IOU Financial Inc. - Results for the Fiscal Year Ended October 31, 2010

MONTREAL, Feb. 28 /CNW Telbec/ - IOU FINANCIAL INC. ("IOU Financial" or "the Corporation") (CNSX: IOU), formerly named MCO Capital Inc., did not record any income during the fiscal years ended October 31, 2010 and 2009. During fiscal 2010, the Corporation incurred operating expenses of $148,547, compared with $55,766 the previous year, consisting primarily of professional and business fees, licenses, payroll, as well as interest and bank fees. Therefore, the Corporation closed fiscal 2010 with a net loss of $148,547 or $0.02 per share on a weighted average number of 9,671,226 outstanding Class B shares, compared with a net loss of $55,766 or $0.01 per share on a weighted average number of 4,233,689 shares in 2009.  The increased number of shares is attributable to the issuance of 6,088,040 Class B shares on December 16, 2009, in connection with the projected reverse takeover ("RTO") of IOU Central Inc. and its American subsidiary IOU USA, which operates an Internet-based lending platform throughout the United Stated aimed at small businesses generating daily sales. The RTO was successfully completed earlier today, February 28, 2011.

During fiscal 2010, operating activities used total net cash of $111,560, while investment activities required total cash of $99,366 in connection with the acquisition of IOU Central Inc. and its US subsidiary. In regards to financing activities, the Corporation issued 6,088,040 Class B shares for net proceeds of $485,012 during the first quarter of fiscal 2010, in order to finance part of the expenses associated with the RTO, and received an interest-free advance of $20,000 from a related entity.  As a result of the various cash flows during the fiscal year 2010, the Corporation's cash stood at $294,815 as at October 31, 2010, up from $729 on October 31, 2009. 

At the end of fiscal 2010, the Corporation's total assets stood at $447,397 up from $43,288 as at October 31, 2009, mainly as the result of the December 16, 2009 share issuance. More precisely, the Corporation had current assets of $313,913 as at October 31, 2010, of which $294,815 was in cash and the balance consisting of sales taxes receivable and prepaid expenses. Long-term assets amounted to $133,484, including deferred charges of $108,484 and the $25,000 advance to IOU Central Inc. As at October 31, 2010, total liabilities, in the amount of $298,408, consisted primarily of interest-free advances from a related entity totaling $200,000, as well as accounts payable and accrued liabilities in the amount of $98,408.  Finally, shareholders' equity amounted to $148,989 as at October 31, 2010, as opposed to a shareholders' deficiency of $187,476 as at October 31, 2009.

Closing of the RTO of IOU Central Inc., Share Consolidation and Listing on the CNSX

Earlier today, February 28, 2011, the Corporation announced the closing of the RTO transaction, pursuant to which a total of 40,913,065 Class B Shares were issued to the shareholders of IOU Central and IOU USA. In addition, the Corporation issued 2,000,000 Class B Shares to a related entity to convert its $200,000 loan into Class B shares. Finally, 331,870 additional Class B shares were issued to convert an amount of $33,187 in various debts due to other parties and 145,782 Class B Shares were issued to GC-Global Capital Corp. as a bridge loan extension fee.  Moreover, concurrently with these share issuances, the Corporation proceeded with the consolidation of all its issued and outstanding Class B shares on the basis of one post-consolidated Class B share for every four pre-consolidated Class B share. Therefore, giving effect to the closing of the RTO, as well as to the February 16, 2011 private placement of Class B shares and Warrants, there are currently 17,411,412 Class B Shares issued and outstanding. Finally, the Corporation today delisted from the NEX entity of TSX Venture Exchange, and was immediately listed on the Canadian National Stock Exchange ("CNSX") under the IOU ticker symbol. The CNSX is a newly created Canadian stock exchange that the Corporation deems better suited to its current profile and needs.

Change of Corporate name

Today, the Corporation filed a request and letters of amendment to its articles of incorporation with the Registre des entreprises du Québec, in order to change its name from MCO Capital Inc. to IOU Financial Inc.

Outlook

The Corporation aims to carry out the second tranche of its planned $5.0 million private placement by the end of March 2011, in order to raise and additional amount of up to $3.5 million to be used for working capital and lending purposes. In addition, for the remainder of the year 2011 and the following quarters, it will continue growing the business of its American subsidiary IOU USA in a reasonable and sustainable manner. Management expects that IOU USA's operating expenses will increase due, notably, to its significant planned investment in infrastructure and marketing initiatives to support its anticipated growth. Emphasis will also continue to be placed on raising capital to finance IOU USA's operations until it reaches profitability and becomes cash-flow positive.

IOU USA's core activity is to help build small businesses by providing them with the necessary capital they need to strengthen their operations and grow their business. Its goal is to provide these businesses with fast financing at affordable rates by allowing them to use the strength of their cash flows to borrow money. As a lender, IOU USA earns revenue from fees it charges its borrowers, interest payments it receives on loans it has funded, gains on sale of loans it has funded, as well as servicing fees it charges third-party purchasers for servicing the loans.

Management believes that investing in short-term cash-flow loans offers above-average risk-adjusted returns for a well-diversified loan portfolio. Moreover, investing in short-term cash-flow loans offers:

  • Security, as loans are paid back daily out of the business' bank account and are personally guaranteed by the owner(s);
  • Liquidity, as loans are repaid daily over 6 or 12 months; and
  • Diversification, as the loan portfolio is comprised of many small loans.

The CNSX does not accept responsibility for the adequacy or accuracy of this release. 


SOURCE MCO CAPITAL INC.

For further information:

Contact:  


Philippe Marleau,President and Chief Executive Officer
Mayco Quiroz,Chief Financial Officer
IOU Financial Inc.
(514) 789-0694


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