IOU Financial Achieves Profitability, Provides Update on Alternative Transaction Process and Reminds Shareholders to Reject Qwave's Coercive Unsolicited Partial Offer

• IOU Financial achieved profitability with record loan originations in the months of July and August, totalling US$31.3 million, representing a year over year increase of 150%.
• Board has approved a letter of intent for a credit facility of up to US$50 million from a major institutional lender.
• Board has received an offer to proceed with a private placement of up to $10 million of convertible debentures, with committed subscriptions in excess of $7 million.
• Board continues to recommend that shareholders reject and not tender to Qwave's coercive unsolicited partial offer.
• Qwave's partial offer remains opportunistic and does not reflect the true value of IOU Financial given its growth opportunities and ability to increase profitability with a new credit facility.

MONTREAL, Sept. 18, 2015 /CNW/ - IOU Financial Inc. (TSX Venture Exchange: IOU) ("IOU Financial" or the "Company"), a leading online lender to small businesses in the United States, today announced that it has achieved profitability with record loan originations, that it has entered into a letter of intent for a credit facility of up to US$50 million, that it has received an offer to proceed with an additional financing of up to $10 million of convertible debentures, and wishes to remind shareholders to reject the unsolicited partial offer by Qwave Capital LLC ("Qwave") to purchase 34,000,000 outstanding common shares of the Company (the "Common Shares") at a price of $0.50 per Common Share (the "Qwave Partial Offer").

Based on Record Origination Volumes IOU Financial Achieved Profitability in July and August

As previously announced, the Company's loan originations for the months of July and August, totaled US$31.3 million, representing a year over year increase of 150% in comparison to the same period in 2014. Based on these volumes, IOU Financial achieved profitability for the months of July and August in excess of $500,000 in aggregate (excluding non-recurring costs).

The Board has approved a letter of intent for a credit facility of up to US$50 million from a major institutional lender

The facility would have an initial commitment of US$25 million and would be expandable to US$50 million at IOU's request and the lender's acceptance.

It is expected that the credit facility will not only increase the availability of capital to support IOU Financial's growth but will also significantly lower its funding cost of capital, both of which continue to be part of management's strategic objectives. 

The Board has received an offer to proceed with a private placement of up to $10 million in principal amount of convertible debentures, with committed subscriptions in excess of $7 million

Since it began its alternative transaction process initiated in response to the Qwave Partial Offer, IOU Financial has received a number of indicative proposals for alternative transactions to the Qwave Partial Offer, including an offer for a private placement of 10% unsecured subordinated convertible debentures convertible at a price of $0.75 per Common Share for gross proceeds of up to $10 million, along with committed subscriptions in excess of $7 million. The debentures would mature on December 31, 2020 and the Company would have the right to force the conversion of the debentures into Common Shares at any time after December 31, 2018 should the 20-day VWAP of the Common Shares exceed 125% of the conversion price. The board of directors of IOU Financial (the "Board"), acting on the recommendation of a special committee composed entirely of independent directors of IOU Financial, has held discussions in respect thereof with the interested parties and will continue to do so.

There can be no assurance that any financing or other alternative transaction will be completed. The Company intends to update shareholders when the circumstances so warrant.

"The Board wishes to reiterate its confidence in management's ability to grow the Company's business and its ability to secure additional financing. IOU Financial is at an inflection point in its operating results and the Company is positioned to deliver value to all shareholders," said Evan Price, the Chairman of the Board.

Qwave Partial Offer

The Board continues to unanimously recommend that shareholders REJECT and NOT TENDER their Common Shares to the Qwave Partial Offer for the reasons set forth in the Company's press release of July 10, 2015, which included:

• given the recent profitability achieved by IOU Financial, the Qwave Partial Offer more than ever significantly undervalues the Company's market position, assets, brand presence and long-term business prospects;
• the Qwave Partial Offer continues to be financially inadequate;
• to date, Qwave has still not articulated a credible plan for the Company's business;
• Qwave's track record of managing technology companies remains unknown;
• the Qwave Partial Offer will have a material adverse effect on the liquidity of the Common Shares;
• the Qwave Partial Offer seeks to provide Qwave with effective control of the Company, without offering shareholders an appropriate control premium for the Common Shares purchased and no premium for the Common Shares not purchased; and
• the Qwave Partial Offer continues to be coercive: tendering shareholders will only be able to sell at most 55.3% of their Common Shares, assuming all Common Shares are tendered.

