EFT Canada Inc. has announced that it has entered into a Letter of Intent to acquire the technology assets of privately held, Toronto-based Linterna Technologies Ltd. (“LTL”) for a total purchase price of $650,000. The acquisition is expected to close on August 19th, 2011 and is subject to certain customary conditions, as well as the completion and signing of a definitive agreement and approval by the TSX Venture Exchange.
LTL operates mainly as an electronic transaction processing consulting firm specializing in operational processes, banking relationships and fraud related controls. The java based software provides its users a web-based point of sale interface that merchants can utilize to accept server to server credit card transactions and the ability for a variety of mobile e-wallet options. In addition, the technology has a built in rules based fraud detection system that is integrated with a number of third-party services that will allow EFT Canada to expand its product offering beyond just financial transactions.
EFT Canada will pay LTL for its technological assets, namely the credit card processing gateway, a total of $650,000 by way of $325,000 in cash, of which $125,000 is due on the closing date, and $325,000 payable in common shares of EFT Canada. The remaining cash payment of $200,000 is due on the twelve month following the closing date, subject to delay and reduction if operating targets are met.
Common shares of EFT Canada issued to LTL will immediately be held in escrow and released in three equal installments following months 6, 12 and 18 following the closing date.
In addition to the purchase price, LTL will be paid by EFT Canada $0.05 per credit card transaction processed for a period of three years following the closing date. Such payments shall not to exceed an aggregate of $330,000.
On the closing date and as part of the agreement, James Watt, a principal of LTL, will enter into a two year consulting agreement with EFT Canada. Further, EFT will be creating and filling two new employment positions to support the new credit card gateway platform.
SMEs are increasingly using internet based services to manage their businesses and there is a growing demand for cost effective and secure transaction processing services, coupled with high levels of support. The acquisition of the LTL credit card gateway technology is an important step in fulfilling EFT Canada’s vision to provide a business solution to SMEs which enables them to transact in EFT’s, debit and credit card transactions. EFT Canada believes the acquisition will allow it to significantly increase gross revenues.
Once the acquired asset has been integrated, in addition to electronic funds transfer, EFT Canada will be able offer its client base of over 800 SME’s, credit card processing services.
Jonathan Pasternak, President of EFT Canada, commented: “The technology being acquired from Linterna, represents an important part of EFT’s vision to place under one umbrella organization all services needed by our merchants to process electronic payments. Moreover, we anticipate excellent long-term value and shareholder appreciation in the combined entity”.
EFT Canada has not entered into any definitive financing arrangements at this time and believes it will be able to complete the acquisition using existing capital resources.