Iron Springs Capital Corp.
TSX VENTURE : ISP.P

August 11, 2005 19:29 ET

Iron Springs Capital Corp. Announces Letter of Intent to Acquire All the Outstanding Securities of Kaboose Inc.

VANCOUVER, BRITISH COLUMBIA--(CCNMatthews - Aug. 11, 2005) - Iron Springs Capital Corp. ("Iron Springs" or the "Corporation")(TSX VENTURE:ISP.P) is pleased to announce that it has entered into a letter of intent with Kaboose Inc. ("Kaboose") dated August 11, 2005 (the "Agreement") to enter into a business combination with Kaboose, such that Kaboose will become a wholly-owned subsidiary of the Corporation (the "Proposed Acquisition"). Pursuant to the terms of the Agreement, the Corporation intends to acquire all of the 14,168,845 common shares, or shares convertible into common shares, of Kaboose ("Kaboose Shares"), all 123,333 investor common share purchase warrants of Kaboose, all 100,097 common share broker warrants of Kaboose (together, "Kaboose Warrants") and all of the 1,840,333 stock options of Kaboose ("Kaboose Options") (collectively, the "Kaboose Securities") which are expected to be issued and outstanding as of the date of the Proposed Acquisition. It is expected that the Proposed Acquisition will occur by way of an exempt take-over bid or three-cornered amalgamation. The Proposed Acquisition will be subject to regulatory approval.

Pursuant to the Agreement, the consideration for the Proposed Acquisition will be as follows: (i) shareholders of Kaboose shall receive 3.1 common shares of Iron Springs ("Iron Springs Shares") for every one Kaboose Share held; (ii) warrantholders of Kaboose shall receive 3.1 common share purchase warrants of Iron Springs ("Iron Springs Warrants") for every one Kaboose Warrant held; and (iii) optionholders of Kaboose shall receive 3.1 options to purchase common shares in Iron Springs ("Iron Springs Options") for every one Kaboose Option held. Upon the completion of the Proposed Acquisition, the above noted existing Kaboose security holders will be issued 43,923,420 Iron Springs Shares, 692,633 Iron Springs Warrants and 5,705,032 Iron Springs Options, as appropriate.

The Corporation currently has 2,320,000 Iron Springs Shares issued and outstanding. In addition, there are 150,000 options that have been granted to the Corporation's directors and officers under its current stock option plan and an agent's option to purchase 100,000 Iron Springs Shares which was granted to Haywood Securities Inc. in connection with the Corporation's initial public offering. Upon completion of the Proposed Acquisition, it is expected that the Corporation will have approximately 46,243,420 Iron Springs Shares issued and outstanding, 692,633 Iron Springs Warrants and 5,955,032 Iron Springs Options.

The Corporation is a "capital pool company" and intends for the Proposed Acquisition of Kaboose to constitute the "Qualifying Transaction" of the Corporation as such terms are defined in the policies of the TSX Venture Exchange (the "Exchange"). Upon completion of the Proposed Acquisition, it is expected that the resulting issuer (the "Resulting Issuer") will be a Tier 2 Technology Issuer. The Proposed Acquisition is an arm's length transaction.

On completion of the Proposed Acquisition, the Corporation will be an online media company focused on the kids and family market.

Kaboose

The following information relating to Kaboose, its operations and financial history, has been provided to the Corporation by Kaboose.

Kaboose is the largest independent online media company in the kids and family market in North America and is a top-10 global Internet destination for kids and families looking for entertaining, interactive and educational content, as measured by comScore Networks, Inc., a third-party provider of Internet audience measurement services. Kaboose consists of three award winning online properties, Funschool.com, Zeeks.com and Kidsdomain.com, as well as the recently acquired Maryland-based Birthday in a Box Inc., one of the leading online ecommerce children's party supplies businesses in North America. Kaboose also has developed a proprietary search engine targeted exclusively to kids and mothers. Kaboose reached over 6.5 million unique users at the end of December, 2004. In total, Kaboose owns in excess of 12,000 pages of content and over 500 proprietary games and educational activities. Kaboose's mission is to improve the quality of family life by connecting parents and kids in a fun, educational and safe environment, and enhancing their online and offline time together.

Since 2001, Kaboose has been a consolidator in the industry, having successfully acquired and integrated six companies. Today, Kaboose's users come from over 100 countries around the world, with approximately 75% residing in the U.S. In addition, over 95% of Kaboose's revenues are generated in the U.S., the majority of which are from Fortune 500 global brands, including Nestle, General Motors, Kellogg's and General Mills.

