Key Venture Capital Announces Qualifying Transaction With Pharmacy Hearing Centres

VANCOUVER, BRITISH COLUMBIA--(Marketwire - Aug. 28, 2012) - Key Venture Capital Inc. (KVC-P.V) (the "Company"), a capital pool company pursuant to Policy 2.4 of the TSX Venture Exchange (the "TSXV"), is pleased to announce that it has entered into a letter of intent (the "LOI") dated August 27, 2012 for the arm's length acquisition, directly or indirectly, of all of the issued and outstanding shares of Ontario-incorporated PHC Canada Inc. and Delaware-incorporated Pharmacy Hearing Centers, Inc. (collectively "PHC") from the shareholders of VitaSound Audio Inc. ("VitaSound"), a private Ontario corporation. VitaSound is owned as to 38.6% by 2171861 Ontario Inc. (an Ontario company that is directly or indirectly owned equally by Philippe Pango, a resident of the Ivory Coast and Gora Ganguli and Mark Chamberlain, whom are residents of the greater Hamilton area) and as to 17.5% by Trivaris-VitaSound Holdings Inc. (an Ontario company that is controlled by Mark Chamberlain).

The LOI contemplates that the Company will, subject to regulatory approval and the approval of the shareholders of the Company and VitaSound, acquire all of the issued and outstanding shares of PHC by way of a share exchange pursuant to which the outstanding securities of PHC will be acquired for an aggregate of approximately 51.9 million shares of the Company (the "Transaction"). The LOI provides, however, that the parties may amend the Transaction to proceed alternatively by way of amalgamation, plan of arrangement, merger or other form of business combination. The Transaction is conditional upon, among other things, (i) PHC receiving binding funding commitments of an aggregate of $2 million from one or more third party suppliers, (ii) PHC completing a $1 million working capital financing, (iii) the Company successfully completing a concurrent private placement financing of at least $4 million at a price to be determined in accordance with the policies of the TSXV, and (iv) the consolidated net and unallocated working capital of the Company and PHC meeting the minimum listing requirements of the TSXV.

Key Venture Capital Inc.

Sophia Leung states, "The Board Directors, comprised of Earl Drake, Chris Carl, Joshua Siow and Sophia Leung have carefully assessed the financial and business plans of PHC and fully support the future business development and expansion in Canada and United States of PHC. The merger of the two companies will provide a strong and viable new business entity for Canada."

About Pharmacy Hearing Centers

PHC has developed an innovative retail distribution model for hearing products and operates this model through "store-in-store" hearing centres located in pharmacies and other retail locations across Canada and the United States. PHC hearing centres provide consumers with affordable, high quality products and services in convenient locations within trusted pharmacy and retail store chains that in turn offer PHC much higher retail traffic than would be the case for standalone, remote locations. The hearing centres offer a variety of hearing solutions, including hearing aids, hearing protection, and assistive listening products. The stores carry major national brands as well as unique technologies such as the patented Neuro-Compensator(R), developed in partnership with VitaSound Audio Inc. and McMaster University. PHC will have an exclusive agreement to distribute through consumer retail channels, hearing-aid devices that incorporate VitaSound's innovative hardware and software technologies that improve the performance of such devices.

PHC Canada Inc. commenced operations in early 2010. By October 2010 it had assumed twenty two stores within a large retail chain that had previously been operated by another company. PHC Canada Inc. has since stabilized these operations and improved the customer experience. PHC Canada Inc. plans to grow the number of hearing centres that it operates in Canada substantially over the next five years, all within the same retail chain. The United States based Pharmacy Hearing Centers, Inc. commenced its operations in May 2009 and initially opened stores within three different retailers. It is now concentrating most of its US expansion efforts into one national chain.

PHC currently operates approximately 60 "store-in-store" hearing centres in the United States and Canada and through existing channel partners, has the potential to grow to over 2,000 additional hearing centres in North America. PHC has, together with its partners, identified over 300 retail locations where there is the opportunity to open new hearing centres within 12 months following the completion of the Transaction, assuming, among other things, PHC's ability to raise sufficient financing. At full capacity, it is anticipated that, each store will have the ability to generate more than approximately $100,000 in annual revenue at EBITDA margins in excess of 10%. Since PHC has already invested in the necessary infrastructure to support this level of financial performance, PHC will also have the opportunity to leverage this infrastructure to increase stores sales and margins through the sale of additional products and services.

PHC's business model is based on two important sets of partnerships that it has cultivated. First, it has partnered with very large national retailers in both Canada and the United States to locate its hearing centres. This allows PHC and the retailers to provide the product and services offering to the large walk-through customer bases of the retailers, while neither increasing operating costs to the retailers nor restricting or eroding the product margins for PHC. Second, in addition to exclusive rights in the consumer retail channel for the Neuro-Compensator(R) hearing-aid products, PHC has partnered with global suppliers of hearing-aid technologies so that PHC can offer a wide array of products to suit individual customer preferences. These suppliers are also funding certain marketing and start-up costs but ownership of the business shall remain exclusively with PHC shareholders.

"This really is a 'customer-benefit business strategy' aimed at offering customers the best product choices, at the most competitive prices and at the most convenient locations," says PHC President, Gora Ganguli. "Unlike traditional hearing aid centres that tend to be located in remote locations and that are single manufacturer specific, these high traffic locations will make the up to 75% of people who could benefit from hearing assistance and who do not have hearing-aids, more aware of the possibilities and allow all customers easy access to testing and additional product knowledge. In addition to providing this much improved customer experience, PHC has tremendous growth opportunities both by rapidly increasing the number of locations and by maximizing profitability growth for each location by offering an ever-expending range of products at a very low overhead cost per unit. This truly is a win-win model for both the consumer and the provider at the same time."

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Key Venture Capital Announces Qualifying Transaction With Pharmacy Hearing Centres