Mint Technology Corp. has announced that the Company has signed a Letter of Intent and substantially completed due diligence on the acquisition of the business assets, trading names, customer lists, merchant agreements, client and third party telecoms contracts, and goodwill of one of the UAE’s leading mobile POS e voucher network company’s, ePAY, from its current owners Global Business Services (“GBS”), a leading UAE telecom, multimedia and premium added value services company.
ePAY’s merchant network currently processes in excess of $160,000,000 in mobile airtime top up per annum through the GBS/ePAY’s proprietary platform solution and over the last 5 years has consistently delivered in excess of $1,500,000 of Net Profit to its owners.
This business will be acquired by a new subsidiary of Mint, to be known as Mint Merchant Services and its offerings will integrate with those of Mint Money including offering mobile top up to Mint’s entire payroll cardholder base in the UAE and eventually beyond.
“This is a unique opportunity for Mint to own and deliver its own mobile airtime top up range of products to its payroll card customer base who we know through survey data, in addition to sending money home, spend in excess of $150,000,000 per annum in airtime on their mobile devices,” said Mint Executive Chairman, Chris Hogg. “I am particularly pleased that a large proportion of the acquisition consideration is in the form of Mint stock as the Vendor shares in Mint’s enthusiasm for our current rate of growth and the opportunity of having our own mobile top up business to add to our growing cardholder base.”
The financial terms of the transaction remain confidential at this time but include both a cash component and an issue of shares to the Vendor at a significant premium to the current average trading price of Mint’s common stock. The transaction structure will be announced in detail following execution of unconditional contracts.
“This acquisition will add cash flow and EBITDA straight out of the gate for Mint Money which together with the micro loan product we are launching this month and the plans we have for an expansion of ePAY’s range of offerings is good news for Mint as we continue to grow our reputation as the “go to” company for the unbanked workers in our core market,” stated Nabil Bader, Mint CEO. “In addition, to marketing our own cardholder base there are also a number of operational synergies to be gained from the combination of this business with the Mint Money front office and the Mint Global Processing back office.”
Mint has also completed the change-over from reporting in Canadian GAAP to IFRS accounting standards and filed its financial statements and MD&A for the transitional period of September 1, 2011 – December 31, 2011.
The most significant change to IFRS reporting has required the Company to evaluate the impact of the changing value of the unexpired warrants on issue. One of the main drivers for the necessity of accounting in this manner is the fact that the functional currency of the Company is different from its reporting currency. The functional currency for the Company and its subsidiaries is the currency of the primary economic environment in which the entity operates – in each case, the United Arab Emirates Dirham (“AED”). These consolidated financial statements are presented in Canadian dollars, which is the Company’s reporting currency.
The adjustment to the transitional year financial statements includes the inclusion of a Derivative Warrant Liability (“DWL”) in the Balance Sheet of $6,953,614. The effect on the Profit and Loss account was the inclusion of a DWL expense of $2,265,564. This adjustment is largely a reflection of the increasing share price relative to the exercise price of the Company’s current outstanding warrants. As and when the warrants are exercised, this cost will be adjusted both through the Profit and Loss account and the Balance Sheet.
Revenue for the Interim Period was $1,329,564, reflecting the partial impact of the Workers Equity acquisition with all those cards acquired not yet generating income. A comparison of Revenue from continuing operations period to period has to take into consideration non-recurring and other Operating Income included in Q4 2011 of $421,723. When adjusted, the Q4 2011 revenue is $884,534. On a prorated basis, this would generate a 4 month revenue of $1,179,378, an increase of 33% on a comparable basis.
The core UAE payroll card business delivered a negative EBITDA of ($305,497) for the 4 months ended December 31, 2011. However, of this amount, $289,000 was attributable to the increased costs of carrying the recently acquired Worker’s Equity portfolio on a costly platform as an interim measure pending certification of the Mint Global Processing platform which has now been received. It is important to note that the “new” contracts secured as part of the Workers Equity Holdings portfolio and associated cards have not yet been loaded to the Mint platform.
In addition, this result also excludes the 5 new contracts and the 76,000 new cards previously announced by Mint on March 21, 2012. The platform therefore currently has over 185,000 new cards to load over the next 3 months now that we have our certification.
The consolidated EBITDA result for the 4 months ended December 31, 2011 was a negative ($2,714,460). Of this amount, $417,000 was attributable to non-recurring charges and as such the adjusted Consolidated EBITDA result was ($2,297,460). Mint continues to invest heavily in the expansion of the Mint Middle East activities outside of UAE in the MENA region and in particular the establishment of both offices and new contract opportunities in Qatar, Egypt and Saudi Arabia. This continues to involve significant investment in people, travel and accommodation, legal fees and professional advisors, but together with our investment in the launch of Mint Money, substantial progress has been made on the launch of the these opportunities and a return on this investment is expected over the next 3 fiscal quarters.
The total invested cost effect of the Non UAE activities on the Consolidated EBITDA figure of ($2,297,460) for the 4 month period under review was ($1,991,963).
The net loss for the 4 month period under review was $5,800,673. The movement in the net loss Q4 to Q1 included the IFRS driven derivate warrant revaluation of $2,265,564, and a number of non-recurring items totaling $417,000.