Kaboose operates in a dynamic and rapidly growing sector. Today, kids and mothers spend more time online than watching television. Children alone influence between US$300 and US$500 billion per year in spending. As a result, the kids and family advertising sector has experienced significant growth over the past few years as additional advertisers focus their resources on this sector. According to PricewaterhouseCoopers, the total media budget allocated to online advertising is expected to increase from US$9.6 billion in 2004 to US$15.5 billion in 2007, representing a 61% growth over the next three years.

Kaboose's head office is located in Toronto, Canada. Kaboose was incorporated pursuant to the provisions of the Business Corporations Act (Ontario) on October 8, 1999 under the name "Kaboose.com Inc." Pursuant to articles of continuance, Kaboose.com Inc. continued under the provisions of the Canada Business Corporations Act on November 22, 1999 and subsequently changed its name on January 11, 2002. Kaboose is not currently a "reporting issuer" in any jurisdiction of Canada and none of its securities have traded on any stock exchange. The current directors of Kaboose are Jason DeZwirek, Jonathan Graff, Eric Yuzpe, Michael Winton and Ray Benzinger. The current officers of Kaboose are Jason DeZwirek, as the Chairman and Chief Executive Officer, Jonathan Graff, as the President and Jonathan Pollack, as the Chief Financial Officer. Including convertible securities, exchangeable or convertible into Kaboose Shares upon the closing of the Proposed Acquisition, Jason DeZwirek, a resident of Ontario, has direct or indirect or beneficial control over 6,325,109 Kaboose Shares, representing approximately 44.6% of the issued and outstanding Kaboose Shares and Dynamic Venture Opportunities Fund, a labour sponsored investment fund corporation under the Small Business Investment Funds Act (Ontario), owns 3,243,590 Kaboose Shares, representing approximately 22.9% of the issued and outstanding Kaboose Shares.

Financial Information

From 2002 to 2004, Kaboose's unique users have grown from 1.2 million a month to 6.5 million a month (132% CAGR). In addition, for the first six months of 2005, Kaboose generated revenues of $2,333,181, which is greater than total revenues for all of 2004 and 131% greater than the same period in 2004. As of June 30, 2005 (unaudited), Kaboose had approximately $4,500,000 of cash on its balance sheet and total assets of $6,767,678.

Over the past three years Kaboose has raised approximately $10,000,000 in equity from institutions and private investors, including Dynamic Ventures Opportunity Fund; Jason DeZwirek (Kaboose's Chairman and CEO); Harold Gordon (Chairman of Dundee Bancorp and Former Vice Chairman of Hasbro); Ruby Osten (Founder and Former CEO of PC Docs); and Harvey Sandler (Founder of New York-based Sandler Capital Management).

Insiders and Board of Directors of the Resulting Issuer

Upon completion of the Proposed Acquisition, it is expected that the board of directors will be comprised of Jason DeZwirek, Jonathan Graff, Ray Benzinger, Michael Winton, A. Murray Sinclair and Peter Miller. The proposed officers of the Resulting Issuer will be Jason DeZwirek, Chief Executive Officer, Jonathan Graff, President and Jonathan Pollack, Chief Financial Officer.

The following is a summary of the principal occupations for the last five years of the proposed directors, officers and promoters of the Resulting Issuer:

Jason DeZwirek - Chief Executive Officer and Director

Mr. DeZwirek has approximately ten years of experience in the new media industry and is considered a leader in the development of children's and family multimedia products. In 1999, Mr. DeZwirek founded Kaboose of which he is currently the Chairman, Chief Executive Officer and a director. Mr. DeZwirek is also currently a director of CECO Environmental Corp. (NASDAQ:CECE), an air pollution control company and API Electronics Group (OTC:AEGCF), a manufacturer of circuits for the military, aerospace and commercial markets.

Jonathan Graff - President and Director

Mr. Graff joined Kaboose as President in 2003. As President, Mr. Graff is responsible for all of Kaboose's sales & marketing, personnel and strategic partnership decisions. From 1998 to 2001, Mr. Graff was Director of Business Development with Homestore.com (NASDAQ:HOMS), an online real estate provider of listings in North America. Mr. Graff also managed Homestore's Canadian national sales force from 2000 to 2001. Mr. Graff holds an MBA from the Richard Ivey School of Business at the University of Western Ontario.

