maximum Private Placement is achieved.

Following completion of the amalgamation, shareholders of the Corporation will hold equity interests equal to approximately 4% of the combined entity (assuming the maximum financing) with the remaining equity interests being held by shareholders of Brightstar and new investors participating in the Private Placement.  The relative valuations of the Corporation and Brightstar will be adjusted to the extent that the pricing of the Private Placement is adjusted from that set forth in this press release.

In accordance with Exchange policy, the Corporation's shares are currently halted from trading and will remain so until the completion of the Qualifying Transaction.

Termination

The letter of intent will terminate (i) on the mutual consent of both the Corporation and Brightstar, (ii) if the Corporation is not satisfied with its due diligence review of Brightstar at 5:00 p.m. (Toronto time), on or before September 30, 2014, (iii)if a Definitive Agreement is not executed on or before 5:00 p.m. (Toronto time) on October 31, 2014.

Description of Significant Conditions to Closing

Completion of the Qualifying Transaction is subject to a number of conditions including but not limited to, due diligence, Exchange acceptance and if required by Exchange policies and shareholder approval. Where applicable, the Qualifying Transaction cannot close until the required shareholder approval is obtained.  There can be no assurance that the Qualifying 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 Qualifying Transaction, any information released or received with respect to the Qualifying 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.

The Corporation will make a subsequent news release with information on sponsorship and summary financial information in accordance with Exchange policy.

Cautionary Statements

This news release contains "forward-looking statements" within the meaning of applicable securities laws relating to the proposal to complete the Qualifying Transaction and associated transactions, including statements regarding the terms and conditions of the Qualifying Transaction and associated transactions.  Readers are cautioned not to place undue reliance on forward-looking statements. Actual results and developments may differ materially from those contemplated by these statements depending on, among other things, the risks that the parties will not proceed with the Qualifying Transaction and associated transactions, that the ultimate terms of the Qualifying Transaction and associated transactions will differ from those that currently are contemplated, and that the Qualifying Transaction and associated transactions will not be successfully completed for any reason (including the failure to obtain the required approvals or clearances from regulatory authorities). The statements in this news release are made as of the date of this release. The Corporation undertakes no obligation to comment on analyses, expectations or statements made by third parties in respect of the Corporation, Brightstar, or their respective financial or operating results or (as applicable), their securities.

Neither 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.

SOURCE 71 Capital Corp.


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