The struggling merchant processor Spindle Inc. canceled its planned acquisition of independent sales organization and gateway provider VyaPay, but reported Wednesday that it plans to form a so-called strategic alliance with VyaPay, and VyaPay’s chief executive will provide day-to-day management of Spindle.
Mesa, Ariz.-based Spindle, whose shares trade over the counter, said in a news release that the new plan “would supplant the previously anticipated acquisition of VyaPay, yielding many of the anticipated benefits and synergies, absent significant new share issuance which would have resulted in material dilution to current shareholders.”
Under an advisory agreement, Mission Viejo, Calif.-based VyaPay chief executive Wain Swapp will provide “day-to-day business, merchant-account, and personnel-management services to Spindle,” the release says. Spindle also said it “preserves right of first option for potential later ability to acquire VyaPay.”
Spindle will get access to VyaPay’s gateway, while VyaPay can run business through Spindle “that it couldn’t otherwise do as a private company, while Spindle participates in [revenue]/profit share,” the release says. The agreement also includes joint marketing and revenue sharing from a banking platform currently under development.
“’While our intention had been to acquire VyaPay, we’re pleased that together we were successful in designing a mutually beneficial alliance yielding the majority of anticipated benefits, while alleviating the need to significantly dilute existing shareholders,” Spindle interim CEO Dr. Jack Scott said in the release.
“While our own growth on a year-over-year basis has been very strong, we believe partnering with Spindle has the potential of opening multiple new revenue and licensing verticals,” Swapp said in the release.
In a Tuesday regulatory filing, Spindle issued a so-called “going concern” notice about its financial condition. The company lost $715,678 in the first quarter, has an accumulated deficit of $32 million, and may need additional capital, according to the filing.
Spindle, which has its own gateway branded Catalyst, tried last year to diversify beyond “the highly competitive payment-processing arena, to developing marketing tools to go along with payment processing to create a unified commerce experience for merchants,” the filing says. “Spindle’s plan was to attract, market to, and retain its customers through the expansion of the Catalyst platform, as well as process payments for goods and services sold through it.”
Spindle said it made “significant progress,” but was unable to develop commercially viable products due to a lack of funding. In addition, merchant acquirer Worldpay, which is the licensor of the Catalyst gateway, told Spindle it would no longer provide platform updates as it moves to more current gateway platforms, the filing says.