Ray Benzinger - Director

Ray Benzinger has been the President of Dundee Private Equity Management, the private equity arm of Dundee Wealth Management Inc., since May 2001. He is also the President and the investment manager of the Dynamic Venture Opportunities Fund, a public venture capital fund. He has been a partner with Goodman and Company Investment Counsel Ltd. since 1991. Mr. Benzinger received a Bachelor of Arts degree in Economics in 1976. He received his Chartered Accountant designation in 1981 and his Chartered Financial Analyst designation in 1992. He is a member of the CFA Institute, the Toronto Society of Financial Analysts, and the Ontario Institute of Chartered Accountants. Since 1986, Mr. Benzinger has held various senior management positions with Dundee Inc., Dundee Wealth Management Inc. and Dynamic Mutual Funds.

A. Murray Sinclair - Director

Mr. Sinclair is currently the Managing Director of Quest Capital Corp. (formerly, Quest Investment Corp.) ("Quest"). Quest trades on the TSX and is a merchant bank that provides financial services to small and mid-cap companies operating primarily in North America. From July 2002 to June 2003, Mr. Sinclair was the President of Quest Investment Corporation, a publicly listed merchant bank based in Vancouver, Canada. Previously, Mr. Sinclair was the managing director of Quest Oil & Gas Inc. from May 1993 to April 1997. Mr. Sinclair is currently a director and officer of a number of public companies. Mr. Sinclair obtained a Bachelors of Arts from Queens University.

K. Peter Miller - Director

Mr. Miller is currently the Chief Financial Officer of Quest Management Corp., a management company that is wholly owned by Quest Capital Corp. From 1988 to 1997, he was the Treasurer of Quest Oil and Gas Inc. He is currently a director and/or officer of numerous other public companies. Mr. Miller obtained a Bachelor of Applied Sciences degree from the University of Waterloo and was granted the designation of Chartered Accountant from the Ontario Institute of Chartered Accountants in 1974.

Michael Winton - Director

Michael Winton is one of Kaboose's early investors and is currently the Vice President of The Equity Group and is President of Global Vending Corp., both private companies located in Dallas, Texas. Prior to joining The Equity Group and Global Vending Corp., Mr. Winton practiced as a lawyer with a boutique corporate law firm in Toronto, Ontario specializing in franchising, licensing and distribution law. He received his Bachelor of Arts degree from the University of Western Ontario and a J. D. from Touro Law School, Huntington, New York.

Jonathan Pollack - Chief Financial Officer

Mr. Pollack brings financial and strategic experience in building both public and private companies to the Resulting Issuer. From 2000 to 2005, Mr. Pollack was President of The JMP Group, a strategic and financial advisory firm to numerous private and public companies based in Toronto, Ontario. From 1996 to 2000, he was a Vice President and founding member of Violy, Byorum & Partners, LLC, a New York based investment bank. Mr. Pollack is currently a director of Lifebank Cryogenics Corp. (TSX-V:LBK). Mr. Pollack received a Masters of Science in Finance from the London School of Economics and a Bachelors of Commerce from McGill University. He is involved in several philanthropic organizations and is the Vice Chair of Leadership Sinai at the Mt. Sinai Hospital and is a director of Crescent School.

Sponsorship of Qualifying Transaction

Sponsorship of a qualifying transaction of a capital pool company is required by the Exchange unless exempt in accordance with Exchange policies. The Corporation will apply for an exemption from sponsorship requirements. However, there is no assurance that the Corporation will obtain this exemption.

Description of Significant Conditions to Closing

Completion of the Proposed Acquisition is subject to a number of conditions including but not limited to, Exchange acceptance and, if applicable pursuant to the Exchange requirements, majority of the minority shareholder approval. Where applicable, the Proposed Acquisition cannot close until the required shareholder approval is obtained. In addition, other necessary conditions to close the Proposed Acquisition include obtaining all other necessary regulatory, court and third party approvals and authorizations, the completion of a definitive agreement setting forth the terms and conditions set forth in the Agreement as discussed above and the completion of due diligence. There can be no assurance that the Proposed Acquisition will be completed as proposed or at all. Investors are cautioned that, except as disclosed in the filing statement to be prepared in connection with the Proposed Acquisition, 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.

In accordance with Exchange policy, the Corporation's shares are currently halted from trading.

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 news release.

Contact Information

  • Iron Springs Capital Corp.
    A. Murray Sinclair
    President and Director
    (604) 689-1428
    or
    Kaboose Inc.
    Jason DeZwirek
    Chief Executive Officer and Director
    (416) 593-3000