Key Venture Capital Announces Qualifying Transaction With Pharmacy Hearing Centres

Key Venture Capital Inc. (TSX VENTURE:KVC.P) (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."


PHC Financial Summary

The following Exhibit 1.1 has been prepared by PHC management, and includes
specific income statement balances from the unaudited financial statements for
the years ended December 31, 2010 and December 31, 2011, as well as the
unaudited interim financial statements for the six-month period ended June 30,
2012, which were prepared in accordance with International Financial Reporting
Standards ("IFRS"). Balance Sheet items will be disclosed in the audited
financial statements of PHC that will be included in the Company's information
circular or filing statement that will be filed on SEDAR in connection with the
Transaction (the "Information Circular").




                   Six Months Ended          Year Ended          Year Ended
                      June 30, 2012   December 31, 2011   December 31, 2010
                                                                           
Revenue                  $1,322,000          $2,105,000            $473,000
EBIT(1)                 ($1,395,000)        ($2,618,000)          ($871,000)
Avg # Locations                  56                  49                  20

(1) The term "EBIT" refers to earnings before income taxes and interest
    expense. PHC believes that EBIT is useful supplemental information as
    it provides an indication of the results generated by the PHC's main
    business activities prior to taking into consideration how those
    activities are financed or taxed. EBIT is a non-IFRS earnings measure
    that does not have standardized measures prescribed by IFRS, and
    therefore may not be comparable to similar measures presented by other
    issuers.



Qualifying Transaction

The Transaction is intended to be the Company's "qualifying transaction" as that
term is defined in Exchange Policy 2.4 concerning capital pool companies. To
date, the Company has been a capital pool company with the business of
identifying a qualifying transaction. The Company has not commenced operations
and has no assets other than cash. Following the Transaction, the combined
company (the "Resulting Issuer") will be a bio-technology distribution company.
PI Financial Corp. has been engaged as a financial advisor for the Transaction.


Trading of the common shares of the Company remains halted in connection with
the dissemination of this news release and will recommence at such time as the
TSXV may determine, having regard to the completion of certain requirements
pursuant to TSXV Policy 2.4.


Financing

In conjunction with the Transaction, the Company plans to undertake a private
placement financing (the "Offering") to raise gross proceeds of $4,000,000 with
PI Financial Corp. as Agent. The Company intends to use the proceeds of the
Offering to fund the expansion plans and working capital of the Resulting
Issuer. Further details concerning the Financing, including details of the
agents' compensation, will be announced by way of press release once determined.


Sponsorship

Due diligence pertaining to a qualifying transaction of a capital pool company
is required by the TSXV in the form of a sponsorship letter or a sponsorship
waiver letter. PI Financial Corp., subject to satisfactory due diligence, is
agreeable to acting as sponsor in connection with the Transaction. An agreement
to provide the foregoing services should not be construed as any assurance with
respect to the merits of the Transaction or the likelihood of its completion.


Officers, Directors and Insiders upon Completion of the Transaction

Upon completion of the Transaction, it is anticipated that the directors and
officers of the Resulting Issuer will be:




Name                   Current Position            Position with the        
                                                   Resulting Issuer         
                                                                            
Gora Ganguli           President and CEO,          Director, President and  
                       VitaSound Audio Inc.        CEO                      
Mark Chamberlain       President and CEO,          Director, Chairman of the
                       Trivaris Ltd.               Board                    
Sophia Leung, C.M.(2)  CEO and Director, Key       Director                 
                       Venture Capital Inc.                                 
Chris Carl             Director, Key Venture       Director                 
                       Capital Inc.                                         
Dean Mosca             Chairman, The St. Joseph's  Director                 
                       Health Foundation                                    
Pete Pigott, C.A.      Chief Operating Officer     Chief Operating Officer  
Sandra Hilliard        Corporate Secretary and     Corporate Secretary      
                       General Counsel of                                   
                       Trivaris Ltd.                                        

(2) Member of the Order of Canada



If applicable, further details of any shareholders who shall hold in excess of
10% of the issued number of shares of the Resulting Issuer shall be disclosed in
a subsequent news release.


A description of the backgrounds of each of the directors and officers listed
above will be included in the Company's Information Circular.


The information in this news release regarding PHC and its management has been
provided to the Company by PHC and has not been independently verified by the
Company.


Completion of the Transaction is subject to a number of conditions, including
but not limited to, TSXV acceptance and if applicable pursuant to TSXV
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 or filing statement 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.


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 information in this news release includes certain information and statements
about management's view of future events, expectations, plans and prospects that
constitute forward looking statements, including but not limited to the closing
of the Transaction and the Offering and the number of shares to be issued in
connection therewith, the ability of PHC to secure the working capital financing
and the funding commitments from suppliers, the ability of PHC to expand its
business by opening new hearing centres, the anticipated number of new hearing
centres PHC intends to open, the timeframe within which such hearing centres are
opened, the expected development costs per hearing centre and the anticipated
revenues and EBITDA margins of its hearing centres. These statements are based
upon assumptions that are subject to significant risks and uncertainties
including among other things, that the Transaction may not satisfy the TSXV
requirements for a Qualifying Transaction, that the Company and PHC may not be
able to satisfy the conditions precedent prior to closing the Transaction, that
the Offering and working capital financing may not be able to be completed on
terms acceptable to the Company, general business and economic conditions, the
timing and receipt of required approvals, the availability of financing, ongoing
relationships between PHC and its retail partners and suppliers, the ability of
PHC to finalize licencing arrangements with VitaSound Audio Inc. and the ability
of PHC to meet its business plan assumptions leading it to become a financially
sustainable company. Because of these assumptions, risks and uncertainties and
as a result of a variety of other factors the actual results, expectations,
achievements or performance may differ materially from those anticipated and
indicated by these forward looking statements. Although the Company and PHC
believe that the expectations reflected in forward looking statements are
reasonable, it can give no assurances that the expectations of any forward
looking statements will prove to be correct. Except as required by law, the
Company and PHC disclaim any intention and assume no obligation to update or
revise any forward looking statements to reflect actual results, whether as a
result of new information, future events, changes in assumptions, changes in
factors affecting such forward looking statements or otherwise.
Key Venture Capital (TSXV:KVC.P)
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