Shareholders who have already tendered their Common Shares to the Qwave Partial Offer should WITHDRAW them IMMEDIATELY. A notice of withdrawal, which sets forth in detail how to withdraw Common Shares under the Qwave Partial Offer, is available on the Company's website at: http://ioufinancial.com/qwave-offer-info/how-to-reject-qwave-partial-offer/  

Any questions or requests for assistance in connection with the withdrawal of Common Shares tendered under the Qwave Partial Offer may be directed to IOU Financial at 1-877-419-0934 (toll-free in North America) or [email protected].

About IOU Financial Inc.

IOU Financial provides small businesses throughout the U.S. access to the capital they need to seize growth opportunities quickly. Typical customers include medical and dental practices, grocery and retail stores, restaurant and hotel franchisees and e-commerce companies. In a unique approach to lending, IOU Financial's advanced, automated application and approval system accurately assesses applicants' financial realities, with an emphasis on day-to-day cash flow trends. It makes loans of up to US$150,000 to qualified applicants within a few business days, with affordable charges favorable to cash-flow management. IOU Financial's speed and transparency make it a trusted alternative to banks. To learn more visit: www.ioufinancial.com.

Financial Information

Figures reported under the heading "Based on Recent Origination Volumes IOU Financial Achieved Profitability in July and August" are preliminary and are subject to change as the Company's financial results for the quarter ending September 30, 2015 are finalized. Such figures have not been reviewed or audited by the Company's independent auditors. The Company does not intend to disclose financial figures outside of its quarterly or annual reporting in the future and will only do so if future circumstances so warrant. The Company is not currently providing financial outlook and no assurance can be given as to the Company's results or performance for future periods.

Forward Looking Statements

Certain information set forth in this news release may contain forward-looking statements. Forward-looking statements are statements, other than statements of historical fact, that address or discuss activities, events or developments that IOU Financial expects or anticipates may occur in the future. These forward looking statements can be identified by the use of words such as "anticipates", "believes", "estimates", "expects", "may", "plans", "projects", "should", "will", or the negative thereof or other variations thereon. These forward-looking statements reflect management's current views and are based on certain assumptions including assumptions as to future economic conditions and courses of action, as well as other factors management believes are appropriate in the circumstances. Such forward-looking statements are subject to risks and uncertainties and no assurance can be given that any of the events anticipated by such statements will occur or, if they do occur, what benefit IOU Financial will derive from them. A number of factors could cause actual results, performance or developments to differ materially from those expressed or implied by such forward-looking statements, including, but not limited to, risks related to the completion or not of a financing, risks related to the Company's incapacity to execute on its business plan, risks related to the actions taken by Qwave in connection with the Qwave Partial Offer, risks related to the actions taken by shareholders in response to the Qwave Partial Offer, risks related to the possible effects of the Qwave Partial Offer on the business and prospects of IOU Financial, risks inherent in growing a new business, dependence on third-party service providers, competition, regulatory risk, dependence on key personnel, risks related to rapid growth of IOU Financial, security and confidentiality risk, risk related to inability to attract borrowers and lenders, technological development risk, IT disruptions, maintenance of client relationships, litigation risk, volatility of stock price, and other factors that are beyond its control. Additional information concerning these and other factors can be found beginning on page 15 under the heading "Risks and Uncertainties" in IOU Financial's management's discussion and analysis dated August 25, 2015, which is available under IOU Financial's profile on SEDAR at www.sedar.com.

Neither TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.

SOURCE IOU FINANCIAL INC.

Shareholders: Philippe Marleau, President and Chief Executive Officer, [phone] ext. 225; Mayco Quiroz, Chief Financial Officer, [phone] ext. 298; Media: Riyaz Lalani, Bayfield Strategy, Inc., [phone], [email protected]