Well I knew SOMETHING was in the works for additional equity capital for VelaTel. Today VELA announced it has closed a $12 million stock purchase agreement with Ironridge Technology Co., an institutional investor in the telecommunications sector.

Proceeds from the Preferred stock offering (convertible at 20 cents a share) will be used to fund VelaTel’s acquisition of China Motion Telecom (HK) Limited.  Ironridge made its first payment of $600,000 for the initial 10% down payment called for under VelaTel’s agreement to acquire 100% of the equity interest of China Motion. 

More important, VelaTel projects that the remaining proceeds of Ironridge’s equity funding will be sufficient for VelaTel to:

·        Pay the remaining balance to acquire China Motion.

·        Complete deployment and launch of VelaTel’s wireless broadband networks in Croatia and Montenegro.

·        Other strategic purposes on projects under development.

As we pointed out in our update on last Friday, the acquisition of China Motion furthers several of VelaTel’s long term strategic goals in a big way:

1)     China Motion’s access to wholesale voice and data services using the wireless network resources of incumbent carriers China Mobile and China Telecom allows VelaTel to deploy its Wireless Data projects in mainland China at a fraction of the capital expenditures originally budgeted. Operating a “MVNO” or mobile virtual network over-the-top (OTT) of China Mobile/China Telecom’s existing network at wholesale cost structure is PERFECT for the roll-out of the B2B wireless networks VELA is building in China with State Owned Enterprises (SOEs) New Generation Special Network (NGSN) and Aerostrong Company Limited (CASC).

2)     China Motion’s experience and personnel in sales and marketing, customer service and billing solutions provides a platform to serve VelaTel’s wireless broadband networks worldwide.

3)     The acquisition creates tremendous synergies with VelaTel’s Europe based subsidiary Zapna, which also focusses on long distance and roaming solutions that cater particularly to the frequent international traveler.

The Deal

Under the Ironridge funding contract, VelaTel will sell Ironridge preferred shares valued at $10,000 per share, which is convertible into VelaTel’s publicly traded Series A Common Stock at a fixed conversion price of $0.20 per share.  Funding is subject to customary equity conditions and Ironridge is entitled to non-cumulative dividends and an embedded derivative liability (which we are seeking to better define later today BTW) upon early redemption or conversion as defined in the contract.  VelaTel also agreed to file a customary S-1 registration statement to allow resale of the shares upon conversion.

“We are very grateful to Ironridge for the continued support they have shown VelaTel,” stated VelaTel’s President Colin Tay.  “Ironridge recently completed payment of more than $1.3 million to our most important vendors under their liability for equity (LIFE) program.  They have now broadened their support by not only increasing the size of their investment, but structuring it in a manner that allows us flexibility to use the proceeds wherever they are needed most.  We also appreciate the efforts of Mr. Luo Hongye, our lead partner in China as CEO of our VN Tech division and a co-founder of ZTE Corporation.  Mr. Luo, as a leader in the telecom and green energy fields in China, was instrumental in bringing VelaTel and Ironridge together in this transaction.”

NBT will get an update from VELA on how this latest equity deal affects their operating subsidiaries:

1.     GO MOVIL
2.     Novi-Net Croatia
3.     Montenegro Connect, Montenegro
4.     Zapna
5.     Sino Crossings
6.     New Generation Special Network (NGSN)
7.     Aerostrong Company Limited
8.     VN technologies Co., Ltd.
9.     China Motion, Ltd

We continue to use a $30 million to $40 revenue estimate for VELA in 2013—we will update this forecast (NBT’s not VELA’s) with management this week.

About VelaTel Global Communications, Inc.

VelaTel acquires spectrum assets through acquisition or joint venture relationships, and provides capital, engineering, architectural and construction services related to the build-out of wireless broadband telecommunications networks, which it then operates by offering services attractive to residential, enterprise and government subscribers. VelaTel currently focuses on emerging markets where internet penetration rate is low relative to the capacity of incumbent operators to provide comparable cutting edge services, and/or where the entry cost to acquire spectrum is low relative to projected subscribers. VelaTel currently has project operations in People’s Republic of China, Croatia, Montenegro and Peru. Additional target markets include countries in Latin America, the Caribbean, Southeast Asia and Eastern Europe. VelaTel’s administrative headquarters are in Carlsbad, California.

The Company’s business model is to combine its engineering and deployment expertise, its equity funding relationship, its vendor partnership, and spectrum, fiber and concession rights assets acquired through subsidiary or joint venture relationships, to create and operate complete networks worldwide.

For more information, please visit www.velatel.com.

About Ironridge Technology Co.

Ironridge Technology Co. is a division of Ironridge Global IV, Ltd. that specializes in direct equity investments in telecommunications, electronics, computer, and technology companies.  Ironridge Global is an institutional investor, making direct equity investments in small cap public companies.  The firm seeks to be a long-term financial partner, assisting public companies in financing operations and expansion by supplying innovative funding solutions and flexible capital.  The firm does not desire to influence or control management, will not restrict use of proceeds, requires no restrictive covenants, and will never take an affiliate or control position. Ironridge Global exclusively places its trust in current management with a strong vision for accelerated growth and increased shareholder value.  For more information on Ironridge Global, please visit www.IronridgeGlobal.com.

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Founder and Editor-in-Chief for NBTEquitiesResearch.com. Contributor and Anchor for the Fox News Channel and Fox Business Network 2000-2013. Chairman & CEO of NBT Group, Inc., a boutique private capital investment bank and investor relations organization.

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