VANCOUVER, BC – August 10, 2009 – IP Applications Corp. (TSX-Venture: IPX) ("IP Applications" or the "Company") is pleased to announce that, further to the Company’s news release of May 26, 2009, it has formally closed its non-brokered private placement and raised gross proceeds of $1,000,000.
John Jacobson, President and CEO, said “This financing provides funding for our aggressive pursuit of new customers for our industry-leading on-demand billing platform. The on-demand billing and payments space is rapidly developing and IPA is well positioned to take advantage of this growing market. Our target customers are online businesses selling technology services and products on a subscription basis. This includes not only SaaS and Cloud Computing companies, but also new and existing enterprises who want to expand into this channel. Our expertise in on-demand billing and payment applications, developed over the last ten years, positions us to meet the on-demand billing needs of these companies. It’s available today and it works.”
The Company received final acceptance from the TSX Venture Exchange (the “Exchange) for the issuance to Pender Growth Fund (VCC) Inc. ("Pender") of 8,333,333 convertible preferred shares (the "Shares") of the Company at a price of $0.12 per Share (the "Offering"). The Company has also issued 4,000,000 common share purchase warrants (the "Warrants") in connection with the Offering, each of which will entitle Pender to acquire a common share of the Company (the "Warrant Shares") at a price of $0.36 until August 7, 2014. The Shares and Warrants, as well as any common shares issued or conversion of the Shares or exercise of the Warrants, are subject to a four month hold period expiring on December 8, 2009.
Pender will be entitled to an annual cumulative cash dividend of 10% of the issue price of the Shares, payable in cash in arrears on December 31 of each year. The Shares are convertible at Pender's option into common shares of the Company on a 1:1 basis. After a period of 18 months from the Closing, the Company may elect to convert the Shares into common shares if: (a) the closing price of the common shares is at a price greater than $0.40 per share for a period of 30 consecutive trading days, and (b) the total trading volume over such period is greater than 20% of the common shares issued and outstanding at the beginning of such period, excluding all common shares of the Company held by Pender and by Pender Financial Group Corporation. The terms of the Shares provide that they be redeemable at the original issue price, plus accrued and unpaid dividends (the "Redemption Price"), on or after the fifth anniversary of the Closing or on the occurrence of a change of control, consolidation, amalgamation or merger of the Company, a sale of substantially all of the Company’s assets or undertaking, or a liquidation, winding-up or dissolution of the Company.
The terms of the Investment Agreement which the Company entered into with Pender in relation to the Offering provide that, for as long as Pender’s investment in the Shares is an "eligible investment" as defined in the Small Business Venture Capital Act (British Columbia), the amount that Pender (or any transferee of the Shares) will receive on redemption of the Shares will be the lesser of: (a) a price equal to three times the Company’s annual revenue, calculated on a per common share basis; and (b) the Redemption Price. The terms of the Investment Agreement also provide that Pender has a pro-rata right to participate in subsequent equity or debt financings and maintain its percentage equity ownership of the Company.
IP Applications had received approval from its shareholders to amend the Company’s Notice of Articles and create the Shares at a special meeting held on July 28, 2009. As well, the Company increased the number of common shares it is authorized to issue to an unlimited number of authorized common shares. Further, as the Company had previously received from Pender an advance of $500,000 of the subscription proceeds to assist with operating cash flow, it received the final installment of $500,000 Pender is a "related party" of the Company and accordingly the Offering is a "related party transaction", as such terms are defined under Multilateral Instrument 61-101 ("MI 61-101"). The Offering is exempt from the formal valuation and minority shareholder approval requirements of MI 61-101 as the common shares of the Company are listed only on the TSX Venture Exchange and the Offering has been approved by the independent directors of the Company, one of whom is not an officer or employee of the Company. Two of the directors of the Company are also directors of Pender, and such related directors abstained from voting on matters related to the Offering. The Offering closed before 21 days following the filing of a material change report as the Company determined this was necessary and reasonable in the circumstances. Assuming exercise in full of the Warrants and full conversion of the Shares into common shares of the Company, Pender would hold approximately 55% of the issued
Company.
About IP Applications
IP Applications Corp. (www.ipapplications.com) delivers billing, payments processing and technical support services for online businesses. The Company’s on-demand billing and payments application delivers variable recurring payments processing and subscriber lifecycle management for Software-as-a-Service (SaaS) and Cloud computing companies. Established in 1998, the Company has a client roster that includes Sprint Nextel, Bell Mobility, Amway Corporation and AOL Canada.
Forward-Looking Statements
This news release contains forward-looking statements. Actual events or results may differ materially from those described in the forward-looking statements due to a number of risks and uncertainties, including changes in financial and product market conditions altering or eliminating product usage, changes in exchange rates affecting profitability, and competitor’s product enhancements reducing IP Application’s competitive advantage. Forward-looking statements are based on management's estimates, beliefs, and opinions. The Company assumes no obligation to update forward-looking statements, other than as may be required by applicable law. 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.
Contact:
John Bean, CFO
D 604.630.5657
E ir@ipapplications.com